Document_and_Entity_Informatio
Document and Entity Information | 12 Months Ended |
Dec. 31, 2014 | |
Document and Entity Information | |
Entity Registrant Name | NetEase, Inc. |
Entity Central Index Key | 1110646 |
Document Type | 20-F |
Document Period End Date | 31-Dec-14 |
Amendment Flag | FALSE |
Current Fiscal Year End Date | -19 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 3,268,019,356 |
Document Fiscal Year Focus | 2014 |
Document Fiscal Period Focus | FY |
Consolidated_Balance_Sheets
Consolidated Balance Sheets | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY |
Current assets: | |||
Cash and cash equivalents | $325,799 | 2,021,453 | 1,458,298 |
Time deposits | 2,981,107 | 18,496,574 | 16,625,468 |
Restricted cash | 423,693 | 2,628,847 | 2,136,749 |
Accounts receivable, net | 140,724 | 873,137 | 402,511 |
Prepayments and other current assets | 234,007 | 1,451,919 | 1,144,272 |
Short-term investments | 331,778 | 2,058,552 | 901,183 |
Deferred tax assets | 32,563 | 202,040 | 129,282 |
Total current assets | 4,469,671 | 27,732,522 | 22,797,763 |
Non-current assets: | |||
Property, equipment and software, net | 206,496 | 1,281,225 | 872,113 |
Land use right, net | 12,515 | 77,648 | 11,271 |
Deferred tax assets | 3,410 | 21,160 | 23,085 |
Time deposits | 108,468 | 673,000 | 500,000 |
Other long-term assets | 91,725 | 569,116 | 342,098 |
Total non-current assets | 422,614 | 2,622,149 | 1,748,567 |
Total assets | 4,892,285 | 30,354,671 | 24,546,330 |
Current liabilities: | |||
Accounts payable (including accounts payable of the consolidated VIEs without recourse to the primary beneficiaries of RMB203,949 and RMB408,112 as of December 31, 2013 and 2014, respectively) | 66,196 | 410,722 | 219,259 |
Salary and welfare payables (including salary and welfare payables of the consolidated VIEs without recourse to the primary beneficiaries of RMB34,631 and RMB56,917 as of December 31, 2013 and 2014, respectively) | 86,156 | 534,565 | 377,117 |
Taxes payable (including taxes payable of the consolidated VIEs without recourse to the primary beneficiaries of RMB12,015 and RMB40,894 as of December 31, 2013 and 2014, respectively) | 53,878 | 334,290 | 74,463 |
Short-term loan | 330,378 | 2,049,865 | 975,504 |
Deferred revenue (including deferred revenue of the consolidated VIEs without recourse to the primary beneficiaries of RMB610,403 and RMB871,722 as of December 31, 2013 and 2014, respectively) | 317,149 | 1,967,780 | 1,481,036 |
Accrued liabilities and other payables (including accrued liabilities and other payables of the consolidated VIEs without recourse to the primary beneficiaries of RMB593,706 and RMB765,895 as of December 31, 2013 and 2014, respectively) | 218,746 | 1,357,228 | 957,299 |
Deferred tax liabilities | 16,439 | 101,997 | 148,506 |
Total current liabilities | 1,088,942 | 6,756,447 | 4,233,184 |
Long-term payable: | |||
Other long-term payable | 17,153 | 106,430 | 144,883 |
Total liabilities | 1,106,095 | 6,862,877 | 4,378,067 |
Commitments and contingencies (See Note 22) | |||
Mezzanine classified noncontrolling interests | 21,538 | 133,634 | |
Shareholders' equity: | |||
Ordinary shares, US$0.0001 par value : 1,000,300,000 shares authorized, 3,250,284 shares issued and outstanding as of December 31, 2013 and 3,268,019 shares issued and outstanding as of December 31, 2014 | 431 | 2,674 | 2,663 |
Additional paid-in capital | 197,662 | 1,226,416 | 854,878 |
Statutory reserves | 151,062 | 937,282 | 878,466 |
Retained earnings | 3,420,684 | 21,223,973 | 18,509,161 |
NetEase, Inc's shareholders' equity | 3,769,839 | 23,390,345 | 20,245,168 |
Noncontrolling interests | -5,187 | -32,185 | -76,905 |
Total shareholders' equity | 3,764,652 | 23,358,160 | 20,168,263 |
Total liabilities, mezzanine classified noncontrolling interests and shareholders' equity | $4,892,285 | 30,354,671 | 24,546,330 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Per Share data, unless otherwise specified | USD ($) | CNY | USD ($) | CNY | Consolidated VIEs | Consolidated VIEs |
CNY | CNY | |||||
Accounts payable of the consolidated VIEs without recourse to the primary beneficiaries | $66,196 | 410,722 | 219,259 | 408,112 | 203,949 | |
Salary and welfare payables of the consolidated VIEs without recourse to the primary beneficiaries | 86,156 | 534,565 | 377,117 | 56,917 | 34,631 | |
Taxes payable of the consolidated VIEs without recourse to the primary beneficiaries | 53,878 | 334,290 | 74,463 | 40,894 | 12,015 | |
Deferred revenue of the consolidated VIEs without recourse to the primary beneficiaries | 317,149 | 1,967,780 | 1,481,036 | 871,722 | 610,403 | |
Accrued liabilities and other payables of the consolidated VIEs without recourse to the primary beneficiaries | $218,746 | 1,357,228 | 957,299 | 765,895 | 593,706 | |
Ordinary shares, US$0.0001 par value (in dollars per share) | $0.00 | $0.00 | ||||
Ordinary shares, shares authorized | 1,000,300,000 | 1,000,300,000 | 1,000,300,000 | 1,000,300,000 | ||
Ordinary shares, shares issued | 3,268,019 | 3,268,019 | 3,250,284 | 3,250,284 | ||
Ordinary shares, shares outstanding | 3,268,019 | 3,268,019 | 3,250,284 | 3,250,284 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations and Comprehensive Income | 12 Months Ended | |||
In Thousands, except Per Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
Revenues: | ||||
Online game services | $1,581,894 | 9,815,019 | 8,308,618 | 7,287,063 |
Advertising services | 250,081 | 1,551,652 | 1,094,623 | 850,157 |
Email, e-commerce and others | 179,507 | 1,113,773 | 368,014 | 242,741 |
Total revenues | 2,011,482 | 12,480,444 | 9,771,255 | 8,379,961 |
Sales tax expense | -123,716 | -767,610 | -575,080 | -179,005 |
Net revenues | 1,887,766 | 11,712,834 | 9,196,175 | 8,200,956 |
Cost of revenues | -525,665 | -3,261,544 | -2,478,516 | -2,578,067 |
Gross profit | 1,362,101 | 8,451,290 | 6,717,659 | 5,622,889 |
Operating expenses: | ||||
Selling and marketing expenses | -305,418 | -1,894,998 | -1,093,612 | -906,707 |
General and administrative expenses | -75,375 | -467,669 | -349,832 | -286,223 |
Research and development expenses | -213,309 | -1,323,498 | -921,618 | -718,315 |
Total operating expenses | -594,102 | -3,686,165 | -2,365,062 | -1,911,245 |
Operating profit | 767,999 | 4,765,125 | 4,352,597 | 3,711,644 |
Other income/(expenses): | ||||
Investment income, net | 4,412 | 27,373 | 37,255 | 43,770 |
Interest income | 96,944 | 601,502 | 506,181 | 423,634 |
Exchange losses | -2,901 | -17,998 | -15,348 | -554 |
Other, net | 13,287 | 82,438 | 95,136 | 99,718 |
Income before tax | 879,741 | 5,458,440 | 4,975,821 | 4,278,212 |
Income tax | -106,814 | -662,735 | -530,603 | -691,642 |
Net income | 772,927 | 4,795,705 | 4,445,218 | 3,586,570 |
Add: Net loss/(income) attributable to noncontrolling interests and mezzanine classified noncontrolling interests | -6,299 | -39,082 | -1,308 | 50,882 |
Net income attributable to the NetEase, Inc.'s shareholders | 766,628 | 4,756,623 | 4,443,910 | 3,637,452 |
Comprehensive income | 772,927 | 4,795,705 | 4,445,218 | 3,586,570 |
Add: Comprehensive loss/(income ) attributable to noncontrolling interests and mezzanine classified noncontrolling interests | -6,299 | -39,082 | -1,308 | 50,882 |
Comprehensive income attributable to the NetEase, Inc.'s shareholders | $766,628 | 4,756,623 | 4,443,910 | 3,637,452 |
Net income per share, basic (in CNY and dollars per share) | $0.24 | 1.46 | 1.37 | 1.11 |
Net income per ADS, basic (in CNY and dollars per share) | $5.87 | 36.43 | 34.21 | 27.7 |
Net income per share, diluted (in CNY and dollars per share) | $0.23 | 1.45 | 1.36 | 1.11 |
Net income per ADS, diluted (in CNY and dollars per share) | $5.85 | 36.29 | 34.12 | 27.65 |
Weighted average number of ordinary shares outstanding, basic (in shares) | 3,264,450 | 3,264,450 | 3,247,874 | 3,282,663 |
Weighted average number of ADS outstanding, basic (in shares) | 130,578 | 130,578 | 129,915 | 131,307 |
Weighted average number of ordinary shares outstanding, diluted (in shares) | 3,277,049 | 3,277,049 | 3,256,297 | 3,288,330 |
Weighted average number of ADS outstanding, diluted (in shares) | 131,082 | 131,082 | 130,252 | 131,533 |
Consolidated_Statements_of_Sha
Consolidated Statements of Shareholders' Equity | Ordinary shares | Additional paid-in capital | Treasury stock | Statutory reserves | Retained earnings | Noncontrolling interests | Total | Total |
In Thousands, except Share data | CNY | CNY | CNY | CNY | CNY | CNY | USD ($) | CNY |
Balance at Dec. 31, 2011 | 2,687 | 1,002,336 | 472,586 | 11,649,092 | -28,237 | 13,098,464 | ||
Balance (in shares) at Dec. 31, 2011 | 3,273,937,000 | |||||||
Ordinary shares issued upon exercise of employee stock options | 3 | 24,709 | 24,712 | |||||
Ordinary shares issued upon exercise of employee stock options (in shares) | 4,929,000 | |||||||
Ordinary shares issued upon settlement of restricted share units | 6 | -6 | ||||||
Ordinary shares issued upon settlement of restricted share units (in shares) | 8,680,000 | |||||||
Share-based compensation | 129,642 | 129,642 | ||||||
Appropriation to statutory reserves | 161,522 | -161,522 | ||||||
Net income attributable to NetEase, Inc. and noncontrolling interest shareholders | 3,637,452 | -50,882 | 3,586,570 | |||||
Repurchase of shares | -422,489 | -422,489 | ||||||
Repurchase of shares (in shares) | -41,504,000 | |||||||
Dividend to shareholders | -815,413 | -815,413 | ||||||
Balance at Dec. 31, 2012 | 2,696 | 1,156,681 | -422,489 | 634,108 | 14,309,609 | -79,119 | 15,601,486 | |
Balance (in shares) at Dec. 31, 2012 | 3,287,546,000 | -41,504,000 | ||||||
Ordinary shares issued upon exercise of employee stock options | 2,474 | 2,474 | ||||||
Ordinary shares issued upon exercise of employee stock options (in shares) | 240,000 | |||||||
Ordinary shares issued upon settlement of restricted share units | 8 | -8 | ||||||
Ordinary shares issued upon settlement of restricted share units (in shares) | 13,083,000 | |||||||
Share-based compensation | 217,431 | 217,431 | ||||||
Appropriation to statutory reserves | 244,358 | -244,358 | ||||||
Net income attributable to NetEase, Inc. and noncontrolling interest shareholders | 4,443,910 | 1,308 | 4,445,218 | |||||
Repurchase of shares | -99,262 | -99,262 | ||||||
Repurchase of shares (in shares) | -9,081,000 | |||||||
Cancellation of treasury stock | -41 | -521,710 | 521,751 | |||||
Cancellation of treasury stock (in shares) | -50,585,000 | 50,585,000 | ||||||
Capital injection in a subsidiary by noncontrolling interests shareholders | 10 | 906 | 916 | |||||
Balance at Dec. 31, 2013 | 2,663 | 854,878 | 878,466 | 18,509,161 | -76,905 | 20,168,263 | ||
Balance (in shares) at Dec. 31, 2013 | 3,250,284,000 | 3,250,284,000 | ||||||
Ordinary shares issued upon exercise of employee stock options | 2,917 | 2,917 | ||||||
Ordinary shares issued upon exercise of employee stock options (in shares) | 285,000 | |||||||
Ordinary shares issued upon settlement of restricted share units | 11 | -11 | ||||||
Ordinary shares issued upon settlement of restricted share units (in shares) | 17,450,000 | |||||||
Share-based compensation | 368,632 | 368,632 | ||||||
Appropriation to statutory reserves | 58,816 | -58,816 | ||||||
Net income attributable to NetEase, Inc. and noncontrolling interest shareholders | 4,756,623 | 35,813 | 4,792,436 | |||||
Capital injection in a subsidiary by noncontrolling interests shareholders | 15 | 8,907 | 8,922 | |||||
Dividend to shareholders | -1,983,010 | -1,983,010 | ||||||
Balance at Dec. 31, 2014 | 2,674 | 1,226,416 | 937,282 | 21,223,973 | -32,185 | $3,764,652 | 23,358,160 | |
Balance (in shares) at Dec. 31, 2014 | 3,268,019,000 | 3,268,019,000 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows | 12 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
Cash flows from operating activities: | ||||
Net income | $772,927 | 4,795,705 | 4,445,218 | 3,586,570 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 28,118 | 174,462 | 158,363 | 233,509 |
Investment impairment | 3,875 | 24,040 | ||
Share-based compensation cost | 56,293 | 349,277 | 306,308 | 203,018 |
Allowance for/(reversal of) provision for doubtful accounts | 607 | 3,765 | -2,007 | 3,088 |
(Gain)/loss on disposal of property, equipment and software | 243 | 1,507 | -509 | -42 |
Unrealized exchange (gains)/ losses | 3,024 | 18,764 | 12,266 | -5,665 |
Deferred income taxes | -18,912 | -117,342 | 142,283 | -31,568 |
Net equity share of (income)/losses from associated companies | 7,890 | 48,955 | 5,321 | -842 |
Fair value changes of short-term investments | -10,355 | -64,249 | 12,355 | 21,758 |
Changes in operating assets and liabilities: | ||||
Accounts receivable | -76,456 | -474,381 | -131,030 | -70,318 |
Prepayments and other current assets | -47,129 | -292,416 | -21,933 | -68,833 |
Accounts payable | 30,695 | 190,453 | 70,959 | 43,168 |
Salary and welfare payables | 25,376 | 157,448 | 87,269 | 45,434 |
Taxes payable | 41,877 | 259,828 | -315,001 | -34,449 |
Deferred revenue | 78,449 | 486,744 | 321,018 | 145,946 |
Accrued liabilities and other payables | 50,037 | 310,463 | 145,010 | 153,516 |
Net cash provided by operating activities | 946,559 | 5,873,023 | 5,235,890 | 4,224,290 |
Cash flows from investing activities | ||||
Purchase of property, equipment and software | -86,609 | -537,376 | -218,936 | -178,654 |
Proceeds from sale of property, equipment and software | 236 | 1,463 | 4,516 | 777 |
Purchase of other intangible assets | -2,258 | -14,011 | -900 | -32 |
Purchase of land use right | -10,792 | -66,957 | ||
Net change of short-term investments with terms of three months or less | 39,875 | 247,406 | -480,000 | -120,000 |
Purchase of short-term investments | -380,060 | -2,358,122 | -400,000 | -1,101,691 |
Proceeds from maturities of short-term investments | 164,007 | 1,017,596 | 1,040,000 | 1,120,000 |
Investment in an associated company | -3,223 | -20,000 | -200,000 | |
Transfer to restricted cash | -79,320 | -492,149 | -1,566,244 | -251,822 |
Placement/rollover of matured time deposits | -3,538,506 | -21,955,012 | -21,807,617 | -19,204,499 |
Proceeds from maturity of time deposits | 3,208,104 | 19,905,004 | 18,231,797 | 15,326,801 |
Net change in other assets | -39,972 | -248,008 | -55,895 | -44,918 |
Net cash used in investing activities | -728,518 | -4,520,166 | -5,453,279 | -4,454,038 |
Cash flows from financing activities: | ||||
Proceeds of short-term bank loan | 329,863 | 2,046,669 | 1,005,680 | |
Payment of short-term bank loan | -157,223 | -975,504 | ||
Proceeds from employees exercising stock options | 470 | 2,917 | 2,474 | 24,712 |
Dividends paid to shareholders | -319,603 | -1,983,010 | -815,413 | |
Capital contribution from mezzanine classified noncontrolling interests shareholders | 21,011 | 130,365 | ||
Capital injection from noncontrolling interest shareholders | 20 | 121 | 916 | |
Repurchase of shares | -106,809 | -414,942 | ||
Net cash (used in)/provided by financing activities | -125,462 | -778,442 | 86,848 | -390,230 |
Effect of exchange rate changes on cash held in foreign currencies | -1,815 | -11,260 | -1,930 | -3,871 |
Net (decrease) increase in cash and cash equivalents | 90,764 | 563,155 | -132,471 | -623,849 |
Cash and cash equivalents beginning of the year | 235,035 | 1,458,298 | 1,590,769 | 2,214,618 |
Cash and cash equivalents end of the year | 325,799 | 2,021,453 | 1,458,298 | 1,590,769 |
Supplemental disclosures of cash flow information: | ||||
Cash paid for income taxes, net of tax refund | 88,854 | 551,303 | 687,454 | 683,609 |
Supplemental schedule of non-cash investing and financing activities: | ||||
Share repurchase financed by accounts payable | 7,547 | |||
Dividend payable | 814,934 | |||
Fixed asset purchases financed by accounts payable | $12,986 | 80,575 | 10,071 | 7,228 |
Organization_and_Nature_of_Ope
Organization and Nature of Operations | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Organization and Nature of Operations | ||||||||
Organization and Nature of Operations | ||||||||
1. Organization and Nature of Operations | ||||||||
(a) The Group | ||||||||
NetEase.com, Inc. was incorporated in the Cayman Islands on July 6, 1999 and changed its name to “NetEase, Inc.” (the “Company”) with effect from March 29, 2012. The Company has been listed on the Nasdaq National Market (now the Nasdaq Global Select Market) in the United States of America since July 2000. As of December 31, 2014, the Company has wholly-owned and majority-owned subsidiaries incorporated in countries and jurisdictions including the People’s Republic of China (“PRC”), Hong Kong, the United States of America (“USA”), Cayman Islands and British Virgin Islands (“BVI”). As of December 31, 2014, the Company also effectively controls a number of variable interest entities (“VIEs”) for which the Company is the primary beneficiary. The Company, its subsidiaries and VIEs are hereinafter collectively referred to as the “Group” or the “Company”. The major subsidiaries and VIEs through which the Company conducts its business operations as of December 31, 2014 are described below: | ||||||||
Place and year of | ||||||||
Major Subsidiaries | Incorporation | |||||||
NetEase Information Technology (Beijing) Co., Ltd. (“NetEase Beijing”) | Beijing, China | |||||||
1999 | ||||||||
Guangzhou Boguan Telecommunication Technology Co., Ltd. (“Boguan”) | Guangzhou, China | |||||||
2003 | ||||||||
NetEase Youdao Information Technology (Beijing) Co., Ltd. (“Youdao Information”) | Beijing, China | |||||||
2006 | ||||||||
NetEase (Hangzhou) Network Co., Ltd. (“NetEase Hangzhou”) | Hangzhou, China | |||||||
2006 | ||||||||
Hangzhou Langhe Technology Co., Ltd. (“Hangzhou Langhe”) | Hangzhou, China | |||||||
2009 | ||||||||
Lede Technology Co., Ltd. (“Lede Technology”) | Hangzhou, China | |||||||
2011 | ||||||||
NetEase Media Technology (Beijing) Co., Ltd.(“Media Beijing”) | Beijing, China | |||||||
2012 | ||||||||
Major VIEs | Place and year of | |||||||
Incorporation | ||||||||
Guangzhou NetEase Computer System Co., Ltd. (“Guangzhou NetEase”) | Guangzhou, China | |||||||
1997 | ||||||||
Beijing Guangyitong Advertising Co., Ltd. (“Guangyitong Advertising”) | Beijing, China | |||||||
1999 | ||||||||
Shanghai EaseNet Network Technology Co., Ltd. (“Shanghai EaseNet”) | Shanghai, China | |||||||
2008 | ||||||||
StormNet Information Technology (Hong Kong) Limited (“StormNet IT HK”) | Hong Kong, China | |||||||
2008 | ||||||||
StormNet Information Technology (Shanghai) Co., Ltd. (“StormNet IT SH”) | Shanghai, China | |||||||
2008 | ||||||||
Hangzhou NetEase Leihuo Network Co., Ltd. (“HZ Leihuo”) | Hangzhou, China | |||||||
2009 | ||||||||
Wangyibao Co., Ltd. (“Wangyibao Company”) | Hangzhou, China | |||||||
2010 | ||||||||
Guangzhou NetEase, one principal VIE of the Company, was incorporated in June 1997 in China and owned by William Lei Ding, the Company’s Chief Executive Officer, director and major shareholder, and another Chinese employee of the Company. It is responsible for providing online games, e-mail and other value-added telecommunication services. | ||||||||
Guangyitong Advertising, owned by Guangzhou NetEase and William Lei Ding, was incorporated in November 1999 in China. Guangyitong Advertising operates the Company’s portal business. | ||||||||
HZ Leihuo was incorporated in April 2009 in China by two Chinese employees of the Company and currently operates the Company’s mobile game business. | ||||||||
Wangyibao Company was incorporated in July 2010 in China as a wholly-owned subsidiary of Guangzhou NetEase for the purpose of operating the Wangyibao online payment platform of the Company to facilitate e-payments by online game or other services customers to the Company. | ||||||||
In addition, Shanghai EaseNet is a PRC company owned by William Lei Ding, and has contractual arrangements with the joint venture established between, and owned equally by, Blizzard Entertainment, Inc. (“Blizzard”) and the Company, and with the Company. The joint venture was established concurrently with the licensing of certain online games in August 2008 and provides technical services to Shanghai EaseNet. The joint venture currently consists of two companies, StormNet IT HK and its wholly-owned subsidiary StormNet IT SH. | ||||||||
The following combined financial information of the Group’s VIEs was included in the accompanying consolidated financial statements of the Group as follows: | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
RMB | RMB | |||||||
Total assets | 2,616,962 | 3,449,055 | ||||||
Total liabilities | 2,624,377 | 3,304,133 | ||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Net revenues | 8,264,780 | 9,263,978 | 11,293,218 | |||||
Net (loss)/income | (134,519 | ) | (29,335 | ) | 139,560 | |||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Net cash provided by operating activities | 180,462 | 143,403 | 368,209 | |||||
Net cash used in investing activities | (173,649 | ) | (220,809 | ) | (148,982 | ) | ||
Net cash (used in)/provided by financing activities | (227,452 | ) | (9,697 | ) | 2,508 | |||
In accordance with various contractual agreements, the Company has the power to direct the activities of the VIEs and can have assets transferred out of the VIEs. Therefore, the Company considers that there are no assets in the respective VIEs that can be used only to settle obligations of the respective VIEs, except for the registered capital of the VIEs and certain non-distributable statutory reserves amounting to approximately RMB199.1 million and RMB13.2 million, respectively as of December 31, 2014. As the respective VIEs are incorporated as limited liability companies under the PRC Company Law, creditors do not have recourse to the general credit of the Company for the liabilities of the respective VIEs. | ||||||||
Currently, there are certain contractual arrangements between the Company and several of its VIEs which require the Company to provide additional financial support or guarantees to its VIEs, where necessary. Please see Note 1(b) for additional information. | ||||||||
There is no entity in the Company’s group for which the Company has a variable interest but is not the primary beneficiary as of December 31, 2014. | ||||||||
(b) Nature of operations | ||||||||
The Group generates revenues from providing online game services and advertising services on the NetEase websites, and from e-mail, e-commerce and other services. Substantially all of the Company’s revenues are generated through its VIEs. | ||||||||
The industry in which the Group operates is subject to a number of industry-specific risk factors, including, but not limited to, rapidly changing technologies; government regulations of the Internet and online game industry in China; significant numbers of new entrants; dependence on key individuals; competition of similar services from larger companies; customer preferences; and the need for the continued successful development, marketing and selling of its services. | ||||||||
VIE Arrangements with Guangzhou NetEase, Guangyitong Advertising, HZ Leihuo, and Shanghai EaseNet | ||||||||
The Group conducts its business mainly in China. The Chinese government regulates Internet access, telecommunications services, the distribution of news and other information and the provision of commerce through strict business licensing requirements and other governmental regulations, which include, among others, those restricting foreign ownership in Chinese companies providing Internet advertising and other Internet or telecommunications value-added services. To comply with the existing Chinese laws and regulations, the Company and certain of its subsidiaries have entered into a series of contractual arrangements with its principal VIEs with respect to the operation of the NetEase websites, operation of self-developed and licensed online and mobile games, Internet content and wireless value-added services, as well as the provision of advertising services. Our VIEs include: | ||||||||
-1 | Guangzhou NetEase (owned by William Lei Ding or Mr. Ding, the Company’s Chief Executive Office, director and principal shareholder, and one Chinese employee of the Company,(together referred as “the VIE shareholders”)*), | |||||||
-2 | Guangyitong Advertising (owned by Mr. Ding and Guangzhou NetEase*), | |||||||
-3 | HZ Leihuo (owned by two employees of the Company), and | |||||||
-4 | Shanghai EaseNet (owned by Mr. Ding). | |||||||
Based on the agreements with these VIEs, the Company’s subsidiaries NetEase Beijing, Media Beijing, Boguan and NetEase Hangzhou provided technical consulting and related services to these VIEs. In 2012, these agreements were replaced with the following new cooperative agreements to reflect a change in the tax rules in China which resulted in the Company’s business in China becoming subject to a value-added tax instead of a business tax. The principal agreements that transfer economic benefits of Guangzhou NetEase and Guangyitong Advertising to the Company and its subsidiaries are: | ||||||||
Cooperative agreements with Guangzhou NetEase — under these agreements, the Company’s subsidiaries NetEase Beijing, Boguan and NetEase Hangzhou provide various technical consulting and related services to Guangzhou NetEase in exchange for substantially all of Guangzhou NetEase’s net profits. | ||||||||
Cooperative agreements with Guangyitong Advertising — under these agreements, NetEase Beijing from 2012 until October 2013, and Media Beijing from October 2013 onwards, provide various technical consulting and related services in exchange for substantially all of Guangyitong Advertising’s profits. | ||||||||
Each cooperative agreement will remain in effect indefinitely unless any one of the contract parties objects or otherwise required by law. | ||||||||
The principal agreements that provide the Company and its subsidiaries effective control over Guangzhou NetEase and Guangyitong Advertising are: | ||||||||
Operating Agreement among NetEase Beijing, Guangyitong Advertising and the VIE shareholders of Guangyitong Advertising. To ensure the successful performance of the various agreements between the parties, Guangyitong Advertising and the VIE shareholders have agreed that they will not enter into any transaction, or fail to take any action, that would substantially affect the assets, liabilities, equity or operations of Guangyitong Advertising without the prior written consent of NetEase Beijing. NetEase Beijing has also agreed that it will provide performance guarantees and guarantee loans for working capital purposes to the extent required by Guangyitong Advertising for its operations. The term of this agreement is 20 years from February 3, 2000. | ||||||||
Shareholder Voting Rights Trust Agreement among the VIE shareholders and NetEase Beijing. William Lei Ding irrevocably appoints NetEase Beijing to represent him to exercise all the voting rights to which he is entitled as a shareholder of Guangyitong Advertising and the VIE shareholders agree to cause Guangzhou NetEase to irrevocably appoint NetEase Beijing to represent Guangzhou NetEase to exercise all voting rights. NetEase Beijing has also agreed that it will provide performance guarantees and guarantee loans for working capital purposes to the extent required by Guangyitong Advertising for its operations. The term of this agreement was 10 years from May 12, 2000, which was extended on June 10, 2011 with a term of 20 years from May 12, 2010. | ||||||||
Letter of Agreement. Each of VIE shareholder have agreed that any amendments to be made to the agreements to which Guangzhou NetEase, Guangyitong Advertising and/or the VIE shareholders are parties, shall be subject to the approval by the vote of a majority of the Board of the Company, excluding the vote of William Lei Ding. The VIE shareholders have also agreed that, if any amendments to the above mentioned agreements require a vote of the shareholders of NetEase, Guangzhou NetEase or Guangyitong Advertising, as applicable, both of them will vote in their capacity as direct or indirect shareholders of these companies to act based upon the instructions of the Company’s Board. The term of this agreement is 20 years from June 6, 2000. | ||||||||
Other Governance Arrangements. The parties have agreed that upon NetEase Beijing’s determination and at any time when NetEase Beijing is able to obtain approval to invest in and operate all or any part of Guangyitong Advertising or Guangzhou NetEase, NetEase Beijing may acquire all or any part of the assets or equity interests of Guangyitong Advertising or Guangzhou NetEase, to the extent permitted by Chinese law. In addition, the ultimate shareholders of Guangyitong Advertising have agreed that upon instruction from NetEase Beijing, they will appoint or terminate Guangyitong Advertising’s board members, General Manager, Chief Financial Officer and other senior officers. | ||||||||
* In May 2014, NetEase Beijing caused the 10.0% interest in Guangzhou NetEase held by Bo Ding to be transferred to William Lei Ding (9%) and one Chinese employee of the Company (1%). As a result of this transfer, William Lei Ding and that employee of the Company own 99.0% and 1.0% of the equity interest in Guangzhou NetEase, respectively. Concurrently, Bo Ding transferred the 20.0% equity interest in Guangyitong Advertising held by him to William Lei Ding. | ||||||||
The principal agreements that provide the Company and its subsidiaries effective control over HZ Leihuo are: | ||||||||
Operating Agreement among NetEase Hangzhou, HZ Leihuo and the VIE shareholders of HZ Leihuo. To ensure the successful performance of the various agreements between the parties, HZ Leihuo and its VIE shareholders have agreed that, except for transactions in the ordinary course of business, HZ Leihuo will not enter into any transaction that would materially affect the assets, liabilities, rights or operations of HZ Leihuo without the prior written consent of NetEase Hangzhou. NetEase Hangzhou has also agreed that it will provide performance guarantees and, at NetEase Hangzhou’s discretion, guarantee loans for working capital purposes to the extent required by HZ Leihuo for its operations. Furthermore, the VIE shareholders of HZ Leihuo have agreed that, upon instruction from NetEase Hangzhou, they will appoint HZ Leihuo’s board members, president, chief financial officer and other senior executive officers. The term of this agreement is 20 years from April 15, 2009 and can be extended with the written consent of NetEase Hangzhou. | ||||||||
Cooperation Agreement between NetEase Hangzhou and HZ Leihuo. Under this agreement, starting from January 1, 2010, NetEase Hangzhou agreed to provide various technical consulting and related services to HZ Leihuo in exchange for a monthly service fee paid by HZ Leihuo. The agreement will continue to be effective unless it is terminated by written notice of NetEase Hangzhou or, in case of a material breach of the agreement, it is terminated by written notice of the non-breaching party. | ||||||||
Proxy Agreements between NetEase Hangzhou and the VIE shareholders of HZ Leihuo. Each of the VIE shareholders of HZ Leihuo has agreed to irrevocably entrust a person designated by NetEase Hangzhou to represent him to exercise all the voting rights and other shareholders’ rights to which he is entitled as a shareholder of HZ Leihuo. The term of each proxy agreement is 20 years from April 15, 2009 and may be extended with the mutual agreement of both parties. | ||||||||
