PRIME GLOBAL CAPITAL GROUP INCORPORATED This discussion summarizes the significant factors affecting the operating results, financial condition, liquidity and cash flows of the Company and its subsidiaries for the fiscal years endedOctober 31, 2019 and 2018. The discussion and analysis that follow should be read together with the section entitled "Forward Looking Statements" and our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this annual report on Form 10-K. Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company's control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by
us in this report.
Currency and exchange rate
Unless otherwise noted, all currency figures quoted as "U.S. dollars", "dollars" or "$" refer to the legal currency ofthe United States . References to "MYR" or "RM" are to the Malaysian Ringgit, the legal currency ofMalaysia . Throughout this report, assets and liabilities of the Company's subsidiaries are translated intoU.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders' equity. Overview
During the fiscal year 2019, we operated in two business segments: (i) our oil palm and durian plantation business; and (ii) our real estate business. Our oil palm and durian plantation business is operated throughVirtual Setup Sdn . Bhd., or VSSB, and our real estate business is primarily operated throughPGCG Assets Holdings Sdn . Bhd., or PGCG Assets, andDunford Corporation Sdn Bhd . Oil palm and durian comprise approximately 79% and 21% of our plantation business.
Summarized financial information regarding each revenue generating segment for
the year ended
Year ended October 31, 2019
Plantation Real Estate
Business Business Corporate Total
Revenues, net $ 286,084 $ 1,657,811 $ - $ 1,943,895
Less: inter-company revenues - (25,756 ) - (25,756 )Revenues from external customers 286,084 1,632,055
- 1,918,139
Cost of revenues (82,983 ) (566,513 ) - (649,496 )
Gross profit 203,101 1,065,542 - 1,268,643
Depreciation 12,434 463,140 6,062 481,636
Net income (loss) 30,933 47,123 (345,377 ) (267,321 )
Total assets 6,308,836 37,943,770 220,675 44,473,281Expenditure for long-lived assets$ 33,515 $ - $
- $ 33,515
20
Our initial business plan launched in July 2010 broadly contemplated the
development, distribution and operation of mobile and online social networking,
ecommerce and search products and services. However, as a result of the
challenges we experienced in implementing our m-commerce business plan, we
entered the oil palm plantation and real estate businesses in 2012 and in 2014
discontinued our software business. Since the commencement of our business
segments, we (through our subsidiaries):
· Acquired an oil palm plantation in
· Acquired 21.8921 hectares (54.10 acres) of vacant development land located
in
July 30, 2100 ; ·Acquired Dunford Corporation Sdn . Bhd., or Dunford, whose primary assets
consist of two parcels of undeveloped land located in
aggregating approximately 31 acres;
· Acquired a 15 story commercial building located at Geran 10010, Lot 238
Section 43, Town and District of
Lumpur, Malaysia ; and
· Acquired a 12 story commercial building located at
189, Jalan Tun Razak , 50400 Kuala Lumpur, Malaysia .
As we continue to develop, we may continue to experience significant fluctuations in revenue which may cause our gross profit to fluctuate.
Challenges From Our Oil Palm Planting Operations
The oil palm business is a highly regulated industry with prices subject to wide fluctuations due to factors beyond our control such as weather conditions, competition, global demand and government policies. Management has limited experience operating in this industry and may not be able to successfully navigate all industry specific factors in addition to any geopolitical factors inMalaysia . If we are not able to successfully respond to any of these or other factors, our business operations and financial results may be adversely affected. We are focused on the maintenance and operation of our oil palm plantation inMalaysia . We believe that the value of our oil palm plantation has increased since its acquisition, and while we have not pursued any discussions or received any formal offers regarding the sale of our plantation, we may consider sales offers in the future if a sale would maximize return to our investors.
Challenges From Our Durian Planting Operations
We commenced planting premium durian, of the "Musang King" variety, in the first quarter of calendar year 2014. As of the date of this report, we have replanted approximately 180 acres of our oil palm with premium durian trees. We planted an average of 30 trees per acre and anticipate an average production of 35-50 grade A fruits per tree for each of the two harvesting seasons per year. We used the latest planting technology in 2016, which we hope will reduce the maturity time of the durian tree from 5 years to 3 years. The durian trees planted during the first phase has begun to bear fruits, and our first major harvest occurred inJuly 2019 . We expect the second and third phase to begin bearing fruit by 2021 and the fourth phase by 2023, at the latest. 21
Challenges From Our Real Estate Operations
Commercial Buildings We generate rental income from our 12 story and 15 story commercial properties and anticipate generating income from the sale of developed properties. As ofOct 31, 2019 , we occupy 2 floors of our 12 story commercial building as our corporate headquarters, 6 floors have been leased to tenants at market rate. The remaining 4 floors are currently vacant and we are actively attempting to lease these 4 floors.
Our 15 story building is fully leased toLe Apple Boutique Hotel (KLCC) Sdn Bhd ("Le Apple") which operates a boutique hotel on the premises. The Rental Agreement has an initial term of one (1) year commencingDecember 1, 2018 and expiringNovember 30, 2019 . Provided that there are no existing breaches by Le Apple, we will be required to renew the lease for additional one-year terms for a maximum aggregate term of thirty years. The monthly rental rate shall be increased every three years at an increment rate of 5% to 10% of the current monthly rental rate, or shall be based on the prevailing market rate, whichever is lower. Our current rental rate has increased fromRM400,000 toRM550,000 (approximately$131,520 ) fromApril 1, 2018 .
