Investments in Unconsolidated Entities

6 Months Ended

Feb. 28, 2014

Investments in Unconsolidated Entities

5. Investments in Unconsolidated Entities

The Company’s ownership interest and carrying amounts of investments in unconsolidated entities as of February 28, 2014 and August 31, 2013 consisted of the following (in thousands, except percentages):

	February 28, 2014				August 31, 2013
	Percentage Ownership		Amount		Percentage Ownership		Amount
Equity method investments:
SILQ (Malaysia) Sdn. Bhd. (“SILQ”)	49	%	$	249	50	%	$	289
Xurui Guangdian Co., Ltd. (“China SemiLEDs”)	49	%	—		49	%	—
Cost method investments	Various		1,971		Various		1,986
Total investments in unconsolidated entities			$	2,220			$	2,275

There were no dividends received from unconsolidated entities through February 28, 2014.

Equity Method Investments

As of August 31, 2013, the Company and the other investor in SILQ, a joint venture in Malaysia which is engaged in the design, manufacture and sale of lighting fixtures and systems, each owned a 50% equity interest in SILQ. In January 2014, the Company participated in SILQ’s capital increase and contributed $76 thousand. Following the capital increase, the Company’s equity interest in SILQ was diluted from 50% to 49%, and consequently, the Company recognized a gain on dilution of its investment of $26 thousand. The dilution gain was recognized as additional paid in capital in the consolidated statement of changes in equity.

The carrying amount of the Company’s investment in China SemiLEDs was reduced to zero as of August 31, 2012 as a result of the Company recognizing its proportionate share of the net loss reported by China SemiLEDs. The Company has suspended using the equity method of accounting and will no longer amortize the excess of the Company’s share of the net assets of China SemiLEDs over the carrying amount 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 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 February 28, 2014, 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 had 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. In the third quarter of fiscal 2013, management reviewed the operating performance and financial condition of HPO based on the latest available financial statements of the investee and other publicly available information. Management considered the extent and duration of time to which the fair value of the investment has been less than its carrying amount, the financial condition of the investee and the prospect for recovery in the near term, and recognized an other-than-temporary impairment loss of $1,885 thousand on its investment in HPO for the year ended August 31, 2013.

- 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.

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