| Significant Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2018 |
| Accounting Policies [Abstract] | |
| Principles of Consolidation | Principles of Consolidation
The consolidated financial statements include the financial
statements of the Company, its subsidiaries, VIEs and subsidiaries
of the VIEs. All inter-company transactions and balances between
the Company, its subsidiaries, VIEs and subsidiaries of the VIEs
are eliminated upon consolidation. The Company included the results
of operations of acquired businesses from the respective dates of
acquisition. |
| Use of Estimates | Use of Estimates
The preparation of the financial statements in conformity with U.S.
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 date of the
financial statements and the reported amounts of revenues and
expenses during the period. Management evaluates estimates,
including those related to the standalone selling prices of
performance obligations of revenue contracts, accounts receivable
and contract assets allowances, credit loss allowance for micro
loan receivables, fair values of certain debt and equity
investments, amortization and impairment of licensed copyrights and
produced content, ultimate revenue of produced content, fair value
of nonmonetary content exchanges, impairment of long-lived assets,
long-term investments and goodwill, the purchase price allocation
and fair value of noncontrolling interests with respect to business
combinations, deferred tax valuation allowance, and redeemable
noncontrolling interests, among others. Management bases the
estimates on historical experience and on various other assumptions
that are believed to be reasonable, the results of which form the
basis for making judgments about the carrying values of assets and
liabilities. Actual results could differ from these estimates. |
| Foreign Currency | Foreign Currency
The Company’s functional currency is the US$. The
Company’s subsidiaries, VIEs and subsidiaries of the VIEs
determine their functional currencies based on the criteria of ASC
Topic 830, Foreign Currency Matters |
| Segment Reporting | Segment Reporting
As of December 31, 2017 and 2018, the Company had two
reportable segments, Baidu Core and iQIYI. Baidu Core mainly
provides search-based, feed-based, and other online marketing
services, as well as new artificial intelligence business. Search
Services and Transaction Services were combined into Baidu Core
beginning April 2017, to reflect the Company’s strategic and
operational change to de-emphasize its transaction services
business and shift more resources to support its online marketing
and other services. iQIYI is an online entertainment service
provider that, offers original, professionally produced and
partner-generated content on its platform. In early April 2018,
iQIYI completed its initial public offering (“IPO”) on
the Nasdaq Global Market.
The Company’s chief executive officer, who has been
identified as the chief operating decision marker
(“CODM”), reviews the operating results of Baidu Core
and iQIYI, to allocate resources and assess the Company’s
performance. Accordingly, the financial statements include segment
information which reflects the current composition of the
reportable segments in accordance with ASC Topic
280, Segment Reporting. |
| Business Combinations | Business Combinations
The Company accounts for its business combinations using the
purchase method of accounting in accordance with ASC Topic 805,
Business Combinations
In a business combination achieved in stages, the Company
remeasures its previously held equity interest in the acquiree
immediately before obtaining control at its acquisition-date fair
value and the re-measurement
The determination and allocation of fair values to the identifiable
assets acquired, liabilities assumed and noncontrolling interests
is based on various assumptions and valuation methodologies
requiring considerable judgment from management. The most
significant variables in these valuations are discount rates,
terminal values, the number of years on which to base the cash flow
projections, as well as the assumptions and estimates used to
determine the cash inflows and outflows. The Company determines
discount rates to be used based on the risk inherent in the related
activity’s current business model and industry comparisons.
Terminal values are based on the expected life of assets, and
forecasted cash flows over that period. |
| Cash and Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents
Cash and cash equivalents primarily consist of cash, money market
funds, investments in interest bearing demand deposit accounts,
time deposits and highly liquid investments with original
maturities of three months or less from the date of purchase and
are stated at cost which approximates their fair value.
Restricted cash
Restricted cash mainly consists of the cash reserved in escrow
accounts at certain banks as online payment service deposits and
cash pledged for bank loan facility.
In November 2016, the FASB issued Accounting
Standards Update No. 2016-18, Statement
of Cash Flows (Topic 230): Restricted Cash end-of-period |
| Accounts Receivable, net of allowance | Accounts Receivable, net of allowance
Accounts receivable are recognized and carried at the original
invoiced amount less an allowance for any potential uncollectible
amounts. An estimate for doubtful debts is made when collection of
the full amount is no longer probable. Receivable balances are
written off when they are deemed uncollectible. The Company
generally does not require collateral from its customers.
