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Skillschina-3-statement-model

china-3-statement-model

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Updated 10-15 23:43

About this skill

china-3-statement-model

Purpose

Build institutional-quality three-statement models (Income Statement / Balance Sheet / Cash Flow) for A-share equities, adapted for Chinese Accounting Standards (CAS) and the Chinese market context.

Key Differences from US 3-Statement Models

Parameter US Model China Model
Accounting standard US GAAP / IFRS CAS (Chinese Accounting Standards)
Tax rate 21% federal 25% standard (15% for high-tech enterprises)
Currency USD CNY (Renminbi)
Fiscal year Varied Mostly Dec 31 year-end
Revenue recognition ASC 606 CAS 14 (similar principles)
Goodwill Indefinite life (no amortization) CAS 8 — goodwill amortized or tested
R&D capitalization Typically expensed Can be capitalized under CAS
VAT treatment Sales tax separate VAT often embedded in revenue/sales
Unit reporting USD Often thousands CNY (千元) — verify

Data Sources

Tier 0 — Wind (万得) (most comprehensive paid data)

  • Coverage: A-shares/HK & US stocks/funds/indices/bonds/macro/research reports/analytics (44 tools)
  • MCP service:wind-mcp(requires WIND_API_KEY key, starting with ak_ )
  • Advantages: widest whole-market coverage, most comprehensive data, includes research reports and quantitative analysis
  • Key application:https://aifinmarket.wind.com.cn/#/home

Tier 1 — iFind (同花顺) (paid precise data) / AkShare MCP (Tier-2 free alternative)

get_financials(ticker, "income", "annual")   → 利润表
get_financials(ticker, "balance", "annual")  → 资产负债表
get_financials(ticker, "cashflow", "annual") → 现金流量表
get_quote(ticker)                            → 实时行情
get_historical_data(ticker)                  → 历史价格
get_stock_info(ticker)                       → 公司基本信息

Secondary Sources (when AkShare insufficient)

  • cninfo.com.cn (巨潮资讯) — mandatory disclosure filings
  • Shanghai Stock Exchange / Shenzhen Stock Exchange — listed company announcements
  • SSE e-Interaction (上证e互动) / SZSE Interactive Easy (深交所互动易) — IR Q&A
  • Company official website investor relations page

Workflow

Step 1: Data Retrieval

Pull 3-5 years of historical financials from AkShare.

Verify units carefully:

  • Some statements report in CNY (元)
  • Others in thousands CNY (千元)
  • Normalize to consistent unit before modeling
# Pull all three statements
get_financials(ticker, "income", "annual")
get_financials(ticker, "balance", "annual")
get_financials(ticker, "cashflow", "annual")

Step 2: Historical Analysis

Document key trends:

  • Revenue growth: YoY %, CAGR over 3-5 years
  • Gross margin: Gross margin — track expansion/contraction
  • Operating margin: Operating margin
  • Net margin: Net margin
  • Tax rate: Income tax rate — flag if below 25% (likely high-tech enterprise)
  • Effective tax rate: vs statutory rate
  • D&A: Depreciation and amortization as % of PPE
  • CapEx: Capital expenditure from cash flow statement
  • Working capital: Accounts receivable, inventory, accounts payable trends
  • Debt structure: Interest-bearing debt composition

Step 3: Build the Model

Follow standard 3-statement modeling methodology, adapted for CAS:

Income Statement (利润表)

Key line items (Chinese naming):

  • Revenue (营业收入)
  • COGS (营业成本)
  • Taxes and surcharges (税金及附加 — includes consumption tax, urban construction tax, etc.)
  • Selling expenses (销售费用)
  • G&A (管理费用)
  • R&D expenses (研发费用 — must be separated per CAS)
  • Financial costs (财务费用 — net of interest income)
  • Operating profit (营业利润)
  • Non-operating income/expenses (营业外收入/支出)
  • Profit before tax (利润总额)
  • Income tax expense (所得税费用)
  • Net income (净利润)
  • Net income attributable to parent (归属于母公司股东的净利润)

Balance Sheet (资产负债表)

Key line items:

  • Cash & equivalents (货币资金)
  • Trading financial assets (交易性金融资产)
  • Accounts receivable (应收账款)
  • Prepayments (预付款项)
  • Inventory (存货)
  • Other current assets (其他流动资产)
  • Total current assets (流动资产合计)
  • Fixed assets / PPE (固定资产)
  • Construction in progress (在建工程)
  • Intangible assets (无形资产)
  • Goodwill (商誉 — flag if >30% of equity)
  • Total non-current assets (非流动资产合计)
  • Total assets (资产总计)
  • Short-term borrowings (短期借款)
  • Accounts payable (应付账款)
  • Advance receipts / contract liabilities (预收款项/合同负债)
  • Current portion of LT debt (一年内到期非流动负债)
  • Total current liabilities
  • Long-term borrowings
  • Bonds payable
  • Total non-current liabilities
  • Total liabilities
  • Share capital
  • Capital reserve
  • Surplus reserve
  • Retained earnings
  • Parent equity
  • Minority interest
  • Total equity
  • Total liabilities + equity

Cash Flow Statement

Chinese indirect method:

  • Operating CF:
    • Start from Net profit
    • Adjust: D&A, Finance costs, Investment income, Working capital changes
    • Net cash flows from operating activities
  • Investing CF:
    • Purchase of fixed assets/intangible assets (CapEx)
    • Disposal proceeds (Asset sales)
    • Investment payments/proceeds (Investment purchases/sales)
  • Financing CF:
    • Equity issuance
    • Borrowings
    • Debt repayment
    • Dividends
  • Net change in cash
  • Ending cash balance

