Exhibit 15.5

Sincere Fame International Limited

 
Consolidated Financial Statements

for the Year ended December 31, 2016

Independent Auditors’ Report on consolidated financial statements

The Board of Directors
Sincere Fame International Limited:

We have audited the accompanying consolidated financial statements of Sincere Fame International Limited and its subsidiaries, which comprise the consolidated statement of financial position as of December 31, 2016, and the related consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

1

Independent Auditors’ Report on consolidated financial statements (continued)

Opinion

In our opinion, the 2016 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sincere Fame International Limited and its subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Other Matter

The accompanying consolidated statements of financial position of Sincere Fame International Limited and its subsidiaries as of December 31, 2015 and January 1, 2015 and the related consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows for the year ended December 31, 2015 were not audited, reviewed, or compiled by us and, accordingly, we do not express an opinion or any other form of assurance on them.

/s/ KPMG Huazhen LLP

Guangzhou, China

April 19, 2017

2

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

Consolidated statement of financial position as at December 31

(Expressed in Renminbi unless otherwise stated)

	Note		2016		2015		January 1, 2015
					unaudited		unaudited
Assets
Property, plant and equipment		11		18,680,463		9,145,446		3,126,945
Intangible assets and goodwill		12		2,999,817		24,264,315		25,381,458
Interest in associate		14		-		3,219,847		2,987,652
Available-for-sale financial assets		15		132,685,781		663,254,634		221,591,888
Loans and advances to customers		16		7,142,529,218		2,368,014,070		1,220,340,622
Deferred tax assets		17(b)		55,613,958		24,248,372		10,990,112
Trade and other receivables		18		215,471,052		109,788,478		54,320,133
Cash and cash equivalents		19		233,138,588		260,081,796		158,567,016
Total assets				7,801,118,877		3,462,016,958		1,697,305,826
Equity
Share capital		20(a)		80,973,634		80,973,634		80,973,634
Reserves		20		1,038,389,405		997,729,535		684,506,165
Total equity				1,119,363,039		1,078,703,169		765,479,799
Liabilities
Interest-bearing borrowings		21		1,094,585,401		708,653,665		437,966,718
Accruals and other payables		22		5,487,974,708		1,568,981,082		453,615,487
Current taxation		17(a)		96,578,805		36,064,216		37,339,589
Deferred tax liabilities		17(b)		2,616,924		69,614,826		2,904,233
Total liabilities				6,681,755,838		2,383,313,789		931,826,027
Total liabilities and equity				7,801,118,877		3,462,016,958		1,697,305,826

The notes on pages 10 to 74 form part of these financial statements.

3

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

Consolidated statement of profit or loss and other comprehensive income for the year ended December 31

(Expressed in Renminbi unless otherwise stated)

	Note		2016			2015
						unaudited
Interest income				1,243,545,829			522,271,037
Interest expense				(442,661,324	)		(170,740,726	)
Net interest income		4		800,884,505			351,530,311
Asset management income				75,615,448			32,587,388
Asset management expense				(3,887,977	)		(818,794	)
Net asset management income		5		71,727,471			31,768,594
Mortgage agency service income				12,373,044			38,516,162
Mortgage agency service expense				-			(567,057	)
Net mortgage agency income				12,373,044			37,949,105
Other revenue and net income		6		15,104,820			6,045,257
Operating income				900,089,840			427,293,267
Operating expenses		7		(441,697,929	)		(230,993,895	)
Operating profit before impairment				458,391,911			196,299,372
Impairment losses on
-  Loans and advances to customers				(106,035,336	)		(20,813,153	)
-  Available-for-sale financial assets				(37,962,696	)		(13,307,305	)
-  Trade and other receivables				(5,326,708	)		(6,886,871	)
-  Goodwill				(20,279,026	)		-
Impairment losses		8		(169,603,766	)		(41,007,329	)
Share of profits of associates		14		47,122			232,195
Profit before taxation				288,835,267			155,524,238
Income tax expense		9		(52,716,807	)		(24,842,040	)
Profit for the year				236,118,460			130,682,198

The notes on pages 10 to 74 form part of these financial statements.

4

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

Consolidated statement of profit or loss and other comprehensive income for the year ended December 31 (continued)

(Expressed in Renminbi unless otherwise stated)

	Note		2016			2015
						unaudited
Profit for the year				236,118,460			130,682,198
Other comprehensive income for the year
Items that may be reclassified subsequently to profit or loss
Fair value reserve (available-for-sale financial assets)
-  Change in fair value		10		(194,680,052	)		192,927,022
Exchange differences on translation of financial statements of entities outside the People’s Republic of China (“PRC”)		10		(778,538	)		(10,385,850	)
Total comprehensive income for the year				40,659,870			313,223,370

The notes on pages 10 to 74 form part of these financial statements.

5

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

Consolidated statement of changes in equity

(Expressed in Renminbi unless otherwise stated)

		Share capital		Capital reserve		Surplus reserve		Regulatory reserve		Fair value reserve			Exchange reserve			Equity-settled share-based payment		Retained			Total
	Note	20(a)		20(b)		20(c)		20(d)		20(e)			20(f)			20(g)		earnings			equity
Balance at January 1, 2015			80,973,634		289,025,865		49,767,634		21,651,372		4,457,799			6,790,324			16,435,975		296,377,196			765,479,799
Profit for the year			-		-		-		-		-			-			-		130,682,198			130,682,198
Other comprehensive income			-		-		-		-		192,927,022			(10,385,850	)		-		-			182,541,172
Total comprehensive income			-		-		-		-		192,927,022			(10,385,850	)		-		130,682,198			313,223,370
Surplus reserve appropriation			-		-		17,069,378		-		-			-			-		(17,069,378	)		-
Regulatory reserve appropriation			-		-		-		26,091,592		-			-			-		(26,091,592	)		-
Balance at December 31, 2015			80,973,634		289,025,865		66,837,012		47,742,964		197,384,821			(3,595,526	)		16,435,975		383,898,424			1,078,703,169
Balance at January 1, 2016			80,973,634		289,025,865		66,837,012		47,742,964		197,384,821			(3,595,526	)		16,435,975		383,898,424			1,078,703,169
Profit for the year			-		-		-		-		-			-			-		236,118,460			236,118,460
Other comprehensive income			-		-		-		-		(194,680,052	)		(778,538	)		-		-			(195,458,590	)
Total comprehensive income			-		-		-		-		(194,680,052	)		(778,538	)		-		236,118,460			40,659,870
Surplus reserve appropriation			-		-		22,403,237		-		-			-			-		(22,403,237	)		-
Regulatory reserve appropriation			-		-		-		65,654,300		-			-			-		(65,654,300	)		-
Balance at December 31, 2016			80,973,634		289,025,865		89,240,249		113,397,264		2,704,769			(4,374,064	)		16,435,975		531,959,347			1,119,363,039

The notes on pages 10 to 74 form part of these financial statements.

6

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

Consolidated statement of cash flows for the year ended December 31

(Expressed in Renminbi unless otherwise stated)

	Note		2016			2015
						unaudited
Operating activities
Profit before tax				288,835,267			155,524,238
Adjustment for:
Depreciation		11		5,603,024			2,061,529
Amortization		12		992,452			1,117,143
Impairment losses on loans and advances to customers		8		106,035,336			20,813,153
Net interest income		4		(800,884,505	)		(351,530,311	)
Impairment losses on trade and other receivables		8		5,326,708			6,886,871
Impairment losses on available-for-sale financial assets		8		37,962,696			13,307,305
Impairment loss on goodwill		8		20,279,026			-
Net loss on disposal of property, plant and equipment		6		61,085			6,001
Share of profit from associates		14		(47,122	)		(232,195	)
Foreign exchange gain		6		(2,717,820	)		(2,116,575	)
Changes in working capital:
Increase in loans and advances to customers				(4,880,550,484	)		(1,168,486,600	)
Increase in other operating assets				(48,048,149	)		(26,404,883	)
(Decrease)/increase in other operating liabilities				(90,929,455	)		60,613,366
Cash used in operating activities				(5,358,081,941	)		(1,288,440,958	)
Interest received				1,194,584,697			486,320,705
Interest paid				(416,084,616	)		(137,205,551	)
PRC income tax paid		17(a)		(25,672,356	)		(36,974,088	)
Net cash used in operating activities				(4,605,254,216	)		(976,299,892	)

The notes on pages 10 to 74 form part of these financial statements.

7

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

Consolidated statement of cash flows
for the year ended December 31 (continued)

(Expressed in Renminbi unless otherwise stated)

	Note	2016			2015
					unaudited
Investing activities
Investment income from asset management service			63,628,908			31,002,300
Proceeds from disposal of available-for-sale financial assets			349,651,127			103,291,316
Proceeds from liquidation of associate			3,266,969			-
Proceeds from disposal of property, plant and equipment and intangible assets			17,215			1,541
Payment on investing in available-for-sale financial assets			(116,618,373	)		(284,025,338	)
Payment on acquisition of property, plant and equipment and intangible assets			(15,223,321	)		(8,087,573	)
Net cash generated from/(used in) investing activities			284,722,525			(157,817,754	)

The notes on pages 10 to 74 form part of these financial statements.

8

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

Consolidated statement of cash flows
for the year ended December 31 (continued)

(Expressed in Renminbi unless otherwise stated)

	Note		2016			2015
						unaudited
Financing activities
Borrowings from third parties				770,910,461			428,392,824
Proceeds from payables to interest holders of consolidated structured entities				5,133,370,000			1,220,240,000
Repayment to related parties				-			(174,849,469	)
Repayment to third parties				(390,453,000	)		(1,100,000	)
Repayment to payables to interest holders of consolidated structured entities				(1,222,740,000	)		(239,140,000	)
Net cash generated from financing activities				4,291,087,461			1,233,543,355
Net (decrease)/increase in cash and cash equivalents				(29,444,230	)		99,425,709
Cash and cash equivalents at January 1				260,081,796			158,567,016
Effect of exchange rate change on cash and cash equivalents				2,501,022			2,089,071
Cash and cash equivalents at December 31		19		233,138,588			260,081,796

The notes on pages 10 to 74 form part of these financial statements.

9

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

Notes to the consolidated financial statements

(Expressed in Renminbi unless otherwise stated)

1 Reporting entity

Sincere Fame International Limited (the ‘Company’) is a company domiciled in the British Virgin Islands and has its principal place of business in the People’s Republic of China (“PRC”). The Company’s registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the ‘Group’). The Group is primarily involved in providing micro credit services for individuals, loan lending agency and asset management services.

The Company was incorporated in the British Virgin Islands on October 6, 2006, and issued initially 100,000 shares on November 15, 2006. On July 15, 2009, shares were transferred within shareholders of the Company. Upon completion of such shareholding changes, the issued shares of the Company remained the same.

On November 1, 2009, CISG Holdings Limited and Gold Source Co., Ltd. subscribed for 27,143 and 4,762 ordinary shares respectively in the Company. Upon completion of this, the issued shares of the Company was 131,905.

On January 1, 2010, 17,562 ordinary shares were allotted and issued by the Company to Day Joy Holdings Limited. Upon completion of such share issuance, the issued shares of the Company was 149,467.

On July 15, 2010, new shares were allotted and issued by the Company to its existing shareholders. Upon completion of such share issuance, the issued shares of the Company was 218,535.

On January 24, 2011, the Company divided the existing issued shares, a total of 218,535 ordinary shares of US$0.10 each into 2,185,350 ordinary shares of US$0.01 each. On the same day, the Company allotted and issued new shares to its existing shareholders in accordance with the ratio of 1:637. Upon completion of such share allotment, the issued shares of the Company was 1,394,253,300.

On August 1, 2011, the Company repurchased and cancelled all the shares held by Day Joy Holdings Limited due to outstanding payment of the consideration for the subscription of such shares. Upon completion of such share subscriptions and share repurchase, the issued shares of the Company was 1,230,434,040 of US$0.01 each.

10

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

2 Basis of accounting

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”), which collective term includes International Accounting Standards (“IASs”) and related interpretations, issued by the International Accounting Standards Board (“IASB”). A summary of the significant accounting policies adopted by the Group is set out below.

In previous periods these financial statements were prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual HKFRSs, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. Although HKFRSs have been fully converged with IFRSs in all material respects since January 1, 2005, these financial statements are the first issued financial statements in which the Group makes an explicit and unreserved statement of compliance with IFRSs. Therefore, in preparing these financial statements management has given due consideration to the requirements of IFRS 1, First-time Adoption of International Financial Reporting Standards. For this purpose the date of the Group’s transition to IFRSs was determined to be January 1, 2015, being the beginning of the earliest period for which the Group presents full comparative information in these financial statements.

