UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No.2)
(Mark One)
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report
For the transition period from to
Commission file number:
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation)
Futian District,
(Address of principal executive offices)
Telephone: +
Email:
Futian District.
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered, pursuant to Section 12(b) of the Act
Title of each class |
| Trading Symbol |
| Name of each exchange on which registered |
The Stock Exchange of Hong Kong Limited |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of issued and outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐ | as issued by the | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
Auditor Name | Auditor Location | Auditor Firm ID |
EXPLANATORY NOTE
This Amendment No.2 to the annual report on Form 20-F for the fiscal year ended December 31, 2023 (the “Amendment No.2”) of OneConnect Financial Technology Co., Ltd. (the “Company”), as originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 23, 2024 (the “Original Filing”), as amended by Amendment No.1 to the annual report on Form 20-F/A filed with the SEC on July 5, 2024 (the “Amendment No.1”), is being filed solely for purposes of filing the updated certifications as exhibits to this Amendment No.2 by the Company’s principal executive officer and principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
The Company is also including the Consolidated Financial Statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 dated April 23, 2024 (the “Audited Financial Statements”) and Item 15 of the Form 20-F. There are no changes to Item 15 or the Audited Financial Statements of the Company from the Original Filing.
Other than as expressly set forth above, this Amendment No.2 does not, and does not purport to, amend, update or restate the information in any other item of the Original Filing or the Amendment No.1, or reflect any event that has occurred after the filing of the Original Filing. The Original Filing, as amended by the Amendment No. 1 and Amendment No. 2, is referred to as “this Form 20-F”, “this annual report on Form 20-F” or “the Annual Report”.
1
ITEM 15.CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management with the participation of our chief executive officer and chief financial officer has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act.
Based on that evaluation, our management has concluded that, as of December 31, 2023, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. As required by Rule 13a-15(c) of the Exchange Act, our management conducted an evaluation of our company’s internal control over financial reporting as of December 31, 2023 based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Attestation Report of the Registered Public Accounting Firm
Our independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP, has audited the effectiveness of our internal control over financial reporting as of December 31, 2023, as stated in its report, which appears on page F-2 of this annual report on Form 20-F.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
2
ITEM 19.EXHIBITS
Exhibit |
| Description of Document |
1.1 | ||
2.1 | Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.4) | |
2.2 | ||
2.3 | ||
2.4 | ||
2.5 | ||
2.6 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
4.5 | ||
4.6 | ||
4.7 | ||
4.8 |
3
4.9 | ||
4.10 | ||
4.11 | ||
8.1*** | ||
11.1 | ||
12.1* | ||
12.2* | ||
13.1** | ||
13.2** | ||
15.1*** | ||
15.2* | Consent of PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm | |
97.1*** | Policy for the Recovery of Erroneously Awarded Compensation of the Registrant | |
101.INS* | Inline XBRL Instance Document | |
101.SCH* | Inline XBRL Taxonomy Extension Scheme Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104.* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
** Furnished herewith
*** Previously filed as an exhibit to the annual report on Form 20-F for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on April 23, 2024
† Certain portions of these exhibits have been omitted as confidential
4
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing this Amendment No.2 and that it has duly caused and authorized the undersigned to sign this Amendment No.2 on its behalf.
OneConnect Financial Technology Co., Ltd. | ||
By: | /s/ Mr. Yongtao Luo | |
Name: | Mr. Yongtao Luo | |
Title: | Chief Financial Officer | |
Date: July 18, 2024 | ||
5
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OneConnect Financial Technology Co., Ltd.
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of OneConnect Financial Technology Co., Ltd.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of OneConnect Financial Technology Co., Ltd. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022 and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with IFRS Accounting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
F-2
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Goodwill Impairment Assessment
As described in Notes 4(d) and 14 to the consolidated financial statements, the Company’s consolidated goodwill balance was RMB 289,161 thousands as of December 31, 2023. Goodwill impairment reviews are undertaken by management at least annually or more frequently if events or changes in circumstances indicate a potential impairment. As a result of the impairment test performed by management at the end of 2023, it was determined that the recoverable amount of the cash generating unit, to which the goodwill was allocated, exceeded its carrying value and therefore no impairment was recorded. The recoverable amount of cash generating unit was determined based on value-in-use using cash flow projections. The significant assumptions used in the goodwill impairment assessment included revenue growth rates, long-term growth rate, profit margin and pre-tax discount rate.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are there were significant estimations and judgments by management when developing the value-in-use calculation of the cash generating unit. This in turn led to a high degree of auditor judgment, effort, and subjectivity in performing procedures, and in evaluating the related audit evidence over management’s cash flow projections and significant assumptions related to the revenue growth rates, long-term growth rate, profit margin and pre-tax discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.
F-3
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s evaluation of the recoverability of goodwill, including controls over the valuation of the recoverable amount of cash generating unit to which the goodwill was allocated. These procedures also included, among others, testing management’s process for the goodwill impairment assessment; evaluating the appropriateness of the goodwill impairment assessment method; testing the completeness, accuracy and relevance of underlying data used in, and evaluating the reasonableness of significant assumptions used by management, including revenue growth rates, long-term growth rate, profit margin and pre-tax discount rate. Evaluating management’s assumptions related to revenue growth rates, long-term growth rate and profit margin involved assessing their reasonableness by considering the (i) the current and historical business performance of the cash generating unit; (ii) the management’s future business plan and market development and (iii) the consistency with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s goodwill impairment assessment method, long-term growth rate and pre-tax discount rate.
Impairment loss allowance for trade receivables and contract assets
As described in Notes 4(a), 5.1(b)(ii), 6.2(c) and 19 to the consolidated financial statements, as of December 31, 2023, the gross balance of trade receivables and contract assets were RMB 779,458 thousands and RMB 153,204 thousands, respectively, and the impairment loss allowances for these assets were RMB 68,789 thousands and RMB 57,379 thousands, respectively. The impairment loss allowances were determined using the expected credit loss (“ECL”) model. Management applied the simplified approach in determining ECL which used a lifetime expected impairment loss allowance for all trade receivables and contract assets. Management grouped trade receivables and contract assets based on their shared credit risk characteristics and the age of the underlying receivables, and then determined the impairment loss allowance on the basis of exposure at default and ECL rates, which considered historical credit loss experience adjusted to reflect current and forward-looking information.
The principal considerations for our determination that performing procedures relating to impairment loss allowance for trade receivables and contract assets is a critical audit matter are the significant judgment by management in developing the ECL model. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s assumptions, related to the grouping of trade receivables and contract assets, and the determination of ECL rates.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included understanding, evaluating and testing the effectiveness of controls relating to the impairment loss allowance for trade receivables and contract assets, including the grouping of trade receivables and contract assets and the determination of ECL rates. These procedures also included, among others (i) testing the completeness, accuracy, and relevance of underlying data used, (ii) testing the mathematical accuracy of the ECL model, (iii) evaluating the appropriateness of the model, and (iv) evaluating the reasonableness of significant assumptions used by management, relating to the grouping of trade receivables and contract assets, and determination of the ECL rates. Evaluating the reasonableness of management’s assumptions relating to grouping of trade receivables and contract assets involved considering the credit risk characteristics and the age of the underlying assets. Evaluating the reasonableness of management’s assumptions relating to ECL rates involved considering (i) the appropriateness of historical period selection, historical credit loss experience, current status of the assets and other relevant information; and (ii) the appropriateness of forward-looking information and macroeconomic factors affecting the expected ability of customers to settle receivables.
F-4
Recognition of deferred tax assets
As described in Notes 4(b) and 34 to the consolidated financial statements, the Company’s deferred tax assets were RMB 768,276 thousands as of December 31, 2023. The recognition of deferred tax assets was based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in future periods, against which existing deductible temporary differences can be utilized. To determine the future taxable profits, reference was made to the latest available profit forecasts. Where the temporary difference is related to the carry-forward of operating losses, relevant tax law was considered on a jurisdictional basis to determine the availability of such losses to offset future taxable profits.
The principal considerations for our determination that performing procedures relating to the recognition of deferred tax assets is a critical audit matter are the significant judgment by management in determining the amount of deferred tax assets that can be recognized. This in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s estimate of sufficient future taxable profits.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating the deferred tax assets recognition process, including controls over the forecast of future taxable profits used to support the recognition of the deferred tax assets. These procedures also included, among others, evaluating the reasonableness of the forecasted future taxable profits used to support the recognition of the deferred income assets by (i) considering the results of a retrospective comparison of forecasted taxable profits in prior year to actual results in the current year; (ii) comparison of revenue growth rate and profit margin in the current year forecast to historical results and industry trends; and (iii) comparing whether the forecast was consistent with evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers Zhong Tian LLP
Shenzhen, the People’s Republic of China
April 23, 2024
We have served as the Company’s auditor since 2018
F-5
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Note | Year ended December 31, | |||||||
|
| 2021 |
| 2022 |
| 2023 | ||
|
| RMB’000 |
| RMB’000 |
| RMB’000 | ||
Revenue |
| 6 |
| | |
| | |
-Technology Solutions | | | | |||||
-Virtual Bank Business | | | | |||||
Cost of revenue |
| 7 |
| ( | ( |
| ( | |
Gross profit |
| | |
| | |||
Research and development expenses |
| 7 |
| ( | ( |
| ( | |
Selling and marketing expenses |
| 7 |
| ( | ( |
| ( | |
General and administrative expenses |
| 7 |
| ( | ( |
| ( | |
Net impairment losses on financial and contract assets | 5.1(b) | ( | ( | ( | ||||
Other income, gains or loss‑net |
| 9 |
| | |
| | |
Operating loss |
| ( | ( |
| ( | |||
Finance income |
| 10 |
| | |
| | |
Finance costs |
| 10 |
| ( | ( |
| ( | |
Finance (costs)/income – net |
| 10 |
| ( | ( |
| | |
Share of gain of associate and joint venture - net |
| 15 |
| | |
| | |
Impairment charges on associate | 15 | — | ( | ( | ||||
Loss before income tax |
| ( | ( |
| ( | |||
Income tax benefit/ (expense) |
| 11 |
| | |
| ( | |
Loss for the year |
| ( | ( |
| ( | |||
Loss attributable to: |
|
|
| |||||
- Owners of the Company |
| ( | ( |
| ( | |||
- Non‑controlling interests |
| ( | ( |
| ( | |||
| ( | ( |
| ( | ||||
Other comprehensive income, net of tax |
|
| ||||||
Items that may be subsequently reclassified to profit or loss |
| |||||||
- Foreign currency translation differences |
| ( | |
| | |||
- Changes in the fair value of debt instruments measured at fair value through other comprehensive income | ( | | | |||||
Items that will not be subsequently reclassified to profit or loss | ||||||||
- Foreign currency translation differences | — | | | |||||
- Changes in the fair value of equity investments measured at fair value through other comprehensive income | ( | — | — | |||||
( | | | ||||||
Total comprehensive loss for the year |
| ( | ( |
| ( | |||
Total comprehensive loss attributable to: |
|
|
| |||||
- Owners of the Company |
| ( | ( |
| ( | |||
- Non‑controlling interests |
| ( | ( |
| ( | |||
| ( | ( |
| ( | ||||
Loss per share attributable to owners of the Company (expressed in RMB per share) |
|
| ||||||
- Basic and diluted |
| 12 |
| ( | ( |
| ( | |
Loss per ADS attributable to owners of the Company (expressed in RMB per share) | ||||||||
- Basic and diluted | 12 | ( | ( | ( | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
CONSOLIDATED BALANCE SHEETS
As at December 31, | ||||||
Note | 2022 | 2023 | ||||
|
| RMB’000 |
| RMB’000 | ||
ASSETS | ||||||
Non‑current assets | ||||||
Property and equipment |
| 13 |
| |
| |
Intangible assets |
| 14 |
| |
| |
Deferred tax assets |
| 34 |
| |
| |
Investments accounted for using the equity method |
| 15 |
| |
| — |
Financial assets measured at fair value through other comprehensive income |
| 17 |
| |
| |
Restricted cash and time deposits over three months |
| 23 |
| — |
| |
Prepayments and other receivables | 20 | — | | |||
Total non‑current assets |
| |
| | ||
Current assets |
|
| ||||
Trade receivables |
| 19 |
| |
| |
Contract assets |
| 6 |
| |
| |
Prepayments and other receivables |
| 20 |
| |
| |
Financial assets measured at amortized cost from virtual bank | 21 | | | |||
Financial assets measured at fair value through other comprehensive income | 17 | | | |||
Financial assets at fair value through profit or loss |
| 22 |
| |
| |
Derivative financial assets | 32 | | | |||
Restricted cash and time deposits over three months |
| 23 |
| |
| |
Cash and cash equivalents |
| 24 |
| |
| |
Total current assets |
| |
| | ||
Total assets |
| |
| | ||
EQUITY AND LIABILITIES |
|
| ||||
Equity |
|
| ||||
Share capital |
| 25 |
| |
| |
Shares held for share incentive scheme |
| 27 |
| ( |
| ( |
Other reserves |
| 26 |
| |
| |
Accumulated losses |
| ( |
| ( | ||
Equity attributable to equity owners of the Company |
| |
| | ||
Non‑controlling interests |
| ( |
| ( | ||
Total equity |
| |
| | ||
LIABILITIES |
|
| ||||
Non‑current liabilities |
|
| ||||
Trade and other payables |
| 28 |
| |
| |
Contract liabilities |
| 6 |
| |
| |
Deferred tax liabilities |
| 34 |
| |
| |
Total non‑current liabilities |
| |
| | ||
Current liabilities |
|
| ||||
Trade and other payables |
| 28 |
| |
| |
Payroll and welfare payables |
| |
| | ||
Contract liabilities |
| 6 |
| |
| |
Short‑term borrowings |
| 29 |
| |
| |
Customer deposits | 30 | | | |||
Other financial liabilities from virtual bank | 31 | | | |||
Derivative financial liabilities |
| 32 |
| |
| — |
Total current liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Total equity and liabilities |
| |
| | ||
The accompanying notes are an integral part of these consolidated financial statements.
The financial information on pages F6 to F95 were approved by the Board of Directors on April 23, 2024 and were signed on its behalf.
F-7
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the Company | ||||||||||||||||
Shares held for | ||||||||||||||||
share incentive | Accumulated | Non‑controlling | ||||||||||||||
|
| Share capital |
| scheme |
| Other reserves |
| losses |
| Total |
| interest |
| Total equity | ||
Note | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||||
As at January 1, 2021 | | ( | | ( | | | | |||||||||
Loss for the year |
| — |
| — |
| — |
| ( | ( | ( | ( | |||||
Other comprehensive income, net of tax |
|
|
|
|
|
|
| |||||||||
- Foreign currency translation differences |
| 26 | — | — | ( | — | ( | — | ( | |||||||
- Fair value changes on financial assets measured at fair value through other comprehensive income | — | — | ( | — | ( | — | ( | |||||||||
Total comprehensive loss for the year |
| — | — | ( | ( | ( | ( | ( | ||||||||
Transactions with equity holders: |
|
|
|
|
|
|
| |||||||||
Share‑based payments: | ||||||||||||||||
- Value of employee services and business cooperation arrangements | 27 | — | — | | — | | — | | ||||||||
- Vesting of shares under Restricted Share Unit Scheme | — | | ( | — | — | — | — | |||||||||
- Exercise of shares under Share Option Scheme | — | | | — | | — | | |||||||||
Total transactions with equity holders at their capacity as equity holders for the year |
| — |
| |
| |
| — |
| |
| — |
| | ||
As at December 31, 2021 |
| |
| ( |
| |
| ( |
| |
| |
| | ||
F-8
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
Attributable to owners of the Company | ||||||||||||||||
Shares | ||||||||||||||||
held for | ||||||||||||||||
share incentive | Accumulated | Non‑controlling | ||||||||||||||
| Note |
| Share capital |
| scheme |
| Other reserves |
| losses |
| Total |
| interest |
| Total equity | |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 | |||
As at January 1, 2022 | | ( | | ( | | | | |||||||||
Loss for the year |
| — |
| — |
| — |
| ( |
| ( |
| ( |
| ( | ||
Other comprehensive income, net of tax |
| |||||||||||||||
- Foreign currency translation differences |
| 26 | — |
| — |
| |
| — |
| |
| — |
| | |
- Fair value changes on financial assets measured at fair value through other comprehensive income |
|
| — |
| — |
| |
| — |
| |
| — |
| | |
Total comprehensive loss for the year |
| — |
| — |
| |
| ( |
| ( |
| ( |
| ( | ||
Transactions with equity holders: |
|
|
|
|
|
|
| |||||||||
Share-based payments: | ||||||||||||||||
- Value of employee services and business cooperation arrangements |
| 27 | — |
| — |
| |
| — |
| |
| — |
| | |
- Vesting of shares under Restricted Share Unit Scheme | — | | ( | — | — | — | — | |||||||||
- Exercise of shares under Share Option Scheme | — | | | — | | — | | |||||||||
- Repurchase of shares | — | ( | — | — | ( | — | ( | |||||||||
Total transactions with equity holders at their capacity as equity holders for the year |
| — |
| ( |
| |
| — |
| ( |
| — |
| ( | ||
As at December 31, 2022 |
| |
| ( |
| |
| ( |
| |
| ( |
| | ||
F-9
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
Attributable to owners of the Company | ||||||||||||||||
Shares held for | ||||||||||||||||
share incentive | Accumulated | Non-controlling | ||||||||||||||
| Note |
| Share capital |
| scheme |
| Other reserves |
| losses |
| Total |
| interest |
| Total equity | |
|
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 | ||
As at January 1, 2023 |
|
|
| |
| ( |
| |
| ( |
| |
| ( |
| |
Loss for the year |
|
|
| — |
| — |
| — |
| ( | ( |
| ( |
| ( | |
Other comprehensive income, net of tax |
|
|
|
| ||||||||||||
- Foreign currency translation differences |
| 26 |
| — |
| — |
| |
| — |
| |
| — |
| |
- Fair value changes on financial assets measured at fair value through other comprehensive income |
|
|
| — |
| — |
| |
| — |
| |
| — |
| |
Total comprehensive loss for the year |
|
|
| — |
| — |
| |
| ( |
| ( |
| ( |
| ( |
Transactions with equity holders: |
|
|
|
|
|
|
|
|
|
|
| |||||
Share-based payments: |
|
|
|
|
|
|
|
| ||||||||
- Value of employee services and business cooperation arrangements |
| 27 |
| — |
| — |
| |
| — |
| |
| — |
| |
- Transactions with non-controlling interests |
| 28(ii) |
| — |
| — |
| ( |
| — |
| ( |
| |
| — |
Total transactions with equity holders at their capacity as equity holders for the year |
|
|
| — |
| — |
| |
| — |
| |
| |
| |
As at December 31, 2023 |
|
|
| |
| ( |
| |
| ( |
| |
| ( |
| |
The accompanying notes are an integral part of these consolidated financial statements.
