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Interests in affiliates

12 Months Ended

Dec. 31, 2018

Investments in affiliates are accounted for using the equity method of accounting.

Far East is holding 19.4% (2017: 19.4%) equity interests in Blue Sky, a company incorporated in the PRC, with total cost of investment US$5,540,000. Blue Sky provides a comprehensive service for design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted from various boilers and industrial furnaces of power plants, steel works and chemical plants since 2000.

Blue Sky has listed its shares on the New Third Board in the PRC since November 17, 2015 and suspended trading from August 15, 2017 and resumed trading on February 2, 2018.

The Group interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation on both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process.

During year 2017, the Group’s equity in Blue Sky was diluted subsequent to the issuance of new ordinary shares by Blue Sky to other shareholders. A net profit on deemed disposal of an affiliate of US$128,000 had been recognized in the consolidated statement of operations and comprehensive income / (loss) for that year.

A summary of the financial information of the affiliate, Blue Sky, is set forth below:

	2018			2017
Balance Sheet:	US$’000			US$’000

Current assets		46,925			56,911

Non-current assets		19,450			26,544
Total assets		66,375			83,455

Total liabilities		(40,330	)		(36,948	)
Total shareholders’ equity		26,045			46,507

	2018			2017
Operating results:	US$’000			US$’000

Net sales		50,165			62,234

Operating (loss) / income		(5,194	)		4,439

Net (loss) / income		(4,048	)		3,863

Far East previously held 20% equity interests in Zhejiang Jia Huan Electronic Co. Ltd. (“Jia Huan”), a company incorporated in the PRC, with total cost of investment US$2,486,000. Jia Huan provides a comprehensive service for environmental protection business since 1969 and is based in Jin Hua, Zhejiang. On March 5, 2018, Far East entered into an Equity Transfer Agreement to sell this 20% equity stake of Jia Huan for a purchase price of RMB31,312,500 to Ms. Jin Lijuan, the wife of the holder of the remaining 80% equity stake of Jia Huan. In accordance with the terms of the Agreement, all approvals and registrations with the relevant governmental authorities were obtained, the closing of the transaction has been completed, and the Purchaser paid the Purchase Price to the Company, in full in May 2018. The Company made gain of US$1,522,000 on this disposal.

A summary of the financial information of the affiliate, Jia Huan, for the year 2017 is set forth below:

	2017
Balance Sheet:	US$’000

Current assets		21,374

Non-current assets		4,570
Total assets		25,944

Total liabilities		(10,215	)
Total shareholders’ equity		15,729

	2017
Operating results:	US$’000

Net sales		16,301

Operating income		32

Net income		597