Auditor’s Report

FIYTA Precision Technology Co. Ltd.RSMSZ[2026]NO.350Z0003

RSM CHINA CPA LLP

CHINA·BEIJING

If there is any conflict of meaning between the Chinese and English versions the Chinese

version will prevailContents

Page

1 Auditor’s report 1-8

2 Consolidated Statement of Financial Position 1

3 Consolidated Statement of Profit or Loss and Other Comprehensive Income 2

4 Consolidated Statement of Cash Flows 3

5 Consolidated Statement of Changes in Owners' Equity 4

6 Statement of Financial Position of Parent Company 5

7 Statement of Profit or Loss and Other Comprehensive Income of Parent Company 6

8 Statement of Cash Flows of Parent Company 7

9 Statement of Changes in Owners' Equity of Parent Company 8

10 Notes to the Financial Statements 9-103容诚会计师事务所（特殊普通合伙）

总所：北京市西城区阜成门外大街22号

1幢10层1001-1至1001-26(100037)

TEL:010-6600 1391 FAX:010-6600 1392

E-mail:bj@rsmchina.com.cn

https://www.rsm.global/china/

(English Translation for Reference Only)

Auditor’s Report

RSMSZ[2026]NO.350Z0003

To the Shareholders of FIYTA Precision Technology Co. Ltd.，Opinion

We have audited the financial statements of FIYTA Precision Technology Co. Ltd.(hereafter referred to as “the Company”) which comprises the consolidated and the

parent company’s statement of financial position as at 31 December 2025 the

consolidated and the parent company’s statement of profit or loss and other

comprehensive income the consolidated and the parent company’s statement of cash

flows the consolidated and the parent company’s statement of changes in equity for the

year then ended and the notes to the financial statements.In our opinion the accompanying the Company’s financial statements present fairly in

all material respects the consolidated and the company’s financial position as at 31

December 2025 and of their financial performance and cash flows for the year then

ended in accordance with Accounting Standards for Business Enterprises.Basis for Opinion

We conducted our audit in accordance with Chinese Standards on Auditing (CSAs). Our

responsibilities under those standards are further described in the Auditor’s

Responsibilities for the Audit of the Financial Statements section of our report. In

accordance with the Code of Ethics for Professional Accountants and the Code of

Independence for Professional Accountants of the Chinese Institute of Certified Public

Accountants we are independent of the Company have complied with the provisions of

the independence standards applicable to audits of financial statements of public interest

entities and have fulfilled our other ethical responsibilities. We believe that the audit

evidence we obtained is sufficient and appropriate to provide a basis for our opinion.Key Audit Matters

Key audit matters are those matters that in our professional judgment were of the most

1significance in our audit of the financial statements of the current period. These matters

were addressed in the context of our audit of the financial statements as a whole and in

forming our opinion thereon and we do not provide a separate opinion on these matters.(I) Existence and Net Realizable Value of Inventory

1. Descriptions of the matter

For the details please refer to Note 3.13 and Note 5.6 of the financial statements.As stated in Note 5.6 as of 31 December 2025 the carrying amount of the Company's

inventory was RMB 1830.9665 million with an inventory write-down provision of

RMB 102.9841 million resulting in a net inventory value of RMB 1727.9824 million

accounting for 46.28% of total assets. The Company's main business involves selling

FIYTA brand watches and other agency-branded watches with year-end inventory

primarily consisting of finished watches and watch components. Given the small size

and high unit value of branded watches and the widely dispersed inventory across

central warehouses regional warehouses and retail stores there is a heightened risk

related to inventory existence and impairment.As of the balance sheet date the Company's management is required to determine the

net realizable value (NRV) of inventory and any excess of cost over NRV should be

written down accordingly. The determination of NRV involves significant management

estimates regarding selling prices costs to completion selling expenses and relevant

taxes. Due to the materiality of the inventory balance and the significant accounting

estimates and judgments involved in the impairment provision we have identified the

existence of inventory and the determination of its NRV as a key audit matter.

2. How the matter was addressed in our audit

The audit procedures we performed in relation to existence and net realizable value of

inventory:

(1) Understanding evaluating and testing the design and operating effectiveness of

internal controls related to procurement and payment production and warehousing and

inventory write-down provisions;

(2) Utilizing expert work to conduct IT audits on the information system to evaluate the

2authenticity and accuracy of business data related to financial reporting;

(3) Performing inventory counts at selected warehouses and retail stores to verify the

existence and condition of year-end inventory;

(4) Selecting samples of significant purchases during the reporting period and tracing

them to purchase contracts invoices purchase requisitions and warehouse receipts;

(5) Sending confirmation requests to selected suppliers to verify transaction amounts

and balances to confirm procurement details;

(6) Reviewing the Company’s inventory impairment policy and methodology to assess

its reasonableness obtaining management’s inventory impairment calculation and

evaluating key assumptions such as estimated selling prices costs to completion selling

expenses and related taxes along with performing recalculations;

(II) Revenue Recognition

1. Descriptions of the matter

For the details please refer to Note 3.27 and Note 5.33 of the financial statements.As stated in Note 5.33 to the financial statements the main operating revenue of the

Company for the current year was RMB 3490.3203 million representing a 11.16%

decrease compared to the previous year. The Company's main operating revenue is

primarily derived from the sales of self-owned and agency-brand watches.Since revenue is one of the Company's key performance indicators there is an inherent

risk that revenue may be recognized in the incorrect period or manipulated to meet

specific targets or expectations. Therefore we have identified the revenue recognition of

the Company as a key audit matter.

2. How the matter was addressed in our audit

The audit procedures we performed in relation to revenue recognition:

(1) Understanding evaluating and testing the design and operating effectiveness of

internal controls related to revenue recognition;

(2) Utilizing expert work to conduct IT audits on the information system evaluating the

authenticity and accuracy of business data related to financial reporting;

3(3) Obtaining and reviewing accounting policies related to revenue recognition and

assessing whether the timing of control transfer transaction price measurement and

special transaction accounting treatment comply with the requirements of accounting

standards;

(4) Selecting samples to examine supporting documents related to revenue recognition

including sales contracts sales invoices mall reconciliation statements customer

receipt records and logistics documents;

(5) Performing audit procedures on accounts receivable by selecting samples for

confirmation of transaction amounts and balances with customers as well as verifying

subsequent collections;

(6) Selecting samples of sales revenue recognized before and after the balance sheet

date to review sales contracts sales invoices mall reconciliation statements customer

receipt records and logistics documents to evaluate whether revenue is recognized in

the appropriate accounting period.Other information

Management of the Company is responsible for the other information. The other

information comprises the information included in the Annual Report of the Company

for the year of 2025 but does not include the financial statements and our auditor’s

report thereon.Our opinion on the financial statements does not cover the other information and we do

not express any form of assurance conclusion thereon.In connection with our audit of the financial statements our responsibility is to read the

other information and in doing so consider whether the other information is materially

inconsistent with the financial statements or our knowledge obtained in the audit or

otherwise appears to be materially misstated.If based on the work we have performed we conclude that there is a material

misstatement of this other information we are required to report that fact. We have

nothing to report in this regard.Responsibilities of Management and Those Charged with Governance for the

Financial Statements

4Management of the Company is responsible for the preparation and fair presentation of

the financial statements in accordance with Accounting Standards of Business

Enterprises and for the design implementation and maintenance of such internal

control as management determines is necessary to enable the preparation of financial

statements that are free from material misstatement whether due to fraud or error.In preparing the financial statements management is responsible for assessing the

Company’s ability to continue as a going concern disclosing as applicable matters

related to going concern and using the going concern basis of accounting unless

management either intends to liquidate the Company or to cease operations or have no

realistic alternative but to do so.Those charged with governance are responsible for overseeing the Company’s financial

reporting process.Auditor’s Responsibilities for the Audit of the Financial Statements

Our Objectives are to obtain reasonable assurance about whether the financial

statements as a whole are free from material misstatement whether due to fraud or error

and to issue an auditor’s report that includes our opinion. Reasonable assurance is a

high level of assurance but is not a guarantee that an audit conducted in accordance

with CSAs will always detect a material misstatement when it exists. Misstatements can

arise from fraud or error and are considered material if individually or in the aggregate

they could reasonably be expected to influence the economic decisions of users taken on

the basis of these financial statements.As part of an audit in accordance with CSAs we exercise professional judgment and

maintain professional skepticism throughout the audit. We also:

i) Identify and assess the risks of material misstatement of the financial statements

whether due to fraud or error design and perform audit procedures responsive to

those risks and obtain audit evidence that is sufficient and appropriate to provide a

basis for our opinion. The risk of not detecting a material misstatement resulting

from fraud is higher than for one resulting from error as fraud may involve

collusion forgery intentional omissions misrepresentations or the override of

internal control.

5ii) Obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances.iii) Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management.iv) Conclude on the appropriateness of management’s use of the going concern basis of

accounting and based on the audit evidence obtained whether a material

uncertainty exists related to events or conditions that may cast significant doubt on

the Company’s ability to continue as a going concern. If we conclude that a material

uncertainty exists we are required to draw attention in our auditor’s report to the

related disclosures in the financial statements or if such disclosures are inadequate

to modify our opinion. Our conclusions are based on the audit evidence obtained up

to the date of our auditor’s report. However future events or conditions may cause

the Company to cease to continue as a going concern.v) Evaluate the overall presentation structure and content of the financial statements

and whether the financial statements represent the underlying transactions and

events in a manner that achieves fair presentation.vi) Obtain sufficient appropriate audit evidence regarding the financial information of

the entities or business activities within the Company to express an opinion on the

financial statements. We are responsible for the direction supervision and

performance of the group audit. We remain solely responsible for our audit opinion.We communicate with those charged with governance regarding among other matters

the planned scope and timing of the audit and significant audit findings including any

significant deficiencies in internal control that we identify during our audit.We also provide those charged with governance with a statement that we have complied

with relevant ethical requirements regarding independence and to communicate with

them all relationships and other matters that may reasonably be thought to bear on our

independence and where applicable related safeguards.From the matters communicated with those charged with governance we determine

those matters that were of most significance in the audit of the financial statements of

the current period and are therefore the key audit matters. We describe these matters in

6our auditor’s report unless law or regulation precludes public disclosure about the

matter or when in extremely rare circumstances we determine that a matter should not

be communicated in our report because the adverse consequences of doing so would

reasonably be expected to outweigh the public interest benefits of such communication.(This is seal page for Auditor’s Report of RSMSZ[2026]No.350Z0003 for FIYTA

Precision Technology Co. Ltd.)

RSM China CPA LLP

Cai Ruxiao

China Certified Public Accountant

(Engagement Partner)

China·Beijing

Ge Hua

China Certified Public Accountant

12 March 2026

7FIYTA Precision Technology Co. Ltd. Notes to the financial statements

FIYTA Precision Technology Co. Ltd.Notes to the Financial Statements

For the year ended 31 December 2025

（All amounts are expressed in Renminbi Yuan(“RMB”)unless otherwise stated）

1. BASIC INFORMATION ABOUT THE COMPANY

FIYTA Precision Technology Co. Ltd. (hereinafter referred to as “the Company”) was

established under the approval of Shen Fu Ban Fu (1992) 1259 issued by the General Office of

Shenzhen Municipal Government through the restructuring of former Shenzhen FIYTA Time

Industrial Company by the promoter of China National Aero-Technology Import and ExportShenzhen Industry & Trade Center (name changed to “China National Aero-TechnologyShenzhen Co. Ltd” lately) on 25 December 1992. On 3 June 1993 both the Company was

listed on Shenzhen Stock Exchange. The Company holds business license with the Unified

Social Credit Code of 91440300192189783K.As at 31 December 2025 the outstanding shares issued by the Company was 405.764007

million shares and the registered capital was 405.764007 million after a series of share

dividends rights offering capitalization of reserves and issuing of new shares. The Company’s

registered address is FIYTA Hi-Tech Building Gao Xin Nan Yi Dao Nanshan District

Shenzhen Guangdong Province where the Company’s headquarters locates. The parent

company of the Company is CATIC Shenzhen Holdings Limited (CATIC Shenzhen) and the

ultimate controlling party of the Company is Aviation Industry Corporation of China Ltd.

(AVIC) .

The business nature and main operating activities of the Company and its subsidiaries mainly

include: Watch and Clock Sales; Watch and Timing Instrument Manufacturing; Watch and

Timing Instrument Sales; Jewelry Wholesale; Jewelry Retail; Wearable Intelligent Devices

Manufacturing; Wearable Intelligent Devices Sales; Non-residential Real Estate Leasing;

Professional Design Services; Sales of Household Electrical Appliances; Sales of Satellite

Mobile Communication Terminals. (Except for projects that require approval by law business

activities may be conducted independently based on the business license in accordance with the

law.)

The Company included a total of 12 subsidiaries in the consolidation scope for the current

period. For details refer to Note 7 Interests in Other Entities. There were no changes in the

entities included in the consolidated financial statements compared to the previous period.The financial statements were approved and authorized for issue upon the resolution of the

Company’s Board of Directors meeting on 12 March 2026.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

9FIYTA Precision Technology Co. Ltd. Notes to the financial statements

2.1 Basis of Preparation

Based on going concern according to actually occurred transactions and events the Company

prepares its financial statements in accordance with the Accounting Standards for Business

Enterprises – Basic standards and concrete accounting standards Accounting Standards for

Business Enterprises – Application Guidelines Accounting Standards for Business Enterprises– Interpretations and other relevant provisions (collectively known as “Accounting Standardsfor Business Enterprises issued by Ministry of Finance of PRC”). In addition the Company

discloses the relevant financial information in accordance with "Rules No.15 for the Information

Disclosure and Reporting of Companies Offering Securities to the Public - General

Requirements for Financial Reporting (2023 Revision)" issued by CSRC.

2.2 Going Concern

The Company has assessed its ability to continually operate for the next twelve months from

the end of the reporting period and no any matters that may result in doubt on its ability as a

going concern were noted. Therefore it is reasonable for the Company to prepare financial

statements on the going concern basis.

3. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

The following significant accounting policies and accounting estimates of the Company are

formulated in accordance with the Accounting Standards for Business Enterprises. Businesses

not mentioned are complied with relevant accounting policies of the Accounting Standards for

Business Enterprises.

3.1 Statement of Compliance with the Accounting Standards for Business Enterprises

The Company prepares its financial statements in accordance with the requirements of the

Accounting Standards for Business Enterprises truly and completely reflecting the Company’s

financial position as at 31 December 2025 and its operating results changes in shareholders'

equity cash flows and other related information for the year then ended.

3.2 Accounting Period

The accounting year of the Company is from 1 January to 31 December in calendar year.

3.3 Operating Cycle

The normal operating cycle of the Company is twelve months.

3.4 Functional Currency

The Company and its domestic subsidiaries use RMB as the functional currency. The

Company’s overseas subsidiary FIYTA (Hong Kong) Limited (“FIYTA Hong Kong”) has

determined HKD as its functional currency based on the primary economic environment in

which it operates. Montres Chouriet SA a subsidiary of FIYTA Hong Kong has determined

CHF as its functional currency based on its operating environment. When preparing financial

statements their amounts are translated into RMB. The Company prepares its financial

statements in RMB.

10FIYTA Precision Technology Co. Ltd. Notes to the financial statements

3.5 Determining Factor and Basis of Selection of Materiality

Item Factor and basis of materiality

Accounts receivable with significant reversal or

The amount of an individual item for year-end

recovery of provision for bad debts recognized

balance is more than RMB 1000000

during the current period

Significant other payables aged more than one The amount of an individual item for year-end

year balance is more than RMB 1000000

3.6 Accounting Treatment of Business Combinations under and not under Common

Control

(a) Business combinations under common control

The assets and liabilities that the Company obtains in a business combination under common

control shall be measured at their carrying amount of the acquired entity at the combination

date. If the accounting policy and accounting period adopted by the acquired entity is different

from that adopted by the acquiring entity the acquiring entity shall according to accounting

policy and accounting period it adopts adjust the relevant items in the financial statements of

the acquired party based on the principal of materiality. As for the difference between the

carrying amount of the net assets obtained by the acquiring entity and the carrying amount of

the consideration paid by it the capital reserve (capital premium or share premium) shall be

adjusted. If the capital reserve (capital premium or share premium) is not sufficient to absorb

the difference any excess shall be adjusted against retained earnings.(b) Business combinations not under common control

The assets and liabilities that the Company obtains in a business combination not under

common control shall be measured at their fair value at the acquisition date. If the accounting

policy and accounting period adopted by the acquired entity is different from that adopted by

the acquiring entity the acquiring entity shall according to accounting policy and accounting

period it adopts adjust the relevant items in the financial statements of the acquired entity based

on the principal of materiality. The acquiring entity shall recognise the positive balance between

the combination costs and the fair value of the identifiable net assets it obtains from the acquired

entity as goodwill. The acquiring entity shall pursuant to the following provisions treat the

negative balance between the combination costs and the fair value of the identifiable net assets

it obtains from the acquired entity:

(i) It shall review the measurement of the fair values of the identifiable assets liabilities and

contingent liabilities it obtains from the acquired entity as well as the combination costs;

(ii) If after the review the combination costs are still less than the fair value of the identifiable

net assets it obtains from the acquired entity the balance shall be recognised in profit or loss of

the reporting period.(c) Treatment of business combination related costs

11FIYTA Precision Technology Co. Ltd. Notes to the financial statements

The intermediary costs such as audit legal services and valuation consulting and other related

management costs that are directly attributable to the business combination shall be charged in

profit or loss in the period in which they are incurred. The costs to issue equity or debt securities

for the consideration of business combination shall be recorded as a part of the value of the

respect equity or debt securities upon initial recognition.

3.7 Judgment of Control and Method of Preparing the Consolidated Financial

Statements

(a) Judgment of control and consolidation decision

Control exists when the Company has power over the investee exposure or rights to variable

returns from its involvement with the investee and the ability to use its power over the investee

to affect the amount of the returns. The definition of control contains there elements: - power

over the investee; exposure or rights to variable returns from the Company’s involvement with

the investee; and the ability to use its power over the investee to affect the amount of the

investor’s returns. The Company controls an investee if and only if the Company has all the

above three elements.The scope of consolidated financial statements shall be determined on the basis of control. It

not only includes subsidiaries determined based on voting rights (or similar) or together with

other arrangement but also structured entities under one or more contractual arrangements.Subsidiaries are the entities that controlled by the Company (including enterprise a divisible

part of the investee and structured entity controlled by the enterprise). A structured entity

(sometimes called a Special Purpose 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.(b) Method of preparing the consolidated financial statements

The consolidated financial statements shall be prepared by the Company based on the financial

statements of the Company and its subsidiaries and using other related information.When preparing consolidated financial statements the Company shall consider the entire group

as an accounting entity adopt uniform accounting policies and apply the requirements of

Accounting Standard for Business Enterprises related to recognition measurement and

presentation. The consolidated financial statements shall reflect the overall financial position

operating results and cash flows of the group.(i) Like items of assets liabilities equity income expenses and cash flows of the parent are

combined with those of the subsidiaries.(ii) The carrying amount of the parent’s investment in each subsidiary is eliminated (off-set)

against the parent’s portion of equity of each subsidiary.(iii) Eliminate the impact of intragroup transactions between the Company and the subsidiaries

or between subsidiaries and when intragroup transactions indicate an impairment of related

assets the losses shall be recognised in full.

12FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(iv) Make adjustments to special transactions from the perspective of the group.(c) Special consideration in consolidation elimination

(i) Long-term equity investment held by the subsidiaries to the Company shall be recognised astreasury stock of the Company which is offset with the owner’s equity represented as “treasurystock” under “owner’s equity” in the consolidated statement of financial position.Long-term equity investment held by subsidiaries between each other is accounted for taking

long-term equity investment held by the Company to its subsidiaries as reference. That is the

long-term equity investment is eliminated (off-set) against the portion of the corresponding

subsidiary’s equity.(ii) Due to not belonging to paid-in capital (or share capital) and capital reserve and being

different from retained earnings and undistributed profit “Specific reserves” and “General riskprovision” shall be recovered based on the proportion attributable to owners of the parent

company after long-term equity investment to the subsidiaries is eliminated with the

subsidiaries’ equity.(iii) If temporary timing difference between the book value of the assets and liabilities in the

consolidated statement of financial position and their tax basis is generated as a result of

elimination of unrealized inter-company transaction profit or loss deferred tax assets of

deferred tax liabilities shall be recognised and income tax expense in the consolidated

statement of profit or loss shall be adjusted simultaneously excluding deferred taxes related to

transactions or events directly recognised in owner’s equity or business combination.(iv) Unrealised inter-company transactions profit or loss generated from the Company sellingassets to its subsidiaries shall be eliminated against “net profit attributed to the owners of theparent company” in full. Unrealized inter-company transactions profit or loss generated fromthe subsidiaries selling assets to the Company shall be eliminated between “net profit attributedto the owners of the parent company” and “non-controlling interests” pursuant to the proportion

of the Company in the related subsidiaries. Unrealized inter-company transactions profit or lossgenerated from the assets sales between the subsidiaries shall be eliminated between “net profitattributed to the owners of the parent company” and “non-controlling interests” pursuant to the

proportion of the Company in the selling subsidiaries.(v) If loss attributed to the minority shareholders of a subsidiary in current period is more than

the proportion of non-controlling interest in this subsidiary at the beginning of the period non-

controlling interest is still to be written down.

3.8 Classification of Joint Arrangements and Accounting for Joint Operation

A joint arrangement is an arrangement of which two or more parties have joint control. Joint

arrangement of the Company is classified as either a joint operation or a joint venture.(a) Joint operation

A joint operation is a joint arrangement whereby the parties that have joint control of the

13FIYTA Precision Technology Co. Ltd. Notes to the financial statements

arrangement have rights to the assets and obligations for the liabilities relating to the

arrangement.The Company shall recognise the following items in relation to shared interest in a joint

operation and account for them in accordance with relevant accounting standards of the

Accounting Standards for Business Enterprises:

(i) its assets including its share of any assets held jointly;

(ii) its liabilities including its share of any liabilities incurred jointly;

(iii) its revenue from the sale of its share of the output arising from the joint operation;

(iv) its share of the revenue from the sale of the output by the joint operation; and

(v) its expenses including its share of any expenses incurred jointly.(b) Joint venture

A joint venture is a joint arrangement whereby the parties that have joint control of the

arrangement have rights to the net assets of the arrangement.The Company accounts for its investment in the joint venture by applying the equity method of

long-term equity investment.

3.9 Cash and Cash Equivalents

Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash

equivalents include short-term (generally within three months of maturity at acquisition) highly

liquid investments that are readily convertible into known amounts of cash and which are

subject to an insignificant risk of changes in value.