F-10
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, | ||||||||
|
| 2021 |
| 2022 |
| 2023 | ||
Note | RMB’000 | RMB’000 | RMB’000 | |||||
Cash flows from operating activities | ||||||||
Cash used in operations |
| 35(a) |
| ( | ( |
| ( | |
Income tax paid |
|
| ( | ( |
| ( | ||
Net cash used in operating activities |
|
| ( | ( |
| ( | ||
Cash flows from investing activities |
|
|
| |||||
Payment for acquisition of subsidiaries, net of cash acquired |
|
| ( | |
| | ||
Payments for property and equipment |
|
| ( | ( |
| ( | ||
Payments for intangible assets |
|
| ( | ( |
| ( | ||
Payment for loans to related parties |
|
| ( | — |
| — | ||
Payments for financial assets measured at fair value through other comprehensive income | ( | ( | ( | |||||
Payments for Investment in Jointly controlled entities | 15 | — | — | ( | ||||
Payments for financial assets at fair value through profit or loss | ( | ( | ( | |||||
(Payments)/Proceeds for settlement of derivatives | ( | | | |||||
Release of restricted cash and time deposits over three months, net |
|
| | |
| | ||
Proceeds from sales of property and equipment | | | | |||||
Receipts of loans to related parties | — | | | |||||
Proceeds from sales of financial assets measured at fair value through other comprehensive income | | | | |||||
Proceeds from disposal of investment in associate | 15 | — | — | | ||||
Proceeds from sales of financial assets at fair value through profit or loss |
|
| | |
| | ||
Interest received on financial assets at fair value through profit or loss |
|
| | |
| | ||
Net cash generated from investing activities |
|
| | |
| | ||
Cash flows from financing activities |
|
|
| |||||
Proceeds from short‑term borrowings |
| 35(c) |
| | |
| | |
Proceeds from exercise of shares under share incentive scheme | | | — | |||||
Payments for lease liabilities |
| 35(c) |
| ( | ( |
| ( | |
Repayments of short‑term borrowings |
| 35(c) |
| ( | ( |
| ( | |
Interest paid |
| 35(c) |
| ( | ( |
| ( | |
Transactions with non-controlling interests | — | — | ( | |||||
Payments for shares held for share incentive scheme | — | — | ( | |||||
Payments for shares repurchase | 27 | — | ( | — | ||||
Net cash used in financing activities |
|
| ( | ( |
| ( | ||
Net (decrease)/increase in cash and cash equivalents |
|
| ( | |
| ( | ||
Cash and cash equivalents at the beginning of the year |
|
| | |
| | ||
Effects of exchange rate changes on cash and cash equivalents |
|
| ( | |
| | ||
Cash and cash equivalents at the end of year |
|
| | |
| | ||
The accompanying notes are an integral part of these consolidated financial statements.
F-11
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 | General information and basis of presentation |
1.1 General information
OneConnect Financial Technology Co., Ltd. (the “Company”) was incorporated in the Cayman Islands on October 30, 2017 as an exempted company with limited liability under the Companies Law (Cap. 22, Law 3 of 1961 as consolidated and revised) of the Cayman Islands. The address of the Company’s registered office is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The Company completed its initial public offering (“IPO”) on December 13, 2019 on the New York Stock Exchange. The Company has listed by way of introduction its ordinary shares on the Main Board of the Stock Exchange of Hong Kong Limited on July 4, 2022.
On November 30, 2022, the Company announced its plans to change the ratio of its American Depositary Share (“ADS”) to its ordinary shares (the “ADS Ratio”) from the current ADS Ratio of one ADS to
The Company, its subsidiaries, its controlled structured entities (“Structured Entities”, “Variable Interest Entities” or “VIEs”) and their subsidiaries (“Subsidiaries of VIEs”) are collectively referred to as the “Group”. The Group is principally engaged in providing cloud-platform-based Fintech solutions, online information service and operating support service to financial institutions (the “Listing Business”) mainly in the People’s Republic of China (the “PRC”). The Company does not conduct any substantive operations of its own but conducts its primary business operations through its subsidiaries, VIEs and subsidiaries of VIEs in the PRC. Further details of the VIEs are set out in Note 1.2 below.
These financial statements are presented in Renminbi (“RMB”), unless otherwise stated.
1.2 Organization and principal activities
As at December 31, 2023, the Company had direct or indirect interests in the following major subsidiaries(which are all corporations) including consolidated structured entities.
Equity interest held | ||||||||||||
Place and date of | Principal activities | Issued and | by the Group | |||||||||
incorporation/ | and place of | paid-in capital/ | As at December 31 | |||||||||
Company name |
| establishment |
| operations |
| Registered capital |
| 2022 |
| 2023 |
| Note |
Subsidiaries | ||||||||||||
Jin Tai Yuan Limited | British Virgin Islands /October 27, 2017 | Investment holding, BVI | USD | % | % | |||||||
Jin Cheng Long Limited |
| Hong Kong /October 30, 2017 |
| Investment holding, Hong Kong, the PRC. | USD | % | % | |||||
OneConnect Financial Technology (Hong Kong) Limited |
| Hong Kong /March 15, 2018 |
| Software and technology service, information transmission, Hong Kong, the PRC. | USD | % | % | |||||
OneConnect Financial Technology (Singapore) Co., Pte. Ltd. |
| Singapore /March 26, 2018 |
| Software and technology service, information transmission, Singapore. | SGD | % | % | |||||
PT OneConnect Financial Technology Indonesia |
| Indonesia/December 04, 2018 |
| Software and technology service, information transmission, Indonesia. | IDR | % | % | |||||
Ping An OneConnect Bank (Hong Kong) Limited (“OneConnect Bank”) | Hong Kong/December 07, 2018 | Banking service, Hong Kong, the PRC. | USD | % | % | |||||||
Shenzhen OneConnect Technology Services Co.,Ltd(“Shenzhen OneConnect Technology”) | the PRC /January 04, 2018 | Technology promotion and computer application services, Shenzhen, the PRC. | RMB | % | % | |||||||
F-12
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 General information and basis of presentation (Continued)
1.2 Organization and principal activities (Continued)
Equity interest held | ||||||||||||
Place and date of | Issued and | by the Group | ||||||||||
incorporation/ | Principal activities and | paid-in capital/ | As at December 31 | |||||||||
Company name |
| establishment |
| place of operations |
| Registered capital |
| 2022 |
| 2023 |
| Note |
Subsidiaries (Continued) | ||||||||||||
Beijing Vantage Point Technology Co., Ltd. (“Vantage Point Technology”) | the PRC /July 18, 2008 | Software and technology service, information transmission, Beijing, the PRC. | RMB | % | % | (i) | ||||||
Shenzhen OneConnect Information Technology Service Company Limited (“Shenzhen OneConnect Information Technology”) | the PRC/January 31, 2019 | Software and technology service, information transmission, Shenzhen, the PRC. | RMB | % | % | |||||||
Beijing BER Technology Company Ltd. (“BER Technology”) | the PRC/March 30,2006 | Software and technology service, information transmission, Shenzhen, the PRC. | RMB | % | % | (i) | ||||||
Zhang Tong Shun (Guangzhou) Technology Co., Ltd. (“Zhang Tong Shun”) | the PRC/May 9, 2019 | Information technology advisory services, Guangzhou, the PRC. | RMB | % | % | (i) | ||||||
VIEs | ||||||||||||
OneConnect Smart Technology Co., Ltd. (Shenzhen) (“Shenzhen OneConnect”) | the PRC / September 15, 2017 | Software and technology service, information transmission, Shenzhen, the PRC. | RMB | % | % | |||||||
Shenzhen E-Commerce Safety Certificates Administration Co., Ltd. (“Shenzhen CA”) | the PRC/August 11, 2000 | E-commerce security certificate administration, Shenzhen, the PRC. | RMB | % | % | (i) | ||||||
Subsidiaries of the VIEs | ||||||||||||
Shanghai OneConnect Financial Technology Co., Ltd. (“Shanghai OneConnect”) * | the PRC / December 29, 2015 | Software and technology service, asset management and consulting, Shanghai, the PRC. | RMB | % | % | |||||||
Shenzhen Kechuang Insurance Assessment Co., Ltd. (“Kechuang”) * |
| the PRC / August 27, 2001 |
| Insurance survey and loss adjustment, Shenzhen, the PRC. | RMB | % | % | |||||
Shenzhen OneConnect Chuangpei Technology Co., Ltd. (“Chuangpei”) * | the PRC / June 1, 2016 | Software and technology service, information transmission, Shenzhen, the PRC. | RMB | % | % | |||||||
Zhuhai Yirongtong Asset Management Co., Ltd. (“Yirongtong”) * | the PRC / June 21, 2016 | Asset management and consulting, Zhuhai, the PRC. | RMB | % | % | |||||||
Ping An OneConnect Cloud Technology Co., Ltd. (“OneConnect Cloud Technology”) | the PRC / June 27, 2016 | Software and technology service, information transmission, Shenzhen, the PRC. | RMB | % | % | |||||||
* Subsidiaries of Shenzhen OneConnect
Note:
| (i) | The subsidiaries were acquired by the Group through business combination. |
F-13
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 General information and basis of presentation (Continued)
1.2 Organization and principal activities (Continued)
PRC laws and regulations prohibit or restrict foreign ownership of companies that provide internet-based business, which include activities and services provided by the Group. The Group operates its business operations in the PRC through a series of contractual arrangements entered into among a wholly-owned subsidiary of the Company and VIEs that legally owned by equity holders (“Nominee Shareholders”) authorized by the Group (collectively, “Contractual Arrangements”). The Contractual Arrangements include Exclusive Equity Purchase Option Agreement, Exclusive Business Cooperation Agreement, Exclusive Asset Option Agreement, Equity Pledge Agreement, Shareholder Voting Proxy Agreement, Letters of Undertakings and Spousal Consent Letters.
Under the Contractual Arrangements, the Company has the power to control the management, and financial and operating policies of the VIEs, has exposure or rights to variable returns from its involvement with the VIEs, and has the ability to use its power over the VIEs to affect the amount of the returns. As a result, all these VIEs are accounted for as consolidated structured entities of the Company and their financial statements have also been consolidated by the Company.
The principal terms of the Contractual Arrangements are further described below:
(a) Contractual agreements with Shenzhen OneConnect
- Exclusive Equity Purchase Option Agreement
Pursuant to the exclusive equity purchase option agreement entered into between Shenzhen OneConnect Technology, Shenzhen OneConnect, the direct shareholders of Shenzhen OneConnect, and the shareholders of the direct shareholders of Shenzhen OneConnect, (each refer to as the “Indirect Shareholder”, together with the direct shareholders of Shenzhen OneConnect, “the Shenzhen OneConnect Shareholders”) (the “Exclusive Equity Purchase Option Agreement”), Shenzhen OneConnect Technology has the irrevocable and exclusive right to purchase, or to designate one or more persons to purchase, from Shenzhen OneConnect Shareholders all or any part of their equity interests in Shenzhen OneConnect at any time and from time to time in Shenzhen OneConnect Technology’s absolute discretion to the extent permitted by PRC laws. Unless terminated upon the parties’ agreement, this agreement will remain effective for
- Exclusive Business Cooperation Agreement
Pursuant to the exclusive business cooperation agreement entered into between Shenzhen OneConnect Technology and Shenzhen OneConnect, Shenzhen OneConnect agreed to engage Shenzhen OneConnect Technology as its exclusive provider of business support, technical and consulting services. In exchange for these services, Shenzhen OneConnect shall pay a service fee, which is equal to Shenzhen OneConnect’s profit before tax, after deducting any accumulated losses of Shenzhen OneConnect and its subsidiaries from the preceding fiscal year, working capital, costs, expenses, tax and other statutory contribution in relation to the respective fiscal year. The service fee shall be paid annually and shall be wired to the designated bank account of Shenzhen OneConnect Technology upon issuance of invoice by Shenzhen OneConnect Technology. The effective term of this agreement is the same as that of the Exclusive Equity Purchase Option Agreement described above.
- Exclusive Asset Option Agreement
Pursuant to the exclusive asset option agreement entered into between Shenzhen OneConnect Technology, Shenzhen OneConnect and the Shenzhen OneConnect Shareholders (the “Exclusive Asset Option Agreement”), Shenzhen OneConnect Technology has the irrevocable and exclusive right to purchase, or to designate one or more persons to purchase, from Shenzhen OneConnect all or any part of its assets at any time at Shenzhen OneConnect Technology’s absolute discretion and to the extent permitted by PRC laws. The consideration shall be the higher of (a) a nominal price or (b) the lowest price as permitted under applicable PRC laws. The effective term of this agreement is the same as that of the Exclusive Equity Purchase Option Agreement described above.
F-14
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 General information and basis of presentation (Continued)
1.2 Organization and principal activities (Continued)
(a) Contractual agreements with Shenzhen OneConnect (Continued)
- Equity Pledge Agreement
Pursuant to the equity pledge agreement entered into between Shenzhen OneConnect Technology, Shenzhen OneConnect and the Shenzhen OneConnect Shareholders (the “Equity Pledge Agreement”), the Registered Shareholders agreed to pledge as first charge all of their equity interests in Shenzhen OneConnect to Shenzhen OneConnect Technology as collateral security for any and all of the guaranteed debt under the Contractual Arrangements and to secure the performance of their obligations under the Contractual Arrangements. During the pledge period, Shenzhen OneConnect Technology is entitled to receive any dividends or other distributable benefits arising from the equity.
The pledge in favor of Shenzhen OneConnect Technology takes effect upon the completion of registration with the relevant administration for industry and commerce of China and shall remain valid until Shenzhen OneConnect Shareholders and Shenzhen OneConnect have discharged all their obligations and fully paid all the amounts payable under the Contractual Arrangements.
- Shareholder Voting Proxy Agreement
Shenzhen OneConnect Technology, Shenzhen OneConnect, the Shenzhen OneConnect Shareholders and the subsidiaries of Shenzhen OneConnect entered into a shareholder voting proxy agreement. Pursuant to this agreement, each shareholder of Shenzhen OneConnect and its subsidiaries irrevocably authorizes the persons designated by Shenzhen OneConnect Technology to act on its behalf to exercise all of such shareholder’s voting and other rights associated with the shareholder’s equity interest in Shenzhen OneConnect and the subsidiaries of Shenzhen OneConnect, such as the right to appoint or designate directors, supervisors and officers, as well as the right to sell, transfer, pledge or dispose of all or any portion of the shares held by such shareholder. The effective term of this agreement is the same as that of the Exclusive Equity Purchase Option Agreement described above.
- Letters of Undertakings
Each Indirect Shareholder signed a letter of undertakings to the Company. Under these letters, the signing Indirect Shareholder has separately irrevocably undertaken, in the event of his or her death or loss of capacity or any other events that could possibly affect his or her capacity to fulfil his or her obligations under the contractual arrangement of Shenzhen OneConnect, that he or she will unconditionally transfer his or her equity interest in Shenzhen OneConnect to any person designated by Shenzhen OneConnect Technology and the transferee will be deemed to be a party to the contractual arrangements and will assume all of his or her rights and obligations as such under the contractual arrangements. Each signing Indirect Shareholder represents that his or her spouse has no ownership interest in his or her equity interests in Shenzhen OneConnect. Each signing Indirect Shareholder further represents that in any circumstances, he or she will not, directly or indirectly, commit any conduct, measure, action or omission that is contrary to the purpose and intention of the contractual arrangements, that leads or may lead to any conflict of interest between Shenzhen OneConnect and OneConnect Financial Technology Co., Ltd. and/or its subsidiaries, and that if, during his or her performance of the contractual arrangements, there is a conflict of interest between the signing Indirect Shareholder and OneConnect Financial Technology Co., Ltd. and/or its subsidiaries, the signing Indirect Shareholder will protect the legal interests of Shenzhen OneConnect Technology under the contractual arrangements and follow the instructions of the Company.
F-15
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 General information and basis of presentation (Continued)
1.2 Organization and principal activities (Continued)
(a) Contractual agreements with Shenzhen OneConnect (Continued)
- Spousal Consent Letters
Under the spousal consent letters, each signing spouse respectively agreed that he or she was aware of the equity interest beneficially owned by his or her spouse in Shenzhen OneConnect and the relevant Contractual Arrangements in connection with such equity interest. The signing spouse unconditionally and irrevocably confirmed that he or she does not have any equity interest in Shenzhen OneConnect and committed not to impose any adverse assertions upon his or her spouse’s respective equity interest. Each signing spouse further confirmed that such equity interest may be disposed of pursuant to the relevant Contractual Arrangements, and committed that he or she will take all necessary measures for the performance of those arrangements.
(b) Contractual agreements with Shenzhen CA
Shenzhen CA and certain of its shareholders holding in the aggregate
(c) Risks in relation to the VIEs
In the opinion of the Company’s management, the Contractual Arrangements discussed above have resulted in the Company, Shenzhen OneConnect Technology and Zhang Tong Shun having the power to direct activities that most significantly impact the VIEs, including appointing key management, setting up operating policies, exerting financial controls and transferring profit or assets out of the VIEs at its discretion. The Company has the power to direct activities of the VIEs and can have assets transferred out of the VIEs under its control. Therefore, the Company considers that there is no asset in any of the VIEs that can be used only to settle obligations of the VIEs, except for registered capital, capital reserve and PRC statutory reserves of the VIEs totalling RMB
In the opinion of the Company’s management, the contractual arrangements among its subsidiaries, the VIE and their respective Nominee Shareholders are in compliance with current PRC laws and are legally binding and enforceable. However, uncertainties in the interpretation and enforcement of the PRC laws, regulations and policies could limit the Company’s ability to enforce these contractual arrangements. In addition, the enforceability of the contractual agreements between the Company, the VIE and its shareholders depends on whether the Company’s shareholders or their PRC holding entities will fulfil these contractual agreements. As a result, the Company may be unable to consolidate the VIE and VIE’ subsidiaries in the consolidated financial statements.
On March 15, 2019, the Foreign Investment Law was formally passed by the thirteenth National People’s Congress and it became effective on January 1, 2020. The Foreign Investment Law replaced the Law on Sino Foreign Equity Joint Ventures, the Law on Sino Foreign Cooperative Joint Ventures and the Law on Foreign Capital Enterprises and became the legal foundation for foreign investment in the PRC. The Implementation Regulations for the Foreign Investment Law was promulgated by the State Council on December 26, 2019, became effective on January 1, 2020, and replaced the corresponding implementation rules of the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Cooperative Joint Ventures and the Law on Foreign-Capital Enterprises.
F-16
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 General information and basis of presentation (Continued)
1.2 Organization and principal activities (Continued)
(c) Risks in relation to the VIEs (Continued)
The Foreign Investment Law stipulates certain forms of foreign investment. However, the Foreign Investment Law does not explicitly stipulate contractual arrangements such as those we rely on as a form of foreign investment. Notwithstanding the above, the Foreign Investment Law stipulates that foreign investment includes “foreign investors investing through any other methods under laws, administrative regulations or provisions prescribed by the State Council.’’ Future laws, administrative regulations or provisions prescribed by the State Council may possibly regard Contractual Arrangements as a form of foreign investment. If this happens, it is uncertain whether the Contractual Arrangements with the VIE and its shareholders would be recognized as foreign investment, or whether the Contractual Arrangements would be deemed to be in violation of the foreign investment access requirements. As well as the uncertainty on how the Contractual Arrangements will be handled, there is substantial uncertainty regarding the interpretation and the implementation of the Foreign Investment Law. The relevant government authorities have broad discretion in interpreting the law. Therefore, there is no guarantee that the Contractual Arrangements, the business of the VIEs and financial conditions of the Company will not be materially and adversely affected.
