| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (a) Principles
of consolidation (b) Use of
estimates (c) Investments
under equity method When the estimated amount to be realized from the investments falls below its carrying value,
an impairment charge is recognized in the consolidated statements of operations when the decline in value is considered other
than temporary. (d) Cash and cash equivalents
Cash equivalents
are placed with financial institutions with high credit ratings and quality. (e) Accounts
receivable (f) Loan receivables (g) Inventories
(h) Goodwill The gross amount
of goodwill and accumulated impairment losses as of March 31, 2019 and 2020 are as follows:
Kayser
$
Gross as of April 1, 2018, March 31,
2019 and 2020 77
Accumulated impairment loss as of April 1, 2018 -
Impairment losses during the
year ended March 31, 2019 (77 )
Accumulated impairment loss as
at March 31, 2019 and 2020 (77 )
Net as of March 31, 2019 and 2020 - The balance represented the carrying value of Kayser Myanmar Manufacturing Company Ltd. ("Kayser Myanmar") and had
an aggregate carrying amount of $77 as of year ended March 31, 2018. During the year ended March 31, 2019, the Group has tested
goodwill for impairment and estimated the fair value of Kayser Myanmar by using the income approach in step 1 of the impairment
test. Based on the quantitative test, it was determined the fair value was more likely than not below its carrying amount. Management
has identified several determinative events and factors, which has led to the above conclusion, included: (1) the financial result
of Kayser Myanmar was below management's expectations due to higher than expected supply chain cost and increased competition,
(2) the fiscal year 2020 annual budget operating plan in March 31, 2019, which provided additional insights into expectations
and priorities for the coming years, such as lower growth and margin expectations and (3) increased and prolonged economic and
regulatory uncertainty in the global economics as of March 31, 2019. Management has compared the implied fair value of Kayser
Myanmar's goodwill to the carrying value of the goodwill which is step 2 of the two-step impairment test. An impairment
loss was recognized for the excess in the carrying value of goodwill over the implied fair value of goodwill. As a result of the two-step impairment
test, the Group has recognized a $77 impairment loss of Kayser Myanmar goodwill in selling, general and administrative expenses
during the year ended March 31, 2019, due to margin and revenue from contracts from customers declines as well as the lower growth
and margin expectation. No impairment expenses were recognized during the years ended March 31, 2018 and 2020. (i) Property,
plant and equipment (j) Impairment
or disposal of long-lived assets (other than goodwill) - During the year ended 2020 and 2019, the Group has reviewed
the long-lived assets for impairment, since there are serval indicative events and factors identified, including (1) significant
adverse changes in the business climate, (2) operating and cash flow losses in prior year, and (3) changes in production plan
by shifting certain production lines from Shenzhen to Myanmar. Management has compared the carrying value of the long-lived asset
to the estimated undiscounted operating cash flow based on the above factors. As a result of the comparison,
management has identified the sum of expected undiscounted cashflow of multiple types of machinery and equipment are more likely
than not below their fair value. The Group has recognized an impairment of long-lived assets amounted to $113, $233 and $nil during
the years ended March 31, 2018, 2019 and 2020. The impairment has been recorded in cost of sales and selling, general and administrative
expenses, based on the nature of the impaired long-lived assets. (k) Concentration
of credit risk The risks with respect to accounts
receivables are mitigated by credit evaluations performed on the customers or debtors and ongoing monitoring of outstanding balances.