The Company maintains allowances for doubtful accounts for
estimated losses resulting from the failure of customers to make
payments on time. The Company reviews the accounts receivable on a
periodic basis and makes general and specific allowances when there
is doubt as to the collectability of individual balances. In
evaluating the collectability of individual receivable balances,
the Company considers many factors, including the age of the
balance, the customer’s payment history, its current
credit-worthiness and current economic trends. |
| Receivables from Online Payment Agencies, net of allowance | Receivables from Online Payment Agencies, net of
allowance
Receivables from online payment agencies are funds due from the
third-party online payment service providers for clearing
transactions. Funds were paid or deposited by customers or users
through these online payment agencies for services provided by the
Company. The Company carefully considers and monitors the credit
worthiness of the third-party payment service providers used. An
allowance for doubtful accounts is recorded in the period in which
a loss is determined to be probable. Receivable balances are
written off when they are deemed uncollectible. The balances are
included in “Other current assets, net” on the
consolidated balance sheets. As of December 31, 2017 and 2018,
no allowance for doubtful accounts was provided for the receivables
from online payment agencies. |
| Loan and Interest Receivables, net of allowance | Loan and Interest Receivables, net of allowance
Loan and interest receivables consist primarily of micro loans to
individual borrowers. Such amounts are recorded at the principal
net of allowance for credit losses relating to micro loans, and
include accrued interest receivable as of the balance sheet date.
The loan periods granted by the Company to the borrowers related to
the micro loans generally range from one month to thirty-six
Allowance for credit losses relating to micro loans represent the
Company’s best estimate of the losses inherent in the
outstanding portfolio of loans. Judgment is required to determine
the allowance amounts and whether such amounts are adequate to
cover potential credit losses, and periodic reviews are performed
to ensure such amounts continue to reflect the best estimate of the
losses inherent in the outstanding portfolio of debts. The Company
bases the allowance for loan and interest receivables credit losses
primarily on historical loss experience using a roll rate-based
model applied to the loan and interest receivables portfolios. The
Company considers many factors, including but not limited to, the
age of the amounts due, the payment history, the month of
origination, the purpose of the loans, creditworthiness, financial
conditions of the borrower, terms of the loans, regulatory
environment, and the general economic conditions. In August 2018,
the Company completed the divestiture of its financial services
business, and related loan and interest receivable balances were
derecognized from the consolidated balance sheet upon disposal
(Note 4). |
| Investments | Investments
Short-term
All highly liquid investments with original maturities of greater
than three months, but less than twelve months, are classified as
short-term investments. Investments that are expected to be
realized in cash during the next twelve months are also included in
short-term investments.
The Company accounts for short-term debt investments in accordance
with ASC Topic 320, Investments—Debt
Securities . “held-to-maturity,” “available-for-sale,”
Securities that the Company has positive intent and ability to hold
to maturity are classified as held-to-maturity held-to-maturity
Securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading securities,
in accordance with ASC 320. Unrealized holding gains and losses for
trading securities are included in earnings.
Debt investments not classified as trading or
as held-to-maturity available-for-sale available-for-sale
Other invested securities
Other invested securities represent investments purchased by the
Company for its financial services business and are resold to
third-party investors. These transactions do not meet the
requirements of asset derecognition in accordance with ASC Topic
860, Transfers and
Servicing .
Long-term investments
The Company’s long-term investments consist of equity
investments with and equity investments without readily
determinable fair value, equity method
investments, available-for-sale
Prior to adopting ASC Topic
321, Investments—Equity
Securities 325-20, Investments-Other:
Cost Method Investments
Management regularly evaluates the impairment of the cost method
investments based on the 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 the
investment.
Subsequent to the Company’s adoption of ASC 321 on
January 1, 2018, the cumulative effect of RMB1.9 billion
(US$270 million) representing the unrealized gains and losses
of available-for-sale Fair
Value Measurements and
Disclosures
Pursuant to ASC 321, for equity investments measured at fair value
with changes in fair value recorded in earnings, the Company does
not assess whether those securities are impaired. For those equity
investments that the Company elects to use the measurement
alternative, the Company makes a qualitative assessment of whether
the investment is impaired at each reporting date. If a qualitative
assessment indicates that the investment is impaired, the entity
has to estimate the investment’s fair value in accordance
with the principles of ASC 820. If the fair value is less than the
investment’s carrying value, the entity has to recognize an
impairment loss in net income equal to the difference between the
carrying value and fair value.
Available-for-sale
Investments in entities in which the Company can exercise
significant influence but does not own a majority equity interest
or control are accounted for using the equity method of accounting
in accordance with ASC Topic
323, Investments-Equity Method and Joint
Ventures
The Company evaluates the equity method investments for impairment
whenever events or changes in circumstances indicate that the
carrying amount of the investment might not be recoverable. Factors
considered by the Company when determining whether an investment
has been other-than-temporarily-impaired, includes, but not limited
to, the length of the time and the extent to which the market value
has been less than cost, the financial performance and near-term
prospect of the investee, and the Company’s intent and
ability to retain the investment until the recovery of its cost. An
impairment loss on the equity method investments is recognized in
earnings when the decline in value is determined to be
other-than-temporary.
