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FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2022

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT

9. FAIR VALUE MEASUREMENT

The Company measures at fair value its financial assets and liabilities by using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) on the measurement date in an orderly transaction between market participants.

As of December 31, 2021 and 2022, with the exception of its listed equity securities, mutual funds to satisfy its obligations under its employee deferred compensation plan and money market funds which were measured based on unadjusted quoted prices for identical assets in active market (Level 1 inputs), the Company’s financial assets and liabilities were measured at fair value on a recurring basis in periods subsequent to their initial recognition all using the significant other observable inputs (Level 2 inputs).

Foreign exchange option and forward contracts

The Company entered into certain foreign currency derivative contracts to protect against volatility of future cash flows caused by the changes in foreign exchange rates. The foreign currency derivative contracts do not qualify for hedge accounting and, as a result, the changes in fair value of the foreign currency derivative contracts are recognized in the consolidated statements of operations.

The Company’s foreign currency derivative instruments relate to foreign exchange options or forward contracts involving major currencies such as Renminbi, Brazilian reals, Euros, Canadian dollars and South African rand. Since its derivative instruments are not traded on an exchange, the Company values them using standard industry valuation models. As applicable, these models use market-based observable inputs, including credit risk, foreign exchange rates, forward and spot rates for currencies. These inputs are observable in active markets over the terms of the instruments the Company holds, and accordingly, the fair value measurements are considered as Level 2 inputs.

9. FAIR VALUE MEASUREMENT (Continued)

Interest rate swap and commodity hedge

In July 2020, the Company completed the sale of its class B membership interests in the Roserock project to an unrelated third party, and consequently the Company’s interest rate swap contracts with total notional amounts of approximately $399,000 were paid off following the loan repayment.

In 2021 and 2022, the Company entered into interest rate swaps to manage part of its interest rate risks, and entered into commodity hedge to manage part of its risks of rising raw material costs.

The estimated fair value of interest rate swaps and commodity hedge was measured based on observable market data, which were considered Level 2 inputs. The unrealized gains or losses on interest rate swaps that qualified as cash flow hedges were recognized in other comprehensive income.

The fair value of derivative instruments on the consolidated balance sheets as of December 31, 2021 and 2022 and the effect of derivative instruments on the consolidated statements of operations for the years ended December 31, 2020, 2021 and 2022 are as follows:


		Fair Value of Derivative Assets
		At December 31, 2021				At December 31, 2022
		Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value
				$				$
Foreign exchange forward contracts		Derivative assets — current		7,124		Derivative assets — current		7,730
Foreign exchange option contracts		Derivative assets — current		162		Derivative assets — current		9,576
Commodity hedge		Derivative assets — current		—		Derivative assets — current		210
Interest rate swap		Other non-current assets		76		Other non-current assets		1,064
		Total		7,362		Total		18,580


		Fair Value of Derivative Liabilities
		At December 31, 2021				At December 31, 2022
		Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value
				$				$
Foreign exchange forward contracts		Derivative liabilities — current		2,622		Derivative liabilities — current		24,104
Foreign exchange option contracts		Derivative liabilities — current		—		Derivative liabilities — current		1,255
		Total		2,622		Total		25,359


				Amount of Gain (Loss)
				Recognized in Statements
		Location of		of Operations
		Gain (Loss) Recognized		Years Ended December 31
		in Statements of Operations		2020		2021		2022
				$		$		$
Foreign exchange forward contracts		Gain (loss) on change in fair value of derivatives, net		49,807		22,582		(49,388)
Foreign exchange option contracts		Gain (loss) on change in fair value of derivatives, net		1,376		220		8,918
Commodity hedge		Gain (loss) on change in fair value of derivatives, net		—		983		(4,019)
Interest rate swap		Gain (loss) on change in fair value of derivatives, net		(1,182)		—		—
		Total		50,001		23,785		(44,489)

Marketable securities

In December 2020, the Company received shares of Suzhou Good-Ark Electronics Co., Ltd, listed on Shenzhen stock exchange, for the disposal of its ownership of Suzhou iSilver Materials Co., Ltd, valued at RMB 91,370 (approximately $14,003) on the transaction date as part of the consideration. These shares were classified and accounted for as available-for-sale, and were carried at fair value of $20,195 and $18,337 as of December 31, 2021 and 2022, respectively, included as a component of Prepaid expenses and other current assets. Unrealized gains on these shares of $1,048 and $4,744 were recorded under investment income in the consolidated statements of operations for the years ended December 31, 2020 and 2021, respectively, and unrealized losses of $418 were recorded for the year ended December 31, 2022 under investment income (loss), net, in the consolidated statements of operations.

9. FAIR VALUE MEASUREMENT (Continued)

Other fair value measurements

The Company measures certain long-lived assets or long-term investments at fair value on a non-recurring basis in periods after initial measurement in circumstances when the fair value of such assets is below its recorded cost and impairment is required. The Company assesses ROU assets for impairment quarterly. If the carrying value of ROU asset is determined to not be recoverable and is in excess of the estimated fair value, the Company recognizes an impairment charge in asset impairments on its consolidated statements of operations.

The Company recorded impairment charges for certain solar product manufacturing asset group of $11,854, $6,084 and $60,330 for the years ended December 31, 2020, 2021 and 2022, respectively. The fair value of these assets was measured based on prices offered by unrelated third-party willing buyers and classified as Level 3 fair value measurements as the offering prices are not observable. The impairment was recorded in general and administrative expenses of CSI Solar segment on its consolidated statements of operations.

The Company recorded impairment loss on project assets of $369, $17,152 and $1,674 for the years ended December 31, 2020, 2021 and 2022, respectively. The fair value of project assets was measured based on prices offered by unrelated third-party willing buyers and classified as Level 3 fair value measurements as the offering prices are not observable. The impairment was recorded as cost of revenues on its consolidated statements of operations.

The Company also holds financial instruments that are not recorded at fair value in the consolidated balance sheets, but whose fair value is required to be disclosed under the U.S. GAAP.

The carrying values of cash and cash equivalents, restricted cash, trade receivables, billed and unbilled, amounts due from related parties, other receivables, accounts payables, short-term notes payable, amounts due to related parties, other payables and short-term borrowings approximate their fair values due to the shorter -term maturity of these instruments. Long-term borrowings were $523,634 and $813,406 as of December 31, 2021 and 2022, respectively, which approximate their fair values since most of the borrowings contain variable interest rates. The fair value of long-term borrowings was measured based on discounted cash flow approach, which is classified as Level 2 as the key inputs can be corroborated with market data.

The carrying value of the Company’s outstanding convertible notes was $224,675 and $225,977 as of December 31, 2021 and 2022, respectively, which approximates the fair value.

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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