Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 20-F/A

(Amendment No. 1)

 


 

(Mark One)

 

o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

OR

 

 

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2017

 

 

OR

 

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                       to                        

 

 

OR

 

 

o

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .

 

Commission file number: 001-33853

 

CTRIP.COM INTERNATIONAL, LTD.

(Exact Name of Registrant as Specified in Its Charter)

 

N/A

(Translation of Registrant’s Name Into English)

 

Cayman Islands

(Jurisdiction of Incorporation or Organization)

 

968 Jin Zhong Road

Shanghai 200335

People’s Republic of China

(Address of Principal Executive Offices)

 

Jane Jie Sun, Chief Executive Officer

Telephone: +86 (21) 3406-4880

Facsimile: +86 (21) 5251-0000

968 Jin Zhong Road

Shanghai 200335

People’s Republic of China

(Name, Telephone, Email and/or Facsimile Number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of Each Exchange on Which Registered

American depositary shares,
each representing 0.125 ordinary share, par value US$0.01 per share

 

Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Ordinary shares, par value US$0.01 per share*

 

 

 


*                 Not for trading, but only in connection with the listing of American depositary shares on the Nasdaq Global Select Market.

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

 

None

(Title of Class)

 



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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

 

None

(Title of Class)

 

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 67,600,654 ordinary shares, par value $0.01 per share, as of December 31, 2017.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  x No  o

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes  o No  x

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  x No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer x

 

Accelerated Filer                       o

Non-Accelerated Filer   o

 

Emerging Growth Company     o

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

o

 


         The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP x

 

International Financial Reporting Standards as issued
by the International Accounting Standards Board
o

 

Other o

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  o  Item 18 o

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes  No x

 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

Yes  o  No o

 



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EXPLANATORY NOTE

 

This Amendment No. 1 on Form 20-F/A (the “Amendment”) is being filed by Ctrip.com International, Ltd. (the “Company,” “we,” “our,” or “us”) to amend the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2017, originally filed with the U.S. Securities Exchange Commission on April 23, 2018 (the “Original Filing”). This Amendment is being filed solely for the purpose of complying with Regulation S-X, Rule 3-09. Rule 3-09 requires, among other things, that separate financial statements for unconsolidated subsidiaries and investees accounted for by the equity method to be included in the Form 20-F when such entities are individually significant.

 

We have determined that our equity method investment in Tongcheng-Elong Holdings Limited (formerly known as “China E-dragon Holdings Limited,” hereinafter referred to as “Tongcheng-Elong”), which is not consolidated in our financial statements, was significant under the income test of Rule 1-02(w) of Regulation S-X in relation to our financial results for the year ended December 31, 2016.  This Amendment is therefore filed solely to supplement the Original Filing with the inclusion of the financial statements and related notes of Tongcheng-Elong as of and for the fiscal years ended December 31, 2015, 2016, and 2017 (the “Tongcheng-Elong Financial Statements”).

 

This Form 20-F/A consists solely of the cover page, this explanatory note, the Tongcheng-Elong Financial Statements, updated certifications of our chief executive officer and chief financial officer, consent of the independent auditor of Tongcheng-Elong. This Amendment does not affect any other parts of, or exhibits to, the Original Filing, nor does it reflect events occurring after the date of the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and with our filings with the U.S. Securities Exchange Commission subsequent to the Original Filing.

 



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TABLE OF CONTENTS

 

 

 

Page

PART III

 

 

ITEM 18.

FINANCIAL STATEMENTS

1

ITEM 19.

EXHIBITS

84

 

i



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PART III

 

Item 18. Financial Statements

 

The following financial statements are included in this Form 20-F/A:

 

Consolidated financial statements of Tongcheng-Elong Holdings Limited as of and for the fiscal year ended December 31, 2017

 

1



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TONGCHENG-ELONG HOLDINGS LIMITED

(FORMERLY KNOWN AS “CHINA E-DRAGON HOLDINGS LIMITED”)

(Incorporated in Cayman Islands with limited liability)

 

ACCOUNTANT’S REPORT

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

 

2



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Report of Independent Auditor

 

To the Board of Directors of Tongcheng-Elong Holdings Limited

 

We have audited the accompanying consolidated financial statements of Tongcheng-Elong Holdings Limited and its subsidiaries, which comprise the consolidated statement of financial position as of December 31, 2016, and the related consolidated statements of comprehensive income, of changes in equity,  and of cash flow for the year then ended.

 

Management’s Responsibility for the Consolidated Financial Statements

 

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors’ Responsibility

 

Our responsibility is to express an opinion on the consolidated financial statements based on our audits.  We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.  The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error.  In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.  Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

3



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Opinion

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tongcheng-Elong Holdings Limited and its subsidiaries as of December 31, 2016, and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

Other Matter

 

The accompanying consolidated statement of financial position of Tongcheng-Elong Holdings Limited as of December 31, 2015 and 2017, and the related consolidated statements of comprehensive income, of changes in equity and of cash flow for the years then ended are presented for purposes of complying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does not require the 2015 and 2017 financial statements to be audited and they are therefore not covered by this report.

 

 

/s/PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China

June 29, 2018

 

4



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Tongcheng-Elong Holdings Limited

Consolidated Statements of Comprehensive (Loss)/Income

 

 

 

 

 

Year ended December 31,

 

 

 

 

 

2015

 

 

 

2017

 

 

 

Note

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

Revenue

 

5

 

1,026,124

 

2,204,565

 

2,518,591

 

Cost of revenue

 

6

 

(639,723

)

(1,032,913

)

(811,781

)

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

386,401

 

1,171,652

 

1,706,810

 

 

 

 

 

 

 

 

 

 

 

Service development expenses

 

6

 

(399,073

)

(517,648

)

(522,018

)

Selling and marketing expenses

 

6

 

(775,464

)

(1,882,779

)

(1,094,977

)

Administrative expenses

 

6

 

(272,584

)

(898,337

)

(97,379

)

Fair value changes on investments measured at fair value through profit or loss

 

17

 

17,646

 

(4,031

)

863

 

Other income

 

9

 

49,006

 

10,547

 

12,805

 

Other gains/(losses), net

 

10

 

51,107

 

4,689

 

22,610

 

 

 

 

 

 

 

 

 

 

 

Operating (loss)/profit

 

 

 

(942,961

)

(2,115,907

)

28,714

 

 

 

 

 

 

 

 

 

 

 

Finance income

 

11

 

9,156

 

8,402

 

10,145

 

Finance costs

 

11

 

(5,831

)

(4,114

)

(163

)

Fair value change on redeemable convertible preferred shares measured at fair value through profit or loss

 

24

 

 

(36,781

)

97,576

 

Share of results of associates

 

15

 

(18,177

)

(11,218

)

(2,251

)

 

 

 

 

 

 

 

 

 

 

(Loss)/profit before income tax

 

 

 

(957,813

)

(2,159,618

)

134,021

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense)/credit

 

12

 

(5,206

)

(978

)

60,356

 

 

 

 

 

 

 

 

 

 

 

(Loss)/profit for the year

 

 

 

(963,019

)

(2,160,596

)

194,377

 

 

 

 

 

 

 

 

 

 

 

- Equity holders of the Company

 

 

 

(916,266

)

(2,139,267

)

195,575

 

- Non-controlling interests

 

 

 

(46,753

)

(21,329

)

(1,198

)

 

 

 

 

(963,019

)

(2,160,596

)

194,377

 

 

 

 

 

 

 

 

 

 

 

(Loss)/earnings per share: (expressed in RMB per share)

 

13

 

 

 

 

 

 

 

- Basic

 

 

 

(12.50

)

(46.01

)

7.51

 

- Diluted

 

 

 

(12.50

)

(46.01

)

1.12

 

 

5



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Tongcheng-Elong Holdings Limited

Consolidated Statements of Comprehensive (Loss)/Income (Continued)

 

 

 

 

 

Year ended December 31,

 

 

 

 

 

2015

 

 

 

2017

 

 

 

Note

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

(Loss)/profit for the year

 

 

 

(963,019

)

(2,160,596

)

194,377

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income/(loss)

 

 

 

 

 

 

 

 

 

Items that will not be reclassified to profit or loss:

 

 

 

 

 

 

 

 

 

- Fair value change relating to preferred shares due to own credit risk

 

24

 

 

36,781

 

(46,592

)

Other comprehensive income/(loss) for the year, net of tax

 

 

 

 

36,781

 

(46,592

)

 

 

 

 

 

 

 

 

 

 

Total comprehensive (loss)/income for the year

 

 

 

(963,019

)

(2,123,815

)

147,785

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive (loss)/income attributable to:

 

 

 

 

 

 

 

 

 

- Equity holders of the Company

 

 

 

(916,266

)

(2,102,486

)

148,983

 

- Non-controlling interests

 

 

 

(46,753

)

(21,329

)

(1,198

)

 

 

 

 

(963,019

)

(2,123,815

)

147,785

 

 

6



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Tongcheng-Elong Holdings Limited

Consolidated Statements of Financial Position

 

 

 

 

 

As of December 31,

 

 

 

 

 

2015

 

 

 

2017

 

 

 

Note

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

ASSETS

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

14

 

98,800

 

101,074

 

441,722

 

Investments accounted for using the equity method

 

15

 

51,087

 

39,869

 

37,618

 

Investments measured at fair value through profit or loss

 

17

 

49,881

 

45,685

 

25,239

 

Intangible assets

 

18

 

209,146

 

347,904

 

308,831

 

Deferred income tax assets

 

19

 

 

 

61,877

 

Prepayment and other receivables

 

20

 

48,149

 

49,761

 

49,172

 

 

 

 

 

457,063

 

584,293

 

924,459

 

Current assets

 

 

 

 

 

 

 

 

 

Trade receivables

 

21

 

461,431

 

883,382

 

539,217

 

Prepayment and other receivables

 

20

 

235,867

 

274,188

 

195,938

 

Short-term investments measured at amortized cost

 

17

 

224,507

 

 

 

Short-term investments measured at fair value through profit or loss

 

17

 

21,046

 

71,041

 

236,107

 

Restricted cash

 

22

 

146,480

 

153,606

 

170,541

 

Cash and cash equivalents

 

22

 

710,403

 

339,299

 

701,748

 

 

 

 

 

1,799,734

 

1,721,516

 

1,843,551

 

Total assets

 

 

 

2,256,797

 

2,305,809

 

2,768,010

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

 

 

Capital and reserves attributable to equity holders of the Company

 

 

 

 

 

 

 

 

 

Share capital

 

27

 

 

84

 

99

 

Share premium

 

27

 

 

1,514,310

 

1,514,310

 

Treasury Stock

 

27

 

 

 

(15

)

Other reserves

 

28

 

2,658,337

 

(3,275,866

)

(3,270,057

)

Accumulated losses

 

 

 

(1,637,460

)

(3,776,727

)

(3,581,152

)

 

 

 

 

1,020,877

 

(5,538,199

)

(5,336,815

)

Non-controlling interests

 

 

 

27,510

 

6,079

 

4,881

 

Total equity

 

 

 

1,048,387

 

(5,532,120

)

(5,331,934

)

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

Borrowings

 

23

 

 

 

172,305

 

Deferred income tax liabilities

 

19

 

3,738

 

4,283

 

201

 

Redeemable convertible preferred shares

 

24

 

 

6,398,631

 

6,347,647

 

Other payables and accruals

 

26

 

2,950

 

2,375

 

1,839

 

 

 

 

 

6,688

 

6,405,289

 

6,521,992

 

Current liabilities

 

 

 

 

 

 

 

 

 

Borrowings

 

23

 

 

 

19,692

 

Trade payables

 

25

 

658,566

 

921,633

 

1,114,917

 

Other payables and accruals

 

26

 

540,753

 

510,593

 

437,358

 

Current income taxes liabilities

 

 

 

2,403

 

414

 

5,985

 

 

 

 

 

1,201,722

 

1,432,640

 

1,577,952

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

1,208,410

 

7,837,929

 

8,099,944

 

 

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

 

 

2,256,797

 

2,305,809

 

2,768,010

 

 

7



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Tongcheng-Elong Holdings Limited

Consolidated Statements of Changes in Equity

For the year ended December 31, 2015 (Unaudited)

 

 

 

Attributable to equity holders of the Company

 

Non-

 

 

 

 

 

Share
capital

 

Share
premium

 

Treasury
Stock

 

Other
reserves

 

Accumulated
losses

 

Sub-total

 

controlling
interests

 

Total
equity

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of January 1, 2015 (Unaudited)

 

 

 

 

2,504,792

 

(715,033

)

1,789,759

 

76,650

 

1,866,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

 

 

 

 

 

(916,266

)

(916,266

)

(46,753

)

(963,019

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

 

 

 

 

(916,266

)

(916,266

)

(46,753

)

(963,019

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensations (Note 8)

 

 

 

 

208,296

 

 

208,296

 

 

208,296

 

Statutory reserves

 

 

 

 

6,161

 

(6,161

)

 

 

 

Exercise of stock options (Note 8)

 

 

 

 

25,397

 

 

25,397

 

 

25,397

 

Share based compensation of a subsidiary

 

 

 

 

3,278

 

 

3,278

 

(226

)

3,052

 

Disposal of a subsidiary

 

 

 

 

 

 

 

(2,161

)

(2,161

)

Purchase of vested eLong Equity Awards in connection with the Expedia Transaction (Note 8)

 

 

 

 

(89,587

)

 

(89,587

)

 

(89,587

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners recognized directly in equity

 

 

 

 

153,545

 

(6,161

)

147,384

 

(2,387

)

144,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2015 (Unaudited)

 

 

 

 

2,658,337

 

(1,637,460

)

1,020,877

 

27,510

 

1,048,387

 

 

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Tongcheng-Elong Holdings Limited

Consolidated Statement of Changes in Equity

For the year ended December 31, 2016

 

 

 

Attributable to equity holders of the Company

 

Non-

 

 

 

 

 

Share
capital

 

Share
premium

 

Treasury
Stock

 

Other
reserves

 

Accumulated
losses

 

Sub-total

 

controlling
interests

 

Total
equity

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of January 1, 2016

 

 

 

 

2,658,337

 

(1,637,460

)

1,020,877

 

27,510

 

1,048,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

 

 

 

 

 

(2,139,267

)

(2,139,267

)

(21,329

)

(2,160,596

)

Changes in fair value of the preferred shares — attributable to its credit risk

 

 

 

 

36,781

 

 

36,781

 

 

36,781

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

 

 

 

36,781

 

(2,139,267

)

(2,102,486

)

(21,329

)

(2,123,815

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensations (Note 8)

 

 

 

 

71,325

 

 

71,325

 

 

71,325

 

Exercise of stock options (Note 8)

 

 

 

 

1,719

 

 

1,719

 

 

1,719

 

Exchange of high-vote ordinary shares to preferred shares in connection with the Restructuring (Note 24)

 

 

 

 

(3,527,596

)

 

(3,527,596

)

 

(3,527,596

)

Re-designation of ordinary shares to preferred shares in connection with the Restructuring (Note 24)

 

 

 

 

(920,414

)

 

(920,414

)

 

(920,414

)

Purchase of vested Equity Awards (Note 8)

 

 

 

 

 

(81,624

)

 

(81,624

)

 

(81,624

)

Incorporation of the Company and consummation of the Restructuring

 

84

 

1,514,310

 

 

(1,514,394

)

 

 

 

 

Purchase of non-controlling interest

 

 

 

 

 

 

 

(102

)

(102

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners recognized directly in equity

 

84

 

1,514,310

 

 

(5,970,984

)

 

(4,456,590

)

(102

)

(4,456,692

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

84

 

1,514,310

 

 

(3,275,866

)

(3,776,727

)

(5,538,199

)

6,079

 

(5,532,120

)

 

9



Table of Contents

 

Tongcheng-Elong Holdings Limited

Consolidated Statements of Changes in Equity

For the year ended December 31, 2017 (Unaudited)

 

 

 

Attributable to equity holders of the Company

 

Non-

 

 

 

 

 

Share
capital

 

Share
premium

 

Treasury
Stock

 

Other reserves

 

Accumulated
losses

 

Sub-total

 

controlling
interests

 

Total
equity

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of January 1, 2017 (Unaudited)

 

84

 

1,514,310

 

 

(3,275,866

)

(3,776,727

)

(5,538,199

)

6,079

 

(5,532,120

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income/(loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the year

 

 

 

 

 

195,575

 

195,575

 

(1,198

)

194,377

 

Changes in fair value of the preferred shares — attributable to its credit risk

 

 

 

 

(46,592

)

 

(46,592

)

 

(46,592

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income/(loss)

 

 

 

 

(46,592

)

195,575

 

148,983

 

(1,198

)

147,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensations (Note 8)

 

 

 

 

56,783

 

 

56,783

 

 

56,783

 

Issuance of RSUs (Note 8)

 

15

 

 

(15

)

 

 

 

 

 

Purchase of vested Equity Awards (Note 8)

 

 

 

 

(4,382

)

 

(4,382

)

 

(4,382

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total transactions with owners recognized directly in equity

 

15

 

 

(15

)

52,401

 

 

52,401

 

 

52,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017 (Unaudited)

 

99

 

1,514,310

 

(15

)

(3,270,057

)

(3,581,152

)

(5,336,815

)

4,881

 

(5,331,934

)

 

10



Table of Contents

 

Tongcheng-Elong Holdings Limited

Consolidated Statements of Cash Flows

 

 

 

 

 

Year ended December 31,

 

 

 

 

 

2015

 

 

 

2017

 

 

 

Note

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Cash (used in)/generated from operations

 

31

 

(794,526

)

(413,844

)

715,021

 

Interest received

 

 

 

35,206

 

6,700

 

4,310

 

Income tax (paid)/refund

 

 

 

(16,872

)

(3,017

)

563

 

Net cash (outflow)/inflow from operating activities

 

 

 

(776,192

)

(410,161

)

719,894

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

Payments for investments accounted for using the equity method

 

 

 

(58,142

)

 

 

Payments for investments measured at fair value through profit or loss

 

 

 

(15,000

)

 

 

Payment for business combination

 

30

 

(5,000

)

 

 

Purchases of property, plant and equipment

 

 

 

(44,012

)

(56,530

)

(392,134

)

Proceeds from disposal of property, plant and equipment and intangible assets

 

 

 

56

 

108

 

62

 

Proceeds from disposal of a subsidiary

 

 

 

64,310

 

 

 

Proceeds from disposal of investments accounted for using the equity method

 

 

 

19,350

 

 

 

Proceeds from disposal of long-term investments measured at fair value through profit or loss

 

 

 

 

 

20,000

 

Increase in restricted cash

 

 

 

(22,543

)

(7,126

)

(16,935

)

Payments for purchases of short-term investments

 

 

 

(917,311

)

(475,075

)

(1,673,388

)

Proceeds from redemptions of short-term investments

 

 

 

2,103,439

 

656,023

 

1,520,440

 

Net cash inflow/(outflow) from investing activities

 

 

 

1,125,147

 

117,400

 

(541,955

)

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

Purchase of vested eLong Equity Awards

 

 

 

 

(81,624

)

(4,382

)

Proceeds from bank borrowings

 

 

 

 

 

196,920

 

Repayments of bank borrowings

 

 

 

 

 

(6,663

)

Settlement of share-based awards

 

 

 

(86,580

)

 

 

Exercise of stock options

 

 

 

25,397

 

1,719

 

 

Net cash (outflow)/inflow from financing activities

 

 

 

(61,183

)

(79,905

)

185,875

 

 

 

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents 

 

 

 

287,772

 

(372,666

)

363,814

 

Cash and cash equivalents at beginning of the year

 

22

 

412,892

 

710,403

 

339,299

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

9,739

 

1,562

 

(1,365

)

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of the year

 

22

 

710,403

 

339,299

 

701,748

 

 

11



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

1.                                      General information, history of the Group, material acquisitions and basis of presentation

 

1.1                               General information

 

Tongcheng-Elong Holdings Limited (the “Company”, formerly known as China E-Dragon Holdings Limited) is an exempted company with limited liability incorporated under the laws of the Cayman Islands on January 14, 2016.