In accordance with ASC 946-320 Financial
Services—Investment Companies, Investments—Debt and
Equity Securities, re-measured |
| Transfers of Financial Assets | Transfers of Financial Assets
The Company accounts for the transfers of financial assets in
accordance with ASC 860. Financial assets are derecognized from the
Company’s consolidated balance sheets if the transfer
qualifies as sales. If the conditions for sale required by ASC 860
are not met, the transfer is considered to be a secured borrowing
included in “Amounts due to the third-party investors”
on the consolidated balance sheets. The assets remain on the
consolidated balance sheets as “Other invested
securities” and the sale proceeds are recognized as the
Company’s liability. All other invested securities and
liability balances were derecognized from the consolidated balance
sheet upon disposal of the financial services business (Note
4). |
| Fair Value Measurements of Financial Instruments | Fair Value Measurements of Financial Instruments
Financial instruments are in the form of cash and cash equivalents,
restricted cash, short-term investments, other invested securities,
accounts receivable, loan and interest receivables, amounts due
from and due to related parties, other receivables, long-term
investments, short-term loans, accounts payable and accrued
liabilities, customer advances and deposits, derivative
instruments, notes payable, convertible senior notes and long-term
loans. The carrying values of the aforementioned financial
instruments included in current assets and liabilities approximate
their respective fair values because of their general short
maturities. The carrying amounts of long-term loans approximate
fair values as the related interest rates approximate rates
currently offered by financial institutions for similar debt
instruments of comparable maturities. |
| Fixed Assets | Fixed Assets
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is recorded on a straight-line basis over the shorter
of the estimated useful lives of the assets or the term of the
related lease, as follows:
Office building
– 43 to 45 years
Office building related facility, machinery and equipment
– 15 years
Computer equipment
– 3 to 5 years
Office equipment
– 3 to 5 years
Vehicles
– 5 years
Leasehold improvements
– over the shorter of lease terms or estimated useful lives
of the assets
Fixed assets have no estimated residual value except for the office
building and its related facility, machinery and equipment, which
have an estimated residual value of 4% of the cost.
Repair and maintenance costs are charged to expense as incurred,
whereas the cost of renewals and betterments that extend the useful
life of fixed assets are capitalized as additions to the related
assets. Retirements, sales and disposals of assets are recorded by
removing the cost and accumulated depreciation from the asset and
accumulated depreciation accounts with any resulting gain or loss
reflected in earnings. All direct and indirect costs that are
related to the construction of fixed assets and incurred before the
assets are ready for their intended use are capitalized as
construction in progress. Construction in progress is transferred
to specific fixed assets items and depreciation of these assets
commences when they are ready for their intended use.
Interest costs are capitalized if they are incurred during the
acquisition, construction or production of a qualifying asset and
such costs could have been avoided if expenditures for the assets
have not been made. Capitalization of interest costs commences when
the activities to prepare the asset are in progress and
expenditures and borrowing costs are being incurred. Interest costs
are capitalized until the assets are ready for their intended use.
Interest costs capitalized for the years ended December 31,
2016, 2017 and 2018 were insignificant. |
| Licensed Copyrights | Licensed Copyrights
Licensed copyrights consist of professionally-produced content such
as movies, television series, variety shows, sports and other video
content acquired from external parties. The license fees are
capitalized and, unless prepaid, a corresponding liability recorded
when cost of the content is known, the content has been accepted by
us in accordance with the conditions of the license agreement and
the content is available for its first showing on our internet
platform. Licensed copyrights are carried at the lower of
unamortized cost or net realizable value. The
current and non-current portions non-exclusive and non-exclusive
Non-exclusive licensed Other non-exclusive licensed certain non-episodic features, Accounting Changes and Error
Corrections
The purchase cost of exclusive licensed copyrights includes the
right to broadcast and the right to sublicense to third parties.
The Company allocates content cost to these two rights when the
exclusive licensed copyrights are initially recognized, based on
the relative proportion of our estimate of the total revenues that
will be generated by each right. Content costs related to the
broadcasting right, which is the portion of an exclusive licensed
copyright that generates direct and indirect advertising and
membership revenues, are amortized in accordance with
ASC Subtopic 920-350, Entertainment-Broadcasters:
Intangibles—Goodwill and
Other (“ASC 920-350”), as non-exclusive licensed Entertainment—Films
On a periodic basis, the Company evaluates the program usefulness
of the broadcasting rights of its licensed copyrights and record
such rights at the lower of unamortized cost or estimated net
realizable value pursuant to the guidance
in ASC 920-350. When
Net realizable value is determined by estimating the expected cash
flows generated from the provision of online advertising and
membership services, less any direct costs, over the remaining
useful lives of non-exclusive licensed Entertainment—Films: Other Assets—Film
Costs |
| Goodwill and Intangible Assets | Goodwill and Intangible Assets
Goodwill
The Company assesses goodwill for impairment in accordance with ASC
Subtopic 350-20, Intangibles—Goodwill
and Other: Goodwill 350-20.
