| Summary of significant accounting policies (Policies) | 12 Months Ended |
| Dec. 31, 2022 |
| Summary of significant accounting policies | |
| Basis of Presentation and Consolidation | (a) The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). |
| Principles of Consolidation | (b) Variable interest entity The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, and consolidated VIEs. All intercompany transactions and balances have been eliminated. The Company, through its wholly-owned foreign invested subsidiary, Beijing WFOE in the PRC, entered into a series of contractual arrangements (“VIE agreements”) with Shenzhen Xiaoying, Beijing Ying Zhong Tong, and Shenzhen Xintang (collectively known as “the VIEs”) and their respective shareholders that enable the Company to (1) have power to direct the activities that most significantly affects the economic performance of the VIEs, and (2) receive the economic benefits of the VIEs that could be significant to the VIEs. Despite the lack of technical majority ownership, there exists a parent-subsidiary relationship between Beijing WFOE and the VIEs through the aforementioned agreements with the nominee shareholders of the VIEs. The following is a summary of the VIE agreements: (1) Shareholders’ Voting Rights Proxy Agreement: Pursuant to the voting rights proxy agreements signed between the VIEs’ nominee shareholders and Beijing WFOE, each nominee shareholder irrevocably appointed Beijing WFOE as its attorney-in-fact to exercise on each shareholder’s behalf and all rights that each shareholder has in respect of its equity interest in the VIEs (including but not limited to executing the exclusive right to the voting rights and the right to appoint directors and executive officers of the VIEs). The nominee shareholders cannot revoke the authorization and entrustment as long as the nominee shareholders remain a shareholder of the VIEs. For the arrangements among Beijing WFOE, each of the VIEs, and their shareholders, the power of attorney will remain in force for ten years. Unless a thirty-day (2) Spouse Consent Agreement Under the spouse consent agreement, each signing spouse acknowledges that the shares of the VIEs held by the relevant shareholder of the VIEs are the personal assets of such shareholder and not jointly owned by the couple. Each signing spouse also unconditionally and irrevocably gives up his or her rights to such shares and any associated economic rights or interests to which he or she may be entitled pursuant to applicable laws and undertakes not to make any assertion of rights to such shares and the underlying assets. Each signing spouse agrees that he or she will not carry out in any circumstances any conduct that are contradictory to the contractual arrangements and this consent agreement. (3) Executive Call Option Agreement: Pursuant to the exclusive call option agreement entered into between the VIEs’ nominee shareholders and Beijing WFOE, the nominee shareholders irrevocably granted Beijing WFOE a call option to request the nominee shareholders to transfer or sell any part or all of its equity interests in the VIEs, to Beijing WFOE, or their designees. The purchase price of the equity interests in the VIEs shall be equal to the minimum price required by PRC law. Without Beijing WFOE’s prior written consent, the VIEs and its nominee shareholders shall not amend its articles of association, increase or decrease the registered capital, sell or otherwise dispose of its assets or beneficial interest, issue any additional equity or right to receive equity, provide any loans, distribute dividends in any form, etc. For the agreements among Beijing WFOE, each of the VIEs, and their shareholders, these arrangements will remain effective for ten years. Unless notified by Beijing WFOE, the parties to these agreements shall extend the term of these agreements for another ten years. The agreement among Beijing WFOE and its shareholder does not specify its effective term. (4) Exclusive Business Cooperation Agreement: Pursuant to the exclusive business cooperation agreement entered into by Beijing WFOE and the VIEs, Beijing WFOE provides exclusive technical support and consulting services in return for fees based on 100% of the VIE’s total consolidated profit, which is adjustable at the sole discretion of Beijing WFOE. Without Beijing WFOE’s consent, the VIEs cannot procure services from any third party or enter into similar service arrangements with any other third party, except for those from Beijing WFOE. For the agreements between Beijing WFOE and each of the VIEs, unless Beijing WFOE terminates these agreements in advance, these agreements will remain effective for ten years. Unless agreed by both parties in writing, this agreement shall be automatically renewed for another ten years upon its expiration. (5) Equity Pledge Agreement Each nominee shareholder of the VIEs has also entered into an equity pledge agreement with Beijing WFOE, pursuant to which each shareholder pledged his/her interest in Beijing WFOE to guarantee the performance of obligations of Beijing WFOE and its shareholders under the exclusive business cooperation agreement, exclusive call option agreement, and shareholders’ voting rights proxy agreement. If the VIEs or any of the nominee shareholder breaches its contractual obligations, Beijing WFOE will be entitled to certain rights and interests regarding the pledged equity interests including the right to dispose the pledged equity interests. None of the nominee shareholders shall, without the prior written consent of Beijing WFOE, assign or transfer to any third party, create or cause any security interest and any liability in whatsoever form to be created on, all or any part of the equity interests it holds in the VIEs. This agreement is not terminated until all of the agreements under the shareholders’ voting rights proxy agreement, exclusive call option agreement and the exclusive business cooperation agreement are fully performed. The irrevocable power of attorney has conveyed all shareholder rights held by the VIEs’ shareholders to Beijing WFOE or any person designated by Beijing WFOE, including the right to appoint executive directors of the VIEs to conduct day to day management of the VIEs’ businesses, and to approve significant transactions of the VIEs. In addition, the exclusive call option agreement provides Beijing WFOE with a substantive kick-out right of the VIEs shareholders through an exclusive option to purchase all or any part of the shareholders’ equity interest in the VIEs. In addition, through the exclusive business cooperation agreement, Beijing WFOE demonstrates its ability and intention to continue to exercise the ability to absorb substantially all of the profits and all of the expected losses of the VIEs. The equity pledge agreements further secure the obligations of the shareholders of the VIEs under the above agreements. Based on these contractual arrangements, the Company consolidates the VIEs in accordance with SEC Regulation S-X Rule 3A-02 and Accounting Standards Codification (“ASC”) topic 810 (“ASC 810”), Consolidation. Uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could: ● revoke the Group’s and operating licenses; ● levy fines on the Group; ● confiscate any of the Group’s income that they deem to be obtained through illegal operations; ● shut down the Group’s services; ● discontinue or restrict the Group’s operations in China; ● impose conditions or requirements with which the Group may not be able to comply; ● require the Group to change corporate structure and contractual arrangements; ● restrict or prohibit the use of the proceeds from overseas offerings to finance the Group’s PRC consolidated VIEs’ business and operations; and ● take other regulatory or enforcement actions that could be harmful to the Group’s business. Consolidated Trusts As part of the Group’s efforts to develop new product offerings for investors and institutional funding partners, the Group established a business relationship with certain trusts which were administered by third-party trust companies. The trusts were set up to invest solely in the loans facilitated by the Group on its platform to provide returns to the beneficiaries of the trusts through interest payments made by the borrowers. Both direct model and intermediary model are adopted for these trusts. Under direct model, loans are originated from trusts to borrowers while under intermediary model, the Group typically provides credit to the borrowers through an intermediary first and then transfers the loans to the trusts, which issue beneficial interests to the investors and institutional funding partners. The Group determines to consolidate these trusts as the Group is the primary beneficiary, due to the following reasons: 1) the Group has the power to direct the operating activities of the trusts; 2) the Group absorbs or enjoys the potential residual losses or returns of these trusts. Under intermediary model, the transfer of loans to the Consolidated Trusts are not eligible for sale accounting because the trust is consolidated and the loan transfer is considered an intercompany transaction. For Consolidated Trusts founded before December 31, 2021, the Group elected to apply fair value option to the loans (at the date of origination) and liabilities due to investors. That is, the loans are continued to be recorded on the Group’s consolidated balance sheets as loans held for investment under “Loans at fair value” and the proceeds received from the investors are recorded as trust liabilities under “Payable to investors at fair value”. For Consolidated Trusts founded from January 1, 2022, the Group elected not to apply fair value option but instead apply amortized cost method to the loans (at the date of origination) and liabilities due to investors or institutional funding partners, to improve the understandability and relevance of financial information. That is, the loans are continued to be recorded on the Group’s consolidated balance sheets as loans held for investment under “Loans receivable from Xiaoying Credit Loans and other loans, net”, which is net of provison of credit loss, and the proceeds received from the investors or institutional funding partners are recorded as trust liabilities under “Payable to investors and institutional funding partners at amortized cost”. During 2021 and 2022, certain of the subsidiaries of the Group funded RMB74,051,199 and RMB81,200,000 to loan products facilitated on the Group’s platform through third-party trust companies. The trusts are consolidated by the Group and the underlying loans are recorded on the Group’s consolidated balance sheets as loans held for investment under “Loans at fair value “ or “Loans receivable from Xiaoying Credit Loans and other loans, net”. Consolidated Partnerships The Group continued developing the partnership business model , where the Group and certain trusts jointly established several limited partnership enterprises, or LPs, to invest solely in the loans facilitated by the Group on its platform to provide returns to partners of the LPs through interest payments made by the borrowers. Intermediary model is adopted for the Consolidated Partnerships, the Group typically provides credit to the borrowers through an intermediary first and then transfers the loans to the LPs. The Group determines to consolidate these LPs as the Group is the primary beneficiary, due to the following reasons: 1) the Group has the power to direct the operating activities of the LPs; 2) the Group absorbs or enjoys the potential residual losses or returns of these LPs. The transfer of loans to the Consolidated Partnerships are not eligible for sale accounting because the LP is consolidated and the loan transfer is considered an intercompany transaction. The Group further applies amortized cost to the loans and liabilities to trust partners in its consolidated financial statements. That is, the loans are recorded on the Group’s consolidated balance sheets under “Loans receivable from Xiaoying Credit Loans and other loans, net” and the proceeds received from the trust partners are recorded as LP liabilities under “Payable to investors and institutional funding partners at amortized cost”. During 2021 and 2022,one of the subsidiaries of the Group funded RMB141,326,511 and RMB 146,245,430 to loan products facilitated on the Group’s platform through the limited partnership enterprises. The LPs are consolidated by the Group and the underlying loans are recorded on the Group’s consolidated balance sheets under “Loans receivable from Xiaoying Credit Loans and other loans, net”. The following financial statement amounts and balances of the Consolidated Trusts and Partnerships are included in the accompanying consolidated financial statements after elimination of intercompany transactions and balances: As of December 31, As of December 31, 2021 2022 2022 RMB RMB US$ Assets: Restricted cash 212,812,257 398,439,250 57,768,261 Accounts receivable and contract assets, net 8,335,518 37,262,868 5,402,608 Loans receivable from Xiaoying Credit Loans and other loans, net 1,622,699,799 2,771,927,123 401,891,655 Loans at fair value 389,679,352 120,279,612 17,438,904 Prepaid expenses and other current assets 7,889,836 5,073,797 735,632 Total assets 2,241,416,762 3,332,982,650 483,237,060 Liabilities: Payable to investors and institutional funding partners at amortized cost 1,466,068,260 2,627,910,203 381,011,164 Payable to investors at fair value 462,714,400 141,288,810 20,484,952 Other taxes payable 5,631,031 3,226,746 467,834 Accrued expenses and other current liabilities 3,259,339 16,698,946 2,421,120 Total liabilities 1,937,673,030 2,789,124,705 404,385,070 Year ended Year ended December 31, December 31, Year ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$ Net revenue 331,300,043 285,859,862 648,893,767 94,080,753 Net income (loss) (19,795,471) 105,610,429 360,550,889 52,274,965 Year ended Year ended December 31, December 31, Year ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$ Net cash provided by (used in) operating activities (20,179,042) 155,272,678 273,610,963 39,669,861 Net cash provided by (used in) investing activities 1,139,220,723 (433,914,047) (928,400,322) (134,605,394) Net cash provided by (used in) financing activities (1,092,165,825) 14,599,010 840,416,352 121,848,917 The following financial statement amounts and balances of the VIEs and Consolidated Trusts and Partnerships were included in the accompanying consolidated financial statements after elimination of intercompany transactions and balances: As of December 31 As of December 31, 2021 2022 2022 RMB RMB US$ Assets: Cash and cash equivalents 212,766,581 116,523,581 16,894,331 Restricted cash 220,812,257 403,439,250 58,493,193 Accounts receivable and contract assets, net 67,917,846 65,289,514 9,466,090 Loans receivable from Xiaoying Credit Loans and other loans, net 2,458,221,481 3,777,595,492 547,699,863 Loans at fair value 389,679,352 120,279,612 17,438,904 Deposits to institutional cooperators, net 2,702,000 — — Prepaid expenses and other current assets, net 104,088,188 53,328,083 7,731,845 Financial guarantee derivative 11,816,799 — — Deferred tax assets, net 128,554,651 2,277,314 330,179 Long-term investments 556,571,016 495,994,880 71,912,498 Property and equipment, net 2,673,157 604,992 87,716 Intangible assets, net 29,554,089 28,711,872 4,162,830 Loan receivable from Xiaoying Housing Loans, net 12,083,317 10,061,258 1,458,745 Income taxes receivable — 1,870,729 271,230 Other non-current assets 4,850,671 2,469,629 358,063 Total assets 4,202,291,405 5,078,446,206 736,305,487 Liabilities: Payable to investors and institutional funding partners at amortized cost 1,466,068,260 2,627,910,203 381,011,164 Payable to investors at fair value 462,714,400 141,288,810 20,484,952 Financial guarantee derivative 565,953,269 107,890,394 15,642,637 Short-term borrowings — 20,000,000 2,899,727 Accrued payroll and welfare 8,959,248 12,047,490 1,746,722 Other taxes payable 100,333,129 123,105,603 17,848,635 Income taxes payable 8,189,833 — — Accrued expenses and other current liabilities 85,485,440 102,148,275 14,810,108 Other non-current liabilities — 1,937,009 280,840 Total liabilities 2,697,703,579 3,136,327,784 454,724,785 Year ended Year ended December 31, December 31, Year ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$ Net revenue 754,755,127 1,388,255,858 1,350,809,649 195,848,989 Net income (loss) (180,518,614) 695,892,749 738,032,308 107,004,626 Year ended Year ended December 31, December 31, Year ended December 31, 2020 2021 2022 2022 RMB RMB RMB US$ Net cash provided by (used in) operating activities (190,951,068) 485,090,529 151,675,178 21,990,834 Net cash provided by (used in) investing activities 1,133,193,197 (702,678,519) (925,707,537) (134,214,977) Net cash provided by (used in) financing activities (1,073,465,825) (4,100,990) 860,416,352 124,748,645 The VIEs and Consolidated Trusts and Partnerships contributed 34%, 38% and 38% of the Group’s consolidated revenue for the years ended December 31, 2020, 2021 and 2022, respectively. As of December 31, 2021 and 2022, the VIEs and Consolidated Trusts and Partnerships accounted for an aggregate of 57% and 57% of the consolidated total assets, and 80% and 77% of the consolidated total liabilities. There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs and Consolidated Trusts and Partnerships. However, if the VIEs were ever to need financial support, the Group may, at its option and subject to statutory limits and restrictions, provide financial support to its VIEs through loans to the shareholders of the VIEs or entrustment loans to the VIEs. The Group believes that there are no assets held in the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and the PRC statutory reserves. As the VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs. Relevant PRC laws and regulations restrict the VIEs from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends. Please refer to Note 17 for disclosure of restricted net assets. |
| Use of Estimates | (c) The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ materially from such estimates. Significant accounting estimates reflected in the Group’s consolidated financial statements include share-based compensation, allowance for credit losses of accounts receivables and contract assets, deposits to institutional cooperators, prepaid expenses and other current assets, loans receivables from Xiaoying Housing Loans and loans receivable from Xiaoying Credit Loans and other loans, allocation of considerations under revenue arrangements with various performance obligations, variable considerations of revenue recognition, valuation allowance for deferred tax assets, unrecognized tax benefits, the indefinite reinvestment assertion, fair value of financial guarantee derivatives and financial investments, loans at fair value and payable to investors at fair value, impairment of long-term investments and financial investments. |
| Revenue recognition | (d) The Group provides services as an online marketplace connecting borrowers and investors or institutional funding partners.Revenue is the transaction price the Group expects to be entitled to in exchange for the promised services in a contract in the ordinary course of the Group’s activities and is recorded net of value-added tax (“VAT”). The services to be accounted for include loan facilitation service, post-origination service (e.g. cash processing and collection services) and financial guarantee service. The major product offered by the Group is Xiaoying Credit Loan, which mainly consists of Xiaoying Card Loan, Xiaoying Preferred Loan and other unsecured loan products that the Group introduce from time to time. The major products offered by the Group before 2021 also include Xiaoying Revolving Loan which mainly consists of Yaoqianhua (previously named as Xiaoying Wallet). The Group ceased facilitation of Xiaoying Preferred Loan in 2019, and ceased facilitation of Xiaoying Revolving Loan in 2020. The Group provides services primarily through the use of two business models. The first business model (“Direct Model”) involves the Group matching borrowers with investors or institutional funding partners who directly funds the credit drawdowns to the borrowers. The Group has determined that it is not the legal lender or borrower in the loan origination and repayment process, but acting as an intermediary to bring the lender and the borrower together. Therefore, the Group does not record the loans receivable or payable arising from the loans facilitated between the investors or institutional funding partners and borrowers on its platform. The second business model (“Intermediary Model”) involves the Group initially providing credit to borrowers using its own funds through an intermediary and subsequently selling the loans including all of the creditor rights in the loans to external investors or institutional funding partners on its platform within a short period of time. Loans facilitated by the Group typically have a term of less than 1 year. For each loan facilitated either through the Direct Model or Intermediary Model, the Group charges a service fee (i) from the borrower indirectly through one of the Group's VIEs, Shenzhen Xintang, or (ii) from the borrower indirectly through external financing guarantee company, or (iii) from institutional funding partner directly. No application fee is charged to borrowers or investors or institutional funding partners. For the loans the Group is entitled to the full service fee regardless of whether the borrowers choose to early repay or not, the Group has the unconditional right to the consideration. For the loans facilitated that the Group collected service fees indirectly through Shenzhen Xintang, when borrowers who have the option of early repayment and upon termination they do not have the obligation to pay the remaining monthly service fees, the Group’s right to consideration for the service fees of facilitation service is conditional on whether or not the borrowers repay in advance. At contract inception, the Group determines the consideration based on historical experiences as well as the credit due diligence performed on each borrower prior to loan origination. For the loans facilitated that the Group collected service fee indirectly through external financing guarantee company or directly from institutional funding partner, the Group’s transaction price includes variable consideration in the form of default risk of the borrowers and prepayment risk of the borrowers. The Group determines the consideration based on historical experiences as well as the credit due diligence performed on each borrower prior to loan origination. In order to be more competitive by providing a certain level of assurance to the investors or institutional funding partners, for certain loans facilitated by the Group’s platform, either borrowers or institutional funding partners are required to directly sign a credit insurance agreement with ZhongAn Online P&C Insurance Co., Ltd. (“ZhongAn”) to protect investors or institutional funding partners against the risk of borrower default. Prior to September 2017, substantially all of the loans facilitated by the Group’s platform are insured by ZhongAn. ZhongAn initially reimbursed the loan principal and interest to the investor upon borrower’s default. In order to maintain stable business relationship with ZhongAn, the Group at its sole discretion paid ZhongAn for substantially all the defaulted loan principal and interest but have not been subsequently collected. From September 2017, the Group revised the arrangement with ZhongAn. Starting from 2020, the Group enters into a series of arrangements with various external financing guarantee companies, which is similar to the revised arrangement with ZhongAn. The Group provides guarantee to investors and instutional funding partners on certain loan products via its consolidated entities. The Group is compensated for this reimbursement from the contractual service fees collected from the borrowers. If a borrower defaults, the Group makes its best efforts to collect the default loan. The Group directly makes payment to the defaulted principal and interest to each investor, and deemed the guarantee as a guarantee service to the investors and recognizes a stand ready obligation for its guarantee exposure in accordance with ASC Topic 460, Guarantees which requires the guarantee to be measured initially at fair value based on the stand-ready obligation. Starting from 2020, the Group ceased to provide guarantee service on the loan facilitated. For certain Xiaoying Card Loans and certain Xiaoying Revolving Loans that are repaid in installments by borrowers, borrowers are required to enter into a guarantee agreement with the Group and an insurance/guarantee agreement with ZhongAn/financing guarantee companies, to pay the guarantee fee and insurance fee to the respective party at a pre-agreed rate. For certain loans that facilitated since 2020, borrowers are required to enter into a guarantee agreement with the Group to pay the guarantee fee at a pre-agreed rate while at the same time, it is the institutional investors who enter into an insurance agreement with ZhongAn and the Group voluntarily pay the insurance fee to ZhongAn. The obligation/ credit risk/ exposure of the Group and ZhongAn to compensate the defaulted loans has no change. Upon borrower’s default, ZhongAn/financing guarantee companies reimburse the full loan principal and interest to the investors or institutional funding partner first, and has the right to recourse to both the borrower and the Group, and the Group’s contractual obligation is at any time it limited to a cap (the “Cap”) which is the lower of (1) total amount of guarantee fees contractually required to be collected from the borrowers for such loans facilitated during the current period on an aggregated basis, and (2) a certain percentage of the total principal of the loans facilitated stated in an annualized manner, as pre-agreed with ZhongAn/financing guarantee companies (the “Rate”). The contractual guarantee fees in (1) is not influenced by default or early repayment of borrowers. The Group has no obligation or intention to compensate ZhongAn/financing guarantee companies for any losses in excess of the contractual obligation. The Rate will be negotiated prospectively at each quarter between the two parties based on the expected default rate. The actual loss in excess of the Cap is absorbed by ZhongAn/financing guarantee companies. ZhongAn/financing guarantee companies ultimately bear substantially all of the credit risk. The Group’s exposure in this arrangement is limited to the default and prepayment risk in relation to the guarantee fee when the Group cannot collect the guarantee fee under the agreement with the borrower on an individual basis but is still obligated to compensate ZhongAn/financing guarantee companies up to the Cap on a pool basis. The Group evaluated the guarantee arrangement pursuant to ASC Topic 815, and concluded that the arrangement meets the definition of a derivative and that it is not eligible for the guarantee scope exception. Therefore, the guarantee is recognized as a derivative liability/asset at fair value and is not accounted for pursuant to ASC Topic 460 or 450. See accounting policy for financial guarantee derivative. Direct Model The Group has adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and all subsequent ASUs that modified ASC 606. