ALIBABA GROUP HOLDING LTD - 20-F - 20180727 - NOTES_TO_FINANCIAL_STATEMENT
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
1. Organization and principal activities
Alibaba
Group Holding Limited (the "Company") is a limited liability company which was incorporated in the Cayman Islands on June 28, 1999. The Company is a holding company and conducts
its businesses primarily through its subsidiaries. In these consolidated financial statements, where appropriate, the term "Company" also refers to its subsidiaries as a whole. The Company provides
the technology infrastructure and marketing reach to help merchants, brands and other businesses to leverage the power of new technology to engage with their users and customers in the People's
Republic of China (the "PRC" or "China") and internationally. Major shareholders of the Company include SoftBank Group Corp. ("SoftBank") and Altaba Inc. (formerly known as
Yahoo! Inc.) ("Altaba").
The
Company has four operating and reportable segments, namely core commerce, cloud computing, digital media and entertainment, and innovation initiatives and others.
The
Company's core commerce segment is mainly comprised of (i) the retail and wholesale commerce businesses in China and internationally and (ii) a logistics data platform and a
nationwide fulfillment network through Cainiao Network (Note 4(b)). Retail commerce businesses in China operated by the Company primarily include the China mobile commerce destination ("Taobao
Marketplace") and the China third-party platform for brands and retailers ("Tmall"). International retail commerce businesses operated by the Company include the e-commerce platform across Southeast
Asia operated by Lazada (Note 4(h)) and the global retail marketplace enabling consumers from around the world to buy directly from manufacturers and distributors primarily in China
("AliExpress"). Wholesale commerce businesses in China operated by the Company include the China integrated domestic wholesale marketplace ("1688.com"). International wholesale commerce businesses
operated by the Company include the integrated international online wholesale marketplace ("Alibaba.com").
The
Company's cloud computing segment is comprised of Alibaba Cloud, which offers a complete suite of cloud services including elastic computing, database, storage, network virtualization services,
large scale computing, security, management and application services, big data analytics, and machine learning platform and Internet of Things ("IoT") services for customers in different sizes across
various industries.
The
Company's digital media and entertainment segment operates businesses through (i) Youku (Note 4(g)), (ii) UC Browser and (iii) other diverse content platforms that
provide movies, TV drama series, online dramas, variety shows, games, literature and music.
The
Company's innovation initiatives and others segment primarily includes businesses such as AutoNavi, DingTalk and others.
The
Company has a profit sharing interest in Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. ("Ant Financial") (Note 4(a)), the financial services group
that operates mainly through Alipay.com Co., Ltd. ("Alipay"), a third-party online payment platform in China. Alipay provides payment processing and escrow services to the Company, which
allow the transactions on the Company's marketplaces to be settled through a secure payment platform and escrow process.
2. Summary of significant accounting policies
(a) Basis of presentation
The
accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
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Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(a) Basis of presentation (Continued)
Translations
of balances in the consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income and consolidated statement of cash flows from Renminbi ("RMB")
into the United States Dollar ("US$") as of and for the year ended March 31, 2018 are solely for the convenience of the readers and are calculated at the rate of US$1.00=RMB6.2726,
representing the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on March 30, 2018. No representation is made that the RMB amounts could have been,
or could be, converted, realized or settled into US$ at such rate, or at any other rate.
(b) Use of estimates
The
preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which
form the basis for making judgments about the carrying values of assets and liabilities.
(c) Consolidation
The
consolidated financial statements include the financial statements of the Company and its subsidiaries, which include the wholly-foreign owned enterprises ("WFOEs") and variable interest entities
("VIEs") over which the Company is the primary beneficiary. All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation. The results of subsidiaries
acquired or disposed of are recorded in the consolidated income statements from the effective date of acquisition or up to the effective date of disposal, as appropriate.
A
subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power; or (ii) the Company has the power 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 the board of directors or to govern the financial and operating policies of the investee pursuant to a statute
or under an agreement among the shareholders or equity holders. A VIE is required to be consolidated by the primary beneficiary of the entity if the equity holders in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other
parties.
Due
to legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications services, which include the operations of Internet content providers, the Company
operates its Internet and other businesses in which foreign investment is restricted or prohibited in the PRC through certain PRC domestic companies. The equity interests of these PRC domestic
companies are held by PRC citizens or by PRC entities owned and/or controlled by PRC citizens. Specifically, these PRC domestic companies that are material to the Company's business are Zhejiang
Taobao Network Co., Ltd., Zhejiang Tmall Network Co., Ltd., Alibaba Cloud Computing Ltd., Hangzhou Alibaba Advertising Co., Ltd. and Youku Information
Technology (Beijing) Co., Ltd. The registered capital of these PRC domestic companies was funded by the Company through loans extended to the equity holders of these PRC domestic
companies. The
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Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
Company
has entered into certain exclusive technical services agreements with these PRC domestic companies, which entitle it to receive a majority of their residual returns and make it obligatory for
the Company to absorb a majority of the risk of losses from their activities. In addition, the Company has entered into certain agreements with the equity holders of these PRC domestic companies,
including loan agreements that require them to contribute registered capital to those PRC domestic companies, exclusive call option agreements to acquire the equity interests in these companies when
permitted by the PRC laws, rules and regulations, equity pledge agreements of the equity interests held by those equity holders, and proxy agreements that irrevocably authorize individuals designated
by the Company to exercise the equity owner's rights over these PRC domestic companies.
Details
of the typical structure of the Company's significant VIEs are set forth below:
-
(i)
-
Contracts
that give the Company effective control of VIEs
Loan agreements
Pursuant
to the relevant loan agreements, the respective WFOEs have granted loans to the equity holders of the VIEs, which may only be used for the purpose of its business operation activities agreed
by the WFOEs. The WFOEs may require acceleration of repayment at their absolute discretion. When the equity holders of the VIEs make early repayment of the outstanding amount, the WFOEs or a
third-party designated by the WFOEs may purchase the equity interests in the VIEs at a price equal to the outstanding amount of the loan, subject to any applicable PRC laws, rules and regulations. The
equity holders of the VIEs undertake not to enter into any prohibited transactions in relation to the VIEs, including the transfer of any business, material assets, intellectual property rights or
equity interests in the VIEs to any third party.
Exclusive call option agreements
The
equity holders of the VIEs have granted the WFOEs exclusive call options to purchase their equity interest in the VIEs at an exercise price equal to the higher of (i) the paid-in registered
capital in the VIEs; and (ii) the minimum price as permitted by applicable PRC law. Each relevant VIE has further granted the relevant WFOE an exclusive call option to purchase its assets at an
exercise price equal to the book value of the assets or the minimum price as permitted by applicable PRC laws, whichever is higher. Certain VIEs and their equity holders
will also jointly grant the WFOEs (A) exclusive call options to request the VIEs to decrease their registered capital at an exercise price equal to the higher of (i) the paid-in
registered capital in the VIEs and (ii) the minimum price as permitted by applicable PRC law (the "Capital Decrease Price"), and (B) exclusive call options to subscribe for the
increased capital of the VIEs at a price equal to the sum of the Capital Decrease Price and the unpaid registered capital, if applicable, as of the capital decrease. The WFOEs may nominate another
entity or individual to purchase the equity interest or assets, or to subscribe for the increased capital, if applicable, under the call options. Execution of each call option shall not violate the
applicable PRC laws, rules and regulations. Each equity holder of the VIE has agreed that the following amounts, to the extent in excess of the original registered capital that they contributed to the
VIE (after deduction of relevant tax expenses), belong to and shall be paid to the WFOEs: (i) proceeds from the transfer of its equity interests in the VIE, (ii) proceeds received in
connection with a capital decease in the VIE, and (iii) distributions or liquidation residuals
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
from
the disposal of its equity interests in the VIE upon termination or liquidation. Moreover, any profits, distributions or dividends (after deduction of relevant tax expenses) received by the VIEs
also belong to and shall be paid to the WFOEs. The exclusive call option agreements remain in effect until the equity interest or assets that are the subject of these agreements are transferred to the
WFOEs.
Proxy agreements
Pursuant
to the relevant proxy agreements, the equity holders of the VIEs irrevocably authorize any person designated by the WFOEs to exercise their rights as the equity holders of the VIEs, including
without limitation the right to vote and appoint directors.
Equity pledge agreements
Pursuant
to the relevant equity pledge agreements, the equity holders of the VIEs have pledged all of their interests in the equity of the VIEs as a continuing first priority security interest in
favor of the corresponding WFOEs to secure the outstanding amounts advanced under the relevant loan agreements described above and to secure the performance of obligations by the VIEs and/or the
equity holders under the other structure contracts. Each WFOE is entitled to exercise its right to dispose of the pledged interests in the equity of the VIE held by the equity holders and has priority
in receiving payment by the application of proceeds from the auction or sale of such pledged interests, in the event of any breach or default under the loan agreement or other structure contracts, if
applicable. These equity pledge agreements remain in force until the earlier of (i) the full performance of the
contractual arrangements by the relevant parties, and (ii) the full repayment of the loans made to the equity holders of the VIEs.
-
(ii)
-
Contracts
that enable the Company to receive substantially all of the economic benefits from the VIEs
Exclusive technology services agreements or exclusive services agreements
Each
relevant VIE has entered into an exclusive technology services agreement or an exclusive services agreement with the respective WFOE, pursuant to which the relevant WFOE provides exclusive
services to the VIE. In exchange, the VIE pays a service fee to the WFOE, the amount of which shall be determined, to the extent permitted by applicable PRC laws as proposed by the WFOE, resulting in
a transfer of substantially all of the profits from the VIE to the WFOE.
Other arrangements
The
exclusive call option agreements described above also entitle the WFOEs to all profits, distributions or dividends (after deduction of relevant tax expenses) to be received by the VIEs, and the
following amounts, to the extent in excess of the original registered capital that they contributed to the VIEs (after deduction of relevant tax expenses) to be received by each equity holder of the
VIEs: (i) proceeds from the transfer of its equity interests in the VIEs, (ii) proceeds received in connection with a capital decease in the VIEs, and (iii) distributions or
liquidation residuals from the disposal of its equity interests in the VIEs upon termination or liquidation.
Based
on these contractual agreements, the Company believes that the PRC domestic companies as described above should be considered as VIEs because the equity holders do not have significant equity at
risk nor do
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
they
have the characteristics of a controlling financial interest. Given that the Company is the primary beneficiary of these PRC domestic companies, the Company believes that these VIEs should be
consolidated based on the structure as described above.
The
following financial information of the VIEs in the PRC was recorded in the accompanying consolidated financial statements:
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As of March 31,
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|
|
|
|
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2017
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|
2018
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|
|
|
|
|
(in millions of RMB)
|
|
|
|
Cash and cash equivalents and short-term investments
|
|
|
7,586
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|
|
7,507
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|
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Investments in equity investees and investment securities
|
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|
17,371
|
|
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26,611
|
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|
Accounts receivable, net of allowance
|
|
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3,301
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5,733
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Amounts due from non-VIE subsidiaries of the Company
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1,400
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|
|
1,949
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Prepayment for licensed copyrights
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1,469
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1,736
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Property and equipment and intangible assets
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4,738
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6,788
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Others
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2,926
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4,139
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Total assets
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38,791
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54,463
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Amounts due to non-VIE subsidiaries of the Company
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25,317
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41,090
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Accruals for purchase of licensed copyrights
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2,244
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3,686
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Accrued expenses, account payable and other liabilities
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7,545
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10,931
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Deferred revenue and customer advances
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3,338
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4,997
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Deferred tax liabilities
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1,481
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995
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Total liabilities
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39,925
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61,699
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Year ended March 31,
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2016
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2017
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2018
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(in millions of RMB)
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Revenue (i)
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8,558
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24,712
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32,898
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Net income (loss) (i)
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35
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(4,688
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)
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(6,167
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)
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Net cash provided by operating activities
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1,224
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3,220
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5,547
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Net cash used in investing activities
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(7,160
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)
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|
(2,557
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)
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(20,366
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)
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Net cash provided by financing activities
|
|
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6,494
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2,688
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|
14,286
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|
-
(i)
-
Revenue
and net income (loss) earned and incurred by the VIEs are primarily from mobile media and entertainment services, cloud computing services and others.
The
VIEs did not have any material related party transactions except for the related party transactions which are disclosed in Note 21 or elsewhere in these consolidated financial
statements, and those transactions with other subsidiaries that are not VIEs, which were eliminated upon consolidation.
Under
the contractual arrangements with the VIEs, the Company has the power to direct activities of the VIEs and can have assets transferred out of the VIEs under its control. Therefore, the Company
considers that there is no asset in any of the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and PRC statutory reserves. As all VIEs are incorporated as
limited liability companies
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
under
the Company Law of the PRC, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs.
Currently
there is no contractual arrangement which requires the Company to provide additional financial support to the VIEs. However, as the Company conducts its businesses primarily based on the
licenses and approvals held by its VIEs, the Company has provided and will continue to provide financial support to the VIEs considering the business requirements of the VIEs, as well as the Company's
own business objectives in the future.
Unrecognized
revenue-producing assets held by the VIEs include certain Internet content provision and other licenses, domain names and trademarks. The Internet content provision and other licenses are
required under relevant PRC laws, rules and regulations for the operation of Internet businesses in the PRC, and therefore are integral to the Company's operations. The Internet content provision
licenses require that core PRC trademark registrations and domain names are held by the VIEs that provide the relevant services.
(d) Business combinations and noncontrolling interests
The
Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") 805 "Business Combinations." The cost of an
acquisition is measured as the aggregate of the acquisition date fair value of the assets transferred to the sellers and liabilities
incurred by the Company and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are
measured separately at their fair values as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value of
the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is
recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated income statements.
During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to
goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded
to the consolidated income statements.
In
a business combination achieved in stages, the Company re-measures the previously held equity interest in the acquiree immediately before obtaining control at its acquisition date fair value and
the re-measurement gain or loss, if any, is recognized in the consolidated income statements.
When
there is a change in ownership interests or a change in contractual arrangements that results in a loss of control of a subsidiary, the Company deconsolidates the subsidiary from the date control
is lost. Any retained noncontrolling investment in the former subsidiary is measured at fair value and is included in the calculation of the gain or loss upon deconsolidation of the subsidiary.
For
the Company's non-wholly owned subsidiaries, a noncontrolling interest is recognized to reflect portion of equity that is not attributable, directly or indirectly, to the Company. When the
noncontrolling interest is contingently redeemable upon the occurrence of a conditional event, which is not solely within the control of the Company, the noncontrolling interest is classified as
mezzanine equity. The Company accretes changes in
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(d) Business combinations and noncontrolling interests (Continued)
the
redemption value over the period from the date that it becomes probable that the mezzanine equity will become redeemable to the earliest redemption date using the effective interest method.
Consolidated net income in the consolidated income statements includes net income (loss) attributable to noncontrolling interests and mezzanine equity holders when applicable. Net income (loss)
attributable to mezzanine equity holders is included in net loss attributable to noncontrolling interests in the consolidated income statements, while it is excluded from the consolidated statements
of changes in shareholders' equity. During the year ended March 31, 2018, net loss attributable to mezzanine equity holders amounted to RMB930 million. The cumulative results of
operations attributable to noncontrolling interests, along with adjustments for share-based compensation expense arising from outstanding share-based awards relating to subsidiaries' shares, are also
recorded as noncontrolling interests in the
Company's consolidated balance sheets. Cash flows related to transactions with noncontrolling interests are presented under financing activities in the consolidated statements of cash flows.
(e) Segment reporting
Operating
segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (the "CODM"), which is comprised of certain members of the
Company's management team. Historically, the Company had one single operating and reportable segment, namely the provision of online and mobile commerce and related services. Starting from the year
ended March 31, 2017, the Company implemented operational changes in how the CODM manages the businesses of the Company to maximize efficiency in allocating resources and assessing performance.
Consequently, the Company presents four operating and reportable segments as set out in Notes 1 and 25 to reflect the change.
(f) Foreign currency translation
The
functional currency of the Company is US$. The Company's subsidiaries with operations in the PRC, Hong Kong, the United States and other jurisdictions generally use their respective local
currencies as their functional currencies. The reporting currency of the Company is RMB as the major operations of the Company are within the PRC. The financial statements of the Company's
subsidiaries, other than the subsidiaries with the functional currency of RMB, are translated into RMB using the exchange rate as of the balance sheet date for assets and liabilities and the average
daily exchange rate for each month for income and expense items. Translation gains and losses are recorded in accumulated other comprehensive income or loss as a component of shareholders' equity.
In
the financial statements of the Company's subsidiaries, transactions in currencies other than the functional currency are measured and recorded in the functional currency using the exchange rate in
effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the functional currency are translated into the
functional currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign currency transactions are recorded in the consolidated income statements during the
year in which they occur.
(g) Revenue recognition
Revenue
is principally comprised of customer management revenue, commissions on transactions, membership fees, cloud computing services revenue and other revenue. Revenue represents the fair value of
the
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
consideration
received or receivable for the sales of goods and the provision of services in the ordinary course of the Company's activities and is recorded net of value-added tax ("VAT"). Consistent
with the criteria of ASC 605 "Revenue Recognition" ("ASC 605"), the Company recognizes revenue 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.
Revenue
arrangements with multiple deliverables are divided into separate units of accounting. The arrangement consideration is allocated at the inception of the arrangement to each element based on
their relative fair values for revenue recognition purposes. The consideration is allocated to each element using vendor-specific objective evidence or third-party evidence of the standalone selling
price for each deliverable, or if neither type of evidence is available, using management's best estimate of selling price. Revenue arrangements with multiple deliverables primarily relate to the sale
of membership packages and customer management services on wholesale marketplaces and Youku's platforms, which are not significant to the Company's total revenue.
The
Company evaluates if it is a principal or an agent in a transaction to determine whether revenue should be recorded on a gross or net basis. When the Company is primarily obligated in a
transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenue is recorded on a gross basis. When the
Company is not the primary obligor, does not bear the inventory risk and does not have the ability to establish the price, revenue is recorded on a net basis.
When
services are exchanged or swapped for other services, revenue will be recognized based on the value of services being exchanged. The amount of revenue recognized for barter transactions was not
material for each of the periods presented.
Revenue
recognition policies for each type of services are as follows:
-
(i)
-
Customer
management revenue
Within
the core commerce segment, the Company provides the following customer management services to merchants on the Company's retail and wholesale marketplaces and certain third-party marketing
affiliates' websites:
Pay for performance ("P4P") marketing services
P4P
marketing services allow merchants to bid for keywords that match product or service listings appearing in search or browser results on the Company's marketplaces. Merchants bid for keywords
through an online bidding system. The positioning of such listings and the price for such positioning are determined through an online auction system, which facilitates price discovery through a
market-based mechanism. In general, merchants prepay for P4P marketing services and the related revenue is recognized when a user clicks their product or service listings.
Display marketing services
Display
marketing services allow merchants to place advertisements in particular areas of a web page of the Company's marketplaces, at fixed prices or prices established by a real-time bidding system
and in
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
particular
formats. In general, merchants need to prepay for display marketing and revenue is recognized ratably over the period in which the advertisement is displayed or when an advertisement is
clicked or viewed by users.
The
Company also places P4P marketing services content and display marketing content through the third-party marketing affiliate program. A substantial portion of customer management revenue generated
through the third-party marketing affiliate program represented P4P marketing services revenue. In delivery of these customer management services, the Company, through the third-party marketing
affiliate program, places the P4P marketing services content of the participating merchants on third-party websites in the forms of picture or text links through contextual relevance technology to
match merchants' marketing content to the textual content of the third-party website and the users' attributes based on the Company's systems and algorithms. When such links on third-party websites
are clicked, users are diverted to a landing page of the Company's marketplaces where listings of the participating merchant as well as similar products or services of other merchants are presented.
In limited cases, the Company may embed a search box for one of its marketplaces on such third-party websites, and when a keyword is input into the search box, the user will be diverted to the
Company's website where search results are
presented. Revenue is recognized when such users further click on the P4P marketing content on such landing pages. The Company places display marketing content on third-party websites in a similar
manner. Revenue is recognized ratably over the period in which the advertisement is displayed or when users click or view the advertisement.
P4P
marketing services revenue as well as display marketing revenue generated on the Company's marketplaces or through the third-party marketing affiliate program are recorded on a gross basis when
the Company is the primary obligor to the merchants in the arrangements. For third-party marketing affiliates with whom the Company has an arrangement to share such revenue, traffic acquisition cost
is also recognized at the same time if the P4P marketing content on the landing page clicked by the users is from merchants participating in the third-party marketing affiliate program.
Taobaoke services
In
addition, the Company offers the Taobaoke program which generates commissions from merchants for transactions completed by consumers sourced from certain third-party marketing affiliates' websites.
The commission rates on Taobaoke are set by the merchants. The Company's portion of commission revenue is recognized at the time when the underlying transaction is completed and is recorded on a net
basis principally because the Company is not the primary obligor as it does not have latitude in establishing prices or does not have inventory risk. In certain occasions where the Company is the
primary obligor of the arrangement (such as arrangements where the Company is obligated to pay for website inventory costs in fixed amounts to third-party marketing affiliates regardless of whether
commission revenue is generated from these marketing affiliates), such commission revenue is recorded on a gross basis.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
Within
the digital media and entertainment segment, the Company offers P4P marketing services to merchants and marketers on websites and mobile media operated by UCWeb. Revenue is recognized when a
user clicks their product or service listings. In addition, marketers can also place advertisements on websites and mobile media operated by UCWeb and Youku's platforms in different formats, including
video, banners, links, logos and buttons.
Revenue is recognized ratably over the period in which the advertisement is displayed or when users click or view the advertisement.
-
(ii)
-
Commissions
on transactions
The
Company earns commissions from merchants when transactions are completed on certain retail marketplaces of the Company. Such commissions are generally determined as a percentage based on the value
of merchandise being sold by the merchants. Revenue related to commissions is recognized in the consolidated income statements at the time when the underlying transaction is completed.
-
(iii)
-
Membership
fees
The
Company earns membership fees revenue from wholesale sellers in respect of the sale of membership packages and subscriptions which allow them to host premium storefronts on the Company's wholesale
marketplaces, as well as the provision of other value-added services, and from customers in respect of the sale of membership packages which allow them to access premium content on Youku's paid
content platforms. These service fees are paid in advance for a specific contracted service period. All these fees are initially deferred when received and revenue is recognized ratably over the term
of the respective service contracts as the services are provided.
-
(iv)
-
Cloud
computing services revenue
The
Company earns cloud computing services revenue from the provision of services such as elastic computing, database, storage, network virtualization services, large scale computing, security,
management and application services, big data analytics, and machine learning platform and IoT services. Revenue is recognized at the time when the services are provided or ratably over the term of
the service contracts as appropriate.
-
(v)
-
Other
revenue
Other
revenue primarily consists of revenue from the sales of goods, which is mainly generated from Lazada (Note 4(h)) and Intime (Note 4(c)). Revenue from the sales of goods is
recognized when the customer has accepted the goods and related risks and rewards of ownership. Receipts of fees in respect of all other incidental services provided by the Company are recognized when
services are delivered and the amounts relating to such incidental services are not material to the Company's total revenue for each of the periods presented.
(h) Cost of revenue
Cost
of revenue consists primarily of cost of inventory, logistics costs, co-location and bandwidth fees, depreciation and maintenance costs for computers and other equipment, content costs, staff
costs and share-based compensation expense, traffic acquisition costs, payment processing fees and other related incidental expenses that are directly attributable to the Company's principal
operations.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(i) Product development expenses
Product
development expenses consist primarily of staff costs and share-based compensation expense for research and development personnel and other expenses which are directly attributable to the
development of new technologies and products for the businesses of the Company, such as the development of the Internet infrastructure, applications, operating systems, software, database and network.
The
Company expenses all costs that are incurred in connection with the planning and implementation phases of development and costs that are associated with repair or maintenance of the existing
websites or the development of software and website content. Costs incurred in the development phase are capitalized and amortized over the estimated product life. However, since the inception of the
Company, the amount of costs qualifying for capitalization has been insignificant and as a result, all website and software development costs have been expensed as incurred.
(j) Sales and marketing expenses
Sales
and marketing expenses consist primarily of online and offline advertising expenses, promotion expenses, staff costs and share-based compensation expense, sales commissions and other related
incidental expenses that are incurred directly to attract or retain consumers and merchants for the Company's marketplaces, mobile products, transaction and service platforms as well as entertainment
distribution platforms.
The
Company expenses the costs of producing advertisements at the time production occurs, and expenses the costs of delivering advertisements in the period in which the advertising space or airtime is
used. Advertising and promotional expenses totaled RMB5,524 million, RMB8,799 million and RMB16,814 million during the years ended March 31, 2016, 2017 and 2018,
respectively.
