| Principal Accounting Policies | 3. PRINCIPAL ACCOUNTING POLICIES
(a) Basis of Presentation The accompanying consolidated financial
statements include the financial statements of the Company, its subsidiaries and its VIEs for which the Company is the ultimate
primary beneficiary. All intercompany transactions and balances have been eliminated upon consolidation. The consolidated financial statements have
been prepared on a historical cost basis to reflect the financial position and results of operations of the Group in accordance
with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company acquired CJOL on June 20, 2014.
At that time, both companies were controlled by SEEK. As a result, the Company’s consolidated financial statements as of
and for the years ended June 30, 2013, 2014 and 2015 reflect the results of the combined entities and businesses of the Company
and CJOL as if they had been combined from February 19, 2013, the date when the Company came under the control of SEEK. Assets and liabilities of CJOL were combined
using the existing book values from the perspective of SEEK, the controlling shareholder. ASC 805-50 provides that consolidated
statements of comprehensive income should include the results of each of the combined entities and businesses from the earliest
date presented or, if more recent, from the date when the combined entities and businesses first came under common control, regardless
of the date of the combination. A subsidiary is an entity in which the
Company, directly or indirectly, controls more than one half of the voting power, or has the power to govern the financial and
operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes
at the meeting of directors or to govern the financial and operating policies of the investee under a statute or agreement among
the shareholders or equity holders. A VIE is an entity in which the Company,
or its subsidiary, through contractual arrangements, has a controlling financial interest in the entity. The Company or its subsidiary
is considered to be the primary beneficiary if the Company or its subsidiary has the power to direct the activities that most significantly
impacts the entity’s economic performance, and bears the risks of, and enjoys the rewards normally associated with, ownership
of the entity.
(b) Use of Estimates The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities. Actual results
could differ from those estimates. Significant accounting estimates reflected
in the Group’s consolidated financial statements mainly include, but are not limited to, the allowance for doubtful accounts,
estimating useful lives of long-lived assets and intangible assets, subsequent impairment assessment of long-lived assets, indefinite-live
intangible assets and goodwill, valuation allowance of deferred tax assets, relative values of accounting units in certain multiple
element arrangements and determination of share-based compensation. In addition, the valuation model used to estimate the fair
value of share options upon grant date uses certain assumptions, including, but not limited to, complex and subjective judgment
made regarding the Group’s projected financial and operating results and business risks.
(c) Functional Currency and Foreign Currency Translation The Group uses Renminbi (“RMB”)
as its reporting currency. The functional currency of the Company is the United States dollar (“US$”), while the functional
currency of the Company’s subsidiaries and VIEs incorporated and operated in the PRC is the RMB. In the consolidated financial
statements, the financial information of the Company has been translated into RMB. Assets and liabilities are translated at the
exchange rates on the balance sheet date, equity amounts are translated at historical exchange rates, and revenues, expenses, gains
and losses are translated using the average rate for the period. Translation adjustments are reported as foreign currency translation
adjustments net of taxes, and are shown as a component of other comprehensive loss in the statements of comprehensive income.
(d) Convenience Translation Translations of balances in the consolidated
balance sheets, consolidated statements of comprehensive income and statements of cash flows from RMB into US$ as of and for the
year ended June 30, 2015 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB 6.2000,
representing the rate as certified by the H.10 weekly statistical release of the Federal Reserve Board on June 30, 2015. No representation
is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate on
June 30, 2015, or at any other rate. On November 6, 2015, the certified exchange rate was US$1.00 = RMB 6.3180, which is not materially
different from the certified rate on June 30, 2015.
(e) Fair Value of Financial Instruments U.S. GAAP establishes a three-tier hierarchy
to prioritize the inputs used in the valuation methodologies in measuring fair value of financial instruments. This hierarchy also
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The three-tier fair value hierarchy is: 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 market place. Level 3—unobservable inputs which
are supported by little or no market activity. The Company’s financial instruments
include time deposits and restricted time deposits, accounts receivable, prepaid and other current assets, non-current restricted
time deposits, short-term borrowings, current portion of long-term bank loans, accounts payable, accrued expenses and other current
liabilities, deferred revenues, and long-term bank loans. See Note 21—Fair Value Measurement.
(f) Cash and cash equivalents Cash and cash equivalents of the Company
primarily represent cash on hand, demand deposits placed with banks which have original maturities of three months or less, and
money market funds with weighted average maturity of the fund’s securities holdings within 90 days. As of June 30, 2015, all money market funds
have been converted into demand deposits.