Exclusive Purchase Option Agreements among NetEase Hangzhou, HZ Leihuo and the VIE shareholders of HZ Leihuo. Each of VIE shareholders of HZ Leihuo has granted NetEase Hangzhou an option to purchase all or a portion of his equity interest in HZ Leihuo at a price equal to the original paid-in capital paid by the ultimate shareholder. In addition, HZ Leihuo has granted NetEase Hangzhou an option to purchase all or a portion of the assets held by HZ Leihuo or its subsidiaries at a price equal to the net book value of such assets. Each of HZ Leihuo and the VIE shareholders of HZ Leihuo agrees not to transfer, mortgage or permit any security interest to be created on any equity interest in or assets of HZ Leihuo without the prior written consent of NetEase Hangzhou. The term of each Exclusive Purchase Option Agreement is 20 years from April 15, 2009 and can be extended with the written consent of NetEase Hangzhou. | ||||||||
The Joint Venture | ||||||||
In addition to the foregoing, in connection with the licensing of certain online games by Blizzard to Shanghai EaseNet for operation in the PRC, there are certain contractual arrangements among Shanghai EaseNet, the joint venture established between Blizzard and the Company, and the Company. | ||||||||
StormNet IT HK, StormNet IT SH and Shanghai EaseNet (collectively referred to as the “JV Group”) are variable interest entities as equity investment at risk is not sufficient to permit the JV Group to finance its activities without additional subordinated financial support provided by any parties. Due to the restriction on the disposition of their respective shares in the joint venture, Blizzard and NetEase are considered related parties for purposes of identifying which party is the primary beneficiary under ASC 810. Since the aggregate variable interests held by Blizzard and NetEase would, if held by a single party, identify that party as the primary beneficiary, either Blizzard or NetEase will be the primary beneficiary. Based on the assessment of all relevant facts and circumstances, the Company determined that NetEase is most closely associated with the JV Group and therefore is the primary beneficiary. As a result, the JV Group’s results of operations, assets and liabilities have been included in the Company’s consolidated financial statements. | ||||||||
The Company conducts substantially all of its business through the various VIEs discussed above and their subsidiaries, and therefore these companies directly affect the Company’s financial performance and cash flows. As discussed below, if the Chinese government determines the VIE agreements do not comply with applicable laws and regulations and requires the Company to restructure its operations entirely or discontinue all or any portion of its business, or if the uncertainties in the PRC legal system limit the Group’s ability to enforce these contractual agreements, the Group’s business operations will be significantly disrupted and the Group might be unable to consolidate these companies in the future. In the opinion of management, the likelihood of loss in respect of the Group’s current ownership structure or the contractual arrangements with its VIEs is remote. | ||||||||
Risks related to the VIE arrangements | ||||||||
The Company believes that its contractual arrangements with the VIEs are in compliance with PRC law and are legally enforceable. The major shareholder of Guangzhou NetEase, which is in turn the major shareholder of Guangyitong Advertising, Wangyibao Company and Youdao Computer, and of Shanghai EaseNet is the largest shareholder of the Company. He therefore has no current interest in seeking to act contrary to the contractual arrangements. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements and if Mr. Ding were to reduce his interest in the Company, his interests may diverge from that of the Company and that may potentially increase the risk that he would seek to act contrary to the contractual terms, for example by influencing the VIEs not to pay the service fees when required to do so. If the VIEs or their respective shareholder fail to perform their respective obligations under the current contractual arrangements, the Company may have to incur substantial costs and expend significant resources to enforce those arrangements and rely on legal remedies under Chinese laws. The Chinese laws, rules and regulations are relatively new, and because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws, rules and regulations involve substantial uncertainties. These uncertainties may impede the ability of the Company to enforce these contractual arrangements, or suffer significant delay or other obstacles in the process of enforcing these contractual arrangements and materially and adversely affect the results of operations and the financial position of the Company. | ||||||||
In addition, many Chinese regulations are subject to extensive interpretive powers of governmental agencies and commissions, and there are substantial uncertainties regarding the interpretation and application of current and future Chinese laws and regulations. Accordingly, the Company cannot be assured that Chinese regulatory authorities will not ultimately take a contrary view to its belief and will not take action to prohibit or restrict its business activities. The relevant regulatory authorities would have broad discretion in dealing with any deemed violations which may adversely impact the financial statements, operations and cash flows of the Company (including the restriction on the Company to carry out the business). It is unclear, however, how such restructuring could impact the Company’s business and operating results, as the Chinese government has not yet found any such contractual arrangements non-compliant. If the legal structure and contractual arrangements were found to be in violation of any existing PRC laws and regulations, the PRC government could potentially: | ||||||||
· | revoke the Group’s business and operating licenses; | |||||||
· | require the Group to discontinue or restrict operations; | |||||||
· | restrict the Group’s right to collect revenues; | |||||||
· | block the Group’s websites; | |||||||
· | require the Group to restructure the operations in such a way as to compel the Group to establish a new enterprise, re-apply for the necessary licenses or relocate the Group’s businesses, staff and assets; | |||||||
· | impose additional conditions or requirements with which the Group may not be able to comply; or | |||||||
· | take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business. | |||||||
The imposition of any of these penalties may result in a material and adverse effect on the Group’s ability to conduct the Group’s business. In addition, if the imposition of any of these penalties causes the Group to lose the rights to direct the activities of the VIEs or the right to receive their economic benefits, the Group would no longer be able to consolidate the VIEs. The Group does not believe that any penalties imposed or actions taken by the PRC government would result in the liquidation of the Company, its subsidiaries or the VIEs. | ||||||||
Principal_Accounting_Policies
Principal Accounting Policies | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Principal Accounting Policies | ||||||||
Principal Accounting Policies | ||||||||
2. Principal Accounting Policies | ||||||||
(a) Basis of consolidation | ||||||||
The consolidated financial statements include the financial statements of the Company, its subsidiaries and VIEs for which the Company is the primary beneficiary with the ownership interests of minority shareholders reported as noncontrolling interests. All significant transactions and balances among the Company, its subsidiaries and VIEs have been eliminated upon consolidation. The Company consolidates a VIE if the Company has the power to direct matters that most significantly impact the activities of the VIE, and has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. | ||||||||
(b) Basis of presentation | ||||||||
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements are prepared based on the historical cost convention. | ||||||||
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Actual results might differ from those estimates. These estimates and assumptions include, but are not limited to, assessing the following: lives of the permanent in-game items, the determination of whether sales prices are fixed or determinable and collectability is reasonably assured, realization of deferred tax assets and the determination of uncertain tax positions, useful lives and impairment provision of property, equipment and software and intangibles, assumptions related to stock-based compensation and assumptions related to the valuation of the equity investments. | ||||||||
(c) Revenue recognition | ||||||||
The Group recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. | ||||||||
Net revenues presented in the consolidated statements of operations and comprehensive income represent revenues from online game services, advertising services, e-mail, e-commerce and others recognized net of sales discount, sales tax and related surcharges. | ||||||||
(i) Online game services | ||||||||
MMORPG games | ||||||||
The Group sells prepaid point cards through Guangzhou NetEase and Shanghai EaseNet to the end user. Customers can purchase physical prepaid point cards in different locations in China, including Internet cafés, software stores, convenience stores and bookstores. Customers can also purchase “virtual” prepaid points from vendors who register the points in the Group’s system and “virtual” prepaid cards online via debit and credit cards or bank transfers via the Company’s Wangyibao online payment services platform, and receive the prepaid point information over the Internet. Customers can use the points to play the Group’s online games, pay for in-game items and use other fee-based services. Proceeds received from the sales of prepaid point cards and online points to players are recorded as deferred revenues. The Group earns revenue through providing online game services to players under two types of revenue models: time-based revenue model and item-based revenue model. For online games using the time-based model, players are charged based on the time they spend playing games. | ||||||||
Under the item-based model, the basic game play functions are free of charge, and players are charged for purchases of in-game items. Revenues from the sales of in-game items are recognized when the items are consumed by the customers or over the estimated lives of the in-game items. The Company considers the average period that players typically play the games and other game player behavior patterns, as well as various other factors, including the acceptance and popularity of expansion packs, promotional events launched and market conditions to arrive at the best estimates for the estimated lives of the permanent in-game items. The Group assesses the estimated lives of the permanent in-game items for the item-based games on a quarterly basis. Adjustments arising from the changes of estimated lives of permanent in-game items are applied prospectively as such changes are resulted from new information indicating a change in the game player behavior patterns. | ||||||||
Unused online points in a personal game account are recognized as revenues when the likelihood that the Group would provide further online games services with respect to such online points is remote. The Group has determined that such likelihood is remote when the personal game account has been inactive for 540 days or more. The revenue recognized from the inactive accounts was insignificant in 2012, 2013 and 2014. | ||||||||
Mobile games | ||||||||
The Group primarily operates mobile games including both self-developed and licensed mobile games through HZ Leihuo and generates mobile game revenues from the sale of in-game virtual items, including items, avatars, skills, privileges or other in-game consumables, features or functionality, within the games. | ||||||||
The Group records revenue generated from mobile games on a gross basis as the Group is acting as the principal to fulfill all obligations related to the mobile game operation. Fees paid to game developers, distribution channels (app stores) and payment channels are recorded as cost of revenues. | ||||||||
For the purposes of determining when the service has been provided to the end-users, the Group determined that an implied obligation exists to provide on-going services to the end-users who purchased virtual items to gain an enhanced game-playing experience over an average playing period of the paying players. Accordingly, the Group recognizes the revenues ratably over the estimated average playing period of these paying players, starting from the point in time when virtual items are delivered to the players’ accounts and all other revenue recognition criteria are met. | ||||||||
The Company considers the average period that players typically play the games and other game player behavior patterns, as well as various other factors to arrive at the best estimates for the estimated playing period of the paying players. If a new game is launched and only a limited period of paying player data is available, then the Group considers other qualitative factors, such as the playing patterns for paying users for other games with similar characteristics and playing patterns of paying players, such as targeted players and purchasing frequency. While the Group believes its estimates to be reasonable based on available game player information, the Group may revise such estimates based on new information indicating a change in the game player behavior patterns and any adjustments are applied prospectively. | ||||||||
(ii)Advertising services | ||||||||
The Group derives its advertising revenues principally from short-term online advertising contracts engaged by Guangyitong Advertising. Advertising service contracts may consist of multiple elements with a typical term of one quarter to one year. In accordance with ASU No.2009-13 Revenue Recognition - Multiple-Deliverable Revenue Arrangements (“ASU No.2009 -13”), the Company treats advertising contracts with multiple deliverable elements as separate units of accounting for revenue recognition purposes and recognizes revenue on a periodic basis during the contract when each deliverable service is provided. Since the contract price is for all deliverables, the Company allocates the arrangement consideration to all deliverables at the inception of the arrangement on the basis of their relative selling price according to the selling price hierarchy established by ASU No.2009-13. The Company uses (a) vendor-specific objective evidence of selling price, if it exists, otherwise, (b) third-party evidence of selling price. If neither (a) nor (b) exists, the Company will use (c) the management’s best estimate of the selling price for that deliverable. The adoption did not have a material impact on the Company’s consolidated financial statements. | ||||||||
In the search engine business, Youdao Information enters into “cost per action” (“CPA”) advertising contracts and receives fees when an online user performs a specific action such as purchasing a product from or registering with the advertiser. Revenue for CPA contracts is recognized when the specific action is completed. Youdao Information may also enter into advertising business contracts with advertisers that include guarantees of a minimum number of impressions or times that an advertisement appears in pages viewed by users. To the extent that minimum guaranteed impressions are not met within the contractual time period, the related revenues are deferred until the remaining guaranteed impression levels are achieved. | ||||||||
The Group recognizes revenue and expense at fair value from a barter transaction involving advertising services provided by the Group only if the fair value of the advertising services surrendered in the transaction is determinable based on the entity’s own historical practice of receiving cash and cash equivalents, marketable securities, or other consideration that is readily convertible to a known amount of cash for similar advertising from buyers unrelated to the counterparty in the barter transaction. | ||||||||
For the years ended December 31, 2012, 2013 and 2014, the Group engaged in certain advertising barter transactions for which the fair value was not determinable and therefore no revenues or expenses derived from these barter transactions were recognized. These transactions primarily involved exchanges of advertising services rendered by the Group for advertising, promotional benefits, content, consulting services and software provided by the counterparties. | ||||||||
(iii)E-mail, e-commerce services and others | ||||||||
Revenue from e-mail, e-commerce and others is predominantly derived from activities related to fee-based premium services, e-commerce and online payment platform services. | ||||||||
Fee-based premium services revenues, operated on a monthly subscription basis, are derived principally from providing premium e-mail and other wireless value-added services. Prepaid subscription revenues are deferred and are recognized by the Group over the period in which the services are provided. | ||||||||
In February 2009, the Company launched its Wangyibao payment platform, through which game players registered for Wangyibao operations can deposit money in their accounts and use the accounts to pay for game point cards and other fee-based services and products rendered by the Company. The Company recognizes revenue when services are rendered to account holders in accordance with service agreement. | ||||||||
Revenues from e-commerce services mainly include e-commerce services related to third party virtual e-commerce products. The Company recognizes revenue when services are rendered to customers based on the pre-determined service fee rate. | ||||||||
(d)Cost of revenues | ||||||||
Costs of online game services, advertising services and e-mail, e-commerce and others consist primarily of staff costs, royalties and consultancy fees related to licensed games, revenue sharing cost related to mobile games, depreciation and amortization of computers and software, server custody fees, bandwidth, and other direct costs of providing these services. These costs are charged to the consolidated statements of operations and comprehensive income as incurred. | ||||||||
(e)Research and development costs | ||||||||
Research and development costs mainly consist of personnel-related expenses and technology service costs incurred for the development of online games prior to the establishment of technological feasibility and costs associated with new product development. For the years ended December 31, 2012, 2013 and 2014, the costs incurred for development of online game products have not been capitalized because the period after the date technical feasibility is reached and the time when the game is marketed is short historically and the development cost incurred in the period are insignificant. | ||||||||
(f)Cash, cash equivalents and time deposits | ||||||||
Cash and cash equivalents represent cash on hand, demand deposits placed with large reputable banks in Hong Kong or China, and highly liquid investments that are readily convertible to known amounts of cash and with original maturities from the date of purchase with terms of less than three months. As of December 31, 2013, there were cash at bank and demand deposits with terms of less than three months denominated in US dollars and Euro amounting to approximately US$12.7 million and Euro4.3 million, respectively. As of December 31, 2014, there were cash at bank and demand deposits with terms of less than three months denominated in US dollars and Euro amounting to approximately US$25.9 million and Euro2.1 million, respectively (equivalent to approximately RMB158.3 million and RMB15.3 million, respectively). | ||||||||
Time deposits represent time deposits placed with banks with original maturities of three months or more. As of December 31, 2013, there were time deposits denominated in US dollars and Euro amounting to approximately US$382.3 million and Euro2.6 million, respectively. As of December 31, 2014, there were time deposits denominated in US dollars and Euro amounting to approximately US$637.6 million and Euro2.0 million (equivalent to approximately RMB3.9 billion and RMB14.9 million, respectively). | ||||||||
As of December 31, 2013 and 2014, the Company had approximately RMB14.6 billion and RMB14.7 billion cash and cash equivalents and time deposits held by its PRC subsidiaries and VIEs, representing 78.3% and 69.2% of total cash and cash equivalents and time deposits of the Company, respectively. | ||||||||
As of December 31, 2013 and 2014, the Company had a restricted cash balance which is set aside for a period of 12 months or less of approximately RMB2,136.7 million and RMB2,628.8 million, respectively, comprising as follows (in millions): | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
RMB | RMB | |||||||
Guarantee deposit for consulting fee payments due to Blizzard | 70.0 | 40.0 | ||||||
Escrow account deposit for funding sales and marketing activities of Blizzard’s licensed games | 212.4 | 276.1 | ||||||
Customer deposit of Wangyibao accounts | 389.3 | 599.3 | ||||||
Pledge deposit for short-term bank borrowing | 1,459.0 | 1,703.4 | ||||||
Others | 6.0 | 10.0 | ||||||
2,136.7 | 2,628.8 | |||||||
The Company had no other lien arrangements during 2013 and 2014. | ||||||||
(g)Fair value of financial instruments | ||||||||
Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. | ||||||||
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value: | ||||||||
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 | ||||||||
The Group’s financial instruments include cash and cash equivalents and time deposits, accounts receivable, prepayments and other current assets, short-term investments, accounts payable, short-term loan, deferred revenue and accrued liabilities and other payables, which the carrying values approximate their fair value. Please see Note 27 for additional information. | ||||||||
(h)Investments | ||||||||
Short-term investments include investments in financial instruments with a variable interest rate indexed to performance of underlying assets and investments that the Company has positive intent and ability to hold to maturity, all of which are with an original maturities of less than 12 months. | ||||||||
In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the consolidated statements of operations and comprehensive income as other income /(expense). Fair value is estimated based on quoted prices of similar products provided by banks at the end of each period. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements. Please see Note 6 and Note 27 for additional information. | ||||||||
The investments that the Company has positive intent and ability to hold to maturity are classified as held-to-maturity investments and stated at amortized cost.For individual investment classified as held-to-maturity investments, the Company evaluates whether a decline in fair value below the amortized cost basis is other than temporary in accordance with the Company’s policy and ASC 320-10. If the Company concludes that, it does not intend or is not required to sell an impaired debt investment before the recovery of its amortized cost basis, the impairment is considered temporary and the held-to-maturity investments continue to be recognized at the amortized cost. | ||||||||
Investments not classified as trading or as held-to-maturity are classified as available-for-sale securities. An available-for-sale investment is reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Realized gains or losses are charged to earnings during the period in which the gain or loss is realized. An impairment loss on the available-for-sale debt securities would be recognized in the consolidated statements of comprehensive income when the decline in value is determined to be other-than-temporary. Investments with maturities of greater than 12 months are recorded in other long-term assets. | ||||||||
For investments in an investee over which the Company does not have significant influence and which do not have readily determinable fair value, the Company carries the investment at cost and only adjusts for other-than-temporary declines in fair value and distributions of earnings that exceed the Company’s share of earnings since its investment. Management regularly evaluates the impairment of the cost method investments based on performance and financial position of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and financing needs. An impairment loss is recognized in earnings equal to the excess of the investment’s cost over its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value would then become the new cost basis of investment. | ||||||||
(i)Investment in associated companies | ||||||||
Investments in associated companies in which the Company is in a position to exercise significant influence by participating in, but not controlling or jointly controlling, the financial and operating policies are accounted for using the equity method and are reported under other long-term assets in the consolidated balance sheets | ||||||||
(j)Property, equipment and software | ||||||||
Property, equipment and software are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line basis over the following estimated useful lives, taking into account any estimated residual value: | ||||||||
Building | 20 years | |||||||
Decoration | 5 years | |||||||
Leasehold improvements | lesser of the term of the lease and the estimated useful lives of the assets | |||||||
Furniture, fixtures and office equipment | 5-10 years | |||||||
Vehicles | 5 years | |||||||
Servers and computers | 3 years | |||||||
Software | 3 years | |||||||
Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of the property and equipment, are expensed as incurred. When the Company retires or disposes its property, equipment and software, it records any gain or loss arising from the retirement or disposal under Other, net in its consolidated statements of operations and comprehensive income. | ||||||||
(k)Intangible assets | ||||||||
Finite-lived intangible assets are tested for impairment if impairment indicators arise. The Company amortizes its finite-lived intangible assets from business acquisition using the straight-line method: | ||||||||
Land use right | over the remaining term of the land use right period | |||||||
License right | over the license period | |||||||
Customer contracts and relationships | 8-10 years | |||||||
Technology | 3 years | |||||||
(l)Advertising expenses | ||||||||
The Company expenses advertising costs as incurred and reports these costs under selling and marketing expense. Advertising expenses totaled approximately RMB242.8 million, RMB370.9 million and RMB466.6 million for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||
(m)Foreign currency translation | ||||||||
The functional currency of the entities within the Group is RMB, which is also the reporting currency. Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates quoted by the People’s Bank of China (the “PBOC”) prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. The resulting exchange differences are included in the consolidated statements of operations and comprehensive income. | ||||||||
Translations of amounts from RMB into United States dollars for the convenience of the reader were calculated at the noon buying rate of US$1.00 =MB6.2046 on the last trading day of 2014 (December 31, 2014) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into United States dollars at such rate. | ||||||||
(n)Share-based compensation | ||||||||
The Company measures the cost of employee services received in exchange for stock options at the grant date fair value of the award under its 2000 Stock Incentive Plan (see Note 20(a)). The Company recognizes the share-based compensation costs, net of a forfeiture rate, on a straight-line basis of 25% a year over a vesting term of four years. The Company adopts the Black-Scholes option pricing model to determine the fair value of stock options and account for share-based compensation cost using an estimated forfeiture rate at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. | ||||||||
Under its 2009 Restricted Share Unit Plan (see Note 20(b)), the Company issues restricted share units (RSUs) to its employees, directors and consultants with performance conditions and service vesting periods ranging from one year to five years. Some of the RSUs issued are to be settled, at the Company’s discretion, in stock or cash upon vesting based on the stock price at grant date. At each reporting period, the Company evaluates the likelihood of performance conditions being met. Share-based compensation costs are then recorded for the number of RSUs expected to vest on a graded-vesting basis, net of estimated forfeitures, over the requisite service period. The compensation cost of the RSUs to be settled in stock only is measured based on the fair value of stock when all conditions to establish the grant date have been met. The compensation cost of RSUs to be settled either in stock or cash at the Company’s discretion is remeasured until the date when settlement in stock or cash is determined by the Company. | ||||||||
The Company records share-based compensation to the consolidated statements of operations and comprehensive income with the corresponding credit to the additional paid-in-capital for share options and RSUs to the extent that such awards are to be settled only in stock. On the other hand, for RSUs which will either be settled in stock or cash as discussed above, the Company continues to mark to market such awards and, in accordance with the vesting schedules of such awards, record the resulting potential liabilities under other long-term payables and accrued liabilities which totaled RMB106.2 million and RMB137.0 million, respectively, as of December 31, 2014. There were no significant cash payments for share-based liabilities for the years ended 2012, 2013 and 2014. | ||||||||
In 2014, Lede Inc., one of the Company’s subsidiaries, adopted a 2014 Stock Incentive Plan (the “Lede Plan”) and granted options exercisable for ordinary shares of Lede Inc. to certain of the Group’s employees (Lede Inc., together with its subsidiaries and VIEs are referred to as “Lede”). The options expire six years from the date of grant and either vest or have a vesting commencement date upon certain conditions being met (“Vesting Commencement Date”). The Company adopts the binomial option pricing model to determine the fair value of stock options and accounts for share-based compensation cost using an estimated forfeiture rate. As of December 31, 2014, there was RMB94.0 million (US$15.2 million) unrecognized compensation cost under the Lede Plan as if all options granted had become fully vested. | ||||||||