The Company has the option to assess qualitative factors first to
determine whether it is necessary to perform
the two-step 350-20. more-likely-than-not two-step two-step
The Company performed qualitative assessments for the reporting
unit of Baidu Core in 2017 and 2018. Based on the requirements of
ASC 350-20, more-likely-than-not
The Company elected to assess goodwill for impairment
using the two-step process
Intangible assets
Intangible assets with finite lives are carried at cost less
accumulated amortization. Land use rights are amortized using a
straight-line method over the shorter of their estimated useful
lives or the terms of the related land use right contracts. All
other intangible assets with finite lives are amortized using the
straight-line method over the estimated useful lives, except for
the sublicensing rights and certain licensed copyrights.
Intangible assets have weighted average useful lives from the date
of purchase as follows:
Land use rights – 50 years
Customer relationships – 3 years
Software – 5 years
Trademarks – 9 years
User list – 3 years
Licensed copyrights of video contents – 3 years
Others – 6 years
Intangible assets with an indefinite useful life are not amortized
and are tested for impairment annually or more frequently if events
or changes in circumstances indicate that they might be impaired in
accordance with ASC Subtopic 350-30, Intangibles-Goodwill
and Other: General Intangibles Other than
Goodwill |
| Produced Content, net | Produced Content, net
The Company produces and contracts external parties to produce
films and episodic series to exhibit on its websites. Produced
content includes direct production costs, production overhead and
acquisition costs and is stated at the lower of unamortized cost or
estimated fair value. Produced content also includes cash
expenditures made to acquire a proportionate share of certain
rights to films including profit sharing, distribution and/or other
rights. Produced content exceeding the total revenues to be earned
(“ultimate revenue”) is expensed as cost of
revenues.
The Company uses the individual-film-forecast-computation method
and amortizes the produced content based on the ratio of current
period actual revenue (numerator) to estimated remaining
unrecognized ultimate revenue as of the beginning of the fiscal
year (denominator) in accordance with
ASC 926-20.
The Company reviews unamortized produced content costs for
impairment whenever events or circumstances indicate that the fair
value of the produced content may be less than its unamortized
cost. Produced content was presented as
“Other non-current |
| Impairment of Long-Lived Assets Other Than Goodwill | Impairment of Long-Lived Assets Other Than
Goodwill
The Company evaluates long-lived assets, such as fixed assets and
purchased or internally developed intangible assets with finite
lives, for impairment whenever events or changes in circumstances
indicate the carrying value of an asset may not be recoverable in
accordance with ASC Topic 360, Property, Plant and
Equipment |
| Revenue Recognition | Revenue Recognition
The Company adopted ASC Topic 606 Revenue from
Contracts with Customers Revenue
Recognition
Revenue is recognized when control of promised goods or services is
transferred to the Company’s customers in an amount of
consideration to which an entity expects to be entitled to in
exchange for those goods or services. Starting from January 1,
2018, value added taxes (“VAT”) was reclassified from
cost of revenue to net against revenues in accordance with ASC 606.
The Company recognized VAT of RMB3.9 billion,
RMB4.8 billion and RMB6.1 billion (US$884 million) for
the years ended December 31, 2016, 2017 and 2018,
respectively. Other than the presentation of VAT, the impact from
adopting ASC 606 was not material to the Company’s
consolidated financial statements as of and for the year ended
December 31, 2018.
The following table presents the Company’s revenues
disaggregated by revenue source:
For the years ended
December 31, December 31, December 31, December 31,
RMB RMB RMB US$
(In
millions)
Online marketing 64,525 73,146 81,912 11,914
iQIYI membership service 3,759 6,532 10,603 1,542
iQIYI content distribution 501 1,192 2,163 315
Interest income earned from provision of financial services 222 1,658 1,724 251
Others 1,542 2,281 5,875 854
Other revenue 6,024 11,663 20,365 2,962
Total revenue 70,549 84,809 102,277 14,876
The Company’s revenue recognition policies effective on the
adoption date of ASC 606 are as follows:
Performance-based online marketing services
Cost-per-click
The Company’s auction-based P4P platform enables customers to
bid for priority placement of their paid sponsored links. The P4P
platform enables customers to reach users who search for
information related to their products or services. The P4P services
include search-based online marketing services and feed-based
online marketing services. The P4P online marketing customers may
choose to set a daily limit on the amount spent and may also choose
to target only users accessing our website from specified regions
in China and/or during a specific time period of the day.
