**Exhibit 99.2**

 

**BITAUTO HOLDINGS LIMITED**

 

**AUDITED CONSOLIDATED FINANCIAL STATEMENTS**

FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

 

----

 

**BITAUTO HOLDINGS LIMITED**

 

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

 
| ** **                                                                                                                    | ** ** | **Page**    |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------|
|                                                                                                                          |       |        |
| Report of Independent   Registered Public Accounting Firm                                                                     |       | F- 2        |
|                                                                                                                          |       |        |
| Consolidated   Balance Sheets as of December 31, 2016 and 2017                                                           |       | F-4 - F-5   |
|                                                                                                                          |       |        |
| Consolidated   Statements of Comprehensive Income for the years ended December 31,   2015, 2016 and 2017                 |       | F-6         |
|                                                                                                                          |       |        |
| Consolidated   Statements of Cash Flows for the years ended December 31, 2015, 2016 and   2017                           |       | F-7 - F-8   |
|                                                                                                                          |       |        |
| Consolidated   Statements of Changes in Shareholders’ Equity for the years ended   December 31, 2015, 2016 and 2017 |       | F-9 - F-11  |
|                                                                                                                          |       |        |
| Notes to Consolidated   Financial Statements                                                                                  |       | F-12 - F-71 |

 

F- 1

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**Report of Independent Registered Public Accounting Firm**

 

To the Board of Directors and Shareholders of Bitauto Holdings Limited:

 

***Opinions on the Financial Statements and Internal Control over Financial Reporting***

 

We have audited the accompanying consolidated balance sheets of Bitauto Holdings Limited and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of comprehensive income, cash flows and changes in shareholders’ equity for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

 

***Basis for Opinions***

 

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 15 of the Form 20-F. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

 

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded Beijing Xinchuang Interactive Advertising Company Limited (“Xinchuang”) from its assessment of internal control over financial reporting as of December 31, 2017 because it was acquired by the Company in a purchase business combination during 2017. We have also excluded Xinchuang from our audit of internal control over financial reporting. Xinchuang is a subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 0.1% and 0.3%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2017.

 

***Definition and Limitations of Internal Control over Financial Reporting***

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

F- 2

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ PricewaterhouseCoopers Zhong Tian LLP

Beijing, the People’s Republic of China

April 27, 2018

 

We have served as the Company’s auditor since 2015.

 

F- 3

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**BITAUTO HOLDINGS LIMITED**

**CONSOLIDATED BALANCE SHEETS**

**AS OF DECEMBER 31, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 
| ** **                                                                                                                                                                                                                             | ** ** | ** ** | ** ** | **2016**   | ** ** | **2017**   | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                                                                                                                                                                                             | ** ** | **Notes**  | ** ** | **RMB**    | ** ** | **RMB**    | ** ** |
|                                                                                                                                                                                                                                   |       |       |       |       |       |       |       |
| **Assets**                                                                                                                                                                                                                             |       |       |       |       |       |       |       |
|                                                                                                                                                                                                                                   |       |       | ** ** | ** ** | ** ** |       |       |
| **Current assets**                                                                                                                                                                                                                     |       |       |       |       |       |       |       |
| Cash and cash equivalents                                                                                                                                                                                                              |       |       |       | 2,021,989  |       | 9,555,027  |       |
| Time deposits                                                                                                                                                                                                                          |       |       |       | 2,000      |       | -          |       |
| Restricted cash                                                                                                                                                                                                                        |       |       |       | 5,475,576  |       | 811,596    |       |
| Accounts receivable, net                                                                                                                                                                                                               |       | 6          |       | 2,068,615  |       | 2,854,410  |       |
| Bills receivable                                                                                                                                                                                                                       |       |       |       | 110,236    |       | 330,544    |       |
| Prepayments and other receivables                                                                                                                                                                                                      |       | 7          |       | 611,675    |       | 1,103,683  |       |
| Due from related parties                                                                                                                                                                                                               |       | 25         |       | 409,091    |       | 205,031    |       |
| Finance receivables - current portion, net                                                                                                                                                                                             |       | 13         |       | 5,758,275  |       | 13,253,898 |       |
| Other current assets                                                                                                                                                                                                                   |       |       |       | 17,502     |       | 3,180      |       |
| **Total current assets**                                                                                                                                                                                                               |       |       |       | 16,474,959 |       | 28,117,369 |       |
|                                                                                                                                                                                                                                   |       |       |       |       |       |       |       |
| **Non-current assets**                                                                                                                                                                                                                 |       |       |       |       |       |       |       |
| Restricted cash                                                                                                                                                                                                                        |       |       |       | 150,000    |       | 672,736    |       |
| Investment in equity investees                                                                                                                                                                                                         |       | 9          |       | 1,447,472  |       | 1,184,196  |       |
| Property, plant and equipment, net                                                                                                                                                                                                     |       | 10         |       | 194,560    |       | 1,296,196  |       |
| Intangible assets, net                                                                                                                                                                                                                 |       | 11         |       | 2,342,840  |       | 1,726,321  |       |
| Deferred tax assets                                                                                                                                                                                                                    |       | 22         |       | 17,387     |       | 52,508     |       |
| Goodwill                                                                                                                                                                                                                               |       | 12         |       | 444,933    |       | 543,655    |       |
| Finance receivables - non-current portion, net                                                                                                                                                                                         |       | 13         |       | 7,924,760  |       | 16,537,707 |       |
| Other non-current assets                                                                                                                                                                                                               |       | 14         |       | 937,845    |       | 1,385,044  |       |
| **Total non-current assets**                                                                                                                                                                                                           |       |       |       | 13,459,797 |       | 23,398,363 |       |
|                                                                                                                                                                                                                                   |       |       |       |       |       |       |       |
| **Total assets**                                                                                                                                                                                                                       |       |       |       | 29,934,756 |       | 51,515,732 |       |
|                                                                                                                                                                                                                                   |       |       |       |       |       |       |       |
| **Liabilities**                                                                                                                                                                                                                        |       |       |       |       |       |       |       |
|                                                                                                                                                                                                                                   |       |       |       |       |       |       |       |
| **Current liabilities (including amounts   of the consolidated VIEs and subsidiaries of VIEs without recourse to the   primary beneficiaries of RMB4,307,570 and RMB3,655,453 as of   December 31, 2016 and 2017, respectively)** |       |       |       |       |       |       |       |
| Short term borrowings                                                                                                                                                                                                                  |       | 15         |       | 5,736,026  |       | 11,243,614 |       |
| Asset-backed securitization debt                                                                                                                                                                                                       |       | 16         |       | 2,799,958  |       | 6,165,429  |       |
| Accounts payable                                                                                                                                                                                                                       |       |       |       | 1,603,577  |       | 2,176,627  |       |
| Bills payable                                                                                                                                                                                                                          |       |       |       | -          |       | 295,089    |       |
| Income tax payable                                                                                                                                                                                                                     |       |       |       | 132,815    |       | 172,018    |       |
| Due to related parties                                                                                                                                                                                                                 |       | 25         |       | 84,447     |       | 98,241     |       |
| Other payables and accruals                                                                                                                                                                                                            |       | 18         |       | 1,597,093  |       | 2,548,221  |       |
| **Total current liabilities**                                                                                                                                                                                                          |       |       |       | 11,953,916 |       | 22,699,239 |       |
|                                                                                                                                                                                                                                   |       |       |       |       |       |       |       |
| **Non-current liabilities**                                                                                                                                                                                                            |       |       |       |       |       |       |       |
| Long term borrowings                                                                                                                                                                                                                   |       | 15         |       | 1,582,971  |       | 5,074,273  |       |
| Asset-backed securitization debt                                                                                                                                                                                                       |       | 16         |       | 1,630,663  |       | 2,611,821  |       |
| Convertible debt                                                                                                                                                                                                                       |       | 17         |       | 859,166    |       | 707,854    |       |
| Deferred tax liabilities                                                                                                                                                                                                               |       | 22         |       | 51,617     |       | 52,237     |       |
| Other non-current liabilities                                                                                                                                                                                                          |       |       |       | 94,712     |       | 132,637    |       |
| **Total non-current liabilities**                                                                                                                                                                                                      |       |       |       | 4,219,129  |       | 8,578,822  |       |
|                                                                                                                                                                                                                                   |       |       |       |       |       |       |       |
| **Total liabilities**                                                                                                                                                                                                                  |       |       |       | 16,173,045 |       | 31,278,061 |       |

 

*The accompanying notes are an integral part of the consolidated financial statements.*

 

F- 4

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**BITAUTO HOLDINGS LIMITED**

**CONSOLIDATED BALANCE SHEETS (CONTINUED)**

**AS OF DECEMBER 31, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 
|                                                                                                                                                                                                                                                                                            |   |      |   | **2016**   |   | **2017**   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|------------|--------|------------|--------|
|                                                                                                                                                                                                                                                                                            |   | **Notes** |   | **RMB**    |   | **RMB**    |   |
|                                                                                                                                                                                                                                                                                            |   |      |   |       |   |       |   |
| **Commitments and contingencies**                                                                                                                                                                                                                                                               |   | 26        |   |       |   |       |   |
|                                                                                                                                                                                                                                                                                            |   |      |   |       |   |       |   |
| **Redeemable noncontrolling interests**                                                                                                                                                                                                                                                         |   | 19        |   | 3,939,646  |   | 301,953    |   |
|                                                                                                                                                                                                                                                                                            |   |      |   |       |   |       |   |
| **Bitauto Holdings Limited shareholders’ equity**                                                                                                                                                                                                                                          |   |      |   |       |   |       |   |
| Ordinary shares (US$0.00004 par value;   1,250,000,000 shares authorized as of December 31, 2016 and 2017, respectively;   70,726,025 shares issued and outstanding as of December 31, 2016;   72,739,966 shares issued and outstanding as of December 31, 2017,   respectively) |   |      |   | 19         |   | 19         |   |
| Additional paid-in capital                                                                                                                                                                                                                                                                      |   |      |   | 8,903,759  |   | 12,220,493 |   |
| Treasury shares                                                                                                                                                                                                                                                                                 |   |      |   | (41,888    | )      | (20,411    | )      |
| Statutory reserves                                                                                                                                                                                                                                                                              |   |      |   | 89,841     |   | 153,538    |   |
| Accumulated other comprehensive income                                                                                                                                                                                                                                                          |   |      |   | 742,302    |   | 468,257    |   |
| Accumulated deficit                                                                                                                                                                                                                                                                             |   |      |   | (150,515   | )      | (1,493,209 | )      |
| **Total Bitauto Holdings Limited shareholders’ equity**                                                                                                                                                                                                                                    |   |      |   | 9,543,518  |   | 11,328,687 |   |
| Noncontrolling interests                                                                                                                                                                                                                                                                        |   |      |   | 278,547    |   | 8,607,031  |   |
| **Total shareholders’ equity**                                                                                                                                                                                                                                                             |   |      |   | 9,822,065  |   | 19,935,718 |   |
|                                                                                                                                                                                                                                                                                            |   |      |   |       |   |       |   |
| **Total liabilities, redeemable noncontrolling interests and   shareholders’ equity**                                                                                                                                                                                                      |   |      |   | 29,934,756 |   | 51,515,732 |   |

 

*The accompanying notes are an integral part of the consolidated financial statements.*

 

F- 5

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** **

**BITAUTO HOLDINGS LIMITED**

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 
|                                                                         |       |      | ** ** | **2015**   | ** ** | **2016**   | ** ** | **2017**   | ** ** |
|------------------------------------------------------------------------------|------------|-----------|------------|------------|------------|------------|------------|------------|------------|
|                                                                         | ** ** | **Notes** | ** ** | **RMB**    | ** ** | **RMB**    | ** ** | **RMB**    | ** ** |
|                                                                         |       |      |       |       |       |       |       |       |       |
| Revenue                                                                      |       | 20        |       | 4,254,195  |       | 5,772,948  |       | 8,751,259  |       |
| Cost of revenue                                                              |       |      |       | (1,450,744 | )          | (2,077,979 | )          | (3,234,680 | )          |
| **Gross profit**                                                             |       |      |       | 2,803,451  |       | 3,694,969  |       | 5,516,579  |       |
|                                                                         |       |      |       |       |       |       |       |       |       |
| Selling and administrative expenses                                          |       |      |       | (3,013,997 | )          | (3,417,811 | )          | (6,059,046 | )          |
| Product development expenses                                                 |       |      |       | (312,100   | )          | (457,367   | )          | (565,702   | )          |
| Other gains, net                                                             |       | 21        |       | 60,508     |       | 70,981     |       | 31,576     |       |
| **Loss from operations**                                                     |       |      |       | (462,138   | )          | (109,228   | )          | (1,076,593 | )          |
|                                                                         |       |      |       |       |       |       |       |       |       |
| Interest income                                                              |       |      |       | 24,980     |       | 41,651     |       | 93,025     |       |
| Interest expense                                                             |       |      |       | (8,140     | )          | (52,155    | )          | (92,633    | )          |
| Share of results of equity investees                                         |       |      |       | (16,663    | )          | (25,640    | )          | (71,866    | )          |
| Investment income/(loss)                                                     |       |      |       | 141,195    |       | (45,012    | )          | (75,097    | )          |
| **Loss before tax**                                                          |       |      |       | (320,766   | )          | (190,384   | )          | (1,223,164 | )          |
|                                                                         |       |      |       |       |       |       |       |       |       |
| Income tax expense                                                           |       | 22        |       | (64,518    | )          | (147,569   | )          | (203,824   | )          |
| **Net loss**                                                                 |       |      |       | (385,284   | )          | (337,953   | )          | (1,426,988 | )          |
|                                                                         |       |      |       |       |       |       |       |       |       |
| Net income/(loss) attributable to noncontrolling   interests                 |       |      |       | 7,898      |       | (1,895     | )          | (147,991   | )          |
| Accretion to redeemable noncontrolling interests                             |       |      |       | 113,810    |       | 205,287    |       | 332,117    |       |
| **Net loss attributable to Bitauto   Holdings Limited**                      |       |      |       | (506,992   | )          | (541,345   | )          | (1,611,114 | )          |
|                                                                         |       |      |       |       |       |       |       |       |       |
| **Net loss per share/ADS   attributable to ordinary shareholders**           |       | 24        |       |       |       |       |       |       |       |
| Basic                                                                        |       |      |       | (8.72      | )          | (8.31      | )          | (23.01     | )          |
| Diluted                                                                      |       |      |       | (8.72      | )          | (8.31      | )          | (23.16     | )          |
|                                                                         |       |      |       |       |       |       |       |       |       |
| **Weighted average number of   shares/ADSs**                                 |       | 24        |       |       |       |       |       |       |       |
| Basic                                                                        |       |      |       | 58,142,432 |       | 65,160,205 |       | 70,154,910 |       |
| Diluted                                                                      |       |      |       | 58,142,432 |       | 65,160,205 |       | 70,154,910 |       |
|                                                                         |       |      |       |       |       |       |       |       |       |
| **Other comprehensive income/(loss)**                                        |       |      |       |       |       |       |       |       |       |
| Foreign currency exchange gains/(losses), net of   tax of nil                |       |      |       | 344,748    |       | 459,430    |       | (353,747   | )          |
|                                                                         |       |      |       |       |       |       |       |       |       |
| **Total comprehensive   (loss)/income, net of tax**                          |       |      |       | (40,536    | )          | 121,477    |       | (1,780,735 | )          |
| Total comprehensive income/(loss) attributable to   noncontrolling interests |       |      |       | 7,898      |       | (1,692     | )          | (227,693   | )          |
| Accretion to redeemable noncontrolling interests                             |       |      |       | 113,810    |       | 205,287    |       | 332,117    |       |
| **Total comprehensive loss   attributable to Bitauto Holdings Limited**      |       |      |       | (162,244   | )          | (82,118    | )          | (1,885,159 | )          |

 

*The accompanying notes are an integral part of the consolidated financial statements.*

 

F- 6

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**BITAUTO HOLDINGS LIMITED**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 
|                                                                                                 |   | **2015** |   | **2016** |   | **2017**   |   |
|------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|------------|--------|
|                                                                                                 |   | **RMB**  |   | **RMB**  |   | **RMB**    |   |
|                                                                                                 |   |     |   |     |   |       |   |
| **Cash flows from operating activities**                                                             |   |     |   |     |   |       |   |
| Net loss                                                                                             |   | (385,284 | )      | (337,953 | )      | (1,426,988 | )      |
|                                                                                                 |   |     |   |     |   |       |   |
| Adjustments to reconcile net loss to net cash provided by operating   activities:                    |   |     |   |     |   |       |   |
| Investment (income)/loss                                                                             |   | (141,195 | )      | 45,012   |   | 75,097     |   |
| Gain from adjustment of contingent consideration                                                     |   | (17,419  | )      | -        |   | -          |   |
| Unrealized exchange losses/(gains)                                                                   |   | 6,560    |   | (3,410   | )      | (8,375     | )      |
| Interest expense                                                                                     |   | -        |   | -        |   | 31,659     |   |
| Depreciation of property, plant and equipment                                                        |   | 55,459   |   | 55,859   |   | 185,344    |   |
| Amortization of intangible assets                                                                    |   | 495,614  |   | 633,368  |   | 688,572    |   |
| Deferred income tax                                                                                  |   | (10,940  | )      | 6,863    |   | (46,171    | )      |
| Share-based compensation                                                                             |   | 120,045  |   | 76,981   |   | 1,185,839  |   |
| Write-down of assets                                                                                 |   | 280,591  |   | -        |   | -          |   |
| Losses/(Gains) on disposal of property, plant and equipment                                          |   | 375      |   | (22,993  | )      | (14,910    | )      |
| Gains on disposal of intangible assets                                                               |   | -        |   | -        |   | (1,520     | )      |
| Share of results of equity investees                                                                 |   | 16,663   |   | 25,640   |   | 71,866     |   |
| Allowance for doubtful accounts for accounts receivable, and credit   losses for finance receivables |   | 8,931    |   | 102,651  |   | 349,185    |   |
| Allowance for due from related party                                                                 |   | -        |   | -        |   | 15,000     |   |
| Changes in assets and liabilities, net of effects of acquisitions and   disposals:                   |   |     |   |     |   |       |   |
| Accounts receivable                                                                                  |   | (384,192 | )      | (426,800 | )      | (869,699   | )      |
| Bills receivable                                                                                     |   | (42,943  | )      | 37,424   |   | (220,308   | )      |
| Prepayments and other receivables                                                                    |   | (154,224 | )      | (258,732 | )      | (343,794   | )      |
| Due from related parties                                                                             |   | (95,769  | )      | 30,996   |   | 29,792     |   |
| Other current assets                                                                                 |   | (47      | )      | (104,313 | )      | (17        | )      |
| Other non-current assets                                                                             |   | (19,686  | )      | (462,033 | )      | (375,823   | )      |
| Accounts payable                                                                                     |   | 433,634  |   | 619,769  |   | 483,312    |   |
| Income tax payable                                                                                   |   | (16,581  | )      | 9,761    |   | 30,561     |   |
| Due to related parties                                                                               |   | 35,322   |   | 35,693   |   | 25,194     |   |
| Other payables and accruals                                                                          |   | 392,608  |   | 393,262  |   | 1,026,485  |   |
| Other non-current liabilities                                                                        |   | 24,361   |   | 70,351   |   | 37,925     |   |
|                                                                                                 |   |     |   |     |   |       |   |
| **Net cash provided by operating activities**                                                        |   | 601,883  |   | 527,396  |   | 928,226    |   |

 

*The accompanying notes are an integral part of the consolidated financial statements.*

 

F- 7

----

 

