Page 141 - China Mobile Limited - Annual Report 2012

China Mobile Limited
Annual Report 2012
135
Notes to the Financial Statements
(Expressed in Renminbi unless otherwise indicated)
36 Capital, Reserves and Dividends (Continued)
(d) Nature and purpose of reserves
(i) Share premium
The application of the share premium account is governed by section 48B of the Hong Kong Companies
Ordinance.
(ii) Capital reserve
The capital reserve comprises the following:
– The fair value of unexercised share options granted to employees of the Group recognized in
accordance with the accounting policy adopted for share-based payments in note 1(u)(ii); and
– RMB295,665,000,000 debit balance brought forward as a result of the elimination of goodwill arising
on the acquisition of subsidiaries before 1 January 2001 against the capital reserve in previous years.
(iii) PRC statutory reserves
PRC statutory reserves mainly include statutory surplus reserve and discretionary surplus reserve.
In accordance with the Company Law of PRC, domestic enterprises in Mainland China are required to
transfer 10% of their profit after taxation, as determined under accounting principles generally accepted in
the PRC (“PRC GAAP”), to the statutory surplus reserve until such reserve balance reaches 50% of the
registered capital. Moreover, upon a resolution made by the shareholders, a certain percentage of
domestic enterprises’ profit after taxation, as determined under PRC GAAP, is transferred to the
discretionary surplus reserve. During the year, appropriations were made by each of the above subsidiaries
to the statutory surplus reserve and discretionary surplus reserve each at 10% of their profit after taxation
determined under PRC GAAP.
The statutory and discretionary surplus reserve can be used to reduce previous years’ losses, if any, and
may be converted into paid-up capital, provided that the balance after such conversion is not less than
25% of the registered capital of the subsidiaries.
In accordance with relevant regulations issued by the Ministry of Finance of PRC, a wholly owned
subsidiary of the Company, China Mobile Finance, is required to set aside a reserve through appropriations
of profit after tax according to a certain ratio of the ending balance of gross risk-bearing assets to cover
potential losses against such assets.
(iv) Exchange reserve
The exchange reserve comprises all foreign exchange differences arising from the translation of the financial
statements of overseas entities. The reserve is dealt with in accordance with the accounting policies set out
in note 1(w).