Company: AOSL
Filing Date: 2025-08-28
Form Type: 10-K
Source: 0001628280-25-041297
Chunk: 136

Company: ALPHA & OMEGA SEMICONDUCTOR Ltd
Filing Date: 2025-08-28
Form: 10-K
Item: Item 7
Chunk 136
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 share of earnings or losses of the JV Company on a one quarter lag. 

We record our interest in the net earnings of the equity method investee, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within earnings or loss from equity interests in the Consolidated Statements of Operations.  Profits or losses related to intra-entity sales with the equity method investee are eliminated until realized by the investor or investee.  Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them.  Equity method goodwill is not amortized.  Instead the total equity method investment balance, including equity method goodwill, is tested for impairment. 

On December 30, 2024, the JV Company signed an investment agreement with an investor, pursuant to which the investor agreed to invest RMB 500 million (or $68.5 million based on the currency exchange rate between RMB and U.S. Dollar on December 31, 2024) in the JV Company in exchange for a 7.09% interest.  This transaction closed on January 15, 2025, at which time, the percentage of outstanding JV Company’s equity interest owned by the Company was reduced to approximately 39.2%.  We recorded a gain of $0.5 million on the change of equity interest in the JV Company, which was included in the equity method investment loss line in the consolidated statements of operations.  The funding of the investment was agreed to be made in three installments.  The JV Company received the first installment of RMB 40 million (or $5.5 million) on December 31, 2024.  However, the JV Company has not received the remaining two installments as of the filing date.

On July 14, 2025, we entered into an equity transfer agreement (“Agreement”) with the investor to sell approximately 20.3% of outstanding equity interest in the JV Company for an aggregate cash consideration of $150 million. We identified the negotiations of the equity transfer agreement throughout the fourth quarter of fiscal year 2025 as an impairment indicator and performed a quantitative impairment test as of June 30, 2025. Based on the implied valuation of the JV Company per the transaction price in the equity transfer agreement, the fair value of the equity method investment was determined to be lower than its carrying value, and a $