Company: GURE
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001193805-25-001627
Chunk: 19

Company: GULF RESOURCES, INC.
Filing Date: 2025-11-19
Form: 10-Q
Item: Item 1
Chunk 19
---
 currency, Renminbi (“RMB”), as the functional currency; whereas the functional
currency and reporting currency of the Company is the United States dollar (“USD” or “$”).

As such, the Company uses the “current rate
method” to translate its PRC operations from RMB into USD, as required under FASB ASC 830 “Foreign Currency Matters”.
The assets and liabilities of its PRC operations are translated into USD using the rate of exchange prevailing at the balance sheet date.
The capital accounts are translated at the historical rate. Adjustments resulting from the translation of the balance sheets of the Company’s
PRC subsidiaries are recorded in stockholders’ equity as part of accumulated other comprehensive loss. The statement of loss and
comprehensive loss is translated at average rate during the reporting period. Gains or losses resulting from transactions in currencies
other than the functional currencies are recognized in net loss for the reporting periods as part of general and administrative expense.
The statement of cash flows is translated at average rate during the reporting period, with the exception of the consideration paid for
the acquisition of business which is translated at historical rates.

(n)       Foreign
Operations

All of the Company’s operations and assets
are located in PRC.  The Company may be adversely affected by possible political or economic events in this country.  The
effect of these factors cannot be accurately predicted.

(o)       Inventories.

Inventories are stated at the lower of cost, determined
on a first-in first-out cost basis, or net realizable value. Costs of work-in-progress and finished goods comprise direct materials, direct
labor and an attributable portion of manufacturing overhead. Net realizable value is based on estimated selling price less costs to complete
and selling expenses.

(p)       Leases

The Company determines if an arrangement is a
lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities
in the consolidated balance sheets. Finance leases are included in finance lease ROU assets and finance lease liabilities in the consolidated
balance sheets.

ROU assets represent the Company’s right
to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising
from the lease. Operating lease and finance lease ROU assets and liabilities are recognized at January 1, 2019 based on the present value
of lease payments over the lease term discounted using the rate implicit in the lease