| Summary of Principal Accounting Policies | 2. Summary of Principal Accounting Policies
(a) Basis of Presentation
The consolidated financial statements were prepared in accordance
with accounting principles generally accepted in the United States
of America (“U.S. GAAP”).
(b) Principles of Consolidation
The consolidated financial statements include the financial
statements of the Company, its subsidiaries and consolidated VIEs.
All inter-company transactions and balances have been eliminated
upon consolidation.
A consolidated 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: appoint or remove the majority of the
members of the board of directors; cast a majority of votes at the
meeting of the board of directors; or govern the financial and
operating policies of the investee under a statute or agreement
among the shareholders or equity holders.
U.S. GAAP provides guidance on the identification and
financial reporting for entities over which control is achieved
through means other than voting interests. The Group evaluates each
of its interests in private companies to determine whether or not
the investee is a VIE and, if so, whether the Group is the primary
beneficiary of such VIE. In determining whether the Group is the
primary beneficiary, the Group considers if the Group (1) has
power to direct the activities that most significantly affects the
economic performance of the VIE, and (2) receives the economic
benefits of the VIE that could be significant to the VIE. If deemed
the primary beneficiary, the Group consolidates the VIE.
The Company had been engaged in the fund distribution business and
distribution of asset management plans sponsored by mutual fund
management companies as part of its business through contractual
arrangements among its PRC subsidiary, Shanghai Noah Investment
(Group) Co., Ltd (formerly known as Shanghai Noah Rongyao
Investment Consulting Co., Ltd). (“Noah Rongyao”), its
PRC variable interest entity, Noah Investment, and Noah
Investment’s shareholders because it was difficult for
foreign investor entities and subsidiaries of foreign investor
entities to apply for a fund distribution license. Noah Upright, a
subsidiary of Noah Investment before March 2016, holds the licenses
and permits necessary to conduct fund distribution and distribution
of asset management plans sponsored by mutual fund management
companies in China. However, as the license and permit approval
authorities relaxed their requirements for foreign investor
entities to apply for fund distribution license, Noah Upright was
restructured to be a subsidiary of Shanghai Noah Financial Services
Corp., or Noah Financial Services, through equity transfer in March
2016.
Since the Company does not have any equity interests in Noah
Investment, in order to exercise effective control over its
operations, the Company, through its wholly owned subsidiary Noah
Rongyao, entered into a series of contractual arrangements with
Noah Investment and its shareholders, pursuant to which the Company
is entitled to receive effectively all economic benefits generated
from Noah Investment shareholders’ equity interests in it.
These contractual arrangements include: (i) a Power of
Attorney Agreement under which each shareholder of Noah Investment
has executed a power of attorney to grant Noah Rongyao or its
designee the power of attorney to act on his or her behalf on all
matters pertaining to Noah Investment and to exercise all of his or
her rights as a shareholder of the Company, (ii) an Exclusive
Option Agreement under which the shareholders granted Noah
Investment or its third-party designee an irrevocable and exclusive
option to purchase their equity interests in Noah Investment when
and to the extent permitted by PRC law, (iii) an Exclusive
Support Service Agreement under which Noah Investment engages Noah
Rongyao as its exclusive technical and operational consultant and
under which Noah Rongyao agrees to assist in arranging the
financial support necessary to conduct Noah Investment’s
operational activities, (iv) a Share Pledge Agreement under
which the shareholders pledged all of their equity interests in
Noah Investment to Noah Rongyao as collateral to secure their
obligations under the agreement, and (v) a Free-Interest Loan
Agreement under which each shareholder of Noah Investment entered
into a loan agreement with Noah Rongyao for their respective
investment in the equity interests in Noah Investment. The total
amount of interest-free loans extended to the Founders is
RMB27 million (approximately US$3.6 million) which has been
injected into Noah Investment. The Founders of Noah Investment
effectively acted as a conduit to fund the required capital
contributions from the Company into Noah Rongyao, are non-substantive re-entered no-interest no-interest
The Exclusive Option Agreement and Power of Attorney Agreements
provide the Company effective control over the VIE and its
subsidiaries, while the equity pledge agreements secure the equity
owners’ obligations under the relevant agreements. Because
the Company, through Noah Rongyao, has (i) the power to direct
the activities of Noah Investment that most significantly affect
the entity’s economic performance and (ii) the right to
receive substantially all of the benefits from Noah Investment, the
Company is deemed the primary beneficiary of Noah Investment.
Accordingly, the Group has consolidated the financial statements of
Noah Investment since its inception. The aforementioned contractual
agreements are effective agreements between a parent and a
consolidated subsidiary, neither of which is accounted for in the
consolidated financial statements (i.e. a call option on subsidiary
shares under the Exclusive Option Agreement or a guarantee of
subsidiary performance under the Share Pledge Agreement) or are
ultimately eliminated upon consolidation (i.e. service fees under
the Exclusive Support Service Agreement or loans payable/receivable
under the Loan Agreement).
The Company believes that these contractual arrangements are in
compliance with PRC laws and regulations and are legally
enforceable. The restructure of fund distribution business from
Noah Investment to Noah Financial Service in 2016 and the transfer
of Tianjin Gopher Asset Management Co., Ltd and Gopher Asset
Management Co., Ltd from Noah Rongyao to Noah Investment in 2012 do
not impact the legal effectiveness of these contractual
arrangements and do not impact the conclusion that the Company is
the primary beneficiary of Noah Investment and its
subsidiaries.
However, the aforementioned contractual arrangements with Noah
Investment and its shareholders are subject to risks and
uncertainties, including:
• Noah Investment and its shareholders
may have or develop interests that conflict with the Group’s
interests, which may lead them to pursue opportunities in violation
of the aforementioned contractual arrangements.
• Noah Investment and its shareholders
could fail to obtain the proper operating licenses or fail to
comply with other regulatory requirements. As a result, the PRC
government could impose fines, new requirements or other penalties
on the VIE or the Group, mandate a change in ownership structure or
operations for the VIE or the Group, restrict the VIE or the
Group’s use of financing sources or otherwise restrict the
VIE or the Group’s ability to conduct business.
• The aforementioned contractual
agreements may be unenforceable or difficult to enforce. The equity
interests under the Share Pledge Agreement have been registered by
the shareholders of Noah Investment with the relevant office of the
administration of industry and commerce, however, the VIE or the
Group may fail to meet other requirements. Even if the agreements
are enforceable, they may be difficult to enforce given the
uncertainties in the PRC legal system.
• The PRC government may declare the
aforementioned contractual arrangements invalid. They may modify
the relevant regulations, have a different interpretation of such
regulations, or otherwise determine that the Group or the VIE have
failed to comply with the legal obligations required to effectuate
such contractual arrangements.
• It may be difficult to finance Noah
Investment by means of loans or capital contributions. Loans from
the offshore parent company to the VIE must be approved by the
relevant PRC government body and such approval may be difficult or
impossible to obtain.
In 2017, the Group invested in an investment fund which it served
as general partner and subscribed 29% of equity interest with the
intention of transferring the equity interest to other parties in
the future. As the Group is deemed to have a controlling financial
interest in the investment fund as of December 31, 2017, the
Group consolidated the investment fund as a primary
beneficiary.
The following amounts of Noah Investment and its subsidiaries and
the consolidated fund were included in the Group’s
consolidated financial statements and are presented before the
elimination of intercompany transactions with the non-VIE
subsidiaries of the Group.
As of December 31 (Amount in Thousands)
2016 2017 2017
RMB RMB US$
Cash and cash equivalents (including cash and cash equivalents of
the consolidated fund of RMB 11,641 as of December 31,
2017) 312,278 394,672 60,660
Restricted cash 1,000
—
—
Accounts receivable, net of allowance for doubtful accounts 14,828 2,795 430
Amounts due from related parties 209,034 155,570 23,911
Deferred tax assets 11,158 6,136 943
Other current assets 33,453 88,740 13,639
Long-term investments (including long-term investment of the
consolidated fund of RMB 49,029 as of December 31, 2017) 81,168 192,920 29,651
Investment in affiliates 488,263 920,848 141,532
Property and equipment, net 28,804 25,458 3,913
Other non-current 13,776 12,641 1,943
Total assets 1,193,762 1,799,780 276,622
Accrued payroll and welfare expenses 72,212 83,553 12,842
Income tax payable (5,037 ) (2,507 ) (385 )
Amount due to related parties 12,000
—
—
Amounts due to the Group’s subsidiaries (including amount due
to Group’s subsidiaries of the consolidated fund of RMB
19,519 as of December 31, 2017) 125,714 498,557 76,627
Deferred revenue 29,834 33,301 5,118
Other current liabilities 31,079 40,942 6,293
Total liabilities 265,802 653,846 100,495
Years Ended
December 31 (Amount in Thousands)
2015 2016 2017 2017
RMB RMB RMB US$
Revenue:
Third-party revenues
