Company: ECIA
Filing Date: 2025-08-15
Form Type: 10-Q
Source: 0001079973-25-001326
Chunk: 22

Company: ENCISION INC
Filing Date: 2025-08-15
Form: 10-Q
Item: Item 8
Chunk 22
---
 that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following
critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements.

We record revenue at a single point in time when control
is transferred to the customer, which is consistent with past practice. We will continue to apply our current business processes, policies,
systems, and controls to support recognition and disclosure. Our shipping policy is FOB Shipping Point. We recognize revenue from sales
to stocking distributors when there is no right of return other than for normal warranty claims. We have no ongoing obligations related
to product sales except for normal warranty obligations. We evaluated the requirement to disaggregate revenue and concluded that substantially
all of our revenue comes from multiple products within a line of medical devices. Our engineering service contracts are billed on a time
and materials basis, and revenue is recognized over time as the services are performed. We record deferred revenue when funds are received
prior to the recognition of the associated revenue. We record a contract liability to deferred revenue, which includes customer prepayments
and is included in other accrued liabilities.

We provide for the estimated cost of product warranties
at the time sales are recognized. While we engage in extensive product quality programs and processes, including actively monitoring and
evaluating the quality of our component suppliers, we have experienced some costs related to warranties. The warranty accrual is based
on historical experience and is adjusted based on current experience. Should actual warranty experience differ from our estimates, revisions
to the estimated warranty liability would be required.

15 

We reduce inventory for estimated obsolete or unmarketable
inventory equal to the difference between the cost of inventory and the estimated realizable value based on assumptions about future demand
and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs
may be required. Any write-downs of inventory would reduce our reported net income during the period in which such write-downs were applied.
To the extent that our estimates prove to be too high, and we ultimately utilize or sell inventory previously determined to be impaired,
we may record a reversal of the provision in the period of such determination.

We recognize deferred income tax assets and liabilities
for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and
tax bases of assets and liabilities. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount