EX-99.2 3 tm2421411d1_ex99-2.htm EXHIBIT 99.2

 

Exhibit 99.2

 

DIFFERENCES BETWEEN U.S. GAAP AND IFRSs

 

The interim financial statements for the six months ended June 30, 2024 is prepared by Directors of the Company under the accounting principles generally accepted in the United States of America (the “U.S. GAAP”), and the differences between U.S. GAAP and the International Financial Reporting Standards issued by the International Accounting Standards Board (the “IFRSs”) (together, the “Reconciliation”) have been disclosed in the Appendix – Reconciliation Statement attached herein.

 

Basis of Preparation

 

The directors of the Company are responsible for the preparation of the Reconciliation based on the notes to Reconciliation as set out in the Appendix, in accordance with paragraph 19.25A of the Hong Kong Listing Rules and the guidance letter HKEX-GL111-22 updated by The Stock Exchange of Hong Kong Limited in August 2022. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation of the Reconciliation to enable the preparation of such information that is free from material misstatement, whether due to fraud or error.

 

Reconciliation Process

 

The Reconciliation has been prepared by the Directors by comparing the differences between the “Amounts as reported under U.S. GAAP” for each of the six months ended June 30, 2024 and 2023 on the one hand, and the “Amounts as reported under IFRSs” on the other hand in respect of each of the six months ended June 30, 2024 and 2023, as appropriate, and quantifying the relevant financial effects of such differences, if any. Attention is drawn to the fact that as the GAAP Difference Reconciliation has not been subject to an independent audit and accordingly, no opinion is expressed by an auditor on whether the financial information in the GAAP Difference Reconciliation presents a true and fair view or not.

 

Limited Assurance Engagement and Results

 

Deloitte Touche Tohmatsu was engaged by the Company to conduct limited assurance engagement in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” (“HKSAE 3000 (Revised)”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) on the Reconciliation. The limited assurance engagement consisted primarily of:

 

(i)Comparing the “Amounts as reported under U.S. GAAP” for the six months ended June 30, 2024 in the Reconciliation as set out in the Appendix with the published unaudited condensed consolidated financial information of the Group for the six months ended June 30, 2024 prepared in accordance with the U.S. GAAP;

 

(ii)Evaluating the assessment made by the Directors in identifying the differences between the accounting policies in accordance with the U.S. GAAP and the IFRSs, and the evidence supporting the adjustments and reclassifications made in the Reconciliation in arriving at the “Amounts as reported under IFRSs” in the Reconciliation as set out in the Appendix; and

 

(iii)Checking the arithmetic accuracy of the computation of the Reconciliation as set out in the Appendix.

 

1 

 

 

The procedures performed by Deloitte Touche Tohmatsu in this limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed. Accordingly, Deloitte Touche Tohmatsu do not express a reasonable assurance opinion.

 

Based on the procedures performed and evidence obtained, Deloitte Touche Tohmatsu have concluded that nothing has come to their attention that causes them to believe that:

 

(i)The “Amounts as reported under U.S. GAAP” for the six months ended June 30, 2024 in the Reconciliation as set out in the Appendix is not in agreement with the published unaudited condensed consolidated financial information of the Group for the six months ended June 30, 2024 prepared in accordance with the U.S. GAAP;

 

(ii)The adjustments and reclassifications made in the Reconciliation in arriving at the “Amounts as reported under IFRSs” in the Reconciliation as set out in the Appendix, do not reflect, in all material respects, the different accounting treatments according to the Group’s accounting policies in accordance with the U.S. GAAP and the IFRSs of the relevant period; and

 

(iii)The computation of the Reconciliation as set out in the Appendix is not arithmetically accurate.

 

2 

 

 

Appendix – Reconciliation prepared by the directors of the Company

 

The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, which differ in certain respects from International Financial Reporting Standards (“IFRSs”) 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 IFRSs are as follows:

 