One-time 145,325 1,184 16,521 2,539
Recurring service fees 181,289 56,998 24,275 3,731
Performance-based income 165,972 8,596 2,389 367
Other service fees 9,616 38,881 35,054 5,388
Total third-party revenues 502,202 105,659 78,239 12,025
Related party revenues
One-time 122,950 2,887 1,012 156
Recurring service fees 348,870 278,460 306,883 47,167
Performance-based income 53,825 38,414 37,240 5,724
Other service fees 2,103 19,857 23,735 3,648
Total related party revenues 527,748 339,618 368,870 56,695
Total revenues 1,029,950 445,277 447,109 68,720
Less: business taxes and related surcharges (57,714 ) (10,206 ) (2,792 ) (429 )
Net revenues 972,236 435,071 444,317 68,291
Operating cost and expenses (including operating cost and expenses
of the consolidated fund of RMB -863 (624,541 ) (452,182 ) (361,765 ) (55,602 )
Other income (including other income of the consolidated fund of
RMB 3,667 for year ended December 31, 2017) 39,115 67,038 43,281 6,652
Net income 327,598 24,381 149,703 23,009
Net income attributable to Noah Holding Limited shareholders 326,209 22,122 147,483 22,668
Cash flows provided by (used in) operating activities* 402,492 (316,765 ) 426,663 65,562
Cash flows (used in) provided by investing activities (293,697 ) 28,995 (372,590 ) (57,251 )
Cash flows provided by financing activities 3,282 14,856 15,680 2,410
* Cash flows provided by operating
activities in 2015, 2016 and 2017 include amounts due to the
Group’s subsidiaries of RMB161,666, RMB125,714 and RMB
479,138 (US$74).
The VIEs contributed an aggregate of 45.9%, 17.3% and 15.7% of the
consolidated net revenues for the years ended December 31,
2015, 2016 and 2017, respectively and an aggregate 62.2%, 4.1% and
19.4% of the consolidated net income for the years ended
December 31, 2015, 2016 and 2017, respectively. As of
December 31, 2016 and 2017, the VIEs accounted for an
aggregate of 20.1% and 26.8%, respectively, of the consolidated
total assets.
There are no consolidated assets of the VIEs and their subsidiaries
that are collateral for the obligations of the VIEs and their
subsidiaries and can only be used to settle the obligations of the
VIEs and their subsidiaries, except for the cash held by the
consolidated fund of which cash could only be used by the
consolidated fund. There are no terms in any arrangements,
considering both explicit arrangements and implicit variable
interests that require the Company or its subsidiaries to provide
financial support to the VIEs. However, if the VIEs ever need
financial support, the Company or its subsidiaries may, at its
option and subject to statutory limits and restrictions, provide
financial support to its VIEs through loans to the shareholder of
the VIEs or entrustment loans to the VIEs.
Relevant PRC laws and regulations restrict the VIEs from
transferring a portion of their net assets, equivalent to the
balance of its statutory reserve and its share capital, to the
Company in the form of loans and advances or cash dividends. Please
refer to Note 16 for disclosure of restricted net assets.
(c) Consolidation policy Upon Adoption of ASU No. 2015-02 2016-17
In February 2015, the FASB issued Accounting Standards Update
(“ASU”) 2015-02,
The Group early adopted ASU 2015-02 re-evaluated
Under ASU 2015-02,
In October 2016, the FASB issued ASU 2016-17, 2016-17”). 2015-02 2016-17
In evaluating whether the investment funds in the legal form of
limited partnership the Group managed as general partner are VIEs
or not, the Group firstly assessed whether a simple majority or
lower threshold of limited partnership interests, excluding
interests held by the general partner, parties under common control
of the general partner, or parties acting on behalf of the general
partner, have substantive kick-out kick-out non-related kick-out non-related
The Group started to manage the contractual funds which it manages
as fund manager and earns management fee and/or carried interest
from second half of 2014. The contractual funds are VIEs as the
fund investors do not have substantive kick-out
As of December 31, 2016 and 2017, the Group had some variable
interests in various investment funds and contractual funds that
are VIEs but determined that it was not the primary beneficiary
and, therefore, was not consolidating the VIEs. The maximum
potential financial statement loss the Group could incur if the
investment funds and contractual funds were to default on all of
their obligations is (i) the loss of value of the interests in
such investments that the Group holds, including equity investments
recorded in investment in affiliates as well as debt securities
investments recorded in short-term investments and long-term
investments in the consolidated balance sheet, and (ii) any
management fee and/or carried interest receivables recorded in
amounts due from related parties. The following table summarizes
the Group’s maximum exposure to loss associated with
identified nonconsolidated VIEs in which it holds variable
interests as of December 31, 2016 and 2017, respectively.