3.10 Foreign Currency Transactions and Translation of Foreign Currency Financial

Statements

(a) Determination of the exchange rate for foreign currency transactions

At the time of initial recognition of a foreign currency transaction the amount in the foreign

currency shall be translated into the amount in the functional currency at the spot exchange rate

of the transaction date or at an exchange rate which is determined through a systematic and

reasonable method and is approximate to the spot exchange rate of the transaction date

(hereinafter referred to as the approximate exchange rate).(b) Translation of monetary items denominated in foreign currency on the balance sheet

date

The foreign currency monetary items shall be translated at the spot exchange rate on the balance

sheet date. The balance of exchange arising from the difference between the spot exchange rate

on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to

the balance sheet date shall be recorded into the profits and losses at the current period. The

foreign currency non-monetary items measured at the historical cost shall still be translated at

the spot exchange rate on the transaction date; for the foreign currency non-monetary items

14FIYTA Precision Technology Co. Ltd. Notes to the financial statements

restated to a fair value measurement shall be translated into the at the spot exchange rate at the

date when the fair value was determined for the Fair Value Through Profit or Lossthe

difference between the restated functional currency amount and the original functional currency

amount shall be recorded into the profits and losses at the current period.(c) Translation of foreign currency financial statements

Before translating the financial statements of foreign operations the accounting period and

accounting policy shall be adjusted so as to conform to the Company. The adjusted foreign

operation financial statements denominated in foreign currency (other than functional currency)

shall be translated in accordance with the following method:

(i) The asset and liability items in the statement of financial position shall be translated at the

spot exchange rates at the date of that statement of financial position. The owners’ equity items

except undistributed profit shall be translated at the spot exchange rates when they are incurred.(ii) The income and expense items in the statement of profit and other comprehensive income

shall be translated at the spot exchange rates or approximate exchange rate at the date of

transaction.(iii) Foreign currency cash flows and cash flows of foreign subsidiaries shall be translated at

the spot exchange rate or approximate exchange rate when the cash flows are incurred. The

effect of exchange rate changes on cash is presented separately in the statement of cash flows

as an adjustment item.(iv) The differences arising from the translation of foreign currency financial statements shall

be presented separately as “other comprehensive income” under the owners’ equity items of the

consolidated statement of financial position.When disposing a foreign operation involving loss of control the cumulative amount of the

exchange differences relating to that foreign operation recognised under other comprehensive

income in the statement of financial position shall be reclassified into current profit or loss

according to the proportion disposed.

3.11 Financial Instruments

Financial instrument is any contract which gives rise to both a financial asset of one entity and

a financial liability or equity instrument of another entity.(a) Recognition and derecognition of financial instrument

A financial asset or a financial liability should be recognised in the statement of financial

position when and only when an entity becomes party to the contractual provisions of the

instrument.A financial asset can only be derecognised when meets one of the following conditions:

(i) The rights to the contractual cash flows from a financial asset expire

(ii) The financial asset has been transferred and meets one of the following derecognition

15FIYTA Precision Technology Co. Ltd. Notes to the financial statements

conditions:

Financial liabilities (or part thereof) are derecognised only when the liability is extinguished—

i.e. when the obligation specified in the contract is discharged or cancelled or expires. An

exchange of the Company (borrower) and lender of debt instruments that carry significantly

different terms or a substantial modification of the terms of an existing liability are both

accounted for as an extinguishment of the original financial liability and the recognition of a

new financial liability.Purchase or sale of financial assets in a regular-way shall be recognised and derecognised using

trade date accounting. A regular-way purchase or sale of financial assets is a transaction under

a contract whose terms require delivery of the asset within the time frame established generally

by regulations or convention in the market place concerned. Trade date is the date at which the

entity commits itself to purchase or sell an asset.(b) Classification and measurement of financial assets

At initial recognition the Company classified its financial asset based on both the business

model for managing the financial asset and the contractual cash flow characteristics of the

financial asset: financial asset at amortised cost financial asset at fair value through profit or

loss (FVTPL) and financial asset at fair value through other comprehensive income (FVTOCI).Reclassification of financial assets is permitted if and only if the objective of the entity’s

business model for managing those financial assets changes. In this circumstance all affected

financial assets shall be reclassified on the first day of the first reporting period after the changes

in business model; otherwise the financial assets cannot be reclassified after initial recognition.Financial assets shall be measured at initial recognition at fair value. For financial assets

measured at FVTPL transaction costs are recognised in current profit or loss. For financial

assets not measured at FVTPL transaction costs should be included in the initial measurement.Notes receivable or accounts receivable that arise from sales of goods or rendering of services

are initially measured at the transaction price defined in the accounting standard of revenue

where the transaction does not include a significant financing component.Subsequent measurement of financial assets will be based on their categories:

(i)Financial asset at amortised cost

The financial asset at amortised cost category of classification applies when both the following

conditions are met: the financial asset is held within the business model whose objective is to

hold financial assets in order to collect contractual cash flows and the contractual term of the

financial asset gives rise on specified dates to cash flows that are solely payment of principal

and interest on the principal amount outstanding. These financial assets are subsequently

measured at amortised cost by adopting the effective interest rate method. Any gain or loss

arising from derecognition according to the amortization under effective interest rate method

or impairment are recognised in current profit or loss.(ii)Financial asset at fair value through other comprehensive income (FVTOCI)

16FIYTA Precision Technology Co. Ltd. Notes to the financial statements

The financial asset at FVTOCI category of classification applies when both the following

conditions are met: the financial asset is held within the business model whose objective is

achieved by both collecting contractual cash flows and selling financial assets and the

contractual term of the financial asset gives rise on specified dates to cash flows that are solely

payment of principle and interest on the principal amount outstanding. All changes in fair value

are recognised in other comprehensive income except for gain or loss arising from impairment

or exchange differences which should be recognised in current profit or loss. At derecognition

cumulative gain or loss previously recognised under OCI is reclassified to current profit or loss.However interest income calculated based on the effective interest rate is included in current

profit or loss.The Company make an irrevocable decision to designate part of non-trading equity instrument

investments as measured through FVTOCI. All changes in fair value are recognised in other

comprehensive income except for dividend income recognised in current profit or loss. At

derecognition cumulative gain or loss are reclassified to retained earnings.(iii)Financial asset at fair value through profit or loss (FVTPL)

Financial asset except for above mentioned financial asset at amortised cost or financial asset

at fair value through other comprehensive income (FVTOCI) should be classified as financial

asset at fair value through profit or loss (FVTPL). These financial assets should be subsequently

measured at fair value. All the changes in fair value are included in current profit or loss.(c) Classification and measurement of financial liabilities

The Company classified the financial liabilities as financial liabilities at fair value through profit

or loss (FVTPL) loan commitments at a below-market interest rate and financial guarantee

contracts and financial asset at amortised cost.Subsequent measurement of financial assets will be based on the classification:

(i)Financial liabilities at fair value through profit or loss (FVTPL)

Held-for-trading financial liabilities (including derivatives that are financial liabilities) and

financial liabilities designated at FVTPL are classified as financial liabilities at FVTP. After

initial recognition any gain or loss (including interest expense) are recognised in current profit

or loss except for those hedge accounting is applied. For financial liability that is designated as

at FVTPL changes in the fair value of the financial liability that is attributable to changes in

the own credit risk of the issuer shall be presented in other comprehensive income. At

derecognition cumulative gain or loss previously recognised under OCI is reclassified to

retained earnings.(ii)Loan commitments and financial guarantee contracts

Loan commitment is a commitment by the Company to provide a loan to customer under

specified contract terms. The provision of impairment losses of loan commitments shall be

recognised based on expected credit losses model.Financial guarantee contract is a contract that requires the Company to make specified

17FIYTA Precision Technology Co. Ltd. Notes to the financial statements

payments to reimburse the holder for a loss it incurs because a specified debtor fails to make

payment when due in accordance with the original or modified terms of a debt instrument.Financial guarantee contracts liability shall be subsequently measured at the higher of: The

amount of the loss allowance recognised according to the impairment principles of financial

instruments; and the amount initially recognised less the cumulative amount of income

recognised in accordance with the revenue principles.(iii) Financial liabilities at amortised cost

After initial recognition the Company measured other financial liabilities at amortised cost

using the effective interest method.Except for special situation financial liabilities and equity instrument should be classified in

accordance with the following principles:

(i) If the Company has no unconditional right to avoid delivering cash or another financial

instrument to fulfill a contractual obligation this contractual obligation meet the definition of

financial liabilities. Some financial instruments do not comprise terms and conditions related

to obligations of delivering cash or another financial instrument explicitly they may include

contractual obligation indirectly through other terms and conditions.(ii) If a financial instrument must or may be settled in the Company's own equity instruments

it should be considered that the Company’s own equity instruments are alternatives of cash or

another financial instrument or to entitle the holder of the equity instruments to sharing the

remaining rights over the net assets of the issuer. If the former is the case the instrument is a

liability of the issuer; otherwise it is an equity instrument of the issuer. Under some

circumstances it is regulated in the contract that the financial instrument must or may be settled

in the Company's own equity instruments where amount of contractual rights and obligations

are calculated by multiplying the number of the equity instruments to be available or delivered

by its fair value upon settlement. Such contracts shall be classified as financial liabilities

regardless that the amount of contractual rights and liabilities is fixed or fluctuate totally or

partially with variables other than market price of the entity’s own equity instruments (such as

interest rate price of some kind of goods or some kind of financial instrument).(d) Derivatives and embedded derivatives

At initial recognition derivatives shall be measured at fair value at the date of derivative

contracts are signed and subsequently measured at fair value. The derivative with a positive fair

value shall be recognized as an asset and with a negative fair value shall be recognised as a

liability.Gains or losses arising from the changes in fair value of derivatives shall be recognised directly

into current profit or loss except for the effective portion of cash flow hedges which shall be

recognised in other comprehensive income and reclassified into current profit or loss when the

hedged items affect profit or loss.An embedded derivative is a component of a hybrid contract with a financial asset as a host

18FIYTA Precision Technology Co. Ltd. Notes to the financial statements

the Company shall apply the requirements of financial asset classification to the entire hybrid

contract. If a host that is not a financial asset and the hybrid contract is not measured at fair

value with changes in fair value recognised in profit or loss and the economic characteristics

and risks of the embedded derivative are not closely related to the economic characteristics and

risks of the host and a separate instrument with the same terms as the embedded derivative

would meet the definition of a derivative the embedded derivative shall be separated from the

hybrid instrument and accounted for as a separate derivative instrument. If the Company is

unable to measure the fair value of the embedded derivative at the acquisition date or

subsequently at the balance sheet date the entire hybrid contract is designated as financial assets

or financial liabilities at fair value through profit or loss.(e) Impairment of financial instrument

The Company shall recognise a loss allowance based on expected credit losses on a financial

asset that is measured at amortised cost a debt investment at fair value through other

comprehensive income a contract asset a lease receivable a loan commitment and a financial

guarantee contract.(i) Measurement of expected credit losses

Expected credit losses are the weighted average of credit losses of the financial instruments

with the respective risks of a default occurring as the weights. Credit loss is the difference

between all contractual cash flows that are due to the Company in accordance with the contract

and all the cash flows that the Company expects to receive (ie all cash shortfalls) discounted at

the original effective interest rate or credit- adjusted effective interest rate for purchased or

originated credit-impaired financial assets.Lifetime expected credit losses are the expected credit losses that result from all possible default

events over the expected life of a financial instrument.

12-month expected credit losses are the portion of lifetime expected credit losses that represent

the expected credit losses that result from default events on a financial instrument that are

possible within the 12 months after the reporting date (or the expected lifetime if the expected

life of a financial instrument is less than 12 months).At each reporting date the Company classifies financial instruments into three stages and makes

provisions for expected credit losses accordingly. A financial instrument of which the credit

risk has not significantly increased since initial recognition is at stage 1. The Company shall

measure the loss allowance for that financial instrument at an amount equal to 12-month

expected credit losses. A financial instrument with a significant increase in credit risk since

initial recognition but is not considered to be credit-impaired is at stage 2. The Company shall

measure the loss allowance for that financial instrument at an amount equal to the lifetime

expected credit losses. A financial instrument is considered to be credit-impaired as at the end

of the reporting period is at stage 3. The Company shall measure the loss allowance for that

financial instrument at an amount equal to the lifetime expected credit losses.The Company may assume that the credit risk on a financial instrument has not increased

19FIYTA Precision Technology Co. Ltd. Notes to the financial statements

significantly since initial recognition if the financial instrument is determined to have low credit

risk at the reporting date and measure the loss allowance for that financial instrument at an

amount equal to 12-month expected credit losses.For financial instrument at stage 1 stage 2 and those have low credit risk the interest revenue

shall be calculated by applying the effective interest rate to the gross carrying amount of a

financial asset (ie impairment loss not been deducted). For financial instrument at stage 3

interest revenue shall be calculated by applying the effective interest rate to the amortised cost

after deducting of impairment loss.For notes receivable accounts receivable and accounts receivable financing no matter it

contains a significant financing component or not the Company shall measure the loss

allowance at an amount equal to the lifetime expected credit losses.Receivables

For the notes receivable accounts receivable other receivables accounts receivable financing

and long-term receivables which are demonstrated to be impaired by any objective evidence

or applicable for individual assessment the Company shall individually assess for impairment

and recognise the loss allowance for expected credit losses. If the Company determines that no

objective evidence of impairment exists for notes receivable accounts receivable other

receivables accounts receivable financing and long-term receivables or the expected credit

loss of a single financial asset cannot be assessed at reasonable cost such notes receivable

accounts receivable other receivables accounts receivable financing and long-term receivables

shall be divided into several groups with similar credit risk characteristics and collectively

calculated the expected credit loss. The determination basis of groups is as following:

Determination basis of notes receivable is as following:

Group 1: Commercial acceptance bills

Group 2: Bank acceptance bills

For each group the Company calculates expected credit losses through default exposure and

the lifetime expected credit losses rate taking reference to historical experience for credit losses

and considering current condition and expectation for the future economic situation.Determination basis of accounts receivable is as following:

Group 1: Accounts receivables due from customers

For each group the Company calculates expected credit losses through preparing an aging

analysis schedule with the lifetime expected credit losses rate taking reference to historical

experience for credit losses and considering current condition and expectation for the future

economic situation.Determination basis of other receivables is as following:

Group 1: Deposit and guarantee receivable

20FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Group 2: Employee advance payments

Group 3: Others

For each group the Company calculates expected credit losses through default exposure and

the 12-months or lifetime expected credit losses rate taking reference to historical experience

for credit losses and considering current condition and expectation for the future economic

situation.The Company calculates the aging of receivables (notes receivable accounts receivable and

other receivables) based on the period from the transaction date to the balance sheet date to

determine credit risk characteristic groups.Debt investment and other debt investment

For debt investment and other debt investment the Company shall calculate the expected credit

loss through the default exposure and the 12-month or lifetime expected credit loss rate based

on the nature of the investment counterparty and the type of risk exposure.(ii) Low credit risk

If the financial instrument has a low risk of default the borrower has a strong capacity to meet

its contractual cash flow obligations in the near term and adverse changes in economic and

business conditions in the longer term may but will not necessarily reduce the ability of the

borrower to fulfill its contractual cash flow obligations.(iii) Significant increase in credit risk

The Company shall assess whether the credit risk on a financial instrument has increased

significantly since initial recognition using the change in the risk of a default occurring over

the expected life of the financial instrument through the comparison of the risk of a default

occurring on the financial instrument as at the reporting date with the risk of a default occurring

on the financial instrument as at the date of initial recognition.To make that assessment the Company shall consider reasonable and supportable information

that is available without undue cost or effort and that is indicative of significant increases in

credit risk since initial recognition including forward-looking information. The information

considered by the Company are as following:

? Significant changes in internal price indicators of credit risk as a result of a change in credit

risk since inception

? Existing or forecast adverse change in the business financial or economic conditions of the

borrower that results in a significant change in the borrower’s ability to meet its debt obligations；

? An actual or expected significant change in the operating results of the borrower; An actual

or expected significant adverse change in the regulatory economic or technological

environment of the borrower；

? Significant changes in the value of the collateral supporting the obligation or in the quality

21FIYTA Precision Technology Co. Ltd. Notes to the financial statements

of third-party guarantees or credit enhancements which are expected to reduce the borrower’s

economic incentive to make scheduled contractual payments or to otherwise influence the

probability of a default occurring;

? Significant change that are expected to reduce the borrower’s economic incentive to make

scheduled contractual payments;

? Expected changes in the loan documentation including an expected breach of contract that

may lead to covenant waivers or amendments interest payment holidays interest rate step-ups

requiring additional collateral or guarantees or other changes to the contractual framework of

the instrument；

? Significant changes in the expected performance and behavior of the borrower；

? Contractual payments are more than 30 days past due.Depending on the nature of the financial instruments the Company shall assess whether the

credit risk has increased significantly since initial recognition on an individual financial

instrument or a group of financial instruments. When assessed based on a group of financial

instruments the Company can group financial instruments on the basis of shared credit risk

characteristics for example past due information and credit risk rating.Generally the Company shall determine the credit risk on a financial asset has increased

significantly since initial recognition when contractual payments are more than 30 days past

due. The Company can only rebut this presumption if the Company has reasonable and

supportable information that is available without undue cost or effort that demonstrates that the

credit risk has not increased significantly since initial recognition even though the contractual

payments are more than 30 days past due.(iv) Credit-impaired financial asset

The Company shall assess at each reporting date whether the credit impairment has occurred

for financial asset at amortised cost and debt investment at fair value through other

comprehensive income. A financial asset is credit-impaired when one or more events that have

a detrimental impact on the estimated future cash flows of that financial asset have occurred.Evidences that a financial asset is credit-impaired include observable data about the following

events:

Significant financial difficulty of the issuer or the borrower；a breach of contract such as a

default or past due event; the lender(s) of the borrower for economic or contractual reasons

relating to the borrower’s financial difficulty having granted to the borrower a concession(s)

that the lender(s) would not otherwise consider；it is becoming probable that the borrower will

enter bankruptcy or other financial reorganisation;the disappearance of an active market for that

financial asset because of financial difficulties；the purchase or origination of a financial asset

at a deep discount that reflects the incurred credit losses.(v) Presentation of impairment of expected credit loss

22FIYTA Precision Technology Co. Ltd. Notes to the financial statements

In order to reflect the changes of credit risk of financial instrument since initial recognition the

Company shall at each reporting date remeasure the expected credit loss and recognise in profit

or loss as an impairment gain or loss the amount of expected credit losses addition (or reversal).For financial asset at amortised cost the loss allowance shall reduce the carrying amount of the

financial asset in the statement of financial position; for debt investment at fair value through

other comprehensive income the loss allowance shall be recognised in other comprehensive

income and shall not reduce the carrying amount of the financial asset in the statement of

financial position.(vi) Write-off

The Company shall directly reduce the gross carrying amount of a financial asset when the

Company has no reasonable expectations of recovering the contractual cash flow of a financial

asset in its entirety or a portion thereof. Such write-off constitutes a derecognition of the

financial asset. This circumstance usually occurs when the Company determines that the debtor

has no assets or sources of income that could generate sufficient cash flow to repay the write-

off amount.Recovery of financial asset written off shall be recognised in profit or loss as reversal of

impairment loss.(f) Transfer of financial assets

Transfer of financial assets refers to following two situations:

? Transfers the contractual rights to receive the cash flows of the financial asset;

? Transfers the entire or a part of a financial asset and retains the contractual rights to receive

the cash flows of the financial asset but assumes a contractual obligation to pay the cash flows

to one or more recipients.(i) Derecognition of transferred assets

If the Company transfers substantially all the risks and rewards of ownership of the financial

asset or neither transfers nor retains substantially all the risks and rewards of ownership of the

financial asset but has not retained control of the financial asset the financial asset shall be

derecognised.Whether the Company has retained control of the transferred asset depends on the transferee’s

ability to sell the asset. If the transferee has the practical ability to sell the asset in its entirety

to an unrelated third party and is able to exercise that ability unilaterally and without needing

to impose additional restrictions on the transfer the Company has not retained control.The Company judges whether the transfer of financial asset qualifies for derecognition based

on the substance of the transfer.If the transfer of financial asset qualifies for derecognition in its entirety the difference between

the following shall be recognised in profit or loss:

? The carrying amount of transferred financial asset;

23FIYTA Precision Technology Co. Ltd. Notes to the financial statements

? The sum of consideration received and the part derecognised of the cumulative changes in

fair value previously recognised in other comprehensive income (The financial assets involved

in the transfer are classified as financial assets at fair value through other comprehensive income

in accordance with Article 18 of the Accounting Standards for Business Enterprises -

Recognition and Measurement of Financial Instruments).If the transferred asset is a part of a larger financial asset and the part transferred qualifies for

derecognition the previous carrying amount of the larger financial asset shall be allocated

between the part that continues to be recognised (For this purpose a retained servicing asset

shall be treated as a part that continues to be recognised) and the part that is derecognised based

on the relative fair values of those parts on the date of the transfer. The difference between

following two amounts shall be recognised in profit or loss:

? The carrying amount (measured at the date of derecognition) allocated to the part

derecognised；

? The sum of the consideration received for the part derecognised and part derecognised of

the cumulative changes in fair value previously recognised in other comprehensive income (The

financial assets involved in the transfer are classified as financial assets at fair value through

other comprehensive income in accordance with Article 18 of the Accounting Standards for

Business Enterprises - Recognition and Measurement of Financial Instruments).(ii) Continuing involvement in transferred assets

If the Company neither transfers nor retains substantially all the risks and rewards of ownership

of a transferred asset and retains control of the transferred asset the Company shall continue

to recognise the transferred asset to the extent of its continuing involvement and also recognise

an associated liability.The extent of the Company’s continuing involvement in the transferred asset is the extent to

which it is exposed to changes in the value of the transferred asset

(iii) Continue to recognise the transferred assets

If the Company retains substantially all the risks and rewards of ownership of the transferred

financial asset the Company shall continue to recognise the transferred asset in its entirety and

the consideration received shall be recognised as a financial liability.The financial asset and the associated financial liability shall not be offset. In subsequent

accounting period the Company shall continuously recognise any income (gain) arising from

the transferred asset and any expense (loss) incurred on the associated liability.(g) Offsetting financial assets and financial liabilities

Financial assets and financial liabilities shall be presented separately in the statement of

financial position and shall not be offset. When meets the following conditions financial assets

and financial liabilities shall be offset and the net amount presented in the statement of financial

position:

24FIYTA Precision Technology Co. Ltd. Notes to the financial statements

The Company currently has a legally enforceable right to set off the recognised amounts; The

Company intends either to settle on a net basis or to realise the asset and settle the liability

simultaneously.In accounting for a transfer of a financial asset that does not qualify for derecognition the

Company shall not offset the transferred asset and the associated liability.(h) Determination of fair value of financial instruments

Determination of fair value of financial assets and financial liabilities please refer to Note 3.12

3.12 Fair Value Measurement

Fair value refers to the price that would be received to sell an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date.The Company determines fair value of the related assets and liabilities based on market value

in the principal market or in the absence of a principal market in the most advantageous market

price for the related asset or liability. The fair value of an asset or a liability is measured using

the assumptions that market participants would use when pricing the asset or liability assuming

that market participants act in their economic best interest.The principal market is the market in which transactions for an asset or liability take place with

the greatest volume and frequency. The most advantageous market is the market which

maximizes the value that could be received from selling the asset and minimizes the value

which is needed to be paid in order to transfer a liability considering the effect of transport

costs and transaction costs both.If the active market of the financial asset or financial liability exists the Company shall measure

the fair value using the quoted price in the active market. If the active market of the financial

instrument is not available the Company shall measure the fair value using valuation techniques.A fair value measurement of a non-financial asset takes into account a market participant’s

ability to generate economic benefits by using the asset in its highest and best use or by selling

it to another market participant that would use the asset in its highest and best use.? Valuation techniques

The Company uses valuation techniques that are appropriate in the circumstances and for which

sufficient data are available to measure fair value including the market approach the income

approach and the cost approach. The Company shall use valuation techniques consistent with

one or more of those approaches to measure fair value. If multiple valuation techniques are used

to measure fair value the results shall be evaluated considering the reasonableness of the range

of values indicated by those results. A fair value measurement is the point within that range that

is most representative of fair value in the circumstances.When using the valuation technique the Company shall give the priority to relevant observable

inputs. The unobservable inputs can only be used when relevant observable inputs is not

available or practically would not be obtained. Observable inputs refer to the information which

25FIYTA Precision Technology Co. Ltd. Notes to the financial statements

is available from market and reflects the assumptions that market participants would use when

pricing the asset or liability. Unobservable Inputs refer to the information which is not available

from market and it has to be developed using the best information available in the circumstances

from the assumptions that market participants would use when pricing the asset or liability.? Fair value hierarchy

To Company establishes a fair value hierarchy that categorises into three levels the inputs to

valuation techniques used to measure fair value. The fair value hierarchy gives the highest

priority to Level 1 inputs and second to the Level 2 inputs and the lowest priority to Level 3

inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or

liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other

than quoted prices included within Level 1 that are observable for the asset or liability either

directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

3.13 Inventories

(a) Classification of inventories

Inventories are finished goods or products held for sale in the ordinary course of business in

the process of production for such sale or in the form of materials or supplies to be consumed

in the production process or in the rendering of services including raw materials work in

progress and goods in stock etc.(b) Measurement method of cost of inventories sold or used

The cost of raw materials and goods in stock (except the branded luxury watch inventory) used

or sold is determined on the weighted average basis while the cost of the branded luxury watch

inventory used or sold is determined on individual valuation method basis.(c) Inventory system

The perpetual inventory system is adopted. The inventories should be counted at least once a

year and surplus or losses of inventory stocktaking shall be included in current profit and loss.(d) Recognition Criteria and Provision for impairment of inventory

Inventories are stated at the lower of cost and net realizable value. The excess of cost over net

realizable value of the inventories is recognised as provision for impairment of inventory and

recognised in current profit or loss.Net realizable value of the inventory should be determined on the basis of reliable evidence

obtained and factors such as purpose of holding the inventory and impact of post balance sheet

event shall be considered.(i) In normal operation process finished goods products and materials for direct sale their net

realizable values are determined at estimated selling prices less estimated selling expenses and

relevant taxes and surcharges; for inventories held to execute sales contract or service contract

their net realizable values are calculated on the basis of contract price. If the quantities of

inventories specified in sales contracts are less than the quantities held by the Company the net

26FIYTA Precision Technology Co. Ltd. Notes to the financial statements

realizable value of the excess portion of inventories shall be based on general selling prices.Net realizable value of materials held for sale shall be measured based on market price.(ii) For materials in stock need to be processed in the ordinary course of production and

business net realisable value is determined at the estimated selling price less the estimated costs

of completion the estimated selling expenses and relevant taxes. If the net realisable value of

the finished products produced by such materials is higher than the cost the materials shall be

measured at cost; if a decline in the price of materials indicates that the cost of the finished

products exceeds its net realisable value the materials are measured at net realisable value and

differences shall be recognised at the provision for impairment.(iii) Provisions for inventory impairment are generally determined on an individual basis. For

inventories with large quantity and low unit price the provisions for inventory impairment are

determined on group basis.(iv) If any factor rendering write-downs of the inventories has been eliminated at the reporting

date the amounts written down are recovered and reversed to the extent of the inventory

impairment which has been provided for. The reversal shall be included in profit or loss.

