FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2013

9. FAIR VALUE MEASUREMENT

In accordance with ASC 820-10, the Company measures short-term investments and available-for-sale investments at fair value on a recurring basis. Available-for-sale investments classified within Level 1 are valued using quoted market prices that currently available on a securities exchange registered with the Securities and Exchange Commission (SEC). Short-term investments classified within Level 2 are valued using directly or indirectly observable inputs in the market place. The available-for-sale investments classified within Level 3 are valued based on a model utilizing unobservable inputs which require significant management judgment and estimation.

Assets measured at fair value on a recurring basis are summarized below:

	Fair Value Measurement at December 31, 2013 Using
	Quoted Prices in Active Market for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Unobservable inputs (Level 3)	Fair Value at December 31, 2013
	RMB	RMB	RMB	RMB	US$
Short-term investments
Financial products	—	3,375,477,351	—	3,375,477,351	557,589,136
Time deposits	—	259,613,604	—	259,613,604	42,885,112
Available-for-sale investments
Hanting	1,016,455,767	—	—	1,016,455,767	167,906,530
eHi	—	—	570,977,550	570,977,550	94,318,772
Easy Go	—	—	143,904,165	143,904,165	23,771,275
Dining Secretary	—	—	56,242,365	56,242,365	9,290,577
Happy City	—	—	37,358,327	37,358,327	6,171,156
Total	1,016,455,767	3,635,090,955	808,482,407	5,460,029,129	901,932,558

	Fair Value Measurement at December 31, 2012 Using
	Quoted Prices in Active Market for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Unobservable inputs (Level 3)	Fair Value at December 31, 2012
	RMB	RMB	RMB	RMB	US$
Short-term investments
Financial products	—	1,030,000,000	—	1,030,000,000	165,326,399
Time deposits	—	378,664,335	—	378,664,335	60,779,817
Available-for-sale investments
Hanting	585,540,705	—	—	585,540,705	93,985,763
Dining Secretary	—	—	60,234,118	60,234,118	9,668,243
Total	585,540,705	1,408,664,335	60,234,118	2,054,439,158	329,760,222

The roll forward of Level 3 eHi’s investment is as following:

		Amount
		RMB
Fair value of available-for-sale(Level 3) investment as at December 31, 2012		—
Investment in Series E Preferred Shares of eHi		570,977,550
Transfer in and/or out of Level 3		—
The change in fair value of the investment in eHi		—
Fair value of available-for-sale (Level 3) investment as at December 31, 2013		570,977,550

Fair value of available-for-sale investment (Level 3) as at December 31, 2013 (US$)		94,318,772

The roll forward of Level 3 Easy Go’s investment is as following:

		Amount
		RMB
Fair value of available-for-sale(Level 3) investment as at December 31, 2012		—
Investment in Series B Preferred Shares of Easy Go		139,633,000
Transfer in and/or out of Level 3		—
The change in fair value of the investment in Easy Go		4,271,165
Fair value of available-for-sale (Level 3) investment as at December 31, 2013		143,904,165

Fair value of available-for-sale investment (Level 3) as at December 31, 2013 (US$)		23,771,275

The significant unobservable inputs used in the valuation are as following:

Valuation Technique	Unobservable Input	Parameter value
Discounted cash flow	Weighted average cost of capital (“WACC”)	28%
	Terminal growth rate	3%
	Lack of marketability discount (“LoMD”)	17.5%
Option pricing model	Time to liquidation	1.57 years
	Risk-free rate	0.955%
	Expected volatility	36.72%
	Probability	Liquidation scenario: 55% Redemption scenario: 40% Mandatory Conversion scenario: 5%
	Dividend yield	Nil

The roll forward of Level 3 Dining Secretary’s investment is as following:

	Amount
	RMB
Fair value of available-for-sale(Level 3) investment as at December 31, 2011	65,414,773
Investment in Series B Preferred Shares of Dining Secretary	—
Transfer in and/or out of Level 3	—
Effect of exchange rate change	(638,000	)
The change in fair value of the investment in Ding Secretary	(4,542,655	)
Fair value of available-for-sale (Level 3) investment as at December 31, 2012	60,234,118
Investment in Series B Preferred Shares of Dining Secretary	—
Transfer in and/or out of Level 3	—
Effect of exchange rate change	(1,764,000	)
The change in fair value of the investment in Ding Secretary	(2,227,753	)
Fair value of available-for-sale (Level 3) investment as at December 31, 2013	56,242,365

Fair value of available-for-sale investment (Level 3) as at December 31, 2013 (US$)	9,290,577

The significant unobservable inputs used in the valuation are as following:

Valuation Technique	Unobservable Input	Parameter value
Discounted cash flow	Weighted average cost of capital (“WACC”)	28%
	Terminal growth rate	3%
	Lack of marketability discount (“LoMD”)	25%
Option pricing model	Time to liquidation	2.0 years
	Risk-free rate	1.08%
	Expected volatility	44.9%
	Probability	Liquidation scenario: 45% Redemption scenario: 45% IPO scenario: 10%
	Dividend yield	Nil

The roll forward of Level 3 Happy City’s investment is as following:

		Amount
		RMB
Fair value of available-for-sale(Level 3) investment as at December 31, 2012		—
Investment in Series A Preferred Shares of Happy City		36,715,800
Transfer in and/or out of Level 3		—
The change in fair value of the investment in Happy City		642,527
Fair value of available-for-sale (Level 3) investment as at December 31, 2013		37,358,327

Fair value of available-for-sale investment (Level 3) as at December 31, 2013 (US$)		6,171,156

The significant unobservable inputs used in the valuation are as following:

Valuation Technique	Unobservable Input	Parameter value
Discounted cash flow	Weighted average cost of capital (“WACC”)	27.5%
	Terminal growth rate	3%
	Lack of marketability discount (“LoMD”)	35%
Option pricing model	Time to liquidation	4.0 years
	Risk-free rate	1.462%
	Expected volatility	51.2%
	Probability	Liquidation scenario: 50% Redemption scenario: 50%
	Dividend yield	Nil

The Company determined the fair value of their investment by using an income approach concluding on the overall investee’s equity value and allocating this value to the various classes of preferred and common shares by using an option-pricing method. The determination of the fair value was assisted by an independent appraisal, based on estimates, judgments and information of other comparable public companies.

- 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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