As of December 31, (Amount in Thousands)
2016 2017 2017
RMB RMB US$
Amounts due from related parties 32,492 36,792 5,655
Investments 508,011 610,386 93,815
Maximum exposure to loss in non-consolidated 540,503 647,178 99,470
The Group has not provided financial support to these
nonconsolidated VIEs during the years ended December 31, 2016
and 2017, and had no liabilities, contingent liabilities, or
guarantees (implicit or explicit) related to these nonconsolidated
VIEs as of December 31, 2016 and 2017.
(d) Use of Estimates
The preparation of 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 the
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and
expense during the reporting period. Actual results could differ
materially from such estimates. Significant accounting estimates
reflected in the Group’s consolidated financial statements
include assumptions used to determine valuation allowance for
deferred tax assets, allowance for accounts receivable, allowance
for loan losses, fair value measurement of underlying investment
portfolios of the funds that the Group invests, assumptions related
to the consolidation of entities in which the Group holds variable
interests, assumptions related to the valuation of share-based
compensation, including estimation of related forfeiture rates and
assumption related to valuation of investments.
(e) Concentration of Credit Risk
The Group is subject to potential significant concentrations of
credit risk consisting principally of cash and cash equivalents,
accounts receivable, amounts due from related parties, loan
receivables and investments. All of the Group’s cash and cash
equivalents and a majority of investments are held with financial
institutions that Group management believes to be high credit
quality. In addition, the Group’s investment policy limits
its exposure to concentrations of credit risk.
Substantially all revenues were generated within China.
There were no financial product providers which accounted for 10%
or more of total revenues for the years ended December 31,
2015, 2016, and 2017.
Credit of lending business is controlled by the application of
credit approvals, limits and monitoring procedures. To minimize
credit risk, the Group requires collateral in form of right to
securities. The Group identifies credit risk on a customer by
customer basis. The information is monitored regularly by
management.
(f) Investments in Affiliates
Affiliated companies are entities over which the Group has
significant influence, but which it does not control. The Group
generally considers an ownership interest of 20% or higher to
represent significant influence. Investments in affiliates are
accounted for by the equity method of accounting. Under this
method, the Group’s share of the post-acquisition profits or
losses of affiliated companies is recognized in the statements of
operations and its shares of post-acquisition movements in other
comprehensive income are recognized in other comprehensive income.
Unrealized gains on transactions between the Group and its
affiliated companies are eliminated to the extent of the
Group’s interest in the affiliated companies; unrealized
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. When the Group’s
share of losses in an affiliated company equals or exceeds its
interest in the affiliated company, the Group does not recognize
further losses, unless the Group has incurred obligations or made
payments on behalf of the affiliated company. An impairment loss is
recorded when there has been a loss in value of the investment that
is other than temporary. The Group has not recorded any impairment
losses in any of the periods reported.
The Group also considers it has significant influence over the
funds that it serves as general partner or fund manager. For funds
that the Group is not deemed the primary beneficiary of these
funds, the equity method of accounting is accordingly used for
investments by the Group in these funds. In addition, the investee
funds meet the definition of an Investment Company and are required
to report their investment assets at fair value. The Group records
its equity pick-up
(g) Fair Value of Financial Instruments
The Group records certain of its financial assets and liabilities
at fair value on a recurring basis. Fair value reflects the price
that would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date. When determining the fair value measurements
for assets and liabilities required or permitted to be recorded at
fair value, the Group considers the principal or most advantageous
market in which it would transact and considers assumptions that
market participants would use when pricing the asset or
liability.
The Group applies a fair value hierarchy that requires an entity to
maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. A financial
instrument’s categorization within the fair value hierarchy
is based upon the lowest level of input that is significant to the
fair value measurement. The hierarchy is as follows:
Level 1 applies to assets or liabilities for which there are
quoted prices in active markets for identical assets or
liabilities.
Level 2 applies to assets or liabilities for which there are
inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, such as quoted prices
for similar assets or liabilities in active markets; quoted prices
for identical asset or liabilities in markets with insufficient
volume or infrequent transactions (less active markets); or
model-derived valuations in which significant inputs are observable
or can be derived principally from, or corroborated by, observable
market data.