 

The Company is an investment holding company. The Company and its subsidiaries (together, the “Group”) are principally engaged in the provision of travel related services, including accommodation reservation services, transportation ticketing services, and online advertising services (the “Listing Business”) in the People’s Republic of China (the “PRC”).

 

The consolidated financial statements of the Group, which comprises the consolidated statements of financial position as of December 31, 2015, 2016 and 2017, and the consolidated statements of comprehensive (loss)/income, the consolidated statements of changes in equity, and the consolidated statements of cash flows for each of the years then ended (the “Track Record Period”) and a summary of significant accounting policies and other explanatory information are collectively as historical financial information (the “Historical Financial Information”).

 

1.2                               History of the Group, material acquisitions and group structure

 

1.2.1                     History of the Group

 

eLong Inc. (“eLong”) and its subsidiaries (collectively, the “eLong Group”) was the group of companies operating the Listing Business throughout the Track Record Period. Prior to May 31, 2016, the ordinary shares of eLong were listed and traded on NASDAQ Global Select Market (“NASDAQ”) in the form of American Depositary Shares (“ADS”). eLong had a dual-class share structure with each ordinary share entitled to one vote and each high-vote ordinary share entitled to fifteen votes.

 

eLong used to be controlled by Expedia, Inc. (“Expedia”) with the majority ownership and voting rights of eLong held by Expedia. Another major shareholder of eLong at the time was TCH Sapphire Limited, a company wholly owned by Tencent Holdings Limited (“Tencent”). On May 22,  2015, Expedia sold all of its equity interest in eLong to several investors, including C-Travel International Limited, a wholly owned subsidiary of Ctrip.com International Ltd. (“Ctrip”), Keystone Lodging Holdings Limited (“Keystone”), Plateno Group Limited (“Plateno”), and Luxuriant Holdings Limited (“Luxuriant”) (the “Expedia Transaction”). In connection with the Expedia Transaction, the board of directors and certain management of eLong were changed. After the Expedia Transaction, eLong no longer has any controlling shareholder and its substantial shareholders include Ctrip and Tencent. On August 17, 2015, Keystone and Plateno transferred their respective shareholding in eLong to Ocean Imagination L.P. (“Ocean Imagination”).

 

On May 31, 2016, eLong consummated a restructuring pursuant to which eLong was acquired by the Company, with all of the then existing ordinary shares of eLong being exchanged with an equivalent number of ordinary shares or convertible and redeemable preferred shares (the “Preferred Shares”) of the Company (the “Restructuring”). In conjunction with the Restructuring, Tencent, Ocean Imagination and certain management members (collectively the “Buyers”) purchased all the ordinary shares of eLong that were not owned by Ctrip, Luxuriant and the Buyers. These ordinary shares purchased by the Buyers were exchanged to the same number of the Preferred Shares of the Company. Thereafter, the ADSs of eLong ceased to be listed on NASDAQ and eLong became a wholly owned subsidiary of the Company.

 

On March 27, 2018, the Company changed its name to Tongcheng-Elong Holdings Limited.

 

12



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

1.2.2                     Material acquisitions

 

On December 28, 2017, the Company entered into an agreement with Tongcheng Network Technology Limited (“Tongcheng Network”) and its shareholders whereby the Company acquired Tongcheng Network’s Online Travel Agency Business (“Tongcheng Online Business”) by entering into a series of contractual arrangements with Tongcheng Network and its then shareholders, and the consideration was satisfied by issuing the Company’s 96,721,818 ordinary shares to the then shareholders of Tongcheng Network (the “Acquisition”). In conjunction with the Acquisition, Tencent, through one of its wholly owned subsidiaries, subscribed additional ordinary shares of the Company at a cash consideration of approximately US$30 million. The Acquisition was completed on March 9, 2018 and thereafter, Tongcheng Network became a company controlled by the Company under the contractual arrangements as further described below. The Acquisition will be accounted for using the purchase method of accounting when it is consummated, thus the Historical Financial Information for the Track Record Period does not include the financial information of Tongcheng Online Business.

 

13



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

1.                                      General information, history of the Group, material acquisitions and basis of presentation (Continued)

 

1.2                               History of the Group, material acquisitions and group structure (Continued)

 

Company name

 

Country/place of
operation and date of
incorporation

 

Particulars of
issued/paid-in
capital

 

Equity/ beneficial
interest held

 

At the date
of this
report

 

Principal activities

 

Type of legal
entity

 

Statutory
auditor
(Note)

 

 

 

 

 

 

 

2015

 

2016

 

2017

 

 

 

 

 

 

 

 

 

Directly held:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

eLong Inc.

 

PRC/April 4, 2001

 

US$

0.01

 

100

%

100

%

100

%

100

%

Investment holding

 

Limited liability entity

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indirectly held:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

eLong Net Information Technology (Beijing) Co., Ltd.(藝龍網信息技術(北京)有限公司)

 

PRC/August 17, 1999

 

US$

214,277,229

 

100

%

100

%

100

%

100

%

Platform service of hotel business

 

Limited liability entity

 

(b)(i)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

eLong Information Technology (Hefei) Co., Ltd.(藝龍信息技術(合肥)有限公司)

 

PRC/July 09, 2012

 

US$

5,000,000

 

100

%

100

%

100

%

100

%

Hotel business service/business process outsourcing service

 

Limited liability entity

 

(b)(i)

 

Beijing eLong Information Technology Co., Ltd.(北京藝龍信息技術有限公司)(Note e)

 

PRC/November 28, 2000

 

RMB

16,000,000

 

100

%

100

%

100

%

100

%

Information technology outsourcing/ advertising service

 

Limited liability entity

 

(b)(ii)

 

Beijing eLong Air Services Co., Ltd.(北京藝龍航空服務有限公司)

 

PRC/October 23, 2002

 

RMB

23,000,000

 

100

%

100

%

100

%

100

%

Air ticket service

 

Limited liability entity

 

(b)(ii)

 

Beijing eLong International Travel Co., Ltd.(北京藝龍國際旅行社有限公司)

 

PRC/July 29, 2004

 

RMB

1,500,000

 

100

%

100

%

100

%

100

%

Hotel business service/other travel service

 

Limited liability entity

 

(b)(ii)

 

Tianjin Chengmei Technology Development Co., Ltd.(天津成美科技發展有限公司)

 

PRC/December 31, 2013

 

RMB

15,000,000

 

100

%

100

%

100

%

100

%

Investment holding

 

Limited liability entity

 

(b)(i)

 

Shenzhen JL-Tour International Travel Service Co., Ltd.(深圳市捷旅國際旅行社有限公司)

 

PRC/October 09, 2001

 

RMB

2,430,769

 

56

%

56

%

56

%

54

%

International Travel Service

 

Limited liability entity

 

(b)(iii)

 

 

14



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

1.                                      General information, history of the Group, material acquisitions and basis of presentation (Continued)

 

1.2                               History of the Group, material acquisitions and group structure (Continued)

 

Company name

 

Country/place of
operation and date of
incorporation

 

Particulars of
issued/paid-in
capital

 

Equity/ beneficial
interest held

 

At the date
of this
report

 

Principal activities

 

Type of legal
entity

 

Statutory
auditor
(Note)

 

 

 

 

 

 

 

2015

 

2016

 

2017

 

 

 

 

 

 

 

 

 

Suzhou Chenghuiwan International Travel Agency Co., Ltd.(蘇州程會玩國際旅行社有限公司)

 

PRC/November 24, 2015

 

RMB

1,000,000

 

0

%

0

%

0

%

100

%

Travel related services

 

Limited liability entity

 

(b)(vi)

 

Nanjing Tongyou Tianxia Car Rental Co., Ltd.(南京同遊天下汽車租賃有限公司)

 

PRC/October 28, 2016

 

 

 

0

%

0

%

0

%

100

%

Travel related services

 

Limited liability entity

 

(b)(vi)

 

SuzhouChuanglv Tianxia Information Technology Co., Ltd. (蘇州創旅天下信息技術有限公司)

 

PRC/December 23, 2015

 

RMB

100,000

 

0

%

0

%

0

%

100

%

Travel related services

 

Limited liability entity

 

(b)(v)

 

Beijing Tongcheng Huading International Travel Agency Company Limited(北京同程華鼎國際旅行社有限公司)

 

PRC/January 12, 2011

 

RMB

5,000,000

 

0

%

0

%

0

%

100

%

Travel related services

 

Limited liability entity

 

(b)(iv)

 

Beijing Tianyuan Difang Insurance Agency Company Limited(天圓地方(北京)保險代理有限公司)

 

PRC/May 28, 2010

 

RMB

50,000,000

 

0

%

0

%

0

%

100

%

Travel related services

 

Limited liability entity

 

(b)(viii)

 

Suzhou Chengyi Technology Limited (蘇州程藝網絡科技有限公司)(Note e)

 

PRC/March 21, 2018

 

 

 

0

%

0

%

0

%

100

%

Travel related services

 

Limited liability entity

 

(a)

 

Tongcheng Network Technology Limited(同程網絡科技股份有限公司)(Note e)

 

PRC/March 10, 2004

 

RMB

111,319,969

 

0

%

0

%

0

%

100

%

Travel related services

 

Limited liability entity

 

(b)(viii)

 

 

15



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

1.                                      General information, history of the Group, material acquisitions and basis of presentation (Continued)

 

1.2                               History of the Group, material acquisitions and group structure (Continued)

 

(a)                                No audited financial statements were issued for these companies as they are either newly incorporated or not required to issue audited financial statements under the statutory requirements of their respective places of incorporation.

 

(b)                                The statutory auditors of these companies for the Track Record Period were as follows:

 

(i)                北京中瑞誠會計師事務所有限公司 for the years ended December 31, 2015 and 2016; 上海中瑞誠會計師事務所(特殊普通合夥) for the year ended December 31, 2017

 

(ii)             北京中瑞誠會計師事務所有限公司 for the years ended December 31, 2015, 2016 and 2017

 

(iii)          深圳東海會計師事務所 for the years ended December 31, 2015, 2016 and 2017

 

(iv)         蘇州鑫城會計師事務所有限公司 (Suzhou Xincheng CPAs Co. Ltd.) for the year ended December 31, 2015; 江蘇華星會計師事務所有限公司 (Jiangsu Welsen CPAs Co. Ltd.) for the year ended December 31, 2016; 普華永道中天會計師事務所(特殊普通合夥) (PricewaterhouseCoopers Zhong Tian LLP) for the year ended December 31, 2017

 

(v)            江蘇公證天業會計師事務所(特殊普通合夥) (Jiangsu Gongzheng Tianye CPAs LLP) for the years ended December 31, 2015 and 2016; 普華永道中天會計師事務所(特殊普通合夥) (PricewaterhouseCoopers Zhong Tian LLP) for the year ended December 31, 2017

 

(vi)         No statutory audit was required for the year ended December 31, 2015; 江蘇公證天業會計師事務所(特殊普通合夥) (Jiangsu Gongzheng Tianye CPAs LLP) for the year ended December 31, 2016; 普華永道中天會計師事務所(特殊普通合夥) (PricewaterhouseCoopers Zhong Tian LLP) for the year ended December 31, 2017

 

(vii)      江蘇公證天業會計師事務所(特殊普通合夥) (Jiangsu Gongzheng Tianye CPAs LLP) for the year ended December 31, 2015; 華普天健會計師事務所 (特殊普通合夥)(Huapu Tianjian CPAs LLP) for the year ended December 31, 2016; 普華永道中天會計師事務所(特殊普通合夥) (PricewaterhouseCoopers Zhong Tian LLP) for the year ended December 31, 2017

 

(viii)   江蘇公證天業會計師事務所(特殊普通合夥) (Jiangsu Gongzheng Tianye CPAs LLP) for the year ended December 31, 2015; 北京中兆國際會計師事務所有限公司(Beijing Zhongzhao International CPAs Co., Ltd.) for the year ended December 31, 2016; 普華永道中天會計師事務所(特殊普通合夥) (PricewaterhouseCoopers Zhong Tian LLP) for the year ended December 31, 2017

 

(c)                                  The English names of certain subsidiaries referred herein represent the Directors’ best effort at translating the Chinese names of these companies as no English names have been registered.

 

(d)                                 All companies comprising the Group have adopted December 31 as their financial year end date.

 

 

16



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

1.                                      General information, history of the Group, material acquisitions and basis of presentation (Continued)

 

1.2                               History of the Group, material acquisitions and group structure (Continued)

 

(e)                                  The prevailing PRC rules and regulations restrict foreign ownership of companies that provide internet content, call center services, travel agency and transportation ticketing services, which represent the core activities of and services provided by the Group.  As a result of such restrictions, the Company does not have equity interests in certain of its PRC operating subsidiaries. However, pursuant to a series of contractual arrangements of the Group with each of Beijing E-dragon Information Technology Limited (北京藝龍信息技術有限公司) (“Beijing E-dragon”), Suzhou Chengyi International Technology Limited (蘇州程藝網絡科技有限公司) (“Suzhou Chengyi”), Tongcheng Network and their respective equity holders (“Beijing E-dragon Contractual Arrangement”, “Suzhou Chengyi Contractual Arrangement”, “Tongcheng Network Contractual Arrangement”, and collectively, the “Contractual Arrangements”), which include powers of attorney, technical services agreements, business operations agreements, equity interest pledge agreements, exclusive purchase right agreements and loan agreement, the Company is able to effectively control, recognize and receive substantially all the economic benefits of the business and operations of the PRC operating subsidiaries. Accordingly, the PRC operating subsidiaries are treated as structured entities controlled by the Company and the financial positions and results of operations of the PRC operating entities have been/will be consolidated based on the respective dates when the Company first obtained control of these PRC operating subsidiaries.

 

1.3          Basis of presentation

 

Immediately prior to and after the Expedia Transaction and the Restructuring, the Listing Business was carried out by eLong Group. The Expedia Transaction, which was the transaction between shareholders of eLong, did not change the business substance of the Listing Business. Pursuant to the Restructuring, the Listing Business were effectively controlled by the Company through its acquisition of the entire equity interest in eLong. The Company had not been involved in any business prior to the Restructuring and its operations did not meet the definition of a business. Therefore, the Restructuring was merely a recapitalization of the Listing Business and did not change the business substance, management or major shareholders of the Listing Business.  Accordingly, the Group resulting from the Expedia Transaction and the Restructuring is regarded as a continuation of the Listing Business conducted by eLong Group.  For the purpose of this report, the Historical Financial Information has been prepared and presented using the carrying amounts of the Listing Business as recorded in the consolidated financial statements of eLong for the Track Record Period.

 

For companies acquired from or disposed of to a third party, including those involved in the Acquisition, their financial information is included in or excluded from the Historical Financial Information from the respective dates of the acquisitions or disposals.

 

Inter-company transactions, balances and unrealized gains/losses on transactions between group companies are eliminated on consolidation.

 

On June 20, 2018, the consolidated financial statements were approved for issue by the Board of Directors of the Company.

 

2                                         Summary of significant accounting policies

 

The principal accounting policies applied in the preparation of the Historical Financial Information are set out below. These policies have been consistently applied throughout the Track Record Period, unless otherwise stated.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.1                               Basis of preparation

 

The Historical Financial Information has been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by International Accounting Standard Board (“IASB”). In preparing the Historical Financial Information, the Group has early adopted IFRS 9 Financial Instruments (“IFRS 9”) and IFRS 15 Revenue from Contracts with Customers (“IFRS 15”).

 

The Financial Information has been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including redeemable convertible preferred shares) which are carried at fair value.

 

The preparation of the Historical Financial Information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Historical Financial Information are disclosed in Note 4 below.

 

All effective standards, amendments to standards and interpretations, which are mandatory for the financial year beginning January 1, 2017, are consistently applied to the Group for the Track Record Period.

 

(a)                                 New and amended standards early adopted by the Group

 

IFRS 9, “Financial instruments”, addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments.  The standard is effective for annual periods beginning on after January 1, 2018 and earlier application is permitted. The Group has reviewed its financial assets and liabilities and has elected to early apply IFRS 9 which has been applied consistently throughout the Track Record Period.

 

IFRS 15, “Revenue from contracts with customers” replaces the previous revenue standards IAS 18 “Revenue” and IAS 11 “Construction Contracts” and related interpretations. The standard is effective for annual periods beginning on after January 1, 2018 and earlier application is permitted.  The Group has elected to early apply IFRS 15 which has been applied consistently throughout the Track Record Period.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.1                               Basis of preparation (Continued)

 

(b)                                 New standards and interpretations not yet adopted

 

The following new standards, amendments and interpretations to existing standards, which are relevant to the Group have been issued and are effective for further reporting periods and have not been early adopted by the Group.

 

 

 

 

 

Effective for annual periods beginning on or after

 

 

 

 

 

Amendments to IAS 40

 

Transfers of investment property

 

January 1, 2018

Annual Improvements to IFRSs 2014-2016 Cycle (Note (i))

 

Retirement of short-term exemptions in IFRS 1 Clarifying measurements of investments under IAS 28

 

January 1, 2018

IFRS 2 (Amendment) (Note (i))

 

Classification and Measurement of Share-based Payment Transactions

 

January 1, 2018

IFRIC 22

 

Foreign currency transactions and advance consideration

 

January 1, 2018

Amendments to IAS 19

 

Plan Amendment, Curtailment or Settlement

 

January 1, 2019

Amendments to IAS 28 (Note (i))

 

Long-term interest in associate or joint ventures

 

January 1, 2019

IFRS 16 (Note (ii))

 

Leases

 

January 1, 2019

IFRIC 23 (Note (i))

 

Uncertainty over income tax treatments

 

January 1, 2019

IFRS 17

 

Insurance Contracts

 

January 1, 2021

IFRS 10 and IAS 28

(Amendments) (Note (i))

 

Sale or contribution of assets between an investor and its associate or joint venture

 

To be determined

 

Note:

 

(i)                                     The Group has already commenced an assessment of the impact of these new or revised standards, and amendments. According to the preliminary assessment made by the directors, no significant impact on the financial performance and positions of the Group is expected when they become effective.

