Company: RETO
Filing Date: 2025-05-09
Form Type: 20-F
Source: 0001213900-25-041195
Chunk: 53

Company: ReTo Eco-Solutions, Inc.
Filing Date: 2025-05-09
Form: 20-F
Item: Item 19
Chunk 53
---
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Leases

The Company adopted ASU No. 2016-02 - Leases
(Topic 842) on January 1, 2019 using the modified retrospective transition method permitted under ASU No. 2018-11. This transition approach
provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted.
In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard,
which among other things, allowed the Company to carry forward the historical lease classification. The standard did not materially impact
the Company’s consolidated net earnings and cash flows.

Fair Value of Financial Instruments

ASC 825-10 requires certain disclosures regarding
the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes
the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of
unobservable inputs. The three levels of inputs used to measure fair value are as follows:

  Level 1 - Quoted prices in active markets for identical assets and liabilities.                                                                                                                       
  Level 2 - Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially th...  
  Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, ...  

The Company considers the recorded value of its
financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, advances to suppliers, accounts
payable, accrued expenses and other liabilities, advances from customers, deferred revenue, taxes payable and due to related parties to
approximate the fair value of the respective assets and liabilities at December 31, 2024 and 2023 based upon the short-term nature of
the assets and liabilities.

The Company believes that the carrying amount
of the short-term and long-term borrowings approximates fair value on December 31, 2024 and 2023 based on the terms of the borrowings
and current market rates as the rates of the borrowings are reflective of the current market rates.

The Company elected