Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENT

v3.7.0.1
FAIR VALUE MEASUREMENT
12 Months Ended
Mar. 31, 2017
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENT

(6)FAIR VALUE MEASUREMENT

 

The following tables present the placement in the fair value hierarchy of assets that are measured at fair value on a recurring basis at March 31, 2017:

 

 

 

 

 

Fair value disclosure or measurement at
March 31, 2017 using

 

 

 

March 31, 2017

 

Level 1

 

Level 2

 

Level 3

 

 

 

RMB

 

RMB

 

RMB

 

RMB

 

Available-for-sale investment

 

 

 

 

 

 

 

 

 

Convertible note

 

10,376,547

 

 

 

10,376,547

 

 

To estimate the fair value of the Notes, the Group used the Cox, Ross and Rubinstein Binomial Model (“Binomial-Model”), which is based on the fair value of the entire invested capital of Brilent evaluated by an income approach. The significant inputs for the valuation model included the following:

 

 

 

Year Ended March 31, 2017

 

Total fair value of underlying asset as at valuation date

 

 

 

USD 12,000,000

 

Risk free rate of interest

 

For the March 30, 2016 Note

 

1.02%

 

 

 

For the April 28, 2016 Note

 

1.04%

 

Maturity Date

 

For the March 30, 2016 Note

 

2018/3/30

 

 

 

For the April 28, 2016 Note

 

2018/4/28

 

Volatility

 

For the March 30, 2016 Note

 

35.22%

 

 

 

For the April 28, 2016 Note

 

36.10%

 

 

The fair value of the underlying asset has been determined using income approach including discounted cash flow model and unobservable inputs including assumptions of projected revenue, expenses, capital spending, other costs and a discount rate of 26% by using the weighted average cost of capital method.

 

Risk free rate of interest adopted for the valuation were estimated based on the U.S. daily treasury yield as at valuation date with term similar to the expected term of the Notes.

 

Maturity date is the time to maturity of the Notes according to the investment agreement.

 

The expected equity volatility were estimated based on the annualized standard deviation of the daily return embedded in the historical stock price of comparable companies with a time horizon close to the expected term determined based on the maturity date.

 

The following table presents a roll-forward of the fair value of Level 3 (significant unobservable inputs) asset for the year ended March 31, 2017, which only contains available-for-sale investment:

 

 

 

Convertible note

 

 

 

RMB

 

Beginning balance as of April 1, 2016

 

1,938,360

 

Purchase

 

7,957,440

 

Total gain or losses:

 

 

 

Included in net income (loss)

 

568,320

 

Included in other comprehensive income (loss)

 

(553,870

)

Foreign currency translation adjustment

 

466,297

 

 

 

 

 

Ending balance as of March 31, 2017

 

10,376,547

 

 

 

 

 

 

The Group did not have any nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis as of March 31, 2016 and 2017, respectively.

 

The Group’s financial instruments consist of cash and cash equivalents, accounts receivable, advances to third parties, employees and suppliers, which are included in the prepaid expenses and other current assets, restricted cash, short-term loan and accrued expenses and other payables, all of which have a carrying amount that approximate fair value because of the short maturity of these instruments.