(k) Share-based compensation
Share-based
awards granted are measured at fair value on grant date and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required,
or (ii) using the accelerated attribution method, net of estimated forfeitures, over the requisite service period. The fair value of share options is determined using the Black-Scholes
valuation model and the fair value of restricted shares and restricted share units ("RSUs") is determined with reference to the fair value of the underlying shares. Share-based awards granted to
non-employees are initially measured at fair value on the grant date and re-measured at each reporting date through the vesting date. Such value is recognized as an expense over the respective service
period, net of estimated forfeitures. Share-based compensation expense, when recognized, is charged to the consolidated income statements with the corresponding entry to additional paid-in capital,
liability or noncontrolling interests as disclosed in Note 2(d).
On
each measurement date, the Company reviews internal and external sources of information to assist in the estimation of various attributes to determine the fair value of the share-based awards
granted by the Company, including the fair value of the underlying shares, expected life and expected volatility. The Company is required to consider many factors and makes certain assumptions during
this assessment. If any of the assumptions used to determine the fair value of the share-based awards change significantly in the future, share-based compensation
expense may differ materially. The Company recognizes the impact of any revisions to the original forfeiture rate assumptions in the consolidated income statements, with a corresponding adjustment to
equity.
F-24
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(l) Other employee benefits
The
Company's subsidiaries in the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are
provided to employees. The relevant labor regulations require the Company's subsidiaries in the PRC to pay the local labor and social welfare authorities monthly contributions based on the applicable
benchmarks and rates stipulated by the local government. The relevant local labor and social welfare authorities are responsible for meeting all retirement benefits obligations and the Company's
subsidiaries in the PRC have no further commitments beyond their monthly contributions. The contributions to the plan are expensed as incurred. During the years ended March 31, 2016, 2017 and
2018, contributions to such plan amounting to RMB2,094 million, RMB2,710 million and RMB3,587 million, respectively, were charged to the consolidated income statements.
The
Company also makes payments to other defined contribution plans for the benefit of employees employed by subsidiaries outside of the PRC. Amounts contributed during the years ended
March 31, 2016, 2017 and 2018 were insignificant.
(m) Income taxes
The
Company accounts for income taxes using the liability method, under which deferred income taxes are recognized for future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized as income or expense in the period
that includes the enactment date. Valuation allowance is provided on deferred tax assets to the extent that it is more likely than not that the asset will not be realizable in the foreseeable future.
Deferred
taxes are also recognized on the undistributed earnings of subsidiaries, which are presumed to be transferred to the parent company and are subject to withholding taxes, unless there is
sufficient evidence to show that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax-free liquidation.
The
Company adopts ASC 740 "Income Taxes" which 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. It also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties
associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The Company did not have significant unrecognized uncertain tax positions or any unrecognized
liabilities, interest or penalties associated with unrecognized tax benefit as of and for the years ended March 31, 2016, 2017 and 2018.
(n) Government grants
Government
grants are recognized as income in other income, net or as a reduction of specific costs and expenses for which the grants are intended to compensate. Such amounts are recognized in the
consolidated income statements upon receipts and all conditions attached to the grants are fulfilled.
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Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(o) Leases
Leases
are classified as either capital or operating leases. Leases that transfer substantially all the benefits and risks incidental to the ownership of assets are accounted for as capital leases as
if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments (net of any
incentives received from the lessor) are recognized in the consolidated income statements on a straight-line basis over the lease terms. The Company had no significant capital leases for the years
ended March 31, 2016, 2017 and 2018.
(p) Cash and cash equivalents
The
Company considers all short-term, highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. Cash and cash equivalents primarily represent
bank deposits, fixed deposits with maturities less than three months and investments in money market funds. As of March 31, 2017 and 2018, the Company had certain amounts of cash held in
accounts managed by Alipay in connection with the provision of online and mobile commerce and related services for a total amount of RMB991 million and RMB1,687 million, respectively,
which have been classified as cash and cash equivalents in the consolidated balance sheets.
(q) Short-term investments
Short-term
investments consist primarily of investments in fixed deposits with maturities between three months and one year and investments in money market funds or other investments whereby the
Company has the intention to redeem within one year. As of March 31, 2017 and 2018, the investments in fixed deposits that were recorded as short-term investments amounted to
RMB1,075 million and RMB2,919 million, respectively. As of the same dates, the Company had certain amounts of short-term investments held in accounts managed by Alipay for a total amount
of RMB982 million and RMB890 million, respectively.
(r) VAT receivables
VAT
receivables mainly represent the advance settlement of relevant VAT refund amounts provided by the Company to its customers prior to receiving such VAT refund from tax authorities. Such amounts
are recorded at the claimed refund amount less allowance for doubtful accounts relating to VAT receivables, and include accrued interest receivable as of the balance sheet date. Allowance for doubtful
accounts relating to VAT receivables represent the Company's best estimate of the losses inherent in the outstanding portfolio of VAT receivables. The
collection periods related to the VAT receivables generally range from three to six months. Judgment is required to determine the allowance amounts and whether such amounts are adequate to cover
potential bad debts, and periodic reviews are performed to ensure such amounts continue to reflect the best estimate of the losses inherent in the outstanding portfolio of debts. For the years ended
March 31, 2016, 2017 and 2018, allowance for doubtful accounts relating to VAT receivables amounting to RMB474 million, RMB1,321 million and RMB153 million were recorded in
cost of revenue within the Company's core commerce segment. For the years ended March 31, 2016, 2017 and 2018, the charge-offs and recoveries in relation to the allowance for doubtful accounts
relating to VAT receivables were insignificant.
F-26
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(s) Inventories
Inventories
mainly consist of merchandise for sales. They are accounted for using the weighted average cost and stated at the lower of cost and net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
(t) Investment securities
The
classification of investment securities is based on the Company's intent, which is re-evaluated periodically, with respect to those securities. The securities that the Company has positive intent
and ability to hold to maturity are classified as held-to-maturity securities and stated at amortized cost. The maturities of the held-to-maturity securities held by the Company generally range from
one to ten years. Other investment securities classified as available-for-sale are carried at fair value with unrealized gains and losses recorded in accumulated other comprehensive income (loss) as a
component of shareholders' equity. Realized gains and losses and provision for decline in value judged to be other-than-temporary, if any, are recognized in the consolidated income statements. In
computing realized gains and losses on available-for-sale securities, the Company determines cost based on amounts paid, including direct costs such as commissions to acquire the security, using the
average cost method. Other than the above, the Company has elected the fair value option for certain investments including convertible and exchangeable bonds subscribed. Such fair value option permits
the irrevocable election on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The
investments accounted for under the fair value option are carried at fair value with realized or unrealized gains and losses recorded in the consolidated income statements.
Interest
income from investment securities is recognized using the effective interest method which is reviewed and adjusted periodically based on changes in estimated cash flows. Dividend income is
recognized when the right to receive the payment is established.
(u) Investments in equity investees
Equity
investments represent the Company's investments in privately held companies and listed securities. The Company applies the equity method to account for an equity investment in common stock or
in-substance common stock, according to ASC 323 "Investment — Equity Method and Joint Ventures," over which it has significant influence but does not own a
majority equity interest or otherwise control.
An
investment in in-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity's common stock. The Company considers
subordination, risks and rewards of ownership and obligation to transfer value when determining whether an investment in an entity is substantially similar to an investment in that entity's common
stock.
Under
the equity method, the Company's share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated income statements and its share of post-acquisition
movements in accumulated other comprehensive income is recognized in other comprehensive income. The Company records its share of the results of such equity investees on a one quarter in arrears
basis. The excess of the carrying amount of the investment over the underlying equity in net assets of the equity investee represents goodwill and intangible assets acquired. When the Company's share
of losses in the equity investee equals or exceeds
F-27
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(u) Investments in equity investees (Continued)
its
interest in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees on behalf of the equity investee.
For
other equity investments that are not considered as debt securities or equity securities that have readily determinable fair values and over which the Company neither has significant influence nor
control through investment in common stock or in-substance common stock, the cost method is used.
Under
the cost method, the Company carries the investment at cost and recognizes income to the extent of dividends received from the distribution of the equity investee's post-acquisition profits.
(v) Property and equipment, net
Property
and equipment are stated at cost less accumulated depreciation and any impairment loss. Depreciation is computed using the straight-line method with no residual value based on the estimated
useful lives of the various classes of assets, which range as follows:
|
|
|
|
|
|
|
Computer equipment and software
|
|
3 – 5 years
|
|
|
Furniture, office and transportation equipment
|
|
3 – 10 years
|
|
|
Buildings
|
|
20 – 50 years
|
|
|
Property improvements
|
|
shorter of remaining lease period or estimated useful life
|
Construction
in progress represents buildings and related premises under construction, which is stated at actual construction cost less any impairment loss. Construction in progress is transferred to
the respective category of property and equipment when completed and ready for its intended use.
Costs
of repairs and maintenance are expensed as incurred and asset improvements are capitalized. The cost and related accumulated depreciation of assets disposed of or retired are removed from the
accounts, and any resulting gain or loss is reflected in the consolidated income statements.
(w) Land use rights, net
Land
use rights represent lease prepayments to the local government authorities. Land use rights are carried at cost less accumulated amortization and any impairment loss. Amortization is provided to
write off the cost of lease prepayments on a straight-line basis over the period of the right which is 30 – 50 years.
(x) Intangible assets other than licensed copyrights
Intangible
assets mainly include those acquired through business combinations and purchased intangible assets. Intangible assets acquired through business combinations are recognized as assets
separate from goodwill if they satisfy either the "contractual-legal" or "separability" criterion. Intangible assets arising from business combinations are recognized and measured at fair value upon
acquisition. Purchased intangible assets are initially recognized and measured at cost upon acquisition. Separately identifiable intangible assets that have
F-28
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(x) Intangible assets other than licensed copyrights (Continued)
determinable
lives continue to be amortized over their estimated useful lives using the straight-line method as follows:
|
|
|
|
|
|
|
User base and customer relationships
|
|
1 – 16 years
|
|
|
Trade names, trademarks and domain names
|
|
3 – 20 years
|
|
|
Developed technology and patents
|
|
2 – 5 years
|
|
|
Non-compete agreements
|
|
over the contracted term up to 6 years
|
(y) Licensed copyrights
Licensed
copyrights related to titles to movies, television series, variety shows, animations and other video content acquired from external parties are carried at the lower of unamortized cost or net
realizable value. The terms of the licenses for professionally produced content vary depending on the type of content and producers, but the terms for movies and television serial dramas typically
range from six months to ten years. Licensed copyrights are presented in the consolidated balance sheets as current assets under prepayments, receivables and other assets, or non-current assets under
intangible assets, net, based on estimated time of usage. Licensed copyrights are generally amortized using an accelerated method based on historical viewership consumption patterns. Estimates of the
consumption patterns for licensed copyrights are reviewed periodically and revised if necessary. For the years ended March 31, 2016, 2017 and 2018, amortization expenses in connection with the
licensed copyrights of RMB347 million, RMB3,886 million and RMB6,111 million were recorded in cost of revenue within the Company's digital media and entertainment segment.
On
a periodic basis, the Company evaluates the program usefulness of its licensed copyrights pursuant to the guidance in ASC 920 "Entertainment — Broadcasters"
which provides that such rights be reported at the lower of unamortized cost or estimated net realizable value. When there is a change in the expected usage of licensed copyrights, the Company
estimates net realizable value of licensed copyrights to determine if any impairment exists. The net realizable value of licensed copyrights is determined by estimating the expected cash flows from
advertising, less any direct costs, over the remaining useful lives of such licensed copyrights. The Company estimates advertising cash flows for each category of content separately. Estimates that
impact advertising cash flows include anticipated levels of demand for the Company's advertising services and the expected selling prices of the Company's advertisements on the entertainment
distribution platforms. For the years ended March 31, 2016, 2017 and 2018, impairment charges in connection with the licensed copyrights of nil,
RMB857 million and RMB801 million were recorded in cost of revenue within the Company's digital media and entertainment segment.
(z) Goodwill
Goodwill
represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired entity as a
result of the Company's acquisitions of interests in its subsidiaries. Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in
circumstances indicate that it might be impaired. The Company first assesses qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In
the qualitative assessment, the Company considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information
related to the operations. Based on the qualitative assessment, if it is more likely than not
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(z) Goodwill (Continued)
that
the fair value of a reporting unit is less than the carrying amount, the quantitative impairment test is performed.
In
performing the two-step quantitative impairment test, the first step compares the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of the reporting
unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step
compares the implied fair value of goodwill to the carrying
value of a reporting unit's goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value
determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the
implied fair value of goodwill. This allocation process is only performed for the purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or
liabilities. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, allocation of assets, liabilities and goodwill to
reporting units, and determination of the fair value of each reporting unit.
(aa) Impairment of long-lived assets other than goodwill and licensed copyrights
The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets other than investments
in equity investees and investment securities was recognized for the years ended March 31, 2016, 2017 and 2018.
(ab) Derivatives and hedging
All
contracts that meet the definition of a derivative are recognized in the consolidated balance sheets as either assets or liabilities and recorded at fair value. Changes in the fair value of
derivatives are either recognized periodically in the consolidated income statements or in other comprehensive income depending on the use of the derivatives and whether they qualify for hedge
accounting and are so designated as cash flow hedges, fair value hedges or net investment hedges.
To
qualify for hedge accounting, the hedge relationship is designated and formally documented at inception, detailing the particular risk management objective and strategy for the hedge (which
includes the item and risk that is being hedged), the derivative that is being used and how hedge effectiveness is being assessed. A derivative has to be effective in accomplishing the objective of
offsetting either changes in fair value or cash flows for the risk being hedged. The effectiveness of the hedging relationship is evaluated on a prospective and retrospective basis using qualitative
and quantitative measures of correlation. Qualitative methods may include comparison of critical terms of the derivative to those of the hedged item. Quantitative methods include a comparison of the
changes in the fair value or discounted cash flow of the hedging instrument to that of the hedged item. A hedging relationship is considered effective if the results of the hedging instrument are
within a ratio of 80% to 125% of the results of the hedged item.
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Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(ab) Derivatives and hedging (Continued)
Interest rate swaps
Interest
rate swaps designated as hedging instruments to hedge against the cash flows attributable to recognized assets or liabilities or forecasted payments may qualify as cash flow hedges. The
Company entered into interest rate swap contracts to swap floating interest payments related to certain borrowings for fixed interest payments to hedge the interest rate risk associated with certain
forecasted payments and obligations. The effective portion of changes in the fair value of interest rate swaps that are designated and qualify as cash flow hedges is recognized in accumulated other
comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in interest and investment income, net in the consolidated income statements. Amounts in
accumulated other comprehensive income shall be reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings.
Forward exchange contracts
Forward
exchange contracts designated as hedging instruments to hedge against the future changes in currency exposure of net investments in foreign operations may qualify as net investment hedges. The
Company entered into forward exchange contracts to hedge the foreign currency risk associated with investments in net assets of certain subsidiaries with operations in the PRC of which the functional
currency is RMB. The effective portion of the changes in fair value of the forward exchange contracts that are designated and qualify as net investment hedges is recognized in accumulated other
comprehensive income to offset the cumulative translation adjustments relating to those subsidiaries. The gain or loss relating to the ineffective portion, which is measured based on changes in
forward exchange rates, is recognized immediately in other income, net in the consolidated income statements. Amounts accumulated are removed from accumulated other comprehensive income and recognized
in the consolidated income statements upon disposal of those subsidiaries. Once the hedge becomes ineffective, hedge accounting is discontinued prospectively.
Changes
in the fair value of the derivatives not qualified for hedge accounting are reported in the consolidated income statements. The estimated fair value of the derivatives is determined based on
relevant market information. These estimates are calculated with reference to the market rates using industry standard valuation techniques.
(ac) Bank borrowing and unsecured senior notes
Bank
borrowings and unsecured senior notes are recognized initially at fair value, net of upfront fees, debt discounts or premiums, debt issuance costs and other incidental fees. Upfront fees, debt
discounts or premiums, debt issuance costs and other incidental fees are recorded as a reduction of the proceeds received and the related accretion is recorded as interest expense in the consolidated
income statements over the estimated term of the facilities using the effective interest method.
(ad) Merchant deposits
The
Company collects deposits representing an annual upfront service fee from merchants on Tmall and AliExpress before the beginning of each calendar year. These deposits are initially recorded as a
liability by the Company. Such deposits are refundable to a merchant depending on the level of sales volume that is generated by that merchant on Tmall and AliExpress during the period. If the
transaction volume target is not
F-31
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(ad) Merchant deposits (Continued)
met
at the end of each calendar year, the relevant deposits will become non-refundable and such portion of the deposits is recognized as revenue in the consolidated income statements.
(ae) Deferred revenue and customer advances
Deferred
revenue and customer advances generally represent cash received from customers that relate to goods or services to be provided in the future. Deferred revenue, mainly relating to membership
fees and cloud computing services revenue, is stated at the amount of service fees received less the amount previously recognized as revenue upon the provision of the respective services over the
terms of the respective service contracts.
(af) Commitments and contingencies
In
the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters. Liabilities for such
contingencies are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.
Certain
conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events
occur or fail to occur. The Company assesses such contingent liabilities which inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the
Company or unasserted claims that may result in such proceedings, the Company, in consultation with its legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims as
well as the perceived merits of the amount of relief sought or expected to be sought therein.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued
in the consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, or is probable but cannot be estimated, then the nature of the
contingent liability, together with an estimate of the range of the reasonably possible loss, if determinable and material, would be disclosed.
Loss
contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
(ag) Treasury shares
The
Company accounts for treasury shares using the cost method. Under this method, the cost incurred to purchase the shares is recorded in the treasury shares account in the consolidated balance
sheets. At retirement, the ordinary shares account is charged only for the aggregate par value of the shares. The excess of the acquisition cost of treasury shares over the aggregate par value is
allocated between additional paid-in capital (up to the amount credited to the additional paid-in capital upon original issuance of the shares) and retained earnings. The treasury shares
account includes 20,789,596 and 20,789,596 ordinary shares issued at par to wholly-owned subsidiaries of the Company for the purpose of certain equity investment plans for management as of
March 31, 2017 and 2018, respectively.
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Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
2. Summary of significant accounting policies (Continued)
(ag) Treasury shares (Continued)
The
Company applies the treasury stock method for the accounting of the reciprocal relationship in which Suning (Note 4(ac)) holds ordinary shares of the Company. The treasury shares account
includes 5,262,306 and 4,162,856 ordinary shares representing the Company's share of Suning's investment in the Company as of March 31, 2017 and 2018, respectively.
(ah) Subscription receivables
The
Company made available loans to certain employees of the Company and its related companies in order to finance their exercise of share options and subscription for ordinary shares of the Company.
The participants of all such loans have pledged the ownership of their ordinary shares or restricted shares as security for these loans. The Company also had arrangements with its related companies
such that the Company will receive cash reimbursements from its related companies upon the vesting of options and RSUs underlying the Company's ordinary shares granted to their employees. For
accounting purposes, loans and reimbursements outstanding with respect to the exercise of vested options and share subscription are recorded as subscription receivables in equity. Further, unvested
options that were exercised are recorded as other current liabilities and they are transferred to equity upon vesting.
(ai) Statutory reserves
In
accordance with the relevant regulations and their articles of association, subsidiaries of the Company incorporated in the PRC are required to allocate at least 10% of their after-tax profit
determined based on the
PRC accounting standards and regulations to the general reserve until such reserve has reached 50% of the relevant subsidiary's registered capital. Appropriations to the enterprise expansion fund and
staff welfare and bonus fund are at the discretion of the respective board of directors of the subsidiaries. These reserves can only be used for specific purposes and are not transferable to the
Company in the form of loans, advances or cash dividends. During the years ended March 31, 2016, 2017 and 2018, appropriations to the general reserve amounted to RMB529 million,
RMB836 million and RMB298 million, respectively. No appropriations to the enterprise expansion fund and staff welfare and bonus fund have been made by the Company.
(aj) Reclassification of comparative figures
In
April 2017, the Company adopted Accounting Standards Update ("ASU") 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," which was issued by the
Financial Accounting Standards Board ("FASB") and effective for the Company for the year ended March 31, 2018 and interim reporting periods during the year ended March 31, 2018. This ASU
simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities to be classified as non-current in the consolidated balance sheet. The Company adopted the ASU
retrospectively to all periods presented and accordingly, the consolidated balance sheet as of March 31, 2017 was retrospectively adjusted with current deferred tax assets amounting to
RMB652 million reclassified from current prepayments, receivables and other assets to non-current prepayments, receivables and other assets, and current deferred tax liabilities amounting to
RMB207 million reclassified from accrued expenses, accounts payable and other liabilities to deferred tax liabilities.
F-33
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
3. Recent accounting pronouncements
In
May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" and issued subsequent amendments to the initial guidance or implementation guidance between
August 2015 and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 (collectively, including ASU 2014-09, "ASC 606"). ASC 606 supersedes the
revenue recognition requirements in ASC 605 and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance is effective retrospectively for the Company for the year ending March 31,
2019 and interim reporting periods during the year ending March 31, 2019. The new guidance is required to be applied either retrospectively to each prior reporting period presented
(the "full retrospective method") or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the "modified
retrospective method"). The Company will apply the new guidance beginning on April 1, 2018 using the modified retrospective method. Upon the adoption of ASC 606, the Company will begin to
recognize revenue relating to the non-cash consideration received from merchants for advertising barter transactions. The adoption of ASC 606 will also impact the Company's revenue recognition
in other areas, including the estimation of variable consideration from merchants at contract inception, which will affect the timing and the amount of revenue to be recognized. The cumulative impact
of these adjustments on retained earnings as of April 1, 2018 is not expected to be material.
In
January 2016, the FASB issued ASU 2016-01, "Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities" and issued certain technical corrections and improvements to the initial guidance within ASU 2018-03 in February 2018. ASU 2016-01 amends
various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The new guidance also simplifies the impairment assessment and enhances the disclosure
requirements of equity
investments. The new guidance is effective for the Company for the year ending March 31, 2019 and interim reporting periods during the year ending March 31, 2019. With respect to the
Company's consolidated financial statements, the most significant impact relates to the accounting for equity investments (except for those accounted for under the equity method or those that result
in the consolidation of the investee). Under the new guidance, these equity investments of the Company are required to be measured at fair value with changes in fair value recognized in net income.
For those investments without readily determinable fair values, the Company will elect to record these investments at cost, less impairment, with subsequent adjustments for observable price changes.
The Company will apply the new guidance beginning on April 1, 2018 and unrealized gains and losses for the Company's available-for-sale securities recorded in accumulated other comprehensive
income as of March 31, 2018 will be reclassified into retained earnings as of April 1, 2018.
In
February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" and issued certain transitional guidance and subsequent amendments within ASU 2018-01 and ASU 2018-10 in
January 2018 and July 2018, respectively. ASU 2016-02 creates a new topic in ASC 842 "Leases" ("ASC 842") to replace the current topic in ASC 840 "Leases," which increases
transparency and comparability among organizations by recognizing lease assets and lease liabilities in the consolidated balance sheet and disclosing key information about leasing arrangements. ASC
842 affects both lessees and lessors, although for the latter the provisions are similar to the current model, but are updated to align with certain changes to the lessee model and also the new
revenue recognition provisions contained in ASC 606. The new guidance is effective for the Company for the year ending March 31, 2020 and interim reporting periods during the year ending
March 31, 2020. Early adoption is permitted. The Company is evaluating the effects of the adoption of ASC 842 and currently believes that it will impact the accounting of the Company's
operating leases.
F-34
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
3. Recent accounting pronouncements (Continued)
In
June 2016, the FASB issued ASU 2016-13, "Financial Instruments — Credit Losses (Topic 326): Measurement on Credit Losses on Financial Instruments,"
which introduces new guidance for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of
financial instruments, including trade and other receivables, held-to-maturity debt securities, loans and net investments in leases. The new guidance also modifies the impairment model for
available-for-sale debt securities and requires entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss. Further, the new guidance
indicates that entities may not use the length of time a security has been in an unrealized loss position as a factor in concluding whether a credit loss exists. The new guidance is effective for the
Company for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted for the Company for the year ending
March 31, 2020 and interim reporting periods during the year ending March 31, 2020. The Company is evaluating the effects, if any, of the adoption of this guidance on the Company's
financial position, results of operations and cash flows.
