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Investments in Unconsolidated Entities | 12 Months Ended
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Aug. 31, 2012
Investments in Unconsolidated Entities |
Investments in Unconsolidated Entities |
5. Investments in Unconsolidated Entities The Company's unconsolidated entities are joint ventures that the Company accounts for as investments on an equity or cost method basis. The Company's ownership interest and carrying amounts of investments in unconsolidated entities as of August 31, 2012 and 2011 consist of the following (in thousands, except percentages):
|  | Percentage Ownership |  | August 31, 2012 |  | August 31, 2011 |
--- | --- | --- | --- | --- | --- | --- | ---
Equity method investments: |  |  |  |  |  |  |  |  |  |
China SemiLEDs |  |  | 49% |  | $ | — |  | $ | 13,434 |
SILQ (Malaysia) Sdn. Bhd. ("SILQ") |  |  | 50% |  |  | 525 |  |  | 833 |
SS Optoelectronics Co., Ltd. ("SS Optoelectronics") |  |  | 49% |  |  | 248 |  |  | 253 |
Cost method investments |  |  | Various |  |  | 1,048 |  |  | 1,059 |
Total investments in unconsolidated entities |  |  |  |  | $ | 1,821 |  | $ | 15,579 |
There were no dividends received from unconsolidated entities through August 31, 2012. Equity Method Investments—The following joint ventures are partially owned by the Company or its wholly owned subsidiaries; however, the Company has determined it does not control the entities but can exercise significant influence over the operating and financial policies of the joint ventures. The Company accounts for these joint ventures using the equity method of accounting. In December 2009, the Company entered into an agreement to establish China SemiLEDs in Guangdong, China for the purposes of conducting research and development and producing LED epitaxial wafers and chips to be sold in China. The Company contributed $14.7 million to acquire a 49% ownership interest in China SemiLEDs, which resulted in the Company's share of net assets of China SemiLEDs exceeding the carrying value of this investment by $7.3 million. Commencing during the year ended August 31, 2011, this difference has been amortized to income and the investment in China SemiLEDs over the weighted average useful life of the tangible assets used in the operations of China SemiLEDs, which is 11 years beginning in the period those assets were put in place and ready for their intended use. For the years ended August 31, 2012 and 2011, the Company recorded increases of $668 thousand and $278 thousand, respectively, to the Company's investment in China SemiLEDs and a corresponding reduction in the Company's equity in the net loss of China SemiLEDs. On November 19, 2012, representatives of China SemiLEDs shareholders held a meeting in which Company officers participated. Following this meeting, Company officers and management of China SemiLEDs determined that it was probable that the shareholders of China SemiLEDs would fail to agree to a restructuring plan for China SemiLEDs. This has caused management of China SemiLEDs to believe that the carrying amount of its long-lived assets might not be fully recoverable and as a result China SemiLEDs recognized an impairment charge of approximately $18.2 million on its long-lived assets at August 31, 2012. Consequently, the Company recognized its proportionate share of this impairment charge at August 31, 2012, which reduced the carrying amount of the Company's investment in China SemiLEDs to zero. Because the carrying amount of the Company's investment in China SemiLEDs had been reduced to zero as of August 31, 2012 and the Company has no obligation or intention to provide additional funding to China SemiLEDs, the Company will suspend using the equity method of accounting and will no longer recognize its equity in the net losses of China SemiLEDs, nor will it continue to amortize the excess of the Company's share of the net assets of China SemiLEDs over the carrying value of this investment until its share of future income, if any, from China SemiLEDs is sufficient to recover its share of the cumulative losses that have not previously been recognized. The excess of the Company's share of the net assets of China SemiLEDs over the carrying value of this investment was $4.6 million and $7.1 million at August 31, 2012 and 2011, respectively. In September 2009, the Company, through a wholly owned subsidiary, contributed $570 thousand to form SILQ, a joint venture in Malaysia. In April 2011, the Company participated in SILQ's capital increase and contributed $662 thousand. The Company and the other investor in the joint venture each hold a 50% ownership and voting interest in SILQ's common stock. The Company entered into the joint venture agreement that established SILQ to design, manufacture and sell lighting fixtures and systems. In December 2009, the Company, through a wholly owned subsidiary, entered into the joint venture agreement that established SS Optoelectronics to facilitate sales of the Company's LED chips to the other investor in the joint venture. In November 2010, the Company made a determination to dissolve the joint venture in accordance with the joint venture agreement, which dissolution was effected in September 2012. The fair value of the Company's investments in the non-marketable stock of its equity method investees is not readily available. These investments, except for China SemiLEDs which had a zero carrying amount at August 31, 2012, are assessed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable. The following is a summary of the financial information for China SemiLEDs and the Company's other equity method investees (in thousands):
|  | August 31, 2012 |  | August 31, 2011 |
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Summary Balance Sheet Information |  | China SemiLEDs |  | Others |  | Total |  | China SemiLEDs |  | Others |  | Total |
Current assets |  | $ | 24,769 |  | $ | 1,411 |  | $ | 26,180 |  | $ | 24,236 |  | $ | 1,959 |  | $ | 26,195 |
Noncurrent assets |  |  | 42,633 |  |  | 508 |  |  | 43,141 |  |  | 63,620 |  |  | 538 |  |  | 64,158 |
Current liabilities |  |  | 19,580 |  |  | 305 |  |  | 19,885 |  |  | 13,874 |  |  | 285 |  |  | 14,159 |
Noncurrent liabilities |  |  | 38,485 |  |  | — |  |  | 38,485 |  |  | 32,139 |  |  | — |  |  | 32,139 |
Shareholders' equity |  |  | 9,337 |  |  | 1,614 |  |  | 10,951 |  |  | 41,843 |  |  | 2,212 |  |  | 44,055 |
|  | Year Ended August 31, 2012 |  | Year Ended August 31, 2011 |
--- | --- | --- | --- | --- | ---
Summary Statement of Operations Information |  | China SemiLEDs |  | Others |  | Total |  | China SemiLEDs |  | Others |  | Total |
Revenues, net |  | $ | 837 |  | $ | 603 |  | $ | 1,440 |  | $ | 355 |  | $ | 213 |  | $ | 568 |
Gross loss |  |  | (10,155 | ) |  | (14 | ) |  | (10,169 | ) |  | (3,267 | ) |  | (39 | ) |  | (3,306 | )
Loss from operations |  |  | (34,269 | ) |  | (472 | ) |  | (34,741 | ) |  | (7,432 | ) |  | (755 | ) |  | (8,187 | )
Net loss |  |  | (32,513 | ) |  | (396 | ) |  | (32,909 | ) |  | (6,388 | ) |  | (769 | ) |  | (7,157 | )
Cost Method Investments—The Company held investments in non-marketable common stock of three unaffiliated companies with a cost of $1,048 thousand and $1,059 thousand as of August 31, 2012 and 2011, respectively. The fair values of these investments are not readily available. These investments are assessed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable.

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- Definition The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is. It also includes certain corporate joint ventures are partially owned by the reporting entity or its wholly-owned subsidiaries, and certain noncontrolled corporations where reporting entities can exercise significant influence over the operating and financial policies of joint ventures. Such investments are accounted for under the equity and cost method of accounting. + References No definition available. + Details
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