Company: DDC
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001213900-25-043916
Chunk: 113

Company: DDC Enterprise Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 5
Chunk 113
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) providing management services in collaborative arrangements.

We evaluate whether it is
appropriate to record the gross amount of products sales and, advertising services and related costs or the net amount earned as commissions.
When we are a principal, that we obtain control of the specified goods or services before they are transferred to the customers, revenue
should be recognized in the gross amount of consideration to which it expects to be entitled in exchange for the specified goods or services
transferred. When we are an agent and our obligation is to facilitate third parties in fulfilling their performance obligation of specified
goods or services, revenue should be recognized in the net amount for the amount of commission which we earn in exchange for arranging
for the specified goods or services to be provided by the third parties.

Impairment of equity investment in PFI Food
Industries Limited (“ PFI”) accounted for using Measurement alternative

We acquired an investment in the equity interests of PFI Food Industries
Limited by issuing our own financial instruments including redeemable convertible preferred shares and warrants to acquire those redeemable
convertible preferred shares. These financial instruments were issued in August 2021 before we obtained the equity investment in PFI and
were determined as non-derivative forward contracts measured at fair value. As of December 31, 2024, we made a qualitative assessment
and considered there to be impairment indicators that investment in PFI was impaired as it was significantly behind the forecasted revenue
growth target and there was a declining trend of the plant-based meat industry performance. As a result, the investment in PFI was written
down to its fair value. In determining the fair value of the PFI investment, we made estimates and judgments in determining the fair value
regarding the cash flow forecasts of PFI, the weighted average cost of capital and the discount for lack of marketability applied to the
projected cash flows. As we do not have significant influence over PFI, we elected to measure investment in PFI, without a readily determinable
fair value, subsequently at cost adjusted for changes resulting from impairments, if any, and observable price changes in orderly transactions
for the identical or similar securities of the same issuer.

Recent Accounting Pronouncements

In June 2022, the FASB issued
ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.
The update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account