Forfeitures were estimated based on the Company’s weighted average historical forfeiture rate of the past five years. Differences between actual and estimated forfeitures are expensed in the period that the differences occur. See Note 20 for further information regarding share-based compensation assumptions and expense. | ||||||||
(o)Taxation | ||||||||
Income tax expense is recognized in accordance with the laws of the relevant taxing authorities, with deferred taxes being provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. Tax rate changes are reflected in income during the period the changes are enacted. | ||||||||
A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and tax bases of assets and liabilities as well as the expected future tax benefit to be derived from tax loss and tax credit carry forwards. The Company classifies deferred tax assets and liabilities into current and non-current based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to tax loss carry forwards, is classified according to the expected reversal date of the temporary difference. | ||||||||
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount “more likely than not” to be realized in future tax returns. The valuation allowance for a particular tax jurisdiction is allocated between current and non-current deferred tax assets for that tax jurisdiction on a pro rata basis. | ||||||||
For a particular tax-paying component of an enterprise and within a particular tax jurisdiction, (a) all current deferred tax assets and liabilities are offset and presented as a single amount and (b) all non-current deferred tax assets and liabilities are offset and presented as a single amount. The Company does not offset deferred tax assets and liabilities attributable to different tax-paying components of the enterprise or to different tax jurisdictions. | ||||||||
The Company reports tax-related interest expense and penalty in Other, net in the consolidated statements of operations and comprehensive income, if there is any. The Company did not incur any material penalty or interest payments in connection with tax positions during the years ended December 31, 2012, 2013 and 2014. | ||||||||
The Company did not have any significant unrecognized uncertain tax positions as of December 31, 2013 and 2014. | ||||||||
In order to assess uncertain tax positions, the Company applies a more likely than not threshold and a two-step approach for the tax position measurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. | ||||||||
(p)Net earnings per share (“EPS”) and per American Depositary Share (“ADS”) | ||||||||
Basic earnings per share are computed on the basis of the weighted-average number of ordinary shares outstanding during the period under measurement. Diluted earnings per share are based on the weighted-average number of ordinary shares outstanding and potential ordinary shares. Potential ordinary shares result from the assumed exercise of outstanding stock options, RSUs or other potentially dilutive equity instruments, when they are dilutive under the treasury stock method or the if-converted method. | ||||||||
(q)Statutory reserves | ||||||||
The Company’s subsidiaries and VIEs incorporated in China are required to make appropriations to certain non-distributable statutory reserves. In accordance with the laws applicable to foreign invested enterprises in China, its subsidiaries have to make appropriations from its after-tax profit as reported in their PRC statutory accounts to non-distributable statutory reserves including (i) general reserve fund and (ii) staff bonus and welfare fund. The appropriation to the general reserve fund is at least 10% of the after-tax profits as reported in the PRC statutory accounts. Appropriation is not required if the reserve fund has reached 50% of the registered capital of the respective company. The appropriation to the other reserve funds is at the discretion of the board of directors of the respective company. At the same time, the Company’s VIEs, in accordance with the China Company Laws, must make appropriations from their after-tax profit as reported in their PRC statutory accounts to non-distributable statutory reserves including (i) statutory surplus fund and (ii) discretionary surplus fund. The appropriation to the statutory surplus fund is at least 10% of the after-tax profits as reported in their PRC statutory accounts. Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of the respective company. Appropriation to the discretionary surplus fund is made at the discretion of the board of directors of the respective companies. | ||||||||
The general reserve fund and statutory surplus fund are restricted to set off against losses, expansion of production and operation or increase in the registered capital of the respective companies. The staff bonus and welfare fund is available to fund payments of special bonuses to staff and for collective welfare benefits. Upon approval by the board of directors, the discretionary surplus can be used to offset accumulated losses or to increase capital. | ||||||||
The staff bonus and welfare fund is a liability in nature. The other statutory reserves are not transferable to the Company in the form of cash dividends, loans or advances, and therefore are not available for distribution except in liquidation. | ||||||||
The following table presents the Group’s appropriations to general reserve funds and statutory surplus funds for the years ended December 31, 2012, 2013 and 2014 (in thousands): | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Appropriations to general reserve funds and statutory surplus funds | 161,522 | 244,358 | 58,816 | |||||
For the years ended December 31, 2012 and 2013, NetEase Beijing and Boguan, as well as Netease Hangzhou for the year ended December 31, 2014, did not make appropriations to statutory reserves as their cumulative appropriations in the past have already reached the statutory limit, namely 50% of the registered capital of the respective companies. | ||||||||
(r)Noncontrolling interests and Mezzanine classified noncontrolling interests | ||||||||
Noncontrolling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and VIEs which is not attributable, directly or indirectly, to the controlling shareholder. | ||||||||
The noncontrolling interest will continue to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance. | ||||||||
Mezzanine classified noncontrolling interests represent Series A convertible redeemable preferred shares (“preferred shares”) issued by Lede Inc. to certain investors (see Note 17), and have been classified as mezzanine classified noncontrolling interests in the consolidated financial statements as these preferred shares are contingently redeemable upon the occurrence of a conditional event (see Note 20(f)), which is not solely within the control of the Company. The carrying value of this non-controlling interest as mezzanine equity will be adjusted by an accumulative amount equal to the amount of net profit attributable to preferred shareholders based on their ownership percentage. | ||||||||
(s)Related parties | ||||||||
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, stockholder, or a related corporation. | ||||||||
(t)Comprehensive income | ||||||||
Comprehensive income is defined as the change in equity of the Company during a period arising from transactions and other events and circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders. The Group’s comprehensive income and net income were the same during the years ended December 31, 2012, 2013 and 2014. | ||||||||
(u)Segment reporting | ||||||||
The Group’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements is set out in detail under Note 26. | ||||||||
(v)Dividends | ||||||||
Dividends of the Company are recognized when declared. | ||||||||
(w)Recently issued accounting pronouncements | ||||||||
In May 2014, the FASB and IASB issued their converged standard on revenue recognition. The objective of the revenue standard ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. For public companies, the revenue standard is effective for the first interim period within annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company is in the process of evaluating the impact of the standard on its consolidated financial statements. | ||||||||
Concentrations_and_Risks
Concentrations and Risks | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Concentrations and Risks | ||||||||
Concentrations and Risks | ||||||||
3.Concentrations and Risks | ||||||||
(a)Bandwidth and server custody service provider | ||||||||
The Group relied on telecommunications service providers and their affiliates for bandwidth and server custody service to support its operations during fiscal years 2012, 2013 and 2014 as follows: | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Total number of telecommunications service providers | 11 | 13 | 13 | |||||
Number of service providers provided by 10% or more of the Company’s bandwidth and server custody expenditure | 2 | 3 | 3 | |||||
Total % of the Company’s bandwidth and server custody expenditure provided by 10% or greater service providers | 82.1 | % | 91.9 | % | 90.2 | % | ||
(b)Credit risk | ||||||||
Financial instruments that potentially subject the Group to significant concentrations of credit risk consist primarily of cash and cash equivalents, time deposits, restricted cash, accounts receivable and short-term investments. As of December 31, 2013 and 2014, substantially all of the Company’s cash equivalents, time deposits and restricted cash were held in major financial institutions located in the PRC or Hong Kong, which management consider being of high credit quality. Accounts receivable are typically unsecured and are generally derived from revenue earned from advertising services. One single customer has a receivable balance exceeding 10% of the total accounts receivable balance for the year ended December 31, 2013 and no single customer has a receivable balance exceeding 10% of the total accounts receivable balance for the year ended December 31, 2014, as follows: | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
Customer A | 10.04 | % | Below 10 | % | ||||
Allowance for doubtful accounts | Not applicable | Not applicable | ||||||
Short-term investments consist of the held-to-maturity investment of fixed-rate corporate bonds of well-known Chinese companies and other short-term investments of financial products issued by commercial banks in China with a variable interest rate indexed to performance of underlying assets, both have a maturity date within one year as of the purchase date. The held-to-maturity investments have a credit rating of Aa or Aaa by Moody’s Investors Service, or AA or AAA by Standard & Poor’s Corp., or an equivalent rating by another reputable PRC licensed rating service agency. The effective yields of the held-to-maturity investments and other short-term investments range from 3.05% to 5.18% per annum. Any negative events or deterioration in financial well-being with respect to the counterparties of the above investments and the underlying collateral may cause a material loss to the Company and have a material effect on the Company’s financial condition and results of operations. | ||||||||
(c)Major Customers | ||||||||
No single customer represented 10% or more of the Company’s total revenues for the years ended December 31, 2012, 2013 and 2014. | ||||||||
(d)Online Games | ||||||||
The Company derived a combined total of 93.7%, 90.9% and 89.8% of its total net game revenues for the years ended December 31, 2012, 2013 and 2014, respectively, from several of the Company’s self-developed massively multi-player online role-playing games, including Fantasy Westward Journey II (a comprehensive upgrade from Fantasy Westward Journey), New Westward Journey Online II (a comprehensive upgrade from Westward Journey Online II), Tianxia III, Ghost II (a comprehensive upgrade from Ghost) and Heroes of Tang Dynasty Zero (a comprehensive upgrade from Heroes of Tang Dynasty II), as well as World of Warcraft® and Hearthstone®: Heroes of Warcraft™, two games developed by and licensed from Blizzard. | ||||||||
(e)Chinese Regulations | ||||||||
The Chinese market in which the Group operates exposes the Company to certain macro-economic and regulatory risks and uncertainties. These uncertainties extend to the ability of the Group to provide Internet services through contractual arrangements in China as this industry remains highly regulated. The Chinese government may issue from time to time new laws or new interpretations on existing laws to regulate this industry. In January 2015, the Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of ‘‘actual control’’ in determining whether a company is considered a foreign-invested enterprise. If the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as foreign-invested enterprises and any operation in the industry category on the ‘‘negative list’’ without market entry clearance may be considered as illegal. It is uncertain whether the Company would be considered as ultimately controlled by Chinese parties under the draft Foreign Investment Law. Moreover, the draft Foreign Investment Law has not taken a position on what actions will be taken with respect to the existing companies with a VIE structure. Further, it is uncertain when or if the draft Foreign Investment Law will be passed and if it is, when it will become effective. In addition, it is uncertain whether the industries of online games, portal and other virtual products, in which the Company’s VIEs operate, will be subject to the foreign investment restrictions or prohibitions set forth in the ‘‘negative list’’ that is to be issued. If the enacted version of the Foreign Investment Law and the final ‘‘negative list’’ mandate further actions, such as market entry clearance or certain restructuring of the Company’s corporate structure and operations, to be completed by companies with existing VIE structures, there may be substantial uncertainties as to whether the Company can complete these actions in a timely manner, or at all, and the Company’s business and financial condition may be materially and adversely affected. | ||||||||
Regulatory risk also encompasses the interpretation by the tax authorities of current tax laws, the status of properties leased for the Group’s operations, its legal structure and scope of operations in China, which could be subject to further restrictions resulting in limitations on the Company’s ability to conduct business in China. | ||||||||
Allowance_for_Doubtful_Account
Allowance for Doubtful Accounts | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
Allowance for Doubtful Accounts | ||||||||||
Allowance for Doubtful Accounts | ||||||||||
4.Allowance for Doubtful Accounts | ||||||||||
The Company closely monitors the collection of its accounts receivables and records a reserve for doubtful accounts against aged accounts and for specifically identified non-recoverable amounts. If the economic situation and the financial condition of the customer deteriorate resulting in an impairment of the customer’s ability to make payments, additional allowances might be required. Receivable balances are written off when they are determined to be uncollectible. The following table sets out the movements of the allowance for doubtful accounts for the years ended December 31, 2012, 2013 and 2014 (in thousands): | ||||||||||
Balance at | Charged to (write- | Write-off of | Balance at | |||||||
January 1, | back against) cost | receivable balances | December 31, | |||||||
and expenses | and corresponding | |||||||||
provisions | ||||||||||
RMB | RMB | RMB | RMB | |||||||
2012 | 7,972 | 3,088 | (668 | ) | 10,392 | |||||
2013 | 10,392 | (2,007 | ) | (110 | ) | 8,275 | ||||
2014 | 8,275 | 3,765 | (878 | ) | 11,162 | |||||
Prepayments_and_Other_Current_
Prepayments and Other Current Assets | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Prepayments and Other Current Assets | ||||||
Prepayments and Other Current Assets | ||||||
5.Prepayments and Other Current Assets | ||||||
The following is a summary of prepayments and other current assets (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Guarantee payment made to Blizzard - royalty fees | 374,877 | 313,342 | ||||
Prepayment for royalties, revenue sharing cost - current portion | 221,921 | 360,499 | ||||
Interest receivable | 246,178 | 305,063 | ||||
Prepayments of content and marketing cost and other operational expenses | 73,693 | 145,445 | ||||
Prepayment for sales tax | 77,436 | 105,096 | ||||
Bridge loans in connection with ongoing investments | 13,800 | 57,168 | ||||
Deposits to vendors | 14,438 | 69,961 | ||||
Employee advances | 21,755 | 27,118 | ||||
Wangyibao operating funds held by third party online payment platform settlement service providers | 74,793 | 22,777 | ||||
Others | 25,381 | 45,450 | ||||
1,144,272 | 1,451,919 | |||||
In accordance with the license agreements of World of Warcraft, StarCraft® II: Wings of Liberty®, and Hearthstone: Heroes of Warcraft, the Company made certain guarantee payments to Blizzard on behalf of Shanghai EaseNet for the minimum guaranteed royalties as of December 31, 2013 and 2014. The guarantee amounts will be released to the Company when actual royalties are paid by Shanghai EaseNet to Blizzard. | ||||||
As of December 31, 2013 and 2014, prepayments for royalties and revenue sharing cost representing prepaid royalties or revenue sharing cost related to operations of licensed PC and mobile games. | ||||||
In February 2009, the Company launched its Wangyibao online payment platform, through which game players registered for Wangyibao online payment services can deposit money in their accounts and use the accounts to pay for game point cards and other fee-based services and products rendered by the Company. Account holders may also withdraw money from their accounts at any time, such as to pay for items purchased from other players or when they want the return of their money. The Company engages certain third party online payment settlement service providers to collect payments from and process withdrawals by customers. As of December 31, 2013 and 2014, the Company had operating funds held by its third party online payment settlement service providers as shown above. | ||||||
The amount of employee advances listed above included staff housing loan balances of RMB19.2 million and RMB24.7 million repayable within 12 months from December 31, 2013 and 2014, respectively (see Note 10 (c)). No advances were made directly or indirectly to the Company’s executive officers for their personal benefit for the years ended December 31, 2013 and 2014. | ||||||
Shortterm_Investments
Short-term Investments | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Short-term Investments [Abstract] | ||||||||
Short-term investments | ||||||||
6.Short-term Investments | ||||||||
As of December 31, 2013 and 2014, the Group’s short-term investments mainly consisted of held-to-maturity investments including fixed-rate corporate bonds and financial products issued by commercial banks in China with a variable interest rate indexed to the performance of underlying assets and a maturity date within one year when purchased. As of December 31, 2014, the effective yields of short-term investments ranged from 3.05% to 5.18% per annum (2013: 3.30% to 7.00% per annum). | ||||||||
The following is a summary of short-term investments (in thousands): | ||||||||
December 31, 2014 | ||||||||
Cost | Unrecognized | Estimated | ||||||
Gains/(Loss) | Fair Value | |||||||
RMB | RMB | RMB | ||||||
Held-to-maturity securities- fixed rate investments | 350,528 | — | 350,528 | |||||
Other short-term investments | 1,708,024 | — | 1,708,024 | |||||
2,058,552 | — | 2,058,552 | ||||||
December 31, 2013 | ||||||||
Cost | Unrecognized | Estimated | ||||||
Gains/(Loss) | Fair Value | |||||||
RMB | RMB | RMB | ||||||
Other short-term investments | 901,183 | — | 901,183 | |||||
During the years ended December 31, 2012, 2013 and 2014, the Company recorded investment income related to short-term investments of RMB42.9 million, RMB35.8 million and RMB64.2 million in the consolidated statements of operations and comprehensive income, respectively. | ||||||||
In addition, as of December 31, 2014, the Company had a loan from an offshore bank in the principal amount of US$90.0 million that was secured by RMB deposits of the Company in an onshore branch of this bank in the amount of RMB614.2 million, which was recognized as a short-term investment. (See Note 13) | ||||||||
Property_Equipment_and_Softwar
Property, Equipment and Software | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Property, Equipment and Software | ||||||
Property, Equipment and Software | ||||||
7.Property, Equipment and Software | ||||||
The following is a summary of property, equipment and software (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Building and decoration | 609,865 | 569,911 | ||||
Leasehold improvements | 42,491 | 40,790 | ||||
Furniture, fixtures and office equipment | 49,000 | 63,946 | ||||
Vehicles | 14,845 | 23,627 | ||||
Servers and computers | 818,271 | 931,024 | ||||
Software | 40,141 | 45,356 | ||||
Construction in progress | 196,929 | 574,932 | ||||
1,771,542 | 2,249,586 | |||||
Less: accumulated depreciation | (899,429 | ) | (968,361 | ) | ||
Net book value | 872,113 | 1,281,225 | ||||
Depreciation expense was RMB184.2 million, RMB158.0 million and RMB172.4 million for the years ended 2012, 2013 and 2014, respectively. | ||||||
As of December 31, 2013 and 2014, the construction in progress balance mainly represented a prepayment of RMB189.5 million and RMB557.7 million, respectively, for the construction of office buildings in Beijing, Hangzhou and Guangzhou. All the related cost is capitalized in construction in progress to the extent it is incurred for the purposes of bringing the construction development to a usable state. | ||||||
Land_Use_Right
Land Use Right (Land use right) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Land use right | ||||||
Intangible assets | ||||||
Land Use Right | ||||||
8.Land Use Right | ||||||
The Company acquired the land use right in 2007 for the purpose of constructing a new research and development center in Hangzhou The Company also acquired additional land use right in 2014 for the second phase construction of the aforementioned Hangzhou research and development center and an office building located in Zhoushan, which construction had not yet started as at December 31, 2014. Amortization of the land use right is made over the remaining term of the land use right period of 50 years from the date when the Company first obtained the land use right certificate from the local authorities. The land use right is summarized as follows (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Cost | 27,779 | 94,736 | ||||
Incentive payment from local government | (15,000 | ) | (15,000 | ) | ||
Accumulated amortization | (1,508 | ) | (2,088 | ) | ||
Land use right, net | 11,271 | 77,648 | ||||
The total amortization expense for each of the years ended December 31, 2012, 2013 and 2014 amounted to approximately RMB258,000, RMB258,000, and RMB580,000, respectively. | ||||||
License_Rights
License Rights (License right) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
License right | ||||||
License Rights | ||||||
License Rights | ||||||
9.License Rights | ||||||
License rights represents fees paid for licensed games. In 2011, the Company recorded an impairment charge of approximately RMB50.3 million in the consolidated statements of operations and comprehensive income, which representing 100% provision on the unamortized portion of one of those license rights as of December 31, 2011. | ||||||
The total amortization expense for the years ended December 31, 2012, 2013 and 2014 amounted to approximately RMB49.0 million, nil and nil, respectively. | ||||||
The foregoing license rights are summarized as follows (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Payment for license rights | 271,582 | 271,582 | ||||
Accumulated amortization | (221,266 | ) | (221,266 | ) | ||
Impairment provision for license rights | (50,316 | ) | (50,316 | ) | ||
— | — | |||||
Other_Longterm_Assets
Other Long-term Assets | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Other Long-term Assets | ||||||
Other Long-term Assets | ||||||
10.Other Long-term Assets | ||||||
The following is a summary of other long-term assets (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Investments in associated companies | 227,656 | 207,492 | ||||
Equity investments | 38,473 | 169,986 | ||||
Copyrights, licenses and domain names | 12,533 | 108,102 | ||||
Staff housing loans | 58,766 | 63,006 | ||||
Non-current deposits | 3,198 | 8,479 | ||||
Others | 1,472 | 12,051 | ||||
342,098 | 569,116 | |||||
(a)Investments in associated companies | ||||||
The Company recorded equity share of profits of RMB0.8 million for the year ended December 31, 2012, equity share of loss of RMB5.3 million for the year ended December 31, 2013, and equity share of loss of RMB33.6 million for the year ended December 31, 2014, which was included in “investment income, net” in the consolidated statements of comprehensive income. The Company received cash dividends for each of the years ended December 31, 2012, 2013 and 2014 of nil, nil and RMB15.3 million, respectively. | ||||||
(1)In August 2008, the Company acquired a 38.5% equity interest in SunEase, Inc., a provider of e-mail integration solution and corporate email post office operation services, sales of domain names and search engine marketing, for a consideration of approximately RMB31.0 million in cash. The investment was accounted for under the equity method of accounting with allocation of the purchase price to tangible assets, intangible assets, goodwill and liabilities. | ||||||
The intangible assets consisted of trade name, customer contracts and relationships and technology, amounting to RMB6.7 million in total, which were fully amortized as of December 31, 2012. Amortization expense of the above-mentioned intangible assets was approximately RMB3.4 million, nil and nil for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||
(2)In August 2013, the Company established a joint venture with China Telecom Corp. Ltd. (“China Telecom”), Hangzhou Yixin Technology Co., Ltd. (“Yixin”) to launch “YiChat”, a proprietary social instant messaging application for smart phones. The Company contributed RMB200 million cash in exchange for a 27% percent equity interest in Yixin. | ||||||
The investment was accounted for under the equity method of accounting with allocation of the investment cost as follows (in thousands): | ||||||
RMB | ||||||
Tangible assets | 58,320 | |||||
Intangible assets | 15,876 | |||||
Goodwill | 129,773 | |||||
Deferred tax liabilities | (3,969 | ) | ||||
200,000 | ||||||
The above intangible assets consisted of non-compete agreement, customer base and an exclusivity arrangement at RMB5.9 million, RMB7.8 million and RMB2.1 million, respectively. Amortization expense of the above-mentioned intangible assets was approximately RMB1.1 million and RMB3.2 million for the years ended December 31, 2013 and 2014, respectively. | ||||||
(3)In September 2014, the Company established a joint venture with several individuals to launch an e-commerce related business. The Company contributed RMB20 million cash in exchange for a 40% percent equity interest. | ||||||
(b)Equity investments | ||||||
Equity investments represent investments in privately held companies. The Company carries the investment at cost as the Company does not have significant influence and the investments do not have readily determinable fair value, As at December 31, 2014, an impairment provision of RMB24.0 million related to one of the equity investments was recognized as “investment income, net” in the consolidated statements of comprehensive income as the Company determined that the decline in its fair value is determined to be other-than-temporary. No other impairment provision was recorded in the consolidated statements of comprehensive income. | ||||||
(c)Staff housing loans | ||||||
The Company made housing loans to its employees (excluding executive officers) for house purchases via a third-party commercial bank in China. Each individual staff housing loan is secured either by the property for which the loan is extended or by approved personal guarantees for the loan amount granted. The repayment term is five years from the date of drawdown. The interest rate is fixed varying from 3.0% to 3.5% per annum for the years ended December 31, 2013 and 2014, respectively. The outstanding portion of the staff housing loans repayable within 12 months as of December 31, 2013 and 2014 amounted to approximately RMB19.2 million and RMB24.7 million, respectively, and are reported under prepayments and other current assets in the consolidated balance sheets (see Note 5). | ||||||
Taxation
Taxation | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Taxation | ||||||||
Taxation | ||||||||
11.Taxation | ||||||||
(a)Income taxes | ||||||||
Cayman Islands | ||||||||
Under the current laws of the Cayman Islands, the Company, and its intermediate holding companies in the Cayman Islands are not subject to tax on income or capital gain. Additionally, upon payments of dividends by the Company or its subsidiaries in the Cayman Islands to their shareholders, no Cayman Islands withholding tax will be imposed. | ||||||||
British Virgin Islands (“BVI”) | ||||||||
Subsidiaries in the BVI are exempted from income tax on its foreign-derived income in the BVI. There are no withholding taxes in the BVI. | ||||||||
Hong Kong | ||||||||
Subsidiaries in Hong Kong are subject to 16.5% income tax for 2013 and 2014 on their taxable income generated from operations in Hong Kong. The payments of dividends by these companies to their shareholders are not subject to any Hong Kong withholding tax. | ||||||||
China | ||||||||
On March 16, 2007, the National People’s Congress of PRC enacted the Enterprise Income Tax Law, under which Foreign Invested Enterprises (“FIEs”) and domestic companies would be subject to enterprise income tax (“EIT”) at a uniform rate of 25%. Preferential tax treatments will continue to be granted to FIEs or domestic companies which conduct businesses in certain encouraged sectors and to entities otherwise classified as “Software Enterprises”, “Key Software Enterprises” and/or “High and New Technology Enterprises” (“HNTEs”). The Enterprise Income Tax Law became effective on January 1, 2008. | ||||||||
NetEase Beijing, Boguan and NetEase Hangzhou qualified as HNTEs and enjoyed a preferential tax rate of 15% from 2011 to 2013. In 2013, each of those three entities was approved as a Key Software Enterprise and enjoyed a preferential tax rate of 10% from 2011 to 2014. The related tax benefit from 2011 to 2013 was recorded in 2013. | ||||||||
Hangzhou Langhe was recognized as a Software Enterprise in 2010. It was exempt from EIT for 2010 and 2011 and subject to a 50% reduction in its EIT rate from 2012 to 2014. | ||||||||
Wangyibao was recognized as a Software Enterprise in 2011. Accordingly it was exempt from EIT for 2011 and 2012 and subject to a 50% reduction in its EIT rate from 2013 to 2015. | ||||||||
