Profit and loss account

Revenue

We generate revenue from sales of fresh bamboo shoots (including winter shoots, spring shoots and dried shoots), processed shoots and bamboo trees. Prices for bamboo products have been relatively stable with an upward bias. In particular bamboo trees have, over the last 10 years, seen a signficiant price increase. Generally, prices fluctuate within a 10% range year-on-year. As a result of local demand and supply dynamics and the quality of the locally grown bamboo shoots and trees, prices can vary from region to region. Other factors influencing the price are quantity, customer relationships, payment terms and the potential of the market segment the customer represents

Most of our transactions are relatively small spot transactions. However, for some of our larger customers, such as Shaowu Zhongzhu Pulp and Paper and our Japanese export clients, we have entered longer-term supply contracts with credit terms

Our revenue is cyclical as we harvest winter shoots, spring shoots and bamboo trees at different times of the year. Revenue is also affected by the RMB-EUR exchange rate as our business, which, with the exception of export sales to Japan, is all done in RMB and translated into EUR for reporting purposes.

Cost structure and development of costs

Most of our costs are booked as cost of sales. Within cost of sales, the key costs are harvesting,amortisation and processing costs. The amortisation cost is fixed over the life-span of a plantation lease whereas all other costs are largely variable and increase in line with our business expansion

Gains/losses in the fair value of biological assets

In line with the rules of IAS 41, we calculate gains/losses in the fair value of biological assets. This is done by valuing immature plantations at cost and mature plantations through a net present value (NPV) calculation. The assumptions used in the NPV calculation are based on historical numbers and available market information. A gain or loss arising from initial recognition of agricultural produce at fair value less estimated point-of-sale costs is recognised in the income statement

Interest income from fair value of long-term financial assets

In the profit and loss account (“P&L”), the impact of our plantation leases are booked both under "Cost of sales" and "Interest income". Under "cost of sales" we book the amortisation cost as though the leases would have been paid on a yearly basis and under "interest income" we book the saving which we achieve by making an up-front payment. We are calculating the saving on making up-front payments, compared to paying the leases on a yearly basis, as interest income from fair value of long-term financial assets, as part of interest income, by using a discount rate of 17%. The discount rate of 17% is derived by comparing the lease fees from old agreements with the up-front payments of recent agreements. As all our plantation leases are now up-front payments our savings are substantial.

Taxation

According to PRC tax regulations, agriculture enterprises selling trees and preliminary agricultural products are fully tax exempt. As a result, our operating subsidiaries are only paying income tax on the profit generated from sales of processed products, not on the profit generated from the sales of fresh shoots and bamboo trees.

Despite this, we calculate deferred tax liabilities on gains in the valuation of biological assets using the highest possible tax rate of 25%. The deferred tax calculated does not in any way affect our cash flow or the amount of tax we actually pay, it is simply a calculation we have to do in order to comply with international accounting standards (IAS 41).

Legals | © 2015 Asian Bamboo AG

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