The Company’s ability to control VIEs also depends on rights provided to Shenzhen OneConnect Technology and Zhang Tong Shun, under the Shareholder Voting Proxy Agreement, to vote on all matters requiring shareholder approval. As noted above, the Company believes Shareholder Voting Proxy Agreement is legally enforceable, but they may not be as effective as direct equity ownership. In addition, if the corporate structure of the Group or the Contractual Arrangements between the Shenzhen OneConnect Technology, and Zhang Tong Shun, the VIEs and their respective shareholders and subsidiaries were found to be in violation of any existing PRC laws and regulations, the relevant PRC regulatory authorities could:
| ● | revoke the Group’s business and operating licenses; |
| ● | require the Group to discontinue or restrict its operations; |
| ● | impose fines or confiscate any of the Group’s income that they deem to have been obtained through illegal operations; |
| ● | require the Group to restructure the ownership structure or operations, re-apply for the necessary licenses or relocate its businesses, staff and assets; |
| ● | impose additional conditions or requirements with which the Group may not be able to comply; or |
| ● | restrict or prohibit the Group’s use of the proceeds from public offerings or other of the Group’s financing activities to finance the business and operations of the VIEs and their subsidiaries; or |
| ● | take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business. |
The imposition of any of these restrictions or actions may result in a material adverse effect on the Company’s ability to conduct its business. In addition, if the imposition of any of these restrictions causes the Company to lose the right to direct the activities of the VIEs or the right to receive their economic benefits, the Company would no longer be able to consolidate the financial statements of the VIEs. In the opinion of management, the likelihood of losing the benefits in respect of the Company’s current ownership structure or the contractual arrangements with its VIEs is remote.
F-17
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 General information and basis of presentation (Continued)
1.2 Organization and principal activities (Continued)
(c) Risks in relation to the VIEs (Continued)
The following are major financial statements amounts and balances of the Group’s VIEs and subsidiaries of VIEs (i.e. Shenzhen OneConnect, Shenzhen CA and their subsidiaries) of December 31, 2022 and 2023 and for the years ended December 31, 2021, 2022 and 2023.
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Total current assets | |
| | |
Total non‑current assets | |
| | |
Total assets | |
| | |
Total current liabilities | |
| | |
Total non‑current liabilities | |
| | |
Total liabilities | |
| | |
For the year ended | ||||||
December 31, | ||||||
2021 | 2022 | 2023 | ||||
| RMB’000 |
| RMB’000 |
| RMB’000 | |
Total revenue |
| | |
| | |
Net loss |
| ( | ( |
| ( | |
Net cash used in operating activities |
| ( | ( |
| ( | |
Net cash generated from investing activities |
| | |
| | |
Net cash generated from/ (used in) financing activities |
| | |
| ( | |
Net (decrease)/increase in cash and cash equivalents |
| ( | |
| ( | |
Cash and cash equivalents, beginning of the year |
| | |
| | |
Cash and cash equivalents, end of the year |
| | |
| | |
The above financial statements amounts and balances have included intercompany transactions which have been eliminated on the Company’s consolidated financial statements.
As of December 31, 2022 and 2023, the total assets of Group’s VIEs were mainly consisting of cash and cash equivalents, trade receivable, contract assets, prepayments and other receivables, financial assets at fair value through profit or loss, property and equipment, intangible assets and deferred tax assets. As of December 31, 2022 and 2023, the total liabilities of VIEs were mainly consisting of trade and other payables, payroll and welfare payables, contract liabilities and short-term borrowings.
F-18
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Basis of preparation and changes in accounting policies
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with IFRS Accounting Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets measured at fair value through other comprehensive income, financial assets at fair value through profit or loss and derivative financial assets and liabilities, which are carried at fair value and subsequent changes are recognized in the statement of comprehensive income.
The preparation of the consolidated financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4 below.
2.2 Recent accounting pronouncements
(a) New and amended standards and interpretations adopted by the Group
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2023:
| ● | IFRS 17 Insurance Contracts |
| ● | Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies |
| ● | Amendments to IAS 8 – Definition of Accounting Estimates |
| ● | Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction |
| ● | Amendment to IAS 12 – International tax reform – pillar two model rules |
The amendments listed above did not have material impact on the amounts recognized in prior periods and are not expected to significantly affect the current or future periods.
F-19
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 Basis of preparation and changes in accounting policies (Continued)
2.2 Recent accounting pronouncements (Continued)
(b) New standards and amendments to standards and interpretations not yet adopted
Several new standards and amendments to standards and interpretations have been issued but not effective during the year 2023 and have not been early adopted by the Group in preparing these consolidated financial statements:
| Effective for annual |
| |
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current | January 1, 2024 | ||
Amendments to IAS 1 – Non-current liabilities with covenants | January 1, 2024 | ||
Amendments to IFRS 16 – Lease liability in sale and leaseback | January 1, 2024 | ||
Amendments to IAS 7 and IFRS 7 – Supplier finance arrangements | January 1, 2024 | ||
Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture | To be determined | ||
Amendments to IAS 21 – Lack of Exchangeability | January 1, 2025 |
The above new standards, new interpretations and amended standards are not expected to have a material impact on the consolidated financial statements of the Group.
3 Summary of accounting policy information
3.1Material accounting policies
3.1.1 Revenue recognition
Revenue represents the amount of consideration the Group is entitled to upon the transfer of promised goods or services in the ordinary course of the Group’s activities and is recorded net of value-added tax (“VAT”). Revenues are recognized when or as control of the asset or service is transferred to the customer. Depending on the terms of the contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time. Control of the goods and services is transferred over time if the Group’s performance:
| ● | provides all of the benefits received and consumed simultaneously by the customer; |
| ● | creates and enhances an asset that the customer controls as the Group performs; or |
| ● | does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. |
If control of the goods and services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation.
Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods and services.
The progress towards complete satisfaction of the performance obligation is measured based on one of the following methods that best depict the Group’s performance in satisfying the performance obligation:
| ● | direct measurements of the value transferred by the Group to the customer; or |
| ● | the Group’s efforts or inputs to the satisfaction of the performance obligation. |
F-20
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.1 Revenue recognition (Continued)
When either party to a contract has performed, the Group presents the contract in the statement of financial position as a contract asset or a contract liability, depending on the relationship between the entity’s performance and the customer’s payment.
A contract asset is the Group’s right to consideration in exchange for goods or services that the Group has transferred to a customer. If the value ascribed to the services rendered by the Group exceed the payment, a contract asset is recognized. Judgement is required in determining whether a right to consideration is unconditional and thus qualifies as a receivable.
A receivable is recorded when the Group has an unconditional right to consideration on the date the payment is due even if it has not yet performed under the contract.
If a customer pays consideration or the Group has a right to an amount of consideration that is unconditional, before the Group transfers a good or service to the customer, the Group presents the contract as a contract liability when the payment is made or the payment is due (whichever is earlier). A contract liability is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. A contract liability is recognized as revenue upon transfer of control to the customers of the promised license, products and services.
Some of the Group’s contracts with customers contain multiple performance obligations. For these contracts, the Group accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Although each of the performance obligations sometimes has a separate contractual price agreed in the contract, the management compares the contractual price with observable standalone market price, if any, or cost plus a margin price to assess the reasonableness of the pricing. If the contractual price for each performance obligation is assessed to be on market price basis, the Group uses the contractual price to measure and recognize revenue for each performance obligation. If the contractual price for each performance obligation is assessed to be not on market price basis, the Group reallocates the total contract price to the identified performance obligations based on its best estimated standalone selling price of each performance obligation.
Only the contracts for business origination services (Note 3.1.1(b)) contain significant financing components. As a
Incremental costs of obtaining customer contract primarily consist of sales commissions and are capitalized as an asset. The Group amortizes assets recognized from capitalizing costs to obtain a contract on a systematic basis to profit or loss, consistent with the pattern of revenue recognition to which the asset relates. As a
The following is a description of the accounting policy for the principal revenue streams of the Group.
F-21
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.1 Revenue recognition (Continued)
| (a) | Implementation and post-implementation support services |
Implementation services represent customer-specific software development or customization services provided to customers for the use of the Group’s software in cloud offerings or on-premise IT environment. The implementation contract is either on a time and material basis or fixed-fee basis. The Group invoices fees for implementation services based on actual time and materials incurred to date or according to pre-agreed payment schedules. After development, license to use the software is granted to the customer with an indefinite life. The customer cannot benefit from the implementation service on its own without the license. The perpetual license is a result of the implementation service. The implementation service and the perpetual license are highly interrelated and within the context of the contract, the promise of the Group is to transfer the implementation service together with the perpetual license as one output to its customers. Both the implementation service and the perpetual license to use the software are not distinct and thus should be combined together as one performance obligation. And there is no sales/usage-based royalty for the license to use the software in the arrangement.
The Group’s customer contracts often include both implementation services and post-implementation support services. Customers can benefit from implementation service and post-implementation support service on their own, and those services are clearly stated in the contract and are separately identifiable, they are not integrated or interrelated with each other, and do not significantly affect each other.
For implementation services, revenue is recognized over time if the Group’s performance (i) provides all of the benefits received and consumed simultaneously by the customer, (ii) creates and enhances an asset that the customer controls as the Group performs, or (iii) does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. Accordingly, revenue for implementation contracts is recognized over the contract terms by reference to the progress of work performed, which is measured based on costs incurred toward satisfying the performance obligation, relative to total costs expected to be incurred to the complete satisfaction of the performance obligation. Otherwise revenue is recognized at a point in time when control of the promised services is transferred to the customer.
For post-implementation support services, the performance obligation is to stand ready to provide technical support and unspecified updates and upgrades on a when-and-if-available basis. The customers simultaneously receive and consume the benefits of these support services as the Group performs and revenue is recognized based on time elapsed and thus ratably over the term of the support arrangement.
(b) | Transaction based service |
The Group derives its transaction based service revenue primarily from business origination services, risk management services, operation support services and other services.
F-22
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.1 Revenue recognition (Continued)
(b) | Transaction based service (Continued) |
Business origination services
The Group provides business origination services by assisting financial institutions in customer acquisition for their products including loans, wealth management products and insurance policies etc.
In order to satisfy its performance obligations (that is generating customer leads for financial institutions), the Group designs marketing plans, sources leads and analyzes the leads. The Group generates customer leads for financial institutions through its own platform or from channel partners. The leads, which are sourced from the Group’s own platform or from the channel partners, are grouped together and are screened and analyzed by the Group to ensure that they meet customers’ criteria. When the leads are sourced from the channel partners, the Group determined that it is the principal in providing the business origination services to the financial institutions because the Group controls the leads sourced from channel partners, screens and analyzes the leads before delivering those leads to customers. For business origination services, the Group is primarily responsible for fulfilling the promise to generate customer leads to financial institutions and has full discretion in establishing the price for the business origination services provided to financial institutions, as well as the selection of and determination of prices paid to the channel partners. Accordingly, the Group records revenue based on the gross amount payable by the financial institutions and records the amount payable to the channel partners as cost of revenue. The Group normally charges its customers based on successful referrals at fixed charge rates.The revenue for business origination services is recognized when a referral is successfully accepted by financial institutions.
The Group determined that it is not the legal lender and legal borrower (or receiver of deposits from investors) in the loan origination and repayment process. Therefore, the Group does not record loans receivable and payable arising from the loans between lenders and borrowers. The Group acts as an agent to facilitate such loans.
Operation support services
Operation support services mainly represent calling services and insurance loss assessment services, digital certification and related services and solutions, service management platforms to participants around auto aftermarket scenarios, asset monitoring services and consulting services provided to financial institutions.
For contracts which the Group charges its customers based on usage of the services at fixed charge rates, and invoices the fees on periodical basis, the revenue from these services is recognized at a point in time when the customers receive and consume the benefits of these services each time the Group performs, based on the amount charged for such services.
For contracts which the Group charges its customers based on the term of services and invoices the fee on periodical basis, and the performance obligation is to stand ready to provide operation support, the customers simultaneously receive and consume the benefits of these support services as the Group performs and revenue is recognized over time based on time elapsed and thus ratably over the term of the support arrangement.
When the consideration receivable is different from the revenue recognized, a “contract asset” or “contract liability” shall be recognized in the consolidated statement of financial position.
F-23
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.1 Revenue recognition (Continued)
(b) | Transaction based service (Continued) |
Risk management services
Risk management services mainly represent credit risk assessment, identity verification service, risk management services used in insurance loss assessment and anti-fraud services provided to financial institutions.
For risk management services contracts, the Group normally charges its customers based on usage of the services at fixed charge rates, and invoices the fees on periodical basis. The revenue from these services is recognized at a point in time when the customers receive and consume the benefits of these services each time the Group performs, based on the amount charged for such services.
Cloud platform services
Cloud platform services mainly represent providing financial institutions with value-added services including computing, storage, database and backup services on a variety of cloud infrastructures. For cloud platform contracts, the Group normally charges its customers based on usage of the services at fixed charge rates, and invoices the fees on periodical basis. The revenue from these services is recognized over time based on time elapsed and thus ratably over the contract terms when the customers receive and consume the benefits of these services.
Others
Other revenue mainly represents sales of products, asset management services and revenue from virtual bank.
For sales of products, the Group recognizes revenue net of discounts and return allowances upon the time when the products are delivered to customers.
(c)Interest and commission income
For virtual bank, interest income from debt instruments measured at amortized cost and debt instruments measured at fair value through other comprehensive income is recognized in revenue using the effective interest rate method. Fees and commissions are recognized on an accrual basis when the service has been provided or significant act performed.
F-24
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.2 Intangible assets
The Group’s intangible assets include application and platforms, purchased software, development costs in progress, goodwill, business licenses and others.
Intangible assets can be recognized only when future economic benefits expected to be obtained from the use of the item will flow into the Group and its cost can be measured reliably. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition.
Costs associated with maintaining application and platform are recognized as an expense as incurred. Development costs that are directly attributable to the development and testing of identifiable application and platform controlled by the Group are recognized as intangible assets when the following criteria are met:
| ● | it is technically feasible to complete the application and platform so that it will be available for use |
| ● | management intends to complete the application and platform and use or sell it |
| ● | there is an ability to use or sell |
| ● | it can be demonstrated how the application and platform will generate probable future economic benefits |
| ● | adequate technical, financial and other resources to complete the development and to use or sell the application and platform are available, and |
| ● | the expenditure attributable to the application and platform during its development can be reliably measured. |
Directly attributable costs that are capitalized mainly include employee costs and technology service fees.
Research expenditure and development expenditure that do not meet the criteria above are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is ready for use.
The useful lives of intangible assets are assessed by the period of bringing economic benefits for the Group.
The useful lives of intangible assets excluding development cost in progress are set as follows:
| Expected useful life |
| |
●Application and platform | |||
●Purchased software | |||
●Business licenses |
Intangible assets with finite lives are subsequently amortized on the straight-line basis over the useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed, and adjusted if appropriate, at least at each year end.
Intangible assets with indefinite useful lives and development costs in progress are not amortized, but are subject to annual impairment assessment.
F-25
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.3 Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that a non-financial asset other than deferred tax assets may be impaired. If any such indication exists, or when annual impairment testing for a non-financial asset is required, the Group makes an estimate of the asset’s recoverable amount. A non-financial asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where the carrying amount of a non-financial asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to disposal, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
For non-financial assets other than goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such an indication exists, the Group makes an estimate of the recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had
Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units), to which the goodwill relates. The recoverable amount is the higher of its fair value less costs of disposal and its value-in-use, determined on an individual asset (or cash-generating unit) basis, unless the individual asset (or cash-generating unit) does not generate cash flows that are largely independent from those of other assets or groups of assets (or groups of cash-generating units). Impairment losses recognized in relation to goodwill are not reversed for subsequent increases in its recoverable amount.
Intangible assets with indefinite useful lives and development costs in progress are tested for impairment annually at each year end either individually or at the cash-generating unit level, as appropriate.
F-26
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.4 Financial assets
Classification
The Group classifies its financial assets in the following measurement categories:
| ● | those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and |
| ● | those to be measured at amortized cost. |
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held and the cash flow characteristics of the asset. For investments in equity instruments, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment measured at fair value through other comprehensive income.
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
Recognition and measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the consolidated statement of comprehensive income.
(a) Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:
| ● | Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other income, gains or loss together with foreign exchange gains and losses. Impairment losses are presented in the consolidated statements of comprehensive income. |
| ● | Fair value through other comprehensive income (“FVOCI”): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other income, gains or loss. Interest income from these financial assets is included in other gain using the effective interest rate method. Foreign exchange gains and losses are presented in other income, gains or loss and impairment expenses are presented in the statement of profit or loss. |
F-27
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.4 Financial assets (Continued)
Recognition and measurement (Continued)
| (a) | Debt instruments (Continued) |
| ● | Fair value through profit or loss (“FVPL”): Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognized in profit or loss and presented net within other income, gains or loss in the period in which it arises. |
(b) | Equity instruments |
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss. Changes in the fair value of financial assets at fair value through profit or loss are recognized in profit or loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
(c)Impairment
The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortized cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Expected credit loss refers to the weighted average amount of credit loss of financial instruments based on the probability of default. Credit loss refers to the difference between all contractual cash flows receivable and all cash flows that the entity expects to receive, discounted at the original effective interest rate. The Group recognizes or reverses the impairment provision through profit or loss.
For debt instruments measured at FVOCI, impairment gains or losses are included in the net impairment losses on financial instruments and correspondingly reduce the accumulated changes in fair value included in the OCI reserves of equity.
For trade receivables and contract assets, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the assets. The impairment matrix is determined based on historical observed default rates over the expected life of the contract assets and trade receivables with similar credit risk characteristics and is adjusted for forward-looking estimates. At every reporting date the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.
Impairment on other receivables are measured as either 12-month expected credit losses or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk since initial recognition. If a significant increase in credit risk of a receivable has occurred since initial recognition, then impairment is measured as lifetime expected credit losses.
F-28
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.5 Share-based payments
An equity-settled share-based compensation plan was granted to the employees and non-employees, under which the entity receives services from employees and non-employees as consideration for equity instruments (options) of the Group. The fair value of the services received in exchange for the grant of the options is recognized as an expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted:
The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market performance and service conditions. It recognizes the impact of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity.
If the terms of an equity-settled award are modified, at a minimum an expense is recognized as if the terms had not been modified. An additional expense is recognized for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.
3.1.6 Tax
Income tax comprises current and deferred tax. Income tax is recognized in the statement of comprehensive income, or in other comprehensive income or in equity if it relates to items that are recognized in the same or a different period directly in other comprehensive income or in equity.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.
Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
| ● | when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and |
| ● | in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in jointly controlled entities, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. |
F-29
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.1 Material accounting policies (Continued)
3.1.6 Tax (Continued)
Deferred tax assets are recognized for all deductible temporary differences, the carry-forward of unused tax credits and any unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilized, except:
| ● | when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and |
| ● | in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in jointly controlled entities, deferred tax assets are only recognized to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. |
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Conversely, previously unrecognized deferred tax assets are reassessed at the end of each reporting period and are recognized to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
3.2Summary of other accounting policies
3.2.1 Principles of consolidation and equity accounting
3.2.1.1 Subsidiaries
Subsidiaries are all entities (including structured entities or VIEs as stated in Note 1.2 above) over which the Group has control. The Group controls an entity when the Group 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of comprehensive income, consolidated statement of changes in equity and consolidated balance sheet, respectively.
For the parent company’s separate financial statements, investments in subsidiaries are accounted for using the equity method.
F-30
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.2Summary of other accounting policies (Continued)
3.2.1 Principles of consolidation and equity accounting (Continued)
3.2.1.2 Investments accounted for using the equity method
(i) Associate
An associate is an entity over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence could be demonstrated for an investment of less than 20%, for example, by representation on the board of directors or equivalent governing body of the investee. Investments in associates are accounted for using the equity method of accounting.
(ii) Joint ventures
Investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. Investments in joint ventures are accounted for using the equity method.
Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment accounted for using the equity method include goodwill identified on acquisition. Upon the acquisition of the ownership interest in an associate or a joint venture, any difference between the cost of the investment accounted for using the equity method and the Group’s share of the net fair value of the investment’s identifiable assets and liabilities is accounted for as goodwill.
If the ownership interest in an associate or a joint venture is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognized in the consolidated statement of comprehensive income, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in investment accounted for using the equity method equals or exceeds its interest in the investment, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the investment.
The Group determines at each reporting date whether there is any objective evidence that the investment accounted for using the equity method is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment and its carrying value and recognizes the amount adjacent to “share of loss of associate and joint venture” in the consolidated statement of comprehensive income.
Profits and losses resulting from upstream and downstream transactions between the Group and its investment accounted for using the equity method are recognized in the Group’s financial statements only to the extent of unrelated investor’s interests in the investment. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
Gain or losses on dilution of equity interest in the investment accounted for using the equity method are recognized in the consolidated statement of comprehensive income.
F-31
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.2Summary of other accounting policies (Continued)
3.2.2 Structured Entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only, and the relevant activities are directed by means of contractual or related arrangements.
The Group determines whether it is an agent or a principal in relation to those structured entities in which the Group acts as an asset manager on management’s judgement. If an asset manager is agent, it acts primarily on behalf of others and so does not control the structured entity. It may be principal if it acts primarily for itself, and therefore controls the structured entity. The unconsolidated structured entities in which the Group acts as an asset manager is set out in Note 37.
3.2.3 Business combination
Except for business combinations under common control, the Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis. Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill.
3.2.4 Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The functional currency of the Company is the United States dollar (“US$”). RMB is the functional currency of the subsidiaries in PRC. As the major operations of the Group are within the PRC, the directors of the Company have chosen to present the Group’s financial statements in RMB (the presentation currency).
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in the consolidated statements of comprehensive income.
F-32
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.2Summary of other accounting policies (Continued)
3.2.4 Foreign currency translation (Continued)
Transactions and balances (Continued)
Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statements of comprehensive income, within finance costs. All other foreign exchange gains and losses are presented in the consolidated statements of comprehensive income on a net basis within other income, gains or loss - net.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as fair value through other comprehensive income are recognized in other comprehensive income.
Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
| ● | assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet |
| ● | income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and |
| ● | all resulting exchange differences are recognized in other comprehensive income. |
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognized in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
3.2.5 Derivative financial instruments
The Group’s derivative financial instruments are initially recognized at fair value on the date of which the related derivative contracts are entered into and are subsequently measured at fair value. All derivatives are carried as assets when the fair values are positive and as liabilities when the fair values are negative. The gains or losses arisen from fair value changes of derivatives are recognized in profit or loss.
3.2.6 Trade receivables
Trade receivables are amounts due from customers for products sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognized initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognized at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost using the effective interest method. See Note 19 for further information about the Group’s accounting for trade receivables and Note 5 and Note 3.1.4 for a description of the Group’s impairment policies.
F-33
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.2Summary of other accounting policies (Continued)
3.2.7 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
3.2.8 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
3.2.9 Leases
The Group leases various properties. Rental contracts are typically made for fixed periods of
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
| ● | fixed payments (including in-substance fixed payments), less any lease incentives receivable |
| ● | variable lease payment that are based on an index or a rate |
| ● | amounts expected to be payable by the lessee under residual value guarantees |
| ● | the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and |
| ● | payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. |
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the group’s incremental borrowing rate.
Right-of-use assets are measured at cost comprising the following:
| ● | the amount of the initial measurement of lease liability |
| ● | any lease payments made at or before the commencement date less any lease incentives received |
| ● | any initial direct costs, and |
| ● | restoration costs. |
Right-of-use assets related to lease of properties are recorded under property and equipment (Note 13). Lease liabilities are recorded under trade and other payables (Note 28).
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss.
F-34
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.2Summary of other accounting policies (Continued)
3.2.10 Property and equipment
Property and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attribute to the acquisition of the items.
Depreciation on property and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives or, in case of a leasehold improvements, the shorter lease term as follows:
Category |
| Expected useful life |
|
Office and telecommunication equipment | |||
Leasehold improvements |
The assets’ residual values and useful lives are reviewed, and adjusted quarterly if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within ‘Other income, gains or loss - net’ in the consolidated statements of comprehensive income.
3.2.11Financial liabilities
The Group, at initial recognition, classifies financial liabilities as either financial liabilities subsequently measured at amortised cost or financial liabilities at fair value through profit or loss.
Except for derivative financial instruments (Note 3.2.5), the Group’s financial liabilities are mainly financial liabilities measured at amortised cost, including trade and other payables, short-term borrowings, customer deposits and other financial liabilities from virtual bank, etc. These financial liabilities are initially measured at the amount of their fair value after deducting transaction costs and use the effective interest rate method for subsequent measurement.
Where the present obligations of financial liabilities are discharged, cancelled or when they are expired, the Group derecognizes these financial liabilities. The differences between the carrying amounts and the consideration received are recognized in profit or loss.
Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
F-35
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3 Summary of accounting policy information (Continued)
3.2Summary of other accounting policies (Continued)
3.2.12 Employee benefits
(a)Pension obligations
The employees of the Group are mainly covered by various defined contribution pension plans. The Group makes and accrues contributions on a monthly basis to the pension plans, which are mainly sponsored by the related government authorities that are responsible for the pension liability to retired employees. Under such plans, the Group has no other significant legal or constructive obligations for retirement benefits beyond the said contributions, which are expensed as incurred. Certain employees are also provided with group life insurance but the amounts involved are insignificant.
(b)Housing benefits
The employees of the Group are entitled to participate in various government-sponsored housing funds. The Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the employees. The Group’s liability in respect of these funds is limited to the contributions payable in each period.
(c)Medical benefits
The Group makes monthly contributions for medical benefits to the local authorities in accordance with relevant local regulations for the employees. The Group’s liability in respect of employee medical benefits is limited to the contributions payable in each period.
3.2.13 Interest income
Interest income from virtual bank is included in the revenue (Note 6).
Interest income from financial assets that are held for cash management purposes is included in finance income, see finance income (Note 10) below.
Interest income from financial assets at FVPL and any other interest income is included in the net gains/(losses), see other income (Note 9) below.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).
3.2.14 Dividend income
Dividend income is recognized when the right to receive payment is established.
3.2.15 Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognized in the income statement over the period necessary to match them with the costs that they are intended to compensate.
F-36
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4 Critical accounting estimates and judgments
The Group makes estimates and judgments that affect the reported amounts of revenues, expenses, assets and liabilities in these financial statements. Estimates and judgments are continually assessed based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
In the process of applying the Group’s accounting policies, management has made the following judgments and accounting estimation, which have the most significant effect on the amounts recognized in the financial statements.
(a) | Impairment of financial assets measured at amortized costs |
The Group applies expected credit losses model in measuring impairment of trade receivables, contract assets, other receivables, loans and advances to customers. The expected loss rates are based on the Group’s past loss experiences, existing market conditions as well as forward looking estimates at the end of each reporting period.
Details of the methodology and key inputs used are disclosed in Note 5.1(b)(ii).
(b) | Income taxes |
The Group is subject to income taxes in numerous jurisdictions. Judgement is required in determining the provision for income taxes.
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the deductible temporary difference can be utilized. To determine the future taxable profits, reference is made to the latest available profit forecasts. Where the temporary difference is related to losses, relevant tax law is considered to on a jurisdictional basis determine the availability of the losses to offset against the future taxable profits.
Significant items on which the Group has exercised accounting judgment include recognition of deferred tax assets in respect of tax losses. Recognition of the deferred tax assets involves judgment regarding the future financial performance of the Group.
The deferred tax assets recognized as at December 31, 2022, 2023 were mainly attributable to major operating companies in Mainland China, which are eligible for preferential tax policies applicable for the qualification of “High and New Technology Enterprise” , and being entitled to a preferential income tax rate of
The carrying amount and reliability of deferred tax assets were reviewed periodically at the end of each reporting period by comparing forecasted taxable profits in prior period to actual results in the current period and comparing revenue growth rate and profit margin in the current year forecast to historical results and industry trends.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact current income tax and deferred income tax in the period in which such determination is made.
(c) | Recognition of share-based compensation expenses |
As mentioned in Note 27, equity-settled share-based compensation schemes were established for the employees. The directors have used applicable models to determine the grant date fair value of the options or restricted shares granted to employees, which is to be expensed over the vesting period. Significant estimate on assumptions, such as the underlying equity value, risk-free interest rate, expected volatility and dividend yield, is required to be made by the directors in applying the relevant models. The values of options or restricted shares are subject to subjectivity and uncertainty relating to the assumptions and limitation of the model used to estimate such values. In addition, The Group is required to estimate the percentage of grantees that will remain in employment with the Group and whether the performance conditions for vesting will be met at the end of the vesting period. The Group only recognizes an expense for those share options or restricted shares expected to vest over the vesting period.
F-37
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4 Critical accounting estimates and judgments (Continued)
(d) | Impairment of intangible assets including goodwill |
The Group is required to test impairment for goodwill, and intangible assets not ready for use on an annual basis or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Other intangible assets are tested whenever events or changes in circumstances indicate that the carrying amount of those assets exceeds its recoverable amount. Intangible assets are tested for impairment based on the recoverable amount of the cash generating unit (“CGU”) to which these assets are related. The recoverable amount is determined based on the higher of fair value less costs to sell and value in use.
Determination of the value in use is an area involving management judgment in order to assess whether the carrying value of intangible assets can be supported by the net present value of future cash flows. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain areas including management’s expectations of (i) revenue growth rates; (ii) long-term growth rate; (iii) pre-tax discount rate; and (iv) profit margin.
Details of the methodology and key inputs used are disclosed in Note 14.
(e) | Consolidation of VIEs |
As disclosed in Note 1.2, the Group exercises control over the VIEs and has the right to recognize and receive substantially all the economic benefits through the Contractual Arrangements. The Group considers that it controls the VIEs notwithstanding the fact that it does not hold direct equity interests in the VIEs, as it has power over the financial and operating policies of the VIEs and receive substantially all the economic benefits from the business activities of the VIEs through the Contractual Arrangements. Accordingly, all these VIEs are accounted for as controlled structured entities and their financial statements have also been consolidated by the Company.
5 Management of financial risk
The Group’s activities expose it to a variety of financial risks: market risk (comprising currency risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. Risk management is carried out by the senior management of the Group.
5.1 Financial risk factors
(a) | Market risk |
Currency risk
Foreign currency risk is the risk of loss resulting from changes in foreign currency exchange rates. Fluctuations in exchange rates between the RMB and other currencies in which the Group conducts business may affect its financial position and results of operations. The foreign currency risk assumed by the Group mainly comes from movements in the USD/RMB exchange rates.
The Company and overseas intermediate holding companies’ functional currency is USD. They are mainly exposed to foreign exchange risk arising from their cash and cash equivalents and loans to group companies denominated in RMB. The Group has entered into spot-forward USD/RMB derivative financial instruments to hedge certain portion of its exposure to foreign currency risk arising from loans to group companies denominated in RMB. The Group monitors the size of foreign currency position, and manages foreign currency risk by utilizing hedging strategy.
F-38
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.1 Financial risk factors (Continued)
(a) Market risk (Continued)
Currency risk (Continued)
The subsidiaries of the Group are mainly operated in mainland China with most of the transactions settled in RMB. The Group considers that the business in mainland China is not exposed to any significant foreign exchange risk as there are no significant financial assets or liabilities of these subsidiaries denominated in the currencies other than the respective functional currency.
The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the post-tax impact on profit and equity, after considering hedging strategy.
At December 31, | ||||||
2021 | 2022 | 2023 | ||||
Impact on post tax profit | ||||||
| RMB’000 | RMB’000 |
| RMB’000 | ||
USD+5% |
| ( | |
| ( | |
USD -5% |
| | ( |
| | |
Interest rate risk
Interest rate risk is the risk of an adverse impact to earnings or capital due to changes in market interest rates. Floating rate instruments expose the Group to cash flow interest rate risk, whereas fixed rate instruments expose the Group to fair value interest risk.
Interest rate risk of the Group is mainly from mismatches in the interest rate profiles of assets, liabilities and capital instruments in Virtual Bank Business. The sensitivity analysis on earnings and economic value is described as follows:
| As at December 31, 2023 | |||||
RMB million |
| HKD |
| USD |
| RMB |
Impact on earnings over the next 12 months if interest rates rise by |
| ( |
| |
| — |
Impact on economic value if interest rates rise by |
| ( |
| ( |
| — |
| As at December 31, 2022 | |||||
RMB million |
| HKD |
| USD |
| RMB |
Impact on earnings over the next 12 months if interest rates rise by |
| ( |
| |
| |
Impact on economic value if interest rates rise by |
| ( |
| ( |
| — |
F-39
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.1 Financial risk factors (Continued)
(b) | Credit risk |
(i) | Credit risk management |
The Group’s credit risk is mainly associated with cash and cash equivalents, restricted cash and time deposits over three months, trade receivables, contract assets, other receivables, financial assets measured at amortized cost from Virtual Bank and financial guarantee contracts. The carrying amounts of each class of the above financial assets represent the Group’s maximum exposure to credit risk in relation to financial assets as disclosed in Note 5.1 (b) (ii).
To manage this risk arising from cash and cash equivalents and restricted cash and time deposits over three months, the Group mainly transacts with state-owned or reputable financial institutions in the PRC including related parties (Note 36(d)) and reputable international financial institution outside the PRC. The Group considers that there is no significant credit risk and the Group will not suffer any material losses due to the default of these financial institutions.
The Group’s trade receivables and contract assets mainly arise from transactions undertaken with customers. The Group mitigates the credit risk by assessing the credit quality, setting a shorter credit period or arranging the instalment payment and prepayment method. The impairment loss allowance for trade receivables and contract assets are disclosed in Note 19 and Note 6.
For other receivables, management make periodic collective assessments as well as individual assessment on the recoverability based on historical settlement records and forward looking information.
For financial assets measured at amortized cost from virtual bank, management developed independent and regular procedures to review the approvals of credit applications, structure levels of credit risk by setting limits on the exposure of risk, and review the ability of borrowers to meet repayment obligations, with monitoring made on a revolving basis and performing periodic reviews. The credit programmes are managed on a portfolio basis, and the limits on the level of credit risk by sectors are approved annually by the management. The exposure to credit risk is mitigated by obtaining relevant financial guarantees. For debt securities and interbank exposure under treasury portfolio, external ratings are used, which are continuously monitored and updated.
(ii) | ECL measurement |
For financial assets whose impairment losses are measured using expected credit loss (“ECL”) model, the Group assesses whether their credit risk has increased significantly since their initial recognition, and applies a three-stage impairment model to calculate their impairment allowance and recognize their ECL, as follows:
- Stage 1: If the credit risk has not increased significantly since its initial recognition, the financial asset is included in stage 1.
- Stage 2: If the credit risk has increased significantly since its initial recognition but is not yet deemed to be credit-impaired, the financial instrument is included in stage 2. The description of how the Group determines when a significant increase in credit risk has occurred is disclosed in the following section of “judgement of significant increase in credit risk”.
- Stage 3: If the financial instruments are credit-impaired, the financial instrument is included in stage 3. The definition of credit-impaired financial assets is disclosed in the following section of “the definition of credit-impaired assets”.
F-40
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.1 Financial risk factors (Continued)
(b) | Credit risk (Continued) |
(ii) | ECL measurement (Continued) |
The Group considers the credit risk characteristics of different financial instruments when determining if there is significant increase in credit risk. For financial instruments with or without significant increase in credit risk, 12-month or lifetime expected credit losses are provided respectively. The expected credit loss is the result of discounting the product of Exposure at Default, Probabilities of Default and Loss given Default.
According to whether the credit risk has increased significantly or whether the assets have been impaired, the Group measures the impairment loss allowance with the expected credit losses of 12-month or the lifetime due to the credit risk characteristics of different assets.
The Group applies the IFRS 9 simplified approach in measuring expected credit losses which uses a lifetime expected impairment loss allowance for all trade receivables and contract assets.
Judgement of significant increase in credit risk (“SICR”)
Under IFRS 9, when considering the impairment stages for financial assets, the Group evaluates the credit risk at initial recognition and also whether there is any significant increase in credit risk for each reporting period.
The Group set quantitative and qualitative criteria to judge whether there has been a SICR after initial recognition. The judgement criteria mainly includes the Probabilities of Default changes of the debtors, changes of credit risk categories and other indicators of SICR, etc.. In the judgement of whether there has been a SICR after initial recognition, the Group has not rebutted the 30 days past due as presumption of SICR.
The definition of credit-impaired assets
Under IFRS 9, in order to determine whether credit impairment occurs, the defined standards adopted by the Group are consistent with the internal credit risk management objectives for relevant financial assets while considering quantitative and qualitative indicators. When the Group assesses whether the debtor has credit impairment, the following factors are mainly considered:
| ● | The debtor has overdue more than 90 days after the contract payment date |
| ● | The debtor has significant financial difficulties |
| ● | The debtor is likely to go bankrupt or other financial restructuring |
| ● | The lender gives the debtor concessions for economic or contractual reasons due to the debtor’s financial difficulties, where such concessions are normally reluctant to be made by the lender |
The credit impairment of financial assets may be caused by the joint effects of multiple events and may not be caused by separately identifiable event.
F-41
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.1 Financial risk factors (Continued)
(b) | Credit risk (Continued) |
(ii) | ECL measurement (Continued) |
Forward-looking information
The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors that affect the ability of the debtors to settle the receivables. The Group has developed macroeconomic forward-looking adjustment model by establishing a pool of macro-economic indicators, preparing data, filtering model factors and adjusting forward-looking elements, and the indicators include country Gross Domestic Product(GDP), Consumer Price Index(CPI), Producer Price Index(PPI), Investment in Fixed Assets, and Total Retail Sales of Consumer Goods, etc. based on the statistical analysis of historical data. The Group has identified the CPI to be the most relevant factor for evaluating expected credit losses on 31 December 2023, and has also taken into account of the Hong Kong GDP and the unemployment rate in Virtual Bank operations, and accordingly adjusts the historical loss rates based on the expected changes in these factors.