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Group applies the following steps: ● Step 1: Identify the contract (s) with a customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation The Group determines its customers to be both the borrowers and the investors or institutional funding partners. The Group considers the loan facilitation service and post-origination service as two separate performance obligations under ASC 606, as these two deliverables are distinct in that customers can benefit from each service on its own and the Group’s promises to deliver the services are separately identifiable from each other in the contract. While the post-origination service is within the scope of ASC Topic 860, the ASC Topic 606 revenue recognition model is applied due to the lack of definitive guidance in ASC Topic 860. The Group determines the total transaction price to be the service fees chargeable from the borrowers indirectly through one of the VIEs, Shenzhen Xintang, or external financing guarantee companies or from certain institutional funding partners directly, including the guarantee fees charged by the Group under the separate guarantee agreement with the borrowers for certain type of Xiaoying Card Loans that are newly facilitated since September 2017. The Group’s transaction price includes variable consideration in the form of default risk of the borrowers for the service fees collected from certain institutional funding partners or through external financing guarantee companies and prepayment risk of the borrowers. The Group reflects, in the transaction price, the default risk and the prepayment risk. The Group estimates variable consideration for these contracts using the expected value approach on the basis of historical information and current trends of the default and prepayment percentage of the borrowers. The transaction price is allocated amongst the financial guarantee service, if any, and two performance obligations. The Group first allocates the transaction price to the financial guarantee, if any, that is recognized in accordance with ASC Topic 815, which requires the guarantee to be measured initially and subsequently at fair value. Then the remaining considerations are allocated to the loan facilitation services and post-origination services using their relative standalone selling prices consistent with the guidance in ASC 606. The Group does not have observable standalone selling price information for the loan facilitation services or post-origination services because it does not provide loan facilitation services or post-origination services on a standalone basis. There is no direct observable standalone selling price for similar services in the market that is reasonably available to the Group. As a result, the estimation of standalone selling price involves significant judgment. The Group uses an expected cost plus margin approach to estimate the standalone selling prices of loan facilitation services and post origination services as the basis of revenue allocation. In estimating its standalone selling price for the loan facilitation services and post-origination services, the Group considers the cost incurred to deliver such services, profit margin for similar arrangements, customer demand, effect of competitors on the Group’s services, and other market factors. For each type of service, the Group recognizes revenue when (or as) the entity satisfies the service/performance obligation by transferring a promised good or service (that is, an asset) to a customer. Revenues from loan facilitation are recognized at the time a loan is originated between the borrower and the investor or institutional funding partner and the principal loan balance is transferred to the borrower, at which time the facilitation service is considered completed. Revenues from post-origination services are recognized on a straight-line basis over the term of the underlying loans as the services are provided. The collection of service fees is not conditional on the provision of subsequent post-origination services. Intermediary Model The Group cooperates with several microcredit companies who use their own funds to provide credit to borrowers first; the Group provide facilitation and post-origination services for these loans and receive service fee from borrowers. These microcredit companies transfer their rights as creditors shortly to SPVs controlled by the Group at the price of the carrying amount of the outstanding loan principal balance and accumulated accrued interest not paid by the borrowers as of the day on which the creditor’s rights are legally transferred to SPVs. The SPVs usually further transfer their creditor’s rights to third party investors or institutional funding partners in a short period at the price of the carrying amount of the outstanding loan principal balance and the accumulated accrued interest not paid by the borrowers as of the day on which the creditor’s rights are legally transferred to investors or institutional funding partners. The Group accounts the relevant interest and service fees received from the borrowers as the financing income and the fee charged by the microcredit companies which is proportionate to the loans facilitated as the origination and servicing cost in its consolidated financial statements. Under the Intermediary business model, the Group provides the funds that are loaned to borrowers and agrees to take predominantly all the risk arising from potential breaches of agreement by the borrowers receiving financing. The Group provides financing to borrowers on their platform and the loans are initially recorded on the consolidated balance sheet as loans held for sale or loans receivable from Xiaoying Credit Loans and other loans. These loans carry the same insurance/ guarantee agreement with external financial institutional co-operators as loans facilitated under the Direct Model, which is attached to the loan and transfers along with the loan. The Group also charges service fees in the same manner as loans facilitated under the Direct Model. Intermediary Model—Non-Trust Model The transfer of loans (including the creditor rights) to external investors or institutional funding partners not involving trust structure is accounted for as a true sale under ASC 860 (see accounting policy under “Sales and Transfers of Financial Instruments”). The Group continues to provide post-origination services to the loans subsequent to their sale in the same manner as the Group services the loans facilitated under the Direct Model. No additional service fee is charged. Similar to the loans facilitated under the Direct Model, the Group charges and collects service fees from the borrowers or institutional funding partners in relation to the transferred loans on a monthly basis. The difference between (1) the proceeds received from the investors or institutional funding partners and accounts receivable and contract assets (see accounting policy on “Accounts receivable and contract assets and allowance for uncollectible accounts receivable and contract assets”) and (2) the sum of the carrying value of the loans and the fair value of the financial guarantee, if any, is recognized as a gain of sale, which effectively represents the service fees earned from facilitation of the loans under Intermediary Model, as the “Loan facilitation service—Intermediary Model” in the consolidated statements of comprehensive income (loss). The subsequent accounting for post-origination service and guarantee services is consistent with that for loans facilitated under the Direct Model. Intermediary Model—Trust Model The transfer of loans to institutional funding partners under the Intermediary Model often involves transferring the loans to a trust formed and operated by unrelated third party trust companies. The Group consolidates such trusts under the VIE model (see accounting policy on “Consolidated Trusts”). Loans transferred to Consolidated Trusts do not qualify for sales accounting as the transfer is to a consolidated subsidiary. Before December 31, 2021, the Group elected to apply fair value option to these loans at the date of origination. The loans are recorded as “Loans at fair value” in the consolidated balance sheets. From January 1, 2022, the Group elected to apply amortized cost method to the loans of newly formed Consolidated Trusts at the date of origination. For loan assets measured at amotized cost, they are recorded as “Loans receivable from Xiaoying Credit Loans and other loans, net”. Under both method, the Group recognizes as revenue under “Financing income” the service fees and interests charged to the borrowers over the lifetime of the loans using effective interest method. Intermediary Model—Partnership Model The transfer of loans to institutional funding partners under the Intermediary Model involves transferring the loans to a limited partnership enterprise, or LP, formed and operated by unrelated third-party trust companies and the Group. The Group consolidates such partnerships under the VIE model (see accounting policy on “Consolidated Partnerships”). The Group elects to measure these loans at amortized cost at the time of origination. Loans transferred to Consolidated Partnerships do not qualify for sales accounting as the transfer is to a consolidated subsidiary. The loans are recorded as “Loans receivable from Xiaoying Credit Loans and other loans, net” in the consolidated balance sheets. The Group recognizes as revenue under “Financing income” the service fees and interests charged to the borrowers over the lifetime of the loans using effective interest method. The online Intermediary Model ceased in April 2017 and the offline Intermediary Model with funding from banking financial institution partners ceased in February 2018 to comply with the promulgated regulatory requirements. The Group continues the operations through the offline Intermediary Model with funding from other partners to the extent permitted under applicable laws and regulations. Disaggregation of revenues All of the Group’s revenue for the years ended December 31, 2020, 2021 and 2022 were generated from the PRC. As the remaining duration of the Group’s performance obligations of the contracts is one year or less, the Group elects to apply the exemption of disclosing the aggregate amount of transaction price allocated to the performance obligations at the end of 31 December, 2020, 2021 and 2022, The following table illustrates the disaggregation of revenue by product the Group offered in 2020, 2021 and 2022: Loan Loan facilitation facilitation service- service-Direct Intermediary Post-origination Financing Other Model Model service income revenue Total 2020 (RMB) (RMB) (RMB) (RMB) (RMB) (RMB) Major products Xiaoying Credit Loan 1,190,088,566 19,755,482 176,229,908 538,869,175 39,537,661 1,964,480,792 Xiaoying Revolving Loan 76,444,207 21,571,881 26,000,468 73,991,011 597,911 198,605,478 Xiaoying Housing Loan — — — — 172,960 172,960 Internet Channel(1) — 45,449 1,611,453 3,291 11 1,660,204 Other loans — — — — 226,720 226,720 Other service(2) — — — — 27,811,304 27,811,304 Total 1,266,532,773 41,372,812 203,841,829 612,863,477 68,346,567 2,192,957,458 