The Group establishes an allowance for doubtful receivables based upon estimates, factors surrounding the credit risk of specific
customers and other information. Accounts receivable are charged against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. (l) Revenue recognition Product revenue recognition The Group's revenue from
contracts with customers is derived from product revenue principally from the sales of metal stamping and mechanical OEM and electric
OEM products directly to other consumer electronics product manufacturers. The Group sell goods to the customer under sales contracts
or by purchase orders. The Group has determined there to be one performance obligation for each of the sales contracts and purchase
orders. The performance obligations are considered to be met and revenue is recognized when the customer obtains control of the
goods. The Group has two major goods delivery channels, included:
(1) Delivering goods to customers'
predetermined location, the Group has satisfied the contracts' performance obligations
when the goods have been delivered and relevant shipping documents have been collected
by the Group; and
(2) Picking up goods by customers in
the Group's warehouse, the Group has satisfied the contracts' performance
obligations when the goods have been picked up and the acceptance document has been signed
by the customers. The Group did not recognize any
revenue from contracts with customers for performance obligations satisfied overtime during the years ended March 31, 2019 and
2020. Accordingly, the timing of revenue recognition is not impacted by the new standard. The transaction price is generally
in the form of a fixed price which is agreed with the customer at contract inception. The transaction price is recorded net of
sales return, surcharges and value-added tax of gross sales. The Group has allocated the transaction price to each performance
obligation based on the sales contracts and purchase orders. The Group would request a deposit
from customers upon receiving the purchase order and issue bills to customers upon transfer control of goods and relevant acceptance
documents have been collected. Customers' deposits would be settled part of the outstanding bill upon receiving an acknowledgement
from customers. For the remaining balance of outstanding bills, Customers are required to pay over an agreed upon credit period,
usually between 30 to 75 days. Return Rights The Group does not provide its
customers with the right of return (except for product quality issue) or production protection. Customer is required to perform
product quality check before acceptance of goods delivery. The Group did not recognize for any refund liability according to the
product return on the consolidated balance sheets. Value-added taxes and surcharges The Group presents revenue net
of VAT and surcharges incurred. The surcharge is sales related taxes representing the City Maintenance and Construction Tax and
Education Surtax. The Group incurs expenses or pays fees to external delivery service providers, respectively, and records such
expenses and fees like shipping and handling expenses. Total VAT and surcharges paid by the Group during the years ended March
31, 2018, 2019 and 2020 amounted to $57, $77 and $90 respectively. Principals vs. agent accounting The Group records all product revenue
on a gross basis. To determine whether the Group is an agent or principal in the sale of products, the Group considers the following
indicators: the Group is primarily responsible for fulfilling the promise to provide the specified goods or services, is subject
to inventory risks before the specified goods have been transferred to a customer or after transfer of control to the customers,
and has discretion in establishing the price of the specified goods. Disaggregation of revenue The Group disaggregates its revenue
from different types of contracts with customers by principal product categories, as the Group believes it best depicts the nature,
amount, timing and uncertainty of its revenue and cash flows. See note 19 for product revenues by segment. Contract balances The Group did not recognize any
contract asset as of March 31, 2019 and March 31, 2020. The timing between the recognition of revenue and receipt of payment is
not significant. The Group's contract liabilities
consist of deposits received from customers. As of March 31, 2019 and March 31, 2020, the balances of the contract liabilities
are $25 and $39, including deposits received from customers. All contract liabilities at the beginning of the year ended March
31, 2020 were recognized as revenue during the year ended March 31, 2020 and all contract liabilities as of year ended March 31,
2020 are expected to be realized in the following year. In periods prior to the adoption
of Topic 606, the Group's accounting policy was to recognize revenue when persuasive evidence of an arrangement exists,
products are delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. (m) Staff retirement plan costs
(n) Foreign
currency translations and transactions The books and
records of the Company's major subsidiaries are maintained in their respective local currencies, the Hong Kong dollars,
Myanmar kyat and Renminbi, which are also their respective functional currencies. The financial statements of the Group's
entities of which the functional currency is not U.S. dollars are translated from their respective functional currency into U.S.
dollars. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the rates of exchange prevailing
at the balance sheet date. Equity accounts other than earnings generated in current period are translated into U.S. dollars at
the appropriate historical rates. Income and expense items are translated into U.S. dollars at the average rates of exchange over
the year. All exchange differences arising from the translation of subsidiaries' financial statements are recorded as a
component of comprehensive income (loss). (o) Income
taxes 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. The Group records interest related to unrecognized
tax benefits and penalties, if any, within income tax expenses. (p) Net income (loss) per share
Diluted net income (loss) attributable
to the Company per share gives effect to all dilutive potential common shares outstanding during the year. The weighted average
number of common shares outstanding is adjusted to include the number of additional common shares that would have been outstanding
if the dilutive potential common shares had been issued. Anti-dilutive potential ordinary shares are not considered in the calculation of the diluted earnings per share.
Potential ordinary shares are antidilutive when the conversion of ordinary shares increases the earnings per share or decreases
the net loss per share. (q) Comprehensive income (loss)
The Group presents
the components of net income (loss), the components of other comprehensive income (loss) and total comprehensive income (loss)
in two separate but consecutive statements. (r) Fair value
measurement and financial instruments
● Level
1 applies to assets or liabilities for which there are quoted prices in active markets
for identical assets or liabilities.
