| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of presentation The
accompanying consolidated financial statements are expressed in U.S. Dollars and have been prepared on the accrual basis of accounting
in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). B. Principles of consolidation The
consolidated financial statements include the accounts of Qilun and its subsidiaries. All significant inter-company accounts and transactions
have been eliminated. The consolidated financial statements include 100% of assets, liabilities, and net income or loss of these subsidiaries. Qilun’s
subsidiaries as of the date filing this report are listed as follows: SCHEDULE OF SUBSIDIARIES
Name Place
of Incorporation Attributable
equity interest
% Authorized
capital
Qilun Group
Limited Hong Kong 100 HK$ 1,000,000
Qilun Culture (HK) Co.,
Ltd. Hong Kong 100 HK$ 5,000,000
Oriental Dream and Strategic
Research Institute Limited (Hong Kong) Hong Kong 100 HK$ 999,000
Qilun Holding (Shenzhen)
Company Limited China 100 US$ 5,000,000
Qilun Culture (Shenzhen)
Group Co., Ltd. China 100 -
Qilun Enterprise Management
Consultant (Shenzhen) Co., Ltd. China 100 -
Shenzhen Houhaitang Culture
Communication Co., Ltd.; Co., Ltd. China 100 - C. Use of estimates The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenue and expenses during the reporting periods. Management makes these estimates using the best information
available at the time the estimates are made. Actual results could differ from these estimates. D. Functional currency and foreign currency translation An
entity’s functional currency is the currency of the primary economic environment in which it operates, normally that is the currency
of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential to determine the
functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing and inter-company
transactions and arrangements. The functional currency of the Company is the Chinese Renminbi (“RMB’), except the functional
currency of Qilun is the United States dollar (“US Dollars” or “$”). The reporting currency of these consolidated
financial statements is in US Dollars. Qilun’s
subsidiaries that are prepared using the RMB, are translated into the Company’s reporting currency, the US Dollar. Assets and liabilities
are translated using the exchange rate at each reporting period end date. Revenue and expenses are translated using weighted average
rates prevailing during each reporting period, and stockholders’ equity (deficit) is translated at historical exchange rates. Adjustments
resulting from the translation are recorded as a separate component of accumulated other comprehensive income or expense. Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing
at the dates of the transactions. Foreign currency exchange gains and losses resulting from these transactions are included in operations. The
exchange rates used for foreign currency translation are as follows: SCHEDULE
OF EXCHANGE RATES USED FOR FOREIGN CURRENCY TRANSLATION
For the Year Ended December 31,
2022 2021
(USD to RMB) (USD to RMB)
Assets and liabilities period end exchange rate 6.8973 6.3614
Revenue and expenses period average 6.7284 6.4518 E. Concentration of credit risk The
Company maintains cash in state-owned banks in China. In China, the insurance coverage of each bank is RMB 500,000 72,492 11,615,311 During
the year ended December 31, 2022, the Company had nil major customers generated more than 10% of revenue. During
the year ended December 31, 2021, the Company had 3 customers generated more than 10% of revenue. SCHEDULE
OF CONCENTRATION OF CREDIT RISK
For the Year Ended December 31, 2021
Revenue Percentage of revenue
A $ 201,955 13.3
B 198,655 13.1
C 196,430 12.9 During
the year ended December 31, 2020, the Company had nil major customers generated more than 10% of revenue. F. Cash Cash
consists of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. All highly liquid investments with original
stated maturity of three months or less are classified as cash and cash equivalents. Cash equivalents approximate or equal fair value
due to their short-term nature. The Company’s cash consist of cash on hand and cash in bank as of December 31, 2022 and 2021. G. Inventories The
Company’s inventories primarily consist of goods for sales such as book, magazine, cultural and creative products and materials
and expenses in processing, are stated at the lower of cost or net realizable value. Cost is determined using moving weighted average
and specific identification method. The Company reviews its inventories regularly for possible obsolete goods and establishes reserves
when determined necessary. No H. Plant and equipment, net Plant
and equipment are stated at cost net of accumulated depreciation. Expenditures for maintenance and repairs are charged to operations
when incurred, while additions and betterments are capitalized. Depreciation is recorded on a straight-line basis over the useful lives
of the assets. When assets are retired or disposed, the asset’s original cost and related accumulated depreciation are eliminated
from those accounts and any gain or loss is reflected in income. The
estimated useful lives for plant and equipment categories are as follows: SCHEDULE
OF PROPERTY PLANT AND EQUIPMENT ESTIMATED USEFUL LIFE
Office
equipment 3 5
Furniture 5
Leasehold
improvements shorter of remaining lease period and estimated useful life I. Fair value measurements The
Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Section 820, Fair Value Measurements Fair
value is defined as the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In determining the fair value for the assets and liabilities required or permitted
to be recorded, the Company 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. ASC
820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value
hierarchy are as follows: Level
1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level
2: Quoted prices, other than those in Level 1, in markets that are not active, or inputs that are observable, either directly or indirectly,
for substantially the full term of the asset or liability, Level
3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported
by little or no market activity). There
were no transfers between level 1, level 2 or level 3 measurements for the years ended December 31, 2022 and 2021. Financial
assets and liabilities of the Company primarily comprise of cash, prepayments, other receivables, inventories, due from related parties,
accounts payable, deposits received, payroll payable, tax payable, amount due to related parties. As of December 31, 2022 and 2021, the
carrying values of these financial instruments approximated their fair values due to the short-term maturity of these instruments. J. Segment information and geographic data The
Company is operating in one Segment Reporting K. Revenue recognition The
Company adopted FASB ASC Section 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from
the sales of products and services by applying the following steps: (1) identify the contract with a customer; (2) identify the performance
obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in
the contract; and (5) recognize revenue when each performance obligation is satisfied. The
Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that economic benefits will flow to the
entity, and specific criteria have been met for each of the Company’s activities as described below. Product
and Service Revenue The
Company mainly sells cultural products, including calligraphy, painting, book, magazine, cultural and creative products, the Company
often provide services such as design, planning, exhibition installation, video recording and production when sells products. The
Company sells products and provide service to a customer. The delivery of products to a customer represents a separate performance obligation.