Loan Loan facilitation facilitation service- service-Direct Intermediary Post-origination Financing Other Model Model service income revenue Total 2021 (RMB) (RMB) (RMB) (RMB) (RMB) (RMB) Major products Xiaoying Credit Loan 2,545,431,636 161,313 312,373,187 644,009,587 31,877,690 3,533,853,413 Xiaoying Revolving Loan — — 3,216,931 27,891,908 537,311 31,646,150 Other loans — — — — 130,768 130,768 Other service(2) — — — — 60,834,774 60,834,774 Total 2,545,431,636 161,313 315,590,118 671,901,495 93,380,543 3,626,465,105 Loan Loan facilitation facilitation service- service-Direct Intermediary Post-origination Financing Other Model Model service income revenue Total 2022 (RMB) (RMB) (RMB) (RMB) (RMB) (RMB) Major products Xiaoying Credit Loan 2,044,343,554 — 372,015,426 959,446,184 20,815,986 3,396,621,150 Xiaoying Revolving Loan — — 435,180 2,815 — 437,995 Other loans — — — 6,828,467 207,964 7,036,431 Other service(2) — — — — 158,854,539 158,854,539 Total 2,044,343,554 — 372,450,606 966,277,466 179,878,489 3,562,950,115 Loan Loan facilitation facilitation service- service-Direct Intermediary Post-origination Financing Other Model Model service income revenue Total 2022 (US$) (US$) (US$) (US$) (US$) (US$) Major products Xiaoying Credit Loan 296,401,954 — 53,937,167 139,106,621 3,018,034 492,463,776 Xiaoying Revolving Loan — — 63,095 408 — 63,503 Other loans — — — 990,034 30,152 1,020,186 Other services(2) — — — — 23,031,743 23,031,743 Total 296,401,954 — 54,000,262 140,097,063 26,079,929 516,579,208 (1) (2) Contract balances The Group did not enter into contracts with customers that were greater than one year for substantially all products for the years ended December 31, 2020, 2021 and 2022. The Group did not record any contract liabilities for both 2021 and 2022. For the loans the Group is entitled to the full service fee regardless of whether the borrowers choose to early repay or not, the Group has the unconditional right to the consideration and an accounts receivable is recorded. For the loans facilitated with borrowers who have the option of early repayment and upon termination they do not have the obligation to pay the remaining monthly service fees, the Group’s right to consideration for the service fees of facilitation service is conditional on whether or not the borrowers repay in advance. In these instances, the Group records a corresponding contract asset when recognizing revenue from loan facilitation service. The contract asset will not be reclassified to a receivable given that the right to invoice and the payment due date is the same date. Revenue for these loan products are recognized when the collection of consideration becomes probable. Remaining unsatisfied performance obligations as of December 31, 2020, 2021 and 2022 pertained to post-origination service in the amount of RMB61,415,170 , RMB113,840,873 and RMB224,461,482 (US$32,543,856), respectively. All remaining unsatisfied performance obligations would be recognized as revenue in the subsequent year. Incentives to investors To expand its market presence, the Group provides incentives to investors in a variety of forms that either reduces the amount of investment required to purchase financial products or entitles them to receive higher interest rates in the products they purchase. During the relevant incentive program period, the Group sets certain thresholds for the investor to qualify to enjoy the incentive. Such incentives are accounted for as a reduction of revenue in accordance with ASC 606. Financing income Financing income consists primarily the financing fees the Group charges for the loans facilitated through the Consolidated Trusts and Consolidated Partnerships, including interest income and service fees generated from providing loan facilitation and post-origination services to the investors and institutional funding partners of the Consolidated Trusts and Consolidated Partnerships, and are recorded as revenue over the life of the underlying financing using the effective interest method. Financing income also includes financing fees, including interest income and service fee, from loans held for sale and loans receivables from Xiaoying Credit Loans and other loans that have not yet been transferred to external investors or institutional funding partners or have been transferred but such transaction does not qualify for sale accounting under the Intermediary Model. Starting from 2021, financing income also includes interest income generated from providing loans by the Group’s own fund from microcredit business, and are recorded as revenue over the life of the underlying financing using the effective interest method. The Group maintains the right to terminate the contract in advance based on the credit due diligence performed on each borrower. The remaining installments of interest would be recognized on non-accrual status after the contract terminated. Other revenue Other revenue primarily includes referral service fees for introducing borrowers to other platforms, technology service fees received for providing assistant technology development services and penalty fees for loan prepayment and late payment. The referral service fees for introducing borrowers to other platforms are recognized when the obligation is fulfilled and is confirmed by the other platforms. The technology service fees are recognized when the assistant technology development services to third parties provided. The penalty fees, which are fees paid to the Group, will be received as a certain percentage of past due amounts in the case of late payments or a certain percentage of interest over the prepaid principal loan amount in the case of prepayment. Penalty fees are contingency-based variable considerations and constrained by the occurrence of delinquency or prepayment. They are recognized when the uncertainty associated with the variability is resolved, that is, when the underlying event occurs. |
| Sales and transfers of financial instruments | (e) Sales and transfers of financial instruments are accounted under authoritative guidance for the transfers and servicing of financial assets and extinguishment of liabilities. Specifically, a transfer of a financial asset, a group of financial assets, or a participating interest in a financial asset is accounted for as a sale only if all the following conditions are met: 1. 2. 3. a. b. c. Under the Intermediary Model, the Group, through its Intermediary, facilitates credits to borrowers and subsequently transfers the loans (including the creditor rights) to third party investors or institutional funding partners at face value within a short period of time. When the loan (including the creditor rights) is transferred, the transferee becomes the direct counterparty to the borrower and the legal record holder of the loan upon transfer. The transfer is accounted for as a sale, when (1) the transferred loans are considered legally isolated from the assets of the Group and its creditors even in the bankruptcies under the PRC laws and regulations, (2) the investors or institutional funding partners (transferees) can freely pledge or exchange the transferred loans, and (3) the Group does not maintain effective control over the transferred loans. When a transfer does not qualify for sale accounting, e.g. when the Group sells loans with recourse to the Group, the transferred financial asset remains in the statement of financial position and a financial liability is recognized for any consideration received. For Xiaoying Housing Loans facilitated through the Intermediary Model, borrowers are required to pledge properties to one of the Group’s consolidated VIE entities (other than the Intermediary or the SPV conducting the facilitation and transfer of the loan) as collateral for the guarantee that the Group is providing to ZhongAn against borrower’s default. It is a separate arrangement with different counterparties from the loan provided by the Group. While the loan (including creditor’s rights) is transferred to third party investors or institutional funding partners, the lien remains under the Group’s name and in security for the Group agreeing to provide the guarantee to ZhongAn. The holding of the lien does not affect the creditor’s right in the loan being fully transferred. Provided all aforementioned conditions under sales accounting are met, the transfer of such loans with collateral are accounted for as a sale. The Group ceased facilitation of Xiaoying Housing Loan in 2019. |
| Foreign currency translation | (f) The functional currency of X Financial is in US dollars (“US$”). The functional currency of the Group’s subsidiaries and VIEs in the PRC is Renminbi (“RMB”). The determination of the respective functional currency is based on the criteria stated in ASC 830, Foreign Currency Matters. The Group also uses RMB as its reporting currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency are measured and recorded in the functional currency at the exchange rate prevailing on the transaction date. Translation gains and losses are recognized in the statements of comprehensive income (loss). The Company with functional currency of US$ translates its operating results and financial positions into RMB, the Group’s reporting currency. Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Equity amounts are translated at historical exchange rates. Revenues, expenses, gains and losses are translated using the average rates for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component in the statements of comprehensive income (loss). |
| Guarantee liabilities | (g) The Group has guarantee service which is directly and indirectly provided to the investors or institutional funding partners. The Group also provides direct guarantee to investors or institutional funding partners on certain loan products via its consolidated entities. If a borrower defaults, the Group makes its best efforts to collect the default loan. The Group directly or indirectly makes payment to the defaulted principal and interest to each investor or institutional funding partner. Prior to September 2017, ZhongAn initially reimbursed the loan principal and interest to the investor or institutional funding partner upon the borrower’s default. In order to maintain stable business relationship with ZhongAn, although not contractually obligated, the Group at its sole discretion compensated ZhongAn for substantially all loan principal and interest default but not subsequently collected. At the inception of each loan, the Group recognizes the guarantee liability at fair value in accordance with ASC 460-10, which incorporates the expectation of potential future payments under the guarantee and takes into both non-contingent and contingent aspects of the guarantee. Subsequent to the loan’s inception, the guarantee liability is composed of two components: (i) ASC Topic 460 component; and (ii) ASC Topic 450 component. The liability recorded based on ASC Topic 460 is determined on a loan by loan basis and it is reduced when the Group is released from the underlying risk, i.e. as the loan is repaid by the borrower or when the investor or institutional funding partner is compensated in the event of a default. This component is a stand-ready obligation which is not subject to the probable threshold used to record a contingent obligation. When the Group is released from the stand-ready liability upon expiration of the underlying loan, the Group records a corresponding amount as “Other revenue” in the consolidated statement of comprehensive income. The other component is a contingent liability determined based on probable loss considering the actual historical performance and current conditions, representing the obligation to make future payouts under the guarantee liability in excess of the stand-ready liability, measured using the guidance in ASC Topic 450. The ASC Topic 450 contingent component is determined on a collective basis and loans with similar risk characteristics are pooled into cohorts for purposes of measuring incurred losses. The ASC 450 contingent component is recognized as part of operating expenses in the consolidated statement of comprehensive income. At all times the recognized liability (including the stand-ready liability and contingent liability) is at least equal to the probable estimated losses of the guarantee portfolio. The Group measures its guarantee liabilities at inception at fair value based on the Group’s expected payouts and also incorporating a markup margin. As the Group’s guarantee liabilities are not traded in an active market with readily observable prices, the Group applies a discounted cash flow methodology to measure the fair value of guarantee liabilities. The impact of credit losses is also considered by applying discounted cash flow method for the subsequent measurement of guarantee liabilities, based on the consideration of reasonable and supportable forecasts of future economic conditions. The significant unobservable inputs used include expected future payout and discount rate. The expected future payouts were estimated based on expected default rates and collection rates for each product type, taking into consideration of historical loss experiences for both contingent and noncontingent elements. The expected future payouts take into account missed payments initially compensated by ZhongAn within two Refer to Note 12 for additional information about guarantee liabilities for the years ended December 31, 2020, 2021 and 2022. From September 2017, the Group revised the arrangement with Zhongan on Xiaoying Credit Loan products, which is the major product offered by Group. The Group no longer records any guarantee liabilities in accordance with ASC Topic 460 for substantially all Xiaoying Preferred Loans. For most Xiaoying Card Loans, the Group records financial guarantee derivatives in accordance with ASC 815. See accounting policy of revenue recognition and financial guarantee derivatives. Starting from 2020, the Group ceased to provide guarantee service on the loan facilitated. The outstanding balance of guarantee liabilities was nil and nil as of December 31, 2021 and 2022. |
