Company: SISI
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-010889
Chunk: 186

Company: SHINECO, INC.
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 2
Chunk 186
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include, but are not limited to, useful lives of property and equipment, and intangible assets, the recoverability of long-lived assets,
assessment of expected credit losses for accounts receivable and other current asset, the valuation allowance of deferred taxes and inventory
reserves. Actual results could differ from those estimates.

Credit Losses

On July 1, 2023, we adopted Accounting Standards Update
2016-13 “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,”
which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss
(“CECL”) methodology. The adoption of the credit loss accounting standard has no material impact on our consolidated financial
statements as of the date of adoption.

Our account receivables and other receivables included
in other current assets on the unaudited condensed consolidated balance sheets are within the scope of ASC Topic 326. We make estimates
of expected credit and collectability trends for the allowance for credit losses based upon assessment of various factors, including historical
experience, the age of the accounts receivable and other receivables balances, credit-worthiness of the customers and other debtors, current
economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability
to collect from the customers and other debtors. We also provide specific provisions for allowance when facts and circumstances indicate
that the receivable is unlikely to be collected.

ASC Topic 326 is also applicable to loans to third
parties that are included in the other current assets on the unaudited condensed consolidated balance sheets. Management estimates the
allowance for credit losses on loans that do not share similar risk characteristics on an individual basis. The key factors considered
when determining the above allowances for credit losses include estimated loan collection schedule, discount rate, and assets and financial
performance of the borrowers.

Expected credit losses are recorded as general and
administrative expenses on the unaudited condensed consolidated statements of loss and comprehensive loss. After all attempts to collect
a receivable have failed, the receivable is written off against the allowance. In the event we recover amounts previously reserved for,
we will reduce the specific allowance for credit losses.

56

Inventories, Net

Inventories, which are stated at the lower of cost
or net realizable value, consist of raw materials, work-in-progress, and finished goods related to our products. Net realizable value