EX-99.1 2 tm2510084d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

RECONCILIATION BETWEEN U.S. GAAP AND IFRS ACCOUNTING STANDARDS

 

The financial statements are prepared in accordance with U.S. GAAP, which differ in certain respects from IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board. The effects of material differences between the financial statements of the Group prepared under U.S. GAAP and IFRS are as follows:

 

Consolidated Balance Sheet

 

  As of December 31, 2023
Amounts in thousands of Renminbi (“RMB”)		  
        IFRS adjustments      
    Amounts as
reported
under U.S.
GAAP  		   Expected
credit
losses, net
of tax
(Note i)		   Effective
interest rate
on loans
receivable,
net of tax
(Note ii)		   Share-based
compensation
(Note iii)		   Financial
guarantee,
net of tax
(Note iv)		   Amounts
as
reported
under
IFRS  		  
    RMB   RMB   RMB   RMB   RMB   RMB  
ASSETS                                      
Current assets:                                      
Financial assets receivable, net     2,522,543     —     —     —     (2,515,354 )   7,189  
Amounts due from related parties     45,346     —     —     —     (8,942 )   36,404  
Loans receivable, net     24,604,487     —     (43,934 )   —     —     24,560,553  
Total current assets     39,796,028     —     (43,934 )   —     (2,524,296 )   37,227,798  
Non-current assets:                                      
Financial assets receivable, net-noncurrent     596,330     —     —     —     (596,330 )   —  
Amounts due from related parties     4,240     —     —     —     (1,057 )   3,183  
Loans receivable, net-noncurrent     2,898,005     148,675     (1,286 )   —     —     3,045,394  
Deferred tax assets     1,067,738     69,350     —     —     (135,172 )   1,001,916  
Total non-current assets     6,022,544     218,025     (1,286 )   —     (732,559 )   5,506,724  
TOTAL ASSETS     45,818,572     218,025     (45,220 )   —     (3,256,855 )   42,734,522  
LIABILITIES AND EQUITY                                      
LIABILITIES                                      
Current liabilities:                                      
Contract liability     —     —     —     —     388,181     388,181  
Guarantee liabilities-stand ready     3,949,601     —     —     —     (3,949,601 )   —  
Guarantee liabilities-contingent     3,207,264     (803,012 )   —     —     —     2,404,252  
Other tax payable     163,252     —     (2,560 )   —     —     160,692  
Total current liabilities     19,899,619     (803,012 )   (2,560 )   —     (3,561,420 )   15,532,627  
Non-current liabilities:                                      
Deferred tax liabilities     224,823     —     (7,655 )   —     —     217,168  
Total non-current liabilities     3,909,096     —     (7,655 )   —     —     3,901,441  
TOTAL LIABILITIES     23,808,715     (803,012 )   (10,215 )   —     (3,561,420 )   19,434,068  
                                       
SHAREHOLDERS’ EQUITY                                      
Additional paid-in capital     6,059,439     —     —     17,505     —     6,076,944  
Retained earnings     16,297,316     1,021,037     (35,005 )   (17,505 )   304,565     17,570,408  
TOTAL QIFU TECHNOLOGY INC. EQUITY     21,937,483     1,021,037     (35,005 )   —     304,565     23,228,080  
TOTAL EQUITY     22,009,857     1,021,037     (35,005 )   —     304,565     23,300,454  
TOTAL LIABILITIES AND EQUITY     45,818,572     218,025     (45,220 )   —     (3,256,855 )   42,734,522  

 

 

 

Consolidated Statement of Operations

 

  Year ended December 31, 2023
Amounts in thousands of Renminbi (“RMB”)		  
        IFRS adjustments      
    Amounts
as reported
under U.S.
GAAP  		   Expected
credit
losses, net
of tax
(Note i)		   Effective
interest
rate on
loans
receivable,
net of tax
(Note ii)		   Share-based
compensation
(Note iii)		   Financial
guarantee,
net of tax
(Note iv)		   Amounts
as
reported
under
IFRS  		  
    RMB   RMB   RMB   RMB   RMB   RMB  
Revenue, net of value-added tax and related surcharges:                                      
Credit driven services     11,738,560     —     82,387     —     —     11,820,947  
Financing income     5,109,921     —     82,387     —     —     5,192,308  
Total net revenue     16,290,027     —     82,387     —     —     16,372,414  
Operating costs and expenses:                                      
Facilitation, origination and servicing     2,659,912     —     —     (23,643 )   —     2,636,269  
Sales and marketing     1,939,885     —     —     (5,096 )   —     1,934,789  
General and administrative     421,076     —     —     (24,788 )   —     396,288  
Provision for loans receivable     2,151,046     (11,520 )   —     —     —     2,139,526  
Provision for financial assets receivable     386,090     —     —     —     (14,778 )   371,312  
Provision for contingent liabilities     3,053,810     (12,062 )   —     —     —     3,041,748  
Total operating costs and expenses     11,433,063     (23,582 )   —     (53,527 )   (14,778 )   11,341,176  
Income from operations     4,856,964     23,582     82,387     53,527     14,778     5,031,238  
Income before income tax expense     5,277,451     23,582     82,387     53,527     14,778     5,451,725  
Income tax expense     (1,008,874 )   (3,582 )   (12,088 )   —     (2,245 )   (1,026,789 )
Net income     4,268,577     20,000     70,299     53,527     12,533     4,424,936  
Net income attributable to ordinary shareholders of the Company     4,285,336     20,000     70,299     53,527     12,533     4,441,695  

