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FAIR VALUE MEASUREMENT | 9 Months Ended
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Sep. 30, 2015
FAIR VALUE MEASUREMENT |
FAIR VALUE MEASUREMENT | 4. 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. The estimated fair value of long-term loans approximated the carrying amount as of December 31, 2014 and September 30, 2015, as the interest rates of the long-term loans are considered as approximate the current rate for comparable loans at the respective balance sheet dates. Assets measured at fair value on a recurring basis are summarized below:
|  | Fair Value Measurement at September 30, 2015 using |  |  |  |  |
|  | Quoted Prices in Active Market for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Unobservable inputs (Level 3) |  | Fair Value at September 30, 2015 |
|  | RMB |  | RMB |  | RMB |  | RMB |  | US$ |
Short-term investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial products |  |  | — |  |  | 7,096,870,156 |  |  | — |  |  | 7,096,870,156 |  |  | 1,116,632,600 |
Time deposits |  |  | — |  |  | 134,753,177 |  |  | — |  |  | 134,753,177 |  |  | 21,202,275 |
Available-for-sale investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tujia |  |  | — |  |  | — |  |  | 2,784,302,479 |  |  | 2,784,302,479 |  |  | 438,086,487 |
LY.com |  |  | — |  |  | — |  |  | 2,253,163,385 |  |  | 2,253,163,385 |  |  | 354,516,235 |
Hanting |  |  | 852,386,094 |  |  | — |  |  | — |  |  | 852,386,094 |  |  | 134,115,755 |
Easy Go |  |  | — |  |  | — |  |  | 643,186,701 |  |  | 643,186,701 |  |  | 101,199,997 |
eHi |  |  | 717,027,215 |  |  | — |  |  | — |  |  | 717,027,215 |  |  | 112,818,178 |
Tuniu |  |  | 313,860,446 |  |  | — |  |  | — |  |  | 313,860,446 |  |  | 49,383,291 |
A travel agency focusing on teenager market |  |  | — |  |  | — |  |  | 81,000,000 |  |  | 81,000,000 |  |  | 12,744,666 |
A big-data advertisement company |  |  | — |  |  | — |  |  | 63,556,000 |  |  | 63,556,000 |  |  | 10,000,000 |
Happy City |  |  | — |  |  | — |  |  | 36,328,061 |  |  | 36,328,061 |  |  | 5,715,914 |
Dining Secretary |  |  | — |  |  | — |  |  | 30,556,000 |  |  | 30,556,000 |  |  | 4,807,729 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total |  |  | 1,883,273,755 |  |  | 7,231,623,333 |  |  | 5,892,092,626 |  |  | 15,006,989,714 |  |  | 2,361,223,127 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | Fair Value Measurement at December 31, 2014 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, 2014 |
|  | RMB |  | RMB |  | RMB |  | RMB |  | US$ |
Short-term investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial products |  |  | — |  |  | 5,990,483,880 |  |  | — |  |  | 5,990,483,880 |  |  | 965,490,746 |
Time deposits |  |  | — |  |  | 448,370,707 |  |  | — |  |  | 448,370,707 |  |  | 72,264,240 |
Available-for-sale investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
LY.com |  |  | — |  |  | — |  |  | 1,547,844,523 |  |  | 1,547,844,523 |  |  | 249,467,254 |
Hanting |  |  | 898,828,511 |  |  | — |  |  | — |  |  | 898,828,511 |  |  | 144,864,860 |
Easy Go |  |  | — |  |  | — |  |  | 627,905,501 |  |  | 627,905,501 |  |  | 101,199,997 |
eHi |  |  | 535,024,052 |  |  | — |  |  | — |  |  | 535,024,052 |  |  | 86,230,225 |
Tuniu |  |  | 216,690,294 |  |  | — |  |  | — |  |  | 216,690,294 |  |  | 34,924,136 |
A travel agency focusing on teenager market |  |  | — |  |  | — |  |  | 81,000,000 |  |  | 81,000,000 |  |  | 13,054,830 |
A big-data advertisement company |  |  | — |  |  | — |  |  | 62,046,000 |  |  | 62,046,000 |  |  | 10,000,000 |
Happy City |  |  | — |  |  | — |  |  | 35,422,062 |  |  | 35,422,062 |  |  | 5,709,000 |
Dining Secretary |  |  | — |  |  | — |  |  | 29,046,000 |  |  | 29,046,000 |  |  | 4,681,365 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total |  |  | 1,650,542,857 |  |  | 6,438,854,587 |  |  | 2,383,264,086 |  |  | 10,472,661,530 |  |  | 1,687,886,653 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
The roll forward of Level 3 Tujia's investment is as following:
|  | Amount |
|  | RMB |
Fair value of available-for-sale(Level 3) investment as at December 31, 2014 |  |  | — |
Fair value of available-for-sale investment of Tujia |  |  | 2,784,302,479 |
Fair value of available-for-sale (Level 3) investment as at September 30, 2015 |  |  | 2,784,302,479 |
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale investment (Level 3) as at September 30, 2015 (US$) |  |  | 438,086,487 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
The roll forward of Level 3 LY.com's investment is as following:
|  | Amount |