**BITAUTO HOLDINGS LIMITED**

**CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 
|                                                                                                           |   | **2015**   |   | **2016**    |   | **2017**    |   |
|----------------------------------------------------------------------------------------------------------------|--------|------------|--------|-------------|--------|-------------|--------|
|                                                                                                           |   | **RMB**    |   | **RMB**     |   | **RMB**     |   |
|                                                                                                           |   | ** ** |   | ** **  |   | ** **  |   |
| **Cash flows from investing activities**                                                                       |   |       |   |        |   |        |   |
| Placement of time deposits                                                                                     |   | (2,388,478 | )      | (2,000      | )      | -           |   |
| Proceeds from maturity of time deposits                                                                        |   | 2,443,311  |   | 100,000     |   | 2,000       |   |
| Placement of restricted cash                                                                                   |   | (334,098   | )      | (6,902,089  | )      | (3,903,776  | )      |
| Proceeds from restricted cash                                                                                  |   | -          |   | 1,822,631   |   | 7,828,146   |   |
| Purchase of investments in equity investees                                                                    |   | (921,130   | )      | (280,168    | )      | (120,429    | )      |
| Disposal of investments in equity investees                                                                    |   | -          |   | -           |   | 127,120     |   |
| Purchases of property, plant and equipment                                                                     |   | (231,850   | )      | (575,015    | )      | (1,728,761  | )      |
| Purchases of intangible assets                                                                                 |   | (3,607     | )      | (33,567     | )      | (26,706     | )      |
| Proceeds from disposal of property, plant and equipment                                                        |   | 42,960     |   | 67,090      |   | 242,282     |   |
| Proceeds from disposal of intangible assets                                                                    |   | -          |   | 445         |   | -           |   |
| Acquisition of finance receivables                                                                             |   | (3,630,792 | )      | (13,951,414 | )      | (24,608,984 | )      |
| Collection of finance receivables                                                                              |   | 854,056    |   | 2,844,009   |   | 9,135,002   |   |
| Acquisition of subsidiaries, net of cash acquired                                                              |   | (6,118     | )      | (56,513     | )      | (49,585     | )      |
|                                                                                                           |   |       |   |        |   |        |   |
| **Net cash used in investing activities**                                                                      |   | (4,175,746 | )      | (16,966,591 | )      | (13,103,691 | )      |
|                                                                                                           |   |       |   |        |   |        |   |
| **Cash flows from financing activities**                                                                       |   |       |   |        |   |        |   |
| Proceeds from issuance of ordinary shares, net of issuance costs                                               |   | 3,370,015  |   | 977,954     |   | -           |   |
| Proceeds from issuance of subsidiary’s ordinary shares, net of   issuance costs                           |   | -          |   | -           |   | 5,528,755   |   |
| Proceeds from issuance of subsidiaries’ redeemable convertible   preference shares, net of issuance costs |   | 1,537,952  |   | 2,043,694   |   | 1,317,450   |   |
| Contribution from noncontrolling interests                                                                     |   | -          |   | -           |   | 2,995       |   |
| Purchase of noncontrolling interests                                                                           |   | -          |   | -           |   | (36,292     | )      |
| Proceeds from issuance of convertible debt                                                                     |   | -          |   | 991,720     |   | -           |   |
| Proceeds from exercise of options                                                                              |   | 5,881      |   | 20,772      |   | 26,673      |   |
| Proceeds from borrowings                                                                                       |   | 361,084    |   | 7,775,989   |   | 23,306,791  |   |
| Repayment of borrowings                                                                                        |   | -          |   | (818,076    | )      | (14,650,880 | )      |
| Proceeds from asset-backed securitization debt                                                                 |   | -          |   | 5,499,400   |   | 11,142,486  |   |
| Repayment of asset-backed securitization debt                                                                  |   | -          |   | (1,068,779  | )      | (6,795,858  | )      |
|                                                                                                           |   |       |   |        |   |        |   |
| **Net cash provided by financing activities**                                                                  |   | 5,274,932  |   | 15,422,674  |   | 19,842,120  |   |
|                                                                                                           |   |       |   |        |   |        |   |
| Effect of exchange rate changes on cash and cash equivalents                                                   |   | 18,332     |   | 97,636      |   | (133,617    | )      |
|                                                                                                           |   |       |   |        |   |        |   |
| Increase/(Decrease) in cash and cash equivalents                                                               |   | 1,719,401  |   | (918,885    | )      | 7,533,038   |   |
| Cash and cash equivalents at beginning of the year                                                             |   | 1,221,473  |   | 2,940,874   |   | 2,021,989   |   |
|                                                                                                           |   |       |   |        |   |        |   |
| **Cash and cash equivalents at end of the year**                                                               |   | 2,940,874  |   | 2,021,989   |   | 9,555,027   |   |
|                                                                                                           |   |       |   |        |   |        |   |
| **Supplemental cash flow disclosures:**                                                                        |   |       |   |        |   |        |   |
|                                                                                                           |   |       |   |        |   |        |   |
| Cash paid for income taxes                                                                                     |   | (92,039    | )      | (130,946    | )      | (219,434    | )      |
| Cash paid for interest                                                                                         |   | (3,117     | )      | (71,759     | )      | (1,118,736  | )      |
|                                                                                                           |   |       |   |        |   |        |   |
| **Supplemental disclosures of non-cash activities:**                                                           |   |       |   |        |   |        |   |
|                                                                                                           |   |       |   |        |   |        |   |
| Issuance of ordinary shares in connection with business cooperation   with JD.com, Inc.                   |   | 3,045,268  |   | -           |   | -           |   |
| Purchases of property, plant and equipment                                                                     |   | 1,537      |   | 1,240       |   | 9,471       |   |
| Purchases of intangible assets                                                                                 |   | 4,258      |   | 291         |   | 708         |   |
| Amounts receivable from exercise of options                                                                    |   | (797       | )      | (3,488      | )      | (58,415     | )      |
| Conversion of convertible debt                                                                                 |   | -          |   | -           |   | 158,450     |   |
| Conversion of Yixin preferred shares                                                                           |   | -          |   | -           |   | 5,323,103   |   |

 

*The accompanying notes are an integral part of the consolidated financial statements.*

 

F- 8

----

 

**BITAUTO HOLDINGS LIMITED**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 
| ** **                                       | ** ** | **Ordinary shares** | ** ** | **Treasury shares** | ** ** | **Additional   paid-in** | ** ** | **Statutory** | ** ** | **Accumulated   other   comprehensive** | ** ** | **Retained** | ** ** | **Total Bitauto   Holdings   Limited   shareholders’** | ** ** | **Noncontrolling** | ** ** | **Total   shareholders’** | ** ** |
|--------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|--------------------------|------------|---------------|------------|-----------------------------------------|------------|--------------|------------|------------------------------------------------------------------|------------|--------------------|------------|--------------------------------|------------|
| ** **                                       | ** ** | **Share**                | ** ** | **Amount**               | ** ** | **Share**                | ** ** | **Amount**    | ** ** | **capital**                             | ** ** | **reserves** | ** ** | **income**                                                       | ** ** | **earnings**       | ** ** | **equity**                     | ** ** | **interests** | ** ** | **equity** | ** ** |
| ** **                                       | ** ** | ** **               | ** ** | **RMB**                  | ** ** | ** **               | ** ** | **RMB**       | ** ** | **RMB**                                 | ** ** | **RMB**      | ** ** | **RMB**                                                          | ** ** | **RMB**            | ** ** | **RMB**                        | ** ** | **RMB** | ** ** | **RMB** | ** ** |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| **As of January 1, 2015**                        |       | 45,575,745.0             |       | 13                       |       | 1,903,665.5              |       | (62,579       | )          | 1,383,503                               |       | 44,357       |       | (63,154                                                          | )          | 738,019            |       | 2,040,159                      |       | 246,855 |   | 2,287,014 |   |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Issuance of ordinary shares                      |       | 17,735,549.0             |       | 4                        |       |  -                  |       |  -       |       | 6,355,197                               |       |  -      |       |  -                                                          |       |  -            |       | 6,355,201                      |       |  - |   | 6,355,201 |   |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Exercise of options and RSUs                     |       |  -                  |       |  -                  |       | (179,168.0               | )          | 5,889         |       | 767                                     |       |  -      |       |  -                                                          |       |  -            |       | 6,656                          |       |  - |   | 6,656 |   |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Share-based compensation                         |       |  -                  |       |  -                  |       |  -                  |       |  -       |       | 120,045                                 |       |  -      |       |  -                                                          |       |  -            |       | 120,045                        |       |  - |   | 120,045 |   |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Net loss                                         |       |  -                  |       |  -                  |       |  -                  |       |  -       |       |  -                                 |       |  -      |       |  -                                                          |       | (393,182           | )          | (393,182                       | )          | 7,898 |   | (385,284 | ) |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Foreign currency translation gains               |       |  -                  |       |  -                  |       |  -                  |       |  -       |       |  -                                 |       |  -      |       | 344,748                                                          |       |  -            |       | 344,748                        |       |  - |   | 344,748 |   |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Acquisitions of subsidiaries                     |       |  -                  |       |  -                  |       |  -                  |       |  -       |       |  -                                 |       |  -      |       |  -                                                          |       |  -            |       |  -                        |       | 10,000 |   | 10,000 |   |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Accretion of redeemable noncontrolling interests |       |  -                  |       |  -                  |       |  -                  |       |  -       |       |  -                                 |       |  -      |       |  -                                                          |       | (113,810           | )          | (113,810                       | )          |  - |   | (113,810 | ) |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Statutory reserves                               |       |  -                  |       |  -                  |       |  -                  |       |  -       |       |  -                                 |       | 12,836       |       |  -                                                          |       | (12,836            | )          |  -                        |       |  - |   |  - |   |
|                                             |       |                     |       |                     |       |                     |       |          |       |                                    |       |         |       |                                                             |       |               |       |                           |       |   |   |   |   |
| **As of December 31, 2015**                      |       | 63,311,294.0             |       | 17                       |       | 1,724,497.5              |       | (56,690       | )          | 7,859,512                               |       | 57,193       |       | 281,594                                                          |       | 218,191            |       | 8,359,817                      |       | 264,753 |   | 8,624,570 |   |

 

*The accompanying notes are an integral part of the consolidated financial statements.*

 

F- 9

----

 

**BITAUTO HOLDINGS LIMITED**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 
| ** **                                                                  | ** ** | **Ordinary shares** | ** ** | **Treasury shares** | ** ** | **Additional   paid-in** | ** ** | **Statutory** | ** ** | **Accumulated   other   comprehensive** | ** ** | **Retained   earnings/   (Accumulated** | ** ** | **Total Bitauto   Holdings   Limited   shareholders’** | ** ** | **Noncontrolling** | ** ** | **Total   shareholders’** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|--------------------------|------------|---------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|------------------------------------------------------------------|------------|--------------------|------------|--------------------------------|------------|
| ** **                                                                  | ** ** | **Share**                | ** ** | **Amount**               | ** ** | **Share**                | ** ** | **Amount**    | ** ** | **capital**                             | ** ** | **reserves**                            | ** ** | **income**                                                       | ** ** | **deficit)**       | ** ** | **equity**                     | ** ** | **interests** | ** ** | **equity** | ** ** |
| ** **                                                                  | ** ** | ** **               | ** ** | **RMB**                  | ** ** | ** **               | ** ** | **RMB**       | ** ** | **RMB**                                 | ** ** | **RMB**                                 | ** ** | **RMB**                                                          | ** ** | **RMB**            | ** ** | **RMB**                        | ** ** | **RMB** | ** ** | **RMB** | ** ** |
| ** **                                                                  |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| **As of January 1, 2016**                                              |       | 63,311,294.0             |       | 17                       |       | 1,724,497.5              |       | (56,690       | )          | 7,859,512                               |       | 57,193                                  |       | 281,594                                                          |       | 218,191            |       | 8,359,817                      |       | 264,753 |   | 8,624,570 |   |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Issuance of ordinary shares                                                 |       | 7,414,731.0              |       | 2                        |       | -                        |       | -             |       | 978,331                                 |       | -                                       |       | -                                                                |       | -                  |       | 978,333                        |       | - |   | 978,333 |   |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Beneficial conversion feature in relation to issuance of convertible   debt |       | -                        |       | -                        |       | -                        |       | -             |       | 185,712                                 |       | -                                       |       | -                                                                |       | -                  |       | 185,712                        |       | - |   | 185,712 |   |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Exercise of options and RSUs                                                |       | -                        |       | -                        |       | (450,311.0               | )          | 14,802        |       | 8,510                                   |       | -                                       |       | -                                                                |       | -                  |       | 23,312                         |       | - |   | 23,312 |   |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Share-based compensation                                                    |       | -                        |       | -                        |       | -                        |       | -             |       | 76,981                                  |       | -                                       |       | -                                                                |       | -                  |       | 76,981                         |       | - |   | 76,981 |   |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Net loss                                                                    |       | -                        |       | -                        |       | -                        |       | -             |       | -                                       |       | -                                       |       | -                                                                |       | (336,058           | )          | (336,058                       | )          | (1,895 | ) | (337,953 | ) |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Foreign currency translation gains                                          |       | -                        |       | -                        |       | -                        |       | -             |       | -                                       |       | -                                       |       | 459,430                                                          |       | -                  |       | 459,430                        |       | - |   | 459,430 |   |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Acquisitions of  subsidiaries                                          |       | -                        |       | -                        |       | -                        |       | -             |       | -                                       |       | -                                       |       | 1,278                                                            |       | -                  |       | 1,278                          |       | 15,689 |   | 16,967 |   |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Accretion of redeemable noncontrolling interests                            |       | -                        |       | -                        |       | -                        |       | -             |       | (205,287                                | )          | -                                       |       | -                                                                |       | -                  |       | (205,287                       | )          | - |   | (205,287 | ) |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| Statutory reserves                                                          |       | -                        |       | -                        |       | -                        |       | -             |       | -                                       |       | 32,648                                  |       | -                                                                |       | (32,648            | )          | -                              |       | - |   | - |   |
|                                                                        |       |                     |       |                     |       |                     |       |          |       |                                    |       |                                    |       |                                                             |       |               |       |                           |       |   |   |   |   |
| **As of December 31, 2016**                                            |       | 70,726,025.0             |       | 19                       |       | 1,274,186.5              |       | (41,888       | )          | 8,903,759                               |       | 89,841                                  |       | 742,302                                                          |       | (150,515           | )          | 9,543,518                      |       | 278,547 |   | 9,822,065 |   |

 

*The accompanying notes are an integral part of the consolidated financial statements.*

 

F- 10

----

 

**BITAUTO HOLDINGS LIMITED**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 
| ** **                                                   | ** ** | **Ordinary shares** | ** ** | **Treasury shares** | ** ** | **Additional   paid-in** | ** ** | **Statutory** | ** ** | **Accumulated   other   comprehensive** | ** ** | **Accumulated** | ** ** | **Total Bitauto   Holdings Limited   shareholders’** | ** ** | **Noncontrolling** | ** ** | **Total   shareholders’** | ** ** |
|--------------------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|--------------------------|------------|---------------|------------|-----------------------------------------|------------|-----------------|------------|----------------------------------------------------------------|------------|--------------------|------------|--------------------------------|------------|
| ** **                                                   | ** ** | **Share**                | ** ** | **Amount**               | ** ** | **Share**                | ** ** | **Amount**    | ** ** | **capital**                             | ** ** | **reserves**    | ** ** | **income**                                                     | ** ** | **deficit**        | ** ** | **equity**                     | ** ** | **interests** | ** ** | **equity** | ** ** |
| ** **                                                   | ** ** | ** **               | ** ** | **RMB**                  | ** ** | ** **               | ** ** | **RMB**       | ** ** | **RMB**                                 | ** ** | **RMB**         | ** ** | **RMB**                                                        | ** ** | **RMB**            | ** ** | **RMB**                        | ** ** | **RMB** | ** ** | **RMB** | ** ** |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| **As of January 1, 2017**                               |       | 70,726,025.0             |       | 19                       |       | 1,274,186.5              |       | (41,888       | )          | 8,903,759                               |       | 89,841          |       | 742,302                                                        |       | (150,515           | )          | 9,543,518                      |       | 278,547 |   | 9,822,065 |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Issuance of ordinary shares                                  |       | 1,000,000.0              |       | -                        |       | -                        |       | -             |       | -                                       |       | -               |       | -                                                              |       | -                  |       | -                              |       | - |   | - |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Exercise of options and RSUs                                 |       | -                        |       | -                        |       | (653,397.0               | )          | 21,477        |       | (2,001                                  | )          | -               |       | -                                                              |       | -                  |       | 19,476                         |       | - |   | 19,476 |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Share-based compensation                                     |       | -                        |       | -                        |       | -                        |       | -             |       | 1,056,653                               |       | -               |       | -                                                              |       | -                  |       | 1,056,653                      |       | 129,186 |   | 1,185,839 |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Net loss                                                     |       | -                        |       | -                        |       | -                        |       | -             |       | -                                       |       | -               |       | -                                                              |       | (1,278,997         | )          | (1,278,997                     | )          | (147,991 | ) | (1,426,988 | ) |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Foreign currency translation losses                          |       | -                        |       | -                        |       | -                        |       | -             |       | -                                       |       | -               |       | (274,045                                                       | )          | -                  |       | (274,045                       | )          | (79,702 | ) | (353,747 | ) |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Conversion of Yixin preferred shares to ordinary shares      |       | -                        |       | -                        |       | -                        |       | -             |       | (947,158                                | )          | -               |       | -                                                              |       | -                  |       | (947,158                       | )          | 6,270,261 |   | 5,323,103 |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Proceeds from Yixin IPO, net of issuance costs               |       | -                        |       | -                        |       | -                        |       | -             |       | 3,321,055                               |       | -               |       | -                                                              |       | -                  |       | 3,321,055                      |       | 2,204,022 |   | 5,525,077 |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Transaction with noncontrolling interests                    |       | -                        |       | -                        |       | -                        |       | -             |       | 12,554                                  |       | -               |       | -                                                              |       | -                  |       | 12,554                         |       | 59,349 |   | 71,903 |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Conversion of convertible debt                               |       | 1,013,941.0              |       | -                        |       | -                        |       | -             |       | 158,450                                 |       | -               |       | -                                                              |       | -                  |       | 158,450                        |       | - |   | 158,450 |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Acquisition of noncontrolling interests in subsidiaries      |       | -                        |       | -                        |       | -                        |       | -             |       | 49,298                                  |       | -               |       | -                                                              |       | -                  |       | 49,298                         |       | (109,671 | ) | (60,373 | ) |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Issuance of ordinary shares by the Company’s subsidiary |       | -                        |       | -                        |       | -                        |       | -             |       | -                                       |       | -               |       | -                                                              |       | -                  |       | -                              |       | 3,030 |   | 3,030 |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Accretion of redeemable noncontrolling interests             |       | -                        |       | -                        |       | -                        |       | -             |       | (332,117                                | )          | -               |       | -                                                              |       | -                  |       | (332,117                       | )          | - |   | (332,117 | ) |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| Statutory reserves                                           |       | -                        |       | -                        |       | -                        |       | -             |       | -                                       |       | 63,697          |       | -                                                              |       | (63,697            | )          | -                              |       | - |   | - |   |
|                                                         |       |                     |       |                     |       |                     |       |          |       |                                    |       |            |       |                                                           |       |               |       |                           |       |   |   |   |   |
| **As of December 31, 2017**                             |       | 72,739,966.0             |       | 19                       |       | 620,789.5                |       | (20,411       | )          | 12,220,493                              |       | 153,538         |       | 468,257                                                        |       | (1,493,209         | )          | 11,328,687                     |       | 8,607,031 |   | 19,935,718 |   |

 

*The accompanying notes are an integral part of the consolidated financial statements.*

 

F- 11

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**1.**                **Principal activities and organization**

 

Bitauto Holdings Limited (the “Company”) is a limited liability company incorporated and domiciled in the Cayman Islands. The registered office is located at Scotia Centre, George Town, Grand Cayman, Cayman Islands.

