Company: DDC
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001213900-25-043916
Chunk: 223

Company: DDC Enterprise Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 19
Chunk 223
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 is required before payment
of that consideration is due.

A contract asset is recorded when the Company
has transferred products to the customer before payment is received or is due, and right to consideration is conditional on future performance
or other factors in the contract.

Product sales to platform distributors, offline
distributors and advertising services to corporate customers are on credit terms. Receivables are recorded when the Company recognizes
revenue upon fulfilment of the performance obligations.

For products sales to individual customers or
small retailers through third-party E-commerce platforms, those customers pay through the payment channels of the platforms before the
Company delivers the products. The platforms will then transfer the payment (after deducting platform service charges) to the Company
based on pre-agreed days after the Company delivers products, or when the customers confirm the receipts of products, whichever is
earlier.

A contract liability is recorded when the obligation
to transfer goods or service to a customer is not yet fulfilled but for which the Company has received consideration from the customer.

Practical Expedients

The Company applies the practical expedient to
not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less and
contracts for which revenue is recognized at the amount to which the Company has the right to invoice services performed.

Payment terms with the customers require settlement
within one year or less. The Company applies the practical expedient and does not adjust any of the transaction price for the time value
of money. The Company generally expenses sales commissions when incurred because the amortization period would be one year or less. These
costs are recorded within sales and marketing expenses.

(v) Cost of Revenues

Cost of revenues primarily consists of the purchase
price of merchandise, lease costs, costs of publishing advertisement, personnel costs for cooking classes, and cost of fresh products.

F-38

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(cont.)

(w) Fulfilment Expenses

Fulfilment expenses relate to product delivery
and packaging.

(x) Sales and Marketing Expenses

Sales and marketing expenses mainly include app
download promotion, social media platform and short video platform content marketing expenses, E-commerce platform promotion and channel
promotion, including the commission of key opinion leader (“ KOL”), payroll and related expenses for personnel engaged in sales
and marketing activities, depreciation expenses relating to facilities and equipment used by those employees, lease costs of stores and
facilities. The amount of advertising expenses incurred were RMB2.9million,