|  | RMB |
Fair value of available-for-sale(Level 3) investment as at December 31, 2013 |  |  | — |
Investment in common share of LY.com |  |  | 1,414,285,714 |
Transfer in and/or out of Level 3 |  |  | — |
The change in fair value of the investment in LY.com |  |  | — |
Fair value of available-for-sale (Level 3) investment as at September 30, 2014 |  |  | 1,414,285,714 |
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale(Level 3) investment as at December 31, 2014 |  |  | 1,547,844,523 |
Investment in common share of LY.com |  |  | — |
Transfer in and/or out of Level 3 |  |  | — |
The change in fair value of the investment in LY.com |  |  | 705,318,862 |
Fair value of available-for-sale (Level 3) investment as at September 30, 2015 |  |  | 2,253,163,385 |
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale investment (Level 3) as at September 30, 2015 (US$) |  |  | 354,516,235 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
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") |  | 19%
|  | Terminal growth rate |  | 3%
|  | Lack of marketability discount ("LoMD") |  | 28%
Option pricing model |  | Time to liquidation |  | 3 years
|  | Risk-free rate |  | 3.43%
|  | Expected volatility |  | 50.89%
|  | Probability |  | Liquidation scenario: 20%
|  |  |  | IPO scenario: 80%
|  | Dividend yield |  | Nil
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, 2013 |  |  | 143,904,165 |
Investment in Series C Preferred Shares of Easy Go |  |  | 184,377,000 |
Transfer in and/or out of Level 3 |  |  | — |
Effect of exchange rate change |  |  | (799,480 | )
The change in fair value of the investment in Easy Go |  |  | 293,683,897 |
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale (Level 3) investment as at September 30, 2014 |  |  | 621,165,582 |
Fair value of available-for-sale(Level 3) investment as at December 31, 2014 |  |  | 627,905,501 |
Investment in Series C Preferred Shares of Easy Go |  |  | — |
Transfer in and/or out of Level 3 |  |  | — |
Effect of exchange rate change |  |  | 15,281,200 |
The change in fair value of the investment in Easy Go |  |  | — |
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale (Level 3) investment as at September 30, 2015 |  |  | 643,186,701 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale investment (Level 3) as at September 30, 2015 (US$) |  |  | 101,199,997 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
The fair value of the investment in Easy Go is determined by the investment in Series C Preferred Shares of Easy Go which was close to year end. The roll forward of Level 3 travel agency focusing on teenager market's investment is as following:
|  | Amount |
|  | RMB |
Fair value of available-for-sale (Level 3) investment as at December 31, 2013 |  |  | — |
Investment in equity interest of a travel agency focusing on teenager market |  |  | 81,000,000 |
Transfer in and/or out of Level 3 |  |  | — |
The change in fair value of the investment in a travel agency focusing on teenager market |  |  | — |
Fair value of available-for-sale (Level 3) investment as at September 30, 2014 |  |  | 81,000,000 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale (Level 3) investment as at December 31, 2014 |  |  | 81,000,000 |
Investment in equity interest of a travel agency focusing on teenager market |  |  | — |
Transfer in and/or out of Level 3 |  |  | — |
The change in fair value of the investment in a travel agency focusing on teenager market |  |  | — |
Fair value of available-for-sale (Level 3) investment as at September 30, 2015 |  |  | 81,000,000 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale investment (Level 3) as at September 30, 2015 (US$) |  |  | 12,744,666 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
The fair value of the investment in the travel agency focusing on teenager market's is determined by the investment in this travel agency focusing on teenager market's which was close to year end. The roll forward of Level 3 big-data service company in digital advertising's investment is as following:
|  | Amount |
|  | RMB |
Fair value of available-for-sale (Level 3) investment as at December 31, 2013 |  |  | — |
Investment in Series B Preferred Shares of a big-data advertisement company |  |  | 61,425,000 |
Transfer in and/or out of Level 3 |  |  | — |
Effect of exchange rate change |  |  | (45,000 | )
The change in fair value of the investment in a big-data advertisement company |  |  | — |
Fair value of available-for-sale (Level 3) investment as at September 30, 2014 |  |  | 61,380,000 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale (Level 3) investment as at December 31, 2014 |  |  | 62,046,000 |