In
October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory," which amends the accounting for income taxes. The new guidance
requires recognition of income tax consequences of an intra-entity asset transfer, other than transfers of inventory, when the transfer occurs. For intra-entity transfers of inventory, the income tax
effects will continue to be deferred until the inventory has been sold to a third party. The new guidance is effective for the Company for the year ending March 31, 2019 and
interim reporting periods during the year ending March 31, 2019. The new guidance is required to be applied on a modified retrospective basis through a cumulative effect adjustment directly
recorded to retained earnings as of the beginning of the period of adoption. The Company does not expect that the adoption of this guidance will have a material impact on the Company's financial
position, results of operations and cash flows.
In
November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which requires the amounts generally described as restricted cash and restricted cash
equivalents to 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 new guidance is effective
for the Company for the year ending March 31, 2019 and interim reporting periods during the year ending March 31, 2019. The guidance requires application using a retrospective transition
method. The Company believes that the adoption of this guidance will impact the presentation of the Company's consolidated statements of cash flows.
In
January 2017, the FASB issued ASU 2017-04, "Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which
simplifies how an entity is required to test goodwill for impairment by eliminating step two from the goodwill impairment test. Step two of the goodwill impairment test measures a goodwill impairment
loss by comparing the implied fair value of a reporting unit's goodwill with its carrying amount. The new guidance is effective prospectively for the Company for the year ending March 31, 2021
and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after
January 1, 2017. The Company is evaluating the effects, if any, of the adoption of this guidance on the Company's financial position, results of operations and cash flows.
In
May 2017, the FASB issued ASU 2017-09, "Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting," which provides guidance
about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718 "Compensation —
Stock Compensation" ("ASC 718"). Under the new guidance, modification accounting is required only if the
F-35
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
3. Recent accounting pronouncements (Continued)
fair
value, the vesting condition, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The new guidance is effective
prospectively for the Company for the year ending March 31, 2019 and interim reporting periods during the year ending March 31, 2019. The Company does not expect that the adoption of
this guidance will have a material impact on the Company's financial position, results of operations and cash flows.
In
August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," which simplifies the application of hedge
accounting and makes more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess
effectiveness. The new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test after the initial qualification, if the company can reasonably support
an expectation of high effectiveness throughout the term of the hedge. Also, for cash flow hedges and net investment hedges, if the hedge is highly effective, all changes in the fair value of the
derivative hedging instrument will be recorded in other comprehensive income. The new guidance is effective prospectively for the Company for the year ending March 31, 2020 and interim
reporting periods during the year ending March 31, 2020. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this guidance on the Company's financial
position, results of operations and cash flows.
In
June 2018, the FASB issued ASU 2018-07, "Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,"
which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should apply the requirements of ASC 718 to non-employee
awards except for specific guidance on inputs to an option pricing model and the attribution of cost. The amendments specify that ASC 718 applies to all share-based payment transactions in
which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. The new guidance is effective for the Company for the year ending
March 31, 2020 and interim reporting periods during the year ending March 31, 2020. Early adoption is permitted. The Company is evaluating the effects of the adoption of this guidance
and currently believes that it will impact the accounting of the share-based awards granted to non-employees.
4. Significant restructuring transaction, mergers and acquisitions and equity investments
(a) Restructuring of the relationship with Ant Financial and Alipay
-
(i)
-
Restructuring in 2011
In
light of the uncertainties relating to the license qualification and application process for a foreign-invested payment company, the Company's management determined that it was necessary to
restructure Alipay as a company wholly-owned by PRC nationals in order to avail Alipay of the specific licensing guidelines applicable only to domestic PRC-owned entities. Accordingly, the Company
divested all of its interest in and control over Alipay, which resulted in deconsolidation of Alipay from the consolidated financial statements.
In
2011, the Company entered into certain commercial arrangements with APN Ltd. (a company owned by two directors of the Company), Altaba, SoftBank, Alipay, Ant Financial, and Ant Financial's
equity
F-36
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(a) Restructuring of the relationship with Ant Financial and Alipay (Continued)
holders,
setting out the mechanism for the future collaboration among the relevant parties relating to Ant Financial.
-
(ii)
-
2014 restructuring of the relationship with Ant Financial and Alipay and 2018 amendments
In
August 2014, the Company entered into a share and asset purchase agreement (the "2014 SAPA"), and entered into or amended certain ancillary agreements including an amendment and
restatement of the intellectual property license agreement with Alipay (the "2014 IPLA"). Pursuant to these agreements, the Company restructured its relationships with Ant Financial and Alipay.
As
of August 2014, the fair value of the restructured arrangement exceeded the fair value of the pre-existing arrangement with Ant Financial by RMB1.3 billion. As Ant Financial was
controlled by a director and major shareholder of the Company, the excess value provided to the Company in this related party transaction was accounted for as an equity contribution by the shareholder
in the statement of changes in shareholders' equity. Given the nature of this transaction, the corresponding asset representing the excess value receivable by the Company was accounted for as a
restructuring reserve in equity and amortized as an expense in the consolidated income statements over the expected term of the restructured arrangement which is estimated to be five years. The
amortization of the excess value of RMB264 million, RMB264 million and RMB264 million were recorded in other income, net in the consolidated income statements for the years ended
March 31, 2016, 2017 and 2018, respectively (Note 6).
In
February 2018, the Company amended both the 2014 SAPA (the amended version of which is referred to as the "2018 SAPA") and the Alipay commercial agreement, and agreed with Ant
Financial and certain other parties on forms of certain ancillary agreements, including an amendment and restatement of the 2014 IPLA ("the 2018 IPLA"). The 2018 SAPA and amendment to the
Alipay commercial agreement were entered into to facilitate the planned acquisition of a 33% equity interest in Ant Financial, and the forms of certain ancillary agreements will be entered into and/or
become effective upon the closing of the acquisition of such equity interest.
Apart
from the amended provisions described below, the key terms of the agreements with Ant Financial and Alipay from the 2014 restructuring remain substantially unchanged.
2014 SAPA and 2018 SAPA
Sale of SME loan business and certain other assets
Pursuant
to the 2014 SAPA, the Company agreed to sell certain securities and assets primarily relating to the SME loan business and other related services to Ant Financial for an aggregate cash
consideration of RMB3,219 million. The sale was completed in February 2015. In addition, pursuant to software system use and service agreements relating to the know-how and related
intellectual property that we agreed to sell together with the SME loan business and related services, the Company will receive annual fees (the "SME Annual Fee") for a term of seven years.
These SME Annual Fees, which are recognized as other revenue, are determined as follows: for calendar years 2015 to 2017, the entities operating the SME loan business paid an annual fee equal to 2.5%
of the average daily balance of the SME loans provided by these entities, and in calendar years 2018 to 2021, these entities will pay an annual fee equal to the amount of the fees paid in calendar
year 2017. The Company accounts for the SME Annual Fee in the periods when the services are provided, where such payments are expected to approximate the estimated
F-37
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(a) Restructuring of the relationship with Ant Financial and Alipay (Continued)
fair
values of the services provided. The SME Annual Fee of RMB708 million, RMB847 million and RMB956 million were recorded in revenue in the consolidated financial statements for
the years ended March 31, 2016, 2017 and 2018, respectively (Note 21).
Planned issuance of equity interest
Pursuant
to the 2014 SAPA, the Company is entitled to receive up to 33% equity interest in Ant Financial under certain circumstances. To facilitate the acquisition of equity interest in Ant Financial
contemplated under the 2014 SAPA, the 2018 SAPA provides that Ant Financial will issue new securities to the Company representing a 33% equity interest in Ant Financial, subject to the receipt of the
necessary PRC regulatory approvals and the satisfaction of other conditions set forth in the 2018 SAPA.
Under
the 2014 SAPA and the 2018 SAPA, the consideration to acquire the 33% equity interest in Ant Financial will be fully funded by payments from Ant Financial and its subsidiaries to the Company in
consideration for certain intellectual property and assets that the Company will transfer at the closing of the equity issuance. Such
consideration is determined based on the fair value of the underlying assets. The Company currently estimates the total consideration for the acquisition of the 33% equity interest in Ant Financial
will be approximately RMB12.2 billion before deducting expenses in connection with such transfers and share subscription. The large majority of the intellectual property and assets to be
transferred as part of these arrangements was previously planned to be transferred to Ant Financial pursuant to the 2014 SAPA. Ant Financial may elect to defer certain offshore transfer payments, in
which case the Company's obligations to pay corresponding consideration for the equity issuance will also be deferred. If the Company has made all its outstanding equity issuance consideration
payments at a time when Ant Financial has not made all corresponding transfer payments to the Company, Ant Financial or its subsidiaries will issue interest-bearing promissory notes to the Company. In
any event, Ant Financial must complete all outstanding transfer payments to the Company, by the earlier of (i) the first anniversary of an Ant Financial IPO meeting certain minimum criteria for
a qualified IPO set forth in the 2018 SAPA (a "Qualified IPO"), and (ii) the fifth anniversary of the equity issuance closing.
Upon
closing of the equity issuance, the Company will enter into the 2018 IPLA and the Profit Share Payments under the 2014 IPLA will automatically terminate.
Removal of liquidity event payment obligation
Under
the 2014 SAPA, in the event of a qualified IPO of Ant Financial or Alipay, if the Company had not acquired equity interest in Ant Financial prior to the closing of such IPO, the Company was
entitled, at its election, to receive a one-time liquidity event payment equal to 37.5% of the equity value, immediately prior to the qualified IPO. If the Company had acquired equity interest in Ant
Financial, but in an aggregate amount less than 33%, the percentage of Ant Financial's equity value used to calculate such liquidity event payment would be adjusted proportionately. In lieu of
receiving the liquidity event payment, the Company could instead elect to receive the Profit Share Payments under the 2014 IPLA described below in perpetuity, subject to the receipt of regulatory
approvals. If the Company so elected, in connection with the qualified IPO, Ant Financial would have been required to use its commercially reasonable efforts to obtain these regulatory approvals. If
these approvals were not obtained, then Ant Financial would have been obligated to pay the Company the liquidity event payment described above.
F-38
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(a) Restructuring of the relationship with Ant Financial and Alipay (Continued)
The
2018 SAPA no longer provides for this liquidity event payment, as the Company has agreed to acquire the entire 33% equity interest in Ant Financial at the closing of the equity issuance.
Regulatory unwind and long-stop date
The
2018 SAPA provides that, if a relevant governmental authority prohibits the Company from owning all or a portion of its equity interest in Ant Financial after the equity issuance has occurred
through enactment of a law, rule or regulation, or explicitly requires Ant Financial to redeem such equity interest, and such prohibition or request is not subject to appeal and cannot otherwise be
resolved, then to the extent necessary, Ant Financial will redeem the equity interest; the related intellectual property and asset transfers, and ancillary transactions under the 2018 SAPA will be
unwound; and the terms of the 2014 SAPA, the 2014 IPLA, and other related agreements will be restored, including the prior Profit Share Payments and liquidity event payment terms discussed above. If
there is a partial unwind where the Company retains a portion of its equity interest in Ant Financial, but less than the full 33%, then pursuant to the terms of the 2014 SAPA and the 2014 IPLA, the
prior Profit Share Payments arrangement and liquidity event payment amount will be proportionately reduced based on the amount of equity interest retained by the Company.
Similarly,
if a governmental authority prohibits the equity issuance through enactment of a law, rule or regulation, and such prohibition is not subject to appeal and cannot otherwise be resolved, or
if the closing of the equity issuance has not occurred by the first anniversary of the establishment of a PRC subsidiary to acquire the relevant equity interest, which time period may be extended in
certain circumstances, then the 2018 SAPA and related agreements will terminate, and the 2014 SAPA and other related agreements will come back into effect.
Pre-emptive rights
As
was the case under the 2014 SAPA, under the 2018 SAPA, following the receipt of equity interest in Ant Financial, the Company will have pre-emptive rights to participate in other issuances of
equity securities by Ant Financial and certain of its affiliates prior to the time of a Qualified IPO of Ant Financial. These pre-emptive rights entitle the Company to maintain the equity ownership
percentage the Company held in Ant Financial immediately prior to any such issuances. In connection with the exercise of the pre-emptive rights the Company is also entitled to receive certain payments
from Ant Financial, effectively funding the subscription for these additional equity interest, up to a value of US$1.5 billion, subject to certain adjustments. In addition, under the 2018 SAPA,
in certain circumstances the Company is permitted to exercise pre-emptive rights through an alternative arrangement which will further protect the Company from dilution.
Corporate governance provisions
Under
the 2018 SAPA, upon the closing of the equity issuance, in addition to an independent director, the Company will have the right to nominate two officers or employees of the Company for election
to the board of Ant Financial. In each case, these director nomination rights will continue unless required to be terminated by applicable laws and regulations or listing rules in connection with an
Ant Financial
F-39
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(a) Restructuring of the relationship with Ant Financial and Alipay (Continued)
Qualified
IPO process or the Company ceases to own a certain amount of its post-issuance equity interest in Ant Financial.
In
connection with the 2018 SAPA, the Company also agreed on the form of the 2018 IPLA, agreed to certain revisions to the previously-agreed form of cross license agreement, and agreed on new forms of
various intellectual property transfer agreements to be entered into in connection with, and to implement, the contemplated intellectual property and asset transfers.
2014 IPLA and 2018 IPLA
2014 IPLA
Under
the 2014 IPLA, the Company receives, in addition to a software technology service fee, royalty streams related to Alipay and other current and future businesses of Ant Financial (collectively,
the "Profit Share Payments"). The Profit Share Payments are paid at least annually and equal the sum of an expense reimbursement plus 37.5% of the consolidated pre-tax income of Ant Financial, subject
to certain adjustments. The expense reimbursement represents the costs and expenses incurred by the Company in the provision of software technology services. The Company accounts for the Profit Share
Payments in the periods when the services are provided, where such payments are expected to approximate the estimated fair values of the services provided. In addition, if the Company acquires any
equity interest in Ant Financial, the Profit Share Payments will also be reduced in proportion to such equity issuances made to the Company. The Profit Share Payments will be terminated upon the
closing of the planned acquisition of a 33% equity interest in Ant Financial.
Income
in connection with the Profit Share Payments, net of costs incurred by the Company, of RMB1,122 million, RMB2,086 million and RMB3,444 million, were recorded in other
income, net in the consolidated income statements for the years ended March 31, 2016, 2017 and 2018, respectively (Notes 6 and 21).
2018 IPLA
Pursuant
to the 2018 SAPA, the Company, Ant Financial and Alipay agreed to enter into the 2018 IPLA upon the closing of the planned acquisition of a 33% equity interest in Ant Financial, at which time
the Company will also
transfer certain intellectual property and assets to Ant Financial and its subsidiaries and the current arrangement of Profit Share Payments will immediately terminate.
The
2018 IPLA will terminate upon the earliest of:
-
•
-
the full payment of all pre-emptive rights funded payments under the 2018 SAPA;
-
•
-
the closing of a Qualified IPO of Ant Financial or Alipay; and
-
•
-
the transfer to Ant Financial of intellectual property the Company owns that is exclusively related to the business of Ant Financial.
F-40
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
Mergers and acquisitions
(b) Acquisition of Cainiao Smart Logistics Network Limited ("Cainiao Network")
Cainiao
Network operates a logistics data platform which leverages the capacity and capabilities of logistics partners to offer domestic and international one-stop-shop logistics services and supply
chain management solutions, fulfilling various logistics needs of merchants and consumers at scale. It uses data insights and technology to improve efficiency across the logistics value chain. In
March 2016, the Company participated in Cainiao Network's equity financing round, after which the Company's investment in Cainiao Network increased from RMB2,400 million to
RMB6,992 million. The Company's equity interest in Cainiao Network was diluted to approximately 47% after this financing round and a gain of RMB448 million arising from such deemed
disposal was recognized in share of results of equity investees in the consolidated income statement for the year ended March 31, 2016. The Company's investment in Cainiao Network was accounted
for under the equity method.
In
October 2017, the Company completed the subscription for newly issued ordinary shares of Cainiao Network for a cash consideration of US$803 million (RMB5,322 million).
Following the completion of the transaction, the
Company's equity interest in Cainiao Network increased to approximately 51% and Cainiao Network became a consolidated subsidiary of the Company.
The
allocation of the purchase price as of the date of acquisition is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Net assets acquired (i)
|
|
|
23,937
|
|
|
|
Amortizable intangible assets (ii)
|
|
|
|
|
|
|
User base and customer relationships
|
|
|
9,344
|
|
|
|
Trade names, trademarks and domain names
|
|
|
4,965
|
|
|
|
Developed technology and patents
|
|
|
459
|
|
|
|
Goodwill
|
|
|
32,418
|
|
|
|
Deferred tax assets
|
|
|
920
|
|
|
|
Deferred tax liabilities
|
|
|
(5,197
|
)
|
|
|
Noncontrolling interests (iii)
|
|
|
(33,189
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
33,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Total purchase price is comprised of:
|
|
|
|
|
|
|
- cash consideration
|
|
|
5,322
|
|
|
|
- fair value of previously held equity interests
|
|
|
28,335
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
33,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Net
assets acquired primarily include the cash consideration of RMB5,322 million, property and equipment of RMB15,144 million and bank borrowings of
RMB5,288 million as of the date of acquisition.
-
(ii)
-
Acquired
amortizable intangible assets have estimated amortization periods not exceeding 16 years and a weighted-average amortization period of
14.3 years.
F-41
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(b) Acquisition of Cainiao Smart Logistics Network Limited ("Cainiao Network") (Continued)
-
(iii)
-
Fair
value of the noncontrolling interests is estimated with reference to the purchase price per share as of the acquisition date.
A
gain of RMB22,442 million in relation to the revaluation of the previously held equity interests was recorded in interest and investment income, net in the consolidated income statement for
the year ended March 31, 2018. The fair value of the previously held equity interests was estimated based on the purchase price per share of Cainiao Network as of the acquisition date.
The
Company expects that the acquisition of control over Cainiao Network will help enhance the overall logistics experience for consumers and merchants across the ecosystem of the Company, and enable
greater efficiencies and lower costs in the logistics sector in the PRC. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of Cainiao
Network and the Company, the assembled workforce and their knowledge and experience in the logistics sector in the PRC. The goodwill recognized was not expected to be deductible for income tax
purpose.
(c) Acquisition of Intime Retail (Group) Company Limited ("Intime")
Intime
is one of the leading department store operators in the PRC that was previously listed on the Hong Kong Stock Exchange ("HKSE"). The Company owned a 9.9% equity interest in Intime which was
accounted for as an available-for-sale security and subscribed for a convertible bond which was accounted for under the fair value option and recorded under investment securities.
In
June 2016, the Company completed the conversion of all of the convertible bond that the Company previously subscribed for into newly issued ordinary shares of Intime, at a conversion price
of Hong Kong Dollar ("HK$") 7.13 per share. Upon the completion of the conversion, the Company's equity interest in Intime increased to approximately 28% and the investment was accounted for
under the equity method. The sum of the market value of the previously held equity interests in Intime and the fair value of the convertible bond on the date of
conversion, amounting to RMB4,758 million, was recognized as the cost of investment under the equity method upon the completion of the conversion. Out of this amount, RMB250 million was
allocated to amortizable intangible assets, RMB426 million was allocated to deferred tax liabilities and RMB4,934 million was allocated to net assets acquired.
In
May 2017, the Company and the founder of Intime completed the privatization of Intime, upon which all of the issued and outstanding shares of Intime that the Company, the founder of Intime
and certain other shareholders did not own were cancelled in exchange for a payment of HK$10.00 per share in cash. The Company paid a cash consideration of HK$12,605 million
(RMB11,131 million) in the privatization. Upon the completion of the privatization, the Company increased its shareholding in Intime to approximately 74% and Intime became a consolidated
subsidiary of the Company. Following the completion of the transaction, the listing of the shares of Intime on the HKSE was withdrawn.
F-42
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(c) Acquisition of Intime Retail (Group) Company Limited ("Intime") (Continued)
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Net assets acquired (i)
|
|
|
20,920
|
|
|
|
Amortizable intangible assets (ii)
|
|
|
|
|
|
|
Trade names, trademarks and domain names
|
|
|
1,131
|
|
|
|
User base and customer relationships
|
|
|
72
|
|
|
|
Developed technology and patents
|
|
|
16
|
|
|
|
Goodwill
|
|
|
4,757
|
|
|
|
Deferred tax liabilities
|
|
|
(2,790
|
)
|
|
|
Noncontrolling interests (iii)
|
|
|
(6,301
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
17,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Total purchase price is comprised of:
|
|
|
|
|
|
|
- cash consideration
|
|
|
11,131
|
|
|
|
- fair value of previously held equity interests
|
|
|
6,674
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
17,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Net
assets acquired primarily include property and equipment of RMB23,492 million and bank borrowings of RMB4,110 million as of the date of
acquisition.
-
(ii)
-
Acquired
amortizable intangible assets have estimated amortization periods not exceeding eleven years and a weighted-average amortization period of
10.1 years.
-
(iii)
-
Fair
value of the noncontrolling interests is estimated with reference to the purchase price of HK$10.00 per share in the privatization.
A
gain of RMB1,861 million in relation to the revaluation of the previously held equity interests was recorded in interest and investment income, net in the consolidated income statement for
the year ended March 31, 2018. The fair value of the previously held equity interests was estimated with reference to the purchase price of HK$10.00 per share in the privatization.
The
Company expects Intime to support its strategy to transform conventional retail by leveraging its substantial consumer reach, rich data and technology. Goodwill arising from this acquisition was
attributable to the synergies expected from the combined operations of Intime and the Company, the assembled workforce and their knowledge and experience in the retail business in the PRC. The
goodwill recognized was not expected to be deductible for income tax purpose.
In
February 2018, the Company purchased additional ordinary shares of Intime from certain minority shareholders for a cash consideration of HK$6,712 million (RMB5,428 million).
This resulted in a reduction of noncontrolling interests amounting to RMB5,854 million. As of March 31, 2018, the Company's equity interest in Intime was approximately 98%.
F-43
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(d) Acquisition of Pony Media Holdings Inc. ("Damai")
Damai
is a leading online ticketing platform for live events such as concerts and theater shows in the PRC. In March 2017, the Company completed an acquisition of all of the issued and
outstanding shares of Damai that the Company did not already own for a cash consideration of US$393 million (RMB2,711 million). Prior to this transaction, the Company held an
approximately 32% equity interest on a fully diluted basis in Damai. The
investment was accounted for under the cost method. Yunfeng, which is comprised of certain investment funds of which the executive chairman of the Company has equity interests in the general partners
of such funds, was one of the shareholders of Damai.
The
allocation of the purchase price as of the date of acquisition is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Net assets acquired
|
|
|
100
|
|
|
|
Amortizable intangible assets (i)
|
|
|
|
|
|
|
Trade names, trademarks and domain names
|
|
|
684
|
|
|
|
Non-compete agreements
|
|
|
271
|
|
|
|
Developed technology and patents
|
|
|
267
|
|
|
|
Goodwill
|
|
|
2,693
|
|
|
|
Deferred tax assets
|
|
|
16
|
|
|
|
Deferred tax liabilities
|
|
|
(202
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Total purchase price is comprised of:
|
|
|
|
|
|
|
- cash consideration
|
|
|
2,711
|
|
|
|
- fair value of previously held equity interests
|
|
|
1,118
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Acquired
amortizable intangible assets have estimated amortization periods not exceeding ten years and a weighted-average amortization period of 7.4 years.
A
gain of RMB201 million in relation to the revaluation of previously held equity interests was recorded in interest and investment income, net in the consolidated income statement for the year
ended March 31, 2017. The fair value of the previously held equity interests was determined using an income approach. As Damai is a private company, the fair value of the previously held equity
interests is estimated based on significant inputs that market participants would consider, which mainly include revenue growth rate, operating margin, discount rate and other factors that may affect
such fair value estimation.
The
Company believes Damai will form a strategic part of the value chain in the Company's digital media and entertainment business. Goodwill arising from this acquisition was attributable to
the synergies expected from the combined operations of Damai and the Company, the assembled workforce and their knowledge and experience in the entertainment industry in the PRC. The goodwill
recognized was not expected to be deductible for income tax purpose.
F-44
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(e) Acquisition of AGTech Holdings Limited ("AGTech")
AGTech,
a company that is listed on the Hong Kong Growth Enterprise Market, is an integrated technology and services company engaged in the lottery and mobile games and entertainment market with a
focus on the PRC and selected international markets. In August 2016, an investment vehicle which is 60% owned by the Company and 40% owned by Ant Financial completed an acquisition of newly
issued ordinary shares of AGTech for a cash consideration of HK$1,675 million (RMB1,436 million), representing an approximately 49% equity interest in AGTech. In addition, the investment
vehicle completed the subscription for convertible bonds, which are convertible into ordinary shares of AGTech, for a purchase price of HK$713 million (RMB611 million). A portion of the
convertible bonds with a total principal amount of HK$205 million (RMB176 million) was converted into ordinary shares of AGTech upon closing of the acquisition. Consequently, the
investment vehicle's equity interest in AGTech increased to approximately 53%. The Company obtained control over AGTech through its control over the investment vehicle and AGTech became a consolidated
subsidiary of the Company.
