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Investments in Unconsolidated Entities

3 Months Ended

Nov. 30, 2012

Investments in Unconsolidated Entities

Investments in Unconsolidated Entities

4. Investments in Unconsolidated Entities

The Company’s ownership interest and investments in unconsolidated entities as of November 30, 2012 and August 31, 2012 consisted of the following (in thousands, except percentages):

		November 30, 2012					August 31, 2012
		Percentage Ownership		Amount			Percentage Ownership		Amount
Equity method investments:
SILQ (Malaysia) Sdn. Bhd.		50	%	$	478		50	%	$	525
Xurui Guangdian Co., Ltd. (“China SemiLEDs”)		49	%	—			49	%	—
SS Optoelectronics Co., Ltd. (“SS Optoelectronics”)		—		—			49	%	248
Cost method investments		Various		3,957			Various		1,048
Total investments in unconsolidated entities				$	4,435				$	1,821

There were no dividends received from unconsolidated entities through November 30, 2012.

Equity Method Investments

In December 2009, 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. As of August 31, 2012, the carrying amount of the Company’s investment in China SemiLEDs was reduced to zero as a result of the Company recognizing its proportionate share of the net loss reported by China SemiLEDs, including an impairment charge on long-lived assets. 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 as of August 31, 2012. Because the Company has no obligation or intention to provide additional funding to China SemiLEDs, the Company has suspended 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.

In September 2012, SS Optoelectronics was dissolved in accordance with the joint venture agreement and the Company received return of investment of $250 thousand.

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 November 30, 2012, are assessed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Cost Method Investments

In October 2012, the Company acquired a 9.9% equity interest in High Power Optoelectronics, Inc. (“HPO”) for total cash consideration of $2.9 million and has an option to increase its equity interest to more than 50% within one year of the acquisition. The fair values of the Company’s cost method investments are not readily available. All cost method investments are assessed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable.

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.

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