With due regard to the Group’s accounting policies in previous periods and the requirements of IFRS 1, management has concluded that no adjustments were required nor elections were made to the amounts reported under HKFRSs as at the date of transition to IFRSs or in respect of the year ended December 31, 2016 due to the convergence between IFRSs and HKFRSs.

The consolidated financial statements were authorized for issue by the Group’s board of directors on April 19, 2017.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for available-for-sale financial assets, which are measured at fair value.

(c) Functional and presentation currency

Items included in consolidated financial statements of each of the Group’s entities are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to the entity (‘‘functional currency’’). These consolidated financial statements are presented in Renminbi (‘‘RMB’’).

11

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

2 Basis of accounting (continued)

(d) Use of estimates and judgements

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

Information about estimation uncertainties and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the consolidated financial statements are described in Note 28.

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

(a) Changes in accounting policies

The IASB has issued a number of amendments to IFRSs that are first effective for the current accounting period of the Group. None of these developments have had a material effect on how the Group’s results and financial position for the current or prior periods have been prepared or presented.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

(b) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

(ii) Non-controlling interests (“NCI”)

NCI are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

12

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

(iii) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(c) Associates

An associate is an entity in which the Group or Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

An investment in an associate is accounted for in the financial statements under the equity method. Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group’s share of the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment (see Note 3(h)). Any acquisition-date excess over cost, the Group’s share of the post-acquisition, post-tax results of the investees and any impairment loss for the year are recognized in the consolidated statement of profit or loss, whereas the Group’s share of the post-acquisition, post-tax items of the investees’ other comprehensive income is recognized in the consolidated statement of profit or loss and other comprehensive income.

When the Group’s share of losses exceeds its interest in the associate, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group’s interest is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate.

Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the investee, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognized immediately in profit or loss.

In all other cases, when the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognized in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see Note 3(i)).

13

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

(d) Goodwill

Goodwill represents the excess of

(i) The aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree; over

(ii) The net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.

When (ii) is greater than (i), then this excess is recognized immediately in profit or loss as a gain on a bargain purchase.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, which is expected to benefit from the synergies of the combination and is tested annually for impairment (see Note 3(h)).

On disposal of a cash generating unit during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.

(e) Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see Note 3(h)).

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labor, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in profit or loss on the date of retirement or disposal.

Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

-	Office and other equipment	1 - 5 years
-	Leasehold improvements	1 - 6 years
-	Motor vehicles	3 - 8 years

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Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

(f) Intangible assets (other than goodwill)

Expenditure on research activities is recognized as an expense in the period in which it is incurred. Expenditure on development activities is capitalized if the product or process is technically and commercially feasible and the Group has sufficient resources and the intention to complete development. The expenditure capitalized includes the costs of materials, direct labor, and an appropriate proportion of overheads and borrowing costs, where applicable (see Note 3(r)). Capitalized development costs are stated at cost less accumulated amortization and impairment losses (see Note 3(h)). Other development expenditure is recognized as an expense in the period in which it is incurred.

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortization (where the estimated useful life is finite) and impairment losses (see Note 3(h)).

Amortization of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets’ estimated useful lives. The following intangible assets with finite useful lives are amortized from the date they are available for use and their estimated useful lives are as follows:

-	Software	1 - 5 years
-	Cooperation agreements	5 years
-	Trademarks	Indefinite

Both the period and method of amortization are reviewed annually.

Intangible assets are not amortized while their useful lives are assessed to be indefinite. Any conclusion that the useful life of an intangible asset is indefinite is reviewed annually to determine whether events and circumstances continue to support the indefinite useful life assessment for that asset. If they do not, the change in the useful life assessment from indefinite to finite is accounted for prospectively from the date of change and in accordance with the policy for amortization of intangible assets with finite lives as set out above.

15

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

(g) Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i) Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases.

(ii) Operating lease charges

Where the Group has the use of assets held under operating lease, payments made under the lease are charged to profit or loss in equal installments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognized in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

(h) Impairment losses on non-financial assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognized no longer exists or may have decreased:

- Property, plant and equipment

- Intangible assets and goodwill

- Investments in subsidiaries and associates in the Group’s statement of financial position.

16

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill, intangible assets that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount is estimated annually whether or not there is any indication of impairment.

- Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

- Recognition of impairment losses

An impairment loss is recognized in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable) to sell, or value in use, (if determinable).

- Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognized.

17

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

(i) Financial Instruments

(i) Recognition and measurement of financial assets and financial liabilities

A financial asset or financial liability is recognized in the statement of financial position when the Group becomes a party to the contractual provisions of a financial instrument.

The Group classifies financial assets and liabilities into different categories at initial recognition: receivables and available-for-sale financial assets and other financial liabilities.

Financial assets and financial liabilities are measured initially at fair value, any attributable transaction costs are included in their initial costs.

Financial assets and financial liabilities are categorised as follows:

● Loans and receivables

Loans and receivables are non-derivative assets held for trading held by the Group with fixed or determinable recoverable amounts that are not quoted in an active market, other than

- Those that the Group intends to sell immediately or in the near-term, which will be classified as held for trading;

- Those designated at fair value through profit or loss upon initiation recognition or as available-for-sale; or

- Those where the Group may not recover substantially all of its initial investment, other than because of credit deterioration, which will be classified as available-for-sale.

Loans and receivables mainly comprise loans and advances to customers and financial assets classified as receivables. Subsequent to initial recognition, loans and receivables are stated at amortised cost using the effective interest method.

● Available-for-sale financial assets

Available-for-sale financial assets include non-derivative assets held for trading that are designated upon initial recognition as available-for-sale and other financial assets which do not fall into any of the above categories.

An investment in equity instrument which does not have a quoted market price in an active market and whose fair value cannot be reliably measured is measured at cost subsequent to initial recognition.

18

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

Other than investments in equity instruments whose fair value cannot be measured reliably as described above, subsequent to initial recognition, other available-for-sale financial assets are measured at fair value and changes therein, except for impairment losses and foreign exchange gains and losses from monetary financial assets which are recognized directly in profit or loss, are recognized in capital reserve through other comprehensive income. When an investment is derecognized, the cumulative gain or loss in equity is removed from equity and recognized in profit or loss. Dividend income from these equity instruments is recognized in profit or loss when the investee declares the dividends. Interest on available-for-sale financial assets calculated using the effective interest method is recognized in profit or loss (see Note 3(p)).

● Other financial liabilities

Financial liabilities other than the financial liabilities at fair value through profit or loss are classified as other financial liabilities.

Subsequent to initial recognition, other financial liabilities are measured at amortised cost using the effective interest method.

(ii) Fair value measurement

If there is an active market for financial instruments, the fair value of financial instruments is based on quoted market prices. If no active market exists for a financial instrument, a valuation technique is used to establish the fair value. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models.

The Group calibrates the valuation technique and tests it for validity periodically.

(iii) Impairment losses on financial assets

The carrying amounts of financial assets other than those at fair value through profit or loss are reviewed by the Group at the end of the years to determine whether there is objective evidence of impairment. If any such evidence exists, impairment loss is provided. Objective evidence of impairment in the financial asset represents events that occur after the initial recognition of the financial assets and have impact on the estimated future cash flows of the asset, which can be estimated reliably.

19

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

Objective evidence that financial assets are impaired includes, but not limited to:

- Significant financial difficulty of the borrower or issuer;

- A breach of contract, such as a default or delinquency in interest or principal payments;

- Becoming probable that the borrower will enter bankruptcy or other financial reorganisation;

- Disappearance of an active market for financial assets because of financial difficulties;

- Significant changes in the technological, market, economic or legal environment that have an adverse effect on the issuer of an equity instrument; or

- A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

● Loans and receivables

The Group uses two methods of assessing impairment losses: those assessed individually and those assessed on a collective basis.

Individual assessment

Loans and receivables, which are considered individually significant, are assessed individually for impairment. If there is objective evidence of impairment of loans and receivables, the amount of loss is measured as the excess of its carrying amount over the present value of the estimated future cash flows discounted at the original effective interest rate. The impairment losses are recognized in profit or loss.

The calculation of the present value of the estimated future cash flows of a collateralised loan or receivable reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, regardless of whether the collateral would be withdrawn.

20

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

Collective assessment

Loans and receivables which are assessed collectively for impairment include homogeneous groups of loans and receivables which are not considered individually significant and not assessed individually. Loans and receivables are grouped for similar credit risk characteristics for collective assessment. The objective evidence of impairment mainly includes that, though it is unable to identify the decrease of cash flow of each individual asset, after collective assessment based on observable data, there is observable evidence indicating that there is a measurable decrease in the estimated future cash flow from a group of financial assets since the initial recognition of those assets.

For homogeneous groups of loans and receivables that are not considered individually significant, the Group adopts a flow rate methodology to collectively assess impairment losses. This methodology utilises a statistical analysis of historical trends of probability of default and amount of consequential loss, as well as an adjustment of observable data that reflects the current economic conditions and judgement based on management’s historical experience.

The collective impairment loss is assessed after taking into account: (i) historical loss experience in portfolios of similar credit risk characteristics; (ii) the emergence period between a loss occurring and that loss being identified; and (iii) the current economic and credit environments and judgement on inherent loss based on management’s historical experience.

The emergence period between a loss occurring and its identification is determined by management based on the historical experience of the markets where the Group operates. Impairment losses recognized on a collective basis represent an interim step pending the identification of impairment losses on individual assets (which are subject to individual assessment) in the pool of financial assets that are collectively assessed for impairment.

Collective assessment covers those loans and receivables that were impaired at the end of the years but which will not be individually identified as such until sometime in the future. As soon as information is available that specifically identifies objective evidence of impairment on individual assets in a portfolio, those assets are removed from the portfolio of financial assets.

21

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

Impairment reversal and loan write-off

If, in a subsequent period, the amount of the impairment losses on loans and receivables decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. The amount of the reversal is recognized in the profit or loss. The reversal shall not result in a carrying amount of the financial asset that exceeds the amortised cost at the date of the reversal had the impairment not been recognized.

When the Group determines that a loan has no reasonable prospect of recovery after the Group has completed all the necessary legal or other proceedings, the loan is written off against its allowance for impairment losses. If in a subsequent period the loan written off is recovered, the amount recovered will be recognized in the profit or loss through impairment losses.

Rescheduled loans

Rescheduled loans are loans that have been restructured due to deterioration in the borrower’s financial position to the extent that the borrower is unable to repay according to the original terms and where the Group has made concessions that it would not otherwise consider under normal circumstances. Rescheduled loans are assessed individually and classified as impaired loans upon restructuring. Rescheduled loans are subject to ongoing monitoring. Once a rescheduled loan has met specific conditions by the end of the observation period of normally 6 months, with the approval from management, they would no longer be considered as impaired.

● Available-for-sale financial assets

For available-for-sale financial asset, the cumulative loss that has been recognised in the fair value reserve is reclassified to profit or loss. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss.

Impairment losses recognised in profit or loss in respect of available-for-sale equity securities are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognised in other comprehensive income.

Impairment losses in respect of available-for-sale debt securities are reversed if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognised. Reversals of impairment losses in such circumstances are recognised in profit or loss.

22

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

(iv) Offsetting

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position when the Group has a legally enforceable right to set off the recognized amounts and the transactions are intended to be settled on a net basis, or by realizing the asset and settling the liability simultaneously.

(j) Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognized and redemption value being recognized in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(k) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

(l) Employee benefits

Salaries, annual bonuses, paid annual leave and contributions to retirement scheme and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

Pursuant to the relevant laws and regulations of the PRC, the Group’s subsidiaries in the PRC have joined defined contributions for the employees, such as basic pension scheme, housing fund, basic medical insurance, unemployment insurance, injury insurance and maternity insurance. The Group makes contributions to the above mentioned schemes at the applicable rates based on the amounts stipulated by the government organization. The contributions are capitalised as part of the cost of assets or charged to profit or loss on an accrual basis.

23

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

(m) Share-based payment

The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the binomial lattice model, taking into accounts the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the options, the total estimated fair value of the options is spread over the vesting period, taking into account the probability that the options will vest.

During the vesting period, the number of share options that is expected to vest is reviewed. Any resulting adjustment to the cumulative fair value recognised in prior years is charged / credited to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the Group’s shares. The equity amount is recognised in the capital reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained profits).