Residential Property Development
OnJune 10, 2015 , we received approval to develop our leasehold land located in Puncak Alam. Due to challenges in the current Malaysian real property market, inNovember 2015 , we submitted a request to convert some of our planned semi-detached and bungalow home parcels into cluster semi-detached homes to improve the marketability of the development. We received approval of our revised development plan onMarch 4, 2016 . OnJuly 1, 2016 , PGCG Assets entered into a memorandum of understanding ("MOU") with Yong Tai Berhad, a public listed corporation in the main market of Bursa Malaysia Berhad ("YTB") engaged in the business of commercial and residential property development, to jointly develop our land (the "Land") located at Puncak Alam (the "Proposed JV"). The MOU was terminated onFebruary 15, 2017 , pursuant to the terms of a Mutual Termination of Memorandum of Understanding (the "Termination MOU"). In light of the termination of the Proposed JV with YTB, we intend to develop, market, promote and complete the construction on our own. Due to market forces, we plan to begin construction by the end of calendar 2023, to maximize profits.
We believe that we will require approximately
OnSeptember 8, 2016 , the Urban Wellbeing,Housing and Local Government Ministry of Malaysia announced the introduction of an initiative that will enable property developers to provide loans to buyers at an annual interest rate between 12 and 18 percent. Developers will be able to begin applying to the ministry onSeptember 8, 2016 , for a moneylending license. It is our understanding that loans made pursuant to such license will not be restricted to first time homebuyers.
We are considering applying for such money lender's license to enable us to provide financing to prospective buyers of our future properties. If we apply and are successful in obtaining such license, we hope that we will be able to boost sales of our properties that we have earmarked for development. We continue to maintain a cautious but positive outlook for the residential market based uponMalaysia's stable employment outlook, growth in household income, formation of new households, and increased demand for affordable residential property for first time home buyers. Developers such as us are facing challenges of inconsistent supply and high cost of labour, increased costs of building materials (such as cement and steel bars) and general increased costs of doing business. Our market is also sensitive to changes in lending rates and lending requirements as many homebuyers rely on financing to make purchases. As a result, government or bank policies that result in increased interest rates and or stricter lending requirements may adversely affect the sales of our developed properties. Results of Operations As ofOctober 31, 2019 , we suffered from continuous operating loss from prior years and working capital deficit of$1,467,703 . Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders or other capital sources. Management believes that the continuing financial support from the existing shareholders and external financing will provide the additional cash to meet our obligations as they become due. 22 These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets and liabilities that may result in the Company not being able to continue as a going concern. The following table sets forth certain operational data for the years indicated: Fiscal Years Ended October 31, 2019 2018 Total net revenues$ 1,918,139 $ 1,529,586 Plantation business 286,084 164,947 Real estate 1,632,055 1,364,639 Total cost of revenue (649,496 ) (695,040 ) Plantation business (82,983 ) (79,679 ) Real estate (566,513 ) (615,361 ) Gross profit 1,268,643 834,546 Plantation business 203,101 85,268 Real estate 1,065,542 749,278
General and administrative expenses (667,932 ) (352,006 )
Other income, net (expense) (690,825 ) (823,079 ) Income tax expense (177,207 ) (213,423 ) Net loss (267,321 ) (553,962 )
Comparison of the fiscal years endedOctober 31, 2019 andOctober 31, 2018 Net Revenue. We generated net revenue of$1,918,139 and$1,529,586 for the fiscal years endedOctober 31, 2019 and 2018, respectively, with our oil palm and durian plantation and real estate businesses accounting for 15% and 85% of the net revenue, respectively, for the fiscal year endedOctober 31, 2019 . For the fiscal year endedOctober 31, 2018 , our oil palm and durian plantation and real estate businesses accounted for approximately 11% and 89% of net revenue, respectively.
