Company: LICN
Filing Date: 2025-04-29
Form Type: 20-F
Source: 0001213900-25-036244
Chunk: 38

Company: Lichen International Ltd
Filing Date: 2025-04-29
Form: 20-F
Item: Item 4A
Chunk 38
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 fair value of reporting units includes estimating future cash flows, determining appropriate discount rates
and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each
reporting unit.

Fair value of financial instruments

ASC 825-10 requires certain
disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value
hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs
and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

  Level 1 — inputs                                                                                                    

  Level 2 — inputs                                                                                                                               

  Level 3 — inputs                                

The fair value of the Company’s
financial instruments, including cash, accounts receivable, accounts payable, accrued expenses and other current liabilities and due to
the related parties, approximate their recorded values due to their short-term maturities as of December 31, 2024 and 2023.

Recent Accounting Pronouncements

The Company considers the
applicability and impact of all accounting standards updates (“ ASUs”). Management periodically reviews new accounting standards
that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “ JOBS Act”), the Company meets the
definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting
standards, which delays the adoption of these accounting standards until they would apply to private companies.

In November 2024, the FASB issued ASU 2024-03,
“ Income Statement - Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This
pronouncement introduces new disclosure requirements aimed at enhancing transparency in financial reporting by requiring disaggregation
of specific income statement expense captions. Under the new guidance, entities are required to disclose a breakdown of certain expense
categories, such as: employee compensation; depreciation; amortization, and other material components. The disaggregated information can
be presented either on the face of the income statement or in the notes to the financial statements, often using a tabular format. The
ASU is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption