FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2015

22. FAIR VALUE MEASUREMENT

ASC 820-10, Fair Value Measurements and Disclosures: Overall, 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 820-10 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 820-10, the Group measures available-for-sale securities, payable for contingent consideration at fair value on a recurring basis. The fair value of the available-for-sale equity securities are measured based on the market price in an active market. The available-for-sale debt securities are classified within Level 3 as the fair value is measured based on business enterprise value allocation method and probability expected return method. The contingent consideration for the acquisition are classified within Level 3 as the fair value is measured based on inputs linked to the achievement of certain performance target that are unobservable in the market.

The carrying value of the fixed-rate time deposits approximates fair value due to its short-term nature and low credit risks.

The Group measures certain financial assets, including loans receivable, other investments stated at cost and equity method investments, at fair value on a nonrecurring basis only if an impairment loss were to be recognized. The Group’s non-financial assets, such as intangible assets, goodwill and property and equipment, would be measured at fair value only if they were determined to be impaired.

For the year ended December 31, 2015, assets and liabilities measured or disclosed at fair value are summarized below:

			Fair value measurement or disclosure
			at December 31, 2015 using
	Total Fair Value at December 31, 2015	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
Fair value measurement—Recurring:
Available-for-sale security	46,373	7,158	46,373	—	—
Fair value measurement—Non-Recurring:
Intangible assets, net	—	—			—	(26,136	)
Goodwill	—	—				(23,746	)
Investment in equity investees	—	—			—	(2,806	)
Other long-term investments	—	—				(6,031	)

Total assets measured at fair value	46,373	7,158	46,373	—	—	(58,719	)

Fair value measurement—Recurring:
Payable for contingent considerations	23,338	3,603	—	—	23,338

Total liabilities measured at fair value	23,338	3,603	—	—	23,338

For the year ended December 31, 2014, assets and liabilities measured or disclosed at fair value are summarized below:

			Fair value measurement or disclosure
			at December 31, 2014 using
	Total Fair Value at December 31, 2014	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	US$	RMB	RMB	RMB
Fair value measurement—Recurring:
Available-for-sale securities	141,031	22,730	62,653	—	78,378
Fair value measurement—Non-Recurring:
Intangible assets, net	—	—			—	(8,304	)
Investment in equity investees	—	—			—	(472	)

Total assets measured at fair value	141,031	22,730	62,653	—	78,378	(8,776	)

Fair value measurement—Recurring:
Payable for contingent considerations	53,592	8,638	—	—	53,592

Total liabilities measured at fair value	53,592	8,638	—	—	53,592

There were no transfers of fair value measurements into or out of Level 3 for the years ended December 31, 2013, 2014 and 2015.

The Company has measured the available-for-sale debt securities and the contingent consideration payable at fair value on a recurring basis using significant unobservable inputs (Level 3) as of the year ended December 31, 2014 and 2015. The significant unobservable inputs used in the fair value measurement and the corresponding impacts to the fair values are presented below:

Valuation
techniques

Unobservable
inputs

Estimation as of
December
31,2014

Estimation as of
December
31,2015

Change in
unobservable
inputs

Change in
fair value

Available-for-sale debt security - Trustlook

Guideline company method and business enterprise value allocation method

 Discount for lack of marketability

20%

Increase / (decrease)

Decrease / (Increase)

 Volatility

40.5%

Increase / (decrease)

Decrease / (Increase)

Available-for-sale debt security - NDP

Probability expected return method

 Discount for lack of marketability

3.81%

Increase / (decrease)

Decrease / (increase)

 Probability of conversion

70%

Increase / (decrease)

Contingent consideration payable

Discount cash flow method

 Performance target

34%-99%

0%-99%

Increase / (decrease)

 Discount rate

10.0%-12.3%

Increase / (decrease)

Decrease / (increase)

*The available-for-sale debt securities were settled in 2015.

The following table presents a reconciliation of the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2013, 2014 and 2015:

	Contingent consideration payable		Available- for-sales debt securities
	RMB		RMB

Balance as of December 31, 2013	11,974		5,903
Recognized during the year	32,953		61,548
Realized or unrealized loss	13,749		11,308
Settlement	(4,923	)	—
Foreign exchange translation adjustments	(161	)	(381	)


Balance as of December 31, 2014	53,592		78,378
Recognized during the year	17,202		—
Realized or unrealized loss	(7,010	)	(11,094	)
Settlement	(42,641	)	(67,507	)
Foreign exchange translation adjustments	2,195		223


Balance as of December 31, 2015	23,338		—

Balance as of December 31, 2015 in US$	3,603		—

Realized or unrealized losses in the available-for-sale debt securities, realized or unrealized losses in the available-for-sale equity securities, the contingent consideration payable, redemption right granted to a noncontrolling shareholder, redemption right granted to employees were recorded as “Other income”, “Settle and Changes in fair value of contingent consideration” and “Changes in fair value of redemption right and put options granted”, respectively, in the consolidated statements of comprehensive income.

- 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 + Details