FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2014

16. FAIR VALUE MEASUREMENTS

The Group did not have any assets or liabilities measured at fair value on a recurring or non-recurring basis for the years prior to 2013.

Assets measured at fair value on a recurring basis

In years 2013 and 2014, the Group's asset measured at fair value on a recurring basis subsequent to initial recognition consisted of short-term investment in a money market fund accounted for as available-for-sale security. As the return of the investment was referenced to short term interest rate and interest income accrued on a daily basis, the fair value approximates carrying amount of US$3.0 million as of December 31, 2013 and was disposed in 2014. The short-term investment is classified as a Level 2 fair value measurement.

Assets measured at fair value on a non-recurring basis

In the year ended December 31, 2013, the Group's assets measured at fair value on a non-recurring basis consisted of the following:

			Fair Value Measurement at Reporting Date Using
	Year Ended December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses
			USD		USD		USD
Acquired intangible assets—upfront licensing fees	$	—	$	—	$	—	$	—	$	1,046,173
Investment in equity investees—Chuangyou		82,466		—		—		82,466		370,407

Total									$	1,416,580

In accordance with the provision of ASC 350, upfront licensing fees related to two games with a carrying amount of $0.8 million and $0.2 million, respectively, were fully impaired, with the resulting impairment charge of $1,046,173 included in earnings for the year ended December 31, 2013.

In accordance with the provision of ASC 323, investment in Chuangyou was written down to its fair value of $82,466, resulting in an impairment charge of $370,407 recognized as impairment loss on investment in equity investees in the consolidated statements of operations for the year ended December 31, 2013. The fair value of the investment was measured based on a discounted cash flow approach. The discounted cash flow analysis requires the use of significant unobservable inputs, including projected future cash flows and a discount rate calculated based on the weighted average cost of capital of 45%. As the significant inputs are not observable or cannot be corroborated with market information, the fair value measurement is classified as Level 3. Any change in the projected future cash flow would result in a change in the fair value measurement in the same direction, while the change in discount rate would result in adverse change in the fair value measurement.

In the year ended December 31, 2014, the Group's assets measured at fair value on a non-recurring basis consisted of the following:

			Fair Value Measurement at Reporting Date Using
	Year Ended December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses
			USD		USD		USD
Acquired intangible assets—upfront licensing fees	$	—	$	—	$	—	$	—	$	115,753
Investment in equity investees—Voozclub		—		—		—		—		1,400,000

Total									$	1,515,753

In accordance with the provision of ASC 350, upfront licensing fees related to a game with a carrying amount of $0.1 million was fully impaired, with the resulting impairment charge of $115,753 included in earnings for the year ended December 31, 2014.

In accordance with the provision of ASC 325, investment in Voozclub was fully written down to its fair value of nil, resulting in an impairment charge of $1,400,000 recognized as impairment loss on investment in equity investees in the consolidated statements of operations for the year ended December 31, 2014. The fair value of the investment was determined to be nil as Voozclub is not able to generate positive future cash flow and is highly likely facing bankruptcy considering the factors that a) Voozclub did not have sufficient cash balance for operation over the next year, and its operating cash inflow is in doubt; b) there were resignations of key management and significant lay-offs of employees in 2014; and c) Voozclub stopped any new business development activities.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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