Lede Technology was recognized as a Software Enterprise in 2014. It was exempt from EIT for 2014 and 2015 and subject to a 50% reduction in its EIT rate from 2016 to 2018. | ||||||||
The aforementioned preferential tax rates are subject to annual review by the relevant tax authorities in China. | ||||||||
The following table presents the combined effects of EIT exemptions and tax rate reductions enjoyed by the Group for the years ended December 31, 2012, 2013 and 2014 (in thousands except per share data): | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Aggregate amount of EIT exemptions and tax rate reductions | 503,045 | 818,056 | 824,007 | |||||
Earnings per share effect, basic | 0.15 | 0.25 | 0.25 | |||||
Earnings per share effect, diluted | 0.15 | 0.25 | 0.25 | |||||
The following table sets forth the component of income tax expenses of the Company for the years ended December 31, 2012, 2013 and 2014 (in thousands): | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Current tax expense | 723,210 | 388,320 | 780,077 | |||||
Deferred tax (benefit) expense | (31,568 | ) | 142,283 | (117,342 | ) | |||
Income tax expenses | 691,642 | 530,603 | 662,735 | |||||
The following table presents a reconciliation of the differences between the statutory income tax rate and the Company’s effective income tax rate for the years ended December 31, 2012, 2013 and 2014: | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
% | % | % | ||||||
Statutory income tax rate | 25 | 25 | 25 | |||||
Permanent differences | (1.0 | ) | 0.3 | (1.4 | ) | |||
Effect due to overseas tax-exempt entities | 1.2 | 1.4 | 1.3 | |||||
Effect of lower tax rate applicable to Software Enterprises, Key Software Enterprise and HNTEs | (11.8 | ) | (16.4 | ) | (15.0 | ) | ||
Change in valuation allowance | 1.9 | 0.8 | (0.1 | ) | ||||
Income tax refund | — | (7.3 | ) | — | ||||
Effect of withholding income tax | 0.9 | 6.9 | 2.3 | |||||
Effective income tax rate | 16.2 | 10.7 | 12.1 | |||||
As of December 31, 2014, certain entities of the Group had net operating tax loss carry forwards as follows (in thousands): | ||||||||
RMB | ||||||||
Loss expiring in 2015 | 57,569 | |||||||
Loss expiring in 2016 | 178,583 | |||||||
Loss expiring in 2017 | 252,783 | |||||||
Loss expiring in 2018 | 247,524 | |||||||
Loss expiring in 2019 | 116,165 | |||||||
852,624 | ||||||||
Full valuation allowance was provided on the related deferred tax assets as the Company’s management does not believe that sufficient positive evidence exists to conclude that recoverability of such deferred tax assets is more likely than not to be realized. | ||||||||
(b)Sales tax | ||||||||
Sales tax includes business tax and value added tax. | ||||||||
In China, business taxes are imposed by the government on the revenues reported by the selling entities for the provision of taxable services in China, transfer of intangible assets and the sale of immovable properties in China. The business tax rate varies depending on the nature of the revenues. The applicable business tax rate for the Company’s revenues generally ranges from 3% to 5%. The Company is also subject to cultural development fee on the provision of advertising services in China. The applicable tax rate is 3% of the advertising services revenue. | ||||||||
Pursuant to the provision regulation of the PRC on value added tax and its implementation rules, all entities engaged in the sale of goods in China are generally required to pay value added tax at a rate of 17.0% or other applicable value added tax rate implemented by the provision regulation of the gross sales proceeds received, less any creditable value added tax already paid or borne by the taxpayer. | ||||||||
Since 2012, a pilot program transitioning specified industries from being subject to Business Tax (“BT”) to Value Added Tax (“VAT”) formally commenced in certain provinces (“Pilot Program”) and subsequently expanded nationwide in 2013. According to the implementation circulars, most of the Company’s subsidiaries and VIEs were in the Pilot Program and subject to VAT at a rate of 6%, as compared to the BT rate of 5%. | ||||||||
(c)Deferred tax assets and liabilities | ||||||||
The following table presents the tax impact of significant temporary differences that give rise to the deferred tax assets and liabilities as of December 31, 2013 and 2014 (in thousands): | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
RMB | RMB | |||||||
Deferred tax assets - Current: | ||||||||
Deferred revenue, primarily for advanced payments from online games customers | 80,115 | 96,223 | ||||||
Accruals | 64,374 | 124,418 | ||||||
144,489 | 220,641 | |||||||
Less: valuation allowance | (15,207 | ) | (18,601 | ) | ||||
Total | 129,282 | 202,040 | ||||||
Deferred tax assets - Non-current: | ||||||||
Depreciation of fixed assets | 2,234 | 2,151 | ||||||
Impairment of license rights | 1,413 | — | ||||||
Net operating tax loss carry forward | 173,243 | 190,726 | ||||||
Amortization of Intangible assets | 20,851 | 19,009 | ||||||
197,741 | 211,886 | |||||||
Less: valuation allowance | (174,656 | ) | (190,726 | ) | ||||
Total | 23,085 | 21,160 | ||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
RMB | RMB | |||||||
Deferred tax liabilities - Current: | 148,506 | 101,997 | ||||||
The Company does not believe that sufficient positive evidence exists to conclude that the recoverability of deferred tax assets of certain entities of the Group is more likely than not to be realized. Consequently, the Company has provided full valuation allowances for certain entities of the Group on the related deferred tax assets. The following table sets forth the movement of the aggregate valuation allowances for deferred tax assets for the periods presented (in thousands): | ||||||||
Balance at | Provision | Balance at | ||||||
January 1 | for the year | December 31 | ||||||
RMB | RMB | RMB | ||||||
2012 | 85,326 | 71,980 | 157,306 | |||||
2013 | 157,306 | 32,557 | 189,863 | |||||
2014 | 189,863 | 19,464 | 209,327 | |||||
(d)Withholding income tax | ||||||||
The Enterprise Income Tax Law also imposes a withholding income tax of 10% on dividends distributed by a FIE to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the FIE’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China. Such withholding income tax was exempted under the previous income tax law. On February 22, 2008, the Ministry of Finance and State Administration of Taxation jointly issued a circular which stated that for FIEs, all profits accumulated up to December 31, 2007 are exempted from withholding tax when they are distributed to foreign investors. Based on the interpretation of the current tax laws, management believes that the Company and all its non-PRC subsidiaries are not considered as a “resident enterprise” in China for corporate income tax purposes, but it cannot be certain that the relevant PRC tax authorities will agree with this determination. Except for the foregoing withholding taxes, the Company’s non-PRC subsidiaries, which are currently all incorporated in Hong Kong, the British Virgin Islands or Cayman Islands and U.S. are not subject to taxation on dividends they receive from the Company’s PRC subsidiaries. | ||||||||
In 2013, the Company accrued RMB344.7 million of withholding tax liabilities, of which RMB55.6 million was associated with its 2013 annual dividend and RMB289.1 million was associated with cash expected to be distributed from its PRC subsidiaries to overseas for general corporate purposes. | ||||||||
In 2014, the Company accrued RMB125.1 million (US$20.2 million) of withholding tax liabilities, associated with its quarterly dividend and cash expected to be distributed from its PRC subsidiaries to overseas for general corporate purposes. | ||||||||
Aside from the above distributions, the Company intends to indefinitely reinvest all remaining undistributed earnings as of December 31, 2014 in its PRC subsidiaries. Accordingly, no other withholding tax is expected to be incurred, and the unrecognized deferred tax liabilities as of December 31, 2013 and 2014 were approximately RMB597.3 million and RMB734.6 million (US$118.4 million), respectively. | ||||||||
Taxes_Payable
Taxes Payable | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Taxes Payable | ||||||
Taxes Payable | ||||||
12.Taxes Payable | ||||||
The following is a summary of taxes payable as of December 31, 2013 and 2014 (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Sales tax | 18,139 | 20,445 | ||||
Withholding individual income taxes for employees | 31,696 | 46,963 | ||||
Enterprise income taxes | 3,326 | 241,008 | ||||
Others | 21,302 | 25,874 | ||||
74,463 | 334,290 | |||||
Shortterm_Loan
Short-term Loan | 12 Months Ended |
Dec. 31, 2014 | |
Short-term Loan | |
Short-term Loan | |
13.Short-term Loan | |
In 2013, the Company entered into a short-term loan arrangement with the Hong Kong and Shanghai Banking Corporation (“HSBC”). The commitment of the loan amounts to RMB975.5 million (US$161.1 million), with a fixed interest rate of 1.25% per annum and a maturity term of twelve months. | |
In 2014, the Company entered into three short-term loan arrangements with HSBC. The commitments of the loans are RMB673.1 million (US$110.0 million), RMB550.7 million (US$90.0 million), and RMB275.4 million (US$45.0 million), with a fixed interest rate of 1.15% , 1.15%, and 0.96% per annum and a maturity term of twelve months, twelve months, and three months, respectively. | |
In 2014, the Company entered into a short-term loan arrangement with the JPMorgan Chase & Co. The commitment of the loan amounts to RMB550.7 million (US$90.0 million), with a fixed interest rate of 0.96% per annum and a maturity term of twelve months. The US$90.0 million loan was secured by RMB deposits of the Company in an onshore branch of this bank in the amount of RMB614.2 million, which was recognized as a short-term investment. (see Note 6) | |
Accrued_Liabilities_and_Other_
Accrued Liabilities and Other Payables | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Accrued Liabilities and Other Payables | ||||||
Accrued Liabilities and Other Payables | ||||||
14.Accrued Liabilities and Other Payables | ||||||
The following is a summary of accrued liabilities and other payables as of December 31, 2013 and 2014 (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Customer deposits on Wangyibao accounts | 464,061 | 622,021 | ||||
Marketing expenses | 158,298 | 294,401 | ||||
RSU payables (see Note 2(n)) | 119,851 | 137,033 | ||||
Accrued fixed assets related payables | 9,449 | 80,942 | ||||
Server custody fees and telecommunication charges | 38,850 | 64,614 | ||||
Accrued revenue sharing | 11,448 | 27,838 | ||||
Other staff related cost | 16,497 | 23,203 | ||||
Content cost | 23,827 | 13,354 | ||||
Professional fees | 10,517 | 11,939 | ||||
Royalty and consulting fee payments due to Blizzard | 53,867 | — | ||||
Others | 50,634 | 81,883 | ||||
957,299 | 1,357,228 | |||||
Deferred_Revenue
Deferred Revenue | 12 Months Ended |
Dec. 31, 2014 | |
Deferred Revenue | |
Deferred Revenue | |
15.Deferred Revenue | |
Deferred revenue represents sales proceeds from prepaid point cards, online points sold, unamortized mobile game in-game spending and prepaid subscription fees for Internet value-added services for which services are yet to be provided as of the balance sheet dates. | |
Other_Longterm_Payable
Other Long-term Payable | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Other Long-term Payable | ||||||
Other Long-term Payable | ||||||
16.Other Long-term Payable | ||||||
The following is a summary of other long-term payables as of December 31, 2013 and 2014 (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
RSU long-term payable (see Note 2(n)) | 144,433 | 106,230 | ||||
Other | 450 | 200 | ||||
144,883 | 106,430 | |||||
Mezzanine_Classified_Noncontro
Mezzanine Classified Noncontrolling Interests | 12 Months Ended |
Dec. 31, 2014 | |
Mezzanine Classified Noncontrolling Interests | |
Mezzanine Classified Noncontrolling Interests | |
17.Mezzanine Classified Noncontrolling Interests | |
In November 2014, one of the Company’s subsidiaries Lede Inc., issued 5,673,796 of Series A convertible redeemable preferred shares (the ‘‘Preferred Shares’’) to certain investors, including LNT Investment Holdings (PTC) Limited (‘‘LNT Holdings’’), Shining Globe International Limited (‘‘Shining Globe’’) and two Directors of the Company, for US$3.74 per share in exchange of a total consideration of US$21.2 million (RMB130.4 million). LNT Holdings is a private trust company incorporated under the laws of the British Virgin Islands, controlled by a group of employees of the Group (other than the employees of Lede). Shining Globe is a private company incorporated under the laws of the British Virgin Islands, controlled by William Lei Ding, the Company’s Chief Executive Officer, director and major shareholder. These preferred shares are recognized as mezzanine classified noncontrolling interest in the consolidated balance sheet as these preferred shares are contingently redeemable upon the occurrence of a conditional event, which is not solely within the control of the Company. No share-based compensation cost was recognized as the subscription price paid by investors was the fair value of the Preferred Shares. | |
The key terms of the Preferred Shares are summarized as follows: | |
Conversion | |
The Preferred Shares will automatically convert into ordinary shares of Lede Inc. upon i) certain conditions being met; or ii) any direct or indirect sale, transfer, assignment or disposition of such number of Preferred Shares by the holder thereof or an affiliate of such holder, or the direct or indirect transfer or assignment of the voting power attached to such number of Preferred Shares through voting proxy or otherwise to any person or entity that is not an affiliate of such holder. | |
Dividends/Voting/Liquidation | |
Except as described in this Note 17, the Preferred Shares and the ordinary shares of Lede Inc. rank pari passu and have the same rights, preferences, privileges and restrictions. | |
Redemption | |
If certain conditions fail to be met by the one year anniversary of the closing date of the purchase of the Preferred Shares, the holder of the outstanding Preferred Shares has the right to sell to Lede Inc. (or its designated assignee) all (or a portion) of such Preferred Shares in cash, at a price equal to the original purchase price. | |
Capital_Structure
Capital Structure | 12 Months Ended |
Dec. 31, 2014 | |
Capital Structure | |
Capital Structure | |
18.Capital Structure | |
The holders of ordinary shares in the Company are entitled to one vote per share and to receive ratably such dividends, if any, as may be declared by the board of directors of the Company. In the event of liquidation, the holders of ordinary shares are entitled to share ratably in all assets remaining after payment of liabilities. The ordinary shares have no preemptive, conversion, or other subscription rights. | |
Employee_Benefits
Employee Benefits | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Employee Benefits | ||||||||
Employee Benefits | ||||||||
19.Employee Benefits | ||||||||
The Company’s subsidiaries and VIEs incorporated in China participate in a government-mandated multi-employer defined contribution plan under which certain retirement, medical, housing and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s Chinese subsidiaries and VIEs to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; hence, the Company has no further commitments beyond its monthly contribution. The following table presents the Group’s employee welfare benefits expense for the years ended December 31, 2012, 2013 and 2014 (in millions): | ||||||||
For the year ended December 31 | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Contributions to medical and pension schemes | 160.9 | 205.0 | 264.0 | |||||
Other employee benefits | 95.6 | 123.0 | 159.2 | |||||
256.5 | 328.0 | 423.2 | ||||||
Sharebased_Compensation
Share-based Compensation | 12 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Share-based Compensation | ||||||||||||
Share-based Compensation | ||||||||||||
20.Share-based Compensation | ||||||||||||
(a)Description of stock option plan | ||||||||||||
According to a resolution of the board of directors of the Company in 2000, the Company adopted its 2000 Stock Incentive Plan which was amended and restated in 2001 (the “2000 Stock Incentive Plan”). | ||||||||||||
According to resolutions of the board of directors and the shareholders of the Company in 2001, the 2000 Stock Incentive Plan was amended and restated. Under the amended plan, the number of ordinary shares available for issuance was increased to 323,715,000. The amended plan also included a mechanism for the automatic increase in the number of ordinary shares available for future issuance. This mechanism, which is known as “Evergreen Provision”, provided for a periodic increase so that the number of ordinary shares available under the plan would automatically increase by 3% each year up to a maximum at any given time of 17.5% of the Company’s total outstanding ordinary shares, on a fully-diluted basis. These increases would occur on June 1 of 2001 and January 1 of each year thereafter. The “Evergreen Provision” was suspended following a resolution of the board of directors dated March 25, 2002. The 2000 Stock Incentive Plan expired in February 2010. | ||||||||||||
(b)Restricted share units plan | ||||||||||||
In November 2009, the Company adopted a restricted share units plan for the Company’s employees, directors and consultants (the “2009 RSU Plan”). The Company has reserved 323,694,050 ordinary shares for issuance under the plan. The 2009 RSU Plan was adopted by a resolution of the board of directors on November 17, 2009 and became effective for a term of ten years unless sooner terminated. | ||||||||||||
(c)Share-based compensation expense | ||||||||||||
The Company recognizes share-based compensation cost in the consolidated statements of operations and comprehensive income based on awards ultimately expected to vest, after considering estimated forfeitures. Forfeitures are estimated based on the Company’s historical experience over the last five years and revised in subsequent periods if actual forfeitures differ from those estimates. | ||||||||||||
The table below presents a summary of the Company’s share-based compensation cost for the years ended December 31, 2012, 2013 and 2014 (in thousands): | ||||||||||||
For the year ended December 31, | ||||||||||||
2012 | 2013 | 2014 | ||||||||||
RMB | RMB | RMB | ||||||||||
Cost of revenues | 100,540 | 165,708 | 169,621 | |||||||||
Selling and marketing expenses | 13,368 | 17,967 | 23,253 | |||||||||
General and administrative expenses | 33,374 | 48,350 | 51,475 | |||||||||
Research and development expenses | 55,736 | 74,283 | 104,928 | |||||||||
203,018 | 306,308 | 349,277 | ||||||||||
As of December 31, 2014, there was no unrecognized compensation cost under the 2000 Stock Incentive Plan as the options granted thereunder were fully vested. | ||||||||||||
As of December 31, 2014, total unrecognized compensation cost related to unvested awards under the 2009 RSU Plan, adjusted for estimated forfeitures, was US$144.9 million (RMB899.0 million) and is expected to be recognized through the remaining vesting period of each grant. As of December 31, 2014, the weighted average remaining vesting period was 3.14 years. | ||||||||||||
(d)Valuation assumptions | ||||||||||||
The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The Company did not grant any stock options in 2012, 2013 and 2014. Refer to Note 2(n) for the description of the bases the Company follows in the valuation of RSUs. | ||||||||||||
(e)Stock options and restricted share units award activities | ||||||||||||
The following table presents a summary of the Company’s stock options and RSUs award activities for the years ended December 31, 2012, 2013 and 2014: | ||||||||||||
Employees | Senior | Director and | Total | Weighted Average | ||||||||
Management | Consultants | Exercise Price | ||||||||||
(in thousands) | (in thousands) | (in thousands) | (in thousands) | US$ | ||||||||
Number of ordinary shares issuable upon exercise of stock options: | ||||||||||||
Outstanding at January 1, 2012 | 4,517 | — | 937 | 5,454 | 0.877 | |||||||
Exercised | (3,992 | ) | — | (937 | ) | (4,929 | ) | 0.794 | ||||
Outstanding at December 31, 2012 | 525 | — | — | 525 | 1.659 | |||||||
Outstanding at January 1, 2013 | 525 | — | — | 525 | 1.659 | |||||||
Exercised during the year | (240 | ) | — | — | (240 | ) | 1.659 | |||||
Outstanding at December 31, 2013 | 285 | — | — | 285 | 1.659 | |||||||
Outstanding at January 1, 2014 | 285 | — | — | 285 | 1.659 | |||||||
Exercised during the year | (285 | ) | — | — | (285 | ) | 1.659 | |||||
Outstanding at December 31, 2014 | — | — | — | — | — | |||||||
For the year ended December 31, 2014, no stock options expired or were forfeited. | ||||||||||||
Employees | Senior | Director and | Total | |||||||||
Management | Consultants | |||||||||||
(in thousands) | (in thousands) | (in thousands) | (in thousands) | |||||||||
Number of ordinary shares issuable upon vesting of restricted share units: | ||||||||||||
Outstanding at January 1, 2012 | 12,372 | 1,700 | 580 | 14,652 | ||||||||
Granted | 18,451 | — | 265 | 18,716 | ||||||||
Vested | (8,390 | ) | — | (290 | ) | (8,680 | ) | |||||
Forfeited | (1,973 | ) | (1,700 | ) | (290 | ) | (3,963 | ) | ||||
Outstanding at December 31, 2012 | 20,460 | — | 265 | 20,725 | ||||||||
Outstanding at January 1, 2013 | 20,460 | — | 265 | 20,725 | ||||||||
Granted | 18,371 | — | 287 | 18,658 | ||||||||
Vested | (12,818 | ) | — | (265 | ) | (13,083 | ) | |||||
Forfeited | (861 | ) | — | — | (861 | ) | ||||||
Outstanding at December 31, 2013 | 25,152 | — | 287 | 25,439 | ||||||||
Outstanding at January 1, 2014 | 25,152 | — | 287 | 25,439 | ||||||||
Granted | 30,429 | — | 195 | 30,624 | ||||||||
Vested | (17,200 | ) | — | (250 | ) | (17,450 | ) | |||||
Forfeited | (1,539 | ) | — | — | (1,539 | ) | ||||||
Outstanding at December 31, 2014 | 36,842 | — | 232 | 37,074 | ||||||||
The following table presents the total intrinsic value of options exercised and the total fair value of RSUs on vesting dates for the years ended 2012, 2013 and 2014, respectively: | ||||||||||||
Stock Options | ||||||||||||
US$ | RMB | |||||||||||
(in millions) | (in millions) | |||||||||||
Total intrinsic value exercised: | ||||||||||||
2012 | 6.3 | 39.1 | ||||||||||
2013 | 0.2 | 1.4 | ||||||||||
2014 | 0.4 | 2.7 | ||||||||||
RSU | ||||||||||||
US$ | RMB | |||||||||||
(in millions) | (in millions) | |||||||||||
Total fair value vested: | ||||||||||||
2012 | 18.6 | 115.8 | ||||||||||
2013 | 27.3 | 165.3 | ||||||||||
2014 | 48.6 | 301.6 | ||||||||||
The following table presents the weighted average remaining contractual life for the RSUs outstanding as of December 31, 2014: | ||||||||||||
Weighted | ||||||||||||
Average | Weighted | |||||||||||
Number | Remaining | Average | ||||||||||
Outstanding/ | Contractual | Exercise | ||||||||||
Exercise Price | Exercisable | Life | Price | |||||||||
(in thousands) | Years | US$ | ||||||||||
Restricted Share Units | ||||||||||||
Performance-based settled in stock | 10,103 | 3.65 | n/a | |||||||||
Time-based-settled in stock/cash | 45,769 | 3.14 | n/a | |||||||||
Time-based-settled in stock | 19,900 | 2.49 | n/a | |||||||||
75,772 | 3.04 | n/a | ||||||||||
The aggregate intrinsic value of RSUs outstanding as of December 31, 2014 was US$294.3 million. The intrinsic value was calculated based on the Company’s closing stock price of US$99.14 per ADS, or US$3.9656 per ordinary share as of December 31, 2014. | ||||||||||||
It is the Company’s policy to issue new shares upon share option exercises and vesting of RSUs. The number of shares available for future grant under the Company’s 2009 RSU Plan was 202,674,425 as of December 31, 2014. | ||||||||||||
(f)Lede Plan | ||||||||||||
In June 2014, one of the Company’s subsidiaries, Lede Inc., adopted the Lede Plan, which allows Lede Inc. to offer a variety of share-based incentive awards to employees of the Group. Under the Lede Plan, the maximum number of shares that may be issued is 18% of Lede Inc.’s total outstanding shares on an as-converted and fully diluted basis as of the effective date of the Lede Plan. | ||||||||||||
Share Options: | ||||||||||||
For the year ended December 31, 2014, 10,851,933 options were granted to certain employees. The options expire in six years from the date of grant and either vest or have a vesting commencement date upon certain conditions being met (“Vesting Commencement Date”). One type of award becomes 100% vested on the Vesting Commencement Date, and a second type of award vests in five substantially equal annual installments with the first installment vesting on the Vesting Commencement Date. | ||||||||||||
Lede Inc. has used the binomial model to estimate the fair value of the options granted. While all share options granted will become vested or commence vesting beginning on the Vesting Commencement Date, the effectiveness of the conditions is not within the control of the Company and is not deemed probable to occur for accounting purposes until the Vesting Commencement Date. Therefore, for the year ended December 31, 2014, no compensation expenses were recorded for the share options granted. | ||||||||||||
Net_Income_Per_Share
Net Income Per Share | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Net Income Per Share | ||||||||
Net Income Per Share | ||||||||
21.Net Income Per Share | ||||||||
The following table sets forth the computation of basic and diluted net income per share for the years ended December 31, 2012, 2013 and 2014: | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Numerator (RMB in thousands): | ||||||||
Net income attributable to NetEase, Inc.’s shareholders for basic/dilutive net income per share calculation | 3,637,452 | 4,443,910 | 4,756,623 | |||||
Denominator (No. of shares in thousands): | ||||||||
Weighted average number of ordinary shares outstanding, basic | 3,282,663 | 3,247,874 | 3,264,450 | |||||
Dilutive effect of employee stock options and restricted share units | 5,667 | 8,423 | 12,599 | |||||
Weighted average number of ordinary shares outstanding, diluted | 3,288,330 | 3,256,297 | 3,277,049 | |||||
Net income per share, basic (RMB) | 1.11 | 1.37 | 1.46 | |||||
Net income per share, diluted (RMB) | 1.11 | 1.36 | 1.45 | |||||
Basic net income per share is computed using the weighted average number of the ordinary shares outstanding during the year. Diluted net income per share is computed using the weighted average number of ordinary shares and potential ordinary shares outstanding during the year. For the years ended December 31, 2012, 2013 and 2014, options to purchase ordinary shares and RSUs that were anti-dilutive and excluded from the calculation of diluted net income per share totaled approximately 4.2 million shares, 2.9 million shares and 3.2 million shares, respectively. | ||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 12 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Commitments and Contingencies | ||||||||||||
Commitments and Contingencies | ||||||||||||
22.Commitments and Contingencies | ||||||||||||
(a)Commitments | ||||||||||||
The Company leases office space, staff quarters and certain equipment under non-cancelable operating lease agreements, which expire at various dates through December 2022. As of December 31, 2014, future minimum lease under non-cancelable operating lease agreements, capital commitments and other commitment related to content and services purchases were as follows (in thousands): | ||||||||||||
Rental | Server Custody | Capital | Office | Total | ||||||||
Commitments | Fee | Commitments | Machines and | |||||||||
Commitments | Other | |||||||||||
Commitments | ||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||
2015 | 81,500 | 17,104 | 208,356 | 65,525 | 372,485 | |||||||
2016 | 33,428 | 312 | 19,629 | 4,752 | 58,121 | |||||||
2017 | 22,898 | 12 | 2,018 | 4,597 | 29,525 | |||||||
2018 | 2,287 | — | — | 4,563 | 6,850 | |||||||
Beyond 2018 | 5,791 | — | — | — | 5,791 | |||||||
145,904 | 17,428 | 230,003 | 79,437 | 472,772 | ||||||||
For the years ended December 31, 2012, 2013 and 2014, the Company incurred rental expenses in the amounts of approximately RMB59.8 million, RMB59.6 million and RMB79.4 million, respectively. | ||||||||||||
Additionally, in August 2008, Blizzard agreed to license to Shanghai EaseNet on an exclusive basis in China three personal computer strategy games and its Battle.net platform. The term of the license will be three years, with an additional one year extension upon agreement of the parties, commencing from the commercial release of StarCraft II: Wings of Liberty in China in April 2011. In April 2014, Blizzard and Shanghai EaseNet agreed to extend the term of the StarCraft II series license agreement for another additional three years commencing from April 2014. In April 2009, Blizzard and the Company announced that Blizzard’s World of Warcraft would also be licensed to Shanghai EaseNet in the PRC for a term of three years following the expiration of its previous license agreement on June 5, 2009 with another game operator. In March 2012, Blizzard and Shanghai EaseNet renewed the license agreement of World of Warcraft, and extended the license period to another three-year period commencing from September 2012. In July 2013, Shanghai EaseNet obtained the right to operate Hearthstone: Heroes of Warcraft in China from Blizzard. The term of the license is three years, with an additional one year extension upon agreement of the parties, commencing from January 2014. Under these license agreements, Shanghai EaseNet is required to pay license fees (except Hearthstone: Heroes of the Warcraft for which no license fee is required to be paid), royalties and consultancy fees (except Hearthstone: Heroes of the Warcraft for which no consultancy fee is required to be paid) to Blizzard for the games, and it also has a minimum marketing expenditure commitment. In accordance with the above-mentioned license agreements, the Company has incurred an overall commitment totaling approximately RMB4.4billion. As of December 31, 2014, the Company’s outstanding commitments under these license agreements totaled RMB1.7 billion which can be summarized as follows (in millions): | ||||||||||||
RMB | ||||||||||||
2015 | 1,181 | |||||||||||
2016 | 509 | |||||||||||
Total | 1,690 | |||||||||||
Furthermore, under a license agreement entered into in November 2012, Blizzard agreed to license to Shanghai EaseNet the exclusive right to operate Heroes of the Storm™ in the PRC for a period of three years commencing from the game’s commercial release. Additionally, in June 2014, Blizzard and Shanghai EaseNet entered into a license agreement, which allows Shanghai EaseNet to obtain the exclusive right to operate Diablo® III in the PRC for a period of two years from the game’s commercial release. The Company expects to incur a commitment totaling approximately RMB765.1 million (US$123.3 million), including royalty to Blizzard and minimum marketing expenditure for these two games. As of December 31, 2014, Heroes of the Storm and Diablo III had not been commercially launched yet in the PRC. | ||||||||||||