 

The Company does not conduct any substanti al operations of its own, but conducts most of its business through its operating subsidiaries, variable interest entities (“VIEs”) and subsidiaries of VIEs established in the People’s Republic of China (the “PRC”). The Company owns the equity interest of its operating subsidiaries, VIEs and subsidiaries of VIEs through its subsidiaries established in Cayman Islands and Hong Kong. The Company, its subsidiaries, VIEs and subsidiaries of VIEs are collectively referred to as the “Group”.

 

The Group is principally engaged in the provision of internet content and marketing services, and transaction services in the automobile industry, including advertising services, subscription services, transaction services and one-stop digital marketing solution services in the PRC.

 

On November 16, 2017, Yixin Group Limited (“Yixin”), the Group’s subsidiary engaging in automobile transaction services, completed its initial public offering (“IPO”) on the Main Board of The Stock Exchange of Hong Kong Limited. After Yixin’s IPO, the Group held 45.2% of the outstanding ordinary shares of Yixin. The Group continues to take control of Yixin and consolidate Yixin as its controlling shareholder through the voting proxy agreement that the Group entered into with certain other shareholders, and recognizes noncontrolling interests reflecting the shares held by the shareholders other than the Group in the consolidated financial statements.

 

F- 12

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**1.**                **Principal activities and organization (continued)**

 

As of December 31, 2017, the Company’s principal subsidiaries, VIEs and subsidiaries of VIEs are as follows:

 
| **Name**                                                                                                                           |   | **Date   of   incorporation or    acquisition** |   | **Place   of   operations** |   | **% equity      interest** |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|-----------------------------|--------|----------------------------|--------|
| Bitauto Hong Kong Limited                                                                                                          |   | April 27,   2010                           |   | Hong   Kong                 |   | 100                        |   |
| Beijing Bitauto Internet Information Company Limited                                                                               |   | January 20,   2006                         |   | PRC                         |   | 100                        |   |
| Dalian Rongxin Financial Guarantees Company Limited                                                                                |   | June 6,   2016                             |   | PRC                         |   | 100                        |   |
| Yixin Group Limited (“Yixin”, formerly known as Yixin Capital   Limited)                                                 |   | November 19,   2014                        |   | Cayman   Islands            |   | 45.2                       |   |
| Yixin Holding Hong Kong   Limited (formerly known as Yixin Capital Hongkong Limited)                                               |   | November 27,   2014                        |   | Hong   Kong                 |   | 45.2                       |   |
| Xinche Investment (Shanghai) Company Limited                                                                                       |   | January 16,   2015                         |   | PRC                         |   | 45.2                       |   |
| Shanghai Yixin Financing Lease Company Limited                                                                                     |   | August 12,   2014                          |   | PRC                         |   | 45.2                       |   |
| Tianjin Hengtong Jiahe Financing Lease Company Limited                                                                             |   | May 18,   2015                             |   | PRC                         |   | 45.2                       |   |
| Xinjiang Yin’an Information Technology Company Limited                                                                        |   | September 6,   2017                        |   | PRC                         |   | 45.2                       |   |
| KKC Holdings Limited (“KKC”)                                                                                             |   | November 10,   2016                        |   | Cayman   Islands            |   | 45.2                       |   |
| KKC Holdings Limited                                                                                                               |   | November 10,   2016                        |   | Hong   Kong                 |   | 45.2                       |   |
| Beijing KKC Technology Company Limited                                                                                             |   | November 10,   2016                        |   | PRC                         |   | 45.2                       |   |
| Beijing C&I Advertising Company Limited (“CIG”)                                                                      |   | December 30,   2002                        |   | PRC                         |   | 75.5                       |   |
| Beijing Bitauto Information Technology Company Limited                                                                             |   | November 30,   2005                        |   | PRC                         |   | 100                        |   |
| Beijing Easy Auto Media Company Limited                                                                                            |   | March 7,   2008                            |   | PRC                         |   | 100                        |   |
| Beijing Bitauto Interactive Advertising Company Limited                                                                            |   | December 12,   2007                        |   | PRC                         |   | 100                        |   |
| Beijing Xinbao Information Technology Company Limited                                                                              |   | February 2,   2008                         |   | PRC                         |   | 100                        |   |
| Tianjin  Boyou   Information Technology Company Limited (formerly known as Bitauto (Tianjin)   Commerce Company Limited) |   | May 16,   2014                             |   | PRC                         |   | 100                        |   |
| Beijing Bit EP Information Technology Company Limited (“Bit EP”)                                                         |   | June 3,   2011                             |   | PRC                         |   | 100                        |   |
| Beijing Yixin Information Technology Company Limited                                                                               |   | January 9,   2015                          |   | PRC                         |   | 45.2                       |   |

 

F- 13

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**1.**                **Principal activities and organization (continued)**

 

*Variable interest entities*

 

To comply with the PRC laws and regulations that restrict foreign ownership of companies involved in provision of internet content and other restricted businesses, the Group operates its websites and engages in such restricted businesses in the PRC through certain PRC domestic companies, whose equity interest are held by certain management members of the Company (“nominee shareholders”). The Company obtained control over these PRC domestic companies by entering into a series of contractual agreements with these PRC domestic companies and their respective nominee shareholders. These contractual agreements include loan agreements, irrevocable power of attorney, share pledge agreements, exclusive business cooperation agreements and exclusive option agreements. Through these contractual agreements, the Company is entitled to receive a majority of residual returns and is obligated to absorb a majority of the risk of losses of these PRC domestic companies. Based on these contractual agreements, management concluded that these PRC domestic companies are VIEs of the Company, of which the Company is the primary beneficiary. As such, the Group consolidated financial results of VIEs and subsidiaries of VIEs in the Group’s consolidated financial statements.

 

The summary of these contractual agreements are further described as below.

 

*Loan Agreements*

 

Pursuant to the relevant loan agreements, the relevant PRC subsidiaries provided interest-free loans to the respective nominee shareholders of the VIEs. The purpose of the loans is to provide capital and/or registered capital to VIEs in order to develop their businesses. The loan agreements have indefinite terms or certain terms that could be extended upon mutual written consent of the parties.

 

*Irrevocable Power of Attorney*

 

Each nominee shareholder of the VIEs executed an irrevocable power of attorney, appointing the relevant PRC subsidiaries or a person designated by such PRC subsidiaries as his or her attorney-in-fact to attend shareholders’ meetings of the respective VIEs, exercise all the shareholder’s voting rights, including but not limited to the sale, transfer, pledge or disposition of the shareholder’s equity interest in the VIEs, and designate or appoint legal representatives, directors and officers of the relevant VIEs. Each power of attorney remains valid and irrevocable from the date of execution so long as the person remains as the nominee shareholder of the respective VIEs.

 

*Share Pledge Agreements*

 

Pursuant to the share pledge agreements, the nominee shareholders of the VIEs have pledged all of their equity interest in the relevant VIEs to the relevant PRC subsidiaries as collateral for all of the VIEs’ and nominee shareholders’ payments due to the relevant PRC subsidiaries and to secure their obligations under applicable contractual agreements. Each pledge of shares or equity interest is effective on the date when it is registered with the local administration for industry and commerce and remains effective until all payments due under the relevant exclusive business cooperation agreement or all the obligations under the relevant contractual agreements have been fulfilled by the relevant VIEs. During the term of a pledge, the relevant PRC subsidiaries, the pledgees, may dispose of the pledge if the VIE defaults under the exclusive business cooperation agreement. Each of the relevant PRC subsidiaries also has the right to collect dividends generated by the shares or equity interest pursuant to these pledge agreements. In addition, each nominee shareholder of the relevant VIEs agrees not to transfer or create any new encumbrance adverse to the relevant PRC subsidiaries on the shareholder’s equity interest in such VIEs without prior written consent of the relevant PRC subsidiaries.

 

F- 14

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**1.**                **Principal activities and organization (continued)**

 

*Exclusive Business Cooperation Agreement*

 

The relevant PRC subsidiaries and relevant VIEs entered into exclusive business cooperation agreements under which the relevant PRC subsidiaries provide the relevant VIEs, on an exclusive basis, with technical, consulting and other services in relation to the respective VIEs’ business. The VIEs shall pay service fees to the relevant PRC subsidiaries determined based on several metrics including the type, value and market price of the services provided by the relevant PRC subsidiaries and the operating conditions of the relevant VIEs. During the terms of the agreements, the relevant VIEs have agreed not to accept any consultation and/or services provided by any third party without the relevant PRC subsidiaries’ prior written consent. The agreements have certain terms that could be extended upon the relevant PRC subsidiaries’ prior written consent, or remain effective unless the relevant PRC subsidiaries terminate them in writing or either the relevant PRC subsidiaries or the relevant VIEs fail to obtain the government’s approval for the renewal of the relevant business license.

 

*Exclusive Option Agreements*

 

Pursuant to these exclusive option agreements, each of the nominee shareholders of the VIEs irrevocably granted the relevant PRC subsidiaries an exclusive right to purchase, or designate one or more persons to purchase, the equity interest in the relevant VIEs then held by such nominee shareholder of the respective VIEs. The relevant PRC subsidiaries or their designees may purchase such equity interest at any time, once or at multiple times, in part or in whole at their own sole and absolute discretion to the extent permitted by the PRC laws. The agreements have certain terms that could be extended at the relevant PRC subsidiaries’ discretion, or remain effective until all the equity interest held by the nominee shareholders of the VIEs have been transferred or assigned to the relevant PRC subsidiaries or any other persons designated by them.

 

*Risks in relations to the VIE structure*

 

Based on the advice of the Company’s PRC legal counsel, the ownership structure and contractual agreement of the VIEs and subsidiaries in the PRC do not violate any existing PRC laws and regulations. Therefore, in the opinion of management, (i) the ownership structure of the Company and the VIEs do not violate any existing PRC laws and regulations;(ii) the contractual agreement with VIEs and their nominee shareholders are valid and binding, and will not result in any violation of PRC laws or regulations currently in effect;(iii) the Group’s business operation are in compliance with existing PRC laws and regulations in all material respects.

 

However, there are uncertainties regarding the interpretation and application of current and future PRC laws and regulations, and the PRC government may in the future take a view that is contrary to the above opinion. If the current ownership structure of the Company and its contractual arrangements with the VIEs and their nominee shareholders were found to be in violation of any existing or future PRC laws or regulations, the Group may be subject to penalties, which may include but not to be limited to, revocation of the Group’s business and operating licenses, being required to discontinue or restrict the Group’s operations, or being required to restructure the Group’s ownership structure or operations. These penalties may result in a material and adverse effect on the Group’s ability to conduct its operations. In such cases, the Company may not be able to operate or control the VIEs, which may result in deconsolidation of the VIEs.

 

F- 15

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**1.**                **Principal activities and organization (continued)**

 

*Changes in VIE structures*

 

In 2017, BBII, CIG and its nominee shareholders entered into an agreement to terminate all of contractual arrangements among them and BBII acquired all of nominee shareholders’ equity interests in CIG. The acquisition was considered as common control transaction and had no impact on the Company’s consolidation of CIG.

 

The following financial information of the VIEs and subsidiaries of VIEs in the PRC was included in the Group’s consolidated financial statements with intercompany transactions eliminated:

 
|              |   | **As of December 31,** |       |
|-------------------|--------|-----------------------------|------------|
|              |   | **2016**                    | ** ** | **2017** |   |
|              |   | **RMB**                     | ** ** | **RMB** |   |
|              |   |                        |       |   |   |
|              |   |                        |       |   |   |
| Total assets      |   | 6,037,614                   |       | 7,287,858 |   |
| Total liabilities |   | 4,338,170                   |       | 3,682,006 |   |

 
|              |   | **For the year ended December 31** |       |
|-------------------|--------|-----------------------------------------|------------|
|              |   | **2015**                                | ** ** | **2016** | ** ** | **2017** |   |
|              |   | **RMB**                                 | ** ** | **RMB** | ** ** | **RMB** |   |
|              |   |                                    |       |   |   |   |   |
| Revenue           |   | 4,153,558                               |       | 4,389,398 |   | 4,419,967 |   |
| Net income/(loss) |   | 217,858                                 |       | 126,673 |   | (111,574 | ) |

 
|                                                |   | **For the year ended December 31** |       |
|-----------------------------------------------------|--------|-----------------------------------------|------------|
|                                                |   | **2015**                                | ** ** | **2016** | ** ** | **2017** |   |
|                                                |   | **RMB**                                 | ** ** | **RMB** | ** ** | **RMB** |   |
|                                                |   |                                    |       |   |   |   |   |
| Net cash provided by operating activities           |   | 110,226                                 |       | 603,227 |   | 660,690 |   |
| Net cash (used in)/provided by investing activities |   | (301,659                                | )          | (415,610 | ) | 57,568 |   |
| Net cash provided by/(used in) financing activities |   | 641,084                                 |       | 39,107 |   | (426,603 | ) |

 

As of December 31, 2016 and 2017, the total assets of the Group’s VIEs and subsidiaries of VIEs were mainly consisting of cash and cash equivalents, accounts receivable, net, prepayments and other receivables, investment in equity investees, property, plant and equipment, net, and intangible assets, net. As of December 31, 2016 and 2017, the total liabilities of the VIEs and subsidiaries of VIEs were mainly consisting of accounts payable, other payables and accruals. These balances have been reflected in the Group’s consolidated financial statements with intercompany transactions eliminated.

 

In accordance with contractual agreements, the Company has the power to direct activities of the VIEs and subsidiaries of VIEs and can have assets transferred out of the VIEs and subsidiaries of VIEs. Therefore, the Company considers that there is no asset in any of the consolidated VIEs and subsidiaries of VIEs that can be used only to settle obligations of these entities, except for registered capital and PRC statutory reserves. Creditors of the VIEs and subsidiaries of VIEs do not have recourse to the general credit of the Company for any of the liabilities of the consolidated VIEs and subsidiaries of VIEs.

 

Currently, there is no contractual arrangement that requires the Company to provide any additional financial support to VIEs and subsidiaries of VIEs. As the Company conducts its business primarily based on the licenses and approvals held by its VIEs and subsidiaries of VIEs, the Company may provide additional financial support on a discretionary basis in the future.

 

In addition to above variable interest entities the Company consolidated through contractual arrangements, the Company also established a number of asset-backed securitization vehicles to issue debt securities to third party investors. The vehicles are considered variable interest entities in accordance with ASC 810 and the Company are considered primary beneficiary of such variable interest entities. Accordingly, the Company consolidated these asset-backed securitization vehicles. As of December 31, 2016 and 2017, none of asset-backed securitization vehicles are considered individually significant to the Group.

 

F- 16

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies**

 

(a)            Basis of presentation

 

The consolidated financial statements of the Group are prepared in accordance with accounting principles generally accepted in the United States of America (‘‘U.S. GAAP’’).

 

(b)           Principles of consolidation

 

The consolidated financial statements include the financial statements of the Company, its subsidiaries, the VIEs and subsidiaries of VIEs for which the Company is the ultimate primary beneficiary.

 

A subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power; or (ii) the Company has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies.

 

A VIE is an entity in which the Company, or its subsidiaries, through contractual agreements, bears the risks of, and enjoys the rewards normally associated with, ownership of the entity, and therefore the Company or its subsidiaries are the primary beneficiary of the entity.

 

All transactions and balances among the Company, its subsidiaries, the VIEs and subsidiaries of VIEs have been eliminated upon consolidation. The results of subsidiaries, the VIEs and subsidiaries of VIEs acquired or disposed of during the year are recorded in the consolidated statements of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

 

F- 17

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(c)            Business combinations and noncontrolling interests

 

The Group accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (‘‘ASC’’) 805 ‘‘Business Combinations’’. The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations and all contractual contingencies as of the acquisition date. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the acquiree, the difference is recognized directly in the consolidated statements of comprehensive income. During the measurement period, which can be up to one year from the acquisition date, the Group may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of comprehensive income.

 

In a business combination considered as a step acquisition, the Group remeasures the previously held equity interest in the acquiree immediately before obtaining control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in the consolidated statements of comprehensive income.

 

For the Company’s majority-owned subsidiaries, VIEs and subsidiaries of VIEs, a noncontrolling interest is recognized to reflect the portion of their equity which is not attributable, directly or indirectly, to the Company. Noncontrolling interests are classified as a separate line item in the equity section of the Group’s consolidated balance sheets and have been separately disclosed in the Group’s consolidated statements of comprehensive income to distinguish the interests from that of the Company.

 

(d)           Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires the Group to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant accounting estimates are used for, but not limited to the valuation and recognition of share-based compensation, realization of deferred tax assets, fair value of assets and liabilities acquired in business combinations, assessment for impairment of long-lived assets, investment in equity investees, intangible assets and goodwill, allowance for doubtful accounts for accounts receivable, allowance for credit losses for finance receivables, and useful lives of intangible assets. The Group bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.

 

F- 18

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(e)            Segment reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, and has been identified as the Chief Executive Officer of the Group. The Group managed its business in three segments, namely advertising and subscription business, transaction services business and digital marketing solutions business.

 

(f)             Foreign currency translation

 

The Company, its subsidiaries, VIEs and subsidiaries of VIEs individually determine their functional currency based on the criteria of ASC 830 “Foreign Currency Matters”. The functional currencies of the Company and its subsidiaries outside China are the U.S. dollar (“US$”) and the Hong Kong dollar (“HKD”), and the functional currency of PRC subsidiaries, VIEs and subsidiaries of VIEs is the RMB. Since the Group’s operations are primarily denominated in the RMB, the Group has chosen the RMB as the reporting currency for the consolidated financial statements.

 

Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date. Exchange gains or losses arising from foreign currency transactions are recorded in the consolidated statements of comprehensive income.

 

The financial statements of the entities with non-RMB functional currencies are translated into RMB using the exchange rate as of the balance sheet date for assets and liabilities, average exchange rate for the year for income and expense items, and historical exchange rate for equity items. Translation gains or losses arising from the translation are recognized in accumulated other comprehensive income as a component of shareholders’ equity.

 

F- 19

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(g)           Cash and cash equivalents

 

Cash and cash equivalents comprise cash at banks and on hand, time deposits and highly liquid investments with an original maturity of three months or less.

 

(h)           Time deposits

 

Time deposits comprise highly liquid investments with original maturities of greater than three months, but less than one year.

 

(i)              Restricted cash

 

Cash that is restricted as to withdrawal for use or pledged as security is reported separately on the face of the consolidated balance sheets, and is not included in the total cash and cash equivalents in the consolidated statements of cash flows. The Group held restricted cash of RMB5.63 billion and RMB1.48 billion as of December 31, 2016 and 2017, respectively, which were primarily pledged for bank borrowings. Changes in the restricted cash balances are classified as cash flows from investing activities in the consolidated statements of cash flows as the Group considers restricted cash arising from these activities similar to an investment.

 

(j)              Accounts receivable, net

 

Accounts receivable are amounts due from customers for services performed or merchandise sold in the ordinary course of business. If collection of accounts receivable is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

 

Accounts receivable are recorded net of allowance for doubtful accounts. An allowance for doubtful accounts is recorded in the period when a loss is probable based on an assessment of specific evidence indicating troubled collection, such as the accounts aging, financial conditions of the customer and industry trend.

 

(k)           Bills receivable

 

Bills receivable represent short-term notes receivables issued by reputable financial institutions that entitle the Group to receive the full face amount from the financial institutions at maturity, which generally range from three to six months from the date of issuance.

