Company: XHG
Filing Date: 2025-01-22
Form Type: 20-F
Source: 0001213900-25-005499
Chunk: 200

Company: XChange TEC.INC
Filing Date: 2025-01-22
Form: 20-F
Item: Item 19
Chunk 200
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 from insurance companies stated at net realizable values. The Company reviews its accounts receivable
on a periodic basis to determine if the allowance for expected credit loss is adequate, and adjust the allowance when necessary.

On October 1, 2023, the Company adopted Accounting Standards Update
(“ ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
(“ ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaces the existing incurred loss impairment
model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, the Company changed
the impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology
for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets.
The adoption of the guidance had no impact on the allowance for credit losses for accounts receivable.

Upon the adoption of ASU 2016-13, the management maintains an allowance
for credit losses and records the allowance for credit losses as an offset to accounts receivable and the estimated credit losses charged
to the allowance is classified as “ General and administrative expenses” in the consolidated statements of operations and comprehensive
income (loss). In determining the amount of the allowance for credit losses, the Company considers historical collectability based on
past due status, the age of the balances, credit quality of the Company’s customers based on ongoing credit evaluations, current
economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s
ability to collect from customers. Delinquent account balances are written-off against the allowance for doubtful accounts after management
has determined that the likelihood of collection is not probable.

The Company acquired the insurance agency business in December 2023.
As of September 30, 2023 and 2024, allowance for allowance for expected credit loss were niland RMB191, respectively.

Advances to suppliers

Prepayments are advanced to suppliers for future
service rendering. As of September 30, 2023 and 2024, Advances to suppliers amounted to RMB7,296and RMB13,745, respectively. For any
advances to suppliers determined by management that such advances will not be in receipts or refundable, the Company will recognize an
allowance account to reserve such balances