Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 204

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 19
Chunk 204
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 from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant,
and Equipment, as ROU assets are long-lived nonfinancial assets.

ROU assets are tested for impairment individually
or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities.
An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable
cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company recognized no impairment of
ROU assets as of September 30, 2023 and 2024. Operating leases are included in operating lease ROU and operating lease liabilities (current
and non-current), on the consolidated balance sheets.

F-16

Revenue recognition

The Company recognizes revenue under Accounting
Standards Codification (“ ASC”) Topic 606, Revenue from Contracts with Customers (“ ASC 606”). The core principle
of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following
five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in
the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the
performance obligations in the contract

Step 5: Recognize revenue when the company satisfies
a performance obligation

The Company generates revenue primarily from its
insurance agency services. According to the agency service contracts made by and between the Company and insurance carriers, the Company
is authorized to sell insurance products provided by insurance carriers to the insureds as an insurance agent, and collects commission
from the respective insurance carriers as revenue.

The commission charged is determined by the terms
agreed in the agency service contract, typically a percentage of insurance premium. The performance obligation is considered met and revenue
is recognized when the insurance agency services are rendered and completed at the time an insurance policy becomes effective and the
premium is collected from the insured.

The necessary data to reasonably determine the
revenue amount is controlled by the insurance carriers, and bill statement is confirmed with the Company on a monthly basis. The Company
has met all the criteria of revenue recognition when the premiums are collected by the respective insurance carriers and not before, because