Directors' Report - Alibaba

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NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2010 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.18 Staff costs (Continued) (c) Share-based compensation (Continued) The ultimate holding company also operates various share-based incentive schemes, where certain directors and employees of the Group are granted share options, RSUs or other rights to acquire ordinary shares of the ultimate holding company or the Company’s ordinary shares held by the ultimate holding company. The resulting share-based compensation expense is allocated to the Group accordingly. The fair value of the employee services received in exchange for the grant of these share-based awards is recognized as staff costs in the consolidated statement of comprehensive income with a corresponding increase in the share premium under equity of the Company or its subsidiaries. The fair value of the options granted is measured at grant date using the Black-Scholes valuation model (“Black-Scholes Model”) whereas the fair value of RSUs, restricted shares or earn-in shares granted is measured at grant date based on the fair value of the ordinary shares of the Company, HiChina or the ultimate holding company, as appropriate, taking into account the terms and conditions upon which these share-based awards were granted, and amortized over the respective vesting periods during which the employees become unconditionally entitled to these share-based awards. At each balance sheet date, the Group revises its estimates of the number of these share-based awards that are expected to become vested. The impact of the revision of original estimates, if any, is recognized in the consolidated statement of comprehensive income over the remaining vesting period. On vesting date, the amount recognized as employee benefit expense is adjusted to reflect the actual number of these share-based awards that become vested. In respect of the Share Award Scheme, when the Alibaba.com Equity Incentive Trust (the “Equity Incentive Trust”) purchases shares of the Company on the market under the scheme, the consideration paid, including any directly attributable incremental costs, is presented as shares held for Share Award Scheme in the consolidated statement of changes in equity and deducted from total equity. When the Equity Incentive Trust transfers the Company’s shares to the grantees upon vesting, the related costs of the awarded shares vested are credited to shares held for Share Award Scheme, with a corresponding adjustment to the share premium. 2.19 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the Group’s activities. The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The Group principally derives its revenue from the provision of membership package and related fees. Revenue recognition policies for each type of service are analyzed as follows: (a) Membership package and related fees The Group’s online B2B marketplaces facilitate e-commerce between suppliers and buyers. The Group earns its revenues from service fees received from suppliers (“paying members”) while buyers may use the marketplaces to conduct business at no charge. Service fees are received by the Group in respect of the sale of membership packages which provide priority placement of paying members’ storefronts and listings in the industry directory and search results on the Group’s marketplaces. Additional revenue is generated from service fees from paying members in respect of the sale of value-added services, including sale of additional keywords to improve the paying member’s rankings in search results on the Group’s marketplaces and sale of premium placements on the web pages to increase the paying member’s exposure to potential buyers. Alibaba.com Limited Annual Report 2010 100
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.19 Revenue recognition (Continued) (a) Membership package and related fees (Continued) Service fees are paid in advance in respect of the above services for a specific contracted service period. All service fees are initially deferred when received and revenue is recognized ratably over the term of the respective service contracts as the services are rendered. When value-added services are purchased by paying members within the service period of their membership packages and the fair value of the respective membership package and the value-added services cannot be objectively measured, the aggregate service fees are recognized as revenue ratably over the term of the membership package. In the event the fair value of the value-added services can be objectively measured, service fees from such value-added services are recognized as revenue ratably over the contracted service period of the value-added services. (b) Search revenue The Group receives service fees from suppliers to enable them to display their storefront/website links or related information on the search results pages of the Group’s marketplaces after a buyer inputs a particular key word or phrase into the search box of such marketplaces. Revenue is recognized when a buyer clicks on the suppliers’ storefront/website links or related information, where the positioning of such information and the price for such positioning are determined through a bidding system. (c) Transaction fees In connection with the transaction services, the Group earns revenues from the suppliers or buyers when completing transactions on the Group’s marketplaces. Revenues related to transaction fees are recognized at the time when the underlying transaction is completed. (d) Domain name registration and other service fees Revenue from registration of domain names is recognized when the related service is rendered and completed. Revenue from web hosting and application/e-commerce hosting services is recognized ratably over the term of the contracted services. (e) Barter transactions When services are exchanged or swapped for services which are of a similar nature and value, the exchange is not regarded as a revenue-generating transaction. When services are rendered in exchange for dissimilar services, the exchange is regarded as a revenue-generating transaction. The revenue is measured at the fair value of the services received, adjusted by the amount of any cash or cash equivalents transferred. When the fair value of the services received cannot be measured reliably, the revenue is measured at the fair value of the services provided in a barter transaction, by reference to non-barter transaction involving similar services, adjusted by the amount of any cash or cash equivalents transferred. (f) Interest income Interest income is recognized on a time-proportion basis using the effective interest method. Interest income is classified as finance income, net in the consolidated statement of comprehensive income. The Group is subject to business tax and related surcharges on the revenue earned for services provided in the PRC. The applicable rate of business tax is 5%. In the consolidated statement of comprehensive income, business tax and related surcharges for revenue earned by the Group are included in cost of revenue. 101 Alibaba.com Limited Annual Report 2010
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02 Financial and Operational Highli
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FINANCIAL HIGHLIGHTS Total register
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SEPTEMBER AUGUST Organized a big bu
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Award / Recognition Awarding Organi
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LEGAL ADVISERS Freshfields Bruckhau
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In closing, a word about the import
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A WINDOW ON THE GLOBAL MARKET MANAG
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were officially launched in the sec
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At the end of September 2010, we an
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Trust and safety With tens of milli
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Financial performance summary Reven
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Revenue from our international mark
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Product development expenses Our pr
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Profit attributable to equity owner
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In 2010, our capital expenditures d
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OUTLOOK Looking ahead to 2011, we f
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PENG Yi Jie, Sabrina TSAI Chung, Jo
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more than 30 years of global manage
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CULTURE DEVELOPMENT Alibaba.com has
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WE TRULY BELIEVE THAT SOCIAL RESPON
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GROWING A GREENER COMMUNITY
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Composition and attendance Director
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Key principle/practice CP/RBP Note
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Key principle/practice CP/RBP Note
Page 51 and 52: Key principle/practice CP/RBP Note
Page 59 and 60: We firmly believe that a sound cont
Page 61 and 62: Upholding Alibaba values is somethi
Page 63 and 64: RESERVES Details of movements in th
Page 65 and 66: Note (continued): (2) These securit
Page 68 and 69: DIRECTORS’ REPORT SHARE-BASED INC
Page 70 and 71: DIRECTORS’ REPORT (ii) Participan
Page 72 and 73: DIRECTORS’ REPORT (b) Particulars
Page 74: DIRECTORS’ REPORT DIRECTORS’ IN
Page 77 and 78: We have also engaged our auditors t
Page 79 and 80: Under the New Cooperation Framework
Page 81 and 82: Unless the parties otherwise agree
Page 83: PURCHASE, SALE OR REDEMPTION OF THE
Page 86 and 87: CONSOLIDATED BALANCE SHEET As of De
Page 88 and 89: BALANCE SHEET As of December 31, 20
Page 90 and 91: CONSOLIDATED STATEMENT OF CHANGES I
Page 92 and 93: CONSOLIDATED CASH FLOw STATEMENT Fo
Page 94 and 95: NOTES TO THE FINANCIAL STATEMENTS F
Page 146: FINANCIAL SUMMARY CONSOLIDATED INCO
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Directors' Report - Alibaba

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