Our plantation business experienced a 73% increase with net revenue increasing
from
Our real estate business experienced a 20% increase in revenue from$1,364,639 for the year endedOctober 31, 2018 , to$1,632,055 for the same period endedOctober 31, 2019 . The increase in our real estate revenue is attributable to the increase in rental income from our fifteen story buildings and the decreased vacancies in our twelve story building. The primary increase in real estate revenue is attributable to the recovery of monthly rental rate fromRM400,000 toRM550,000 (approximately$131,520 ) from our tenant of fifteen story building, Le Apple, effective fromApril 1, 2018 . The monthly rental rate on Le Apple was previously decreased from our initial rental rate ofRM550,000 toRM400,000 due to unfavourable market conditions. Cost of Revenue. Cost of revenue as a percentage of net revenue was approximately 34%, or$649,496 , for the fiscal year endedOctober 31, 2019 , with real estate and plantation sales accounting for approximately 35% and 29%, respectively, of the respective net revenue. Cost of revenue for the year endedOctober 31, 2018 was$695,040 . Cost of revenue as a percentage of net revenue for the year endedOctober 31, 2018 was approximately 45%, with real estate and plantation sales accounting for approximately 45% and 48%, respectively, of the respective net revenue. The decrease in cost of revenue as a percentage of net revenue is attributable to real estate sales accounting. Gross Profit. We achieved a gross profit of$1,268,643 for the fiscal year endedOctober 31, 2019 , as compared to$834,546 for the fiscal year endedOctober 31, 2018 , with real estate rental income and plantation sales accounting for approximately 84% and 16%, respectively of total gross profit. The increase in gross profit is primarily attributable to the increased rental income derived from our real estate business segment and plantation business segment. Once we begin real estate development, we expect gross profit derived from our real estate business to gradually increase as we commence sales activities with respect to our developed properties. We also expect our plantation revenue to continue to increase as our premium durian orchard matures and is able to increase production of grade A fruits for distribution. 23 General and Administrative Expenses ("G&A"). We incurred G&A expenses of$667,932 for the fiscal year endedOctober 31, 2019 , representing a increase of 90%, as compared to$352,006 for the fiscal year endedOctober 31, 2018 . The increase in G&A is primarily attributable to increase in accommodation, air ticket, processing fees, filing fees, salaries and wages and incentives and allowances of$287,325 . G&A as a percentage of net revenue was approximately 35% and 23% for the fiscal years endedOctober 31, 2019 and 2018, respectively. As a general matter, we expect our G&A to increase in the foreseeable future as we acquire real estate or other businesses and assets. Other Expense, net. We incurred net other expenses of$690,825 for the fiscal year endedOctober 31, 2019 , as compared to$823,079 for the fiscal year endedOctober 31, 2018 . The decrease is attributable primarily to a decrease in interest rate charged on our bank loans. Our net other expenses for the years endedOctober 31, 2019 and 2018 consisted primarily of interest expense on
our bank loans. Income Tax Expense. We recorded income tax expenses of$177,207 and$213,423 for the fiscal years endedOctober 31, 2019 and 2018, respectively. In fiscals 2019 and 2018, we recorded under-accrual of estimated Malaysian income tax of$243 and$505 , respectively, for previous years. The Malaysian income tax in fiscals 2019 and 2018 was mainly related to the rental income being taxed as a non-business source pursuant to the Malaysian income tax rules. The increase in fiscal 2019 is primarily attributable to the increase in rental income.
Liquidity and Capital Resources
As of
As of
Our ratio of current assets to current liabilities was 0.28:1 and 0.36:1 as of
We expect to incur significantly greater expenses in the near future, including the contractual obligations that we have assumed discussed below, to begin development activities. We also expect our general and administrative expenses to increase as we expand our finance and administrative staff, and add infrastructure.
We have never paid dividends on our Common Stock. Our present policy is to apply cash to investments in product development, acquisitions or expansion; consequently, we do not expect to pay dividends on Common Stock in the foreseeable future.
Going Concern Uncertainties
Our continuation as a going concern is dependent upon improving our
profitability and the continuing financial support from our stockholders. Our
sources of capital in the past have included the sale of equity securities,
which include common stock sold in private transactions and public offerings,
capital leases and short-term and long-term debts. While we believe that we will
obtain external financing and the existing shareholders will continue to provide
the additional cash to meet our obligations as they become due, there can be no
assurance that we will be able to raise such additional capital resources on
satisfactory terms. We believe that our current cash and other sources of
liquidity discussed below are adequate to support operations for at least the
next 12 months.
Fiscal Year Ended October 31,
2019 2018
Net cash used in operating activities
(106,549 ) (292,639 )
Net cash provided by financing activities (198,933 ) 724,461
24
For the fiscal year ended
For the fiscal year endedOctober 31, 2018 , net cash used in operating activities was$200,185 , which consisted primarily of a net loss (excluding non-cash depreciation and impairment on fair value) of$202,421 , an increase in account receivable of$145,861 , offset by a decrease in accrued liabilities and other payables of$61,925 , and a decrease in income tax payable of$123,872 . We expect rental income from our real estate operations to increase as we increase the occupancy rates of our commercial buildings, which will be offset by the increased expenses associated with developing our residential projects. We expect to continue to rely on cash generated through private placements of our securities, however, to finance our operations and future acquisitions.
For the fiscal year ended
For the fiscal year ended
We expect investing cash outflows to increase as the durian orchard further matures. The first phase of the orchard has already begun commercial harvesting. We also expect investing cash outflows to increase due to expenditures associated with developing our residential projects.
Net Cash Provided By/(Used In) Financing Activities.
For the fiscal year ended
For the fiscal year endedOctober 31, 2018 , net cash provided by financing activities was$724,461 consisting primarily proceeds from new bank borrowings of$13,151,916 , offset by repayment of advances fromWeng Kung Wong , our Chief Executive Officer and director, of$190,385 and repayments on bank loans of$12,237,070 .
Off-Balance Sheet Arrangements
We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Contractual Obligations and Commercial Commitments
We had the following contractual obligations and commercial commitments as ofOctober 31, 2019 : Contractual Less than 1 More than 5
Obligations Total Year 1-3 Years 3-5 Years Years
$ $ $ $ $
Amount due to
related parties 1,601,573 86,420 1,515,153 - -
Commercial
Commitments
Bank borrowing
repayment 14,644,497 717,475 1,563,053 1,750,851 10,613,118 Total obligations 16,246,070 803,895 3,078,206 1,750,851 10,613,118
25
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted inthe United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management's subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following accounting policies are critical in the preparation of our financial statements. · Accounts receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. We extend unsecured credit to our customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on managements' assessment of known requirements, aging of receivables, payment history, the customer's current credit worthiness and the economic environment. We will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of our customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance-sheet credit exposure related to our customers. Based upon the aforementioned criteria, we did not write off accounts receivable on uncollectible rental receivable atOctober 31, 2019
and 2018.
