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Fair Value Measurement

12 Months Ended

Dec. 31, 2019

Fair Value Measurement

Fair Value Measurement

6. Fair Value Measurement

As of December 31, 2018, and December 31, 2019, information about (i) inputs into the fair value measurements of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition and (ii) investments measured at NAV or its equivalent as a practical expedient is as follows:

​

​	​	​	​	​	​	​	​	​
​	​	​	​	Fair Value Measurements at Reporting Date Using
​	​	​	​	(Amount in Thousands)
​		​		Quoted Prices		​		​
​	​	​	​	in Active	​	Significant	​	​
​	​	​	​	Markets for	​	Other	​	Significant
​	​	As of	​	Identical	​	Observable	​	Unobservable
​	​	December 31,	​	Assets	​	Inputs	​	Inputs
Description	​	2018	​	(Level 1)	​	(Level 2)	​	(Level 3)
​	​	RMB	​	RMB	​	RMB	​	RMB
Short-term investments
Available-for-sale investments		42,148		—		42,148		—
Investments held by consolidated investment fund		395,929		—		395,929		—
Long-term investments
Available-for-sale investments		139,994		—		139,994		—
Investments held by consolidated investment fund		109,439		—		109,439		—
Other long-term investments measured at fair value		374,612		157,855		216,757		—

​

​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	Fair Value Measurements at Reporting Date Using
​	​	​	​	(Amount in Thousands)
​		​		Quoted Prices		​		​	​	​
​	​	​	​	in Active	​	Significant	​	​	​	​
​	​	​	​	Markets for	​	Other	​	Significant	​	​
​	​	As of	​	Identical	​	Observable	​	Unobservable	​	​
​	​	December 31,	​	Assets	​	Inputs	​	Inputs	​	NAV
Description	​	2019	​	(Level 1)	​	(Level 2)	​	(Level 3)	​	​
​	​	RMB	​	RMB	​	RMB	​	RMB	​	RMB
Short-term investments									​	​
Investments held by consolidated investment funds		642,759	​	—	​	642,759	​	—	​	—
Long-term investments		​	​	​	​	​	​	​	​	​
Available-for-sale investments		15,081	​	—	​	15,081	​	—	​	—
Investments held by consolidated investment fund		260,311	​	—	​	260,311	​	—	​	—
Other long-term investments measured at fair value		255,967	​	7,968	​	—	​	219,679	​	28,320

​

Available-for-sale investments in debt securities consist of investments in trust products, asset management plans, contractual funds and real estate funds that have stated maturity and normally pay a prospective fixed rate of return. These investments are recorded at fair value on a recurring basis. The fair value is measured either using discounted cash flow model based on contractual cash flow and a discount rate of prevailing market yield for products with similar terms as of the measurement date, as such, it is classified within Level 2 measurement.

As of December 31, 2018 and 2019, the Group has two consolidated investment funds whose underlying investments are either bonds or asset management plans. The bonds have stated maturity and normally pay a prospective fixed rate of return and using discounted cash flow model based on contractual cash flow and a discount rate of prevailing market yield for products with similar terms as of the measurement date, as such, it is classified within Level 2 measurement. The asset management plans measured at recent observable transaction prices are classified within Level 2 as well.

Other long-term investments measured at fair value are (i) equity investments in listed companies whose fair value can be obtained through active markets which is classified within Level 1 measurement, (ii) private equity funds categorized within Level 3 of the fair value hierarchy, and (iii) private equity funds measured at NAV.

A reconciliation of the beginning and ending balances of the investments measured at fair value using significant unobservable inputs (Level 3) for the year ended December 31, 2019, presented as follows:

​

​	​	​	​	​
​		RMB		US$
​	​	(Amount in Thousands)
Beginning balance of investments, at fair value		—		—
Transfer of investments in fair value hierarchy from Level 2 to Level 3		193,105		27,738
Measurement approach change from measurement alternative to fair value measurement	​	35,176	​	5,053
Disposal of portfolio investments		(14,109)		(2,027)
Changes in gains included in investment income (loss)		5,507		791
Ending balance of investments, at fair value		219,679		31,555
Changes in net unrealized gains included in investment income (loss) related to Level 3 investments still held as of December 31, 2019	​	878	​	126

​

Total realized and unrealized gains and losses recorded for Level 3 investments are reported in investment income (loss) in the consolidated statements of operations.