 

F- 20

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(l)              Investment in equity investees

 

Investment in equity investees represents the Group’s investments in privately-held companies. The Group applies the equity method to account for an equity investment, in common stock or in-substance common stock, according to ASC 323 ‘‘Investment - Equity Method and Joint Ventures’’, over which it has significant influence but does not own a majority equity interest or otherwise control.

 

An investment in in-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity’s common stock. The Group considers subordination, risks and rewards of ownership and obligation to transfer value when determining whether an investment in an entity is substantially similar to an investment in that entity’s common stock.

 

For other equity investments that are not considered as debt securities or equity securities that have readily determinable fair values and over which the Group neither has significant influence nor control through investment in common stock or in-substance common stock, the cost method is used.

 

Under the equity method, the Group’s share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated statements of comprehensive income and its share of post-acquisition movements in accumulated other comprehensive income is recognized in shareholders’ equity. The excess of the carrying amount of the investment over the underlying equity in net assets of the equity investee represents goodwill and intangible assets acquired. When the Group’s share of losses in the equity investee equals or exceeds its interest in the equity investee, the Group does not recognize further losses, unless the Group has incurred obligations or made payments or guarantees on behalf of the equity investee.

 

Under the cost method, the Group carries the investment at cost and recognizes income to the extent of dividends received from the distribution of the equity investee’s post-acquisition profits.

 

From time to time, the rights on certain investments in which the Group has significant influence were modified with new rounds of financing. These modifications may be additions or removals of certain rights. As a result of such modification, these equity investments, which were accounted for using equity method, were reclassified as investments accounted for using cost method, or vice versa. The carrying amount of the investments was remeasured upon the reclassification and a deemed disposal gain or loss was recognized in the investment income/(loss) in the consolidated statements of comprehensive income.

 

The Group continually reviews its investments in equity investees to determine whether a decline in fair value below the carrying value is other than temporary. The primary factors the Group considers in its determination are the length of time that the fair value of the investment is below the carrying value; the financial condition, operating performance and the prospects of the equity investee; and other company specific information such as recent financing rounds. If the decline in fair value is deemed to be other than temporary, the carrying value of the equity investee is written down to fair value, which is reflected in share of results of equity investees and investment income/(loss) in the consolidated statements of comprehensive income.

 

F- 21

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(m)        Property, plant, and equipment, net

 

Property, plant, and equipment are stated at cost less accumulated depreciation and impairment if any. Depreciation is computed using the straight-line method with no residual value based on the estimated useful lives of the various classes of assets, which range as follows:

 
| Computers   and servers            | 3   – 5 years                                           |
|------------------------------------|--------------------------------------------------------------|
| Automobiles   for Group uses       | 5   years                                                    |
| Automobiles   for operating leases | 5   years                                                    |
| Furniture   and fixtures           | 3   – 5  years                                     |
| Leasehold   improvements           | shorter   of remaining lease period or estimated useful life |

 

Costs of repairs and maintenance are expensed as incurred and asset improvements are capitalized. The cost and related accumulated depreciation of assets disposed of or retired are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statements of comprehensive income.

 

(n)           Goodwill

 

Goodwill represents the excess of the purchase consideration over the fair value of the identifiable net assets acquired in a business combination. Goodwill is not amortized but is tested for impairment on an annual basis as of December 31, or more frequently if events or changes in circumstances indicate that it might be impaired. The Group has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In the qualitative assessment, the Group considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations. The Group will perform the quantitative impairment test if the Group bypasses the qualitative assessment, or based on the qualitative assessment, if it is more likely than not that the fair value of each reporting unit is less than the carrying amount.

 

In performing the two-step quantitative impairment test, the first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying amount of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for the purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets, liabilities and goodwill to reporting units, and determining the fair value of each reporting unit.

 

F- 22

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(o)           Intangible assets, net

 

Intangible assets are stated at cost less accumulated amortization and impairment if any. Intangible assets acquired in a business combination are recognized initially at fair value at the date of acquisition. Intangible assets with an indefinite useful life are not amortized and are tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired in accordance with ASC subtopic 350-30 (“ASC 350-30”), Intangibles-Goodwill and Other: General Intangibles Other than Goodwill. Separately identifiable intangible assets that have determinable lives continue to be amortized over their estimated useful lives using the straight-line method as follows:

 
| Purchased   software                | 5   - 10 years          |
|-------------------------------------|-------------------------|
| Digital   Sales Assistant system    | 10   years              |
| Domain   names                      | 10   years              |
| Brand   name                        | 10.1   - 15.25 years    |
| Customer   relationship             | 2   - 15.25 years       |
| Business   cooperation (Note 5)     | 5   years               |
| Others                              | 5   - 10 years          |
| Trademark   and lifetime membership | 10   years / Indefinite |

 

(p)           Impairment of long-lived assets

 

The Group reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

 

(q)           Borrowings

 

Borrowings are recognized initially at fair value, net of upfront fees, debt issuance costs, and debt discounts or premiums. Upfront fees, debt issuance costs, and debt discounts or premiums are recorded as a reduction of the proceeds received and the related accretion is recorded as interest expense in the consolidated statements of comprehensive income over the estimated term of the facilities and borrowings using the effective interest method.

 

F- 23

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(r)             Asset-backed securitization debt

 

The Group securitizes finance receivables arising from its consumers through the transfer of those assets to asset-backed securitization vehicles. The securitization vehicles usually issue senior tranche debt securities to third party investors, collateralized by the transferred assets, and subordinate tranche debt securities to the Group. In limited circumstances, the Group may also subscribe a portion of the senior tranche debt securities. The asset-backed debt securities issued by the securitization vehicles to third party investors are recourse to the Group. The securitization vehicles are considered consolidated variable interest entities of the Group, and the asset-backed debt securities subscribed by third party investors are reported as current and non-current liabilities in the consolidated balance sheets based on their respective expected repayment dates.

 

(s)            Accounts payable

 

Accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

 

(t)              Convertible debt

 

The Group determines the appropriate accounting treatment of its convertible debt in accordance with the terms in relation to the conversion feature, call and put option, and beneficial conversion feature. After considering the impact of such features, the Company may account for such instrument as a liability in its entirety, or separate the instrument into debt and equity components following the respective guidance described under ASC 815 “Derivatives and Hedging” and ASC 470 “Debt”.

 

The debt discount, if any, together with related issuance cost are subsequently amortized as interest expense, using the effective interest method, from the issuance date to the earliest conversion date. Convertible debt is classified as a current liability if their due date is or will be within one year from the balance sheet date.

 

(u)           Fair value

 

Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurement for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

 

The Group measures certain financial assets, including the investments under the cost method and equity method on other-than-temporary basis, intangible assets, goodwill and property, plant and equipment are marked to fair value when an impairment charge is recognized.

 

Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:

 

F- 24

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(v)           Fair value (continued)

 

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

 

Level 3 - Unobservable inputs which are supported by little or no market activity.

 

Accounting guidance also describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

 

(w)        Treasury shares

 

The Company’s equity instruments that are repurchased are recognized at cost and deducted from equity as treasury shares. No gain or loss is recognized in the consolidated statements of comprehensive income on the purchase, sale, issue or cancellation of the Company’s equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized in additional paid-in capital. Voting rights related to treasury shares are nullified for the Company and no dividends are allocated to them. For the years ended December 31, 2015, 2016 and 2017, the Company did not repurchase any shares.

 

(x)           Statutory reserves

 

In accordance with the laws applicable to the Foreign Investment Enterprises established in the PRC, the Company’s subsidiaries registered as wholly-owned foreign enterprise have to make appropriations from their net income based on PRC accounting standards to reserve funds including general reserve fund, enterprise expansion fund and staff bonus and welfare fund. The appropriation to the general reserve fund must be at least 10% of the net income based on PRC accounting standards until such appropriations for the fund reach 50% of the registered capital of the entity. Appropriations to the enterprise expansion fund and staff bonus and welfare fund are made at the discretion of the respective entity.

 

In addition, in accordance with the PRC Company Laws, the Company’s VIEs and subsidiaries of VIEs, registered as Chinese domestic companies, must make appropriations from their net income based on PRC accounting standards to non-distributable reserve funds including statutory surplus fund and discretionary surplus fund. The appropriation to the statutory surplus fund must be at least 10% of the net income based on PRC accounting standards until such appropriations for the fund reach 50% of the registered capital of the entity. Appropriation to the discretionary surplus fund is made at the discretion of the respective entity.

 

None of these reserves are allowed to be transferred to the Company in terms of dividends, loans or advances, nor can they be distributed except under liquidation.

 

F- 25

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(y)           Revenue recognition

 

Revenue principally represents advertising and subscription services revenue, transaction services revenue and agent services revenue. Consistent with the criteria of ASC 605 ‘‘Revenue Recognition’’, the Group recognizes revenue when the following four revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the selling price is fixed or determinable, and (iv) collectability is reasonably assured. Revenue is measured at the fair value of the consideration received or receivable. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. Value-added tax (“VAT”) is included in revenue.

 

Revenue arrangements with multiple deliverables are divided into separate units of accounting. The arrangement consideration is allocated at the inception of the arrangement to each element based on their relative fair values for revenue recognition purposes. The consideration is allocated to each element using vendor-specific objective evidence or third-party evidence of the standalone selling price for each deliverable, or if neither type of evidence is available, using management’s best estimate of selling price.

 

*Advertising and subscription services*

 

*Advertising services*

 

Revenue from advertising services is recognized when the advertisements are published over the stated display period, and when the collectability is reasonably assured. The Group also organizes promotional events to help customers to promote their products. The Group recognizes revenue from organizing promotional events when the services have been rendered, and the collectability is reasonably assured. Revenues from advertising services are reported at a gross amount.

 

*Subscription services*

 

The Group provides web-based and mobile-based integrated digital marketing solutions, via SaaS platform, to dealer customers in China. Such SaaS platform enables dealer subscribers to create their own online showrooms, list pricing and promotional information, provide dealer contact information, place advertisements and manage customer relationships, which help them effectively market their automobiles to consumers. The revenue is recognized on a straight-line basis over the subscription or listing period. Revenues from dealer subscription and listing services are reported at a gross amount.

 

The Group invoices its customers based on the payment terms stipulated in the executed subscription agreements, which generally ranges from several months to one year. The Group records amounts received prior to revenue recognition in advances from customers, which is included in the other payables and accruals line item in the Group’s consolidated balance sheets.

 

F- 26

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**                **Summary of significant accounting policies (continued)**

 

(y)           Revenue recognition (continued)

 

*Transaction services*

 

*Automobile financing lease and operating lease services*

 

The Group provides automobile financing lease services to individual customers and automobile dealers through two models: direct financing lease and sales-and-leaseback. In a direct financing lease arrangement, revenue is recognized over the lease period on a systematic and rational basis so as to produce a constant periodic rate of return on the net investment in the financing leases. In a sales-and-leaseback arrangement, the transaction is in substance a collateral financing and revenue is recognized over the lease period using the effective interest rate method. The Group also provides automobile operating lease services to individual and corporate customers. Revenue from these services is recognized on a straight-line basis over the lease period.

 

*Other transaction services*

 

The Group recognizes revenue from direct automobile sales to automobile dealers and institutional customers. The revenue is recorded on a gross basis as the Group acts as the principal, is primarily responsible for the sales arrangements and is subject to inventory risk. Revenue from direct automobile sales is recognized when a sales contract has been executed and the automobiles have been delivered.

 

The Group recognizes revenue from facilitation and other services when assisting the customers to complete a used automobile purchase transaction or an automobile financing transaction. The Group recognizes sales revenue of vehicle telematics devices upon transfer of the title and associated risks and rewards of the devices to its business partners. The Group also recognizes commission-based fees for the provision of automobile e-commerce services.

 

*Agent services*

 

The Group receives commissions for assisting customers in placing advertisements on media vendor websites (“advertising agent services”). The net commission revenue from advertising agent services is recognized when the advertisements are published over the stated display period, and when the collectability is reasonably assured. The Group also receives performance-based rebates from the media vendors, equal to a percentage of the purchase price for qualifying advertising space purchased and utilized by the customers the Group represents. Revenue is recognized when the amounts of these performance-based rebates are probable and reasonably estimable. The Group also provides project-based services such as public relations and marketing campaign. Revenue is recognized when the services have been rendered, and the collectability is reasonably assured.

 

(z)            Cost of revenue

 

Cost of revenue mainly includes fees paid to the Group’s business partners to distribute the dealer customers’ automobile pricing and promotional information, direct service cost, funding costs, cost of automobiles sold and vehicle telematics devices sold, and turnover taxes and related surcharges.

 

F- 27

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**               **Summary of significant accounting policies (continued)**

 

(aa)      Selling and administrative expenses

 

Selling and administrative expenses consist primarily of salaries and benefits for the sales and marketing personnel and administrative personnel, sales and marketing expenses, share-based compensation expense, depreciation and amortization of assets and other expenses for daily operations.

 

Advertising expenditures are expensed as incurred and are included in selling and administrative expenses. Total advertising expenditures were RMB495.2 million, RMB363.8 million and RMB631.7 million for the years ended December 31, 2015, 2016 and 2017.

 

(bb)    Product development expenses

 

Product development expenses consist primarily of staff costs related to personnel involved in the development and enhancement of the Group’s service offerings on its websites, mobile application and related software. The Group recognizes these costs as expenses when incurred, unless they result in significant additional functionality, in which case they are capitalized.

 

(cc)      Share-based compensation

 

The Group’s share-based awards mainly comprise share options and RSUs. In accordance with ASC 718 “Compensation – Stock Compensation”, share-based awards granted to employees are measured at fair value on grant date and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the graded vesting method, net of estimated forfeitures, over the requisite service period.

 

All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

 

If a share-based award is modified after the grant date, additional compensation expenses are recognized in an amount equal to the excess of the fair value of the modified equity instrument over the fair value of the original equity instrument immediately before modification. The additional compensation expenses are recognized immediately on the date of the modification or over the remaining requisite service period, depending on the vesting status of the award.

 

The Group determined the fair value of share options with the assistance of independent third-party valuation firms. The binomial option pricing model was applied in determining the fair value of share options. The fair value of RSUs granted subsequent to the initial public offering will be the price of publicly traded shares on the date of grant.

 

The Group also determined the fair value of share options granted by Yixin with the assistance of independent third-party valuation firms. In determining the fair value of ordinary shares granted by Yixin as share-based awards in 2017 before Yixin’s IPO, the discounted cash flow method with a discount for lack of marketability was applied, given that the shares underlying the awards were not publicly traded at the time of grant. Based on fair value of the underlying ordinary shares, the binomial option pricing model was applied in determining the fair value of share options on the date of grant.

 

F- 28

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**               **Summary of significant accounting policies (continued)**

 

(dd)    Employee Benefits - PRC contribution scheme

 

Full-time employees of the Group in the PRC participate in a government mandated contribution scheme pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the Group makes contributions to the government for these benefits based on certain percentages of the employees’ salaries. The Group has no legal or constructive obligations for further contributions if the fund does not hold sufficient assets to pay all employees the benefit relating to their current and past services. The total expenses for the scheme were RMB178.2 million, RMB282.2 million and RMB364.5 million for the years ended December 31, 2015, 2016 and 2017, respectively.

 

(ee)      Income taxes

 

The Group accounts for income taxes using the asset and liability method, under which deferred income taxes are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized as income or expense in the period that includes the enactment date. Valuation allowance is provided on deferred tax assets to the extent that it is more likely than not that the asset will not be realizable in the foreseeable future.

 

The Group adopts ASC 740-10-25 ‘‘Income Taxes’’ which prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The Group did not have significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit for the years ended December 31, 2015, 2016 and 2017.

 

F- 29

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**               **Summary of significant accounting policies (continued)**

 

(ff)        Leases

 

Each lease is classified at the inception date as either a capital lease or an operating lease.

 

For the lessee, a lease is a capital lease if any of the following conditions exist: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property’s estimated remaining economic life or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases. Payments made under operating lease are charged to the consolidated statements of comprehensive income on a straight-line basis over the terms of underlying lease.

 

For direct financing leases where the Group is the lessor and for the sales and leaseback transactions where the Group is the buyer-lessor, the transaction is accounted for as a capital lease if the transaction satisfies one of the four capital lease conditions as discussed above. The leased automobiles the Group purchased would be derecognized upon the inception of the lease and the net investment of the lease will be recorded as finance receivables. The net investment in a lease consists of the minimum lease payments, net of executory costs plus the unguaranteed residual value, less the unearned interest income plus the unamortized initial direct costs related to the lease. The accrued interests are also included in the finance receivables balance. Over the period of a lease, each lease payment received is allocated between the repayment of the net investment in the lease and lease income based on the effective interest method so as to produce a constant rate of return on the net investment in the lease. The lease income is recorded as the Group’s revenue in the consolidated statements of comprehensive income. Initial direct costs of the capital leases are amortized over the lease term by adjusting against the related lease income. The net investment in the leases, net of allowance for credit losses, is presented as finance receivables and classified as current or non-current assets in the balance sheets based on the duration of the remaining lease terms. The Group’s finance receivables are typically secured with automobiles in the lease arrangements. The allowance for credit losses is based on a systematic, ongoing review and valuation performed as part of the credit-risk evaluation process.

 

F- 30

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**               **Summary of significant accounting policies (continued)**

 

(ff)        Leases (continued)

 

The Group reviews credit quality of its finance receivables based on customer payment activities, including past due information. The entire balance of a finance receivable is considered contractually past due if the minimum required repayment is not received by the contractual repayment day. If any delinquency arises, the Group will consider initiating collection process, which includes (a) making phone calls and sending collection notice to the customers; (b) outsourcing to collection specialists to conduct collection of the automobiles; (c) re-possessing the automobiles directly followed by bidding of the automobiles. As of December 31, 2016 and 2017, the carrying amount of the repossessed automobiles is minimal. The Group has not established a practice of modifying the contractual payment terms, or entering into any troubled debt restructurings of the finance receivables with its customers.

 

Accrued lease income on finance receivables is calculated based on the effective interest rate of the net investment. Finance receivables are placed on non-accrual status upon reaching past due status for more than 90 days. When a finance receivable is placed on non-accrual status, the Group stops accruing interest and reverses all accrued but unpaid interest when such finance receivable is past due for 180 days. For the years ended December 31, 2016 and 2017, such reversals were immaterial. The finance receivable in non-accrual status was RMB57.2 million and RMB245.7 million as of December 31, 2016 and 2017, respectively. Lease income is subsequently recognized only upon the receipt of cash payments. The Group determines it is probable that, certain finance receivables that are past due for 180 days after the above mentioned collection process has been administered, will become uncollectable, and writes off such finance receivables.

 

If a lease transaction does not meet the criteria for classification as a capital lease as specified above, it is classified by the lessor as an operating lease. The payments received by the lessor are recorded as lease income in the period in which the payment is received or becomes receivable. The Group records the leased property as property, plant and equipment, net on the consolidated balance sheets and depreciated in the same manner as the other equipment.

 

(gg)         Government grants

 

Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.

 

F- 31

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**2.**               **Summary of significant accounting policies (continued)**

 

(hh)    Earnings per share

 

Basic earnings per share is computed by dividing net income/(loss) attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

 

Diluted earnings per ordinary share is computed by dividing the net income/(loss) attributable to ordinary shareholders for the year by the weighted average number of ordinary and potential ordinary shares outstanding during the year, if the effect of potential ordinary shares is dilutive. Potential ordinary shares for the Company include incremental shares of ordinary shares issuable upon the exercise of share options and RSUs, and conversion of convertible debt.

