View:
United States securities and exchange commission logo
September 10, 2020
Peng Ge
Chief Financial Officer
Fanhua Inc.
27/F, Pearl River Tower
No. 15 West Zhujiang Road
Guangzhou, Guangdong 510623
People's Republic of China
Re: Fanhua Inc.
Form 20-F for the
Fiscal Year Ended December 31, 2019
Filed April 29,
2020
File No. 001-33768
Dear Mr. Ge:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within 10 business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 20-F for the Fiscal Year Ended December 31, 2019
Notes to the Consolidated Financial Statements
Note 2: Summary of Significant Accounting Policies
(a) Basis of Presentation and Consolidation, page F-13
1. On page 77 you indicate
that your non-controlling interests relate to an entity in which
you currently own only
44.7% of the equity interests. It appears from the organization
structure chart on page
59 that this entity is Fanhua Insurance Surveyors & Loss Adjustors
Company Limited. With a
view towards explanatory disclosure to be added in future
filings, please tell us
why it is appropriate to consolidate this entity when you do not have
a majority ownership
interest. Separately reference for us in your response the
authoritative
literature you rely upon to consolidate this entity.
Peng Ge
Fanhua Inc.
September 10, 2020
Page 2
(r) Revenue Recognition
Insurance agency services revenue, page F-21
2. You disclose that you do not recognize commission revenue before the
receipt of the
related premium because collectability is not ensured until receipt.
Please tell us why it is
appropriate to use an "ensured" recognition threshold when ASC
606-10-25-1e indicates
that collectibility of substantially all of the consideration in a
revenue arrangement is
assessed under a probable notion. Reference for us the authoritative
literature your rely
upon to support your accounting.
3. You disclose that you recognize revenue at a point in time as no
performance obligations
exist after the insurance policy was signed. As it is clear from
disclosure on page 75 that
45.4% of your revenue increase in 2019 over 2018 is associated with
renewal
commissions in your life insurance agency business, tell us why you do
not recognize
subsequent year commissions as variable consideration subject to the
variable
consideration constraint under ASC 606-10-32-11. In your response,
tell us whether:
any policies automatically renew;
a new policy is signed each year; and
you are obligated to re-market or encourage existing policyholders
to renew.
Reference for us the authoritative literature you rely upon to support
your accounting.
Note 12: Income Taxes, page F-42
4. In your income tax rate reconciliation on page F-45, the "other"
category in 2019
represents 13.1% of the effective tax. Please tell us the nature of
any individual
reconciling item over 5% of your effective tax rate; if there are
none, please tell us the
nature of the underlying amounts. Provide us proposed revised
disclosure to be included
in next year's Form 20-F that separately discloses each item over 5%
of the effective tax.
See Rule 4-08(h)(2) of Regulation S-X.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Mark Brunhofer at 1-202-551-3638 or Sharon Blume at
1-202-551-
3474 with any questions.
FirstName LastNamePeng Ge Sincerely,
Comapany NameFanhua Inc.
Division of
Corporation Finance
September 10, 2020 Page 2 Office of
Finance
FirstName LastName