20. RESTATEMENT OF FINANCIAL STATEMENTS

The financial statements for the periods ended September 30, 2011 and 2010 were restated to reflect the following:

According to FASB ASC 480-10-35-5, all other financial instruments recognized under the guidance in Section 480-10-25 shall be measured subsequently at fair value with changes in fair value recognized in earnings, unless either this subtopic or another subtopic specifies another measurement attribute.

Accordingly, the shares to be issued to Dong (with fixed obligation of RMB 80 million (US $11.78 million)) pursuant to Biomass Power Generation Asset Transfer Agreement entered on June 29, 2010 (“Note 16 - Shareholders’ Equity”) should be classified as a liability on the balance sheet and adjusted to fair value at each reporting period. Previously, the Company did not measure the changes in fair value of the liability at each reporting date.

The following table presents the effects of the restatement adjustment on the accompanying consolidated balance sheet at September 30, 2011:

Consolidated Balance Sheet	As Previously Reported		Restated		Net Adjustment
Shares to be issued	$	11,780,471	$	3,529,411	$	(8,251,060	)
Retained earnings	$	30,173,358	$	38,424,418	$	8,251,060

The following table presents the effects of the restatement adjustment on the accompanying consolidated statement of income and comprehensive income for the nine months ended September 30, 2011:

Consolidated Statement of Income and Comprehensive Income	As Previously Reported		Restated		Net Adjustment
Changes in fair value of the liability	$	-	$	5,441,176	$	5,441,176
Total non-operating income (expense), net	$	1,871,324	$	7,312,500	$	5,441,176
Income before income taxes	$	22,053,728	$	27,494,904	$	5,441,176
Income before noncontrolling interest	$	17,684,471	$	23,125,647	$	5,441,176
Net income attributable to CREG	$	16,913,200	$	22,354,376	$	5,441,176
Comprehensive income attributable to CREG	$	21,318,297	$	26,759,473	$	5,441,176
Basic	$	0.41	$	0.54	$	0.13
Diluted	$	0.33	$	0.40	$	0.07

The following table presents the effects of the restatement adjustment on the accompanying consolidated statement of cash flows for the nine months ended September 30, 2011:

	As Previously Reported		Restated			Net Adjustment
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	17,684,471	$	23,125,647		$	5,441,176
Changes in fair value of the liability	$	-	$	(5,441,176	)	$	(5,441,176	)

The following table presents the effects of the restatement adjustment on the accompanying consolidated statement of income and comprehensive income for the three months ended September 30, 2011:

Consolidated Statement of Income and Comprehensive Income	As Previously Reported		Restated		Net Adjustment
Changes in fair value of the liability	$	-	$	2,411,764	$	2,411,764
Total non-operating income (expense), net	$	1,334,924	$	3,746,688	$	2,411,764
Income before income taxes	$	10,932,831	$	13,344,595	$	2,411,764
Income before noncontrolling interest	$	8,743,205	$	11,154,969	$	2,411,764
Net income attributable to CREG	$	8,655,232	$	11,066,996	$	2,411,764
Comprehensive income attributable to CREG	$	10,700,927	$	13,112,691	$	2,411,764
Basic	$	0.20	$	0.25	$	0.05
Diluted	$	0.16	$	0.20	$	0.04

The following table presents the effects of the restatement adjustment on the accompanying consolidated statement of income and comprehensive income for the nine months ended September 30, 2010:

Consolidated Statement of Income and Comprehensive Income	As Previously Reported			Restated		Net Adjustment
Changes in fair value of the liability	$	-		$	2,574,590	$	2,574,590
Total non-operating income (expense), net	$	(1,780,580	)	$	794,010	$	2,574,590
Income before income taxes	$	15,067,783		$	17,642,373	$	2,574,590
Income from operations	$	10,817,221		$	13,391,811	$	2,574,590
Net income attributable to CREG	$	10,227,402		$	12,801,992	$	2,574,590
Comprehensive income attributable to CREG	$	11,447,706		$	14,022,296	$	2,574,590
Basic	$	0.26		$	0.33	$	0.07
Diluted	$	0.21		$	0.26	$	0.05

The following table presents the effects of the restatement adjustment on the accompanying consolidated statement of cash flows for the nine months ended September 30, 2010:

	As Previously Reported		Restated			Net Adjustment
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	10,817,221	$	13,391,811		$	2,574,590
Changes in fair value of the liability	$	-	$	(2,574,590	)	$	(2,574,590	)

The following table presents the effects of the restatement adjustment on the accompanying consolidated statement of income and comprehensive income for the three months ended September 30, 2010:

Consolidated Statement of Income and Comprehensive Income	As Previously Reported			Restated		Net Adjustment
Changes in fair value of the liability	$	-		$	1,823,529	$	1,823,529
Total non-operating income (expense), net	$	(609,997	)	$	1,213,532	$	1,823,529
Income before income taxes	$	4,502,489		$	6,326,018	$	1,823,529
Income from operations	$	3,149,970		$	4,973,499	$	1,823,529
Net income attributable to CREG	$	3,046,724		$	4,870,253	$	1,823,529
Comprehensive income attributable to CREG	$	3,923,080		$	5,746,609	$	1,823,529
Basic	$	0.08		$	0.13	$	0.05
Diluted	$	0.06		$	0.09	$	0.03