NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Mar. 31, 2025

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. Inter-company accounts and transactions have been eliminated.

USE OF ESTIMATES

The presentation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as the date of the financial statements and the reported amounts of revenue and expenses reported in those financial statements. Certain accounting policies that contain subjective management estimates and assumptions include those related to write-down in value of inventory, useful lives and impairment of long-lived assets and legal contingencies. Operating results in the future could vary from the amounts derived from management's estimates and assumptions.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially expose the Company to concentrations or credit risk consist primarily of cash. The Company places its majority of cash with financial institutions with high credit ratings and quality located in Japan. Cash balances in bank accounts in Japan are insured by the Deposit Insurance Corporation of Japan up to a limitation of JPY10 million per depositor per financial institution.

RELATED PARTY TRANSACTION

A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

FOREIGN CURRENCY TRANSLATION

The Company maintains its books and records in its local currencies, Japanese YEN (“JPY”), Hong Kong Dollars (“HK$”) and the United States Dollars (“US$”), which are the functional currencies as being the primary currencies of the economic environment in which their operations are conducted. 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 consolidated statements of operations and comprehensive income.

The reporting currency of the Company is US$ and the accompanying consolidated financial statements have been expressed in US$. In accordance with ASC Topic 830-30, Translation of Financial Statement, assets and liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. Shareholders’ equity is translated at historical exchange rate at the time of transaction. The gains and losses resulting from translation of financial statements are recorded as a separate component of accumulated other comprehensive income within the consolidated statements of changes in shareholders’ equity.

Translation of amounts from the local currency of the Company into US$1 has been made at the following exchange rates:

	March 31, 2025	March 31, 2024
Current JPY: US$1 exchange rate	149.52	151.41
Average JPY: US$1 exchange rate	152.59	148.14

Current HK$: US$1 exchange rate	7.80	7.80
Average HK$: US$1 exchange rate	7.80	7.80

REVENUE RECOGNITION

The Company operates and manages multilevel marketing (“MLM”) in operating its businesses as the Force Club Membership and generates revenues primarily by providing the rights to access the Company’s educational content and to recruit new members.

The Company recognizes revenue by applying the following steps in accordance with ASC 606 - Revenue from contracts with Customers. The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products or services.

- Identification of the contract, or contracts, with a customer

- Identification of the performance obligations in the contract

- Determination of the transaction price

- Allocation of the transaction price to the performance obligations in the contract

- Recognition of revenue when (or as) we satisfy the performance obligation

Force Club Membership fee

Nature of operation

Our revenue generated from Force Club Membership arrangements accounted for substantially all of our revenues during the six months ended March 31, 2025. Generally, the Company grants Force Club members the rights to access the Company’s educational content. There are three tiers of members, namely standard members, support members and premium members.

The premium members are granted full access to the Company’s educational content and the right to recruit prospect customers to become the Company’s members. Each premium member needs to purchase a premium pack, containing promotional materials aiding the recruiting process, from the Company. The standard members are granted limited access to the Company’s educational content.

To further promote the Company’s business, starting fiscal year 2021, the Company also offers its customers to subscribe and become a support member. Similar to a premium member, the support members are granted full access to the Company’s educational content and the right to recruit prospect customers to become the Company’s members, but the amount of commission entitled to the support member for each recruitment is lower than that to the premium members. The customers subscribing to support membership pay a lower fee for the access to educational content and will receive promotional materials which is substantially lesser in scale as compared to that to a premium member. For the six months ended March 31, 2025 and 2024, the revenue generated from support member subscription is still immaterial.

The support member has the choice to become a premium member by making relevant premium member registration and purchasing the upgrade pack from the Company. The revenue from upgrade pack is accounted for in the same manner as the revenue from the premium pack as described below.

Revenue from the premium pack (including the upgrade pack) is recognized net of discounts and return allowances at a point in time upon delivery. Revenue from the right to access the Company’s educational content is recognized over a period of time ratably over the effective period. For sales of premium packs and upgrade packs with return conditions, the Company reasonably estimate the possibility of return based on historical experience. There were no liabilities for return allowances nor assets from the right to recover products from the associated return allowances recorded as of March 31, 2025 and September 30, 2024, as substantially all sales of premium packs (including the upgrade pack) during the periods then ended have reached the end of the return periods.

Connector Plan Membership Fee

The Company launched a new Game Business (Connector Plan) website as from June 2024, earning membership fee and virtual points charge, and those virtual points can only be consumed in the Company’s online games. Therefore, the Company regards the sales of a virtual point as a service, where the related performance obligation is satisfied over time, and revenues are recognized by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. Accordingly, the Company recognizes revenues from the sale of virtual points over the period of time using the output method, which is generally the estimated service period.

Estimated Service Period - The Company used the estimated retention period of the players as the estimate for the service period. The Company evaluates the appropriateness of such estimates quarterly to see if they are in line with the Company’s observations in the operations. The Company believes this provides a reasonable depiction of the transfer of services to customers, as it is the best representation of the time period during which the Company’s customers play the Company’s games. Determining the estimated service period is subjective and requires management’s judgment. Future usage patterns may differ from historical ones and therefore, the estimated service period may change in the future. The estimated service periods for players of the Company’s current games are generally 1 month.

Membership fee - The Company charges a membership fee to its customers, which grants its members the rights to full access to the Company’s online games and the right to recruit prospect customers to become the Company’s members for the duration of the membership. As the Company has the obligation to provide access to its online games for the duration of the membership term, the Company recognizes membership fee on a straight-line basis over a period of time ratably over the estimated service period. For membership with refundable periods, the Company reasonably estimates the possibility of refund based on historical experience. The Company historically did not incur material refunds and did not accrue liabilities for refunds of membership fees. If actual refunds differ from the Company’s estimates, the effects could be material to the consolidated financial statements.

Contract asset and liability

Deferred income is recorded when consideration is received from a member prior to the goods were delivered or the access was granted. As of March 31, 2025 and September 30, 2024, the Company's deferred income was $16,326 and $498,975 respectively. During the six months ended March 31, 2025, the Company recognized $498,975 of deferred income in the opening balance.

The Company does not have any contract asset.

Disaggregation of revenue

For the six months ended March 31, 2025 and 2024, substantially all of the Company’s revenue was generated in Japan and contributed by the Company’s subsidiaries. The Company disaggregates revenue into two revenue streams, consisting of Force Club Membership Fee and Connector Plan Membership Fee, as follows：

	Six Months Ended March 31, 2025	Six Months Ended March 31, 2024
Force Club Membership Fee	3,614,326	11,122,274
Connector Plan Membership Fee	1,660,976	-
Others	45,641	64,395
Total	5,320,943	11,186,669

OPERATING LEASES

The Company recognizes its leases in accordance with ASC 842 - Leases. Under ASC 842, lessees are required to recognize all qualified operating leases at the commencement date including a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use (ROU) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The initial lease liability is equal to the future fixed minimum lease payments discounted using the Company’s incremental borrowing rate, on a secured basis. The lease term includes option renewal periods and early termination payments when it is reasonably certain that the Company will exercise those rights. The initial measurement of the ROU asset is equal to the initial lease liability plus any initial direct costs and prepayments, less any lease incentives.

The Company elected the practical expedient not to separate lease and non-lease components for certain classes of underlying assets and the short-term lease exemption for contracts with lease terms of 12 months or less. The Company recognizes lease expenses for such leases on a straight-line basis over the lease term. In addition, the Company elected the land easement transition practical expedient and did not reassess whether an existing or expired land easement is a lease or contains a lease if it has not historically been accounted for as a lease.

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Exceed World, Inc. 10-Q