Based upon the aforementioned criteria, the Company did not record any allowance
for doubtful accounts for the years ended
· Marketable securities at fair value
Marketable securities at fair value are reported at fair value using the market approach based on the quoted prices in active markets at the reporting date. We classify the valuation techniques that use these inputs as Level 1 of fair value measurements. Any unrealized losses that are deemed other-than-temporary are included in current period earnings and removed from accumulated other comprehensive income (loss). Realized gains and losses on marketable securities are included in current period earnings. For purposes of computing realized gains and losses, the cost basis of each investment sold is generally based on the weighted average cost method.
We regularly evaluate whether the decline in fair value of fair-value-sale securities is other-than-temporary and objective evidence of impairment could include:
· The severity and duration of the fair value decline; · Deterioration in the financial condition of the issuer; and
· Evaluation of the factors that could cause individual securities to have
an other-than-temporary impairment.
26
During the years ended October 31, 2019 , and 2018, we invested in equity
securities listed on Bursa Malaysia with a total cost of $265,606 and escrow
funds (which invested in equity securities listed in the U.S. ) with a total cost
of $200,000 . The Company entered into an escrow agreement with Peijin Wu Hoppe
("Hoppe"), our former director, to set up an escrow fund up to $500,000 as a
reserve to indemnify Hoppe from any claim of liability until July 29, 2022 , the
seventh year anniversary of the termination of Director Retainer Agreement, or
any mutual agreement with Hoppe and us. The unrealized gain representing the
change in fair value of $14,294 and the unrealized loss of $50,830 was charged
against accumulated other comprehensive income for the years ended October31, 2019 and 2018, respectively. · Biological assets Biological assets are measured at their fair value less costs to sell at each reporting date. The fair value is determined as the net present value of cash flows expected to be generated by these crops (including a risk adjustment factor). Where fair value cannot be measured reliably, biological assets are measured at cost.
The valuation takes into account expected sales prices, yields, picked fruit quality and expected direct costs related to the production and sale of the assets and management must make a judgment as to the trend in these factors.
· Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses, if any. Depreciation is calculated on the
straight-line basis over the following expected useful lives from the date on
which the assets become fully operational:
Categories Location of properties Expected useful life
Freehold plantation land Oil palm and durian plantation in Indefinite, as per
and orchard Malaysia land titles
Leasehold land under Leasehold land in Puncak Alam, Remaining lease life
development Malaysia of 88 years, as per
land titles
Freehold land under Freehold land in Sungai Long, Indefinite, as per
development Cheras, Selangor, Malaysia land titles
Freehold land and land Land portion of 15 story Indefinite, as per
improvement for rental building in Kuala Lumpur, Malaysia property titles
purpose
Building structure and Building structure of commercial 33 years
improvements buildings in Kuala Lumpur,
Malaysia, including: 12 story
building "Megan Avenue" and 15
story building
Office furniture and 3-10 years
equipment
Motor vehicle 5 years
Bearer plants Oil palm and durian plantation in 50 years
Malaysia
Expenditure for maintenance and repairs is expensed as incurred. The gain or
loss on the disposal of property, plant and equipment is the difference between
the net sales proceeds and the carrying amount of the relevant assets and is
recognized in the statement of operations.
Bearer plants consist of replanting costs of durian such as soil amendments,
cultivation, fertilization and purchase costs of sapling. Costs related to
durian development projects on our plantation land, are capitalized during the
sapling, developing and planting durian fruit bunches and when the harvests are
substantially available for commercial sale. The bearer plants will then
commence to be depreciated as components of plantation costs and expenses.27
Deferred development costs for oil palms that had been capitalized as part of freehold plantation land were not amortized over the useful life of the oil palms since these costs were not separately identifiable from the cost of freehold plantation land and buildings when the whole oil palm plantation was purchased inJuly 2011 . Long-lived assets primarily include freehold plantation land, leasehold land held for development, freehold land and land improvement for rental purpose and building structure and improvements. In accordance with the provision of ASC Topic 360, "Impairment or Disposal of Long-Lived Assets", we generally conduct our annual impairment evaluation to its long-lived assets, usually in the fourth quarter of each fiscal year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The recoverability of long-lived assets is measured at the reporting unit level. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. There has been no impairment charge for the years presented. We have separately identified the portion of freehold land and building structure, in which freehold land is not subject to amortization and buildings are to be amortized over 33 years on a straight-line method, based on applicable local laws and practice.
Policy for Capitalizing Development Cost
The cost of buildings and improvements includes the purchase price of property, legal fees and other acquisition costs. Costs directly related to planning, developing, initial leasing and constructing a property are capitalized and classified as Real Estate in the consolidated balance sheets. Capitalized development costs include interest, and other direct project costs incurred during the period of development. As ofOctober 31, 2019 and 2018, there was no such capitalized interest.
