Fair Value Measurement

12 Months Ended

Dec. 31, 2016

21. FAIR VALUE MEASUREMENT

ASC topic 820 (“ASC 820”), Fair Value Measurements and Disclosures, 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 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, the Company measures available-for-sale investments and trading investments at fair value on a recurring basis. The fair value of time deposits are determined based on the prevailing interest rates in the market. The fair values of the Company’s held-to-maturity investments as disclosed are determined based on the discounted cash flow model using the discount curve of market interest rates. The fair value of the Company’s available-for-sale debt investments and trading investments are measured using the income approach, based on quoted market interest rates of similar instruments and other significant inputs derived from or corroborated by observable market data. The fair values of the Company’s available-for-sale equity investments in the equity securities of publicly listed companies are measured using quoted market prices.

The Company measures certain financial assets, including equity method investments and cost method investments, at fair value on a nonrecurring basis only if an impairment charge were to be recognized. The Company’s non-financial assets, such as intangible assets, goodwill and fixed assets, would be measured at fair value only if they were determined to be impaired on an other-than-temporary basis.

The fair value of the long-term notes payable is disclosed using quoted market price.

Assets and liabilities measured or disclosed at fair value are summarized below:


			Fair value measurement or disclosure at December 31, 2015 using
	Total fair value at December 31, 2015		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
	(In thousands)
*Fair value disclosure (Notes 2 and 4)*
Cash equivalents
Time deposits		678,000				678,000
Money market fund		608,353		608,353
Short-term investments Held-to-maturity investments
Fixed-rate investments		37,134,096				37,134,096
Long-term investments Held-to-maturity investments
Fixed-rate investments		1,806,446				1,806,446
Long-term notes payable		30,714,586		30,714,586

*Fair value measurements*

Recurring
Short-term investments Available-for-sale investments
Fixed-rate debt investments		6,958,399				6,958,399
Adjustable-rate debt investments		13,325,385				13,325,385
Equity investments		742,618		742,618
Long-term investments Available-for-sale investments
Equity investments		276,965		276,965

Non-recurring
Long-term investments		—		—		—		—		(116,978	)

Total assets measured at fair value		21,303,367		1,019,583		20,283,784		—		(116,978	)

In 2015, the value of a cost method investment was written down to zero, as a result of declining financial performance and a change in the business circumstances of the investee. The corresponding impairment charge incurred was recorded in earnings for the year then ended.


					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		US$		RMB		RMB		RMB		RMB			US$
	(In thousands)
*Fair value disclosure (Notes 2 and 4)*
Cash equivalents
Time deposits		1,674,172		241,131				1,674,172
Money market fund		4,419,206		636,498		4,419,206
Short-term investments Held-to-maturity investments
Fixed-rate investments		41,868,641		6,030,339				41,868,641
Long-term notes payable		33,252,561		4,789,365		33,252,561

*Fair value measurements*

Recurring
Short-term investments Available-for-sale investments
Fixed-rate debt investments		14,377,856		2,070,842				14,377,856
Adjustable-rate debt investments		14,986,816		2,158,550				14,986,816
Equity investments		28,787		4,146		28,787
Trading securities		7,747,436		1,115,863				7,747,436
Long-term investments Available-for-sale investments
Equity investments		496,512		71,513		496,512
Non-recurring
Long-term investments		—		—		—		—		—		(150,745	)		(21,712	)
Intangible assets												(822	)		(118	)

Total assets measured at fair value		37,637,407		5,420,914		525,299		37,112,108		—		(151,567	)		(21,830	)

In 2016, the value of certain cost method investments and an equity method investment were written down to zero, as a result of declining financial performance and a change in the business circumstances of the investee. The corresponding impairment charges incurred were recorded in earnings for the year then ended.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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