Step 4: Balance Checks

CRITICAL — Chinese-specific checks:

  1. Cash reconciliation: Cash and cash equivalents (BS) = Ending cash balance (CF) ± restricted cash
  2. BS balancing: Total assets = Total liabilities + equity
  3. RE roll-forward: Beginning retained earnings + Current period net profit - Surplus reserve appropriation - Cash dividends = Ending retained earnings
  4. CF-IS linkage: Net profit (IS) → starting point for Operating CF
  5. CapEx check: Purchase of fixed assets (CF) ≈ Increase in fixed assets (BS) + Increase in accumulated depreciation (BS)
  6. Debt check: Changes in borrowings (CF) = Changes in short-term borrowings + Changes in long-term borrowings (BS)
  7. Tax check: Income tax expense (IS) vs Actual payments (CF indirect method add-back)

Step 5: Scenario & Sensitivity

  • Base / Bear / Bull scenarios
  • Sensitivity on revenue growth, gross margin, tax rate
  • Key drivers: Gross margin, Period expense ratio, Working capital efficiency

China-Specific Modeling Conventions

VAT

  • Listed companies report Operating revenue net of VAT
  • Taxes and surcharges includes Consumption tax but not VAT
  • VAT is off-balance-sheet in most models

Goodwill

  • Common from M&A, especially 2015-2016 boom
  • Flag if Goodwill > 30% of Parent equity
  • Note annual impairment testing requirements

R&D

  • CAS requires R&D to be expensed (not capitalized like IFRS allows)
  • Some companies disclose R&D capitalization in notes — check if >5% of revenue

Depreciation

  • Chinese companies often use straight-line over longer lives
  • Typical ranges:
    • Buildings: 20-40 years
    • Equipment: 5-10 years
    • Vehicles: 4-6 years

Inventory

  • LIFO not permitted under CAS (FIFO or weighted average only)
  • Inventory valuation affects margin comparability across years

Receivables

  • Trade AR often high for industrial companies — check DSO
  • Notes receivable vs Trade AR — treat separately
  • Allowance for doubtful accounts varies by company

Debt

  • Short-term borrowings often high for leveraged companies
  • Long-term borrowings may include Non-current liabilities due within one year
  • Bonds payable for corporate bond issuers
  • Interest expense in Finance costs (net of interest income)

Excel Formatting (OpenPyXL / Office JS)

Follow the same professional conventions as the base xlsx-author skill, with China-specific adaptations:

  • Section headers: Dark blue #1F4E79 with white bold text
  • Column headers: Light blue #D9E1F2 with black bold text
  • Input cells: Blue font (RGB: 0,0,255) — all hardcoded inputs
  • Formula cells: Black font (RGB: 0,0,0)
  • Sheet links: Green font (RGB: 0,128,0)
  • Currency: CNY (¥) with thousands separator
  • Percentages: 0.0% format
  • Cell comments: "Source: AkShare, [date], [field], [ticker]"

Number Format Conventions

Item Format Example
Revenue ¥#,##0 ¥12,345
Percentages 0.0% 15.3%
Ratios 0.00x 2.50x
Dates YYYY 2024
Stock price ¥#,##0.00 ¥158.50

Quality Checks

Before delivering:

  • All three statements balance correctly
  • Cash from CF = Cash on BS
  • Retained earnings roll-forward ties
  • CapEx/Depreciation logic consistent
  • Debt changes tie between BS and CF
  • Tax rate reasonable (20-28% unless High-tech enterprise)
  • All hardcoded inputs have cell comments
  • All formulas reference cells, no hardcodes in formulas
  • Scenario blocks structured correctly (Bear/Base/Bull)
  • Sensitivity analysis included

Common Pitfalls

  1. Unit mismatch: Mixing yuan and thousand yuan — always normalize
  2. VAT confusion: Double-counting VAT in revenue or COGS
  3. Goodwill spike: Forgetting large goodwill from acquisitions
  4. Tax rate variance: Assuming 25% when company is a High-Tech Enterprise (15%)
  5. R&D understatement: CAS expenses all R&D, but some companies capitalize in notes
  6. Receivables inflation: Accounts receivable much higher than revenue growth — flag
  7. Short-term debt: Short-term borrowings often high; don't miss current portion of LT debt
  8. Minority interest: Minority interests can be significant for conglomerates

Data Source Priority

  1. AkShare MCP (primary) — real-time and historical A-share data
  2. CNINFO (cninfo.com.cn) — mandatory disclosures
  3. Exchange announcements — SH/SZ exchange filings
  4. Company website/IR — supplementary data
  5. Web search — only if above insufficient, mark [UNSOURCED]

Output Checklist

  • Three-statement model fully linked (IS → BS → CF)
  • All balance checks pass
  • Historical + projected years included
  • Scenario analysis (Bear/Base/Bull)
  • Sensitivity tables
  • All hardcoded inputs sourced and commented
  • CAS conventions documented
  • Currency consistent (CNY)
  • File named: [Ticker]_3StatementModel_[Date].xlsx

Data Source Mode Switch: Set env var IFIND_DATA_SOURCE_MODE to control data source preference.

  • ifind-only (strict): Use iFind only, error if unavailable
  • ifind-fallback (default): iFind preferred, fallback to AkShare
  • akshare-only: Skip iFind, use AkShare only
  • wind-only: Wind only, error if unavailable
  • wind-fallback: Wind first, fallback to iFind → AkShare