The
allocation of the total purchase price of HK$1,880 million (RMB1,612 million), representing the cost of acquisition for the newly issued ordinary shares and the partial conversion of
the convertible bonds by the investment vehicle, as of the date of acquisition is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Net assets acquired (i)
|
|
|
1,638
|
|
|
|
Amortizable intangible assets (ii)
|
|
|
|
|
|
|
Developed technology and patents
|
|
|
414
|
|
|
|
Trade names, trademarks and domain names
|
|
|
44
|
|
|
|
Non-compete agreements
|
|
|
38
|
|
|
|
Others
|
|
|
33
|
|
|
|
Goodwill
|
|
|
7,782
|
|
|
|
Deferred tax assets
|
|
|
4
|
|
|
|
Deferred tax liabilities
|
|
|
(86
|
)
|
|
|
Noncontrolling interests (iii)
|
|
|
(8,255
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Net
assets acquired include the cash consideration of RMB1,612 million.
-
(ii)
-
Acquired
amortizable intangible assets have estimated amortization periods and a weighted-average amortization period of 3.0 years.
-
(iii)
-
Fair
value of the noncontrolling interests is estimated with reference to the market price per ordinary share of AGTech as of the acquisition date.
The
Company believes that AGTech will serve as its vehicle for participating in the online lottery business in the PRC. Goodwill arising from this acquisition was attributable to the synergies
expected from the combined operations of AGTech and the Company, the assembled workforce and their knowledge and experience surrounding lottery related businesses in the PRC. The goodwill recognized
was not expected to be deductible for income tax purpose.
F-45
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(e) Acquisition of AGTech Holdings Limited ("AGTech") (Continued)
In
March 2017, an additional portion of the convertible bonds with a total principal amount of HK$175 million (RMB155 million) was converted into ordinary shares of AGTech. The
conversion was accounted for as a reduction of noncontrolling interests. As of March 31, 2018, the investment vehicle's equity interest in AGTech was approximately 55%.
(f) Acquisition of South China Morning Post and other media businesses ("SCMP")
In
April 2016, the Company acquired the business of South China Morning Post, the premier English newspaper in Hong Kong. Apart from the flagship South China Morning Post, the Company also
acquired the recruitment, outdoor media, events and conferences, education and digital media businesses in the same transaction. The cash consideration of HK$2,134 million
(RMB1,780 million) was paid upon the closing of the transaction. These acquired businesses became wholly-owned by the Company after the completion of the transaction.
The
allocation of the purchase price as of the date of acquisition is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Net assets acquired
|
|
|
800
|
|
|
|
Amortizable intangible assets (i)
|
|
|
|
|
|
|
Trade names, trademarks and domain names
|
|
|
378
|
|
|
|
User base and customer relationships
|
|
|
166
|
|
|
|
Others
|
|
|
15
|
|
|
|
Goodwill
|
|
|
529
|
|
|
|
Deferred tax assets
|
|
|
1
|
|
|
|
Deferred tax liabilities
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Acquired
amortizable intangible assets have estimated amortization periods and a weighted-average amortization period of 3.0 years.
By
combining the heritage and editorial excellence of SCMP with the Company's digital expertise, the Company intended to provide comprehensive and insightful news and analysis of the big stories in
Hong Kong and the PRC so as to expand the readership globally through digital distribution and allow easier access to content. Goodwill arising from this acquisition was attributable to the synergies
expected from the combined operations of SCMP and the Company, the assembled workforce and their knowledge and experience in the provision and distribution of content to reach global audience. The
goodwill recognized was not expected to be deductible for income tax purpose.
(g) Acquisition of Youku Tudou Inc. ("Youku")
Youku
is one of the largest online video platforms in the PRC that was previously listed on the New York Stock Exchange ("NYSE"). In April 2016, the Company completed an acquisition of
all of the issued and outstanding shares of Youku that the Company or Yunfeng did not previously own, at a purchase price of US$27.60 per American Depositary Share ("ADS"). Following the completion of
the transaction, the Company
F-46
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(g) Acquisition of Youku Tudou Inc. ("Youku") (Continued)
held
an approximately 98% equity interest in Youku. As a result, Youku became a consolidated subsidiary of the Company, with Yunfeng holding approximately 2% noncontrolling interests. The listing of
the ADS of Youku on the NYSE was withdrawn upon the closing of the transaction.
The
cash consideration of US$4,443 million (RMB28,724 million) was paid upon the closing of the transaction. The allocation of the purchase price as of the date of acquisition is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Net assets acquired (i)
|
|
|
5,923
|
|
|
|
Amortizable intangible assets (ii)
|
|
|
|
|
|
|
Trade names, trademarks and domain names
|
|
|
4,047
|
|
|
|
User base and customer relationships
|
|
|
284
|
|
|
|
Developed technology and patents
|
|
|
143
|
|
|
|
Others
|
|
|
175
|
|
|
|
Goodwill
|
|
|
26,395
|
|
|
|
Deferred tax assets
|
|
|
73
|
|
|
|
Deferred tax liabilities
|
|
|
(1,167
|
)
|
|
|
Noncontrolling interests (iii)
|
|
|
(773
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
35,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Total purchase price is comprised of:
|
|
|
|
|
|
|
- cash consideration
|
|
|
28,724
|
|
|
|
- fair value of previously held equity interests
|
|
|
6,376
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
35,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Net
assets acquired primarily include cash and cash equivalents and short-term interest-bearing deposits with total balance of RMB5,857 million and licensed
copyrights of RMB703 million as of the date of acquisition.
-
(ii)
-
Acquired
amortizable intangible assets have estimated amortization periods not exceeding 20 years and a weighted-average amortization period of
17.4 years.
-
(iii)
-
Fair
value of the noncontrolling interests is estimated with reference to the purchase price of US$27.60 per ADS in the step acquisition.
A
gain of RMB518 million in relation to the revaluation of the previously held equity interests was recorded in interest and investment income, net in the consolidated income statement for the
year ended March 31, 2017. The fair value of the previously held equity interests was estimated with reference to the purchase price of US$27.60 per ADS in the step acquisition.
Youku
is a core part of the Company's strategy to offer digital entertainment to consumers in the Company's ecosystem, thereby strengthening user engagement and loyalty as well as enabling a new
marketing channel for
F-47
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(g) Acquisition of Youku Tudou Inc. ("Youku") (Continued)
the
merchants and brands in the Company's ecosystem. Further, Youku creates additional revenue sources for the Company from advertising and membership subscriptions. Goodwill arising from this
acquisition was attributable to the synergies expected from the combined operations of Youku and the Company, the assembled workforce and their knowledge and experience in the digital entertainment
business. The goodwill recognized was not expected to be deductible for income tax purpose.
Subsequent
to the completion of the transaction and as a resolution to negotiations with certain former management members and shareholders of Youku with respect to an option to purchase up to 15% of
its equity, the Company issued 1.3 million ordinary shares and 3.4 million restricted share units of the Company to certain former management members and shareholders in
April 2017. An expense of RMB994 million relating to the 1.3 million ordinary shares issued was recorded in interest and investment income, net in the consolidated income
statement. The 3.4 million restricted share units contain vesting conditions pursuant to a non-compete agreement which was entered into by the Company and a former management member of Youku in
April 2017 (Note 15).
In
December 2017, the Company made a capital injection of US$132 million (RMB870 million) in Youku, which resulted in the Company holding substantially all of the shares in Youku
and a reduction of noncontrolling interests.
(h) Acquisition of Lazada Group S.A. ("Lazada")
Lazada
operates a leading e-commerce platform across Southeast Asia, with local language websites and mobile apps in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. In
April 2016, the Company completed an acquisition of an approximately 54% equity interest in Lazada for a cash consideration of US$1,020 million (RMB6,607 million). Lazada became a
consolidated subsidiary of the Company after the completion of the transaction.
The
allocation of the purchase price as of the date of acquisition is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Net assets acquired
|
|
|
2,874
|
|
|
|
Amortizable intangible assets (i)
|
|
|
|
|
|
|
User base and customer relationships
|
|
|
2,014
|
|
|
|
Non-compete agreements
|
|
|
959
|
|
|
|
Trade names, trademarks and domain names
|
|
|
292
|
|
|
|
Developed technology and patents
|
|
|
79
|
|
|
|
Goodwill
|
|
|
5,216
|
|
|
|
Deferred tax assets
|
|
|
616
|
|
|
|
Deferred tax liabilities
|
|
|
(1,027
|
)
|
|
|
Noncontrolling interests (ii)
|
|
|
(4,416
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Acquired
amortizable intangible assets have estimated amortization periods not exceeding three years and a weighted-average amortization period of 2.5 years.
-
(ii)
-
Fair
value of the noncontrolling interests is estimated with reference to the purchase price per share as of the acquisition date. The noncontrolling interests is
classified as mezzanine equity due to certain put and call arrangements with other Lazada shareholders.
F-48
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(h) Acquisition of Lazada Group S.A. ("Lazada") (Continued)
Lazada
offers merchants and brands a one-stop marketplace solution to access consumers in the six countries. Lazada also sells products on its platforms directly via its own retail operations. In
addition, it has an in-house logistics operation, which is supported by the highly scalable warehouse management system, to ensure quick and reliable order fulfilment. The Company believes that Lazada
will be the vehicle for expansion into the Southeast
Asia consumer market, including potential cross-border opportunities to introduce Chinese merchants and international brands to Southeast Asian consumers. Goodwill arising from this acquisition was
attributable to the synergies expected from the combined operations of Lazada and the Company, the assembled workforce and their knowledge and experience in e-commerce in Southeast Asia. The goodwill
recognized was not expected to be deductible for income tax purpose.
During
the year ended March 31, 2018, the Company purchased additional equity interest in Lazada for a cash consideration of US$1,016 million (RMB6,877 million) as a result of the
partial exercise of the put and call arrangement with minority shareholders. In addition, the Company made capital injections amounting to US$483 million (RMB3,124 million) into Lazada
and acquired additional equity interest held by certain management members and employees of Lazada for a total consideration of US$87 million (RMB578 million) during the year ended
March 31, 2018. These transactions resulted in a reduction of noncontrolling interests amounting to RMB1,681 million. As of March 31, 2018, the Company's equity interest in Lazada
was approximately 91%.
(i) Acquisition of Alibaba Health Information Technology Limited ("Alibaba Health")
Alibaba
Health, a company that is listed on the HKSE, is engaged in self-operated healthcare product sales, e-commerce platform services, tracking services and innovation healthcare related services
in the PRC. The Company and Yunfeng hold a total equity and voting interest of approximately 54% in Alibaba Health through their investments in a special purpose entity. The Company holds an
approximately 70% equity interest in the special purpose entity and Yunfeng holds the remaining equity interests. Cash consideration of HK$932 million (RMB741 million) was paid upon the
closing of the transaction by the Company to acquire its equity interests in the special purpose entity in 2014. Although the Company controls the board of the special purpose entity, the investment
and shareholders agreement provided that the underlying shares in Alibaba Health are voted by the Company and Yunfeng separately based on their respective effective equity interests, including voting
rights. The Company exercised significant influence over Alibaba Health through its effective equity and voting interest of approximately 38% in Alibaba Health, and accounted for Alibaba Health under
the equity method.
In
July 2015, in preparation of the transfer of the Tmall online pharmacy business operations of the Company to Alibaba Health (of which the agreement was subsequently terminated), the
investment and shareholders agreement
was amended under which Yunfeng agreed to irrevocably give up its separate voting rights with respect to its indirect interest in Alibaba Health at no consideration. Such control is important for the
Company to execute its digital and data-driven healthcare strategy through Alibaba Health as its flagship vehicle in this sector, indirectly benefiting all shareholders including Yunfeng economically.
As a result of the amendment, the Company obtained control over the entire 54% equity interest in Alibaba Health through its control over the board and majority of voting rights of the special purpose
entity. Consequently, Alibaba Health became a consolidated subsidiary while the Company's effective equity interest in Alibaba Health remained at approximately 38%.
F-49
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(i) Acquisition of Alibaba Health Information Technology Limited ("Alibaba Health") (Continued)
The
equity value of Alibaba Health of HK$64,319 million (RMB50,723 million), estimated based on the market price of the issued shares of Alibaba Health listed on the HKSE which was the
more readily determinable fair value as of the deemed acquisition date, was used to allocate the fair value of net assets acquired and the fair value of noncontrolling interests, and calculate the
gain of RMB18,603 million. Such gain relating to the revaluation of previously held equity interests upon obtaining control of Alibaba Health was recorded in interest and investment income, net
in the consolidated income statement for the year ended March 31, 2016.
The
allocation of the equity value of Alibaba Health as of the date of the deemed acquisition is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Net assets acquired
|
|
|
1,290
|
|
|
|
Amortizable intangible assets (i)
|
|
|
|
|
|
|
Developed technology and patents
|
|
|
70
|
|
|
|
Trade names, trademarks and domain names
|
|
|
35
|
|
|
|
User base and customer relationships
|
|
|
8
|
|
|
|
Goodwill
|
|
|
49,320
|
|
|
|
Deferred tax assets
|
|
|
19
|
|
|
|
Deferred tax liabilities
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
50,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The equity value is comprised of:
|
|
|
|
|
|
|
- fair value of previously held equity interests
|
|
|
19,264
|
|
|
|
- fair value of noncontrolling interests (ii)
|
|
|
31,459
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
50,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Acquired
amortizable intangible assets have estimated amortization periods not exceeding three years and a weighted-average amortization period of 2.6 years.
-
(ii)
-
Fair
value of the noncontrolling interests is estimated with reference to the market price per share as of the deemed acquisition date.
This
transaction will enable the Company to benefit from the focused healthcare expertise of Alibaba Health in the operation of the online pharmacy business and foster consumer trust through the sale
of authentic pharmaceuticals through Alibaba Health's verification and authentication technology. Goodwill arising from this acquisition was attributable to the synergies expected from the combined
business which will create a technology enabled solution provider to consumers and other participants in the healthcare industry in the PRC. The goodwill recognized was not expected to be deductible
for income tax purpose.
In
June 2017, the Company transferred its business relating to certain regulated health food products on Tmall to Alibaba Health, in exchange for approximately 1.2 billion newly issued
ordinary shares of Alibaba Health. After this transaction, the Company's effective equity interests in Alibaba Health increased to approximately 46%. The transfer of business was accounted for as a
transaction under common control, which resulted in a reduction of noncontrolling interests amounting to RMB3,962 million.
F-50
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(i) Acquisition of Alibaba Health Information Technology Limited ("Alibaba Health") (Continued)
In
January 2018, the Company purchased approximately 442 million newly issued ordinary shares of Alibaba Health for a cash consideration of HK$1,770 million
(RMB1,469 million). This resulted in a reduction of noncontrolling interests amounting to RMB468 million. As of March 31, 2018, the Company's effective equity interest in Alibaba
Health was approximately 48%.
In
May 2018, the Company agreed to transfer its business relating to certain medical devices, healthcare and adult products and the medical and healthcare services on Tmall to Alibaba Health
for an aggregate consideration of HK$10.6 billion, which will be settled through the issuance of approximately 1.8 billion newly issued ordinary shares of Alibaba Health. The completion
of this transaction is subject to a number of conditions including the approval by the shareholders of Alibaba Health and certain regulatory authorities. Upon the closing of this transaction, the
Company's effective equity ownership of Alibaba Health will increase to approximately 56%.
(j) Other acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Net assets (liabilities)
|
|
|
350
|
|
|
(223
|
)
|
|
(58
|
)
|
|
|
Identifiable intangible assets
|
|
|
876
|
|
|
593
|
|
|
411
|
|
|
|
Deferred tax liabilities
|
|
|
(198
|
)
|
|
(36
|
)
|
|
(60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,028
|
|
|
334
|
|
|
293
|
|
|
|
Noncontrolling interests and mezzanine equity
|
|
|
(10
|
)
|
|
(110
|
)
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net identifiable assets acquired
|
|
|
1,018
|
|
|
224
|
|
|
216
|
|
|
|
Goodwill
|
|
|
1,403
|
|
|
793
|
|
|
618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase consideration
|
|
|
2,421
|
|
|
1,017
|
|
|
834
|
|
|
|
Fair value of previously held equity interests
|
|
|
—
|
|
|
(51
|
)
|
|
(133
|
)
|
|
|
Purchase consideration settled
|
|
|
(2,360
|
)
|
|
(771
|
)
|
|
(575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent/deferred consideration as of year end
|
|
|
61
|
|
|
195
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase consideration is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
- cash consideration
|
|
|
2,421
|
|
|
966
|
|
|
701
|
|
|
|
- fair value of previously held equity interests
|
|
|
—
|
|
|
51
|
|
|
133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,421
|
|
|
1,017
|
|
|
834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
relation to the revaluation of previously held equity interests, the Company recognized a gain of nil, RMB51 million and RMB133 million in the consolidated income statements for the
years ended March 31, 2016, 2017 and 2018, respectively, for the other acquisitions that constitute business combinations.
Pro forma
results of operations for these acquisitions have not been presented because they are not material to the consolidated income statements for the years ended March 31, 2016,
2017 and 2018, either individually or in aggregate.
F-51
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
Equity investments and others
(k) Investment in Wanda Film Holding Co., Ltd. ("Wanda Film")
Wanda
Film, a company that is listed on the Shenzhen Stock Exchange, is principally engaged in the investment and management of cinemas and film distribution businesses. In March 2018, the
Company completed an investment in existing ordinary shares of Wanda Film for a cash consideration of RMB4,676 million, representing
an approximately 8% equity interest in Wanda Film. Such investment is accounted for under the cost method (Note 13) given that a readily determinable fair value is not available due to the
suspension of trading of its shares for an extended period as of March 31, 2018.
(l) Investment in Beijing Easyhome Furnishing Chain Group Co., Ltd.
("Easyhome")
Easyhome
is one of the largest home improvement supplies and furniture chains in the PRC. In March 2018, the Company completed an investment in Easyhome for a cash consideration of
RMB3,635 million, representing a 10% equity interest in Easyhome. Yunfeng and the Onshore Retail Fund (Note 4(w)) are also the investors in this transaction. Such investment is accounted
for under the cost method (Note 13).
(m) Investment in OFO International Limited ("OFO")
OFO
is one of the leading bike-sharing companies in the PRC. During the year ended March 31, 2018, the Company completed an investment in existing and newly issued preferred shares of OFO for a
total cash consideration of US$343 million (RMB2,272 million). As of March 31, 2018, the Company's equity interest in OFO was approximately 12% on a fully diluted basis. Ant
Financial is also an existing minority shareholder of OFO. Such investment is accounted for under the cost method (Note 13).
(n) Investment in Sun Art Retail Group Limited ("Sun Art")
Sun
Art, a company that is listed on the HKSE, is a leading hypermarket operator in the PRC. In December 2017, the Company completed investments in existing ordinary shares of Sun Art and
existing ordinary shares of A-RT Retail Holdings Limited, a limited liability company incorporated in Hong Kong that holds an approximately 51% equity interest in Sun Art, for an aggregate
consideration of HK$19,303 million (RMB16,264 million). In January 2018, the Company acquired additional ordinary shares of Sun Art from public shareholders through a mandatory
general offer as required under Hong Kong regulations, for a cash consideration of HK$2 million (RMB2 million). After the completion of these transactions, the Company's effective equity
interest in Sun Art was approximately 31%, which is comprised of the direct equity interest of 21% and the indirect equity interest through its shareholding in A-RT Retail Holdings Limited. The
Offshore Retail Fund (Note 4(w)) is also an investor in this transaction.
The
investment in Sun Art is accounted for under the equity method (Note 13). Out of the total cash consideration, RMB2,499 million was allocated to amortizable intangible assets,
RMB2,953 million was allocated to goodwill, RMB2,187 million was allocated to deferred tax liabilities and RMB12,999 million was allocated to net assets acquired.
(o) Investment in CMC Holdings Limited ("CMC")
CMC
is an investment platform that focuses on the media and entertainment sectors. In December 2015, the Company completed an investment in newly issued preferred shares of CMC for a cash
consideration of US$197 million (RMB1,270 million). In November 2017, the Company made an additional investment in CMC
F-52
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(o) Investment in CMC Holdings Limited ("CMC") (Continued)
for
a cash consideration of US$165 million (RMB1,093 million). As of March 31, 2018, the Company held an approximately 21% equity interest on a fully diluted basis in CMC. The
preferred shares are not considered to be in-substance common stock given that such shares contain certain terms such as dividend and liquidation preferences over ordinary shares. As a result, such
investment is accounted for under the cost method (Note 13).
In
addition, the Company also acquired equity interest in a limited partnership in the PRC which is managed by the founder of CMC. The objective of the limited partnership is consistent with that of
CMC. A cash consideration of RMB1,250 million was paid upon the closing of the transaction in December 2015. In November 2017, the Company made an additional investment in this
limited partnership for a cash consideration of RMB590 million. As of March 31, 2018, the Company held an approximately 21% equity interest on a fully diluted basis in this limited
partnership. Such investment is accounted for under the equity method (Note 13).
(p) Shanghai Yiguo E-Commerce Co., Ltd. ("Yiguo")
Yiguo
is one of the largest fresh produce online marketplaces in the PRC. In November 2017, the Company completed an additional investment in Yiguo for a cash consideration of
RMB1,977 million. As of March 31, 2018, the Company's equity interest in Yiguo was approximately 35% on a fully diluted basis. Yunfeng is also an existing minority shareholder of Yiguo.
The equity interest in Yiguo held by the Company is not considered in-substance common stock given that such equity interest contain certain terms such as liquidation preference over ordinary shares.
As a result, such investment is accounted for under the cost method (Note 13).
(q) Investment in China United Network Communications Ltd. ("China Unicom")
China
Unicom, a company that is listed on the Shanghai Stock Exchange, is a major telecommunications company in the PRC. In October 2017, the Company completed an investment in newly issued
ordinary shares of China Unicom for a cash consideration of RMB4,325 million, representing an approximately 2% equity interest in China Unicom. Such investment is accounted for as an
available-for-sale security (Note 11).
(r) Investment in Souche Holdings Ltd. ("SouChe")
SouChe
provides digital sales solutions to offline car dealerships in the PRC. In October 2017, the Company completed an investment in newly issued preferred shares of SouChe for a cash
consideration of US$241 million (RMB1,596 million), representing an approximately 27% equity interest on a fully diluted basis. Ant Financial is also an existing minority shareholder of
SouChe. The preferred shares are not considered in-substance common stock given that such shares contain certain terms such as liquidation preference over ordinary shares. As a result, such investment
is accounted for under the cost method (Note 13).
(s) Investment in Magic Leap, Inc. ("Magic Leap")
Magic
Leap is a technology company that focuses on the development of augmented reality technology. In December 2015, the Company completed an investment in newly issued convertible preferred
shares of Magic Leap for a cash consideration of US$430 million (RMB2,775 million). In October 2017, the Company made an additional cash investment of US$68 million
(RMB451 million) in Magic Leap. As of March 31, 2018, the Company's equity
interest in Magic Leap was approximately 9% on a fully diluted basis. Such investment is accounted for under the cost method (Note 13).
F-53
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(t) Investment in BEST Inc. (formerly known as Best Logistics Technologies Limited)
("Best Logistics")
Best
Logistics is a provider of comprehensive supply-chain solutions and services. In September 2017, in connection with the completion of Best Logistics' initial public offering on the NYSE,
all preferred shares of Best Logistics held by the Company were automatically converted into ordinary shares of Best Logistics. Concurrently, the
Company acquired additional equity interest in Best Logistics for a cash consideration of US$100 million (RMB657 million), after which the equity interest in Best Logistics held by the
Company increased to approximately 23%. Upon the completion of the share conversion, the original investment with a carrying value of US$256 million (RMB1,679 million) was reclassified
from a cost method investment to an equity method investment (Note 13). Out of the total purchase price, which included the cash consideration and the carrying amount of the previously held
interests in Best Logistics, RMB1,072 million was allocated to amortizable intangible assets, RMB443 million was allocated to goodwill, RMB214 million was allocated to deferred
tax liabilities and RMB1,035 million was allocated to net assets acquired.
