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) 2.20 Government grants Government grants are recognized where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. The income approach is adopted to recognize government grants. Government grants are recognized as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis. Where a government grant becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the company with no future related costs, it is recognized as income in the period in which it becomes receivable. Government grants are recognized within other operating income, net in the consolidated statement of comprehensive income. 2.21 Operating 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 on a straight-line basis over the period of the lease. 2.22 Dividend distribution Dividend distribution to the shareholders or equity owners of the Group is recognized as a liability in the Group’s financial statements in the year in which the dividends are approved by the shareholders or equity owners of the Company or Group’s subsidiaries. 2.23 Customer accounts and amounts due to customers The Group has established a business integrity insurance fund for members on the China marketplace. Under this fund, buyers can claim compensation for losses, up to certain maximum protection amount, arising from fraudulent acts by the China TrustPass members of the Group who join the plan. In addition, certain China TrustPass members voluntarily join the business integrity insurance fund and increase the protection amount by providing additional funds to the Group. The funds received from these members are held in the consolidated balance sheet as customer accounts with a corresponding current liability in amounts due to customers. Alibaba.com Limited Annual Report 2010 102
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 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. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below: (a) Recognition of share-based compensation expense The Group’s employees have participated in various share-based incentive schemes of the Company and the ultimate holding company. Management of the Group have used the Black-Scholes Model to determine the total fair value of the options granted, which is based on fair value and various attributes of the underlying shares of the Company, HiChina and the ultimate holding company, depending on the type of the share-based incentive scheme. Significant estimates and assumptions are required to be made in determining the parameters for applying the Black-Scholes Model, including estimates and assumptions regarding the risk-free rate of return, expected dividend yield and volatility of the underlying shares and the expected life of the share options. The total fair value of RSUs, restricted shares or earn-in shares granted is measured on the grant date based on the fair value of the underlying shares of the Company, HiChina and the ultimate holding company. In addition, the Group is required to estimate the expected percentage of grantees that will remain in employment with the Group or, where applicable, the performance conditions for vesting will be met at the end of the vesting period. The Group only recognizes an expense for those options, RSUs, restricted shares or earn-in shares expected to vest over the vesting period during which the grantees become unconditionally entitled to these share-based awards. Changes in these estimates and assumptions could have a material effect on the determination of the fair value of the options, RSUs and restricted shares and the amount of such share-based awards expected to become vested, which may in turn significantly impact the determination of the share-based compensation expense. The fair value of options, RSUs, restricted shares and earn-in shares at the time of grant is to be expensed over the vesting period of these share-based awards based on an accelerated graded attribution approach. Under the accelerated graded attribution approach, each vesting installment of a graded vesting award is treated as a separate share-based award, which means that each vesting installment will be separately measured and attributed to expense, resulting in accelerated recognition of share-based compensation expense. Based on the fair value of the share-based awards granted by the Company and the ultimate holding company to the Group’s employees, the expected turnover rate of grantees and the probability that the performance conditions for vesting are met, the corresponding share-based compensation expense recognized by the Group in respect of their services rendered for the year ended December 31, 2010 was RMB340,971,000 (2009: RMB200,385,000) (Note 27(c)). (b) Recognition of income taxes The Group is mainly subject to income tax in the PRC. There are transactions (including entitlement to preferential tax treatment and deductibility of expenses) where the ultimate tax determination is uncertain until the final tax position is confirmed by relevant tax authorities. In addition, the Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. 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 tax provisions in the period in which such determination is made. Deferred income tax is recognized for all temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available in the future against which the temporary differences, the carry forward of unused tax credits and unused tax losses could be utilized. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted at the balance sheet date and which are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled. Where the actual or expected tax positions in future are different from the original estimate, such difference will impact the recognition of deferred income tax and income tax charge in the period in which such estimate has been changed. 103 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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Page 53 and 54: 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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