(g) Short-term investments Short-term investments represent short-term
principal-protected wealth management products offered by financial institutions which are restricted as to withdrawal. The investments
are issued by commercial bank in China with a variable interest rate indexed to performance of underlying assets. All short-term investments have been converted
into cash at each reporting period end. The group had no short-term investment balances as of June 30, 2014 and 2015, respectively. Cash flows related to short-term wealth
management products are presented on a net basis because they have quick turnover, occur in large volumes and have short maturities
(less than 90 days).
(h) Restricted cash In 2014, the Company entered into several
loan facility agreements with offshore branches of certain banks and made drawdowns from the banks to refinance the loans borrowed
from the same banks in 2013 to fund the repurchase of Series E preferred shares (see Note 14) and partially finance an acquisition
of CJOL (see Note 16). These bank loans are secured by RMB deposits in onshore branches of those banks. The loans from the offshore banks are classified
as long-term bank loans within one year or long-term bank loans as of June 30, 2015 based on their repayment period. The rates
of interest under the bank loan agreements with the lending banks were determined based on the prevailing interest rates in the
market. As at June 30, 2014 and 2015, RMB8,024
and RMB6,103 cash deposits are held respectively in interest reserve accounts for the bank loans, which are designated for bank
loan payment only, and are classified as restricted cash on the Company’s consolidated financial statements. Restricted cash deposits are valued based
on the prevailing interest rates in the market, and classified into current and non-current portion based on the maturities of
the bank loans they are associated with.
(i) Time deposits and restricted time deposits Time deposits represent demand deposits
placed with banks with original maturities of more than three months. Interest earned is recorded as interest income in the consolidated
statements of comprehensive income during the periods. Time deposits are valued based on the prevailing interest rates in the market. RMB493,265 and RMB435,024 time deposits
are pledged respectively as of June 30, 2014 and 2015, as collateral to the bank loans and therefore are treated as restricted
time deposits on the Company’s consolidated financial statements. RMB nil and RMB100,000 time deposit with original maturities
more than three months were placed with banks as of June 30, 2014 and 2015. Restricted time deposits are valued based
on the prevailing interest rates in the market, and classified into current portion and non-current portion based on the maturities
of the bank loans they are associated with.
(j) Accounts Receivable, net The carrying value of accounts receivable
is reduced by an allowance that reflects the Group’s best estimate of the amount that will not be collected. The Group makes
an estimation of the collectability of accounts receivable considering many factors including, but not limited to, reviewing accounts
receivable balances, historical bad debt rate, repayment patterns, customer credit worthiness, financial condition of the customer
and industry trend analysis that resulted in an inability to make overdue payments. The Group also makes specific allowances if
there is evidence that receivables are likely to be irrecoverable and the allowances are written off after all collection efforts
have been exhausted and the potential for recovery is considered remote. Accounts receivable in the consolidated balance sheet
were stated net of such provisions.
(k) Property and Equipment Property and equipment are stated at cost
less accumulated depreciation. Depreciation is provided on a straight-line basis over the following estimated useful lives:
Estimated
Useful Lives of the Assets
Leasehold improvements Shorter of the remaining lease period or the estimated useful lives
Electronic equipment 3 years
Furniture and office equipment 5 years
Motor vehicles 5 years Expenditures for repairs and maintenance
are expensed as incurred. The gain or loss on disposal of property and equipment is the difference between the net sales proceeds
and the carrying amount of the disposal assets. Such differences, if any, are recognized as other income, net in the consolidated
statements of comprehensive income.
(l) Intangible Assets Intangible assets mainly comprise computer
software, licenses purchased for internal use, trademarks, customer relationship, and brand name. The intangible assets have original
estimated useful lives as follows:
Estimated
Useful Lives of the Assets
Computer software 3 years
Acquired Internet Content Provider License 10 years
Trademarks 10 years
Customer relationship 2.2 years
Brand name Indefinite Finite-lived intangible assets are stated
at cost less accumulated amortization, which is recognized using the straight-line method over the estimated useful lives of the
assets. The Company has determined that the brand
name has the continued ability to generate cash flows indefinitely. There are no legal, regulatory, contractual, economic or other
factors limiting the useful life of the brand name. Consequently, the carrying amounts of trade names are not amortized but are
tested for impairment annually in the fourth quarter or more frequently if events or circumstances indicate that the assets may
be impaired.
(m) Goodwill Goodwill represents the excess of the purchase
price over the fair value of the identifiable assets and liabilities of CJOL when it was acquired by SEEK in May 2011. Goodwill is not depreciated or amortized
but is tested for impairment at the reporting unit level on an annual basis every June 30, and in between annual tests when an
event occurs or circumstances change that could indicate that the asset might be impaired. Commencing September 2011, in accordance
with the FASB revised guidance on “Testing of Goodwill for Impairment,” a company first has the option to assess qualitative
factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
If the company decides, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting
unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required.