| Financial guarantee derivatives | (h) Starting from September 2017, for newly facilitated Xiaoying Credit Loans and Xiaoying Revolving Loans, the Group entered into a series of arrangements with various financial institutional cooperators in which it has agreed that the Group’s exposure is limited to the contractual guarantee fee that the Group cannot collect under the agreement from the borrower as a result of default or prepayment but are still obligated to compensate those financial institutional cooperators based on the contractual guarantee fee up to the pre-agreed cap. See accounting policy in Revenue Recognition. The financial guarantee is accounted for as a derivative under ASC 815 because the financial guarantee scope exemption in ASC 815-10-15-58 is not met. The derivative is remeasured at each reporting period. The change in fair value of the derivative is recorded as a change in fair value of financial guarantee derivatives in the consolidated statements of comprehensive income(loss). The derivative is increased by the guarantee fees collected from the borrowers upon receipt as the Group expects all the fees to be ultimately paid to those financial institutional cooperators. When the Group settles the guarantee through performance of the guarantee by making payments to those financial institutional cooperators, the Company records a corresponding deduction to the derivative. The Group uses the discounted cash flow model to value these financing guarantee derivatives at inception and subsequent valuation dates. This discounted cash flow model incorporates assumptions such as the expected delinquency rates, prepayment rate and discount rate. The expected delinquency rate and prepayment rate is estimated by taking into consideration of historical loss experiences. The discount rate is determined based on the market rates. The Group considers that the impact of discount rate to the fair value of financial guarantee derivatives is immaterial. |
| Fair value | (i) Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows: ● Level 1—inputs are based upon unadjusted quoted prices for identical assets or liabilities traded in active markets. ● Level 2—inputs are based upon quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ● Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Most fair value is therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. |
| Cash and Cash Equivalents | (j) Cash and cash equivalents primarily consist of cash on hand and cash in bank which are highly liquid. As of December 31, 2021 and 2022, cash equivalents were comprised of term deposits in banks. All cash and cash equivalents are unrestricted as to withdrawal and use. |
| Restricted Cash | (k) Restricted cash consists primarily of cash held by the Consolidated Trusts and Partnerships through segregated bank accounts which can only be used by the Consolidated Trusts and Partnerships to specified activities as stipulated in the Consolidated Trust or Partnership agreements. Cash in the Consolidated Trusts and Partnerships is not available to fund the general liquidity needs of the Group. Restricted cash also includes cash deposited with banks as collateral for borrowings from the respective banks and security deposits set aside in banks. Restriction on the use of such cash and the interest earned thereon is imposed by the banks and remains effective throughout the terms of the borrowings. See Note 8. |
| Accounts receivable and contract assets, net | (l) Accounts receivable and contract assets, net Accounts receivable and contract assets consist of accounts receivable and contract assets from the facilitation and post-origination service in relation to loans facilitated under both Direct and Intermediary Models, and from financing income generated from Consolidated Trusts and Partnerships and Xiaoying Microcredit. Contract assets represent the Group’s right to consideration in exchange for facilitation services that the Company has transferred to the customer before payment is due. The Group only recognizes accounts receivable and contract assets to the extent that the Group believes it is probable that they will collect substantially all of the consideration to which it will be entitled in exchange for the services transferred to the customer. The general life time of accounts receivable and contract assets lasts no more than 12 months. Accounts receivable and contract assets from facilitation service and financing income is stated at the historical carrying amount net of write-offs and allowance for credit losses. The Group establishes an allowance for credit losses in accordance with ASC 326 based on estimates, historical experience of net default rates, current economic conditions, reasonable and supportable forecasts of future economic conditions and other factors surrounding the credit risk of customers. The profile of the borrowers is similar under each product therefore the Group applies a consistent credit risk management framework to the entire portfolio of borrowers under each product. For individual customers where there is an observable indicator of impairment such as fraud, a specific allowance is provided. The Group also constantly monitor the financial condition and evaluates the credit quality of certain institutional funding partners and external financing guarantee companies from which the Group’s service fees are collected directly or indirectly. The Group evaluates and adjusts its allowance for credit losses for accounts receivable and contract assets on a quarterly basis or more often as necessary. Uncollectible accounts receivable or contract assets are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when accounts receivable or contract assets are deemed uncollectible. The following table presents the accounts receivable and contract assets from facilitation, post-origination and financing income as of December 31, 2021 and 2022, respectively: Accounts Accounts receivable receivable and contract and contract assests from assests from Accounts facilitation post-origination receivable from Allowance for As of December 31, 2021 services services financing income credit losses Total RMB RMB RMB RMB RMB Accounts receivable: Xiaoying Credit Loan 189,556,149 2,468,496 26,080,407 (8,092,404) 210,012,648 Contract assests: Xiaoying Credit Loan 529,311,240 25,931,783 — (17,775,553) 537,467,470 Total 718,867,389 28,400,279 26,080,407 (25,867,957) 747,480,118 Accounts Accounts receivable receivable Accounts and contract and contract receivable assests from assests from and contract facilitation post-origination assests from Allowance for As of December 31, 2022 services services financing income credit losses Total RMB RMB RMB RMB RMB Accounts receivable: Xiaoying Credit Loan 24,326,715 1,427,297 54,103,450 (15,353,343) 64,504,119 Other loans — — 824,527 (39,132) 785,395 Contract assests: Xiaoying Credit Loan 1,038,520,804 60,244,520 317,399 (6,480,105) 1,092,602,618 Other loans 3,887,805 134,389 — (2,586) 4,019,608 Total 1,066,735,324 61,806,206 55,245,376 (21,875,166) 1,161,911,740 . Accounts Accounts receivable receivable Accounts and contract and contract receivable assests from assests from and contract facilitation post-origination assests from Allowance for As of December 31, 2022 services services financing income credit losses Total US$ US$ US$ US$ US$ Accounts receivable: Xiaoying Credit Loan 3,527,042 206,939 7,844,263 (2,226,025) 9,352,219 Other loans — — 119,545 (5,674) 113,871 Contract assests: Xiaoying Credit Loan 150,571,362 8,734,634 46,019 (939,527) 158,412,488 Other loans 563,679 19,485 — (375) 582,789 Total 154,662,083 8,961,058 8,009,827 (3,171,601) 168,461,367 The following tables present the aging of accounts receivable as of December 31, 2021 and 2022 respectively. The Group charges off accounts receivable overdue more than 60 days. As of December 31, 2021 Aging Not past-due 1 - 30 days 30 - 60 days Total RMB RMB RMB RMB Xiaoying Credit Loan 205,943,964 6,352,735 5,808,353 218,105,052 Total 205,943,964 6,352,735 5,808,353 218,105,052 As of December 31, 2022 Aging Not past-due 1 - 30 days 30 - 60 days Total RMB RMB RMB RMB Xiaoying Credit Loan 72,674,385 2,932,527 4,250,550 79,857,462 Other loans 746,331 40,675 37,521 824,527 Total 73,420,716 2,973,202 4,288,071 80,681,989 As of December 31, 2022 Aging Not past-due 1 - 30 days 30 - 60 days Total US$ US$ US$ US$ Xiaoying Credit Loan 10,536,796 425,176 616,272 11,578,244 Other loans 108,208 5,897 5,440 119,545 Total 10,645,004 431,073 621,712 11,697,789 The following tables present the movement of allowance for credit losses for accounts receivables and contract assets as of December 31, 2020, 2021 and 2022: As of Provision for Charge-off for As of January 1, Adoption of ASU accounts receivable accounts December 31, 2020 2016-13 (net of recovery) (1) receivable 2020 RMB RMB RMB RMB RMB Xiaoying Credit Loan 185,085,029 11,480,592 112,833,743 (271,870,171) 37,529,193 Xiaoying Revolving Loan 7,824,878 811,579 11,883,737 (19,367,707) 1,152,487 Internet Channel — 3,232,265 (3,232,265) — — Total 192,909,907 15,524,436 121,485,215 (291,237,878) 38,681,680 Provision for accounts receivable Charge-off for As of and contract assets accounts As of January 1, (net of recovery) receivable and December 31, 2021 (1) contract assets 2021 RMB RMB RMB RMB Accounts receivable: Xiaoying Credit Loan 37,529,193 46,512,298 (75,949,087) 8,092,404 Xiaoying Revolving Loan 1,152,487 1,612,419 (2,764,906) — Contract assests: Xiaoying Credit Loan — 29,123,093 (11,347,540) 17,775,553 Total 38,681,680 77,247,810 (90,061,533) 25,867,957 Provision for accounts receivable Charge-off for As of and contract assets accounts As of January 1, (net of recovery) receivable and December 31, 2022 (1) contract assets 2022 RMB RMB RMB RMB Accounts receivable: Xiaoying Credit Loan 8,092,404 21,753,517 (14,492,578) 15,353,343 Other loans — 145,931 (106,799) 39,132 Contract assests: Xiaoying Credit Loan 17,775,553 (66,409) (11,229,039) 6,480,105 Other loans — 2,586 — 2,586 Total 25,867,957 21,835,625 (25,828,416) 21,875,166 Provision for accounts receivable Charge-off for As of and contract assets accounts As of January 1, (net of recovery) receivable and December 31, 2022 (1) contract assets 2022 US$ US$ US$ US$ Accounts receivable: Xiaoying Credit Loan 1,173,288 3,153,963 (2,101,226) 2,226,025 Other loans — 21,158 (15,484) 5,674 Contract assests: Xiaoying Credit Loan 2,577,213 (9,628) (1,628,058) 939,527 Other loans — 375 — 375 Total 3,750,501 3,165,868 (3,744,768) 3,171,601 (1) The recoveries of charge-off of accounts receivables and contract assets amounted to RMB 4,243,262 , RMB 850,597 and RMB 1,738,580 (US$ 252,070 ) during the year ended December 31, 2020, 2021 and 2022, respectively. |