Credit risk exposure
Without considering the impact of collateral and other credit enhancement, for on-balance sheet assets, the maximum exposures are based on net carrying amounts as reported in the consolidated financial statements.
| (1) | Trade receivables and contract assets |
As at December 31, 2022 | ||||||
| RMB’000 |
| RMB’000 |
| RMB’000 | |
| Trade |
| Contract |
| ||
| receivables |
| assets | Total | ||
Gross carrying amount |
|
|
|
|
|
|
Applying simplified approach |
| |
| |
| |
Loss allowance |
|
|
|
|
|
|
Applying simplified approach |
| |
| |
| |
As at December 31, 2023 | ||||||
| RMB’000 |
| RMB’000 |
| RMB’000 | |
| Trade |
| Contract |
| ||
| receivables |
| assets | Total | ||
Gross carrying amount |
|
|
|
|
|
|
Applying simplified approach |
| |
| |
| |
Loss allowance |
|
|
| |||
Applying simplified approach |
| | |
| | |
F-42
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.1 Financial risk factors (Continued)
(b) | Credit risk (Continued) |
(ii) | ECL measurement (Continued) |
Credit risk exposure (Continued)
(1)Trade receivables and contract assets (Continued)
To measure the expected credit losses, all trade receivables and contract assets have been grouped based on shared credit risk characteristics and the aging analysis. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The impairment loss allowance of trade receivables and contract assets applying simplified approach was determined as follows:
As at December 31, 2022 |
| ||||||||||||
| Related |
| Up to |
| 1 year to |
| 2 year to |
| Above |
|
| ||
parties | 1 year | 2 year | 3 year | 3 years | Total |
| |||||||
Expected loss rate | | % | | % | | % | | % | | % | | % | |
Gross carrying amount of trade receivables and contract assets applying simplified approach |
| |
| |
| |
| |
| |
| | |
Loss allowance of trade receivables and contract assets applying simplified approach |
| |
| |
| |
| |
| |
| | |
As at December 31, 2023 |
| ||||||||||||
Related | Up to | 1 year to | 2 year to | Above |
| ||||||||
| parties |
| 1 year |
| 2 year |
| 3 year |
| 3 years |
| Total |
| |
Expected loss rate |
| | % | | % | | % | | % | | % | | % |
Gross carrying amount of trade receivables and contract assets applying simplified approach |
| |
| |
| | | | | ||||
Loss allowance of trade receivables and contract assets applying simplified approach |
| |
| |
| | | | | ||||
F-43
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.1 Financial risk factors (Continued)
(b) | Credit risk (Continued) |
(ii) | ECL measurement (Continued) |
Credit risk exposure (Continued)
(1) | Trade receivables and contract assets (Continued) |
Movements in the impairment loss allowance of trade receivables and contract assets applying simplified approach are as follows:
For the year ended December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Beginning of the year |
| ( | ( |
| ( | |
Additions of impairment loss, net | ( | ( | ( | |||
Recovery of amounts written off previously | — | ( | — | |||
Write-off |
| | |
| | |
Exchange difference | — | ( | ( | |||
End of the year |
| ( | ( |
| ( | |
(2)Other receivables
Impairment on other receivables is measured as either 12-month expected credit losses or lifetime expected credit loss, depending on whether there has been a significant increase in credit risk since initial recognition. If a significant increase in credit risk of a receivable has occurred since initial recognition, then impairment is measured as lifetime expected credit loss. The credit risk exposure of the other receivables was disclosed in Note 20(a).
(3)Loans and advances to customers
The following table presents the credit risk exposure of the loans and advances to customers from virtual bank.
As at December 31, |
| ||||
| 2022 |
| 2023 |
| |
RMB’000 | RMB’000 |
| |||
Gross carrying amount |
|
| |||
Financial assets measured at amortized cost |
| |
| | |
Financial assets measured at fair value through other comprehensive income |
| |
| | |
| |
| | ||
Expected credit loss provision |
| — |
| | |
|
| ||||
Expected loss rate |
| — | | % | |
F-44
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.1 Financial risk factors (Continued)
(b) | Credit risk (Continued) |
(ii) | ECL measurement (Continued) |
Credit risk exposure (Continued)
(3)Loans and advances to customers (Continued)
Movements in the impairment loss allowance of loans and advances to customers applying three-stage approach are as follows:
*1Financial assets measured at amortized cost
For the year ended December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Beginning of the year | ( |
| ( |
| — | |
(Additions)/Reversals of impairment loss | ( | | ( | |||
Write‑off | |
| — |
| — | |
End of the year | ( |
| — |
| ( | |
*2Financial assets measured at fair value through other comprehensive income
| For the year ended December 31, | |||||
2021 |
| 2022 |
| 2023 | ||
| RMB’000 | RMB’000 | RMB’000 | |||
Beginning of the year |
| ( |
| ( |
| ( |
Additions of impairment loss |
| ( |
| ( |
| ( |
Write-off |
| — |
| |
| |
End of the year |
| ( |
| ( |
| ( |
F-45
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.1 Financial risk factors (Continued)
(c) | Liquidity risk |
The Group manages liquidity risk by maintaining adequate cash and cash equivalents and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Management believe that the Group’s current cash and cash equivalents and anticipated cash flows from operations, investment and financing activities will be sufficient to meet the Group’s anticipated working capital requirements and capital expenditures for the next 12 months from December 31, 2023.
The liquidity risk of the foreign exchange swap is managed by aligning the critical terms of such swaps with the hedged items.
The table below analyses the Group’s financial liabilities into relevant maturity grouping based on the remaining period at the end of each reporting period to the contractual maturity date. The amounts disclosed in the table are undiscounted contractual cash flows.
As at December 31, 2022 | ||||||
| Within 1 year |
| 1 to 5 years |
| Total | |
RMB’000 | RMB’000 | RMB’000 | ||||
Short‑term borrowings |
| | — | | ||
Trade and other payables |
| | | | ||
- Including: lease liabilities | | | | |||
Other financial liabilities from virtual bank | | — | | |||
Customer deposits |
| | — | | ||
Non‑derivative financial liabilities | | | | |||
Gross settled (foreign currency swaps) |
| |||||
- (inflow) |
| ( | — | ( | ||
- outflow | | — | | |||
Derivative financial liabilities | | — | | |||
Total | | | | |||
F-46
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.1 Financial risk factors (Continued)
(c) | Liquidity risk (Continued) |
As at December 31, 2023 | ||||||
| Within 1 year |
| 1 to 5 years |
| Total | |
RMB’000 | RMB’000 | RMB’000 | ||||
Short‑term borrowings |
| | — | | ||
Trade and other payables |
| | | | ||
- Including: lease liabilities | | | | |||
Other financial liabilities from virtual bank | | — | | |||
Customer deposits | | — | | |||
Non‑derivative financial liabilities |
| | | | ||
5.2 Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to enhance shareholders’ value in the long-term.
The Group monitors capital (including share capital and reserves) by regularly reviewing the capital structure. As a part of this review, the Company considers the cost of capital and the risks associated with the issued share capital. The Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or repurchase the Company’s shares. In the opinion of the Directors of the Company, the Group’s capital risk was low as at December 31, 2023.
5.3 Fair value estimation
Fair value estimates are made at a specific point in time based on relevant market information and information about financial instruments. When an active market exists, such as an authorized securities exchange, the market value is the best reflection of the fair values of financial instruments. For financial instruments where there is no active market, fair value is determined using valuation techniques.
The Group’s financial assets measured at fair value mainly include financial assets at fair value through profit or loss and financial assets measured at fair value through other comprehensive income.
Determination of fair value and fair value hierarchy
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchies. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
F-47
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.3 Fair value estimation (Continued)
Determination of fair value and fair value hierarchy (Continued)
The levels of the fair value hierarchy are as follows:
(a) | Fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities (“Level 1”); |
(b) | Fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (“Level 2”); and |
(c) | Fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs) (“Level 3”). |
The level of fair value calculation is determined by the lowest level input that is significant in the overall calculation. As such, the significance of the input should be considered from an overall perspective in the calculation of fair value.
For Level 2 financial instruments, valuations are generally obtained from third party pricing services for identical or comparable assets, or through the use of valuation methodologies using observable market inputs, or recent quoted market prices. Valuation service providers typically gather, analyze and interpret information related to market transactions and other key valuation model inputs from multiple sources, and through the use of widely accepted internal valuation models, provide a theoretical quote on various securities.
For Level 3 financial instruments, prices are determined using valuation methodologies such as discounted cash flow models and other similar techniques. Determinations to classify fair value measurement within Level 3 of the valuation hierarchy are generally based on the significance of the unobservable factors to the overall fair value measurement, and valuation methodologies such as discounted cash flow models and other similar techniques. To determine the fair value of loans and advances to customers from virtual bank, loans are segregated into portfolios of similar characteristics. Fair values are estimated using discounted cash flow methodology incorporating a range of input assumptions including expected customer prepayment rates, new business interest rate estimates for similar loans. The fair value of loans reflects expected credit losses at the balance sheet date and the fair value effect of repricing between origination and the reporting date. For credit impaired loans, fair value is estimated by discounting the future cash flows over the period they are expected to be recovered.
For assets and liabilities that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The following tables provide the fair value measurement hierarchy of the Group’s financial assets and liabilities:
As at December 31, 2022 | ||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |
RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||
Assets measured at fair value |
|
|
|
| ||||
Financial assets at fair value through profit or loss (Note 22) |
| — |
| |
| — |
| |
Financial assets measured at fair value through other comprehensive income (Note 17) |
| |
| — |
| |
| |
Derivative financial assets (Note 32) | — | | — | | ||||
Financial liabilities | ||||||||
Derivative financial liabilities (Note 32) | — | | — | | ||||
F-48
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.3 Fair value estimation (Continued)
Determination of fair value and fair value hierarchy (Continued)
As at December 31, 2023 | ||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |
RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||
Assets measured at fair value |
|
|
|
| ||||
Financial assets at fair value through profit or loss (Note 22) |
| — | | — | | |||
Financial assets measured at fair value through other comprehensive income (Note 17) |
| | — | | | |||
Derivative financial assets (Note 32) | — | | — | | ||||
For the years ended December 31, 2022 and 2023, there were
Movements of Level 3 financial instruments measured at fair value are as follows:
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Beginning of the year |
| | | | ||
Additions, net |
| | | | ||
Losses recognized in other comprehensive income | ( | ( | ( | |||
(Losses)/gain recognized in profit or loss | — | ( | | |||
End of the year |
| | | | ||
Valuation inputs and relationships to fair value
The following table summarises main quantitative and qualitative information about the significant unobservable inputs used in level 3 fair value measurements for loans and advances to customers from virtual bank measured at fair value through other comprehensive income. The impact of changes in unobservable inputs for other level 3 fair value measurement was immaterial.
Unobservable inputs | Range of inputs |
| |||||
|
| 2022 |
| 2023 |
| ||
Financial assets measured at fair value through other comprehensive income |
|
|
|
|
|
| |
-Loans and advances to customers from virtual bank |
|
|
|
|
|
| |
| Discount rate |
| % | % | |||
| Prepayment ratio |
| % | | % | ||
F-49
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 Management of financial risk (Continued)
5.3 Fair value estimation (Continued)
Valuation inputs and relationships to fair value (Continued)
The analysis below is performed for reasonably possible movements in unobservable inputs with all other variables held constant, showing the impact on the assets and other comprehensive income.
Unobservable inputs | Impact on the assets and | |||||
other comprehensive | ||||||
income | ||||||
| 2022 | 2023 | ||||
-Loans and advances to customers from virtual bank |
|
|
|
|
|
|
Discount rate |
| + | % | ( |
| ( |
| - | % | |
| | |
Prepayment ratio |
| + | % | ( |
| ( |
| - | % | |
| | |
6 Segment information and revenue
6.1 Description of segments and principal activities
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers (“CODM”), who are responsible for allocating resources and assessing performance of the operating segments and making strategic decisions. The Group’s chief operating decision makers have been identified as the executive directors of the Company, they review the Group’s internal reporting in order to assess performance, allocate resources, and determine the operating segments based on these reports.
The Group has the following reportable segments for the year ended December 31, 2023:
– Technology Solutions
– Virtual Bank Business
F-50
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Segment information and revenue (Continued)
6.1 Description of segments and principal activities (Continued)
As the Group’s assets and liabilities are substantially located in the PRC, substantially all revenues are earned and substantially all expenses incurred in the PRC, no geographical segments are presented.
Year ended December 31, 2021 | ||||||||
Intersegment | ||||||||
eliminations | ||||||||
Virtual Bank | Technology | and | ||||||
Business | Solutions | adjustments | Consolidated | |||||
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 | |
Revenue |
| |
| |
| ( |
| |
Cost of revenue |
| ( |
| ( |
| |
| ( |
Gross profit |
| ( |
| |
| — |
| |
Research and development expenses |
| ( |
| ( |
| — |
| ( |
Selling and marketing expenses |
| ( |
| ( |
| — |
| ( |
General and administrative expenses |
| ( |
| ( |
| — |
| ( |
Net impairment losses on financial and contract assets |
| ( |
| ( |
| — |
| ( |
Other income, gains or loss-net |
| |
| |
| — |
| |
Operating loss |
| ( |
| ( |
| — |
| ( |
Finance income |
| — |
| |
| — |
| |
Finance costs |
| ( |
| ( |
| — |
| ( |
Finance costs – net |
| ( |
| ( |
| — |
| ( |
Share of gain of associate and joint venture |
| — |
| |
| — |
| |
Loss before income tax |
| ( |
| ( |
| — |
| ( |
ASSETS |
|
|
|
| ||||
Segment Assets |
| |
| |
| ( |
| |
Goodwill |
| — |
| |
| — |
| |
Deferred income tax assets |
| — |
| |
| — |
| |
Total assets |
| |
| |
| ( |
| |
LIABILITIES |
|
|
|
| ||||
Segment Liabilities |
| |
| |
| ( |
| |
Deferred income tax liabilities |
| — |
| |
| — |
| |
Total Liabilities |
| |
| |
| ( |
| |
Other segment information |
|
|
|
| ||||
Depreciation of property and equipment |
| |
| |
| — |
| |
Amortization of intangible assets |
| |
| |
| — |
| |
Additions of non-current assets except for goodwill and deferred income tax assets |
| |
| |
| — |
| |
F-51
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Segment information and revenue (Continued)
6.1 Description of segments and principal activities (Continued)
Year ended December 31, 2022 | ||||||||
Intersegment | ||||||||
eliminations | ||||||||
Virtual Bank | Technology | and | ||||||
Business | Solutions | adjustments | Consolidated | |||||
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 | |
Revenue |
| |
| |
| ( |
| |
Cost of revenue |
| ( |
| ( |
| |
| ( |
Gross profit |
| |
| |
| — |
| |
Research and development expenses |
| ( |
| ( |
| — |
| ( |
Selling and marketing expenses |
| ( |
| ( |
| — |
| ( |
General and administrative expenses |
| ( |
| ( |
| — |
| ( |
Net impairment losses on financial and contract assets |
| ( |
| ( |
| — |
| ( |
Other income, gains or loss-net |
| ( |
| |
| — |
| |
Operating loss |
| ( |
| ( |
| — |
| ( |
Finance income |
| — |
| |
| — |
| |
Finance costs |
| ( |
| ( |
| — |
| ( |
Finance costs – net |
| ( |
| ( |
| — |
| ( |
Share of gain of associate and joint venture |
| — |
| |
| — |
| |
Impairment charges on associate | — | ( | — | ( | ||||
Loss before income tax |
| ( |
| ( |
| — |
| ( |
ASSETS |
|
|
|
| ||||
Segment Assets |
| |
| |
| ( |
| |
Goodwill |
| — |
| |
| — |
| |
Deferred income tax assets |
| — |
| |
| — |
| |
Total assets |
| |
| |
| ( |
| |
LIABILITIES |
|
|
|
| ||||
Segment Liabilities |
| |
| |
| ( |
| |
Deferred income tax liabilities |
| — |
| |
| — |
| |
Total Liabilities |
| |
| |
| ( |
| |
Other segment information |
|
|
|
| ||||
Depreciation of property and equipment |
| |
| |
| — |
| |
Amortization of intangible assets |
| |
| |
| — |
| |
Additions of non-current assets except for goodwill and deferred income tax assets |
| |
| |
| — |
| |
F-52
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Segment information and revenue (Continued)
6.1 Description of segments and principal activities (Continued)
Year ended December 31, 2023 | ||||||||
Intersegment | ||||||||
eliminations | ||||||||
Virtual Bank | Technology | and | ||||||
Business | Solutions | adjustments | Consolidated | |||||
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 | |
|
|
|
|
|
|
|
| |
Revenue |
| |
| |
| ( |
| |
Cost of revenue |
| ( |
| ( |
| |
| ( |
Gross profit |
| |
| |
| — |
| |
Research and development expenses |
| — |
| ( |
| — |
| ( |
Selling and marketing expenses |
| ( |
| ( |
| — |
| ( |
General and administrative expenses |
| ( |
| ( |
| — |
| ( |
Net impairment losses on financial and contract assets |
| ( |
| ( |
| — |
| ( |
Other income, gains or loss-net |
| |
| |
| — |
| |
Operating loss |
| ( |
| ( |
| — |
| ( |
Finance income |
| — |
| |
| — |
| |
Finance costs |
| ( |
| ( |
| — |
| ( |
Finance costs – net |
| ( |
| |
| — |
| |
Share of gain of associate and joint venture |
| — |
| |
| — |
| |
Impairment charges on associate | — | ( | — | ( | ||||
Loss before income tax |
| ( |
| ( |
| — |
| ( |
ASSETS |
|
|
|
|
| |||
Segment Assets |
| |
| |
| ( |
| |
Goodwill |
| — |
| |
| — |
| |
Deferred income tax assets |
| — |
| |
| — |
| |
Total assets |
| |
| |
| ( |
| |
LIABILITIES |
|
|
|
| ||||
Segment Liabilities |
| |
| |
| ( |
| |
Deferred income tax liabilities |
| — |
| |
| — |
| |
Total Liabilities |
| |
| |
| ( |
| |
Other segment information |
|
|
|
|
| |||
Depreciation of property and equipment |
| |
| |
| — |
| |
Amortization of intangible assets |
| |
| |
| — |
| |
Additions of non-current assets except for goodwill and deferred income tax assets |
| |
| |
| — |
| |
F-53
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Segment information and revenue (Continued)
6.2 Revenue
(a) Disaggregation of revenue from contracts with customers
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
- Technology Solutions | ||||||
Implementation |
| | | | ||
Transaction based and support revenue |
| |||||
- Operation support services | | | | |||
- Business origination services |
| | | | ||
- Risk management services |
| | | | ||
- Cloud services platform |
| | | | ||
- Post‑implementation support services |
| | | | ||
- Others |
| | | | ||
| | | | |||
F-54
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Segment information and revenue (Continued)
6.2 Revenue (Continued)
(a) Disaggregation of revenue from contracts with customers (Continued)
Disaggregation of revenue by timing of transfer of services over time or at a point in time is set out below:
| At a point |
|
| |||
in time | Over time | Total | ||||
Year ended December 31, 2021 |
|
|
| |||
Implementation |
| — | | | ||
Transaction based and support revenue |
| |||||
- Operation support services |
| | | | ||
- Business origination services | | — | | |||
- Risk management services |
| | — | | ||
- Cloud services platform | — | | | |||
- Post‑implementation support services |
| — | | | ||
- Others |
| | | | ||
| | | | |||
| At a point | |||||
in time | Over time | Total | ||||
Year ended December 31, 2022 |
| |||||
Implementation |
| | | | ||
Transaction based and support revenue |
| |||||
- Operation support services |
| | | | ||
- Business origination services | | — | | |||
- Risk management services |
| | — | | ||
- Cloud services platform | — | | | |||
- Post-implementation support services |
| — | | | ||
- Others |
| | | | ||
| | | |
F-55
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Segment information and revenue (Continued)
6.2 Revenue (Continued)
(a) Disaggregation of revenue from contracts with customers (Continued)
At a point | ||||||
| in time |
| Over time |
| Total | |
Year ended December 31, 2023 |
|
|
|
|
|
|
Implementation |
| | | | ||
Transaction based and support revenue |
| |||||
- Operation support services |
| | | | ||
- Business origination services |
| | — | | ||
- Risk management services | | — | | |||
- Cloud services platform |
| — | | | ||
- Post-implementation support services |
| — | | | ||
- Others |
| | | | ||
| | | |
During the years ended December 31, 2021, 2022 and 2023, the Group mainly operated in the PRC and most of the revenue were generated in PRC.