In addition, Shanghai EaseNet is also obligated to purchase or lease certain prescribed hardware and then make such prescribed hardware available to fulfill its obligations under the license agreements with Blizzard in the aggregate amount of up to approximately RMB198.5 million over the remaining term of licenses as of December 31, 2014. This amount represents the maximum expenditure Shanghai EaseNet would have to make for the prescribed hardware, but it may not be required to spend this amount in order to satisfy its obligations with respect to such hardware. | ||||||||||||
With respect to the above commitment table related to Blizzard licensed games, the Company has guaranteed the foregoing amounts if and to the extent Shanghai EaseNet has insufficient funds to make such payments. The Company will be entitled to reimbursement of any amounts paid for the marketing of the games and for hardware support to operate the games under the guarantee from any net profits subsequently generated by Shanghai EaseNet, after the deduction of, among other things, various fees and expenses payable to Blizzard, the Company and the joint venture with Blizzard which provides technical services to Shanghai EaseNet. | ||||||||||||
(b)Litigation | ||||||||||||
From time to time, the Company is involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available information, management does not believe that the ultimate outcome of these unresolved matters, individually and in the aggregate, is reasonably possible to have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties and the Company’s view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position, results of operations or cash flows for the period in which the unfavorable outcome occurs, and potentially in future periods. | ||||||||||||
Dividends
Dividends | 12 Months Ended |
Dec. 31, 2014 | |
Dividends | |
Dividends | |
23.Dividends | |
Annual Dividend | |
On February 11, 2014, the Company’s board of directors approved an annual cash dividend with respect to fiscal year 2013 in the amount of US$1.41 per ADS, amounting to an aggregate of RMB1,109.7 million (US$183.3 million). Such dividend was payable to shareholders of record as of February 26, 2014 and was paid on March 7, 2014. | |
Quarterly Dividend Policy | |
In May 2014, the Company’s board of directors approved a new quarterly dividend policy. Under this policy, the Company intends to make quarterly cash dividend distributions at an amount equivalent to approximately 25% of the Company’s anticipated net income after tax in each fiscal quarter. | |
The Company paid a dividend of US$0.34 per ADS for the first quarter of 2014 on June 3, 2014, US$0.37 per ADS for the second quarter of 2014 on September 5, 2014, US$0.36 per ADS for the third quarter of 2014 on December 5, 2014 and US$0.39 per ADS for the fourth quarter of 2014 on March 6, 2015. The cash dividend paid respect to fiscal year 2014 was RMB1,177.2 million (US$190.3 million) in total. | |
The determination to make dividend distributions and the amount of such distributions in any particular quarter will be made at the discretion of the Company’s board of directors and will be based upon its operations and earnings, cash flow, financial condition, capital and other reserve requirements and surplus, any applicable contractual restrictions, the ability of the Company’s PRC subsidiaries to make distributions to their offshore parent companies, and any other conditions or factors which the board deems relevant and having regard to the directors’ fiduciary duties. | |
Share_Repurchase_Programs
Share Repurchase Programs | 12 Months Ended |
Dec. 31, 2014 | |
Share Repurchase Programs | |
Share Repurchase Programs | |
24.Share Repurchase Programs | |
The Company’s board of directors approved five share repurchase programs prior to 2012 which authorized management to repurchase the Company’s ordinary shares to enhance shareholder value. In November 2012, the Company’s Board approved a share repurchase program authorizing management to repurchase up to US$100 million of the Company’s ordinary shares to enhance shareholder value for a period not to exceed twelve months. The timing and actual number of shares subject to repurchase were at the discretion of the Company’s management and contingent on a number of factors and limitations, including the price of the Company’s stock, corporate and regulatory requirements, alternative investment opportunities and other market conditions. The share repurchase program specified a maximum dollar value of shares subject to repurchase and had an expiration date and could have been limited or terminated at any time without prior notice. Such share repurchase program expired on November 20, 2013, and the Company repurchased 2.02 million ADSs (equivalent to 48.6 million ordinary shares) for consideration amounting to approximately US$83.0 million under this program. | |
The Company accounts for repurchased ordinary shares under the cost method and includes such treasury stock as a component of the common shareholders’ equity. Cancellation of treasury stock is recorded as a reduction of ordinary shares, additional paid-in-capital and retained earnings, as applicable. An excess of purchase price over par value is allocated to additional paid-in-capital first with any remaining excess charged entirely to retained earnings. | |
In February 2014, the Company’s board of directors approved a new share repurchase program authorizing management to repurchase up to US$100 million of the Company’s ordinary shares to enhance shareholder value for a period not to exceed twelve months. The timing and actual number of shares subject to repurchase are at the discretion of the Company’s management and contingent on a number of factors and limitations, including the price of the Company’s stock, corporate and regulatory requirements, alternative investment opportunities and other market conditions. The share repurchase program specifies a maximum dollar value of shares subject to repurchase and has an expiration date and can be limited or terminated at any time without prior notice. As of the expiration date of the program, no ADSs had been repurchased under this program. | |
Related_Party_Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2014 | |
Related Party Transactions | |
Related Party Transactions | |
25.Related Party Transactions | |
In November, 2014, one of the Company’s subsidiaries, Lede Inc., issued 5,673,796 Preferred Shares to certain investors, including LNT Holdings, Shining Globe and two Directors of the Company, for US$3.74 per share in exchange of a total consideration of US$21.2 million (RMB130.4 million). LNT Holdings is a private trust company incorporated under the laws of the British Virgin Islands, controlled by a group of employees of the Group (other than the employees of Lede). Shining Globe is a private company incorporated under the laws of the British Virgin Islands, controlled by William Lei Ding, the Company’s Chief Executive Officer and a director of the Company. | |
Other than the above issuance of Preferred Shares, the Group had no material transactions with related parties for the year ended December 31, 2012, 2013 and 2014, and no material related parties’ balances as of December 31, 2014. | |
Segment_Information
Segment Information | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Segment Information | ||||||||
Segment Information | ||||||||
26.Segment Information | ||||||||
(a)Description of segments | ||||||||
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is the Chief Executive Officer. | ||||||||
The Company’s organizational structure is based on a number of factors that the CODM uses to evaluate, view and run its business operations which include, but are not limited to, customer base, homogeneity of products and technology. The Company’s operating segments are based on this organizational structure and information reviewed by the Company’s CODM to evaluate the operating segment results. The Company has determined that its operations are organized into three reportable segments: 1) Online Game Services; 2) Advertising Services; and 3) E-mail, E-commerce and Others. | ||||||||
(b)Segment data | ||||||||
The table below provides a summary of the Group’s operating segment results for the years ended December 31, 2012, 2013 and 2014. The Group does not allocate any operating costs or assets to its business segments as the Company’s CODM does not use this information to measure the performance of the operating segments. There was no significant transaction between reportable segments for the years ended December 31, 2012, 2013 and 2014 (in thousands). | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Total revenues: | ||||||||
Online game services | 7,287,063 | 8,308,618 | 9,815,019 | |||||
Advertising services | 850,157 | 1,094,623 | 1,551,652 | |||||
E-mail, e-commerce and others | 242,741 | 368,014 | 1,113,773 | |||||
Total revenues | 8,379,961 | 9,771,255 | 12,480,444 | |||||
Sales tax expense (Note 11(b)): | ||||||||
Online game services | (86,478 | ) | (444,154 | ) | (548,861 | ) | ||
Advertising services | (82,680 | ) | (107,156 | ) | (154,583 | ) | ||
E-mail, e-commerce and others | (9,847 | ) | (23,770 | ) | (64,166 | ) | ||
Total Sales taxes | (179,005 | ) | (575,080 | ) | (767,610 | ) | ||
Net revenues: | ||||||||
Online game services | 7,200,585 | 7,864,464 | 9,266,158 | |||||
Advertising services | 767,477 | 987,467 | 1,397,069 | |||||
E-mail, e-commerce and others | 232,894 | 344,244 | 1,049,607 | |||||
Total net revenues | 8,200,956 | 9,196,175 | 11,712,834 | |||||
Cost of revenues: | ||||||||
Online game services | (1,872,734 | ) | (1,649,803 | ) | (2,111,701 | ) | ||
Advertising services | (474,165 | ) | (461,286 | ) | (528,665 | ) | ||
E-mail, e-commerce and others | (231,168 | ) | (367,427 | ) | (621,178 | ) | ||
Total cost of revenues | (2,578,067 | ) | (2,478,516 | ) | (3,261,544 | ) | ||
Gross profit (loss): | ||||||||
Online game services | 5,327,851 | 6,214,661 | 7,154,457 | |||||
Advertising services | 293,312 | 526,181 | 868,404 | |||||
E-mail, e-commerce and others | 1,726 | (23,183 | ) | 428,429 | ||||
Total gross profit | 5,622,889 | 6,717,659 | 8,451,290 | |||||
All revenues of the Company’s reportable segments are derived from China based on the geographical locations where services are provided to customers. | ||||||||
Financial_Instruments
Financial Instruments | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Financial Instruments | ||||||||
Financial Instruments | ||||||||
27.Financial Instruments | ||||||||
The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2014 (in thousands): | ||||||||
Fair Value Measurements | ||||||||
(RMB) | ||||||||
Quoted Prices in | ||||||||
Active Market | Significant Other | |||||||
for Identical Assets | Observable Inputs | |||||||
Total | (Level 1) | (Level 2) | ||||||
Time deposits-short term | 18,496,574 | 18,496,574 | — | |||||
Time deposits-long term | 673,000 | 673,000 | — | |||||
Held-to-maturity securities-fixed rate investments | 350,528 | — | 350,528 | |||||
Other short-term investments | 1,708,024 | — | 1,708,024 | |||||
Total | 21,228,126 | 19,169,574 | 2,058,552 | |||||
The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2013 (in thousands): | ||||||||
Fair Value Measurements | ||||||||
(RMB) | ||||||||
Quoted Prices in | ||||||||
Active Market | Significant Other | |||||||
for Identical Assets | Observable Inputs | |||||||
Total | (Level 1) | (Level 2) | ||||||
Time deposits-short term | 16,625,468 | 16,625,468 | — | |||||
Time deposits-long term | 500,000 | 500,000 | — | |||||
Other short-term investments | 901,183 | — | 901,183 | |||||
Total | 18,026,651 | 17,125,468 | 901,183 | |||||
The rates of interest under the loan agreements with the lending banks were determined based on the prevailing interest rates in the market. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements of short-term bank loans. For other financial assets and liabilities with carrying values that approximate fair value, if measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. As of December 31, 2014, an cost method investment (Note 10) were measured using significant unobservable inputs (Level 3) and written down from their respective carrying value to fair value of nil, with impairment charges of RMB24.0 million incurred and recorded in earnings for the year then ended. | ||||||||
Restricted_Net_Assets
Restricted Net Assets | 12 Months Ended |
Dec. 31, 2014 | |
Restricted Net Assets | |
Restricted Net Assets | |
28.Restricted Net Assets | |
Relevant PRC laws and regulations permit PRC companies to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, the Company’s PRC subsidiaries and VIEs can only distribute dividends upon approval of the shareholders after they have met the PRC requirements for appropriation to the general reserve fund and the statutory surplus fund respectively. The general reserve fund and the statutory surplus fund require that annual appropriations of 10% of net after-tax income should be set aside prior to payment of any dividends. As a result of these and other restrictions under PRC laws and regulations, the PRC subsidiaries and VIEs are restricted in their ability to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances, which restricted portion amounted to approximately RMB3.1 billion or 13% of the Company’s total consolidated net assets as of December 31, 2014. Even though the Company currently does not require any such dividends, loans or advances from the PRC subsidiaries and VIEs for working capital and other funding purposes, the Company may in the future require additional cash resources from its PRC subsidiaries and VIEs due to changes in business conditions, to fund future acquisitions and developments, or merely declare and pay dividends to or distributions to the Company’s shareholders. There were no undistributed retained earnings in associated companies in the consolidated retained earnings due to losses incurred by them. | |
Principal_Accounting_Policies_
Principal Accounting Policies (Policies) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Principal Accounting Policies | ||||||||
Basis of consolidation | ||||||||
(a) Basis of consolidation | ||||||||
The consolidated financial statements include the financial statements of the Company, its subsidiaries and VIEs for which the Company is the primary beneficiary with the ownership interests of minority shareholders reported as noncontrolling interests. All significant transactions and balances among the Company, its subsidiaries and VIEs have been eliminated upon consolidation. The Company consolidates a VIE if the Company has the power to direct matters that most significantly impact the activities of the VIE, and has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. | ||||||||
Basis of presentation | ||||||||
(b) Basis of presentation | ||||||||
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements are prepared based on the historical cost convention. | ||||||||
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting periods. Actual results might differ from those estimates. These estimates and assumptions include, but are not limited to, assessing the following: lives of the permanent in-game items, the determination of whether sales prices are fixed or determinable and collectability is reasonably assured, realization of deferred tax assets and the determination of uncertain tax positions, useful lives and impairment provision of property, equipment and software and intangibles, assumptions related to stock-based compensation and assumptions related to the valuation of the equity investments. | ||||||||
Revenue recognition | ||||||||
(c) Revenue recognition | ||||||||
The Group recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. | ||||||||
Net revenues presented in the consolidated statements of operations and comprehensive income represent revenues from online game services, advertising services, e-mail, e-commerce and others recognized net of sales discount, sales tax and related surcharges. | ||||||||
(i) Online game services | ||||||||
MMORPG games | ||||||||
The Group sells prepaid point cards through Guangzhou NetEase and Shanghai EaseNet to the end user. Customers can purchase physical prepaid point cards in different locations in China, including Internet cafés, software stores, convenience stores and bookstores. Customers can also purchase “virtual” prepaid points from vendors who register the points in the Group’s system and “virtual” prepaid cards online via debit and credit cards or bank transfers via the Company’s Wangyibao online payment services platform, and receive the prepaid point information over the Internet. Customers can use the points to play the Group’s online games, pay for in-game items and use other fee-based services. Proceeds received from the sales of prepaid point cards and online points to players are recorded as deferred revenues. The Group earns revenue through providing online game services to players under two types of revenue models: time-based revenue model and item-based revenue model. For online games using the time-based model, players are charged based on the time they spend playing games. | ||||||||
Under the item-based model, the basic game play functions are free of charge, and players are charged for purchases of in-game items. Revenues from the sales of in-game items are recognized when the items are consumed by the customers or over the estimated lives of the in-game items. The Company considers the average period that players typically play the games and other game player behavior patterns, as well as various other factors, including the acceptance and popularity of expansion packs, promotional events launched and market conditions to arrive at the best estimates for the estimated lives of the permanent in-game items. The Group assesses the estimated lives of the permanent in-game items for the item-based games on a quarterly basis. Adjustments arising from the changes of estimated lives of permanent in-game items are applied prospectively as such changes are resulted from new information indicating a change in the game player behavior patterns. | ||||||||
Unused online points in a personal game account are recognized as revenues when the likelihood that the Group would provide further online games services with respect to such online points is remote. The Group has determined that such likelihood is remote when the personal game account has been inactive for 540 days or more. The revenue recognized from the inactive accounts was insignificant in 2012, 2013 and 2014. | ||||||||
Mobile games | ||||||||
The Group primarily operates mobile games including both self-developed and licensed mobile games through HZ Leihuo and generates mobile game revenues from the sale of in-game virtual items, including items, avatars, skills, privileges or other in-game consumables, features or functionality, within the games. | ||||||||
The Group records revenue generated from mobile games on a gross basis as the Group is acting as the principal to fulfill all obligations related to the mobile game operation. Fees paid to game developers, distribution channels (app stores) and payment channels are recorded as cost of revenues. | ||||||||
For the purposes of determining when the service has been provided to the end-users, the Group determined that an implied obligation exists to provide on-going services to the end-users who purchased virtual items to gain an enhanced game-playing experience over an average playing period of the paying players. Accordingly, the Group recognizes the revenues ratably over the estimated average playing period of these paying players, starting from the point in time when virtual items are delivered to the players’ accounts and all other revenue recognition criteria are met. | ||||||||
The Company considers the average period that players typically play the games and other game player behavior patterns, as well as various other factors to arrive at the best estimates for the estimated playing period of the paying players. If a new game is launched and only a limited period of paying player data is available, then the Group considers other qualitative factors, such as the playing patterns for paying users for other games with similar characteristics and playing patterns of paying players, such as targeted players and purchasing frequency. While the Group believes its estimates to be reasonable based on available game player information, the Group may revise such estimates based on new information indicating a change in the game player behavior patterns and any adjustments are applied prospectively. | ||||||||
(ii)Advertising services | ||||||||
The Group derives its advertising revenues principally from short-term online advertising contracts engaged by Guangyitong Advertising. Advertising service contracts may consist of multiple elements with a typical term of one quarter to one year. In accordance with ASU No.2009-13 Revenue Recognition - Multiple-Deliverable Revenue Arrangements (“ASU No.2009 -13”), the Company treats advertising contracts with multiple deliverable elements as separate units of accounting for revenue recognition purposes and recognizes revenue on a periodic basis during the contract when each deliverable service is provided. Since the contract price is for all deliverables, the Company allocates the arrangement consideration to all deliverables at the inception of the arrangement on the basis of their relative selling price according to the selling price hierarchy established by ASU No.2009-13. The Company uses (a) vendor-specific objective evidence of selling price, if it exists, otherwise, (b) third-party evidence of selling price. If neither (a) nor (b) exists, the Company will use (c) the management’s best estimate of the selling price for that deliverable. The adoption did not have a material impact on the Company’s consolidated financial statements. | ||||||||
In the search engine business, Youdao Information enters into “cost per action” (“CPA”) advertising contracts and receives fees when an online user performs a specific action such as purchasing a product from or registering with the advertiser. Revenue for CPA contracts is recognized when the specific action is completed. Youdao Information may also enter into advertising business contracts with advertisers that include guarantees of a minimum number of impressions or times that an advertisement appears in pages viewed by users. To the extent that minimum guaranteed impressions are not met within the contractual time period, the related revenues are deferred until the remaining guaranteed impression levels are achieved. | ||||||||
The Group recognizes revenue and expense at fair value from a barter transaction involving advertising services provided by the Group only if the fair value of the advertising services surrendered in the transaction is determinable based on the entity’s own historical practice of receiving cash and cash equivalents, marketable securities, or other consideration that is readily convertible to a known amount of cash for similar advertising from buyers unrelated to the counterparty in the barter transaction. | ||||||||
For the years ended December 31, 2012, 2013 and 2014, the Group engaged in certain advertising barter transactions for which the fair value was not determinable and therefore no revenues or expenses derived from these barter transactions were recognized. These transactions primarily involved exchanges of advertising services rendered by the Group for advertising, promotional benefits, content, consulting services and software provided by the counterparties. | ||||||||
(iii)E-mail, e-commerce services and others | ||||||||
Revenue from e-mail, e-commerce and others is predominantly derived from activities related to fee-based premium services, e-commerce and online payment platform services. | ||||||||
Fee-based premium services revenues, operated on a monthly subscription basis, are derived principally from providing premium e-mail and other wireless value-added services. Prepaid subscription revenues are deferred and are recognized by the Group over the period in which the services are provided. | ||||||||
In February 2009, the Company launched its Wangyibao payment platform, through which game players registered for Wangyibao operations can deposit money in their accounts and use the accounts to pay for game point cards and other fee-based services and products rendered by the Company. The Company recognizes revenue when services are rendered to account holders in accordance with service agreement. | ||||||||
Revenues from e-commerce services mainly include e-commerce services related to third party virtual e-commerce products. The Company recognizes revenue when services are rendered to customers based on the pre-determined service fee rate. | ||||||||
Cost of revenues | ||||||||
(d)Cost of revenues | ||||||||
Costs of online game services, advertising services and e-mail, e-commerce and others consist primarily of staff costs, royalties and consultancy fees related to licensed games, revenue sharing cost related to mobile games, depreciation and amortization of computers and software, server custody fees, bandwidth, and other direct costs of providing these services. These costs are charged to the consolidated statements of operations and comprehensive income as incurred. | ||||||||
Research and development costs | ||||||||
(e)Research and development costs | ||||||||
Research and development costs mainly consist of personnel-related expenses and technology service costs incurred for the development of online games prior to the establishment of technological feasibility and costs associated with new product development. For the years ended December 31, 2012, 2013 and 2014, the costs incurred for development of online game products have not been capitalized because the period after the date technical feasibility is reached and the time when the game is marketed is short historically and the development cost incurred in the period are insignificant. | ||||||||
Cash, cash equivalents and time deposits | ||||||||
(f)Cash, cash equivalents and time deposits | ||||||||
Cash and cash equivalents represent cash on hand, demand deposits placed with large reputable banks in Hong Kong or China, and highly liquid investments that are readily convertible to known amounts of cash and with original maturities from the date of purchase with terms of less than three months. As of December 31, 2013, there were cash at bank and demand deposits with terms of less than three months denominated in US dollars and Euro amounting to approximately US$12.7 million and Euro4.3 million, respectively. As of December 31, 2014, there were cash at bank and demand deposits with terms of less than three months denominated in US dollars and Euro amounting to approximately US$25.9 million and Euro2.1 million, respectively (equivalent to approximately RMB158.3 million and RMB15.3 million, respectively). | ||||||||
Time deposits represent time deposits placed with banks with original maturities of three months or more. As of December 31, 2013, there were time deposits denominated in US dollars and Euro amounting to approximately US$382.3 million and Euro2.6 million, respectively. As of December 31, 2014, there were time deposits denominated in US dollars and Euro amounting to approximately US$637.6 million and Euro2.0 million (equivalent to approximately RMB3.9 billion and RMB14.9 million, respectively). | ||||||||
As of December 31, 2013 and 2014, the Company had approximately RMB14.6 billion and RMB14.7 billion cash and cash equivalents and time deposits held by its PRC subsidiaries and VIEs, representing 78.3% and 69.2% of total cash and cash equivalents and time deposits of the Company, respectively. | ||||||||
As of December 31, 2013 and 2014, the Company had a restricted cash balance which is set aside for a period of 12 months or less of approximately RMB2,136.7 million and RMB2,628.8 million, respectively, comprising as follows (in millions): | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
RMB | RMB | |||||||
Guarantee deposit for consulting fee payments due to Blizzard | 70.0 | 40.0 | ||||||
Escrow account deposit for funding sales and marketing activities of Blizzard’s licensed games | 212.4 | 276.1 | ||||||
Customer deposit of Wangyibao accounts | 389.3 | 599.3 | ||||||
Pledge deposit for short-term bank borrowing | 1,459.0 | 1,703.4 | ||||||
Others | 6.0 | 10.0 | ||||||
2,136.7 | 2,628.8 | |||||||
The Company had no other lien arrangements during 2013 and 2014. | ||||||||
Fair value of financial instruments | ||||||||
(g)Fair value of financial instruments | ||||||||
Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. | ||||||||
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value: | ||||||||
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 | ||||||||
The Group’s financial instruments include cash and cash equivalents and time deposits, accounts receivable, prepayments and other current assets, short-term investments, accounts payable, short-term loan, deferred revenue and accrued liabilities and other payables, which the carrying values approximate their fair value. Please see Note 27 for additional information. | ||||||||
Investments | ||||||||
(h)Investments | ||||||||
Short-term investments include investments in financial instruments with a variable interest rate indexed to performance of underlying assets and investments that the Company has positive intent and ability to hold to maturity, all of which are with an original maturities of less than 12 months. | ||||||||
In accordance with ASC 825, for investments in financial instruments with a variable interest rate indexed to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carried these investments at fair value. Changes in the fair value are reflected in the consolidated statements of operations and comprehensive income as other income /(expense). Fair value is estimated based on quoted prices of similar products provided by banks at the end of each period. The Company classifies the valuation techniques that use these inputs as Level 2 of fair value measurements. Please see Note 6 and Note 27 for additional information. | ||||||||
The investments that the Company has positive intent and ability to hold to maturity are classified as held-to-maturity investments and stated at amortized cost.For individual investment classified as held-to-maturity investments, the Company evaluates whether a decline in fair value below the amortized cost basis is other than temporary in accordance with the Company’s policy and ASC 320-10. If the Company concludes that, it does not intend or is not required to sell an impaired debt investment before the recovery of its amortized cost basis, the impairment is considered temporary and the held-to-maturity investments continue to be recognized at the amortized cost. | ||||||||