A variety of costs are incurred in the acquisition, development and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease involves a degree of judgment. We adopt the capitalization policy on development properties, which is guided by ASC Topic 835-20 "Interest - Capitalization of Interest" and ASC Topic 970 "Real Estate - General". The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, salaries and related costs and other costs incurred during the period of development. We consider a construction project as substantially completed and held available for occupancy upon the receipt of certificates of occupancy, but no later than one year from cessation of major construction activity. We cease capitalization on the portion (1) substantially completed and (2) occupied or held available for occupancy, and we capitalize only those costs associated with the portion under construction. We capitalize leasing costs which include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal costs that may be applicable. We allocate these costs to individual tenant leases and amortize them over the related lease term. · Revenue recognition
Revenue recognition applicable from
We recognize revenue in accordance with ASC Topic 606, "Revenue from Contracts with Customers". Revenue is measured based on a consideration specified in a contract with a customer. We recognize revenue when it satisfies a performance obligation by transferring control over a product or service to a customer, usually upon delivery of palm oil fruit bunches and durian fruits. There are no significant payment terms, no significant financing components or any variable consideration. All of the company's revenue from contracts with customers in the scope of ASC 606 is recognized in one geographical market inMalaysia , and one major product line, and plantation sales are transferred at a point in time. 28
Revenue recognition applicable until
We recognize our revenue in accordance with ASC Topic 605, "Revenue Recognition", upon the delivery of our plantation products when: (1) title and risk of loss are transferred; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable. Our sale arrangements do not contain general rights of return. (a) Plantation sales Revenue from plantation sales include the sale of palm oil fruit bunches and sale of durian fruits. The sale is recognized upon confirmation of the weight of the produce and transport to the customer, when there is persuasive evidence of an arrangement, delivery has occurred and risk of loss has passed, the sales price is fixed or determinable at the date of sale, and collectability is reasonably assured. For the year endedOctober 31, 2019 , sales of palm oil and durian was$286,084 . For the year endedOctober 31, 2018 , sales of palm oil
was$164,947 . (b) Rental income
We generally lease the units under operating leases with terms of two years or less. For the year endedOctober 31, 2019 and 2018, we have recorded$1,632,055 and$1,364,639 , respectively, in lease revenue, based upon our annual rental over the life of the lease under operating lease, using the straight-line method in accordance with ASC Topic 970-605, "Real Estate - General - Revenue Recognition" ("ASC Topic 970-605"). As ofOctober 31, 2019 , the commercial buildings for lease are as follows: Number of units Footage area Name of Commercial building (by floor) (square feet) Vacancy percentage Megan Avenue 12 19,987 33% Le Apple Boutique Hotel KLCC 15 91,848 0% (fka "Menara CMY") We expect to record approximately$1.62 million in annual lease revenue under the operating lease arrangements in the next twelve months through October
31, 2020. · Rental concession We lease retail and office spaces to the tenants under operating lease arrangements. The Company receives rental income over a stated period of time from the real estate properties it leased out. Rental income is recognized over the life of the operating lease agreement as it is earned in the period under ASC Topic 970-605. The typical leases contain initial terms of one to two years with renewal options and do not contain escalating rent amounts. Under the lease agreement ofLe Apple Boutique Hotel KLCC , the initial term of lease is one year. Provided that there are no existing breaches by the tenant, an irrecoverable annual renewal option is granted for up to twenty-nine years, with a maximum aggregate term of thirty years. Six-months' rent-free period under the operating lease agreement is treated as long-term rent concession, which is being amortized as an offset to revenues collected over the term of the underlying lease of 30 years on a straight-line basis. · Cost of revenues Costs of revenue on plantation sales includes material supplies, subcontracting costs and transportation costs incurred for planting, fertilizing and harvesting the oil palm and durian trees. Transportation and handling costs associated with the distribution of fresh oil palm fruit bunches and durian fruits to the customers are also included in cost of revenues. Costs related to our real estate business shown on the accompanying statements of operations include costs associated with land tax, on-site and property management personnel, repairs and maintenance, property insurance, marketing, landscaping and other on-site and related administrative costs. Utility expenses are paid directly by tenants. 29 · Comprehensive income ASC Topic 220, "Comprehensive Income" establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying statements of stockholders' equity consists of changes in unrealized gains and losses on foreign currency translation and cumulative net change in the fair value of available-for-sale investments held at the balance sheet date. This comprehensive income is not included in the computation of income tax expense or benefit. · Non-controlling interests
Non-controlling interests represent the equity interest in the capital contributions, income and loss of less than wholly-owned and consolidated entities that is not attributable to the Company.
· Income taxes
Income taxes are determined in accordance with the provisions of ASC Topic 740,
"Income Taxes" ("ASC Topic 740"). Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted income tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Any effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize,
measure, present, and disclose in their financial statements uncertain tax
positions taken or expected to be taken on a tax return. Under ASC 740, tax
positions must initially be recognized in the financial statements when it is
more likely than not the position will be sustained upon examination by the tax
authorities. Such tax positions must initially and subsequently be measured as
the largest amount of tax benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement with the tax authority assuming full
knowledge of the position and relevant facts.