 

Additionally, for purposes of calculating basic and diluted earnings per share, Yixin’s net income/(loss) attributable to Bitauto Holdings Limited is adjusted as follows:

 

For the purpose of calculating basic earnings per share, Yixin’s net income/(loss) attributable to Bitauto Holdings Limited was determined using the two-class method by allocating Yixin’s net income/(loss) to each class of participating shares issued by Yixin, including the outstanding ordinary shares and redeemable convertible preference shares.

 

For the purpose of calculating diluted earnings per share, the potentially issuable shares of Yixin, namely (i) the redeemable convertible preference shares, prior to the IPO of Yixin, and (ii) the share options granted by Yixin, are assessed for dilutive impact. The diluted earnings per share will be adjusted if the impact is deemed dilutive.

 

F- 32

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**3.**               **Recent accounting pronouncements**

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, ‘‘Revenue from Contracts with Customers (Topic 606)”. This guidance supersedes current guidance on revenue recognition in Topic 605, ‘‘Revenue Recognition”. In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. In August 2015, the FASB issued ASU No. 2015-14 to defer the effective date of ASU No. 2014-09 for all entities by one year. For public business entities that follow U.S. GAAP, the deferral results in the new revenue standard are being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 and interim periods therein. Early adoption is permitted to the original effective date. The Group will adopt the new revenue standard beginning January 1, 2018 by applying the modified retrospective approach. Based on the assessment completed, the Group noted the most significant impact is the change from presentation of VAT on a gross basis to a net basis. According to the provision of Topic 606, the Group determined VAT are collected from the customers on behalf of the government and as an agent, the Group will report VAT on a net basis. Other than the change above, the Group expects revenue recognition for its major revenue streams to remain materially consistent with its historical revenue recognition practices.

 

In January, 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”, which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This amendment requires all equity investments to be measured at fair value, with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). An entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. This standard will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Group will apply the new standard beginning January 1, 2018. For investments in equity securities lacking of readily determinable fair values, the Group will elect to use the measurement alternative defined as cost, less impairments, adjusted by observable price changes. The Group anticipates that the adoption of ASU 2016-01 will increase the volatility of its investment income/(losses) , as a result of the remeasurement of its equity securities upon the occurrence of observable price changes.

 

On February 25, 2016, the FASB issued ASU No. 2016-02, “Leases”. ASU No. 2016-02 specifies the accounting for leases. For operating leases, this standard requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. In addition, this standard requires both lessees and lessors to disclose certain key information about lease transactions. This standard is effective for public companies for annual reporting periods, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Group is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures.

 

F- 33

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**3.**               **Recent accounting pronouncements (continued)**

 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326)”, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. Topic 326 introduces “expected credit loss” model, which is different from the “incurred loss” model the Group currently applied. It will incorporate both available forward looking information and historical pattern to estimate the lifetime expected credit losses for all finance receivables, including those that have not become past due. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. While the Group is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures, it is generally expected that the adoption will likely increase the level of provision for credit losses of finance receivables.

 

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments”, which clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Group does not expect significant impact of the adoption of the guidance on the Group’s consolidated financial statements.

 

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. The Group will adopt the standard beginning January 1, 2018 using a retrospective transition method. The balances of restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statement of cash flows and changes in the restricted cash balances will no longer be classified as cash flows from investing activities.

 

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after the effective date. The Group will adopt the standard prospectively and does not expect material impact.

 

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment”. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Group is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures.

 

F- 34

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**4.**               **Concentration of risks**

 

*(a)*          *Concentration of customers*

 

There were no customers that individually represented greater than 10% of the total revenue for the years ended December 31, 2015, 2016 and 2017, respectively.

 

*(b)*          *Concentration of credit risks*

 

Financial instruments that potentially subject the Group to significant concentration of credit risk consist principally of cash and cash equivalents, time deposits, restricted cash, accounts receivable and finance receivables.

 

As of December 31, 2015, 2016 and 2017, substantially all of the Group’s cash and cash equivalents, time deposits and restricted cash were held by major financial institutions located in Hong Kong and the PRC, which management believes are of high credit quality. Under the new Bankruptcy Law effective in 2007, a Chinese bank may go into bankruptcy. In the event of bankruptcy of one of the banks which holds the Group’s deposits, it is unlikely to claim its deposits bank in full since it is unlikely to be classified as a secured creditor based on PRC laws.

 

Accounts receivable and finance receivables are typically unsecured or secured with automobiles for financing lease and derived from revenue earned from customers in the PRC, which are exposed to credit risk. The risk is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring process of outstanding balance. The Group maintains reserves for estimated credit losses and these losses have generally been within its expectations.

 

*(c)*           *Foreign currency exchange rate risk*

 

In July 2005, the PRC government changed its decades-old policy of pegging the value of the RMB to the US$, and the RMB appreciated more than 20% against the US$ over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the US$ remained within a narrow band. Since June 2010, the RMB has fluctuated against the US$, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the US$ in the future.

 

*(d)*          *Currency convertibility risk*

 

Substantially all of the Group’s businesses are transacted in RMB, which is not freely convertible into foreign currencies. In the PRC, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (the “PBOC”). Remittances in currencies other than RMB by the Group in the PRC must be processed through the PBOC or other PRC foreign exchange regulatory bodies and require certain supporting documentation in order to effect the remittance.

 

F- 35

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**5.**               **Significant equity transactions and acquisitions**

 

*Acquisition of additional interest in Target Net (Beijing) Technology Company Limited (“Target Net”)*

 

As of December 31, 2015 and 2016, the Group held 51% equity interest in Target Net, an unlisted entity based in the PRC and involved in the provision of internet information distribution services. In October 2017, Target Net repurchased its equity interests held by a noncontrolling shareholder for a total consideration of RMB36.3 million, which increased the Group’s ownership interest in Target Net to 74.8%. It was considered to be an equity transaction and the excess of the noncontrolling interest repurchased over the consideration was recorded in equity.

 

*Acquisition of KKC*

 

In April 2015 and September 2016, the Group acquired equity interest of KKC, an unlisted entity based in the PRC and involved in the used car business, in aggregate to approximately 54.8% on a fully diluted basis. Although holding the majority of equity interest, the Group did not obtain control over KKC due to the absence of the majority of voting power at the board of directors of KKC. In November 2016, the Group further acquired equity interest of KKC, increasing its equity interest to 49.7% of ordinary shares and approximately 74.8% on a fully diluted basis, and obtained control over KKC. The Group acquired KKC to expand its used car business.

 

The transaction in November 2016 was considered a step acquisition under ASC 805 “Business Combinations”. A step acquisition gain of RMB28.1 million arising from the revaluation of previously held equity interest was recognized in the investment income/(loss) in the consolidated statements of comprehensive income for the year ended December 31, 2016.

 

In May 2017, the Group acquired the remaining equity interest of KKC from the noncontrolling shareholders for a total consideration of RMB13.2 million, which increased the Group’s ownership interest in KKC to 100%. It was considered to be an equity transaction and the difference between the consideration paid and the carrying amount of the non-controlling interest was recorded in equity.

 

F- 36

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**5.**               **Significant equity transactions and acquisitions (continued)**

 

*Acquisition of Beijing Xinchuang Interactive Advertising Company Limited (“Xinchuang”)*

 

As of December 31, 2016, the Group held 30% equity interest in Xinchuang, an unlisted entity located in the PRC and engaged in internet digital marketing services. In January 2017, the Group acquired an additional 30% of the equity interest, increasing its ownership interest to 60%. The Group acquired Xinchuang to expand its digital marketing solutions business.

 

This transaction was considered as a step acquisition under ASC 805 “Business Combinations”. A step acquisition gain of RMB36.3 million arising from revaluation of previously held equity interest was recognized in the investment income/(loss) in the consolidated statements of comprehensive income.

 

The total purchase consideration for acquiring Xinchuang was RMB105.6 million, including a liability of RMB63.6 million for the committed purchase of the remaining 40% equity interest in the following two years equally. In October 2017, a modification of the original share purchase agreement was entered into whereby the Group was no longer committed to buy and the selling shareholder was no longer committed to sell the remaining 40% equity interest. It was considered an equity transaction and the difference between the liability as at modification date and the carrying amount of the non-controlling interest was recorded in equity.

 

F- 37

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**5.**               **Significant equity transactions and acquisitions (continued)**

 

*Other acquisitions*

 

For the year ended December 31, 2017, the Group acquired equity interests in other acquirees for total purchase consideration of RMB26.5 million.

 

The fair values of the identifiable assets and liabilities as at the date of the acquisitions are summarized in the following table:

 
|                                            |   | **Fair   value recognized on acquisition** |   |
|-------------------------------------------------|--------|--------------------------------------------|--------|
|                                            |   | **2015**                                   |   | **2016** |   | **2017** |   |
|                                            |   | **RMB**                                    |   | **RMB** |   | **RMB** |   |
|                                            |   |                                       |   |   |   |   |   |
| Cash and cash equivalents                       |   | -                                          |   | 39,406 |   | 23,072 |   |
| Property, plant and equipment, net              |   | -                                          |   | 1,211 |   | 292 |   |
| Intangible assets, net                          |   | -                                          |   | 63,922 |   | 60,684 |   |
| Other assets                                    |   | -                                          |   | 41,778 |   | 61,142 |   |
| Current liabilities                             |   | -                                          |   | (73,021 | ) | (59,867 | ) |
| Deferred tax liabilities                        |   | -                                          |   | (15,977 | ) | (15,171 | ) |
| Net assets                                      |   | -                                          |   | 57,319 |   | 70,152 |   |
| Noncontrolling interests                        |   | -                                          |   | (15,689 | ) | - |   |
| Mandatorily redeemable noncontrolling interests |   | -                                          |   | - |   | (63,569 | ) |
| Goodwill arising on acquisitions                |   | -                                          |   | 115,848 |   | 103,136 |   |
| Total                                           |   | -                                          |   | 157,478 |   | 109,719 |   |
|                                            |   |                                       |   |   |   |   |   |
| Cash consideration                              |   | -                                          |   | 20,366 |   | 68,480 |   |
| Fair value of previously held equity interests  |   | -                                          |   | 137,112 |   | 41,239 |   |
| Total consideration                             |   | -                                          |   | 157,478 |   | 109,719 |   |

 

The goodwill represented expected synergies arising on acquisitions. The knowledge and expertise of employees is not separable. Therefore, it does not meet the criteria for recognition as intangible asset under ASC 350 “Intangibles – Goodwill and Other”. None of the goodwill recognized is expected to be deductible for income tax purposes. The intangible assets arising from the acquisition include customer relationship, software, contract backlog, and brand name. The estimated useful lives were described in Note 2 (o).

 

The noncontrolling interest has been recognized at fair value on the acquisition date.

 

Neither the results of operations since the acquisition date nor the pro forma results of operations of the acquirees were presented because the effects of these business combinations, individually or in the aggregate, were not significant to the Group’s consolidated results of operations.

 

F- 38

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**5.**               **Significant equity transactions and acquisitions (continued)**

 

*Transaction with JD.com, Inc. (“JD”) and Tencent Holdings Limited (“Tencent”)*

 

On January 9, 2015, the Group entered into a share subscription agreement with JD.com, Inc. and JD.com Global Investment Limited (collectively as “JD”), together with Dongting Lake Investment Limited, a special purpose vehicle of Tencent Holdings Limited (collectively as “Tencent” together with Tencent Holdings Limited). On the same date, the Group entered into a business cooperation agreement with JD.com, Inc. Pursuant to the share subscription agreement and business cooperation agreement, JD invested RMB2.45 billion and certain resources to the Group and Tencent invested RMB919.1 million to the Group.

 

As consideration for the transaction, the Group issued 15,689,443 ordinary shares to JD, representing approximately 25% of the then outstanding ordinary shares on a fully diluted basis and 2,046,106 ordinary shares to Tencent, representing approximately 3.3% of the then outstanding ordinary shares on a fully diluted basis, upon the closing of the transaction on February 16, 2015.

 

Pursuant to the business cooperation agreement, the resources provided by JD include (a) an exclusive right to operate JD’s finished automobile business, which includes the sale of finished automobiles on JD Mall, Paipai.com, their respective mobile sites and JD’s mobile applications, as well as the provision of advertising services on JD’s finished car channels, in mainland China, (b) traffic supports including traffic generating from and advertising display on JD website and mobile applications, (c) general business cooperation such as big data capabilities and technology infrastructure. The term of the business cooperation is five years from April 9, 2015.

 

The general business cooperation as above (c) is not recognized as a separate intangible asset because such provisions only set out the general principal for the cooperation between the Group and JD with no specific deliverables provided to the Group. The amount recognized for the business cooperation agreement relates to the exclusive right to operate JD’s finished automobile business as above (a) and traffic support as above (b). The fair value was established using two forms of the income approach known as the excess earnings method and the cost saving method. The Group applied a discount rate of 16% for valuing the business cooperation agreement. The business cooperation is amortized on a straight-line basis over five years from April 9, 2015.

 

At the end of 2015, the Group recorded a write-down of assets amounting to RMB238.6 million for the business cooperation relating to resources to be provided through the channel of Paipai.com, as the Paipai.com business was terminated by JD.

 

F- 39

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**6.**               **Accounts receivable, net**

 

Accounts receivable, net as of December 31, 2016 and 2017 are as follows:

 
|                                  |   | **2016**  |   | **2017**  |   |
|---------------------------------------|--------|-----------|--------|-----------|--------|
|                                  |   | **RMB**   |   | **RMB**   |   |
|                                  |   |      |   |      |   |
| Accounts receivable                   |   | 2,168,655 |   | 3,107,315 |   |
| Less: allowance for doubtful accounts |   | (100,040  | )      | (252,905  | )      |
|                                  |   |      |   |      |   |
|                                  |   | 2,068,615 |   | 2,854,410 |   |

 

Accounts receivable are non-interest bearing and are generally on terms of 60 to 90 days. In some cases, these terms are extended up to 360 days for certain qualifying long-term customers who have met specific credit requirements.

 

As of December 31, 2017, accounts receivable at carrying value of RMB252.9 million (2016: RMB100.0 million) were impaired and fully provided for. The movements in the allowance for doubtful accounts are as follows:

 
|                           |   | **2015** |   | **2016** |   | **2017** |   |
|--------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                           |   | **RMB**  |   | **RMB**  |   | **RMB**  |   |
|                           |   |     |   |     |   |     |   |
| Balance as of January 1   |   | 37,699   |   | 46,441   |   | 100,040  |   |
| Charge for the year            |   | 8,931    |   | 53,599   |   | 152,865  |   |
| Write off for the year         |   | (189     | )      | -        |   | -        |   |
|                           |   |     |   |     |   |     |   |
| Balance as of December 31 |   | 46,441   |   | 100,040  |   | 252,905  |   |

 

**7.**               **Prepayments and other receivables**

 

Components of prepayments and other receivables as of December 31, 2016 and 2017 are as follows:

 
|                            |   | **2016** |   | **2017**  |   |
|---------------------------------|--------|----------|--------|-----------|--------|
|                            |   | **RMB**  |   | **RMB**   |   |
|                            |   |     |   |      |   |
| Advances to suppliers           |   | 73,815   |   | 80,647    |   |
| Prepaid expenses                |   | 11,320   |   | 45,818    |   |
| Deposits                        |   | 29,840   |   | 88,587    |   |
| Advances to used car dealers    |   | 14,131   |   | 62,843    |   |
| Staff advances                  |   | 33,268   |   | 57,355    |   |
| VAT and other taxes receivables |   | 366,697  |   | 638,267   |   |
| Interest receivable             |   | 25,912   |   | 23,548    |   |
| Other receivables               |   | 56,692   |   | 106,618   |   |
|                            |   |     |   |      |   |
|                            |   | 611,675  |   | 1,103,683 |   |

 

Prepayments and other receivables are unsecured, interest-free, have no fixed terms of repayment and are due on demand.

 

F- 40

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**8.**               **Fair value measurement**

 

*Financial instruments measured at fair value on a recurring basis*

 

As of December 31, 2016 and 2017, there is no asset or liability measured at fair value in the consolidated balance sheets.

 

The following are other financial instruments not measured at fair value in the consolidated balance sheets, but for which the fair value is estimated for disclosure purposes.

 

Cash and cash equivalents, time deposits, restricted cash, accounts receivable, bills receivable, finance receivables, other receivables and due from related parties are financial assets with carrying values that approximate fair value due to their short-term nature. Accounts payable, other payables and due to related parties are financial liabilities with carrying values that approximate fair value due to their short-term nature.

 

Borrowings. Interest rates under the loan agreements with the lending banks were determined based on the prevailing interest rates in the market. The Group classifies the valuation techniques that use these inputs as Level 2 fair value measurement. The carrying value of borrowings approximate fair value.

 

*Assets and liabilities measured at fair value on a nonrecurring basis*

 

The Group holds investments in equity investees of privately-held companies that are accounted for using the cost method or equity method. The Group performs impairment assessments of these investments whenever events or changes in circumstances indicate that the carrying value of the investment may not be fully recoverable. The Group determined certain investments in equity investees were fully impaired after evaluated the business prospects, operational data and financial results of the investees. Impairment charges were recorded in connection with the investment in equity investees of nil, RMB86.6 million and RMB165.2 million for the years ended December 31, 2015, 2016 and 2017, respectively. The fair value of the investments were measured using significant unobservable inputs as Level 3.

 

F- 41

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**9.**               **Investment in equity investees**

 

The Group’s investment in equity investees consisted of the follows:

 
|                                     |   | **Cost   method** |   | **Equity   method** |   | **Total** |   |
|------------------------------------------|--------|-------------------|--------|---------------------|--------|-----------|--------|
|                                     |   | **RMB**           |   | **RMB**             |   | **RMB**   |   |
|                                     |   |              |   |                |   |      |   |
| Balance as of January 1, 2015       |   | 69,698            |   | 72,364              |   | 142,062   |   |
| Additions                                |   | 1,042,134         |   | 171,813             |   | 1,213,947 |   |
| Share of loss of equity investees        |   | -                 |   | (16,663             | )      | (16,663   | )      |
| Less: disposals and transfers            |   | (16,000           | )      | (44,788             | )      | (60,788   | )      |
| Foreign currency translation adjustments |   | 3,287             |   | 913                 |   | 4,200     |   |
| Balance as of December 31, 2015     |   | 1,099,119         |   | 183,639             |   | 1,282,758 |   |
| Additions                                |   | 268,535           |   | 34,685              |   | 303,220   |   |
| Share of loss of equity investees        |   | -                 |   | (25,640             | )      | (25,640   | )      |
| Less: disposals and transfers            |   | (75,675           | )      | (6,486              | )      | (82,161   | )      |
| Less: impairment losses                  |   | (86,618           | )      | -                   |   | (86,618   | )      |
| Foreign currency translation adjustments |   | 55,415            |   | 498                 |   | 55,913    |   |
| Balance as of December 31, 2016     |   | 1,260,776         |   | 186,696             |   | 1,447,472 |   |
| Additions                                |   | 34,737            |   | 103,472             |   | 138,209   |   |
| Share of loss of equity investees        |   | -                 |   | (50,643             | )      | (50,643   | )      |
| Less: disposals and transfers            |   | (14,623           | )      | (126,512            | )      | (141,135  | )      |
| Less: impairment losses                  |   | (143,974          | )      | (21,223             | )      | (165,197  | )      |
| Foreign currency translation adjustments |   | (44,836           | )      | 326                 |   | (44,510   | )      |
| Balance as of December 31, 2017     |   | 1,092,080         |   | 92,116              |   | 1,184,196 |   |

 

*Cost method*

 

As of December 31, 2016 and 2017, the carrying value of the Group’s cost-method investments were RMB1.26 billion and RMB1.09 billion, respectively. Investments are accounted for under the cost method if the underlying stocks the Group invested in had no readily determinable fair value or the Group has neither significant influence nor control through investment in common stock or in-substance common stock. For the years ended December 31, 2015, 2016 and 2017, the Group invested RMB1.04 billion, RMB268.5 million, and RMB34.7 million in multiple private companies accounted for under the cost method respectively, which management believes will lead to future operating synergies with the Group’s business in future years.

