v3.20.1

Business Acquisitions | 12 Months Ended
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Dec. 31, 2019
Business Combinations [Abstract] |
Business Acquisitions |
(3) | BUSINESS ACQUISITION
Acquisition of Huanqiuyimeng In 2019, the Company entered into share purchase agreements with all of the selling shareholders of Huanqiuyimeng to acquire 100% equity interests of Huanqiuyimeng in exchange for 9,360,000 ordinary shares of the Company and RMB 91.1 million consideration in cash. The control of Huanqiuyimeng business transitioned to the Group on August 6, 2019. As of December 31, 2019, the consideration payable for business acquisition was RMB 19,642,082 and expected to be paid within one year. The Company accounted for the acquisition of Huanqiuyimeng under the acquisition method of accounting in accordance with ASC 805, Business Combinations. The Group determined the fair values of assets acquired and liabilities assumed for this acquisition with assistance of an independent appraiser. The goodwill resulting from the acquisition is primarily attributable to the assembled workforce and the outreaching training center network around China and abroad. The acquired goodwill is not deductible for tax purposes. A summary of identifiable assets acquired and liabilities assumed in connection with the acquisition is as follows:
|  | RMB |
Purchase consideration: |  |  |
Cash |  | 91,126,055 |
Fair value of 9,360,000 ordinary shares |  | 76,868,663 |
|  | 167,994,718 |
Recognized amounts of identifiable assets acquired and liabilities assumed: |  |  |
Cash |  | 36,785,802 |
Prepaid expenses and other current assets |  | 26,333,563 |
Long-term investments |  | 157,850 |
Property and equipment, net |  | 8,505,683 |
Intangible assets |  |  |
Trademark |  | 79,000,000 |
Non-compete arrangements |  | 56,000,000 |
Order backlogs |  | 4,000,000 |
Other non-current assets |  | 881,926 |
Right-of-use assets |  | 32,089,416 |
Deferred revenues |  | (163,400,000) |
Short-term loan |  | (13,991,000) |
Lease liabilities-current |  | (18,728,346) |
Deferred income tax liabilities |  | (45,659,880) |
Accrued expense and other payables |  | (14,326,672) |
Other non-current liabilities |  | (13,361,070) |
Total identifiable assets acquired and liabilities assumed |  | (25,712,728) |
Fair value of non-redeemable non-controlling interests in Huanqiuyimeng |  | (6,771,349) |
Goodwill |  | 200,478,795 |
The intangible assets consist of trademark, non-compete arrangements and order backlogs. The fair values of trademark of RMB 79,000,000, non-competition arrangements of RMB 56,000,000 and order backlogs of RMB 4,000,000 are amortized over 10 years, 6 years and 1.4 years, respectively on a straight-line basis. The appraiser adopted relief from royalty method to estimate the fair value of trademark as at August 6, 2019.This approach is based on the assumption that, if an intangible asset has to be licensed from a third-party owner, a royalty rate on turnover will be charged for the privilege of using the asset. The significant inputs for the valuation model include, but not limited to, projected revenue, remaining useful life and discount rates. The appraiser adopted with and without method to estimate the fair value of non-compete arrangements as at August 6, 2019. The fair value of non-compete arrangements were derived by comparing the discounted cash flow models under the income approach for the two scenarios – one is based on the scenario where the non-compete arrangements are in place and the other is where it is not in place. The significant inputs for the valuation model include, but not limited to, remaining useful life, financial forecasts for the scenario without non-compete arrangements in place, discount rate and probability of competition. The appraiser adopted discounted cash flow method to estimate the fair value of deferred revenues as at August 6, 2019.The fair value of the deferred revenues was estimated based on the costs of fulfilling the obligations plus a normal profit margin. The significant inputs for the valuation model include, but not limited to, projected direct cost, savings on selling effort, profit margin and discount rate. The appraiser adopted price-to-sales method to estimate fair value of the non-controlling interests as at August 6, 2019. The price-to-sales multiple is referred to the purchase consideration and the revenue of Huanqiuyimeng. Considering the comparability of each entity with non-controlling interests, the appraiser adopted such multiple in deriving the non-controlling interests. As of the acquisition date, the goodwill acquired in the business combination was assigned to overseas art study services segment of RMB 176,046,647 and to other educational services segment of RMB 24,432,148 based on the excess of the fair value of each acquired reporting unit over the fair value of individual assets acquired and liabilities assumed that are assigned to each reporting unit. The following summarized unaudited pro forma results of operations for the years ended December 31, 2018 and 2019 assuming that the acquisition of Huanqiuyimeng occurred as of January 1, 2018. The unaudited pro forma financial information is supplemental information only and is not necessarily indicative of the results of operations which actually would have been had the acquisitions occurred as of January 1, 2018, nor is it indicative of future operating results.
|  | For the years ended December 31,
|  | 2018 |  | 2019
|  | RMB |  | RMB
|  | (Unaudited) |  | (Unaudited)
Pro forma net revenues |  | 105,071,457 |  | 201,416,606
Pro forma net income (loss) attributable to ATA Creativity Global |  | 757,139,789 |  | (174,265,822)
The amounts of net revenues and net loss of the acquiree since the acquisition date included in the consolidated statement of comprehensive income (loss) for the year ended December 31, 2019 is RMB 91,422,138 and RMB 24,291,035, respectively.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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- References No definition available. + Details
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