| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of preparation and principle of consolidation These consolidated financial statements (“financial
statements”) have been prepared in conformity with accounting principles generally accepted in the United States of America,
or US GAAP. The Company’s functional currency of subsidiaries
in China is the Chinese Renminbi (RMB). Other subsidiaries outside of China use the U.S. Dollar (USD) as the functional currency.
The accompanying consolidated financial statements have been translated and presented in USD. The consolidated financial statements include
the financial statements of the Company and its subsidiaries. All transactions and balances among the Company and its subsidiaries
have been eliminated upon consolidation. Segment Information The Company maintains discrete financial information
for each of its six parks, which is used by the Chief Operating Decision Maker (“CODM”), as a basis for allocating resources
and assessing performance. All six parks have been identified as an operating segment and meets the criteria for aggregation due to similar
economic characteristics. In addition, all of the parks provide similar products and services and share similar processes for delivering
services. The parks have a high degree of similarity in the workforces and target similar consumer groups. Accordingly, based on these
economic and operational similarities and the way the CODM monitors and makes decisions affecting the operations, the Company has concluded
that its operating segments may be aggregated and that it has one reportable segment.
Main services provided in each parks Representative revenue-generating activities, products or services
Sales of in-park recreation Ticket sales
Rental income Venue rental
Park service fees Income from services such as circuses and food festivals Use of Estimates The Company’s consolidated financial statements
have been prepared in accordance with US GAAP and this requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and reported amounts of revenue and expenses during the reporting period. The significant areas requiring the use of management estimates
include, but are not limited to, the allowance for doubtful accounts receivable, estimated useful life and residual value of property,
plant and equipment, impairment of long-lived assets, provision for staff benefits, recognition and measurement of deferred income taxes
and valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events
and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may
be material to our consolidated financial statements. Impairment of Long-Lived Assets In accordance with the ASC 360-10, Accounting
for the Impairment or Disposal of Long-Lived Assets If such assets are considered to be impaired,
the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Fair Value of Financial Instruments The Company has adopted Financial Accounting Standards
Board ASC Topic on Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework
for measuring fair value in US GAAP, and expands disclosures about fair value measurements. ASC 820 establishes a three-level valuation
hierarchy of valuation techniques based on observable and unobservable input, which may be used to measure fair value and include the
following:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Input other than Level 1 that is observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other input that is observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable input that is supported by little or no market activity and that is significant to the fair value of the assets or liabilities. Our cash and cash equivalents and restricted cash
are classified within Level 1 of the fair value hierarchy because they are value using quoted market price. Cash and Cash Equivalents Cash and cash equivalents included cash on hand
and demand deposits placed with banks or other financial institutions, which are unrestricted as to withdrawal and use and with an original
maturity of three months or less. Deposits in banks in the PRC are only insured
by the government up to RMB500,000 (approximately $69,640 as of September 30, 2023), and are consequently exposed to risk of loss.
The Company believes the probability of a bank failure, causing loss to the Company, is remote. Receivable and Allowances Other receivables, and loan receivables are recognized
and carried at the initial amount when they occurred less an allowance for any uncollectible amount. We have a policy of reserving for
uncollectible accounts based on our best estimate of the amount of probable impairment losses in our existing receivables. Revenue Recognition We apply the five steps defined under ASC 606:
(i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine
the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize
revenue when (or as) the entity satisfies a performance obligation. We assess its revenue arrangements against specific criteria in order
to determine if it is acting as principal or agent. Revenue arrangements with multiple performance obligations are divided into separate
distinct goods or services. We allocate the transaction price to each performance obligation based on the relative stand-alone selling
price of the goods or services provided. Revenue is recognized upon the transfer of control of promised goods or services to a customer. We do not make any significant judgment in evaluating
when control is transferred. Revenue is recorded net of value-added tax. Revenue recognitions are as follows: To enjoy the rides and attractions that the parks
offer, the guests need to obtain prepaid cards at ticket booths with a modest security deposit of less than $2. however, no such deposit
is required since January 1, 2022. The guests can load any amount of money onto the prepaid cards and receive rebates, depending
on the amount of money that they add to the prepaid cards. Thereafter, the guests are able to enjoy the rides and attractions by paying
with their prepaid cards for each access to each facility. If the guests no longer need the prepaid cards, they may return them at ticket
booths and get a full security deposit refund, for those guests who paid for the security deposit before January 1, 2022. Any unutilized
stored value and deposits will be forfeited after 24 Sales of in-park recreation: Rental
income: Park
service revenue: Costs of revenue consisted primarily of compensation
of operational employees, depreciation of amusement facilities, daily maintenance costs, utility bills and rental fee, etc. For the fiscal years
ended September 30, 2023, September 30, 2022 and September 30, 2021, the Company had $12.47 million, $11.62 million
and $11.69 million in costs of revenue, respectively. Administrative
expenses consisted primarily of compensation of administrative and management employees, depreciation of computer and furniture and professional
fees, etc. For the fiscal years ended September 30, 2023 Advertising costs The costs of other advertising, promotion, and
marketing programs are charged to operations when incurred. As of September 30, 2023 and September 30, 2022, the Company had
$1.54 million and $1.53 million in prepaid advertising, respectively. The amounts capitalized are included in other current
assets. Advertising expense was $3.69 million, $4.91 million
and $5.60 million for the fiscal years ended September 30, 2023, September 30, 2022 and September 30, 2021, respectively.