3.14 Contract Assets and Contract Liabilities

The Company shall present contract assets or contract liabilities in the statement of financial

position depending on the relationship between the Company’s satisfying a performance

obligation and the customer’s payment. A contract asset shall be presented if the Company has

the right to consideration in exchange for goods or services that the Company has transferred

to a customer when that right is conditioned on something other than the passage of time. A

contract liability shall be presented if the Company has the obligation to transfer goods or

services to a customer for which the Company has received consideration (or the amount is due)

from the customer.Method of determination and accounting for expected credit loss for contract assets please refer

to Note 3.11.Contract assets and contract liabilities shall be presented separately in the statement of financial

position. The contract asset and contract liability for the same contract shall be presented on a

net basis. A net balance shall be listed in the item of "Contract assets" or "Other non-current

assets" according to its liquidity; a credit balance shall be listed in the item of "Contract

liabilities" or "Other non-current liabilities" according to its liquidity. Contract assets and

contract liabilities for different contracts cannot be offset.

3.15 Contract costs

Contract costs include costs to fulfill a contract and the costs to obtain a contract.The Company shall recognise an asset from the costs incurred to fulfill a contract only if those

costs meet all of the following criteria:

(i) the costs relate directly to a contract or to an anticipated contract including: direct labour

27FIYTA Precision Technology Co. Ltd. Notes to the financial statements

direct materials manufacturing costs (or similar costs) costs that are explicitly chargeable to

the customer under the contract and other costs that are incurred only because an entity entered

into the contract;

(ii) the costs enhance resources of the Company that will be used in satisfying performance

obligations in the future; and

(iii) the costs are expected to be recovered.The incremental costs of obtaining a contract shall be recognised as an asset if the Company

expects to recover them.An asset related to contract costs shall be amortised on a systematic basis that is consistent with

the revenue recognition of the goods or services to which the asset relates. The Company

recognises the contract acquisition costs as an expense when incurred if the amortisation period

of the asset that the Company otherwise would have recognised is one year or less.The Company shall accrue the provision for impairment recognise an impairment loss in profit

or loss to the extent that the carrying amount of an asset related to the contract cost exceeds the

difference of below two items and further consider whether the estimated liability related to

the onerous contract needs to be accrued:

(i) the remaining amount of consideration that the Company expects to receive in exchange

for the goods or services to which the asset relates; less

(ii) the costs that relate directly to providing those goods or services and that have not been

recognised as expenses.The Company shall recognise in profit or loss a reversal of some or all of an impairment loss

previously recognised when the impairment conditions no longer exist or have improved. The

increased carrying amount of the asset shall not exceed the amount that would have been

determined (net of amortisation) if no impairment loss had been recognised previously.Providing that the costs to fulfil a contract satisfy the requirement to be recognised as an asset

the Company shall present them in the account “Inventory” if the contract has an originalexpected duration of one year (or a normal operating cycle) or less or in the account “Othernon-current assets” if the contract has an original expected duration of more than one year (or

a normal operating cycle).Providing that the costs to obtain a contract satisfy the requirement to be recgonised as an asset

the Company shall present them in the account “Other current asset” if the contract has an

original expected duration of one year (or a normal operating cycle) or less or in the account

“Other non-current assets” if the contract has an original expected duration of more than one

year (or a normal operating cycle).

3.16 Long-term Equity Investments

Long-term equity investments refer to equity investments where an investor has control of or

significant influence over an investee as well as equity investments in joint ventures.

28FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Associates of the Company are those entities over which the Company has significant influence.(a) Determination basis of joint control or significant influence over the investee

Joint control is the relevant agreed sharing of control over an arrangement and the arranged

relevant activity must be decided under unanimous consent of the parties sharing control. In

assessing whether the Company has joint control of an arrangement the Company shall assess

first whether all the parties or a group of the parties control the arrangement. When all the

parties or a group of the parties considered collectively are able to direct the activities of the

arrangement the parties control the arrangement collectively. Then the Company shall assess

whether decisions about the relevant activities require the unanimous consent of the parties that

collectively control the arrangement. If two or more groups of the parties could control the

arrangement collectively it shall not be assessed as have joint control of the arrangement. When

assessing the joint control the protective rights are not considered.Significant influence is the power to participate in the financial and operating policy decisions

of the investee but is not control or joint control of those policies. In determination of significant

influence over an investee the Company should consider not only the existing voting rights

directly or indirectly held but also the effect of potential voting rights held by the Company and

other entities that could be currently exercised or converted including the effect of share

warrants share options and convertible corporate bonds that issued by the investee and could

be converted in current period.If the Company holds directly or indirectly 20% or more but less than 50% of the voting power

of the investee it is presumed that the Company has significant influence of the investee unless

it can be clearly demonstrated that in such circumstance the Company cannot participate in the

decision-making in the production and operating of the investee.(b) Determination of initial investment cost

(i) Long-term equity investments generated in business combinations

For a business combination involving enterprises under common control if the Company makes

payment in cash transfers non-cash assets or bears liabilities as the consideration for the

business combination the share of carrying amount of the owners’ equity of the acquiree in the

consolidated financial statements of the ultimate controlling party is recognised as the initial

cost of the long-term equity investment on the combination date. The difference between the

initial investment cost and the carrying amount of cash paid non-cash assets transferred and

liabilities assumed shall be adjusted against the capital reserve; if capital reserve is not enough

to be offset undistributed profit shall be offset in turn.For a business combination involving enterprises under common control if the Company issues

equity securities as the consideration for the business combination the share of carrying amount

of the owners’ equity of the acquiree in the consolidated financial statements of the ultimate

controlling party is recognised as the initial cost of the long-term equity investment on the

combination date. The total par value of the shares issued is recognised as the share capital. The

difference between the initial investment cost and the carrying amount of the total par value of

29FIYTA Precision Technology Co. Ltd. Notes to the financial statements

the shares issued shall be adjusted against the capital reserve; if capital reserve is not enough to

be offset undistributed profit shall be offset in turn.For business combination not under common control the assets paid liabilities incurred or

assumed and the fair value of equity securities issued to obtain the control of the acquiree at the

acquisition date shall be determined as the cost of the business combination and recognised as

the initial cost of the long-term equity investment. The audit legal valuation and advisory fees

other intermediary fees and other relevant general administrative costs incurred for the business

combination shall be recognised in profit or loss as incurred.(ii) Long-term equity investments acquired not through the business combination the

investment cost shall be determined based on the following requirements:

For long-term equity investments acquired by payments in cash the initial cost is the actually

paid purchase cost including the expenses taxes and other necessary expenditures directly

related to the acquisition of long-term equity investments.For long-term equity investments acquired through issuance of equity securities the initial cost

is the fair value of the issued equity securities.For the long-term equity investments obtained through exchange of non-monetary assets if the

exchange has commercial substance and the fair values of assets traded out and traded in can

be measured reliably the initial cost of long-term equity investment traded in with non-

monetary assets are determined based on the fair values of the assets traded out together with

relevant taxes. Difference between fair value and book value of the assets traded out is recorded

in current profit or loss. If the exchange of non-monetary assets does not meet the above

criterion the book value of the assets traded out and relevant taxes are recognised as the initial

investment cost.For long-term equity investment acquired through debt restructuring the initial cost is

determined based on the fair value of the equity obtained and the difference between initial

investment cost and carrying amount of debts shall be recorded in current profit or loss.(c) Subsequent measurement and recognition of profit or loss

Long-term equity investment to an entity over which the Company has ability of control shall

be accounted for at cost method. Long-term equity investment to a joint venture or an associate

shall be accounted for at equity method.(i) Cost method

For Long-term equity investment at cost method cost of the long-term equity investment shall

be adjusted when additional amount is invested or a part of it is withdrawn. The Company

recognises its share of cash dividends or profits which have been declared to distribute by the

investee as current investment income.(ii) Equity method

If the initial cost of the investment is in excess of the share of the fair value of the net identifiable

30FIYTA Precision Technology Co. Ltd. Notes to the financial statements

assets in the investee at the date of investment the difference shall not be adjusted to the initial

cost of long-term equity investment; if the initial cost of the investment is in short of the share

of the fair value of the net identifiable assets in the investee at the date investment the difference

shall be included in the current profit or loss and the initial cost of the long-term equity

investment shall be adjusted accordingly.The Company recognises the share of the investee’s net profits or losses as well as its share of

the investee’s other comprehensive income as investment income or losses and other

comprehensive income respectively and adjusts the carrying amount of the investment

accordingly. The carrying amount of the investment shall be reduced by the share of any profit

or cash dividends declared to distribute by the investee. The investor’s share of the investee’s

owners’ equity changes other than those arising from the investee’s net profit or loss other

comprehensive income or profit distribution shall be recognised in the investor’s equity and

the carrying amount of the long-term equity investment shall be adjusted accordingly. The

Company recognises its share of the investee’s net profits or losses after making appropriate

adjustments of investee’s net profit based on the fair values of the investee’s identifiable net

assets at the investment date. If the accounting policy and accounting period adopted by the

investee is not in consistency with the Company the financial statements of the investee shall

be adjusted according to the Company’s accounting policies and accounting period based on

which investment income or loss and other comprehensive income etc. shall be adjusted. The

unrealized profits or losses resulting from inter-company transactions between the company

and its associate or joint venture are eliminated in proportion to the company’s equity interest

in the investee based on which investment income or losses shall be recognised. Any losses

resulting from inter-company transactions between the investor and the investee which belong

to asset impairment shall be recognised in full.Where the Company obtains the power of joint control or significant influence but not control

over the investee due to additional investment or other reason the relevant long-term equity

investment shall be accounted for by using the equity method initial cost of which shall be the

fair value of the original investment plus the additional investment. Where the original

investment is classified as other equity investment difference between its fair value and the

carrying value in addition to the cumulative changes in fair value previously recorded in other

comprehensive income shall be recogised into retained earnings of the period of using equity

method.If the Company loses the joint control or significant influence of the investee for some reasons

such as disposal of equity investment the retained interest shall be measured at fair value and

the difference between the carrying amount and the fair value at the date of loss the joint control

or significant influence shall be recognised in profit or loss. When the Company discontinues

the use of the equity method the Company shall account for all amounts previously recognised

in other comprehensive income under equity method in relation to that investment on the same

basis as would have been required if the investee had directly disposed of the related assets or

liabilities.

31FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(d) Impairment testing and provision for impairment loss

For investment in subsidiaries associates or a joint ventures provision for impairment loss

please refer to Note 3.22.

3.17 Investment Properties

(a) Classification of investment properties

Investment properties are properties to earn rentals or for capital appreciation or both including:

(i)Land use right leased out

(ii)Land held for transfer upon appreciation

(iii)Buildings leased out

(b) The measurement model of investment property

The Company adopts the cost model for subsequent measurement of investment properties. For

provision for impairment please refer to Note 3.22.The Company calculates the depreciation or amortization based on the net amount of

investment property cost less the accumulated impairment and the net residual value using

straight-line method. The estimated useful life and annual depreciation rates which are

determined according to the categories estimated economic useful lives and estimated net

residual rates are listed as followings:

Estimated useful Annual depreciation rates

Category Residual rates (%)

life (year) (%)

Buildings and constructions 20-35 5.00 2.71-4.85

3.18 Fixed Assets

Fixed assets refer to the tangible assets with higher unit price held for the purpose of producing

commodities rendering services renting or business management with useful lives exceeding

one year.(a) Recognition criteria of fixed assets

Fixed assets will only be recognised at the actual cost paid when obtaining as all the following

criteria are satisfied:

(i) It is probable that the economic benefits relating to the fixed assets will flow into the

Company;

(ii) The costs of the fixed assets can be measured reliably.Subsequent expenditure for fixed assets shall be recorded in cost of fixed assets if recognition

criteria of fixed assets are satisfied otherwise the expenditure shall be recorded in current profit

or loss when incurred.

32FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(b) Depreciation methods of fixed assets

The Company begins to depreciate the fixed asset from the next month after it is available for

intended use using the straight-line-method. The estimated useful life and annual depreciation

rates which are determined according to the categories estimated economic useful lives and

estimated net residual rates of fixed assets are listed as followings:

Depreciation Estimated useful Residual rates Annual depreciation

Category

method life (year) (%) rates (%)

Buildings and straight-line-

20-355.002.71-4.85

constructions method

straight-line-

Machinery equipment 10 5.00-10.00 9.00-9.50

method

straight-line-

Electrical equipment 5 5.00 19.00

method

straight-line-

Vehicles 5 5.00 19.00

method

straight-line-

Other equipment 5 5.00 19.00

method

For the fixed assets with impairment provided the impairment provision should be excluded

from the cost when calculating depreciation.At the end of reporting period the Company shall review the useful life estimated net residual

value and depreciation method of the fixed assets. Estimated useful life of the fixed assets shall

be adjusted if it is changed compared to the original estimation.

3.19 Construction in Progress

(a) Classification of construction in progress

Construction in progress is measured on an individual project basis.(b) Recognition criteria and timing of transfer from construction in progress to fixed

assets

The initial book values of the fixed assets are stated at total expenditures incurred before they

are ready for their intended use including construction costs original price of machinery

equipment other necessary expenses incurred to bring the construction in progress to get ready

for its intended use and borrowing costs of the specific loan for the construction or the

proportion of the general loan used for the constructions incurred before they are ready for their

intended use. The construction in progress shall be transferred to fixed asset when the

installation or construction is ready for the intended use. For construction in progress that has

been ready for their intended use but relevant budgets for the completion of projects have not

33FIYTA Precision Technology Co. Ltd. Notes to the financial statements

been completed the estimated values of project budgets prices or actual costs should be

included in the costs of relevant fixed assets and depreciation should be provided according to

relevant policies of the Company when the fixed assets are ready for intended use. After the

completion of budgets needed for the completion of projects the estimated values should be

substituted by actual costs but depreciation already provided is not adjusted.

3.20 Borrowing Costs

(a) Recognition criteria and period for capitalization of borrowing costs

The Company shall capitalize the borrowing costs that are directly attributable to the acquisition

construction or production of qualifying assets when meet the following conditions:

(i) Expenditures for the asset are being incurred;

(ii) Borrowing costs are being incurred and;

(iii) Acquisition construction or production activities that are necessary to prepare the assets

for their intended use or sale are in progress.Other borrowing cost discounts or premiums on borrowings and exchange differences on

foreign currency borrowings shall be recognized into current profit or loss when incurred.Capitalization of borrowing costs is suspended during periods in which the acquisition

construction or production of a qualifying asset is interrupted abnormally and the interruption

is for a continuous period of more than 3 months.Capitalization of such borrowing costs ceases when the qualifying assets being acquired

constructed or produced become ready for their intended use or sale. The expenditure incurred

subsequently shall be recognised as expenses when incurred.(b) Capitalization rate and measurement of capitalized amounts of borrowing costs

When funds are borrowed specifically for purchase construction or manufacturing of assets

eligible for capitalization the Company shall determine the amount of borrowing costs eligible

for capitalisation as the actual borrowing costs incurred on that borrowing during the period

less any interest income on bank deposit or investment income on the temporary investment of

those borrowings.Where funds allocated for purchase construction or manufacturing of assets eligible for

capitalization are part of a general borrowing the eligible amounts are determined by the

weighted-average of the cumulative capital expenditures in excess of the specific borrowing

multiplied by the general borrowing capitalization rate. The capitalisation rate will be the

weighted average of the borrowing costs applicable to the general borrowing.

3.21 Intangible Assets

(a) Measurement method of intangible assets

Intangible assets are recognised at actual cost at acquisition.(b) The useful life and amortisation of intangible assets

34FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(i) The estimated useful lives of the intangible assets with finite useful lives are as follows:

Estimated useful

Category Basis

life

Land use right 50years Legal life

The service life is determined by reference to the

Software 5 years period that can bring economic benefits to the

Company

The service life is determined by reference to the

Right to use the trademark 5-10 years period that can bring economic benefits to the

Company

For intangible assets with finite useful life the estimated useful life and amortisation method

are reviewed annually at the end of each reporting period and adjusted when necessary. No

change has incurred in current year in the estimated useful life and amortisation method upon

review.(ii) Assets of which the period to bring economic benefits to the Company are unforeseeable

are regarded as intangible assets with indefinite useful lives. The Company reassesses the useful

lives of those assets at every year end. If the useful lives of those assets are still indefinite

impairment test should be performed on those assets at the balance sheet date.(iii) Amortisation of the intangible assets

For intangible assets with finite useful lives their useful lives should be determined upon their

acquisition and systematically amortised on a straight-line basis [units of production method]

over the useful life. The amortisation amount shall be recognised into current profit or loss or

capitalized as part of the cost of the related asset according to the beneficial items. The amount

to be amortised is cost deducting residual value. For intangible assets which has impaired the

cumulative impairment provision shall be deducted as well. The residual value of an intangible

asset with a finite useful life shall be assumed to be zero unless: there is a commitment by a

third party to purchase the asset at the end of its useful life; or there is an active market for the

asset and residual value can be determined by reference to that market; and it is probable that

such a market will exist at the end of the asset’s useful life.Intangible assets with indefinite useful lives shall not be amortised. The Company reassesses

the useful lives of those assets at every year end. If there is evidence to indicate that the useful

lives of those assets become finite the useful lives shall be estimated and the intangible assets

shall be amortised systematically and reasonably within the estimated useful lives.(c) Scope of Research and Development Expenditures

The Company classifies the expenses directly related to research and development activities as

research and development expenditures including remuneration of research and development

staff direct material depreciation cost and long-term amortised expense design fee equipment

35FIYTA Precision Technology Co. Ltd. Notes to the financial statements

commissioning fee intangible assets amortisation cost outsourcing research and development

cost and other expenses etc.(d) Criteria of classifying expenditures on internal research and development projects into

research phase and development phase

Preparation activities related to materials and other relevant aspects undertaken by the Company

for the purpose of further development shall be treated as research phase.Expenditures incurred during the research phase of internal research and development projects

shall be recognised in profit or loss when incurred.Development activities after the research phase of the Company shall be treated as development

phase.(e) Criteria for capitalization of qualifying expenditures during the development phase

Expenditures arising from development phase on internal research and development projects

shall be recognised as intangible assets only if all of the following conditions have been met:

(i) Technical feasibility of completing the intangible assets so that they will be available for use

or sale;

(ii) Its intention to complete the intangible asset and use or sell it;

(iii) The method that the intangible assets generate economic benefits including the Company

can demonstrate the existence of a market for the output of the intangible assets or the intangible

assets themselves or if it is to be used internally the usefulness of the intangible assets;

(iv) The availability of adequate technical financial and other resources to complete the

development and to use or sell the intangible asset; and

(v) Its ability to measure reliably the expenditure attributable to the intangible asset.

3.22 Impairment of Long-Term Assets

Impairment loss of long-term equity investment in subsidiaries associates and joint ventures

investment properties subsequently measured at cost fixed assets constructions in progress

intangible assets and right of use assets shall be determined according to following method:

The Company shall assess at the end of each reporting period whether there is any indication

that an asset may be impaired. If any such indication exists the Company shall estimate the

recoverable amount of the asset and test for impairment. Irrespective of whether there is any

indication of impairment the Company shall test for impairment of goodwill acquired in a

business combination intangible assets with an indefinite useful life or intangible assets not yet

available for use annually.The recoverable amounts of the long-term assets are the higher of their fair values less costs to

dispose and the present values of the estimated future cash flows of the long-term assets. The

Company estimate the recoverable amounts on an individual basis. If it is difficult to estimate

the recoverable amount of the individual asset the Company estimates the recoverable amount

36FIYTA Precision Technology Co. Ltd. Notes to the financial statements

of the groups of assets that the individual asset belongs to. Identification of a group of asset is

based on whether the cash inflows from it are largely independent of the cash inflows from

other assets or groups of assets.If and only if the recoverable amount of an asset or a group of assets is less than its carrying

amount the carrying amount of the asset shall be reduced to its recoverable amount and the

provision for impairment loss shall be recognised accordingly.When test for impairment if there is an indication that relevant group of assets or combination

of asset groups may be impaired impairment testing for group of assets or combination of asset

groups excluding goodwill shall be conducted first and the recoverable amount shall be then

calculated and the impairment loss shall be recognised accordingly. Then the group of assets or

combination of asset groups including goodwill shall be tested for impairment by comparing

the carrying amount with its recoverable amount. If the recoverable amount is less than the

carrying amount the Company shall recognise the impairment loss.The mentioned impairment loss will not be reversed in subsequent accounting period once it

had been recognised.