The private equity funds were previously valued based on recent observable transaction prices, classified within Level 2 of the fair value hierarchy. However as no observable transactions of the investments occurred since middle of 2018, the Group’s valuation methodology in 2019 for these investments involved significant unobservable inputs that required significant judgment or estimation. Hence such investments were classified within Level 3 measurement at the beginning of the period. In 2019, the Group also elected to measure a single investment at fair value, which was previously measured using the measurement alternative at cost, less impairment.

With respect to the private equity funds within Level 3 measurement, the Group generally uses a market comparable analysis. The valuation methodology requires a subjective process in determining significant inputs and making assumptions and judgments, for which the Group considers and evaluates including, but not limited to, (1) comparable data wherever possible to quantify or adjust the fair value, (2) quantitative information about significant unobservable inputs used by the third party and (3) prevailing market conditions.

The Group also has financial instruments that are not reported at fair value on the consolidated balance sheet but whose fair values are practicable to estimate. The Group believes the fair value of its financial instruments: principally cash and cash equivalents, restricted cash, accounts receivable, amount due from related parties, short-term held-to-maturity investments, loan receivables and other payables approximate their recorded values due to the short-term nature of the instruments.

As of December 31, 2018 and 2019, information about inputs into the fair value measurements of the Group’s long-term financial instruments that are not reported at fair value on balance sheet is as following:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	Fair Value Measurements at Reporting Date Using
​	​	​	​	​	​	(Amount in Thousands)
​	​	​	​	​	​	Quoted Prices	​	​	​	​
​	​	​	​	​	​	in Active	​	Significant	​	​
​	​	​	​	​	​	Markets for	​	Other	​	Significant
​	​	​	​	​	​	Identical	​	Observable	​	Unobservable
​	​	As of December 31, 2018			​	Assets	​	Inputs	​	Inputs
Description	​	Carrying Value	​	Fair Value	​	(Level 1)	​	(Level 2)	​	(Level 3)
​		RMB		RMB		RMB		RMB		RMB
Long-term investments – held-to-maturity:
Investment in fixed income products		121,671	​	144,086	​	—	​	144,086	​	—

​

​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	Fair Value Measurements at Reporting Date Using
​	​	​	​	​	​	(Amount in Thousands)
​	​	​	​	​	​	Quoted Prices	​	​	​	​
​	​	​	​	​	​	in Active	​	Significant	​	​
​	​	​	​	​	​	Markets for	​	Other	​	Significant
​	​	​	​	​	​	Identical	​	Observable	​	Unobservable
​	​	As of December 31, 2019			​	Assets	​	Inputs	​	Inputs
Description	​	Carrying Value	​	Fair Value	​	(Level 1)	​	(Level 2)	​	(Level 3)
​		RMB		RMB		RMB		RMB		RMB
Long-term investments – held-to-maturity:
Investment in fixed income products		36,816	​	41,062	​	—	​	41,062	​	—

​

Fair value measurement on a non-recurring basis for the year ended December 31, 2019 included that used in impairment of held-to-maturity investment (see Note 5) which was classified as a level 3 fair value measurement, and the Group did not have assets or liabilities reported at fair value on a non-recurring basis for the year ended December 31, 2018.

On January 1, 2018, the Group adopted ASU 2016-01, Financial Instruments, and started to measure long-term equity investments, other than equity method investments, at fair value through earnings. For those investments without readily determinable fair value that the Group cannot estimate fair value without undue cost, the Group elected to record those investments at cost, less impairment, and plus or minus subsequent adjustments for observable price changes, which are generally not categorized in the fair value hierarchy. As of December 31, 2018 and 2019, the carrying value of equity investments without readily determinable fair value was RMB279,349 and RMB312,916, respectively.

The fair value of long-term investments in fixed income products is estimated using a discounted cash flow model based on contractual cash flows and a discount rate at the prevailing market yield on the measurement date for similar products, and is classified as a Level 2 fair value measurement.

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- References

No definition available.

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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/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258

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