Besides the Company’s traditional search-based P4P services,
the Company also displays feed-based marketing to target the right
feed users based on user data on the Company’s platform.
Customers pay the Company when a targeted user clicks
the feed-based marketing and are directed to its
platforms.
Revenue is recognized when all of the revenue recognition criteria
are met, which is generally when a user clicks on one of the
customer-sponsored links or feed-based marketing.
Other performance-based online marketing services
To the extent the Company provides online marketing services based
on performance criteria other than cost-per-click, the pre-determined ratios
Display advertisements
The Company provides display-based online advertising services to
its customers by integrating text description, image and video, and
displaying the advertisement in a prominent position of the search
result page, vertical search products or Baidu Feed. The Company
recognizes revenue on a pro-rata
Online marketing services involving Baidu Union
Baidu Union is a program through which the Company expands
distribution of its customers’ sponsored links or
advertisements by leveraging the traffic of Baidu Union
partners’ internet properties. The Company makes payments to
Baidu Union partners for the acquisition of traffic. The Company is
the principal in these transactions, as it is primarily responsible
for fulfilling the service, has discretion in establishing pricing
and controls the advertising inventory before the transfer to
customers. Therefore, revenue is recognized on a gross basis on the
amount of fees it billed to its customers. Payments made to Baidu
Union partners are recorded as traffic acquisition costs, which are
included in “Cost of revenues” in the consolidated
statements of comprehensive income.
Membership services
The Company offers membership services that provide subscribing
members access to stream a library of premium content or personal
cloud service in exchange for
upfront non-refundable
Content distribution
The Company generates revenues from sub-licensing sub-license non-exclusive sub-license sub-licensee sub-licensing sub-license sub-licensing sub-licensee sub-license
The Company also enters into nonmonetary transactions to exchange
online broadcasting rights of licensed copyrights with other online
video broadcasting companies from time to time. The exchanged
licensed copyrights provide rights for each party to broadcast the
licensed copyrights received on its own website only. Each
transferring party retains the right to continue broadcasting the
exclusive content on its own website and/or sublicense the rights
to the content it surrendered in the exchange. The Company accounts
for these nonmonetary exchanges in accordance with ASC 606, and
records the transaction based on the fair value of the asset
received starting from January 1, 2018. Barter sublicensing
revenue are recognized in accordance with the same ASC 606 criteria
above. The Company estimates the fair value of the licensed
copyrights received based on various factors, including
broadcasting schedule, cast and crew, theme and popularity, box
office and market share of counterparties to the exchange. The
attributable cost of cash sublicensing transactions, whether for
cash or through nonmonetary exchanges, is recognized as cost of
revenues through the amortization of the sublicensing right
component of the exclusive licensed copyright, computed using the
individual-film-forecast-computation method in accordance with ASC
926.
The Company recognized barter sublicensing revenues of
RMB382 million, RMB763 million and RMB1.1 billion
(US$158 million) and related costs of RMB363 million,
RMB650 million and RMB1.0 billion (US$149 million) for
the years ended December 31, 2016, 2017 and 2018,
respectively.
Barter transactions
The Company engages in certain barter transactions other than
licensed copyrights of video contents, such as advertising, from
time to time. The transaction price of the nonmonetary
consideration is measured at fair value at contract inception. If
fair value cannot be reasonably estimated, the Company measures the
consideration indirectly by reference to the standalone selling
price of the services promised to the customer in exchange for the
consideration. Revenues recognized on advertising barter
transactions were immaterial for the years ended December 31,
2016, 2017 and 2018.
Financial services
The Company offers financial services which include provision of
installment payment services to consumers and wealth management
services to third-party investors. Interest income earned from
provision of financial services is reported as “Other
revenues” and reported on a net basis after deduction of
related interest costs incurred. The Company recognized gross
interest income of RMB3.5 billion and RMB3.3 billion
(US$483 million) and interest costs of RMB1.9 billion and
RMB1.6 billion (US$232 million) for the years ended
December 31, 2017 and 2018, respectively. Gross interest
income and interest costs recognized for the year ended
December 31, 2016 were insignificant. The financial services
business was disposed of in August 2018 (Note 4).
Other revenue recognition related policies
For arrangements that include multiple performance obligations,
primarily for advertisements to be displayed in different spots,
placed under different forms and displayed at different times, the
Company would evaluate all the performance obligations in the
arrangement to determine whether each performance obligation is
distinct. Consideration is allocated to each performance obligation
based on its standalone selling price. If a promised good or
service does not meet the criteria to be considered distinct, it is
combined with other promised goods or services until a distinct
bundle of goods or services exists.
