Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 126

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 5
Chunk 126
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 inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilit...  

Our financial instruments include cash and cash
equivalents, other current assets, accounts payable, amounts due to related parties, short-term debt, and other current liabilities.

Income taxes

Current income taxes are provided on the basis
of profit before income tax for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible
for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. We follow the asset and liability method
of accounting for income taxes.

Deferred income taxes are provided using assets
and liabilities method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on
the basis of the differences between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.

Deferred tax assets are recognized to the extent
that these assets are more likely than not to be realized. In making such determination, our management considers all positive and negative
evidence, including future reversals of projected future taxable income and results of recent operation.

In order to assess uncertain tax positions, we apply a more likely than
not threshold and a two-step approach for the tax position measurement and financial statement recognition. Under the two-step approach,
the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is
more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The
second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. We
recognize interest and penalties, if any, under accrued expenses and other current liabilities on our consolidated balance sheet and under
other expenses in its consolidated statement of comprehensive loss. As of September 30, 2023 and 2024, we did not have any significant
unrecognized uncertain tax positions.

Discontinued operations

In accordance with ASU No. 2014-08, Reporting
Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of
components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or
will have