Company: DSWL
Filing Date: 2025-07-29
Form Type: 20-F
Source: 0001174947-25-001096
Chunk: 137

Company: DESWELL INDUSTRIES INC
Filing Date: 2025-07-29
Form: 20-F
Item: Item 18
Chunk 137
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Table of Contents

DESWELL INDUSTRIES, INC.

2. Summary of Significant Accounting Policies(cont.)

liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. It uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-linebasis over the lease term. The Company determines its land use rights contain operating leases of land under ASC 842. However, this determination does not result in any changes to the accounting for land use rights as the cost for land use rights are fully prepaid and no liabilities would be recorded.

When the Company is the lessor, minimum contractual rental from leases is recognized on a straight-linebasis over the non-cancelableterm of the lease. With respect to a particular lease, actual amounts billed in accordance with the lease during any given period may be higher or lower than the amount of rental revenue recognized for the period. Straight-linerental revenue commences when the customer assumes control of the leased premises. Accrued straight-linerents receivable represents the amount by which straight-linerental revenue exceeds rents currently billed in accordance with lease agreements. If later, the billing amount exceeds the straight-linerental revenue, the variance will be credited to accrued straight-linerents receivable. Contingent rental revenue is accrued when the contingency is removed.

Impairment of long-lived assets - Long-livedassets are included in impairment evaluations when events and circumstances exist that indicate the carrying value of these assets may not be recoverable. In accordance with ASC No. 360, “ Property, Plant and Equipment”, the Company assesses the recoverability of the carrying value of long-livedassets by first grouping its long-livedassets with other assets and liabilities at the lowest level for which identifiable cash flows largely independent of the cash flows of other assets and liabilities (the asset group) and, secondly, estimating the undiscounted future cash flows that are directly associated with and expected to arise from the use of and eventual disposition of such asset