● Level
2 applies to assets or liabilities for which there are inputs other than quoted prices
included within Level 1 that are observable for the asset or liability such as quoted
prices for similar assets or liabilities in active markets; quoted prices for identical
asset or liabilities in markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which significant inputs are observable
or can be derived principally from, or corroborated by, observable market data.
● Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation
methodology that are significant to the measurement of the fair value of the assets or
liabilities. Determining which category an asset
or liability falls within the hierarchy requires significant judgment. The carrying amounts of financial
instruments, which consist of cash and cash equivalents, accounts receivable, other current assets, accounts payable and other
liabilities approximate their fair values due to the short term nature of these instruments. (s) Non-controlling interest
(t) Stock-based compensation
The fair value of each option
award is estimated on the date of grant using the Black-Scholes Option Valuation Model, and recognized as expenses (a) immediately
at the grant date if no vesting conditions are required; and (b) for share options or restricted shares granted with only service
conditions, using the straight-line vesting method, over the vesting period. The expected volatility was based on the historical
volatilities of the Company's listed common stocks in the United States and other relevant market information. The Company
uses historical data to estimate share option exercises and employee departure behavior used in the valuation model. The expected
terms of share options granted is derived from the output of the option pricing model and represents the period of time that share
options granted are expected to be outstanding. Since the share options once exercised will primarily trade in the U.S. capital
market, the risk-free rate for periods within the contractual term of the share option is based on the U.S. Treasury yield curve
in effect at the time of grant. There were no grants to non-employee
consultants after the effectiveness of ASU 2018-07—Compensation—stock compensation (Topic 718)—Improvements
to nonemployee share-based payment accounting. (u) Recently Adopted Accounting
Standards On April 1, 2019, the Group adopted
Topic 842 using the modified retrospective transition approach by applying the new standard to all leases existing at the date
of initial application. Results and disclosure requirements for reporting periods beginning after April 1, 2019 are presented
under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with its historical
accounting under Topic 840. The Group elected the package of
practical expedients permitted under the transition guidance, which allowed it to carry forward its historical lease classification,
its assessment on whether a contract was or contains a lease, and its initial direct costs for any leases that existed prior to
April 1, 2019. The Group also elected to combine its lease and non-lease components and to keep leases with an initial term of
12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on
a straight-line basis over the lease term. Upon adoption, the Group recognized total ROU assets of $2,184, with corresponding liabilities
of $1,275 on the consolidated balance sheets. The ROU assets include adjustments for prepayments and accrued lease payments. The
adoption of the new lease standard does not have significant impact on the consolidated statements of comprehensive income and
cash flows and there was no adjustment to the beginning retained earnings on April 1, 2019. Under Topic 842, the Group determines
if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present
value of remaining lease payments over the lease term. For this purpose, the Group considers only payments that are fixed and
determinable at the time of commencement. As most of its leases do not provide an implicit rate, it uses its incremental borrowing
rate based on the information available at commencement date in determining the present value of lease payments. The Group's
incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU asset
also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Group's
lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options. Operating leases are included in
operating lease right-of-use assets, operating lease liabilities, current and non-current operating lease liabilities, on the
consolidated balance sheets. (v) Accounting standards issued
but not adopted as of March 31, 2020 - In January 2017, the FASB issued ASU 2017-04, "Intangibles
- Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". The update simplifies the subsequent measurement
of goodwill by eliminating step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed
by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount
by which the carrying amount exceeds the reporting unit's fair value. The update also eliminates the requirements for any
reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test,
to perform step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a
reporting unit to determine if the quantitative impairment test is necessary. The update should be applied on a prospective basis.
The nature of and reason for the change in accounting principle should be disclosed upon transition. The update is effective for
any annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted
for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Group expects the adoption
of the new guidance will not have an impact on the consolidated financial statements. In August 2018, the FASB issued
ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair
Value Measurement," which is part of the FASB disclosure framework project to improve the effectiveness of disclosures in
the notes to the financial statements. The amendments in the new guidance remove, modify and add certain disclosure requirements
related to fair value measurements covered in Topic 820, "Fair Value Measurement." The new standard is effective for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for
either the entire standard or only the requirements that modify or eliminate the disclosure requirements, with certain requirements
applied prospectively, and all other requirements applied retrospectively to all periods presented. The Group is currently evaluating
the impact of adopting this guidance. In
December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting
for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance
to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15,
2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Company must apply
certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective
basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Group
is evaluating the impact this update will have on its financial statements. Other
accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption
until a future date are not expected to have a material impact on the Group's consolidated financial statements upon adoption. |