 

(ii)                                IFRS 16, “Leases”, address the definition of a lease, recognition and measurement of leased and established principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that almost all operating leases will be accounted for in the Consolidated Statement of Financial Position for lessees. The accounting for lessors will not significantly change.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.1                               Basis of preparation (Continued)

 

The Group is a lessee of certain office spaces which are currently classified as operating leases. The Group’s current accounting policy for such leases, as set out in Note 2.23, is to record the rental expenses in profit or loss when such expenses were incurred, with the related operating lease commitments being separately disclosed (Note 34). IFRS 16 provides new provisions for the accounting treatment of leases which no longer allows lessees to recognize the leases outside of the Consolidated Statement of Financial Position. Instead, all non-current leases should be recognized in the form of assets (for the right of use) and financial liabilities (for the payment obligations) in the Consolidated Statement of Financial Position. Short-term leases of less than twelve months and leases of low-value assets are exempt from such reporting obligation. The new standard will therefore result in a derecognition of prepaid operating leases, increase in right-of-use assets and increase in lease liabilities in the Consolidated Statement of Financial Position. In the Consolidated Statement of Comprehensive (Loss)/Income, as a result, the annual rental and amortization expenses of prepaid operating lease under otherwise identical circumstances will decrease, while depreciation of right-of-use of assets and interest expense arising from the lease liabilities will increase. The new standard will impact the Consolidated Statement of Financial Position in terms of total assets and liabilities.

 

The Group has disclosed its non-cancellable operating lease commitments amounting to RMB28 million as of December 31, 2017 in Note 34. The standard will affect primarily the accounting for Group’s operating leases. However, the Group has just commenced its assessment and had not yet determined to what extent its commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group’s operating results and classification of cash flow. Based on the preliminary assessment results, it is expected that certain portion of these operating lease commitments aforementioned will be required to be recognized in the Consolidated Statements of Financial Position as right-of-use assets and lease liabilities.

 

The application of IFRS 16 is mandatory for financial years commencing on or after January 1, 2019. The Group does not intend to early adopt the standard before its effective date. The Group intends to apply the simplified transition approach and will not restate comparative amounts for the year prior to first adoption.

 

There are no other standards that are not yet effective and that would be expected to have a material impact on the Group’s financial performance and position.

 

2.2                               Subsidiaries

 

(a)                                 Consolidation

 

A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

 

Intra-group transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.2                               Subsidiaries (Continued)

 

(b)                                 Consolidation (Continued)

 

(i)                                    Subsidiaries controlled through contractual arrangements

 

As described in Note 1.2 as at the date of this report, the Company and its wholly-owned subsidiaries have entered into the Contractual Arrangements which enable the Company to:

 

·                      govern the financial and operating policies of Beijing E-dragon, Tongcheng Network and Suzhou Chengyi;

 

·                      exercise equity holders’ voting rights of Beijing E-dragon, Tongcheng Network and Suzhou Chengyi;

 

·                      receive substantially all of the economic interest returns generated by Beijing E-dragon, Tongcheng Network and Suzhou Chengyi, in consideration for the technical services and software license provided by wholly-owned subsidiaries of the Company;

 

·                      have the irrevocable and exclusive right, at any time when applicable PRC law permits foreign invested companies to operate an internet content provision business, to purchase from the equity holders of Beijing E-dragon, Tongcheng Network and Suzhou Chengyi for their respective equity interests in Beijing E-dragon, Tongcheng Network and Suzhou Chengyi. The exercise price of the option is equal to the actual paid-in registered capital (or pro rata portion thereof, as appropriate) unless otherwise specified under PRC law on the date of exercise. If the transfer price of the equity interest is greater than the loan amount, the shareholders are required to immediately return the proceeds from the transfer price in excess of the loan amount to the Company; and

 

·                      obtain a pledge over the entire ownership interests of Beijing E-dragon, Tongcheng Network and Suzhou Chengyi from their respective equity holders to secure the payment obligations of Beijing E-dragon, Tongcheng Network and Suzhou Chengyi under the Contractual Arrangements.

 

As a result of the Contractual Arrangements, the Company has rights to exercise power over Beijing E-dragon, Tongcheng Network and Suzhou Chengyi and their respective subsidiaries, receive variable returns from its involvement with Beijing E-dragon, Tongcheng Network and Suzhou Chengyi and their respective subsidiaries, and has the ability to affect those returns through its power over Beijing E-dragon, Tongcheng Network and Suzhou Chengyi and their respective subsidiaries.  Therefore, the Company is considered to have the power to control Beijing E-dragon, Tongcheng Network and Suzhou Chengyi and their respective subsidiaries. Consequently, the Company regards Beijing E-dragon, Tongcheng Network and Suzhou Chengyi and their respective subsidiaries as the controlled entities and consolidates the financial positions and results of operations of these entities in the consolidated financial statements of the Group.

 

Nevertheless, the Contractual Arrangements may not be as effective as direct legal ownership in providing the Group with direct control over Beijing E-dragon, Tongcheng Network and Suzhou Chengyi and their respective subsidiaries and such uncertainties presented by the PRC legal system could impede the Group’s beneficiary rights of the results, assets and liabilities of Beijing E-dragon, Tongcheng Network and Suzhou Chengyi and their respective subsidiaries. The Directors, based on the advice of its legal counsel, consider that the Contractual Arrangements are in compliance with the relevant PRC laws and regulations and are legally binding and enforceable.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.2                               Subsidiaries (Continued)

 

(a)                                 Consolidation (Continued)

 

(ii)                                Business combination

 

The Group applies the acquisition method to account for business combinations except for business combination under common control. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

 

The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis. Non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation are measured at either fair value or the present ownership interests’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by IFRS.

 

Acquisition-related costs are expensed as incurred.

 

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognized in profit or loss.

 

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is a financial asset or liability is recognized in accordance with IFRS 9 in profit or loss. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

 

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the statement of profit or loss.

 

(iii)                            Changes in ownership interests in subsidiaries without change of control

 

Transactions with non-controlling interests that do not result in a loss of control are accounted for as equity transactions - that is, as transactions with the owners of the subsidiary in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.2                               Subsidiaries (Continued)

 

(a)                                 Consolidation (Continued)

 

(iv)                              Disposal of subsidiaries

 

When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

 

(b)                                 Separate financial statements

 

Investments in subsidiaries (including structured entities) are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

 

Impairment testing of the investments in subsidiaries is required upon receiving a dividends from these investments if the dividends exceeds the total comprehensive income of the subsidiary in the period the dividends declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

 

2.3                               Associates

 

An associate is an entity over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.

 

(a)                                 Investments in associates in the form of ordinary shares

 

Investments in associates in the form of ordinary shares are accounted for using the equity method of accounting in accordance with IAS 28. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investments in these associates include goodwill identified on acquisition, net of any accumulated impairment loss. Upon the acquisition of the ownership interest in an associate, any difference between the cost of the associate and the Group’s share of the net fair value of the associate’s identifiable assets and liabilities is accounted for as goodwill.

 

If the ownership interest in an associate in the form of ordinary shares is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income or loss is reclassified to consolidated statement of comprehensive income or loss where appropriate.

 

The Group’s share of the associates’ post-acquisition profit or loss is recognized in the consolidated statement of comprehensive income or loss, and its share of post-acquisition movements in other comprehensive income or loss is recognized in other comprehensive income or loss. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.3                               Associates (Continued)

 

(a)                                 Investments in associates in the form of ordinary shares (Continued)

 

The Group determines at each reporting date whether there is any objective evidence that the investments in the associate are impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount adjacent to “share of results of associates” in the consolidated statement of comprehensive income or loss.

 

Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognized in the Group’s consolidated financial statements only to the extent of unrelated investor’s interests in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

Gain or losses on dilution of equity interest in associates are recognized in the consolidated statement of comprehensive income or loss.

 

(b)                                 Investments in associates in the form of redeemable convertible preferred shares

 

Investments in associates in the form of redeemable convertible preferred shares or ordinary shares with preferential rights shares are accounted as financial assets measured at fair value through profit or loss (Note 2.9).

 

2.4                               Segment reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (“CODM”). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer, vice presidents and directors of the Company that makes strategic decisions.

 

2.5                               Foreign currency translation

 

(a)                                 Functional and presentation currency

 

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The functional currency of the Company is Renminbi (“RMB”). The Company’s primary subsidiaries were incorporated in the PRC and these subsidiaries considered RMB as their functional currency. As the major operations of the Group during the Track Record Period are within the PRC, the Group determined to present its consolidated financial statements in RMB (unless otherwise stated).

 

(b)                                 Transactions and balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit or loss.

 

Translation differences on non-monetary financial assets and liabilities such as instruments held at fair value through profit or loss are recognized in profit or loss as part of the fair value changes.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.5                               Foreign currency translation (Continued)

 

(c)                                  Group companies

 

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

 

·                      assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

 

·                      income and expenses for each statement of profit or loss are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

 

·                      all resulting currency translation differences are recognized in other comprehensive income.

 

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognized in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Currency translation differences arising are recognized in other comprehensive income.

 

2.6                               Property, plant and equipment

 

All property, plant and equipment is stated at historical costs less accumulated depreciation and accumulated impairment charge. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

 

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the consolidated statement of comprehensive income or loss during the financial period in which they are incurred. Depreciation is calculated on the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

 

Software

 

3 years

IT equipment

 

2 to 5 years

Leasehold improvements

 

Estimated useful lives or remaining lease terms, whichever is shorter the shorter of their useful lives and the lease terms

Furniture and fixtures

 

5 years

 

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

 

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

 

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognized in “Other gains/(losses), net” in the consolidated statement of comprehensive income or loss.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.6                               Property, plant and equipment (Continued)

 

Construction in progress represents office building and leasehold improvements under construction. Construction in progress is stated at cost less accumulated impairment losses, if any.

 

Cost includes the costs of construction and acquisition, and capitalized costs attributable to the construction during the period of construction. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and ready for intended use. When the assets concerned are available for use, the costs are transferred to property, plant and equipment and depreciated in accordance with the policy as set out above.

 

2.7                               Intangible assets

 

(a)                                 Goodwill

 

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interests in the acquiree.

 

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

 

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.

 

(b)                                 Other intangible assets acquired in a business combination

 

Other intangible assets acquired in a business combination, mainly including customer lists, trade names, copy rights and internet domain names, are recognized initially at fair value at the acquisition date and subsequently carried at the amount initially recognized less accumulated amortization and impairment losses, if any. Amortization is calculated using the straight-line method to allocate the costs of acquired intangible assets over the following estimated useful lives:

 

Customer lists

 

5 years

 

Trade names

 

5 years

 

Internet domain names

 

5 years

 

 

(c)                                  Other intangible assets

 

Other intangible assets mainly include business cooperation arrangement. It was initially recognized and measured at cost or estimated fair value of intangible assets acquired at the acquisition date (Note 18). Other intangible assets are amortized over their estimated useful lives (generally 3 to 5 years) using the straight-line method.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.7                               Intangible assets (Continued)

 

(d)                               Research and development expenditures

 

Research expenditure is recognized as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are capitalized as intangible assets when recognition criteria are fulfilled. These criteria include: (1) it is technically feasible to complete the software product so that it will be available for use; (2) management intends to complete the software product and use or sell it; (3) there is an ability to use or sell the software product; (4) it can be demonstrated how the software product will generate probable future economic benefits; (5) adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and (6) the expenditure attributable to the software product during its development can be reliably measured. Other development expenditures that do not meet those criteria are recognized as expenses as incurred.

 

Development costs previously recognized as expenses are not recognized as assets in subsequent periods. Capitalized development costs are amortized from the point at which the assets are ready for use on a straight-line basis over their useful lives.

 

All development costs incurred by the Group during Track Record Period do not meet the R&D capitalization criteria and hence are fully expensed off.

 

2.8                               Impairment of non-financial assets other than goodwill

 

Intangible assets other than goodwill that have an indefinite useful life or intangible assets not ready to use are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.9                               Financial assets

 

(a)                                 Classification

 

The Group classifies its financial assets in the following measurement categories:

 

·                      those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and

 

·                      those to be measured at amortized cost.

 

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.

 

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.

 

See Note 16 for details about each type of financial assets.

 

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

 

(b)                                 Measurement

 

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

 

Debt instruments

 

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:

 

·                      Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2.9                               Financial assets (Continued)

 

(b)                                Measurement (Continued)

 

·                      Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through other comprehensive income (“OCI”), except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains/(losses), net. Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses and impairment expenses are presented in other gains/(losses), net.

 

·                      Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented net in profit or loss within other gains/(losses), net in the period in which it arises.

 

Equity instruments

 

The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss as other income when the Group’s right to receive payments is established.

 

Changes in the fair value of financial assets at fair value through profit or loss are recognized in other gain/ (losses) in profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

 

(c)                                 Impairment

 

The Group has types of financial assets subject to IFRS 9’s new expected credit loss model:

 

·                      trade receivables for sales of goods or provision of services; and

·                      other receivables

 

The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at a amortized cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 4.1(b) details how the Group determines whether there has been a significant increase in credit risk.

 

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables. The Group uses practical expedients when estimating life time expected credit losses on trade receivables, which is calculated using a provision matrix where a fixed provision rate applies depending on the number of days that a trade receivable is outstanding.

 

Impairment on other receivables is measured as either 12-month expected credit losses or lifetime expected credit loss, depending on whether there has been a significant increase in credit risk since initial recognition. If a significant increase in credit risk of a receivable has occurred since initial recognition, then impairment is measured as lifetime expected credit loss.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.10                        Trade and other receivables

 

Trade receivables are amounts due from customers for services performed in the ordinary course of business.

 

Trade and other receivables are generally due for settlement within one year and therefore are all classified as current.

 

Trade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

 

2.11                        Cash and cash equivalents

 

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

 

2.12                        Share capital

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or share options are shown in equity as a deduction from the proceeds.

 

2.13                        Trade payables

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

 

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

 

2.14                        Borrowings

 

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of comprehensive income or loss over the period of the borrowings using the effective interest method.

 

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.

 

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.15                        Redeemable convertible preferred shares

 

Redeemable convertible preferred shares issued by the Company are redeemable upon occurrence of certain future events and at the option of the holders. This instrument can be converted into ordinary shares of the Company at any time at the option of the holders or automatically converted into ordinary shares upon occurrence of an initial public offering of the Company or agreed by majority of the holders as detailed in Note 24.

 

The Group designated the redeemable convertible preferred shares as financial liabilities at fair value through profit or loss. They are initially recognized at fair value. Any directly attributable transaction costs are recognized as finance costs in the consolidated statements of comprehensive (loss)/income.

 

Subsequent to initial recognition, the redeemable convertible preferred shares are carried at fair value with changes in fair value recognized in the consolidated statements of comprehensive (loss)/income in the year in which they arise.

 

The redeemable convertible preferred shares are classified as non-current liabilities because the Group has unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

 

2.16                        Current and deferred income tax

 

The tax expense for the period comprises current and deferred tax. Tax is recognized in the consolidated statement of comprehensive income or loss, except to the extent that it relates to items recognized in other comprehensive income or loss or directly in equity. In this case, the tax is also recognized in other comprehensive income or loss or directly in equity, respectively.

 

(a)                                 Current income tax

 

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of each reporting period in the countries/territories where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

(b)                                 Deferred income tax

 

Inside basis differences

 

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of each reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

 

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.16                        Current and deferred income tax (Continued)

 

Outside basis differences

 

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally the Group is unable to control the reversal of the temporary difference for associates. Only when there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference in the foreseeable future, deferred tax liability in relation to taxable temporary differences arising from the associate’s undistributed profits is not recognized.

 

Deferred income tax assets are recognized on deductible temporary differences arising from investments in subsidiaries and associates only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilized.

 

(c)                                  Offsetting

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

2.17                        Employee benefits

 

(a)                                 Defined contribution plans

 

The Group contributes on a monthly basis to various defined contribution plans organized by the relevant governmental authorities. The Group’s liability in respect of these plans is limited to the contributions payable in each period. Contributions to these plans are expensed as incurred. Assets of the plans are held and managed by government authorities.

 

(b)                                 Bonus plan

 

The expected cost of bonuses is recognized as a liability when the Group has a present legal or constructive obligation for payment of bonus as a result of services rendered by employees and a reliable estimate of the obligation can be made. Liabilities for bonus plans are expected to be settled within 1 year and are measured at the amounts expected to be paid when they are settled.

 

(c)                                  Employee leave entitlements

 

Employee entitlements to annual leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period. Employee entitlements to sick and maternity leave are not recognized until the time of leave.

 

(d)                                 Share-based compensation

 

Equity-settled share-based payment transactions

 

The Group operates share incentive plan, under which it receives services from employees as consideration for equity instruments (restricted shares units (“RSUs”) and options) of the Company. The fair value of the services received in exchange for the grant of the equity instruments (RSUs and options) is recognized as an expense in the consolidated statements of comprehensive (loss)/income with a corresponding increase in equity.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.17                        Employee benefits (Continued)

 

In terms of the shares, RSUs and options awarded to employees, the total amount to be expensed is determined by reference to the fair value of equity instruments (RSUs and options) granted:

 

·                      Including any market performance conditions;

·                      Excluding the impact of any service and non-market performance vesting conditions; and

·                      Including the impact of any non-vesting conditions.

 

Non-marketing performance and service conditions are included in calculation of the number of RSUs and options that are expected to vest. The total amount expensed is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.

 

At the end of each reporting period, the Group revises its estimates of the number of RSUs and options that are expected to vest based on the non-marketing performance and service conditions. It recognizes the impact of the revision to original estimates, if any, in the consolidated income statements, with a corresponding adjustment to equity.

 

When the share options are exercised, the Company issues new ordinary shares. The proceeds received net of any directly attributable transaction costs are credited to share capital and share premium. Where there is any modification of terms and conditions which increases the fair value of the equity instruments granted, the Group includes the incremental fair value granted in the measurement of the amount recognized for the services received over the remainder of the vesting period. The incremental fair value is the difference between the fair value of the modified equity instrument and that of the original equity instrument, both estimated as of the date of the modification. An expense based on the incremental fair value is recognized over the period from the modification date to the date when the modified equity instruments vest in addition to any amount in respect of the original instrument, which should continue to be recognized over the remainder of the original vesting period.

 

Cash-settled share-based payment transactions

 

Share-based compensation awards which are settled in cash upon vesting are classified as liabilities in the consolidated balance sheets. Compensation expense is determined based on the current share price at the balance sheet dates, and the proportionate amount of the requisite service that has been rendered to such date. Changes in the fair value of the liability-classified awards, after the requisite service period has been completed and before the awards are vested, are recognized as compensation expenses in the period in which the change in fair value occurs.

 

2.18                        Provisions

 

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for further operating losses.

 

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

 

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.19                        Revenue recognition

 

The Group offers a variety of travel related services, including accommodation reservation service, transportation ticketing service and, to a much lesser extent, online advertising service.