3.23 Long-term Deferred Expenses

Long-term deferred expenses are various expenses already incurred which shall be amortised

over current and subsequent periods with the amortisation period exceeding one year.Long-

term deferred expenses are evenly amortised over the beneficial period.

3.24 Employee Benefits

Employee benefits refer to all forms of consideration or compensation given by the Company

in exchange for service rendered by employees or for the termination of employment

relationship. Employee benefits include short-term employee benefits post-employment

benefits termination benefits and other long-term employee benefits. Benefits provided to an

employee's spouse children dependents family members of decreased employees or other

beneficiaries are also employee benefits.According to liquidity employee benefits are presented in the statement of financial position as

“Employee benefits payable” and “Long-term employee benefits payable”.(a) Short-term employee benefits

(i) Employee basic salary (salary bonus allowance subsidy)

The Company recognises in the accounting period in which an employee provides service

actually occurred short-term employee benefits as a liability with a corresponding charge to

current profit except for those recognised as capital expenditure based on the requirement of

accounting standards.(ii) Employee welfare

The Company shall recognise the employee welfare based on actual amount when incurred into

current profit or loss or related capital expenditure. Employee welfare shall be measured at fair

37FIYTA Precision Technology Co. Ltd. Notes to the financial statements

value as it is a non-monetary benefits.(iii) Social insurance such as medical insurance work injury insurance and maternity insurance

housing funds labor union fund and employee education fund

Payments made by the Company of social insurance for employees such as medical insurance

work injury insurance and maternity insurance payments of housing funds and labor union

fund and employee education fund accrued in accordance with relevant requirements in the

accounting period in which employees provide services is calculated according to required

accrual bases and accrual ratio in determining the amount of employee benefits and the related

liabilities which shall be recognised in current profit or loss or the cost of relevant asset.(iv) Short-term paid absences

The company shall recognise the related employee benefits arising from accumulating paid

absences when the employees render service that increases their entitlement to future paid

absences. The additional payable amounts shall be measured at the expected additional

payments as a result of the unused entitlement that has accumulated. The Company shall

recognise relevant employee benefit of non-accumulating paid absences when the absences

actually occurred.(v)Short-term profit-sharing plan

The Company shall recognise the related employee benefits payable under a profit-sharing plan

when all of the following conditions are satisfied:

? The Company has a present legal or constructive obligation to make such payments as a

result of past events; and

? A reliable estimate of the amounts of employee benefits obligation arising from the profit-

sharing plan can be made.(b) Post-employment benefits

(i) Defined contribution plans

The Company shall recognise in the accounting period in which an employee provides service

the contribution payable to a defined contribution plan as a liability with a corresponding

charge to the current profit or loss or the cost of a relevant asset.When contributions to a defined contribution plan are not expected to be settled wholly before

twelve months after the end of the annual reporting period in which the employees render the

related service they shall be discounted using relevant discount rate (market yields at the end

of the reporting period on high quality corporate bonds in active market or government bonds

with the currency and term which shall be consistent with the currency and estimated term of

the defined contribution obligations) to measure employee benefits payable.(ii) Defined benefit plan

The present value of defined benefit obligation and current service costs

38FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Based on the expected accumulative welfare unit method the Company shall make estimates

about demographic variables and financial variables in adopting the unbiased and consistent

actuarial assumptions and measure defined benefit obligation and determine the obligation

period. The Company shall discount the obligation arising from defined benefit plan using

relevant discount rate (market yields at the end of the reporting period on high quality corporate

bonds in active market or government bonds with the currency and term which shall be

consistent with the currency and estimated term of the defined benefit obligations) in order to

determine the present value of the defined benefit obligation and the current service cost.The net defined benefit liability or asset

The net defined benefit liability (asset) is the deficit or surplus recognised as the present value

of the defined benefit obligation less the fair value of plan assets (if any).When the Company has a surplus in a defined benefit plan it shall measure the net defined

benefit asset at the lower of the surplus in the defined benefit plan and the asset ceiling.The amount recognised in the cost of asset or current profit or loss

Service cost comprises current service cost past service cost and any gain or loss on settlement.Other service cost shall be recognised in profit or loss unless accounting standards require or

allow the inclusion of current service cost within the cost of assets.Net interest on the net defined benefit liability (asset) comprising interest income on plan assets

interest cost on the defined benefit obligation and interest on the effect of the asset ceiling shall

be included in profit or loss.The amount recognised in other comprehensive income

Changes in the net liability or asset of the defined benefit plan resulting from the

remeasurements including:

? Actuarial gains and losses the changes in the present value of the defined benefit obligation

resulting from experience adjustments or the effects of changes in actuarial assumptions;

? Return on plan assets excluding amounts included in net interest on the net defined benefit

liability or asset;

? Any change in the effect of the asset ceiling excluding amounts included in net interest on

the net defined benefit liability (asset).Remeasurements of the net defined benefit liability (asset) recognised in other comprehensive

income shall not be reclassified to profit or loss in a subsequent period. Upon termination of

the original defined benefit plan the Company may within equity transfer the entire amount

previously recognized in other comprehensive income to retained earning.(c) Termination benefits

The Company providing termination benefits to employees shall recognise an employee

benefits liability for termination benefits with a corresponding charge to the profit or loss of

39FIYTA Precision Technology Co. Ltd. Notes to the financial statements

the reporting period at the earlier of the following dates:

(i) When the Company cannot unilaterally withdraw the offer of termination benefits because

of an employment termination plan or a curtailment proposal.(ii) When the Company recognises costs or expenses related to a restructuring that involves

the payment of termination benefits.If the termination benefits are not expected to be settled wholly before twelve months after the

end of the annual reporting period the Company shall discount the termination benefits using

relevant discount rate (market yields at the end of the reporting period on high quality corporate

bonds in active market or government bonds with the currency and term which shall be

consistent with the currency and estimated term of the defined benefit obligations) to measure

the employee benefits.(d) Other long-term employee benefits

(i) Meet the conditions of the defined contribution plan

When other long-term employee benefits provided by the Company to the employees satisfies

the conditions for classifying as a defined contribution plan all those benefits payable shall be

accounted for as employee benefits payable at their discounted value.(ii) Meet the conditions of the defined benefit plan

At the end of the reporting period the Company recognised the cost of employee benefit from

other long-term employee benefits as the following components:

? Service costs;

? Net interest cost for net liability or asset of other long-term employee benefits

? Changes resulting from the remeasurements of the net liability or asset of other long-term

employee benefits

In order to simplify the accounting treatment the net amount of above items shall be recognised

in profit or loss or relevant cost of assets.

3.25 Estimated Liabilities

(a) Recognition criteria of estimated liabilities

The Company recognises the estimated liabilities when obligations related to contingencies

satisfy all the following conditions:

(i) That obligation is a current obligation of the Company;

(ii) It is likely to cause any economic benefit to flow out of the Company as a result of

performance of the obligation; and

(iii) The amount of the obligation can be measured reliably.(b) Measurement method of estimated liabilities

40FIYTA Precision Technology Co. Ltd. Notes to the financial statements

The estimated liabilities of the Company are initially measured at the best estimate of expenses

required for the performance of relevant present obligations. The Company when determining

the best estimate has had a comprehensive consideration of risks with respect to contingencies

uncertainties and the time value of money. The carrying amount of the estimated liabilities shall

be reviewed at the end of every reporting period. If conclusive evidences indicate that the

carrying amount fails to be the best estimate of the estimated liabilities the carrying amount

shall be adjusted based on the updated best estimate.

3.26 Share-based Payments

(a) Classification of share-based payments

Share-based payments of the Company include equity-settled share-based payments and cash-

settled share-based payments.(b) Determining fair value of equity instruments

(i) The fair value of shares granted to the employees can be determined by reference to the

quotations in the active market adjusted in accordance with the terms and conditions granted

(excluding vesting conditions other than market conditions).(ii) For share option granted to the employees it is usually difficult to obtain its market price.If the share option with similar terms and conditions is not available the Company estimates

the fair value of those options using an applicable option pricing model.(c) Basis of best estimate of equity instruments expected to vest

Every balance sheet date during the vesting period the Company makes best estimate according

to the most updated number of employees that are eligible to exercise their options and revises

the number of equity instruments expected to vest in order to make the best estimate of equity

instruments expected to vest.(d) Accounting for implementation of share-based payment programs

Cash-settled share-based payment

(i) For cash-settled share-based payment vested immediately after granting the Company shall

recognise relevant costs or expenses at the fair value of the liability borne at grant date and a

corresponding increase in liability. Until the liability is settled the Company shall remeasure

the fair value of the liability at the end of each reporting period and at the date of settlement

with any changes in fair value recognised in profit or loss.(ii) If the share instrument do not vest until services during the vesting period are completed or

performance conditions are satisfied during the vesting period at the end of each reporting

period during the vesting period the Company shall recognise relevant costs or expenses and

the corresponding increase in liability for services received in the reporting period at the fair

value of the liability borne based on the best available estimate of the number expected to vest.Equity-settled share-based payment

41FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(i) For equity-settled share-based payment transaction in which services are received if the

equity instrument granted vest immediately the Company shall recognise relevant costs or

expenses at the fair value of the equity instruments at grant date and the corresponding increase

in capital reserve.(ii) If the equity instrument do not vest until services during the vesting period are completed

or performance conditions are satisfied at the end of each reporting period during the vesting

period the Company shall recognise relevant costs or expenses and the corresponding increase

in capital reserve for services received in the reporting period at the fair value of the equity

instruments at grant date based on the best available estimate of the number of equity

instruments expected to vest.(e) Accounting for modification of share-based payment programs

When the Company modifies terms and conditions of the share-based payment program if the

modification increases the fair value of the equity instruments granted the increased amount

should be recognised for service received accordingly; if the quantity granted of the equity

instruments is increased the increased amount should be recgonised for service received

accordingly as well. If the modification reduces the total fair value of the share-based payment

arrangement or the terms are changed in such a way that the arrangement is no longer for the

benefit of the employee the entity is still required to account for the services received as

consideration for the equity instruments granted as if that modification had not occurred unless

a part or all of the equity instruments are cancelled.(f) Accounting for termination of share-based payment programs

If a grant of equity instruments is cancelled or settled during the vesting period (other than a

grant cancelled by forfeiture when the vesting conditions are not satisfied) the Company shall:

(i) Account for the cancellation or settlement as an acceleration of vesting and therefore

recognise immediately the amount that otherwise would have been recognised for services

received over the remainder of the vesting period.(ii)Account for any payment made to the employee on the cancellation or settlement of the grant

as the repurchase of an equity interest and recognize any excess of the payment over the fair

value of the equity instruments measured at the repurchase date as an expense.If the Company repurchases vested equity instruments the payment made to the employee shall

be accounted for as a deduction from equity and recognize any excess of the payment over the

fair value of the equity instruments measured at the repurchase date shall be recognised in

current profit or loss.

3.27 Revenue

(a) General Principle

Revenue is defined as the gross inflow of economic benefits arising in the course of the ordinary

activities of the Company when those inflows result in the increases in shareholders’ equity

42FIYTA Precision Technology Co. Ltd. Notes to the financial statements

other than increases relating to contributions from shareholders.The Company shall recognise revenue when it satisfies a performance obligation in the contract

as the customer obtains control of a good or service. Control of a good or service refers to the

ability to direct the use of and obtain substantially all of the remaining economic benefits from

the good or service.When the contract has two or more obligation performances the Company shall allocate the

transaction price to each performance obligation in proportion to a relative stand-alone selling

price at contract inception of the promised good or service underlying each performance

obligation in the contract and recognize revenue based on the transaction price allocated to each

performance obligation.The transaction price is the amount of consideration to which the Company expects to be

entitled in exchange for transferring promised goods or services to a customer excluding

amounts collected on behalf of third parties. When determining the transaction price of the

contract if the contract includes a variable consideration the Company shall determine the best

estimate of the variable consideration based on the expected value or the most likely amount

and include in the transaction price only to the extent that it is highly probable that a significant

reversal in the amount of cumulative revenue recognised will not occur when the uncertainty

associated with the variable consideration is subsequently resolved. If the contract contains a

significant financing component the Company shall determine the transaction price at an

amount that reflects the price that a customer would have paid for the promised goods or

services if the customer had paid cash for those goods or services when (or as) they transfer to

the customer. The difference between the transaction price and the promised consideration shall

be amortised using the effective interest method within the contract period. The Company need

not consider the effects of a significant financing component if the period between when the

Company transfers control of a good or service to a customer and when the customer pays for

that good or service will be one year or less.The Company satisfies a performance obligation over time if one of the following criteria is

met; otherwise a performance obligation is satisfied at a point in time:

(i) the customer simultaneously receives and consumes the benefits provided by the Company’s

performance as the Company performs;

(ii) the Company’s performance creates or enhances an asset (for example work in progress)

that the customer controls as the asset is created or enhanced;

(iii) the Company’s performance does not create an asset with an alternative use to the Company

and the Company has an enforceable right to payment for performance completed to date.For each performance obligation satisfied over time the Company shall recognise revenue over

time by measuring the progress towards complete satisfaction of that performance obligation

unless those progress cannot be reasonably measured. The Company measures the progress of

a performance obligation for the service rendered using input methods (or output methods). In

some circumstances the Company cannot be able to reasonably measure the progress of a

43FIYTA Precision Technology Co. Ltd. Notes to the financial statements

performance obligation but the Company expects to recover the costs incurred in satisfying the

performance obligation. In those circumstances the Company shall recognise revenue only to

the extent of the costs incurred until such time that it can reasonably measure the progress of

the performance obligation.The Company shall recognise revenue at the point in which a customer obtains control of a

promised good or service if a performance obligation is satisfied at a point in time. To determine

the point in time at which a customer obtains control of a promised good or service the

Company shall consider indicators of the transfer of control which include but are not limited

to the followings:

(i) The Company has a present right to payment for the good or service – a customer is presently

obliged to pay for the good or service;

(ii) The Company has transferred legal title of an asset to a customer - the customer has legal

title to the asset;

(iii) The Company has transferred physical possession of an asset to a customer - the customer

has physical possession of the asset;

(iv) The Company has transferred the significant risks and rewards of ownership of the asset to

a customer - the customer has the significant risks and rewards of ownership of the asset;

(v) The customer has accepted the asset.Sale with a right of return

For sales with a right of return when the customer obtains the control of a product the Company

shall recognise revenue for the transferred products in the amount of consideration to which the

Company expects to be entitled and a refund liability at the amounts receivable for which the

Company does not expect to be entitled; meanwhile an asset shall be recognised as receivables

on the cost of return measured at the former carrying amount of the product expected to be

returned less any expected costs to recover those products (including potential decreases in the

value to the entity of returned products) and the net amount of the former carrying amount of

the product when transferred to the customer less above mentioned cost shall be recorded into

the cost of sales. At the end of each reporting period the Company shall re-assess the

expectations about the sales return and remeasure above mentioned assets and liabilities.Warranties

In accordance with the contract the law or other requirements the Company provides a

warranty in connection with the sale of a product or construction of a project. For warranties

which provide a customer with assurance that the related product will function as the parties

intended because it complies with agreed-upon specifications the Company shall treat it in

accordance with " Accounting Standards for Business Enterprise No. 13-Contingencies". If a

warranty or a part of a warranty provides a customer with a service in addition to the assurance

that the product complies with agreed-upon specifications the Company shall treat it as a

performance obligation and allocate the transaction price to the warranty based on the relative

44FIYTA Precision Technology Co. Ltd. Notes to the financial statements

proportion to the stand-alone selling price of the product and the service and recognise revenue

when the customer obtains the control of the service. In assessing whether a warranty provides

a customer with a service in addition to the assurance that the product complies with agreed-

upon specifications the Company shall consider factors such as: whether the warranty is

required by law; the length of the warranty coverage period and the nature of the tasks that the

Company promises to perform.Principal versus agent considerations

The Company determines whether it is a principal or an agent of the transaction on the basis of

whether it has control over the goods or services before they are transferred to customers. If the

Company obtains the control of the specified goods or services from another party and then

transfers the goods or services to the customer the Company is therefore a principal and

recognises revenue in the gross amount of consideration to which it expects to be entitled in

exchange for the specified goods or services transferred. Otherwise the Company is an agent

and shall recognise revenue in the amount of any fee or commission to which it expects to be

entitled in exchange for arranging for the specified goods or services to be provided by another

party. The fee or commission might be the net amount of received or receivable consideration

that the Company retains after paying the other party the consideration received in exchange

for the goods or services to be provided by that party or determined based on the specified

commission amount or proportion.Consideration payable to a customer

The Company shall account for consideration payable to a customer as a reduction of the

transaction price unless the payment to the customer is in exchange for a distinct good or service

that the customer transfers to the Company. The reduction of revenue shall be recognised when

(or as) the later of either of the following events occurs: the Company recognises revenue for

the transfer of the related goods or services to the customer; and the Company pays or promises

to pay the consideration.Customers’ unexercised rights

Upon receipt of a prepayment for a good or service from a customer the Company shall

recognise a contract liability in the amount of the prepayment and recognise revenue when it

satisfies its performance obligation. If the prepayment to the Company is non-refundable and

the customer may not exercise part or all of its contractual rights and the Company expects to

be entitled to a breakage amount related to those unexercised rights of the customer the

Company shall recognise the expected breakage amount as revenue in proportion to the pattern

of rights exercised by the customer; otherwise the Company shall recognise the remaining

balance of above mentioned liability as revenue when the likelihood of the customer exercising

its remaining rights becomes remote.Contract modifications

When the construction contract modifications exist between the Company and the customer:

45FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(i) The Company shall account for a contract modification as a separate contract if the

modification results in the addition of promised construction services that are distinct and

increase of the price of the contract and the price of the contract increases by an amount of

consideration that reflects the Company’s stand-alone selling prices of the additional promised

construction services;

(ii) If the contract modification is not accounted for as a separate contract in accordance with

above mentioned circumstance and the remaining construction services are distinct from the

construction services transferred on or before the date of the contract modification the

Company shall account for the contract modification as if it were a termination of the existing

contract and the creation of a new contract with the combination of the remaining performance

obligations of the existing contract and the contract modification.(iii) If the contract modification is not accounted for as a separate contract in accordance with

above mentioned circumstance and the remaining construction services cannot be distinct from

the construction services transferred on or before the date of the contract modification the

Company shall account for the contract modification as if it were a part of the existing contract

and the effect that the contract modification has on the transaction price and on the entity’s

measure of progress towards complete satisfaction of the performance obligation is recognised

as an adjustment to revenue at the date of the contract modification.(b) Specific Method

Revenue recognition methods of the Company are as follows:

(i) Sales of watch

Sale of watch belongs to fulfilling performance obligations at a point of time.A. Online sales

Revenue shall be recognized at the point that the goods are dispatched the customer confirmed

received the goods and the platform has collected the payment

B. Offline sales

Revenue shall be recognized at the point when the goods are delivered and payment by

customer is collected.Revenue shall be recognized at the point when the products are delivered to and accepted by

the customer the payment has been received or the right to collect payment is obtained and

related economic benefits are probable to flow into the entity

C. Consignment sale

Under consignment sales arrangements revenue is recognized upon receiving the sales list from

the consignee confirming that control of goods has been transferred to the customer.D. Sale of consigned goods from others

46FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Under sale arrangement of consigned goods from others the Company recognizes revenue

using the net method when external consigned products are delivered to customers and control

of the goods has been transferred to the buyer

(ii) Precision manufacturing

Precision manufacturing business belongs to fulfilling performance obligations at a point of

time. Revenue from domestic sales shall be recognized when the goods are delivered and the

economic benefit associated with the goods is probable to flow into the Company. Revenue

from export shall be recognized when the following criteria is satisfied: the Company declared

the good at custom; obtained bill of lading; the right of collecting payment is obtained and its

probable that the economic benefit associated with the goods flows into the Company.(iii) Property leasing

For the accounting treatment of the Company as a lessor please refer to Note 3.30.

3.28 Government Grants

(a) Recognition of government grants

A government grant shall not be recgonised until there is reasonable assurance that:

(i) The Company will comply with the conditions attaching to them; and

(ii) The grants will be received.(b) Measurement of government grants

Monetary grants from the government shall be measured at amount received or receivable and

non-monetary grants from the government shall be measured at their fair value or at a nominal

value of RMB 1.00 when reliable fair value is not available.(c) Accounting for government grants

(i) Government grants related to assets

Government grants pertinent to assets mean the government grants that are obtained by the

Company used for purchase or construction or forming the long-term assets by other ways.Government grants pertinent to assets shall be recognised as deferred income and should be

recognised in profit or loss on a systematic basis over the useful lives of the relevant assets.Grants measured at their nominal value shall be directly recognised in profit or loss of the period

when the grants are received. When the relevant assets are sold transferred written off or

damaged before the assets are terminated the remaining deferred income shall be transferred

into profit or loss of the period of disposing relevant assets.(ii) Government grants related to income

Government grants other than related to assets are classified as government grants related to

income. Government grants related to income are accounted for in accordance with the

following principles:

47FIYTA Precision Technology Co. Ltd. Notes to the financial statements

If the government grants related to income are used to compensate the enterprise’s relevant

expenses or losses in future periods such government grants shall be recognised as deferred

income and included into profit or loss in the same period as the relevant expenses or losses are

recognised;

If the government grants related to income are used to compensate the enterprise’s relevant

expenses or losses incurred such government grants are directly recognised into current profit

or loss.For government grants comprised of part related to assets as well as part related to income each

part is accounted for separately; if it is difficult to identify different part the government grants

are accounted for as government grants related to income as a whole.Government grants related to daily operation activities are recognised in other income in

accordance with the nature of the activities and government grants irrelevant to daily operation

activities are recognised in non-operating income.(iii) Loan interest subsidy

When loan interest subsidy is allocated to the bank and the bank provides a loan at lower-

market rate of interest to the Company the loan is recognised at the actual received amount

and the interest expense is calculated based on the principal of the loan and the lower-market

rate of interest.When loan interest subsidy is directly allocated to the Company the subsidy shall be recognised

as offsetting the relevant borrowing cost.(iv) Repayment of the government grants

Repayment of the government grants shall be recorded by increasing the carrying amount of

the asset if the book value of the asset has been written down or reducing the balance of relevant

deferred income if deferred income balance exists any excess will be recognised into current

profit or loss; or directly recognised into current profit or loss for other circumstances.