The quantitative impairment test consists of a comparison of the fair value of each reporting unit with its carrying amount, including
goodwill. If the carrying amount of each reporting unit exceeds its fair value, an impairment charge equal to the difference between
the implied fair value of the reporting unit’s goodwill and the carrying amount of goodwill will be recorded. Application
of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning
assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting
unit. The Group as a whole, including recently
acquired CJOL, is determined to be one reporting unit for goodwill impairment testing. The Company directly applied the quantitative
assessment and performed the goodwill impairment test by quantitatively comparing the fair values of the reporting unit to its
carrying amounts, and no impairment loss has been identified for the years ended 2014 and 2015, respectively.
(n) Impairment of Long-lived Assets and Indefinite-lived Intangible Assets Long-lived assets are reviewed for impairment
whenever events or changes in the circumstances indicate that the carrying value of an asset may not be recoverable. When these
events occur, the Group assesses the recoverability of the long-lived assets by comparing the carrying amount of the asset group
to the estimated future undiscounted cash flows associated with the related assets. The Group recognizes impairment for long-lived
assets in the event that the carrying value of such assets exceeds the estimated undiscounted cash flows attributable to such assets.
No impairment of long-lived assets was recognized for any of the periods presented. Indefinite-lived
intangible assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that the
asset might be impaired. The impairment test consists of a comparison of the fair value of the intangible asset to its carrying
amount. If the carrying amount exceeds the fair value, an impairment charge is recognized equal in amount to that excess.
(o) Non-controlling Interest Recognition Non-controlling interest is 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. Currently, the non-controlling interest in our consolidated financial statements primarily consists
of non-controlling interest for CJOL.
(p) Revenue Recognition Revenue is recognized when persuasive evidence
of an arrangement exists, service has been rendered, the price is fixed or determinable and collection is reasonably assured. Revenue
is deferred until these criteria are met and any cash payments received up front are initially recognized as deferred revenues. Revenues presented in the consolidated
statements of comprehensive income include revenues from online recruitment services and other services. Online Recruitment Services The Group provides online recruitment services
such as classified job postings, display advertisements, resume access services and other online value-added recruitment services.
Employers enter into standard service agreements with the Group, under which different service arrangements, service fulfillment
period, total consideration and other terms are agreed upon by both parties. Online recruitment services revenues are recognized
ratably over the service fulfillment period, which normally ranges from one month to one year. Online Recruitment Services contracts may
consist of multiple deliverables in the arrangement such as those services described above. Each deliverable is a separate unit
of accounting, as they have value to the customer on a standalone basis and there are no customer-negotiated refunds or return
rights for the delivered items. Arrangement consideration is allocated to each unit of accounting at the inception of the arrangement
based on the relative selling price of each unit of accounting according to the selling price hierarchy established by ASU No.2009-13,
“Revenue Recognition—Multiple-Deliverable Revenue Arrangements” and recognized over the service fulfillment period.
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. Selling price is generally determined by vendor specific objective evidence, which is the price charged for
a deliverable when it is sold on a standalone basis. For all the periods presented, the service fulfillment period for the separate
units of accounting within the multiple-element arrangement is the same. Therefore, the allocation between the separate units of
accounting for online recruitment services does not have a material impact on the Company’s consolidated financial statements. Other online valued-added recruitment services
mainly includes Recruiting Companion, a service that provides online job posting, resume screening, interviews, recruitment analysis
and strategy, detailed day-to-day execution of recruitment plans and candidate recruitment on behalf of our customers. Upon completion
of these activities, a completion report is delivered to customers summarizing the activities carried out. Fees for Recruiting
Companion service are recognized upon delivery of the completion report. Other services Other services provided by the Group are
comprised of campus recruitment services, assessment services and other human resources related services. Campus Recruitment Services The Group provides campus recruitment services
to corporate employers. Campus recruitment service includes planning, recruitment advertising and organizing recruitment activities.