 

Revenues are recognized when or as the control of the goods or services is transferred to the customer. Depending the terms of the contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time.

 

(a)                                 Principal agent consideration

 

The Group determines the presentation of its revenue by assessing whether it acts as the principal of the services that are rendered. The Group presents its revenues on a net basis (that is, the amount billed to the users less the amount paid to the travel service suppliers) when the Group acts as an agent with no control over the underlying services and does not assume inventory risk. The Group presents its revenue on a gross basis (that is, the amount billed to the users) when the Group assumes inventory risk and acts as a principal by pre-purchasing the hotel room nights or tickets from the travel service suppliers. The purchase payments to the travel suppliers are recorded as “cost of revenue” in the consolidated statements of comprehensive (loss)/income.

 

The Group presents majority of its revenue on net basis as the supplier is primarily responsible for providing the underlying travel services and the Group does not control the service provided by the supplier prior to its transfer to the user.

 

(b)                                 Timing of revenue recognition

 

Accommodation reservation services

 

The Group generates revenue as a result of the booking of travel products and services on its websites and mobile apps and derives its revenue mainly from the commissions earned from intermediating services for facilitating reservations of hotel accommodations. Commissions from accommodation reservation services are recognized when the accommodation reservations placed by users through the Group become non-cancellable.

 

Transportation ticketing services

 

Transportation ticketing services primarily consist of the reservation of air tickets and train tickets, sale of travel insurance and other transportation-related services. The commissions from such services are recognized upon the issuance of the tickets or the travel insurance, net of estimated cancellations.

 

Other Services

 

Other revenues are primarily derived from technical development service and advertising business. The revenues are recognized over the service period.

 

(c)                                  Contract asset and contract liability

 

When either party to a contract has performed, the Group presents the contract in the statement of financial position as a contract asset or a contract liability, depending on the relationship between the Group’s performance and the customer’s payment. A contract asset is the Group’s right to consideration in exchange for services that the Group has transferred to its customer. A contract liability is the Group’s obligation to transfer services to its customer for which the Group has received consideration from the customer. Incremental costs incurred to obtain a contract, if recoverable, are capitalized and presented as contract assets and subsequently amortized when the related revenue is recognized. The Group did not recognize any significant contract asset or liability for the services it rendered in the Track Record Period.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

2                                         Summary of significant accounting policies (Continued)

 

2.19                        Revenue recognition

 

(d)                                Users incentive programs

 

The Company provides various users incentive programs. Where participating travelers are awarded incentives on current transactions that can be redeemed for future reservations through the Company’s platforms or redeemed for cash, the estimated fair value of the incentives that are expected to be redeemed is recognized as a reduction of revenues at the time the incentives are granted.

 

2.20                        Service development expense

 

Service development expense represents the expenses incurred to develop and diversify the travel products and services the Company sources from its travel service providers as well as the expenses in relation to research and development of service providers assist system and the Company’s online platforms.

 

2.21                        Interest income

 

Interest income is recognized on a time proportion basis, taking into account of the principal outstanding and the effective interest rate over the period to maturity, when it is determined that such income will accrue to the Group.

 

2.22                        Government grants/subsidies

 

Grants/subsidies from government are recognized at their fair value where there is a reasonable assurance that the grants/subsidies will be received and the Group will comply with all attached conditions.

 

Under these circumstances, the grants/subsidies are recognized as income or matched with the associated costs which the grants/subsidies are intended to compensate.

 

2.23                        Leases

 

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income or loss on a straight-line basis over the period of the lease.

 

2.24                        Dividends distribution

 

Dividends distribution to the Company’s shareholders is recognized as a liability in the Group’s and the Company’s financial information in the period in which the dividends are approved by the Company’s shareholders or directors, where appropriate.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

3                                         Critical accounting estimates and judgements

 

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Management of the Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Apart from the PRC operating entities under the Group’s control through the Contractual Arrangements being accounted for as subsidiaries as described in Note 2.2(a) above, the estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:

 

(a)                                 Impairment of non-financial assets

 

The Group tests annually whether goodwill has suffered any impairment. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts have been determined based on value-in-use calculations or fair value less costs to sell. These calculations require the use of judgments and estimates.

 

Judgment is required to determine key assumptions adopted in the valuation models for impairment review purpose. Changing the assumptions selected by management in assessing impairment could materially affect the result of the impairment test and as a result affect the Group’s financial condition and results of operations. If there is a significant adverse change in the key assumptions applied, it may be necessary to take additional impairment charge to the consolidated statement of comprehensive income or loss.

 

(b)                                 Valuation of redeemable convertible preferred shares

 

The preferred shares issued by the Company are not traded in an active marker and the respective fair value is determined by using valuation techniques. The Group has used the discounted cash flow method to determine the underlying equity value of the Company and adopted equity allocation model to determine the fair value of the preferred shares. Key assumptions, such as discount rate, risk-free interest rate, lack of marketability discount and volatility are disclosed in Note 24.

 

(c)                                  Useful lives and amortization charges of intangible assets

 

The Group’s management determines the estimated useful lives and related amortization charges for the Group’s intangible assets with reference to the estimated periods that the Group intends to derive future economic benefits from the use of these assets. Management will revise the amortization charges where useful lives are different to that of previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. Actual economic lives may differ from estimated useful lives. Periodic review could result in a change in useful lives and therefore amortization expense in future periods.

 

(d)                                 Current and deferred income taxes

 

The Group is subject to income taxes in the PRC and other jurisdictions. Judgment is required in determining the provision for income taxes in each of these jurisdictions. There are transactions and calculations during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.

 

Deferred income tax assets relating to certain temporary differences and tax losses are recognized when management considers it is probable that future taxable profits will be available against which the temporary differences or tax losses can be utilized. When the expectation is different from the original estimate, such differences will impact the recognition of deferred income tax assets and taxation charges in the period in which such estimate is changed.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

4                                         Financial risk management

 

4.1                               Financial risk factors

 

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and fair value interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. Risk management is carried out by the senior management of the Group.

 

(a)                                 Market risk

 

(i)                                     Foreign exchange risk

 

Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the Group entities’ functional currency. The Group manages its foreign exchange risk by performing regular reviews of the Group’s net foreign exchange exposures. The Group does not hedge against any fluctuation in foreign currency during the Track Record Period.

 

The Group operates mainly in the PRC with most of the transactions settled in RMB, management considers that the business is not exposed to any significant foreign exchange risk as there are no significant financial assets or liabilities of the Group are denominated in the currencies other than the respective functional currencies of the Group’s entities.

 

(ii)                                  Interest rate risk

 

The Group’s interest rate risk primarily arose from borrowings with floating rates (Note 23), time deposits and cash and cash equivalents. Those carried at floating rates expose the Group to cash flow interest rate risk whereas those carried at fixed rates expose the Group to fair value interest rate risk.

 

If the interest rate of borrowings with floating rate had been 10 percent higher/lower, the profit before income tax for the year ended December 31, 2017 would have been approximately RMB264,000 lower/higher.

 

If the interest rate of time deposits had been 10 percent higher/lower, the profit before income tax for the year ended December 31, 2015 would have been approximately RMB28,000 higher/lower.

 

If the interest rate of short-term investments measured at fair value through profit or loss had been 10 percent higher/lower, the profit before income tax the years ended December 31, 2015, 2016 and 2017 would have been approximately RMB3,437,000 higher/lower, RMB195,000 higher/lower and RMB745,000 higher/lower, respectively.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

4                                         Financial risk management

 

4.1                               Financial risk factors

 

(b)                                 Credit risk

 

The Group is exposed to credit risk in relation to its cash and bank deposits, trade and other receivables and short-term investments measured at fair value through profit or loss.

 

The carrying amounts of each class of the above financial assets represent the Group’ maximum exposure to credit risk in relation to financial assets. To manage this risk arising from cash and bank deposits and wealth management products issued by commercial banks, The Group only transacts with reputable commercial banks which are all high-credit-quality financial institutions in the PRC. There has been no recent history of default in relation to these financial institutions.

 

Trade receivables at each end of Track Record Period are mainly due from the third-party customers including hotels or related agents, etc. in cooperation with the Group and other receivables mainly include deposits and others (“Receivables”). The Group considers the probability of default upon initial recognition of Receivables and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, The Group compares the risk of a default occurring on the Receivables as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are incorporated:

 

· internal credit rating;

· external credit rating (as far as available);

· actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the debtors’ ability to meet its obligations;

· actual or expected significant changes in the operating results of the debtors;

· significant increases in credit risk on other financial instruments of the same debtors;

· significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements;

· significant changes in the expected performance and behavior of the debtors, including changes in the payment status of debtors, etc.

 

Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment.

 

A default on Receivables are when the counterparty fails to make contractual payments within 180 days of when they fall due.

 

The Group makes periodic assessment on the credit risk of the Receivables based on the history of cooperation with customers, settlement records and past experience, the Directors believe that the credit risk inherent in the outstanding Receivables due from the debtors is not material.

 

(c)                                  Price risk

 

The Group is exposed to price risk in respect of the long-term investments and short-term investments measured at fair value through profit or loss held by the Group. The Group is not exposed to commodity price risk. To manage its price risk arising from the investments, the Group diversifies its portfolio. Each investment is managed by senior management on a case by case basis. The sensitivity analysis is performed by management, see Note 4.3 for detail.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

4                                         Financial risk management

 

4.1                               Financial risk factors

 

(d)                                 Liquidity risk

 

The Group aims to maintain sufficient cash and cash equivalents and marketable securities. Due to the dynamic nature of the underlying businesses, the Group maintains flexibility in funding by maintaining adequate cash and cash equivalents.

 

The table below analyzes the Group’s financial liabilities into relevant maturity grouping based on the remaining period at the end of each reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

 

 

 

Less than 1
year

 

Between
1 and 2
years

 

Between
2 and 5
years

 

Over 5
years

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Trade payables

 

658,566

 

 

 

 

658,566

 

Other payables and accruals

 

256,339

 

 

 

 

256,339

 

 

 

914,905

 

 

 

 

914,905

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

Trade payables

 

921,633

 

 

 

 

921,633

 

Redeemable convertible preferred shares

 

 

 

6,398,631

 

 

6,398,631

 

Other payables and accruals

 

123,624

 

 

 

 

123,624

 

 

 

1,045,257

 

 

6,398,631

 

 

7,443,888

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2017 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Borrowings

 

29,643

 

28,581

 

79,375

 

106,141

 

243,740

 

Trade payables

 

1,114,917

 

 

 

 

1,114,917

 

Redeemable convertible preferred shares

 

 

 

6,347,647

 

 

6,347,647

 

Other payables and accruals

 

120,610

 

 

 

 

120,610

 

 

 

1,265,170

 

28,581

 

6,427,022

 

106,141

 

7,826,914

 

 

4.2                               Capital risk management

 

The Group’s objectives when managing capital (including funding from the Group and related parties) are to safeguard the Group’s ability to continue as a going concern in order to provide returns for the Group and benefits for other stakeholders and to maintain an optimal capital structure to enhance equity value in the long-term.

 

4.3                               Fair value estimation

 

The table below analyzes the Group’s financial instruments carried at fair value as of December 31, 2015, 2016 and 2017, by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorized into three levels within a fair value hierarchy as follows:

 

·                      quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

·                      inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2);

·                      inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

4                                         Financial risk management

 

4.3                               Fair value estimation (Continued)

 

The following table presents the Group’s assets and liabilities that are measured at fair value as of December 31, 2015.

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

- Long-term investments measured at fair value through profit or loss (Note 17)

 

 

 

49,881

 

49,881

 

- Short-term investments measured at fair value through profit or loss (Note 17)

 

 

 

21,046

 

21,046

 

 

 

 

 

70,927

 

70,927

 

 

The following table presents the Group’s assets and liabilities that are measured at fair value as of December 31, 2016.

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

- Long-term investments measured at fair value through profit or loss (Note 17)

 

 

 

45,685

 

45,685

 

- Short-term investments measured at fair value through profit or loss (Note 17)

 

 

 

71,041

 

71,041

 

 

 

 

 

116,726

 

116,726

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

- Redeemable convertible preferred shares (Note 24)

 

 

 

6,398,631

 

6,398,631

 

 

The following table presents the Group’s assets and liabilities that are measured at fair value as of December 31, 2017.

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017 (Unaudited)

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

- Long-term investments measured at fair value through profit or loss (Note 17)

 

 

 

25,239

 

25,239

 

- Short-term investments measured at fair value through profit or loss (Note 17)

 

 

 

236,107

 

236,107

 

 

 

 

 

261,346

 

261,346

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

- Redeemable convertible preferred shares (Note 24)

 

 

 

6,347,647

 

6,347,647

 

 

40



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

4                                         Financial risk management

 

4.3                               Fair value estimation (Continued)

 

(a)                                 Financial instruments in level 1

 

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

 

(b)                                 Financial instruments in level 2

 

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

 

(c)                                  Financial instruments in level 3

 

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

 

Specific valuation techniques used to value financial instruments include:

 

·                      Quoted market prices or dealer quotes for similar instruments.

·                      Other techniques, such as discounted cash flow analysis, are used to determine fair value for financial instruments.

 

Level 3 instruments of the Group’s assets and liabilities include long-term investment measured at fair value through profit or loss, short-term investments measured at fair value through profit or loss and redeemable convertible preferred shares.

 

The changes in level 3 instruments of the Preferred Shares for the years ended December 31, 2015, 2016 and 2017 are presented in the Note 24.

 

The following table presents the changes in level 3 instruments of long-term investments measured at fair value through profit or loss for the years ended December 31, 2015, 2016 and 2017.

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

At the beginning of the year

 

15,000

 

49,881

 

45,685

 

Addition

 

15,000

 

 

 

Reclassify from investments accounted for using the equity method

 

2,424

 

 

 

Disposal

 

 

 

(19,247

)

Changes in fair value

 

17,457

 

(4,196

)

(1,199

)

At the end of the year

 

49,881

 

45,685

 

25,239

 

 

41



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

4                                         Financial risk management

 

4.3                               Fair value estimation (Continued)

 

The following table presents the changes in level 3 instruments of short-term investments measured at fair value through profit or loss for the year ended December 31, 2015, 2016 and 2017.

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

At the beginning of the year

 

91,998

 

21,046

 

71,041

 

Addition

 

226,298

 

425,623

 

1,673,388

 

Disposal

 

(302,247

)

(382,064

)

(1,520,439

)

Changes in fair value

 

4,997

 

6,436

 

12,117

 

At the end of the year

 

21,046

 

71,041

 

236,107

 

Net unrealized gains for the year

 

189

 

165

 

2,062

 

 

The valuation of the level 3 instruments mainly included the Preferred Shares (Note 24), long-term investments measured at fair value through profit or loss in unlisted companies (Note 17) and short-term investments measured at fair value through profit or loss (Note 17). As these instruments are not traded in an active market, their fair values have been determined by using various applicable valuation techniques, including discounted cash flows and market approach etc. Major assumptions used in the valuation for the preferred shares are presented in Note 24.

 

The following table summarizes the quantitative information about the significant unobservable inputs used in recurring level 3 fair value measurements of the short-term and long-term investments.

 

 

 

Fair Values

 

 

 

 

 

Range of inputs

 

Relationship
of

 

 

 

As of December 31,

 

 

 

Significant

 

As of December 31,

 

unobservable

 

 

 

2015

 

 

 

2017

 

Valuation

 

unobservable

 

2015

 

 

 

2017

 

inputs to fair

 

Description

 

(Unaudited)

 

2016

 

(Unaudited)

 

techniques

 

inputs

 

(Unaudited)

 

2016

 

(Unaudited)

 

values

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments measured at fair value through profit or loss

 

49,881

 

45,685

 

25,239

 

Market approach

 

Expected volatility

 

48.8%~59.9%

 

47.2%~52%

 

35%~43.1%

 

The higher the expected volatility, the lower the fair value

 

 

 

 

 

 

 

 

 

 

 

Risk-free rate

 

2.6%~3.2%

 

2.7%~2.8%

 

3.8%~3.9%

 

The higher the risk-free rate, the higher the fair value

 

Short-term investments measured at fair value through profit or loss

 

21,046

 

71,041

 

236,107

 

Discounted cash flows

 

Expected rate of return

 

0.4%-5.4%

 

0.8%-6.0%

 

1.5%-6.0%

 

The higher the expected rate of return, the higher the fair value

 

 

42



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

4                                         Financial risk management

 

4.3                               Fair value estimation (Continued)

 

If the fair values of the long-term investments and short-term investments measured at fair value through profit or loss held by the Group had been 10% higher/lower, the profit before income tax for the years ended December 31, 2015, 2016 and 2017 would have been approximately RMB7.1 million higher/lower, RMB11.7 million higher/lower and RMB26.1 million higher/lower, respectively.

 

Fair value of the Preferred Shares is affected by changes in the Company’s equity value, if the Company’s equity value had increased/decreased by 10% with all other variables held constant, the profit before income tax for the years ended December 31, 2016 and 2017 would have been approximately RMB604 million lower/RMB605 million higher and RMB591 lower/RMB595 million higher, respectively.

 

There were no transfers between level 1, 2 and 3 of fair value hierarchy classifications during the years ended December 31, 2015, 2016 and 2017.

 

5.                                     Revenue and segment information

 

The CODM assesses the performance of the operating segment mainly based on the measure of operating profit, excluding items which are not directly related to the segment performance (“combined results”). These include non-operating income/(expenses) such as government subsidies, fair value gains on short-term investments measured at fair value through profit or loss, and other non-operating items. The CODM reviews the combined results when making decisions about allocating resources and assessing performance of the Group as a whole. Therefore, the Group has only one reportable segment which mainly operates its businesses in the PRC and earns substantially all of the revenues from external customers attributed to the PRC. As of December 31, 2015, 2016 and 2017, substantially all of the non-current assets of the Group were located in the PRC. Therefore, no geographical segments are presented. No analysis of segment assets or segment liabilities is presented as they are not used by the CODM when making decisions about allocating resources and assessing performance of the Group.

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Operating (loss)/profit per consolidated statements of comprehensive (loss)/Income

 

(942,961

)

(2,115,907

)

28,714

 

Less: Other income

 

(49,006

)

(10,547

)

(12,805

)

Fair value changes on investments measured at fair value through profit or loss

 

(17,646

)

4,031

 

(863

)

Other gains/(losses), net

 

(51,107

)

(4,689

)

(22,610

)

Operating (loss)/profit presented to the CODM

 

(1,060,720

)

(2,127,112

)

(7,564

)

 

Revenue by service type for the years ended December 31, 2015, 2016 and 2017 are as follows:

 

 

 

Year ended December 31,

 

 

 

2015

 

2016

 

2017

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Accommodation reservation services

 

907,649

 

2,094,050

 

2,361,625

 

Transportation ticketing services

 

89,378

 

86,650

 

61,295

 

Others

 

29,097

 

23,865

 

95,671

 

Total revenue

 

1,026,124

 

2,204,565

 

2,518,591

 

 

43



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

5.                                     Revenue and segment information (Continued)

 

Since no revenue derived from sale to single customer of the Group has individually accounted for over 10% of the Group’s total revenue during each of the years presented, no information about major customers in accordance with IFRS 8 Operating Segment is presented.