   Six months ended June 30, 2023 
       IFRSs adjustments     
           Effective             
   Amounts as   Expected   interest rate           Amounts as 
   reported   credit   on loans       Financial   reported 
   under   Losses,   receivable,   Share-based   Guarantee,   under 
Condensed Consolidated Statement of Operations  U.S. GAAP   net of tax   net of tax   compensation   net of tax   IFRSs 
   (In thousands of Renminbi (“RMB”)) 
       (Note i)   (Note ii)   (Note iii)   (Note iv)     
   RMB   RMB   RMB   RMB   RMB   RMB 
Revenue, net of value-added tax and related surcharges:                              
Credit driven services   5,419,328    –    (253,007)   –    –    5,166,321 
Financing income   2,254,620    –    (253,007)   –    –    2,001,613 
Total net revenue   7,513,498    –    (253,007)   –    –    7,260,491 
Operating costs and expenses:                              
Facilitation, origination and servicing   1,288,330    –    –    (14,561)   –    1,273,769 
Sales and marketing   858,663    –    –    (2,114)   –    856,549 
General and administrative   217,646    –    –    (32,662)   –    184,984 
Provision for loans receivable   1,002,170    (116,729)   –    –    –    885,441 
Provision for financial assets receivable   151,017    –    –    –    159,778    310,795 
Provision for contingent liabilities   1,437,924    87,062    –    –    –    1,524,986 
Total operating costs and expenses   5,324,968    (29,667)   –    (49,337)   159,778    5,405,742 
Income from operations   2,188,530    29,667    (253,007)   49,337    (159,778)   1,854,749 
Income before income tax expense   2,468,424    29,667    (253,007)   49,337    (159,778)   2,134,643 
Income tax expense   (445,225)   (4,450)   37,952    –    23,967    (387,756)
Net income   2,023,199    25,217    (215,055)   49,337    (135,811)   1,746,887 
Net income attributable to ordinary shareholders of the Company  2,031,549   25,217   (215,055)  49,337   (135,811)  1,755,237 

 

3 

 

 

   Six months ended June 30, 2024 
       IFRSs adjustments     
           Effective             
   Amounts as   Expected   interest rate           Amounts as 
   reported   credit   on loans       Financial   reported 
   under   Losses,   receivable,   Share-based   Guarantee,   under 
Condensed Consolidated Statement of Operations  U.S. GAAP   net of tax   net of tax   compensation   net of tax   IFRSs 
   (In thousands of Renminbi (“RMB”)) 
       (Note i)   (Note ii)   (Note iii)   (Note iv)     
   RMB   RMB   RMB   RMB   RMB   RMB 
Revenue, net of value-added tax and related surcharges:                                                
Credit driven services     5,928,487       –       (50,622 )     –       –       5,877,865  
Financing income     3,225,096       –       (50,622 )     –       –       3,174,474  
Total net revenue     8,313,246       –       (50,622 )     –       –       8,262,624  
Operating costs and expenses:                                                
Facilitation, origination and servicing     1,458,186       –       –       (8,190 )     –       1,449,996  
Sales and marketing     782,005       –       –       (1,368 )     –       780,637  
General and administrative     201,469       –       –       (2,413 )     –       199,056  
Provision for loans receivable     1,697,429       22,939       –       –       –       1,720,368  
Provision for financial assets receivable     169,169       –       –       –       86,950       256,119  
Provision for contingent liabilities     103,397       467,263       –       –       –       570,660  
Total operating costs and expenses     4,964,159       490,202       –       (11,971 )     86,950       5,529,340  
Income from operations     3,349,087       (490,202 )     (50,622 )     11,971       (86,950 )     2,733,284  
Income before income tax expense     3,602,772       (490,202 )     (50,622 )     11,971       (86,950 )     2,986,969  
Income tax expense     (1,066,120 )     73,514       7,591       –       13,040       (971,975 )
Net income     2,536,652       (416,688 )     (43,031 )     11,971       (73,910 )     2,014,994  
Net income attributable to ordinary shareholders of the Company     2,544,815     (416,688 )     (43,031 )     11,971       (73,910 )     2,023,157  

 

4 

 

 

    As of December 31, 2023  
          IFRSs adjustments        
Condensed Consolidated Balance Sheet   Amounts as
reported
under
U.S. GAAP		     Expected
credit
losses,
net of tax		     Effective
interest rate
on loans
receivable,
net of tax		     Share-based
compensation		     Financial
guarantee,
net of tax		     Amounts as
reported
under
IFRSs		  
    (In thousands of Renminbi (“RMB”))  
     RMB     (Note i)
RMB		     (Note ii)
RMB		     (Note iii)
RMB		     (Note iv)
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  

 

5 

 

 

   As of December 31, 2023 
       IFRSs adjustments     
Condensed Consolidated Balance Sheet  Amounts as
reported
under
U.S. GAAP		   Expected
credit
losses,
net of tax		   Effective
interest rate
on loans
receivable,
net of tax		   Share-based
compensation		   Financial
guarantee,
net of tax		   Amounts as
reported
under
IFRSs		 
   (In thousands of Renminbi (“RMB”)) 
  