Upon completion of these activities, a completion report is delivered to customers summarizing the activities carried out. Fees
for these types of services are recognized upon delivery of the completion report. Assessment Services The Group provides both online and offline
assessment services to assist corporate customers in evaluating capabilities and dispositions of their job candidates and existing
employees. Online assessment services are based on
an online assessment platform. Corporate employers are granted with access to the online assessment with a predetermined service
fulfillment period, which normally ranges from 3 months to one year. Revenues are recognized ratably over the service fulfillment
period. Offline assessment services include planning,
organizing assessment events, and summarizing assessment results. Upon completion of these activities, a completion report is delivered
to customers summarizing the activities carried out. Fees for these types of services are recognized upon delivery of the completion
report. Other Human Resources Related Services The Group also provides other human resources
related services such as executive search services, print advertising services, training services, human resources agent services
and other services. Arrangements for these other human resources related services are generally short-term in nature. Fees for
these types of services are recognized when fees are fixed or determinable, collectability is reasonably assured and service performance
is complete.
(q) Cost of Services Cost of services consist primarily of network
costs, printing and publishing expenses, payroll, share-based compensation and other employee-related costs and other expenses
incurred by the Group which are directly attributable to the performance of the Group’s online recruitment and other human
resources related services.
(r) Sales and Marketing Expenses Sales and marketing expenses consist primarily
of payroll, share-based compensation and other employee-related expenses for the Group’s sales and marketing staff, office
rental and property management fees as well as advertising expenses. Advertising expenses generally represent the cost of marketing
activities used to create or stimulate a positive image of the Group’s brand or a desire for the Group’s services.
Advertising expenses are recorded as sales and marketing expenses when incurred, and totaled RMB71,345, RMB73,955 and RMB93,860
for the year ended June 30, 2013, 2014 and 2015.
(s) General and Administrative Expenses General and administrative expenses consist
primarily of payroll, share-based compensation and other employee-related expenses for the Group’s managerial and administrative
staff, office rental and property management fees, professional services fees, depreciation of equipment and other administrative
office expenses.
(t) Share-Based Compensation The Company grants share options to its
employees and directors under share incentive plans, and accounts for these share-based compensation arrangements in accordance
with ASC 718, Compensation—Stock Compensation The Binomial option-pricing model is used
to measure the value of the awards. The determination of the fair value is affected by the share price as well as assumptions regarding
a number of complex and subjective variables, including the expected share price volatility, actual and projected employee share
option exercise behavior, risk-free interest rates and expected dividends. The use of the Binomial option-pricing model requires
a number of complex assumptions.
(u) Operating Leases Leases where substantially all the rewards
and risks of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases,
net of any rent concessions, are charged to the consolidated statements of comprehensive income on a straight-line basis over the
lease term.
(v) Taxation Value-added tax, business tax and surcharges Prior to September 2012, the Company’s
subsidiaries and VIEs in the PRC were subject to business taxes and related surcharges on the revenues earned for services provided
in the PRC after certain deductions. The applicable rate of business taxes was 5%. Business taxes and related surcharges were deducted
from gross revenues to arrive at net revenues in the Group’s consolidated statements of comprehensive income. Effective January 1, 2012, the PRC Ministry
of Finance and the State Administration of Taxation launched the Value Added Tax (“VAT”) Pilot Program for certain
industries in certain regions. According to the implementation circulars released by the Ministry of Finance and the State Administration
of Taxation on the Pilot Program, the “Modern Service Industries” includes research, development and technological
services, information technology services, cultural innovation services, logistics support, lease of corporeal properties, attestation
and consulting services. Accordingly, most of the Company’s subsidiaries and VIEs were in the Pilot Program and subject to
VAT at a rate of 6%. The VAT payable of these subsidiaries and VIEs is the net balance of the output VAT for the period after crediting
the input VAT for the period. Hence, the amount of VAT payable does not result directly from output VAT generated from taxable
services provided. As such, the net presentation of revenues subject to VAT is adopted. Subsidiaries and VIEs in the PRC which
are not subject to VAT are still subject to business taxes at a rate of 5% and related surcharges on the revenues earned for services
provided in the PRC after certain deductions. Income Taxes Current income taxes are provided on the
basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible
for income tax purposes, in accordance with the regulations of the relevant tax jurisdiction. Deferred income taxes are provided
using the asset and liability method, which requires the recognition of income tax payable or refundable for the current period
and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Group’s
financial statements or tax returns. Deferred income taxes are determinable based on the temporary differences between the financial
reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates. The effect on deferred
tax assets and liabilities of a change in tax rate is recognized in the consolidated statements of comprehensive income in the
period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred tax assets
if it is considered more likely than not that some portion, or all, of the Group’s deferred tax assets will not be realized. Uncertain Tax Positions The guidance on accounting for uncertainties
in income taxes prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. Significant judgment is required in evaluating the Group’s uncertain tax positions
and determining its provision for income taxes. The Group recognizes interest and penalties, if any, under accrued expenses and
other current liabilities on its balance sheet and under income tax expenses in its statement of comprehensive income. The Group
did not recognize any significant interest and penalties associated with uncertain tax positions for the year ended June 30, 2013,
2014 and 2015. As of June 30, 2014 and 2015, the Group did not have any significant unrecognized uncertain tax positions, respectively.