 

6.                                     Expenses by nature

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Commission expenses

 

182,002

 

473,276

 

659,761

 

Employee benefit expense (Note 7)

 

722,577

 

688,790

 

635,186

 

Cost of pre-purchased inventory risk-taking room nights

 

239,686

 

677,359

 

532,870

 

Advertising and promotion expenses

 

567,557

 

1,357,769

 

356,776

 

Depreciation and amortization expense (Note 14 & 18)

 

73,292

 

77,333

 

84,150

 

Order processing cost

 

52,371

 

46,708

 

51,841

 

Rental and utility fees

 

44,583

 

42,995

 

38,963

 

Telephone and communication

 

35,375

 

38,022

 

37,779

 

Professional fees

 

18,932

 

39,596

 

35,032

 

Audit fees

 

7,352

 

4,158

 

1,491

 

Travelling and entertainment expenses

 

25,736

 

21,762

 

23,613

 

Bandwidth and servers custody fee

 

18,426

 

20,949

 

23,581

 

Tax and surcharges

 

56,896

 

21,549

 

7,815

 

Charges related to re-designation of ordinary shares to the Preferred Shares in connection with the Restructuring (Note 24)

 

 

742,467

 

 

Others

 

42,059

 

78,944

 

37,297

 

 

 

2,086,844

 

4,331,677

 

2,526,155

 

 

7.                                     Employee benefit expense (including directors’ emoluments)

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Wages, salaries and bonuses

 

372,506

 

458,322

 

446,399

 

Pension costs - defined contribution plans

 

55,813

 

62,167

 

62,881

 

Other social security costs, housing benefits and other employee benefits

 

82,758

 

95,958

 

69,123

 

Share-based compensation expenses (Note 8)

 

211,500

 

72,343

 

56,783

 

 

 

722,577

 

688,790

 

635,186

 

 

44



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

7.                                      Employee benefit expense (including directors’ emoluments)

 

(a)                                 Pension costs — defined contribution plans

 

Employees of the Group in the PRC are required to participate in a defined contribution retirement scheme administered and operated by the local municipal governments. The Group contributes funds which are calculated on a fixed percentage of 14% of the employees’ salary (subject to a floor and cap) as set by local municipal governments to each scheme locally to fund the retirement benefits of the employees.

 

(b)                                 Directors’ emoluments

 

With the completion of the Acquisition, the emoluments of individual directors of the Company are set out below which accounts for the directors of the Company after the Acquisition:

 

 

 

Emoluments paid or receivable in respect of a person’s services as a Director, whether of the Company or its
subsidiaries undertaking

 

 

 

 

 

 

 

Fees

 

Salary

 

Discretionary
Bonuses

 

Housing
allowance

 

Estimated
money value of
other benefits

 

Employer’s
contribution of
a retirement
benefit scheme

 

Share-based
compensation
expenses

 

Other emoluments
paid or receivable in
respect of director’s
other services in
connection with the
management of the
affairs of the Company
or its subsidiaries
undertaking

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

Year ended December 31, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Director — Mr. Jiang Hao

 

 

328

 

 

7

 

14

 

21

 

3,943

 

 

4,313

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Director — Mr. Jiang Hao

 

 

675

 

 

14

 

26

 

42

 

11,055

 

 

11,812

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Director — Mr. Jiang Hao

 

 

925

 

1,662

 

16

 

26

 

46

 

9,447

 

 

12,122

 

 

The remuneration shown above represents remuneration received from the Group by the director in his capacity as employee to the companies comprising the Group. No directors waived any emolument during the Track Record Period.

 

45



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

7.                                      Employee benefit expense (including directors’ emoluments) (Continued)

 

(c)                                  Five highest paid individuals

 

The five individuals whose emoluments were the highest in the Group for the Track Record Period include 0, 1 and 1 director whose emoluments are reflected in the analysis shown in “Directors’ emoluments”. The emoluments payable to the remaining 5, 4 and 4 individuals for the Track Record Period are as follows:

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Wages, salaries and bonuses

 

6,247

 

4,234

 

5,306

 

Pension costs - defined contribution plans

 

201

 

172

 

198

 

Other social security costs, housing benefits and other employee benefits

 

392

 

292

 

234

 

Share-based compensation expenses (Note 8)

 

119,344

 

9,285

 

6,105

 

 

 

126,184

 

13,983

 

11,843

 

 

The emoluments fell within the following band:

 

 

 

Number of individuals

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

HKD 2 million to HKD 3 million

 

 

 

3

 

HKD 3 million to HKD 4 million

 

 

3

 

 

HKD 4 million to HKD 5 million

 

 

 

 

HKD 5 million to HKD 10 million

 

4

 

1

 

1

 

Over HKD 10 million

 

1

 

 

 

 

46



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

8.                                      Share-based compensation expenses

 

(a)                                 Share incentive plans

 

In July 2004, eLong adopted a share and annual incentive plan (the “2004 Plan”), which allows eLong grants share options, share appreciation rights, restricted shares or Restricted Share Units (“RSUs”) to officers, employees, non-employees, directors or consultants of eLong up to a maximum of 4,000,000 ordinary shares of eLong.

 

In May 2009, eLong adopted a share and annual incentive plan (the “2009 Plan”), which allows eLong to grant share options, share appreciation rights, restricted shares or RSUs to officers, employees, directors or consultants of eLong up to an aggregate of 17,000,000 ordinary shares of eLong.

 

In August 2016, the Company adopted a 2016 share incentive plan (the “2016 Plan”), which allows officers, employees, non-employees, directors of the Company to (i) acquire ordinary shares of the Company pursuant to options granted hereunder, (ii) receive RSU awards, and (iii) make direct purchases of restricted shares. The maximum number of ordinary shares that may be subject to the awards granted under the 2016 Plan is 10,136,000.

 

Share options granted under the 2004 Plan expired in five or ten years, and generally vested and became exercisable ratably over three to five years from the date of grant. Options granted under the 2009 Plan generally expired in five years and vested and became exercisable over one to three years from the date of grant.

 

RSUs are rights to receive the ordinary shares of eLong or the Company, when applicable in the case of grants to the Company’s independent directors, a cash award linked to the Company’s ordinary share value.  RSUs generally vest over a two to five-year period, and are not entitled to dividends or voting rights.

 

47



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

8.                                      Share-based compensation expenses (Continued)

 

(b)                                 Equity Awards in connection with the Expedia Transaction

 

In May 2015, in connection with the Expedia Transaction which resulted in the change of control of eLong, the Board of Directors of eLong resolved the follows:

 

·                      to accelerate the vesting and cash settlement of unvested restricted share units held by certain then directors for a price of US$14.635 per RSU. The associated cost for the accelerating vesting of these RSU amounted to RMB4.1 million and was recognized in administrative expenses for the year ended December 31, 2015;

 

·                      to accelerate the vesting of 3,655,722 then un-vested RSUs previously granted to the then CEO of eLong. The associated cost for the accelerating vesting of these RSUs amounted to RMB110.3 million and was recognized in administrative expenses for the year ended December 31, 2015;

 

·                      eLong to repurchase 253,804 then unvested RSUs and share options held by certain senior management at a price of US$14.635 per share. The cost for such repurchase amounted to RMB6.8 million and was recognized in administrative expenses for the year ended December 31, 2015.

 

·                      to accelerate the vesting of then-unvested options and RSUs held by employees and granted to such employees a right to sell to eLong the ordinary shares issued upon vesting, for a price of $14.635 per share. In this connection, the Company repurchased 740,226 vested RSUs and share options from the employees who exercised the right. The cost arising from the acceleration of the vesting amounted to RMB98.4 million and was recognized in administrative expenses for the year ended December 31, 2015;

 

In connection with the Expedia Transaction, the then CEO of eLong sold 1,588,692 ordinary shares of related shares to Ctrip at a price of $14.635 per share. As Ctrip became the largest shareholder of eLong upon the completion of the Expedia Transaction, the aggregate difference between the selling price and the then market price of related shares amounted to RMB22.1 million was recognized in administrative expenses for the year ended December 31, 2015. In addition, Ctrip also granted an option to the then CEO of eLong to exchange 529,564 ordinary shares of eLong for 27,679 ordinary shares of Ctrip, which was exercised on November 22, 2015. The fair value of such option amounted to RMB23.7 million was recorded in administrative expenses for the year ended December 31, 2015.

 

(c)                                  Equity Awards in connection with the Restructuring

 

In August 2017, to align the interests of key employees with that of the Company, the Company established several employees’ equity awards entities in the form of limited liability partnerships in 2017 (the “EAEs”) and the EAEs jointly established an employees’ equity awards holding company (the “EAE Holdco”). According to the agreements between the EAEs and EAE Holdco, the Company has the discretion to invite any employee of the Company to participate in the EAEs by subscribing for their partnership interest. The participating employees are entitled to all the economic benefits generated by the EAEs with the requisition service period. As the general partner of these EAEs are designated by the Company, the EAEs and EAE Holdco are therefore controlled and consolidated by the Company as structured entities and all the ordinary shares issued to EAE Holdco for the purpose of equity incentives are recorded as treasury stock of the Company.

 

48



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

8.                                      Share-based compensation expenses (Continued)

 

(d)                                 Equity Awards after the Restructuring

 

After the incorporation of EAEs and EAE Holdco, to assume and replace the RSUs of eLong granted under eLong Equity Awards as aforementioned, the Company issued 2,068,671 ordinary shares to EAE Holdco which represented the then outstanding RSUs under eLong Equity Awards held by the related employees of these RSUs participated in EAEs.

 

On September 1, 2017, the Company, through EAEs and EAE Holdco, granted 2,350,000 RSUs to certain selected employees, 662,667 of which were immediately vested upon the grant with the remaining portion to be vested in 5 instalments over a 2.5 year requisite service period.

 

The share-based compensation expense recognized for employee services received during the Track Record Period is shown in the following table:

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Expense arising from equity-settled share-based payment transactions

 

211,500

 

72,343

 

56,783

 

 

Share options

 

The following table summarizes information with respect to share options outstanding as of December 31, 2015, 2016 and 2017 and the weighted average exercise prices (“WAEP”).

 

 

 

2015
number

 

2015 WAEP

 

2016

 

2016

 

2017
number

 

2017 WAEP

 

 

 

(Unaudited)

 

(Unaudited)

 

number

 

WAEP

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

USD

 

 

 

USD

 

 

 

 

 

Outstanding at January 1

 

972,139

 

7.39

 

183,513

 

8.35

 

n/a

 

n/a

 

Forfeited and expired during the year

 

(101,288

)

8.48

 

(97,216

)

8.74

 

n/a

 

n/a

 

Exercised during the year

 

(603,786

)

6.83

 

(29,872

)

7.14

 

n/a

 

n/a

 

Repurchased during the year

 

(83,552

)

8.02

 

(56,425

)

8.36

 

n/a

 

n/a

 

Outstanding at December 31

 

183,513

 

8.35

 

 

 

n/a

 

n/a

 

Exercisable at December 31

 

183,513

 

8.35

 

 

 

n/a

 

n/a

 

 

There was no new share option granted during the year ended December 31, 2015, 2016 and 2017.

 

The weighted average remaining contractual life for the share options outstanding as of December 31, 2015 was 2.13 years.

 

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the share options were granted.

 

Share options outstanding at the end of 2015 have the following expiry date and exercise prices:

 

Expiry date — December 31

 

Exercise price in USD per
share option

 

Number of share options
2015

 

2016

 

3.18~10.26

 

40,676

 

2017

 

7.19~8.5

 

87,037

 

2020

 

8.82

 

55,800

 

 

 

 

 

183,513

 

 

49



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

8.                                      Share-based compensation expenses (Continued)

 

RSUs

 

The following table summarizes information with respect to RSUs arrangements through EAEs and EAE Holdco as aforementioned as of December 31, 2015, 2016 and 2017 and the weighted average fair value (“WAFV”).

 

 

 

2015
number

 

2015 WAFV

 

2016

 

2016

 

2017
number

 

2017 WAFV

 

 

 

(Unaudited)

 

(Unaudited)

 

number

 

WAFV

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

USD

 

 

 

USD

 

 

 

USD

 

Outstanding at January 1

 

6,156,728

 

8.09

 

3,937,415

 

8.33

 

2,158,679

 

8.54

 

Granted during the year

 

2,619,913

 

8.49

 

410,000

 

8.77

 

2,350,000

 

9.54

 

Forfeited and expired during the year

 

(1,197,022

)

8.07

 

(504,384

)

7.94

 

(3,229

)

9.00

 

Exercised during the year

 

(2,731,726

)

8.16

 

(211,433

)

8.04

 

 

 

Repurchased during the year

 

(910,478

)

8.02

 

(1,472,919

)

8.32

 

(86,779

)

7.35

 

Outstanding at December 31

 

3,937,415

 

8.33

 

2,158,679

 

8.54

 

4,418,671

 

9.09

 

Exercisable at December 31

 

3,937,415

 

8.33

 

2,158,679

 

8.54

 

4,418,671

 

9.09

 

 

The fair value of RSUs grants during years ended December 31, 2015 and 2016 were determined by the trading price of eLong’s ADR or ordinary share on NASDAQ Global Select Market. While, to determine the fair value of RSUs granted during fiscal year 2017, the Company used discounted cash flow method to determine the underlying equity fair value of the Company and adopted equity allocation model to determine the fair value of the underlying ordinary share.

 

9.                                      Other income

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Government subsidies

 

20,955

 

10,547

 

12,805

 

Interest income from time deposit

 

28,051

 

 

 

 

 

49,006

 

10,547

 

12,805

 

 

10.                              Other gains/(losses), net

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Fair value gains from short-term investments measured at fair value through profit or loss

 

4,808

 

6,271

 

10,056

 

Foreign exchange gain/(loss)

 

2,931

 

(3,086

)

1,294

 

Gain on disposal of long-term investments

 

 

 

753

 

Impairment of goodwill and other intangible assets (Note 18)

 

(40,402

)

 

 

Impairment loss on equity investments (Note 15)

 

(459

)

 

 

Gain on disposal of equity investments (Note 15)

 

13,191

 

 

 

Gain from disposal of a subsidiary (a)

 

71,082

 

 

 

Others

 

(44

)

1,504

 

10,507

 

 

 

51,107

 

4,689

 

22,610

 

 

(a)                                  On March 15, 2015, the Group disposed all of the Group’s equity interest in Nanjing Xici Information Technology Share Co., Ltd. (“Nanjing Xici”) to an independent third party for cash consideration of RMB75,820,000 with a gain of RMB71,081,854.

 

50



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

11.                              Finance income and costs

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Finance income

 

 

 

 

 

 

 

Interest income on bank deposits

 

8,601

 

7,972

 

9,800

 

Others

 

555

 

430

 

345

 

 

 

9,156

 

8,402

 

10,145

 

 

 

 

 

 

 

 

 

Finance costs

 

 

 

 

 

 

 

Service fee for bank guarantee

 

(585

)

(879

)

(475

)

Others

 

(5,246

)

(3,235

)

312

 

 

 

(5,831

)

(4,114

)

(163

)

 

 

 

 

 

 

 

 

Net finance income

 

3,325

 

4,288

 

9,982

 

 

12.                               Income tax expense/(credit)

 

The income tax expense/(credit) of the Group for the years ended December 31, 2015, 2016 and 2017 is analyzed as follows:

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Current income tax

 

20,040

 

433

 

5,603

 

Deferred income tax (Note 19)

 

(14,834

)

545

 

(65,959

)

 

 

5,206

 

978

 

(60,356

)

 

(a)                                 Cayman Islands income tax

 

Under the current laws of the Cayman Islands, the Company is not subject to tax on the Company’s income or capital gains. In addition, no Cayman Islands withholding tax is imposed upon any payments of dividends.

 

(b)                                 Hong Kong income tax

 

Entities incorporated in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5% on the assessable profits for the periods presented, based on the existing legislation, interpretations and practices in respect thereof.

 

51



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

12.                               Income tax expense/(credit) (Continued)

 

(c)                                  PRC corporate income tax (“CIT”)

 

CIT provision was made on the estimated assessable profits of entities within the Group incorporated in the PRC for the years ended December 31, 2015, 2016 and 2017, calculated in accordance with the relevant regulations of the PRC after considering the available tax benefits from refunds and allowances. The general PRC CIT rate is 25% in 2015, 2016 and 2017.

 

One subsidiary of the Company is qualified as High and New Technology Enterprise, and accordingly, its subject to a reduced preferential CIT rate of 15% for the years ended December 31, 2015, 2016 and 2017 according to the applicable CIT law.

 

(d)                                 PRC Withholding Tax (“WHT”)

 

According to the applicable PRC tax regulations, dividends distributed by a company established in the PRC to a foreign investor with respect to profits derived after January 1, 2008 are generally subject to a 10% WHT. If a foreign investor incorporated in Hong Kong meets the conditions and requirements under the double taxation treaty arrangement entered into between the PRC and Hong Kong, the relevant withholding tax rate will be reduced from 10% to 5%.

 

During the Track Record Period, the Group does not have any plan to require its PRC subsidiaries to distribute their retained earnings and intends to retain them to operate and expand its business in the PRC. Accordingly, no deferred income tax liability on WHT was provided as of December 31, 2015, 2016 and 2017.

 

The tax on the Group’s profit/(loss) before tax differs from the theoretical amount that would arise using the tax rate of 25% for the years ended December 31, 2015, 2016 and 2017, being the tax rate of the major subsidiaries of the Group. The difference is analyzed as follows:

 

 

 

Year ended December 31

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

(Loss)/profit before income tax

 

(957,813

)

(2,159,618

)

134,021

 

 

 

 

 

 

 

 

 

Tax calculated at PRC statutory tax rate of 25%

 

(239,453

)

(539,905

)

33,505

 

 

 

 

 

 

 

 

 

Tax effects of:

 

 

 

 

 

 

 

Preferential income tax rates

 

108,683

 

228,595

 

(18,075

)

Super deduction for research and development expenses*

 

(10,911

)

(14,190

)

(18,142

)

Expenses not deductible for tax purposes

 

3,044

 

272,023

 

16,148

 

Utilization/(recognition) of previously unrecognized tax losses and temporary differences**

 

140,536

 

57,083

 

(74,079

)

Others

 

3,307

 

(2,628

)

287

 

Income tax expense/(credit)

 

5,206

 

978

 

(60,356

)

 


* According to the relevant tax laws and regulations in the PRC, that was effective from 2008 onwards, enterprises engaging in research and development activities are entitled to claim 150% of their research and development expenses so incurred as tax deductible expenses when determining their assessable profits for the year.

 

** The Group did not recognize the deferred tax assets for its tax losses in 2015 and 2016 considering that there is substantial uncertainty in utilization of the tax losses when the Company’s PRC subsidiaries were still in loss making position. In 2017, with its major PRC subsidiaries turning to be profitable, the Group recognized the associated deferred tax assets based on its best estimate of the future utilization of the tax losses.

