Company: MEGL
Filing Date: 2025-04-14
Form Type: 20-F
Source: 0001641172-25-004566
Chunk: 126

Company: Magic Empire Global Ltd
Filing Date: 2025-04-14
Form: 20-F
Item: Item 19
Chunk 126
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Accounts
receivables

Accounts receivables are stated at the original amount less an allowance
for credit losses.

Accounts
receivables are recognized in the period when the Group has provided services to its customers and when its right to consideration is
unconditional. On January 1, 2023, the Company 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 doubtful accounts, replacing
the previous incurred loss impairment model, which makes allowances when there is substantial doubt as to the collectability and a loss
is determined to be probable.

The
Group adopts the current expected credit loss model (“ CECL model”) to estimate the expected credit losses, which is determined
by multiplying the probability of default. In determining the probability of default, the Group mainly considers factors such as aging
schedule of receivables, migration rate of receivables, assessment of receivables due from specific identifiable counterparties that
are considered at risk or uncollectible, current market conditions, as well as reasonable and supportable forecasts of future economic
conditions. The Group concludes that there is no impact over the initial adoption of CECL model, which should be treated as cumulative-effect
adjustment on accumulated deficits as of January 1, 2023. Accounts receivable balances are written off after all collection efforts have
been exhausted.

Accounts receivables mainly represent amounts
due from clients for corporate finance services which are recorded net of allowance for the Group’s credit losses. The group does
not grant credit terms to the clients. Under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), the Group adopted the
expected loss approach using macroeconomic forecasts, referred to as a current expected credit losses (“ CECL”) methodology.
The allowance for credit losses reflects the Group’s estimated expected losses. The Group estimates the allowance for credit losses,
mainly based on past collection experience as well as consideration of current and future economic conditions