Yongxing Project Overview and Xinyuan Project Investment Highlights
Financial Effects of Convertible Bonds (CBs) and Warrants
CBs were issued on 3 March 2017 and 15 October 2018 with the debt host liability component and the derivative liability
component carried at amortised cost and fair value respectively. The changes in the fair value of the derivative liabilities of the
CB and Warrants are recognized in profit or loss. In accordance with SFRS(I), the financial effects on profit or loss associated
with the issuance of compound financial instruments are as follows: (i) fair value change arising from fair valuation relating to
the conversion option and Warrants and (ii) amortised interest charge relating to the amortised cost liability component of the
CB and commitment fee of Warrants. The fair value change is an accounting treatment arising from the compliance with the
accounting standards and has no cash flow effect and no financial impact on the performance targets in relation to the CB as
stipulated in the CB Agreement.
The fair value change of the CB and Warrants and the related financial effects to the statement of profit or loss and other
statements have no operational effects to the financial performance of the Group. Financial effects of CB and Warrants consist
of unrealised foreign exchange translation, amortised interest expenses (inclusive of interest charges) and fair value gain/ (loss)
of CB and Warrants.
Warrants are classified as derivative liabilities. At the date of issue, the fair value of derivative liabilities are estimated using the
Binomial model. The amount is recorded as a liability at fair value, and is subsequently remeasured at the end of each financial
period with changes in fair value recognised in profit or loss.
In order to reflect the true operating performance of the Group, Sunpower uses "Profit for the year attributable to equity holders
of the Company" in the "WITHOUT financial effects of Convertible Bonds and Warrants" column of the P&L Statement,
which is after adjusting net profit attributable to shareholders (WITH the effects of CBs and Warrants) for amortised interest
expenses and fair value gains or losses as well as foreign exchange gains or losses associated with the CBs and Warrants.
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