(n) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in profit or loss except to the extent that they relate to business combinations, items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

24

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognized is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of reporting period. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

- In the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or

- In the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

- The same taxable entity; or

25

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

- Different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

(o) Provisions and contingent liabilities

Provisions are recognized for other liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(p) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized in profit or loss as follows:

(i) Interest income

Interest income for financial assets is recognized in profit or loss based on effective interest method. Interest income includes the amortization of any discount or premium or differences between the initial carrying amount of an interest-bearing asset and its amount at maturity calculated using the effective interest basis.

The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating the interest income over the years. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract, transaction costs and all other premiums or discounts that are an integral part of the effective interest rate.

Interest on the impaired assets is recognized using the rate of interest used to discount future cash flows.

26

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

(ii) Asset management income and mortgage agency service income

Asset management income and mortgage agency service income are recognized on an accrual basis in accordance with the terms of the relevant agreements.

(iii) Rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue from the rendering of services is recognised by reference to the stage of completion of the transaction based on the services performed to date as a percentage of the total services to be performed.

When the outcome of a transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the costs incurred that it is probable be recoverable.

(iv) Dividends

Dividend income from unlisted investments is recognized when the shareholder’s right to receive payment is established.

(v) Other income

Other income is recognised on an accrual basis.  

(q) Translation of foreign currencies

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognized in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was measured.

(r) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

27

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

(s) Fiduciary activities

The Group acts in a fiduciary activity as a manager, a custodian, or an agent for customers. Assets held by the Group and the related undertakings to return such assets to customers are recorded as off-balance sheet items as the risks and rewards of the assets reside with customers.

The Group enters into entrusted loan agreements with customers, whereby the customers provide funding (“entrusted funds”) to the Group, and the Group grants loans to third parties (“entrusted loans”) under instructions of the customers. As the Group does not assume the risks and rewards of the entrusted loans and the corresponding entrusted funds, the entrusted loans and funds are recorded as off-balance sheet items at their principal amount. No provision for impairment loss is made for entrusted loans.

(t) Related parties

(a) A person, or a close member of that person’s family, is related to the Group if that person:

(i) Has control or joint control over the Group;

(ii) Has significant influence over the Group; or

(iii) Is a member of the key management personnel of the Group or the Group’s parent.

(b) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same Group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of the Group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third entity.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third party.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

28

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

3 Significant accounting policies (continued)

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(u) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial statements provided regularly to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

4 Net interest income

	2016			2015
	RMB			RMB
				unaudited
Interest income arising from:
- Cash at bank		1,417,305			1,153,512
- Loans and advances to customers		1,242,128,524			521,117,525
Total interest income		1,243,545,829			522,271,037
Interest expense arising from:
- Payables to interest holders of consolidated structured entities		(368,843,788	)		(130,348,671	)
- Interest-bearing borrowings		(73,817,536	)		(40,392,055	)
Total interest expense		(442,661,324	)		(170,740,726	)
Net interest income		800,884,505			351,530,311

29

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

5 Net asset management income

	2016			2015
	RMB			RMB
				unaudited
Asset management income:
Asset management service fees		9,628,621			4,783,365
Net gain arising from investment securities		65,986,827			27,804,023
Total asset management income		75,615,448			32,587,388
Asset management expense:
Asset management expense		(3,887,977	)		(818,794	)
Total asset management expense		(3,887,977	)		(818,794	)
Net asset management income		71,727,471			31,768,594

6 Other revenue and net income

	2016			2015
	RMB			RMB
				unaudited
Labour outsourcing services income		12,035,445			7,754,392
Register services income		238,500			403,000
Foreign exchange gain		2,717,820			2,116,575
Net loss on disposal of property, plant and equipment		(61,085	)		(6,001	)
Others		174,140			(4,222,709	)
Total		15,104,820			6,045,257

30

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

7 Operating expenses

			2016		2015
	Note		RMB		RMB
					unaudited
Staff cost				287,473,913		132,847,598
Cost for labour outsourcing services				11,751,906		6,890,248
Business tax and surcharges				26,336,151		34,855,557
Non-deductible input value-added tax				21,081,339		-
Rental and property management expenses				24,404,690		13,633,676
Advertising and promotion expenses				16,383,290		8,615,190
Office expense				14,453,830		7,829,789
Entertainment and travelling expenses				11,767,688		7,653,791
Research and development expenses				8,507,265		6,936,113
Consulting fees				5,736,437		2,949,049
Depreciation of property, plant and equipment		11		5,603,024		2,061,529
Amortization of intangible assets		12(a)		992,452		1,117,143
Communication expenses				2,530,162		2,030,256
Others				4,675,782		3,573,956
Total				441,697,929		230,993,895

8 Impairment losses

			2016		2015
	Note		RMB		RMB
					unaudited
Loans and advances to customers		16(a)		106,035,336		20,813,153
Available-for-sale financial assets		15(a)		37,962,696		13,307,305
Goodwill		12(b)		20,279,026		-
Trade and other receivables		18(b)		5,326,708		6,886,871
Total				169,603,766		41,007,329

31

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

9 Income tax expense in the consolidated statement of profit or loss

(a) Taxation in the consolidated statement of profit or loss

	2016			2015
	RMB			RMB
				unaudited
Current tax
Provision for PRC income tax for the year		86,186,945			35,698,715
Deferred tax
Origination and reversal of temporary differences		(33,470,138	)		(10,856,675	)
Total		52,716,807			24,842,040

(b) Reconciliation between tax expense and accounting profit at applicable tax rates

	2016			2015
	RMB			RMB
				unaudited
Profit before taxation		288,835,267			155,524,238
National tax on profit before taxation, calculated at the rates applicable in the jurisdictions concerned		92,176,701			41,635,467
Effect of tax concessions		(61,421,155	)		(16,819,869	)
Effect of unrecognized tax losses and temporary differences		15,781,513			2,430,103
Effect of non-deductible expenses		666,186			385,014
Effect of non-deductible impairment loss		5,069,756			-
Effect of tax filing differences		471,536			(3,084,699	)
Others		(27,730	)		296,024
Income tax expense		52,716,807			24,842,040

(i) Pursuant to the rules and regulations of the British Virgin Islands, the Group is not subject to any income tax in the British Virgin Islands.

(ii) No provision for Hong Kong Profits Tax has been made for the subsidiary located in Hong Kong as the subsidiary has not derived any income subject to Hong Kong Profits Tax during the years.

(iii) According to the PRC Corporate Income Tax (“CIT”) Law that was effective from January 1, 2008, the Group’s PRC subsidiaries are subject to PRC income tax at the statutory tax rate of 25%, unless otherwise specified.

(iv) Guangzhou Chengze Information Technology Co., Ltd. (“Chengze”) and Guangzhou Heze Information Technology Co., Ltd. (“Heze”) were qualified as an eligible software enterprise, which entitled them to a tax holiday of a two-year full exemption followed by a three-year 50% exemption since 2010 and 2012, respectively. The income tax rate for Chengze is 25% for the year ended December 31, 2016 (2015: 25%). The income tax rate for Heze is 12.5% for the year ended December 31, 2016 (2015: 12.5%). Another subsidiary Shenzhen Taotaojin Internet Financial Services Company Limited(“Taotaojin”) was qualified as an eligible software enterprise, which entitled them to a tax holiday of a two-year full exemption followed by a three-year 50% exemption since 2015. The income tax rate for Taotaojin is 0% for the year ended December 31, 2016 (2015: 0%).

32

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

10 Other comprehensive income

(a) Tax effects relating to each component of other comprehensive income

	2016								2015 (unaudited)
	Before tax amount			Tax  benefit		Net of tax amount			Before tax amount			Tax  benefit			Net of tax amount
	RMB			RMB		RMB			RMB			RMB			RMB
Exchange differences on translation of financial statements of entities outside the PRC		(778,538	)		-		(778,538	)		(10,385,850	)		-			(10,385,850	)
Available-for-sale securities:
Net movement in fair value reserve		(259,573,403	)		64,893,351		(194,680,052	)		257,236,029			(64,309,007	)		192,927,022
Other comprehensive income		(260,351,941	)		64,893,351		(195,458,590	)		246,850,179			(64,309,007	)		182,541,172

33

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

11 Property, plant and equipment

	Office and other equipment			Leasehold improvements			Motor vehicles			Total
	RMB			RMB			RMB			RMB
Cost:
As at January 1, 2014		7,903,066			4,794,192			1,369,785			14,067,043
Additions		651,378			466,244			474,615			1,592,237
Disposals		(410,014	)		(22,874	)		-			(432,888	)
As at December 31, 2014		8,144,430			5,237,562			1,844,400			15,226,392
As at January 1, 2015		8,144,430			5,237,562			1,844,400			15,226,392
Additions		4,058,294			3,724,676			304,603			8,087,573
Disposals		(77,879	)		(925	)		-			(78,804	)
As at December 31, 2015		12,124,845			8,961,313			2,149,003			23,235,161
As at January 1, 2016		12,124,845			8,961,313			2,149,003			23,235,161
Additions		6,931,788			8,278,403			6,150			15,216,341
Disposals		(374,208	)		(240,361	)		(81,103	)		(695,672	)
As at December 31, 2016		18,682,425			16,999,355			2,074,050			37,755,830
Accumulated depreciation:
As at January 1, 2014		(6,905,690	)		(3,548,833	)		(547,047	)		(11,001,570	)
Charge for the year		(560,590	)		(688,507	)		(264,482	)		(1,513,579	)
Written back on disposals		392,828			22,874			-			415,702
As at December 31, 2014		(7,073,452	)		(4,214,466	)		(811,529	)		(12,099,447	)
As at January 1, 2015		(7,073,452	)		(4,214,466	)		(811,529	)		(12,099,447	)
Charge for the year		(856,387	)		(896,623	)		(308,519	)		(2,061,529	)
Written back on disposals		71,261			-			-			71,261
As at December 31, 2015		(7,858,578	)		(5,111,089	)		(1,120,048	)		(14,089,715	)
As at January 1, 2016		(7,858,578	)		(5,111,089	)		(1,120,048	)		(14,089,715	)
Charge for the year		(2,427,730	)		(2,843,973	)		(331,321	)		(5,603,024	)
Written back on disposals		341,081			223,321			52,970			617,372
As at December 31, 2016		(9,945,227	)		(7,731,741	)		(1,398,399	)		(19,075,367	)
Net book value:
As at December 31, 2014		1,070,978			1,023,096			1,032,871			3,126,945
As at December 31, 2015		4,266,267			3,850,224			1,028,955			9,145,446
As at December 31, 2016		8,737,198			9,267,614			675,651			18,680,463

34

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

12 Intangible assets and goodwill

			2016		2015		January 1, 2015
	Note		RMB		RMB		RMB
					unaudited		unaudited
Intangible assets		(a)		2,999,817		3,985,289		5,102,432
Goodwill		(b)		-		20,279,026		20,279,026
Total				2,999,817		24,264,315		25,381,458

(a) Intangible assets

	Software			Cooperation agreement			Trademarks		Total
	RMB			RMB			RMB		RMB
Cost:
As at January 1, 2014		7,161,075			5,030,000			2,970,000		15,161,075
Additions		118,543			-			-		118,543
As at December 31, 2014		7,279,618			5,030,000			2,970,000		15,279,618
As at January 1, 2015		7,279,618			5,030,000			2,970,000		15,279,618
As at December 31, 2015		7,279,618			5,030,000			2,970,000		15,279,618
As at January 1, 2016		7,279,618			5,030,000			2,970,000		15,279,618
Additions		6,980			-			-		6,980
As at December 31, 2016		7,286,598			5,030,000			2,970,000		15,286,598
Accumulated amortization:
As at January 1, 2014		(3,988,862	)		(5,030,000	)		-		(9,018,862	)
Charge for the year		(1,158,324	)		-			-		(1,158,324	)
As at December 31, 2014		(5,147,186	)		(5,030,000	)		-		(10,177,186	)
As at January 1, 2015		(5,147,186	)		(5,030,000	)		-		(10,177,186	)
Charge for the year		(1,117,143	)		-			-		(1,117,143	)
As at December 31, 2015		(6,264,329	)		(5,030,000	)		-		(11,294,329	)
As at January 1, 2016		(6,264,329	)		(5,030,000	)		-		(11,294,329	)
Charge for the year		(992,452	)		-			-		(992,452	)
As at December 31, 2016		(7,256,781	)		(5,030,000	)		-		(12,286,781	)
Net book value:
As at December 31, 2014		2,132,432			-			2,970,000		5,102,432
As at December 31, 2015		1,015,289			-			2,970,000		3,985,289
As at December 31, 2016		29,817			-			2,970,000		2,999,817

35

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

12 Intangible assets and goodwill (continued)

(b) Goodwill

	2016			2015			January 1, 2015
	RMB			RMB			RMB
				unaudited			unaudited
Cost:
Balance at the beginning and the end of the year		79,495,583			79,495,583			79,495,583
Impairment losses:
Balance at the beginning of the year		(59,216,557	)		(59,216,557	)		(59,216,557	)
Charge for the year		(20,279,026	)		-			-
Balance at the end of the year		(79,495,583	)		(59,216,557	)		(59,216,557	)
Carrying amounts:
At the end of the year		-			20,279,026			20,279,026
At the beginning of the year		20,279,026			20,279,026			20,279,026

On August 31, 2006, the Group acquired a 55% stake in Guangzhou Anyu Mortgage Consulting Co., Limited (“Guangzhou Anyu”). On the acquisition date, the fair value of Guangzhou Anyu’s identifiable net assets was RMB42.36 million, 55% of which the Group accounted for was RMB23.3 million. An amount of RMB20.28 million was recognized as goodwill, representing the excess of the consideration transferred over the Group’s proportionate share of the fair value of identifiable net assets. On May 25, 2009, the Group acquired the remaining 45% shares in Guangzhou Anyu for RMB27.47 million. Guangzhou Anyu was incorporated in the PRC in 2003 and was primarily engaged in the business of providing mortgage agency services and loans at the time of acquisition.