Cainiao
Network (Note 4(b)) is also an existing shareholder of Best Logistics with an approximately 5% equity interest. Upon the consolidation of Cainiao Network in October 2017, the
Company began to account for Cainiao Network's investment in Best Logistics under the equity method (Note 13), and the fair value of this investment at the time amounting to
US$215 million (RMB1,420 million) was recognized as the new investment cost. Out of this amount, RMB652 million was allocated to amortizable intangible assets,
RMB270 million was allocated to goodwill, RMB131 million was allocated to deferred tax liabilities and RMB629 million was allocated to net assets acquired.
After
the completion of these transactions, the Company's equity interest in Best Logistics was approximately 28%.
(u) Investment in PT Tokopedia ("Tokopedia")
Tokopedia
operates one of the leading e-commerce platforms in Indonesia. During the year ended March 31, 2018, the Company completed a minority investment in existing and newly issued preferred
shares of Tokopedia for a total cash consideration of US$445 million (RMB2,920 million). In connection with the transaction, the Company also agreed to subscribe for up to
US$500 million in additional preferred shares of Tokopedia at the then fair market value if so elected by Tokopedia during a 24-month period after the completion of the initial investment. The
preferred shares are not considered in-substance common stock given that such shares contain certain terms such as liquidation preference over ordinary shares. As a result, such investment is
accounted for under the cost method (Note 13).
(v) Investment in Xiaoju Kuaizhi Inc. ("Didi Chuxing")
Didi
Chuxing is a leading transportation network company that provides vehicles and taxis for hire in the PRC via smartphone applications. During the years ended March 31, 2017 and 2018, the
Company completed additional investments in preferred shares of Didi Chuxing for a total cash consideration of US$400 million (RMB2,652 million). In September 2017, the Company
completed a partial disposal of its investment in Didi Chuxing to Softbank for a cash consideration of US$639 million (RMB4,198 million), and a disposal gain of RMB2,096 million
was recognized in interest and investment income, net in the consolidated income statement for the year ended March 31, 2018. As of March 31, 2018, the Company's equity interest in Didi
Chuxing was approximately 5% on a fully diluted basis. Such investment is accounted for under the cost method (Note 13).
F-54
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(w) Investments in Hangzhou Hanyun Xinling Equity Investment Fund Partnership
(the "Onshore Retail Fund") and New Retail Strategic Opportunities Fund, L.P. (the "Offshore Retail Fund")
The
Onshore Retail Fund and the Offshore Retail Fund were set up to raise capital to invest in retail related businesses in the PRC and internationally, respectively. The Company is able to exercise
significant influence over the investment decisions in both funds. In August 2017 and January 2018, the Company made a commitment to invest RMB1.6 billion and
US$200 million in the Onshore Retail Fund and the Offshore Retail Fund, relating to which the Company has funded RMB462 million and US$77 million as of March 31, 2018,
respectively. As of March 31, 2018, the Company held an approximately 20% equity interest in the Onshore Retail Fund and an approximately 19% equity interest in the Offshore Retail Fund. Such
investments are accounted for under the equity method (Note 13).
(x) Investment in Rajax Holding ("Ele.me")
Ele.me
is one of the leading on-demand delivery and local services platforms in the PRC. In March 2016, the Company and Ant Financial completed a portion of the subscription for newly issued
preferred shares in Ele.me through a joint investment vehicle, based on a total combined commitment of US$1,250 million, of which the Company's total commitment was US$900 million
(RMB5,891 million). The Company paid a cash consideration of US$540 million (RMB3,512 million) for the initial subscription in March 2016, and the remaining committed
balance of US$360 million (RMB2,394 million) was settled by cash in August 2016. After the initial subscription, the effective equity interest in Ele.me held by the Company was
approximately 20% on a fully diluted basis.
In
April and August 2017, the joint investment vehicle completed additional investments in newly issued preferred shares in Ele.me for a total investment amount of US$1,200 million
(RMB8,090 million), of which the Company's investment was US$864 million (RMB5,824 million). As a result, the Company's effective equity interest in Ele.me increased to
approximately 27% on a fully diluted basis.
The
preferred shares are not considered in-substance common stock given that such shares contain certain terms such as dividend and liquidation preferences over ordinary shares. As a result, such
investment was accounted for under the cost method (Note 13).
In
May 2018, the joint investment vehicle completed the acquisition of all outstanding shares of Ele.me that it does not already own at a consideration of US$5.5 billion. Upon the
completion of the acquisition, the Company became the controlling shareholder of Ele.me. The Company expects that the acquisition will deepen Ele.me's integration into the Company's ecosystem and
advance the Company's New Retail strategy to provide a seamless online and offline consumer experience in the local services sector. Upon the issuance of the consolidated financial statements,
the accounting of such business combination, including the purchase price allocation and the gain or loss arising from this transaction, has not been finalized.
(y) Investment in Paytm E-Commerce Private Limited ("Paytm Mall")
In
March 2017, One97 Communications Limited ("Paytm"), one of the largest mobile payment platforms in India which is an equity investee of the Company, completed the spin-off of its
e-commerce business, Paytm Mall, to the shareholders of Paytm. Upon the establishment of Paytm Mall, the Company, together with other shareholders of Paytm, subscribed for newly issued common shares
of Paytm Mall at par value in proportion to their respective shareholding in Paytm, after which the Company obtained an approximately 8% equity interest in Paytm Mall. In March 2017, the
Company subsequently subscribed for newly issued preferred
F-55
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(y) Investment in Paytm E-Commerce Private Limited ("Paytm Mall") (Continued)
shares
in Paytm Mall for a cash consideration of US$177 million (RMB1,220 million). In March 2018, the Company committed to invest an additional US$45 million in Paytm
Mall, of which US$10 million (RMB63 million) was paid in March 2018. The remaining committed balance was fully paid in April and May 2018. As of March 31, 2018, the
Company's equity interest in Paytm Mall was approximately 31% on a fully diluted basis. Ant Financial is also a shareholder of both Paytm and Paytm Mall.
The
investment in the common shares of Paytm Mall is accounted for under the equity method (Note 13). The investment in preferred shares of Paytm Mall is not considered to be in-substance
common stock given that such shares contain certain terms such as dividend and liquidation preferences over ordinary shares. As a result, such investment is accounted for under the cost method
(Note 13).
(z) Investment in Qingdao Goodaymart Logistics Co., Ltd. ("RRS")
RRS
is primarily engaged in the logistics business in the PRC and is a subsidiary of Haier Electronics Group Co., Ltd., a company that is listed on the HKSE and in which the Company has
an approximately 2% equity interest. In January 2017, the Company exchanged the convertible and exchangeable bond that the Company held into an approximately 24% effective equity interest in
RRS. After the exchange, the equity interests in RRS held by the Company increased from 10% to 34%, and the investment in RRS will continue to be accounted for under the equity method
(Note 13). The fair value of the convertible and exchangeable bond on the date of exchange amounting to RMB1,225 million was recognized as the cost of the approximately 24% equity
interest in RRS. Out of this amount, RMB296 million was allocated to amortizable intangible assets, RMB312 million was allocated to goodwill, RMB107 million was allocated to
deferred tax liabilities and RMB724 million was allocated to net assets acquired. In May 2017, the Company made an additional cash investment of RMB340 million in RRS. As of
March 31, 2018, the Company's shareholding in RRS was approximately 31%.
(aa) Investment in Sanjiang Shopping Club Co., Ltd. ("Sanjiang")
Sanjiang,
a company that is listed on the Shanghai Stock Exchange, is one of the leading neighborhood grocery chains in Zhejiang province of the PRC. In November 2016, the Company agreed to
acquire existing and newly issued ordinary shares, representing an approximately 32% equity interest in Sanjiang, for a total cash consideration of approximately RMB1,960 million. In
January 2017, the Company completed the transaction relating to the acquisition of ordinary shares from an existing shareholder, representing an approximately 9% equity interest in Sanjiang,
for a cash consideration of RMB439 million. Such investment is accounted for under the equity method (Note 13). RMB290 million of the purchase price was allocated to goodwill,
amortizable intangible assets and the corresponding deferred tax liabilities and RMB149 million was allocated to net assets acquired. The completion of the subscription of newly issued ordinary
shares is subject to the approval by certain regulatory authorities. The Onshore Retail Fund (Note 4(w)) is also a holder of the exchangeable bonds issued by a shareholder of Sanjiang.
(ab) Investment in YTO Express Group Co., Ltd. ("YTO Express")
YTO
Express is one of the leading express delivery companies in the PRC. The Company initially acquired an ownership interest of 12% for a cash consideration of RMB1,500 million in
May 2015. In September 2016, YTO Express completed its reverse takeover of a company listed on the Shanghai Stock Exchange. All registered capital of YTO Express previously held by the
Company was converted into newly issued ordinary
F-56
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(ab) Investment in YTO Express Group Co., Ltd. ("YTO Express") (Continued)
shares
of the listed entity of YTO Express, representing an approximately 10% equity interest. Concurrently, the Company subscribed for newly issued shares of YTO Express for a cash consideration of
RMB420 million and its equity interest in YTO Express increased to approximately 11%. Such investment is accounted for as an available-for-sale security (Note 11).
(ac) Investment in Suning Commerce Group Co., Ltd. ("Suning")
Suning,
a company that is listed on the Shenzhen Stock Exchange, is one of the largest consumer electronics retail chains in the PRC. In May 2016, the Company completed the subscription for
newly issued ordinary shares for a cash consideration of RMB28.2 billion, representing a 19.99% equity interests in Suning. Such investment is accounted for under the equity method
(Note 13).
Concurrent
with the Company's investment in Suning, Suning subscribed for approximately 26.3 million newly issued ordinary shares of the Company which represent an 1.1% equity interest in the
Company for a cash consideration of US$81.51 per ordinary share. The Company's share of Suning's investment in the Company amounting to US$429 million (RMB2,823 million) was deducted
from the investment cost of Suning and recognized as an issuance of treasury shares during the year ended March 31, 2017.
Out
of the total purchase consideration, net of the amount related to the treasury shares described above, RMB5,100 million was allocated to amortizable intangible assets,
RMB9,113 million was allocated to goodwill, RMB1,582 million was allocated to deferred tax liabilities and RMB12,778 million was allocated to net assets acquired.
In
December 2017, Suning completed a partial disposal of its equity interest in the Company. Accordingly, RMB590 million was added back to the investment cost of Suning and the
recognition of the corresponding treasury shares was reversed.
(ad) Investment in Beijing Shiji Information Technology Co., Ltd. ("Shiji
Information")
Shiji
Information, a company that is listed on the Shenzhen Stock Exchange, is primarily engaged in the development and sale of hotel information management system software, system integration and
technical service. In November 2015, the Company completed an investment in newly issued ordinary shares of Shiji Information for a cash consideration of RMB2,389 million, representing
an approximately 13% equity interest in Shiji Information. Such investment is accounted for as an available-for-sale security (Note 11).
(ae) Investment in Huayi Brothers Media Corporation ("Huayi Brothers")
Huayi
Brothers, a company that is listed on the Shenzhen Stock Exchange, is primarily engaged in the production of television programs and movies in the PRC. In August 2015, the Company
completed an investment in newly issued ordinary shares of Huayi Brothers for a cash consideration of RMB1,533 million, representing an approximately 4% equity interest in Huayi Brothers. Such
investment is accounted for as an available-for-sale security (Note 11).
(af) Investment in Koubei Holding Limited ("Koubei")
Koubei
is one of the leading local services platforms in the PRC. In June 2015, the Company and Ant Financial set up Koubei, a joint venture in which the Company and Ant Financial each held a
49.6% equity
F-57
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(af) Investment in Koubei Holding Limited ("Koubei") (Continued)
interest,
while an unrelated third party affiliated with a major Chinese establishment held the remaining minority equity interests.
The
capital injection from the Company included cash of RMB3.0 billion as well as the injection of certain related businesses. The injection of cash and businesses was completed as of
March 31, 2016. A gain of RMB128 million approximating the fair value of the businesses being injected, was recognized in relation to the contribution of the businesses of which the
carrying amount was insignificant to Koubei, in interest and investment income, net in the consolidated income statement for the year ended March 31, 2016. Such investment is accounted for
under the equity method (Note 13). As of March 31, 2018, the Company held an approximately 38% equity interest in Koubei on a fully diluted basis.
(ag) Investment in wealth management products in relation to a founder's investment in
Wasu Media Holding Co., Ltd. ("Wasu")
In
April 2015, the Company entered into an arrangement with a bank in the PRC to invest in wealth management products with an aggregate principal amount of RMB7.3 billion, of which
RMB420 million was redeemed in January 2017. The wealth management products carry an interest rate of 5% per annum, with a maturity of five years and the return of principal and interest
income on the products are guaranteed by the bank. The wealth management products have been served as collateral to the issuing bank for the issuance of a financing amounting to RMB6.9 billion
to one of the founders of the Company to support his minority investment through a PRC limited partnership in Wasu, a company listed on the Shenzhen Stock Exchange which is engaged in the business of
digital media broadcasting and distribution in the PRC. The financing has also been collateralized by the equity interests of Wasu held by such PRC limited partnership. The founder is exposed to the
risks and rewards of the Wasu shares held by the PRC limited partnership. The Company does not have the power to direct the activities of the PRC limited partnership. The Company entered into
strategic cooperation agreements with a major shareholder of Wasu in order to enhance the Company's capabilities and profile in the entertainment sector in the PRC. Such investment in the wealth
management products is accounted for as a held-to-maturity security.
In
addition, the Company entered into a loan agreement for a principal amount of up to RMB2.0 billion with the founder in April 2015 to finance the repayment by the founder of the
principal and interest under the above financing. The founder has also pledged his interest in the PRC limited partnership to the Company. Loan balances of nil, RMB749 million and
RMB1,137 million were drawn down as of March 31, 2016, 2017 and 2018, respectively.
Equity transactions and acquisitions that were not completed as of March 31, 2018
(ah) Investment in Focus Media Information Technology Co., Ltd. ("Focus
Media")
Focus
Media, a company that is listed on the Shenzhen Stock Exchange, operates a media network for advertisements, including within cinemas, and advertising posters and displays in elevators of office
and residential buildings. In July 2018, the Company and its affiliates agreed to acquire a total interest of approximately 8% in Focus Media for a cash consideration of approximately
RMB11.6 billion. In addition, the Company agreed to acquire a 10% equity interest of an entity controlled by the founder and chairman of Focus Media, which holds an approximately 23% equity
interest in Focus Media, for a cash consideration of
F-58
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
4. Significant restructuring transaction, mergers and acquisitions and equity investments (Continued)
(ah) Investment in Focus Media Information Technology Co., Ltd. ("Focus Media") (Continued)
US$511 million.
The completion of the transactions as described above is subject to customary closing conditions.
(ai) Acquisition of DSM Grup Danişmanlik Iletişim Ve
Satiş Ticaret Anonim Şirketi ("Trendyol")
Trendyol
is one of the leading online fashion retailers in Turkey. In June 2018, the Company entered into an agreement under which the Company will invest into Trendyol as well as acquire
shares from certain existing investors, representing a controlling equity interest for a cash consideration of US$728 million. The investment underscores the Company's commitment to
international expansion. The completion of this transaction is subject to customary closing conditions.
(aj) Investment in ZTO Express (Cayman) Inc. ("ZTO Express")
ZTO
Express, a company that is listed on the NYSE, is one of the leading express delivery companies in the PRC. In June 2018, the Company completed an investment in newly issued ordinary shares
of ZTO Express for a cash consideration of US$1,100 million, representing an approximately 8% equity interest in ZTO Express. The Offshore Retail Fund (Note 4(w)) is also an investor in
this transaction.
(ak) Investment in Huitongda Network Co., Ltd. ("Huitongda")
Huitongda
operates a rural online services platform in the PRC. In April 2018, the Company completed an investment in existing and newly issued shares of Huitongda for a cash consideration of
RMB4,500 million, representing a 20% equity interest in Huitongda.
(al) Investment in Shiji Retail Information Technology Co., Ltd. ("Shiji
Retail")
Shiji
Retail, a subsidiary of Shiji Information (Note 4(ad)), is engaged in the provision of retail information system solutions. In April 2018, the Company acquired a 38% equity
interest in Shiji Retail for a cash consideration of US$486 million.
(am) Acquisition of Kaiyuan Commerce Co., Ltd. ("Kaiyuan")
Kaiyuan
is one of the leading department store operators in the northwestern part of the PRC. In April 2018, the Company acquired a 100% equity interest in Kaiyuan for a cash consideration of
RMB3,362 million. The Company expects that Kaiyuan will complement the Company's New Retail initiatives to transform the retail landscape and reengineer the fundamentals of retail
operations. Upon the issuance of the consolidated financial statements, the accounting of such business combination has not been finalized.
F-59
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(am) Acquisition of Kaiyuan Commerce Co., Ltd. ("Kaiyuan") (Continued)
5. Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Core commerce:
|
|
|
|
|
|
|
|
|
|
|
|
|
China commerce retail (i)
|
|
|
|
|
|
|
|
|
|
|
|
|
- Customer management
|
|
|
52,396
|
|
|
77,530
|
|
|
114,285
|
|
|
|
- Commission
|
|
|
25,829
|
|
|
34,066
|
|
|
46,525
|
|
|
|
- Others
|
|
|
1,808
|
|
|
2,513
|
|
|
15,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,033
|
|
|
114,109
|
|
|
176,559
|
|
|
|
China commerce wholesale (ii)
|
|
|
4,288
|
|
|
5,679
|
|
|
7,164
|
|
|
|
International commerce retail (iii)
|
|
|
2,204
|
|
|
7,336
|
|
|
14,216
|
|
|
|
International commerce wholesale (iv)
|
|
|
5,425
|
|
|
6,001
|
|
|
6,625
|
|
|
|
Cainiao logistics services (v)
|
|
|
—
|
|
|
—
|
|
|
6,759
|
|
|
|
Others
|
|
|
385
|
|
|
755
|
|
|
2,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core commerce
|
|
|
92,335
|
|
|
133,880
|
|
|
214,020
|
|
|
|
Cloud computing (vi)
|
|
|
3,019
|
|
|
6,663
|
|
|
13,390
|
|
|
|
Digital media and entertainment (vii)
|
|
|
3,972
|
|
|
14,733
|
|
|
19,564
|
|
|
|
Innovation initiatives and others (viii)
|
|
|
1,817
|
|
|
2,997
|
|
|
3,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
101,143
|
|
|
158,273
|
|
|
250,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Revenue
from China commerce retail is primarily generated from the Company's China retail marketplaces and includes revenue from customer management, commissions and
sales of goods.
-
(ii)
-
Revenue
from China commerce wholesale is primarily generated from 1688.com and includes fees from memberships and value-added services and revenue from customer
management.
-
(iii)
-
Revenue
from international commerce retail is primarily generated from AliExpress and Lazada (Note 4(h)) and includes revenue from customer
management, commissions and sales of goods.
-
(iv)
-
Revenue
from international commerce wholesale is primarily generated from Alibaba.com and includes fees from memberships and value-added services and revenue from
customer management.
-
(v)
-
Revenue
from Cainiao logistics services represents revenue from the domestic and cross-border fulfilment services provided by Cainiao Network (Note 4(b)).
-
(vi)
-
Revenue
from cloud computing is primarily generated from the provision of services, such as elastic computing, database, storage, network virtualization services,
large scale computing, security, management and application services, big data analytics, and machine learning platform and IoT services.
-
(vii)
-
Revenue
from digital media and entertainment is primarily generated from Youku (Note 4(g)) and UCWeb and includes revenue from P4P marketing
services, display marketing services and subscriptions.
-
(viii)
-
Revenue
from innovation initiatives and others is primarily generated from businesses such as AutoNavi and other innovation initiatives. Other revenue also
includes SME Annual Fee received from Ant Financial and its affiliates (Note 4(a)).
F-60
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
5. Revenue (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Customer management services
|
|
|
|
|
|
|
|
|
|
|
|
|
P4P and display marketing
|
|
|
53,185
|
|
|
83,581
|
|
|
119,822
|
|
|
|
Other customer management services
|
|
|
3,963
|
|
|
5,706
|
|
|
9,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total customer management services
|
|
|
57,148
|
|
|
89,287
|
|
|
128,898
|
|
|
|
Commission
|
|
|
27,793
|
|
|
37,848
|
|
|
52,411
|
|
|
|
Membership fees and value-added services
|
|
|
7,627
|
|
|
10,638
|
|
|
13,823
|
|
|
|
Cainiao logistics services
|
|
|
—
|
|
|
—
|
|
|
6,759
|
|
|
|
Cloud computing services
|
|
|
3,019
|
|
|
6,663
|
|
|
13,390
|
|
|
|
Sales of goods and other revenue (i)
|
|
|
5,556
|
|
|
13,837
|
|
|
34,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
101,143
|
|
|
158,273
|
|
|
250,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
This
mainly represents sales of goods and other revenue generated by Lazada (Note 4(h)), Intime (Note 4(c)) and UCWeb, as well as SME Annual Fee
received from Ant Financial and its affiliates (Note 4(a)).
6. Other income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Profit Share Payments (Note 4(a))
|
|
|
1,122
|
|
|
2,086
|
|
|
3,444
|
|
|
|
Government grants (i)
|
|
|
401
|
|
|
451
|
|
|
555
|
|
|
|
Amortization of restructuring reserve (Note 4(a))
|
|
|
(264
|
)
|
|
(264
|
)
|
|
(264
|
)
|
|
|
Exchange differences
|
|
|
(563
|
)
|
|
2,328
|
|
|
(1,679
|
)
|
|
|
Others
|
|
|
1,362
|
|
|
1,485
|
|
|
2,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,058
|
|
|
6,086
|
|
|
4,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Government
grants mainly represent amounts received from central and local governments in connection with the Company's investments in local business districts and
contributions to technology development.
F-61
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
7. Income tax expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Current income tax expense
|
|
|
7,223
|
|
|
13,495
|
|
|
17,223
|
|
|
|
Deferred taxation
|
|
|
1,226
|
|
|
281
|
|
|
976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,449
|
|
|
13,776
|
|
|
18,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under
the current laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman
Islands withholding tax is imposed. The Company's subsidiaries incorporated in Hong Kong were subject to the Hong Kong profits tax rate at 16.5% for the years ended March 31, 2016, 2017 and
2018. The Company's subsidiaries incorporated in other jurisdictions were subject to income tax charges calculated according to the tax laws enacted or substantially enacted in the countries where
they operate and generate income.
Current
income tax expense primarily includes the provision for PRC Enterprise Income Tax ("EIT") for subsidiaries operating in the PRC and withholding tax on earnings that have been declared for
distribution by PRC subsidiaries to offshore holding companies. Substantially all of the Company's income before income tax and share of results of equity investees are generated by these PRC
subsidiaries. These subsidiaries are subject to EIT on their taxable income as reported in their respective statutory financial statements adjusted in accordance with the relevant tax laws, rules and
regulations in the PRC.
Under
the PRC Enterprise Income Tax Law (the "EIT Law"), the standard enterprise income tax rate for domestic enterprises and foreign invested enterprises is 25%. In addition, the EIT Law
provides for, among others, a preferential tax rate of 15% for enterprises qualified as High and New Technology Enterprises. Further, certain subsidiaries were recognized as Software
Enterprises and thereby entitled to full exemption from EIT for two years beginning from their first profitable calendar year and a 50% reduction for the subsequent three calendar years. In addition,
a duly recognized Key Software Enterprise within China's national plan can enjoy a preferential EIT rate of 10%. The Key Software Enterprise status is subject to review by the relevant authorities
every year. The timing of the annual review and notification by the relevant authorities may vary from year to year, and the related tax adjustments in relation to the change in applicable EIT rate as
a result of notification of qualification are accounted for in the period in which the Key Software Enterprise status is recognized and notified.
The
tax status of the subsidiaries of the Company with major taxable profits is described below:
-
•
-
Alibaba (China) Technology Co., Ltd. ("Alibaba China") and Taobao (China) Software Co., Ltd. ("Taobao China"),
entities primarily engaged in the operations of the Company's wholesale marketplaces and Taobao Marketplace, respectively, obtained the annual review and notification relating to the renewal of the
Key Software Enterprises status for the taxation years of 2015 and 2016 in the quarters ended September 30, 2016 and 2017, respectively. Accordingly, Alibaba China and Taobao China, which had
qualified as High and New Technology Enterprises and applied an EIT rate of 15% for the taxation years of 2015 and 2016, reflected the reduction in tax rate to 10% for the taxation years of
2015 and 2016 in the consolidated income statements for the years ended March 31, 2017 and 2018.