 

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Consolidated Balance Sheet

 

  As of December 31, 2024
Amounts in thousands of Renminbi (“RMB”)		  
        IFRS adjustments      
    Amounts as
reported
under U.S.
GAAP  		   Expected
credit
losses, net
of tax
(Note i)		   Effective
interest rate
on loans
receivable,
net of tax (Note ii)		   Share-based
compensation
(Note iii)		   Financial
guarantee,
net of tax
(Note iv)		   Amounts
as
reported
under
IFRS  		  
    RMB   RMB   RMB   RMB   RMB   RMB  
ASSETS                                      
Current assets:                                      
Financial assets receivable, net     1,553,912     —     —     —     (1,545,875 )   8,037  
Amounts due from related parties     8,510     —     —     —     168     8,678  
Loans receivable, net     26,714,428     —     (140,502 )   —     —     26,573,926  
Total current assets     42,780,568     —     (140,502 )   —     (1,545,707 )   41,094,359  
Non-current assets:                                      
Financial assets receivable, net-noncurrent     170,779     —     —     —     (170,779 )   —  
Amounts due from related parties     51     —     —     —     —     51  
Loans receivable, net-noncurrent     2,537,749     224,446     (17,023 )   —     —     2,745,172  
Deferred tax assets     1,206,325     135,222     —     —     (124,964 )   1,216,583  
Total non-current assets     5,352,050     359,668     (17,023 )   —     (295,743 )   5,398,952  
TOTAL ASSETS     48,132,618     359,668     (157,525 )   —     (1,841,450 )   46,493,311  
LIABILITIES AND EQUITY                                      
LIABILITIES                                      
Current liabilities:                                      
Contract liability     —     —     —     —     295,578     295,578  
Guarantee liabilities-stand ready     2,383,202     —     —     —     (2,383,202 )   —  
Guarantee liabilities-contingent     1,820,350     (284,558 )   —     —     —     1,535,792  
Other tax payable     109,161     —     (8,917 )   —     —     100,244  
Total current liabilities     17,472,209     (284,558 )   (8,917 )   —     (2,087,624 )   15,091,110  
Non-current liabilities:                                      
Deferred tax liabilities     439,435     —     (23,202 )   —     —     416,233  
Total non-current liabilities     6,414,190     —     (23,202 )   —     —     6,390,988  
TOTAL LIABILITIES     23,886,399     (284,558 )   (32,119 )   —     (2,087,624 )   21,482,098  
                                       
SHAREHOLDERS’ EQUITY                                      
Additional paid-in capital     4,339,413     —     —     (17,867 )   —     4,321,546  
Retained earnings     20,952,340     644,226     (125,406 )   17,867     246,174     21,735,201  
TOTAL QIFU TECHNOLOGY INC. EQUITY     24,190,043     644,226     (125,406 )   —     246,174     24,955,037  
TOTAL EQUITY     24,246,219     644,226     (125,406 )   —     246,174     25,011,213  
TOTAL LIABILITIES AND EQUITY     48,132,618     359,668     (157,525 )   —     (1,841,450 )   46,493,311  

 

3

 

 

Consolidated Statement of Operations

 

