NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Company initially records its investment at cost and the difference between the cost of the equity investee and the fair value of the underlying equity in the net assets of the equity investee is
recognized as equity method goodwill, which is included in the equity method investment on the consolidated balance sheets. The Company subsequently adjusts the carrying amount of its investment to recognize the Companys proportionate share of
each equity investees net income or loss into earnings after the date of investment. The Company will discontinue applying the equity method if an investment (and additional financial supports to the investee, if any) has been reduced to zero.
If the Company is not required to advance additional funds to an investee and the equity-method investment in ordinary shares is reduced to zero, the Company would recognize losses based on its percentage of the investment with the same liquidation
preference for further investments made with a higher liquidation preference than ordinary shares. Such losses are first applied to those investments of a lower liquidation preference before being further applied to the investments of a higher
liquidation preference. The Company evaluates the equity method investments for impairment under ASC 323. An impairment loss on the equity method investments is recognized in earnings when the decline in value is determined to be
investments and long-term available-for-sale investments are measured in the same manner as short-term
held-to-maturity investments and short-term available-for-sale investments, respectively.
The Company recognizes revenue in accordance with ASC topic 605 (ASC 605), Revenue Recognition. Revenue is recognized when
the following four revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been provided, (iii) the selling price is fixed or determinable, and
(iv) collectability is reasonably assured.
Performance-based online marketing services
The Companys auction-based pay-for-performance
(P4P) platform enables a customer to place its website link and related description on the Companys search result list on the website which could be accessed through personal computer or mobile devices. Customers make bids on
keywords based on how much they are willing to pay for each click to their listings in the search results listed on the Companys website and the relevance between the keywords and the customers businesses. Internet users search of
the keyword will trigger the display of the listings. The ranking of the customers listing depends on both the bidding price and the listings relevance to the keyword searched. Customers pay the Company only when a user clicks on one of
its website links. Other than the auction-based P4P platform, the Company has certain vertical platforms from which it generates revenue through pre-determined prices per click. Revenue is recognized when all
of the revenue recognition criteria set forth in ASC 605 are met, which is generally when a user clicks on one of the customer-sponsored website links.
Other performance-based online marketing services
To the extent the Company provides online marketing services based on performance criteria other than
cost-per-click, such as the number of downloads (and user registration) of mobile applications, the number of incremental end users and the total incremental revenue generated, revenue is recognized when the
specified performance criteria are met together with satisfaction of other applicable revenue recognition criteria as prescribed by ASC 605.