Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 197

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 19
Chunk 197
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 general credit of the Group for any of the liabilities of the VIE entities. Relevant PRC
laws and regulations restrict the VIE entities from transferring a portion of their net assets, equivalent to the balance of its statutory
reserve and its share capital, to the Group in the form of loans and advances or cash dividends.

Use of estimates

The preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.
Actual results could differ materially from those estimates. The Group bases its estimates on historical experience and various other
factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s
consolidated financial statements include valuation allowance of deferred tax assets and share-based compensation.

Foreign currency translation

The reporting currency of the Group is the Renminbi (“ RMB”).
The functional currency of the Group’s entities incorporated in Cayman Islands, the United States and Hong Kong is the United States
dollar (“ US dollar”) and the functional currency of the Group’s PRC subsidiaries is RMB. Monetary assets and liabilities
denominated in currencies other than the functional currency are translated into functional currency at the rates of exchange ruling at
the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into the functional
currency at the applicable rates of exchange prevailing on the day transactions occurred. Transaction gains and losses are recognized
in the consolidated statements of comprehensive income (loss).

The financial statements of the Group’s non PRC entities are
translated from their respective functional currency into RMB. Assets and liabilities are translated into RMB at the exchange rates at
the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated
using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate
component of other comprehensive (loss) income in the consolidated statements of comprehensive income (loss).

The financial records of the Group’s subsidiaries are maintained
in local currencies, which are the functional currencies.

Convenience translation

The Group’s business is primarily conducted in the PRC and all
of the revenues are denominated in RMB. The financial statements of the