The major customers which contributed more than 10% of the total revenue of the Group for the years ended December 31, 2021, 2022 and 2023 are listed as below:
For the year ended |
| ||||||
December 31, |
| ||||||
| 2021 |
| 2022 |
| 2023 |
| |
| % of total |
| % of total |
| % of total |
| |
revenue | revenue | revenue |
| ||||
Ping An Group and its subsidiaries |
| | % | | % | | % |
Lufax Holding Ltd (“Lufax” and its subsidiaries) |
| | % | | % | | % |
| | % | | % | | % | |
(b) Interest and commission income
For the year ended December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
– Virtual Bank Business |
|
|
|
|
|
|
Interest and commission income |
| |
| |
| |
F-56
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Segment information and revenue (Continued)
6.2 Revenue (Continued)
(c) Contract assets and liabilities
The Group has recognized the following revenue-related contract assets and liabilities:
At December 31, | ||||
2022 | 2023 | |||
| RMB’000 |
| RMB’000 | |
Contract assets | ||||
-Implementation |
| |
| |
-Transaction based and support |
| |
| |
- Business origination services | | — | ||
- Operation support services | | | ||
- Post implementation support services |
| |
| |
| |
| | |
Less: Impairment loss allowance |
|
| ||
-Implementation |
| ( |
| ( |
-Transaction based and support |
| ( |
| ( |
- Operation support services | ( | ( | ||
- Post implementation support services |
| ( |
| ( |
| ( |
| ( | |
| |
| | |
At December 31, | ||||
2022 | 2023 | |||
RMB’000 |
| RMB’000 | ||
Contract liabilities |
|
| ||
-Implementation | | | ||
-Transaction based and support |
| |
| |
-Post implementation support services |
| |
| |
-Risk management services |
| |
| |
-Operation support services |
| |
| |
-Others | | | ||
| |
| | |
Less: Non‑current contract liabilities |
| ( |
| ( |
| |
| | |
F-57
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 Segment information and revenue (Continued)
6.2 Revenue (Continued)
(c) Contract assets and liabilities (Continued)
During the years ended December 31, 2021, 2022 and 2023, there were no material cumulative catch-up adjustments to revenue that affect the corresponding contract asset or contract liability, including adjustments arising from a change in the measure of progress, a change in an estimate of the transaction price or a contract modification, there were also
(i)Revenue recognized in relation to contract liabilities
For the year ended | ||||||
Revenue recognized in relation to contract liabilities | December 31, | |||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Revenue recognized that was included in the contract liability balance at the beginning of the year | | | | |||
(ii) | Remaining performance obligations of long-term contracts |
Remaining performance obligations of long-term contracts | For the year ended | |||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Aggregate amount of the transaction price allocated to long‑term contracts that are partially or fully unsatisfied at the end of each year | ||||||
Expected to be recognized within one year |
| | |
| | |
Expected to be recognized in one to two years |
| | |
| | |
Expected to be recognized in two to three years |
| | |
| | |
Expected to be recognized beyond three years |
| | |
| | |
| | |
| | ||
The remaining performance obligations disclosed above represent implementation, post-implementation support services, risk management services and operation support services that have an original contractual term of more than one year. Moreover, the amount disclosed above does not include variable consideration which is constrained.
F-58
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7 Expenses by nature
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Technology service fees |
| | |
| | |
Employee benefit expenses (Note 8) |
| | |
| | |
Outsourcing labor costs |
| | |
| | |
Amortization of intangible assets (Note 14) |
| | |
| | |
Depreciation of property and equipment (Note 13) |
| | |
| | |
Purchase costs of products |
| | |
| | |
Business origination fees to channel partners |
| | |
| | |
Travelling expenses |
| | |
| | |
Marketing and advertising fees | | | | |||
Professional service fees | | | | |||
Auditor’s remuneration | ||||||
—Audit related |
| | |
| | |
—Non-audit |
| | |
| | |
Impairment loss of intangible assets (Note 14) |
| | |
| | |
Listing expenses | | | — | |||
Others |
| | |
| | |
Total cost of revenue, research and development expenses, selling and marketing expenses, general and administrative expenses |
| | |
| | |
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Research and development costs |
|
| ||||
- Employee benefit expenses |
| | |
| | |
- Technology service fees |
| | |
| | |
- Amortization of intangible assets |
| | |
| | |
- Depreciation of property and equipment |
| | |
| | |
- Impairment loss of intangible assets | | | | |||
- Others |
| | |
| | |
Amounts incurred |
| | |
| | |
Less: capitalized |
|
| ||||
- Employee benefit expenses |
| ( | ( |
| ( | |
- Technology service fees |
| ( | ( |
| ( | |
| ( | ( |
| ( | ||
| | |
| | ||
F-59
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8 Employee benefit expenses
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Wages and salaries |
| | |
| | |
Welfare and other benefits |
| | |
| | |
Share‑based payments (Note 27) |
| | |
| | |
| | |
| | ||
9 Other income, gains or loss - net
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Net foreign exchange gain/ (loss) |
| | ( | ( | ||
Government grants and tax rebates (Note a) |
| | | | ||
Net gain on financial assets at fair value through profit or loss |
| | | | ||
Loss on disposal of property and equipment and intangible asset |
| ( | ( | ( | ||
Remeasurement of redemption liability (Note 28(ii)) |
| — | | — | ||
Guarantee gain, net |
| | — | — | ||
Net (loss)/gain on derivatives |
| ( | | | ||
Others | ( | | ( | |||
| | | ||||
| (a) | Government grants and tax rebates |
Government grants and tax rebates were related to income. There were no unfulfilled conditions or contingencies related to these subsidies.
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Government grants |
| | |
| | |
- Technology development incentives |
| | |
| | |
- Operation subsidies |
| | |
| | |
Tax rebates | | | | |||
| | |
| | ||
F-60
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10 Finance costs — net
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Finance income |
|
| ||||
Interest income on bank deposits |
| | | | ||
Finance costs |
|
| ||||
Interest expense on borrowings |
| ( | ( | ( | ||
Interest expense on lease liabilities |
| ( | ( | ( | ||
Interest expense on redemption liability |
| ( | ( | ( | ||
Bank charges |
| ( | ( | ( | ||
( | ( | ( | ||||
| ( | ( | | |||
11 Income tax benefit/(expense)
The income tax benefit/(expense) of the Group for the years ended December 31, 2021, 2022 and 2023 is analyzed as follows:
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Current income tax | ( | ( | ( | |||
Deferred income tax | | | | |||
Income tax benefit/ (expense) | | | ( | |||
The tax on the Group’s loss before income tax differs from the theoretical amount that would arise using the statutory tax rate applicable to loss of the consolidated entities as follows:
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 |
| RMB’000 |
| RMB’000 | ||
Loss before income tax | | | | |||
Tax calculated at PRC statutory income tax rate of | | | | |||
Differential of income tax rates applicable to subsidiaries | ( | ( | ( | |||
Expense not deductible for tax purposes | ( | ( | ( | |||
Incomes not subject to tax | | | | |||
Tax losses and temporary differences for which no deferred income tax asset was recognized | ( | ( | ( | |||
Derecognition of deferred tax assets on tax losses | ( | — | — | |||
Additional deductible allowance for research and development expenses | ||||||
Utilization of previously unrecognized tax losses | | | | |||
Income tax benefit/ (expense) | | | ( | |||
F-61
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11 Income tax benefit/(expense) (Continued)
The unused tax losses for the years ended December 31, 2022 and 2023 is analyzed as follows:
At December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 |
| RMB’000 | ||
Unused tax losses for which no deferred tax asset has been recognized | |
| | |
The expiry dates of the unused tax losses not recognized as deferred tax assets for the years ended December 31, 2022 and 2023 are listed as follows:
At December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 |
| RMB’000 | ||
Year 2023 | | — | ||
Year 2024 | | | ||
Year 2025 | | | ||
Year 2026 | | | ||
Year 2027 | | | ||
Year 2028 | | | ||
Year 2029 | | | ||
Year 2030 | | | ||
Year 2031 | | | ||
Year 2032 | ||||
Year 2033 | — | |||
F-62
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11 Income tax benefit/(expense) (Continued)
(a) | PRC Enterprise Income Tax (“EIT”) |
The income tax provision of the Group in respect of operations in Mainland China has been calculated at the tax rate of
Shenzhen OneConnect, Vantage Point Technology, BER Technology, OneConnect Cloud Technology, Shenzhen OneConnect Technology and Shenzhen CA as subsidiaries of the Group, were established in mainland China. They were eligible for preferential tax policies applicable for the qualification of “High and New Technology Enterprise” and were entitled to a preferential income tax rate of
Shenzhen OneConnect Technology and OneConnect Cloud Technology as subsidiaries of the Group, were established in the Shenzhen Qianhai Shenzhen-Hong Kong Cooperation Zone and accordingly is entitled to a reduced income tax rate of
(b) | Cayman Islands Income Tax |
The Company is incorporated under the laws of the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands and is not subject to Cayman Islands income tax.
(c) | Hong Kong Income Tax |
The Hong Kong income tax rate is
(d) | Singapore Income Tax |
The Singapore income tax rate is
(e) | Indonesia Income Tax |
The income tax provision in respect of the Group’s operations in Indonesia was calculated at the tax rate of
(f) | Malaysia Income Tax |
The Malaysia income tax rate is
(g) | Philippines Income Tax |
The Philippines income tax rate is
(h) | PRC Withholding Tax |
According to the EIT Law, distribution of profits earned by PRC companies since January 1, 2008 to overseas investors is subject to withholding tax of
F-63
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group plans to indefinitely reinvested undistributed earnings earned from its PRC subsidiaries in its operations in PRC. Therefore,
12 Loss per share
Year ended December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 |
| RMB’000 |
| RMB’000 | ||
Net loss for the year attributable to owners of the Company | ( | ( | ( | |||
Weighted average number of ordinary shares in issue (in’000 shares) | | | | |||
Basic loss per share (RMB yuan) | ( | ( | ( | |||
Diluted loss per share (RMB yuan) | ( | ( | ( | |||
Basic loss per ADS (RMB yuan) (Note) | ( | ( | ( | |||
Diluted loss per ADS (RMB yuan) (Note) | ( | ( | ( | |||
Note: One ADS represent
Basic loss per share is calculated by dividing the loss attributable to owners of the Company by the weighted average number of ordinary shares in issue during the years ended December 31, 2021, 2022 and 2023.
Shares held for share incentive scheme purpose have been treated as treasury shares. Accordingly, for purpose of calculation of loss per share, the issued and outstanding number of ordinary shares as at December 31, 2021, 2022 and 2023, taking into account the shares held for share incentive scheme purpose, were
The effects of all outstanding share options granted under the Share Option Scheme and Restricted Share Units Scheme (Note 27) for the years ended December 31, 2021, 2022 and 2023, have been excluded from the computation of diluted loss per share as their effects would be anti-dilutive. Accordingly, dilutive loss per share for the years ended December 31, 2021, 2022 and 2023 were the same as basic loss per share for the years.
F-64
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13 Property and equipment
Office and | ||||||||
telecommunication | Right‑of‑use | Leasehold | ||||||
| equipment |
| properties |
| improvements |
| Total | |
RMB’000 |
| RMB’000 | RMB’000 |
| RMB’000 | |||
As at January 1, 2022 |
|
|
|
|
|
|
| |
Cost |
| | | | | |||
Accumulated depreciation |
| ( | ( | ( | ( | |||
Exchange difference | ( | ( | ( | ( | ||||
Net book amount |
| | | | | |||
Year ended December 31, 2022 |
|
|
|
|
|
|
| |
Opening net book amount |
| | | | | |||
Additions |
| | | | | |||
Disposals, net |
| ( | ( | ( | ( | |||
Depreciation charge |
| ( | ( | ( | ( | |||
Exchange difference | | | | | ||||
Closing net book amount |
| | | | | |||
As at December 31, 2022 |
|
|
|
|
|
|
| |
Cost |
| | | | | |||
Accumulated depreciation | ( | ( | ( | ( | ||||
Exchange difference |
| ( | | ( | ( | |||
Net book amount |
| | | | | |||
Year ended December 31, 2023 | ||||||||
Opening net book amount | | | | | ||||
Additions | | | | | ||||
Disposals, net | ( | ( | ( | ( | ||||
Depreciation charge | ( | ( | ( | ( | ||||
Exchange difference | | | | | ||||
Closing net book amount | | | | | ||||
As at December 31, 2023 | ||||||||
Cost | | | | | ||||
Accumulated depreciation | ( | ( | ( | ( | ||||
Exchange difference | ( | | ( | ( | ||||
Net book amount | | | | |
F-65
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13 Property and equipment (Continued)
During the different periods, the approximate depreciation which were charged to cost of revenue, research and development expenses, selling and marketing expenses and general and administrative expenses were as follows:
Year ended December 31, | ||||
2022 | 2023 | |||
| RMB’000 |
| RMB’000 | |
Cost of revenue |
| | | |
Research and development expenses |
| | | |
Selling and marketing expenses |
| | | |
General and administrative expenses |
| | | |
| | | ||
Depreciation of office and telecommunication equipment is allocated to different functional expenses based on usage of equipment by different functional divisions. Right-of-use properties and leasehold improvement are primarily related to business office buildings leased by the Group and used as corporate headquarters. For leased business office buildings which are for general and administrative use, the depreciation of the related right-of-use properties and leasehold improvement is charged to general and administrative expense.
F-66
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14 Intangible assets
Application and platform | ||||||||||||||||||
Contributed | Development | |||||||||||||||||
by Ping | Developed | Purchased | costs in | Business | ||||||||||||||
| An Group |
| internally |
| Acquired |
| Software |
| progress |
| Goodwill |
| license |
| Others |
| Total | |
| RMB’000 |
| RMB’000 | RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 | ||
Year ended December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Opening net book amount |
| — | | | | | | | | | ||||||||
Additions |
| — | — | — | | | — | — | — | | ||||||||
Write-off | — | ( | — | — | ( | — | — | — | ( | |||||||||
Transfer |
| — | | — | — | ( | — | — | — | — | ||||||||
Amortization |
| — | ( | ( | ( | — | — | ( | ( | ( | ||||||||
Exchange differences | — | | — | | | — | — | — | | |||||||||
Closing net book amount |
| — | | — | | | | | | | ||||||||
As at December 31, 2022 |
|
|
|
|
|
|
|
| ||||||||||
Cost |
| | | | | | | | | | ||||||||
Accumulated amortization |
| ( | ( | ( | ( | — | — | ( | ( | ( | ||||||||
Exchange differences | — | | — | ( | | — | — | — | | |||||||||
Net book amount |
| — | | — | | | | | | | ||||||||
Application and platform | ||||||||||||||||||
Contributed | Development | |||||||||||||||||
by Ping | Developed | Purchased | costs in | Business | ||||||||||||||
| An Group |
| internally |
| Acquired |
| Software |
| progress |
| Goodwill |
| license |
| Others |
| Total | |
| RMB’000 |
| RMB’000 | RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 |
| RMB’000 | ||
Year ended December 31, 2023 | ||||||||||||||||||
Opening net book amount | — | | — | | | | | | | |||||||||
Additions | — | — | — | | | — | — | — | | |||||||||
Write-off | — | ( | — | — | ( | — | — | — | ( | |||||||||
Transfer | — | | — | — | ( | — | — | — | — | |||||||||
Amortization | — | ( | — | ( | — | — | ( | ( | ( | |||||||||
Exchange differences | — | | — | | | — | — | — | | |||||||||
Closing net book amount | — | | — | | | | | — | | |||||||||
As at December 31, 2023 | ||||||||||||||||||
Cost | | | | | | | | | | |||||||||
Accumulated amortization | ( | ( | ( | ( | — | — | ( | ( | ( | |||||||||
Exchange differences | — | | — | | | — | — | — | | |||||||||
Net book amount | — | | — | | | | | — | | |||||||||
F-67
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14 Intangible assets (Continued)
The Group assesses at each reporting date whether there is an indication that intangible assets may be impaired. During the year ended December 31, 2023, impairment charge of RMB
During the years ended December 31, 2021, 2022 and 2023, the amount of amortization charged to cost of revenue, research and development expenses and general and administrative expenses are as follows:
Year ended December 31, | ||||||
Amortization of intangible assets | 2021 | 2022 | 2023 | |||
| RMB’000 |
| RMB’000 |
| RMB’000 | |
Cost of revenue |
| | | | ||
Research and development expenses |
| | | | ||
General and administrative expenses |
| | | | ||
| | | | |||
(a) | Impairment tests for goodwill |
Goodwill arises from the Group’s acquisitions of Vantage Point Technology on July 31, 2018, BER Technology on June 30, 2019, and View Foundation on August 30, 2019.
The goodwill of the Group is attributable to the acquired workforce and synergies expected to be derived from combining with the operations of the Group. During the year ended December 31, 2022 and 2023, the goodwill is regarded as attributable to the CGU of Technology Solutions segment. The Group carries out its impairment testing on goodwill by comparing the recoverable amounts of groups of CGUs to their carrying amounts.
The management did the value-in-use calculations to determine the recoverable amounts. Value-in-use is calculated based on discounted cash flows. The discounted cash flows calculations of group of CGUs use cash flow projection developed based on financial budgets approved by management of the Group covering a five-year period, after considering the current and historical business performance, the future business plan and market data. Cash flows beyond the five-year period are extrapolated using the estimated long term growth rates stated below.