F-62
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
7. Income tax expenses (Continued)
-
•
-
Zhejiang Tmall Technology Co., Ltd. ("Tmall China"), an entity primarily engaged in the operations of Tmall, was recognized as a
High and New Technology Enterprise and also granted the Software Enterprise status and was thereby entitled to an income tax exemption for two years beginning from its first profitable taxation
year of 2012, and a 50% reduction for the subsequent three years starting from the taxation year of 2014. Accordingly, Tmall China was entitled to an EIT rate of 12.5% during the taxation years of
2014, 2015 and 2016. Tmall China obtained notification of recognition as a Key Software Enterprises for the taxation year of 2016 in the quarter ended September 30, 2017. Accordingly, Tmall
China, which had applied an EIT rate of 12.5% for the taxation year of 2016, reflected the reduction in tax rate to 10% for the taxation year of 2016 in the consolidated income statement for the year
ended March 31, 2018.
The
total tax adjustments for Alibaba China, Taobao China, Tmall China and certain other PRC subsidiaries of the Company, amounting to nil, RMB720 million and RMB2,295 million, were
recorded in the consolidated income statements for the years ended March 31, 2016, 2017 and 2018, respectively. The annual review and notification relating to the renewal of the Key Software
Enterprises status for the taxation year of 2017 has not yet been obtained as of March 31, 2018. Accordingly, Alibaba China, Taobao China and Tmall China continued to apply an EIT rate of 15%
for the taxation year of 2017 as High and New Technology Enterprises.
Most
of the remaining PRC entities of the Company are subject to EIT at 25% for the years ended March 31, 2016, 2017 and 2018.
Pursuant
to the EIT Law, a 10% withholding tax is levied on dividends declared by PRC companies to their foreign investors. A lower withholding tax rate of 5% is applicable if direct foreign investors
with at least 25% equity interest in the PRC company are incorporated in Hong Kong and meet the relevant requirements pursuant to the tax arrangement between the PRC and Hong Kong. Since the equity
holders of the major PRC subsidiaries of the Company are Hong Kong incorporated companies and meet the relevant requirements pursuant to the tax arrangement between the PRC and Hong Kong, the Company
has used 5% to provide for deferred tax liabilities
on retained earnings which are anticipated to be distributed. As of March 31, 2018, the Company had fully accrued the withholding tax on the earnings distributable by all of the subsidiaries of
the Company in the PRC, except for those undistributed earnings that the Company intends to invest indefinitely in the PRC which amounted to RMB28.6 billion.
F-63
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
7. Income tax expenses (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
Licensed copyrights
|
|
|
574
|
|
|
1,191
|
|
|
|
Tax losses carried forward and others (i)
|
|
|
5,969
|
|
|
9,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,543
|
|
|
10,658
|
|
|
|
Valuation allowance
|
|
|
(5,505
|
)
|
|
(8,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
1,038
|
|
|
2,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
Identifiable intangible assets
|
|
|
(2,358
|
)
|
|
(9,181
|
)
|
|
|
Withholding tax on undistributed earnings (ii)
|
|
|
(6,377
|
)
|
|
(8,375
|
)
|
|
|
Available-for-sale securities and others
|
|
|
(1,626
|
)
|
|
(1,756
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(10,361
|
)
|
|
(19,312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
|
(9,323
|
)
|
|
(17,130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Others
is primarily comprised of property and equipment, deferred revenue and customer advances, as well as accrued expenses which are not deductible until paid
under PRC tax laws.
-
(ii)
-
The
related deferred tax liabilities as of March 31, 2017 and 2018 were provided on the assumption that 100% of the distributable reserves of the major PRC
subsidiaries will be distributed as dividends, except for those undistributed earnings that the Company intends to invest indefinitely in the PRC which amounted to RMB28.2 billion and
RMB28.6 billion, respectively.
Valuation
allowances have been provided on the deferred tax assets mainly related to the tax losses carried forward due to the uncertainty surrounding their realization. If events occur in the future
that improve the certainty of realization, an adjustment to the valuation allowances will be made and consequently income tax expenses will be reduced.
As
of March 31, 2018, the accumulated tax losses of subsidiaries incorporated in Singapore, Indonesia and Hong Kong, subject to the agreement of the relevant tax authorities, of
RMB3,343 million, RMB2,412 million and RMB1,755 million, respectively, are allowed to be carried forward to offset against future taxable profits. Such carry forward of tax losses
in Hong Kong and Singapore has no time limit, while the tax losses in Indonesia will expire, if unused, in the years ending March 31, 2019 through 2023. The accumulated tax losses of
subsidiaries incorporated in the PRC, subject to the agreement of the PRC tax authorities, of RMB17,672 million as of March 31, 2018 will expire, if unused, in the years ending
March 31, 2019 through 2023.
F-64
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
7. Income tax expenses (Continued)
Reconciliation of the differences between the statutory EIT rate applicable to profits of the consolidated
entities and the income tax expenses of the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB, except per
share data)
|
|
|
|
Income before income tax and share of result of equity investees
|
|
|
81,468
|
|
|
60,029
|
|
|
100,403
|
|
|
|
Income tax computed at statutory EIT rate (25%)
|
|
|
20,367
|
|
|
15,007
|
|
|
25,101
|
|
|
|
Effect of different tax rates available to different jurisdictions
|
|
|
(869
|
)
|
|
(772
|
)
|
|
392
|
|
|
|
Effect of tax holiday and preferential tax benefit on assessable profits of subsidiaries incorporated in the PRC
|
|
|
(6,680
|
)
|
|
(10,507
|
)
|
|
(14,782
|
)
|
|
|
Non-deductible expenses and non-taxable income, net (i)
|
|
|
(4,994
|
)
|
|
6,090
|
|
|
1,780
|
|
|
|
Tax savings from additional deductions on certain research and development expenses available for subsidiaries incorporated in the PRC (ii)
|
|
|
(1,205
|
)
|
|
(1,694
|
)
|
|
(2,330
|
)
|
|
|
Withholding tax on the earnings distributed and anticipated to be remitted
|
|
|
1,573
|
|
|
3,009
|
|
|
4,393
|
|
|
|
Change in valuation allowance, deduction of certain share-based compensation expense and others (iii)
|
|
|
257
|
|
|
2,643
|
|
|
3,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses
|
|
|
8,449
|
|
|
13,776
|
|
|
18,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of tax holidays inside the PRC on basic earnings per share/ADS (RMB)
|
|
|
2.72
|
|
|
4.21
|
|
|
5.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Expenses
not deductible for tax purposes and non-taxable income primarily represent investment income (loss), share-based compensation expense, interest expense and
exchange differences. Investment income (loss) during the year ended March 31, 2016 included gains from the revaluation of the Company's remaining equity interest in Alibaba Pictures Group
Limited ("Alibaba Pictures") (Note 13) and from the revaluation of previously held equity interest relating to the acquisition of Alibaba Health (Note 4(i)). Investment income
(loss) during the year ended March 31, 2017 included gains from the revaluation of previously held equity interest relating to the acquisition of Damai (Note 4(d)) and Youku
(Note 4(g)). Investment income (loss) during the year ended March 31, 2018 included gains from the revaluation of previously held equity interest relating to the acquisition of Cainiao
Network (Note 4(b)) and Intime (Note 4(c)).
-
(ii)
-
This
amount represents tax incentives relating to the research and development expenses of certain major operating subsidiaries in the PRC. This tax incentive
enables the Company to claim an additional tax deduction amounting to 50% of the qualified research and development expenses incurred.
-
(iii)
-
This
amount primarily represents valuation allowance against the deferred tax assets associated with operating losses, amortization of licensed copyrights and
other timing differences which may not be realized as a tax benefit.
8. Share-based awards
Share-based
awards such as incentive and non-statutory options, restricted shares, RSUs, dividend equivalents, share appreciation rights and share payments may be granted to any directors, employees
and consultants of the Company or affiliated companies under the employee share option plans adopted in 1999, 2004, 2005, the share incentive plan adopted in 2007 and the equity incentive plan adopted
in 2011, which govern the terms of
F-65
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
8. Share-based awards (Continued)
the
awards. In September 2014, the Company adopted a post-IPO equity incentive plan (the "2014 Plan") which has a ten-year term. Share-based awards are only available for issuance under
the 2014 Plan. If an award under the previous plan terminates, expires or lapses, or is cancelled for any reason, ordinary shares subject to the award become available for the grant of a new award
under the 2014 Plan. On April 1, 2015 and each anniversary thereof, an additional amount equal to the lesser of (A) 25,000,000 ordinary shares, and (B) such lesser number of
ordinary shares determined by the board of directors will become available for the grant of a new award under the 2014 Plan. All share-based awards granted under the 2014 Plan are subject to dilution
protection should the capital structure of the Company be affected by a share split, reverse share split, share dividend or other dilutive action. The 2014 Plan has substantially similar terms as the
plan adopted in 2011 except that (i) the 2014 Plan is
administered by the compensation committee of the board (or a subcommittee thereof), or such other committee of the board to which the board has delegated power to act, or the board in the
absence of any such committee, and (ii) certain terms are adjusted for the purposes of compliance with the Sarbanes-Oxley Act of 2002, U.S. Securities Act of 1933 and the regulations
thereunder, as amended from time to time and U.S. Securities Exchange Act of 1934 and the regulations thereunder, as amended from time to time, among others. As of March 31, 2018, the
number of shares authorized but unissued was 29,376,187 ordinary shares.
Share
options and RSUs granted are generally subject to a four-year vesting schedule as determined by the administrator of the plans. Depending on the nature and the purpose of the grant, share
options and RSUs in general vest 25% or 50% upon the first or second anniversary of the vesting commencement date, respectively, as provided in the grant agreement, and 25% every year thereafter. No
outstanding share options or RSUs will be exercisable or subject to vesting after the expiry of a maximum of six years from the date of grant. Certain share options and RSUs granted to the senior
management members of the Company are subject to a six-year pro rata vesting schedule. No outstanding share options or RSUs will be exercisable or subject to vesting after the expiry of a
maximum of eight years from the date of grant.
(a) Share options relating to ordinary shares of the Company
A
summary of the changes in the share options related to ordinary shares granted by the Company during the year ended March 31, 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of share
options
|
|
Weighted
average
exercise
price
|
|
Weighted
average
remaining
contractual
life
|
|
|
|
|
|
|
|
US$
|
|
(in years)
|
|
|
|
Outstanding as of April 1, 2017
|
|
|
11,713,003
|
|
|
61.94
|
|
|
5.0
|
|
|
|
Exercised
|
|
|
(3,628,263
|
)
|
|
43.51
|
|
|
|
|
|
|
Cancelled/forfeited/expired
|
|
|
(146,725
|
)
|
|
76.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of March 31, 2018
|
|
|
7,938,015
|
|
|
70.10
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and exercisable as of March 31, 2018
|
|
|
2,231,589
|
|
|
70.47
|
|
|
4.2
|
|
|
|
Vested and expected to vest as of March 31, 2018 (i)
|
|
|
7,691,058
|
|
|
69.85
|
|
|
4.5
|
|
-
(i)
-
The
share options expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding share options.
F-66
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
8. Share-based awards (Continued)
(a) Share options relating to ordinary shares of the Company (Continued)
As
of March 31, 2017 and 2018, 347,513 and 141,000 outstanding share options were held by non-employees, respectively. These share options are subject to re-measurement through each
vesting date to determine the appropriate amount of the expense.
As
of March 31, 2018, the aggregate intrinsic value of all outstanding options was RMB5,652 million. As of the same date, the aggregate intrinsic value of options that were vested and
exercisable and options that were vested and expected to vest is RMB1,584 million and RMB5,489 million, respectively.
During
the years ended March 31, 2016, 2017 and 2018, the weighted average grant date fair value of share options granted was US$28.65, US$22.89 and nil, respectively, and the total grant date
fair value of options vested during the same years was RMB602 million, RMB348 million and RMB452 million, respectively. During the same years, the aggregate intrinsic value of
share options exercised was RMB556 million, RMB1,799 million and RMB1,980 million, respectively.
Cash
received from option exercises under the share option plans, including repayment of loans and interest receivable on employee loans for the exercise of vested options, for the years ended
March 31, 2016, 2017 and 2018 was RMB693 million, RMB287 million and RMB174 million, respectively.
No
share options were granted during the year ended March 31, 2018. The fair value of each option grant is estimated on the date of grant using the Black-Scholes model and the assumptions
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
|
|
Risk-free interest rate (i)
|
|
|
1.24% – 1.79
|
%
|
|
1.23% – 1.30
|
%
|
|
|
Expected dividend yield (ii)
|
|
|
0
|
%
|
|
0
|
%
|
|
|
Expected life (years) (iii)
|
|
|
4.25 – 5.75
|
|
|
4.38
|
|
|
|
Expected volatility (iv)
|
|
|
33.4% – 35.7
|
%
|
|
31.7% – 33.2
|
%
|
-
(i)
-
Risk-free
interest rate is based on the yields of United States Treasury securities with maturities similar to the expected life of the share options in
effect at the time of grant.
-
(ii)
-
Expected
dividend yield is assumed to be 0% as the Company has no history or expectation of paying a dividend on its ordinary shares.
-
(iii)
-
Expected
life of share options is based on the average between the vesting period and the contractual term for each grant.
-
(iv)
-
Expected
volatility is assumed based on the historical volatility of the Company's comparable companies in the period equal to the expected life of each grant.
As
of March 31, 2018, there were RMB245 million of unamortized compensation costs related to these outstanding share options, net of expected forfeitures and after re-measurement
applicable to the awards granted to non-employees. These amounts are expected to be recognized over a weighted average period of 2.0 years.
During
the years ended March 31, 2016, 2017 and 2018, the Company recognized share-based compensation expense of RMB578 million, RMB524 million and RMB270 million,
respectively, in connection with the above share options, net of cash reimbursement from related companies, including Ant Financial (Note 21).
F-67
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
8. Share-based awards (Continued)
(b) RSUs relating to ordinary shares of the Company
A
summary of the changes in the RSUs related to ordinary shares granted by the Company during the year ended March 31, 2018 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of RSUs
|
|
Weighted-
average
grant date
fair value
|
|
|
|
|
|
|
|
US$
|
|
|
|
Awarded and unvested as of April 1, 2017
|
|
|
69,595,719
|
|
|
69.18
|
|
|
|
Granted
|
|
|
29,544,661
|
|
|
142.05
|
|
|
|
Vested
|
|
|
(26,025,540
|
)
|
|
63.62
|
|
|
|
Cancelled/forfeited
|
|
|
(4,689,982
|
)
|
|
95.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded and unvested as of March 31, 2018
|
|
|
68,424,858
|
|
|
100.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to vest as of March 31, 2018 (i)
|
|
|
56,965,205
|
|
|
99.94
|
|
-
(i)
-
RSUs
expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding RSUs.
As
of March 31, 2017 and 2018, 4,594,874 and 1,983,785 outstanding RSUs were held by non-employees, respectively. These RSUs are subject to re-measurement through each vesting date to
determine the appropriate amount of the expense.
As
of March 31, 2018, there were RMB18,207 million of unamortized compensation costs related to these outstanding RSUs, net of expected forfeitures and after re-measurement applicable to
the awards granted to non-employees. These amounts are expected to be recognized over a weighted average period of 2.0 years.
During
the years ended March 31, 2016, 2017 and 2018, the Company recognized share-based compensation expense of RMB9,915 million, RMB12,322 million and RMB16,165 million,
respectively, in connection with the above RSUs, net of cash reimbursement from related companies, including Ant Financial (Note 21).
(c) Partner Capital Investment Plan relating to ordinary shares of the Company
Beginning
in 2013, the Company offered selected members of the Alibaba Partnership rights to acquire restricted shares of the Company. For the rights offered before 2016, such rights and the
underlying restricted shares were subject to a non-compete provision, and the holders were entitled to purchase restricted shares at a price of US$14.50 per share during a four-year period. Upon the
exercise of such rights, the underlying ordinary shares
may not be transferred for a period of eight years from the date of subscription of the relevant rights. For the rights offered in 2016 and 2017, such rights and the underlying restricted shares were
subject to certain service provisions that were not related to employment, and holders were entitled to purchase restricted shares at a price of US$23.00 and US$26.00 per share, respectively, over a
period of ten years from the vesting commencement date.
The
number of ordinary shares underlying these rights is 18,000,000 shares, of which the rights to subscribe for 17,300,000 shares were offered and subscribed up to March 31,
2018. The rights offered before 2016 were accounted for as noncontrolling interests of the Company as such rights were issued by the Company's subsidiaries and classified as equity at the subsidiary
level. The rights offered in the subsequent periods were accounted for as share options issued by the Company.
F-68
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
8. Share-based awards (Continued)
(c) Partner Capital Investment Plan relating to ordinary shares of the Company (Continued)
As
of March 31, 2018, there were RMB1,062 million of unamortized compensation costs related to these rights, net of expected forfeitures and after re-measurement applicable to the awards
granted to non-employees. These amounts are expected to be recognized over a weighted average period of 4.7 years. Share-based compensation expense of nil, RMB241 million and
RMB435 million was recognized in connection with these rights for the years ended March 31, 2016, 2017 and 2018, respectively.
The
fair value of each right to acquire restricted shares is estimated on the subscription date using the Black-Scholes model and the assumptions below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
Risk-free interest rate (i)
|
|
|
1.86
|
%
|
|
2.07
|
%
|
|
|
Expected dividend yield (ii)
|
|
|
0
|
%
|
|
0
|
%
|
|
|
Expected life (years) (iii)
|
|
|
8.25
|
|
|
8.25
|
|
|
|
Expected volatility (iv)
|
|
|
39.0
|
%
|
|
34.2
|
%
|
-
(i)
-
Risk-free
interest rate is based on the yields of United States Treasury securities with maturities similar to the expected life of the share-based awards in
effect at the time of grant.
-
(ii)
-
Expected
dividend yield is assumed to be 0% as the Company has no history or expectation of paying a dividend on its ordinary shares.
-
(iii)
-
Expected
life of the rights is based on management's estimate on timing of redemption for ordinary shares by the participants.
-
(iv)
-
Expected
volatility is assumed based on the historical volatility of the Company's comparable companies in the period equal to expected life of each right.
(d) Share-based awards relating to Ant Financial
Junhan,
the general partner of which is a company wholly-owned by the executive chairman of the Company and a major equity holder of Ant Financial, made grants of share economic rights similar to
share appreciation awards linked to the valuation of Ant Financial (the "SERs") to certain employees of the Company. The vesting of the SERs is conditional upon the fulfillment of certain
requisite service conditions, and the SERs will be settled in cash by Junhan upon the disposal by the holders. Junhan has the right to repurchase the vested SERs from the holders upon an initial
public offering of Ant Financial or the termination of holders' employment with the Company at a price to be determined based on the then fair market value of Ant Financial. The Company has no
obligation to reimburse Junhan, Ant Financial or its subsidiaries for the cost associated with these SERs.
For
accounting purposes, the SERs meet the definition of a financial derivative. The cost relating to such SERs is recognized by the Company and the related expense is recognized over the requisite
service period in the consolidated income statements with a corresponding credit to additional paid-in capital. Subsequent changes in the fair value of the SERs are recorded in the consolidated income
statements through the date on which the underlying SERs are settled by Junhan.
F-69
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
8. Share-based awards (Continued)
During
the years ended March 31, 2016, 2017 and 2018, the Company recognized expenses of RMB5,506 million, RMB2,188 million and RMB2,278 million in respect of the
share-based awards relating to Ant Financial granted by Junhan, respectively.
(e) Share-based compensation expense by function
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Cost of revenue
|
|
|
4,003
|
|
|
3,893
|
|
|
5,505
|
|
|
|
Product development expenses
|
|
|
5,703
|
|
|
5,712
|
|
|
7,374
|
|
|
|
Sales and marketing expenses
|
|
|
1,963
|
|
|
1,772
|
|
|
2,037
|
|
|
|
General and administrative expenses
|
|
|
4,413
|
|
|
4,618
|
|
|
5,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
16,082
|
|
|
15,995
|
|
|
20,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9. Earnings per share
Basic
earnings per share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of outstanding ordinary shares, adjusted for treasury shares.
For
the calculation of diluted earnings per share, net income attributable to ordinary shareholders for basic earnings per share is adjusted by the effect of dilutive securities, including share-based
awards, under the treasury stock method. Potentially dilutive securities, of which the amounts are insignificant, have been excluded from the computation of diluted net income per share if their
inclusion is anti-dilutive.
F-70
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
9. Earnings per share (Continued)
(e) Share-based compensation expense by function (Continued)
The
following table sets forth the computation of basic and diluted net income per share/ADS for the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB, except share
data and per share data)
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to ordinary shareholders for computing net income per ordinary share — basic
|
|
|
71,460
|
|
|
43,675
|
|
|
63,985
|
|
|
|
Dilution effect arising from share-based awards issued by a subsidiary and equity investees
|
|
|
—
|
|
|
(11
|
)
|
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to ordinary shareholders for computing net income per ordinary share — diluted
|
|
|
71,460
|
|
|
43,664
|
|
|
63,964
|
|
|
|
Shares (denominator):
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in calculating net income per ordinary share — basic (million shares)
|
|
|
2,458
|
|
|
2,493
|
|
|
2,553
|
|
|
|
Adjustments for dilutive share options and RSUs (million shares)
|
|
|
104
|
|
|
80
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in calculating net income per ordinary share — diluted (million shares)
|
|
|
2,562
|
|
|
2,573
|
|
|
2,610
|
|
|
|
Net income per ordinary share/ADS — basic (RMB)
|
|
|
29.07
|
|
|
17.52
|
|
|
25.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per ordinary share/ADS — diluted (RMB)
|
|
|
27.89
|
|
|
16.97
|
|
|
24.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Restricted cash and escrow receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Money received or receivable on escrow services offered by AliExpress (i)
|
|
|
2,528
|
|
|
3,171
|
|
|
|
Others
|
|
|
127
|
|
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,655
|
|
|
3,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
The
amount represents customer funds held by external payment networks outside the PRC relating to AliExpress with a corresponding liability recorded under escrow
money payable.
F-71
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
(e) Share-based compensation expense by function (Continued)
11. Investment securities and fair value disclosure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
|
|
|
|
Original
cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Provision
for decline
in value
|
|
Fair
value
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed equity securities
|
|
|
15,325
|
|
|
9,792
|
|
|
(836
|
)
|
|
(1,019
|
)
|
|
23,262
|
|
|
|
Held-to-maturity securities
|
|
|
12,241
|
|
|
—
|
|
|
—
|
|
|
(180
|
)
|
|
12,061
|
|
|
|
Investment securities accounted for under the fair value option
|
|
|
183
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,749
|
|
|
9,792
|
|
|
(836
|
)
|
|
(1,199
|
)
|
|
35,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2018
|
|
|
|
|
|
Original
cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Provision
for decline
in value
|
|
Fair
value
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed equity securities
|
|
|
20,303
|
|
|
10,990
|
|
|
(1,587
|
)
|
|
(983
|
)
|
|
28,723
|
|
|
|
Held-to-maturity securities
|
|
|
12,642
|
|
|
—
|
|
|
—
|
|
|
(179
|
)
|
|
12,463
|
|
|
|
Investment securities accounted for under the fair value option
|
|
|
1,754
|
|
|
67
|
|
|
—
|
|
|
—
|
|
|
1,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,699
|
|
|
11,057
|
|
|
(1,587
|
)
|
|
(1,162
|
)
|
|
43,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details
of the significant additions of the investment securities during the years ended March 31, 2016, 2017 and 2018 are set out in Note 4.
During
the years ended March 31, 2016, 2017 and 2018, gross realized gains of RMB1,012 million, RMB6,306 million and nil and gross realized losses of RMB410 million,
RMB534 million and nil from disposals of investment securities were recognized in interest and investment income, net in the consolidated income statements, respectively. During the same
period, impairment losses of RMB962 million, RMB173 million and RMB63 million were charged in interest and investment income, net in the consolidated income statements,
respectively, as a result of other-than-temporary decline in values related to listed equity securities and held-to-maturity securities.
As
of March 31, 2016, 2017 and 2018, net unrealized gains of RMB5,502 million, RMB8,956 million and RMB9,403 million on available-for-sale securities were recorded in
accumulated other comprehensive income, respectively. For available-for-sale securities with unrealized losses, their related aggregate fair values amounted to RMB1,751 million,
RMB4,366 million and RMB7,636 million as of March 31, 2016, 2017 and 2018, respectively. The carrying amounts of available-for-sale securities that were in a loss position over
twelve months were insignificant as of the same dates.
The
carrying amount of long-term held-to-maturity investments approximates their fair value due to the fact that the related interest rates approximate rates currently offered by financial
institutions for similar debt instruments of comparable maturities.