We conduct major businesses in
· Foreign currencies translation
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 transaction. Monetary assets and liabilities denominated in
currencies other than the functional currency are translated into the functional
currency using the applicable exchange rates at the balance sheet dates. The
resulting exchange differences are recorded in the statement of operations.
The reporting currency of the Company is the United States Dollars ("US$") and
the accompanying financial statements have been expressed in US$. In addition,
we maintain our books and record in a local currency, Malaysian Ringgit ("MYR"
or "RM"), which is functional currency as being the primary currency of the
economic environment in which the entity operates.
In general, for consolidation purposes, assets and liabilities of its
subsidiaries whose functional currency is not US$ are translated into US$, in
accordance with ASC Topic 830-30, "Translation of Financial Statements", using
the exchange rate on the balance sheet date. Revenues and expenses are
translated at average rates prevailing during the period. The gains and losses
resulting from translation of financial statements of foreign subsidiary are
recorded as a separate component of accumulated other comprehensive income
within the statement of stockholders' equity. The gains and losses are recorded
as a separate component of accumulated other comprehensive income within the
statement of stockholders' equity.
30
Translation of amounts from the local currency of the Company into
As of and for the year ended
October 31,
2019 2018Year-end MYR :$1 exchange rate 4.1745
4.1819
Yearly average MYR :$1 exchange rate 4.1653
4.0248
· Related parties
Parties, which can be a corporation or individual, are considered to be related
if we have the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and
operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.
· Segment reporting
ASC Topic 280, "Segment Reporting" establishes standards for reporting
information about operating segments on a basis consistent with our internal
organization structure as well as information about geographical areas, business
segments and major customers in financial statements. During the years ended
October 31, 2019 and 2018, we operate in two reportable operating segmentsinMalaysia .
· Fair value of financial instruments
The carrying value of our financial instruments (excluding obligation under
finance lease, long-term bank loans and marketable securities at fair value):
cash and cash equivalents, accounts receivable, deposits and other receivables,
amount due to a related party and other payables approximate at their fair
values because of the short-term nature of these financial instruments.
Management believes, based on the current market prices or interest rates for
similar debt instruments, the fair value of its obligation under finance lease
and long-term bank loans approximates the carrying amount.
We also follow the guidance of the ASC Topic 820-10, "Fair Value Measurements
and Disclosures" ("ASC 820-10"), with respect to financial assets and
liabilities that are measured at fair value. ASC 820-10 establishes a three-tier
fair value hierarchy that prioritizes the inputs used in measuring fair value as
follows:
Level 1 : Observable inputs such as quoted prices in active markets;
Level 2 : Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and
Level 3 : Unobservable inputs in which there is little or no market data,
which require the reporting entity to develop its own assumptions
The following table summarizes information on the fair value measurement of our financial assets as ofOctober 31, 2019 , measured at fair value, grouped by the categories described above: Significant Quoted prices other Significant in active observable unobservable markets inputs inputs (Level 1) (Level 2) (Level 3) As ofOctober 31, 2019 Marketable securities at fair value$ 186,835 $ - $ - As ofOctober 31, 2018 Marketable securities at fair value$ 172,532 $
- $ - As ofOctober 31, 2019 , we did not have any non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements, at least annually, on a recurring basis, nor did we have any assets or liabilities measured at fair value on a non-recurring basis. 31
· Recent accounting pronouncements
InJune 2016 , the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2019 . Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2018 . We do not anticipate that the adoption of this ASU to have a significant impact on our consolidated financial statements. InFebruary 2017 , FASB issued Accounting Standards Update 2017-06; Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting (a consensus of theEmerging Issues Task Force ). The amendments in this ASU requires an employee benefit plan within the scope of Topic 960,1 962,2 or 9653 to present its interest in a master trust and the change in its interest in that master trust as single line items in the statement of net assets available for benefits and the statement of changes in net assets available for benefits, respectively. In addition, the amendments update and align the disclosure requirements for an interest in a master trust across Topics 960, 962, and 965. The amendments in this ASU are effective for interim and annual periods beginning afterDecember 15, 2018 . Early adoption is permitted. The amendments in the ASU should be adopted on a retrospective basis. We do not expect that adoption of this ASU to have a material effect on our consolidated financial statements. InMarch 2017 , FASB issued Accounting Standards Update 2017-08; Receivables-Non refundable Fees and Other Costs (Subtopic 310-20): Premium Amortization onPurchased Callable Debt Securities . The amendments in this ASU shortens the amortization period for certain purchased callable debt securities held at a premium. Specifically, it requires the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount. The discount continues to be amortized to maturity. The amendments in this ASU are effective for interim and annual periods beginning afterDecember 15, 2018 . Early adoption is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.
