11. Investment securities and fair value disclosure

	As of March 31, 2016
	Original cost		Gross unrealized gains		Gross unrealized losses			Provision for decline in value			Fair value
	(in millions of RMB)
Assets
Trading securities:
Listed equity securities		646		230		(105	)		—			771
Financial derivatives		7		171		—			—			178
Available-for-sale securities:
Listed equity securities and other treasury investments		12,701		5,940		(438	)		(957	)		17,246
Held-to-maturity securities		10,760		—		—			(7	)		10,753
Investment securities accounted for under the fair value option		4,256		366		—			—			4,622

		28,370		6,707		(543	)		(964	)		33,570

	As of March 31, 2017
	Original cost		Gross unrealized gains		Gross unrealized losses			Provision for decline in value			Fair value
	(in millions of RMB)
Assets
Available-for-sale securities:
Listed equity securities		15,325		9,792		(836	)		(1,019	)		23,262
Held-to-maturity securities		12,241		—		—			(180	)		12,061
Investment securities accounted for under the fair value option		183		—		—			—			183

		27,749		9,792		(836	)		(1,199	)		35,506

During the years ended March 31, 2016 and 2017, the Company completed several investments accounted for as investment securities. Details of these significant investments are summarized in Note 4.

During the years ended March 31, 2015, 2016 and 2017, gross realized gains of RMB141 million, RMB1,012 million and RMB6,306 million and gross realized losses of RMB97 million, RMB410 million and RMB534 million from disposals of investment securities were recognized in interest and investment income, net in the consolidated income statements, respectively. During the same period, impairment losses of nil, RMB962 million and RMB173 million were charged in interest and investment income, net in the consolidated income statements, respectively, as a result of other-than-temporary decline in values related to a listed equity security and held-to-maturity securities.

As of March 31, 2015, 2016 and 2017, net unrealized gains of RMB3,384 million, RMB5,502 million and RMB8,956 million on available-for-sale securities were recorded in accumulated other comprehensive income, respectively. For available-for-sale securities with unrealized losses, their related aggregate fair values amounted to RMB4,929 million, RMB1,751 million and RMB4,366 million as of March 31, 2015, 2016 and 2017, respectively. The carrying amounts of available-for-sale securities that were in a loss position over twelve months were insignificant as of the same dates.

The carrying amount of long-term held-to-maturity investments approximates their fair value due to the fact that the related interest rates approximate rates currently offered by financial institutions for similar debt instruments of comparable maturities.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1	-	Valuations based on unadjusted quoted prices for identical assets and liabilities in active markets.
Level 2	-	Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3	-	Valuations based on unobservable inputs reflecting assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

Fair value of short-term investments and listed equity securities are based on quoted prices in active markets for identical assets or liabilities. All other financial instruments, such as derivative instruments and forward exchange contracts, are valued based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. Convertible and exchangeable bonds are valued using binomial model with unobservable inputs including risk-free interest rate, expected volatility and dividend yield. Contingent consideration is valued using an expected cashflow method with unobservable inputs including the probability to achieve the operating and financial targets, which is assessed by the Company, in connection with the contingent consideration arrangements.

The following table summarizes the Company's assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:

	As of March 31, 2016
	Level 1		Level 2		Level 3		Total
	(in millions of RMB)
Assets
Short-term investments		4,700		—		—		4,700
Restricted cash and escrow receivables		1,346		—		—		1,346
Trading securities:
Listed equity securities		771		—		—		771
Financial derivatives		—		178		—		178
Available-for-sale securities:
Listed equity securities		17,246		—		—		17,246
Investment securities accounted for under the fair value option		—		—		4,622		4,622

		24,063		178		4,622		28,863


Liabilities
Forward exchange contracts		—		461		—		461
Contingent consideration in relation to investments and acquisitions		—		—		1,264		1,264

		—		461		1,264		1,725

	As of March 31, 2017
	Level 1		Level 2		Level 3		Total
	(in millions of RMB)
Assets
Short-term investments		3,011		—		—		3,011
Restricted cash and escrow receivables		2,655		—		—		2,655
Available-for-sale securities:
Listed equity securities		23,262		—		—		23,262
Investment securities accounted for under the fair value option		—		—		183		183
Interest rate swap contracts		—		436		—		436

		28,928		436		183		29,547


Liabilities
Forward exchange contracts		—		78		—		78
Contingent consideration in relation to investments and acquisitions		—		—		921		921

		—		78		921		999

Convertible and exchangeable bonds accounted for under the fair value option:

	Amounts
	(in millions of RMB)
Balance at April 1, 2015		3,719
Net increase in fair value		630
Foreign currency translation adjustments		273

Balance at March 31, 2016		4,622
Decrease in fair value		(113	)
Conversion or exchange (Notes 4(o) and 4(v))		(4,678	)
Foreign currency translation adjustments		169

Balance at March 31, 2017		—

Contingent consideration in relation to investments and acquisitions:

	Amounts
	(in millions of RMB)
Balance at April 1, 2015		1,278
Net decrease in fair value		(14	)

Balance at March 31, 2016		1,264
Additions		293
Net decrease in fair value		(642	)
Foreign currency translation adjustment		6

Balance at March 31, 2017		921

Other than contingent consideration disclosed in Note 4(l), other items included in contingent consideration as of March 31, 2016 and 2017 are individually insignificant.