The Company’s policy is to recognize the service revenue when service is provided, and recognize the sales revenue when the product
is signed for receipt, at that time the sold products and service, ownership and risk of loss have been transferred to the customer.
Accordingly, revenue is recognized at the point in time when the products and service is provided. Sales and service revenue is recognized
when the products and service has been delivered to the customer as no remaining performance obligation after the delivery of products
and service. Management
regularly reviews the sales return and allowance based on historical experience. Any subsequent sales return and cancellations are recognized
upon notification from the customers. The amount of sales return allowance for the sale of products and service amounted to $nil as of
December 31, 2022 and 2021. The
Company typically collects fees before delivery of products and service. Amounts received from a customer before the delivery of products
and service are recorded as deposits received on the Consolidated Balance Sheets. Cost
of Revenues Cost
of revenue consists primarily of the cost of products and service purchased from third party providers to fulfill a contract with a customer,
and no asset was recognized from the costs incurred to obtain or fulfill a contract with a customer. Cost
of products consists primarily of the cost of products purchased from suppliers. Cost of products is recognized when the product has
been delivered to the customer. L . Income taxes The
Company follows FASB ASC Section 740, Income Taxes ASC
740-10-30 requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements.
Under ASC 740-10-30, tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first
subsequent financial reporting period in which that threshold is met. The
application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations
themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court
rulings. Therefore, the actual liability may be materially different from our estimates, which could result in the need to record additional
tax liabilities or potentially reverse previously recorded tax liabilities or the deferred tax asset valuation allowance. As
a result of the implementation of ASC 740-10, the Company made a comprehensive review of its portfolio of tax positions in accordance
with recognition standards established by ASC 740-10. The Company recognized no material adjustments to liabilities or shareholder’s
equity as a result of the implementation. M. Earnings per share The
Company computes earnings per share (“EPS”) in accordance with ASC 260, Earnings Per Share Diluted
EPS is similar to basic EPS but presents the dilutive effect on a per share basis of contracts to issue ordinary common shares (e.g.,
convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date,
if later. The computation of diluted EPS includes the estimated impact of the exercise of contracts to purchase common stock using the
treasury stock method and the potential shares of converted common stock associated with the convertible debt using the if-converted
method. Potential common shares that have an anti-dilutive effect (i.e., those that increase earnings per share or decrease loss per
share) are excluded from the calculation of diluted EPS. There is no N. Leases In
February 2016, the FASB issued ASU 2016-02 Leases (Topic 842), which increases transparency and comparability among organizations by
recognizing right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet and disclosing key information about
leasing arrangements. The ASU maintains a distinction between finance leases and operating leases, which is substantially similar to
the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance. Retaining
this distinction allows the recognition, measurement and presentation of expenses and cash flows arising from a lease to remain similar
to the previous accounting treatment. A lessee is permitted to make an accounting policy election by class of underlying asset to exclude
from balance sheet recognition any lease assets and lease liabilities with a term of 12 months or less, and instead to recognize lease
expense on a straight-line basis over the lease term. For both financing and operating leases, the ROU asset and lease liability is initially
measured at the present value of the lease payments in the consolidated balance sheet. In July 2018, the FASB issued ASU 2018-11 which
provides entities with the option to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment
to the opening balance of retained earnings in the period of adoption, if necessary. As discussed in Note 10, we adopted ASU 2016-02–Leases
(Topic 842) effective January 1, 2020 utilizing the transition option provided by ASU 2018-11. O. Impairment of long-lived assets Long-lived
assets, including property and equipment are reviewed for impairment whenever events or changes in circumstances (such as a significant
adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not
be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected
to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset
plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is
identified, the Company will reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach
or, when available and appropriate, to comparable market values. For the years ended December 31, 2022 and 2021 no P. Related parties Parties,
which can be a corporation or individuals, are considered to be related if the Company has the ability, directly or indirectly, to control
the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also
considered to be related if they are subject to common control or common significant influence. Q. Recently accounting pronouncements In
August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)
(“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope
exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces
additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity.
ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible
instruments. ASU 2020-06 is effective on August 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption
permitted beginning on August 1, 2021. We have determined not to early adopt. Management
does not believe that this and any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would
have an effect on our financial statements. |