Timing of revenue recognition may differ from the timing of
invoicing to customers. For certain services customers are required
to pay before the services are delivered to the customer. When
either party to a revenue contract has performed, the Company
recognizes a contract asset or a contract liability in the
consolidated balance sheet, depending on the relationship between
the entity’s performance and the customer’s payment.
Contract liabilities were mainly related to fees for membership
services to be provided over the membership period, which were
presented as deferred revenue on the consolidated balance sheets.
The increase in deferred revenue as compared to the year
ended December 31, 2017 is a result of the increase
in consideration received from the Company’s customers.
The opening balance of contract assets were RMB832 million as
of January 1, 2018. As of December 31, 2018, contract
assets of RMB1.4 billion (US$206 million), net of allowance
for doubtful accounts of RMB21 million (US$3 million) were
recognized and included in “Other current assets, net”
on the consolidated balance sheet.
The Company does not disclose the value of unsatisfied performance
obligations for (i) contracts with an original expected length
of one year or less and (ii) contracts for which the Company
recognizes revenue at the amount to which it has the right to
invoice for services performed.
The Company provides sales incentives to customers which entitle
them to receive reductions in the price of the online marketing
services by meeting certain cumulative consumption requirements.
The Company accounts for these incentives granted to customers as
variable consideration and net against revenue. The amount of
variable consideration is measured based on the most likely amount
of incentives to be provided to customers. |
| Cost of Revenues | Cost of Revenues
Cost of revenues consists primarily of traffic acquisition costs,
bandwidth costs, depreciation, content costs, payroll and related
costs of operations. Starting from January 1, 2018, VAT was
recorded net against revenue instead of as cost of revenue.
Traffic acquisition costs represent the amounts paid or payable to
Baidu Union partners who direct search queries to the
Company’s websites or distribute the Company’s
customers’ paid links through their properties. These
payments are primarily based on revenue sharing arrangements under
which the Company pays its Baidu Union partners and other business
partners a percentage of the fees it earns from its online
marketing customers. |
| Advertising and Promotional Expenses | Advertising and Promotional Expenses
Advertising and promotional expenses, including advertisements
through various forms of media and kinds of marketing and
promotional activities, are included in “Selling, general and
administrative expense” in the consolidated statements of
comprehensive income (loss) and are expensed when incurred.
Advertising and promotional expenses for the years ended
December 31, 2016, 2017 and 2018 were RMB7.7 billion,
RMB4.6 billion and RMB10.1 billion (US$1.5 billion),
respectively. |
| Government Subsidies | Government Subsidies
Government subsidies primarily consist of financial subsidies
received from provincial and local governments for operating a
business in their jurisdictions and compliance with specific
policies promoted by the local governments. For certain government
subsidies, there are no defined rules and regulations to govern the
criteria necessary for companies to receive such benefits, and the
amount of financial subsidy is determined at the discretion of the
relevant government authorities. The government subsidies of
non-operating non-operating |
| Leases | Leases
Leases are classified as either capital or operating leases. Leases
that transfer substantially all the benefits and risks incidental
to the ownership of assets are accounted for as capital leases as
if there was an acquisition of an asset and incurrence of an
obligation at the inception of the lease. All other leases are
accounted for as operating leases wherein rental payments are
expensed as incurred. |
| Income Taxes | Income Taxes
The Company recognizes income taxes under the liability method.
Deferred income taxes are recognized for differences between the
financial reporting and tax bases of assets and liabilities at
enacted tax rates in effect for the years in which the differences
are expected to reverse. The Company records a valuation allowance
against the amount of deferred tax assets that it determines is not
more-likely-than-not
The Company applies the provisions of ASC Topic 740, Income
Taxes |
| Share-based Compensation | Share-based Compensation
The Company accounts for share-based compensation in accordance
with ASC Topic 718, Compensation-Stock Compensation
Forfeitures are estimated based on historical experience and are
periodically reviewed. Cancellation of an award accompanied by the
concurrent grant of a replacement award is accounted for as a
modification of the terms of the cancelled award (“modified
awards”). The compensation costs associated with the modified
awards are recognized if either the original vesting condition or
the new vesting condition is achieved. Total recognized
compensation cost for the awards is at least equal to the fair
value of the awards at the grant date unless at the date of the
modification the performance or service conditions of the original
awards are not expected to be satisfied. The incremental
compensation cost is measured as the excess of the fair value of
the replacement award over the fair value of the cancelled award at
the cancellation date. Therefore, in relation to the modified
awards, the Company recognizes share-based compensation over the
vesting periods of the replacement award, which comprises,
(i) the amortization of the incremental portion of share-based
compensation over the remaining vesting term and (ii) any
unrecognized compensation cost of the original award, using either
the original term or the new term, whichever results in higher
expenses for each reporting period.
