The carrying amounts of current financial assets and liabilities in the consolidated balance sheets for cash equivalents, time deposits, and restricted cash equivalents approximate fair value due to the short-term duration of those instruments, which are considered level 2 fair value measurement.
Marketable securities and long-term investments in REITs – The fair values of equity securities and REITs were valued based on quoted market prices in active markets.
Concentration of Credit Risk
The Company maintains cash and cash equivalents with banks in the USA, the PRC, Hong Kong, and Taiwan. Should any bank holding the Company’s cash become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose all or part of its cash deposit with that bank; however, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. In Taiwan, a depositor has up to NTD 3,000,000 insured by Central Deposit Insurance Corporation (“CDIC”). In China, a depositor has up to RMB 500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”). In Hong Kong, a depositor has up to HKD 500,000 insured by Hong Kong Deposit Protection Board (“DPB”). In the United States, the standard insurance amount is $250,000 per depositor in a bank insured by the Federal Deposit Insurance Corporation (“FDIC”).
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, time deposits, restricted cash, register capital deposits, contract assets and accounts receivable. As of March 31, 2023 and December 31, 2022, approximately $2,724,643 and $2,356,000 of the Company’s cash and cash equivalents, time deposits, restricted cash, and register capital deposits held by financial institutions, was insured, and the remaining balance of approximately $98,662,650 and $93,337,000, was not insured. With respect to accounts receivable, the Company generally does not require collateral and does not have collectability concern.
For the three months ended March 31, 2023 and 2022, the Company had three insurance companies individually exceeding 10% of total revenues, which represented 29%, 15% and 12% for the three months ended March 31, 2023, and 25%, 14% and 11% for the three months ended March 31, 2022, respectively.
As of March 31, 2023 and December 31, 2022, the Company had three insurance companies with accounts receivable and contract assets balances individually exceeding 10% of the total accounts receivable and contract assets balances, which represented accounting for 30%, 15% and 11% as of March 31, 2023, and 32%, 13% and 12% as of December 31, 2022, respectively.
The Company’s operations are in Taiwan, the PRC, and Hong Kong. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic, foreign currency exchange and legal environments in the PRC, Hong Kong and Taiwan, and by the state of each economy. The Company’s results of operations may be adversely affected by changes in the political and social conditions in the PRC, Hong Kong and Taiwan, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
New Accounting Pronouncements and Other Guidance
New accounting pronouncement adopted
Credit Losses
The Company adopted ASU No. 2016-13, (FASB ASC Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments on January 1, 2023, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASC Topic 326 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. There was no impact upon initial application of ASC Topic 326 on the Company’s financial position, results of operations or cash flows.
New accounting pronouncements not yet adopted
During the first quarter of 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-01, “Leases,” which guides accounting for leasehold improvements associated with leases between entities under common control, and issued ASU 2023-02, “Investments—Equity Method and Joint Ventures,” which permits reporting entities to elect to account for their tax equity investments,