These amounts are presented within “Selling expenses”. Property, Plant and Equipment Property, plant and equipment are stated at cost
less accumulated depreciation and any impairment losses. Depreciation is computed using the straight-line method over the useful lives
of the assets. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of
the respective assets are expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from
the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Depreciation related to property, plant and equipment
used in production is reported in cost of sales, and includes amortized amounts related to capital leases. We estimated that the residual
value of the Company’s property and equipment ranges from 3% to 5%. Property, plant and equipment are depreciated over their estimated
useful lives as follows:
Machinery 10 years
Electronic equipment 3 years
Office equipment 3 – 5 years
Park facilities 20 years
Vehicles 4 years
Other 10 years Foreign Currency and Other Comprehensive Income
(Loss) The financial statements of the Company’s
foreign subsidiaries are measured using the local currency as the functional currency; however, the reporting currency of the Company
is the USD. Assets and liabilities of the Company’s foreign subsidiaries have been translated into USD using the exchange rate
at the balance sheet dates, while equity accounts are translated using historical exchange rate. The exchange rate we used to convert
RMB to USD was 7.18, 7.10 and 6.49 at the balance sheet dates of September 30, 2023, September 30, 2022 and September 30, 2021,
respectively. The average exchange rate for the period has been used to translate revenues
and expenses. The average exchange rates we used to convert RMB to USD were 7.05, 6.58 and 6.50 for fiscal year 2023, fiscal year 2022
and fiscal 2021, respectively. Translation adjustments are reported separately and accumulated in a separate component of equity (cumulative
translation adjustment). Income Taxes We use the asset and liability method of accounting
for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized
for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences
resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of
operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported
if, based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred
tax assets will not be realized. ASC Topic 740-10-30 clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC
Topic 740-10-25 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition. We have no material uncertain tax positions for any of the reporting periods presented. Lease We adopted ASU No. 2016-02, Leases (Topic 842),
or ASC 842, from January 1, 2020. We determine if an arrangement is a lease or contains a lease at lease inception. For operating leases,
we recognize a right-of-use (“ROU”) asset and a lease liability based on the present value of the lease payments over the
lease term on the consolidated balance sheets at commencement date. As most of our leases do not provide an implicit rate, we estimate
our 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 ROU assets also include any lease payments made, net of lease incentives.
Lease expense is recorded on a straight-line basis over the lease term. Our leases often include options to extend and lease terms include
such extended terms when we are reasonably certain to exercise those options. Lease terms also include periods covered by options to terminate
the leases when we are reasonably certain not to exercise those options. Statutory reserves Pursuant to the laws applicable to the PRC, PRC
entities must make appropriations from after-tax profits to the non-distributable “statutory surplus reserve fund”. Subject
to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profits
until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted
in the PRC (“PRC GAAP”) at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations
should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund”
cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under
PRC GAAP at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net
income after tax to offset against the accumulated loss. New Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13
(“ASU 2016-13”) “Financial Instruments — Credit Losses” (“ASC 326”): Measurement
of Credit Losses on Financial Instruments,” which requires the measurement and recognition of expected credit losses for financial
assets to be held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model
which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary
impairment and requires credit losses related to available-for-sale debt securities
to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These
changes will result in earlier recognition of credit losses. In November 2019, the FASB issued ASU 2019-10 “Financial
Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)”
(“ASC 2019-10”), which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15,
2022, including interim periods within those fiscal years, for public entities which meet the definition of a smaller reporting company.
The Company will adopt ASU 2016-13 effective January 1, 2023. Management is currently evaluating the effect of the adoption
of ASU 2016-13 on the consolidated financial statements. The effect will largely depend on the composition and credit quality of
our investment portfolio and the economic conditions at the time of adoption. Management does not believe that any other recently
issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying consolidated financial
statements. |
