Tian Ge Interactive Holdings Limited Issues Clarification on Revenue Recognition Policy Change

Key Points

• Tian Ge Interactive Holdings Limited (HKEX: 1980) has announced a significant modification in its revenue recognition policy for its “Sila Chat” social interactive platform.
• The Company will now recognize revenue at the net amount equivalent to cash proceeds received from its distributor for “Sila Chat,” instead of the previous method of recognizing revenue at users’ recharging amounts.
• This change applies retrospectively to the full year ended 31 December 2025 and affects the presentation of revenue and cost figures in the Company’s unaudited interim results for the six months ended 30 June 2025.
• The adjustment has no impact on gross profit or net profit/loss attributable to Company owners for the relevant period.

Details of the Revenue Recognition Policy Change

The modification follows the Company’s reassessment of its roles and responsibilities in relation to the operation of “Sila Chat” under the new cooperation agreement with its distributor, effective from April 2025. After consideration of the relevant indicators under IFRS 15, management concluded that recognizing revenue at net amount is a more appropriate reflection of the Company’s position as an agent rather than a principal in these transactions.

Initially, the Company recognized revenue at users’ recharging amounts, believing it was acting as the principal in the sale of virtual gift items. However, after further review during the annual accounts preparation for 2025, the Company determined that the net basis recognition better aligns with its actual business practices and contractual arrangements.

Impact on Financial Figures

The change in revenue recognition has led to reclassification and adjustment of certain reported financial figures for the six months ended 30 June 2025. The adjustments only affect the presentation of revenue and cost, not the underlying profitability or losses for the period.

Shareholder Considerations and Potential Price Sensitivity

• This modification is material and may influence investor perception of the Company’s topline revenue, as reported revenue will be significantly lower than previously stated due to the net basis recognition.
• The adjustment does not impact gross profit, net profit, or loss for the Company, which indicates the underlying business economics remain unchanged. However, top-line revenue figures are often closely watched by analysts and investors, and this restatement may influence valuation multiples and short-term share price movements.
• Investors should note that these figures are preliminary and unaudited. The Company expects to publish its final audited annual results for FY2025 on or around 30 March 2026.

Board and Leadership Update

The announcement was made by Chairman Fu Zhengjun. As of the date of the announcement, the Board consists of Mr. Fu Zhengjun, Mr. Mai Shi’en, Mr. Zhao Weiwen (executive directors), Ms. Cao Fei (non-executive director), and Mr. Tse Ming Lun Alan, Mr. Wang Mingchun, Mr. Lam Yick Man (independent non-executive directors).

Conclusion

While the change in accounting policy does not impact the Company’s underlying profitability, the significant reduction in reported revenue could be interpreted as a negative signal by some investors and may affect share price performance in the short term. Investors are advised to closely monitor the Company’s future disclosures and the upcoming final audited results for FY2025.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should refer to the Company’s official filings and consult with financial advisors before making investment decisions.

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