InJuly 2017 , FASB issued Accounting Standards Update 2017-11; Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480): Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Non public Entities and Certain Mandatorily Redeemable Non controlling Interests with a Scope Exception. The guidance is intended to reduce the complexity associated with issuers' accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. The amendments in this ASU are effective for interim and annual periods beginning afterDecember 15, 2018 . Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InAugust 2017 , FASB issued Accounting Standards Update 2017-12; Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The guidance in this ASU will result in the simplification of certain accounting requirements for hedging activities, resolve hedge accounting practice issues that have arisen under the current guidance, and better align hedge accounting with an organization's risk management activities. The amendments in this ASU are effective for interim and annual periods beginning afterDecember 15, 2018 . Early application is permitted in any interim period after issuance of the amendments for existing hedging relationships on the date of adoption. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. 32 InDecember 2017 , FASB issued Accounting Standards Update 2017-15; Codification Improvements to Topic 995,U.S. Steamship Entities: Elimination of Topic 995. The amendments in this ASU affect all entities that have unrecognized deferred taxes related to statutory reserve deposits that were made on or beforeDecember 15, 1992 . Entities are required to recognize the unrecognized income taxes in accordance with Topic 740. The amendments in this ASU are effective for interim and annual periods beginning afterDecember 15, 2018 . Early adoption is permitted. We do not anticipate that the adoption of this ASU to have a significant impact on our consolidated financial statements. InFebruary 2018 , FASB issued Accounting Standards Update 2018-02; Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in the ASU addresses the accounting issue pertaining to the deferred tax amounts that are "stranded" in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (the Act). We do not expect that the adoption will have a material impact on our consolidated financial statements. The amendments in this ASU are effective for interim and annual periods beginning afterDecember 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. We do not expect that the adoption will have a material impact on our consolidated financial statements. InMay 2018 , FASB issued Accounting standards Update 2018-06; Codification Improvements to Topic 942 Financial Services - Depository and Lending which supersedes outdated guidance related to the office of the Comptroller of the Currency's Baking Circular 202, Accounting for Net Deferred Tax Charges (Circular 202). The amendments in this update remove outdated guidance related to Circular 202 and is effective upon issuance of this update. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InJune 2018 , the FASB issued ASU 2018-07-Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting which is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. The amendment is effective for fiscal years beginning afterDecember 15, 2018 , including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity's adoption date of Topic 606. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InJuly 2018 , the FASB issued ASU 2018-08-Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made which clarifies and improves the scope and accounting guidance around contributions of cash and other assets received and made by not-for-profit organizations and business enterprises. The amendment is effective for fiscal years beginning afterJune 15, 2018 (serving as resource recipient) andDecember 15, 2018 (serving as resource provider), including interim periods within that fiscal year. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.
In
- Clarify when excess tax benefits should be recognized for share-based
compensation awards
- Remove inconsistent guidance in income tax accounting for business
combinations
- Clarify the circumstances when derivatives may be offset
- Clarify the measurement of liability or equity-classified financial
instruments when an identical asset is held as an asset
- Allow portfolios of financial instruments and nonfinancial instrumentsaccounted for as derivatives to use the portfolio exception to valuation
The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in this Update do not require transition guidance and will be effective upon issuance of this Update. However, many of the amendments in this Update do have transition guidance with effective dates for annual periods beginning afterDecember 15, 2018 . We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. 33 InJuly 2018 , the FASB issued ASU 2018-10-Codification Improvements to Topic 842, Leases which clarifies and corrects unintended application of narrow aspects of the lease accounting guidance. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InAugust 2018 , the FASB issued ASU 2018-11-Leases (Topic 842): Targeted Improvements which simplifies transition requirements and, for lessors, provides a practical expedient for the non separation of non-lease components from lease components if certain conditions are met. For entities that have not adopted Topic 842 before the issuance of this Update, the effective date and transition requirements for the amendments in this Update related to separating components of a contract are the same as the effective date and transition requirements in Update 2016-02. The practical expedient may be elected either in the first reporting period following the issuance of this Update or at the original effective date of Topic 842 for that entity. The practical expedient may be applied either retrospectively or prospectively. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InAugust 2018 , the FASB issued ASU 2018-12-Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts which improves financial reporting for insurance companies that issue long-duration contracts, such as life insurance, disability income, long-term care, and annuities. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2020 . Early application of the amendments is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InAugust 2018 , the FASB issued ASU 2018-13-Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement which improves the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. Effective for all entities for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2019 . The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InAugust 2018 , the FASB issued ASU 2018-14-Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans which improves disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This standard is effective for fiscal years ending afterDecember 15, 2020 , for public business entities. Early adoption is permitted for all entities. An entity should apply the amendments in this Update on a retrospective basis to all periods presented. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InAugust 2018 , the FASB issued ASU 2018-15-Intangibles-Goodwill andOther-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of theFASB Emerging Issues Task Force ) which aligns the requirements for capitalizing implementation costs that are incurred in a hosting arrangement that is a service contract or incurred to develop or obtain internal-use software (and hosing arrangements that include an internal -use software license). This standard is effective for public business entities for fiscal years beginning afterDecember 15, 2019 , and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, for all entities. The amendments in this Update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. 34 InOctober 2018 , FASB issued Accounting Standards Update 2018-16, Derivatives and Hedging (Topic 805): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The ASU amends ASC 815 to add the OIS rate based on the SOFR as a fifth US benchmark interest rate. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InOctober 2018 , FASB issued Accounting Standards Update 2018-17: Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This standard expands the application of a specific private company accounting alternative related to VIEs and changes the guidance for determining whether a decision-making fee is a variable interest. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InNovember 2018 , FASB issued Accounting Standards Update 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. The ASU amends ASC 808 to clarify ASC 606 should apply in entirety to certain transactions between collaborative arrangement participants. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InNovember 2018 , FASB issued Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses. The ASU changes the effective date of ASU 2016-13 to fiscal years beginning afterDecember 15, 2021 , including interim periods within those fiscal years. Thus, the effective date for such entities' annual financial statements is now aligned with that for these interim financial statements. We are currently evaluating the impact that the standard will have on our consolidated financial statements and related disclosures. InDecember 2018 , FASB issued Accounting Standards Update 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors. The amendments are designed to make lessors adoption of the new leases standard easier such as accounting policy election on sales tax, exclude variable payments for all lessor costs, and clarification on lessor costs. We are currently evaluating the impact that the standard will have on our consolidated financial statements and related disclosures. InMarch 2019 , FASB Issued Accounting Standards Update 2019-01, Leases (Topic 842): Codification Improvements. For public business entities, the amendments in this Update are effective for fiscal years beginning afterDecember 15, 2019 , and interim periods within those fiscal years. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InMarch 2019 , FASB Issued Accounting Standards Update 2019-02, Leases (Topic 842): Improvements to Accounting for Costs of Films and License Agreements for Program Materials. For public business entities, the amendments in this Update are effective for fiscal years beginning afterDecember 15, 2019 , and interim periods within those fiscal years. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InMarch 2019 , FASB Issued Accounting Standards Update 2019-03, Not-for-Profit Entities (Topic 958): Updating the Definition of Collections (Topic 958). We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements as the ASU is applicable to not-for-profit entities.
