Company: DDC
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001213900-25-043916
Chunk: 216

Company: DDC Enterprise Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 19
Chunk 216
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 842), which requires that a lessee recognize in the consolidated balance sheet a lease liability
and a corresponding Right-of-use assets, including for those leases that the Company currently classifies as operating leases. The Right-of-use
assets and the lease liability was initially measured using the present value of the remaining lease payments. ASC 842 was implemented
using a modified retrospective approach which resulted in no cumulative-effect adjustment in the opening balance of accumulated deficit
as of January 1, 2022. As a result, the consolidated balance sheet prior to January 1, 2022 was not restated and continues to be reported
under FASB ASC Topic 840, “ Leases,” (“ ASC 840”), which did not require the recognition of a Right-of-use assets
or lease liability for operating leases. As permitted under ASC 842, the Company adopted the following practical expedients: (1) not to
reassess whether an expired or non-lease contract that commenced before January 1, 2022 contained an embedded lease, (2) not to reassess
the classification of existing leases, (3) not to determine whether initial direct costs related to existing leases should be capitalized
under ASC 842.

F-33

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(cont.)

The Company categorizes leases at their inception
as either operating or finance leases. Lease agreements mainly cover offices, warehouses and equipment, most of these leases are operating
leases; however, certain equipment from a third-party lessor are leased under finance leases. Leased assets pursuant to operating leases
are included in operating lease Right-of-use assets (“ ROU”), while leased assets pursuant to finance leases are included in
property and equipment, net. The Company’s lease agreements do not contain any residual value guarantees, restrictions or covenants.
The Company reviews all relevant contracts to determine if the contract contains a lease at its inception date. A contract contains a
lease if the contract conveys to the Company the right to control the use of an underlying asset for a period of time in exchange for
consideration. If the Company determines that a contract contains a lease, it recognizes, in the consolidated balance sheets, a lease
liability and a corresponding Right-of-use assets on the commencement date of the lease. The lease liability is initially measured at
the present value of the future lease payments over the lease term using the rate implicit in the lease or, if not readily determinable,
the Company’s secured incremental borrowing