Fair Value Measurement

12 Months Ended

Dec. 31, 2015

21. FAIR VALUE MEASUREMENT

ASC topic 820 (“ASC 820”), Fair Value Measurements and Disclosures, 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 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 or Disclosed at Fair Value

In accordance with ASC 820, the Company measures available-for-sale investments at fair value on a recurring basis. The fair values of the Company’s held-to-maturity investments as disclosed are determined based on the discounted cash flow model using the discount curve of market interest rates. The fair value of the Company’s long-term available-for-sale debt investment is measured using the market approach. The fair values of the Company’s available-for-sale equity investments in the equity securities of publicly listed companies are measured using quoted market prices.

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 impaired on an other-than-temporary basis.

The fair value of the long-term notes payable is disclosed using quoted market price.

Assets and liabilities measured or disclosed at fair value are summarized below:


	Total fair value at December 31, 2014		Fair value measurement or disclosure at December 31, 2014 using
	Total fair value at December 31, 2014		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total losses
	RMB		RMB		RMB		RMB		RMB
	(In thousands)
*Fair value disclosure (Notes 2 and 4)*
Cash equivalents
Time deposits		1,746,888				1,746,888
Money market fund		755,095		755,095
Short-term investments Held-to-maturity investments
Fixed-rate investments		38,248,723				38,248,723
Adjustable-rate investments		59,519				59,519
Long-term investments Held-to-maturity investments
Fixed-rate investments		531,318				531,318
Long-term notes payable		21,811,666		21,811,666

*Fair value measurement*

Recurring
Short-term investments Available-for-sale investments
Fixed-rate debt investments		2,865,096				2,865,096
Adjustable-rate debt investments		1,568,543				1,568,543
Equity investments		45,508		45,508
Long-term investments Available-for-sale investments
Debt investment		272,680						272,680
Equity investment		115,921		115,921

Non-recurring
Long-term investments		—						—		(93,424	)
Intangible assets		—						—		(1,625	)

Total assets measured at fair value		4,867,748		161,429		4,433,639		272,680		(95,049	)

As of December 31, 2014, long-term available-for-sale debt investment was measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

As of December 31, 2014, certain intangible assets (Note 8) and equity method investments (Note 4) were written down from their respective carrying value to fair value of nil, which were measured using significant unobservable inputs (Level 3), with impairment charges incurred and recorded in earnings for the year then ended.


	Total fair value at December 31, 2015				Fair value measurement or disclosure at December 31, 2015 using
	Total fair value at December 31, 2015				Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total losses
	RMB		US$		RMB		RMB		RMB		RMB			US$
	(In thousands)
*Fair value disclosure (Notes 2 and 4)*
Cash equivalents
Time deposits		678,000		104,665				678,000
Money market fund		608,353		93,914		608,353
Short-term investments Held-to-maturity investments
Fixed-rate investments		37,134,096		5,732,517				37,134,096
Long-term investments Held-to-maturity investments
Fixed-rate investments		1,806,446		278,867				1,806,446
Long-term notes payable		30,714,586		4,741,515		30,714,586

*Fair value measurement*

Recurring
Short-term investments Available-for-sale investments
Fixed-rate debt investments		6,958,399		1,074,192				6,958,399
Adjustable-rate debt investments		13,325,385		2,057,085				13,325,385
Equity investments		742,618		114,640		742,618
Long-term investments Available-for-sale investments
Equity investments		276,965		42,756		276,965
Non-recurring
Long-term investments		—		—						—		(116,978	)		(18,058	)

Total assets measured at fair value		21,303,367		3,288,673		1,019,583		20,283,784		—		(116,978	)		(18,058	)

As of December 31, 2015, a cost method investment (Note 4) was written down from its carrying value to fair value of nil, which was measured using significant unobservable inputs (Level 3), with impairment charges incurred and recorded in earnings for the year then ended.

The following table presents a reconciliation of long-term available-for-sale debt investment at fair value on a recurring basis using significant unobservable inputs (Level 3).


	Long-term available-for- sale debt investment
	RMB			US$
	(In thousands)
Balance as of January 1, 2015		272,680			42,095
Reclassification as a cost method investment		(272,680	)		(42,095	)

Balance as of December 31, 2015		—			—

As of December 31, 2014, long-term available-for-sale debt investment represented investment in the redeemable preferred shares of a private company. As the preferred shares were redeemable at the option of the Company, the investment was classified as available-for-sale debt securities and measured at fair value. In June 2015, the redemption right was modified such that the preferred shares are only redeemable upon the occurrence of certain events out of the Company’s control. The modification was accounted for as an extinguishment of the available-for-sale debt investment and any relevant unrealized gains/losses in other comprehensive income was recognized in earnings immediately upon reclassification to a cost method investment. Subsequent to the modification, the preferred shares were reclassified to cost method investments as the investment was not an in-substance common stock investment in a corporation and did not have a readily determinable fair value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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