The Company accounts for share awards issued to non-employees 505-50, Equity: Equity-based
Payments to Non-Employees non-employees |
| Earnings Per Share ("EPS") | Earnings Per Share (“EPS”)
The Company computes earnings per Class A and Class B
ordinary shares in accordance with ASC Topic 260, Earnings Per
Share
Diluted earnings per share is computed using the weighted average
number of ordinary shares and, if dilutive, potential ordinary
shares outstanding during the period. Potentially dilutive
securities such as convertible senior notes have been excluded from
the computation of diluted net income per share if their inclusion
is anti-dilutive. Potential ordinary shares consist of the
incremental ordinary shares issuable upon the exercise of stock
options, restricted shares subject to forfeiture, and contracts
that may be settled in the Company’s stock or cash. The
dilutive effect of outstanding stock options and restricted shares
is reflected in diluted earnings per share by application of the
treasury stock method. The computation of the diluted earnings per
Class A ordinary share assumes the conversion of Class B
ordinary shares to Class A ordinary shares, while diluted
earnings per Class B ordinary share does not assume the
conversion of such shares.
The liquidation and dividend rights of the holders of the
Company’s Class A and Class B ordinary shares are
identical, except with respect to voting rights. As a result, and
in accordance with ASC 260, the undistributed earnings for each
year are allocated based on the contractual participation rights of
the Class A and Class B ordinary shares as if the
earnings for the year had been distributed. As the liquidation and
dividend rights are identical, the undistributed earnings are
allocated on a proportionate basis. Further, as the conversion of
Class B ordinary shares is assumed in the computation of the
diluted earnings per Class A ordinary share, the undistributed
earnings are equal to net income for that computation.
For the purposes of calculating the Company’s basic and
diluted earnings per Class A and Class B ordinary shares,
the ordinary shares relating to the options that were exercised are
assumed to have been outstanding from the date of exercise of such
options. |
| Contingencies | Contingencies
The Company records accruals for certain of its outstanding legal
proceedings or claims when it is probable that a liability will be
incurred and the amount of loss can be reasonably estimated. The
Company evaluates, on a quarterly basis, developments in legal
proceedings or claims that could affect the amount of any accrual,
as well as any developments that would make a loss contingency both
probable and reasonably estimable. The Company discloses the amount
of the accrual if it is material.
When a loss contingency is not both probable and estimable, the
Company does not record an accrued liability but discloses the
nature and the amount of the claim, if material. However, if the
loss (or an additional loss in excess of the accrual) is at least
reasonably possible, then the Company discloses an estimate of the
loss or range of loss, unless it is immaterial or an estimate
cannot be made. The assessment of whether a loss is probable or
reasonably possible, and whether the loss or a range of loss is
estimable, often involves complex judgments about future events.
Management is often unable to estimate the loss or a range of loss,
particularly where (i) the damages sought are indeterminate,
(ii) the proceedings are in the early stages, or
(iii) there is a lack of clear or consistent interpretation of
laws specific to the industry-specific complaints among different
jurisdictions. In such cases, there is considerable uncertainty
regarding the timing or ultimate resolution of such matters,
including eventual loss, fine, penalty or business impact, if
any. |
| Concentration of Risks | Concentration of Risks
Concentration of credit risk
Financial instruments that potentially subject the Company to
significant concentration of credit risk primarily consist of cash
and cash equivalents, restricted cash, short-term investments,
accounts receivable, and amounts due from related parties. As of
December 31, 2018, the Company has RMB141.5 billion
(US$20.6 billion) in cash and cash equivalents, restricted cash,
and short-term investments, 94% and 6% of which are held by
financial institutions in the PRC and international financial
institutions outside of the PRC, respectively. The Company’s
total cash and cash equivalents, restricted cash, and short-term
investments held at four financial institutions in the PRC exceeded
10%, representing 37%, 15%, 13%, and 11% of the Company’s
total cash and cash equivalents, restricted cash, and short-term
investments as of December 31, 2018, respectively.
PRC state-owned banks, such as Bank of China, are subject to a
series of risk control regulatory standards, and PRC bank
regulatory authorities are empowered to take over the operation and
management when any of those banks faces a material credit crisis.