(i) Impairment tests for cash-generating units containing goodwill

Goodwill is allocated to the Group’s cash-generating units (CGU) identified as follows:

	2016		2015		January 1, 2015
	RMB		RMB		RMB
			unaudited		unaudited
Micro credit and mortgage agency services		-		20,279,026		20,279,026

36

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

12 Intangible assets and goodwill (continued)

The recoverable amount of the CGU is calculated using Dividend Discount Model (DDM). The projected cash flow for the next year is based on financial budgets approved by management. Cash flows beyond next year are estimated using a weighted average growth rate of 3%, which is consistent with the forecasts in industry research reports. The growth rate does not exceed the long-term average growth rates for the business in which the CGU operates. The projected cash flows are then discounted using a discount rate of 21% as of December 31, 2016 (2015: 21%; 2014: 21%). The discount rate is pre-tax and reflects specific risks relating to the relevant segments. 

In 2016, the key management of Guangzhou Anyu has left the company. Guangzhou Anyu's business model has changed from providing loans to referring micro-credit business to other entities of the Group, resulting in an expected reduction in the operating profits and cash flows in the future. Therefore, the Group recognized a goodwill impairment loss of RMB20,279,026 (2015: nil). The goodwill was fully impaired as of December 31, 2016.

13 Investment in subsidiaries

Name of company (i)	Place and date of incorporation/ establishment	Registered capital	Issued   and fully   paid up capital	Percentage of equity attributable to the Company						Principal activities
				Direct			Indirect
China Financial Services Group Limited 香港泛华金融服务集团有限公司	Hong Kong August 28, 2000	HKD100,000,000	HKD100,000,000		100	%		-		Investment Holding
Fanhua Chuang Li Information Technology (Shenzhen)Co., Ltd. 泛华创利信息技术 (深圳) 有限公司	the PRC December 21, 1999	HKD400,000,000	HKD400,000,000		-			100	%	Investment Holding
Shenzhen Fanhua United Investment Group Co., Ltd. 深圳泛华联合投资集团有限公司	the PRC August 9, 2006	RMB250,000,000	RMB250,000,000		-			100	%	Investment Holding
Shenzhen Fanyingjie Asset Management Co., Ltd. 深圳泛盈捷资产管理有限公司	the PRC December 12, 2007	RMB30,000,000	RMB30,000,000		-			100	%	Asset Management
Guangzhou Anyu Mortgage Consulting Co., Ltd. 广州安宇按揭咨询有限公司	the PRC January 23, 2003	RMB2,220,000	RMB2,220,000		-			100	%	Micro credit and mortgage agency services
Zhengzhou Lirui Financial Advisory Co., Ltd. 郑州利瑞财务咨询有限公司	the PRC December 17, 2009	RMB500,000	RMB500,000		-			100	%	Financial consultancy
Chongqing Fengjie Financial Advisory Co., Ltd. 重庆丰捷财务咨询有限公司	the PRC June 13, 2010	RMB500,000	RMB500,000		-			100	%	Financial consultancy
Guangzhou Chengze Information Technology Co., Ltd. 广州诚泽信息科技有限公司	the PRC December 11, 2006	RMB3,000,000	RMB3,000,000		-			100	%	Software  development and maintenance
Qidong Fanhua Financial Management Co., Ltd. 启东泛华财务管理有限公司	the PRC December 11, 2006	RMB300,000	RMB300,000		-			100	%	Asset Management

37

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

13 Investment in subsidiaries (continued)

Name of company (i)	Place and date of  incorporation/ establishment	Registered capital	Issued and fully paid up capital	Percentage of equity attributable to the Company					Principal activities
				Direct		Indirect
Shenzhen Fanyingjie Equity Investment and Fund Management Co., Ltd.  深圳泛盈捷股权投资基金管理有限公司	the PRC  June 20, 2011	RMB20,000,000	RMB20,000,000		-		100	%	Asset Management
Chongqing Liangjiang New Area Fanhua Micro-credit Co., Ltd. 重庆市两江新区泛华小额贷款有限公司	the PRC  December 26,  2011	USD30,000,000	USD30,000,000		-		100	%	Micro credit  and mortgage agency services
Shenzhen Fanhua Micro-credit Co., Ltd. 深圳泛华小额贷款有限公司	the PRC  March 15, 2012	RMB100,000,000	RMB100,000,000		-		100	%	Micro credit and mortgage agency services
Guangzhou Chengyu Fanhua Labor Dispatch Co., Ltd. 广州诚誉泛华劳务派遣有限公司	the PRC  May 21, 2012	RMB2,000,000	RMB2,000,000		-		100	%	Labour outsourcing services
Shenzhen Fanhua Fund Management Services Co., Ltd. 深圳泛华基金管理服务有限公司	the PRC  June 8, 2012	RMB5,000,000	RMB5,000,000		-		100	%	Company register service
Beijing Fanhua Micro-credit Company Limited 北京泛华小额贷款有限公司	the PRC  August 10, 2012	RMB100,000,000	RMB100,000,000		-		100	%	Micro credit and mortgage agency services
Guangzhou Heze Information Technology Co., Ltd. 广州和泽信息科技有限公司	the PRC  September 16,  2010	RMB3,000,000	RMB3,000,000		-		100	%	Software development and maintenance
Beijing Lianxin Chuanghui Information Technology Co., Ltd. 北京联鑫创辉信息技术有限公司	the PRC  February 2, 2012	HKD10,000,000	HKD10,000,000		-		100	%	Software development and maintenance
Shenzhen Fanlian Investment Co., Ltd. 深圳泛联投资有限公司	the PRC  November 26,  2012	RMB30,000,000	RMB30,000,000		-		100	%	Investment Holding
Fanhua Financial Leasing (Shenzhen) Co., Ltd. 泛华融资租赁 (深圳) 有限公司	the PRC  September 4,  2012	USD10,000,000	USD10,000,000		-		100	%	Financial leasing
Shenzhen Fanhua Chengyu Finance Service Co., Ltd. 深圳泛华诚誉金融配套服务有限公司	the PRC March 15, 2012	RMB10,000,000	RMB10,000,000		-		100	%	Labour outsourcing services

38

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

13 Investment in subsidiaries (continued)

Name of company (i)	Place and date of incorporation/ establishment	Registered capital	Issued   and fully   paid up capital		Percentage of equity attributable to the Company					Principal activities
					Direct		Indirect
Shenzhen Taotaojin  Internet Financial Services Company Limited 深圳淘淘金互联网金融 服务有限公司	the PRC August 7, 2014	RMB50,000,000		RMB50,000,000		-		100	%	Investment  Holding
Fanhua Wealth Management (Shenzhen) Co., Ltd. 泛华财富投资管理 (深圳) 有限公司	the PRC March 28, 2016	RMB20,000,000		RMB20,000,000		-		100	%	Asset Management
Hangzhou Shenzhen Fanlian Investment Co., Ltd. 杭州深泛联投资管理有限公司	the PRC  December 14,  2015	RMB1,000,000		-		-		100	%	Asset Management
Fanhua Asset Management (Shenzhen) Co., Ltd. 泛华资产管理 (深圳) 有限公司	the PRC March 30, 2016	RMB10,000,000		-		-		100	%	Asset Management
Shenzhen Yingjiejin Asset Management Co., Ltd. 深圳盈捷金资产管理有限公司	the PRC  December 2, 2014	RMB5,100,000		-		-		100	%	Asset Management
Guangzhou Taotaojin Technology Co., Ltd. 广州淘淘金科技有限公司	the PRC November 21, 2016	RMB10,000,000		-		-		100	%	Software development and maintenance
Beijing Fanhua Qilin Capital Management Co., Ltd.  北京泛华麒麟资本管理有限公司	the PRC December 26, 2016	RMB100,000,000		-		-		100	%	Asset Management
Shenzhen Anying Fengli  Investment Partnership (Limited Partnership) 深圳安盈丰利投资合伙企业(有限合伙) (ii)	the PRC March 14, 2012	RMB3,600,000		RMB200,000		-		6	%	Asset Management
Tianjin Yingjie Investment Partnership (Limited Partnership) 天津盈捷投资合伙企业 (有限合伙) (ii) (iii)	the PRC March 16, 2011	RMB38,400,000		-		-		26	%	Asset Management
Tianjin Yingjieying Investment Partnership (Limited Partnership) 天津盈捷赢投资合伙企业 (有限合伙) (ii) (iii)	the PRC May 11, 2011	RMB62,000,000		-		-		16	%	Asset Management
Tianjin Lianxin Investment Partnership (Limited Partnership) 天津联鑫投资合伙企业 (有限合伙) (ii) (iii)	the PRC  August 18, 2011	RMB29,600,000		-		-		35	%	Asset Management
Tianjin Yingxiu Investment Partnership (Limited Partnership) 天津赢绣投资合伙企业 (有限合伙) (ii) (iii)	the PRC  August 22, 2011	RMB28,800,000		-		-		17	%	Asset Management

39

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

13 Investment in subsidiaries (continued)

Name of company (i)	Place and date of  incorporation/ establishment	Registered capital	Issued and fully paid up capital		Percentage of equity attributable to the Company					Principal activities
					Direct		Indirect
Tianjin Fanjie Investment Partnership (Limited Partnership) 天津泛捷投资合伙企业 (有限合伙) (ii) (iii)	the PRC August 22, 2011	RMB33,700,000		-		-		15	%	Asset Management
No.5 Jinghua Structure Fund 菁华5号信托计划 (iv)	the PRC December 19, 2014	RMB6,547,168,471		RMB6,547,168,471		-		23	%	Micro credit
No.6 Jinghua Structure Fund 菁华6号信托计划 (iv)	the PRC September 9, 2014	RMB95,061,049		RMB95,061,049		-		62	%	Micro credit
Bohai Baichuanghui Structure Fund 渤海百川汇信托计划 (iv)	the PRC  September 12, 2016	RMB112,500,000		RMB112,500,000		-		20	%	Micro credit

(i) The official names of those companies are in Chinese. The English translation is for reference only.

(ii) The management is appointed by the Group, and all the key operation decisions are made by the Group. The Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Therefore, the entity is regarded as a subsidiary of the Group.

(iii) The entities have no operation and the profit has been distributed to the partners according to the partnership agreements. However, the deregistration of business certificates has not been completed as at December 31, 2016.

(iv) Capital of all the three structure funds are used for granting loans to customers, which are managed by the Group. The Group is general partner of the funds, promising the expected returns for limited partners, and provide guarantee on the loans to customers under the fund. Therefore, the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Therefore, the entity is regarded as subsidiary of the Group.

40

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

14 Interest in associate

The Group had interests in an associate named Fujian Jianyin Channel Equity Investment Management Co., Ltd. (福建建银海峡股权投资管理有限公司). The Group owned 30% of the equity interests; and determined that it has significant influence because it has representation on the board of the investee. The associate was liquidated in 2016.