3.29 Deferred Tax Assets and Deferred Tax Liabilities

Temporary differences are differences between the carrying amount of an asset or liability in

the statement of financial position and its tax base at the balance sheet date. The Company

recognise and measure the effect of taxable temporary differences and deductible temporary

differences on income tax as deferred tax liabilities or deferred tax assets using liability method.Deferred tax assets and deferred tax liabilities shall not be discounted.(a) Recognition of deferred tax assets

Deferred tax assets should be recognised for deductible temporary differences the carryforward

of unused tax losses and the carryforward of unused tax credits to the extent that it is probable

that taxable profit will be available against which the deductible temporary differences the

carryforward of unused tax losses and the carryforward of unused tax credits can be utilised at

the tax rates that are expected to apply to the period when the asset is realised unless the

48FIYTA Precision Technology Co. Ltd. Notes to the financial statements

deferred tax asset arises from the initial recognition of an asset or liability in a transaction that:

(i) Is not a business combination; and

(ii) At the time of the transaction affects neither accounting profit nor taxable profit (tax loss)

However a single transaction that meets both of the above two conditions and where the

initially recognized assets and liabilities give rise to equal amounts of taxable temporary

differences and deductible temporary differences is not eligible for the exemption from the

requirement to initially recognize deferred tax liabilities and deferred tax assets under this

provision. For the taxable temporary differences and deductible temporary differences arising

from the initial recognition of the assets and liabilities of such a transaction the Company

recognizes the corresponding deferred tax liabilities and deferred tax assets separately at the

time of the transaction.The Company shall recognise a deferred tax asset for all deductible temporary differences

arising from investments in subsidiaries associates and joint ventures only to the extent that

it is probable that:

(i) The temporary difference will reverse in the foreseeable future; and

(ii) Taxable profit will be available against which the deductible temporary difference can be

utilised.At the end of each reporting period if there is sufficient evidence that it is probable that taxable

profit will be available against which the deductible temporary difference can be utilized the

Company recognises a previously unrecognised deferred tax asset.The carrying amount of a deferred tax asset shall be reviewed at the end of each reporting period.The Company shall reduce the carrying amount of a deferred tax asset to the extent that it is no

longer probable that sufficient taxable profit will be available to allow the benefit of part or all

of that deferred tax asset to be utilised. Any such reduction shall be reversed to the extent that

it becomes probable that sufficient taxable profit will be available.(b) Recognition of deferred tax liabilities

A deferred tax liability shall be recognised for all taxable temporary differences at the tax rate

that are expected to apply to the period when the liability is settled.(i) No deferred tax liability shall be recognised for taxable temporary differences arising from:

? The initial recognition of goodwill; or

? The initial recognition of an asset or liability in a transaction which: is not a business

combination; and at the time of the transaction affects neither accounting profit nor taxable

profit (tax loss)

(ii) An entity shall recognise a deferred tax liability for all taxable temporary differences

associated with investments in subsidiaries associates and joint ventures except to the extent

that both of the following conditions are satisfied:

49FIYTA Precision Technology Co. Ltd. Notes to the financial statements

? The Company is able to control the timing of the reversal of the temporary difference; and

? It is probable that the temporary difference will not reverse in the foreseeable future.(c) Recognition of deferred tax liabilities or assets involved in special transactions or

events

(i) Deferred tax liabilities or assets related to business combination

For the taxable temporary difference or deductible temporary difference arising from a business

combination not under common control a deferred tax liability or a deferred tax asset shall be

recognised and simultaneously goodwill recognised in the business combination shall be

adjusted based on relevant deferred tax expense (income).(ii) Items directly recognised in equity

Current tax and deferred tax related to items that are recognised directly in equity shall be

recognised in equity. Such items include: other comprehensive income generated from fair

value fluctuation of other debt investments; an adjustment to the opening balance of retained

earnings resulting from either a change in accounting policy that is applied retrospectively or

the correction of a prior period (significant) error; amounts arising on initial recognition of the

equity component of a compound financial instrument that contains both liability and equity

component.(iii) Unused tax losses and unused tax credits

Unused tax losses and unused tax credits generated from daily operation of the Company itself

Deductible loss refers to the loss calculated and permitted according to the requirement of tax

law that can be offset against taxable income in future periods. The criteria for recognising

deferred tax assets arising from the carryforward of unused tax losses and tax credits are the

same as the criteria for recognising deferred tax assets arising from deductible temporary

differences. The Company recognises a deferred tax asset arising from unused tax losses or tax

credits only to the extent that there is convincing other evidence that sufficient taxable profit

will be available against which the unused tax losses or unused tax credits can be utilised by

the Company. Income taxes in current profit or loss shall be deducted as well.Unused tax losses and unused tax credits arising from a business combination

Under a business combination the acquiree’s deductible temporary differences which do not

satisfy the criteria at the acquisition date for recognition of deferred tax asset shall not be

recognised. Within 12 months after the acquisition date if new information regarding the facts

and circumstances exists at the acquisition date and the economic benefit of the acquiree’s

deductible temporary differences at the acquisition is expected to be realised the Company

shall recognise acquired deferred tax benefits and reduce the carrying amount of any goodwill

related to this acquisition. If goodwill is reduced to zero any remaining deferred tax benefits

shall be recognised in profit or loss. All other acquired deferred tax benefits realised shall be

recognised in profit or loss.

50FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(iv) Temporary difference generated in consolidation elimination

When preparing consolidated financial statements if temporary difference between carrying

value of the assets and liabilities in the consolidated financial statements and their taxable bases

is generated from elimination of inter-company unrealized profit or loss deferred tax assets or

deferred tax liabilities shall be recognised in the consolidated financial statements and income

taxes expense in current profit or loss shall be adjusted as well except for deferred tax related

to transactions or events recognised directly in equity and business combination.(v) Share-based payment settled by equity

If tax authority permits tax deduction that relates to share-based payment during the period in

which the expenses are recognised according to the accounting standards the Company

estimates the tax base in accordance with available information at the end of the accounting

period and the temporary difference arising from it. Deferred tax shall be recognised when

criteria of recognition are satisfied. If the amount of estimated future tax deduction exceeds the

amount of the cumulative expenses related to share-based payment recognised according to the

accounting standards the tax effect of the excess amount shall be recognised directly in equity.(d) Basis for deferred income tax assets and deferred income tax liabilities presented on a

net basis

The Company shall offset deferred tax assets and deferred tax liabilities if and only if: (i) the

Company has a legally enforceable right to set off current tax assets against current tax liabilities;

and

(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the

same taxation authority on either:

? the same taxable entity; or

? different taxable entities which intend either to settle current tax liabilities and assets on a

net basis or to realise the assets and settle the liabilities simultaneously in each future period

in which significant amounts of deferred tax liabilities or assets are expected to be settled or

recovered.

3.30 Leases

(a) Identifying a lease

At inception of a contract the Company shall assess whether the contract is or contains a lease.A contract is or contains a lease if the contract conveys the right to control the use of one or

more identified assets for a period of time in exchange for consideration. To assess whether a

contract conveys the right to control the use of an identified asset for a period of time the

Company shall assess whether throughout the period of use the customer has the right to obtain

substantially all of the economic benefits from use of the identified asset and to direct the use

of the identified asset.(b) Identifying a separate lease component

51FIYTA Precision Technology Co. Ltd. Notes to the financial statements

When a contract includes more than one separate lease components the Company shall separate

components of the contract and account for each lease component separately. The right to use

an underlying asset is a separate lease component if both conditions have been satisfied: (i) the

lessee can benefit from use of the underlying asset either on its own or together with other

resources that are readily available to the lessee; (ii) the underlying asset is neither highly

dependent on nor highly interrelated with the other underlying assets in the contract.(c) The Company as a lessee

At the commencement date the Company identifies the lease that has a lease term of 12 months

or less and does not contain a purchase option as a short-term lease. A lease qualifies as a lease

of a low-value asset if the nature of the asset is such that when new the asset is typically of

low value. If the Company subleases an asset or expects to sublease an asset the head lease

does not qualify as a lease of a low-value asset.For all the short-term leases or leases for which the underlying asset is of low value the

Company shall recognise the lease payments associated with those leases as cost of relevant

asset or expenses in current profit or loss on a straight-line basis over the lease term.Except for the election of simple treatment as short-term lease or lease of a low-value asset as

mentioned above at the commencement date the Company shall recognise a right-of-use asset

and a lease liability.(i) Right-of-use asset

A right-of-use asset is an asset that represents a lessee’s right to use an underlying asset for the

lease term.At the commencement date the Company shall initially measure the right-of-use asset at cost.The cost of the right-of-use asset shall comprise:

? the amount of the initial measurement of the lease liability；

? any lease payments made at or before the commencement date less any lease incentives

received;

? any initial direct costs incurred by the lessee; and

? an estimate of costs to be incurred by the lessee in dismantling and removing the underlying

asset restoring the site on which it is located or restoring the underlying asset to the condition

required by the terms and conditions of the lease. The Company recognises and measures the

cost in accordance with the recognition criteria and measurement method for estimated

liabilities details please refer to Notes 3.25. Those costs incurred to produce inventories shall

be included in the cost of inventories.The right-of-use asset shall be depreciated according to the categories using straight‐line

method. If it is reasonably certain that the ownership of the underlying asset shall be transferred

to the lessee by the end of the lease term the depreciation rate shall be determined based on the

classification of the right-of- use asset and estimated residual value rate from the

52FIYTA Precision Technology Co. Ltd. Notes to the financial statements

commencement date to the end of the useful life of the underlying asset. Otherwise the

depreciation rate shall be determined based on the classification of the right-of-use asset from

the commencement date to the earlier of the end of the useful life of the right-of-use asset or

the end of the lease term.After the commencement date the Company shall remeasure the lease liability based on the

revised present value of the lease payments and adjust the carrying amount of the right-of-use

asset if there is a change in the in-substance fixed payments or change in the amounts expected

to be payable under a residual value guarantee or change in an index or a rate used to determine

lease payments or change in the assessment or exercising of an option to purchase the

underlying asset or an option to extend or terminate the lease.(d) The Company as a lessor

At the commencement date the Company shall classify a lease as a finance lease if it transfers

substantially all the risks and rewards incidental to ownership of an underlying asset otherwise

it shall be classified as an operating lease.(i) Operating leases

The Company shall recognise lease payments from operating leases as income on a straight-

line basis over the term of the relevant lease and the initial direct costs incurred in obtaining an

operating lease shall be capitalised and recognised as an expense over the lease term on the

same basis as the lease income. The Company shall recognise the variable lease payments

relating to the operating lease but not included in the measurement of the lease receivables into

current profit or loss when incurred.(ii) Finance leases

At the commencement date the Company shall recognise the lease receivables at an account

equal to the net investment in the lease (the sum of the present value of the unguaranteed

residual values and the lease payment that are not received at the commencement date

discounted at the interest rate implicit in the lease) and derecognise the asset relating to the

finance lease. The Company shall recognise interest income using the interest rate implicit in

the lease over the lease term.The Company shall recognise the variable lease payments relating to the finance lease but not

included in the measurement of the net investment in the lease into current profit or loss when

incurred.(e) Lease modifications

(i) A lease modification accounted for as a separate lease

The Company shall account for a modification to a lease as a separate lease if both:

? the modification increases the scope of the lease by adding the right to use one or more

underlying assets; and

? the consideration for the lease increases by an amount commensurate with the stand-alone

53FIYTA Precision Technology Co. Ltd. Notes to the financial statements

price for the increase in scope.(ii) A lease modification not accounted for as a separate lease

The Company as a lessee

At the effective date of the lease modification the Company shall redetermine the lease term

of the modified lease and remeasure the lease liability by discounting the revised lease payments

using a revised discount rate. The revised discount rate is determined as the interest rate implicit

in the lease for the remainder of the lease term if that rate can be readily determined or the

incremental borrowing rate at the effective date of the modification if the interest rate implicit

in the lease cannot be readily determined.The Company shall account for the remeasurement of the lease liability by:

? decreasing the carrying amount of the right-of-use asset to reflect the partial or full

termination of the lease for lease modifications that decrease the scope of the lease or shorten

the lease term. The Company shall recognise in profit or loss any gain or loss relating to the

partial or full termination of the lease.? Making a corresponding adjustment to the carrying amount of the right-of-use asset for all

other lease modifications.The Company as a lessor

The Company shall account for a modification to an operating lease as a new lease from the

effective date of the modification considering any prepaid or accrued lease payments relating

to the original lease as part of the lease payments for the new lease.For a modification to a finance lease that is not accounted for as a separate lease the Company

shall account for the modification as follows:

? if the lease would have been classified as an operating lease had the modification been in

effect at the inception date the Company shall account for the lease modification as a new lease

from the effective date of the modification and measure the carrying amount of the underlying

asset as the net investment in the lease immediately before the effective date of the lease

modification;

? if the lease would have been classified as a finance lease had the modification been in effect

at the inception date the Company shall account for the lease modification according to the

requirements in the modification or renegotiation of the contract.(f) Sale and leaseback

The Company shall determine whether the transfer of an asset under the sale and leaseback

transaction is a sale of that asset according to the policies in Note 3.27.(i) The Company as a seller (lessee)

If the transfer of the asset is not a sale the Company shall continue to recognise the transferred

asset and shall recognise a financial liability equal to the transfer proceeds. It shall account for

54FIYTA Precision Technology Co. Ltd. Notes to the financial statements

the financial liability according to Note 3.11. If the transfer of the asset is a sale the Company

shall measure the right-of-use asset arising from the leaseback at the proportion of the previous

carrying amount of the asset that relates to the right of use retained by the Company.Accordingly the Company shall recognise only the amount of any gain or loss that relates to

the rights transferred to the buyer-lessor.(ii) The Company as a buyer (lessor)

If the transfer of the asset is not a sale the Company shall not recognise the transferred asset

and shall recognise a financial asset equal to the transfer proceeds. It shall account for the

financial asset according to Note 3.11. If the transfer of the asset is a sale the Company shall

account for the purchase of the asset applying applicable Accounting Standards of Business

Enterprises and for the lease applying the lessor accounting requirements.

3.31 Safety Production Costs

According to the relevant regulations the Company accrues the safety production costs.The safety production costs shall be recognised in the cost of the relevant products or current

profit or loss when makes the accrual and included in the “special reserve” account

simultaneously.When the accrued safety production costs are used within the scope of the regulations it shall

be treated as expense and directly deducted from the special reserve; if the fixed assets arecapitalized the expenditure incurred shall be firstly collectively recorded in “construction inprogress” and recognised as fixed asset when the safety project has been completed for its

intended use. At the same time the cost that capitalized as the fixed assets shall be deducted

from the special reserve and the accumulated depreciation with the same amount shall be

recognised. The fixed assets shall not be depreciated in subsequent reporting period.

3.32 Repurchase of Company’s Share

(a) If the Company reduces its registered capital through repurchase of the Company’s share

according to the approval required in relevant laws and regulations the share capital shall be

reduced at the par value of the shares deregistered the difference between the consideration

paid for repurchase (including the transaction cost) and the par value of the shares shall adjust

the owner’s equity. Any excess of the total par value shall offset the capital reserve (share

premium) surplus reserve and retained earnings in turn. If the consideration paid is less than

the total par value the difference shall increase the capital reserve (share premium).(b) Before being deregistered or transfered shares repurchased by the Company shall be treated

as treasury stock and all expenditures of the repurchase shall be recognised as the cost of

treasury stock.(c) Any excess of the income generated from transferring the treasury stock over their cost shall

increase the capital reserve (share premium) and any less shall offset the capital reserve (share

premium) surplus reserve and retained earnings in turn.

55FIYTA Precision Technology Co. Ltd. Notes to the financial statements

3.33 Restricted Stock

In the equity incentive plan the Company shall grant restricted shares to the motivated target

and the motivated object first subscribes for the stock. If the subsequent unlocking conditions

specified in the equity incentive plan are not met the Company repurchases the stock at the

price agreed in advance. If the restricted shares issued to employees are subject to the

procedures for capital increase such as registration in accordance with relevant regulations at

grant date the Company shall recognise the share capital and capital reserve (share premium)

based on the received subscription fees from the employees; treasury stocks and other payables

shall be recognised based on the repurchase obligation.

3.34 Changes in Significant Accounting Policies and Accounting Estimates

(a) Changes in accounting polices

The Company has no significant changes in accounting polices for the reporting period..(b) Significant changes in accounting estimates

The Company has no significant changes in accounting estimates for the reporting period.

4. TAXATION

4.1 Major Categories of Tax and Tax Rates Applicable to the Company

Categories of tax Basis of tax assessment Tax rate

Output tax is calculated at rates of 5% 6%

9% and 13% based on sales revenue. After

Value added tax (VAT) Taxable revenue

deducting input tax as per regulations the

net tax payable is determined.Taxable Price and Sales

Consumption tax Volume of High-End Watch 20%

Sales Revenue

Urban maintenance and

Turnover tax payable 5% 7%

construction tax

70% or 80% of the original

Property tax 1.2% 12%

cost of property

Tax rates of income tax of different subsidiaries are stated as below:

Name of Taxpayer Rate of Income Tax

FIYTA Precision Technology Co. Ltd. 25%

Shenzhen HARMONY World Watch Center Co. Ltd. (i) 25%

FIYTA Sales Co. Ltd. (i) 25%

Shenzhen FIYTA Precision Technology Co. Ltd. (ii) 15%

Shenzhen FIYTA Technology Development Co. Ltd. (ii) 15%

56FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Name of Taxpayer Rate of Income Tax

HARMONY World Watch Center(Hainan) Co. Ltd. (v) 20%

Shenzhen Xunhang Precision Technology Co. Ltd. 25%

Emile Choureit Timing (Shenzhen) Ltd. 25%

Liaoning Hengdarui Commercial & Trade Co. Ltd. 25%

Temporal (Shenzhen) Co. Ltd. 25%

Shenzhen Harmony E-commerce Co. Ltd. (v) 20%

FIYTA Hong Kong (iii) 16.5%

Montres Chouriet SA (iv) 30%

Notes:

(i) According to the relevant provisions of the Notice of the State Administration of Taxation

on Issuing the Interim Measures for the Administration of Collection of Enterprise Income Tax

on the Basis of Consolidation of Trans-regional Business Operations the head office of the

Company and its branches shall be governed by the administrative measures for enterpriseincome tax namely namely “centralized calculation level-by-level administration pre-payment at the locality consolidated settlement and payment and transfer to treasury”. 50% of

the prepayment shall be apportioned among the branches and 50% shall be apportioned by the

head office;(ii) the companies enjoy the corporate income tax rate reduction for “key high-tech enterprisessupported by the state”;

(iii) the company is incorporated in Hong Kong and is subject to Hong Kong Profits Tax at a

rate of 16.50% for the current year;

(iv) the company is incorporated in Switzerland and is subject to the local tax rate which the

comprehensive tax rate for the current year is 30%;

(v) the companies qualify as small low-profit enterprises and are subject to corporate income

tax at a rate of 20%.

4.2 Tax Preference

In accordance with the Corporate Income Tax Law of the People's Republic of China high-tech

enterprises that are key areas of state support are subject to a reduced corporate income tax rate

of 15%. The subsidiary Shenzhen FIYTA Precision Technology Co. Ltd. was certified as a

high-tech enterprise in 2024 with a certificate number of GR202444200965 valid for three

years and is subject to a corporate income tax rate of 15% from 2024 to 2026. The subsidiary

Shenzhen FIYTA Technology Development Co. Ltd. was certified as a high-tech enterprise

in 2025 with a certificate number of GR202544201002 valid for three years and is subject to

a corporate income tax rate of 15% from 2025 to 2027.In accordance with the relevant provisions of the Announcement of the Ministry of Finance and

the State Administration of Taxation on Preferential Income Tax Policies for Small and Micro

57FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Enterprises and Individual Businesses (Cai Shui [2023] No. 6) small low-profit enterprises are

allowed to include only 25% of their income in the taxable income base and are then subject to

a 20% corporate income tax rate.In accordance with the Notice of the Ministry of Finance and the State Administration of

Taxation on Extending the Loss Carryforward Period for High-Tech Enterprises and

Technology-Based Small and Medium-Sized Enterprises (Cai Shui [2018] No. 76) effective

from January 1 2018 any unutilized losses incurred during the five accounting years prior to

obtaining high-tech enterprise status may be carried forward to subsequent years. The

maximum carryforward period has been extended from five years to ten years.In accordance with the Announcement of the Ministry of Finance and the State Administration

of Taxation on Further Improving the Pre-Tax Additional Deduction Policy for R&D

Expenses (Cai Shui [2023] No. 7) for R&D expenses actually incurred by enterprises that do

not result in the creation of an intangible asset (and are therefore recorded in the current profit

or loss) an additional 100% deduction may be claimed for tax purposes on top of the

statutory deduction starting from January 1 2023. If the R&D activities result in the creation

of an intangible asset beginning January 1 2023 200% of the intangible asset’s cost may be

amortized for tax purposes.Since 2019 Hong Kong has implemented a two-tiered profits tax regime. Under this system

the first HKD 2 million of profits is taxed at a rate of 8.25% and any profits exceeding that

threshold continue to be taxed at 16.5%.

5. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5.1 Monetary funds

Items 31 December 2025 31 December 2024

Cash on hand 34041.22 76344.01

Cash in bank 75156082.51 18205968.96

Other monetary funds 3489741.96 2055640.10

Funds in finance company 552559173.96 498616224.42

Total 631239039.65 518954177.49

Including：The total amount

7127169.506150258.49

deposited overseas

Notes:

(i) Funds in finance company primarily refer to amounts held at AVIC Finance Co. Ltd..(ii) As of 31 December 2025 the Company has no pledged or frozen funds nor any amounts

with potential recovery risk.

