Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 202

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 19
Chunk 202
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 and the Group performs step two of the impairment test (measurement).
Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied
fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a
manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting
unit goodwill.

Application of the goodwill impairment test requires judgment, including
the determination of the fair value of each reporting unit. Estimating fair value is performed by utilizing various valuation techniques,
with a primary technique being a discounted cash flow which requires significant judgments, including estimation of future cash flows,
which is dependent on internal forecasts, estimation of the long term rate of growth for the Group’s business, estimation of the useful
life over which cash flows will occur, and determination of the Group’s weighted average cost of capital.

During the year, due to macroeconomics downturn in the industry, although
the Group secure the turnover, but experienced increase of operating expenditures such as personnel cost and distribution expenses to
maintain the operation, which was beyond our expectation at the acquisition of Alpha Mind. The trend of increase in operating expenditures
will probably lead to significant decrease of positive operating cash flows in the future, which will also decease the fair value of the
reporting unit. Thus, the Group believe there is an indication of goodwill impairment and performed an impairment test at the year end.
The Company adopted discounted cash flow method, which is an income-based approach, to estimate the fair value of equity interest of Alpha
Mind at RMB716,160.

The Company estimated the average revenue growth rate from 2025 to
2029 is36%. The Company estimated the weighted average cost of capital at13%, which is based on the premise that the risk free rate
of return plus an equity risk premium adjusted by an industry risk factor based on beta.

Goodwill impairment loss was recorded RMB574,978for the years ended
September 30, 2024.

F-15

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation,
and depreciated on a straight-line basis over the estimated useful lives of the assets. Cost represents the purchase price of the asset
and other costs incurred to bring the asset into its existing use. The cost of repairs and maintenance is expensed as incurred; major
replacements and improvements are capitalized. When assets are retired or disposed of