The significant assumptions used for value-in-use calculations are as follows:
| For the year ended December 31, | ||||
| 2022 |
| 2023 | ||
RMB’000 | RMB’000 | ||||
| |||||
Revenue growth rate | - | % | - | % | |
Profit margin | - | % | - | % | |
Long term growth rate |
| | % | | % |
Pre-tax discount rate | | % | | % | |
Recoverable amount of the CGU exceeding its carrying amount (RMB’000) |
| | | ||
F-68
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14 Intangible assets (Continued)
(a) | Impairment tests for goodwill (Continued) |
The following table sets forth the impact of reasonable possible changes in absolute value in each of the significant assumptions, with all other variables held constant, of goodwill impairment testing at the dates indicated.
Possible changes of significant assumptions | Recoverable amount of the CGU | |||
exceeding its carrying amount | ||||
Year ended December 31, | ||||
| 2022 |
| 2023 | |
| RMB’000 |
| RMB’000 | |
Revenue growth rate decrease by |
| |
| |
Profit margin decrease by | | | ||
Long term growth rate decrease by |
| |
| |
Pre-tax discount rate increase by |
| |
| |
15 Investments accounted for using the equity method
(a) | Investment in associate |
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
| RMB’000 |
| RMB’000 |
| RMB’000 | |
At beginning of year |
| | | | ||
Share of gain of associate |
| | | | ||
Impairment charges on associate |
| — | ( | ( | ||
Disposal | — | — | ( | |||
At end of the year |
| | | — | ||
| (i) | On March 28, 2017, Shanghai OneConnect set up Pingan Puhui Lixin Asset Management Co., Ltd. (“Puhui Lixin”) with Pingan Puhui Enterprise Management Co., Ltd. (“Puhui Management”), a subsidiary of Lufax, by investing a capital amount of RMB |
On November 24, 2022, Shanghai OneConnect entered into the Equity Transfer Agreement with Puhui Management, pursuant to which Shanghai OneConnect conditionally agreed to sell, and Puhui Management conditionally agreed to purchase, the Group’s
F-69
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15 Investments accounted for using the equity method (Continued)
(a) | Investment in associate (Continued) |
(ii) | Summarised financial information for associate |
Summarised balance sheet | As at December 31, | |||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Total assets |
| |
| |
| * |
Total liabilities |
| ( |
| ( |
| * |
Net assets |
| |
| |
| * |
Summarised income statement | For the year ended December 31, | |||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Operating income |
| |
| |
| * |
Profit or loss from continuing operations |
| |
| |
| * |
Group’s share % |
| | % | | % | * |
Group’s share in net assets |
| |
| |
| * |
Goodwill |
| |
| |
| * |
| |
| |
| * | |
Less: impairment charges on associate |
| — |
| ( |
| * |
Carrying amount |
| |
| |
| * |
*2023 information not presented as the associate was disposed of as described above.
(b) | Investment in joint venture |
| For the year ended December 31, | |||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
At beginning of year | | | — | |||
Additions | — | — | | |||
Share of losses of joint venture | ( | ( | ( | |||
Exchange difference | ( | — | — | |||
At end of the year | | — | — | |||
F-70
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15 Investments accounted for using the equity method (Continued)
(b) | Investment in joint venture (Continued) |
On August 23, 2019, the Group entered into an investment in SBI OneConnect Japan Co., Ltd. (“SBI Japan”) with SBI Holdings, Inc., (“SBI”) by investing a capital of RMB
The Group entered into an agreement of setting up Financial Open Portal (Guangxi) Cross-border Financial Digital Co., Ltd. (“Open Portal Guangxi”) with Digital Guangxi Group Co., Ltd. (“Digital Guangxi”) on April 10, 2020. The Group made a capital injection of RMB
16 Financial instruments by category
The Group holds the following financial instruments:
As at December 31, | ||||||
| Note |
| 2022 |
| 2023 | |
| RMB’000 |
| RMB’000 | |||
Financial assets |
|
|
| |||
Financial assets at amortized cost |
|
|
| |||
- Trade receivables |
| 19 |
| |
| |
- Prepayments and other receivables (excluding non-financial asset items) |
| 20 |
| |
| |
- Financial assets measured at amortized cost from virtual bank | 21 | | | |||
- Restricted cash and time deposits over three months |
| 23 |
| |
| |
- Cash and cash equivalents |
| 24 |
| |
| |
Financial assets measured at fair value through other comprehensive income (FVOCI) |
| 17 |
| |
| |
Financial assets at fair value through profit or loss (FVPL) |
| 22 |
| |
| |
Derivative financial asset | ||||||
- Held at FVPL | 32 | | | |||
Total |
|
| |
| | |
Financial liabilities |
|
|
| |||
Liabilities at amortized cost |
|
|
| |||
- Trade and other payables (excluding non-financial liability items) |
| 28 |
| |
| |
- Short-term borrowings |
| 29 |
| |
| |
- Customer deposits | 30 | | | |||
- Other financial liabilities from virtual bank | 31 | | | |||
Derivative financial liability |
|
| ||||
- Held at FVPL |
| 32 |
| |
| — |
Total |
|
| |
| | |
F-71
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17 Financial assets measured at fair value through other comprehensive income
As at December 31, | ||||
| 2022 |
| 2023 | |
| RMB’000 |
| RMB’000 | |
Loans and advances to customers | | | ||
Equity securities (Note a) |
| |
| |
Debt securities | | | ||
| | |||
Less: Non-current financial asset measured at fair value through other comprehensive income | ( | ( | ||
| | |||
(a) | On August 4, 2016, the Group acquired |
18 Leases
(a) | Amounts recognized in the consolidated balance sheet |
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Right‑of‑use assets (Note 13) | ||||
- Properties |
| |
| |
Lease liabilities (Note 28) |
|
| ||
- Non current |
| |
| |
- Current |
| |
| |
| |
| | |
Additions to the right-of-use assets during the years ended December 31, 2022 and 2023 were RMB
The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on December 31, 2022 and 2023 was
F-72
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18 Leases (Continued)
(b) | Amounts recognized in the consolidated statement of profit or loss |
For the year ended | ||||||
December 31, | ||||||
2021 | 2022 | 2023 | ||||
| RMB’000 |
| RMB’000 |
| RMB’000 | |
Depreciation charge of right‑of‑use assets |
| | | | ||
Interest expenses (included in finance cost) |
| | | | ||
| | | | |||
The total cash outflow for leases in 2021, 2022 and 2023 were RMB
Expenses recognized in relation to short-term leases for the years ended December 31, 2021, 2022 and 2023 amounted to RMB
19 Trade receivables
| As at December 31, | |||
| 2022 |
| 2023 | |
| RMB’000 |
| RMB’000 | |
Trade receivables |
| |
| |
Less: impairment loss allowance (Note 5.1(b)) |
| ( |
| ( |
| |
| | |
Trade receivables and their aging analysis, based on recognition date, are as follows:
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Up to 1 year |
| |
| |
1 to 2 years |
| |
| |
2 to 3 years |
| |
| |
Above 3 years |
| |
| |
| |
| | |
F-73
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 Prepayments and other receivables
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Deposit receivable * | | | ||
Value-added-tax deductible |
| |
| |
Advance to suppliers |
| |
| |
Advance to staff |
| |
| |
Receivables for value-added-tax paid on behalf of wealth management products |
| |
| — |
Others |
| |
| |
Less: impairment loss allowance |
| ( |
| ( |
| | |||
Less: Non-current portion of other receivables | — | ( | ||
| |
| | |
* Deposit receivable mainly represents deposit paid to the Group’s service vendors according to the contractual agreements and such receivables will contractually be repaid within one year.
(a) | Movements in the impairment loss allowance of prepayments and other receivables are as follows: |
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Beginning of the year | ( | ( | ( | |||
Reversals/ (Additions) | | ( | | |||
Write-off | | — | — | |||
Exchange differences | | — | — | |||
End of the year |
| ( |
| ( |
| ( |
21 Financial assets measured at amortized cost from virtual bank
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Loans and advances to customers |
| |
| |
Less: expected credit loss provision |
| — |
| ( |
| |
| | |
The balance represents financial assets measured at amortized cost carried out by OneConnect Bank, a wholly owned subsidiary from the Group, since 2020.
F-74
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22 Financial assets at fair value through profit or loss
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Wealth management products | | | ||
As at December 31, 2022 and 2023, out of the wealth management products which the Group invested in, RMB
23 Restricted cash and time deposits over three months
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Restricted bank deposits | | | ||
Accrued interests | |
| | |
Time deposits with initial terms over three months | | | ||
|
| | ||
Less: Non-current restricted cash | — | ( | ||
|
| | ||
As at December 31, 2022, RMB
As at December 31, 2023, RMB
24 Cash and cash equivalents
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Cash on hand | | | ||
Cash at central bank | | | ||
Cash at banks | |
| | |
|
| | ||
At December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
USD | | | ||
RMB | |
| | |
HKD | | | ||
SGD | |
| | |
IDR | | | ||
MYR | | | ||
PHP | | | ||
|
| | ||
F-75
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25 Share capital
| Number of shares |
| USD | |
Authorized | ||||
Ordinary shares of USD |
| |
| |
|
|
| Equivalent | |||
Number of shares | USD | to RMB | ||||
Issued | ||||||
Ordinary shares of USD |
| |
| |
| |
Newly issued ordinary shares (Note a) |
| |
| |
| |
Ordinary shares of USD |
| |
| |
| |
Newly issued ordinary shares (Note b) | | | | |||
Newly issued ordinary shares upon initial public offering (Note c) | | | | |||
Ordinary shares of USD |
| |
| |
| |
Newly issued ordinary shares (Note d) | | | | |||
Surrendered ordinary shares (Note e) | ( | | | |||
Ordinary shares of USD |
| |
| |
| |
Surrendered ordinary shares (Note f) | ( | — | — | |||
Ordinary shares of USD | | | |
(a) | The Company completed its Round A investments (“Round A Investments”) in April 2018 with |
(b) | On March 11, 2019, the Company issued |
(c) | On December 13, 2019, the Company completed its IPO on the New York Stock Exchange. In the offering, |
(d) | On January 14, 2020, the over-allotment options for the IPO were partially exercised and an addition of |
(e) | On December 11, 2020 and December 24, 2020, the Company bought back and cancelled |
(f) | On April 1, 2021 and April 2, 2021, the Company bought back and cancelled |
F-76
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26 Other reserves
|
|
|
| Foreign |
|
| ||||||
Share‑based | currency | |||||||||||
Recapitalization | Share | compensation | translation | |||||||||
reserve | premium | reserve | differences | Others | Total | |||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||
As at January 1, 2021 |
| | | | ( | ( | | |||||
Other comprehensive income |
| |||||||||||
-Foreign currency translation differences |
| — | — | — | ( | — | ( | |||||
-Fair value changes on financial assets measured at fair value through other comprehensive income | — | — | — | — | ( | ( | ||||||
Share-based payments: | ||||||||||||
- Value of employee services and business cooperation arrangements(Note 27) |
| — | — | | — | — | | |||||
- Exercise of shares under share option Scheme |
| — | — | | — | — | | |||||
- Vesting of shares under Restricted Share Unit Scheme |
| — | — | ( | — | — | ( | |||||
As at December 31, 2021 |
| | | | ( | ( | | |||||
Other comprehensive income | ||||||||||||
-Foreign currency translation differences | — | — | — | | — | | ||||||
-Fair value changes on financial assets measured at fair value through other comprehensive income | — | — | — | — | | | ||||||
Share-based payments: | ||||||||||||
- Value of employee services and business cooperation arrangements (Note 27) | — | — | | — | — | | ||||||
- exercise of shares under share option Scheme | — | — | | — | — | | ||||||
- Vesting of shares under Restricted Share Unit Scheme | — | — | ( | — | — | ( | ||||||
As at December 31, 2022 | | | | | ( | | ||||||
Other comprehensive income | ||||||||||||
-Foreign currency translation differences | — | — | — | | — | | ||||||
-Fair value changes on financial assets measured at fair value through other comprehensive income | — | — | — | — | | | ||||||
Share-based payments: | ||||||||||||
- Value of employee services and business cooperation arrangements (Note 27) | — | — | | — | — | | ||||||
Transactions with equity holders: | ||||||||||||
- Transactions with non-controlling interests | — | — | — | — | ( | ( | ||||||
As at December 31, 2023 | | | | | ( | |
F-77
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27 Share-based payments
For the purpose of establishing the Group’s share incentive scheme, a special purpose vehicle was set up in 2017 to indirectly hold ordinary shares of the Company. As the Company has the power to govern the relevant activities of the special purpose vehicle and can derive benefits from the services to be rendered by the grantees, the directors of the Company consider that it is appropriate to consolidate the special purpose vehicle. In September 2020, the Company purchased at par value of the
On November 7, 2017, equity-settled share-based compensation plan (“the Share Option Scheme”) was set up with the objective to recognize and reward the contribution of eligible directors, employees and other persons (collectively, the “Grantees”) for the growth and developments of the Group. On September 10, 2019, the Board of Directors of the Company approved to amend and restate the equity-settled share-based compensation plan to supplement the Share Option Scheme with performance-based shares to grant to the Grantees (“the Restricted Share Units Scheme”). The
In 2022, the Board of Directors of the Company approved a new share repurchase program in which the Company may purchase its own ADSs for award grant purpose. For the year ended December 31, 2022, the Company repurchased
Share-based compensation expenses for the years ended December 31, 2021, 2022 and 2023 were allocated as follows:
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
-Cost of revenue | | — | | |||
-Research and development expenses | | — | | |||
-Selling and marketing expenses | | | | |||
-General and administrative expenses | | | | |||
Total | | | | |||
Value of employee’s services (Note 8) | | | | |||
Value of non-employee’s services | | | | |||
Total | | | | |||
F-78
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27 Share-based payments (Continued)
(a) Share Option Scheme
Subject to the Grantee continuing to be a service provider,
The exercisable period of options starts no earlier than
Movements in the number of share options granted to employees are as follows:
Number of share options | ||||||
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
At the beginning of the year | | | | |||
Exercised | ( | ( | — | |||
Forfeited |
| ( |
| ( |
| ( |
At the end of the year |
| |
| |
| |
For the outstanding share options, the weighted-average exercise price was RMB
Share options outstanding at the balance sheet dates have the following expiry dates and exercise prices.
Number of share options | ||||||||||||
As at December 31, | ||||||||||||
Grant Year |
| Expiry Year |
| Exercise price |
| Fair value of options | 2022 |
| 2023 | |||
2017 | 2027 | RMB | RMB | | | |||||||
2017 |
| 2027 |
| RMB |
| RMB | |
| | |||
2018 |
| 2028 |
| RMB |
| RMB | |
| | |||
2019 | 2029 | RMB | RMB | | | |||||||
|
| | ||||||||||
The Company have used the discounted cash flow method to determine the underlying equity fair value of the Company to determine the fair value of the underlying ordinary share before its IPO. Key assumptions, such as discount rate and projections of future performance, are required to be determined by the Company with best estimate.
Based on fair value of the underlying ordinary share, the Company have used Binomial option-pricing model to determine the fair value of the share option as at the grant date. Key assumptions are set as below:
| 2017 |
| 2018 |
| 2019 |
| |
Discount rate |
| | % | | % | | % |
Risk‑free interest rate |
| | % | | % | | % |
Volatility |
| | % | | % | | % |
Dividend yield |
| | % | | % | | % |
F-79
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27 Share-based payments (Continued)
(a) Share Option Scheme (Continued)
The Binomial Model requires the input of highly subjective assumptions. The risk-free rate for periods within the contractual life of the option is based on the China Treasury yield curve in effect at the time of grant. The expected dividend yield was estimated based on the Company’s expected dividend policy over the expected life of the options. The Company estimates the volatility of its ordinary shares at the respective dates of grant based on the historical volatility of similar U.S. public companies for a period equal to the expected life preceding the grant date.
(b) | Restricted Share Units Scheme |
Subject to the Grantee continuing to be a service provider,
Movements in the number of restricted share units granted to employees are as follows:
Number of restricted share units | ||||||
For the year ended December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
At the beginning of the year |
| |
| |
| |
Granted |
| |
| |
| |
Vested | ( | ( | — | |||
Forfeited |
| ( |
| ( |
| ( |
At the end of the year |
| |
| |
| |
F-80
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27 Share-based payments (Continued)
(b) Restricted Share Units Scheme (Continued)
Restricted share units outstanding at the balance sheet dates have the following expiry dates and fair value prices.
Number of restricted share units | ||||||||
As at December 31, | ||||||||
|
|
| 2022 |
| 2023 | |||
Fair value of restricted share units | ||||||||
Grant Year | Expiry Year | RMB | ||||||
09/10/2019 |
| 09/10/2029 |
| |
| | ||
01/01/2020 |
| 01/01/2030 |
| |
| | ||
04/01/2020 |
| 04/01/2030 |
| |
| | ||
07/01/2020 |
| 07/01/2030 |
| |
| | ||
06/01/2021 |
| 06/01/2031 |
| |
| | ||
06/01/2021 |
| 06/01/2031 |
| |
| | ||
06/01/2021 |
| 06/01/2031 |
| |
| | ||
07/01/2021 |
| 07/01/2031 |
| |
| | ||
09/01/2021 |
| 09/01/2031 |
| |
| | ||
10/01/2021 |
| 10/01/2031 |
| |
| | ||
10/01/2021 |
| 10/01/2031 |
| |
| | ||
01/02/2022 |
| 01/02/2032 |
| |
| | ||
01/02/2022 | 01/02/2032 | |
| | ||||
01/02/2022 | 01/02/2032 | | | |||||
01/02/2022 | 01/02/2032 | | | |||||
04/02/2022 | 04/02/2032 | | | |||||
07/02/2022 | 07/02/2032 | | | |||||
10/02/2022 | 10/02/2032 | | | |||||
12/16/2022 | 12/16/2032 | | | |||||
01/02/2023 | 01/02/2033 | — | | |||||
| | |||||||
Based on fair value of the underlying ordinary share, the Company have used the Monte Carlo model to determine the fair value of the restricted share units as at the grant date. Key assumptions are set as below:
| 2021 |
| 2022 |
| 2023 | ||
Risk-free interest rate |
| % | % | % | |||
Volatility |
| % | % | % | |||
Dividend yield |
| | % | | % | | % |
The Monte Carlo model requires the input of highly subjective assumptions. The risk-free rate for periods within the contractual life of the restricted share units is based on the China Treasury Bond Yield Curve in effect at the time of grant. The expected dividend yield was estimated based on the Company’s expected dividend policy over the expected life of the restricted share units. The Company estimates the volatility of its ordinary shares at the date of grant based on the historical volatility of similar US public companies for a period equal to the expected life preceding the grant date.
