Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

3. Summary of Significant Accounting Policies

(a) Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted.

In the opinion of management, the information reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. Quarterly results are not necessarily indicative of results for the full year. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

(b) Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Group to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Group’s unaudited condensed consolidated financial statements include the allowance made for credit losses, inventory write-downs, the estimated useful lives of long-lived assets, the impairment of goodwill, long-lived assets and project assets, valuation allowance of deferred tax assets, accrued warranty expenses, the grant-date fair value of share-based compensation awards and related forfeiture rates, the lease discount rate, the purchase price allocation in acquisition, and fair value of financial instruments. Changes in facts and circumstances may result in revised estimates. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.

(c) Revenue Recognition

The Group’s accounting practices under Accounting Standards Codification (“ASC”) No. 606 are as followings:

The Group generates revenue from sales of PV components, roofing and solar energy systems installation, electricity revenue with Power Purchase Agreements (“PPAs”), sales and leasing of EV, and others for the nine months ended September 30, 2022 and 2021.

Sale of PV components

Revenue on sale of PV components includes one performance obligation of delivering the products and the revenue is recognized at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or acceptance of the customer depending on the terms of the underlying contracts.

Revenue from roofing and solar energy systems installation

Revenue from roofing and solar energy system installation is recognized over time.

For revenue from solar energy system installation, the Group’s only performance obligation is to design and install a customize solar energy system, sometimes, reinstall the customer’s existing solar energy system. For roofing the Group’s only performance obligation is to design and build roof system per customer selection.

All costs to obtain and fulfill contracts associated with system sales and other product sales are expensed to cost of revenue when the corresponding revenue is recognized.

The Group recognizes revenue using a cost-based input method that recognizes revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated cost of the contract, to determine the Group’s progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize. The total estimated cost of the contract consists of material cost and labor cost, and is developed based on the size and specific situation of different jobs. Changes in estimates are mainly due to: (i) unforeseen field conditions that impacts the estimated workload, and (ii) change of the unit price of material or labor cost.

If the estimated total costs on any contract are greater than the net contract revenues, the Group recognizes the entire estimated loss in the period the loss becomes known.

Electricity revenue with PPAs

The Group sells energy generated by PV solar power systems under PPAs. For energy sold under PPAs, the Group recognizes revenue each period based on the volume of energy delivered to the customer (i.e., the PPAs off-taker) and the price stated in the PPAs. The Group has determined that none of the PPAs contains a lease since (i) the purchaser does not have the rights to operate the PV solar power systems, (ii) the purchaser does not have the rights to control physical access to the PV solar power systems, and (iii) the price that the purchaser pays is at a fixed price per unit of output.

Revenue from sales and leasing of EV

The Group recognizes revenue from sales of EV at a point in time following the transfer of control of such products to the customer, which typically occurs upon the delivery to the customer for EV sales. The Group determined that the government grants related to sales of EV should be considered as part of the transaction price because it is granted to the EV buyer and the buyer remains liable for such amount in the event the grants were not received by the Group or returned due to the buyer violates the government grant terms and conditions.

EV leasing revenue includes revenue recognized under lease accounting guidance for direct leasing programs. The Group accounts for these leasing transactions as operating leases under ASC 842 Leases, and revenues are recognized on a straight-line basis over the contractual term.

Other revenue

Other revenue mainly consisted of revenue generated from sales of self-assembled solar panels, sales of component and charging stations, sales of forklifts, engineering and maintenance service, shipping and delivery service, and others. Other revenues are recognized at a point in time following the transfer of control of such service or products to the customer, which typically occurs upon shipment of product or acceptance of the customer depending on the terms of the underlying contracts.

Disaggregation of revenues

The following table illustrates the disaggregation of revenue by revenue stream and by geographical location for the three and nine months ended September 30, 2022 and 2021:

By revenue stream	For the nine months ended September 30, 2022 (Unaudited)
	Sales of PV components		Revenue from roofing and solar systems installation		Electricity revenue with PPAs		Automotive sales & leasing		Others		Total
Australia	$	94,953	$	–	$	–	$	–	$	660	$	95,613
Italy		–		–		776		–		–		776
United States		1,608		23,735		–		2,572		2,330		30,245
United Kingdom		–		–		1,561		–		–		1,561
Greece		–		–		2,136		–		–		2,136
Total	$	96,561	$	23,735	$	4,473	$	2,572	$	2,990	$	130,331

By revenue stream	For the three months ended September 30, 2022 (Unaudited)
	Sales of PV components		Revenue from roofing and solar systems installation		Electricity revenue with PPAs		Automotive sales & leasing		Others		Total
Australia	$	35,399	$	–	$	–	$	–	$	218	$	35,617
Italy		–		–		308		–		–		308
United States		305		3,582		–		411		1,575		5,873
United Kingdom		–		–		629		–		–		629
Greece		–		–		785		–		–		785
Total	$	35,704	$	3,582	$	1,722	$	411	$	1,793	$	43,212

By revenue stream	For the nine months ended September 30, 2021 (Unaudited)
	Sales of PV components		Revenue from roofing and solar systems installation		Electricity revenue with PPAs		Automotive sales & leasing		Others		Total
Australia	$	88,168	$	–	$	–	$	–	$	835	$	89,003
Italy		–		–		498		–		–		498
United States		–		23,603		–		1,680		267		25,550
United Kingdom		–		–		1,036		–		–		1,036
Greece		–		–		2,317		–		–		2,317
Total	$	88,168	$	23,603	$	3,851	$	1,680	$	1,102	$	118,404

By revenue stream	For the three months ended September 30, 2021 (Unaudited)
	Sales of PV components		Revenue from roofing and solar systems installation		Electricity revenue with PPAs		Automotive sales & leasing		Others		Total
Australia	$	27,365	$	–	$	–	$	–	$	203	$	27,568
Italy		–		–		177		–		–		177
United States		–		9,240		–		554		122		9,916
United Kingdom		–		–		365		–		–		365
Greece		–		–		938		–		–		938
Total	$	27,365	$	9,240	$	1,480	$	554	$	325	$	38,964

Contract balance

The following table provides information about contract assets and contract liabilities from contracts with customers:

	September 30, 2022 (Unaudited)		December 31, 2021
Contract assets	$	1,625	$	1,621
Advance from customers	$	6,749	$	4,924

The contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the reporting date, primarily for the revenue from roofing and solar energy systems installation in the United States. The contract assets are transferred to receivables when the rights become unconditional after billing is issued.

Advance from customers, which representing a contract liability, represents mostly unrecognized revenue amount received from customers. Advance from customers is recognized as (or when) the Group performs under the contract. During the nine months ended September 30, 2022 and 2021, the Group recognized $4,924 and $1,377 as revenue that was included in the balance of advance from customers at January 1, 2022 and 2021, respectively.

(d) Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This guidance eliminates the beneficial conversion feature and cash conversion models in Accounting Standards Codification (ASC or Codification) 470-20 that require separate accounting for embedded conversion features in convertible instruments. This guidance also eliminates some of the conditions that must be met for equity classification under ASC 815-40-25. The new guidance also requires entities to use the if-converted method to calculate earnings per share (EPS) for all convertible instruments in the diluted EPS calculation and include the effect of potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for liability-classified share-based payment awards. ASU No. 2020-06 is effective for annual periods beginning after December 15, 2021 and interim periods therein. The Group adopted ASU No. 2020-06 on January 1, 2022. The adoption did not have a material impact on the Group’s consolidated financial statements.

Other significant accounting policies are detailed in “Note 3 - Summary of Significant Accounting Policies” of the Company’s consolidated financial statements for the year ended December 31, 2021.