|SEVEN STARS CLOUD GROUP, INC. filed this Form 8-K/A on 08/14/2017|
Wide Angle Group Limited
December 31, 2015 and December 31, 2016
Note 1 - Operations and significant accounting policies (continued)
Revenue recognition (continued)
The Group generates revenue mainly from sales of goods. Sales orders are confirmed after negotiation on price between the Group and customers. Purchase orders are confirmed after careful selection of suppliers and negotiation on price. The Group purchases finished goods from suppliers in accordance with sales orders from customers. The Group’s suppliers then deliver goods to the Group’s customers directly. When the delivery is completed, the Group recognizes revenue and transfers cost at same time. According to purchase orders with suppliers, the Group, as the owner of the goods, becomes the first responsible party for the goods. The Group is required to bear the direct risk of damage to the goods and the direct default risk that cannot be delivered to the customer.
In accordance with ASC 605-45, Revenue Recognition – Principal Agent Consideration, the Group accounts for revenue from sales of goods on a gross basis. The Group is the primary obligor in the arrangements, the Group has the ability to establish prices, the Group has discretion in selecting the independent suppliers and other third-party that will perform the delivery service, the Group is responsible for the defective products and the Group bears credit risk with customer payments. Accordingly, all such revenue billed to customers is classified as revenue and all corresponding payments to suppliers are classified as cost.
The Company and Amer are incorporated in Hong Kong and are subject to statutory income tax on its Hong Kong sourced income (of which there are none). The statutory income tax rate in Hong Kong is 16.5%. Shanghai Huicang is PRC company. The statutory income tax rate applicable to PRC companies is 25%.
The Group accounts for income taxes in accordance with the asset and liability method. Deferred taxes are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established, as needed to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized.
The Group recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.