| Loans receivables from Xiaoying Credit Loans and Xiaoying Revolving Loans, net | (m) Loans receivables represent loans facilited through the Consolidated Trusts and Partnerships and loans provided by Xiaoying Microcredit, which consist of Xiaoying Credit Loans, Xiaoying Revolving Loans and other miscellaneous loans that the Group facilitated and provided during the years. Loans receivables from Xiaoying Credit Loans and other loans are stated at the historical carrying amount net of write-offs and allowance for credit losses. The Group establishes an allowance for credit losses in accordance with ASC 326 based on estimates, historical experience of net default rates, current economic conditions, reasonable and supportable forecasts of future economic conditions and other factors surrounding the credit risk of customers. The profile of the borrowers is similar under each product therefore the Group applies a consistent credit risk management framework to the entire portfolio of borrowers under each product. For individual customers where there is an observable indicator of impairment such as fraud, a specific allowance is provided. The Group evaluates and adjusts its allowance for credit losses for loans receivables on a quarterly basis or more often as necessary. Uncollectible loans receivables are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when loans receivables are deemed uncollectible. As of December 31, 2021 and 2022, loans receivables from Xiaoying Credit Loans and other loans amounted to RMB2,484,072,931 and RMB3,810,393,225 (US$552,455,087) respectively. The general life time of loans receivables from Xiaoying Credit Loans and other loans lasts no more than 12 months. The Group excluded the accrued interest receivable balance from the disclosed amortized cost basis, amounting to RMB26,080,407 and RMB55,245,376 (US$8,009,827) as of December 31, 2021 and 2022. The accrued interest receivables were recorded in accounts receivable and contract assets from financing income in the consolidated balance sheet. In 2021 and 2022, the Group charges off loan receivables from Xiaoying Credit Loans and other loans overdue more than 60 days. The following table presents the loans receivable from Xiaoying Credit Loans and other loans originated and retained by the Company as of December 31,2021 and 2022, respectively: Loans receivables from Xiaoying Credit Loans and other Allowance for As of December 31, 2021 loans credit losses Total RMB RMB RMB Xiaoying Credit Loan 2,537,161,361 (54,725,057) 2,482,436,304 Xiaoying Revolving Loan 2,247,311 (610,684) 1,636,627 Total 2,539,408,672 (55,335,741) 2,484,072,931 Loans receivables from Xiaoying Credit Loans and other Allowance for As of December 31, 2022 loans credit losses Total RMB RMB RMB Xiaoying Credit Loan 3,856,622,443 (103,630,827) 3,752,991,616 Other loans 60,249,936 (2,848,327) 57,401,609 Total 3,916,872,379 (106,479,154) 3,810,393,225 Loans receivables from Xiaoying Credit Loans and other Allowance for As of December 31, 2022 loans credit losses Total US$ US$ US$ Xiaoying Credit Loan 559,157,693 (15,025,057) 544,132,636 Other loans 8,735,420 (412,969) 8,322,451 Total 567,893,113 (15,438,026) 552,455,087 The following tables present the movement of provision for loans receivable from Xiaoying Credit Loans and other loans as of December 31, 2020, 2021 and 2022, respectively: Provision for loans receivable from Xiaoying Credit As of Loans and other January 1, Adoption of ASU loans (net of As of December 2020 2016-13 recovery) (1) Charge-off 31, 2020 RMB RMB RMB RMB RMB Xiaoying Credit Loans — — 74,934,783 (4,319,003) 70,615,780 Xiaoying Revolving Loans 24,709,468 4,205,046 152,275,243 (149,249,753) 31,940,004 Total 24,709,468 4,205,046 227,210,026 (153,568,756) 102,555,784 (Reversal of) provision for loans receivable from Xiaoying Credit Loans and As of January 1, other loans (net of As of December 31, 2021 recovery) (1) Charge-off 2021 RMB RMB RMB RMB Xiaoying Credit Loans 70,615,780 80,823,776 (96,714,499) 54,725,057 Xiaoying Revolving Loans 31,940,004 (4,428,608) (26,900,712) 610,684 Total 102,555,784 76,395,168 (123,615,211) 55,335,741 (Reversal of) provision for loans receivable from Xiaoying Credit Loans and As of December 31, other loans (net of As of December 31, 2021 recovery) (1) Charge-off 2022 RMB RMB RMB RMB Xiaoying Credit Loans 54,725,057 160,131,434 (111,225,664) 103,630,827 Xiaoying Revolving Loans 610,684 — (610,684) — Other loans — 4,510,445 (1,662,118) 2,848,327 Total 55,335,741 164,641,879 (113,498,466) 106,479,154 (Reversal of) provision for loans receivable from Xiaoying Credit Loans and As of December 31, other loans (net of As of December 31, 2021 recovery) (1) Charge-off 2022 US$ US$ US$ US$ Xiaoying Credit Loans 7,934,387 23,216,876 (16,126,206) 15,025,057 Xiaoying Revolving Loans 88,541 — (88,541) — Other loans — 653,953 (240,984) 412,969 Total 8,022,928 23,870,829 (16,455,731) 15,438,026 (1) The following table presents the aging of loans receivable from Xiaoying Credit Loans and other loans as of December 31, 2021 and 2022, respectively: As of December 31, 2021 Aging Not past-due 1 - 30 days 30 - 60 days Total RMB RMB RMB RMB Xiaoying Credit Loans 2,514,735,264 13,800,724 8,625,373 2,537,161,361 Xiaoying Revolving Loans 2,241,915 — 5,396 2,247,311 Total 2,516,977,179 13,800,724 8,630,769 2,539,408,672 As of December 31, 2022 Aging Not past-due 1 - 30 days 30 - 60 days Total RMB RMB RMB RMB Xiaoying Credit Loans 3,822,596,905 22,812,090 11,213,448 3,856,622,443 Other loans 57,586,395 1,705,924 957,617 60,249,936 Total 3,880,183,300 24,518,014 12,171,065 3,916,872,379 As of December 31, 2022 Aging Not past-due 1 - 30 days 30 - 60 days Total US$ US$ US$ US$ Xiaoying Credit Loans 554,224,454 3,307,442 1,625,797 559,157,693 Other loans 8,349,243 247,336 138,841 8,735,420 Total 562,573,697 3,554,778 1,764,638 567,893,113 |
| Loans and payable to investors of Consolidated Trusts | (n) For Consolidated Trusts founded before December 31, 2021, the Group elected to apply the fair value option for the loan assets and liabilities of the Consolidated Trusts on an individual basis at initial recognition, which is irrevocable throughout the existing period of each Consolidated Trust. For the Consolidated Trusts founded after January 1, 2022, the Group elected to apply amortized cost method to the loan assets and liabilities of newly formed Consolisated Trusts. For loan assets and liabilities measured at fair value, the Group uses a discounted cash flow valuation methodology by discounting the estimated future net cash flows using an appropriate discount rate. The future net cash flows are estimated based on contractual cash flows, taking into consideration of estimated delinquency rate, prepayment rate and collection rate of the loans, and the pre-determined rate of the Group’s guarantee exposure for certain products. They are recorded as “Loans at fair value” and “Payable to investors at fair value” in the consolidated balance sheet. Changes in fair value of loans and payable to investors are reported net as recorded in “Fair value adjustments related to Consolidated Trusts” in the consolidated statement of comprehensive income. See Note 3 for further disclosure on financial instruments of the Consolidated Trusts for which the fair value option has been elected. |
| Loan receivable from Xiaoying Housing Loans, net | (o) Xiaoying Housing Loan is a home equity loan product secured by properties owned by borrowers and had been ceased the facilitation since 2019. The Group directly or indirectly guarantees on borrowers’ defaults to the investors or institutional funding partners of Xiaoying Housing Loan products and obtains a collateral right from the borrowers for such guarantees. The collaterals include apartments, houses and properties, which can fully cover the underlying loan principle and interest. Upon default of the loan, the Group compensates the investor or institutional funding partners for defaulted loan principal and interest and obtains the creditor’s right of the underlying loan. The payout amount in relation to the original guarantee provision provided at loan inception was recorded as a deduction of guarantee liability, reflected in net payouts in the guarantee liabilities rollforward. The remaining payout amount in relation to the acquisition of the creditor’s right of the underlying loan is recorded as loan receivable upon payment of compensation in “Loan receivable from Xiaoying Housing Loans” in the consolidated balance sheets as the collection cycle typically will be more than one year. No loan receivables are recorded at loan inception. Loan receivable from Xiaoying Housing Loans is recorded based on the present value of the expected amount to be collected from the exercise of the collateral right. Given the deterioration of the credit related to those loans upon acquisition, the Group determined that those loans are in non-accrual status and should only recognize related service and penalty fees upon cash received in other revenues. The outstanding balance of loan receivable from Xiaoying Housing Loans were RMB12,083,317 and RMB10,061,258 (US$1,458,745) as of December 31, 2021 and 2022, respectively. The contractually required payments that are receivable for loans acquired during 2021 and 2022 were nil and nil, respectively. The outstanding undiscounted balance including the principal, interest, fees, penalties under Xiaoying Housing Loans receivable were RMB121,854,733 and RMB154,623,985 (US$22,418,371), as of December 31, 2021 and 2022, respectively. The guarantee related to the default of the outstanding balance of Xiaoying Housing Loan were all settled in 2020. Allowance for loan receivable is established through periodic charges to the provision for loan receivable when the Group believes that the future collection of defaulted loan principal and interest is unlikely. Allowance for credit losses for loan receivables from Xiaoying Housing loans is also recognized when the fair value is below the original recorded present value of the expected amount to be collected. In order to accelerate the collection process, the Group transferred the creditor rights of certain defaulted loans as well as the underlying collateral right to third party companies at a discount in 2020, 2021 and 2022. The discounted amount was recorded as an allowance for loan receivables which represent the amount that the Group expects not able to collect from the proceedings. In addition, the Group also recorded an allowance for the remaining outstanding loans not transferred benchmarked to the discounted amount. The Group also institutes proceedings to collect the payout amount from collaterals. Uncollectible loan receivable from Xiaoying Housing Loans is written off when a settlement is reached for an amount that is less than the outstanding historical balance or when loan receivables are deemed uncollectible. The following tables presents the movement in provision for loans receivable from Xiaoying Housing Loans for the years ended December 31, 2020, 2021 and 2022. Provision for Loans Receivable As of December 31, 2019 from Xiaoying Housing Loans Charge-off As of December 31, 2020 RMB RMB RMB RMB 48,211,512 17,993,570 (66,205,082) — Reversal of provision for Loans Receivable Recoveries of As of December 31, 2020 from Xiaoying Housing Loans charge-off As of December 31, 2021 RMB RMB RMB RMB — (377,559) 377,559 — Reversal of provision for Loans Receivable Recoveries of As of December 31, 2021 from Xiaoying Housing Loans charge-off As of December 31, 2022 RMB RMB RMB RMB — (6,066,176) 6,066,176 — Reversal of provision for Loans Receivable Recoveries of As of December 31, 2021 from Xiaoying Housing Loans charge-off As of December 31, 2022 US$ US$ US$ US$ — (879,513) 879,513 — The following tables presents the aging of Loan receivables from Xiaoying Housing Loans as of December 31, 2021 and 2022, respectively: As of December 31, 2021 Over due 1 – 2 Over due 2 – 3 Over due over 3 Aging years years years Total RMB RMB RMB RMB Xiaoying Housing Loans — 1,392,439 10,690,878 12,083,317 As of December 31, 2022 Over due 1 – 2 Over due 2 – 3 Over due over 3 Aging years years years Total RMB RMB RMB RMB Xiaoying Housing Loans — — 10,061,258 10,061,258 As of December 31, 2022 Over due Over due Over due Aging 1 – 2 years 2 – 3 years over 3 years Total US$ US$ US$ US$ Xiaoying Housing Loans — — 1,458,745 1,458,745 |
| Financial investments | (p) The Group invested in several Venture Capital funds (“VC funds”) in the year 2021 and 2022. These investments are in the legal form of limited partnership or zero coupon convertible note. For partnership investments, unless the fair value option under ASC 825 is elected, the Group uses equity method to account for these investments under ASC 323, which means these investments are initially recorded at cost and subsequently adjusted for the proportionated share of income or loss, impairment as well as contributions made or distributions received. However, for the case that virtually no influence was exerted by the Group in the partnership agreement, fair value measurement is applied under ASC 321. For VC funds investment measured under ASC 321, fair value measurement is applied except for the case that readily determinable fair value is not available thus the Group measures them alternatively at cost minus impairment, plus or minus observable price changes from orderly transactions of identical or similar investments of the same issuer. For the investment in the legal form of zero coupon convertible note, it is in substance a prepaid forward contract that entitles the Group to obtain shares of the VC fund in the future, and because no readily determinable fair value is available, the Group measures the investment at cost minus impairment, plus or minus observable price changes from orderly transactions of identical or similar investments of the same issuer under ASC 321. The Group reviews VC funds investment for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is measured based on the excess of the carrying amount of an investment over its estimated fair value. |
