Due to the special capital market situation in China during the period 20072008, the authors voluntarily left
Question:
Youngor Group, founded in 1979, has grown over 30 years into a large-scale multinational group with over 50,000 employees in over 40 subsidiaries and interests in as diverse activities as apparel, real estate development, and equity investment. Its largest subsidiary, Youngor Group Co., Ltd (the leading Chinese enterprise involved in designing, manufacturing, selling and trading clothing products and accessories) has been listed on the Shanghai Stock Exchange since 1998. In 2007, the group sales reached 18.4 billion yuan and yielded $865 million in foreign exchange from exports. Its total profit amounted to about four billion yuan, with tax contributions of 2,184 million yuan. It was listed in Chinas Top 100 Leading Enterprises in 2007 for its excellent performance and sustained growth. In 2008, it was ranked No. 134 on the list of Chinas Top 500 Manufacturing Enterprises. In addition, it has made several appearances on Forbes Charity List for its good image as corporate citizen and won Chinas Charity Award for Extraordinary contributions. It had also been listed for two consecutive years in Hurun Chinese Top 50 Socially Responsible Enterprises.
Apparel
One of the groups principal activities is apparel manufacturing and merchandising. It has developed a vertical textile and clothing industry supply chain through continuous efforts since it first engaged in mens apparel manufacturing in 1979.
Youngor Clothing Co., Ltd, the apparel subsidiary, has more than 100 branches, over 400 fully owned speciality stores, and a total of over 1,500 business outlets nationwide. Its brand Youngor is the reference for mens clothing, which includes shirts, business suits, trousers and
jackets, ties and T-shirts, among others. Its apparel products carry an image of maturity, self-confidence, modesty and a high quality life.
Youngor Clothing Co. Ltd has been the domestic market share leader for 12 consecutive years in shirts (its main product). It became the first Chinese apparel manufacturer exempted from export inspection for shirts. It has held the largest domestic market share in business suits for seven consecutive years.
Youngor has ranked No. 1 in Chinas clothing industry in terms of both sales revenues and total profits for seven consecutive years. Youngor has expanded its apparel business upstream all the way to cotton plantations. In 2008 it extended its integration upstream and downstream by acquiring Smart Apparel Group Limited, Kellwood Companys core menswear business, with strong capabilities in apparel design and international operation management, and bringing to Youngor a solid distribution network throughout the US.
Real estate development
Since setting foot in real estate development in 1992, Youngor group has successively developed Donghu Garden, Donghu Xinyuan, City Forest, Suzhou Future City, Sea View Garden, Qianhu Bihuali and other largescale buildings in Ningbo, Suzhou and other places. The accumulated land area of residential buildings, villas, and commercial buildings developed by Youngor totals three million square meters, and is growing continuously.
Equity investment
Youngor entered the equity investment sector in 1993 and then expanded into other financial sectors like securities and banking. It had invested in many enterprises including Guangbo Group, Yak Technology, Citic Securities, Bank of Ningbo and Hai Tong Securities. With the near-completion of the Equity Division Reform in 2006, the net assets of Youngor increased significantly and many of its investments represent large potential unrealized capital gains.
Youngor established in 2007 a professional investment company for equity investment in financial institutions, resource-based enterprises and industry leaders which are already listed or are planning to list on Chinese stock exchanges.
In addition to its three major business segments, namely, apparel, real estate development and equity investment, Youngor also has expanded into other fields such as hotel, tourism and international trade. One of its subsidiaries, China-Base Ningbo Foreign Trade Co., Ltd, is the biggest import and export company in Ningbo.
The following financial statements have been extracted from Youngor Group Co., Ltd. annual Report 2007 and 2008.
Some background information:
1 In 2007, the Chinese capital market leading index Shanghai Stock Index increased by 96.1 percent, while in 2008, it dropped 65.4 percent.
2 Youngor has a substantial business in real estate development, which is reflected in the following accounts:
=> Prepaid accounts in assets: mainly the deposits paid to the local government after land purchase agreements.
=> Inventory in assets: land in stock and on-going real estate projects.
=> Accounts received in advance in liabilities: in China, real estate projects are usually pre-sold to owners before construction. Since the transfer of ownership of the houses is only made after the construction, developers keep, as required by Chinese GAAP and IFRS/IAS, these prepaid revenues as liabilities during the construction period.
Required
1 Explain why the Financial assets available for sale change so violently over the period under consideration.
2 Comment on these figures and analyze their impacts on Youngors strategy and financial structure.
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Step by Step Answer:
Financial Accounting and Reporting a Global Perspective
ISBN: 978-1408076866
4th edition
Authors: Michel Lebas, Herve Stolowy, Yuan Ding