 

F- 42

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**9.**               **Investment in equity investees (continued)**

 

*Equity method*

 

As of December 31, 2016 and 2017, the carrying value of the Group’s investments accounted for under the equity method were RMB186.7 million and RMB92.1 million, respectively. The Group applies the equity method to account for its equity investments, in common stock or in-substance common stock, over which it has significant influence but does not own a majority equity interest or otherwise control. For the year ended December 31, 2017, the Group disposed certain investments accounted for under the equity method and recorded a disposal gain of RMB43.6 million, which was recognized in the investment income/(loss) in the consolidated statements of comprehensive income.

 

The condensed financial information of the Group’s equity investments accounted for under the equity method were summarized as a group below in accordance with Rule 4-08 of Regulation S-X:

 
| ** **                                             | ** ** | **For the year ended December 31,** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                             | ** ** | **2015**                                                     | ** ** | **2016** | ** ** | **2017** | ** ** |
| ** **                                             | ** ** | **RMB**                                                      | ** ** | **RMB** | ** ** | **RMB** | ** ** |
|                                                   |       |                                                         |       |   |   |   |   |
| Revenue                                                |       | 120,930                                                      |       | 652,864 |   | 80,095 |   |
| Gross profit                                           |       | 13,846                                                       |       | 138,640 |   | 4,981 |   |
| Loss from operations                                   |       | (45,351                                                      | )          | (35,586 | ) | (133,910 | ) |
| Net loss                                               |       | (45,621                                                      | )          | (47,855 | ) | (133,207 | ) |
| Net loss attributable to the equity-method   investees |       | (45,621                                                      | )          | (36,886 | ) | (129,223 | ) |

 
| ** **               | ** ** | **As of December 31,** | ** ** |
|--------------------------|------------|---------------------------------------|------------|
| ** **               | ** ** | **2016**                              | ** ** | **2017** | ** ** |
| ** **               | ** ** | **RMB**                               | ** ** | **RMB** | ** ** |
|                     |       |                                  |       |   |   |
| Current assets           |       | 400,179                               |       | 222,030 |   |
| Non-current assets       |       | 33,689                                |       | 133,003 |   |
| Current liabilities      |       | 208,515                               |       | 45,515 |   |
| Non-current liabilities  |       | 2,171                                 |       | - |   |
| Noncontrolling interests |       | 4,656                                 |       | 8,603 |   |

 

**10.**         **Property, plant and equipment, net**

 

Property, plant and equipment, net as of December 31, 2016 and 2017 are as follows:

 
| ** **                       | ** ** | **2016** | ** ** | **2017**  | ** ** |
|----------------------------------|------------|----------|------------|-----------|------------|
| ** **                       | ** ** | **RMB**  | ** ** | **RMB**   | ** ** |
|                             |       |     |       |      |       |
| Computers and servers            |       | 129,842  |       | 150,593   |       |
| Automobiles for Group uses       |       | 29,436   |       | 35,805    |       |
| Automobiles for operating leases |       | 84,318   |       | 1,267,556 |       |
| Furniture and fixtures           |       | 9,745    |       | 14,101    |       |
| Leasehold improvements           |       | 94,741   |       | 98,594    |       |
| Less: accumulated depreciation   |       | (153,522 | )          | (270,453  | )          |
|                             |       |     |       |      |       |
| Net book value                   |       | 194,560  |       | 1,296,196 |       |

 

Depreciation expenses recognized for the years ended December 31, 2015, 2016 and 2017 were RMB55.5 million, RMB55.9 million and RMB185.3 million, respectively.

 

F- 43

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**11.**         **Intangible assets, net**

 

Intangible assets, net as of December 31, 2016 and 2017 are as follows:

 
| ** **                        | ** ** | **As of December 31, 2016** | ** ** |
|-----------------------------------|------------|-------------------------------------------------|------------|
| ** **                        | ** ** | **Gross carrying    amount**          | ** ** | **Accumulated    amortization** | ** ** | **Impairment    amount** | ** ** | **Net carrying    amount** | ** ** |
|                              |       | **RMB**                                         |       | **RMB** |   | **RMB** |   | **RMB** |   |
|                              |       |                                            |       |   |   |   |   |   |   |
| Purchased software                |       | 43,942                                          |       | (17,471 | ) | - |   | 26,471 |   |
| Digital Sales Assistant system    |       | 25,430                                          |       | (12,927 | ) | - |   | 12,503 |   |
| Trademark and lifetime membership |       | 9,960                                           |       | - |   | - |   | 9,960 |   |
| Domain names                      |       | 22,101                                          |       | (6,285 | ) | - |   | 15,816 |   |
| Customer relationships            |       | 211,310                                         |       | (44,989 | ) | - |   | 166,321 |   |
| Brand name                        |       | 20,830                                          |       | (819 | ) | - |   | 20,011 |   |
| Business cooperation              |       | 3,447,689                                       |       | (1,131,710 | ) | (254,873 | ) | 2,061,106 |   |
| Others                            |       | 32,191                                          |       | (1,539 | ) | - |   | 30,652 |   |
|                              |       |                                            |       |   |   |   |   |   |   |
|                              |       | 3,813,453                                       |       | (1,215,740 | ) | (254,873 | ) | 2,342,840 |   |

 
| ** **                        | ** ** | **As of December 31, 2017** | ** ** |
|-----------------------------------|------------|-------------------------------------------------|------------|
| ** **                        | ** ** | **Gross carrying       amount**       | ** ** | **Accumulated    amortization** | ** ** | **Impairment    amount** | ** ** | **Net carrying    amount** | ** ** |
| ** **                        | ** ** | **RMB**                                         | ** ** | **RMB** | ** ** | **RMB** | ** ** | **RMB** | ** ** |
|                              |       |                                            |       |   |   |   |   |   |   |
| Purchased software                |       | 58,686                                          |       | (25,038 | ) | - |   | 33,648 |   |
| Digital Sales Assistant system    |       | 25,430                                          |       | (15,470 | ) | - |   | 9,960 |   |
| Trademark and lifetime membership |       | 13,095                                          |       | (265 | ) | - |   | 12,830 |   |
| Domain names                      |       | 25,399                                          |       | (8,431 | ) | - |   | 16,968 |   |
| Customer relationships            |       | 244,822                                         |       | (75,349 | ) | - |   | 169,473 |   |
| Brand name                        |       | 20,830                                          |       | (2,760 | ) | - |   | 18,070 |   |
| Business cooperation              |       | 3,447,689                                       |       | (1,761,589 | ) | (254,873 | ) | 1,431,227 |   |
| Others                            |       | 39,113                                          |       | (4,968 | ) | - |   | 34,145 |   |
|                              |       |                                            |       |   |   |   |   |   |   |
|                              |       | 3,875,064                                       |       | (1,893,870 | ) | (254,873 | ) | 1,726,321 |   |

 

Amortization expenses for the years ended December 31, 2015, 2016 and 2017 amounted to RMB495.6 million, RMB633.4 million and RMB688.6 million, respectively. The impairment of business cooperation in 2015 mainly related to resources to be provided through the channel of Paipai.com, as the Paipai.com business was terminated by JD. Further details are set out in Note 5.

 

The estimated aggregate amortization expenses for each of the five succeeding fiscal years are as follows:

 
| ** **            | ** ** | **For the year ended December 31,** | ** ** |
|-----------------------|------------|--------------------------------------------------------------|------------|
| ** **            | ** ** | **2018**                                                     | ** ** | **2019** | ** ** | **2020** | ** ** | **2021** | ** ** | **2022** | ** ** |
| ** **            | ** ** | **RMB**                                                      | ** ** | **RMB** | ** ** | **RMB** | ** ** | **RMB** | ** ** | **RMB** | ** ** |
|                  |       |                                                         |       |   |   |   |   |   |   |   |   |
| Amortization expenses |       | 697,100                                                      |       | 671,441 |   | 206,881 |   | 26,525 |   | 20,444 |   |

 

F- 44

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**12.**         **Goodwill**

 
|                           |   | **2015** |   | **2016** |   | **2017** |   |
|--------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                           |   | **RMB**  |   | **RMB**  |   | **RMB**  |   |
|                           |   |     |   |     |   |     |   |
| Balance as of January 1   |   | 328,927  |   | 329,000  |   | 444,933  |   |
| Acquisition of subsidiaries    |   | -        |   | 115,848  |   | 103,136  |   |
| Disposal of subsidiaries       |   | -        |   | -        |   | (4,326   | )      |
| Foreign exchange difference    |   | 73       |   | 85       |   | (88      | )      |
|                           |   |     |   |     |   |     |   |
| Balance as of December 31 |   | 329,000  |   | 444,933  |   | 543,655  |   |

 

Goodwill impairment is tested at the business segment level and there is no impairment charge as of December 31, 2015, 2016 and 2017.

 
|     |   | **As of December 31, 2016**                |       |
|----------|--------|-------------------------------------------------|------------|
|     |   | **Advertising   and   subscription   business** | ** ** | **Transaction   services   business** | ** ** | **Digital   marketing   solutions** | ** ** | **Total** |   |
|     |   | **RMB**                                         | ** ** | **RMB** | ** ** | **RMB** | ** ** | **RMB** |   |
|     |   |                                            |       |   |   |   |   |   |   |
| Goodwill |   | 327,754                                         |       | 115,848 |   | 1,331 |   | 444,933 |   |

 
|     |   | **As of December 31, 2017**                 |       |
|----------|--------|--------------------------------------------------|------------|
|     |   | **Advertising   and   subscription****business** | ** ** | **Transaction   services   business** | ** ** | **Digital   marketing   solutions** | ** ** | **Total** |   |
|     |   | **RMB**                                          | ** ** | **RMB** | ** ** | **RMB** | ** ** | **RMB** |   |
|     |   |                                             |       |   |   |   |   |   |   |
| Goodwill |   | 327,754                                          |       | 116,716 |   | 99,185 |   | 543,655 |   |

 

F- 45

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**13.**          **Finance receivables, net**

 

The Group provides automobile financial leasing services on its automotive financial services platform. Detailed information of finance receivables as of December 31, 2016 and 2017 are as follows:

 
|                                                                                |   | **2016**   |   | **2017**   |   |
|-------------------------------------------------------------------------------------|--------|------------|--------|------------|--------|
|                                                                                |   | **RMB**    |   | **RMB**    |   |
|                                                                                |   |       |   |       |   |
| Finance receivables, gross                                                          |   |       |   |       |   |
| -       Within one year                               |   | 7,443,959  |   | 16,363,872 |   |
| -       After one year but not more   than five years |   | 8,935,544  |   | 17,224,604 |   |
|                                                                                |   |       |   |       |   |
|                                                                                |   | 16,379,503 |   | 33,588,476 |   |
|                                                                                |   |       |   |       |   |
| Unearned finance income                                                             |   | (2,673,982 | )      | (3,662,702 | )      |
|                                                                                |   |       |   |       |   |
|                                                                                |   | 13,705,521 |   | 29,925,774 |   |
|                                                                                |   |       |   |       |   |
| Allowance for credit losses                                                         |   | (22,486    | )      | (134,169   | )      |
|                                                                                |   |       |   |       |   |
| Finance receivables, net                                                            |   | 13,683,035 |   | 29,791,605 |   |

 

Aging analysis of finance receivables are as follows:

 
|                                                |   | **2016**   | ** ** | **2017**   |   |
|-----------------------------------------------------|--------|------------|------------|------------|--------|
|                                                |   | **RMB**    | ** ** | **RMB**    |   |
|                                                |   |       |       |       |   |
| Not past due                                        |   | 13,497,984 |       | 29,069,556 |   |
|                                                |   |       |       |       |   |
| Past due                                            |   |       |       |       |   |
| -       Up to 1 month |   | 110,032    |       | 411,830    |   |
| -       1 to 3 months |   | 40,331     |       | 198,671    |   |
| -       3 to 6 months |   | 37,584     |       | 177,070    |   |
| -       Over 6 months |   | 19,590     |       | 68,647     |   |
|                                                |   |       |       |       |   |
|                                                |   | 13,705,521 |       | 29,925,774 |   |
|                                                |   |       |       |       |   |
| Allowance for credit losses                         |   | (22,486    | )          | (134,169   | )      |
|                                                |   |       |       |       |   |
| Finance receivables, net                            |   | 13,683,035 |       | 29,791,605 |   |

 

Finance receivables due from related parties for the years ended December 31, 2016 and 2017 were RMB680.8 million and RMB121.0 million, which are presented as due from related parties.

 

F- 46

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**13.**         **Finance receivables, net (continued)**

 

Management assesses the allowance for credit losses of finance receivables collectively based on its estimates on historical experience and on various other assumptions that are believed to be reasonable, including estimated loss percentages of contracts that are not collectable, the historical migration pattern of past due balances, other information gathered through collection efforts and general economic conditions. Management reassesses the provision at each balance sheet date. As of December 31, 2016 and 2017, the allowance for credit losses was RMB22.5 million and RMB134.2 million, respectively. The movements in the allowance for credit losses are as follows:

 
|                           |   | **2016** |   | **2017** |   |
|--------------------------------|--------|----------|--------|----------|--------|
|                           |   | **RMB**  |   | **RMB**  |   |
|                           |   |     |   |     |   |
| Balance as of January 1   |   | -        |   | 22,486   |   |
| Charge for the year            |   | 29,052   |   | 196,320  |   |
| Write off for the year         |   | (6,566   | )      | (84,637  | )      |
|                           |   |     |   |     |   |
| Balance as of December 31 |   | 22,486   |   | 134,169  |   |

 

Since 2016, the Group securitizes finance receivables arising from its consumers through transfer of those assets to asset-backed securitization vehicles. The securitization vehicles usually issue senior tranche debt securities to third party investors, collateralized by the transferred assets, and subordinate tranche debt securities to the Group. As of December 31, 2016 and 2017, the collateralized finance receivables transferred to the securitization vehicles were RMB5.12 billion and RMB10.44 billion, respectively. Please refer to “Note 2 - Summary of significant accounting policies—Asset-backed securitization debt” for details. The Group also secures certain borrowings from financial institutions with the cash proceeds of certain of the Group’s finance receivables. As of December 31, 2016 and 2017, the finance receivables collateralized for borrowings from financial institutions were RMB2.18 billion and RMB12.20 billion, respectively.

 

**14.**         **Other non-current assets**

 
|                                    |   | **2016** | ** ** | **2017**  |   |
|-----------------------------------------|--------|----------|------------|-----------|--------|
|                                    |   | **RMB**  | ** ** | **RMB**   |   |
|                                    |   |     |       |      |   |
|                                    |   |     |       |      |   |
| Prepayment for automobiles              |   | 191,360  |       | 261,768   |   |
| Automobiles purchased for future leases |   | 250,151  |       | 583,298   |   |
| Long-term prepaid expenses              |   | 387,408  |       | 123,554   |   |
| Deposits and others                     |   | 108,926  |       | 416,424   |   |
|                                    |   |     |       |      |   |
|                                    |   | 937,845  |       | 1,385,044 |   |

 

F- 47

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**15.**         **Borrowings**

 

The Group’s short term borrowings represent the borrowings which were payable within one year or on demand.

 

These short term and long term borrowings are collateralized by a pledge of time deposits with carrying values of RMB5.41 billion and RMB1.06 billion as of December 31, 2016 and 2017, respectively, which are presented as restricted cash in the consolidated balance sheets.

 

During 2017, the Group entered into revolving line of credit agreements with some commercial banks located in China. As of December 31, 2017, the total revolving line of credit was RMB1.98 billion (2016: RMB2.79 billion) and available within one year from the respective agreement date. There are no commitment fees associated with the unused portion of the line of credit. The major revolving line of credit is guaranteed by the Company or other entities within the Group.

 

The weighted average interest rate on borrowings outstanding as of December 31, 2016 and 2017 was approximately 4.9% and 6.4%, respectively.

 

As of December 31, 2017, the borrowings will be due according to the following schedule:

 
| ** **        | ** ** | **Within 1 year** | ** ** | **Between 1 to   2 years** | ** ** | **Between 2 to   3 years** | ** ** | **Between 3 to   4 years** | ** ** | **Between 4 to   5 years** | ** ** |
|-------------------|------------|-----------------------------|------------|-------------------------------------------|------------|-------------------------------------------|------------|-------------------------------------------|------------|-------------------------------------------|------------|
| ** **        | ** ** | **RMB**                     | ** ** | **RMB**                                   | ** ** | **RMB**                                   | ** ** | **RMB**                                   | ** ** | **RMB**                                   | ** ** |
|              |       |                        |       |                                      |       |                                      |       |                                      |       |                                      |       |
| Principal amounts |       | 11,243,614                  |       | 4,140,463                                 |       | 933,810                                   |       | -                                         |       | -                                         |       |

 

**16.**         **Asset-backed securitization debt**

 

As of December 31, 2016 and 2017, the asset-backed debt securities were RMB4.43 billion and RMB8.78 billion, respectively. The weighted average interest rate for the outstanding asset-backed securitization debt as of December 31, 2016 and 2017 were approximately 4.7% and 5.7%. The amount of interest charges recognized for the year ended December 31, 2016 and December 31, 2017 were RMB81.0 million and RMB453.0 million.

 

As of December 31, 2017, the asset-backed securitization debt will be due according to the following schedule:

 
|              |   | **Within 1 year** |   | **Between 1 to   2 years** |   | **Between 2 to   3 years** |   | **Between 3 to   4 years** |   | **Between 4 to   5 years** |   |
|-------------------|--------|-----------------------------|--------|-------------------------------------------|--------|--------------------------------------|--------|--------------------------------------|--------|-------------------------------------------|--------|
|              |   | **RMB**                     |   | **RMB**                                   |   | **RMB**                              |   | **RMB**                              |   | **RMB**                                   |   |
|              |   |                        |   |                                      |   |                                 |   |                                 |   |                                      |   |
| Principal amounts |   | 6,165,429                   |   | 2,320,331                                 |   | 291,490                              |   | -                                    |   | -                                         |   |

 

F- 48

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**17.**         **Convertible debt**

 

On August 2, 2016, the Company issued convertible notes (the “PAG Notes”) for an aggregate principal amount of US$150.0 million to PA Grand Opportunity Limited (PAG). The PAG Notes are due on August 1, 2021 and bear interest of 2% annually which will be paid semi-annually beginning on February 2, 2017.

 

The PAG Notes can be converted, at the holder’s option, into the Company’s fully paid American Depositary Shares (“ADSs”) or ordinary shares with an initial conversion price of approximately US$23.67 per ADS, representing an initial conversion rate of 4,224.7671 ADSs per US$100,000 principal amount of the PAG Notes.

 

The issuance costs of the PAG Notes were US$0.18 million and are being amortized to interest expense, using the effective interest method, until the maturity date of the PAG Notes.

 

The Company has accounted for the PAG Notes in accordance with ASC 470, as a single instrument classified as a long-term debt within the consolidated financial statements. The value of the PAG Notes is measured by the cash received. The Company recorded the interest expenses according to its annual interest rate. As of December 31, 2016 and 2017, the value of the PAG Notes in non-current liabilities is RMB859.2 million and RMB707.9 million, respectively.

