Company: ILAG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001641172-25-006445
Chunk: 113

Company: Intelligent Living Application Group Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 3
Chunk 113
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 to December 31, 2024
that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that
would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

E. Critical Accounting Estimates

We prepare our financial statements in accordance with generally accepted
accounting principles of the United States (“ GAAP”). GAAP is a comprehensive set of accounting and disclosure rules
and requirements. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period. Our actual results could differ from those estimates. We use historical
data to assist in the forecast of our future results. Deviations from our projections are addressed when our financials are reviewed on
a monthly basis. This allows us to be proactive in our approach to managing our business. It also allows us to rely on proven data rather
than having to make assumptions regarding our estimates.

When reading our CFS, you should consider
our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the
sensitivity of reported results to changes in conditions and assumptions. Our critical accounting policies and practices include the following:
(i) leases, and (ii) deferred tax assets.

  68  

(i) Leases

The Company follows FASB ASU 2016-02, “ Leases”
(Topic 842) and measures the lease liability based on the present value of the lease payments discounted by the relevant borrowing rate
and reduces the carrying value of the lease liability for lease payments made.

The Company accounts for all significant
leases as either operating or finance leases. At lease inception, if the lease meets any of the following five criteria, the Company will
classify it as a finance lease: (i) the lease transfers ownership of the underlying asset to the Company by the end of the lease term,
(ii) the lease grants the Company an option to purchase the underlying asset that the lessee is reasonably certain to exercise, (iii)
the lease term is for the major part of the remaining economic life of the underlying asset, (iv) the present value of the sum of the
lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially
all (90% or more)