CHINA YUCHAI INTERNATIONAL LTD (ifrs-full:DisclosureOfInterestsInSubsidiariesExplanatory)

4.	Investments in subsidiaries

Details of significant subsidiaries of the Group are as follows:


Name of significant subsidiary	Place of incorporation/ business	Group’s effective equity interest
		31.12.2016		31.12.2017
		%		%

Guangxi Yuchai Machinery Company Limited	People’s Republic of China		76.4		76.4
Guangxi Yuchai Machinery Monopoly Development Co., Ltd	People’s Republic of China		54.9		54.9
Guangxi Yuchai Accessories Manufacturing Company Limited	People’s Republic of China		76.4		76.4
Guangxi Yuchai Equipment Mould Company Limited (formerly known as Guangxi Yulin Yuchai Accessories Manufacturing Company Limited)	People’s Republic of China		76.4		76.4
Guangxi Yulin Hotel Company Limited	People’s Republic of China		76.4		76.4
Jining Yuchai Engine Company Limited ⁽ⁱ⁾	People’s Republic of China		—		76.4
Yuchai Remanufacturing Services (Suzhou) Co., Ltd.	People’s Republic of China		76.4		76.4
HL Global Enterprises Limited	Singapore		50.2		50.2

Note:

⁽ⁱ⁾

In September, 2014, Yuchai disposed its 70% equity interest in Jining Yuchai. Subsequently, through contractual arrangements, Yuchai obtained 100% control in Jining Yuchai.

In November, 2017, Yuchai acquired 100% equity interest in Jining Yuchai, As a result, Jining Yuchai became a wholly owned subsidiary of Yuchai. For details, please refer to Note 1.2.

The Group has the following subsidiary that has non-controlling interests (“NCI”) that are material to the Group.


	31.12.2015			31.12.2016			31.12.2017
Proportion of equity interest held by NCI
Yuchai		23.6	%		23.6	%		23.6	%


	31.12.2015 RMB’000		31.12.2016 RMB’000		31.12.2017 RMB’000		31.12.2017 US$’000
Accumulated balances of material NCI
Yuchai				2,253,207		2,437,215		385,063

Profit allocated to material NCI
Yuchai		129,088		210,013		290,497		45,896

Dividends paid to material NCI
Yuchai		100,412		83,677		98,941		15,632

Summarized financial information including goodwill on acquisition and consolidation adjustments but before intercompany eliminations of subsidiaries with material non-controlling interests are as follows:


	31.12.2015
	Yuchai RMB’000
Summarized statement of comprehensive income
Revenue		13,671,931

Profit for the year, representing total comprehensive income for the year		547,216

Attributable to NCI		129,088

Summarized statement of cash flows
Operating		1,742,989
Investing		(33,515	)
Financing		(659,691	)

Net increase in cash and cash equivalents		1,049,783


	31.12.2016
	Yuchai
	RMB’000
Summarized statement of financial position
Current assets		12,448,174
Non-current assets, excluding goodwill		4,876,773
Goodwill		212,636
Current liabilities		(7,957,306	)
Non-current liabilities		(461,712	)

Net assets		9,118,565

Total equity		9,118,565

Attributable to NCI		2,253,207

Summarized statement of comprehensive income
Revenue		13,598,487

Profit for the year, representing total comprehensive income for the year		726,379

Attributable to NCI		210,013

Summarized statement of cash flows
Operating		2,329,367
Investing		(293,477	)
Financing		(1,697,173	)

Net increase in cash and cash equivalents		338,717


	31.12.2017
	Yuchai
	RMB’000			US$’000
Summarized statement of financial position
Current assets		14,717,316			2,325,231
Non-current assets, excluding goodwill		4,693,931			741,608
Goodwill		212,636			33,595
Current liabilities		(9,344,836	)		(1,476,417	)
Non-current liabilities		(495,429	)		(78,274	)

Net assets		9,783,618			1,545,743

Total equity		9,783,618			1,545,743

Attributable to NCI		2,437,215			385,063

Summarized statement of comprehensive income
Revenue		16,165,245			2,553,993

Profit for the year, representing total comprehensive income for the year		1,045,330			165,155

Attributable to NCI		290,497			45,896

Summarized statement of cash flows
Operating		1,385,156			218,845
Investing		(165,817	)		(26,198	)
Financing		221,660			35,021

Net increase in cash and cash equivalents		1,440,999			227,668

Significant restrictions

The nature and extent of significant restrictions on the Group’s ability to use or access assets and settle liabilities of subsidiaries with material non-controlling interests are:

Cash and cash equivalents of RMB 4,710,158 (US$744,171) (2016: RMB 3,270,182) held in the PRC are subject to local exchange control regulations. These regulations places restriction on the amount of currency being exported other than through dividends, trade and service related transactions.

Disposal of a subsidiary in 2015

On September 21, 2015, the Group disposed of one of its wholly-owned subsidiaries, Xiamen Yuchai Diesel Engines Co., Ltd. (“Xiamen Yuchai”) and the disposal consideration was settled in cash.

The value of assets and liabilities of the disposal recorded in the consolidated financial statements and the cash flow effect of the disposals were:


	31.12.2015
	RMB’000
Property, plant and equipment		66,597
Land use rights		17,661
Inventories		6,354
Trade receivables and other receivables		111,651
Deferred taxation		244
Cash and bank balances		18,797

		221,304
Payables and accruals		(17,161	)
Provision for taxation		(996	)

Carrying value of net assets		203,147

Total consideration		189,500
Net asset derecognized		(203,147	)

Loss on disposal of a subsidiary (Note 8.2(b))		(13,647	)

Total consideration		189,500
Cash and bank balances of the subsidiary		(18,797	)

Net cash inflow on disposal of the subsidiary		170,703

Acquisition of ownership in subsidiaries, without loss of control in 2015

(i)

In July 2015, Yuchai’s subsidiary company, YMMC acquired 40.00% of equity interest in Yunnan Yuchai Machinery Industry Company Limited (“YMMC Yunnan”) by way of offsetting trade receivables from the third party of RMB 18.3 million. As a result, YMMC Yunnan became wholly owned subsidiary of YMMC.

(ii)

In October 2015, Yuchai acquired 2.86% of equity interest in Guangxi Yulin Yuchai Accessories Manufacturing Company Limited which was renamed to Guangxi Yuchai Equipment Mould Company Limited (“YEMC”) in November 2017, from State Holding Company with a purchase consideration of RMB 4.2 million. As a result, YEMC became wholly owned subsidiary of Yuchai.

Acquisition of additional interest in a joint venture in 2016

In December 2016, Yuchai acquired an additional 32.5% equity interest in its 35% owned joint venture, YC Europe Co., Limited (“YC Europe”) through share allotment transfer and the injection of share capital will be completed in phases. Upon the full injection of capital, Yuchai’s equity interest in YC Europe will increase from 35% to 67.5%.

The Group has elected to measure the non-controlling interest at the non-controlling interest’s proportionate share of YC Europe’s net identifiable assets. There was no gain or loss on remeasuring previously held equity interest in YC Europe to fair value at the acquisition date.

YC Europe was newly incorporated in April 2015 to market off-road engines (excluding marine engines) in Europe. As at December 31, 2016, YC Europe is a subsidiary of the Group. The contribution from the acquisition to the Group’s financial performance for the year ended December 31, 2016, and net assets as at December 31, 2016 were not material.

Goodwill arising from the acquisition of RMB 1,131 was fully written off and recognized in the “other operating expenses” line item in the Group’s profit or loss for the year ended December 31, 2016.

Acquisition of ownership in subsidiaries, without loss of control in 2016

In September 2016, YMMC acquired 47.53% of equity interest in Sichuan Yuchai Machinery Industry Company Limited (“YMMC Sichuan”) from non-controlling interest for a cash consideration of RMB 8.9 million. As a result, YMMC Sichuan became wholly owned subsidiary of YMMC.

Acquisition of ownership in subsidiaries, without loss of control in 2017

(i)

In June 2017, GYAMC acquired 25% of equity interest in Guangxi Yuchai Crankshaft Co., Limited (“Crankshaft”) from non-controlling interest for a cash consideration of RMB 1.3 million. As a result, Crankshaft became wholly owned subsidiary of GYAMC.

(ii)

In October 2017, YMMC acquired 49% of equity interest in Hunan Yuchai Machinery Industry Company Limited (“YMMC Hunan”) from non-controlling interest for a cash consideration of RMB 6.7 million. As a result, YMMC Hunan became wholly owned subsidiary of YMMC.

(iii)

In November 2017, Yuchai acquired 100% issued shares in Jining Yuchai for a cash consideration of RMB 250. As a result, Jining Yuchai became wholly owned subsidiary of Yuchai.

Prior to the acquisition, Yuchai control 100% of Jining Yuchai through various contractual agreements and consolidated Jining Yuchai’s financial results in the Group’s consolidated financial statements. The acquisition would not have financial impact in the Group’s profit or loss for the year ended December 31, 2017.

Disposal of subsidiaries in 2017

On November 22, 2017, HLGE disposed its entire shareholding in its wholly-owned subsidiary, LKN Investment International Pte. Ltd (“LKNII”) together with LKNII’s wholly-owned subsidiary, Shanghai Hutai Real Estate Development Co., Ltd to a third party for a cash consideration of RMB395.0 million (US$62.4 million).

The value of assets and liabilities of the disposal recorded in the consolidated financial statements and the cash flow effect of the disposals were:


	31.12.2017			31.12.2017
	RMB’000			US$’000
Property, plant and equipment (Note 11)		104,844			16,565
Trade receivables and other receivables		3,257			514
Cash and bank balances		9,153			1,446

		117,254			18,525
Trade and other payables		(3,737	)		(590	)
Provision for taxation		(44	)		(7	)
Deferred taxation		(588	)		(93	)

Carrying value of net assets		112,885			17,835

Gain on disposal:
Total consideration		395,000			62,407
Less: Cost of disposal		(47,532	)		(7,510	)

Total consideration less cost of disposal		347,468			54,897
Net assets derecognized		(112,885	)		(17,835	)
Realization of foreign translation reserves upon disposal		(18,468	)		(2,917	)

Gain on disposal of the subsidiaries (Note 8.2(b))		216,115			34,145

Total consideration less cost of disposal		347,468			54,897
Add: Transaction cost unpaid		33,287			5,260
Less: Retention sum receivables		(30,000	)		(4,740	)
Cash and bank balances of the subsidiaries		(9,153	)		(1,446	)

Net cash inflow on disposal of the subsidiaries		341,602			53,971

CHINA YUCHAI INTERNATIONAL LTD | CIK:0000932695 |

ifrs-full:DisclosureOfInterestsInSubsidiariesExplanatory