 

The Company evaluated the embedded conversion features contained in the PAG Notes in accordance with ASC 815-10-15 to determine if the conversion option requires bifurcation. In accordance with ASC 815-10-15-83, the conversion option meets the definition of a derivative. However, bifurcation of conversion option from the PAG Notes is not required as the scope exception prescribed in ASC 815-10-15-74 is met as the conversion option is considered indexed to the entity’s own stock and classified in stockholders’ equity.

 

As the conversion option was not bifurcated, the Company then assessed if there was any beneficial conversion feature (“BCF”) in accordance with ASC 470-20. The Company recognized a BCF of US$27.9 million (RMB185.7 million) through a credit to additional paid-in capital because the fair value per ordinary share of US$28.08 exceeded the conversion price of US$23.67 at the commitment date on August 2, 2016. The resulting discount of US$27.9 million to the PAG Notes is then accreted to the redemption value as interest expense using the effective interest method through the consolidated statement of comprehensive income over the term of the PAG Notes.

 

The Company evaluated the embedded contingent redemption features contained in the PAG Notes in accordance with ASC 815-15-25-42 and ASC 815-15-25-26. The contingent redemption features were not required to be bifurcated because they are considered to be clearly and closely related to the debt host contract, as the PAG Notes were not issued at a substantial discount and are puttable at par.

 

On November 23, 2017, a third party investor who purchased US$24.0 million of the PAG Notes from PAG notified the Company of its intent of conversion. Upon conversion, the Company issued 1,013,941 ordinary shares to the investor and accordingly, the balance of the PAG Notes converted and related unamortized discounts and issuance costs, which amounted to RMB158.5 million, were recorded as the Company’s shareholders’ equity. The unamortized BCF associated with the PAG Notes converted, which amounted to RMB23.3 million, was expensed immediately in accordance with ASC 470-20 “Debt with conversion and other options”.

 

F- 49

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**17.**         **Convertible debt (continued)**

 

For the year ended December 31, 2016 and December 31, 2017, the effective interest rate for PAG Notes was 6.5% and 6.5%, and the amount of interest charges recognized was RMB21.4 million and RMB53.8 million.

 

The expected repayment amount of the convertible debt is nil for each of the years ending December 31, 2018, 2019 and 2020 and US$126.0 million for the year ended December 31, 2021.

 

**18.**         **Other payables and accruals**

 

Components of other payables and accruals as of December 31, 2016 and 2017 are as follows:

 
|                    |   | **2016**  |   | **2017**  |   |
|-------------------------|--------|-----------|--------|-----------|--------|
|                    |   | **RMB**   |   | **RMB**   |   |
|                    |   |      |   |      |   |
| Accrued payroll         |   | 196,693   |   | 251,651   |   |
| Accrued expenses        |   | 49,304    |   | 150,835   |   |
| Advances from customers |   | 786,078   |   | 1,182,840 |   |
| Other payables          |   | 195,632   |   | 488,428   |   |
| Other tax payables      |   | 281,220   |   | 296,336   |   |
| Deferred revenue        |   | 37,956    |   | 81,629    |   |
| Interest payable        |   | 50,210    |   | 96,502    |   |
|                    |   |      |   |      |   |
|                    |   | 1,597,093 |   | 2,548,221 |   |

 

The above balances are non-interest-bearing and are normally settled under the terms of 120 to 150 days. Included in advances from customers, are amounts received from dealer subscriptions and listing customers prior to revenue recognition amounting to RMB669.7 million and RMB898.7 million, and from leasing customers prior to revenue recognition amounting to RMB59.9 million and RMB240.6 million as of December 31, 2016 and 2017, respectively.

 

F- 50

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**19.**         **Redeemable noncontrolling interests**

 
|                                                                 |   | **2016**  |   | **2017**   |   |
|----------------------------------------------------------------------|--------|-----------|--------|------------|--------|
|                                                                 |   | **RMB**   |   | **RMB**    |   |
|                                                                 |   |      |   |       |   |
| Balance as of January 1                                         |   | 1,697,718 |   | 3,939,646  |   |
| Issuance of shares of the Group’s subsidiaries                  |   | 2,036,641 |   | 1,353,293  |   |
| Conversion of redeemable noncontrolling interests to ordinary shares |   | -         |   | (5,323,103 | )      |
| Accretion to redeemable noncontrolling interests                     |   | 205,287   |   | 332,117    |   |
|                                                                 |   |      |   |       |   |
|                                                                 |   | 3,939,646 |   | 301,953    |   |

 

In 2015, 2016 and 2017, Yixin issued redeemable convertible preference shares to JD and other third-party investors. The redeemable convertible preference shares contain conversion features and redemption features. The Group records accretion of redemption value in accordance with ASC 480 “Distinguishing Liabilities from Equity”. The Group elects to use the effective interest method for the changes of redemption value over the period from the date of issuance to the earliest redemption date of the noncontrolling interests.

 

Upon completion of Yixin’s IPO on November 16, 2017, all the redeemable convertible preference shares were automatically converted into ordinary shares of Yixin. As a result, the Group held 45.2% of the outstanding ordinary shares of Yixin. However, through the voting proxy agreement that the Group entered into with JD and another shareholder, the Group is able to control Yixin by gaining the simple majority of the voting rights in Yixin’s shareholders’ meeting immediately after the IPO. Accordingly, the Group continues to consolidate the operations and the financial results of Yixin and provide for noncontrolling interests reflecting ordinary shares in Yixin held by shareholders other than the Group in the consolidated financial statements. The Group recognized a one-time credit to additional paid-in capital of RMB2.37 billion in shareholders’ equity in the consolidated balance sheets to reflect the increase in the value of the Group’s equity in Yixin that resulted from the completion of Yixin’s IPO and conversion of redeemable convertible preference shares.

 

In 2017, one subsidiary of the Group issued ordinary shares with redemption features to certain third-party investors. The Group classifies redeemable noncontrolling interests as mezzanine equity and records accretion of redemption value in accordance with ASC 480 “Distinguishing Liabilities from Equity”. The Group elects to use the effective interest method for the changes of redemption value over the period from the date of issuance to the earliest redemption date of the noncontrolling interests.

 

F- 51

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**20.**         **Revenue**

 
|                                  |   | **2015**  |   | **2016**  |   | **2017**  |   |
|---------------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|
|                                  |   | **RMB**   |   | **RMB**   |   | **RMB**   |   |
|                                  |   |      |   |      |   |      |   |
| Advertising and subscription services |   | 3,106,025 |   | 3,432,986 |   | 3,922,158 |   |
| Transaction services                  |   | 664,225   |   | 1,551,676 |   | 3,872,244 |   |
| Agent services                        |   | 483,945   |   | 788,286   |   | 956,857   |   |
|                                  |   |      |   |      |   |      |   |
|                                  |   | 4,254,195 |   | 5,772,948 |   | 8,751,259 |   |

 

**21.**         **Other gains, net**

 
|                                                                                     |   | **2015** |   | **2016** |   | **2017** |   |
|------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                                                                     |   | **RMB**  |   | **RMB**  |   | **RMB**  |   |
|                                                                                     |   |     |   |     |   |     |   |
| Foreign currency exchange gains/(losses)                                                 |   | 30,744   |   | 4,005    |   | (1,721   | )      |
| (Losses)/Gains on disposal of property, plant and equipment and   intangible assets, net |   | (1,779   | )      | 22,993   |   | 16,430   |   |
| Government grants                                                                        |   | 22,512   |   | 26,788   |   | 28,946   |   |
| Others, net                                                                              |   | 9,031    |   | 17,195   |   | (12,079  | )      |
|                                                                                     |   |     |   |     |   |     |   |
|                                                                                     |   | 60,508   |   | 70,981   |   | 31,576   |   |

 

F- 52

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**22.**         **Income tax expense**

 

Cayman Islands

 

Under the current laws of the Cayman Islands, the Company and its subsidiaries incorporated in the Cayman Islands are not subject to tax on income or capital gain. Additionally, the Cayman Islands do not impose a withholding tax on payments of dividends to shareholders.

 

Hong Kong

 

Under the Hong Kong tax laws, subsidiaries in Hong Kong are subject to the Hong Kong profits tax rate at 16.5% and they may be exempted from income tax on their foreign-derived income and there is no withholding tax in Hong Kong on remittance of dividends.

 

PRC

 

Under the PRC Enterprise Income Tax Law (“EIT Law”), EIT rate is 25% for enterprises incorporated in the PRC. Preferential EIT rates are available for enterprises qualified as High and New Technology Enterprises (“HNTEs”) and Software Enterprises (“SEs”). Entities qualified as HNTEs enjoy a reduced tax rate of 15% within three years after obtaining the HNTE certificate. An entity could re-apply for the HNTE certificate when the prior certificate expires. Historically, all of HNTEs of the Group successfully re-applied for the certificates when the prior ones expired. Entities qualified as SEs enjoy a two-year exemption for EIT from the first profitable year followed by a three-year half reduction in tax rate. In addition, in accordance with relevant PRC tax regulations, qualified entities established in specific geographical areas are exempt from EIT for five years, commencing from the first year of operation.

 

Further, pursuant to the EIT Law, a 10% withholding tax is levied on dividends declared by PRC enterprises to their foreign non-resident enterprise investors. A lower withholding tax rate will be applied if tax treaty or arrangement benefits are available. According to the tax arrangement between the PRC and Hong Kong, withholding tax rate of 5% is applicable if direct foreign non-resident enterprise investors own directly at least 25% equity interest in the PRC enterprises and meet the relevant requirements.

 

F- 53

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**22.**         **Income tax expense (continued)**

 

*C omposition of income tax expense:*

 
|                |   | **2015** |   | **2016** |   | **2017** |   |
|---------------------|--------|----------|--------|----------|--------|----------|--------|
|                |   | **RMB**  |   | **RMB**  |   | **RMB**  |   |
|                |   |     |   |     |   |     |   |
| Current income tax  |   | 75,458   |   | 140,706  |   | 249,995  |   |
| Deferred income tax |   | (10,940  | )      | 6,863    |   | (46,171  | )      |
|                |   |     |   |     |   |     |   |
| ** **          |   | 64,518   |   | 147,569  |   | 203,824  |   |

 

*Composition of deferred tax assets and liabilities:*

 
|                                                 |   | **2016** |   | **2017** |   |
|------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                 |   | **RMB**  |   | **RMB**  |   |
|                                                 |   |     |   |     |   |
| **Deferred tax assets**                              |   |     |   |     |   |
| Amortization of intangible assets                    |   | 680      |   | 698      |   |
| Tax losses carried forward                           |   | 29,255   |   | 26,828   |   |
| Allowance for credit losses                          |   | 5,622    |   | 41,119   |   |
| Others                                               |   | -        |   | 2,374    |   |
| Less: valuation allowance                            |   | (18,170  | )      | (18,511  | )      |
|                                                 |   | 17,387   |   | 52,508   |   |
|                                                 |   |     |   |     |   |
| **Deferred tax liabilities**                         |   |     |   |     |   |
| Intangible assets arising from business combinations |   | (51,617  | )      | (52,237  | )      |
|                                                 |   | (51,617  | )      | (52,237  | )      |
| **Net deferred tax (liabilities)/assets**            |   | (34,230  | )      | 271      |   |

 

*Movement of valuation allowance:*

 
|                           |   | **2015** |   | **2016** |   | **2017** |   |
|--------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                           |   | **RMB**  |   | **RMB**  |   | **RMB**  |   |
|                           |   |     |   |     |   |     |   |
| Balance as of January 1   |   | 2,044    |   | 17,471   |   | 18,170   |   |
| Additions                      |   | 16,707   |   | 1,014    |   | 2,319    |   |
| Reversals                      |   | (1,280   | )      | (315     | )      | (1,978   | )      |
|                           |   |     |   |     |   |     |   |
| Balance as of December 31 |   | 17,471   |   | 18,170   |   | 18,511   |   |

 

As of December 31, 2017, the Group had net operating losses carried forward of approximately RMB107.5 million which arose from the subsidiaries, VIEs and subsidiaries of VIEs established in the PRC. The losses carried forward will expire during the period from 2018 to 2022.

 

The Group did not provide for deferred taxes on the undistributed earnings of its subsidiaries, VIEs and subsidiaries of VIEs registered in the PRC as of December 31, 2016 and 2017 on the basis of its intent to reinvest the earnings. As of December 31, 2016 and 2017, the total amount of undistributed earnings from the subsidiaries, VIEs and subsidiaries of VIEs registered in the PRC was RMB1.86 billion and RMB2.79 billion, respectively. As of December 31, 2016 and 2017, determination of the amount of unrecognized deferred tax liability related to the earnings that are indefinitely reinvested is not practical.

 

F- 54

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**22.**         **Income tax expense (continued)**

 

*Reconciliation of the differences between the statutory EIT rate applicable to profits of the consolidated entities and the income tax expenses of the Group:*

 
| ** **                                                                                                                               | ** ** | **2015** | ** ** | **2016** | ** ** | **2017**   | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|------------|------------|
| ** **                                                                                                                               | ** ** | **RMB**  | ** ** | **RMB**  | ** ** | **RMB**    | ** ** |
|                                                                                                                                     |       |     |       |     |       |       |       |
| Loss before tax                                                                                                                          |       | (320,766 | )          | (190,384 | )          | (1,223,164 | )          |
|                                                                                                                                     |       |     |       |     |       |       |       |
| Income tax computed at statutory EIT rate (25%)                                                                                          |       | (80,192  | )          | (47,596  | )          | (305,791   | )          |
| Effect of preferential tax rates for certain entities comprising the   Group                                                             |       | (60,798  | )          | (20,409  | )          | (112,684   | )          |
| Effect of differing tax rates in different jurisdictions                                                                                 |       | 177,749  |       | 184,235  |       | 422,677    |       |
| Non-deductible expenses and non-taxable income, net                                                                                      |       | 11,960   |       | 34,012   |       | 188,069    |       |
| Tax savings from additional deductions on certain research and   development expenses available for subsidiaries incorporated in the PRC |       | -        |       | (3,253   | )          | (3,822     | )          |
| Change in valuation allowances                                                                                                           |       | 15,427   |       | 699      |       | 1,933      |       |
| Others                                                                                                                                   |       | 372      |       | (119     | )          | 13,442     |       |
|                                                                                                                                     |       |     |       |     |       |       |       |
| Income tax expense                                                                                                                       |       | 64,518   |       | 147,569  |       | 203,824    |       |
|                                                                                                                                     |       |     |       |     |       |       |       |
| Effective income tax rate                                                                                                                |       | (20.1    | %)         | (77.5    | %)         | (16.7      | %)         |

 

F- 55

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**23.**         **Share-based compensation**

 

For the years ended December 31, 2015, 2016 and 2017, total share-based compensation expenses recognized were RMB120.0 million, RMB77.0 million and RMB1.19 billion, respectively.

 

*Share incentive plan*

 

On December 31, 2006, the Company implemented an Employee Stock Incentive Plan (“2006 Plan”) under which the Company has reserved 1,028,512.5 ordinary shares for employees. The Board of Directors of the Company may invite employees of the Group to subscribe for options over the Company’s ordinary shares.

 

On February 8, 2010, the Company implemented an Employee Stock Incentive Plan (“2010 Plan”) under which the Company has reserved 3,089,887.5 ordinary shares for employees. The 2010 Plan stipulates that if options are forfeited, the forfeited options can be added back to the option pool to be granted to other employees. The board of the Company may invite employees of the Company to subscribe for options over the Company’s ordinary shares.

 

On August 7, 2012, the Company implemented an Employee Stock Incentive Plan (“2012 Plan”) under which the Company has reserved 1,908,180.0 ordinary shares to motivate, attract and retain employees, and directors. The 2012 Plan permits the awards of options and RSUs.

 

On November 17, 2016, the Company implemented an Employee Stock Incentive Plan (“2016 Plan”) under which the Company has reserved 2,500,000.0 ordinary shares to attract and retain the best available personnel and provide additional incentives to employees, officers, directors and advisors of the Company. The 2016 Plan permits the awards of options and RSUs.

 

*Share options*

 

The Company granted share options on December 31, 2006, February 8, 2010, December 28, 2010 and August 7, 2012, respectively. Options granted typically expire in ten years from the respective grant dates, except for options granted on December 31, 2006 whose expiration date was extended to December 31, 2026. The options have graded vesting terms, and vest in equal tranches from the grant date over three or four years, on the condition that employees remain in service without any performance requirements.

 

F- 56

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**23.**          **Share-based compensation (continued)**

 

The activities of share options for the year ended December 31, 2017 is summarized as below:

 
| ** **                                 | ** ** | **Number of   shares** | ** ** | **Weighted   average   exercise prices   US$/Share** | ** ** | **Aggregate   intrinsic   value   US$ in thousands** | ** ** | **Weighted   average   remaining   contractual   life** | ** ** |
|--------------------------------------------|------------|-----------------------------|------------|-----------------------------------------------------------|------------|----------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| Outstanding as of   January 1, 2017   |       | 972,581.0                   |       | 5.71                                                      |       | 12,867                                                         |       | 4.99 years                                              |       |
| Granted during   the year                  |       | -                           |       | -                                                         |       |                                                           |       |                                                    |       |
| Exercised during   the year                |       | (558,875.0                  | )          | 5.10                                                      |       |                                                           |       |                                                    |       |
| Forfeited during   the year                |       | -                           |       | -                                                         |       |                                                           |       |                                                    |       |
| Outstanding as of   December 31, 2017 |       | 413,706.0                   |       | 6.54                                                      |       | 10,450                                                         |       | 3.82 years                                              |       |
| Exercisable as of   December 31, 2017 |       | 413,706.0                   |       | 6.54                                                      |       | 10,450                                                         |       | 3.82 years                                              |       |

 

The aggregate intrinsic value in the table above represents the difference between the Company’s closing stock price on the last trading day of the year and the exercise price.

 

Total intrinsic value of options exercised for the years ended December 31, 2015, 2016 and 2017 was RMB51.2 million, RMB126.6 million and RMB93.2 million, respectively. The total fair value of options vested during the years ended December 31, 2015, 2016 and 2017 was RMB3.2 million, RMB3.4 million and nil, respectively.

 

For the years ended December 31, 2015, 2016 and 2017, share-based compensation expenses recognized associated with the share options were RMB1.4 million, RMB0.5 million and nil, respectively. As of December 31, 2017, there were no unrecognized share-based compensation expenses related to share options.

 

F- 57

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**23.**          **Share-based compensation (continued)**

 

*Restricted shares units*

 

Starting from 2013, the Company granted RSUs under share incentive plans. The RSUs granted would vest (i) on the anniversary of the grant date, or in equal tranches from the grant date over three or four years, on the condition that employees remain in service without any performance requirements; or (ii) on specific dates, or in equal tranches from the grant date over three or four years, if the grantees’ key performance indicators were achieved on each vest date.

 

Once the vesting conditions underlying the respective RSUs are met, the RSUs are considered duly and validly issued to the holder, and free of restrictions on transfer.

 

The activities of RSUs for the year ended December 31, 2017 is summarized as below:

 
|                                       |   | **Number of RSUs** |   | **Weighted-average fair   value per RSU granted   (US$)** |   |
|--------------------------------------------|--------|------------------------------|--------|-------------------------------------------------------------------------------|--------|
| Outstanding as of   January 1, 2017   |   | 1,446,080.0                  |   | 26.34                                                                         |   |
| Granted during   the year                  |   | 2,660,687.0                  |   | 22.44                                                                         |   |
| Vested and sold   during the year          |   | (890,959.0                   | )      | 25.33                                                                         |   |
| Forfeited during   the year                |   | (404,056.0                   | )      | 23.26                                                                         |   |
| Outstanding as of   December 31, 2017 |   | 2,811,752.0                  |   | 23.42                                                                         |   |
| Vested as of   December 31, 2017      |   | 922,178.0                    |   | 22.28                                                                         |   |

 

The weighted-average grant-date fair value during the years ended December 31, 2015, 2016 and 2017 was US$54.03, US$23.25 and US$22.44, respectively. The total fair value of the RSUs vested during the years ended December 31, 2015, 2016 and 2017 was RMB83.8 million, RMB99.4 million, RMB209.5 million, respectively.

