Audit Report
RSM China Accounting Firm (Special General Partnership) No. RSM Audit [2026] 518Z0545
Guangdong TCL Smart Appliances Co., Ltd.
To all shareholders of Guangdong TCL Smart Appliances Co., Ltd.:
I. Audit Opinion
We have audited the financial statements of Guangdong TCL Smart Appliances Co., Ltd. (hereinafter referred to as TCL Smart Appliances), including the consolidated and parent company balance sheets as of December 31, 2025, the consolidated and parent company income statements, consolidated and parent company cash flow statements, consolidated and parent company statements of changes in equity, and related notes to the financial statements. In our opinion, the attached financial statements have been prepared in all material respects in accordance with the provisions of the Accounting Standards for Business Enterprises and fairly present the financial position of TCL Smart Appliances as of December 31, 2025, as well as the operating results and cash flows for the year 2025.
II. Basis for Audit Opinion
We conducted our audit in accordance with the Chinese Certified Public Accountant Auditing Standards. The section "Responsibilities of Certified Public Accountants for the Audit of Financial Statements" in this report further elaborates on our responsibilities under these standards. In accordance with the Code of Ethics for Certified Public Accountants and the Independence Standards for Certified Public Accountants, we are independent of TCL Smart Appliances and have complied with the provisions applicable to the audit of financial statements of public interest entities, while fulfilling other ethical responsibilities. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
III. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the current period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our audit opinion, and we do not express a separate opinion on these matters.
(1) Revenue Recognition
- Description of the Matter Refer to Note 3 of the financial statements regarding the accounting policies for revenue and Note 5 regarding operating revenue and operating costs. For the year 2025, TCL Smart Appliances reported operating revenue of 18,530,993,941.45 RMB, an increase of 0.93% compared to the same period last year. Due to the significant amount of operating revenue and its impact on key performance indicators, there is an inherent risk that management may manipulate the timing of revenue recognition to achieve specific targets or expectations. Therefore, we identified revenue recognition as a key audit matter.
- Audit Response Our procedures related to revenue recognition included:
- Obtaining TCL Smart Appliances' internal control policies related to sales and revenue recognition, understanding and evaluating the design of internal controls, and testing the effectiveness of key control procedures.
- Examining sales contracts and orders from major customers to identify key terms related to the transfer of control of goods and evaluating whether the revenue recognition policy complies with the provisions of the Accounting Standards for Business Enterprises.
- Performing analytical procedures to identify any unusual fluctuations and significant variations between periods.
- Checking supporting evidence such as sales contracts, orders, shipping documents, customs declarations, bills of lading, invoices, and acceptance documents to determine the authenticity of revenue recognition in conjunction with invoicing and collection situations.
- Performing confirmation procedures to confirm accounts receivable balances and sales amounts with major customers.
- Conducting cutoff tests to check whether transactions are recorded in the appropriate accounting period.
- For export revenue, obtaining customs system export data and reconciling it with sales data and tax refund summary tables to verify the authenticity of revenue.
- Evaluating the completeness of disclosures related to operating revenue and the accuracy of accounting presentations. Based on the results of the above work, we believe that the evidence obtained supports management's judgments and estimates regarding revenue recognition.