| Deposits to institutional cooperators, net | (q) Starting from November 2019, the Group enter into a series of deposit arrangements with financing institutional cooperators, such as insurance company and financing guarantee company. The Group is required to pay deposits to those financial institutional cooperators monthly or in accordance with an agreed payment schedule. The amount of deposit is separately agreed with each institutional cooperator, usually calculated by multiplying the outstanding loan balance on the reconciliation date by an agreed percent rate (“the standard amount “). The agreed percent rate may be adjusted from time to time. If the balance of the deposits exceeds the standard amount or supplementary payment of deposit is needed, the financial institutional cooperators shall refund the excess part to the Group or the Group shall make supplementary payment of deposit in accordance with an agreed payment schedule. Deposits to institutional cooperators is stated at the historical carrying amount net of write-offs and allowance for credit losses. The Group establishes an allowance based on estimates, the current and expected default rates, insurance premium/guarantee fee, the historical pay-out amounts, the outstanding loan balances, the forecasted loan facilitation amounts and the credit risk of institutional cooperators. The Group evaluates and adjusts its allowance for deposits to institutional cooperators on a quarterly basis or more often as necessary. Deposits to institutional cooperators are written off when deposits are deemed uncollectible. Deposits to institutional cooperators are recorded as current assets because the term of the underlying loan assets was 12 months or less. As of December 31, 2021 and 2022, all deposits are refundable and none of them passed the original due date. |
| Property and equipment, net | (r) Furniture and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the following estimated useful lives: Computer and transmission equipment 3 years Furniture and office equipment 5 years Motor vehicles 4 years Leasehold improvements Over the shorter of the lease term or expected useful lives Gains and losses from the disposal are included in “Other income (loss), net”. |
| Intangible assets | (s) Intangible assets with finite lives represent domain name and purchased computer software. These intangible assets are amortized on a straight-line basis over their estimated useful lives of the respective asset, which varies from 1 Intangible assets with an indefinite useful life represent the insurance broker license purchased during 2018 and insurance sale on line license authorized in 2019, See Note 7. Intangible assets with an indefinite life is not amortized and is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. |
| Impairment of long-lived assets | (t) Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carring amount of an asset may not be recoverable. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carring amounts of the assets to an estimate of future undiscouneted cashs flow attributable to theses assets. If the sum of the future undiscouneted cash flows is less than the carring amouts of the assets, the Group recognizes an impairment loss based on the exess of the carring amounts of the assets over the fair value of the assets. Meanwhile, annual impairment testing is required for goodwill and intangible assets that have an indefinite useful life. |
| Long-term investments | (u) The Group accounts for long-term investments using either the cost or equity method of accounting depending upon whether the Group has the ability to exercise significant influence over investments. As part of this evaluation, the Group considers the participating and protective rights in the investments as well as its legal form. The Group applies the equity method of accounting for the long-term investments when the Group has the ability to significantly influence the operations or financial activities of the investee. The Group records the investments at cost and subsequently adjusts the carrying amount each period for share of the earnings or losses of the investee and other adjustments required by the equity method of accounting. Dividends received from the equity method investments are recorded as reductions in the cost of such investments. The Group records the cost method long-term investments at historical cost and subsequently record any dividends received from the net accumulated earnings of the investee as income. Dividends received in excess of earnings are considered a return of investment and are recorded as reductions in the cost of the investments. Long-term investments are evaluated for impairment when facts or circumstances indicate that the fair value of the long-term investments is less than its carrying value. An impairment is recognized when a decline in fair value is determined to be other-than-temporary. The Group reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, the: (i) nature of the investment; (ii) cause and duration of the impairment; (iii) extent to which fair value is less than cost; (iv) financial condition and near term prospects of the investments; and (v) ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. As of December 31, 2021 and 2022, long-term investments of the Group consist of five and three equity investments of PRC private companies, respectively. |
| Deposit payable to channel cooperators | (v) The Group co-operates with selected Fintech and other financial companies by connecting the borrowers referred by those companies to investors on the Group’s platform. As part of the arrangements, the selected companies also provide credit enhancements on the loans facilitated to the borrowers referred by them and are required to pay a certain amount of cash as deposit to the Group, from which the Group is entitled to deduct if they fail to compensate the defaulted loans on a timely basis. Any remaining balance of the deposit is released upon expiry of the co-operation agreements or newly signed settlement agreements. As of December 31, 2021 and 2022, the outstanding balance of the deposit that the Group received from Fintech and other financial companies were RMB21,012,235 and RMB19,700,235 (US$2,856,266) respectively. |
| Employee defined contribution plan | (w) Full time employees of the Group in the PRC participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the Group make contributions to the government for these benefits based on a certain percentage of the employee’s salaries. The Group has no legal obligation for the benefits beyond the contributions. The total amount that was expensed as incurred were RMB28,891,339 , RMB35,601,429 and RMB41,757,571(US$6,054,279) for the years ended December 31, 2020, 2021 and 2022 respectively. |
| Advertising cost | (x) Advertising costs are expensed as incurred in accordance with ASC 720-35 Other Expense—Advertising costs. Advertising costs were RMB25,594,249,RMB7,395,353 and RMB8,491,724 (US$1,231,184) for the years ended December 31, 2020, 2021 and 2022 respectively. Advertising costs are included in sales and marketing expense in the consolidated statements of comprehensive income (loss). |
| Origination and servicing expense | (y) Origination and servicing expense consists primarily of variable expenses and vendor costs, including labor costs, costs related to credit assessment, borrower acquisitions, payment processing services, fees paid to third party collection agencies, as well as interest expense paid to investors and institutional funding partners of the Consolidated Trusts and Partnerships. |
| Income taxes | (z) Current taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred taxes are provided using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax return. Under this method, deferred tax assets and liabilities are recognized for the differences between the financial statement carrying amount and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are then evaluated to determine the extent to which they are more likely than not to be realized. In making such a determination, management considers all positive and negative evidence, including future reversals of existing taxable temporary differences and projected future taxable income exclusive of reversing temporary differences and carryforwards. Deferred tax assets are then reduced by a valuation allowance to the amount, in the opinion of management, that is more like than not to be realized. The Group accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of the benefit to be recognized. First, each the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If a tax position is deemed more-likely-than-not to be sustained (defined as a likelihood of more than fifty percent of being sustained upon an examnination, based on the technical merits of the tax position), the tax position is then assessed to determine the amount of benefits to recognize in the consolidated financial statements. The amount of the benefits that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon settlement. Interest and penalties on income taxes are classified as a component of income taxes. |
| Value added taxes ("VAT") | (aa) The Group is subject to VAT at the rate of 6% and 13% given that they are classified as general tax payers and at the rate of 3% as certain Consolidated Trusts and Partnerships of the Group are classified as small-scale tax payers. VAT is reported as a deduction to revenue when incurred and amounted to RMB197,016,590 , RMB228,029,948, and RMB234,931,501(US$34,061,866) for the years ended December 31, 2020, 2021 and 2022 respectively. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in the line item of accrued expense and other liabilities on the consolidated balance sheets. |
| Segment information | (ab) The Group uses management approach to determine operation segment. The management approach considers the internal organization and reporting used by the Group’s chief operating decision maker (“CODM”)for making decisions, allocation of resource and assessing performance. The Group’s CODM has been identified as the Chief Executive Officer who reviews the consolidated results of operations when making decisions about allocating resources and assessing performance of the Group. The Group operates and manages its business as a single segment. All of the Group’s revenue for the years ended December 31, 2020, 2021 and 2022 were generated from the PRC. As the Group generates all of its revenues in the PRC, no geographical segments are presented. |
| Treasury shares | (ac) Treasury shares The Group accounts for treasury shares using the cost method. Under this method, the cost incurred to purchase the shares is recorded in the treasury shares account in the consolidated balance sheets. In the event that treasury shares are transferrd to Employee Stock Ownership Plans (“ESOP”), the Company recognized the amount in addition paid-in capital. The treasury shares account includes 41,199,374 ordinary shares as of December 31, 2022, which will be canceled or held as treasury shares. |