InApril 2019 , FASB Issued Accounting Standards Update 2019-04 Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The ASU 2019-04 clarifies and improves guidance within the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments: The effective dates for amendments related to ASUs 2016-13 and 2017-12 align with the effective dates of those standards, unless an entity has already adopted one or both. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InMay 2019 , FASB Issued Accounting Standards Update 2019-05, Targeted Transition Relief. ASU 2019-05 provides transition relief for ASU 2016-13 ("credit losses standard") by providing entities with an alternative to irrevocably elect the fair value option for eligible financial assets measured at amortized cost upon adoption of the new credit losses standard. For entities that have not yet adopted ASU 2016-13, the effective dates are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning afterDecember 15, 2019 , including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. 35
InMay 2019 , FASB Issued Accounting Standards Update 2019-06, Extending the Private Company Accounting Alternatives onGoodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities. The amendments are affective upon issuance of the ASU. We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InNovember 2019 , the ASB issued Accounting Standards Update 2019-08-Compensation-Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements-Share-Based Consideration Payable to a Customer. This ASU will affect companies that issue share-based payments (e.g., options or warrants) to their customers. Similar to issuing a cash rebate to a customer, issuing a share-based payment to a customer can incentivize additional purchases. The share-based payments can also serve a strategic purpose by aligning the interests of a supplier and its customer, because the customer's additional purchases increase its investment in the supplier. For entities that have not yet adopted the amendments in Update 2018-07, the amendments in this update are effective in fiscal years beginning afterDecember 15, 2019 . We do not expect the adoption of this ASU to have a material affect on our consolidate financial statements. InNovember 2019 , the FASB issued Accounting Standards Update 2019-09-Financial Services-Insurance (Topic 944). This ASU will affect companies that issue share-based payments (e.g., options or warrants) to their customers. Similar to issuing a cash rebate to a customer, issuing a share-based payment to a customer can incentivize additional purchases. The share-based payments can also serve a strategic purpose by aligning the interests of a supplier and its customer, because the customer's additional purchases increase its investment in the supplier. The amendments in this Update are effective in fiscal years beginning afterDecember 15, 2021 . We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InNovember 2019 , the FASB issued Accounting Standards Update 2019-10-Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. This ASU discusses the FASB's proposed ASU Codification Improvements to Hedge Accounting, which would clarify certain amendments made by ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, to the guidance in ASC 815 on hedging activities. The FASB issued the proposal in response to feedback and questions received from stakeholders related to their implementation of ASU 2017-12. The ASU also discusses the recent issuance of FASB ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. The ASU provides a framework to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, ASU 2019-10 changes some effective dates for ASU 2017-12 on hedging, ASU 2016-02 on leasing, ASU 2016-13 on current expected credit losses, and ASU 2017-04 on simplifying the goodwill impairment test. The amendments in this Update amend the mandatory effective dates Credit Losses for all entities as follows or fiscal years beginning afterDecember 15, 2019 . The effective dates for Hedging after applying this update are as follows: for fiscal years beginning afterDecember 15, 2018 . The effective dates for Leases after applying this Update are as follows for fiscal years beginning afterDecember 15, 2018 . We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InDecember 2019 , the FASB issued Accounting Standards Update 2019-12-Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU summarizes the FASB's recently issued Accounting Standards Update (ASU) No. 2019-12, simplifying the Accounting for Income Taxes. The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2020 . We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements. InJanuary 2020 , the FASB issued Accounting Standards Update 2020-01-Investments-Equity Securities (Topic 321),Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This ASU clarifies the interaction between accounting standards related to equity securities (ASC 321), equity method investments (ASC 323), and certain derivatives (ASC815). The amendments in this Update are effective for fiscal years beginning afterDecember 15, 2020 . We do not expect the adoption of this ASU to have a material effect on our consolidated financial statements.
The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
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