Level 3 applies to asset or liabilities for which there are
unobservable inputs to the valuation methodology that are
significant to the measurement of the fair value of the assets or
liabilities.
(h) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and demand
deposits, which are unrestricted as to withdrawal and use, and
which have original maturities of three months or less when
purchased.
As of December 31, 2017, cash and cash equivalents of RMB 11,641
was held by the consolidated fund (see note 2(b)). Cash and cash
equivalents held by the consolidated fund represents cash that,
although not legally restricted, is not available to general
liquidity needs of the Company as the use of such funds is
generally limited to the investment activities of the consolidated
fund.
(i) Restricted Cash
The Group’s restricted cash primarily represents cash
deposits required by China Insurance Regulatory Commission for
entities engaging in insurance agency or brokering activities in
China. Such cash cannot be withdrawn without the written approval
of the China Insurance Regulatory Commission. The Company sold the
subsidiary which was doing the insurance agency business in 2017
and there was no restricted cash balance as of December 31, 2017 as
a result.
The Group early adopted ASU 2016-18, Statement of Cash Flows (Topic
230), Restricted Cash. According to this guidance, amounts
generally described as restricted cash and restricted cash
equivalents should be included with cash and cash equivalents when
reconciling the beginning-of-period and end-of-period total amounts
shown on the statement of cash flows. The Company applied the
guidance on a retrospective basis and have applied the changes to
the consolidated statements of cash flows for the years ended
December 31, 2015, 2016 and 2017.
(j) Investments
The Group invests in debt securities and equity securities and
accounts for the investments based on the nature of the products
invested, and the Group’s intent and ability to hold the
investments to maturity.
The Group’s investments in debt securities include marketable
bond fund securities, trust products, asset management plans,
contractual funds and real estate funds those have a stated
maturity and normally pay a prospective fixed rate of return and
secondary market equity fund products, the underlying assets of
which are portfolios of equity investments in listed enterprises.
The Group classifies the investments in debt securities as
held-to-maturity Held-to-maturity held-to-maturity available-for-sale,
The Group records investments in private equity funds under the
cost method when they do not qualify for the equity method. Gains
or losses are realized when such investments are sold.
The Group reviews its investments except for those classified as
trading securities for other-than-temporary impairment based on the
specific identification method and considers available quantitative
and qualitative evidence in evaluating potential impairment. If the
cost of an investment exceeds the investment’s fair value,
the Group considers, among other factors, general market
conditions, government economic plans, the duration and the extent
to which the fair value of the investment is less than cost and the
Group’s intent and ability to hold the investment to
determine whether an other-than-temporary impairment has
occurred.
The Group recognizes other-than-temporary impairment in earnings if
it has the intent to sell the debt security or if it is
more-likely-than-not
If the investment’s fair value is less than the cost of an
investment and the Group determines the impairment to be
other-than-temporary, the Group recognizes an impairment loss based
on the fair value of the investment. The Group has not recorded an
other-than-temporary impairment.
(k) Non-controlling
A non-controlling Non-controlling non-controlling non-controlling non-controlling
The following schedule shows the effects of changes in the
Company’s ownership interest in less than wholly owned
subsidiaries on equity attributable to Noah Holdings Limited
shareholders:
Years Ended
December 31, (Amount in Thousands)
2015 2016 2017 2017
RMB RMB RMB US$
Net income attributable to Noah Holdings Limited shareholders 535,825 643,829 762,923 117,261
Transfers from (to) the non-controlling
Increase (decrease) in Noah’s equity by partial disposal
(acquisition) of subsidiaries 29,076 151,990 30 5
Net transfers from (to) non-controlling 29,076 151,990 30 5
Change from net income attributable to Noah and transfers from
non-controlling 564,901 795,819 762,953 117,266
(l) Property and Equipment, net
Property and equipment is stated at cost less accumulated
depreciation, and is depreciated using the straight-line method
over the following estimated useful lives:
Estimated Useful Lives in Years
Leasehold improvements
Shorter of the lease term or expected useful life
Furniture, fixtures, and equipment 3—5 years
Motor Vehicles 5 years
Software 2—5 years
Building 30 years
Gains and losses from the disposal of property and equipment are
included in income from operations.
