SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Aug. 31, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

Principles of Consolidation

The accompanying consolidated financial statements include the financial statements of the Company and its 49% owned subsidiary Fellazo Berhad, an entity under common control. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

Variable Interest Entities

The Company holds both the power to direct the most significant activities of FB, as well as an economic interest in FB and, as such, is deemed to be the primary beneficiary or consolidator of FB. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity.

Use of Estimates

In preparing these financial statements, in conformity with GAAP requires management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the years reported. Actual results may differ from these estimates. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Foreign Currency 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 aggerated amount of exchange differences are recorded as general and administrative expenses in the statement of operations.

The reporting currency of the Company is the United States Dollar (“USD”). The Company’s subsidiary in Malaysia maintains their books and records in their local currency, the Malaysia Ringgit (“RM”), which is the functional currency as being the primary currency of the economic environment in which these entities operate.

In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not the USD are translated into USD, in accordance with ASC 830, “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.

Exchange Rates

August 31,

2022

August 31,

2021

Spot rate RM : USD exchange rate

0.2234

0.2406

Average period RM : USD exchange rate

0.2343

0.2389

Cash and Cash Equivalents

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of August 31, 2022 and 2021, the Company had $9,055 and $7,361 in cash and cash equivalents, respectively.

Fair value of financial instruments

The carrying value of the Company’s financial instruments (excluding short-term bank borrowing and note payable): cash and cash equivalents, accounts payable and accrued liabilities and amount due to a related party at their fair values because of the short-term nature of these financial instruments.

The Company also follows 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 : Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;

	·	Level 2 : Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs; and

	·	Level 3 : Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Revenue recognition

The Company commenced its operation in mid-October 2019. At this initial stage revenue is earned from the trading of raw bird-nest only. During the year ended August 31, 2022, the Company began selling durian paste to its customers.

The Company’s revenue recognition procedures consist of the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations pursuant to each of its sales transactions:

	·	identify the contract with a customer;
	·	identify the performance obligations in the contract;
	·	determine the transaction price;
	·	allocate the transaction price to performance obligations in the contract; and
	·	recognize revenue as the performance obligation is satisfied.

The Company believes it is still in the initial stage of its operations which started with the trading of raw bird-nest and with the recent addition of the product, durian past, the management is using this initial stage as exposure of the management to the bird-nest business in order to learn and gain experience with our suppliers whom are bird-nest farmers or their agents, determination of quality of the raw materials, the process of raw bird-nest cleaning of the different class of the raw material and market for these clean bird-nest, and handling of durian paste as a food product.

Thus at this initial stage we have not entered into any formal contract with our suppliers and purchasers, most of the suppliers and purchasers are known to our management or introduced to the management by closed business friends. The Company recognizes the revenue at a point in time when products are transferred to its customers which also typically corresponds with the issuance of invoices to those customers. The Company has a single performance obligation which is completed when goods are physically transferred to its customers.

Cost of Goods Sold

At the current stage of stage of business operations which the management considered as exposure, gaining of knowledge and experience of the overall bird-nest and durian paste business, our Cost of goods sold only include the actual cost of the raw bird-nest and durian paste purchased from suppliers.

Commitments and contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Concentrations

Sale

During the year ended August 31, 2022, the Company had a concentration in demand for its products as two customers comprised 89.7% of the Company’s sales where for one customer was 46.5%, and a second customer was 43.1.

During the year ended August 31, 2021, the Company had a concentration in demand for its products as three customers comprised 66.2% of the Company’s sales where for one customer was 32.0%, a second customer was 21.9%, and a third customer was 12.3%.

During the year ended August 31, 2022, the Company had a concentration in its products portfolio as one product comprised 100% of bird’s nest.

During the year ended August 31, 2021, the Company had a concentration in its products portfolio as two products comprised 100% of which 32.0% was durian past and 68.0% was bird’s nest the Company’s sales.

Purchase

During the year ended August 31, 2022, the Company had a concentration in supply of its products as one supplier provided 86.7%.

During the year ended August 31, 2021, the Company had a concentration in supply of its products as one supplier provided 19.0% and second supplier provided 42% of the Company’s purchases totaling 61.0%

Income taxes

The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the Hong Kong is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of August 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company conducts businesses in Malaysia and is subject to tax in this jurisdiction. As a result of its business activities, the Company will file tax returns that are subject to examination by the foreign tax authority.

Net loss per share

The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive. As of August 31, 2022 and 2021, the Company has no dilutive securities.

Related Parties

Parties, which can be a corporation or individual, 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.

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

Fellazo Corp 10-K