F-72
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
11. Investment securities and fair value disclosure (Continued)
(e) Share-based compensation expense by function (Continued)
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase
the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
|
|
|
|
|
|
|
|
|
Level 1
|
|
-
|
|
Valuations based on unadjusted quoted prices for identical assets and liabilities in active markets.
|
|
|
Level 2
|
|
-
|
|
Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and
liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|
|
|
Level 3
|
|
-
|
|
Valuations based on unobservable inputs reflecting assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
|
Fair
value of short-term investments and listed equity securities are based on quoted prices in active markets for identical assets or liabilities. All other financial instruments, such as interest
rate swaps and forward exchange contracts, are valued based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.
Convertible and exchangeable bonds are valued using binomial model with unobservable inputs including risk-free interest rate, expected volatility and dividend yield. Contingent consideration is
valued using an expected cash flow method with unobservable inputs including the probability to achieve the operating and financial targets, which is assessed by the Company, in connection with the
contingent consideration arrangements.
The
following table summarizes the Company's assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
3,011
|
|
|
—
|
|
|
—
|
|
|
3,011
|
|
|
|
Restricted cash and escrow receivables
|
|
|
2,655
|
|
|
—
|
|
|
—
|
|
|
2,655
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed equity securities
|
|
|
23,262
|
|
|
—
|
|
|
—
|
|
|
23,262
|
|
|
|
Investment securities accounted for under the fair value option
|
|
|
—
|
|
|
—
|
|
|
183
|
|
|
183
|
|
|
|
Interest rate swap contracts
|
|
|
—
|
|
|
436
|
|
|
—
|
|
|
436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,928
|
|
|
436
|
|
|
183
|
|
|
29,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward exchange contracts
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
78
|
|
|
|
Contingent consideration in relation to investments and acquisitions
|
|
|
—
|
|
|
—
|
|
|
921
|
|
|
921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
78
|
|
|
921
|
|
|
999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-73
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
11. Investment securities and fair value disclosure (Continued)
(e) Share-based compensation expense by function (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2018
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
6,086
|
|
|
—
|
|
|
—
|
|
|
6,086
|
|
|
|
Restricted cash and escrow receivables
|
|
|
3,417
|
|
|
—
|
|
|
—
|
|
|
3,417
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed equity securities
|
|
|
28,723
|
|
|
—
|
|
|
—
|
|
|
28,723
|
|
|
|
Investment securities accounted for under the fair value option
|
|
|
—
|
|
|
—
|
|
|
1,821
|
|
|
1,821
|
|
|
|
Interest rate swap contracts
|
|
|
—
|
|
|
542
|
|
|
—
|
|
|
542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,226
|
|
|
542
|
|
|
1,821
|
|
|
40,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration in relation to investments and acquisitions
|
|
|
—
|
|
|
—
|
|
|
120
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
120
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Balance as of April 1, 2016
|
|
|
4,622
|
|
|
|
Decrease in fair value
|
|
|
(113
|
)
|
|
|
Conversion or exchange (Notes 4(c) and 4(z))
|
|
|
(4,678
|
)
|
|
|
Foreign currency translation adjustments
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017
|
|
|
—
|
|
|
|
Additions
|
|
|
1,264
|
|
|
|
Foreign currency translation adjustments
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2018
|
|
|
1,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Balance as of April 1, 2016
|
|
|
1,264
|
|
|
|
Additions
|
|
|
293
|
|
|
|
Net decrease in fair value
|
|
|
(642
|
)
|
|
|
Foreign currency translation adjustments
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017
|
|
|
921
|
|
|
|
Repayment
|
|
|
(770
|
)
|
|
|
Net decrease in fair value
|
|
|
(17
|
)
|
|
|
Foreign currency translation adjustments
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2018
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-74
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
12. Prepayments, receivables and other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
VAT receivables, net of allowance (i)
|
|
|
8,810
|
|
|
8,915
|
|
|
|
Amounts due from related companies (ii)
|
|
|
4,131
|
|
|
8,080
|
|
|
|
Accounts receivable, net of allowance
|
|
|
4,388
|
|
|
7,284
|
|
|
|
Inventories
|
|
|
957
|
|
|
4,535
|
|
|
|
Prepaid cost of revenue, sales and marketing expenses and others
|
|
|
2,431
|
|
|
4,283
|
|
|
|
Deferred direct selling costs (iii)
|
|
|
1,283
|
|
|
1,643
|
|
|
|
Advances to customers and merchants
|
|
|
788
|
|
|
1,477
|
|
|
|
Licensed copyrights
|
|
|
327
|
|
|
964
|
|
|
|
Interest receivables
|
|
|
447
|
|
|
672
|
|
|
|
Loan receivables, net
|
|
|
812
|
|
|
419
|
|
|
|
Employee loans and advances (iv)
|
|
|
176
|
|
|
183
|
|
|
|
Receivable for proceeds from disposal of investments
|
|
|
2,786
|
|
|
—
|
|
|
|
Others
|
|
|
1,072
|
|
|
4,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,408
|
|
|
43,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current:
|
|
|
|
|
|
|
|
|
|
Prepayment for acquisition of property and equipment
|
|
|
4,018
|
|
|
5,933
|
|
|
|
Prepayment for licensed copyrights and others
|
|
|
1,639
|
|
|
5,614
|
|
|
|
Deferred tax assets (Note 7)
|
|
|
1,038
|
|
|
2,182
|
|
|
|
Fair value of interest rate swap contracts
|
|
|
436
|
|
|
542
|
|
|
|
Employee loans (iv)
|
|
|
451
|
|
|
344
|
|
|
|
Deferred direct selling costs (iii)
|
|
|
114
|
|
|
188
|
|
|
|
Prepaid upfront fees related to long-term borrowings / unsecured senior notes
|
|
|
53
|
|
|
170
|
|
|
|
Others
|
|
|
954
|
|
|
1,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,703
|
|
|
16,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
VAT
receivables mainly represent VAT receivable from relevant PRC tax authorities arising from the Company's VAT refund service. The Company provides advance
settlement of relevant VAT refund amounts to its customers prior to receiving such VAT refund from tax authorities. To provide this service, the Company relies on short-term banking facilities and
takes on credit risk if the Company fails to recover the prepaid VAT amount.
-
(ii)
-
Amounts
due from related companies primarily represent balances arising from transactions with Ant Financial and its subsidiaries (Notes 4(a) and 21).
The balances are unsecured, interest free and repayable within the next twelve months.
-
(iii)
-
The
Company is obligated to pay certain costs upon the receipt of membership fees from merchants or other customers, which primarily consist of sales commissions.
The membership fees are initially deferred and recognized as revenue in the consolidated income statements in the period in which the services are rendered. As such, the related costs are also
initially deferred and recognized in the consolidated income statements in the same period as the related service fees are recognized.
F-75
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
12. Prepayments, receivables and other assets (Continued)
-
(iv)
-
Employee
loans mainly include loans extended under an interest-free loan program, with a term of five years, to eligible employees for purchase of their first
residential properties.
13. Investments in equity investees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
method
|
|
Equity
method
|
|
Total
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Balance as of April 1, 2016
|
|
|
33,264
|
|
|
58,197
|
|
|
91,461
|
|
|
|
Additions (i)
|
|
|
8,860
|
|
|
35,154
|
|
|
44,014
|
|
|
|
Share of results, other comprehensive income and other reserves (ii)
|
|
|
—
|
|
|
(2,074
|
)
|
|
(2,074
|
)
|
|
|
Disposals
|
|
|
(2,512
|
)
|
|
(324
|
)
|
|
(2,836
|
)
|
|
|
Transfers (iii)
|
|
|
(3,763
|
)
|
|
(5,891
|
)
|
|
(9,654
|
)
|
|
|
Impairment loss (iv)
|
|
|
(2,125
|
)
|
|
(245
|
)
|
|
(2,370
|
)
|
|
|
Foreign currency translation adjustments
|
|
|
1,680
|
|
|
147
|
|
|
1,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017
|
|
|
35,404
|
|
|
84,964
|
|
|
120,368
|
|
|
|
Additions (i)
|
|
|
34,121
|
|
|
26,391
|
|
|
60,512
|
|
|
|
Share of results, other comprehensive income and other reserves (ii)
|
|
|
—
|
|
|
(3,660
|
)
|
|
(3,660
|
)
|
|
|
Disposals
|
|
|
(3,051
|
)
|
|
(474
|
)
|
|
(3,525
|
)
|
|
|
Transfers (iii)
|
|
|
(1,725
|
)
|
|
(9,011
|
)
|
|
(10,736
|
)
|
|
|
Impairment loss (iv)
|
|
|
(1,753
|
)
|
|
(18,153
|
)
|
|
(19,906
|
)
|
|
|
Foreign currency translation adjustments
|
|
|
(3,054
|
)
|
|
(299
|
)
|
|
(3,353
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2018
|
|
|
59,942
|
|
|
79,758
|
|
|
139,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Details
of the significant additions of the investments in equity investees are set out in Note 4.
-
(ii)
-
Share
of results, other comprehensive income and other reserves included the share of results of the equity investees, the gain or loss arising from the deemed
disposal of the equity investees and the amortization of basis differences. The balance excluded the expenses in connection with the share-based awards relating to ordinary shares of the Company and
Ant Financial granted to employees of certain equity investees (Note 8(d)).
-
(iii)
-
During
the year ended March 31, 2017, transfers under the cost method were primarily related to the completion of the listing of YTO Express
(Note 4(ab)) and the step acquisition of Damai (Note 4(d)). Transfers under the equity method were primarily related to the step acquisition of Youku (Note 4(g)).
During
the year ended March 31, 2018, transfers under the equity method were primarily related to the consolidation of Cainiao Network (Note 4(b)) and Intime (Note 4(c))
upon the acquisition of control by the Company.
-
(iv)
-
The
Company continually reviews its investments in equity investees to determine whether a decline in fair value below the carrying value is other-than-temporary.
The primary factors the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee; other company specific information such
as recent financing rounds; the geographic region, market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its carrying value.
If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value. Impairment charges in connection with the equity method
investments of nil, RMB245 million and
F-76
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
13. Investments in equity investees (Continued)
RMB18,153 million
were recorded in share of results of equity investees in the consolidated income statements for the years ended March 31, 2016, 2017 and 2018, respectively. Impairment
charges in connection with the cost method investments of RMB902 million, RMB2,125 million and RMB1,753 million were recorded in interest and investment income, net in the
consolidated income statements for the years ended March 31, 2016, 2017 and 2018, respectively.
Out
of the impairment charges relating to the equity method investments for the year ended March 31, 2018, RMB18,116 million was related to the Company's investment in Alibaba Pictures.
The impairment amount represented the difference between the market value and the carrying value of this investment as of December 31, 2017. In June 2015, following a financing
transaction that diluted the Company's shareholding from a controlling position to minority investment, the Company deconsolidated the financial results of Alibaba Pictures and accounted for the
investment in the remaining equity interest under the equity method. A gain of RMB24,734 million arising from the revaluation of the Company's remaining equity interest in Alibaba Pictures was
recognized in interest and investment income, net in the consolidated income statement for the year ended March 31, 2016, with a corresponding increase in the carrying value of the investment.
Since July 2015, the market value of Alibaba Pictures has declined and remained below the increased carrying value of this investment. Given the market price trend and Alibaba Pictures'
strategic decision made in early 2018 to increase investments and expenses for market share growth of its online movie ticketing business, the Company determined that the decline in the market value
against the carrying value of this investment was other-than-temporary and an impairment charge was recorded for the year ended March 31, 2018. The fair value measurements with respect to the
impairments of other equity investees were individually insignificant and utilized a number of different unobservable inputs not subject to meaningful aggregation.
As
of March 31, 2018, equity method investments with an aggregate carrying amount of RMB65,639 million that are publicly traded have increased in value and the total market value of
these investments amounted to RMB118,357 million. As of March 31, 2017 and 2018, cost method investments with an aggregate carrying amount of RMB17,273 million and RMB30,318
million have appreciated in value and the Company estimated the fair value to be approximately RMB46,351 million and RMB61,936 million, respectively.
As
of the same dates, for certain other cost method investments with an aggregate carrying amount of RMB18,131 million and RMB29,624 million, the Company identified no events or changes in
circumstances that may have a significant adverse effect on the fair value of the investments and determined that it is not practicable to estimate their fair values, respectively.
For
the years ended March 31, 2017 and 2018, equity method investments held by the Company in aggregate have met the significance criteria as defined under Rule 4-08 (g) of
Regulation S-X. As such, the Company is required to present summarized financial information for all of its equity method investments as a group as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
20,808
|
|
|
125,701
|
|
|
284,706
|
|
|
|
Cost of revenue
|
|
|
(17,505
|
)
|
|
(109,790
|
)
|
|
(242,068
|
)
|
|
|
Loss from operations
|
|
|
(5,429
|
)
|
|
(9,071
|
)
|
|
(7,072
|
)
|
|
|
Net (loss) income
|
|
|
(1,504
|
)
|
|
(6,743
|
)
|
|
195
|
|
F-77
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
13. Investments in equity investees (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
137,900
|
|
|
200,742
|
|
|
|
Non-current assets
|
|
|
122,844
|
|
|
184,310
|
|
|
|
Current liabilities
|
|
|
93,354
|
|
|
162,340
|
|
|
|
Non-current liabilities
|
|
|
12,375
|
|
|
26,107
|
|
|
|
Noncontrolling interests and mezzanine equity
|
|
|
7,443
|
|
|
16,586
|
|
14. Property and equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Buildings and property improvements
|
|
|
10,529
|
|
|
45,909
|
|
|
|
Computer equipment and software
|
|
|
18,427
|
|
|
33,852
|
|
|
|
Construction in progress
|
|
|
2,627
|
|
|
5,110
|
|
|
|
Furniture, office and transportation equipment
|
|
|
884
|
|
|
2,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,467
|
|
|
86,928
|
|
|
|
Less: accumulated depreciation and amortization
|
|
|
(12,261
|
)
|
|
(20,439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
20,206
|
|
|
66,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization expenses recognized for the years ended March 31, 2016, 2017 and 2018 were RMB3,699 million, RMB5,177 million and RMB8,654 million,
respectively.
15. Intangible assets, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Trade names, trademarks and domain names
|
|
|
8,100
|
|
|
14,198
|
|
|
|
User base and customer relationships
|
|
|
4,169
|
|
|
13,510
|
|
|
|
Licensed copyrights
|
|
|
6,087
|
|
|
9,182
|
|
|
|
Non-compete agreements (i)
|
|
|
5,915
|
|
|
7,820
|
|
|
|
Developed technology and patents
|
|
|
4,793
|
|
|
5,463
|
|
|
|
Others
|
|
|
32
|
|
|
225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,096
|
|
|
50,398
|
|
|
|
Less: accumulated amortization and impairment
|
|
|
(14,988
|
)
|
|
(22,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
14,108
|
|
|
27,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
In
April 2017, the Company entered into a non-compete agreement with a former management member of Youku (Note 4(g)), with a fair value of
RMB2,528 million. As of March 31, 2018, the remaining amortization period of such non-compete agreement was two years.
F-78
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
15. Intangible assets, net (Continued)
Amortization
expenses recognized for the years ended March 31, 2016, 2017 and 2018 amounted to RMB3,278 million, RMB9,008 million and RMB13,231 million, respectively.
The
estimated aggregate amortization expenses for each of the five succeeding fiscal years and thereafter are as follows:
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
For the year ending March 31,
|
|
|
|
|
|
|
2019
|
|
|
6,764
|
|
|
|
2020
|
|
|
3,408
|
|
|
|
2021
|
|
|
1,962
|
|
|
|
2022
|
|
|
1,513
|
|
|
|
2023
|
|
|
1,391
|
|
|
|
Thereafter
|
|
|
12,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16. Goodwill
Changes
in the carrying amount of goodwill by segment for the years ended March 31, 2017 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
commerce
|
|
Cloud
computing
|
|
Digital media
and
entertainment
|
|
Innovation
initiatives and
others
|
|
Total
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Balance as of April 1, 2016
|
|
|
66,223
|
|
|
368
|
|
|
10,378
|
|
|
4,676
|
|
|
81,645
|
|
|
|
Additions (i)
|
|
|
13,298
|
|
|
—
|
|
|
30,110
|
|
|
—
|
|
|
43,408
|
|
|
|
Foreign currency translation adjustments
|
|
|
334
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017
|
|
|
79,855
|
|
|
368
|
|
|
40,521
|
|
|
4,676
|
|
|
125,420
|
|
|
|
Additions (i)
|
|
|
37,458
|
|
|
—
|
|
|
335
|
|
|
—
|
|
|
37,793
|
|
|
|
Impairment
|
|
|
—
|
|
|
—
|
|
|
(494
|
)
|
|
—
|
|
|
(494
|
)
|
|
|
Foreign currency translation adjustments
|
|
|
(515
|
)
|
|
—
|
|
|
(55
|
)
|
|
—
|
|
|
(570
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2018
|
|
|
116,798
|
|
|
368
|
|
|
40,307
|
|
|
4,676
|
|
|
162,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
During
the year ended March 31, 2017, additions under the digital media and entertainment segment were primarily related to the acquisition of Youku
(Note 4(g)).
During
the year ended March 31, 2018, additions under the core commerce segment were primarily related to the acquisition of Cainiao Network (Note 4(b)).
Gross
goodwill balances were RMB128,870 million and RMB166,093 million as of March 31, 2017 and 2018, respectively. Accumulated impairment losses were RMB3,450 million and
RMB3,944 million as of the same dates, respectively.
F-79
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
16. Goodwill (Continued)
In
the annual goodwill impairment assessment, the Company concluded that the carrying amounts of certain reporting units exceeded their respective fair values and recorded impairment losses of
RMB455 million, nil and RMB494 million during the years ended March 31, 2016, 2017 and 2018, respectively. The impairment losses were resulted from a revision of long-term
financial outlook and the change in business model of those reporting units. The impairment loss was determined by comparing the carrying amounts of goodwill associated with the reporting units with
their respective implied fair values of the goodwill. The goodwill impairment is presented as an unallocated item in the segment information (Note 25) because the CODM of the Company does not
consider this as part of the segment operating performance measure.
17. Deferred revenue and customer advances
Deferred
revenue and customer advances primarily represent service fees prepaid by merchants or customers for which the relevant services have not been provided. The respective balances are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Deferred revenue
|
|
|
9,643
|
|
|
13,350
|
|
|
|
Customer advances
|
|
|
6,050
|
|
|
9,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,693
|
|
|
23,290
|
|
|
|
Less: current portion
|
|
|
(15,052
|
)
|
|
(22,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current portion
|
|
|
641
|
|
|
993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
service fees received in advance are initially recorded as customer advances. These amounts are transferred to deferred revenue upon commencement of the provision of services by the Company and
are recognized in the consolidated income statements in the period in which the services are provided. In general, service fees received in advance are non-refundable after such amounts are
transferred to deferred revenue.
F-80
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
18. Accrued expenses, accounts payable and other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Payables and accruals for cost of revenue and sales and marketing expenses
|
|
|
20,165
|
|
|
40,363
|
|
|
|
Accrued bonus and staff costs, including sales commission
|
|
|
8,249
|
|
|
11,212
|
|
|
|
Payable to merchants and third party marketing affiliates
|
|
|
3,177
|
|
|
6,584
|
|
|
|
Other deposits and advances received
|
|
|
2,314
|
|
|
6,271
|
|
|
|
Payables and accruals for purchases of property and equipment
|
|
|
2,554
|
|
|
6,095
|
|
|
|
Other taxes payable (i)
|
|
|
1,549
|
|
|
2,382
|
|
|
|
Amounts due to related companies (ii)
|
|
|
2,167
|
|
|
1,996
|
|
|
|
Accrued donations
|
|
|
880
|
|
|
1,215
|
|
|
|
Accrued professional services expenses
|
|
|
709
|
|
|
889
|
|
|
|
Accrual for interest expense
|
|
|
445
|
|
|
885
|
|
|
|
Contingent and deferred consideration in relation to investments and acquisitions
|
|
|
2,311
|
|
|
807
|
|
|
|
Others
|
|
|
2,459
|
|
|
2,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,979
|
|
|
81,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current:
|
|
|
|
|
|
|
|
|
|
Contingent and deferred consideration in relation to investments and acquisitions
|
|
|
630
|
|
|
408
|
|
|
|
Others
|
|
|
660
|
|
|
1,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,290
|
|
|
2,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Other
taxes payable represent business tax, VAT and related surcharges and PRC individual income tax of employees withheld by the Company.
-
(ii)
-
Amounts
due to related companies primarily represent balances arising from the transactions with Ant Financial and its subsidiaries (Note 21). The balances
are unsecured, interest free and repayable within the next twelve months.
19. Bank borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
US$4.0 billion syndicated loan denominated in US$ (i)
|
|
|
27,346
|
|
|
24,957
|
|
|
|
Long-term other borrowings (ii)
|
|
|
3,613
|
|
|
9,196
|
|
|
|
Short-term other borrowings (iii)
|
|
|
5,948
|
|
|
6,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,907
|
|
|
40,181
|
|
|
|
Less: current portion
|
|
|
(5,948
|
)
|
|
(6,028
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current portion
|
|
|
30,959
|
|
|
34,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
As
of March 31, 2017 and 2018, the Company had a five-year US$4.0 billion syndicated loan, which was entered into with a group of eight lead arrangers.
The loan has a five-year bullet maturity and is priced at
F-81
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
19. Bank borrowings (Continued)
Certain
other bank borrowings are collateralized by a pledge of certain bank deposits, buildings and property improvements, construction in progress and land use rights in the PRC with carrying values
of RMB6,715 million
and RMB20,927 million, as of March 31, 2017 and 2018, respectively. As of March 31, 2018, the Company is in compliance with all covenants in relation to bank borrowings.
In
April 2017, the Company obtained a new revolving credit facility provided by certain financial institutions for an amount of US$5.15 billion which has not yet been drawn down. The
interest rate on any outstanding utilized amount under this new credit facility is calculated based on LIBOR plus 95 basis points. This facility is reserved for general corporate and working
capital purposes (including acquisitions).
As
of March 31, 2018, the borrowings will be due according to the following schedule:
|
|
|
|
|
|
|
|
|
|
|
Principal amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Within 1 year
|
|
|
6,031
|
|
|
|
Between 1 to 2 years
|
|
|
3,101
|
|
|
|
Between 2 to 3 years
|
|
|
747
|
|
|
|
Between 3 to 4 years
|
|
|
25,400
|
|
|
|
Between 4 to 5 years
|
|
|
430
|
|
|
|
Beyond 5 years
|
|
|
4,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20. Unsecured senior notes
In
November 2014, the Company issued unsecured senior notes including floating rate and fixed rate notes with varying maturities for an aggregate principal amount of US$8.0 billion
(the "2014 Senior Notes"), of which US$1.3 billion was repaid in November 2017. The 2014 Senior Notes are senior unsecured obligations which are listed on the HKSE, and interest
is payable in arrears, quarterly for the floating rate notes and semiannually for the fixed-rate notes.
In
December 2017, the Company issued another series of unsecured fixed rate senior notes with varying maturities for an aggregate principal amount of US$7.0 billion (the "2017
Senior Notes"). The 2017 Senior Notes are senior unsecured obligations which are listed on the Singapore Stock Exchange, and interest is payable in arrears semiannually.
F-82
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
20. Unsecured senior notes (Continued)
The
following table provides a summary of the Company's unsecured senior notes as of March 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
Effective
interest rate
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
|
|
US$2,250 million 2.500% notes due 2019
|
|
|
14,083
|
|
|
2.67
|
%
|
|
|
US$1,500 million 3.125% notes due 2021
|
|
|
9,365
|
|
|
3.26
|
%
|
|
|
US$700 million 2.800% notes due 2023
|
|
|
4,372
|
|
|
2.90
|
%
|
|
|
US$2,250 million 3.600% notes due 2024
|
|
|
14,050
|
|
|
3.68
|
%
|
|
|
US$2,550 million 3.400% notes due 2027
|
|
|
15,848
|
|
|
3.52
|
%
|
|
|
US$700 million 4.500% notes due 2034
|
|
|
4,339
|
|
|
4.60
|
%
|
|
|
US$1,000 million 4.000% notes due 2037
|
|
|
6,219
|
|
|
4.06
|
%
|
|
|
US$1,750 million 4.200% notes due 2047
|
|
|
10,880
|
|
|
4.25
|
%
|
|
|
US$1,000 million 4.400% notes due 2057
|
|
|
6,216
|
|
|
4.44
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
|
85,372
|
|
|
|
|
|
|
Unamortized discount and debt issuance costs
|
|
|
624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal amounts of unsecured senior notes
|
|
|
85,996
|
|
|
|
|
|
|
Less: current portion of principal amounts of unsecured senior notes
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current portion of principal amounts of unsecured senior notes
|
|
|
85,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
2014 Senior Notes and the 2017 Senior Notes were issued at a discount with a total amount of US$47 million (RMB297 million). The debt issuance costs of US$82 million
(RMB517 million) were presented as a direct deduction from the principal amount of the unsecured senior notes in the consolidated balance sheets. The effective interest
rates for the unsecured senior notes include the interest charged on the notes as well as amortization of the debt discounts and debt issuance costs.