| Leases | (ad) The Group adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) from January 1, 2019 by using the modified retrospective method and did not restate the comparable periods. The Group has elected the package of practical expedients, which allows the Group not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any expired or existing leases as of the adoption date. The Group also elected the practical expedient not to separate lease and non-lease components of contracts. Lastly, the Group elected the short-term lease exemption for all contracts with lease terms of 12 months or less. The Group determines if an arrangement is a lease or contains a lease at inception. Right-of-use (“ROU”) assets and liabilities are recognized at lease commencement date based on the present value of remaining lease payments over the lease terms. As most of the Group’s leases do not provide an implicit rate, the Group estimates its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The Group’s leases often include options to extend lease terms and such extended terms are included in lease terms when the Group is reasonably certain to exercise those options. Lease terms also include periods covered by options to terminate the leases when the Group is reasonably certain not to exercise those options. Lease expense is recorded on a straight-line basis over the lease term. For operating leases, ROU assets were recorded as “Other non-current assets”, and the current and non-current portions of the lease liabilities were recorded as “Accrued expenses and other current liabilities” and “Other non-current liabilities” in the consolidated balance sheets. The Group does not have any finance leases for the year ended December 31, 2021 and 2022. As of December 31, 2021 and 2022, the Group recognized ROU assets of RMB25,199,346 and RMB62,688,248 (US$9,088,942), and total lease liabilities of RMB24,350,514 and RMB62,497,742 (US$9,061,321), including current portion of RMB12,331,166 and RMB11,304,693 (US$1,639,026). The Group’s operating leases mainly related to office facilitates. As of December 31, 2022, the weighted average remaining lease term was 4.77 years and the weighted average discount rate was 6.2% for the Group’s operating leases. Operating lease cost for the year ended 31 December, 2022 was RMB17,254,245(US$2,501,630), which excluded cost of short-term contracts. Short-term lease cost for the year ended 31 December, 2022 was insignificant. For the year ended 31 December, 2021 and 2022, no lease cost for operating leases was capitalized. Supplemental cash flow information related to operating leases was as follows: As of December 31, 2022 RMB US$ Cash payments for operating leases 18,949,406 2,747,406 ROU assets obtained in exchange for operating lease liabilities 54,743,146 7,937,010 Future lease payments under operating leases as of December 31, 2022 were as follows: Operating leases RMB US$ Year ending December 31, 2023 16,425,020 2,381,404 2024 16,829,056 2,439,984 2025 15,561,821 2,256,252 2026 9,572,584 1,387,894 2027 and thereafter 15,896,286 2,304,745 Total future lease payments 74,284,767 10,770,279 Less: Imputed interest 11,787,025 1,708,958 Total lease liability balance 62,497,742 9,061,321 As of December 31, 2022, additional operating leases that have not yet commenced were immaterial. |
| Net income (loss) per share | (ae) Basic income (loss) per share is computed by dividing net income (loss) attributable to the holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted income (loss) per share is calculated by dividing net income (loss) attributable to the holders of ordinary shares as adjusted for the effect of dilutive ordinary share equivalents, if any, by the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. Ordinary share equivalents of stock options are calculated using the treasury stock method. However, ordinary share equivalents are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded. |
| Share-based compensation | (af) Share-based payment transactions with employees and directors, such as stock options and restricted stocks, are measured based on the grant date fair value of the awards in accordance with ASC 718, Compensation-Stock Compensation, with the resulting expense generally recognized on a straight-line basis in the consolidated statements of income over the period during which the employee is required to perform service in exchange for the award. |
| Certain risks and concentrations | (ag) Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash, restricted cash, financial investments, accounts receivable and contract assets, deposits to institutional cooperators, loans receivables and loans at fair value. The Group’s investment policy requires cash and restricted cash to be placed with high-quality financial institutions and to limit the amount of credit risk from any one issuer. The Group regularly evaluates the credit standing of the counterparties or financial institutions. Financial investments that potentially subject the Group to market risk mainly consist of investments in VC funds. The Group limits its exposure to market risks associated with financial investments by regularly conducting post-investment management of the funds. Accounts receivable and contract assets are typically unsecured and are derived from revenue earned from customers in the PRC. The risk with respect to accounts receivable and contract assets is mitigated through the Group’s consistent credit risk management framework to the entire portfolio of borrowers under each product. The Group also constantly monitor the financial condition and evaluates the credit quality of certain institutional funding partners and external financing guarantee companies from which the Group’s service fees are collected. Deposits to institutional cooperators are placed with financial institutional cooperators. The Group regularly monitors the financial condition and evaluates the credit quality of each institutional cooperator. Credit of loans receivables and loans at fair value is controlled by the application of credit approval, limit and monitoring procedures. No investor or institutional funding partner represented greater than 10% or more of the total net revenues for the years ended December 31, 2020, 2021 and 2022. During the years ended December 31, 2020 and 2021, there was one and one institutional cooperator individually provided credit insurance or guarantee services for greater than 10% or more of the total loans the Group facilitated and provided. During the year ended December 31, 2022, there were two institutional cooperators individually provided credit insurance or guarantee services for greater than 10% or more of the total loans the Group facilitated and provided. Year ended Year ended Year ended December 31, December 31, December 31, 2020 2021 2022 Institutional cooperator A Nil * 29.6 % Institutional cooperator B * * 12.3 % Institutional cooperator C 54.4 % 27.6 % * There were two and three contract assets due from institutional funding partners/institutional cooperators that individually accounted for greater than 10% of the Group’s carrying amount of accounts receivable and contract assets as of December 31, 2021 and 2022, respectively. As of December 31, As of December 31, 2021 2022 Institutional cooperator A * 26.3 % Institutional cooperator B * 13.7 % Institutional cooperator D Nil 15.6 % Institutional cooperator E 15.5 % * Institutional funding partner A 11.0 % * As of December 31, 2021 and 2022, two and four institutional cooperators individually accounted for more than 10% of the Group's deposits to institutional cooperators, respectively. As of December 31, As of December 31, 2021 2022 Institutional cooperator B * 20.1 % Institutional cooperator C 30.7 % Nil Institutional cooperator D * 19.2 % Institutional cooperator E 23.1 % 10.7 % Institutional cooperator F * 10.0 % * Less than 10%. The Company manages current payment risk of financial guarantee derivative through a self-developed risk management model. The rating scale of risk management model takes into account factors such as identity characteristics, credit history, payment overdue history, payment capacity, behavioral characteristics and online social network activity. As of December 31, 2022, substantially all of the loans facilitated by the Group were insured/guaranteed by external insurance company or financing guarantee companies. |
| Credit losses | (ah) In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The ASU introduced a new credit loss methodology, the current expected credit losses (“CECL”) methodology, which requires earlier recognition of credit losses while also providing additional disclosure about credit risk. The Group adopted the ASU as of January 1, 2020, which resulted in an increase in the Group’s Allowance for credit losses (“ACL”) and a decrease to opening Retained earnings, net of deferred income taxes, at January 1, 2020. The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, receivables, contract assets and other financial assets measured at amortized cost at the time the financial asset is originated or acquired. The ACL is adjusted each period for changes in expected lifetime credit losses. The CECL methodology represents a significant change from prior U.S. GAAP and replaced the prior multiple existing impairment methods, which generally required that a loss be incurred before it was recognized. Within the life cycle of a loan or other financial asset, the methodology generally results in the earlier recognition of the provision for credit losses and the related ACL than prior U.S. GAAP. The CECL methodology’s impact on expected credit losses, among other things, reflects the Group’s view of the current state of the economy, forecasted macroeconomic conditions and the Group’s portfolios. The CECL methodology also applies to certain off-balance sheet credit exposures, such as financial guarantees not accounted for as derivatives. The financial guarantees provided for the Group’s off-balance sheet loans accounted for under ASC 460 are in the scope of ASC 326 and subject to the CECL methodology. At the January 1, 2020 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to the Group was an approximate RMB22.99 million, or an approximate 8.03%, pre tax increase in the Allowance for credit losses, along with a RMB17.24 million after-tax decrease in Retained earnings and a deferred tax asset increase of RMB5.75 million. Under the CECL methodology, the allowance for credit losses is model based and utilizes a forward-looking macroeconomic forecast in estimating expected credit losses. The model of the allowance for credit losses would be considers (i) the uncertainty of forward-looking scenarios based on the likelihood and severity of a possible recession as another possible scenario; (ii) certain portfolio characteristics, such as portfolio concentration and collateral coverage; and (iii) model limitations as well as idiosyncratic events. |
| Impact of COVID-19 | (ai) Impact of COVID-19 The Company’s results of operations have been adversely affected by the COVID-19 which harmed the Chinese and global economy in general in 2020. In the early onset of the third quarter of 2020, the Group’s business was already on track for a steady recovery. In July 2020, the Group’s total loan facilitation amount was back to the level in January 2020 before COVID-19, and so were the delinquency rates for outstanding loans. In 2021 and 2022, the Group’s operational and financial results continued to show progress against the Group’s strategic objectives. The Company has also provided additional credit losses for accounts receivable and contract assets, other current assets and loans receivables in 2021 and 2022, due to the impact of COVID-19, other economic conditions and other factors. In January, 2023, China officially started to manage COVID-19 as a Class-B infectious disease. The implementation of Class-B management of COVID-19 emphasizes more scientific, precise and efficient epidemic prevention and minimizes its disruptions in the economy and society. However, there are still uncertainties of COVID-19’s future impact, and the extent of the impact will depend on a number of factors, including the duration and severity of COVID-19, possibility of a second wave in China, the development and progress of distribution of COVID-19 vaccine and other medical treatment, the potential change in user behavior, especially on internet usage due to the prolonged impact of COVID-19, the actions taken by government authorities, particularly to contain the outbreak, stimulate the economy to improve business condition, almost all of which are beyond the Company’s control. As a result, certain of the Company’s estimates and assumptions, including the allowance for credit losses, require significant judgments and carry a higher degree of variabilities and volatilities that could result in material changes to the Company’s current estimates in future periods. |
| Recent accounting pronouncements | (ak) The FASB issued Accounting Standards Update No. 2021-08 Business Combinations (Topic 805) in October 2021, which will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Accounting Standards Update No. 2021-08 equires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination, which applies prospectively for all business combinations that occur on or after the date of initial application. The Group will evaluate the impact of this new guidance on the consolidated financial statements when necessary. The FASB issued Accounting Standards Update No. 2022-02 Financial Instruments—Credit Losses (Topic 326) in March, 2022, which will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Accounting Standards Update No. 2022-02 is related to credit loss from troubled debt restructurings and vintage disclosures. The Group is currently evaluating the impact of this new guidance on the consolidated financial statements but does not expect this guidance will have a material impact on its consolidated financial statements. |
| Translation into United States Dollars | (al) The financial statements of the Group are stated in RMB. Translations of amounts from RMB into United States dollars are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.8972, on December 31, 2022, as set forth in H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into United States dollars at that rate on December 31, 2022, or at any other rate. |
