Company: DDC
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001213900-25-043916
Chunk: 112

Company: DDC Enterprise Ltd
Filing Date: 2025-05-15
Form: 20-F
Item: Item 5
Chunk 112
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. Fair value of Cook SF reporting unit was less than its carrying amount. The impairment loss on goodwill
was nil and RMB6.6 million (US$0.9 million) for the year ended December 31, 2022 and 2023.

Share-based compensation

The cost for share-based compensation
were RMB39.0 million and RMB83.9 million (US$11.8 million) for the years ended December 31, 2022 and 2023. The increase was
due to mass exercise of stock options upon our successful IPO in November 2023 which resulted in recognition of share-based compensation
expense.

Critical Accounting Policies and Estimates

We prepare our financial statements
in conformity with U. S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates
and assumptions based on the most recently available information, our own historical experience and various other assumptions that we
believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process,
actual results could differ from our expectations as a result of changes in its estimates. Some of our accounting policies require a higher
degree of judgment than others in their application and require us to make significant accounting estimates.

The following descriptions
of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements
and accompanying notes and other disclosures included in this proxy statement.

Revenue recognition

Our revenue is recognized
when control of the promised good or service is transferred to the customer in an amount that reflects the consideration expected to receive
in exchange for those goods or services, after considering estimated sales return allowances, and value added tax (“ VAT”).
We follow five steps for revenue recognition: (i) identify the contract(s) with a customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations
in the contract, and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

Revenue is primarily derived
from (i) online products sales to individual customers or small retailers through third-party E-commerce platforms (ii) offline
products sales to various distributors, e. g. offline retail chains or supermarkets who then sell to end customers, (iii) advertising
services to customers with well-known brand names in lifestyle-related industries, (iv) cooking classes in the branded experience
stores operated by us and (v