5.2 Notes Receivable

58FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(a) Notes receivable by category

31 December 2025 31 December 2024

Items Provision Book Carrying Book Provision Carrying

for bad

Balance amount Balance for bad debt amount

debt

Bank acceptance bills 3665974.22 3665974.22 9184912.30 9184912.30

Commercial

10474961.40523748.079951213.3321501777.161075088.8620426688.30

acceptance bills

13617187.5

Total 14140935.62 523748.07 30686689.46 1075088.86 29611600.60

5

(b) Notes receivable by bad debt provision method

31 December 2025

Book balance Provision for bad debt

Category

Provisio Carrying

Amount Proportion (%) Amount n ratio amount

(%)

Provision for bad debt

recognised

individually

Provision for bad debt

14140935.62100.00523748.073.7013617187.55

recognised by groups

Including: Group 2 3665974.22 25.92 3665974.22

Group 1 10474961.40 74.08 523748.07 5.00 9951213.33

Total 14140935.62 100.00 523748.07 3.70 13617187.55

(Continued)

31 December 2024

Book balance Provision for bad debt

Category

Provisio Carrying

Proportion

Amount Amount n ratio amount

(%)

(%)

Provision for bad debt recognised

individually

Provision for bad debt recognised

30686689.46100.001075088.863.5029611600.60

by groups

Including: Group 2 9184912.30 29.93 9184912.30

Group 1 21501777.16 70.07 1075088.86 5.00 20426688.30

Total 30686689.46 100.00 1075088.86 3.50 29611600.60

For details of recognition criteria and explanation for provision of bad debt by groups please

refer to Notes 3.11.(c) Changes of provision for bad debt during the reporting period

59FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Changes during the reporting period

31

Category 31 December 2024 Recovery Elimination December

Provision or others

or write-off 2025

reversal

Provision for bad debt

recognised individually

Provision for bad debt

1075088.86-551340.79523748.07

recognised by groups

Including: Group 2 1075088.86 -551340.79 523748.07

Group 1 1075088.86 -551340.79 523748.07

Total 1075088.86 -551340.79 523748.07

5.3 Accounts Receivable

(a) Accounts receivable by aging

Aging 31 December 2025 31 December 2024

Within one year 260899769.98 271349349.06

1-2 years 3565228.42 764175.79

2-3 years 524363.37 1410843.36

Over 3 years 9567138.57 20138406.23

Subtotal 274556500.34 293662774.44

Less: provision for bad debt 24687959.40 33509940.01

Total 249868540.94 260152834.43

(b) Accounts receivable by bad debt provision method

31 December 2025

Category Book balance Provision for bad debt Carrying

Proportion Provision

Amount Amount amount

(%) ratio (%)

Provision for bad debt

recognised individually 15766982.49 5.74 15433987.23 97.89 332995.26

Provision for bad debt

recognised by groups 258789517.85 94.26 9253972.17 3.58 249535545.68

Including:Group1 258789517.85 94.26 9253972.17 3.58 249535545.68

Total 274556500.34 100.00 24687959.40 8.99 249868540.94

(Continued)

31 December 2024

Category Book balance Provision for bad debt Carrying

Proportion Provision ratio

Amount Amount amount

(%)(%)

Provision for bad debt 25816016.35 8.79 24222124.31 93.83 1593892.04

60FIYTA Precision Technology Co. Ltd. Notes to the financial statements

31 December 2024

Category Book balance Provision for bad debt Carrying

Proportion Provision ratio

Amount Amount amount

(%)(%)

recognised individually

Provision for bad debt

recognised by groups 267846758.09 91.21 9287815.70 3.47 258558942.39

Including:Group1 267846758.09 91.21 9287815.70 3.47 258558942.39

Total 293662774.44 100.00 33509940.01 11.41 260152834.43

Detailed explanation of provision for bad debt:

(i) As at 31 December 2025 accounts receivable with bad debt provision recognised

individually

31 December 2025

Name Provision for Provision ratio

Book balance Reason for provision

bad debt (%)

Existence of disputes poor

Other customers 15766982.49 15433987.23 97.89

management ect

(ii) As at 31 December 2025 accounts receivable with bad debt provision recognised by group

31 December 2025 31 December 2024

Aging Accounts Provision for Provision Accounts Provision for Provision

receivable bad debt ratio (%) receivable bad debt ratio (%)

Within one year 257859630.24 8916306.48 3.46 266494339.01 8150327.80 3.06

1-2 years 658024.35 65802.43 10.00 238812.42 23881.24 10.00

Over 2 years 271863.26 271863.26 100.00 1113606.66 1113606.66 100.00

Total 258789517.85 9253972.17 3.58 267846758.09 9287815.70 3.47

(c) Changes of provision for bad debt during the reporting period

Changes during the reporting period

31 December 31 December

Category

2024 Recovery or Elimination Provision Others 2025

reversal or write-off

Provision for bad

debt recognised 23148792.25 4728732.75 3699262.84 43862.15 24222124.31

individually

Provision for bad

debt recognised 11242194.21 -1945944.73 -8433.78 9287815.70

by groups

Including:Group1 11242194.21 -1945944.73 -8433.78 9287815.70

Total 34390986.46 2782788.02 3699262.84 35428.37 33509940.01

(d) Details of accounts receivable written off during the current period

61FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items Amount

Accounts receivable written off 9701377.67

(e) Top five closing balances by entity

Percentage

of Total

Entity Balance as at 31 Age of Other

Nature of Amount Provision for Bad Debts

name December 2025 Amount Receivables

at Period

End (%)

Within

No. 1 Others 2650000.00 4.56 2650000.00

1 year

Deposit and guarantee Within

No. 2 1998936.00 3.44 99946.79

receivable 1 year

Deposit and guarantee Within

No. 3 1937848.05 3.33 115232.33

receivable 1 year

Deposit and guarantee Within

No. 4 1859688.00 3.20 92984.40

receivable 1 year

Deposit and guarantee Within

No. 5 1594477.50 2.74 79723.88

receivable 1 year

5.4 Advances to Suppliers

(a) Advances to suppliers by aging

31 December 2025 31 December 2024

Aging

Amount Proportion (%) Amount Proportion (%)

Within one year 4912759.05 100.00 3858053.60 100.00

(b) Top five closing balances by entity

Balance as at 31 Proportion of the balance to the

Entity name

December 2025 total advances to suppliers (%)

Total of the top five advances to suppliers

2771821.7956.42

at the end of the period

5.5 Other Receivables

(a) Other receivables by aging

Aging 31 December 2025 31 December 2024

Within one year 54498112.58 59521049.33

1-2 years 2058962.96 302069.34

2-3 years 103556.63 219738.83

Over 3 years 1446064.90 1278954.90

Subtotal 58106697.07 61321812.40

Less: provision for bad debt 7066543.88 4339461.13

Total 51040153.19 56982351.27

62FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(b) Other receivables by nature

Nature 31 December 2025 31 December 2024

Deposit and guarantee receivable 49507243.06 52384967.00

Employee advance payments 941768.76 1282327.49

Others 7657685.25 7654517.91

Subtotal 58106697.07 61321812.40

Less: provision for bad debt 7066543.88 4339461.13

Total 51040153.19 56982351.27

(c) Other receivables by bad debt provision method

A. As at 31 December 2025 provision for bad debt recognised based on three stages model

Stages Book balance Provision for bad debt Carrying amount

Stage 1 53691455.91 2651302.72 51040153.19

Stage 2

Stage 3 4415241.16 4415241.16

Total 58106697.07 7066543.88 51040153.19

As at 31 December 2025 provision for bad debt at stage 1:

Provision ratio Provision for Carrying

Category Book balance

(%) bad debt amount

Provision for bad debt

recognised individually

Provision for bad debt

53691455.914.942651302.7251040153.19

recognised by groups

Including: Group 1 48443814.53 5.06 2453308.64 45990505.89

Group 2 908012.96 908012.96

Group 3 4339628.42 4.56 197994.08 4141634.34

Total 53691455.91 4.94 2651302.72 51040153.19

As at 31 December 2025 provision for bad debt at stage 3:

Provision for Carrying

Category Book balance Provision ratio (%)

bad debt amount

Provision for bad debt

4415241.16100.004415241.16

recognised individually

B. As at 31 December 2024 provision for bad debt recognised based on three stages model

Stages Book balance Provision for bad debt Carrying amount

Stage 1 59786824.63 2872168.83 56914655.80

Stage 2

Stage 3 1534987.77 1467292.30 67695.47

63FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Stages Book balance Provision for bad debt Carrying amount

Total 61321812.40 4339461.13 56982351.27

As at 31 December 2024 provision for bad debt at stage 1:

Provision ratio Provision for Carrying

Category Book balance

(%) bad debt amount

Provision for bad debt

recognised individually

Provision for bad debt

59786824.634.802872168.8356914655.80

recognised by groups

Including: Group 1 51515791.06 5.10 2629814.29 48885976.77

Group 2 1282327.49 1282327.49

Group 3 6988706.08 3.47 242354.54 6746351.54

Total 59786824.63 4.80 2872168.83 56914655.80

As at 31 December 2024 provision for bad debt at stage 3:

Provision for Carrying

Category Book balance Provision ratio (%)

bad debt amount

Provision for bad debt

1534987.7795.591467292.3067695.47

recognised individually

Basis of provision for bad debt during the reporting period:

For details of recognition criteria and explanation for provision of bad debt by groups please

refer to Notes 3.11

(d) Changes of provision for bad debt during the reporting period

Changes during the reporting period

31 December 31 December

Category

2024 Recovery Elimination Provision Others 2025

or reversal or write-off

Provision for bad

debt recognised 1467292.30 2960644.33 12695.47 4415241.16

individually

Provision for bad

debt recognised by 2872168.83 -221458.72 592.61 2651302.72

groups

Total 4339461.13 2739185.61 12695.47 592.61 7066543.88

(e) Details of other receivables written off during the current period

Items Amount

Accounts receivable actually written off 9701377.67

(f) Top five closing balances by entity

64FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Balance as at 31 Proportion of the balance to

Entity name Provision for bad debt

December 2025 the total other receivables (%)

Total of the top five

other receivables at the 10040949.55 17.28 3037887.40

end of the period.

5.6 Inventories

(a) Inventories by category

31 December 2025 31 December 2024

Items Provision for Provision for

Book balance Carrying amount Book balance Carrying amount

impairment impairment

Raw

123474829.599910053.86113564775.73114983902.682082708.59112901194.09

materials

Work in

7461603.287461603.288125895.428125895.42

process

Goods in

1700030073.2993074047.641606956025.651934763585.6171303705.381863459880.23

stock

Total 1830966506.16 102984101.50 1727982404.66 2057873383.71 73386413.97 1984486969.74

(b) Provision for impairment

Increase during the Decrease during the

31 December reporting period reporting period 31 December

Items

2024 Reversal or 2025

Provision Others Others

elimination

Raw

2082708.597875652.4248307.159910053.86

materials

Work in

process

Goods in

71303705.3846061288.6824178528.73112417.6993074047.64

stock

Total 73386413.97 53936941.10 24178528.73 160724.84 102984101.50

5.7 Other Current Assets

Items 31 December 2025 31 December 2024

Reclassification from debit side

47303261.96

balance of VAT payable 45766634.09

Term Deposit 29408855.46

Advance Tax Payment 5517052.75 4402072.04

Others 13690557.92 18430363.63

Total 66510872.63 98007925.22

5.8 Long-term Equity Investments

65FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Changes during the reporting period

Investment

31 December Addition Decrease Adjustments

Investees income/(losses) Changes

2024 al in of other recognised in other

investme investme comprehensi

under equity equity

nt nt ve income

method

I. Associates

Shanghai Watch

50907036.84-4470479.98

Co. Ltd.

(Continued)

Changes during the reporting period

Provision for

Declaration of cash 31 December impairment at

Investees dividends or Provision for

Others 2025 31 December

distribution of impairment 2025

profit

II. Associates

Shanghai Watch

46436556.86

Co. Ltd.

5.9 Investment Properties

(a) Investment properties accounted for using cost model

Items Building and plants

Initial cost:

Balance as at 31 December 2024 544545292.87

Increase during the reporting period 31364878.67

(i) Transfer from fixed assets 31364878.67

Decrease during the reporting period 20051952.11

(i) Transfer to fixed assets 20051952.11

Balance as at 31 December 2025 555858219.43

Accumulated depreciation and amortisation:

Balance as at 31 December 2024 243542928.46

Increase during the reporting period 15299764.79

(i) Provision 12747661.27

(ii) Transfer from fixed assets 2552103.52

Decrease during the reporting period 11255054.19

(i) Transfer to fixed assets 11255054.19

Balance as at 31 December 2025 247587639.06

Provision for impairment:

Carrying amount:

66FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items Building and plants

Balance as at 31 December 2025 308270580.37

Balance as at 31 December 2024 301002364.41

5.10 Fixed Assets

(a)Details of fixed assets

Buildings and Machinery Electrical Other

Items Vehicles Total

constructions equipment equipment equipment

Initialcost:

Balance as at 31 December 2024 515518210.64 131660591.28 12031744.02 51743615.12 43815743.01 754769904.07

Increase during the reporting period 25735214.41 9976509.89 6095.44 5123507.07 1819719.87 42661046.68

(i)Acquisition 7421347.01 6095.44 5042075.03 1585918.17 14549793.21

(ii)Transfer from investment properties 20051952.11 20051952.11

(iii)Exchange differences on translating foreign

5683262.302555162.8881432.04233801.708059301.36

operations

Decrease during the reporting period 31439555.87 662604.92 2690812.87 3977462.46 3915311.32 42685747.44

(i) Disposal 631760.47 2690812.87 3977139.78 3915311.32 11215024.44

(ii) Transfer to investment properties 31364878.67 31364878.67

(iii ) Exchange differences on translating

74677.2030844.45322.68105844.33

foreign operations

Balance as at 31 December 2025 509813869.18 140974496.25 9347026.59 52889659.73 41720151.56 754745203.31

Accumulated depreciation:

Balance as at 31 December 2024 195960430.03 90553556.06 11195032.63 40399800.29 39092940.65 377201759.66

Increase during the reporting period 31272155.78 9484929.29 565561.39 3434613.56 1286779.15 46044039.17

(i) Provision 16034245.03 6995125.56 565561.39 3357907.33 1053059.37 28005898.68

(ii)Transfer from investment properties 11255054.19 11255054.19

(iii) Exchange differences on translating foreign

3982856.562489803.7376706.23233719.786783086.30

operations

Decrease during the reporting period 2620144.63 608340.70 2550307.45 2803574.54 3272226.35 11854593.67

(i) Disposal 579038.47 2550307.45 2803267.99 3272226.35 9204840.26

(ii) Transfer to investment properties 2552103.52 2552103.52

(iii ) Exchange differences on translating

68041.1129302.23306.5597649.89

foreign operations

Balance as at 31 December 2025 224612441.18 99430144.65 9210286.57 41030839.31 37107493.45 411391205.16

Provision for impairment:

Carrying amount:

Balance as at 31 December 2025 285201428.00 41544351.60 136740.02 11858820.42 4612658.11 343353998.15

Balance as at 31 December 2024 319557780.61 41107035.22 836711.39 11343814.83 4722802.36 377568144.41

(b) Fixed assets without certificate of title

67FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items Carrying amount Reason

Buildings and constructions 158506.40 Defective property rights

5.11 Right-of-use Assets

Items Buildings and constructions

Initial cost:

Balance as at 31 December 2024 216731879.49

Increase during the reporting period 84382199.14

(i) New leasing 84382199.14

Decrease during the reporting period 111855194.44

(i) Disposal 111855194.44

Balance as at 31 December 2025 189258884.19

Accumulated depreciation:

Balance as at 31 December 2024 118293903.08

Increase during the reporting period 102678424.23

(i) Provision 102674310.42

(ii) Exchange differences on translating foreign

4113.81

operations

Decrease during the reporting period 104504535.18

(i) Disposal 104504535.18

Balance as at 31 December 2025 116467792.13

Provision for impairment:

Carrying amount:

Balance as at 31 December 2025 72791092.06

Balance as at 31 December 2024 98437976.41

5.12 Intangible Assets

Right to use the

Items Land use rights Software Total

trademark

Initial cost:

Balance as at 31 December

34933822.4038764216.5616605353.1690303392.12

2024

Increase during the

3159520.8824661.223184182.10

reporting period

(i) Acquisition 3159520.88 3159520.88

(ii) Exchange differences on

translating foreign 24661.22 24661.22

operations

Decrease during the

reporting period

68FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Right to use the

Items Land use rights Software Total

trademark

(i)Disposal

Balance as at 31 December

34933822.4041923737.4416630014.3893487574.22

2025

Accumulated depreciation:

Balance as at 31 December

17983028.5830442053.3910310382.9958735464.96

2024

Increase during the

733553.292278135.6819676.253031365.22

reporting period

(i) Provision 733553.29 2278135.68 19676.25 3031365.22

Decrease during the

reporting period

Balance as at 31 December

18716581.8732720189.0710330059.2461766830.18

2025

Provision for impairment:

Carrying amount:

Balance as at 31 December

16217240.539203548.376299955.1431720744.04

2025

Balance as at 31 December

16950793.828322163.176294970.1731567927.16

2024

5.13 Long-term Deferred Expenses

Decrease during the reporting

31 December Increase during the period

Items 31 December 2025

2024 reporting period Other

Amortisation

decrease

Renovation

expenses and

counter 107493262.36 35661123.29 64812808.67 2109876.49 76231700.49

fabrication

expenses

Others 2712060.93 16612375.45 6381867.37 12942569.01

Total 110205323.29 52273498.74 71194676.04 2109876.49 89174269.50

5.14 Deferred Tax Assets and Deferred Tax Liabilities

(a) Deferred tax assets before offsetting

31 December 2025 31 December 2024

Items Deductible Deductible temporary Deferred tax

Deferred tax assets temporary

differences assets

differences

Provision for

123393575.1528379525.24108844748.4925235985.22

impairment loss

Unrealised

73681954.3117864553.3365606873.0116083716.18

intragroup profit

Deductible losses 203464885.90 45249255.22 150789689.25 35315775.40

Equity Incentive 7958442.71 1839229.47

69FIYTA Precision Technology Co. Ltd. Notes to the financial statements

31 December 2025 31 December 2024

Items Deductible Deductible temporary Deferred tax

Deferred tax assets temporary

differences assets

differences

Lease liabilities 74789934.31 18697483.59 98553370.15 24638342.52

Others 5030696.54 1248681.80 11064124.31 2766031.08

Total 480361046.21 111439499.18 442817247.92 105879079.87

(b) Deferred tax liabilities before offsetting

31 December 2025 31 December 2024

Items Taxable temporary Deferred tax Taxable temporary Deferred tax

difference liabilities difference liabilities

One-off deduction of

fixed asset before 27169935.68 4075490.34 27444135.67 4116620.35

Corporate income tax

Right-of-use asset 72643762.42 18160940.61 98388890.53 24597222.63

Total 99813698.10 22236430.95 125833026.20 28713842.98

(c) Net balance of deferred tax liabilities and deferred tax assets after offsetting

Net balance after Net balance after

Offset amount at 31 Offset amount at 31

Items offsetting at 31 offsetting at 31

December 2025 December 2024

December 2025 December 2024

Deferred tax

20713435.3090726063.8823723301.5682155778.31

assets

Deferred tax

20713435.301522995.6523723301.564990541.42

liabilities

(d) Unrecognized deferred tax assets

Items 31 December 2025 31 December 2024

Deductible temporary differences 11868777.70 3466155.48

Deductible losses 42305096.05

Total 11868777.70 45771251.53

(e) Deductible losses not recognised as deferred tax assets will expire in the following

periods:

Year 31 December 2025 31 December 2024

202542305096.05

5.15 Other Non-current Assets

70FIYTA Precision Technology Co. Ltd. Notes to the financial statements

31 December 2025 31 December 2024

Items Provision Provision Book Book Carrying

for Carrying amount for

balance balance amount

impairment impairment

Prepayment

of long- 5757347.81 5757347.81 3792253.84 3792253.84

term assets

5.16 Short-term Borrowings

Items 31 December 2025 31 December 2024

Credit loans 120000000.00

Bill discounting 3957187.86

Accrued interest payable 130566.65

Total 124087754.51

5.17 Accounts Payable

Items 31 December 2025 31 December 2024

Payables for goods 94791440.02 114881141.96

Payables for project 651779.61

Total 94791440.02 115532921.57

5.18 Receipts in advance

Items 31 December 2025 31 December 2024

Rental received in advance 11368005.63 11783796.49

5.19 Contract liabilities

Items 31 December 2025 31 December 2024

Advances for goods 16450934.50 12605722.95

5.20 Employee Benefits Payable

(a) Details of employee benefits payable

31 December Increase during the Decrease during the 31 December

Items

2024 reporting period reporting period 2025

Short-term employee

79250553.06450414443.54462096745.6067568251.00

benefits

Post-employment benefits-

7969370.6647441557.9447767934.367642994.24

defined contribution plans

Termination benefits 5040229.42 19323749.66 19516006.50 4847972.58

Total 92260153.14 517179751.14 529380686.46 80059217.82

71FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(b) Short-term employee benefits

31 December Increase during the Decrease during the 31 December

Items

2024 reporting period reporting period 2025

Salaries bonuses

78062428.74398887603.98410386830.2366563202.49

allowances and subsidies

Employee benefits 74715.46 8000962.96 8070016.54 5661.88

Social insurance 240049.63 20588686.72 20479063.60 349672.75

Including: Health

239971.3118571955.9318462332.81349594.43

insurance

Injury insurance 78.32 1168695.23 1168695.23 78.32

Birth insurance 848035.56 848035.56

Housing accumulation

7289.0017522022.7317512858.5316453.20

fund

Labour union funds and

employee education 866070.23 5415167.15 5647976.70 633260.68

funds

Total 79250553.06 450414443.54 462096745.60 67568251.00

(c) Defined contribution plans

31 December Increase during the Decrease during the 31 December

Items

2024 reporting period reporting period 2025

Post-employment

benefits:

1. Basic endowment

240419.9140805387.0540891942.45153864.51

insurance

2. Unemployment

384.041635860.841636118.61126.27

insurance

3. Enterprise annuity 7728566.71 5000310.05 5239873.30 7489003.46

Total 7969370.66 47441557.94 47767934.36 7642994.24

5.21 Taxes Payable

Items 31 December 2025 31 December 2024

Value added tax (VAT) 24404139.24 33699458.80

Corporate income tax 12878070.87 11535771.24

Individual income tax 969315.24 994923.84

Urban maintenance and construction tax 453029.07 1359840.26

Educational surcharge 316181.96 972536.24

Others 1177277.66 1252620.97

Total 40198014.04 49815151.35

5.22 Other Payables

(a) Other payables by category

72FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items 31 December 2025 31 December 2024

Dividend payable 2785293.14

Other payables 75141232.27 101853190.67

Total 75141232.27 104638483.81

(b) Dividends payable

Items 31 December 2025 31 December 2024

Dividends on ordinary shares 2785293.14

(c) Other payables

Items 31 December 2025 31 December 2024

Deposit security deposit 28070048.35 31563500.48

Repurchase liability for restricted shares 12815556.81

Decoration expenses 3524465.97 3978759.28

Accrued expenses and others 43546717.95 53495374.10

Total 75141232.27 101853190.67

5.23 Non-current Liabilities Maturing within One Year

Items 31 December 2025 31 December 2024

Lease liabilities due within one year 57044492.54 63538231.06

5.24 Other Current Liabilities

Items 31 December 2025 31 December 2024

Tax payable-reclassification from credit

2392725.111529468.07

balance of VAT Payable

5.25 Lease liabilities

Items 31 December 2025 31 December 2024

Lease payments 76851971.25 101263377.23

Less: Unrealised finance expenses 1915088.40 2659854.13

Subtotal 74936882.85 98603523.10

Less: lease liabilities due within one year 57044492.54 63538231.06

Total 17892390.31 35065292.04

5.26 Share Capital

73FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Changes during the reporting period (+-)

31 December 31 December

Items

2024 New Bonus Capitalisation Others 2025

issues issues of reserves

Number of total shares 405764007.00 405764007.00

5.27 Capital Reserves

31 December Increase during the Decrease during the 31 December

Items

2024 reporting period reporting period 2025

Share premium 912742221.49 8861512.48 921603733.97

Other capital reserves 23597282.11 9591764.14 14005517.97

Total 936339503.60 8861512.48 9591764.14 935609251.94

Notes:

(i) According to the resolution approved by the Company's Board of Directors and the General

Meeting of Shareholders on the Proposal for the Achievement of the Conditions for Lifting of

Restrictions in the Third Restriction Lifting Period under the 2018 A-Share Restricted Stock

Incentive Plan (Phase II) the Company completed the procedures for lifting restrictions on

20.4742 million A-share restricted shares that satisfied the conditions for lifting restrictions

during the year 2025. The capital reserve of RMB 8861512.48 corresponding to the restricted

shares of the aforementioned incentive recipients was transferred from “Other capital reserves”

to “Share premium”.(ii) The difference between the current year’s income tax pre-tax deduction amount and the

relevant costs and expenses recognized during the waiting period arising from the difference

between the fair value at the time of unlocking the restricted shares and the grant price at thetime of grant resulted in an income tax effect which accordingly decreased “Other capitalreserves” by RMB 730251.66.

5.28 Treasury Stock

Increase during the Decrease during the 31 December

Items 31 December 2024

reporting period reporting period 2025

Share Repurchase for

64340669.4264340669.42

Capital Reduction

Restricted Stock

14304862.811489306.0012815556.81

Payment

Total 78645532.23 65829975.42 12815556.81

Note:

(i) As stated in Note 5.27.1 to these financial statements for the restricted shares for which the

repurchase obligations are no longer required as the unlocking conditions have been met thecorresponding repurchase obligations were derecognized thereby reducing “Restricted SharePayment” by RMB 12815556.81.

74FIYTA Precision Technology Co. Ltd. Notes to the financial statements

5.29 Other Comprehensive Income

Changes during the reporting period

Less: Items

Less: Items

previously

previously

31 December recognized in Less: Attributable

Items recognized in other Attributable to

2024 Amount other Income to non-

31 December 2025

comprehensive owners of the

before tax comprehensive tax controlling

income being Company

income being expenses interest

reclassified to

reclassified to

current profit or loss

retained earnings

(a)Items will not be

reclassified to profit or

loss

(b)Items will be

reclassified to profit or 15686794.62 7978422.75 7978422.75 23665217.37

loss

Including: Exchange

differences on translating 15686794.62 7978422.75 7978422.75 23665217.37

foreign operations

Total 15686794.62 7978422.75 7978422.75 23665217.37

75FIYTA Precision Technology Co. Ltd. Notes to the financial statements

5.30 Specific Reserves

31 December Increase during the Decrease during the 31 December

Items

2024 reporting period reporting period 2025

Safety production costs 4340162.76 223177.64 602170.53 3961169.87

5.31 Surplus Reserves

31 December Increase during the Decrease during the 31 December

Items

2024 reporting period reporting period 2025

Statutory surplus reserves 213025507.50 213025507.50

Others 61984894.00 61984894.00

Total 275010401.50 275010401.50

As of 31 December 2025 the Company's cumulative surplus reserve has reached 50% of its

registered capital and therefore no further extraction will be made during current period.

5.32 Retained Earnings

Items 2025 2024

Balance as at the end of last period before

1767517887.941709513385.76

adjustments

Adjustments for the opening balance (increase

/(decrease))

Balance as at the beginning of the reporting period

1767517887.941709513385.76

after adjustments

Add: net profit attributable to owners of the parent

87317829.63220350184.99

company for the reporting period

Less: Declaration of ordinary share dividends 162305602.80 162345682.81

Balance as at the end of the reporting period 1692530114.77 1767517887.94

5.33 Revenue and costs of sales

20252024

Items

Revenue Costs of sales Revenue Costs of sales

Principal activities 3490320310.17 2257153747.65 3928845057.63 2475847402.83

Other activities 18167601.23 4977286.11 11685876.44 350531.60

Total 3508487911.40 2262131033.76 3940530934.07 2476197934.43

Principal activities by category

20252024

Items

Revenue Costs of sales Revenue Costs of sales

Watch Brand Business 570402572.45 186950718.29 721623074.27 236520324.15

Watch Retail Services 2662429068.19 1901757507.69 2934683059.47 2080768868.69

76FIYTA Precision Technology Co. Ltd. Notes to the financial statements

20252024

Items

Revenue Costs of sales Revenue Costs of sales

Precision Technology

143992442.15126544822.35134469811.50115312826.08

Business

Leasing Business 113496227.38 41900699.32 138069112.39 43245383.91

Others 18167601.23 4977286.11 11685876.44 350531.60

Total 3508487911.40 2262131033.76 3940530934.07 2476197934.43

5.34 Taxes and Surcharges

Items 2025 2024

Urban maintenance and construction tax 10668474.38 10496860.12

Educational surcharge 7526202.94 7450711.80

Property tax 7523043.74 7672948.68

Stamp duty 2302823.44 2638753.37

Others 3015326.28 3217860.83

Total 31035870.78 31477134.80

5.35 Selling and Distribution Expenses

Items 2025 2024

Employee Compensation 286763707.41 350108585.64

Department store expense and rental 143592007.22 141659138.17

Advertising Exhibition and

129933752.03143251551.40

Marketing Expenses

Depreciation and amortization 168982088.02 187804323.98

Utilities and property management

20547402.9422259318.73

expenses

Packaging expenses 6429475.59 8732106.49

Office Expenses 4172341.49 5299644.22

Transportation Expenses 4133136.45 5326216.64

Travel Expenses 3261011.00 6511503.28

Business Entertainment Expenses 1379425.70 3354425.04

Others 11868035.89 8470993.04

Total 781062383.74 882777806.63

5.36 General and Administrative Expenses

Items 2025 2024

Employee Compensation 139683676.61 141263743.91

77FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items 2025 2024

Depreciation and amortization 20859869.65 21858646.45

Office Expenses 2697248.05 3237040.25

Intermediary Agents fees 2043134.60 2072802.52

Travel Expenses 1551295.98 3444726.00

Vehicle and Transportation Expenses 1067770.55 1184673.02

Utilities Property Management and

882800.691050016.25

Rental Fees

Business Entertainment Expenses 401441.02 854422.68

Telecommunication expenses 206918.14 329077.20

Others 7963641.22 7982781.89

Total 177357796.51 183277930.17

5.37 Research and Development Expenses

Items 2025 2024

Employee Compensation 54014603.82 38055759.66

Sample and Material Costs 1205956.77 1635339.74

Depreciation and Amortization 5099464.51 4783178.84

Technical Cooperation Fees 2836648.30 3704971.76

Others 6050008.96 7820750.18

Total 69206682.36 56000000.18

5.38 Finance Costs

Items 2025 2024

Interest expenses 4883063.98 10697706.12

Less: Interest income 4192623.18 4925264.78

Net interest expenses 690440.80 5772441.34

Net foreign exchange losses -717041.20 1151055.95

Bank charges and others 11422485.63 11001374.05

Total 11395885.23 17924871.34

5.39 Other Income

Items 2025 2024

1. Government grant recognised in other imcome 3071440.45 5480540.76

Including: Government grant related to deferred

952785.69

income

Government grant directly recognised in current 3071440.45 4527755.07

78FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items 2025 2024

profit or loss

2. Others related to daily operation activities and

2651457.632012101.57

recognised in other income

Including: Charges of withholding individual

472676.89477697.33

income tax

Additional Deduction for Input VAT 2178780.74 1534404.24

Total 5722898.08 7492642.33

5.40 Investment Income/(Losses)

Items 2025 2024

Investment income from long-term equity investments

-4324269.84-955570.46

under equity method

Interest income from term deposit 437789.65 524315.57

Total -3886480.19 -431254.89

5.41 Credit Impairment Losses

Items 2025 2024

Bad debt of notes receivable 551340.79 -659008.68

Bad debt of accounts receivable -887347.19 916474.82

Bad debt of other receivables -2726490.14 9019.82

Total -3062496.54 266485.96

5.42 Asset Impairment Losses

Items 2025 2024

Impairment of inventories -53936941.10 -19289865.31

5.43 Gains/ (losses) from Disposal of Assets

Items 2025 2024

Gains/(losses) from disposal of fixed

-279011.132795633.25

assets

Gains/(losses) from disposal of

-954954.96-427816.65

Right-of-use assets

Total -1233966.09 2367816.60

5.44 Non-operating Income

Recognised in current non-

Items 2025 2024

recurring profit or loss

No payables required 125708.82 1217512.88 125708.82

Compensation income 1797356.05 1916585.22 1797356.05

79FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Recognised in current non-

Items 2025 2024

recurring profit or loss

Others 199641.35 489407.21 199641.35

Total 2122706.22 3623505.31 2122706.22

5.45 Non-operating Expenses

Recognised in current non-

Items 2025 2024

recurring profit or loss

Donations 115080.00 243626.35 115080.00

Fine and penalty for late payment 1330662.34 143706.74 1330662.34

Payment for breach of agreement 90666.43 279932.96 90666.43

Others 383732.91 121651.88 383732.91

Total 1920141.68 788917.93 1920141.68

5.46 Income Tax Expenses

(a) Details of income tax expenses

Items 2025 2024

Current tax expenses 45203294.78 67911869.72

Deferred tax expenses -12417286.69 -2146386.12

Total 32786008.09 65765483.60

(b) Reconciliation of accounting profit and income tax expenses

Items 2025 2024

Profit before tax 120103837.72 286115668.59

Income tax expense at the statutory /applicable tax

30025959.4371528917.15

rate

Effect of different tax rate of subsidiaries -1147998.02 -2574951.45

Adjustments of impact from prior period income

7288200.26440345.72

tax

Effect of income that is exempt from taxation 1081067.46 238892.62

Effect of non-deductible costs expenses or losses 1900231.98 1160439.96

Effect of previously unrecognised deductible

-163165.84-172422.26

losses recognised as deferred tax assets

Effect of deductible temporary differences and

deductible losses not recognised as deferred tax

assets

R&D expenses plus deduction -6198287.18 -4855738.14

Others

Income tax expenses 32786008.09 65765483.60

80FIYTA Precision Technology Co. Ltd. Notes to the financial statements

5.47 Other Comprehensive Income

For details of the other comprehensive income and related tax effect transfer to profit or loss

and adjustment of other comprehensive income please refer to Note 5.29 Other Comprehensive

Income.

5.48 Notes to the Statement of Cash Flow

(a) Cash relating to operating activities

(i)Other cash received relating to operating activities

Items 2025 2024

Security deposit 8493431.78 9790425.68

Government grants 3543246.91 4922856.45

Promotion expenses 6268215.19 12351768.55

Interest income 4192623.18 4925264.78

Return of petty cash 2021594.33 3851281.76

Others 12736500.64 13783494.72

Total 37255612.03 49625091.94

(ii) Other cash payments relating to operating activities

Items 2025 2024

Security deposit 9573911.71 8953141.58

Period expenses and others 301031362.89 321439889.86

Total 310605274.60 330393031.44

(b) Cash relating to investing activities

(i)Other cash received relating to investing activities

Items 2025 2024

Withdrawal of time deposits 185690609.60 201839677.57

(ii) Other cash payments relating to investing activities

Items 2025 2024

Purchase of time deposits 156380120.10 231179882.49

(c) Cash relating to financing activities

(i)Other cash payments relating to financing activities

Items 2025 2024

Payment for principal and interest

103960778.17115962403.46

of lease liabilities

81FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items 2025 2024

Payment for share buyback 794690.45

Total 103960778.17 116757093.91

(ii) Changes in liabilities arising from financing activities

Increase in the current period Decrease in the current period

31 December 31 December

Items

2024 Changes in Changes in Changes in Changes in 2025

cash non-cash cash non-cash

Short-term

124087754.51140000000.00261318879.722768874.79-

borrowings

Dividend

2785293.14162305602.80165090895.94-

payables

Non-current

liabilities

63538231.0697467039.65103960778.1757044492.54

maturing within

one year

Lease liabilities 35065292.04 80294137.92 97467039.65 17892390.31

Total 225476570.75 140000000.00 340066780.37 530370553.83 100235914.44 74936882.85

5.49 Supplementary Information to the Statement of Cash Flows

(a) Supplementary information to the statement of cash flows

Supplementary information 2025 2024

(i) Adjustments of net profit to cash flows from

operating activities:

Net profit 87317829.63 220350184.99

Add: Provisions for impairment of assets 53936941.10 19289865.31

Impairment Loss of Credit 3062496.54 -266485.96

Depreciation of fixed assets Investment

Properties oil and gas asset and productive 40707711.30 42123553.82

biological assets

Depreciation of right-of-use assets 102674310.42 107301685.07

Amortisation of intangible assets 3031365.22 3623865.56

Amortisation of long-term deferred expenses 71194676.04 72228172.82

Losses /(gains) on disposal of fixed assets

1233966.09-2367816.60

intangible assets and other long-term assets

Losses /(gains) on scrapping of fixed assets

Losses /(gains) on changes in fair value

Finance costs /(income) 4883063.98 10697706.12

Investment losses /(income) 3886480.19 431254.89

Decreases /(increases) in deferred tax assets -8570285.57 -1928006.85

Increases /(decreases) in deferred tax liabilities -3467545.77 -218379.27

Decreases /(increases) in inventories 226906877.55 114705609.37

82FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Supplementary information 2025 2024

Decreases /(increases) in operating receivables 37261097.03 55993621.50

Increases /(decreases) in operating payables -81807703.33 -106350875.18

Others -378992.89 1117004.70

Net cash flows from operating activities 541872287.53 536730960.29

(ii)Significant activities not involving cash receipts

and payments:

Conversion of debt into capital

Convertible corporate bonds maturing within one

year

Assets under leases(other than leases under

simplified method)

(iii)Net increases in cash and cash equivalents:

Cash at the end of the reporting period 631239039.65 518954177.49

Less: Cash at the beginning of the reporting period 518954177.49 504629153.71

Add: Cash equivalents at the end of the reporting

period

Less: Cash equivalents at the beginning of the

reporting period

Net increase in cash and cash equivalents 112284862.16 14325023.78

(b) The components of cash and cash equivalents

Items 31 December 2025 31 December 2024

(i) Cash 631239039.65 518954177.49

Including: Cash on hand 34041.22 76344.01

Cash in bank available for immediate use 627225875.81 516822193.38

Other monetary funds available for

3979122.622055640.10

immediate use

(ii) Cash equivalents

Including: Bond investments maturing within three

months

(iii) Cash and cash equivalents at the end of the

631239039.65518954177.49

reporting period

Including Restricted cash and cash equivalents for the

7127169.506150258.49

Company and its subsidiaries

(c) Presented as cash and cash equivalents despite restrictions in scope of application

Items 2025 2024 Reason

The Company's subsidiary FIYTA Hong Kong and

its subsidiary Montres Chouriet SA hold funds in

Cash in bank 7127169.50 6150258.49 accounts located overseas. These funds are subject

to restrictions on repatriation but this does not

affect their daily use.

83FIYTA Precision Technology Co. Ltd. Notes to the financial statements

5.50 Foreign Currency Monetary Items

(a) Foreign currency monetary items at 31 December 2025:

Carrying amount at

Items Exchange rate Carrying amount at RMB

foreign currency

Monetary funds 20882200.49

Including: USD 554469.45 7.0288 3897254.87

EUR 238872.98 8.2355 1967238.43

HKD 9531520.15 0.9032 8608869.00

CHF 724080.69 8.8510 6408838.19

Accounts receivable 6230672.18

Including: USD 663545.07 7.0288 4663925.59

EUR 62.71 8.2355 516.45

HKD 1482135.05 0.9032 1338664.38

CHF 25710.74 8.8510 227565.76

Other receivables 274146.65

Including: HKD 25605.60 0.9032 23126.98

CHF 28360.60 8.8510 251019.67

Accounts payable 141631.35

Including: HKD 156810.62 0.9032 141631.35

Other payables 878305.57

Including: HKD 856802.22 0.9032 773863.77

CHF 11800.00 8.8510 104441.80

(b) Overseas business entity

Please refer the Note 3.4 for the details of the main operating locations and functional

currencies of significant overseas operating entities .

5.51 Leases

(a) The Company as a lessee

Items 2025

Expenses for short-term lease under simplified method 6106487.48

Expenses for lease of low value asset (except for short-term lease) under

simplified method

Interest expense of lease liabilities 3992813.82

Variable lease payments not included in lease liabilities recognised in

83819371.16

current profit or loss

Income from subleasing the right-of-use assets

84FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items 2025

Cash outflows related to leases 193886636.81

Profit or loss in sale and leaseback transaction

(b) The Company as a lessor

(i) Operating lease

A. Lease income

Items 2025

Lease income 113496227.38

Including: income related to variable lease payments not included in lease

receivables

6. RESEARCH AND DEVELOPMENT EXPENDITURES

Items 2025 2024

Employee Compensation 54014603.82 38055759.66

Sample and Material Costs 1205956.77 1635339.74

Depreciation and Amortization 5099464.51 4783178.84

Technical Cooperation Fees 2836648.30 3704971.76

Others 6050008.96 7820750.18

Total 69206682.36 56000000.18

Including：Expensed R&D 69206682.36 56000000.18

expenditures

Capitalized R&D

expenditures

7. INTERESTS IN OTHER ENTITIES

7.1 Interests in Subsidiaries

(a) Composition of corporate group

Percentage of equity

interests by the

Nature of

Name of subsidiary Principal place Registered Company (%) Ways of acquisition

business

of business Address Direct Indirect

Shenzhen HARMONY

World Watch Center Incorporated or Shenzhen Shenzhen Commerce 100.00

Co. Ltd. investment

FIYTA Sales Co. Ltd. Shenzhen Shenzhen Commerce 100.00

Incorporated or

investment

Shenzhen FIYTA

Precision Technology Shenzhen Shenzhen Manufacturing 99.44 0.56

Incorporated or

Co. Ltd. investment

85FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Percentage of equity

interests by the

Nature of

Name of subsidiary Principal place Registered

business Company (%)

Ways of acquisition

of business Address Direct Indirect

Shenzhen FIYTA

Technology Shenzhen Shenzhen Manufacturing 100.00

Incorporated or

Development Co. Ltd. investment

HARMONY World

Watch Center(Hainan) Incorporated or Sanya Sanya Commerce 100.00

Co. Ltd. investment

Shenzhen Xunhang

Precision Technology Incorporated or Shenzhen Shenzhen Manufacturing 100.00

Co. Ltd. investment

Emile Choureit Timing Incorporated or

(Shenzhen) Ltd. Shenzhen Shenzhen Commerce

100.00

investment

Liaoning Hengdarui Business

Commercial & Trade Shenyang Shenyang Commerce 100.00 combination under

Co. Ltd. common control

Temporal (Shenzhen)

100.00 Incorporated or

Co. Ltd. Shenzhen Shenzhen Commerce investment

Shenzhen Harmony E-

100.00 Incorporated or

commerce Co. Ltd. Shenzhen Shenzhen Commerce investment

FIYTA (Hong Kong) Incorporated or

Limited Hong Kong Hong Kong Commerce

100.00

investment

Business

Montres Chouriet SA Switzerland Switzerland Manufacturing 100.00

combination not

under common

control

7.2 Interests in Joint Arrangements or Associates

(a) Insignificant associates

Proportion of equity

Principal place Registered Nature of interests by the Measurement Company name

address business methods

of business Company (%)

Direct Indirect

Shanghai Watch Co.Shanghai Shanghai Commerce 25% Equity method

Ltd.(a) Main financial information of the insignificant associates

31 December 31 December

Items

2025/20252024/2024

Shanghai Watch Co. Ltd.Aggregate amount of the following items calculated

46436556.8650907036.84

at the proportion of shareholding ratio

—Net profit/(loss)

—Other comprehensive income -4470479.98 -955570.46

—Total comprehensive income

86FIYTA Precision Technology Co. Ltd. Notes to the financial statements

8. GOVERNMENT GTRANTS

8.1Government grants recognised in current profit or loss

Items presented in income

20252024

statement

Other income 3071440.45 5480540.76

9. RISKS RELATED TO FINANCIAL INSTRUMENTS

Risks related to the financial instruments of the Company arise from the recognition of various

financial assets and financial liabilities during its operation including credit risk liquidity risk

and market risk.Management of the Company is responsible for determining risk management objectives and

policies related to financial instruments. Operational management is responsible for the daily

risk management through functional departments (e.g. credit management department of the

Company reviews each credit sale). Internal audit department is responsible for the daily

supervision of implementation of the risk management policies and procedures and report their

findings to the audit committee in a timely manner.Overall risk management objective of the Company is to establish risk management policies to

minimize the risks without unduly affecting the competitiveness and resilience of the Company.

9.1 Credit Risk

Credit risk is the risk of one party of the financial instrument face to a financial loss because

the other party of the financial instrument fails to fulfill its obligation. The credit risk of the

Company is related to cash and equivalent notes receivable accounts receivables other

receivables and long-term receivables. Credit risk of these financial assets is derived from the

counterparty’s breach of contract. The maximum risk exposure is equal to the carrying amount

of these financial instruments.Cash and cash equivalent of the Company has lower credit risk as they are mainly deposited in

such financial institutions as commercial bank of which the Company thinks with higher

reputation and financial position.For notes receivable accounts receivable accounts receivable financing and other receivables

the Company establishes related policies to control their credit risk exposure. The Company

assesses credit capability of its customers and determines their credit terms based on their

financial position possibility of the guarantee from third party credit record and other factors

(such as current market status etc.). The Company monitors its customers’ credit record

periodically and for those customers with poor credit record the Company will take measures

such as written call shortening or cancelling their credit terms so as to ensure the overall credit

risk of the Company is controllable.(i) Determination of significant increases in credit risk

The Company assesses at each reporting date as to whether the credit risk on financial

87FIYTA Precision Technology Co. Ltd. Notes to the financial statements

instruments has increased significantly since initial recognition. When the Company determines

whether the credit risk has increased significantly since initial recognition it considers based

on reasonable and supportable information that is available without undue cost or effort

including quantitative and qualitative analysis of historical information external credit ratings

and forward-looking information. The Company determines the changes in the risk of a default

occurring over the expected life of the financial instrument through comparing the risk of a

default occurring on the financial instrument as at the reporting date with the risk of a default

occurring on the financial instrument as at the date of initial recognition based on individual

financial instrument or a group of financial instruments with the similar credit risk

characteristics.When met one or more of the following quantitative or qualitative criteria the Company

determines that the credit risk on financial instruments has increased significantly: the

quantitative criteria applied mainly because as at the reporting date the increase in the

probability of default occurring over the lifetime is more than a certain percentage since the

initial recognition; the qualitative criteria applied if the debtor has adverse changes in business

and economic conditions early warning list of customer and etc.(ii) Definition of credit-impaired financial assets

The criteria adopted by the Company for determination of credit impairment are consistent with

internal credit risk management objectives of relevant financial instruments in considering both

quantitative and qualitative indicators.When the Company assesses whether the debtor has incurred the credit impairment the main

factors considered are as following: Significant financial difficulty of the issuer or the borrower;

a breach of contract e.g. default or past-due event; a lender having granted a concession to the

borrower for economic or contractual reasons relating to the borrower’s financial difficulty that

the lender would not otherwise consider; the probability that the borrower will enter bankruptcy

or other financial re-organisation; the disappearance of an active market for the financial asset

because of financial difficulties of the issuer or the borrower; the purchase or origination of a

financial asset at a deep discount that reflects the incurred credit losses.(iii) The parameter of expected credit loss measurement

The company measures impairment provision for different assets with the expected credit loss

of 12-month or the lifetime based on whether there has been a significant increase in credit risk

or credit impairment has occurred. The key parameters for expected credit loss measurement

include default probability default loss rate and default risk exposure. The Company sets up

the model of default probability default loss rate and default risk exposure in considering the

quantitative analysis of historical statistics (such as counterparties’ ratings guarantee method

and collateral type repayment method etc.) and forward-looking information.Relevant definitions are as following:

Default probability refers to the probability of the debtor will fail to discharge the repayment

obligation over the next 12 months or the entire remaining lifetime;

88FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Default loss rate refers to the Company's expectation of the loss degree of default risk exposure.The default loss rate varies depending on the type of counterparty recourse method and priority

and the collateral. The default loss rate is the percentage of the risk exposure loss when default

has occurred and it is calculated over the next 12 months or the entire lifetime;

The default risk exposure refers to the amount that the company should be repaid when default

has occurred in the next 12 months or the entire lifetime. Both the assessment of significant

increase in credit risk of forward-looking information and the calculation of expected credit

losses involve forward-looking information. Through historical data analysis the Company

identifies key economic indicators that have impact on the credit risk and expected credit losses

for each business.The maximum exposure to credit risk of the Company is the carrying amount of each financial

asset in the statement of financial position. The Company does not provide any other guarantees

that may expose the Company to credit risk.For the accounts receivable of the Company the amount of top 5 clients represents 26.91% of

the total (31 December 2024: 22.77%).

