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)

• 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)

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$		—			—