 

52



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

13.                               Earnings/(loss) per share

 

(a)                                 Basic

 

Basic earnings or loss per share for the years ended December 31, 2015, 2016 and 2017 are calculated by dividing the profit or loss attribute to the Company’s equity holders by the weighted average number of ordinary shares in issue during the respective years.

 

As of December 31, 2015, 2016 and 2017, 3,937,415, 2,158,679 and 4,418,671 ordinary shares were issued to certain employees respectively. However, the shareholder’ rights of these shares were restricted and would be vested over certain service periods. Accordingly, these shares were accounted for as RSUs. The Group did not include these ordinary shares in the calculation of basic earnings/(loss) per share for the years ended December 31, 2015, 2016 and 2017 as these shares are not considered outstanding for earnings/(loss) per share calculation purposes.

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Net profit/(loss) attributable to the owners of the Company(RMB’000)

 

(916,266

)

(2,139,267

)

195,575

 

Weighted average number of ordinary shares in issue (‘000)

 

73,300

 

46,497

 

26,052

 

Basic earnings/(loss) per share (RMB)

 

(12.50

)

(46.01

)

7.51

 

 

(b)                                  Diluted

 

Diluted earnings/(loss) per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

 

As the Group incurred losses for the years ended December 31, 2015 and 2016, the potential ordinary shares were not included in the calculation of dilutive loss per share, as their inclusion would be anti-dilutive. Accordingly, diluted loss per share for the years ended December 31, 2015 and 2016 are the same as basic loss per share of the respective years.

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Net profit/(loss) attributable to the owners of the Company

 

(916,266

)

(2,139,267

)

195,575

 

Adjustment for redeemable convertible preferred shares

 

 

 

(97,576

)

Net profit/loss for calculation of diluted earnings/(loss) per share

 

(916,266

)

(2,139,267

)

97,999

 

 

 

 

 

 

 

 

 

Weighted average number of ordinary shares in issue

 

73,300

 

46,497

 

26,052

 

Adjustments for redeemable convertible preferred shares

 

 

 

60,534

 

Adjustments for RSUs granted to employees

 

 

 

1,167

 

Weighted average number of ordinary shares for calculation of diluted earnings/(loss) per share

 

73,300

 

46,497

 

87,753

 

 

 

 

 

 

 

 

 

Diluted earnings/(loss) per share

 

(12.50

)

(46.01

)

1.12

 

 

53



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

14.                               Property, plant and equipment

 

 

 

IT equipment

 

Furniture and
fixtures

 

Software

 

Leasehold
improvements

 

Construction in
progress

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

117,458

 

12,506

 

153,306

 

16,049

 

 

299,319

 

Accumulated depreciation

 

(63,857

)

(7,793

)

(105,535

)

(9,778

)

 

(186,963

)

Net book amount

 

53,601

 

4,713

 

47,771

 

6,271

 

 

112,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening net book amount

 

53,601

 

4,713

 

47,771

 

6,271

 

 

112,356

 

Additions

 

15,051

 

1,228

 

24,267

 

1,126

 

 

41,672

 

Depreciation charge

 

(20,154

)

(1,827

)

(28,443

)

(1,643

)

 

(52,067

)

Disposal

 

(2,722

)

(273

)

(36

)

(130

)

 

(3,161

)

Closing net book amount

 

45,776

 

3,841

 

43,559

 

5,624

 

 

98,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

121,225

 

11,669

 

170,681

 

16,209

 

 

319,784

 

Accumulated depreciation

 

(75,449

)

(7,828

)

(127,122

)

(10,585

)

 

(220,984

)

Net book amount

 

45,776

 

3,841

 

43,559

 

5,624

 

 

98,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening net book amount

 

45,776

 

3,841

 

43,559

 

5,624

 

 

98,800

 

Additions

 

40,173

 

1,128

 

13,066

 

1,063

 

 

55,430

 

Depreciation charge

 

(22,799

)

(1,748

)

(27,094

)

(1,204

)

 

(52,845

)

Disposal

 

(217

)

(87

)

(7

)

 

 

(311

)

Closing net book amount

 

62,933

 

3,134

 

29,524

 

5,483

 

 

101,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

158,034

 

12,222

 

174,824

 

13,719

 

 

358,799

 

Accumulated depreciation

 

(95,101

)

(9,088

)

(145,300

)

(8,236

)

 

(257,725

)

Net book amount

 

62,933

 

3,134

 

29,524

 

5,483

 

 

101,074

 

 

54



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

14.                               Property, plant and equipment (Continued)

 

 

 

IT equipment

 

Furniture and
fixtures

 

Software

 

Leasehold
improvements

 

Construction in
progress

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening net book amount

 

62,933

 

3,134

 

29,524

 

5,483

 

 

101,074

 

Additions

 

30,239

 

446

 

130

 

138

 

356,565

 

387,518

 

Depreciation charge

 

(24,311

)

(1,387

)

(18,054

)

(1,325

)

 

(45,077

)

Disposal

 

(1,532

)

(179

)

 

(82

)

 

(1,793

)

Closing net book amount

 

67,329

 

2,014

 

11,600

 

4,214

 

356,565

 

441,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2017 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

174,841

 

11,420

 

174,167

 

13,564

 

356,565

 

730,557

 

Accumulated depreciation

 

(107,512

)

(9,406

)

(162,567

)

(9,350

)

 

(288,835

)

Net book amount

 

67,329

 

2,014

 

11,600

 

4,214

 

356,565

 

441,722

 

 

55


 


Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

14.                               Property, plant and equipment (Continued)

 

Depreciation expenses have been charged to the consolidated statement of profit or loss as follows:

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Cost of revenue

 

45,935

 

47,250

 

39,961

 

Service development expenses

 

4,511

 

4,244

 

4,072

 

Administrative expenses

 

1,305

 

1,184

 

905

 

Selling and marketing expenses

 

316

 

167

 

139

 

 

 

52,067

 

52,845

 

45,077

 

 

Note: Construction in progress with carrying amount of RMB356,564,820 were pledged as security for the Group’s bank borrowings of RMB191,997,000 as of December 31, 2017 (Note 23).

 

15.                              Investments accounted for using the equity method

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

At the beginning of the year

 

78,306

 

51,087

 

39,869

 

Shares of results

 

(18,177

)

(11,218

)

(2,251

)

Impairment loss (Note 10)

 

(459

)

 

 

Reclassify to long-term investment measured as fair value through profit or loss (b)

 

(2,424

)

 

 

Disposal of investments accounted for using the equity method

 

(6,159

)

 

 

At the end of the year

 

51,087

 

39,869

 

37,618

 

 

Set out below are the particulars of the associate of the Group as of December 31, 2015, 2016 and 2017.

 

 

 

 

 

 

 

Equity interest held
as of December 31,

 

 

 

Place of

 

Principal

 

2015

 

 

 

2017

 

Name of associate

 

incorporation

 

activities

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

2012 Affiliate Company(a)

 

The PRC

 

Property management software development

 

46.5

%

46.5

%

46.5

%

 

Note:

 

(a)                                 Equity Method Investment - 2012 Affiliate Company

 

In 2012, the Group acquired 30% equity interest in an unlisted company (the “2012 Affiliate Company”) at RMB5.6 million. The Company accounted for its investment using the equity method. In 2013, the 2012 Affiliate Company changed its business focus to property management software development, which was considered as better business collaboration with the Group. As such, in 2014, the Group acquired an additional 19% equity interest in the associate at consideration of RMB76,663,200.

 

In 2015, the Group reached an agreement with a third party to sell a 2.5% equity interest in the 2012 Affiliate Company for cash consideration of RMB13,750,000, and recognized a gain of RMB10,014,455 on the date of the disposal.

 

56



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

15.                               Investments accounted for using the equity method (Continued)

 

(b)                                 Equity Method Investment - 2014 Affiliate Company

 

On December 12, 2014, the Group invested RMB5,600,000 to acquire a 30% equity interest in 2014 Affiliate Company and accounted for this investment using the equity method. On July 20, 2015, the Group disposed of a 15% equity interest in 2014 Affiliate Company for proceeds of RMB5,600,000 and realized a gain of RMB3,176,066. Upon the completion of the disposition, the Group held a remaining 15% equity interest in 2014 Affiliate Company and switched to short-term investment measured at fair value through profit or loss due to the Group’s lack of ability to exercise significant influence.

 

The Company’s investments in affiliates, either accounted for under equity method or measured at fair value through profit and loss, are not considered material in individual or aggregated basis in the Track Record Period.

 

16.                              Financial instruments by category

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Assets as per consolidated statement of financial position

 

 

 

 

 

 

 

Financial assets at fair value through profit or loss:

 

 

 

 

 

 

 

- Long term investments measured at fair value through profit or loss (Note 17)

 

49,881

 

45,685

 

25,239

 

- Short-term investments measured at fair value through profit or loss (Note 17)

 

21,046

 

71,041

 

236,107

 

Financial assets at amortized costs:

 

 

 

 

 

 

 

- Trade receivables (Note 21)

 

461,431

 

883,382

 

539,217

 

- Other receivables (Note 20)

 

118,126

 

128,015

 

115,400

 

- Time deposits (Note 17)

 

224,507

 

 

 

- Restricted cash (Note 22)

 

146,480

 

153,606

 

170,541

 

- Cash and cash equivalents (Note 22)

 

710,403

 

339,299

 

701,748

 

 

 

1,731,874

 

1,621,028

 

1,788,252

 

 

 

 

 

 

 

 

 

Liabilities as per consolidated statement of financial position

 

 

 

 

 

 

 

Financial liabilities at amortized cost:

 

 

 

 

 

 

 

- Trade payables (Note 25)

 

658,566

 

921,633

 

1,114,917

 

- Other payables (Note 26)

 

256,339

 

123,624

 

120,610

 

- Borrowings (Note 23)

 

 

 

191,997

 

Financial liabilities at fair value through profit or loss:

 

 

 

 

 

 

 

- Redeemable convertible preferred shares (Note 24)

 

 

6,398,631

 

6,347,647

 

 

 

914,905

 

7,443,888

 

7,775,171

 

 

57



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

17.                               Investments

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Short-term investments measured at

 

 

 

 

 

 

 

-Amortized cost (a)

 

224,507

 

 

 

-Fair value through profit or loss (b)

 

21,046

 

71,041

 

236,107

 

 

 

245,553

 

71,041

 

236,107

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Long-term investments measured at fair value through profit or loss (c)

 

49,881

 

45,685

 

25,239

 

 

(a)                                 Short-term investments measured at amortized cost

 

Short-term investments measured at amortized cost are time deposits with maturities above 3 months to one year with fixed interest rates and denominated in RMB. The investments are held for collection of contractual cash flow and the contractual cash flows of these investments qualify for solely payments of principal and interest, hence they are measured at amortized costs. None of these investments are past due.

 

(b)                                 Short-term investments measured at fair value through profit or loss

 

The short-term investments measured at fair value through profit or loss are wealth management products, denominated in RMB and with expected rates of return ranging from 0.4% to 5.4%, 0.8% to 6.0%, and 1.5% to 6.0% per annum for the years ended December 31, 2015, 2016 and 2017, respectively. The returns on all of these wealth management products are not guaranteed, hence their contractual cash flows do not qualify for solely payments of principal and interest. Therefore they are measured at fair value through profit or loss. None of these investments are past due.

 

The fair values are based on cash flow discounted using the expected return based on management judgment and are within level 3 of the fair value hierarchy.

 

(c)                                  Long-term investments measured at fair value through profit or loss

 

As of December 31, 2015, 2016 and 2017, long-term investments measured at fair value through profit or loss are equity interests held by the Group in several private companies in the PRC.

 

The equity interests held by the Group in the private companies are (i) less than 20% of each entity and the Group does not have control nor significant influence over each of these entities, or (ii) not considered to be common equity due to the investment having a substantive liquidation preference or redemption rights. Therefore, these investments are classified as long-term investments measured at fair value through profit or loss.

 

The fair values of the long-term investments are measured using a valuation technique with unobservable inputs and hence classified as Level 3 of the fair value hierarchy. The major assumptions used in the valuation for investment in private companies refer to Note 4.3.

 

58



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

17.                               Investments (Continued)

 

(d)                                 Amounts recognized in profit or loss

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Fair value changes in long-term investments

 

17,457

 

(4,196

)

(1,199

)

Fair value changes in short-term investments measured at fair value through profit or loss

 

189

 

165

 

2,062

 

 

 

17,646

 

(4,031

)

863

 

 

59



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

18.                               Intangible assets

 

 

 

Goodwill
(Note c)

 

Customer
lists

 

Trade names

 

Copy-rights

 

Business
cooperation
arrangement
and internet
domain name
(Note a)

 

Others

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

186,846

 

9,191

 

86,467

 

192

 

3,904

 

4,930

 

291,530

 

Accumulated amortization

 

 

(7,410

)

(7,730

)

(192

)

(2,162

)

(1,886

)

(19,380

)

Impairment

 

(5,524

)

 

 

 

(555

)

 

(6,079

)

Net book amount

 

181,322

 

1,781

 

78,737

 

 

1,187

 

3,044

 

266,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening net book amount

 

181,322

 

1,781

 

78,737

 

 

1,187

 

3,044

 

266,071

 

Addition

 

2,920

 

510

 

1,570

 

 

 

37

 

5,037

 

Amortization charge

 

 

(714

)

(18,435

)

 

(454

)

(1,622

)

(21,225

)

Disposal

 

 

 

 

 

(335

)

 

(335

)

Impairment loss (Note b)

 

 

 

(40,402

)

 

 

 

(40,402

)

Closing net book amount

 

184,242

 

1,577

 

21,470

 

 

398

 

1,459

 

209,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

189,766

 

9,701

 

88,037

 

192

 

3,049

 

4,967

 

295,712

 

Accumulated amortization

 

 

(8,124

)

(26,165

)

(192

)

(2,096

)

(3,508

)

(40,085

)

Impairment

 

(5,524

)

 

(40,402

)

 

(555

)

 

(46,481

)

Net book amount

 

184,242

 

1,577

 

21,470

 

 

398

 

1,459

 

209,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening net book amount

 

184,242

 

1,577

 

21,470

 

 

398

 

1,459

 

209,146

 

Addition (Note a)

 

 

 

 

 

163,246

 

 

163,246

 

Amortization charge

 

 

(682

)

(5,728

)

 

(16,723

)

(1,355

)

(24,488

)

Closing net book amount

 

184,242

 

895

 

15,742

 

 

146,921

 

104

 

347,904

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

189,766

 

9,701

 

88,037

 

192

 

166,295

 

4,967

 

458,958

 

Accumulated amortization

 

 

(8,806

)

(31,892

)

(192

)

(18,819

)

(4,863

)

(64,573

)

Impairment

 

(5,524

)

 

(40,402

)

 

(555

)

 

(46,481

)

Net book amount

 

184,242

 

895

 

15,742

 

 

146,921

 

104

 

347,904

 

 

60



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

18.                               Intangible assets (Continued)

 

 

 

Goodwill
(Note c)

 

Customer
lists

 

Trade names

 

Copy-rights

 

Business
cooperation
arrangement
and internet
domain name
(Note a)

 

Others

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening net book amount

 

184,242

 

895

 

15,742

 

 

146,921

 

104

 

347,904

 

Amortization charge

 

 

(683

)

(5,727

)

 

(32,649

)

(14

)

(39,073

)

Closing net book amount

 

184,242

 

212

 

10,015

 

 

114,272

 

90

 

308,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2017 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

189,766

 

9,701

 

88,037

 

192

 

166,295

 

4,967

 

458,958

 

Accumulated amortization

 

 

(9,489

)

(37,620

)

(192

)

(51,468

)

(4,877

)

(103,646

)

Impairment

 

(5,524

)

 

(40,402

)

 

(555

)

 

(46,481

)

Net book amount

 

184,242

 

212

 

10,015

 

 

114,272

 

90

 

308,831

 

 

61



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

18.                               Intangible assets (Continued)

 

Note:

 

(a)                                 Business cooperation arrangement

 

In July 2016, the Company entered into a Strategic Cooperation Arrangement with one of its shareholders (the “Shareholder”), which includes a Business Cooperation Arrangement and a compensation to promotion and marketing service rendered by the Shareholder to the Company by issuing 11,111,111 Preferred Shares of  the  Company.  The Business Cooperation Arrangement has a term of five years and the shareholder will deploy certain agreed-upon business resources to the Company to increase the user traffic in 2016 of the Company’s platform. The Company assessed and concluded that the Business Cooperation Arrangement was qualified as an intangible asset to recognize in separate from the total consideration. Based on the valuation performed by the Company with assistance from the independent appraisal, the fair value of the 11,111,111 newly issued Preferred Shares was RMB1,208 million, out of which RMB163 million was attributable to the fair value of Business Cooperation Arrangement which is recorded as intangible asset and amortized over five years under straight line method, the remaining RMB1,045 million represented the compensation for the promotion and marketing service rendered by the Shareholder and was recorded as selling and marketing expense upon the issuance of the Preferred Shares.

 

(b)                                 Impairment tests for trade names

 

In 2015, changes in circumstances in the geographical territory covered by one of the Company’s subsidiary indicated that the carrying value of the trade name might not be recoverable. With the assistance of an external valuer, the management of the Group decided to  write down the value of trade name to its fair value less cost of disposal, which was measured using the relief from royalty method. As such, an impairment charge of RMB40,401,740 was recorded as “Other gain/(loss), net” in the consolidated statements of comprehensive (loss)/income for the year ended December 31, 2015.