The following table analyses, in aggregate, the carrying amount and share of profit of the associate.

	2016		2015		January 1, 2015
	RMB		RMB		RMB
			unaudited		unaudited
Carrying amount of interests in associate		-		3,219,847		2,987,652
Share of:
- Profit from continuing operations		47,122		232,195		1,245

15 Available-for-sale financial assets

			2016			2015			January 1, 2015
	Note		RMB			RMB			RMB
						unaudited			unaudited
Carrying amount:
Investment management products managed by securities companies				112,865,781			644,681,938			156,887,895
Investment fund				-			-			51,398,993
Equity investments				71,090,001			31,880,001			13,305,000
Subtotal				183,955,782			676,561,939			221,591,888
Less: Impairment losses		(a)		(51,270,001	)		(13,307,305	)		-
Total				132,685,781			663,254,634			221,591,888

(a) Movement of impairment losses

	2016		2015		January 1, 2015
	RMB		RMB		RMB
			unaudited		unaudited
Balance at January 1		13,307,305		-		-
Charge for the year		37,962,696		13,307,305		-
Balance at December 31		51,270,001		13,307,305		-

41

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

16 Loans and advances to customers

			2016			2015			January 1, 2015
	Note		RMB			RMB			RMB
						unaudited			unaudited
Gross loans and advances to customers				7,281,885,329			2,401,334,845			1,232,848,244
Less: Impairment losses
- Individually assessed				(55,180,661	)		(20,804,475	)		(7,638,026	)
- Collectively assessed				(84,175,450	)		(12,516,300	)		(4,869,596	)
Subtotal		(a)		(139,356,111	)		(33,320,775	)		(12,507,622	)
Net loans and advances to customers				7,142,529,218			2,368,014,070			1,220,340,622

(a) Movements of impairment losses

			2016
			Allowances for loans and advances which are collectively assessed			Allowances for impaired loans and advances which are individually assessed			Total
	Note		RMB			RMB			RMB
As at January 1				12,516,300			20,804,475			33,320,775
Charge for the year		8		75,813,844			47,123,053			122,936,897
Recoveries				(4,154,694	)		(12,746,867	)		(16,901,561	)
As at December 31				84,175,450			55,180,661			139,356,111

42

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

16  Loans and advances to customers (continued)

			2015 (unaudited)
			Allowances for loans and advances which are collectively assessed			Allowances for impaired loans and advances which are individually assessed			Total
	Note		RMB			RMB			RMB
As at January 1				4,869,596			7,638,026			12,507,622
Charge for the year		8		9,293,786			16,831,171			26,124,957
Recoveries				(1,647,082	)		(3,664,722	)		(5,311,804	)
As at December 31				12,516,300			20,804,475			33,320,775

			2014 (unaudited)
			Allowances for loans and advances which are collectively assessed			Allowances for impaired loans and advances which are individually assessed			Total
	Note		RMB			RMB			RMB
As at January 1				2,002,350			6,763,733			8,766,083
Charge for the year		8		4,362,060			7,031,233			11,393,293
Write-offs				-			(3,273,580	)		(3,273,580	)
Recoveries				(1,494,814	)		(2,883,360	)		(4,378,174	)
As at December 31				4,869,596			7,638,026			12,507,622

43

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

17 Income tax expense in the consolidated statement of financial position

(a) Current tax liabilities

			2016			2015			January 1, 2015
	Note		RMB			RMB			RMB
						unaudited			unaudited
At the beginning of the year				36,064,216			37,339,589			37,626,639
Provision for PRC income tax for the year		9(a)		86,186,945			35,698,715			35,846,630
PRC income tax paid				(25,672,356	)		(36,974,088	)		(36,133,680	)
At the end of the year				96,578,805			36,064,216			37,339,589

44

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

17 Income tax expense in the consolidated statement of financial position (continued)

(b) Deferred tax assets and liabilities recognized:

(i) The components of deferred tax assets/ (liabilities) recognized in the consolidated statement of financial position and the movements during the years are as follows:

	Impairment provision			Amortisation of intangible assets			Depreciation of property, plant and equipment			Accrued payroll			Other accrued expenses			Fair value change in available-for-sale financial assets			Total deferred tax assets			Amortisation of intangible assets			Fair value change in available-for-sale financial assets			Total deferred tax liabilities
	RMB			RMB			RMB			RMB			RMB			RMB			RMB			RMB			RMB			RMB
At January 1, 2014		2,191,521			1,722,894			430,689			2,108,326			1,255,014			3,285,037			10,993,481			(742,500	)		(314,384	)		(1,056,884	)
Recognized in profit or loss		3,975,168			311,487			397,522			3,237,893			165,887			675,801			8,763,758			-			(2,161,734	)		(2,161,734	)
Recognized in reserve		(1,912,939	)		(215,157	)		(250,654	)		(2,108,326	)		(995,014	)		(3,285,037	)		(8,767,127	)		-			314,385			314,385
At December 31, 2014		4,253,750			1,819,224			577,557			3,237,893			425,887			675,801			10,990,112			(742,500	)		(2,161,733	)		(2,904,233	)
At January 1, 2015		4,253,750			1,819,224			577,557			3,237,893			425,887			675,801			10,990,112			(742,500	)		(2,161,733	)		(2,904,233	)
Recognized in profit or loss		8,546,863			9,914			(101,210	)		2,291,896			109,212			-			10,856,675			-			-			-
Recognized in reserve		-			-			-			-			-			2,401,585			2,401,585			-			(66,710,593	)		(66,710,593	)
At December 31, 2015		12,800,613			1,829,138			476,347			5,529,789			535,099			3,077,386			24,248,372			(742,500	)		(68,872,326	)		(69,614,826	)
At January 1, 2016		12,800,613			1,829,138			476,347			5,529,789			535,099			3,077,386			24,248,372			(742,500	)		(68,872,326	)		(69,614,826	)
Recognized in profit or loss		37,269,525			(152,964	)		1,546,827			(5,529,789	)		336,539			-			33,470,138			-			-			-
Recognized in reserve		-			-			-			-			-			(2,104,552	)		(2,104,552	)		-			66,997,902			66,997,902
At December 31, 2016		50,070,138			1,676,174			2,023,174			-			871,638			972,834			55,613,958			(742,500	)		(1,874,424	)		(2,616,924	)

45

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

17 Income tax expense in the consolidated statement of financial position (continued)

(ii) Reconciliation to the consolidated statement of financial position

	2016			2015			January 1, 2015
	RMB			RMB			RMB
				unaudited			unaudited
Deferred tax assets recognized on the consolidated statement of financial position		55,613,958			24,248,372			10,990,112
Deferred tax liabilities recognized on the consolidated statement of financial position		(2,616,924	)		(69,614,826	)		(2,904,233	)

(c) Deferred tax assets not recognized:

			2016		2015		January 1, 2015
	Note		RMB		RMB		RMB
					unaudited		unaudited
Tax losses		(i)		86,140,716		23,014,664		13,294,252
Goodwill impairment loss		(ii)		20,279,026		-		-
Total				106,419,742		23,014,664		13,294,252

(i) Tax losses

In accordance with the accounting policy set out in Note 3(n), the Group has not recognized deferred tax assets in respect of unused tax losses of RMB86,140,716 at December 31, 2016 (2015: RMB23,014,664; 2014: RMB13,294,252) as it is not probable that those losses and temporary difference can be utilized in the foreseeable future. According to current tax law, the Group can use these deductible losses for tax deduction if the Group gets enough taxable income in the next five years.

(ii) Goodwill impairment loss

In accordance with the accounting policy set out in Note 3(n), the Group has not recognized deferred tax assets in respect of goodwill impairment loss of RMB20,279,026 as at December 31, 2016 (2015: nil; 2014: nil). The goodwill was recognized initially on the acquisition of Guangzhou Anyu. As it is not probable that the Group will dispose of the company, this loss cannot be utilized in the foreseeable future.

46

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

18 Trade and other receivables

			2016			2015			January 1, 2015
	Note		RMB			RMB			RMB
						unaudited			unaudited
Interest receivables				120,433,765			71,472,633			35,522,301
Other trade receivables				10,258,654			11,768,850			11,971,095
Less: Impairment losses		(b)		(15,470,310	)		(10,390,242	)		(6,976,219	)
Trade receivables				115,222,109			72,851,241			40,517,177
Deposits				51,592,458			10,660,214			2,446,843
Advances to employees				16,306,520			6,899,250			4,566,287
Receivables for release of loans				10,868,038			8,376,493			610,886
Prepayments				5,007,153			1,097,854			1,138,590
Other receivables				16,474,774			9,903,426			5,040,350
Total				215,471,052			109,788,478			54,320,133

(a) Aging analysis

The aging analysis of trade receivables, based on the invoice date and net of impairment losses of the Group is as follows:

	2016		2015		January 1, 2015
	RMB		RMB		RMB
			unaudited		unaudited
Within 1 month		113,690,745		68,078,485		33,041,094
Over 1 month but less than 3 months		2,314,632		1,008,645		2,973,515
Over 3 months but less than 1 year		2,597,568		2,581,608		4,938,364
More than 1 year		12,089,474		11,572,745		6,540,423
Total		130,692,419		83,241,483		47,493,396

47

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

18 Trade and other receivables (continued)

(b) Movements of impairment losses

The movement in the impairment losses on trade receivables during the years is as follows:

	2016			2015			January 1, 2015
	RMB			RMB			RMB
				unaudited			unaudited
At the beginning of the year		10,390,242			6,976,219			5,742,421
Charge for the year		5,332,042			6,971,886			1,246,848
Written-offs		(246,640	)		(3,472,848	)		-
Recoveries		(5,334	)		(85,015	)		(13,050	)
At the end of the year		15,470,310			10,390,242			6,976,219

19 Cash and cash equivalents

	2016		2015		January 1, 2015
	RMB		RMB		RMB
			unaudited		unaudited
Demand deposits and term deposits with banks with original maturity less than three months		232,391,435		259,806,107		158,310,858
Cash on hand		747,153		275,689		256,158
Cash and bank deposits in the consolidated statement of financial position		233,138,588		260,081,796		158,567,016

48

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

20 Share capital and reserves

(a) Share capital

	2016		2015		January 1, 2015
	RMB		RMB		RMB
			unaudited		unaudited
Ordinary shares, issued and fully paid:
In issue at January 1		80,973,634		80,973,634		80,973,634
In issue at December 31		80,973,634		80,973,634		80,973,634

As set out in Note 1, the Company was incorporated in the British Virgin Islands on October 6, 2006. Upon completion of ordinary shares issuance, allotment and repurchase, the issued shares of the Company was 1,230,434,040 of US$0.01 each as at August 1, 2011. No change has been made to the issued shares since August 1, 2011.

(b) Capital reserve

The capital reserve represents (1) the difference between the nominal value of share capital and the paid-up capital of the Company; (2) the difference between the purchase price and the proportionate share of the identifiable net assets of Guangzhou Anyu when the Group acquired its remaining shares to take full ownership.

(c) Surplus reserve

In accordance with the Company’s PRC subsidiaries’ articles of associate, the subsidiaries are required to appropriate 10% of their net profits, upon approval by board of directors.

(d) Regulatory reserve

With effect from July 1, 2012, pursuant to the “Administrative Measures on Accrual of Provisions by Financial Institutions” issued by the MOF in March 2012, the Group is required, in principle, to set aside a general reserve not lower than 1.5% of the ending balance of its gross risk-bearing assets.

(e) Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for sale securities held at the end of the reporting period and are dealt with in accordance with the accounting policies in Note 3(i).

49

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

20 Share capital and reserves (continued)

(f) Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of operations with functional currency other than RMB. The reserve is dealt with in accordance with the accounting policies set out in Note 3(q).

(g) Equity-settled share-based payment arrangements

(i) Description of equity-settled share-based payment arrangements

At December 31, 2016, the Group had the following equity-settled share-based payment arrangements.

On November 1, 2009, the Company granted options to its directors and employees to purchase up to 25,678 ordinary shares of the Company. Pursuant to the option agreements entered into between the Company and the option grantees, the options shall vest over a five-year period from 2010 to 2014. The number of options that the grantees are entitled to in each year will be calculated based on the key performance indicator scores of the grantees in the respective prior year and continued employment is not regarded as vesting condition. Accordingly, 60%, 10%, 10%, 10% and 10% of the award options shall vest on January 1, each of the years 2010 to 2014, respectively.

