Company: SISI
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001493152-25-006895
Chunk: 30

Company: SHINECO, INC.
Filing Date: 2025-02-14
Form: 10-Q
Item: Part I, Item 1
Chunk 30
---
 period (not longer than 12 months). The acquisition method also requires that
acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed, and requires the Company
to recognize and measure certain assets and liabilities, including those arising from contingencies and contingent consideration in a
business combination.

Goodwill

Goodwill represents the excess of the
purchase price over the fair value of assets acquired. The goodwill impairment test compares the fair value of a reporting unit with
its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting
unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill
is compared to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount
of goodwill recognized in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair
value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, the fair value of
each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow
methodology. To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable
market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private
transaction (to the extent available).

Leases

Lessee accounting

The Company follows FASB ASC No. 842,
Leases (“Topic 842”). The Company leases office spaces, warehouse, and farmland which are classified as operating
leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception
of short-term leases, usually with initial term of 12 months or less) on the commencement date: (i) lease liability, which is a lessee’s
obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use (“ROU”) asset,
which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Operating lease ROU assets and operating
lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement
date. As most of the Company’s leases do not