  Year ended December 31, 2024
Amounts in thousands of Renminbi (“RMB”)		  
        IFRS adjustments      
    Amounts
as reported
under U.S.
GAAP  		   Expected
credit
losses, net
of tax
(Note i)		   Effective
interest
rate on
loans
receivable,
net of tax
(Note ii)		   Share-based
compensation
(Note iii)		   Financial
guarantee,
net of tax
(Note iv)		   Amounts
as
reported
under
IFRS  		  
    RMB   RMB   RMB   RMB   RMB   RMB  
Revenue, net of value-added tax and related surcharges:                                      
Credit driven services     11,719,027     —     (105,947 )   —     —     11,613,080  
Financing income     6,636,511     —     (105,947 )   —     —     6,530,564  
Total net revenue     17,165,656     —     (105,947 )   —     —     17,059,709  
Operating costs and expenses:                                      
Facilitation, origination and servicing     2,900,704     —     —     (24,992 )   —     2,875,712  
Sales and marketing     1,725,877     —     —     (2,352 )   —     1,723,525  
General and administrative     449,505     —     —     (8,028 )   —     441,477  
Provision for loans receivable     2,773,323     (75,771 )   —     —     —     2,697,552  
Provision for financial assets receivable     296,857     —     —     —     68,598     365,455  
Provision for contingent liabilities     478,404     518,454     —     —     —     996,858  
Total operating costs and expenses     9,637,086     442,683     —     (35,372 )   68,598     10,112,995  
Income from operations     7,528,570     (442,683 )   (105,947 )   35,372     (68,598 )   6,946,714  
Income before income tax expense     7,892,422     (442,683 )   (105,947 )   35,372     (68,598 )   7,310,566  
Income tax expense     (1,644,306 )   65,872     15,546     —     10,207     (1,552,681 )
Net income     6,248,116     (376,811 )   (90,401 )   35,372     (58,391 )   5,757,885  
Net income attributable to ordinary shareholders of the Company     6,264,314     (376,811 )   (90,401 )   35,372     (58,391 )   5,774,083  

 

4

 

 

Notes:

 

(i)Expected credit losses, net of tax

 

Under U.S. GAAP, ASC 326 requires recognition of allowances upon origination or acquisition of financial assets at an estimate to reflect expected credit losses over the contractual term of the financial assets (the current expected credit loss or the “CECL” model), and adjusted as of each subsequent reporting period. Under IFRS, in accordance with IFRS 9, only the portion of lifetime expected credit loss (“ECL”) that results from default events that are possible within 12 months after the reporting date is recorded (“stage 1”) upon initial recognition. Lifetime expected credit losses are subsequently recorded only if there is a significant increase in the credit risk of the asset (“stage 2”). Once there is objective evidence of impairment (“stage 3”), lifetime ECL continues to be recognized, but interest revenue is calculated on the net carrying amount (that is, amortized cost net of the credit allowance). Accordingly, the reconciliation includes a difference in the credit losses for loans receivable and guarantee liabilities to reflect the difference between IFRS 9 and ASC 326.

 

(ii)Effective interest rate on loans receivable, net of tax

 

The Group recognizes revenue fees and interests charged to the borrowers over the lifetime of the loans using the effective interest method under “financing income” in the consolidated statement of operations. Under U.S. GAAP, the effective interest rate is computed on the basis of the contractual cash flows over the contractual term of the loan. Under IFRS, the effective interest rate is computed on the basis of the estimated cash flows that are expected to be received over the expected life of a loan by considering all of the loan’s contractual terms (e.g., prepayment and similar options). Accordingly, the reconciliation includes a difference in financing income and loans receivable as a result.

 

(iii)Share-based compensation

 

The Group granted options and restricted shares with service condition only to employees and the share-based compensation expenses were recognized over the vesting period using straight-line method under U.S. GAAP. The Group is allowed to make an accounting policy election to account for awards forfeitures as they occur or by estimating expected forfeitures as compensation cost is recognized. The Group elects to account for forfeitures of all the rewards in the period they occur as a deduction to expense. While under IFRS, the graded vesting method must be applied and in regard of forfeitures of the awards, the Group is required to estimate the forfeitures. Accordingly, the reconciliation includes an income of RMB53,527 and RMB35,372 in the consolidated statements of operations for each of the years ended December 31, 2023 and 2024, respectively.

 

(iv)Financial guarantee, net of tax

 

Under U.S. GAAP, the Group adopted ASC 326, Financial Instruments – Credit Losses, which requires gross accounting for guarantee liability. As a result, at inception of the guarantee, the Group will recognize both a stand-ready guarantee liability under ASC 460 with an associated financial assets receivable, and a contingent guarantee liability with an allowance under CECL model. Subsequent to the initial recognition, the ASC 460 stand-ready guarantee liability is released into guarantee revenue on a straight-line basis over the term of the guarantee, while the contingent guarantee is reduced by the payouts made by the Group to compensate the investors upon borrowers’ default. Under IFRS, according to IFRS 9 and IFRS 15, the Group chose to apply the accounting policy that guarantee premium receivable is accrued and the corresponding revenue recognized on a monthly basis as the service fees are due and collected by installment rather than upfront. After initial recognition, the Group subsequently measure the financial guarantees at the higher of (1) the amount of the loss allowance and (2) the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of IFRS 15. Accordingly, the reconciliation includes a difference in financial guarantee to reduce the liabilities recorded.

 

Tax impacts for each difference have been reflected in respective columns.

 

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