Investment in Series B Preferred Shares of a big-data advertisement company |  |  | — |
Transfer in and/or out of Level 3 |  |  | — |
Effect of exchange rate change |  |  | 1,510,000 |
The change in fair value of the investment in a big-data advertisement company |  |  | — |
Fair value of available-for-sale (Level 3) investment as at September 30, 2015 |  |  | 63,556,000 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale investment (Level 3) as at September 30, 2015 (US$) |  |  | 10,000,000 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
The fair value of the investment in the big-data service company is determined by the investment in this big-data service company which was close to year end. The roll forward of Level 3 Happy City's investment is as following:
|  | Amount |
|  | RMB |
Fair value of available-for-sale(Level 3) investment as at December 31, 2013 |  |  | 37,358,327 |
Investment in Series A Preferred Shares of Happy City |  |  | — |
Transfer in and/or out of Level 3 |  |  | — |
Effect of exchange rate change |  |  | 112,200 |
The change in fair value of the investment in Happy City |  |  | — |
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale (Level 3) investment as at September 30, 2014 |  |  | 37,470,527 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale (Level 3) investment as at December 31, 2014 |  |  | 35,422,061 |
Investment in Series A Preferred Shares of Happy City |  |  | — |
Transfer in and/or out of Level 3 |  |  | — |
Effect of exchange rate change |  |  | 906,000 |
The change in fair value of the investment in Happy City |  |  | — |
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale (Level 3) investment as at September 30, 2015 |  |  | 36,328,061 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale investment (Level 3) as at September 30, 2015 (US$) |  |  | 5,715,914 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
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") |  | 27.67%
|  | Terminal growth rate |  | 3%
|  | Lack of marketability discount ("LoMD") |  | 25%
Option pricing model |  | Time to liquidation |  | 2.67 years
|  | Risk-free rate |  | 1.567%
|  | Expected volatility |  | 45.4%
|  | Probability |  | Liquidation scenario: 50% Redemption scenario: 50%
|  | 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, 2013 |  |  | 56,242,365 |
Investment in Series B Preferred Shares of Dining Secretary |  |  | — |
Transfer in and/or out of Level 3 |  |  | — |
Effect of exchange rate change |  |  | 843,000 |
The change in fair value of the investment in Dining Secretary |  |  | — |
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale (Level 3) investment as at September 30, 2014 |  |  | 57,085,365 |
Fair value of available-for-sale (Level 3) investment as at December 31, 2014 |  |  | 29,046,000 |
Investment in Series B Preferred Shares of Dining Secretary |  |  | — |
Transfer in and/or out of Level 3 |  |  | — |
Effect of exchange rate change |  |  | 1,510,000 |
The change in fair value of the investment in Dining Secretary |  |  | — |
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale (Level 3) investment as at September 30, 2015 |  |  | 30,556,000 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
Fair value of available-for-sale investment (Level 3) as at September 30, 2015(US$) |  |  | 4,807,729 |
​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​
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") |  | 27.94%
|  | Terminal growth rate |  | 3%
|  | Lack of marketability discount ("LoMD") |  | 25%
Option pricing model |  | Time to liquidation |  | 3.01 years
|  | Risk-free rate |  | 4.13%
|  | Expected volatility |  | 41.4%
|  | Probability |  | Liquidation scenario: 45% Redemption scenario: 45% IPO scenario: 10%
|  | Dividend yield |  | Nil
Based on the review of various factors of Dining Secretary, including, but not limited to its current market condition, operating performance and current and expected earnings trend, the Company determined the decline in fair value of Dining Secretary to below its carrying value is other than temporary. Accordingly, an impairment with amount of RMB33 million based on the difference of its fair value and cost was provided in other income with a reversal of the previously recognized unrealized loss of RMB4 million recorded in other comprehensive income in 2014. 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.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 + Details
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