The
2014 Senior Notes and the 2017 Senior Notes contain covenants including, among others, limitation on liens, consolidation, merger and sale of the Company's assets. As of March 31, 2018, the
Company is in compliance with all such covenants. In addition, the 2014 Senior Notes and the 2017 Senior Notes rank senior in right of payment to all of the Company's existing and future indebtedness
expressly subordinated in right of payment to the notes and rank at least equally in right of payment with all of the Company's existing and future unsecured unsubordinated indebtedness (subject to
any priority rights pursuant to applicable law).
The
proceeds from issuance of the 2014 Senior Notes were used in full to refinance a previous syndicated loan in the same amount. The proceeds from the issuance of the 2017 Senior Notes were used for
general corporate purposes.
F-83
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
20. Unsecured senior notes (Continued)
As
of March 31, 2018, the future principal payments for the Company's unsecured senior notes will be due according to the following schedule:
|
|
|
|
|
|
|
|
|
|
|
Principal amounts
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Within 1 year
|
|
|
—
|
|
|
|
Between 1 to 2 years
|
|
|
14,123
|
|
|
|
Between 2 to 3 years
|
|
|
—
|
|
|
|
Between 3 to 4 years
|
|
|
9,416
|
|
|
|
Between 4 to 5 years
|
|
|
—
|
|
|
|
Thereafter
|
|
|
62,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of March 31, 2018, the fair value of the Company's unsecured senior notes, based on Level 2 inputs, was US$13,317 million (RMB83,590 million).
21. Related party transactions
During
the years ended March 31, 2016, 2017 and 2018, other than disclosed elsewhere, the Company had the following material related party transactions:
Transactions with Ant Financial and its affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Amount earned by the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit Share Payments (i)
|
|
|
1,122
|
|
|
2,086
|
|
|
3,444
|
|
|
|
SME Annual Fee (ii)
|
|
|
708
|
|
|
847
|
|
|
956
|
|
|
|
Reimbursement on options and RSUs (iii)
|
|
|
113
|
|
|
54
|
|
|
5
|
|
|
|
Commission on transactions (iv)
|
|
|
246
|
|
|
409
|
|
|
497
|
|
|
|
Cloud computing revenue (iv)
|
|
|
104
|
|
|
264
|
|
|
482
|
|
|
|
Other services (iv)
|
|
|
736
|
|
|
621
|
|
|
1,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,029
|
|
|
4,281
|
|
|
6,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount incurred by the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment processing fee (v)
|
|
|
4,898
|
|
|
5,487
|
|
|
6,295
|
|
|
|
Other fees (iv)
|
|
|
299
|
|
|
952
|
|
|
1,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,197
|
|
|
6,439
|
|
|
8,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-84
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
21. Related party transactions (Continued)
by
Ant Financial to the Company were RMB274 million, RMB245 million and RMB37 million for the years ended March 31, 2016, 2017 and 2018, respectively.
-
(ii)
-
The
Company entered into software system use and service agreements with Ant Financial in 2014. In calendar years 2015 to 2017, the Company received the SME Annual
Fee equal to 2.5% of the average daily balance of the SME loans made by Ant Financial and its affiliates. In calendar years 2018 to 2021, the Company received or will receive the SME Annual Fee equal
to the amount paid in calendar year 2017 (Note 4(a)).
-
(iii)
-
The
Company entered into agreements with Ant Financial in 2012 and 2013 under which the Company will receive a reimbursement for options and RSUs relating to the
ordinary shares granted to the employees of Ant Financial and its subsidiaries during the period from December 14, 2011 to March 31, 2014. Pursuant to the agreements, the Company will,
upon vesting of such options and RSUs, receive a cash reimbursement equal to their respective grant date fair value. As this arrangement relates to share-based awards previously granted by the
Company, the reimbursement is recognized as a reduction of share-based compensation expense. The Company also entered into a similar agreement relating to share-based awards granted to the employees
of Koubei and its subsidiaries, and the amounts are not material.
-
(iv)
-
The
Company also has other commercial arrangements, treasury management arrangements and cost sharing arrangements with Ant Financial, its subsidiaries and
affiliates (including Koubei) on various sales and marketing, cloud computing, treasury management and other administrative services.
-
(v)
-
The
Company and Alipay, among others, entered into a commercial agreement in 2011 whereby the Company receives payment processing services in exchange for a payment
processing fee, which was recognized in cost of revenue.
As
of March 31, 2017 and 2018, the Company had certain amounts of cash and short-term investments held in accounts managed by Alipay.
Transactions with Cainiao Network
The
Company entered into an agreement with Cainiao Network during the year ended March 31, 2016 whereby the Company disposed of a wholly-owned subsidiary to Cainiao Network for cash
consideration of US$33 million (RMB204 million). The major asset of the disposed subsidiary consisted of a land use right in the PRC. The gain on disposal for the year ended
March 31, 2016 amounted to RMB3 million.
The
Company has commercial arrangements with Cainiao Network to receive certain logistics services. Expenses incurred in connection with the logistics services provided by Cainiao Network of
RMB2,370 million, RMB4,444 million and RMB3,437 million were recorded in the consolidated income statements for the years ended March 31, 2016, 2017 and for the period from
April 1, 2017 to the date of consolidation of Cainiao Network in October 2017, respectively.
The
Company also has cost sharing and other services arrangements with Cainiao Network and its subsidiaries primarily related to various administrative and support services. In connection with these
services provided by the Company, RMB86 million, RMB152 million and RMB123 million were recorded in the consolidated income statements for the years ended March 31, 2016,
2017 and for the period from April 1, 2017 to the date of consolidation of Cainiao Network in October 2017, respectively.
F-85
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
21. Related party transactions (Continued)
Transactions with Weibo Corporation ("Weibo")
The
strategic collaboration agreement and the marketing cooperation agreement that were entered into between the Company and Weibo, an equity investee of the Company, were expired in
January 2016. Expenses incurred in connection with the marketing services provided by Weibo pursuant to these agreements and other commercial
arrangements of RMB715 million, RMB340 million and RMB615 million were recorded in the cost of revenue and sales and marketing expenses in the consolidated income statements for
the years ended March 31, 2016, 2017 and 2018, respectively.
The
Company also has other commercial arrangements with Weibo primarily related to cloud computing services. In connection with such services provided by the Company, RMB38 million,
RMB105 million and RMB223 million were recorded in revenue in the consolidated income statements for the years ended March 31, 2016, 2017 and 2018, respectively.
Transactions with other equity investees
Cainiao
Network has commercial arrangements with certain equity investees of the Company to receive logistics services. Expenses incurred in connection with such services of RMB5,608 million
were recorded in the consolidated income statement for the period from the date of consolidation of Cainiao Network in October 2017 to March 31, 2018.
Repurchase of ordinary shares from Softbank
In
June 2016, the Company entered into a share purchase agreement with SoftBank, pursuant to which the Company repurchased 27,027,027 ordinary shares from SoftBank at US$74.00 per share
for an aggregate consideration of approximately US$2.0 billion. Such ordinary shares were cancelled upon the completion of the transaction.
Other transactions
The
Company's ecosystem offers different platforms on which different enterprises operate and the Company believes that all transactions on the Company's platforms are conducted on terms obtained in
arms-length transactions with similar unrelated parties.
Other
than the transactions disclosed above or elsewhere in the consolidated financial statements, the Company has commercial arrangements with SoftBank, its equity investees and other related parties
to provide and receive certain marketing, logistics, traffic acquisition, cloud computing and other services and products. The amounts relating to these services provided and received represent less
than 1% of the Company's revenue and total costs and expenses, respectively, for the years ended March 31, 2016, 2017 and 2018.
In
addition, the Company has made certain acquisitions and equity investments together with related parties from time to time during the years ended March 31, 2016, 2017 and 2018. The
agreements for acquisitions and equity investments were entered into by the parties involved and conducted on fair value basis. The significant acquisitions and equity investments together with
related parties are included in Note 4.
F-86
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
22. Restricted net assets
PRC
laws and regulations permit payments of dividends by the Company's subsidiaries incorporated in the PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting
standards and regulations. In addition, the Company's subsidiaries incorporated in the PRC are required to annually appropriate 10% of their net income to the statutory reserve prior to payment of any
dividends, unless such reserve have reached 50% of their respective registered capital. Furthermore, registered share capital and capital reserve accounts are also restricted from distribution. As a
result of the restrictions described above and elsewhere under PRC laws and regulations, the Company's subsidiaries incorporated in the PRC are restricted in their ability to transfer a portion of
their net assets to the Company in the form of dividends. Such restriction amounted to RMB77,891 million as of March 31, 2018. Except for the above or disclosed elsewhere, there is no
other restriction on the use of proceeds generated by the Company's subsidiaries to satisfy any obligations of the Company.
23. Commitments
(a) Capital commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Contracted but not provided for:
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
1,771
|
|
|
3,181
|
|
|
|
Construction of corporate campuses
|
|
|
2,838
|
|
|
2,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,609
|
|
|
5,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Operating lease commitments for office facility and transportation equipment
The
Company has leased office premises and transportation equipment under non-cancellable operating lease agreements. These leases have different terms and renewal rights. The future aggregate minimum
lease payments under non-cancellable operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
No later than 1 year
|
|
|
862
|
|
|
2,760
|
|
|
|
Later than 1 year and no later than 5 years
|
|
|
1,593
|
|
|
7,652
|
|
|
|
More than 5 years
|
|
|
834
|
|
|
11,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,289
|
|
|
22,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the years ended March 31, 2016, 2017 and 2018, the Company incurred rental expenses under operating leases of RMB451 million, RMB747 million and RMB2,279 million,
respectively.
F-87
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
23. Commitments (Continued)
(c) Commitments for co-location and bandwidth fees, licensed copyrights and marketing
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
No later than 1 year
|
|
|
8,295
|
|
|
19,737
|
|
|
|
Later than 1 year and no later than 5 years
|
|
|
10,593
|
|
|
12,097
|
|
|
|
More than 5 years
|
|
|
3,678
|
|
|
3,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
22,566
|
|
|
35,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) Investment commitments
The
Company was obligated to pay up to RMB17,495 million and RMB15,174 million for business combinations and the acquisition of investment securities and equity investees under various
arrangements as of March 31, 2017 and 2018, respectively. The commitment balance as of March 31, 2017 primarily included the consideration for the privatization of Intime
(Note 4(c)) and the investments in Ele.me (Note 4(x)) and Sanjiang (Note 4(aa)), in which the commitments relating to Intime and Ele.me were settled during the year
ended March 31, 2018. The commitment balance as of March 31, 2018 primarily includes the consideration for the investment in Shiji Retail (Note 4(al)) and the acquisition
of Kaiyuan (Note 4(am)).
(e) Sponsorship commitment
In
January 2017, the Company entered into a framework agreement with the International Olympic Committee (the "IOC") and the United States Olympic Committee for a long-term
partnership arrangement through 2028. Joining in The Olympic Partner worldwide sponsorship program, the Company has become the official "E-Commerce Services" Partner and "Cloud Services" Partner of
the IOC. In addition, the Company has been
granted certain marketing rights, benefits and opportunities relating to future Olympic Games and related initiatives, events and activities. The Company will provide at least US$815 million
worth of cash, cloud infrastructure services and cloud computing services, as well as marketing and media support in connection with various Olympic initiatives, events and activities, including the
Olympic Games and the Winter Olympic Games through 2028. As of March 31, 2017 and 2018, the aggregate amount of cash to be paid and value of services to be provided in the future approximates
US$800 million and US$770 million, respectively.
24. Risks and contingencies
-
(a)
-
The
Company is incorporated in the Cayman Islands and considered as a foreign entity under PRC laws. Due to legal restrictions on foreign ownership and investment
in, among other areas, value-added telecommunications services, which include the operations of Internet content providers, the Company conducts its Internet businesses and other businesses through
various contractual arrangements with VIEs that are held by PRC citizens or by PRC entities owned and/or controlled by PRC citizens. The VIEs hold the licenses and approvals that are essential for
their business operations in the PRC and the Company has entered into various agreements with the VIEs and their equity holders such that the Company has the right to benefit from their licenses and
approvals and generally has control of the VIEs. In the Company's opinion, the current ownership structure and the contractual arrangements with the VIEs and their equity holders as well as the
operations of the VIEs are in substantial compliance with all existing PRC laws, rules and regulations. However, there may be changes and other developments in PRC laws,
F-88
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
24. Risks and contingencies (Continued)
(e) Sponsorship commitment (Continued)
rules
and regulations. Accordingly, the Company gives no assurance that PRC government authorities will not take a view in the future that is contrary to the opinion of the Company. If the current
ownership structure of the Company and its contractual arrangements with the VIEs and their equity holders were found to be in violation of any existing or future PRC laws or regulations, the
Company's ability to conduct its business could be impacted and the Company may be required to restructure its ownership structure and operations in the PRC to comply with the changes in the PRC laws
which may result in deconsolidation of the VIEs.
-
(b)
-
The
PRC market in which the Company operates poses certain macro-economic and regulatory risks and uncertainties. These uncertainties extend to the ability of the
Company to operate or invest in online and mobile commerce or other Internet related businesses, representing the principal services provided by the Company, in the PRC. The information and technology
industries are highly regulated. Restrictions are currently in place or are unclear regarding what specific segments of these industries foreign owned enterprises, like the Company, may operate. If
new or more extensive restrictions were imposed on the segments in which the Company is permitted to operate, the Company could be required to sell or cease to operate or invest in some or all of its
current businesses in the PRC.
-
(c)
-
The
Company's sales, purchase and expense transactions are generally denominated in RMB and a significant portion of the Company's assets and liabilities are
denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at
exchange rates set by the People's Bank of China ("PBOC"). Remittances in currencies other than RMB by the Company in the PRC must be processed through the PBOC or other PRC foreign exchange
regulatory bodies and require certain supporting documentation in order to effect the remittance. If such foreign exchange control system prevents the Company from obtaining sufficient foreign
currencies to satisfy its currency demands, the Company may not be able to pay dividends in foreign currencies and the Company's ability to fund its business activities that are conducted in foreign
currencies could be adversely affected.
-
(d)
-
Financial
instruments that potentially subject the Company to significant concentration of credit risk consist principally of cash and cash equivalents, short-term
investments, restricted cash and investment securities. As of March 31, 2016, 2017 and 2018, substantially all of the Company's cash and cash equivalents, short-term investments, restricted
cash and investment securities were held by major financial institutions located worldwide, including Hong Kong and the PRC. If the banking system or the financial markets deteriorate or become
volatile, the financial institutions and other issuers of financial instruments held by the Company could become insolvent and the markets for these instruments could become illiquid, in which case
the Company could lose some or all of the value of its investments.
-
(e)
-
During
the years ended March 31, 2016, 2017 and 2018, the Company offered a trade assurance program on the international wholesale marketplaces at no charge
to the wholesale buyers and sellers. If the wholesale sellers who participate in this program do not deliver the products in their stated specifications to the wholesale buyers on schedule, the
Company may compensate the wholesale buyers for their losses on behalf of the wholesale sellers up to a pre-determined amount following a review of each particular case. In turn, the Company will seek
a full reimbursement from the wholesale sellers for the prepaid reimbursement amount, yet the Company is exposed to a risk over the collectability of such reimbursement from the wholesale sellers.
During the years ended March 31, 2016, 2017 and 2018, the Company did not incur any material losses with respect to the compensation provided under this program. Given that the maximum
compensation for each wholesale seller is pre-determined based on
F-89
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
24. Risks and contingencies (Continued)
(e) Sponsorship commitment (Continued)
25. Segment information
The
Company presents segment information after elimination of inter-company transactions. In general, revenue, cost of revenue and operating expenses are directly attributable, or are allocated, to
each segment. The Company allocates costs and expenses that are not directly attributable to a specific segment, such as those that support infrastructure across different segments, to different
segments mainly on the basis of usage, revenue or headcount, depending on the nature of the relevant costs and expenses. The Company does not allocate assets to its segments as the CODM does not
evaluate the performance of segments using asset information.
F-90
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
25. Segment information (Continued)
(e) Sponsorship commitment (Continued)
The
following tables present the summary of each segment's revenue, income from operations and adjusted earnings before interest, taxes and amortization ("Adjusted EBITA") which is considered as a
segment operating performance measure, for the years ended March 31, 2016, 2017 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2016
|
|
|
|
|
|
Core
commerce
|
|
Cloud
computing
|
|
Digital media
and
entertainment
|
|
Innovation
initiatives
and others
|
|
Total
segments
|
|
Unallocated (i)
|
|
Consolidated
|
|
|
|
|
|
(in millions of RMB, except percentages)
|
|
|
|
Revenue
|
|
|
92,335
|
|
|
3,019
|
|
|
3,972
|
|
|
1,817
|
|
|
101,143
|
|
|
—
|
|
|
101,143
|
|
|
|
Income (Loss) from operations
|
|
|
51,153
|
|
|
(2,605
|
)
|
|
(4,112
|
)
|
|
(7,216
|
)
|
|
37,220
|
|
|
(8,118
|
)
|
|
29,102
|
|
|
|
Add: share-based compensation expense
|
|
|
6,224
|
|
|
1,349
|
|
|
981
|
|
|
3,092
|
|
|
11,646
|
|
|
4,436
|
|
|
16,082
|
|
|
|
Add: amortization of intangible assets
|
|
|
659
|
|
|
4
|
|
|
1,321
|
|
|
657
|
|
|
2,641
|
|
|
290
|
|
|
2,931
|
|
|
|
Add: impairment of goodwill
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
455
|
|
|
455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITA (ii)
|
|
|
58,036
|
|
|
(1,252
|
)
|
|
(1,810
|
)
|
|
(3,467
|
)
|
|
51,507
|
|
|
(2,937
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITA margin (iii)
|
|
|
63
|
%
|
|
(41
|
)%
|
|
(46
|
)%
|
|
(191
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2017
|
|
|
|
|
|
Core
commerce
|
|
Cloud
computing
|
|
Digital media
and
entertainment
|
|
Innovation
initiatives
and others
|
|
Total
segments
|
|
Unallocated (i)
|
|
Consolidated
|
|
|
|
|
|
(in millions of RMB, except percentages)
|
|
|
|
Revenue
|
|
|
133,880
|
|
|
6,663
|
|
|
14,733
|
|
|
2,997
|
|
|
158,273
|
|
|
—
|
|
|
158,273
|
|
|
|
Income (Loss) from operations
|
|
|
74,180
|
|
|
(1,681
|
)
|
|
(9,882
|
)
|
|
(6,798
|
)
|
|
55,819
|
|
|
(7,764
|
)
|
|
48,055
|
|
|
|
Add: share-based compensation expense
|
|
|
5,994
|
|
|
1,201
|
|
|
1,454
|
|
|
3,017
|
|
|
11,666
|
|
|
4,329
|
|
|
15,995
|
|
|
|
Add: amortization of intangible assets
|
|
|
2,258
|
|
|
4
|
|
|
1,886
|
|
|
656
|
|
|
4,804
|
|
|
318
|
|
|
5,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITA (ii)
|
|
|
82,432
|
|
|
(476
|
)
|
|
(6,542
|
)
|
|
(3,125
|
)
|
|
72,289
|
|
|
(3,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITA margin (iii)
|
|
|
62
|
%
|
|
(7
|
)%
|
|
(44
|
)%
|
|
(104
|
)%
|
|
|
|
|
|
|
|
|
|
F-91
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
25. Segment information (Continued)
(e) Sponsorship commitment (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2018
|
|
|
|
|
|
Core
commerce
|
|
Cloud
computing
|
|
Digital media
and
entertainment
|
|
Innovation
initiatives
and others
|
|
Total
segments
|
|
Unallocated (i)
|
|
Consolidated
|
|
|
|
|
|
(in millions of RMB, except percentages)
|
|
|
|
Revenue
|
|
|
214,020
|
|
|
13,390
|
|
|
19,564
|
|
|
3,292
|
|
|
250,266
|
|
|
—
|
|
|
250,266
|
|
|
|
Income (Loss) from operations
|
|
|
102,743
|
|
|
(3,085
|
)
|
|
(14,140
|
)
|
|
(6,901
|
)
|
|
78,617
|
|
|
(9,303
|
)
|
|
69,314
|
|
|
|
Add: share-based compensation expense
|
|
|
8,466
|
|
|
2,274
|
|
|
2,142
|
|
|
3,707
|
|
|
16,589
|
|
|
3,486
|
|
|
20,075
|
|
|
|
Add: amortization of intangible assets
|
|
|
2,891
|
|
|
12
|
|
|
3,693
|
|
|
198
|
|
|
6,794
|
|
|
326
|
|
|
7,120
|
|
|
|
Add: impairment of goodwill
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
494
|
|
|
494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITA (ii)
|
|
|
114,100
|
|
|
(799
|
)
|
|
(8,305
|
)
|
|
(2,996
|
)
|
|
102,000
|
|
|
(4,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITA margin (iii)
|
|
|
53
|
%
|
|
(6
|
)%
|
|
(42
|
)%
|
|
(91
|
)%
|
|
|
|
|
|
|
|
|
|
The
following table presents the reconciliation from the Adjusted EBITA to the consolidated net income for the years ended March 31, 2016, 2017 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Total Segments Adjusted EBITA
|
|
|
51,507
|
|
|
72,289
|
|
|
102,000
|
|
|
|
Unallocated (i)
|
|
|
(2,937
|
)
|
|
(3,117
|
)
|
|
(4,997
|
)
|
|
|
Share-based compensation expense
|
|
|
(16,082
|
)
|
|
(15,995
|
)
|
|
(20,075
|
)
|
|
|
Amortization of intangible assets
|
|
|
(2,931
|
)
|
|
(5,122
|
)
|
|
(7,120
|
)
|
|
|
Impairment of goodwill
|
|
|
(455
|
)
|
|
—
|
|
|
(494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated income from operations
|
|
|
29,102
|
|
|
48,055
|
|
|
69,314
|
|
|
|
Interest and investment income, net
|
|
|
52,254
|
|
|
8,559
|
|
|
30,495
|
|
|
|
Interest expenses
|
|
|
(1,946
|
)
|
|
(2,671
|
)
|
|
(3,566
|
)
|
|
|
Other income, net
|
|
|
2,058
|
|
|
6,086
|
|
|
4,160
|
|
|
|
Income tax expenses
|
|
|
(8,449
|
)
|
|
(13,776
|
)
|
|
(18,199
|
)
|
|
|
Share of results of equity investees
|
|
|
(1,730
|
)
|
|
(5,027
|
)
|
|
(20,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
|
71,289
|
|
|
41,226
|
|
|
61,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-92
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2016, 2017 AND 2018
25. Segment information (Continued)
(e) Sponsorship commitment (Continued)
The
following table presents the total depreciation and amortization expenses of property and equipment and land use rights by segment for the years ended March 31, 2016, 2017 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
|
|
|
|
|
|
2016
|
|
2017
|
|
2018
|
|
|
|
|
|
(in millions of RMB)
|
|
|
|
Core commerce
|
|
|
1,696
|
|
|
2,124
|
|
|
3,784
|
|
|
|
Cloud computing
|
|
|
1,116
|
|
|
1,438
|
|
|
3,047
|
|
|
|
Digital media and entertainment
|
|
|
316
|
|
|
752
|
|
|
986
|
|
|
|
Innovation initiatives and others
|
|
|
333
|
|
|
407
|
|
|
437
|
|
|
|
Unallocated (i)
|
|
|
309
|
|
|
563
|
|
|
535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization expenses of property and equipment and land use rights
|
|
|
3,770
|
|
|
5,284
|
|
|
8,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(i)
-
Unallocated
expenses are primarily related to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.
-
(ii)
-
Adjusted
EBITA represents net income before (i) interest and investment income, net, other income, net, interest expense, income tax expenses and share of
results of equity investees, and (ii) certain non-cash expenses, consisting of share-based compensation expense, amortization of intangible assets and impairment of goodwill, which are not
reflective of the Company's core operating performance.
-
(iii)
-
Adjusted
EBITA margin represents Adjusted EBITA divided by revenue.
Details
of the Company's revenue by segment are set out in Note 5. As substantially all of the Company's long-lived assets are located in the PRC and substantially all of the Company's revenue
is derived from within the PRC, no geographical information is presented.
F-93
