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FAIR VALUE MEASUREMENT
 12 Months Ended
Dec. 31, 2011
FAIR VALUE MEASUREMENT
20. FAIR VALUE MEASUREMENT

ASC subtopic 820-10 (“ASC 820-10”), Fair Value Measurements and Disclosures: Overall, establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2—Include other inputs that are directly or indirectly observable in the marketplace

Level 3—Unobservable inputs which are supported by little or no market activity

ASC 820-10 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

Assets and liabilities measured at fair value on a recurring basis

In accordance with ASC 820-10, the Company measures cash equivalents and debt and equity securities, including held-to-maturity and available-for-sale securities, at fair value. Cash equivalents are valued using quoted market prices. The fair values of the Company’s held-to-maturity securities and available-for-sale securities are determined based on the discounted cash flow model using the discount curve of market interest rates.

Assets measured at fair value on a recurring basis are summarized below (in thousands):

 

     Fair value measurement at
December 31, 2010 using		         
     Quoted
prices in
active
markets
for
identical
assets
(Level 1)		      Significant
other
observable
inputs
(Level 2)		      Significant
unobservable
inputs
(Level 3)		      Total
fair value at
December 31,
2010		  
   RMB      RMB      RMB      RMB  

Cash equivalents:

            

Time deposits

      3,905,479         —           —           3,905,479   

Money market fund

      993,047         —           —           993,047   

Short-term investments:

            

Held-to-maturity securities

            

Fixed-rate investments

      —           375,234         —           375,234   

Long-term investments

            

Available-for-sale securities

      —           —           24,814         24,814   
  

 

 

     

 

 

     

 

 

     

 

 

  
     4,898,526         375,234         24,814         5,298,574   
  

 

 

     

 

 

     

 

 

     

 

 

  
     Fair value measurement at
December 31, 2011 using		      Total fair value at
December 31, 2011		  
     Quoted
prices in
active
markets
for
identical
assets
(Level 1)		      Significant
other
observable
inputs
(Level 2)		      Significant
unobservable
inputs
(Level 3)		     
   RMB      RMB      RMB      RMB      US$  

Cash equivalents:

               

Time deposits

      2,419,726         —           —           2,419,726         384,456   

Money market fund

      192,324         —           —           192,324         30,557   

Short-term investments:

               

Held-to-maturity securities

               

Fixed-rate investments

      —           9,834,275         —           9,834,275         1,562,509   

Adjustable-rate investments

      —           100,027         —           100,027         15,893   

Available-for-sale securities

      —           102,682         —           102,682         16,314   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     2,612,050         10,036,984         —           12,649,034         2,009,729   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

The following table presents a reconciliation for the Company’s assets measured and recorded at fair value on a recurring basis, using significant unobservable inputs (Level 3) for the year ended December 31, 2011 (in thousands):

 

     Significant
unobservable inputs
(Level 3)		  
     RMB     US$  

Balance at December 31, 2010

      24,814        3,942   

Settlements

      (24,814 )      (3,942 ) 

Change in unrealized gain (loss) included in other comprehensive income

      —          —     
  

 

 

    

 

 

  

Balance at December 31, 2011

      —          —     
  

 

 

    

 

 

  

Assets and liabilities measured at fair value on a nonrecurring basis

The Company measures certain financial assets, including equity method investments and cost method investments, at fair value on a nonrecurring basis only if an impairment charge were to be recognized. The Company’s non-financial assets, such as intangible assets, goodwill and fixed assets, would be measured at fair value only if they were determined to be other-than-temporarily impaired.

In the year ended December 31, 2011, certain cost and equity method investments (Note 4), goodwill (Note 8) and intangible assets (Note 8) were measured using significant unobservable inputs (Level 3) and written down from their carrying amounts to fair value of nil, with impairment charges incurred and included in earnings for the year.