 

RMB

   (Note i)
RMB		   (Note ii)
RMB		   (Note iii)
RMB		   (Note iv)
RMB		  

 

RMB

 
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 

 

6 

 

 

   As of June 30, 2024 
       IFRSs adjustments     
           Effective             
   Amounts as   Expected   interest rate           Amounts as 
   reported   credit   on loans       Financial   reported 
   under   losses,   receivable,   Share-based   guarantee,   under 
Condensed Consolidated Balance Sheet  U.S. GAAP   net of tax   net of tax   compensation   net of tax   IFRSs 
                         
       (In thousands of Renminbi (“RMB”))     
   RMB   (Note i)
RMB		   (Note ii)
RMB		   (Note iii)
RMB		   (Note iv)
RMB		   RMB 
ASSETS                        
Current assets:                              
Financial assets receivable, net   1,528,003    –    –    –    (1,499,657)   28,346 
Amounts due from related parties   31,459    –    –    –    (2,308)   29,151 
Loans receivable, net   26,722,713    –    (86,277)   –    –    26,636,436 
                               
Total current assets   41,415,757    –    (86,277)   –    (1,501,965)   39,827,515 
                               
Non-current assets:                              
Financial assets receivable, net-noncurrent   232,571    –    –    –    (232,571)   – 
Amounts due from related parties   396    –    –    –    –    396 
Loans receivable, net-noncurrent   2,859,871    125,736    (12,603)   –    –    2,973,004 
Deferred tax assets   1,050,308    142,864    –    –    (122,131)   1,071,041 
                               
Total non-current assets   5,567,292    268,600    (12,603)   –    (354,702)   5,468,587 
                               
TOTAL ASSETS   46,983,049    268,600    (98,880)   –    (1,856,667)   45,296,102 
                               
LIABILITIES AND EQUITY LIABILITIES                              
Current liabilities:   –    –    –    –    380,232    380,232 
Contract liabilities                              
Guarantee liabilities-stand ready   2,467,554    –    –    –    (2,467,554)   – 
Guarantee liabilities-contingent   1,887,777    (335,749)   –    –    –    1,552,028 
Other tax payable   116,590    –    (5,597)   –    –    110,993 
                               
Total current liabilities   16,883,628    (335,749)   (5,597)   –    (2,087,322)   14,454,960 
                               
Non-current liabilities:                              
Deferred tax liabilities   453,808    –    (15,247)   –    –    438,561 
                               
Total non-current liabilities   7,466,442    –    (15,247)   –    –    7,451,195 
                               
TOTAL LIABILITIES   24,350,070    (335,749)   (20,844)   –    (2,087,322)   21,906,155 

 

7 

 

 

   As of June 30, 2024 
       IFRSs adjustments     
           Effective             
   Amounts as   Expected   interest rate           Amounts as 
   reported   credit   on loans       Financial   reported 
   under   losses,   receivable,   Share-based   guarantee,   under 
Condensed Consolidated Balance Sheet  U.S. GAAP   net of tax   net of tax   compensation   net of tax   IFRSs 
                         
       (In thousands of Renminbi (“RMB”))     
   RMB   (Note i)
RMB		   (Note ii) 
RMB		   (Note iii)
RMB		   (Note iv) 
RMB		   RMB 
SHAREHOLDERS’ EQUITY                              
Additional paid-in capital   5,475,034    –    –    5,534    –    5,480,568 
Retained earnings   18,195,707    604,349    (78,036)   (5,534)   230,655    18,947,141 
                               
TOTAL QIFU TECHNOLOGY INC. EQUITY   22,568,768    604,349    (78,036)   –    230,655    23,325,736 
                               
TOTAL EQUITY   22,632,979    604,349    (78,036)   –    230,655    23,389,947 
                               
TOTAL LIABILITIES AND EQUITY   46,983,049    268,600    (98,880)   –    (1,856,667)   45,296,102 

 

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 IFRSs, 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 condensed 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 IFRSs, 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.

 

8 

 

 

(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 Company 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 Company elects to account for forfeitures in the period they occur as a deduction to expense. While under IFRSs, 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 RMB49,337 and RMB11,971 in the condensed consolidated statements of operations for each of the six months ended June 30, 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 IFRSs, 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.

 

9