 

(c)                                  Impairment tests for goodwill

 

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount. Management reviews the business performance of the Group at group level as a single segment which goodwill is monitored. The recoverable amount for goodwill impairment assessment is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by the Directors for the next five-year period using the estimated growth in revenue with a range of 5.9% to 19.8% and gross profit margin with a range from 67.8% to 74.8%. Thereafter, the cash flows are extrapolated using the terminal growth rate not exceeding the long-term average growth rate for the Group. The key assumptions such as discount rate and the constant growth rate used for value-in-use calculations in 2015, 2016 and 2017 are as follows:

 

 

 

As of December 31,

 

 

 

2015

 

2016

 

2017

 

 

 

 

 

 

 

 

 

Discount rate

 

14.5

%

14.50

%

14.50

%

Constant growth rate

 

3

%

3

%

3

%

 

62



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

18.                               Intangible assets (Continued)

 

Amortization charges were expensed in the following categories in the consolidated statements of comprehensive (loss)/income:

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

 

 

Service development expenses

 

 

 

 

Selling and marketing expenses

 

 

16,324

 

32,649

 

Administrative expenses

 

21,225

 

8,164

 

6,424

 

 

 

21,225

 

24,488

 

39,073

 

 

19.                              Deferred income tax

 

The amount of offsetting deferred income tax assets and liabilities is RMB5,343,000, RMB4,165,000 and RMB3,071,000 for the years ended 2015, 2016 and 2017, respectively. The analysis of deferred income tax assets and liabilities is as follows:

 

The analysis of deferred tax assets and deferred tax liabilities is as follows:

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

 

 

—   to be recovered after more than 12 months

 

5,343

 

4,165

 

50,506

 

—   to be recovered within 12 months

 

 

 

14,442

 

 

 

5,343

 

4,165

 

64,948

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

—   to be recovered after more than 12 months

 

(9,081

)

(8,448

)

(3,272

)

 

63



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

19.                               Deferred income tax (Continued)

 

The movements in the deferred income tax assets are as follows:

 

 

 

Accrued
liabilities
and
provisions

 

Impairment on
investment,
trade
receivables
and
prepayment
and other
receivables

 

Future
deductible
expenses
and others

 

Tax losses

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2015 (Unaudited)

 

 

 

 

 

 

Statement of profit or loss credit/(charge) (Note 12)

 

 

 

 

5,343

 

5,343

 

At December 31, 2015 (Unaudited)

 

 

 

 

5,343

 

5,343

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2016

 

 

 

 

5,343

 

5,343

 

Statement of profit or loss credit/(charge) (Note 12)

 

 

 

 

(1,178

)

(1,178

)

At December 31, 2016

 

 

 

 

4,165

 

4,165

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2017 (Unaudited)

 

 

 

 

4,165

 

4,165

 

Statement of profit or loss credit/(charge) (Note 12)

 

14,576

 

4,247

 

35,217

 

6,743

 

60,783

 

At December 31, 2017 (Unaudited)

 

14,576

 

4,247

 

35,217

 

10,908

 

64,948

 

 

The movements in the deferred income tax liability are as follows:

 

 

 

Intangible
assets acquired
in business
combination

 

Fair value changes
in investments
measured at fair
value through
profit or loss

 

Others

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2015 (Unaudited)

 

(18,534

)

 

(38

)

(18,572

)

Statement of profit or loss credit/(charge) (Note 12)

 

13,935

 

(4,444

)

 

9,491

 

At December 31, 2015 (Unaudited)

 

(4,599

)

(4,444

)

(38

)

(9,081

)

 

 

 

 

 

 

 

 

 

 

At January 1, 2016

 

(4,599

)

(4,444

)

(38

)

(9,081

)

Statement of profit or loss credit/(charge) (Note 12)

 

1,200

 

(592

)

25

 

633

 

At December 31, 2016

 

(3,399

)

(5,036

)

(13

)

(8,448

)

 

 

 

 

 

 

 

 

 

 

At January 1, 2017 (Unaudited)

 

(3,399

)

(5,036

)

(13

)

(8,448

)

Statement of profit or loss credit/(charge) (Note 12)

 

1,200

 

3,976

 

 

5,176

 

At December 31, 2017 (Unaudited)

 

(2,199

)

(1,060

)

(13

)

(3,272

)

 

64



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

Details of unrecognized deferred tax are as follows:

 

Deferred income tax assets are recognized for deductible temporary differences and tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The Group did not recognize deferred income tax assets of RMB164,686,000 and RMB243,907,000 and RMB236,713,000 as of December 31, 2015, 2016 and 2017, respectively, in respect of tax losses amounting to RMB986,710,000 and RMB1,394,086,000 and RMB1,381,382,000 of certain subsidiaries comprising the Group as at those dates, respectively, that can be carried forward against future taxable income, and will expire between 2021 and 2022 under PRC tax regulations.

 

65



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

20.                               Prepayment and other receivables

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Included in non-current assets

 

 

 

 

 

 

 

Deposits (financial assets) (Note 22(b))

 

38,303

 

38,303

 

38,303

 

Others (financial assets)

 

9,846

 

11,458

 

10,869

 

 

 

48,149

 

49,761

 

49,172

 

 

 

 

 

 

 

 

 

Included in current assets

 

 

 

 

 

 

 

Advances to accommodation suppliers

 

109,454

 

174,155

 

51,682

 

Prepaid taxation

 

15,403

 

74

 

46,588

 

Advances to tickets suppliers

 

4,733

 

4,247

 

12,389

 

Prepayment for advertising

 

23,396

 

4,052

 

4,875

 

Prepayment for office rental

 

3,773

 

3,320

 

2,656

 

Others

 

9,131

 

10,086

 

11,520

 

Total non-financial assets

 

165,890

 

195,934

 

129,710

 

 

 

 

 

 

 

 

 

Deposits

 

60,268

 

70,247

 

52,386

 

Interest receivables

 

2,059

 

357

 

6,192

 

Receivables from Nanjing Xici disposal

 

7,650

 

7,650

 

7,650

 

Total financial assets

 

69,977

 

78,254

 

66,228

 

 

 

 

 

 

 

 

 

Current, total

 

235,867

 

274,188

 

195,938

 

 

(a)                                 The Group considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. Other receivables that are measured at amortized costs mainly included deposits, interest receivables and receivables from Nanjing Xici disposal. The Group considers the probability of default upon initial recognition of other receivables and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. Based on the assessment and analysis conducted by the Directors, no actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant increase of credit risk, and thus the impairment provisions, excluding that of receivable from Nanjing Xici disposal, recognized during the years ended December 31, 2015, 2016 and 2017 were limited to 12 months expected losses. For the receivables from Nanjing Xici disposal, it was arising from the Group’s disposal of equity interest in Nanjing Xici in 2015 (Note 10(a)) and secured by collateral assets. The Directors do not expect any significant credit risk relating to the receivables after considering the collateral assets.

 

(b)                                 Movement in impairment of other receivables are as follows:

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

At the beginning of the year

 

338

 

4,753

 

2,350

 

Reverse for impairment

 

 

(2,767

)

(521

)

Provision for impairment

 

4,415

 

364

 

398

 

At the end of the year

 

4,753

 

2,350

 

2,227

 

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

21.                               Trade receivables

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Receivables from third parties

 

251,619

 

354,040

 

213,696

 

Receivables from related parties (Note 35)

 

216,331

 

534,812

 

329,618

 

 

 

467,950

 

888,852

 

543,314

 

Less: allowance for impairment of trade receivables

 

(6,519

)

(5,470

)

(4,097

)

 

 

461,431

 

883,382

 

539,217

 

 

Note:

 

(a)                                 Movements on the Group’s allowance for impairment of trade receivables are as follows:

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

At the beginning of the year

 

(4,991

)

(6,519

)

(5,470

)

Provision for doubtful receivables

 

(7,505

)

(30,042

)

(700

)

Receivables written off during the year as uncollectible

 

5,977

 

31,091

 

2,073

 

At the end of the year

 

(6,519

)

(5,470

)

(4,097

)

 

(b)                                 The Group normally allows a credit period of 30 days to its customers. An ageing analysis of trade receivables based on invoice date is as follows:

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Up to 6 months

 

461,431

 

883,382

 

539,217

 

Over 6 months

 

6,519

 

5,470

 

4,097

 

 

 

467,950

 

888,852

 

543,314

 

 

(c)                                  Trade receivables are classified as financial assets measured at amortized cost under “loan and receivables”. The carrying amount of trade receivable approximated their fair values due to their short maturities.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

21.                              Trade receivables (Continued)

 

(d)                                 The Group applies the simplified approach to provide for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The provision is determined as follows:

 

 

 

Not
past due

 

Up to 2
months
past due

 

2 to 3
months
past due

 

Over 3
months
past due

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Expected loss rate

 

0.27

%

0.66

%

3.81

%

14.01

%

 

 

Gross carrying amount

 

317,226

 

97,657

 

23,517

 

29,550

 

467,950

 

Loss allowance provision

 

843

 

640

 

895

 

4,141

 

6,519

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

Expected loss rate

 

0.11

%

0.30

%

2.70

%

12.11

%

 

 

Gross carrying amount

 

633,606

 

200,649

 

26,176

 

28,421

 

888,852

 

Loss allowance provision

 

719

 

601

 

707

 

3,443

 

5,470

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Expected loss rate

 

0.22

%

0.80

%

11.28

%

46.78

%

 

 

Gross carrying amount

 

466,582

 

65,505

 

7,632

 

3,595

 

543,314

 

Loss allowance provision

 

1,032

 

522

 

861

 

1,682

 

4,097

 

 

22.                               Bank balances and cash

 

(a)                                 Cash and cash equivalents

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Cash on hand

 

26

 

95

 

82

 

Cash at bank

 

710,377

 

339,204

 

701,666

 

Cash at bank and on hand

 

710,403

 

339,299

 

701,748

 

 

Cash at banks earns interest at floating rates based on daily bank deposit rates. The conversion of the RMB denominated balances maintained in the PRC into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government.

 

(b)                                 Restricted cash

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Deposits to business partners

 

146,480

 

153,606

 

170,541

 

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

Restricted cash represents cash that cannot be withdrawn without the permission of third parties. In connection with the Group’s air ticket business and the accommodation reservation services, the Group was required by its business partners to pay deposits as guarantee in order for the issuance of air tickets and timely payment. As of December 31, 2015, 2016 and 2017, the amount of the deposit placed in commercial banks under these guarantee arrangements was approximately RMB134 million, RMB91 million and RMB115 million, respectively and recorded as restricted cash; and the amount of the deposit deployed in commercial institution under these guarantee arrangements was approximately RMB38 million, RMB38 million and RMB38 million, respectively and recorded as prepayment and other receivables (Note 20).

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

23.                               Borrowings

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Secured bank borrowings (note a)

 

 

 

191,997

 

Less: current portion

 

 

 

(19,692

)

Non-current portion

 

 

 

172,305

 

 

Notes:

 

(a)                                 The borrowings were secured by property, plant and equipment of the Group (Note 14) and bear interest at CHIBOR floating rate with 10% per annum.

 

At December 31, 2015, 2016 and 2017, the Group’s borrowings were repayable as follows:

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Within 1 year

 

 

 

19,692

 

1~2 years

 

 

 

19,692

 

2~5 years

 

 

 

59,076

 

Over 5 years

 

 

 

93,537

 

 

 

 

 

191,997

 

 

The exposure of the Group’s borrowings to interest rate change at December 31, 2017 is disclosed in Note 4.1.

 

The Group is in compliance with all banking covenants as of December 31, 2015, 2016 and 2017.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

24.                               Redeemable convertible preferred shares

 

In connection with the Restructuring as discussed in Note 1, all of eLong’s then outstanding ordinary shares were cancelled and all of its then existing ordinary shares were exchanged for the ordinary shares or the Preferred Shares of the Company in the following manner:

 

·                      All the then outstanding ordinary shares of eLong were exchanged to the same number of ordinary shares of the Company;

 

·                      All the then outstanding high-vote ordinary shares of eLong were exchanged to the same number of the Preferred Shares of the Company; and

 

·                      In connection with the Restructuring, the ordinary shares of eLong that were purchased by the Buyers were re-designated and exchanged to the same number of the Preferred Shares of the Company.

 

After the completion of the Restructuring, the equity shareholdings of eLong, as if-converted basis, by its then existing shareholders have not changed. The Preferred Shares were recognized based on its fair value of RMB3,527 million, and the difference between the fair value of the Preferred Shares and the carrying value of the high-vote ordinary shares relinquished was recorded against the other reserve of RMB3,527 million.

 

The Company also assessed the re-designation of ordinary shares purchased by the Buyers and concluded that the difference between the fair value of the Preferred Shares that the Buyers obtained and the fair value of the ordinary shares purchased and relinquished by the Buyers should be recognized as expenses to reflect the benefit received by the Buyers. Therefore, the total difference between the carrying value of the ordinary shares that the Buyers purchased and the fair value of the Preferred Shares that the Buyers obtained with amount to RMB1,662 million was further allocated as (1) RMB742 million, being the difference between the fair value of the Preferred Shares that the Buyers obtained and the fair value of the ordinary shares purchased and relinquished by the Buyers, was deemed as share based payment received by Buyers and recorded as administrative expenses for the year ended December 31, 2016; and (2) RMB920 million, being the difference between the carrying value and fair value of the ordinary shares that the Buyers purchased was recorded as deduction of other reserve.

 

In July 2016, the Company issued 11,111,111 preferred shares to one of its shareholders with the total fair value of RMB1,208 million on the issuance date. Please refer to Note 18 for details.

 

The key terms of the Preferred Shares of the Company are as follows:

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

24.                               Redeemable convertible preferred share (Continued)

 

Voting

 

Each ordinary share has one vote. Each of the Preferred Shares carries a number of votes equal to the number of ordinary shares into which such preferred share could be converted into. The holders of ordinary shares and the Preferred Shares shall vote together as a single class.

 

Dividends

 

The holders of the Preferred Shares shall rank senior to the holders of ordinary shares in respect of any dividends declared by the Company and shall be entitled to participate in dividends on the ordinary shares on an as-converted basis.

 

Liquidation

 

Upon any liquidation or winding up of the Company, whether voluntary or involuntary or any deemed liquidation event, to the extent lawfully possible, before any distribution or payment shall be made to the holders of any ordinary shares, the holders of the Preferred Shares shall be entitled to receive an amount with respect to each preferred share equal to the greater of:

 

(a)                                 the liquidation preference (“Liquidation Preference”) means the higher of (i) $13.50 or (ii) $9.00 plus an 8% compounding annual rate commencing on the date of issuance; and

 

(b)                                 the amount distributable to such holder of the Preferred Shares if the funds and assets of the Company available for distribution to the prefer shareholders are distributed pro rata amongst all the shareholders of the Company on an as-converted basis.

 

Conversion

 

Each of the Preferred Shares shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable ordinary shares as is determined by dividing the Liquidation Preference by the applicable Conversion Price in effect at the time of conversion. The “Conversion Price” shall initially be equal to the Original Issue Price and such Conversion Price shall be subject to adjustment.

 

On December 28, 2017, in connection with the merger agreement entered into among the Company, Tongcheng Network and Tongcheng Network’s shareholders, the holders of the Preferred Shares agreed to change the conversion of the Preferred Shares as immediately prior to the completion of the Acquisition, each of the Preferred Share shall be converted into one ordinary share of the Company. Such change of the conversion constituted a modification to the Preferred  Shares  and resulted in, excluding other factors, a decrease in fair value of the Preferred Shares.

 

Redemption Rights

 

If (i) a Qualified IPO has not been completed before the fifth (5th) anniversary of May 31, 2016, or (ii) the Company or any other group company is in material breach of the shareholders’ agreement, each of the preferred shareholders shall have the right but not the obligation, to require the Company to redeem and purchase all (but not part) of the Preferred Shares held by such preferred shareholder (the “Redemption Right”) at a price (the “Redemption Price”) equal to the Liquidation Preference per preferred share to be paid in cash, subject to applicable bankruptcy, insolvency, corporate “solvency” requirements or similar laws. The Redemption Right may be exercised at each preferred shareholder’s discretion but may only be exercised once.

 

The Company designated the Preferred Shares as financial liabilities at fair value through profit or loss. The Preferred Shares are initially recognized at fair value.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

24.                               Redeemable convertible preferred share (Continued)

 

The movement of the Preferred Shares is set as below:

 

 

 

Number of
Shares

 

RMB’000

 

 

 

 

 

 

 

At January 1, 2016

 

 

 

 

Exchange of high-vote ordinary shares to the Preferred Shares in connection with the Restructuring

 

33,589,204

 

3,527,596

 

Re-designation of ordinary shares to the Preferred Shares in connection with the Restructuring

 

15,833,693

 

1,662,882

 

Issuance of the Preferred shares to one of shareholders

 

11,111,111

 

1,208,153

 

Changes in fair value - attribute to changes in the credit risk of the financial liability

 

 

 

(36,781

)

Changes in fair value - others

 

 

 

36,781

 

At December 31, 2016

 

 

 

6,398,631

 

 

 

 

 

 

 

At January 1, 2017 (Unaudited)

 

 

 

6,398,631

 

Changes in fair value - attribute to changes in the credit risk of the financial liability

 

 

 

46,592

 

Changes in fair value - others

 

 

 

(97,576

)

At December 31, 2017 (Unaudited)

 

 

 

6,347,647

 

 

The Group has used the discounted cash flow method to determine the underlying share value of the Company and adopted equity allocation model to determine the fair value of the Preferred Shares as of the dates of issuance and at the end of each reporting period.

 

Key valuation assumptions used to determine the fair value of the Preferred Shares are as follows:

 

 

 

As of December 31,

 

 

 

2015

 

2016

 

2017

 

 

 

 

 

 

 

 

 

Discount rate

 

N/A

 

14.50

%

14.50

%

Risk-free interest rate

 

N/A

 

1.93

%

1.60

%

Discounts for lack of marketability (“DLOM”)

 

N/A

 

16.50

%

16.00

%

Volatility

 

N/A

 

48.00

%

45.30

%

 

Discount rate (post-tax) was estimated by weighted average cost of capital as of each valuation date. The risk-free interest rate based on the yield of US Treasury Strip Bond with a maturity life equal to the expected terms as of valuation date. The DLOM was estimated based on the option-pricing method. Under option-pricing method, the cost of put option, which can hedge the price change before the private held share can be sold, was considered as a basis to determine the lack of marketability discount. Volatility was estimated based on annualized standard deviation of daily stock price return of comparable companies for a period from the respective valuation date and with similar span as time to expiration. Probability weight under each of the redemption feature and liquidation preferences was based on the Group’s best estimates. In addition to the assumptions adopted above, the Company’s projections of future performance were also factored into the determination of the fair value of the Preferred Shares on each valuation date.

 

The fair value changes in the Preferred Shares that are attributable to changes of credit risk of this liability amounted to RMB (36,781,000) and RMB46, 592,000 for the years ended December 31, 2016 and 2017, respectively.

 

Changes in fair value of the Preferred Shares were recorded in “Fair value change on redeemable convertible preferred shares measured at fair value through profit or loss” in the consolidated statements of comprehensive (loss)/income.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

25.                               Trade payables

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Payables to third parties

 

623,611

 

789,629

 

960,940

 

Payables to related parties (Note 35)

 

34,955

 

132,004

 

153,977

 

 

 

658,566

 

921,633

 

1,114,917

 

 

Trade payables and their aging analysis based on invoice date are as follows:

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Up to 6 months

 

658,566

 

921,633

 

1,114,917

 

 

26.                               Other payables and accruals

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Accrual for users incentive program

 

217,359

 

75,567

 

67,862

 

Payable to travel service suppliers

 

21,501

 

24,001

 

25,759

 

Deposits from sales channel

 

16,924

 

23,675

 

26,336

 

Payables to related parties (Note 35)

 

555

 

381

 

653

 

Total financial liabilities

 

256,339

 

123,624

 

120,610

 

 

 

 

 

 

 

 

 

Advances from users

 

92,364

 

177,389

 

116,044

 

Accrued payroll and welfare

 

69,669

 

94,277

 

77,919

 

Accrued commissions

 

27,279

 

23,851

 

13,701

 

Business and other taxes

 

24,076

 

2,023

 

13,573

 

Accrued advertisement expenses

 

17,296

 

23,310

 

30,788

 

Accrued professional fees

 

6,187

 

9,125

 

11,100

 

Others

 

50,493

 

59,369

 

55,462

 

Total non-financial liabilities

 

287,364

 

389,344

 

318,587

 

 

 

 

 

 

 

 

 

Total

 

543,703

 

512,968

 

439,197

 

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

27.                               Share capital and share premium

 

 

 

Number of
ordinary shares

 

Ordinary share
capital

 

Ordinary share
premium

 

Treasury stock

 

Total

 

 

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

 

 

 

 

Vesting of RSUs

 

 

 

 

 

 

At December 31, 2015 (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2016

 

 

 

 

 

 

Incorporation of the Company and consummation of the Restructuring (a)

 

26,052

 

84

 

1,514,310

 

 

1,514,394

 

At December 31, 2016

 

26,052

 

84

 

1,514,310

 

 

1,514,394

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2017 (Unaudited)

 

26,052

 

84

 

1,514,310

 

 

1,514,394

 

Issuance of new shares (b)

 

4,419

 

15

 

 

(15

)

 

At December 31, 2017 (Unaudited)

 

30,471

 

99

 

1,514,310

 

(15

)

1,514,394

 

 


(a)                                 In connection of incorporation of the Company and consummation of the Restructuring, the Company issued 26,051,810 ordinary shares, a share premium of RMB1,514 million arisen from the difference between its fair value and par value.

