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Property, Plant and Equipment | 3 Months Ended
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Mar. 31, 2014
Property, Plant and Equipment [Abstract] |
Property, plant and equipment | (8) Property, plant and equipment As of March 31, 2014 and December 31, 2013, property, plant and equipment consisted of the following: 65,160,213
|  | March 31, |  |  | December 31, |
|  | 2014 |  |  | 2013 |
Property, Plant, and Equipment: |  |  |  |  |  |
Land use rights |  | $ | 7,697,285 |  |  | $ | 7,761,511 |
Building and improvements |  |  | 22,221,421 |  |  |  | 22,406,836 |
Machinery and equipment |  |  | 120,086,941 |  |  |  | 121,088,942 |
Vehicles |  |  | 682,066 |  |  |  | 683,051 |
Construction in progress |  |  | 67,559,504 |  |  |
|  |  | 218,247,217 |  |  |  | 217,100,553 |
Less: accumulated depreciation and amortization |  |  | (40,285,715 | ) |  |  | (38,565,294 | )
Property, Plant and Equipment, net |  | $ | 177,961,502 |  |  | $ | 178,535,259 |
As of March 31, 2014 and December 31, 2013, land use rights represented a parcel of state-owned land located in Xushui County of Hebei Province in China, with lease terms of 50 years expiring in 2061. The Company entered into a sale-leaseback arrangement with a leasing company in China on June 16, 2013 for a total financing proceeds in the amount of RMB 150 million (approximately US$24 million). Under the sale-leaseback arrangement, Orient Paper HB sold certain of its paper manufacturing equipment to the leasing company for an amount of RMB 150 million (approximately US$24 million). Concurrent with the sale of equipment, Orient Paper HB leases back all of the equipment (“Leased Equipment”) sold to the leasing company for a lease term of three years. At the end of the lease term, Orient Paper HB may pay a nominal purchase price of RMB 15,000 (approximately $2,400) to the leasing company and buy back all of the Leased Equipment. The sale-leaseback is treated by the Company as a mere financing and capital lease transaction, rather than a sale of assets (under which gain or loss is immediately recognized) under ASC 840-40-25-4. All of the Leased Equipment are included as part of the property, plant and equipment of the Company as of March 31, 2014 and December 31, 2013. As a result of the sale, a deferred gain on sale of Leased Equipment in the amount of $1,379,282 was created at the closing of the transaction and presented as a non-current liability. The deferred gain would be amortized by the Company during the lease term and would be used to offset the depreciation of the Leased Equipment, which are recorded at the new cost of $25,778,581 and $25,993,677 as of March 31, 2014 and December 31, 2013, respectively. See “Financing with Sale-Leaseback” under Note (9), Loans Payable, for details of the transaction and asset collaterals. The depreciation of Leased Equipment has started in July 2013 and was included with the depreciation expense of the Company’s own assets in the consolidated statement of income. During the three months ended March 31, 2014 and 2013, depreciation of Leased Equipment were $414,524 and $nil, respectively. The accumulated depreciation of the leased asset were $1,234,390 and $829,794 as of March 31, 2014 and December 31, 2013. During the three months ended March 31, 2014 and 2013, the gain realized on sale-leaseback transaction were $115,923 and $nil, respectively. The gain realized was recorded in cost of sales as a reduction of depreciation expenses. The unamortized deferred gain on sale-lease back are $1,035,603 and $1,160,271 as of March 31, 2014 and December 31, 2013, respectively. Construction in progress mainly represents payments for the new 15,000 tonnes per year tissue paper manufacturing equipment PM8, the tissue paper workshops, four warehouses, office buildings and the new staff dormitory in the Wei County industrial park, as well as the equipment for the renovation of PM1. Tissue paper manufacturing equipment PM8 and ancillary facilities were expected to start installation in the second quarter of year 2014; while the renovation of PM1 is expected to come online in the second quarter of year 2014. Upon completion, it will bring about an addition of $117,994,062 to the Company’s machinery and equipment. For the three months ended March 31, 2014 and 2013, the amount of interest capitalized is $261,433 and $nil, respectively. As of March 31, 2014 and December 31, 2013, the three employee dormitory buildings in the amount of $4,096,411 and $4,130,590, which will be sold to a related party company controlled by our Chairman and CEO Mr. Zhenyong Liu by the second half of year 2014, were reclassified as assets held for sale. Please refer to Note (7) for details. As of March 31, 2014 and December 31, 2013, certain property, plant and equipment of Orient Paper HB with net values of $19,072,822 and $21,901,456 have been pledged for the long-term loan from credit union of Orient Paper HB, respectively. As of March 31, 2014 and December 31, 2013, certain of the Company’s property, plant and equipment in the amount of $33,499 and $34,177 have been pledged for the facility obtained from Bank of Hebei. See “Notes Payable” under Note (11) for details. In addition, land use right with net values of $7,402,223 and $7,502,794 as of March 31, 2014 and December 31, 2013 was pledged for the sale-leaseback financing. See “Financing with Sale-Leaseback” under Note (9), Loans Payable, for details of the transaction and asset collaterals. As of March 31, 2014 and December 31, 2013, essentially all production equipment of Orient Paper Shengde with net value of $35,143,954 and $36,134,038 has been pledged for the guarantee of Orient Paper HB’s performance under the capital lease. Depreciation and amortization of property, plant and equipment was $1,938,794 and $1,932,853 for the three months ended March 31, 2014 and 2013, respectively.

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- Definition The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6391035&loc=d3e2868-110229 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6391110&loc=d3e2921-110230 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1361-107760 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.13-14) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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