Company: DDC
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001213900-25-043916
Chunk: 222

Company: DDC Enterprise Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 19
Chunk 222
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 advertising placements on the Company’s website channels and offline promotion e. g. products exhibition in
the Company’s branded experience stores.

The Company recognizes advertising revenue when
the advertisement is published or displayed.

F-37

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(cont.)

Collaborative arrangements

On July 1, 2021, the Company entered into purchase
agreements with the selling shareholders of Fujian Yujiaweng Food Co. Ltd (“ YJW”) and Fujian Keke Food Co. Ltd (“ KeKe”)
acquire the respective60% interests of YJW and KeKe’s product sales business, which primarily included distribution contracts,
the sales and marketing teams, procurement team and other supporting function personnel (“the Target Assets”). The Company
and the selling shareholders agreed to form an entity to which the Target Assets will be transferred specific to each purchase agreement.
The Company and one of the selling shareholders agreed to hold60% and40% equity interests of the respective entities formed. During
the period from July 1, 2021 until June 17, 2022 when the new entities were formed (“the transition period”), the Company
managed and operated the Target Assets and was entitled to60% of the net profit arising from the operation of the Target Assets.

The Company has determined that the arrangements
during the transition period are collaborative arrangements between the Company and YJW and KeKe to jointly operate the product manufacturing
and distribution activities. Under the arrangements, YJW and KeKe owned and provided the customer relationships, brand use rights and
manufactured the products, and the Company is primarily responsible for managing and directing the daily operation of the sales and marketing
activities. Each party is entitled to60% and40% respectively of the net profit arising from the operation of the Target Assets during
the transition period. As both parties actively participate in the product manufacturing and distribution activities and are exposed to
significant risks and rewards of such joint operating activities, the Company considers these arrangements to be in the scope of ASC 808
 - Collaborative Arrangements. The Company determined that it provided distinct management services to its customers, YJW and KeKe,
and recognized60% of the net profit arising from the operation of the Target Assets as revenue from contracts with customers in accordance
with ASC 606.

Reconciliation of contract balance

A receivable is recorded when the Company has
an unconditional right to consideration. A right to consideration is unconditional if only the passage of time