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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 26 MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED) (d) Related party balances The Group At 31 December 2012 2011 RMB million RMB million Amounts due from subsidiaries of Groupe Auchan S.A. 53 37 Amounts due from Kunshan Ruenfu and its subsidiaries 12 286 Amounts due to Groupe Auchan S.A. and its subsidiaries 93 44 The above balances are all trade in nature. (e) Applicability of the Listing Rules relating to connected transactions The related party transactions in respect of agency fee receivables and trademark fee payable above constitute non-exempt continuing connected transactions as defined in Chapter 14A of the Listing Rules. The disclosures required by Chapter 14A of the Listing Rules are provided under the section “Connected Transactions” in the Report of Directors. 27 JOINTLY CONTROLLED ENTITY The Group’s subsidiary, RT-MART Limited Shanghai (“Shanghai RT-MART”) together with an independent third party established Suzhou Ruenhua Property Co., Ltd. (“SZ Ruenhua”) pursuant to a joint venture agreement whereby Shanghai RT-MART and the third party share proportionately assets and liabilities of SZ Ruenhua and the operating results generated from the assets and liabilities of their respective share. SZ Ruenhua is incorporated in the PRC and, prior to 25 December 2012, the Group owned 80% of its issued share capital. On 25 December 2012, Shanghai RT-MART completed its acquisition of the remaining 20% equity interest in SZ Ruenhua for a total cash consideration of RMB11.9 million. After the completion of the acquisition, SZ Ruenhua became a wholly owned subsidiary of Shanghai RT-MART, and SZ Ruenhua’s assets, liabilities, income and expenses were directly consolidated in the financial statements after the completion of the acquisition. 28 IMMEDIATE AND ULTIMATE CONTROLLING PARTY At 31 December 2012, the directors consider the immediate parent of the Group to be A-RT Retail Holdings Limited, which is incorporated in Hong Kong. The directors consider the Group is jointly controlled by Groupe Auchan S.A. and Ruentex ultimately. Sun Art Retail Group Limited Annual Report 2012 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The selection of critical accounting policies, the judgements and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing the financial statements. The principal accounting policies are set forth in note 1. The Group believes the following critical accounting policies involve the most significant judgements and estimates used in the preparation of the financial statements. (a) Depreciation Investment properties and other property, plant and equipment are depreciated on a straightline basis over their estimated useful lives, after taking into account their estimated residual value. The Group reviews annually the useful life of an asset and its residual value, if any, in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets and taking into account anticipated technology changes. (b) Provision for inventories The Group reviews the carrying amounts of the inventories at each reporting period end date to determine whether the inventories are carried at the lower of cost and net realisable value. Management estimates the net realisable value based on the current market situation and historical experience on similar inventories. Any change in the assumptions would increase or decrease the amount of inventories write-down or the related reversals of write-downs and affect the Group’s net asset value. (c) Impairment losses on trade and other receivables Impairment losses on trade and other receivables are assessed and provided based on management’s regular review of ageing analysis and evaluation of collectability. Any increase or decrease in the impairment losses for bad and doubtful debts would affect the consolidated statement of comprehensive income in future years. (d) Income tax Determining income tax provisions involves judgement on the future tax treatment of certain transactions. The Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislation. 108 Sun Art Retail Group Limited Annual Report 2012
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