Company: LICN
Filing Date: 2025-04-29
Form Type: 20-F
Source: 0001213900-25-036244
Chunk: 111

Company: Lichen International Ltd
Filing Date: 2025-04-29
Form: 20-F
Item: Item 19
Chunk 111
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 7.8282                        7.8310  

F-11

Related parties

Parties, which can be a corporation or individual,
are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject
to common control or common significant influence, such as a family member or relative, shareholder, or a related corporation.

Fair value of financial instruments

ASC 825-10 requires certain disclosures regarding
the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes
the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of
unobservable inputs. The three levels of inputs used to measure fair value are as follows:

  Level                                                                                                                 

  Level                                                                                                                                     

  Level                                                      

The fair value of the Company’s financial
instruments, including cash, accounts receivable, accounts payable, accrued expenses and other current liabilities and due to the related
parties, approximate their recorded values due to their short-term maturities as of December 31, 2024 and 2023.

Cash

Cash consist of cash on hand, cash in banks, which
are unrestricted as to withdrawal or use, and have insignificant risk of changes in value. The Company maintains most of its bank accounts
in the Cayman and mainland of China.

Accounts receivable and allowance for credit
losses

Accounts receivable represents the Company’s
right to consideration in exchange for goods and services that the Company has transferred to the customers before payment is due. Accounts
receivable is stated at the historical carrying amount, net of an estimated allowance for uncollectible accounts. The allowance for credit
losses for accounts receivable is based upon the current expected credit losses (“ CECL”) model. The CECL model requires an
estimate of the credit losses expected over the life of accounts receivable since initial recognition, and accounts receivable with similar
risk characteristics are grouped together when estimating CECL. In assessing the CECL, the Company applies a roll rate-based method that
considers historical collectability based on past due status, the age of the balances, credit quality of the Company’s customers
based on