9.2 Liquidity Risk

Liquidity risk is the risk of shortage of funds when fulfilling the obligation of settlement by

delivering cash or other financial assets. The Company is responsible for the capital

management of all of its subsidiaries including short-term investment of cash surplus and

dealing with forecasted cash demand by raising loans. The Company’s policy is to monitor the

demand for short-term and long-term floating capital and whether the requirement of loan

contracts is satisfied so as to ensure to maintain adequate cash and cash equivalents.As at 31 December 2025 the maturity profile of the Company’s financial liabilities is as follows:

Unit: RMB 10000

31 December 2025

Items

Within 1 year 1-2 years 2-3 years Over 3 years

Short-term loans

Accounts payable 9479.14

Other payables 7514.12

Non-current liabilities

5704.45

maturing within one year

Lease liabilities 1416.11 373.13

Total 22697.71 1416.11 373.13

(Continued)

31 December 2024

Items

Within 1 year 1-2 years 2-3 years Over 3 years

Short-term loans 12408.78

89FIYTA Precision Technology Co. Ltd. Notes to the financial statements

31 December 2024

Items

Within 1 year 1-2 years 2-3 years Over 3 years

Accounts payable 11553.29

Other payables 10463.85

Non-current liabilities

6353.82

maturing within one year

Lease liabilities 2851.41 655.12

Total 40779.74 2851.41 655.12

9.3 Market Risk

(a) Foreign currency risk

Except for the operations of the Company’s subsidiaries located in Hong Kong and foreign

countries are denominated and settled in HKD USD BPD RMB and SGD other main

operations of the Company are settled in RMB.Except that the Company’s subsidiary in Hong Kong uses HKD as settlement currency and sub-

subsidiary in Swiss used CHF as settlement currency the principal places of operations of the

Company are located in China and the major businesses are settled in RMB. However the

Company’s recognized foreign currency assets and liabilities as well as the foreign currency

transactions in the future (the functional currencies of foreign assets and liabilities as well as

the transactions are mainly HKD and CHF) remain exposed to exchange rate risk.(i) Please refer to Note 5.50 Foreign Currency Monetary Items for the details of the main

foreign currency risk exposures of the Company’s foreign currency assets and liabilities as at

31 December 2025.

(ii) Sensitivity analysis

As at 31 December 2025 if RMB appreciates or depreciates 5% against USD while all other

risk variables stay unchanged net profit in current year of the Company will increase or

decrease by RMB 131840 (31 December 2024: RMB 394100).(b) Interest rate risk

Interest rate risk of the Company primarily arises from its long-term interest-bearing debts such

as long-term loans and bonds payables etc. Financial liabilities with floating interest rate make

the Company subject to cash flow interest rate risk and financial liabilities with fixed interest

rate make the Company subject to fair value interest rate risk. The Company determines the

relative proportion of the fixed interest contracts and floating interest contracts based on the

current market environment.Finance department of the Company’s headquarter monitors interest rate of the group

continuously. Increase of the interest rate will result in the increase of the cost of new interest-

bearing debts and the interest expense of the unpaid interest-bearing debts with floating rate

and subsequently lead to significant negative impact on the financial performance of the

90FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Company. The management makes adjustment in accordance with the update market condition

in a timely manner.As at 31 December 2025 the company does not have any long-term interest-bearing debt.

10. FAIR VALUE DISCLOSURES

10.1 Assets and Liabilities Measured at Fair Value at 31 December 2025

As at 31 December 2025 the Company does not have financial instruments measured at fair

value.

10.2 Fair Value of Financial Assets or Financial Liabilities which are not Measured at

Fair Value

Financial assets and financial liabilities not measured at fair value include: accounts receivable

short-term borrowings accounts payable long-term borrowings due within one year and equity

instrument investment that does not have public quotation in an active market and its fair value

cannot be measured reliably.The difference between fair value and carrying amount of the above financial assets and

liabilities that not measured at fair value is insignificant.

11. RELATED PARTIES AND RELATED PARTY TRANSACTIONS

Recognition of related parties: The Company has control or joint control of or exercise

significant influence over another party; or the Company and another party are controlled or

jointly controlled by the same third party.

11.1 General Information of the Parent Company

Percentage of

Voting rights in

Registered Nature of Registered equity interests

Name of the parent the Company

address the business capital in the Company

(%)

(%)

CATIC Shenzhen

Shenzhen Commercial 116616.20 40.17 40.17

Holdings Limited

(a) Details of the parent company

CATIC Shenzhen Holdings Limited is a subsidiary that 100.00% held indirectly by AVIC

Innovation Holding Limited.(b) Ultimate controlling party of the Company is AVIC Innovation Holding Limited.

11.2 General Information of Subsidiaries

Details of the subsidiaries please refer to Notes 7 INTERESTS IN OTHER ENTITIES.

11.3 Associates of the Company

Details of significant associates please refer to Notes 7 INTERESTS IN OTHER ENTITIES.

11.4 Other Related Parties of the Company

91FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Name Relationship with the Company

Joint ventures of Aviation Industry Corporation of China and their

The associate of the ultimate

subsidiaries (hereinafter referred to as "Joint ventures of AVIC and

controlling party

their subsidiaries")

Aviation Industry Corporation of China and its subsidiaries

Under the same control

(hereinafter referred to as "AVIC and its subsidiaries")

The directors managers Chief Financial Officer (CFO) and Secretary

to the Board of Directors Key management personnel

(hereinafter referred to as "key management personnel").

11.5 Related Party Transactions

(a) Purchases or sales of goods rendering or receiving of services

Purchases of goods receiving of services:

Related parties Nature of the transaction(s) 2025 2024

Mall Expenses and Goods

AVIC and its subsidiaries 14257917.38 16376625.49

Procurement

Joint ventures of AVIC and Mall Expenses and Property

10798465.6911542080.81

their subsidiaries Management Fees

Sales of goods and rendering of services:

Related parties Nature of the transaction(s) 2025 2024

Sales of goods and rendering of

AVIC and its subsidiaries 33254801.38 46244991.78

services

Joint ventures of AVIC SSales of goods and Property

2837063.872917960.60

and their subsidiaries Management Fees

Shanghai Watch Co. Ltd. Sales of goods 3695244.27

(b) Leases

The Company as lessor:

The lessee Type of assets 2025 2024

Joint ventures of AVIC and

Buildings 45714.32 1666400.02

their subsidiaries

AVIC and its subsidiaries Buildings 281999.98 1637357.56

The Company as lessee:

2025

Type of

The lessor Variable lease Increase in

assets Lease payment Interest expense of payments not included right-of-use

for current period lease liabilities

in lease liabilities assets

Joint

ventures of

AVIC and Buildings 21750.50 350896.02 5099.96

their

subsidiaries

AVIC and

Buildings 129523.85 5108.57 44363.60

its

92FIYTA Precision Technology Co. Ltd. Notes to the financial statements

2025

Type of

The lessor Variable lease Increase in

assets Lease payment Interest expense of payments not included right-of-use

for current period lease liabilities

in lease liabilities assets

subsidiaries

(Continued)

2024

Type of

The lessor Variable lease Increase in

assets Lease payment Interest expense of payments not included right-of-use

for current period lease liabilities

in lease liabilities assets

Joint

ventures of

AVIC and Buildings 2692.68 485331.20 11649.16 -100148.57

their

subsidiaries

AVIC and

its Buildings 162868.56 1894.34 -157702.74

subsidiaries

(c) Key management personnel compensation

Items 2025 2024

Key management personnel

12625200.0014048100.00

compensation

(d) Other related party transactions

The deposit balance of our company held at AVIC Finance Company as at 31 December 2025

amounted to RMB 552559173.96 of which the deposit interest received during the year

totaled RMB 1963880.34.

11.6 Receivables and Payables with Related Parties

(a) Receivables

31 December 2025 31 December 2024

Items Related parties Bad debt Bad debt

Book balance Book balance

provision provision

Notes

AVIC and its subsidiaries 200546.78 508273.49

receivable

Accounts

AVIC and its subsidiaries 5142670.67 530714.66 2894425.51 281416.75

receivable

Other

AVIC and its subsidiaries 867917.00 43395.85 924947.00 47070.35

receivables

Other Joint ventures of AVIC

77990.003899.5056000.002800.00

receivables and their subsidiaries

(b) Payables

93FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items Related parties 31 December 2025 31 December 2024

Other payables AVIC and its subsidiaries 358280.00

Joint ventures of AVIC and

Other payables 892941.08 1066456.79

their subsidiaries

Accounts payable AVIC and its subsidiaries 37471.91

Receipts in advance AVIC and its subsidiaries 11250.00 7500.00

12. SHARE-BASED PAYMENTS

12.1 The Stock payment overall situation

Grant in the Exercise in the Failure in the

Unlocking in the current period

Grant object category current period current period current period

Qty Amount Qty Amount Qty Amount Qty Amount

Some Directors

Senior Management

2047420.002047420.00

& Core Backbone

Staff

12.2 Equity-settled Share-based Payment

Method of determining fair value of equity

Close price of share on grant date

instrument on grant date

Evidence to determine the number of exercisable Term of employee service status of target

equity instrument completion and personal performance assessment

Reasons for significant difference between current

Nil

period estimation and prior period estimation

Accumulated amount charged to capital reserve for

28874466.74

equity settled share-based payment

13. COMMITMENTS AND CONTINGENCIES

13.1 Significant Commitments

As of the balance sheet date the significant external commitments of the Company include

lease contracts that have been signed and are in progress or are about to be executed along with

their financial impacts. For detailed information please refer to Note 5.25 Lease Liabilities and

Note 5.51 Leases.Except for the commitments mentioned above as of 31 December 2025 the Company has no

other significant commitments that need to be disclosed.

13.2 Contingencies

As at 31 December 2025 the Company has no significant contingencies need to be disclosed.

14. EVENTS AFTER THE REPORTING PERIOD

94FIYTA Precision Technology Co. Ltd. Notes to the financial statements

14.1 Profit Distribution

In accordance with the resolutions at the 14th Meeting of the 11th Board

The proposed profit or of Directors held on 12 March 2026 the Company will distribute cash

dividend distribution refers to dividends of RMB 1.20 (tax included) per 10 share to all shareholders

the profit or dividend that has from the undistributed profits based on the total number of shares

been reviewed approved and eligible for profit distribution for the year end 31 December 2025. No

announced for payment. stock dividends will be distributed nor will there be any conversion of

capital reserves into share capital.Note: The profit distribution plan above shall be implemented after being reviewed and

approved by the general meeting of shareholders.

14.2 Others

(a) On 12 March 2026 upon the approval of the resolutions passed at the 14th Meeting of the

11th Board of Directors the Company and its wholly-owned subsidiaries proposed to apply for

credit facilities from banks and other financial institutions in 2026 through various methods

including credit guarantee mortgage and pledge with the outstanding balance of actual

borrowings under such credit facilities not exceeding RMB 1.2 billion. The proposal for the

total credit facilities from banks is still pending approval by the Company's shareholders'

meeting.(b) On 12 March 2026 upon the approval of the resolutions passed at the 14th Meeting of the

11th Board of Directors the Company proposed to provide guarantees for its wholly-owned

subsidiaries in 2026 in respect of credit facilities applied from banks and other financial

institutions with the amount not exceeding RMB 300 million. Such limit is included within the

actual borrowing limit of RMB 1.2 billion under the credit facilities. The proposal for the

aforementioned guarantee limit is still pending approval by the Company's shareholders'

meeting.As at 12 March 2026 the Company has no other events after the reporting period that require

disclosure.

15. OTHER SIGNIFICANT MATTERS

15.1 Segment Information

The Company identifies operating segments according to its internal organization structure

management requirements and internal reporting systems. Then the reportable segments are to

be determined based on the Company’s operating segments:

(a) its business activities are engaged to generate revenue and incur expenses;

(b) its operating results are regularly reviewed by the Company’s management to make

decisions on resources allocation and performance assessment;

(c) its financial conditions operating results cash flow and related accounting information are

95FIYTA Precision Technology Co. Ltd. Notes to the financial statements

available to the Company.The Company determines the reporting segment based on the operating segment and the

operating segment that meets any of the following conditions is determined as the reporting

segment:

(a) The segment income of the operating segment accounts for 10.00% or more of total income

of all segments;

(b) The absolute amount of profits (losses) of the segment account for 10.00% or more of the

higher of the absolute amount of total profits of the profiting segment and the absolute amount

of total losses of the unprofitable segment.The Company’s business is simple. The business mainly involves manufacturing and sales of

watch. The management considers the business as a whole in implementing management and

assessing its performance. As a result no segment information is disclosed in this financial

statement.

15.2 Others

As at 31 December 2025 the Company does not have other significant matters that require to

disclose.

16. NOTES TO THE MAIN ITEMS OF THE FINANCIAL STATEMENTS OF THE

PARENT COMPANY

16.1 Accounts Receivable

(a) Accounts receivable by aging

Aging 31 December 2025 31 December 2024

Within one year 10466091.51 6238972.29

1-2 years 1637255.79 238812.42

2-3 years 319.04

Subtotal 319.04

Less: provision for bad debt 12103666.34 6478103.75

Total 2120455.62 1846113.37

(b) Accounts receivable by bad debt provision method

31 December 2025

Category Book balance Provision for bad debt Carrying

Proportion Provision

Amount Amount amount

(%) ratio (%)

Provision for bad debt recognised

individually 2303565.35 19.03 1970570.09 85.54 332995.26

96FIYTA Precision Technology Co. Ltd. Notes to the financial statements

31 December 2025

Category Book balance Provision for bad debt Carrying

Proportion Provision

Amount Amount amount

(%) ratio (%)

Provision for bad debt recognised

by groups 9800100.99 80.97 149885.53 1.53 9650215.46

Including: Group 1 4632024.39 38.27 149885.53 3.24 4482138.86

Receivable from Related party in

scope of consolidation 5168076.60 42.70 5168076.60

Total 12103666.34 100.00 2120455.62 17.52 9983210.72

(Continued)

31 December 2024

Category Book balance Provision for bad debt Carrying

Proportion Provision

Amount Amount amount

(%) ratio (%)

Provision for bad debt recognised

1631798.6625.191631798.66100.00

individually

Provision for bad debt recognised

4846305.0974.81214314.714.424631990.38

by groups

Including: Group 1 4041736.34 62.39 214314.71 5.30 3827421.63

Receivable from Related party in

804568.7512.42804568.75

scope of consolidation

Total 6478103.75 100.00 1846113.37 28.50 4631990.38

Detailed explanation of provision for bad debt:

(i)As at 31 December 2025 accounts receivable with bad debt provision recognised

individually

31 December 2025

Name Provision for bad Reason for

Book balance Provision ratio (%)

debt provision

Expected to be

Other customers 2303565.35 1970570.09 85.54

irrecoverable

(ii) As at 31 December 2025 accounts receivable with bad debt provision recognised by group

1

31 December 2025 31 December 2024

Aging Accounts Provision for Provision Accounts Provision for Provision

receivable bad debt ratio (%) receivable bad debt ratio (%)

Within

one year 4632024.39 149885.53 3.24

3802604.87190114.425.00

1-2 years 238812.42 23881.24 10.00

2-3 years 319.05 319.05 100.00

Total 4632024.39 149885.53 3.24 4041736.34 214314.71 5.30

97FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(c) Changes of provision for bad debt during the reporting period

Changes during the reporting period

31 December 31 December

Category

2024 Recovery Elimination Provision Others 2025

or reversal or write-off

Provision for bad debt

recognised 1631798.66 338771.43 1970570.09

individually

Provision for bad debt

214314.71

recognised by groups -64429.18 149885.53

Including:Group1 214314.71 -64429.18 149885.53

Total 1846113.37 274342.25 2120455.62

(d) No accounts receivable written off during the reporting period

(e) Top five closing balances by entity

Balance of accounts Proportion of the balance Provision for bad

Entity name receivable as at 31 to the total accounts debt of accounts

December 2025 receivable (%) receivable

Total of the top five accounts

receivable balances at the end 9623667.20 1268165.48 79.51

of the period

16.2 Other Receivables

(a) Other receivables by aging

Aging 31 December 2025 31 December 2024

Within one year 545738870.53 659558728.69

1-2 years 14177.51

2-3 years 13056.63 9531.90

Over 3 years 40050.00 40050.00

Subtotal 545791977.16 659622488.10

Less: provision for bad debt 40702.83 56619.62

Total 545751274.33 659565868.48

(b) Other receivables by nature

Nature 31 December 2025 31 December 2024

Related party in scope of

consolidation 545517289.16 658724812.91

Deposit and guarantee receivable 61809.82 119550.00

Others 212878.18 778125.19

Subtotal 545791977.16 659622488.10

Less: provision for bad debt 40702.83 56619.62

Total 545751274.33 659565868.48

98FIYTA Precision Technology Co. Ltd. Notes to the financial statements

(c) Other receivables by bad debt provision method

A. As at 31 December 2025 provision for bad debt recognised based on three stages model

Stages Book balance Provision for bad debt Carrying amount

Stage 1 545791977.16 40702.83 545751274.33

As at 31 December 2025 provision for bad debt at stage 1:

Provision Provision for

Category Book balance Carrying amount

ratio (%) bad debt

Provision for bad debt recognised

individually

Provision for bad debt recognised by

groups 545791977.16 0.01 40702.83 545751274.33

Including: Deposit and guarantee

receivable 61809.82 65.80 40673.05 21136.77

Related party in scope of

consolidation 545517289.16 545517289.16

Others 212878.18 0.01 29.78 212848.40

Total 545791977.16 0.01 40702.83 545751274.33

B. As at 31 December 2024 provision for bad debt recognised based on three stages model

Stages Book balance Provision for bad debt Carrying amount

Stage 1 659622488.10 56619.62 659565868.48

As at 31 December 2024 provision for bad debt at stage 1:

Provision Provision for

Category Book balance Carrying amount

ratio (%) bad debt

Provision for bad debt recognised

individually

Provision for bad debt recognised by

groups 659622488.10 0.01 56619.62 659565868.48

Including: Deposit and guarantee

receivable 119550.00 36.83 44025.00 75525.00

Related party in scope of

consolidation 658724812.91 658724812.91

Others 778125.19 1.62 12594.62 765530.57

Total 659622488.10 0.01 56619.62 659565868.48

Basis of provision for bad debt during the reporting period:

For details of recognition criteria and explanation for provision of bad debt by groups please

refer to Notes 3.11

(d) Changes of provision for bad debt during the reporting period

99FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Changes during the reporting period

31 December 31 December

Category

2024 Recovery Elimination Provision Others 2025

or reversal or write-off

Provision for bad debt

56619.62-15916.7940702.83

recognised by groups

(e) No other receivables written off during the reporting period

(f) Top five closing balances by entity

Percentage

of Total

Balance as at 31 Age of Other Provision for

Entity name Nature of Amount

December 2025 Amount Receivables Bad Debts

at Period

End (%)

Related party in scope of Within 1

No. 1 427402059.90 78.31

consolidation year

Related party in scope of Within 1

No. 2 63265181.51 11.59

consolidation year

Related party in scope of Within 1

No. 3 28923820.90 5.30

consolidation year

Related party in scope of Within 1

No. 4 15680483.80 2.87

consolidation year

Related party in scope of Within 1

No. 5 6000000.00 1.10

consolidation year

16.3 Long-term Equity Investments

31 December 2025 31 December 2024

Items Provision Provision

Book balance for Carrying amount Book balance for Carrying amount

impairment impairment

Subsidiaries 1592543885.91 1592543885.91 1592543885.91 1592543885.91

Associates 46436556.86 46436556.86 50907036.84 50907036.84

Total 1638980442.77 1638980442.77 1643450922.75 1643450922.75

(a) Investments in subsidiaries

31 December 2024 Changes during the period 31 December 2025

Provisi

Investees on for Additional Disposal of Provision for Provision for

Book balance Others Book balance

impair investment investment impairment impairment

ment

ShenzhenHARMONYWo 609891973.62 609891973.62

rldWatchCenterCo.Ltd.

11684484.3911684484.39

ShenzhenHarmonyE-

100FIYTA Precision Technology Co. Ltd. Notes to the financial statements

31 December 2024 Changes during the period 31 December 2025

Provisi

Investees on for Additional Disposal of Provision for Provision for

Book balance Others Book balance

impair investment investment impairment impairment

ment

commerceCo.Ltd.ShenzhenFIYTAPrecision 182290834.31 182290834.31

TechnologyCo.Ltd.ShenzhenFIYTATechnolo 51160141.67 51160141.67

gyDevelopmentCo.Ltd.

137737520.00137737520.00

FIYTA(HongKong)Ltd.Temporal(Shenzhen)Co. 5000000.00 5000000.00

Ltd.

457297183.13457297183.13

FIYTASalesCo.Ltd.LiaoningHengdaruiComm 36867843.96 36867843.96

ercial&TradeCo.Ltd.EmileChoureitTiming(Sh 80613904.83 80613904.83

enzhen)Ltd.HARMONYWorldWatch 10000000.00 10000000.00

Center(Hainan)Co.Ltd.ShenzhenXunhangPrecisi 10000000.00

10000000.00

onTechnologyCo.Ltd.

1592543885.911592543885.91

Total

(b) Investments in associates

Changes during the reporting period

31 December Increase Decrease Gains /(losses) Adjustments of

Investees Changes

2024 during the during the on investments other in other

reporting reporting under the comprehensive

equity

period period equity method income

Shanghai

50907036.84-4470479.98

Watch Co. Ltd.

(Continued)

101FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Changes during the reporting period Provision for

Declaration of cash 31 December impairment at Investees Provision for

dividends or Others 2025 31 December

impairment

distribution of profit 2025

Investees 46436556.86

16.4 Revenue and Cost of Sales

20252024

Items

Revenue Costs of sales Revenue Costs of sales

Principal

180681781.8556887861.74177350230.1849729440.87

activities

Other activities 3858500.75 3524696.56

Total 184540282.60 56887861.74 180874926.74 49729440.87

16.5 Investment Income

Items 2025 2024

Investment income from long-term equity investments

288278232.76198000000.00

under equity method

Investment income from long-term equity investments

-955570.46-5819479.60

under cost method

Total 287322662.30 192180520.40

17. SUPPLEMENTARY INFORMATION

17.1 Details of current non-recurring profit or loss

Items 2025

Gains /(losses) on disposal of non-current assets (including the written-

-1233966.09

off portion of provisions for asset impairment)

Government grants (except for government grants which are closely

related to the ordinary course of business of the Company in

compliance with national policies and regulations granted in 3071440.46

accordance with the determined standards; and influence the profit and

loss on an ongoing basis) charged to gains or losses for the period

Non-financial business’s gains or losses from fair value change

arising from financial assets and financial liabilities held and gains or

losses from disposal of financial assets and financial liabilities other 437789.65

than effective value protection hedges relating to the Company’s

ordinary course of business

Reversal of provision for impairment of individually tested

2621990.02

receivables

Other non-operating income/expenses except for items mentioned

202564.54

above

Other profit /(loss) items that meet the definition of non-recurring

profit or loss

102FIYTA Precision Technology Co. Ltd. Notes to the financial statements

Items 2025

Total non-recurring profit /(loss) 5099818.58

Less: Income tax effect 961852.20

Net non-recurring profit /(loss) 4137966.38

Less: net non-recurring profit /(loss) attributable to non-controlling

interest

Net non-recurring profit /(loss) attributable to ordinary shareholders 4137966.38

17.2 Return on Net Assets and Earnings Per Share (‘EPS’)

(a) 2025

Weighted average return EPS

Profit for the reporting period

on net assets (%) Basic Diluted

Net profit attributable to ordinary

shareholders 2.60 0.2153 0.2152

Net profit attributable to ordinary

shareholders after non-recurring profit 2.48 0.2051 0.2050

or losses

(b) 2024

Weighted average return EPS

Profit for the reporting period

on net assets (%) Basic Diluted

Net profit attributable to ordinary

shareholders 6.55 0.5385 0.5378

Net profit attributable to ordinary

shareholders after non-recurring profit 6.21 0.5100 0.5093

or losses

Name of the Company：FIYTA Precision Technology Co. Ltd.Date: 12 March 2026

103