(m) Revenue Recognition
The Group derives revenue primarily from one-time
The Group recognizes revenues when there is persuasive evidence of
an arrangement, service has been rendered, the sales price is fixed
or determinable and collectability is reasonably assured. Prior to
a client’s purchase of a financial product, the Group
provides the client with a wide spectrum of consultation services,
including product selection, review, risk profile assessment and
evaluation and recommendation for the client. Revenues are
recorded, net of sales related taxes and surcharges.
One-time
The Group enters into one-time one-time
The Group also earns one-time “one-time
Recurring Service Fees
Recurring service fees depend on the types of financial products
the Company distributes and/or manages and are calculated as either
(i) a percentage of the total capital commitments of
investments made by the investors or (ii) as a percentage of
the fair value of the total investment in the financial products,
calculated daily. As the Group provides these services throughout
the contract term, for either method of calculation, revenue is
recognized on a daily basis over the contract term, assuming all
other revenue recognition criteria have been met. Recurring service
agreements do not include rights of return, credits or discounts,
rebates, price protection or other similar privileges.
Multiple Element Arrangements
The Group enters into multiple element arrangements when a product
provider or underlying corporate borrower engages it to provide
both distributing financial products and recurring services. The
Group also provides both distributing financial products and
recurring services to funds that it serves as general partner or
fund manager.
The Group allocates arrangement consideration in
multiple-deliverable revenue arrangements at the inception of an
arrangement to all deliverables based on the relative selling price
in accordance with the selling price hierarchy, which includes:
(i) vendor-specific objective evidence (“VSOE”) if
available; (ii) third-party evidence (“TPE”) if
VSOE is not available; and (iii) best estimate of selling
price (“BESP”) if neither VSOE nor TPE is
available.
VSOE. The Group determines VSOE based on its historical pricing and
discounting practices for the specific service when sold
separately. In determining VSOE, the Group requires that a
substantial majority of the selling prices for these services fall
within a reasonably narrow pricing range. The Group historically
had provided distributing financial products services on a
stand-alone basis but the volume of such services has been
significantly decreased in recent years. Therefore VSOE is no
longer available for its distributing financial products services.
The Group has not sold its recurring services on a stand-alone
basis, no VSOE exists for recurring services.
TPE. When VSOE cannot be established for deliverables in multiple
element arrangements, the Group applies judgment with respect to
whether it can establish a selling price based on TPE. TPE is
determined based on competitor prices for similar deliverables when
sold separately. Generally, the Group’s products and services
contain certain level of differentiation such that the comparable
pricing of services with similar functionality cannot be obtained.
Furthermore, the Group is unable to reliably determine what similar
competitor services’ selling prices are on a stand-alone
basis. As a result, the Group has not been able to establish
selling price based on TPE.
BESP. When it is unable to establish selling price using VSOE or
TPE, the Group uses BESP in its allocation of arrangement
consideration. The objective of BESP is to determine the price at
which the Group would transact a sale if the service were sold on a
stand-alone basis. The Group determines BESP for deliverables by
considering multiple factors including, but not limited to, prices
it charged for similar offerings, market conditions, specification
of the services rendered, product lifecycles, and pricing
strategies and practices. The Group has used BESP to allocate the
selling price of distributing financial products service and
recurring services under these multiple element arrangements.
Revenue for the respective units of accounting is also recognized
in the same manner as described above.
Performance-based Income
In a typical arrangement in which the Group serves as fund manager,
and in some cases in which the Company serves as distributor,
except for secondary market equity fund products, the Group is
entitled to a performance-based fee based on the extent by which
the fund’s investment performance exceeds a certain threshold
at the end of the contract term. Such performance-based fee is
typically calculated and distributed at the end of the contract
term when the cumulative return of the fund can be determined, and
is not subject to clawback provisions. The Group does not record
any performance-based income until the end of the contract
term.
Beginning in 2015, for certain secondary market products for which
the Group provides recurring services, including both the funds for
which the Group serves as the distribution channel and the funds
for which the Group acts as the fund manager, the performance-based
income may also include a variable performance fee contingent upon
the performance of the underlying investment in the measurement
period, typically calculated at the end of the measurement period
and settled subsequently. Such performance-based fee is not subject
to clawback provisions and is recognized when the contingent
criteria are met at the end of the measurement period.
Other Service Fees
Other service fees constitutes less than 10% of total revenue of
the Group. The Group mainly derived other service fees from online
wealth management, lending services, payment technology services
and investor education services.
The Group offers lending services. Interest income from such
services is recognized monthly in accordance with their contractual
terms and recorded as pa |
