CIIT, a growing international company, has successfully recorded an $8,704 right of use (ROU) asset and operating lease liabilities in January 2023. This move is based on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 5%. As an emerging growth company under the Jumpstart Our Business Startups Act (JOBS Act), CIIT is actively expanding its operations and taking advantage of new accounting standards to support its development.
The company adheres to U.S. GAAP policies and initially determines if a contract contains a lease at inception. It evaluates and classifies these leases as either operating or finance leases for financial reporting purposes. Consequently, the classification evaluation begins at the commencement date, and the lease term used in the evaluation includes the non-cancellable period for which the company has the right to use the underlying asset.
CIIT classified all of its real estate leases as operating leases and transitioned to ASC 842 using the effective date. Lease payments for an operating lease transitioning were based on future payments at the transition date and on the present value of lease payments over the remaining lease term. Since the implicit rate for the company’s leases is not readily determinable, CIIT uses its incremental borrowing rate to determine the present value of lease payments.
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Impairment and Recoverability of ROU Assets
According to the ROU agreement, CIIT consistently reviews the impairment of its ROU assets in alignment with the approach applied to its other long-lived assets. Furthermore, it reviews the recoverability of its long-lived assets when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The evaluation of possible impairment is based on the company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.
Taxation Policies
Regarding taxation, CIIT accounts for current income taxes following the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year, adjusted for items that are non-taxable or non-deductible. It is also calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Emerging Growth Company Status and Accounting Standards
CIIT has established itself as an emerging growth company under the Jumpstart Our Business Startups Act (JOBS Act). The company is taking advantage of new accounting standards put forth by the Financial Accounting Standards Board (FASB). This includes assessing and adopting applicable accounting standards updates (ASUs), which are delayed under the JOBS Act for emerging growth companies like CIIT.
Income Tax Information
In terms of income tax, CIIT has an effective tax rate of (0.41)% and 16.5% for the three months ended April 30, 2023, and 2022. The company has incurred U.S. operating losses and has minimal taxable profits in foreign jurisdictions.
Conclusion
Overall, CIIT’s successful recognition of the ROU asset and its aggressive expansion as an emerging growth company under the JOBS Act reflect its strategic positioning for significant growth and success. With a strong foundation in financial management, CIIT is set to make a substantial impact in the global market.
Note that we may hold securities mentioned in this article. The source of this article are the SEC filings available at https://www.sec.gov/Archives/edgar/data/1557798/000168316823004090/tianci_i10q-043023.htm that we extracted with the help of various software tools. Even though we have implemented various fact-checking processes, some incorrect information may have remained in the article (false positive). Let us know if you find any inconsistencies!