Company: XTKG
Filing Date: 2025-04-25
Form Type: 20-F
Source: 0001213900-25-035626
Chunk: 233

Company: X3 Holdings Co., Ltd.
Filing Date: 2025-04-25
Form: 20-F
Item: Item 19
Chunk 233
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 performance obligation, which usually
takes less than one year. Under this method, the transaction price allocated to application development service is recognized as work
is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations.

Incurred costs include all
direct material, labor and subcontract costs, and those indirect costs related to application development performance, such as indirect
labor, supplies, and tools. Cost-based input method requires the Group to make estimates of revenues and costs to complete the construction.
In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the application development,
including materials, labor, and other system costs. The Group’s estimates are based upon the professional knowledge and experience
of our engineers and project managers to assess the contract’s schedule, performance, technical matters. The Group has adequate
cost history and estimating experience, and with respect to which management believes it can reasonably estimate total development costs.
If the estimated costs are greater than the related revenues, the Group recognizes the entire estimated loss in the period the loss becomes
known and can be reasonably estimated. Changes in estimates for application development services include but not limited to cost forecast
changes and change orders. The cumulative effect of changes in estimates is recorded in the period in which the revisions to estimates
are identified and the amounts can be reasonably estimated. To date, the Group has not incurred a material loss on any contracts. However,
as a policy, provisions for estimated losses on such engagements will be made during the period in which a loss becomes probable and can
be reasonably estimated. If contract modifications result in additional goods or services that are distinct from those transferred before
the modification, they are accounted for prospectively as if the Group entered into a new contract. If the goods or services in the modification
are not distinct from those in the original contract, sales and gross profit are adjusted using the cumulative catch-up method for revisions
in estimated total contract costs and contract values.

In certain application development
service arrangements, the Group sells and delivers IT equipment on standalone basis prior to the delivery of the services. In these cases,
the Group controls the IT equipment before they are transferred to the customer. The Group has the right to direct the suppliers and control
the goods or assets transferred to its customers. Thus, the Group considers it should recognize revenue as a principal in the gross amount
of consideration to which it is entitled in exchange for the IT equipment delivered. The Group assesses the sale of equipment is separately
ident