| Principal Accounting Policies | 3. PRINCIPAL ACCOUNTING POLICIES (a) 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 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, 2014, 2015 and 2016 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) 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,
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 selling prices 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 granted prior to the IPO 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) The Group uses Renminbi (“RMB”)
as its reporting currency. The functional currency of the Company is the United States dollar (“US$”), while the functional
currency of the Company’s subsidiaries and VIEs incorporated and operated in the PRC is the RMB, further the functional currency
of the Company’s subsidiary incorporated and operated in Hong Kong is the Hong Kong dollar (“HK$”). 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) 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, 2016 are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB 6.6459,
representing the rate as certified by the H.10 weekly statistical release of the Federal Reserve Board on June 30, 2016. No representation
is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate on
June 30, 2016, or at any other rate. (e) 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
cash and cash equivalents, restricted cash, time deposits and restricted time deposits, accounts receivable, prepayments and other
current assets, accounts payable, accrued expenses and other current liabilities, deferred revenues, other non-current assets and
long-term bank loans. See Note 21—Fair Value Measurement. (f) 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, 2016, all money market funds
have been converted into demand deposits. (g) 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 banks in China with a variable interest rate indexed to performance of underlying assets, LIBOR and exchange
rate between HK$ and US$. 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, 2015 and 2016, 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) The Company entered into several loan facility
agreements with offshore branches of certain banks. These bank loans are collateralized 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 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, 2015 and 2016, RMB6,103 and
nil cash deposits are held respectively in interest reserve accounts for the bank loans, which are designated for bank loan interest
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 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. RMB435,024 and RMB215,741 time deposits are
pledged respectively as of June 30, 2015 and 2016, as collateral to the bank loans and therefore are treated as restricted time
deposits on the Company’s consolidated financial statements. RMB100,000 and RMB348,000 time deposit with original maturities
more than three months were placed with banks as of June 30, 2015 and 2016. Time deposits and 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) 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 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 included in income from operations in the consolidated
statements of comprehensive income. (l) Intangible assets mainly comprise computer
software, licenses purchased for internal use, acquired technology, 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
Acquired technology 5 years
Trademarks 10 years
Customer relationship 2.2 years
Brand name Indefinite Computer software, licenses and trademarks
are stated at cost less accumulated amortization, which is recognized using the straight-line method over the estimated useful
lives of the assets. Acquired technology, customer relationship
and brand name arising from business combinations (Note 16) are stated at fair value upon acquisition 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 brand name are not amortized but are tested for
impairment annually in the fourth quarter or more frequently if events or circumstances indicate that the asset may be impaired. (m) 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, and the
excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Group’s
other acquisitions of interests in its subsidiaries and consolidated VIEs. 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
entities, is determined to be one reporting unit for goodwill impairment testing. The Group 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 June 30, 2014, 2015 and 2016, respectively. (n) 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 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, forecasted life cycle and forecasted
cash flows over that period. 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 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
interests for CJOL and Shanghai Ruipin. (p) 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 the Group’s 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 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 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 RMB73,955, RMB93,860 and RMB117,821
for the year ended June 30, 2014, 2015 and 2016. (s) 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
expenses. (t) 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) 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) Value-added tax, business tax and surcharges Effective January 1, 2012, the PRC Ministry
of Finance and the State Administration of Taxation launched the Value Added Tax (“VAT”) Pilot Program (the “Pilot
Program”) for certain industries in certain regions. According to the implementation circulars released by the Ministry of
Finance (“MoF”) and the State Administration of Taxation (“SAT”) on the Pilot Program, the “Modern
Service Industries” including research, development and technological services, information technology services, cultural
innovation services, logistics support, lease of corporeal properties, attestation and consulting services, are subject to VAT.
Accordingly, most of the Company’s subsidiaries and VIEs were in the Pilot Program and subject to VAT at a rate of 6% or
3%. According to the Circular on Comprehensively Promoting the Pilot Program of the Collection of VAT in Lieu of Business Tax jointly
promulgated by SAT and MoF on March 23, 2016, effective from May 1, 2016, the Pilot Program was promoted nationwide and in all
industries. Hence, all of the Company’s PRC subsidiaries and VIEs are subject to VAT at a rate of 6% or 3% since May 2016.
The VAT payable of the Company’s subsidiaries and VIEs is the net balance of the output VAT for the period after crediting
the input VAT for the period. Therefore, the amount of VAT payable does not result directly from output VAT generated from taxable
services provided. As such, revenues are presented net of VAT in the consolidated statements of comprehensive income. The Company’s
PRC subsidiaries and VIEs which were not subject to VAT before the Pilot Program were subject to business taxes at a rate of 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. 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, 2014,
2015 and 2016. As of June 30, 2015 and 2016, the Group did not have any significant unrecognized uncertain tax positions, respectively. (w) 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, 2014, 2015 and
2016, the Company’s PRC subsidiaries and VIEs made appropriations of RMB1,613, RMB63 and nil to their statutory reserves. (x) 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) Basic net income per share is computed by dividing
net income 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 per share is calculated by dividing net income 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 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) 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, 2014, 2015 and 2016, total amounts recognized for such employee benefits amounted to RMB99,475,
RMB96,481 and RMB127,174, 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 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 shareho |
