Company: SDAWW
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001213900-25-036086
Chunk: 101

Company: SunCar Technology Group Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 4A
Chunk 101
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 used.

Allowance for Credit Losses

Accounts receivable, net are
stated at the original amounts less allowances for credit losses. Accounts receivable are recognized in the period when we have provided
services to our customers and when our right to consideration is unconditional. We adopted ASC Topic 326, Financial Instruments-Credit
Losses (Topic 326) from January 1, 2023 using modified-retrospective transition approach with a cumulative-effect adjustment to shareholders’
equity amounting to US$0.5 million recognized as of January 1, 2023. We assess collectability by reviewing accounts receivable on a collective
basis where similar characteristics exist, primarily based on similar business lines, and on an individual basis when we identify specific
customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, we consider historical
collectability based on past due status, the age of the accounts receivable balances, credit quality of our customers based on ongoing
credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors
that may affect our ability to collect from customers.

For the years ended December
31, 2022, 2023 and 2024, we recognized US$26.0 million, reversed credit losses of accounts receivable of US$4.1 million and recognized
credit losses of US$1.3 million, respectively. A 10% increase in our credit losses provision (reversal) would have increased (decreased)
our loss before income tax by 24%, (3)% and 0.2% for the years ended December 31, 2023 and 2024, respectively.

Valuation Allowance of Deferred Tax Assets

Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets
will not be realized. We consider positive and negative evidence when determining whether a portion or all of our deferred tax assets
will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current and
cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, our experience with tax attributes
expiring unused, and our tax planning strategies. The ultimate realization of deferred tax assets is dependent upon our ability to generate
sufficient future taxable income within the carry-forward periods provided for in the tax law and