On January 24, 2011, the Company divided the existing issued shares, US$0.10 each share into US$0.01 each share. On the same day, the Company allotted and issued new shares to its existing shareholders in accordance with the ratio of 1:637. Upon completion of such share split and share allotment, the number of such share options was adjusted from 25,678 to 163,825,640. Accordingly, the exercise price was adjusted from RMB3,190 to RMB0.5. The expiration date of such options was December 31, 2016 originally, and extended to December 31, 2018 in 2016.

50

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

20 Share capital and reserves (continued)

(ii) Fair value of share options and assumptions

The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The estimate of the fair value of the share options granted is measured based on a binomial lattice model. The contractual life of the share option is used as an input into this model. Expectations of early exercise are incorporated into the binomial lattice model.

	Share awards granted on November 1, 2009
Fair value of share options and assumptions
Fair value of share options at measurement date		640.1
Share price		1,506
Exercise price		3,190
Expected volatility (expressed as weighted average volatility used in the modelling under binomial lattice model)		71	%
Option life (expressed as weighted average life used in the modeling under binomial lattice model)		7.17
Expected dividend yield		0.0	%
Risk-free interest rate (based on Exchange Fund Notes)		3.5	%

The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility based on publicly available information. Expected dividends are based on historical dividends. Changes in the subjective input assumptions could materially affect the fair value estimate.

Share options were granted under a service condition. This condition has not been taken into account in the grant date fair value measurement of the services received. There was no market conditions associated with the share option grants.

51

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

21 Interest-bearing borrowings

			2016		2015		January 1, 2015
	Note		RMB		RMB		RMB
					unaudited		unaudited
Borrowings from
- Related parties		(i)		-		-		174,849,469
- Asset management partnerships		(ii)		450,000,000		-		-
- The peer-to-peer lending platform of the Group's subsidiary		(iii)		602,850,285		267,939,824		-
- Investors of asset management plans		(iv)		-		390,453,000		231,100,000
Interest payable to
- Related parties		(i)		32,494,914		36,508,260		28,106,194
- Asset management partnerships		(ii)		3,889,315		-		-
- The peer-to-peer lending platform of the Group's subsidiary		(iii)		5,350,887		1,275,456		-
- Investors of asset management plans		(iv)		-		12,477,125		3,911,055
Total				1,094,585,401		708,653,665		437,966,718

(i) The Group’ s related parties, Fanhua Inc. and its subsidiaries, agreed to grant a revolving loan with a maximum amount of US$50,000,000 (equivalent to RMB317, 990,000 as per the agreement) to the Group. The amounts are unsecured and bear interest at 7.3% and are repayable on demand. As of December 31, 2016, the amount of principal payable due to Fanhua Inc. and its subsidiaries are nil (2015: nil; 2014: RMB174,849,469), and RMB32,494,914 (2015: RMB36,508,260; 2014: RMB28,106,194) interest payable.

(ii) The borrowings from asset management partnerships are from Beijing Shanzheng Longhua Capital Management Partnership (Limited Partnership) with principal RMB150 million, and Shenzhen Zhongzhidixun Investment Partnership (Limited Partnership) with principal RMB300 million. The interest-bearing borrowings bear interest at 11% and 8% per year, respectively.

(iii) The third parties invest on peer-to-peer lending platform of the Group's subsidiary, interest rate range is from 5.3% to 10% per year.

(iv) The third parties invest on Ping’an Huitong asset management plan and Wanjia Gongying asset management plan, bearing interest at 9% and 11.5% per year, respectively.

52

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

22 Accruals and other payables

			2016		2015		January 1, 2015
	Note		RMB		RMB		RMB
					unaudited		unaudited
Payables to interest holders of consolidated structured entities		(i)		5,169,370,000		1,258,740,000		277,640,000
Interest payable				61,566,829		26,464,396		44,534,229
Customer pledged deposits				77,807,696		117,394,191		11,172,813
Accrued staff cost				51,329,948		23,222,277		12,910,238
Other tax payables				51,236,294		27,756,263		9,030,024
Amounts due to related parties				-		-		1,500,000
Amounts due to third parties				23,848,850		13,518,799		18,686,699
Payable to banks as mortgage agency		(ii)		15,173,806		65,276,128		23,903,216
Receipt in advance				1,077,372		16,409,930		18,867,631
Others				36,563,913		20,199,098		35,370,637
Total				5,487,974,708		1,568,981,082		453,615,487

(i) The financial liabilities arising from the consolidated structured entities with underlying investments in loans and advances to customers are classified as other payables and accruals in these consolidated financial statements. It is because, the Group has an obligation to pay other investors upon maturity dates of the structured entities based on the net book value and related terms of those consolidated structured funds.

(ii) The amount mainly represents payable to the original bank for settling the loan and releasing collateral on behalf of customers of mortgage agency services.

(iii) All of other trade and other payables (including interest payable to related parties) are expected to be settled or recognized as income within one year or are repayable on demand.

23 Segment reporting

The principal activity of the Group is micro credit business. The Group has similar economic characteristic and is similar in respect of the business nature, products, customer type and services. Therefore the Group does not disclose segmental report based on the information used internally by the chief operating decision maker for purpose of assessing performance and making resource allocation decisions.

53

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments

(i) Capital management

The Group’s primary objective when managing capital is to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for equity shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Group actively and regularly reviews and manages its capital structure, to maintain a balance between the higher shareholders returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

There were no changes in the Group’s approach to capital management during the years.

Particularly for credit loan operation, the Group monitors regularly the residual balance of outstanding credit loans for single customers and multiples of the total credit loans in relation to share capital of companies in the Group credit loan business, so as to keep the capital risk within an acceptable limit. The decision to manage the share capital of companies in the Group to meet the needs of developing credit loan business rests with the directors.

(ii) Exposure to risk

Exposure to credit, market and liquidity risks arises in the normal course of the Group’s business. The Group is also exposed to equity price risk arising from its equity investments in other entities. The Group’s exposure to these risks and the financial risk management policies and practice used by the Group to manage these risks are described below.

54

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

(a) Credit risk

Credit risk arises from a customer’s inability or unwillingness to meet its financial obligations to make timely payments under loans the Group provided. Credit risk is primarily attributable to the loan business of the Group, loans and advances to customers and trade and other receivables.

The maximum exposure to credit risk is represented by the net carrying amount of each type of financial assets as at the end of the reporting periods.

Credit risk arising from loans and advances to customers

To identify, evaluate, monitor and manage credit risk, the Group designs the risk management structure, credit policies and processes required for effective credit risk management which have been implemented across the Group upon approval of the Board. The Board is responsible for formulating the credit policies, management framework and marketing strategies from time to time, analysing the development of micro credit and mortgage agency services businesses and the level of risk management, and approving loans with amounts exceeding the authorized limit of the senior management in accordance with relevant rules, regulations and monetary policies in the PRC and the Group’s business strategy.

The Group carries out pre-approval, review and credit approval of loans by professionals for credit risk arising from micro credit business. During the post-transaction monitoring process, the Group conducts a visit of customers regularly after disbursement of loans, and conducts on-site inspection when the Group considers it is necessary. The review focuses on the status of the collateral.

The Group has established relevant mechanisms to apply tiered management of credit risks, and set limits to acceptable risks for different industries and geographical regions. The Group monitors the risk status of these customers regularly.

The Group adopts a loan risk classification approach to manage the loan portfolio risk. Loans are classified as non-impaired and impaired based on the different risk level. When one or more event demonstrates there is objective evidence of impairment and causes losses, corresponding loans are considered to be classified as impaired. The allowance for impairment losses on impaired loans are collectively or individually assessed as appropriate.

The Group applies a series of criteria in determining the classification of loans. The loan classification criteria focuses on a number of factors, including (i) the borrower’s ability to repay the loan; (ii) the borrower’s repayment history; (iii) the borrower’s willingness to repay; (iv) the net realizable value of any collateral; and (v) the prospect for the support from any financially responsible guarantor. The Group also takes into account the length of time for which payments of principal and interest on a loan are overdue.

55

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

In accordance with accounting policies and regulations, if there is objective evidence that indicates the cash flow for a particular loan is expected to decrease, and the amount can be estimated, the loan is recorded as an impaired loan and the impairment loss is recognized in the income statement.

(i) Breakdown of total credit extended by the Group by type of collateral:

	2016			2015			January 1, 2015
	RMB			RMB			RMB
				unaudited			unaudited
Collateralised loans		7,281,459,545			2,383,995,115			1,224,363,998
Unsecured loans		425,784			17,339,730			8,484,246
Gross loans and advances to customers		7,281,885,329			2,401,334,845			1,232,848,244
Less: Impairment losses
Individually assessed		(55,180,661	)		(20,804,475	)		(7,638,026	)
Collectively assessed		(84,175,450	)		(12,516,300	)		(4,869,596	)
Subtotal		(139,356,111	)		(33,320,775	)		(12,507,622	)
Net loans and advances to customers		7,142,529,218			2,368,014,070			1,220,340,622

(ii) The credit quality of loans and advances to customers:

	2016			2015			January 1, 2015
	RMB			RMB			RMB
				unaudited			unaudited
Gross loans and advances to customers
Neither overdue nor impaired		6,955,872,213			2,136,903,426			1,035,777,576
Overdue but not impaired		222,969,993			159,950,942			159,945,351
Impaired		103,043,123			104,480,477			37,125,317
Less: Impairment losses
Neither overdue nor impaired		(56,434,034	)		(5,801,058	)		(1,666,005	)
Overdue but not impaired		(27,741,416	)		(6,715,241	)		(3,203,591	)
Impaired		(55,180,661	)		(20,804,476	)		(7,638,026	)
Net balance
Neither overdue nor impaired		6,899,438,179			2,131,102,368			1,034,111,571
Overdue but not impaired		195,228,577			153,235,701			156,741,760
Impaired		47,862,462			83,676,001			29,487,291
Net loans and advances to customers		7,142,529,218			2,368,014,070			1,220,340,622

56

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

(iii) Analysed by geographical sector

	December 31, 2016
	Loan balance			Percentage
	RMB
Pearl River Delta		2,072,300,414			28	%
Yangtze River Delta		2,719,591,352			37	%
Bohai Rim		1,598,296,773			22	%
Others		891,696,790			13	%
Total		7,281,885,329
Less: Impairment losses
Individually assessed		(55,180,661	)
Collectively assessed		(84,175,450	)
Total		(139,356,111	)
Net loans and advances to customers		7,142,529,218

	December 31, 2015 (unaudited)
	Loan balance			Percentage
	RMB
Pearl River Delta		667,162,550			28	%
Yangtze River Delta		834,386,817			35	%
Bohai Rim		372,453,406			16	%
Others		527,332,072			21	%
Total		2,401,334,845
Less: Impairment losses
Individually assessed		(20,804,475	)
Collectively assessed		(12,516,300	)
Total		(33,320,775	)
Net loans and advances to customers		2,368,014,070

	January 1, 2015 (unaudited)
	Loan balance			Percentage
	RMB
Pearl River Delta		242,180,815			20	%
Yangtze River Delta		499,050,132			40	%
Bohai Rim		119,640,773			10	%
Others		371,976,524			30	%
Total		1,232,848,244
Less: Impairment losses
Individually assessed		(7,638,026	)
Collectively assessed		(4,869,596	)
Total		(12,507,622	)
Net loans and advances to customers		1,220,340,622

57

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

(iv) Overdue loans analyzed by type of collateral and overdue period

	December 31, 2016
	Overdue within three months		Overdue between three months and one year		Overdue between one year and three years		Overdue more than three years		Total
	RMB		RMB		RMB		RMB		RMB
Loans secured by tangible other than monetary assets		222,969,993		43,432,017		52,629,523		6,555,799		325,587,332
Unsecured loans		-		-		-		425,784		425,784
Total		222,969,993		43,432,017		52,629,523		6,981,583		326,013,116

	December 31, 2015 (unaudited)
	Overdue within three months		Overdue between three months and one year		Overdue between one year and three years		Overdue more than three years		Total
	RMB		RMB		RMB		RMB		RMB
Loans secured by tangible other than monetary assets		153,919,842		69,387,881		21,948,217		2,207,749		247,463,689
Unsecured loans		6,031,100		7,882,284		2,157,100		897,246		16,967,730
Total		159,950,942		77,270,165		24,105,317		3,104,995		264,431,419

	January 1, 2015 (unaudited)
	Overdue within three months		Overdue between three months and one year		Overdue between one year and three years		Overdue more than three years		Total
	RMB		RMB		RMB		RMB		RMB
Loans secured by tangible other than monetary assets		159,945,351		24,716,878		9,142,625		-		193,804,854
Unsecured loans		-		-		2,440,030		825,784		3,265,814
Total		159,945,351		24,716,878		11,582,655		825,784		197,070,668

58

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

(v) Fair value of collateral and other credit enhancement held against financial assets

	2016		2015		January 1, 2015
	RMB		RMB		RMB
			unaudited		unaudited
Fair value of collateral held against financial assets that are:
Neither overdue nor impaired		24,303,909,300		7,864,531,882		3,848,747,982
Overdue but not impaired		696,857,840		629,246,700		537,199,100
Impaired		402,539,900		314,298,700		119,929,346
Total		25,403,307,040		8,808,077,282		4,505,876,428

Other credit risks

In respect of trade and other receivables, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluation focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Normally, the Group does not obtain collateral from customers.

Further quantitative disclosure in respect of the Group’s exposure to credit risk arising from loans and advances to customers and trade and other receivables are set out in Note 16 and Note 18, respectively.

(b) Market risk

Market risk arises when the adverse changes in market prices (interest rates, exchange rates, as well as equity prices and other prices) lead to losses from the Group’s on-balance sheet and off-balance sheet businesses. The Group’s market risk mainly arises from currency risk and interest rate risk.

(i) Currency risk

The Group’s businesses are principally conducted in RMB, and the recognised assets or liabilities are mainly denominated in the functional currency of the Group entity to which they relate at the end of the reporting period. Accordingly, the directors considered the Group’s exposure to foreign currency risk is not significant during the year.

59

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

(ii) Interest rate risk

Interest-bearing financial instruments at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest risk, respectively. The Group determines the appropriate weightings of the fixed and floating rate interest bearing instruments based on the current market conditions and performs regular reviews and monitoring to achieve an appropriate mix of fixed and floating rate exposure.

● Interest rate profile

As at December 31, the Group held the following interest-bearing financial instruments:

				2016			2015			January 1, 2015
	Note			RMB			RMB			RMB
							unaudited			unaudited
Fixed interest rate
Asset
- Loans and advances to customers		16			7,142,529,218			2,368,014,070			1,220,340,622
Liabilities
- Interest-bearing borrowings		21			(1,094,585,401	)		(708,653,665	)		(437,966,718	)
- Accruals and other payables		22	(i)		(5,169,370,000	)		(1,258,740,000	)		(277,640,000	)
Net					878,573,817			400,620,405			504,733,904
Variable interest rate
Asset
- Demand deposits and term deposits with banks with original maturity less than three months		19			232,391,435			259,806,107			158,310,858
Net					232,391,435			259,806,107			158,310,858

● Sensitivity analysis

As of December 31, 2016, 2015 and January 1, 2015, we estimated that a general increase/decrease of 25 basis points in the interest rates, with all other variables held constant, would have increased or reduced our profit before tax by approximately RMB475,041, RMB545,768 and RMB319,230 respectively.

The sensitivity analysis above indicates the instantaneous change in our profit before tax that would arise assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to re-measure those financial instruments held by us which expose us to fair value interest rate risk at the end of the reporting period. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by us at the end of the reporting period, the impact on our profit before tax is estimated as an annualized impact on interest expense or income of such a change in interest rates.

60

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

(c) Liquidity risk

(i) Maturity analysis

The following tables provide an analysis of liabilities of the Group into relevant maturity groupings based on the remaining periods to repayment at the end of the years

	December 31, 2016
	Carrying amount		Repayable on demand		Within 3 months		Between 3 months and 1 year		Between 1 and 5 years		Over 5 years		Undated
	RMB		RMB		RMB		RMB		RMB		RMB		RMB
Accruals and other payables		5,487,974,708		147,915,179		909,188,407		3,927,231,122		503,640,000		-		-
Interest-bearing borrowings		1,094,585,401		36,384,230		221,509,860		836,691,311		-		-		-
Total		6,582,560,109		184,299,409		1,130,698,267		4,763,922,433		503,640,000		-		-

	December 31, 2015 (unaudited)
	Carrying amount		Repayable on demand		Within 3 months		Between 3 months and 1 year		Between 1 and 5 years		Over 5 years		Undated
	RMB		RMB		RMB		RMB		RMB		RMB		RMB
Accruals and other payables		1,568,981,082		217,471,746		392,117,473		923,391,863		36,000,000		-		-
Interest-bearing borrowings		708,653,665		36,508,260		217,361,353		449,851,199		4,932,853		-		-
Total		2,277,634,747		253,980,006		609,478,826		1,373,243,062		40,932,853		-		-

	January 1, 2015 (unaudited)
	Carrying amount		Repayable on demand		Within 3 months		Between 3 months and 1 year		Between 1 and 5 years		Over 5 years		Undated
	RMB		RMB		RMB		RMB		RMB		RMB		RMB
Accruals and other payables		453,615,487		124,083,206		51,892,281		219,140,000		58,500,000		-		-
Interest-bearing borrowings		437,966,718		202,955,663		3,911,055		-		231,100,000		-		-
Total		891,582,205		327,038,869		55,803,336		219,140,000		289,600,000		-		-

61

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

(ii) Contractual undiscounted cash flow

Management regularly monitors the Group’s liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and long term. The following tables show the remaining contractual maturities at the end of the each reporting period of the Group’s financial liabilities, which are based on contractual undiscounted cash flows and the earliest date the Group can be required to pay:

	December 31, 2016
	Carrying amount		Contractual undiscounted cash outflows		Repayable on demand		Within  3 months		Between 3 months and 1 year		Between 1 and 5 years		Over 5 years		Undated
	RMB		RMB		RMB		RMB		RMB		RMB		RMB		RMB
Accruals and other payables		5,487,974,708		5,823,970,010		147,915,180		969,516,968		4,159,638,973		546,898,889		-		-
Interest-bearing borrowings		1,094,585,401		1,156,809,689		36,384,229		225,833,040		894,592,420		-		-		-
Total		6,582,560,109		6,980,779,699		184,299,409		1,195,350,008		5,054,231,393		546,898,889		-		-

	December 31, 2015 (unaudited)
	Carrying amount		Contractual undiscounted cash outflows		Repayable on demand		Within 3 months		Between 3 months and 1 year		Between 1 and 5 years		Over 5 years		Undated
	RMB		RMB		RMB		RMB		RMB		RMB		RMB		RMB
Accruals and other payables		1,568,981,082		1,843,509,773		217,471,746		436,199,479		1,153,680,740		36,157,808		-		-
Interest-bearing borrowings		708,653,665		734,546,429		36,508,260		221,683,071		471,307,557		5,047,541		-		-
Total		2,277,634,747		2,578,056,202		253,980,006		657,882,550		1,624,988,297		41,205,349		-		-

	January 1, 2015 (unaudited)
	Carrying  amount		Contractual undiscounted cash outflows		Repayable on demand		Within 3 months		Between 3 months and 1 year		Between 1 and 5 years		Over 5 years		Undated
	RMB		RMB		RMB		RMB		RMB		RMB		RMB		RMB
Accruals and other payables		453,615,487		489,081,805		122,583,206		59,765,086		242,578,979		64,154,534		-		-
Interest-bearing borrowings		437,966,718		437,966,718		202,955,663		3,911,055		-		231,100,000		-		-
Total		891,582,205		927,048,523		325,538,869		63,676,141		242,578,979		295,254,534		-		-

62

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

(d) Fair values

The carrying amounts of the Group’s financial instruments carried at cost or amortised cost are not materially different from their fair values as at January 1, 2015, December 31, 2015 and 2016.

(i) Fair value hierarchy

The following table presents the fair value of the Group’s financial instruments measured at the end of the reporting period on a recurring basis, categorised into the three-level fair value hierarchy as defined in IFRS 7, Financial Instruments: Disclosures. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

- Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date

- Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available.

- Level 3 valuations: Fair value measured using significant unobservable inputs

	December 31, 2016
	Fair value		Level 1		Level 2		Level 3
	RMB		RMB		RMB		RMB
Investment management products managed by securities companies		62,865,781		-		62,865,781		-
Equity investments		69,820,000		30,010,000		-		39,810,000
Total		132,685,781		30,010,000		62,865,781		39,810,000

	December 31, 2015 (unaudited)
	Fair value		Level 1		Level 2		Level 3
	RMB		RMB		RMB		RMB
Investment management products managed by securities companies		631,374,633		-		578,859,829		52,514,804
Equity investments		31,880,001		-		-		31,880,001
Total		663,254,634		-		578,859,829		84,394,805

63

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

24 Financial risk management and fair values of financial instruments (continued)

	January 1, 2015 (unaudited)
	Fair value		Level 1		Level 2		Level 3
	RMB		RMB		RMB		RMB
Investment management products managed by securities companies		156,887,895		-		54,377,342		102,510,553
Investment fund		51,398,993		-		51,398,993		-
Equity investments		13,305,000		-		-		13,305,000
Total		221,591,888		-		105,776,335		115,815,553

During the years ended December 31, 2014, 2015 and 2016, there were no transfers between instruments in Level 1 and Level 2, or transfers into or out of Level 3. The movement during the period in the balance of Level 3 fair value measurements is as follows:

	2016			2015			January 1, 2015
	RMB			RMB			RMB
				unaudited			unaudited
At the beginning of the year		84,394,805			115,815,553			50,390,789
Net unrealised gains or losses recognised in other comprehensive income during the year		(6,350,530	)		6,183,135			167,395
Payment for purchases		12,348,948			28,994,738			316,904,738
Proceeds from sales		(12,620,527	)		(53,291,316	)		(251,647,369	)
Impairment losses		(37,962,696	)		(13,307,305	)		-
At the end of the year		39,810,000			84,394,805			115,815,553

(ii) Valuation techniques and significant unobservable inputs

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Financial instruments valued with significant unobservable inputs are primarily certain investment management products managed by securities companies and equity securities. The fair value of investment management products managed by securities companies is determined by maximizing the use of observable market data where it is available and rely as little as possible on entity specific estimates. The fair value of equity securities is determined using the price ratios of comparable listed companies adjusted for lack of marketability discount and discounted cash flow analysis, respectively. The fair value measurement is negatively correlated to the discount for lack of marketability.

64

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

25 Interests in structured entities

(a) Interests in structured entities consolidated by the Group

Structured entities consolidated by the Group mainly stand for the structure funds and the asset management scheme as set out in Note 22(i) where the Group involves as manager or investment consultant and also as investor, the Group assesses whether the combination of investments it holds together with its remuneration creates exposure to variability of returns from the activities of the structure funds and the asset management scheme and whether the Group has the ability to affect those returns through its power over the structured funds and the asset management scheme to a level of such significance and that it indicates that the Group is a principal.

As at December 31 2016, payables to interest holders of consolidated structured entities represented capital injection received from structured funds named No.5 and No.6 of Jinghua and Bohai Baichuanghui, as well as capital injection received from asset management plan named No. 3 An Xin, which was settled in 2016. As at December 31, 2016, the total assets of the consolidated structured entities is RMB7,368,535,524 (2015: RMB2,279,057,186; 2014: RMB578,932,985) , and the carrying amount of interests held by the Group in the consolidated structured entities is RMB1,585,359,520 (2015: RMB834,656,409; 2014: RMB281,000,000).

(b) Interests in structured entities sponsored by the Group but not consolidated

Structured entities for which the Group served as general partner or manager, therefore has power over them during the reporting periods are asset management schemes. Except for the structured entities that the Group has consolidated as set out in Note 25(a),the Group’s exposure to the variable returns in the structured entities in which the Group has interest are not significant. The Group therefore did not consolidate these structured entities.

As at December 31, 2016, the total assets of these unconsolidated structured entities managed by the Group amounted to RMB92,000,000 (2015: RMB489,950,000; 2014: RMB457,600,000). As at December 31, 2016, the carrying amount of interests held by the Group in these unconsolidated structured entities are RMB36,374,261 (2015: RMB568,762,569; 2014: RMB52,488,921).

During the years ended December 31, 2016, income derived from these unconsolidated structured entities held by the Group amounted to RMB65,891,580 (2015: RMB1,411,179; 2014: RMB27,152,787).

