Company: SCAG
Filing Date: 2025-11-12
Form Type: 20-F
Source: 0001213900-25-109190
Chunk: 120

Company: Scage Future
Filing Date: 2025-11-12
Form: 20-F
Item: Item 4A
Chunk 120
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We prepare our consolidated
financial statements in accordance with U. S. GAAP. The preparation of financial statements in conformity with U. S. GAAP
requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date
of the financial statements and reported amounts of revenue and expenses during the reporting period. We continually evaluate these judgments
and estimates based on our own experience, knowledge and assessment of current business and other conditions, and our expectations regarding
the future based on available information and assumptions that we believe to be reasonable. Since the use of estimates is an integral
component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require
a higher degree of judgment than others in their application.

We consider an accounting
estimate to be critical if: (a) the accounting estimate requires us to make assumptions about matters that were highly uncertain
at the time the accounting estimate was made, and (b) changes in the estimate that are reasonably likely to occur from period to
period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial
condition or results of operations. We believe the following accounting estimates involve the most significant judgments used in the
preparation of our financial statements: (1) provision for expected credit losses, (2) estimates for inventory write-downs,
(3) warranty reserve and (4) impairment of long-lived assets.

Provision of allowance for expected credit
losses

On July 1, 2023, we
adopted ASU 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement on Credit Losses on Financial
Instruments”, including certain subsequent amendments, transitional guidance and other interpretive guidance within ASU 2018-19,
ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-02 and ASU 2020-03 (collectively, including ASU 2016-13,
“ ASC 326”). ASC 326 introduces an approach based on expected losses to estimate the allowance for credit losses,
which replaces the previous incurred loss impairment model. We use aging schedule method in the current expected credit loss model (“ CECL
model”) to estimate the expected credit losses. Our estimation of allowance for credit losses considers factors such as historical
credit loss experience, age of receivable balances, current market