Investments not classified as trading or as held-to-maturity are classified as available-for-sale securities. An available-for-sale investment is reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Realized gains or losses are charged to earnings during the period in which the gain or loss is realized. An impairment loss on the available-for-sale debt securities would be recognized in the consolidated statements of comprehensive income when the decline in value is determined to be other-than-temporary. Investments with maturities of greater than 12 months are recorded in other long-term assets. | ||||||||
For investments in an investee over which the Company does not have significant influence and which do not have readily determinable fair value, the Company carries the investment at cost and only adjusts for other-than-temporary declines in fair value and distributions of earnings that exceed the Company’s share of earnings since its investment. Management regularly evaluates the impairment of the cost method investments based on performance and financial position of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewing the investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts and financing needs. An impairment loss is recognized in earnings equal to the excess of the investment’s cost over its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value would then become the new cost basis of investment. | ||||||||
Investment in associated companies | ||||||||
(i)Investment in associated companies | ||||||||
Investments in associated companies in which the Company is in a position to exercise significant influence by participating in, but not controlling or jointly controlling, the financial and operating policies are accounted for using the equity method and are reported under other long-term assets in the consolidated balance sheets | ||||||||
Property, equipment and software | ||||||||
(j)Property, equipment and software | ||||||||
Property, equipment and software are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line basis over the following estimated useful lives, taking into account any estimated residual value: | ||||||||
Building | 20 years | |||||||
Decoration | 5 years | |||||||
Leasehold improvements | lesser of the term of the lease and the estimated useful lives of the assets | |||||||
Furniture, fixtures and office equipment | 5-10 years | |||||||
Vehicles | 5 years | |||||||
Servers and computers | 3 years | |||||||
Software | 3 years | |||||||
Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of the property and equipment, are expensed as incurred. When the Company retires or disposes its property, equipment and software, it records any gain or loss arising from the retirement or disposal under Other, net in its consolidated statements of operations and comprehensive income. | ||||||||
Intangible assets | ||||||||
(k)Intangible assets | ||||||||
Finite-lived intangible assets are tested for impairment if impairment indicators arise. The Company amortizes its finite-lived intangible assets from business acquisition using the straight-line method: | ||||||||
Land use right | over the remaining term of the land use right period | |||||||
License right | over the license period | |||||||
Customer contracts and relationships | 8-10 years | |||||||
Technology | 3 years | |||||||
Advertising expenses | ||||||||
(l)Advertising expenses | ||||||||
The Company expenses advertising costs as incurred and reports these costs under selling and marketing expense. Advertising expenses totaled approximately RMB242.8 million, RMB370.9 million and RMB466.6 million for the years ended December 31, 2012, 2013 and 2014, respectively. | ||||||||
Foreign currency translation | ||||||||
(m)Foreign currency translation | ||||||||
The functional currency of the entities within the Group is RMB, which is also the reporting currency. Transactions denominated in currencies other than RMB are translated into RMB at the exchange rates quoted by the People’s Bank of China (the “PBOC”) prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into RMB using the applicable exchange rates quoted by the PBOC at the balance sheet dates. The resulting exchange differences are included in the consolidated statements of operations and comprehensive income. | ||||||||
Translations of amounts from RMB into United States dollars for the convenience of the reader were calculated at the noon buying rate of US$1.00 =MB6.2046 on the last trading day of 2014 (December 31, 2014) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into United States dollars at such rate. | ||||||||
Share-based compensation | ||||||||
(n)Share-based compensation | ||||||||
The Company measures the cost of employee services received in exchange for stock options at the grant date fair value of the award under its 2000 Stock Incentive Plan (see Note 20(a)). The Company recognizes the share-based compensation costs, net of a forfeiture rate, on a straight-line basis of 25% a year over a vesting term of four years. The Company adopts the Black-Scholes option pricing model to determine the fair value of stock options and account for share-based compensation cost using an estimated forfeiture rate at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. | ||||||||
Under its 2009 Restricted Share Unit Plan (see Note 20(b)), the Company issues restricted share units (RSUs) to its employees, directors and consultants with performance conditions and service vesting periods ranging from one year to five years. Some of the RSUs issued are to be settled, at the Company’s discretion, in stock or cash upon vesting based on the stock price at grant date. At each reporting period, the Company evaluates the likelihood of performance conditions being met. Share-based compensation costs are then recorded for the number of RSUs expected to vest on a graded-vesting basis, net of estimated forfeitures, over the requisite service period. The compensation cost of the RSUs to be settled in stock only is measured based on the fair value of stock when all conditions to establish the grant date have been met. The compensation cost of RSUs to be settled either in stock or cash at the Company’s discretion is remeasured until the date when settlement in stock or cash is determined by the Company. | ||||||||
The Company records share-based compensation to the consolidated statements of operations and comprehensive income with the corresponding credit to the additional paid-in-capital for share options and RSUs to the extent that such awards are to be settled only in stock. On the other hand, for RSUs which will either be settled in stock or cash as discussed above, the Company continues to mark to market such awards and, in accordance with the vesting schedules of such awards, record the resulting potential liabilities under other long-term payables and accrued liabilities which totaled RMB106.2 million and RMB137.0 million, respectively, as of December 31, 2014. There were no significant cash payments for share-based liabilities for the years ended 2012, 2013 and 2014. | ||||||||
In 2014, Lede Inc., one of the Company’s subsidiaries, adopted a 2014 Stock Incentive Plan (the “Lede Plan”) and granted options exercisable for ordinary shares of Lede Inc. to certain of the Group’s employees (Lede Inc., together with its subsidiaries and VIEs are referred to as “Lede”). The options expire six years from the date of grant and either vest or have a vesting commencement date upon certain conditions being met (“Vesting Commencement Date”). The Company adopts the binomial option pricing model to determine the fair value of stock options and accounts for share-based compensation cost using an estimated forfeiture rate. As of December 31, 2014, there was RMB94.0 million (US$15.2 million) unrecognized compensation cost under the Lede Plan as if all options granted had become fully vested. | ||||||||
Forfeitures were estimated based on the Company’s weighted average historical forfeiture rate of the past five years. Differences between actual and estimated forfeitures are expensed in the period that the differences occur. See Note 20 for further information regarding share-based compensation assumptions and expense. | ||||||||
Taxation | ||||||||
(o)Taxation | ||||||||
Income tax expense is recognized in accordance with the laws of the relevant taxing authorities, with deferred taxes being provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. Tax rate changes are reflected in income during the period the changes are enacted. | ||||||||
A deferred income tax asset or liability is computed for the expected future impact of differences between the financial reporting and tax bases of assets and liabilities as well as the expected future tax benefit to be derived from tax loss and tax credit carry forwards. The Company classifies deferred tax assets and liabilities into current and non-current based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to tax loss carry forwards, is classified according to the expected reversal date of the temporary difference. | ||||||||
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount “more likely than not” to be realized in future tax returns. The valuation allowance for a particular tax jurisdiction is allocated between current and non-current deferred tax assets for that tax jurisdiction on a pro rata basis. | ||||||||
For a particular tax-paying component of an enterprise and within a particular tax jurisdiction, (a) all current deferred tax assets and liabilities are offset and presented as a single amount and (b) all non-current deferred tax assets and liabilities are offset and presented as a single amount. The Company does not offset deferred tax assets and liabilities attributable to different tax-paying components of the enterprise or to different tax jurisdictions. | ||||||||
The Company reports tax-related interest expense and penalty in Other, net in the consolidated statements of operations and comprehensive income, if there is any. The Company did not incur any material penalty or interest payments in connection with tax positions during the years ended December 31, 2012, 2013 and 2014. | ||||||||
The Company did not have any significant unrecognized uncertain tax positions as of December 31, 2013 and 2014. | ||||||||
In order to assess uncertain tax positions, the Company applies a more likely than not threshold and a two-step approach for the tax position measurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. | ||||||||
Net earnings per share ("EPS") and per American Depositary Share ("ADS") | ||||||||
(p)Net earnings per share (“EPS”) and per American Depositary Share (“ADS”) | ||||||||
Basic earnings per share are computed on the basis of the weighted-average number of ordinary shares outstanding during the period under measurement. Diluted earnings per share are based on the weighted-average number of ordinary shares outstanding and potential ordinary shares. Potential ordinary shares result from the assumed exercise of outstanding stock options, RSUs or other potentially dilutive equity instruments, when they are dilutive under the treasury stock method or the if-converted method. | ||||||||
Statutory reserves | ||||||||
(q)Statutory reserves | ||||||||
The Company’s subsidiaries and VIEs incorporated in China are required to make appropriations to certain non-distributable statutory reserves. In accordance with the laws applicable to foreign invested enterprises in China, its subsidiaries have to make appropriations from its after-tax profit as reported in their PRC statutory accounts to non-distributable statutory reserves including (i) general reserve fund and (ii) staff bonus and welfare fund. The appropriation to the general reserve fund is at least 10% of the after-tax profits as reported in the PRC statutory accounts. Appropriation is not required if the reserve fund has reached 50% of the registered capital of the respective company. The appropriation to the other reserve funds is at the discretion of the board of directors of the respective company. At the same time, the Company’s VIEs, in accordance with the China Company Laws, must make appropriations from their after-tax profit as reported in their PRC statutory accounts to non-distributable statutory reserves including (i) statutory surplus fund and (ii) discretionary surplus fund. The appropriation to the statutory surplus fund is at least 10% of the after-tax profits as reported in their PRC statutory accounts. Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of the respective company. Appropriation to the discretionary surplus fund is made at the discretion of the board of directors of the respective companies. | ||||||||
The general reserve fund and statutory surplus fund are restricted to set off against losses, expansion of production and operation or increase in the registered capital of the respective companies. The staff bonus and welfare fund is available to fund payments of special bonuses to staff and for collective welfare benefits. Upon approval by the board of directors, the discretionary surplus can be used to offset accumulated losses or to increase capital. | ||||||||
The staff bonus and welfare fund is a liability in nature. The other statutory reserves are not transferable to the Company in the form of cash dividends, loans or advances, and therefore are not available for distribution except in liquidation. | ||||||||
The following table presents the Group’s appropriations to general reserve funds and statutory surplus funds for the years ended December 31, 2012, 2013 and 2014 (in thousands): | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Appropriations to general reserve funds and statutory surplus funds | 161,522 | 244,358 | 58,816 | |||||
For the years ended December 31, 2012 and 2013, NetEase Beijing and Boguan, as well as Netease Hangzhou for the year ended December 31, 2014, did not make appropriations to statutory reserves as their cumulative appropriations in the past have already reached the statutory limit, namely 50% of the registered capital of the respective companies. | ||||||||
Noncontrolling interests and Mezzanine classified noncontrolling interests | ||||||||
(r)Noncontrolling interests and Mezzanine classified noncontrolling interests | ||||||||
Noncontrolling interests are recognized to reflect the portion of the equity of majority-owned subsidiaries and VIEs which is not attributable, directly or indirectly, to the controlling shareholder. | ||||||||
The noncontrolling interest will continue to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance. | ||||||||
Mezzanine classified noncontrolling interests represent Series A convertible redeemable preferred shares (“preferred shares”) issued by Lede Inc. to certain investors (see Note 17), and have been classified as mezzanine classified noncontrolling interests in the consolidated financial statements as these preferred shares are contingently redeemable upon the occurrence of a conditional event (see Note 20(f)), which is not solely within the control of the Company. The carrying value of this non-controlling interest as mezzanine equity will be adjusted by an accumulative amount equal to the amount of net profit attributable to preferred shareholders based on their ownership percentage. | ||||||||
Related parties | ||||||||
(s)Related parties | ||||||||
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, stockholder, or a related corporation. | ||||||||
Comprehensive income | ||||||||
(t)Comprehensive income | ||||||||
Comprehensive income is defined as the change in equity of the Company during a period arising from transactions and other events and circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders. The Group’s comprehensive income and net income were the same during the years ended December 31, 2012, 2013 and 2014. | ||||||||
Segment reporting | ||||||||
(u)Segment reporting | ||||||||
The Group’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements is set out in detail under Note 26. | ||||||||
Dividends | ||||||||
(v)Dividends | ||||||||
Dividends of the Company are recognized when declared. | ||||||||
Recently issued accounting pronouncements | ||||||||
(w)Recently issued accounting pronouncements | ||||||||
In May 2014, the FASB and IASB issued their converged standard on revenue recognition. The objective of the revenue standard ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. For public companies, the revenue standard is effective for the first interim period within annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company is in the process of evaluating the impact of the standard on its consolidated financial statements. | ||||||||
Organization_and_Nature_of_Ope1
Organization and Nature of Operations (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Organization and Nature of Operations | ||||||||
Schedule of principle subsidiaries and VIEs | ||||||||
The major subsidiaries and VIEs through which the Company conducts its business operations as of December 31, 2014 are described below: | Place and year of | |||||||
Major Subsidiaries | Incorporation | |||||||
NetEase Information Technology (Beijing) Co., Ltd. (“NetEase Beijing”) | Beijing, China | |||||||
1999 | ||||||||
Guangzhou Boguan Telecommunication Technology Co., Ltd. (“Boguan”) | Guangzhou, China | |||||||
2003 | ||||||||
NetEase Youdao Information Technology (Beijing) Co., Ltd. (“Youdao Information”) | Beijing, China | |||||||
2006 | ||||||||
NetEase (Hangzhou) Network Co., Ltd. (“NetEase Hangzhou”) | Hangzhou, China | |||||||
2006 | ||||||||
Hangzhou Langhe Technology Co., Ltd. (“Hangzhou Langhe”) | Hangzhou, China | |||||||
2009 | ||||||||
Lede Technology Co., Ltd. (“Lede Technology”) | Hangzhou, China | |||||||
2011 | ||||||||
NetEase Media Technology (Beijing) Co., Ltd.(“Media Beijing”) | Beijing, China | |||||||
2012 | ||||||||
Major VIEs | Place and year of | |||||||
Incorporation | ||||||||
Guangzhou NetEase Computer System Co., Ltd. (“Guangzhou NetEase”) | Guangzhou, China | |||||||
1997 | ||||||||
Beijing Guangyitong Advertising Co., Ltd. (“Guangyitong Advertising”) | Beijing, China | |||||||
1999 | ||||||||
Shanghai EaseNet Network Technology Co., Ltd. (“Shanghai EaseNet”) | Shanghai, China | |||||||
2008 | ||||||||
StormNet Information Technology (Hong Kong) Limited (“StormNet IT HK”) | Hong Kong, China | |||||||
2008 | ||||||||
StormNet Information Technology (Shanghai) Co., Ltd. (“StormNet IT SH”) | Shanghai, China | |||||||
2008 | ||||||||
Hangzhou NetEase Leihuo Network Co., Ltd. (“HZ Leihuo”) | Hangzhou, China | |||||||
2009 | ||||||||
Wangyibao Co., Ltd. (“Wangyibao Company”) | Hangzhou, China | |||||||
2010 | ||||||||
Scheduld of combined financial information of the Group's VIEs included in the accompanying consolidated financial statements of the Group | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
RMB | RMB | |||||||
Total assets | 2,616,962 | 3,449,055 | ||||||
Total liabilities | 2,624,377 | 3,304,133 | ||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Net revenues | 8,264,780 | 9,263,978 | 11,293,218 | |||||
Net (loss)/income | (134,519 | ) | (29,335 | ) | 139,560 | |||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Net cash provided by operating activities | 180,462 | 143,403 | 368,209 | |||||
Net cash used in investing activities | (173,649 | ) | (220,809 | ) | (148,982 | ) | ||
Net cash (used in)/provided by financing activities | (227,452 | ) | (9,697 | ) | 2,508 | |||
Principal_Accounting_Policies_1
Principal Accounting Policies (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Principal Accounting Policies | ||||||||
Schedule of restricted cash balance | ||||||||
As of December 31, 2013 and 2014, the Company had a restricted cash balance which is set aside for a period of 12 months or less of approximately RMB2,136.7 million and RMB2,628.8 million, respectively, comprising as follows (in millions): | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
RMB | RMB | |||||||
Guarantee deposit for consulting fee payments due to Blizzard | 70.0 | 40.0 | ||||||
Escrow account deposit for funding sales and marketing activities of Blizzard’s licensed games | 212.4 | 276.1 | ||||||
Customer deposit of Wangyibao accounts | 389.3 | 599.3 | ||||||
Pledge deposit for short-term bank borrowing | 1,459.0 | 1,703.4 | ||||||
Others | 6.0 | 10.0 | ||||||
2,136.7 | 2,628.8 | |||||||
Schedule of property and equipment useful lives | ||||||||
Building | 20 years | |||||||
Decoration | 5 years | |||||||
Leasehold improvements | lesser of the term of the lease and the estimated useful lives of the assets | |||||||
Furniture, fixtures and office equipment | 5-10 years | |||||||
Vehicles | 5 years | |||||||
Servers and computers | 3 years | |||||||
Software | 3 years | |||||||
Schedule of intangible assets and its estimated useful life | ||||||||
Land use right | over the remaining term of the land use right period | |||||||
License right | over the license period | |||||||
Customer contracts and relationships | 8-10 years | |||||||
Technology | 3 years | |||||||
Schedule of Group's appropriations to general reserve fund and statutory surplus fund | ||||||||
The following table presents the Group’s appropriations to general reserve funds and statutory surplus funds for the years ended December 31, 2012, 2013 and 2014 (in thousands): | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Appropriations to general reserve funds and statutory surplus funds | 161,522 | 244,358 | 58,816 | |||||
Concentrations_and_Risks_Table
Concentrations and Risks (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Requirement for telecommunications services | Bandwidth and server custody service provider | ||||||||
Concentrations and Risks | ||||||||
Schedule of concentration risk by risk factor | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Total number of telecommunications service providers | 11 | 13 | 13 | |||||
Number of service providers provided by 10% or more of the Company’s bandwidth and server custody expenditure | 2 | 3 | 3 | |||||
Total % of the Company’s bandwidth and server custody expenditure provided by 10% or greater service providers | 82.1 | % | 91.9 | % | 90.2 | % | ||
Accounts receivable | Credit risk | ||||||||
Concentrations and Risks | ||||||||
Schedule of concentration risk by risk factor | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
Customer A | 10.04 | % | Below 10 | % | ||||
Allowance for doubtful accounts | Not applicable | Not applicable | ||||||
Allowance_for_Doubtful_Account1
Allowance for Doubtful Accounts (Tables) | 12 Months Ended | |||||||||
Dec. 31, 2014 | ||||||||||
Allowance for Doubtful Accounts | ||||||||||
Schedule of movements of the allowance for doubtful accounts | The following table sets out the movements of the allowance for doubtful accounts for the years ended December 31, 2012, 2013 and 2014 (in thousands): | |||||||||
Balance at | Charged to (write- | Write-off of | Balance at | |||||||
January 1, | back against) cost | receivable balances | December 31, | |||||||
and expenses | and corresponding | |||||||||
provisions | ||||||||||
RMB | RMB | RMB | RMB | |||||||
2012 | 7,972 | 3,088 | (668 | ) | 10,392 | |||||
2013 | 10,392 | (2,007 | ) | (110 | ) | 8,275 | ||||
2014 | 8,275 | 3,765 | (878 | ) | 11,162 | |||||
Prepayments_and_Other_Current_1
Prepayments and Other Current Assets (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Prepayments and Other Current Assets | ||||||
Summary of prepayments and other current assets | ||||||
The following is a summary of prepayments and other current assets (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Guarantee payment made to Blizzard - royalty fees | 374,877 | 313,342 | ||||
Prepayment for royalties, revenue sharing cost - current portion | 221,921 | 360,499 | ||||
Interest receivable | 246,178 | 305,063 | ||||
Prepayments of content and marketing cost and other operational expenses | 73,693 | 145,445 | ||||
Prepayment for sales tax | 77,436 | 105,096 | ||||
Bridge loans in connection with ongoing investments | 13,800 | 57,168 | ||||
Deposits to vendors | 14,438 | 69,961 | ||||
Employee advances | 21,755 | 27,118 | ||||
Wangyibao operating funds held by third party online payment platform settlement service providers | 74,793 | 22,777 | ||||
Others | 25,381 | 45,450 | ||||
1,144,272 | 1,451,919 | |||||
Shortterm_Investments_Tables
Short-term Investments (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Short-term Investments [Abstract] | ||||||||
Summary of short-term investments | ||||||||
The following is a summary of short-term investments (in thousands): | ||||||||
December 31, 2014 | ||||||||
Cost | Unrecognized | Estimated | ||||||
Gains/(Loss) | Fair Value | |||||||
RMB | RMB | RMB | ||||||
Held-to-maturity securities- fixed rate investments | 350,528 | — | 350,528 | |||||
Other short-term investments | 1,708,024 | — | 1,708,024 | |||||
2,058,552 | — | 2,058,552 | ||||||
December 31, 2013 | ||||||||
Cost | Unrecognized | Estimated | ||||||
Gains/(Loss) | Fair Value | |||||||
RMB | RMB | RMB | ||||||
Other short-term investments | 901,183 | — | 901,183 | |||||
Property_Equipment_and_Softwar1
Property, Equipment and Software (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Property, Equipment and Software | ||||||
Summary of property, equipment and software | ||||||
The following is a summary of property, equipment and software (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Building and decoration | 609,865 | 569,911 | ||||
Leasehold improvements | 42,491 | 40,790 | ||||
Furniture, fixtures and office equipment | 49,000 | 63,946 | ||||
Vehicles | 14,845 | 23,627 | ||||
Servers and computers | 818,271 | 931,024 | ||||
Software | 40,141 | 45,356 | ||||
Construction in progress | 196,929 | 574,932 | ||||
1,771,542 | 2,249,586 | |||||
Less: accumulated depreciation | (899,429 | ) | (968,361 | ) | ||
Net book value | 872,113 | 1,281,225 | ||||
Land_Use_Right_Tables
Land Use Right (Tables) (Land use right) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Land use right | ||||||
Intangible assets | ||||||
Summary of land use right | The land use right is summarized as follows (in thousands): | |||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Cost | 27,779 | 94,736 | ||||
Incentive payment from local government | (15,000 | ) | (15,000 | ) | ||
Accumulated amortization | (1,508 | ) | (2,088 | ) | ||
Land use right, net | 11,271 | 77,648 | ||||
License_Rights_Tables
License Rights (Tables) (License right) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
License right | ||||||
License Rights | ||||||
Summary of foregoing license rights | ||||||
The foregoing license rights are summarized as follows (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Payment for license rights | 271,582 | 271,582 | ||||
Accumulated amortization | (221,266 | ) | (221,266 | ) | ||
Impairment provision for license rights | (50,316 | ) | (50,316 | ) | ||
— | — | |||||
Other_Longterm_Assets_Tables
Other Long-term Assets (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Other Long-term Assets | ||||||
Summary of other long-term assets | ||||||
The following is a summary of other long-term assets (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Investments in associated companies | 227,656 | 207,492 | ||||
Equity investments | 38,473 | 169,986 | ||||
Copyrights, licenses and domain names | 12,533 | 108,102 | ||||
Staff housing loans | 58,766 | 63,006 | ||||
Non-current deposits | 3,198 | 8,479 | ||||
Others | 1,472 | 12,051 | ||||
342,098 | 569,116 | |||||
Yixin | ||||||
Allocation of the purchase price or investment cost | ||||||
Allocation of the purchase price or investment cost | ||||||
The investment was accounted for under the equity method of accounting with allocation of the investment cost as follows (in thousands): | ||||||
RMB | ||||||
Tangible assets | 58,320 | |||||
Intangible assets | 15,876 | |||||
Goodwill | 129,773 | |||||
Deferred tax liabilities | (3,969 | ) | ||||
200,000 | ||||||
Taxation_Tables
Taxation (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Taxation | ||||||||
Schedule of the combined effects of EIT exemptions and tax rate reductions | ||||||||
The following table presents the combined effects of EIT exemptions and tax rate reductions enjoyed by the Group for the years ended December 31, 2012, 2013 and 2014 (in thousands except per share data): | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Aggregate amount of EIT exemptions and tax rate reductions | 503,045 | 818,056 | 824,007 | |||||
Earnings per share effect, basic | 0.15 | 0.25 | 0.25 | |||||
Earnings per share effect, diluted | 0.15 | 0.25 | 0.25 | |||||
Schedule of component of income tax expenses | ||||||||
The following table sets forth the component of income tax expenses of the Company for the years ended December 31, 2012, 2013 and 2014 (in thousands): | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Current tax expense | 723,210 | 388,320 | 780,077 | |||||
Deferred tax (benefit) expense | (31,568 | ) | 142,283 | (117,342 | ) | |||
Income tax expenses | 691,642 | 530,603 | 662,735 | |||||
Schedule of reconciliation of the differences between the statutory income tax rate and the Company's effective income tax rate | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
% | % | % | ||||||
Statutory income tax rate | 25 | 25 | 25 | |||||
Permanent differences | (1.0 | ) | 0.3 | (1.4 | ) | |||
Effect due to overseas tax-exempt entities | 1.2 | 1.4 | 1.3 | |||||
Effect of lower tax rate applicable to Software Enterprises, Key Software Enterprise and HNTEs | (11.8 | ) | (16.4 | ) | (15.0 | ) | ||
Change in valuation allowance | 1.9 | 0.8 | (0.1 | ) | ||||
Income tax refund | — | (7.3 | ) | — | ||||
Effect of withholding income tax | 0.9 | 6.9 | 2.3 | |||||
Effective income tax rate | 16.2 | 10.7 | 12.1 | |||||
Summary of net operating tax loss carry forwards | ||||||||
As of December 31, 2014, certain entities of the Group had net operating tax loss carry forwards as follows (in thousands): | ||||||||
RMB | ||||||||
Loss expiring in 2015 | 57,569 | |||||||
Loss expiring in 2016 | 178,583 | |||||||
Loss expiring in 2017 | 252,783 | |||||||
Loss expiring in 2018 | 247,524 | |||||||
Loss expiring in 2019 | 116,165 | |||||||
852,624 | ||||||||
Schedule of tax impact of significant temporary differences that give rise to the deferred tax assets and liabilities | ||||||||
The following table presents the tax impact of significant temporary differences that give rise to the deferred tax assets and liabilities as of December 31, 2013 and 2014 (in thousands): | ||||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
RMB | RMB | |||||||
Deferred tax assets - Current: | ||||||||
Deferred revenue, primarily for advanced payments from online games customers | 80,115 | 96,223 | ||||||
Accruals | 64,374 | 124,418 | ||||||
144,489 | 220,641 | |||||||
Less: valuation allowance | (15,207 | ) | (18,601 | ) | ||||
Total | 129,282 | 202,040 | ||||||
Deferred tax assets - Non-current: | ||||||||
Depreciation of fixed assets | 2,234 | 2,151 | ||||||
Impairment of license rights | 1,413 | — | ||||||
Net operating tax loss carry forward | 173,243 | 190,726 | ||||||
Amortization of Intangible assets | 20,851 | 19,009 | ||||||
197,741 | 211,886 | |||||||
Less: valuation allowance | (174,656 | ) | (190,726 | ) | ||||