 

(b)                                 In 2017, the Company issued 4,418,671 ordinary shares to EAE Holdco with amount of RMB14,714 for the purpose of granting RSUs to the employees (Note (8)).

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

28.                               Other reserves

 

 

 

Capital reserve

 

Statutory reserve

 

Share-based
compensations
reserve

 

Others(a)

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2015 (Unaudited)

 

563,802

 

3,665

 

1,453,712

 

483,613

 

2,504,792

 

Statutory reserves

 

 

6,161

 

 

 

6,161

 

Exercise of stock options

 

25,397

 

 

 

 

25,397

 

Share based compensation of a subsidiary

 

 

 

3,278

 

 

3,278

 

Share-based compensations (Note 8)

 

 

 

208,296

 

 

208,296

 

Purchase of eLong Equity Awards in connection with the Expedia Transaction

 

 

 

(89,587

)

 

(89,587

)

At December 31, 2015 (Unaudited)

 

589,199

 

9,826

 

1,575,699

 

483,613

 

2,658,337

 

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2016

 

589,199

 

9,826

 

1,575,699

 

483,613

 

2,658,337

 

Fair value change of the Preferred Shares attributable to changes in credit risk

 

 

 

 

36,781

 

36,781

 

Exercise of stock options

 

1,719

 

 

 

 

1,719

 

Exchange of high-vote ordinary shares to the Preferred Shares in connection with the Restructuring

 

(3,527,596

)

 

 

 

(3,527,596

)

Redesignation of ordinary shares to the Preferred Shares in connection with the Restructuring

 

(920,414

)

 

 

 

(920,414

)

Purchase of vested Equity Awards in connection with the Restructuring

 

 

 

(81,624

)

 

(81,624

)

Incorporation of the Company and consummation of the Restructuring

 

(1,514,394

)

 

 

 

(1,514,394

)

Share-based compensations (Note 8)

 

 

 

71,325

 

 

71,325

 

At December 31, 2016

 

(5,371,486

)

9,826

 

1,565,400

 

520,394

 

(3,275,866

)

 

 

 

 

 

 

 

 

 

 

 

 

At January 1, 2017 (Unaudited)

 

(5,371,486

)

9,826

 

1,565,400

 

520,394

 

(3,275,866

)

Fair value change of the Preferred Shares attributable to changes in credit risk

 

 

 

 

(46,592

)

(46,592

)

Purchase of Equity Awards in connection with the Restructuring

 

 

 

(4,382

)

 

(4,382

)

Share-based compensations (Note 8)

 

 

 

56,783

 

 

56,783

 

At December 31, 2017 (Unaudited)

 

(5,371,486

)

9,826

 

1,617,801

 

473,802

 

(3,270,057

)

 


(a): Others mainly represents the reserves arising from the conversion of preferred shares of eLong before the Track Record Period and the fair value change of the Preferred Shares attributable to changes in credit risk.

 

76



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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

29.                               Dividend

 

No dividend has been paid or declared by the Company or the companies now comprising the Group during each of the years ended December 31, 2015, 2016 and 2017.

 

30.                               Business combination

 

In February 2015, the Group acquired the accommodation reservation business (“Accommodation Reservation Business”) from Beijing Jiuyou Technology Co., Ltd. (“Jiuyou”) for RMB5,000,000, The Group accounted for the acquisition of Accommodation Reservation Business as a business combination.

 

The following table summarizes the allocation of the purchase price for assets related to the Accommodation Reservation Business:

 

 

 

February 2015

 

 

 

(Unaudited)

 

 

 

RMB’000

 

 

 

 

 

Consideration

 

 

 

Cash consideration

 

5,000

 

Total consideration paid by the Group

 

5,000

 

Fair value of identifiable assets acquired

 

 

 

Trade name

 

1,570

 

Customer list

 

510

 

Total identifiable net assets

 

2,080

 

Goodwill

 

2,920

 

 

 

5,000

 

 

Goodwill, which is not tax deductible, is primarily attributable to the synergies expected to be achieved from the acquisition.

 

The fair value of the trade name was measured using the relief from royalty method, with a royalty rate of 1.5%, a tax rate of 25% and a discount rate of 19%, while the fair value of the customer list was measured using the multi-period excess earnings method, using an annual revenue growth rate ranging from -5% to 5%, a terminal growth rate of 3% and a discount rate of 19%.

 

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Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

31.                               Note to consolidated statements of cash flows

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Profit/(loss) before income tax

 

(957,813

)

(2,159,618

)

134,021

 

Adjustment for:

 

 

 

 

 

 

 

- Foreign exchange losses

 

(9,739

)

(1,562

)

1,365

 

- Impairment of intangible assets (Note 18)

 

40,402

 

 

 

- Allowance for doubtful accounts

 

11,920

 

27,637

 

1,098

 

- Loss on disposal of property, plant and equipment (Note 14)

 

155

 

203

 

534

 

- Depreciation of property, plant and equipment (Note 14)

 

52,067

 

52,845

 

45,077

 

- Amortization of intangible assets (Note 18)

 

21,225

 

24,488

 

39,073

 

- Share-based compensation (Note 8)

 

211,500

 

72,343

 

56,783

 

- Gain on disposal of a subsidiary

 

(71,082

)

 

 

- Gain from disposal of equity investments

 

(13,191

)

 

(753

)

- Impairment on equity investment

 

459

 

 

 

- Fair value changes on investments measured at fair value through profit or loss

 

(17,646

)

4,031

 

(863

)

- Fair value change on redeemable convertible preferred shares measured at fair value through profit or loss (Note 24)

 

 

36,781

 

(97,576

)

- Finance income

 

(9,156

)

(8,402

)

(10,145

)

- Other income

 

(28,051

)

 

 

- Other gains/(losses), net

 

(4,808

)

(6,271

)

(10,056

)

- Share of results from investments in associates (Note 15)

 

18,177

 

11,218

 

2,251

 

- Selling and marketing expenses which were settled with newly issued preferred shares (Note 24)

 

 

1,044,908

 

 

- Charges for re-designation of ordinary shares to the Preferred Shares in connection with the Restructuring (Note 24)

 

 

742,467

 

 

Changes in working capital:

 

 

 

 

 

 

 

- Trade receivables

 

(122,702

)

(451,991

)

343,464

 

- Prepayment and other receivables

 

(21,514

)

(35,235

)

84,881

 

- Trade payables

 

88,577

 

263,067

 

199,640

 

- Accrued expenses and other current liabilities

 

16,694

 

(30,755

)

(73,773

)

Cash generated from/(used in) operating activities

 

(794,526

)

(413,844

)

715,021

 

 

In the consolidated statements of cash flows, proceeds from sale of property, plant and equipment comprise:

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Net book value

 

211

 

311

 

596

 

Loss on disposal of property, plant and equipment

 

(155

)

(203

)

(534

)

Proceeds from disposal of property, plant and equipment

 

56

 

108

 

62

 

 

The principal non-cash transaction is the issue of preferred shares i) as consideration for settlement of selling and marketing expenses, ii) and for re-designation of ordinary shares, as discussed in Note 24.

 

78



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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

31.                               Note to consolidated statements of cash flows (Continued)

 

Reconciliation of liabilities generated from financing activities

 

 

 

Borrowings
due within a
year

 

Borrowings
due after a
year

 

Interest
payable

 

Redeemable
convertible
preferred
shares

 

Total

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

 

 

 

 

As of January 1, 2015 (Unaudited)

 

 

 

 

 

 

Cash flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2015 (Unaudited)

 

 

 

 

 

 

Cash flows

 

 

 

 

 

 

 

 

Issuance of the Preferred Shares

 

 

 

 

6,398,631

 

6,398,631

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

 

 

 

6,398,631

 

6,398,631

 

Cash flows

 

19,692

 

172,305

 

(1,740

)

 

190,257

 

Fair value changes of the Preferred Shares

 

 

 

 

(97,576

)

(97,576

)

Fair value change relating to preferred shares due to own credit risk

 

 

 

 

46,592

 

46,592

 

Accrued interest expenses

 

 

 

1,740

 

 

1,740

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017 (Unaudited)

 

19,692

 

172,305

 

 

6,347,647

 

6,539,644

 

 

32.                               Banking facilities

 

As of December 31, 2015, 2016 and 2017, the Company had banking facilities available in the form of letters of guarantee of RMB40.0 million, RMB63.2 million and RMB39.1 million, respectively, in which RMB40.0 million, RMB63.2 million and RMB39.1 million, respectively are utilised and provided to a business partner in connection with air ticketing business for financial security.

 

33.                               Contingencies

 

As of December 31, 2015, 2016 and 2017, the Group did not have any significant contingent liabilities.

 

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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

34.                               Commitment

 

(a)                                 Operating lease commitments

 

The Group leases offices under non-cancellable operating lease agreements. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

No later than 1 year

 

19,800

 

19,278

 

15,131

 

Between 1 and 2 years

 

15,971

 

15,083

 

5,736

 

Between 2 and 5 years

 

20,146

 

10,771

 

7,027

 

 

 

55,917

 

45,132

 

27,894

 

 

(b)                               Purchase commitments

 

The purchase commitments represent the minimum payment that the Company would pay for the prepurchase of hotel room nights assuming inventory risk pursuant to the existing agreements with hotels.

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Purchase commitments

 

15,722

 

48,947

 

54,436

 

 

80



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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

35.                               Related party transactions

 

Parties are considered to be related if one party has the ability, directly or indirectly, control the other party or exercise significant influence over the other party in making financial and operation decisions. Parties are also considered to be related if they are subject to common control. Members of key management and their close family member of the Group are also considered as related parties.

 

Save as disclosed in elsewhere of the report, the following significant transactions were carried out between the Group and its related parties during the Track Record Period. In the opinion of the directors of the Company, the related party transactions were carried out in the normal course of business and at terms negotiated between the Group and the respective related parties.

 

(a)                                 Names and relationships with related parties

 

The following companies are related parties of the Group that had balances and/or transactions with the Group during the Track Record Period.

 

Company

 

Relationship with the Group

 

 

 

Ctrip and its affiliated companies

 

Shareholder with significant influence over the Group

Tencent and its affiliated companies

 

Shareholder with significant influence over the Group

Plateno and its affiliated hotels

 

Shareholder with significant influence over the Group prior to August 2015

Beijing Miot Technology Co., Ltd. (“Miot”)

 

Associate

Expedia and its affiliates

 

Shareholder of eLong prior to May 2015

 

(b)                                 Significant transactions with related parties

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Commission and other service income received from related parties:

 

 

 

 

 

 

 

- Ctrip and its affiliates

 

9,532

 

85,781

 

243,783

 

- Expedia and its affiliates

 

56,542

 

 

 

- Plateno and its affiliated hotels

 

5,771

 

 

 

Total

 

71,845

 

85,781

 

243,783

 

 

 

 

 

 

 

 

 

Commission, settlement and other service fees paid to related parties:

 

 

 

 

 

 

 

- Ctrip and its affiliates

 

7,378

 

261,140

 

573,128

 

- Tencent and its affiliates

 

5,701

 

1,224,655

 

31,655

 

- Others

 

2,737

 

50

 

 

Total

 

15,816

 

1,485,845

 

604,783

 

 

81



Table of Contents

 

Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

35.                               Related party transactions (Continued)

 

(c)                                  Balance with related parties

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Trade receivables from related parties (Note 21):

 

 

 

 

 

 

 

- Ctrip and its affiliates

 

187,548

 

506,461

 

273,480

 

- Plateno and its affiliated hotels

 

323

 

 

 

- Tencent and its affiliates

 

28,460

 

28,351

 

56,138

 

Total

 

216,331

 

534,812

 

329,618

 

 

The receivables from related parties arise mainly from ordinary course of business. The receivables are unsecured, interest-free and with no fixed term of repayment. No provisions have been made against receivables from related parties.

 

 

 

As of December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Trade payables and other payables to related parties (Note 25 & 26):

 

 

 

 

 

 

 

- Ctrip and its affiliates

 

34,515

 

132,382

 

152,826

 

- Plateno and its affiliated hotels

 

654

 

 

 

- Tencent and its affiliates

 

341

 

 

362

 

- Others

 

 

3

 

1,442

 

Total

 

35,510

 

132,385

 

154,630

 

 

The payables to related parties are unsecured, interest-free and with no fixed term of repayment.

 

(d)                                 Key management personnel compensations

 

The compensations paid or payable to key management personnel (including CEO and other senior executives) for employee services are show below:

 

 

 

Year ended December 31,

 

 

 

2015

 

 

 

2017

 

 

 

(Unaudited)

 

2016

 

(Unaudited)

 

 

 

RMB’000

 

RMB’000

 

RMB’000

 

 

 

 

 

 

 

 

 

Wages, salaries and bonuses

 

2,380

 

3,901

 

6,188

 

Pension costs - defined contribution plans

 

146

 

184

 

198

 

Other social security costs, housing benefits and other employee benefits

 

173

 

218

 

234

 

Share-based compensation expenses (Note 8)

 

14,137

 

14,946

 

11,916

 

 

 

16,836

 

19,249

 

18,536

 

 

82



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Tongcheng-Elong Holdings Limited

Notes to Consolidated Financial Statements

 

36.                               Subsequent events

 

Save as disclosed in the report, the following significant events took place subsequent to December 31, 2017:

 

(i)                                      Acquisition of Tongcheng Online Business

 

As disclosed in 1.2.2, on March 9, 2018, the Company consummated the acquisition of Tongcheng Network. The Company accounted for the acquisition of Tongcheng Network as business combination.

 

The Company performed the valuation with the assistance from the independent appraisals. The preliminary valuation of acquisition cost and the allocation of the purchase price of the assets acquired and liabilities assumed based on their fair values was as follows:

 

 

 

RMB’000

 

 

 

 

 

Current assets

 

2,680,810

 

Non-current assets

 

974,720

 

Current liabilities

 

(1,764,774

)

Net assets of Tongcheng Network acquired

 

1,890,756

 

Identifiable intangible assets - trade name

 

1,788,360

 

Identifiable intangible assets - business relationship

 

1,686,704

 

Identifiable intangible assets - technology platform

 

232,506

 

Deferred tax liabilities

 

(594,465

)

Goodwill

 

3,652,249

 

Fair value of total purchase consideration by issued shares

 

8,656,110

 

 

As of the date of this report, the Company is still working on the valuation and the above result of purchase price allocation reflects the Company’s current and preliminary estimate, which is subject to change.

 

(ii)                                   Share incentive plan

 

In March 2018, the Company adopted a 2018 share incentive plan (the “2018 Plan”), which allows senior management, other employees, non-employees, directors of the Company, with certain vesting conditions being fulfilled, to (i) acquire ordinary shares of the Company pursuant to options granted, (ii) receive RSU awards, and (iii) make direct purchases of restricted shares. The maximum number of ordinary shares that may be subject to the awards granted under the 2018 Plan is 163,240,270.

 

83



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ITEM 19.                             EXHIBITS

 

Exhibit Number

 

Document

12.1*

 

Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

12.2*

 

Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

13.1**

 

Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

13.2**

 

Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 15.4*

 

Consent of PricewaterhouseCoopers Zhong Tian LLP

 


*                 Filed with this amendment to annual report on Form 20-F.

 

**          Furnished with this amendment to annual report on Form 20-F.

 

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Table of Contents

 

SIGNATURES

 

The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

 

CTRIP.COM INTERNATIONAL, LTD.

 

 

By:

/s/ Jane Jie Sun

 

 

Name:

Jane Jie Sun

 

 

Title:

Chief Executive Officer and Director

 

Date: June 29, 2018

 

85


EXHIBIT 12.1

 

Certification by the Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Jane Jie Sun, certify that:

 

1.                                      I have reviewed this annual report on Form 20-F of Ctrip.com International, Ltd. (the “Company”);

 

2.                                      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                                      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

 

4.                                      The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)          Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)         Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

 

5.                                      The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

 

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

 

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

Date: June 29, 2018

 

By:

/s/ Jane Jie Sun

 

 

Name: Jane Jie Sun

 

 

Title: Chief Executive Officer

 

 


EXHIBIT 12.2

 

Certification by the Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Cindy Xiaofan Wang, certify that:

 

1.                                      I have reviewed this annual report on Form 20-F of Ctrip.com International, Ltd. (the “Company”);

 

2.                                      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                                      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

 

4.                                      The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)          Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)         Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

 

5.                                      The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

 

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

 

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

Date: June 29, 2018

 

By:

/s/ Cindy Xiaofan Wang

 

 

Name: Cindy Xiaofan Wang

 

 

Title: Chief Financial Officer

 

 


EXHIBIT 13.1

 

Certification by the Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Annual Report of Ctrip.com International, Ltd. (the “Company”) on Form 20-F for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jane Jie Sun, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 29, 2018

 

By:

/s/ Jane Jie Sun

 

 

Name: Jane Jie Sun

 

 

Title: Chief Executive Officer

 

 


 

EXHIBIT 13.2

 

Certification by the Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Annual Report of Ctrip.com International, Ltd. (the “Company”) on Form 20-F for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Cindy Xiaofan Wang, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 29, 2018

 

By:

/s/ Cindy Xiaofan Wang

 

 

Name: Cindy Xiaofan Wang

 

 

Title: Chief Financial Officer

 

 


EXHIBIT 15.4

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-116567, No. 333-136264, No. 333-146761, and No. 333-218899) and in the Registration Statement on Form F-3 (No. 333-208399) of Ctrip.com International, Ltd. of our report dated June 29, 2018 relating to the consolidated financial statements of Tongcheng-Elong Holdings Limited included in this Amendment to the Annual Report on Form 20-F for the year ended December 31, 2017.

 

/s/ PricewaterhouseCoopers Zhong Tian LLP

 

PricewaterhouseCoopers Zhong Tian LLP

 

Shanghai, People’s Republic of China

 

June 29, 2018