The Company does not foresee substantial credit risk with respect
to cash and cash equivalents, restricted cash and short-term
investments held at the PRC state-owned banks. Meanwhile, China
does not have an official deposit insurance program, nor does it
have an agency similar to what was the Federal Deposit Insurance
Corporation (FDIC) in the U.S. In the event of bankruptcy of one of
the financial institutions in which the Company has deposits or
investments, it may be unlikely to claim its deposits or
investments back in full. The Company selected reputable
international financial institutions with high rating rates to
place its foreign currencies. The Company regularly monitors the
rating of the international financial institutions to avoid any
potential defaults. There has been no recent history of default in
relation to these financial institutions.
Accounts receivable are typically unsecured and derived from
revenue earned from customers and agents in China, which are
exposed to credit risk. The risk is mitigated by credit evaluations
the Company performs on its customers and its ongoing monitoring
process of outstanding balances. The Company maintains reserves for
estimated credit losses and these losses have generally been within
its expectations. As of December 31, 2017 and 2018, the
Company had no single customer with a receivable balance exceeding
10% of the total accounts receivable balance.
No customer or any Baidu Union partner generated greater than 10%
of total revenues in any of the three years presented.
Amounts due from related parties are typically unsecured. In
evaluating the collectability of the amounts due from related
parties balance, the Company considers many factors, including the
related parties’ repayment history and their
credit-worthiness. An allowance for doubtful accounts is made when
collection of the full amount is no longer probable.
Business and economic risks
The Company participates in a dynamic high technology industry and
believes that changes in any of the following areas could have a
material adverse effect on the Company’s future financial
position, results of operations or cash flows: changes in the
overall demand for services and products; changes in business
offerings; competitive pressures due to new entrants; advances and
new trends in new technologies and industry standards; changes in
bandwidth suppliers; changes in certain strategic relationships or
customer relationships; regulatory considerations; copyright
regulations; brand maintenance and enhancement; and risks
associated with the Company’s ability to attract and retain
employees necessary to support its growth.
The Company’s operations could be adversely affected by
significant political, economic and social uncertainties in the
PRC.
Currency convertibility risk
Substantially all of the Company’s businesses are transacted
in RMB, which is not freely convertible into foreign currencies.
All foreign exchange transactions take place either through Bank of
China or other banks authorized to buy and sell foreign currencies
at the exchange rates quoted by the People’s Bank of China.
Approval of foreign currency payments by the People’s Bank of
China or other regulatory institutions requires submitting a
payment application form together with suppliers’ invoices,
shipping documents and signed contracts.
Foreign currency exchange rate risk
The functional currency and the reporting currency of the Company
are the US$ and the RMB, respectively. The Company’s exposure
to foreign currency exchange rate risk primarily relates to cash
and cash equivalents, restricted cash, short-term investments,
long-term investments, notes payable and convertible senior notes
denominated in the US$. On June 19, 2010, the People’s
Bank of China announced the end of the RMB’s de facto peg to
the US$, a policy which was instituted in late 2008 in the face of
the global financial crisis, to further reform the RMB exchange
rate regime and to enhance the RMB’s exchange rate
flexibility. On March 15, 2014, the People’s Bank of
China announced the widening of the daily trading band for RMB
against US$. The appreciation of the US$ against the RMB was
approximately 5.67% in 2018. Most of the revenues and costs of the
Company are denominated in RMB, while a portion of cash and cash
equivalents, restricted cash, short-term investments, long-term
investments, notes payable and convertible senior notes are
denominated in U.S. dollars. It is difficult to predict how
market forces or PRC or U.S. government policy may impact the
exchange rate between the Renminbi and the U.S. dollar in the
future. Any significant fluctuation of the valuation of RMB
may materially affect the Company’s cash flows, revenues,
earnings and financial position, and the value of, and any
dividends payable on, the ADS in US$. |
| Derivative Instruments | Derivative Instruments
ASC Topic 815, Derivatives and Hedging |
| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In February 2016, the FASB issued
ASU No. 2016-02, Leases 2016-02”). 2016-02 2016-02 right-of-use 2016-02 2016-02
In June 2016, the FASB issued ASU No. 2016-13, Financial
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses
on Financial
Instruments 2016-13”) 2016-13 2016-13 2016-13
In June 2018, the FASB issued
ASU No. 2018-07 ,
Compensation—Stock Compensation (Topic
718) ： Improvements
to Nonemployee Share-Based Payment Accounting to simplify the
accounting for share-based payments to
nonemployees 2018-07”) 2018-07 non-employees
In August 2018, the FASB issued
ASU No. 2018-13, Fair
Value Measurement (Topic 820): Disclosure Framework—Changes
to the Disclosure Requirements for Fair Value
Measurement 2018-13”)
In March 2019, the FASB issued ASU
2019-02, Improvements to Accounting for Costs
of Films and License Agreements for Program
Materials |
| Guarantees | Guarantees
The Company accounts for guarantees in accordance with ASC Topic
460, Guarantees . |
