Qifu Technology (QFIN) 6-K Qifu Technology Announces Second Quarter and Interim 2024 Unaudited Financial Results, Announces Board Change and Raises Semi-Annual Dividend

Exhibit 99.2

DIFFERENCES BETWEEN U.S. GAAP AND IFRSs

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

Basis of Preparation

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

Reconciliation Process

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

Limited Assurance Engagement and Results

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

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

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

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

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

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

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

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

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

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Appendix – Reconciliation prepared by the directors of the Company

The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, which differ in certain respects from International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board. The effects of material differences between the financial statements of the Group prepared under U.S. GAAP and IFRSs are as follows:

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

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

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	As of December 31, 2023
			IFRSs adjustments
Condensed Consolidated Balance Sheet	Amounts as reported under U.S. GAAP		Expected credit losses, net of tax			Effective interest rate on loans receivable, net of tax			Share-based compensation		Financial guarantee, net of tax			Amounts as reported under IFRSs
	(In thousands of Renminbi (“RMB”))
	RMB		(Note i) RMB			(Note ii) RMB			(Note iii) RMB		(Note iv) RMB			RMB
ASSETS
Current assets:
Financial assets receivable, net		2,522,543		–			–			–		(2,515,354	)		7,189
Amounts due from related parties		45,346		–			–			–		(8,942	)		36,404
Loans receivable, net		24,604,487		–			(43,934	)		–		–			24,560,553
Total current assets		39,796,028		–			(43,934	)		–		(2,524,296	)		37,227,798
Non-current assets:
Financial assets receivable, net-noncurrent		596,330		–			–			–		(596,330	)		–
Amounts due from related parties		4,240		–			–			–		(1,057	)		3,183
Loans receivable, net-noncurrent		2,898,005		148,675			(1,286	)		–		–			3,045,394
Deferred tax assets		1,067,738		69,350			–			–		(135,172	)		1,001,916
Total non-current assets		6,022,544		218,025			(1,286	)		–		(732,559	)		5,506,724
TOTAL ASSETS		45,818,572		218,025			(45,220	)		–		(3,256,855	)		42,734,522
LIABILITIES AND EQUITY LIABILITIES
Current liabilities:
Contract liability		–		–			–			–		388,181			388,181
Guarantee liabilities-stand ready		3,949,601		–			–			–		(3,949,601	)		–
Guarantee liabilities-contingent		3,207,264		(803,012	)		–			–		–			2,404,252
Other tax payable		163,252		–			(2,560	)		–		–			160,692
Total current liabilities		19,899,619		(803,012	)		(2,560	)		–		(3,561,420	)		15,532,627
Non-current liabilities:
Deferred tax liabilities		224,823		–			(7,655	)		–		–			217,168
Total non-current liabilities		3,909,096		–			(7,655	)		–		–			3,901,441
TOTAL LIABILITIES		23,808,715		(803,012	)		(10,215	)		–		(3,561,420	)		19,434,068

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	As of December 31, 2023
			IFRSs adjustments
Condensed Consolidated Balance Sheet	Amounts as reported under U.S. GAAP		Expected credit losses, net of tax		Effective interest rate on loans receivable, net of tax			Share-based compensation			Financial guarantee, net of tax			Amounts as reported under IFRSs
	(In thousands of Renminbi (“RMB”))
	RMB		(Note i) RMB		(Note ii) RMB			(Note iii) RMB			(Note iv) RMB			RMB
SHAREHOLDERS’ EQUITY
Additional paid-in capital		6,059,439		–		–			17,505			–			6,076,944
Retained earnings		16,297,316		1,021,037		(35,005	)		(17,505	)		304,565			17,570,408
TOTAL QIFU TECHNOLOGY INC. EQUITY		21,937,483		1,021,037		(35,005	)		–			304,565			23,228,080
TOTAL EQUITY		22,009,857		1,021,037		(35,005	)		–			304,565			23,300,454
TOTAL LIABILITIES AND EQUITY		45,818,572		218,025		(45,220	)		–			(3,256,855	)		42,734,522

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

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

Notes:

(i) Expected credit losses, net of tax

Under U.S. GAAP, ASC 326 requires recognition of allowances upon origination or acquisition of financial assets at an estimate to reflect expected credit losses over the contractual term of the financial assets (the current expected credit loss or the “CECL” model) and adjusted as of each subsequent reporting period. Under IFRSs, in accordance with IFRS 9, only the portion of lifetime expected credit loss (“ECL”) that results from default events that are possible within 12 months after the reporting date is recorded (“stage 1”) upon initial recognition. Lifetime expected credit losses are subsequently recorded only if there is a significant increase in the credit risk of the asset (“stage 2”). Once there is objective evidence of impairment (“stage 3”), lifetime ECL continues to be recognized, but interest revenue is calculated on the net carrying amount (that is, amortized cost net of the credit allowance). Accordingly, the reconciliation includes a difference in the credit losses for loans receivable and guarantee liabilities to reflect the difference between IFRS 9 and ASC 326.

(ii) Effective interest rate on loans receivable, net of tax

The Group recognizes revenue fees and interests charged to the borrowers over the lifetime of the loans using the effective interest method under “financing income” in the condensed consolidated statement of operations. Under U.S. GAAP, the effective interest rate is computed on the basis of the contractual cash flows over the contractual term of the loan. Under IFRSs, the effective interest rate is computed on the basis of the estimated cash flows that are expected to be received over the expected life of a loan by considering all of the loan’s contractual terms (e.g., prepayment and similar options). Accordingly, the reconciliation includes a difference in financing income and loans receivable as a result.

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(iii) Share-based compensation

The Group granted options and restricted shares with service condition only to employees and the share-based compensation expenses were recognized over the vesting period using straight-line method under U.S. GAAP. The Company is allowed to make an accounting policy election to account for awards forfeitures as they occur or by estimating expected forfeitures as compensation cost is recognized. The Company elects to account for forfeitures in the period they occur as a deduction to expense. While under IFRSs, the graded vesting method must be applied and in regard of forfeitures of the awards, the Group is required to estimate the forfeitures. Accordingly, the reconciliation includes an income of RMB49,337 and RMB11,971 in the condensed consolidated statements of operations for each of the six months ended June 30, 2023 and 2024, respectively.

(iv) Financial guarantee, net of tax

Under U.S. GAAP, the Group adopted ASC 326, Financial Instruments – Credit Losses, which requires gross accounting for guarantee liability. As a result, at inception of the guarantee, the Group will recognize both a stand-ready guarantee liability under ASC 460 with an associated financial assets receivable, and a contingent guarantee liability with an allowance under CECL model. Subsequent to the initial recognition, the ASC 460 stand-ready guarantee liability is released into guarantee revenue on a straight-line basis over the term of the guarantee, while the contingent guarantee is reduced by the payouts made by the Group to compensate the investors upon borrowers’ default. Under IFRSs, according to IFRS 9 and IFRS 15, the Group chose to apply the accounting policy that guarantee premium receivable is accrued and the corresponding revenue recognized on a monthly basis as the service fees are due and collected by installment rather than upfront. After initial recognition, the Group subsequently measure the financial guarantees at the higher of (1) the amount of the loss allowance and (2) the amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of IFRS 15. Accordingly, the reconciliation includes a difference in financial guarantee to reduce the liabilities recorded.

Tax impacts for each difference have been reflected in respective columns.

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