Total | 23,085 | 21,160 | ||||||
December 31, | December 31, | |||||||
2013 | 2014 | |||||||
RMB | RMB | |||||||
Deferred tax liabilities - Current: | 148,506 | 101,997 | ||||||
Schedule of movement of the aggregate valuation allowances for deferred assets | The following table sets forth the movement of the aggregate valuation allowances for deferred tax assets for the periods presented (in thousands): | |||||||
Balance at | Provision | Balance at | ||||||
January 1 | for the year | December 31 | ||||||
RMB | RMB | RMB | ||||||
2012 | 85,326 | 71,980 | 157,306 | |||||
2013 | 157,306 | 32,557 | 189,863 | |||||
2014 | 189,863 | 19,464 | 209,327 | |||||
Taxes_Payable_Tables
Taxes Payable (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Taxes Payable | ||||||
Summary of taxes payable | ||||||
The following is a summary of taxes payable as of December 31, 2013 and 2014 (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Sales tax | 18,139 | 20,445 | ||||
Withholding individual income taxes for employees | 31,696 | 46,963 | ||||
Enterprise income taxes | 3,326 | 241,008 | ||||
Others | 21,302 | 25,874 | ||||
74,463 | 334,290 | |||||
Accrued_Liabilities_and_Other_1
Accrued Liabilities and Other Payables (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Accrued Liabilities and Other Payables | ||||||
Summary of accrued liabilities and other payables | ||||||
The following is a summary of accrued liabilities and other payables as of December 31, 2013 and 2014 (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
Customer deposits on Wangyibao accounts | 464,061 | 622,021 | ||||
Marketing expenses | 158,298 | 294,401 | ||||
RSU payables (see Note 2(n)) | 119,851 | 137,033 | ||||
Accrued fixed assets related payables | 9,449 | 80,942 | ||||
Server custody fees and telecommunication charges | 38,850 | 64,614 | ||||
Accrued revenue sharing | 11,448 | 27,838 | ||||
Other staff related cost | 16,497 | 23,203 | ||||
Content cost | 23,827 | 13,354 | ||||
Professional fees | 10,517 | 11,939 | ||||
Royalty and consulting fee payments due to Blizzard | 53,867 | — | ||||
Others | 50,634 | 81,883 | ||||
957,299 | 1,357,228 | |||||
Other_Longterm_Payable_Tables
Other Long-term Payable (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Other Long-term Payable | ||||||
Summary of other long-term payables | ||||||
The following is a summary of other long-term payables as of December 31, 2013 and 2014 (in thousands): | ||||||
December 31, | December 31, | |||||
2013 | 2014 | |||||
RMB | RMB | |||||
RSU long-term payable (see Note 2(n)) | 144,433 | 106,230 | ||||
Other | 450 | 200 | ||||
144,883 | 106,430 | |||||
Employee_Benefits_Tables
Employee Benefits (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Employee Benefits | ||||||||
Schedule of group's employee welfare benefits expense | ||||||||
The following table presents the Group’s employee welfare benefits expense for the years ended December 31, 2012, 2013 and 2014 (in millions): | ||||||||
For the year ended December 31 | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Contributions to medical and pension schemes | 160.9 | 205.0 | 264.0 | |||||
Other employee benefits | 95.6 | 123.0 | 159.2 | |||||
256.5 | 328.0 | 423.2 | ||||||
Sharebased_Compensation_Tables
Share-based Compensation (Tables) | 12 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Summary of the Company's share-based compensation cost | ||||||||||||
The table below presents a summary of the Company’s share-based compensation cost for the years ended December 31, 2012, 2013 and 2014 (in thousands): | ||||||||||||
For the year ended December 31, | ||||||||||||
2012 | 2013 | 2014 | ||||||||||
RMB | RMB | RMB | ||||||||||
Cost of revenues | 100,540 | 165,708 | 169,621 | |||||||||
Selling and marketing expenses | 13,368 | 17,967 | 23,253 | |||||||||
General and administrative expenses | 33,374 | 48,350 | 51,475 | |||||||||
Research and development expenses | 55,736 | 74,283 | 104,928 | |||||||||
203,018 | 306,308 | 349,277 | ||||||||||
Schedule of total intrinsic value of options exercised and the total fair value of RSUs vested during the period | ||||||||||||
Stock Options | ||||||||||||
US$ | RMB | |||||||||||
(in millions) | (in millions) | |||||||||||
Total intrinsic value exercised: | ||||||||||||
2012 | 6.3 | 39.1 | ||||||||||
2013 | 0.2 | 1.4 | ||||||||||
2014 | 0.4 | 2.7 | ||||||||||
RSU | ||||||||||||
US$ | RMB | |||||||||||
(in millions) | (in millions) | |||||||||||
Total fair value vested: | ||||||||||||
2012 | 18.6 | 115.8 | ||||||||||
2013 | 27.3 | 165.3 | ||||||||||
2014 | 48.6 | 301.6 | ||||||||||
Stock Option | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Summary of the Company's stock options award and RSUs activities | ||||||||||||
Employees | Senior | Director and | Total | Weighted Average | ||||||||
Management | Consultants | Exercise Price | ||||||||||
(in thousands) | (in thousands) | (in thousands) | (in thousands) | US$ | ||||||||
Number of ordinary shares issuable upon exercise of stock options: | ||||||||||||
Outstanding at January 1, 2012 | 4,517 | — | 937 | 5,454 | 0.877 | |||||||
Exercised | (3,992 | ) | — | (937 | ) | (4,929 | ) | 0.794 | ||||
Outstanding at December 31, 2012 | 525 | — | — | 525 | 1.659 | |||||||
Outstanding at January 1, 2013 | 525 | — | — | 525 | 1.659 | |||||||
Exercised during the year | (240 | ) | — | — | (240 | ) | 1.659 | |||||
Outstanding at December 31, 2013 | 285 | — | — | 285 | 1.659 | |||||||
Outstanding at January 1, 2014 | 285 | — | — | 285 | 1.659 | |||||||
Exercised during the year | (285 | ) | — | — | (285 | ) | 1.659 | |||||
Outstanding at December 31, 2014 | — | — | — | — | — | |||||||
Restricted Stock Units (RSU) | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Summary of the Company's stock options award and RSUs activities | ||||||||||||
Employees | Senior | Director and | Total | |||||||||
Management | Consultants | |||||||||||
(in thousands) | (in thousands) | (in thousands) | (in thousands) | |||||||||
Number of ordinary shares issuable upon vesting of restricted share units: | ||||||||||||
Outstanding at January 1, 2012 | 12,372 | 1,700 | 580 | 14,652 | ||||||||
Granted | 18,451 | — | 265 | 18,716 | ||||||||
Vested | (8,390 | ) | — | (290 | ) | (8,680 | ) | |||||
Forfeited | (1,973 | ) | (1,700 | ) | (290 | ) | (3,963 | ) | ||||
Outstanding at December 31, 2012 | 20,460 | — | 265 | 20,725 | ||||||||
Outstanding at January 1, 2013 | 20,460 | — | 265 | 20,725 | ||||||||
Granted | 18,371 | — | 287 | 18,658 | ||||||||
Vested | (12,818 | ) | — | (265 | ) | (13,083 | ) | |||||
Forfeited | (861 | ) | — | — | (861 | ) | ||||||
Outstanding at December 31, 2013 | 25,152 | — | 287 | 25,439 | ||||||||
Outstanding at January 1, 2014 | 25,152 | — | 287 | 25,439 | ||||||||
Granted | 30,429 | — | 195 | 30,624 | ||||||||
Vested | (17,200 | ) | — | (250 | ) | (17,450 | ) | |||||
Forfeited | (1,539 | ) | — | — | (1,539 | ) | ||||||
Outstanding at December 31, 2014 | 36,842 | — | 232 | 37,074 | ||||||||
Schedule of weighted average remaining contractual life for the RSUs outstanding | ||||||||||||
The following table presents the weighted average remaining contractual life for the RSUs outstanding as of December 31, 2014: | ||||||||||||
Weighted | ||||||||||||
Average | Weighted | |||||||||||
Number | Remaining | Average | ||||||||||
Outstanding/ | Contractual | Exercise | ||||||||||
Exercise Price | Exercisable | Life | Price | |||||||||
(in thousands) | Years | US$ | ||||||||||
Restricted Share Units | ||||||||||||
Performance-based settled in stock | 10,103 | 3.65 | n/a | |||||||||
Time-based-settled in stock/cash | 45,769 | 3.14 | n/a | |||||||||
Time-based-settled in stock | 19,900 | 2.49 | n/a | |||||||||
75,772 | 3.04 | n/a | ||||||||||
Net_Income_Per_Share_Tables
Net Income Per Share (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Net Income Per Share | ||||||||
Schedule of computation of basic and diluted net income per share | ||||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
Numerator (RMB in thousands): | ||||||||
Net income attributable to NetEase, Inc.’s shareholders for basic/dilutive net income per share calculation | 3,637,452 | 4,443,910 | 4,756,623 | |||||
Denominator (No. of shares in thousands): | ||||||||
Weighted average number of ordinary shares outstanding, basic | 3,282,663 | 3,247,874 | 3,264,450 | |||||
Dilutive effect of employee stock options and restricted share units | 5,667 | 8,423 | 12,599 | |||||
Weighted average number of ordinary shares outstanding, diluted | 3,288,330 | 3,256,297 | 3,277,049 | |||||
Net income per share, basic (RMB) | 1.11 | 1.37 | 1.46 | |||||
Net income per share, diluted (RMB) | 1.11 | 1.36 | 1.45 | |||||
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 12 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Commitments and Contingencies | ||||||||||||
Schedule of future commitments under various contracts | As of December 31, 2014, future minimum lease under non-cancelable operating lease agreements, capital commitments and other commitment related to content and services purchases were as follows (in thousands): | |||||||||||
Rental | Server Custody | Capital | Office | Total | ||||||||
Commitments | Fee | Commitments | Machines and | |||||||||
Commitments | Other | |||||||||||
Commitments | ||||||||||||
RMB | RMB | RMB | RMB | RMB | ||||||||
2015 | 81,500 | 17,104 | 208,356 | 65,525 | 372,485 | |||||||
2016 | 33,428 | 312 | 19,629 | 4,752 | 58,121 | |||||||
2017 | 22,898 | 12 | 2,018 | 4,597 | 29,525 | |||||||
2018 | 2,287 | — | — | 4,563 | 6,850 | |||||||
Beyond 2018 | 5,791 | — | — | — | 5,791 | |||||||
145,904 | 17,428 | 230,003 | 79,437 | 472,772 | ||||||||
Summary of company's outstanding commitments under several license contracts | As of December 31, 2014, the Company’s outstanding commitments under these license agreements totaled RMB1.7 billion which can be summarized as follows (in millions): | |||||||||||
RMB | ||||||||||||
2015 | 1,181 | |||||||||||
2016 | 509 | |||||||||||
Total | 1,690 | |||||||||||
Segment_Information_Tables
Segment Information (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Segment Information | ||||||||
Summary of the Group's operating segment results | There was no significant transaction between reportable segments for the years ended December 31, 2012, 2013 and 2014 (in thousands). | |||||||
For the year ended December 31, | ||||||||
2012 | 2013 | 2014 | ||||||
RMB | RMB | RMB | ||||||
Total revenues: | ||||||||
Online game services | 7,287,063 | 8,308,618 | 9,815,019 | |||||
Advertising services | 850,157 | 1,094,623 | 1,551,652 | |||||
E-mail, e-commerce and others | 242,741 | 368,014 | 1,113,773 | |||||
Total revenues | 8,379,961 | 9,771,255 | 12,480,444 | |||||
Sales tax expense (Note 11(b)): | ||||||||
Online game services | (86,478 | ) | (444,154 | ) | (548,861 | ) | ||
Advertising services | (82,680 | ) | (107,156 | ) | (154,583 | ) | ||
E-mail, e-commerce and others | (9,847 | ) | (23,770 | ) | (64,166 | ) | ||
Total Sales taxes | (179,005 | ) | (575,080 | ) | (767,610 | ) | ||
Net revenues: | ||||||||
Online game services | 7,200,585 | 7,864,464 | 9,266,158 | |||||
Advertising services | 767,477 | 987,467 | 1,397,069 | |||||
E-mail, e-commerce and others | 232,894 | 344,244 | 1,049,607 | |||||
Total net revenues | 8,200,956 | 9,196,175 | 11,712,834 | |||||
Cost of revenues: | ||||||||
Online game services | (1,872,734 | ) | (1,649,803 | ) | (2,111,701 | ) | ||
Advertising services | (474,165 | ) | (461,286 | ) | (528,665 | ) | ||
E-mail, e-commerce and others | (231,168 | ) | (367,427 | ) | (621,178 | ) | ||
Total cost of revenues | (2,578,067 | ) | (2,478,516 | ) | (3,261,544 | ) | ||
Gross profit (loss): | ||||||||
Online game services | 5,327,851 | 6,214,661 | 7,154,457 | |||||
Advertising services | 293,312 | 526,181 | 868,404 | |||||
E-mail, e-commerce and others | 1,726 | (23,183 | ) | 428,429 | ||||
Total gross profit | 5,622,889 | 6,717,659 | 8,451,290 | |||||
Financial_Instruments_Tables
Financial Instruments (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Financial Instruments | ||||||||
Schedule of financial instruments, measured at fair value | ||||||||
The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2014 (in thousands): | ||||||||
Fair Value Measurements | ||||||||
(RMB) | ||||||||
Quoted Prices in | ||||||||
Active Market | Significant Other | |||||||
for Identical Assets | Observable Inputs | |||||||
Total | (Level 1) | (Level 2) | ||||||
Time deposits-short term | 18,496,574 | 18,496,574 | — | |||||
Time deposits-long term | 673,000 | 673,000 | — | |||||
Held-to-maturity securities-fixed rate investments | 350,528 | — | 350,528 | |||||
Other short-term investments | 1,708,024 | — | 1,708,024 | |||||
Total | 21,228,126 | 19,169,574 | 2,058,552 | |||||
The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2013 (in thousands): | ||||||||
Fair Value Measurements | ||||||||
(RMB) | ||||||||
Quoted Prices in | ||||||||
Active Market | Significant Other | |||||||
for Identical Assets | Observable Inputs | |||||||
Total | (Level 1) | (Level 2) | ||||||
Time deposits-short term | 16,625,468 | 16,625,468 | — | |||||
Time deposits-long term | 500,000 | 500,000 | — | |||||
Other short-term investments | 901,183 | — | 901,183 | |||||
Total | 18,026,651 | 17,125,468 | 901,183 | |||||
Organization_and_Nature_of_Ope2
Organization and Nature of Operations (Details) | 12 Months Ended | 0 Months Ended | 0 Months Ended | 1 Months Ended | ||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Apr. 30, 2009 | Apr. 15, 2009 | Apr. 15, 2009 | Apr. 15, 2009 | Dec. 31, 2014 | Feb. 03, 2000 | 12-May-10 | 12-May-00 | Jun. 06, 2000 | 31-May-14 | 31-May-14 | 31-May-14 | 31-May-14 | |
USD ($) | CNY | CNY | CNY | Consolidated VIEs | Consolidated VIEs | Consolidated VIEs | HZ Leihuo | HZ Leihuo | HZ Leihuo | HZ Leihuo | StormNet IT SH and StormNet IT HK Joint Venture | Guangzhou NetEase and Guangyitong Advertising | Guangzhou NetEase and Guangyitong Advertising | Guangzhou NetEase and Guangyitong Advertising | Guangzhou NetEase and Guangyitong Advertising | Guangzhou NetEase | Guangzhou NetEase | Guangzhou NetEase | Guangyitong Advertising | |
entity | CNY | CNY | CNY | employee | Operating Agreement | Proxy Agreement | Exclusive Purchase Option Agreements | company | Operating Agreement | Shareholder Voting Rights Trust Agreement | Shareholder Voting Rights Trust Agreement | Letter of Agreement | Bo Ding | William Lei Ding | One Chinese employee | Bo Ding | ||||
Principle subsidiaries and variable interest entities | ||||||||||||||||||||
Number of employees incorporating new entity | 2 | |||||||||||||||||||
Number of companies in joint venture | 2 | |||||||||||||||||||
Total assets of all the consolidated VIEs | 3,449,055,000 | 2,616,962,000 | ||||||||||||||||||
Total liabilities of all the consolidated VIEs | 3,304,133,000 | 2,624,377,000 | ||||||||||||||||||
Net revenues | 1,887,766,000 | 11,712,834,000 | 9,196,175,000 | 8,200,956,000 | 11,293,218,000 | 9,263,978,000 | 8,264,780,000 | |||||||||||||
Net (loss)/income | 772,927,000 | 4,795,705,000 | 4,445,218,000 | 3,586,570,000 | 139,560,000 | -29,335,000 | -134,519,000 | |||||||||||||
Net cash provided by operating activities | 368,209,000 | 143,403,000 | 180,462,000 | |||||||||||||||||
Net cash used in investing activities | -148,982,000 | -220,809,000 | -173,649,000 | |||||||||||||||||
Net cash (used in)/provided by financing activities | 2,508,000 | -9,697,000 | -227,452,000 | |||||||||||||||||
Amount of assets for settlement of obligations except for the registered capital of the VIEs and certain non-distributable statutory reserves | 0 | |||||||||||||||||||
Registered capital of VIEs | 199,100,000 | |||||||||||||||||||
Non-distributable statutory reserves of the consolidated VIEs | 13,200,000 | |||||||||||||||||||
Number of entities for which the company has a variable interest but is not the primary beneficiary | 0 | 0 | ||||||||||||||||||
Term of principal (or amended principal) agreement | 20 years | 20 years | 20 years | 20 years | 20 years | 10 years | 20 years | |||||||||||||
Ownership percentage, owned by noncontrolling owners | 10.00% | 1.00% | ||||||||||||||||||
Percentage of ownership transferred | 9.00% | 1.00% | 20.00% | |||||||||||||||||
Ownership percentage,owned by parent, after transaction | 99.00% |
Principal_Accounting_Policies_2
Principal Accounting Policies (Details) | 12 Months Ended | 12 Months Ended | ||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2011 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | |
CNY | CNY | CNY | USD ($) | USD ($) | CNY | PRC subsidiaries and VIEs | PRC subsidiaries and VIEs | Denominated in USD | Denominated in USD | Denominated in USD | Denominated in EUR | Denominated in EUR | Denominated in EUR | Maximum | Minimum | |
item | CNY | CNY | USD ($) | CNY | USD ($) | CNY | EUR (€) | EUR (€) | ||||||||
Revenue recognition | ||||||||||||||||
Number of revenue models used for online game services | 2 | |||||||||||||||
Minimum period of inactivity in online points account for recognition of revenue (in days) | 540 days | |||||||||||||||
Term of advertising service contracts | 1 year | 3 months | ||||||||||||||
Revenues derived from barter transactions | 0 | 0 | 0 | |||||||||||||
Expenses derived from barter transactions | 0 | 0 | 0 | |||||||||||||
Cash, cash equivalents and time deposits | ||||||||||||||||
Term of original maturity of demand deposits and highly liquid investments | 3 months | |||||||||||||||
Cash at bank and demand deposits | 2,021,453,000 | 1,458,298,000 | 1,590,769,000 | 325,799,000 | 235,035,000 | 2,214,618,000 | 25,900,000 | 158,300,000 | 12,700,000 | 15,300,000 | 2,100,000 | 4,300,000 | ||||
Term of time deposits | 3 months | |||||||||||||||
Time deposits | 637,600,000 | 3,900,000,000 | 382,300,000 | 14,900,000 | 2,000,000 | 2,600,000 | ||||||||||
Cash and cash equivalent and time deposits | 14,700,000,000 | 14,600,000,000 | ||||||||||||||
Percentage of cash and cash equivalent and time deposits held by PRC subsidiaries and VIEs | 69.20% | 78.30% |
Principal_Accounting_Policies_3
Principal Accounting Policies (Details 2) | 12 Months Ended | ||||||||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
USD ($) | CNY | CNY | Maximum | Maximum | Guarantee deposit for consulting fee payments due to Blizzard | Guarantee deposit for consulting fee payments due to Blizzard | Escrow account deposit for funding sales and marketing activities of Blizzard's licensed games | Escrow account deposit for funding sales and marketing activities of Blizzard's licensed games | Customer deposit of Wangyibao accounts | Customer deposit of Wangyibao accounts | Pledge deposit for short-term bank borrowing | Pledge deposit for short-term bank borrowing | Others | Others | |
agreement | agreement | agreement | CNY | CNY | CNY | CNY | Wangyibao | Wangyibao | CNY | CNY | CNY | CNY | |||
CNY | CNY | ||||||||||||||
Restricted cash | |||||||||||||||
Period set aside for restricted cash | 12 months | 12 months | |||||||||||||
Restricted cash | $423,693 | 2,628,847 | 2,136,749 | 40,000 | 70,000 | 276,100 | 212,400 | 599,300 | 389,300 | 1,703,400 | 1,459,000 | 10,000 | 6,000 | ||
Number of other lien arrangements | 0 | 0 | 0 |
Principal_Accounting_Policies_4
Principal Accounting Policies (Details 3) | 12 Months Ended |
Dec. 31, 2014 | |
Building | |
Property, Plant and Equipment | |
Estimated useful lives of assets | 20 years |
Estimated useful lives of assets | 20 years |
Decoration | |
Property, Plant and Equipment | |
Estimated useful lives of assets | 5 years |
Estimated useful lives of assets | 5 years |
Leasehold improvements | |
Property, Plant and Equipment | |
Estimated useful lives of assets | lesser of the term of the lease and the estimated useful lives of the assets |
Furniture, fixtures and office equipment | |
Property, Plant and Equipment | |
Estimated useful lives of assets | 5-10 years |
Furniture, fixtures and office equipment | Minimum | |
Property, Plant and Equipment | |
Estimated useful lives of assets | 5 years |
Furniture, fixtures and office equipment | Maximum | |
Property, Plant and Equipment | |
Estimated useful lives of assets | 10 years |
Vehicles | |
Property, Plant and Equipment | |
Estimated useful lives of assets | 5 years |
Estimated useful lives of assets | 5 years |
Servers and computers | |
Property, Plant and Equipment | |
Estimated useful lives of assets | 3 years |
Estimated useful lives of assets | 3 years |
Software | |
Property, Plant and Equipment | |
Estimated useful lives of assets | 3 years |
Estimated useful lives of assets | 3 years |
Principal_Accounting_Policies_5
Principal Accounting Policies (Details 4) (CNY) | 12 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Advertising Expense | |||
Advertising expenses | 466.6 | 370.9 | 242.8 |
Foreign currency translation | |||
Buying rate per US$ | 0.1612 | ||
Land use right | |||
Intangible assets | |||
Estimated useful lives of assets | over the remaining term of the land use right period | ||
License right | |||
Intangible assets | |||
Estimated useful lives of assets | over the license period | ||
Customer contracts and relationships | |||
Intangible assets | |||
Estimated useful lives of assets | 8-10 years | ||
Customer contracts and relationships | Minimum | |||
Intangible assets | |||
Estimated useful lives of assets | 8 years | ||
Customer contracts and relationships | Maximum | |||
Intangible assets | |||
Estimated useful lives of assets | 10 years | ||
Technology | |||
Intangible assets | |||
Estimated useful lives of assets | 3 years | ||
Estimated useful lives of assets | 3 years |
Principal_Accounting_Policies_6
Principal Accounting Policies (Details 5) | 12 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 12 Months Ended | ||||||
Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Nov. 30, 2009 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | |
Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | 2000 Stock Incentive Plan | 2009 RSU Plan | 2009 RSU Plan | 2009 RSU Plan | 2009 RSU Plan | Lede Plan | Lede Plan | Lede Inc. | ||
CNY | CNY | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Stock Option | Stock Option | Lede Plan | ||||
CNY | Minimum | Maximum | USD ($) | CNY | Stock Option | ||||||
Share-based Compensation | |||||||||||
Percentage of annual recognition for share-based compensation costs | 25.00% | ||||||||||
Service vesting period | 4 years | 1 year | 5 years | ||||||||
Resulting potential liabilities recorded under other long-term payables | 106,230,000 | 144,433,000 | 106,200,000 | ||||||||
Resulting potential liabilities recorded under accrued liabilities | 137,033,000 | 119,851,000 | 137,000,000 | ||||||||
Expiration period | 10 years | 6 years | |||||||||
Unrecognized compensation cost | $15,200,000 | 94,000,000 | |||||||||
Number of preceding years considered for estimating forfeiture | 5 years |
Principal_Accounting_Policies_7
Principal Accounting Policies (Details 6) (CNY) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
NetEase Beijing | |||
Statutory reserves | |||
Appropriation of after tax profit to reserve fund limit registered capital percentage reached by the entity | 50.00% | 50.00% | 50.00% |
Boguan | |||
Statutory reserves | |||
Appropriation of after tax profit to reserve fund limit registered capital percentage reached by the entity | 50.00% | 50.00% | 50.00% |
NetEase Hangzhou | |||
Statutory reserves | |||
Appropriation of after tax profit to reserve fund limit registered capital percentage reached by the entity | 50.00% | ||
PRC | |||
Statutory reserves | |||
Appropriations to general reserve funds and statutory surplus funds | 58,816 | 244,358 | 161,522 |
PRC | General reserve fund | |||
Statutory reserves | |||
Statutory threshold percentage of the reserve fund to the registered capital of the respective company, above which the appropriation is not required. | 50.00% | ||
PRC | General reserve fund | Minimum | |||
Statutory reserves | |||
Required minimum percentage of annual appropriations | 10.00% | ||
PRC | Statutory surplus reserve | |||
Statutory reserves | |||
Statutory threshold percentage of the reserve fund to the registered capital of the respective company, above which the appropriation is not required. | 50.00% | ||
PRC | Statutory surplus reserve | Minimum | |||
Statutory reserves | |||
Required minimum percentage of annual appropriations | 10.00% |
Concentrations_and_Risks_Detai
Concentrations and Risks (Details) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
item | item | item | |
Requirement for telecommunications services | Bandwidth and server custody service provider | |||
Concentrations and Risks | |||
Total number of telecommunications service providers | 13 | 13 | 11 |
Number of service providers provided by 10% or more of the Company's bandwidth and server custody expenditure | 3 | 3 | 2 |
Concentration risk (as a percent) | 90.20% | 91.90% | 82.10% |
Requirement for telecommunications services | Bandwidth and server custody service provider | Minimum | |||
Concentrations and Risks | |||
Threshold for disclosure of risk (as a percent) | 10.00% | ||
Accounts receivable | Credit risk | |||
Concentrations and Risks | |||
Number of customers | 0 | 1 | |
Accounts receivable | Credit risk | Customer A | |||
Concentrations and Risks | |||
Concentration risk (as a percent) | 10.04% | ||
Accounts receivable | Credit risk | Minimum | |||
Concentrations and Risks | |||
Threshold for disclosure of risk (as a percent) | 10.00% | 10.00% | |
Accounts receivable | Credit risk | Maximum | Customer A | |||
Concentrations and Risks | |||
Concentration risk (as a percent) | 10.00% | ||
Total revenues | Major Customers | Minimum | |||
Concentrations and Risks | |||
Threshold for disclosure of risk (as a percent) | 10.00% | 10.00% | 10.00% |
Total net revenues | Self-developed Massively Multi-player Online Role-playing Games | |||
Concentrations and Risks | |||
Concentration risk (as a percent) | 89.80% | 90.90% | 93.70% |
Short-term investments [Member] | Credit risk | Minimum | |||
Concentrations and Risks | |||
Effective yields of held-to-maturity investments and other short-term investments | 3.05% | ||
Short-term investments [Member] | Credit risk | Maximum | |||
Concentrations and Risks | |||
Maturity period, maximum | 1 year | ||
Effective yields of held-to-maturity investments and other short-term investments | 5.18% |
Allowance_for_Doubtful_Account2
Allowance for Doubtful Accounts (Details) | 12 Months Ended | |||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
Allowance for Doubtful Accounts | ||||
Balance at the beginning of the period | 8,275 | 10,392 | 7,972 | |
Charged to (write-back against) cost and expenses | 607 | 3,765 | -2,007 | 3,088 |
Write-off of receivable balances and corresponding provisions | -878 | -110 | -668 | |
Balance at the end of the period | 11,162 | 8,275 | 10,392 |
Prepayments_and_Other_Current_2
Prepayments and Other Current Assets (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
USD ($) | CNY | CNY | |
Prepayments and Other Current Assets | |||
Guarantee payment made to Blizzard - royalty fees | 313,342,000 | 374,877,000 | |
Prepayment for royalties, revenue sharing cost - current portion | 360,499,000 | 221,921,000 | |
Interest receivable | 305,063,000 | 246,178,000 | |
Prepayments of content and marketing cost and other operational expenses | 145,445,000 | 73,693,000 | |
Prepayment for sales tax | 105,096,000 | 77,436,000 | |
Bridge loans in connection with ongoing investments | 57,168,000 | 13,800,000 | |
Deposits to vendors | 69,961,000 | 14,438,000 | |
Employee advances | 27,118,000 | 21,755,000 | |
Wangyibao operating funds held by third party online payment platform settlement service providers | 22,777,000 | 74,793,000 | |
Others | 45,450,000 | 25,381,000 | |
Prepayments and other current assets | 234,007,000 | 1,451,919,000 | 1,144,272,000 |
Staff housing loans outstanding repayable within 12 months | 24,700,000 | 19,200,000 | |
Advances were made directly or indirectly to the executive officers for their personal benefit | 0 | 0 |
Shortterm_Investments_Details
Short-term Investments (Details) | 12 Months Ended | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | |
CNY | CNY | CNY | USD ($) | Held-to-maturity securities - Fixed rate investments | Other short-term investments | Other short-term investments | Short-term investments [Member] | Short-term investments [Member] | Short-term investments [Member] | Short-term investments [Member] | Short-term investments [Member] | JPMorgan Chase & Co. | JPMorgan Chase & Co. | |
CNY | CNY | CNY | CNY | Minimum | Minimum | Maximum | Maximum | USD ($) | CNY | |||||
Short-term Investments | ||||||||||||||
Short-term investments, effective yields (as a percent) | 3.05% | 3.30% | 5.18% | 7.00% | ||||||||||
Cost | 2,058,552,000 | 901,183,000 | $331,778,000 | 350,528,000 | 1,708,024,000 | 901,183,000 | ||||||||
Estimated Fair Value | 350,528,000 | 1,708,024,000 | 901,183,000 | 2,058,552,000 | ||||||||||
Investment income related to short-term investments | 64,200,000 | 35,800,000 | 42,900,000 | |||||||||||
Principal amount of a loan from an offshore bank | 2,049,865,000 | 975,504,000 | 330,378,000 | 90,000,000 | 550,700,000 | |||||||||
Deposits to secure bank loan | 614,200,000 |
Property_Equipment_and_Softwar2
Property, Equipment and Software (Details) | 12 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | |
CNY | CNY | CNY | USD ($) | Building and Decoration | Building and Decoration | Leasehold improvements | Leasehold improvements | Furniture, fixtures and office equipment | Furniture, fixtures and office equipment | Vehicles | Vehicles | Servers and computers | Servers and computers | Software | Software | Construction in progress | Construction in progress | Construction in progress | Construction in progress | |
CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | Beijing Hangzhou and Guangzhou | Beijing Hangzhou and Guangzhou | |||||
CNY | CNY | |||||||||||||||||||
Summary of property, equipment and software | ||||||||||||||||||||
Gross book value | 2,249,586,000 | 1,771,542,000 | 569,911,000 | 609,865,000 | 40,790,000 | 42,491,000 | 63,946,000 | 49,000,000 | 23,627,000 | 14,845,000 | 931,024,000 | 818,271,000 | 45,356,000 | 40,141,000 | 574,932,000 | 196,929,000 | 557,700,000 | 189,500,000 | ||
Less: accumulated depreciation | -968,361,000 | -899,429,000 | ||||||||||||||||||
Net book value | 1,281,225,000 | 872,113,000 | 206,496,000 | |||||||||||||||||
Depreciation expense | 172,400,000 | 158,000,000 | 184,200,000 |
Land_Use_Right_Details
Land Use Right (Details) (Land use right, CNY) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Intangible assets | |||
Cost | 94,736,000 | 27,779,000 | |
Incentive payment from local government | -15,000,000 | -15,000,000 | |
Accumulated amortization | -2,088,000 | -1,508,000 | |
Total | 77,648,000 | 11,271,000 | |
Total amortization expense | 580,000 | 258,000 | 258,000 |
Hangzhou | |||
Intangible assets | |||
Amortization period | 50 years |
License_Rights_Details
License Rights (Details) (License right, CNY) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
License right | ||||
License Rights | ||||
Impairment provision for license rights | 50,300,000 | |||
Percentage of impaired assets included in provision | 100.00% | |||
