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Fair Value Measurement | 12 Months Ended
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Dec. 31, 2017
Fair Value Measurement |
23. | 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, contingent consideration payable at fair value on a recurring basis. 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 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, 2017, assets and liabilities measured or disclosed at fair value are summarized below:
|  |  |  |  |  |  |  | Fair value measurement or disclosure at December 31, 2017 using |  |  |  |
|  | Total Fair Value at December 31, 2017 |  |  | Total Fair Value at December 31, 2017 |  |  | 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 |  |  | RMB |
Fair value measurement — Recurring: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale debt security |  |  | 182 |  |  |  | 28 |  |  |  | 182 |  |  |  |  |  |  |  |  |  |  |  | (39 | )
Available-for-sale debt security |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |  |  |  | — |  |  |  | (6,594 | )
Fair value measurement — Non-Recurring: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Intangible assets, net |  |  | 90 |  |  |  | 14 |  |  |  |  |  |  |  |  |  |  |  | 90 |  |  |  | (38,862 | )
Other long-term investments |  |  | 61,100 |  |  |  | 9,391 |  |  |  |  |  |  |  |  |  |  |  | 61,100 |  |  |  | (268,432 | )
Total assets measured at fair value |  |  | 61,372 |  |  |  | 9,433 |  |  |  | 182 |  |  |  |  |  |  |  | 61,190 |  |  |  | (313,927 | )
The Group adjusts for other-than-temporary declines in fair value of its cost-method investments and recognizes an impairment loss in earnings equal to the excess of the investment’s cost over its fair value. All impairments recorded in the year ended December 31, 2017 (note 4) resulted from full impairments except for one cost method investment, which was written down from its carrying value of RMB 80,000 to fair value of RMB61,100 (US$9,391) as of December 31, 2017. The investee is a privately held company and the Group utilized market approach with significant unobservable inputs (Level 3) to estimate the fair value of the cost method investment that was not fully impaired. For the year ended December 31, 2016, assets and liabilities measured or disclosed at fair value are summarized below:
|  |  |  |  | Fair value measurement or disclosure at December 31, 2016 using |  |  |  |
|  | Total Fair Value at December 31, 2016 |  |  | Quoted prices in active markets for identical assets (Level 1) |  |  | Significant other observable inputs (Level 2) |  |  | Significant unobservable inputs (Level 3) |  |  | Total losses |
|  | RMB |  |  | RMB |  |  | RMB |  |  | RMB |  |  | RMB |
Fair value measurement — Recurring: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale debt security |  |  | 7,353 |  |  |  |  |  |  |  |  |  |  |  | 7,353 |  |  |  |  |
Fair value measurement — Non-Recurring: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Intangible assets, net |  |  | 370 |  |  |  |  |  |  |  |  |  |  |  | 370 |  |  |  | (2,889 | )
Investment in equity investees |  |  | — |  |  |  |  |  |  |  |  |  |  |  | — |  |  |  | (11,453 | )
Other long-term investments |  |  | 132,417 |  |  |  |  |  |  |  |  |  |  |  | 132,417 |  |  |  | (129,616 | )
Total assets measured at fair value |  |  | 140,140 |  |  |  |  |  |  |  |  |  |  |  | 140,140 |  |  |  | (143,958 | )
Fair value measurement — Recurring: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration payable |  |  | 30,358 |  |  |  |  |  |  |  |  |  |  |  | 30,358 |  |  |  |  |
Total liabilities measured at fair value |  |  | 30,358 |  |  |  |  |  |  |  |  |  |  |  | 30,358 |  |  |  |  |
There were no transfers of fair value measurements into or out of Level 3 for the years ended December 31, 2015, 2016 and 2017. The Group has measured the available-for-sale debt securities and contingent consideration payable at fair value on a recurring basis using significant unobservable inputs (Level 3) as of the years ended December 31, 2016 and 2017. 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, 2016 |  |  | Estimation as of December 31, 2017 |  |  | Change in unobservable inputs |  | Change in fair value
Contingent consideration payable |  | Discounted cash flow method |  | •  Probability of achieving performance target |  |  | 0%-100% |  |  |  | * |  |  | Increase / (decrease) |  | Increase / (decrease)
|  |  |  | •  Discount rate |  |  | 10.9% |  |  |  | * |  |  | Increase / (decrease) |  | Decrease / (increase)
Available-for-sale debt security |  | Probability expected return method |  | •  Discount rate for lack of marketability |  |  | 3.81% |  |  |  | * |  |  | Increase / (decrease) |  | Decrease / (increase)
|  |  |  | •  Probability of conversion |  |  | 20.0% |  |  |  | * |  |  | Increase / (decrease) |  | Increase / (decrease)
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, 2016 and 2017:
|  | Contingent consideration payable |  |  | Available- for-sales debt securities |
|  | RMB |  |  | RMB |
Balance as of December 31, 2015 |  |  | 23,338 |  |  |  | — |
Recognized during the year |  |  | 25,067 |  |  |  | 6,647 |
Realized or unrealized losses |  |  | 3,377 |  |  |  | 417 |
Settlement |  |  | (23,266 | ) |  |  | — |
Foreign exchange translation adjustments |  |  | 1,842 |  |  |  | 289 |
Balance as of December 31, 2016 |  |  | 30,358 |  |  |  | 7,353 |
Recognized during the year |  |  | — |  |  |  | — |
Realized or unrealized losses |  |  | 9,014 |  |  |  | (7,011 | )
Settlement |  |  | (38,562 | ) |  |  | — |
Foreign exchange translation adjustments |  |  | (810 | ) |  |  | (342 | )
Balance as of December 31, 2017 |  |  | — |  |  |  | — |
Balance as of December 31, 2017 in US$ |  |  | — |  |  |  | — |

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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 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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