(c) Interests in structured entities sponsored by third party institutions

The Group holds an interest in some investment management products and Limited Partnership (“the investments”) sponsored by third party institutions and the Group does not consolidate the investments. The nature and purpose of the investments are to generate investment consulting revenue and investment income from those products, plans and funds, also generate management fee and dividend from Limited Partnership as a General Partner.

65

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

25 Interests in structured entities (continued)

The following table sets out an analysis of the carrying amounts of interests held by the Group as at January 1, and December 31, 2015 and 2016 in the investments sponsored by third party institutions, as well as an analysis of the line items in the statement of financial position in which relevant assets are recognized:

	December 31, 2016
	Carrying amount of available-for-sale financial assets		Maximum loss exposure
	RMB		RMB
Investment management products managed by securities companies		26,501,520		26,501,520
Limited Partnership		29,800,000		29,800,000
Total		56,301,520		56,301,520

	December 31, 2015 (unaudited)
	Carrying amount of available-for-sale financial assets		Maximum loss exposure
	RMB		RMB
Investment management products managed by securities companies		63,192,064		63,192,064
Limited Partnership		20,100,000		20,100,000
Total		83,292,064		83,292,064

66

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

25 Interests in structured entities (continued)

	January 1, 2015 (unaudited)
	Carrying amount of available-for-sale financial assets		Maximum loss exposure
	RMB		RMB
Investment management products managed by securities companies		107,478,974		107,478,974
Total		107,478,974		107,478,974

The maximum exposures to loss in the above investment management products managed by securities companies and Limited Partnership are the carrying values of the assets held by the Group at the reporting date.

26 Commitments

(a) Operating leases commitment

At the end of each reporting period, the total future minimum lease payments under non-cancellable operating leases are payable as follows:

	2016		2015		January 1, 2015
	RMB		RMB		RMB
			unaudited		unaudited
Within 1 year		27,431,156		13,162,401		8,557,642
Within 2 years		19,046,461		7,654,155		6,432,982
Within 3 years		11,029,486		5,093,739		2,927,849
More than 3 years		6,655,667		11,320,816		12,872,180
Total		64,162,770		37,231,111		30,790,653

The Group is the lessee in respect of a number of properties held under operating leases. The leases typically run for an initial period of 1-3 years, at the end of which period all terms are renegotiated. The leases do not include contingent rentals.

67

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

27 Material related party transactions

(a) Name and relationship with related parties

During the years, transactions with the following parties are considered as related parties:

Name of related party	Relationship
CISG Holdings Limited	one of the shareholders
Fanhua Inc. and its subsidiaries	one of the owners beneficially owns 100% equity interests of CISG Holdings Limited
Litian Zhuoyue Software (Beijing) Co., Ltd. 力天卓越软件(北京)有限公司*	one of Fanhua Inc.’s subsidiaries

* The official name of the company is in Chinese. The English translation is for reference only.

(b) Key management personnel remuneration

Remuneration for key management personnel is as follows:

	2016		2015
	RMB		RMB
			unaudited
Salaries allowances and other benefits		1,502,077		1,469,192

(c) Related party transactions

At each of the end of each reporting period, the Group had the following transactions with related parties and all the transactions were conducted with Fanhua Inc. and its subsidiaries:

	2016		2015
	RMB		RMB
			unaudited
Interest expense		-		8,402,065
Total		-		8,402,065

68

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

27 Material related party transactions (continued)

(d) Balances with related parties

At each of the end of each reporting period, the Group had the following balances with related parties:

Payables to related parties

			2016		2015		January 1, 2015
	Note		RMB		RMB		RMB
					unaudited		unaudited
Fanhua Inc. and its subsidiaries		i		32,494,914		36,508,260		202,955,663
Litian Zhuoyue Software (Beijing) Co., Ltd.				-		-		1,500,000
Total				32,494,914		36,508,260		204,455,663

(i) All the outstanding balances with the related parties, Fanhua Inc. and its subsidiaries, are priced on an arm’s length basis. The balances are interest-bearing borrowings granted by the related parties, of which the principals were settled in 2015 and the interests are repayable on demand. None of the balances are secured. No expense has been recognised in the current year or prior year for bad or doubtful debts in respect of amounts owed by the related parties, Fanhua Inc. and its subsidiaries. No guarantees have been given or received.

As set out in Note 21(i), the Group paid the interest of US$578,042 to Fanhua Inc. and its subsidiaries in 2016.

28 Accounting judgement and estimates

In the process of applying the Group’s accounting policies, the key sources of estimation uncertainty are as follows:

(a) Impairment losses on loans and advances to customers

The Group reviews the portfolios of loans and advances to customers periodically to assess whether impairment losses exist and if they exist, the amounts of impairment losses. Objective evidence for impairment includes observable data indicating that there is a measurable decrease in the estimated future cash flows identified with an individual loan to customer. It also includes observable data indicating adverse changes in the repayment status of borrowers or issuers in the assets portfolio or national or local economic conditions that correlate with defaults on the assets in the portfolio.

69

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

28 Accounting judgement and estimates (continued)

The impairment loss for a loans and advances to customers that is individually assessed for impairment is the net decrease in the estimated discounted future cash flows. When the financial assets are collectively assessed for impairment, the estimate is based on historical loss experience for assets with credit risk characteristics similar to the financial assets. Historical loss experience is adjusted on the basis of the relevant observable data that reflect current economic conditions and judgements based on management’s historical experience. Management reviews the methodology and assumptions used in estimating future cash flows regularly to reduce any difference between loss estimates and actual losses.

(b) Impairment losses on trade and other receivables

As described in Note 3(i), trade and other receivables that are measured at amortised cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. If any such evidence exists, impairment loss is provided. Objective evidence of impairment includes observable data that comes to the attention of the Group about loss events such as a significant decline in the estimated future cash flow of an individual debtor or the portfolio of debtors, and significant changes in the financial condition that have an adverse effect on the debtor. If there is an indication that there has been a change in the factors used to determine the provision for impairment, the impairment loss recognized in prior years is reversed or additional impairment charge is required.

(c) Deferred tax assets

Deferred tax assets arising from deductible temporary differences are recognized to the extent that it is probable that future taxable income will be available against which deductible temporary differences and tax losses can be utilised. The outcome of their actual utilization may be different.

(d) Fair value of financial assets

There are no quoted prices from an active market for a number of financial instruments. The fair values for these financial instruments are established by using valuation techniques. These techniques include using recent arm’s length market transactions by referring to the current fair value of similar instruments and discounted cash flow analysis. The Group has established a work flow to ensure that the valuation techniques are constructed by qualified personnel and are validated and reviewed by independent personnel. Valuation techniques are certified and calibrated before implementation to ensure the valuation result reflects the actual market conditions. Valuation models established by the Group make maximum use of market input and rely as little as possible on the Group’s specific data. However, it should be noted that some input, such as credit and counterparty risk, and risk correlations require management’s estimates. The Group reviews the above estimations and assumptions periodically and makes adjustments if necessary.

70

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

28 Accounting judgement and estimates (continued)

(e) Impairment losses on available-for-sale financial assets

The objective evidence of impairment for available-for-sale financial assets includes significant or continual decline in fair value of investments. When deciding whether there is significant or continual decline in fair value, the Group will consider the historical fluctuation records of market and debtors’ credit condition, financial position and performances of related industry.

(f) Impairment losses on goodwill

At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

(g) Determination of consolidation of structured entities

The Group acts as manager to a number of investment funds and segregated asset management plans. Determining whether the Group controls such a structured entity usually focuses on the assessment of the aggregate economic interests of the Group in the entity (comprising any carried interests and expected management fees) and the decision-making authority of the entity. For all these structured entities managed by the Group, the Group’s aggregate economic interest is in each case not significant and the decision makers establish market and manage them according to restricted parameters as set out in the investment agreements as required by laws and regulations.

71

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

29 Possible impact of amendments, new standards and interpretations issued but not yet effective for the years

Up to the date of issue of these consolidated financial statements, the IASB has issued a number of amendments, new standards and interpretations which are not yet effective for the year ended December 31, 2016 and which have not been adopted in these financial statements. These include the following which may be relevant to the Group.

	Effective for accounting periods beginning on or after
Amendments to IAS 7, Disclosure initiative	January 1, 2017
Amendments to IAS 12, Income taxes - Recognition of deferred tax assets for unrealised losses	January 1, 2017
IFRS 15 Revenue from Contracts with Customers	January 1, 2017
IFRS 9 Financial Instruments	January 1, 2018
IFRS 16 Leases	January 1, 2019

The Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidated financial statements except for the IFRS 9 and IFRS 15 which may have an impact on the Group’s financial performance and financial position.

IFRS 9, Financial Instruments

The main changes to the requirements of IAS 39 are summarised below.

Classification and measurement of financial assets and financial liabilities

IFRS 9 includes three principal classification categories for financial assets: measured at: amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). A financial asset is classified as being subsequently measured at amortised cost if the asset is held within a business model whose objective is to collect contractual cash flows, and the contractual terms of the financial asset give rise to cash flows that are solely payments of principal and interest (the “SPPI criterion”). A financial asset is classified as being subsequently measured at FVOCI if it meets the SPPI criterion and is held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. All other financial assets are classified as being subsequently measured at FVTPL. In addition, an entity may, at initial recognition, irrevocably designate a financial asset as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. At initial recognition of an equity investment that is not held for trading, an entity may irrevocably elect to present in other comprehensive income (OCI) subsequent changes in its fair value.

72

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

29 Possible impact of amendments, new standards and interpretations issued but not yet effective for the years (continued)

For the classification and measurement, IFRS 9 introduces a new requirement that the gain or loss on a financial liability designated at fair value through profit or loss that is attributable to changes in the entity’s own credit risk is recognised in other comprehensive income; the remaining amount of change in fair value is recognised in profit or loss (“own credit risk requirements”).

Impairment

The new impairment requirements in IFRS 9 replace the “incurred loss” model in IAS 39 with an “expected credit loss” model. The new model applies to financial assets that are debt instruments not measured at FVTPL (including loans, lease and trade receivables, debt securities), financial guarantees within the scope of IFRS 9, and loan commitments issued that are not accounted for at FVTPL; contract assets arising under IFRS 15 are also subject to the impairment requirements in IFRS 9. The impairment requirements do not apply to investments in equity instruments. The measurement of the loss allowance generally depends on whether there has been a significant increase in credit risk since initial recognition of the instrument. In other words, under IFRS 9 it is not necessary for a credit event to have occurred before credit losses are recognized.

Since the Group is in the process of making an assessment on overall impact of IFRS 9, and given the nature of the Group’s operations, the Standard is expected to have an impact on the Group’s financial statements, including the classification categories and the measurement of financial assets, the measurement of financial liabilities, and disclosures. For instance, the Group will be required to replace the incurred loss impairment model in IAS 39 with an expected loss impairment model that will apply to various exposures to credit risk, including trade and other receivables. IFRS 9 will also change the way the Group classifies and measures its financial assets, and will require the Group to consider the business model and contractual cash flow characteristics of financial assets to determine classification and subsequent measurement. Until a detailed review of the impact of adopting IFRS 9 is performed, the Group cannot provide a reasonable estimate that quantifies the impact on its financial statements nor can it yet conclude whether that impact will be significant or not. It is expected that adopting IFRS 9 will require changes to systems and processes to collect necessary data.

73

Sincere Fame International Limited

Financial statements for the year ended December 31, 2016

29 Possible impact of amendments, new standards and interpretations issued but not yet effective for the years (continued)

IFRS 15, Revenue from contracts with customers

IFRS 15 contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised.

IFRS 15 also introduces extensive qualitative and quantitative disclosure requirements which aim to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Some of these apply to interim financial reports prepared under IAS 34 as well as to annual financial statements. An entity may adopt IFRS 15 on a full retrospective basis. Alternatively, it may choose to adopt it from the date of initial application by adjusting opening balances at that date. Transitional disclosures are different depending on the approach adopted by the entity.

Application of IFRS 15 in the future may have a material impact on amounts reported and disclosures made in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect until a detailed review has been completed.

IFRS 16, Leases

IFRS 16 provides comprehensive guidance for the identification of lease arrangements and their treatment by lessees and lessors. In particular, IFRS 16 introduces a single lessee accounting model, whereby assets and liabilities are recognised for all leases, subject to limited exceptions. It replaces IAS 17 Leases and the related interpretations including IFRIC 4 Determining whether an arrangement contains a lease.

With respect to IFRS 16, given the Group has not completed its assessment of its full impact on the Group, its possible impact on the Group’s results of operations and financial position has not been quantified.

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