Total amortization expense | 0 | 0 | 49,000,000 | |
Foregoing license rights | ||||
Payment for license rights | 271,582,000 | 271,582,000 | ||
Accumulated amortization | -221,266,000 | -221,266,000 | ||
Impairment provision for license rights | -50,316,000 | -50,316,000 | ||
Total | 0 | 0 |
Other_Longterm_Assets_Details
Other Long-term Assets (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY |
Other Long-term Assets | |||
Investments in associated companies | 207,492 | 227,656 | |
Equity investments | 169,986 | 38,473 | |
Copyrights, licenses and domain names | 108,102 | 12,533 | |
Staff housing loans | 63,006 | 58,766 | |
Non-current deposits | 8,479 | 3,198 | |
Others | 12,051 | 1,472 | |
Total | $91,725 | 569,116 | 342,098 |
Other_Longterm_Assets_Details_
Other Long-term Assets (Details 2) | 12 Months Ended | 0 Months Ended | 12 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | |||||||||||
Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Aug. 31, 2008 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Aug. 31, 2008 | Dec. 31, 2014 | Dec. 31, 2013 | Aug. 31, 2013 | Aug. 31, 2013 | Aug. 31, 2013 | Aug. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2014 | |
USD ($) | CNY | CNY | CNY | SunEase, Inc. | SunEase, Inc. | SunEase, Inc. | SunEase, Inc. | SunEase, Inc. | Yixin | Yixin | Yixin | Yixin | Yixin | Yixin | Joint venture established with several individuals, E-commerce | One of equity investments | |
CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | Non-compete agreement | Customer base | Exclusivity arrangement | CNY | CNY | |||||
CNY | CNY | CNY | item | ||||||||||||||
Allocation of the purchase price or investment cost | |||||||||||||||||
Percentage of equity interest acquired | 38.50% | 27.00% | 40.00% | ||||||||||||||
Consideration paid in cash | 31,000,000 | 200,000,000 | |||||||||||||||
Allocation of the purchase price | |||||||||||||||||
Tangible assets | 58,320,000 | ||||||||||||||||
Intangible assets | 15,876,000 | ||||||||||||||||
Goodwill | 129,773,000 | ||||||||||||||||
Deferred tax liabilities | -3,969,000 | ||||||||||||||||
Total | 200,000,000 | ||||||||||||||||
Acquired finite-lived intangible assets | |||||||||||||||||
Amount of acquired finite lived intangible assets | 6,700,000 | 5,900,000 | 7,800,000 | 2,100,000 | |||||||||||||
Amortization expense of acquired intangible assets | 0 | 0 | 3,400,000 | 3,200,000 | 1,100,000 | ||||||||||||
Equity Investments | |||||||||||||||||
Equity share of losses or profits from associated companies | -33,600,000 | -5,300,000 | 800,000 | ||||||||||||||
Proceeds from dividends received | 15,300,000 | 0 | 0 | ||||||||||||||
Payments to Acquire Interest in Joint Venture | 20,000,000 | ||||||||||||||||
Equity Method Investment, Ownership Percentage | 38.50% | 27.00% | 40.00% | ||||||||||||||
Investments, all other investments | |||||||||||||||||
Impairment provision | 3,875,000 | 24,040,000 | 24,000,000 | ||||||||||||||
Number of equity investment that is impaired | 1 | ||||||||||||||||
Other impairment provision of equity investments | 0 |
Other_Longterm_Assets_Details_1
Other Long-term Assets (Details 3) (CNY) | 12 Months Ended | |
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 |
Housing loans made to employees | ||
Term of staff housing loan | 5 years | |
Staff housing loans outstanding repayable within 12 months | 24.7 | 19.2 |
Minimum | ||
Housing loans made to employees | ||
Interest rate on staff housing loan (as a percent) | 3.00% | 3.00% |
Maximum | ||
Housing loans made to employees | ||
Interest rate on staff housing loan (as a percent) | 3.50% | 3.50% |
Taxation_Details
Taxation (Details) (CNY) | 12 Months Ended | 48 Months Ended | 36 Months Ended | |||||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2018 | |
entity | ||||||||
Income taxes | ||||||||
Income tax rate (as a percent) | 25.00% | 25.00% | 25.00% | |||||
Cayman Islands | ||||||||
Income taxes | ||||||||
Withholding tax amount | 0 | 0 | 0 | |||||
BVI | ||||||||
Income taxes | ||||||||
Withholding tax amount | 0 | 0 | 0 | |||||
Hong Kong | ||||||||
Income taxes | ||||||||
Income tax rate (as a percent) | 16.50% | 16.50% | ||||||
PRC | ||||||||
Combined effects of EIT exemptions and tax rate reductions | ||||||||
Aggregate amount of EIT exemptions and tax rate reductions | 824,007,000 | 818,056,000 | 503,045,000 | |||||
Earnings per share effect, basic (in CNY per share) | 0.25 | 0.25 | 0.15 | |||||
Earnings per share effect, diluted (in CNY per share) | 0.25 | 0.25 | 0.15 | |||||
PRC | Key Software Enterprise | ||||||||
Income taxes | ||||||||
Number of entities approved for preferential tax rate | 3 | |||||||
PRC | NetEase Beijing | HNTEs | ||||||||
Income taxes | ||||||||
Preferential tax rate | 15.00% | |||||||
PRC | NetEase Beijing | Key Software Enterprise | ||||||||
Income taxes | ||||||||
Preferential tax rate | 10.00% | |||||||
PRC | Boguan | HNTEs | ||||||||
Income taxes | ||||||||
Preferential tax rate | 15.00% | |||||||
PRC | Boguan | Key Software Enterprise | ||||||||
Income taxes | ||||||||
Preferential tax rate | 10.00% | |||||||
PRC | NetEase Hangzhou | HNTEs | ||||||||
Income taxes | ||||||||
Preferential tax rate | 15.00% | |||||||
PRC | NetEase Hangzhou | Key Software Enterprise | ||||||||
Income taxes | ||||||||
Preferential tax rate | 10.00% | |||||||
PRC | Hangzhou Langhe | Software Enterprises | ||||||||
Income taxes | ||||||||
Percentage of tax deduction | 50.00% | |||||||
PRC | Wangyibao | Software Enterprises | ||||||||
Income taxes | ||||||||
Percentage of tax deduction | 50.00% | |||||||
PRC | Lede Inc. | Software Enterprises | ||||||||
Income taxes | ||||||||
Percentage of tax deduction | 50.00% |
Taxation_Details_2
Taxation (Details 2) | 12 Months Ended | ||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 |
USD ($) | CNY | CNY | CNY | 2015 | 2016 | 2017 | 2018 | 2019 | |
CNY | CNY | CNY | CNY | CNY | |||||
Component of income tax expenses | |||||||||
Current tax expense | 780,077 | 388,320 | 723,210 | ||||||
Deferred tax expense (benefit) | -117,342 | 142,283 | -31,568 | ||||||
Income tax expenses | 106,814 | 662,735 | 530,603 | 691,642 | |||||
Reconciliation of the differences between the statutory income tax rate and the Company's effective income tax rate | |||||||||
Statutory income tax rate (as a percent) | 25.00% | 25.00% | 25.00% | 25.00% | |||||
Permanent differences (as a percent) | -1.40% | -1.40% | 0.30% | -1.00% | |||||
Effect due to overseas tax-exempt entities (as a percent) | 1.30% | 1.30% | 1.40% | 1.20% | |||||
Effect of lower tax rate applicable to Software Enterprises, Key Software Enterprise and HNTEs (as a percent) | -15.00% | -15.00% | -16.40% | -11.80% | |||||
Change in valuation allowance (as a percent) | -0.10% | -0.10% | 0.80% | 1.90% | |||||
Income tax refund (as a percent) | -7.30% | ||||||||
Effect of withholding income tax (as a percent) | 2.30% | 2.30% | 6.90% | 0.90% | |||||
Effective income tax rate (as a percent) | 12.10% | 12.10% | 10.70% | 16.20% | |||||
Net operating loss carryforwards and other tax disclosures | |||||||||
Total | 852,624 | 57,569 | 178,583 | 252,783 | 247,524 | 116,165 |
Taxation_Details_3
Taxation (Details 3) | 12 Months Ended |
Dec. 31, 2014 | |
Sales tax | |
Business tax rate, low end of range (as a percent) | 3.00% |
Business tax rate, high end of range (as a percent) | 5.00% |
Cultural development fee rate on advertising services revenue (as a percent) | 3.00% |
Value added tax rate (as a percent) | 17.00% |
Value added tax rate changed from business tax rate (as a percent) | 6.00% |
Business tax rate (as a percent) | 5.00% |
Taxation_Details_4
Taxation (Details 4) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | |
CNY | CNY | CNY | USD ($) | |
Deferred tax assets - Current: | ||||
Deferred revenue, primarily for advanced payments from online games customers | 96,223,000 | 80,115,000 | ||
Accruals | 124,418,000 | 64,374,000 | ||
Deferred tax assets - Current | 220,641,000 | 144,489,000 | ||
Less: valuation allowance | -18,601,000 | -15,207,000 | ||
Total | 202,040,000 | 129,282,000 | 32,563,000 | |
Deferred tax assets - Non-current: | ||||
Depreciation of fixed assets | 2,151,000 | 2,234,000 | ||
Impairment of license rights | 1,413,000 | |||
Net operating tax loss carry forward | 190,726,000 | 173,243,000 | ||
Amortization of Intangible assets | 19,009,000 | 20,851,000 | ||
Deferred tax assets - Non-Current | 211,886,000 | 197,741,000 | ||
Less: valuation allowance | -190,726,000 | -174,656,000 | ||
Total | 21,160,000 | 23,085,000 | 3,410,000 | |
Deferred tax liabilities - Current: | 101,997,000 | 148,506,000 | ||
Movement of the aggregate valuation allowances for deferred assets | ||||
Balance at the beginning of the period | 189,863,000 | 157,306,000 | 85,326,000 | |
Provision for the year | 19,464,000 | 32,557,000 | 71,980,000 | |
Balance at the end of the period | 209,327,000 | 189,863,000 | 157,306,000 | |
Withholding income tax | ||||
Withholding tax rate on dividend distributed by foreign investment entities to its immediate holding company outside of China (as a percent) | 10.00% | |||
Lower withholding income tax rate on dividend applied, if the FIE's immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China (as a percent) | 5.00% | |||
Accrued withholding tax liabilities | 344,700,000 | |||
Accrued withholding tax liabilities associated with annual dividend | 55,600,000 | |||
Accrued withholding tax liabilities associated with cash expected to be distributed from its PRC subsidiaries to overseas for general corporate purposes | 125,100,000 | 289,100,000 | 20,200,000 | |
Unrecognized deferred tax liabilities | 734,600,000 | 597,300,000 | $118,400,000 |
Taxes_Payable_Details
Taxes Payable (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY |
Taxes Payable | |||
Sales tax | 20,445 | 18,139 | |
Withholding individual income taxes for employees | 46,963 | 31,696 | |
Enterprise income taxes | 241,008 | 3,326 | |
Others | 25,874 | 21,302 | |
Total taxes payable | $53,878 | 334,290 | 74,463 |
Shortterm_Loan_Details
Short-term Loan (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 |
USD ($) | CNY | CNY | HSBC | HSBC | HSBC | HSBC | HSBC | HSBC | HSBC | HSBC | HSBC | JPMorgan Chase & Co. | JPMorgan Chase & Co. | |
agreement | USD ($) | CNY | Short-term loan one, due 12 months | Short-term loan one, due 12 months | Short-term loan two, due 12 months | Short-term loan two, due 12 months | Short-term loan three, due 3 months | Short-term loan three, due 3 months | USD ($) | CNY | ||||
USD ($) | CNY | USD ($) | CNY | USD ($) | CNY | |||||||||
Short-term loan | $330,378,000 | 2,049,865,000 | 975,504,000 | $161,100,000 | 975,500,000 | $110,000,000 | 673,100,000 | $90,000,000 | 550,700,000 | $45,000,000 | 275,400,000 | $90,000,000 | 550,700,000 | |
Short-term loan, fixed interest rate (as a percent) | 1.25% | 1.25% | 1.15% | 1.15% | 1.15% | 1.15% | 0.96% | 0.96% | 0.96% | 0.96% | ||||
Short-term loan, maturity term | 12 months | 12 months | 12 months | 12 months | 12 months | 12 months | 3 months | 3 months | 12 months | 12 months | ||||
Number of short-term loans | 3 | |||||||||||||
Deposits to secure short-term loan | 614,200,000 |
Accrued_Liabilities_and_Other_2
Accrued Liabilities and Other Payables (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) |
CNY | CNY | ||||
Accrued liabilities | |||||
RSU payables | 137,033 | 119,851 | |||
Customer deposits on Wangyibao accounts | 622,021 | 464,061 | |||
Marketing expenses | 294,401 | 158,298 | |||
Accrued fixed assets related payables | 80,942 | 9,449 | |||
Server custody fees and telecommunication charges | 64,614 | 38,850 | |||
Accrued revenue sharing | 27,838 | 11,448 | |||
Other staff related cost | 23,203 | 16,497 | |||
Content cost | 13,354 | 23,827 | |||
Professional fees | 11,939 | 10,517 | |||
Royalty and consulting fee payments due to Blizzard | 53,867 | ||||
Others | 81,883 | 50,634 | |||
Total accrued liabilities and other payables | $218,746 | 1,357,228 | 957,299 |
Other_Longterm_Payable_Details
Other Long-term Payable (Details) | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | USD ($) | CNY | CNY | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) |
CNY | CNY | ||||
Accrued liabilities | |||||
RSU long-term payable | 106,230 | 144,433 | |||
Other | 200 | 450 | |||
Total other long-term payable | $17,153 | 106,430 | 144,883 |
Mezzanine_Classified_Noncontro1
Mezzanine Classified Noncontrolling Interests (Details) | 0 Months Ended | 12 Months Ended | 0 Months Ended | 12 Months Ended | |||||
Nov. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Nov. 30, 2014 | Nov. 30, 2014 | Nov. 30, 2014 | Dec. 31, 2014 | Nov. 30, 2014 | |
subsidiary | CNY | CNY | CNY | Series A convertible redeemable preferred shares | Lede Inc. | Lede Inc. | Lede Inc. | Lede Inc. | |
Investor | Investor | Investor | Investor | ||||||
Series A convertible redeemable preferred shares | Series A convertible redeemable preferred shares | Series A convertible redeemable preferred shares | Series A convertible redeemable preferred shares | ||||||
USD ($) | CNY | CNY | USD ($) | ||||||
director | |||||||||
Mezzanine Classified Noncontrolling Interests [Abstract] | |||||||||
Number of subsidiaries that issued temporary equity | 1 | ||||||||
Number of Shares issued (in shares) | 5,673,796 | 5,673,796 | |||||||
Number of directors that were issued temporary equity | 2 | 2 | |||||||
Share price (in dollars per share) | $3.74 | ||||||||
Total consideration | $21,200,000 | 130,400,000 | |||||||
Share-based Compensation Expense | 349,277,000 | 306,308,000 | 203,018,000 | 0 | |||||
Anniversary period from the closing date of the purchase of the temporary equity under which redemption may be demanded if certain conditions fail to be met | 1 year |
Capital_Structure_Details
Capital Structure (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Vote | |
Capital Structure | |
Voting rights per share | 1 |
Employee_Benefits_Details
Employee Benefits (Details) (CNY) | 12 Months Ended | ||
In Millions, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Employee Benefits | |||
Contributions to medical and pension schemes | 264 | 205 | 160.9 |
Other employee benefits | 159.2 | 123 | 95.6 |
Total group's employee welfare benefits | 423.2 | 328 | 256.5 |
Sharebased_Compensation_Detail
Share-based Compensation (Details) | 12 Months Ended | 1 Months Ended |
Dec. 31, 2001 | Nov. 30, 2009 | |
2000 Stock Incentive Plan | ||
Share-based Compensation | ||
Number of ordinary shares reserved for issuance under the plan | 323,715,000 | |
Percentage increase in number of ordinary shares available under the plan every year | 3.00% | |
The maximum proportion of number of ordinary shares available under the share based compensation plan to the company's total outstanding ordinary shares | 17.50% | |
2009 RSU Plan | ||
Share-based Compensation | ||
Number of ordinary shares reserved for issuance under the plan | 323,694,050 | |
Term of plan | 10 years |
Sharebased_Compensation_Detail1
Share-based Compensation (Details 2) (CNY) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Share-based Compensation | |||
Number of preceding years considered for estimating forfeiture | 5 years | ||
Share-based compensation cost | |||
Share-based Compensation Expense | 349,277,000 | 306,308,000 | 203,018,000 |
Cost of revenues | |||
Share-based compensation cost | |||
Share-based Compensation Expense | 169,621,000 | 165,708,000 | 100,540,000 |
Selling and marketing expenses | |||
Share-based compensation cost | |||
Share-based Compensation Expense | 23,253,000 | 17,967,000 | 13,368,000 |
General and administrative expenses | |||
Share-based compensation cost | |||
Share-based Compensation Expense | 51,475,000 | 48,350,000 | 33,374,000 |
Research and development expenses | |||
Share-based compensation cost | |||
Share-based Compensation Expense | 104,928,000 | 74,283,000 | 55,736,000 |
Sharebased_Compensation_Detail2
Share-based Compensation (Details 3) | 12 Months Ended | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2014 | |
Stock Option | Stock Option | Stock Option | Stock Option | Stock Option | Stock Option | Stock Option | Stock Option | Stock Option | Stock Option | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | Restricted Stock Units (RSU) | 2000 Stock Incentive Plan | 2009 RSU Plan | 2009 RSU Plan | |
USD ($) | CNY | USD ($) | CNY | USD ($) | CNY | Employees | Employees | Employees | Director and Consultants | USD ($) | CNY | USD ($) | CNY | USD ($) | CNY | Employees | Employees | Employees | Senior Management | Director and Consultants | Director and Consultants | Director and Consultants | CNY | USD ($) | CNY | |
Share-based Compensation | ||||||||||||||||||||||||||
Total unrecognized compensation cost related to unvested awards | 0 | $144,900,000 | 899,000,000 | |||||||||||||||||||||||
Weighted average remaining vesting period over which unrecognized compensation cost is recognized | 3 years 1 month 21 days | 3 years 1 month 21 days | ||||||||||||||||||||||||
Number of ordinary shares issuable upon exercise of stock options: | ||||||||||||||||||||||||||
Outstanding at the beginning of the period (in shares) | 285,000 | 285,000 | 525,000 | 525,000 | 5,454,000 | 5,454,000 | 285,000 | 525,000 | 4,517,000 | 937,000 | ||||||||||||||||
Exercised (in shares) | -285,000 | -285,000 | -240,000 | -240,000 | -4,929,000 | -4,929,000 | -285,000 | -240,000 | -3,992,000 | -937,000 | ||||||||||||||||
Outstanding at the end of the period (in shares) | 285,000 | 285,000 | 525,000 | 525,000 | 285,000 | 525,000 | ||||||||||||||||||||
Weighted Average Exercise Price | ||||||||||||||||||||||||||
Outstanding at the beginning of the period (in dollars per share) | $1.66 | $1.66 | $0.88 | |||||||||||||||||||||||
Exercised (in dollars per share) | $1.66 | $1.66 | $0.79 | |||||||||||||||||||||||
Outstanding at the end of the period (in dollars per share) | $1.66 | $1.66 | ||||||||||||||||||||||||
Expired/forfeited (in shares) | 0 | 0 | ||||||||||||||||||||||||
Number of ordinary shares issuable upon vesting of restricted share units | ||||||||||||||||||||||||||
Outstanding at the beginning of the period (in shares) | 25,439,000 | 25,439,000 | 20,725,000 | 20,725,000 | 14,652,000 | 14,652,000 | 25,152,000 | 20,460,000 | 12,372,000 | 1,700,000 | 287,000 | 265,000 | 580,000 | |||||||||||||
Granted (in shares) | 30,624,000 | 30,624,000 | 18,658,000 | 18,658,000 | 18,716,000 | 18,716,000 | 30,429,000 | 18,371,000 | 18,451,000 | 195,000 | 287,000 | 265,000 | ||||||||||||||
Vested (in shares) | -17,450,000 | -17,450,000 | -13,083,000 | -13,083,000 | -8,680,000 | -8,680,000 | -17,200,000 | -12,818,000 | -8,390,000 | -250,000 | -265,000 | -290,000 | ||||||||||||||
Forfeited (in shares) | -1,539,000 | -1,539,000 | -861,000 | -861,000 | -3,963,000 | -3,963,000 | -1,539,000 | -861,000 | -1,973,000 | -1,700,000 | -290,000 | |||||||||||||||
Outstanding at end of the period (in shares) | 37,074,000 | 37,074,000 | 25,439,000 | 25,439,000 | 20,725,000 | 20,725,000 | 36,842,000 | 25,152,000 | 20,460,000 | 232,000 | 287,000 | 265,000 | ||||||||||||||
Total intrinsic value of options exercised and the total fair value of RSUs on vesting dates | ||||||||||||||||||||||||||
Total intrinsic value exercised | 400,000 | 2,700,000 | 200,000 | 1,400,000 | 6,300,000 | 39,100,000 | ||||||||||||||||||||
Total fair value vested | $48,600,000 | 301,600,000 | $27,300,000 | 165,300,000 | $18,600,000 | 115,800,000 |
Sharebased_Compensation_Detail3
Share-based Compensation (Details 4) | 12 Months Ended |
In Thousands, unless otherwise specified | Dec. 31, 2014 |
Restricted Stock Units (RSU) | |
Share-based Compensation | |
Number outstanding/ Exercisable | 75,772 |
Weighted Average Remaining Contractual Life | 3 years 15 days |
Performance-based settled in stock | |
Share-based Compensation | |
Number outstanding/ Exercisable | 10,103 |
Weighted Average Remaining Contractual Life | 3 years 7 months 24 days |
Time-based-settled in stock/cash | |
Share-based Compensation | |
Number outstanding/ Exercisable | 45,769 |
Weighted Average Remaining Contractual Life | 3 years 1 month 21 days |
Time-based-settled in stock | |
Share-based Compensation | |
Number outstanding/ Exercisable | 19,900 |
Weighted Average Remaining Contractual Life | 2 years 5 months 27 days |
Sharebased_Compensation_Detail4
Share-based Compensation (Details 5) (USD $) | Dec. 31, 2014 |
In Millions, except Share data, unless otherwise specified | |
2009 RSU Plan | |
Share-based Compensation | |
Number of shares available for future grant | 202,674,425 |
Restricted Stock Units (RSU) | |
Share-based Compensation | |
Aggregate intrinsic value of RSUs outstanding | 294.3 |
Company's closing stock price per ADS used to calculate intrinsic value | 99.14 |
Company's closing stock price per share used to calculate intrinsic value | 3.9656 |
Sharebased_Compensation_Detail5
Share-based Compensation (Details 6) (CNY) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expenses | 349,277,000 | 306,308,000 | 203,018,000 |
Lede Inc. | Lede Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
The maximum proportion of number of ordinary shares available under the share based compensation plan to the company's total outstanding ordinary shares | 18.00% | ||
Lede Inc. | Lede Plan | Stock Option | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of options granted | 10,851,933 | ||
Expiration period | 6 years | ||
Compensation expenses | 0 | ||
Lede Inc. | Lede Plan | Lede option type I | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Percentage of vesting of equity awards on the predefined Vesting Commencement Date | 100.00% | ||
Lede Inc. | Lede Plan | Lede option type II | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of equal installments of vesting of equity awards from the predefined Vesting Commencement Date | 5 |
Net_Income_Per_Share_Details
Net Income Per Share (Details) | 12 Months Ended | |||
In Thousands, except Share data, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | |
Numerator (RMB in thousands): | ||||
Net income attributable to NetEase, Inc.'s shareholders for basic/dilutive net income per share calculation | $766,628 | 4,756,623 | 4,443,910 | 3,637,452 |
Denominator (No. of shares in thousands): | ||||
Weighted average number of ordinary shares outstanding, basic (in shares) | 3,264,450,000 | 3,264,450,000 | 3,247,874,000 | 3,282,663,000 |
Dilutive effect of employee stock options and restricted share units | 12,599,000 | 12,599,000 | 8,423,000 | 5,667,000 |
Weighted average number of ordinary shares outstanding, diluted | 3,277,049,000 | 3,277,049,000 | 3,256,297,000 | 3,288,330,000 |
Net income per share, basic | $0.24 | 1.46 | 1.37 | 1.11 |
Net income per share, diluted | $0.23 | 1.45 | 1.36 | 1.11 |
Anti-dilutive ordinary shares and restricted share units excluded from the calculation of diluted net income per share | 3,200,000 | 3,200,000 | 2,900,000 | 4,200,000 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details) (CNY) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Rent expense - additional disclosures | |||
Rental expenses | 79,400,000 | 59,600,000 | 59,800,000 |
Total | |||
Commitments | |||
2015 | 372,485,000 | ||
2016 | 58,121,000 | ||
2017 | 29,525,000 | ||
2018 | 6,850,000 | ||
Beyond 2018 | 5,791,000 | ||
Total | 472,772,000 | ||
Rental Commitments | |||
Commitments | |||
2015 | 81,500,000 | ||
2016 | 33,428,000 | ||
2017 | 22,898,000 | ||
2018 | 2,287,000 | ||
Beyond 2018 | 5,791,000 | ||
Total | 145,904,000 | ||
Server Custody Fee Commitments | |||
Commitments | |||
2015 | 17,104,000 | ||
2016 | 312,000 | ||
2017 | 12,000 | ||
Total | 17,428,000 | ||
Capital Commitments | |||
Commitments | |||
2015 | 208,356,000 | ||
2016 | 19,629,000 | ||
2017 | 2,018,000 | ||
Total | 230,003,000 | ||
Office Machines and Other Commitments | |||
Commitments | |||
2015 | 65,525,000 | ||
2016 | 4,752,000 | ||
2017 | 4,597,000 | ||
2018 | 4,563,000 | ||
Total | 79,437,000 |
Commitments_and_Contingencies_2
Commitments and Contingencies (Details 2) (Blizzard) | Dec. 31, 2014 | Aug. 31, 2008 | Apr. 30, 2014 | Aug. 31, 2008 | Mar. 31, 2012 | Apr. 30, 2009 | Jul. 31, 2013 | Dec. 31, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Nov. 30, 2012 | Jun. 30, 2014 | Dec. 31, 2014 |
StarCraft II, Warcraft III: The Frozen Throne, Warcraft III: Reign of Chaos, World of Warcraft, Heroes of the Storm and Hearthstone: Heroes of Warcraft licensing agreements | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | Shanghai EaseNet | |
CNY | StarCraft II/Warcraft III: The Frozen Throne/Warcraft III: Reign of Chaos | StarCraft II/Warcraft III: The Frozen Throne/Warcraft III: Reign of Chaos/Battle.net platform | StarCraft II/Warcraft III: The Frozen Throne/Warcraft III: Reign of Chaos/Battle.net platform | World of Warcraft License Agreement | World of Warcraft License Agreement | Hearthstone : Heroes of Warcraft | Hearthstone : Heroes of Warcraft | Heroes of the Storm and Diablo III | Heroes of the Storm and Diablo III | Heroes of the Storm | Diablo III | Prescribed hardware purchase/lease commitments | |
item | CNY | USD ($) | CNY | Maximum | |||||||||
CNY | |||||||||||||
Commitments | |||||||||||||
Number of personal computer strategy games agreed to be licensed | 3 | ||||||||||||
Estimated useful lives of assets | 3 years | 3 years | 3 years | 3 years | 2 years | ||||||||
Extension in license term | 3 years | 1 year | 3 years | 1 year | |||||||||
License fees | 0 | ||||||||||||
Consultancy fees | 0 | ||||||||||||
Total commitment incurred for license contracts | 4,400,000,000 | ||||||||||||
Commitments under several license contracts | |||||||||||||
2015 | 1,181,000,000 | ||||||||||||
2016 | 509,000,000 | ||||||||||||
Total | 1,690,000,000 | 198,500,000 | |||||||||||
Total commitment expected to be incurred for license contracts | $123,300,000 | 765,100,000 |
Dividends_Details
Dividends (Details) | 1 Months Ended | 12 Months Ended | 0 Months Ended | 0 Months Ended | 12 Months Ended | ||||||
31-May-14 | Dec. 31, 2014 | Dec. 31, 2012 | Dec. 05, 2014 | Sep. 05, 2014 | Jun. 03, 2014 | Feb. 11, 2014 | Feb. 11, 2014 | Mar. 06, 2015 | Dec. 31, 2014 | Dec. 31, 2014 | |
CNY | CNY | ADS shares | ADS shares | ADS shares | ADS shares | ADS shares | ADS shares | ADS shares | ADS shares | ||
USD ($) | USD ($) | USD ($) | USD ($) | CNY | Subsequent event | Subsequent event | Subsequent event | ||||
USD ($) | USD ($) | CNY | |||||||||
Dividends | |||||||||||
Cash dividend per ADS (in dollars per share) | $1.41 | ||||||||||
Dividend payable | $183,300,000 | 1,109,700,000 | |||||||||
Quarterly cash dividend distribution percentage | 25.00% | ||||||||||
Cash dividend paid per ADS (in dollars per share) | $0.36 | $0.37 | $0.34 | $0.39 | |||||||
Cash dividend paid | 1,983,010,000 | 815,413,000 | $190,300,000 | 1,177,200,000 |
Share_Repurchase_Programs_Deta
Share Repurchase Programs (Details) | 12 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Nov. 20, 2013 | Nov. 30, 2012 | Feb. 28, 2014 | Nov. 20, 2013 | Feb. 28, 2015 | |
CNY | CNY | Ordinary shares | Ordinary shares | Ordinary shares | Ordinary shares | ADS shares | ADS shares | |
Share repurchase programs, Pre-2012 | 2012 Share repurchase program | 2012 Share repurchase program | 2014 share repurchase program | 2012 Share repurchase program | 2014 share repurchase program | |||
Program | USD ($) | USD ($) | USD ($) | |||||
Share repurchases | ||||||||
Number of share repurchase programs approved by the Board prior to 2012 | 5 | |||||||
Authorized amount | $100,000,000 | $100,000,000 | ||||||
Share repurchase program period, maximum | 12 months | 12 months | ||||||
Shares repurchased (in shares) | 48,600,000 | 2,020,000 | 0 | |||||
Value of shares repurchased | 99,262,000 | 422,489,000 | $83,000,000 |
Related_Party_Transactions_Det
Related Party Transactions (Details) (Series A convertible redeemable preferred shares, Investor, Lede Inc.) | 0 Months Ended | ||
In Millions, except Share data, unless otherwise specified | Nov. 30, 2014 | Nov. 30, 2014 | Nov. 30, 2014 |
USD ($) | CNY | USD ($) | |
Related Party Transactions | |||
Number of Shares issued (in shares) | 5,673,796 | 5,673,796 | |
Share Price | $3.74 | ||
Total consideration | $21.20 | 130.4 |
Segment_Information_Details
Segment Information (Details) | 12 Months Ended | ||||||||||||
In Thousands, unless otherwise specified | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
USD ($) | CNY | CNY | CNY | Online game services | Online game services | Online game services | Advertising services | Advertising services | Advertising services | E-mail, e-commerce and others | E-mail, e-commerce and others | E-mail, e-commerce and others | |
segment | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | CNY | ||||
Segment Information | |||||||||||||
Number of reportable segments | 3 | 3 | |||||||||||
Total revenues: | |||||||||||||
Revenues | $2,011,482 | 12,480,444 | 9,771,255 | 8,379,961 | 9,815,019 | 8,308,618 | 7,287,063 | 1,551,652 | 1,094,623 | 850,157 | 1,113,773 | 368,014 | 242,741 |
Sales tax expense | |||||||||||||
Sales tax expense | -123,716 | -767,610 | -575,080 | -179,005 | -548,861 | -444,154 | -86,478 | -154,583 | -107,156 | -82,680 | -64,166 | -23,770 | -9,847 |
Net revenues: | |||||||||||||
Net revenues | 1,887,766 | 11,712,834 | 9,196,175 | 8,200,956 | 9,266,158 | 7,864,464 | 7,200,585 | 1,397,069 | 987,467 | 767,477 | 1,049,607 | 344,244 | 232,894 |
Cost of revenues: | |||||||||||||
Cost of revenues | -525,665 | -3,261,544 | -2,478,516 | -2,578,067 | -2,111,701 | -1,649,803 | -1,872,734 | -528,665 | -461,286 | -474,165 | -621,178 | -367,427 | -231,168 |
Gross profit (loss): | |||||||||||||
Gross profit | $1,362,101 | 8,451,290 | 6,717,659 | 5,622,889 | 7,154,457 | 6,214,661 | 5,327,851 | 868,404 | 526,181 | 293,312 | 428,429 | -23,183 | 1,726 |
Financial_Instruments_Details
Financial Instruments (Details) | 12 Months Ended | |||||||
Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | |
USD ($) | CNY | CNY | Quoted Prices in Active Market for Identical Assets (Level 1) | Quoted Prices in Active Market for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |
CNY | CNY | CNY | CNY | CNY | ||||
Fair Value Measurements | ||||||||
Time deposits-short term | $2,981,107,000 | 18,496,574,000 | 16,625,468,000 | 18,496,574,000 | 16,625,468,000 | |||
Time deposits-long term | 108,468,000 | 673,000,000 | 500,000,000 | 673,000,000 | 500,000,000 | |||
Held-to-maturity securities-fixed rate investments | 350,528,000 | 350,528,000 | ||||||
Other short-term investments | 1,708,024,000 | 901,183,000 | 1,708,024,000 | 901,183,000 | ||||
Total | 21,228,126,000 | 18,026,651,000 | 19,169,574,000 | 17,125,468,000 | 2,058,552,000 | 901,183,000 | ||
Cost Method Investments, Fair Value Disclosure | 0 | |||||||
Impairment charges of an cost method investment | $3,875,000 | 24,040,000 |
Restricted_Net_Assets_Details
Restricted Net Assets (Details) (CNY) | 12 Months Ended |
Dec. 31, 2014 | |
Restricted Net Assets | |
Restricted net assets | 3,100,000,000 |
Percentage of restricted net assets | 13.00% |
Undistributed retained earnings in associated companies | 0 |
PRC | General reserve fund | Minimum | |
Restricted Net Assets | |
Required minimum percentage of annual appropriations | 10.00% |
PRC | Statutory surplus reserve | Minimum | |
Restricted Net Assets | |
Required minimum percentage of annual appropriations | 10.00% |