(w) Statutory Reserves The Company’s PRC subsidiaries and
VIEs in China are required to make appropriations to certain non-distributable reserve funds. In accordance with the laws applicable
to China’s Foreign Investment Enterprises, the Company’s subsidiaries registered as wholly-owned foreign enterprises
in China have to make appropriations from their after-tax profits (as determined under the Accounting Standards for Business Enterprises
as promulgated by the Ministry of Finance of the People’s Republic of China (“PRC GAAP”)) to reserve funds including
(i) general reserve fund, (ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The appropriation to the general
reserve fund must be at least 10% of the respective entity’s after-tax profits as calculated in accordance with PRC GAAP.
Appropriation is not required if the reserve fund has reached 50% of the registered capital of the respective company. Appropriation
to the enterprise expansion fund and staff bonus and welfare fund is at each PRC entity’s discretion. Beijing Wangpin, which is considered a
Sino-foreign joint venture as is 90% owned by the Company and 10% owned by Zhilian Sanke, is permitted to provide reserve fund
allocations of annual after-tax profit at the discretion of its board of directors. Under China Company Laws, the VIEs of the
Company, which are registered as domestic companies in China, must make appropriations from their after-tax profit as determined
under PRC GAAP to non-distributable reserve funds including a statutory surplus fund and a discretionary surplus fund. The appropriation
to the statutory surplus fund must be at least 10% of their after-tax profits as determined under PRC GAAP. Appropriation is not
required if the surplus fund has reached 50% of the registered capital of the PRC entity. Appropriation to the discretionary surplus
fund is made at the discretion of the respective PRC entity. The use of the general reserve fund, statutory
surplus fund and discretionary surplus fund are restricted to the offsetting of losses or increases to the registered capital of
the respective company. Appropriations to the enterprise expansion fund can be used to increase registered capital upon PRC regulatory
approval. The staff bonus and welfare fund is a liability in nature and is restricted to fund payments of special bonuses to staff
and for the collective welfare of employees. All these reserves are not allowed to be transferred to the Company in terms of cash
dividends, loans or advances, nor can they be distributed except under liquidation. For the years ended June 30, 2013, 2014
and 2015, the Company’s PRC subsidiaries and VIEs made appropriations of RMB2,355, RMB1,613 and RMB63 to their statutory
reserves.
(x) 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, shareholder, or a related corporation.
(y) Net Income/(Loss) Per Share Basic net income/(loss) per share is computed
by dividing net income/(loss) attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding
during the period using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other
participating securities based on their participating rights, which provide the holders of participating securities the ability
to participate in all dividends declared with the holders of ordinary shares on a one-to-one per-share basis in all dividend declared,
as if all undistributed earnings for the period were distributed. Diluted net income/(loss) per share is calculated by dividing
net income/(loss) attributable to ordinary shareholders as adjusted for the effect of income allocation to holders of participating
preferred shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during
the period. Ordinary equivalent shares consist of shares issuable upon the exercise of share options (using the treasury stock
method) and the conversion of the convertible preferred shares (using the if-converted method). Ordinary equivalent shares are
not included in the denominator of the diluted net income/(loss) per share calculation when inclusion of such shares would be anti-dilutive,
such as in a period in which a net loss is recorded.
(z) Employee Benefits The full-time employees of the Group that
are employed in the PRC are entitled to staff welfare and benefits including medical care, welfare subsidies, unemployment insurance,
pension benefits and housing fund contributions through a PRC government-mandated multi-employer defined contribution plan. Companies
are required to accrue for the benefits based on certain percentages of the employees’ salaries in accordance with the relevant
regulations, and make contributions to the state-sponsored welfare, pension and medical plans out of the amounts accrued for these
benefits. For the years ended June 30, 2013, 2014 and 2015, total amounts recognized for such employee benefits amounted to RMB79,777,
RMB99,475 and RMB96,481, and were charged to the consolidated statements of comprehensive income. The PRC government is responsible
for the welfare and medical benefits and ultimate pension liability to these employees.
(aa) Comprehensive Income Comprehensive income is defined as the
change in equity of a company during a period from transactions and other events and circumstances excluding those resulting from
investments by shareholders and distributions to shareholders. Accumulated other comprehensive loss consists of foreign currency
translation adjustments.
(bb) Segment Reporting Operating segments are defi |