F-81
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27 Share-based payments (Continued)
(c) Share Repurchase
In 2022, the Board of Directors of the Company approved a new share repurchase program in which the Company may purchase its own ADSs for award grant purpose. For the year ended December 31, 2022, the Company repurchased
28 Trade and other payables
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Trade payables (i) |
|
| ||
Due to related parties | |
| | |
Due to third parties | |
| | |
|
| | ||
Redemption liability (ii, iii) | |
| | |
Accrued expenses | |
| | |
Security deposits | | | ||
Lease liabilities (Note 18(a)) | |
| | |
Amounts payable for purchase of shares held for share incentive scheme (Note 27) | |
| — | |
Income and other tax payables | |
| | |
Amounts due to related parties | |
| | |
Others | |
| | |
|
| | ||
| ||||
Less: non - current portion |
|
|
| |
Lease liabilities | ( |
| ( | |
Amounts payable for purchase of shares held for share incentive scheme (Note 27) | ( |
| — | |
( | ( | |||
|
| | ||
| (i) | As at December 31, 2022, and 2023, based on recognition date, the aging of the trade payables are mainly within |
| (ii) | According to the shareholders agreement of BER Technology, the non-controlling shareholders shall have the right to request the Group to purchase the remaining |
F-82
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28 Trade and other payables (Continued)
| (iii) | The Group wrote a put option on the equity in Vantage Point Technology pursuant to the relevant transaction documents entered into with certain non-controlling shareholders of Vantage Point Technology, which provides each of such non-controlling shareholders with the right to require the Group to purchase the equity interest subject to the terms and conditions of the put option. A financial liability (redemption liability) of RMB |
29 Short-term borrowings
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Unsecured | |
| | |
The weighted average interest rate of short-term borrowings was
30 Customer deposits
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Current and savings accounts | | | ||
Fixed deposit | |
| | |
|
| | ||
It represented customer deposits held by OneConnect Bank.
31 Other financial liabilities from virtual bank
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Repurchase agreements |
| |
| |
As at December 31, 2023, the repurchase agreements of OneConnect Bank amounting to RMB
F-83
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32 Derivative financial assets and liabilities
As at December 31, | ||||||||
2022 | 2023 | |||||||
| Nominal |
|
| Nominal |
| |||
amount | Fair value | amount | Fair value | |||||
RMB’000 | RMB’000 | |||||||
Foreign exchange swaps | | | | | ||||
Currency forwards | | | | | ||||
Derivative financial assets | | | | | ||||
Foreign exchange swaps | | | — | — | ||||
Derivative financial liabilities | | | — | — | ||||
33 Dividends
34 Deferred income tax
(a) | Deferred tax assets |
The movements of deferred tax assets were as follows:
|
| Accelerated |
|
| ||||
amortization | ||||||||
of intangible | ||||||||
Tax losses | assets | Others | Total | |||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||
At January 1, 2021 |
| | |
| | | ||
Recognized in the profit or loss |
| | ( |
| | | ||
At December 31, 2021 |
| | |
| | | ||
Recognized in the profit or loss | | ( | ( | | ||||
At December 31, 2022 | | | | | ||||
Recognized in the profit or loss |
| |
| ( |
| |
| |
At December 31, 2023 | | | | |
F-84
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34 Deferred income tax (Continued)
(b) | Deferred tax liabilities |
The movements of deferred tax liabilities were as follows:
| Intangible |
|
| |||
assets | ||||||
acquired | ||||||
through | ||||||
business | ||||||
combination | Others | Total | ||||
RMB’000 | RMB’000 | RMB’000 | ||||
At January 1, 2021 |
| |
| |
| |
Recognized in the profit or loss |
| ( |
| |
| ( |
At December 31, 2021 |
| |
| |
| |
Recognized in the profit or loss | ( | ( | ( | |||
At December 31, 2022 | | | | |||
Recognized in the profit or loss |
| ( |
| |
| |
At December 31, 2023 | | | |
(c)Offsetting of deferred tax assets and deferred tax liabilities
| As at 31 December | |||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Deferred tax assets | | | | |||
Set-off of deferred tax liabilities | ( | ( | ( | |||
| | | ||||
| As at 31 December | |||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Deferred tax liabilities | | | | |||
Set-off of deferred tax assets | ( | ( | ( | |||
| | | ||||
F-85
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
35 Cash flow information
(a) | Cash used in operations |
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Loss before income tax |
| ( | ( | ( | ||
Depreciation and amortization |
| | | | ||
Net impairment losses on financial and contract assets | | | | |||
Net impairment losses on intangible assets | — | | | |||
Losses on disposal of property and equipment and intangible asset |
| | | | ||
Share-based payments expenses (Note 27) |
| |
| |
| |
Net losses/ (gain) on derivatives (Note 9) |
| | ( | ( | ||
Net gain on financial assets at fair value through profit or loss (Note 9) |
| ( | ( | ( | ||
Share of gain of associate and joint venture (Note 15) |
| ( | ( | ( | ||
Impairment charges on associate(Note 15) | — | | | |||
Remeasurement of redemption liability(Note 9) | — | ( | — | |||
Finance costs |
| | | | ||
Interest from investing activities | ( | ( | ( | |||
Exchange (gain)/losses (Note 9) | ( | | | |||
Changes in working capital: |
|
|
|
|
|
|
Trade receivables |
| ( |
| ( |
| |
Contract assets |
| |
| |
| |
Prepayments and other receivables |
| ( | ( | | ||
Trade and other payable |
| | | ( | ||
Contract liabilities |
| | | ( | ||
Customer deposits | | | | |||
Other financial liabilities from virtual bank | — | | ( | |||
Financial assets measured at amortized cost from virtual bank | | | ( | |||
Financial assets measured at fair value through other comprehensive income from virtual bank |
| ( | ( | ( | ||
Payroll and welfare payables | ( | ( | ( | |||
| ( | ( | ( | |||
(b) | Non-cash investing and financing activities |
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Acquisition of right‑of‑use properties by leasing (Note 13) |
| |
| |
| |
F-86
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
35 | Cash flow information (Continued) |
(c) | Reconciliation of cash and liquid investments and gross debt |
This section sets out an analysis of cash and liquid investments and gross debt as of December 31, 2022 and 2023 and the movements in cash and liquid investments and gross debt for the years ended December 31, 2021, 2022 and 2023.
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Restricted cash and time deposits over three months | |
| | |
Cash and cash equivalents | |
| | |
Financial assets at fair value through profit or loss | |
| | |
Lease liabilities (Note 18) | ( |
| ( | |
—due within one year | ( |
| ( | |
—due after one year | ( |
| ( | |
Borrowings — repayable within one year | ( |
| ( | |
|
| | ||
Cash and liquid investments | |
| | |
Gross debt — fixed interest rates | ( |
| ( | |
|
| | ||
Financial | ||||||||||||
assets at | ||||||||||||
fair value | Liabilities from | |||||||||||
through | financing activities | |||||||||||
| Restricted |
| Cash and cash |
| profit or |
| Lease |
|
| |||
cash (ii) | equivalents | loss | liabilities | Borrowings | Total | |||||||
RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | RMB’000 | |||||||
As at January 1, 2021 |
| | | | ( | ( | | |||||
Cash flows |
| ( | ( | | | | ( | |||||
Acquisition of right-of-use assets | — | — | — | ( | — | ( | ||||||
Other Changes (i) |
| ( | ( | | | ( | ( | |||||
As at December 31, 2021 |
| | | | ( | ( | | |||||
Cash flows | ( | | ( | | | ( | ||||||
Acquisition of right-of-use assets | — | — | — | ( | — | ( | ||||||
Other Changes (i) | | | | | ( | | ||||||
As at December 31, 2022 | | | | ( | ( | | ||||||
Cash flows | | ( | | | | ( | ||||||
Acquisition of right-of-use assets | — | — | — | ( | — | ( | ||||||
Other Changes (i) | | | | | ( | | ||||||
As at December 31, 2023 | | | | ( | ( | | ||||||
(i) | Other changes include accrued interests, disposal, foreign currency translation differences and other non-cash movements. |
(ii) | Cash flows include restricted cash and time deposits over three months movements recognized in cash flows from operating activities and investing activities. |
F-87
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36 Related party transactions
The following significant transactions were carried out between the Group and its related parties during the years ended December 31, 2021, 2022 and 2023.
(a) | Names and relationships with related parties |
The following companies are related parties of the Group that had balances and/or transactions with the Group during the years ended December 31, 2021, 2022 and 2023.
Name of related parties |
| Relationship with the Group |
| ||
Sen Rong Limited(i) | A shareholder that has significant influence over the Group | ||||
Rong Chang Limited(i) | A shareholder that has significant influence over the Group | ||||
Bo Yu | A shareholder that has significant influence over the Group | ||||
Ping An Group | Ultimate parent company of Bo Yu | ||||
Subsidiaries of Ping An Group | Controlled by Ping An Group | ||||
Open Portal Guangxi | Significant influenced by the Group | ||||
(i) | Sen Rong Limited and Rong Chang Limited has entered into an acting-in-concert agreement in 2020 and an amended and restarted agreement in 2021. As a result, Rong Chang and Sen Rong as a concert group had significant influence over the Group. |
(b) | Key management personnel compensations |
Key management includes directors (executive and non-executive) and senior officers. The compensations paid or payable by the Group to key management for employee services are shown below:
For the year ended December 31, | ||||||
2021 | 2022 | 2023 | ||||
| RMB’000 |
| RMB’000 |
| RMB’000 | |
Wages and salaries |
| |
| |
| |
Welfare and other benefits |
| |
| |
| |
Share-based payments |
| |
| |
| |
| |
| |
| | |
F-88
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36 Related party transactions (Continued)
(c) | Significant transactions with related parties |
For the year ended | ||||||
December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Revenue |
|
|
|
|
|
|
Ping An Group and its subsidiaries |
| | | | ||
| For the year ended December 31, | |||||
2021 | 2022 | 2023 | ||||
RMB’000 | RMB’000 | RMB’000 | ||||
Purchase of services |
|
|
|
|
|
|
Ping An Group and its subsidiaries |
| |
| |
| |
Net loss on disposal of property and equipment | ||||||
Ping An Group and its subsidiaries | — | ( | ( | |||
Net gain from wealth management products consolidated by related parties |
|
|
|
|
|
|
Ping An Group and its subsidiaries |
| |
| |
| |
Net (loss)/gain on derivatives |
|
|
|
|
|
|
Ping An Group and its subsidiaries |
| ( |
| |
| |
|
|
| ||||
Investment income from loan to related party | ||||||
Open Portal Guangxi | — | | — | |||
Interest income on bank deposits |
|
|
|
|
|
|
Ping An Group and its subsidiaries |
| |
| |
| |
Leasing payment |
|
|
|
|
|
|
Ping An Group and its subsidiaries |
| |
| |
| |
Interest expenses |
|
|
|
|
|
|
Ping An Group and its subsidiaries |
| |
| |
| — |
Net gain on financial assets measured at fair value through other comprehensive income | ||||||
Ping An Group and its subsidiaries |
| — |
| |
| — |
F-89
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36 | Related party transactions (Continued) |
(d) | Year end balances with related parties |
As at December 31, | ||||
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | |||
Trade receivables |
|
| ||
Ping An Group and its subsidiaries (i) | |
| | |
Contract assets |
| |||
Ping An Group and its subsidiaries | |
| | |
Prepayment and other receivables |
| |||
Ping An Group and its subsidiaries | |
| | |
Financial assets at fair value through profit or loss (Note 22) |
|
|
| |
Ping An Group and its subsidiaries | |
| | |
Cash and restricted cash and time deposits over three months |
|
|
| |
Ping An Group and its subsidiaries | |
| | |
Trade and other payables |
|
|
| |
Ping An Group and its subsidiaries (i) | |
| | |
Contract liabilities | ||||
Ping An Group and its subsidiaries | | | ||
Derivative financial assets |
|
|
| |
Ping An Group and its subsidiaries | |
| | |
Derivative financial liabilities |
|
|
| |
Ping An Group and its subsidiaries | |
| — | |
(i) | The balances with related parties were unsecured, interest-free and repayable on demand. |
F-90
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
37 The Group’s maximum exposure to unconsolidated structured entities
The Group has determined that all of assets management products managed by the Group and its investments in wealth management products, which are not controlled by the Group, are unconsolidated structured entities.
The Group invests in wealth management products managed by related parties for treasury management purposes. The Group also managed some assets management fund products as fund manager to generate fees from managing assets on behalf of other investors, mainly Ping An Group and its subsidiaries. The assets management fund products are financed by capital contribution from investors.
The following table shows the Group’s maximum exposure to the unconsolidated structured entities which represents the Group’s maximum possible risk exposure that could occur as a result of the Group’s arrangements with structured entities. The maximum exposure is contingent in nature and approximates the sum of direct investments made by the Group. The direct investments made by the Group are classified as FVPL.
The size of unconsolidated structured entities and the Group’s funding and maximum exposure are shown below:
Unconsolidated structured entities | ||||||||
The Group’s | ||||||||
Carrying | maximum | Interest held | ||||||
31 December 2022 |
| Size |
| amount |
| exposure |
| by the Group |
RMB’000 | RMB’000 | RMB’000 | ||||||
Asset management products managed by the Group |
| | — | — | Service fee | |||
Wealth management products managed by related parties | Note a | | | Investment income | ||||
Unconsolidated structured entities | ||||||||
The Group’s | ||||||||
Carrying | maximum | Interest held | ||||||
31 December 2023 |
| Size |
| amount |
| exposure |
| by the Group |
RMB’000 | RMB’000 | RMB’000 | ||||||
Wealth management products managed by related parties | Note a | | | Investment income | ||||
Note a: The wealth management products are sponsored by related financial institutions and the information related to size of these structured entities were not publicly available. The carrying amount is recorded in financial assets at fair value through profit or loss.
38 Contingencies
The Group did
F-91
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39 Restricted net assets
Relevant PRC laws and regulations permit payments of dividends by the subsidiaries, the VIEs and Subsidiaries of VIEs incorporated in the PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, each of the Company’s subsidiaries, the VIEs and Subsidiaries of VIEs is required to annually appropriate
40 Parent company only condensed financial information
Parent Company only financial statements have been provided pursuant to the requirements of Securities and Exchange Commission Regulation S-X Rule 12-04(a), which require condensed financial information as to financial position, cash flows and results of operations of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have been presented, as the restricted net assets of the Company’s consolidated subsidiaries, including VIEs, as of December 31, 2023 exceeded the 25% threshold, using the same accounting policies as set out in the Group’s consolidated financial statements, except that the Company uses the equity method to account for investments in its subsidiaries and VIEs. Certain information and footnote disclosures generally included in financial statements prepared in accordance with IFRSs have been condensed and omitted. The footnote disclosures contain supplemental information relating to the operations of the Company, as such, these statements are not the general-purpose financial statements of the reporting entity and should be read in conjunction with the notes to the consolidated financial statements of the Company.
The Company did not have significant capital and other commitments or guarantees as at December 31, 2023. The subsidiaries did not pay any dividend to the Company for the years presented.
F-92
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
40 Parent company only condensed financial information (Continued)
(a) | Condensed Statements of Comprehensive Income |
| Year ended December 31, | |||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Selling and marketing expenses | ( | ( | ( | |||
General and administrative expenses |
| ( | ( | ( | ||
Net impairment losses on amount due from subsidiaries | — | ( | ( | |||
Other income, gains or loss‑net |
| | | ( | ||
Operating loss |
| ( | ( | ( | ||
Finance (costs)/income – net |
| ( | ( | | ||
Share of losses of joint venture | ( | — | — | |||
Share of losses of subsidiaries and VIEs |
| ( | ( | ( | ||
Loss before income tax | ( | ( | ( | |||
Income tax expenses | — | — | — | |||
Loss for the year |
| ( | ( | ( | ||
Other comprehensive income, net of tax |
| |||||
Items that may be subsequently reclassified to profit or loss | ||||||
– Foreign currency translation differences |
| ( | | | ||
– Changes in the fair value of debt instruments measured at fair value through other comprehensive income | ( | | | |||
Items that will not be subsequently reclassified to profit or loss | ||||||
– Foreign currency translation differences |
| — | | | ||
– Changes in the fair value of equity investments measured at fair value through other comprehensive income | ( | — | — | |||
Total comprehensive loss |
| ( | ( | ( | ||
F-93
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
40 Parent company only condensed financial information(Continued)
(b) | Condensed Balance Sheets |
As at December 31, | ||||||
|
| 2022 |
| 2023 | ||
Note | RMB’000 | RMB’000 | ||||
ASSETS |
|
|
|
| ||
Non‑current assets |
|
|
|
| ||
Interest in subsidiaries |
| 40(d) | | | ||
Total non‑current assets |
| | | |||
Current assets |
| |||||
Amount due from subsidiaries |
| 40(d) | | | ||
Prepayments and other receivables |
| | | |||
Cash and cash equivalents |
| | | |||
Total current assets |
| | | |||
Total assets |
| | | |||
EQUITY AND LIABILITIES |
| |||||
Equity |
| |||||
Share capital |
| 25 | | | ||
Shares held for share incentive scheme |
| 27 | ( | ( | ||
Reserves |
| 26 | | | ||
Accumulated loss |
| ( | ( | |||
Total equity |
| | | |||
Liabilities |
| |||||
Non‑current liabilities |
| |||||
Trade and other payables |
| | — | |||
Total non‑current liabilities |
| | — | |||
Current liabilities |
|
| ||||
Trade and other payables | | | ||||
Total current liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Total equity and liabilities |
| |
| | ||
F-94
ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
40 | Parent company only condensed financial information (Continued) |
(c) | Condensed Statements of Cash Flows |
Year ended December 31, | ||||||
| 2021 |
| 2022 |
| 2023 | |
RMB’000 | RMB’000 | RMB’000 | ||||
Cash used in operating activities |
|
|
|
|
|
|
Cash used in operations |
| ( |
| ( |
| ( |
Net cash used in operating activities |
| ( |
| ( |
| ( |
Cash flows from investing activities |
|
|
| |||
Payment for interest in subsidiaries, net of cash acquired |
| ( |
| ( |
| ( |
Proceeds from loan to subsidiaries |
| |
| |
| |
Net cash generated from investing activities |
| |
| |
| |
Cash flows from financing activities |
|
|
| |||
Proceeds from exercise of shares under share incentive scheme | | | — | |||
Payments for shares repurchase | — | ( | — | |||
Net cash generated from/ (used in) financing activities |
| |
| ( |
| — |
Net (decrease)/increase in cash and cash equivalents |
| ( |
| |
| ( |
Cash and cash equivalents at the beginning of the year |
| |
| |
| |
Effects of exchange rate changes on cash and cash equivalents |
| ( |
| |
| |
Cash and cash equivalents at the end of year |
| |
| |
| |
(d) | Interest in subsidiaries and amount due from subsidiaries |
As at December 31, | ||||
2022 | 2023 | |||
| RMB’000 |
| RMB’000 | |
Interest in subsidiaries | ||||
Equity investment in subsidiaries |
| |
| |
As at December 31, | ||||
2022 | 2023 | |||
| RMB’000 |
| RMB’000 | |
Amount due from subsidiaries | ||||
Loan receivables |
| |
| |
41 Subsequent events
On November 13, 2023, the Company entered into the Share purchase Agreement with Lufax Holding Ltd (the Purchaser), pursuant to which the Company conditionally agreed to sell, and the Purchaser conditionally agreed to acquire OneConnect Bank through transferring the entire issued share capital of the Jin Yi Tong Limited (the “Disposal Company”, a company indirectly holds
F-95