 

For the years ended December 31, 2015, 2016 and 2017, share-based compensation recognized associated with the RSUs was RMB118.6 million, RMB75.8 million and RMB268.5 million, respectively. As of December 31, 2017, there was RMB181.4 million of unrecognized share-based compensation expense related to RSUs. The compensation expenses are expected to be recognized over a weighted-average period of 3.02 years.

 

F- 58

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**23.**          **Share-based compensation (continued)**

 

*Subsidiaries-Yixin*

 

In November 2017, Yixin implemented share recapitalization to effect a 7-for-1 share split for all ordinary shares then issued and outstanding. All information related to Yixin’s ordinary shares and stock options have been retroactively adjusted to give effect to the share split.

 

On May 26, 2017, Yixin approved the establishment of the Pre-IPO Share Option Scheme which was amended on September 1, 2017, the purpose of which is to provide an incentive for employees and persons contributing to Yixin. The Pre-IPO Share Option Scheme shall be valid and effective for 10 years from the grant date. The maximum number of shares that may be issued pursuant to all awards (including incentive share options) under 2017 Share Incentive Plan shall be 418,464,263 shares.

 

On May 26, 2017, Yixin approved the establishment of the First Share Award Scheme which was amended on September 1, 2017, the purpose of which is to provide an incentive for employees and persons contributing to Yixin. The First Share Award Scheme shall be valid and effective for 10 years from the grant date. The maximum number of shares that may be issued pursuant to all awards (including incentive share options) under First Share Award Scheme shall be 70,830,417 shares.

 

On September 1, 2017, Yixin approved the establishment of the Second Share Award Scheme with the purpose of which is to provide an incentive for employees and persons contributing to Yixin. The maximum number of shares that may be issued pursuant to all awards (including incentive share options) under Second Share Award Scheme shall be 5% of the total number of issued shares without Shareholders’ approval, subject to an annual limit of 3% of the total number of issued shares at the relevant time.

 

From July 2017 to October 2017, 395,341,709 share options were granted under the Pre-IPO Share Option Scheme to 149 grantees of Yixin. Subject to the grantee continuing to be an employee of Yixin, 49.0%, 17.7%, 12.0%, 12.0%, 9.0% and 0.3% of the share options shall vest in 2017, 2018, 2019, 2020, 2021 and 2022, respectively. The exercise price of the share options is US$0.0014 per share.

 

F- 59

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**23.**          **Share-based compensation (continued)**

 

The activities of Yixin’s share options for the year ended December 31, 2017 is summarized as below:

 
| ** **                                 | ** ** | **Number of   shares** | ** ** | **Weighted   average   exercise prices   US$/Share** | ** ** | **Aggregate   intrinsic   value   US$ in thousands** | ** ** | **Weighted   average   remaining   contractual   life** | ** ** |
|--------------------------------------------|------------|------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| Outstanding as of   January 1, 2017   |       | -                      |       |                                                 |       | -                                                         |       |                                                    |       |
| Granted during   the year                  |       | 395,341,709            |       | 0.0014                                               |       |                                                      |       |                                                    |       |
| Exercised during   the year                |       | (1,134,000             | )          | 0.0014                                               |       |                                                      |       |                                                    |       |
| Forfeited during   the year                |       | (1,778,000             | )          | 0.0014                                               |       |                                                      |       |                                                    |       |
| Outstanding as of   December 31, 2017 |       | 392,429,709            |       | 0.0014                                               |       | 314,387                                                   |       | 9.55                                                    |       |
| Exercisable as of   December 31, 2017 |       | 192,599,071            |       | 0.0014                                               |       | 314,387                                                   |       | 9.51                                                    |       |

 

The aggregate intrinsic value in the table above represents the difference between Yixin’s closing stock price on the last trading day of the year and the exercise price.

 

Total intrinsic value of options exercised for the years ended December 31, 2017 was RMB5.2 million. The total fair value of options vested during the years ended December 31, 2017 was RMB690.0 million.

 

For the year ended December 31 2017, total share-based compensation expenses recognized were RMB891.7 million, and there was RMB567.0 million unrecognized compensation expenses related to share options granted by Yixin. The compensation expenses are expected to be recognized over a weighted-average period of 3.39 years.

 

The estimate of the fair values of the options were measured based on the binomial model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used on the date of grant and weighted-average fair value per option granted:

 
|                                             |   | **July 3, 2017** |   | **October 1, 2017** |   |
|--------------------------------------------------|--------|-----------------------|--------|--------------------------|--------|
|                                             |   |                  |   |                     |   |
| Fair value per   share                           |   | US$                   | 0.53   |                     | US$    | 0.70 |   |
| Exercise price                                   |   | US$                   | 0.0014 |                     | US$    | 0.0014 |   |
| Risk-free   interest rate                        |   | 2.50                  | %      | 2.46                     | %      |
| Dividend yield                                   |   | 0.00                  | %      | 0.00                     | %      |
| Weighted-average   fair value per option granted |   | US$                   | 0.53   |                     | US$    | 0.70 |   |
| Expected   volatility                            |   | 51                    | %      | 56                       | %      |
| Expected terms                                   |   | 10 years              |   | 10 years                 |   |

 

F- 60

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**23.**          **Share-based compensation (continued)**

 

*Subsidiaries-Others*

 

Other subsidiary of the Company also has equity incentive plans granting RSUs. For the year ended December 31 2017, total share-based compensation expenses recognized were RMB23.3 million, and there was RMB63.0 million unrecognized compensation expenses related to RSUs granted by other subsidiary.

 

**24.**          **Earnings per share**

 

The following table sets forth the computation of basic and diluted net loss per share for the following periods:

 
|                                                                                            |   | **2015**   |   | **2016**   |   | **2017**   |   |
|-------------------------------------------------------------------------------------------------|--------|------------|--------|------------|--------|------------|--------|
|                                                                                            |   |       |   |       |   |       |   |
| **Numerator:**                                                                                  |   |       |   |       |   |       |   |
| Net loss attributable to Bitauto Holdings Limited                                               |   | (506,992   | )      | (541,345   | )      | (1,611,114 | )      |
| Income allocation to participating securities of subsidiaries                                   |   | -          |   | -          |   | (2,936     | )      |
| Numerator for basic net loss per share                                                          |   | (506,992   | )      | (541,345   | )      | (1,614,050 | )      |
| Dilutive effect of redeemable convertible preference shares and share   options of subsidiaries |   | -          |   | -          |   | (11,036    | )      |
| Numerator for diluted net loss per share                                                        |   | (506,992   | )      | (541,345   | )      | (1,625,086 | )      |
| **Denominator:**                                                                                |   |       |   |       |   |       |   |
| Weighted average number of shares - basic                                                       |   | 58,142,432 |   | 65,160,205 |   | 70,154,910 |   |
| Dilutive effect of potentially issuable ordinary shares                                         |   | -          |   | -          |   | -          |   |
| Weighted average number of shares - diluted                                                     |   | 58,142,432 |   | 65,160,205 |   | 70,154,910 |   |
|                                                                                            |   |       |   |       |   |       |   |
| Net loss per ordinary share - basic                                                             |   | (8.72      | )      | (8.31      | )      | (23.01     | )      |
| Net loss per ordinary share - diluted                                                           |   | (8.72      | )      | (8.31      | )      | (23.16     | )      |

 

The redeemable convertible preference shares were not included in the calculation of diluted net loss per share because they are anti-dilutive for the years ended December 31, 2015 and 2016.

 

The weighted average number of shares, that could potentially dilute basic net loss per share in the future including incremental shares of ordinary shares issuable upon the exercise of share options and RSUs, and conversion of convertible debt, but were not included in the computation of diluted net loss per share because they were anti-dilutive for the years presented, are 2,157,626, 4,030,651 and 8,126,552 for the years ended December 31, 2015, 2016 and 2017.

 

F- 61

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**25.**          **Related party transactions**

 

The table below sets forth the related parties and their relationships with the Group as of December 31, 2017:

 
| **Name of related parties**                                                        |   | **Relationship with the Group**     |   |
|------------------------------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                               |   |                                |   |
| Chetuan E-Commerce Ltd. (“Chetuan”)                                      |   | An investee of the Group            |   |
| Shanghai Eclicks Network Co. Ltd. (“Eclicks”)                            |   | An investee of the Group            |   |
| TTP CAR INC. (“TTP”)                                                     |   | An investee of the Group            |   |
| Beijing Anxinbao Insurance Brokerage Co., Ltd. (“Anxinbao”)         |   | An investee of the Group            |   |
| Beijing Jingzhengu Information Technology   Co., Ltd.(“Jingzhengu”) |   | An investee of the Group            |   |
| Wuhan Kuanter Investment Co., Ltd (“Wuhan Kuantu”)                       |   | An investee of the Group            |   |
| JD                                                                                 |   | Ordinary shareholder of the   Group |   |

 

As of December 31, 2015 and 2016, Xinchuang was a related party as an investee of the Group. In January 2017, the Group acquired additional equity interests of Xinchuang to obtain control of it and Xinchuang became a subsidiary of the Group as of December 31, 2017.

 

*The Group entered into the following transactions for the years ended December 31, 2015, 2016 and 2017 with related parties:*

 
|                                                   |   | **2015** |   | **2016** |   | **2017** |   |
|--------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
|                                                   |   | **RMB**  |   | **RMB**  |   | **RMB**  |   |
|                                                   |   |     |   |     |   |     |   |
| Services provided to related parties:                  |   |     |   |     |   |     |   |
| Automobile transaction services provided to Chetuan    |   | 168,343  |   | 79,632   |   | 9,830    |   |
| Advertising services provided to Xinchuang             |   | 86,308   |   | 79,922   |   | -        |   |
| Advertising services provided to TTP                   |   | 10,020   |   | 32,059   |   | 15,260   |   |
| Other transaction services provided to Anxinbao        |   | -        |   | -        |   | 14,183   |   |
| Others                                                 |   | 2,079    |   | 2,966    |   | 27,741   |   |
|                                                   |   |     |   |     |   |     |   |
|                                                   |   | 266,750  |   | 194,579  |   | 67,014   |   |
|                                                   |   |     |   |     |   |     |   |
| Services purchased from related parties:               |   |     |   |     |   |     |   |
| Automobile transaction services purchased from Chetuan |   | -        |   | 86,632   |   | -        |   |
| Advertising services purchased from Xinchuang          |   | 9,982    |   | 16,024   |   | -        |   |
| Advertising services purchased from Eclicks            |   | 69,642   |   | 85,838   |   | 98,530   |   |
| Marketing and promotion services purchased from JD     |   | 35,051   |   | 22,102   |   | 40,411   |   |
| Used car valuation services purchased from Jingzhengu  |   | -        |   | 3,366    |   | 14,400   |   |
| Others                                                 |   | 4,806    |   | 16,597   |   | 31,155   |   |
|                                                   |   |     |   |     |   |     |   |
|                                                   |   | 119,481  |   | 230,559  |   | 184,496  |   |

 

F- 62

----

 

**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**25.**          **Related party transactions (continued)**

 

*The Group had the following balances as of December 31, 2016 and 2017 with related parties:*

 
|                  |   | **2016** |   | **2017** |   |
|-----------------------|--------|----------|--------|----------|--------|
|                  |   | **RMB**  |   | **RMB**  |   |
|                  |   |     |   |     |   |
| Due from Chetuan      |   | 341,796  |   | 153,214  |   |
| Due from Xinchuang    |   | 24,162   |   | -        |   |
| Due from Anxinbao     |   | -        |   | 9,593    |   |
| Due from Wuhan Kuantu |   | -        |   | 5,281    |   |
| Others                |   | 43,133   |   | 36,943   |   |
|                  |   |     |   |     |   |
|                  |   | 409,091  |   | 205,031  |   |
|                  |   |     |   |     |   |
| Due to Eclicks        |   | 55,000   |   | 81,440   |   |
| Due to Jingzhengu     |   | -        |   | 3,170    |   |
| Others                |   | 29,447   |   | 13,631   |   |
|                  |   |     |   |     |   |
|                  |   | 84,447   |   | 98,241   |   |

 

The Group provided unsecured loans for a total of RMB20.0 million to Wuhan Kuantu, with an initial term of 12 months at an interest rate of 1.5% per annum. As at December 31, 2017, a provision of RMB15.0 million was recorded against the loan balance, based on the amount the Group expected to recover from Wuhan Kuantu.

 

*Loans from JD:*

 
| ** **                     | ** ** | **2016** | ** ** | **2017**   | ** ** |
|--------------------------------|------------|----------|------------|------------|------------|
| ** **                     | ** ** | **RMB**  | ** ** | **RMB**    | ** ** |
|                           |       |     |       |       |       |
| Balance as of January 1   |       | -        |       | -          |       |
| Loans received during year     |       | -        |       | 2,036,020  |       |
| Loans repayment made           |       | -        |       | (2,036,020 | )          |
| Interest charged               |       | -        |       | 22,244     |       |
| Interest paid                  |       | -        |       | (22,244    | )          |
|                           |       |     |       |       |       |
| Balance as of December 31 |       | -        |       | -          |       |

 

On March 3, 2017, JD subscribed to a total of RMB835.0 million in Yixin’s asset-backed securitization transactions with the applicable interest rate per annum of 6.20% and 8.94% in the two separate tranches of asset-backed debt securities, respectively. Yixin also agreed to repurchase the securities in three months at a price comprised of the cost of the investment and any accrued interests. The transaction is accounted for as a collateral loan from JD. On June 2, 2017, the loan was repaid in full by Yixin. On July 12, 2017, JD subscribed to a total of RMB201.0 million of asset-backed debt securities mentioned above. On November 14, 2017, the principal of the loan was repaid in full by Yixin. On December 27, 2017, Yixin settled all interests charged. On November 7, 2017, Yixin extended a short-term loan amounting to RMB1.00 billion from JD at an interest rate of 6.525% per annum. On December 4, 2017, the loan was repaid in full by Yixin.

 

The transactions with other related parties, and balance with other related parties are individually and aggregately insignificant.

 

F- 63

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**26.**          **Commitments and contingencies**

 

*Operating lease commitments*

 

The Group has leased office premises under non-cancellable operating lease agreements. These leases have varying terms and renewal rights. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

 
| ** **                                  | ** ** | **2016** | ** ** | **2017** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|
| ** **                                  | ** ** | **RMB**  | ** ** | **RMB**  | ** ** |
|                                        |       |     |       |     |       |
| Within one year                             |       | 93,185   |       | 119,484  |       |
| After one year but not more than five years |       | 150,467  |       | 172,452  |       |
| Later than five years                       |       | -        |       | 1,823    |       |
|                                        |       |     |       |     |       |
|                                        |       | 243,652  |       | 293,759  |       |

 

For the years ended December 31, 2015, 2016 and 2017, the Group incurred rental expenses under operating leases of RMB104.5 million, RMB123.1 million and RMB136.6 million, respectively.

 

*Capital commitments*

 

*Capital expenditure contracted for at the end of the year but not yet incurred is as follows:*

 
| ** **              | ** ** | **2016** | ** ** | **2017** | ** ** |
|-------------------------|------------|----------|------------|----------|------------|
| ** **              | ** ** | **RMB**  | ** ** | **RMB**  | ** ** |
|                    |       |     |       |     |       |
|                    |       |     |       |     |       |
| Purchase of automobiles |       | 499,822  |       | 503,903  |       |
|                    |       |     |       |     |       |
|                    |       | 499,822  |       | 503,903  |       |

 

*Legal proceedings*

 

From time to time, the Group is subject to legal proceedings, investigations and claims incidental to the conduct of our business. The Group is currently not involved in any legal or administrative proceedings that may have a material adverse impact on the Group’s business, balance sheets, results of operations or cash flows. From time to time, the Group may be subject to legal proceedings, investigations and claims incidental to our business conduct.

 

F- 64

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**27.**          **Operating segment information**

 

As disclosed in Note 2(e), the Group managed its business in three segments, namely advertising and subscription business, transaction services business and digital marketing solutions business.

 

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements.

 

As the Group’s long-lived assets are substantially all located in the PRC and substantially all the Group’s revenues are derived from external customers within the PRC, no geographical segments are presented.

 

For the purpose of preparing segment information, all the intersegment transactions have been eliminated and only revenue from external customers are presented as segment revenue. The Group does not allocate non-operating income and expenses to each reportable segment. Accordingly, the measure of profit and loss for each reportable segment as reported to the chief operating decision maker is operating profit. A reconciliation of operating profit to profit before tax is presented in the consolidated statements of comprehensive income.

 

F- 65

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**27.**          **Operating segment information (continued)**

 
|                                   |   | **Advertising   and   subscription   business** |   | **Transaction   services   business** |   | **Digital   marketing   solutions** |   | **Total**  |   |
|----------------------------------------|--------|-------------------------------------------------|--------|---------------------------------------|--------|-------------------------------------|--------|------------|--------|
| ** **                             |   |                                            |   |                                  |   |                                |   |       |   |
| **Year ended, December 31, 2015** |   |                                            |   |                                  |   |                                |   |       |   |
|                                   |   |                                            |   |                                  |   |                                |   |       |   |
| Revenue                                |   | 3,106,025                                       |   | 664,225                               |   | 483,945                             |   | 4,254,195  |   |
| Gross profit                           |   | 2,344,872                                       |   | 237,585                               |   | 220,994                             |   | 2,803,451  |   |
| Income/(Loss) from operations          |   | 553,455                                         |   | (1,053,483                            | )      | 37,890                              |   | (462,138   | )      |
|                                   |   |                                            |   |                                  |   |                                |   |       |   |
| **Year ended, December 31, 2016** |   |                                            |   |                                  |   |                                |   |       |   |
|                                   |   |                                            |   |                                  |   |                                |   |       |   |
| Revenue                                |   | 3,432,986                                       |   | 1,551,676                             |   | 788,286                             |   | 5,772,948  |   |
| Gross profit                           |   | 2,542,534                                       |   | 668,238                               |   | 484,197                             |   | 3,694,969  |   |
| Income/(Loss) from operations          |   | 592,611                                         |   | (848,267                              | )      | 146,428                             |   | (109,228   | )      |
|                                   |   |                                            |   |                                  |   |                                |   |       |   |
| **Year ended, December 31, 2017** |   |                                            |   |                                  |   |                                |   |       |   |
|                                   |   |                                            |   |                                  |   |                                |   |       |   |
| Revenue                                |   | 3,922,158                                       |   | 3,872,244                             |   | 956,857                             |   | 8,751,259  |   |
| Gross profit                           |   | 3,076,332                                       |   | 1,902,614                             |   | 537,633                             |   | 5,516,579  |   |
| Income/(Loss) from operations          |   | 444,564                                         |   | (1,525,073                            | )      | 3,916                               |   | (1,076,593 | )      |

 

The income/(loss) from operations for the year ended December 31, 2015 for advertising and subscription business, transaction services business, and digital marketing solutions included depreciation and amortization expenses of RMB69.4 million, RMB745.0 million and RMB6.1 million, respectively.

 

The income/(loss) from operations for the year ended December 31, 2016 for advertising and subscription business, transaction services business, and digital marketing solutions included depreciation and amortization expenses of RMB52.3 million, RMB619.3 million and RMB8.3 million, respectively.

 

The income/(loss) from operations for the year ended December 31, 2017 for advertising and subscription business, transaction services business, and digital marketing solutions included depreciation and amortization expenses of RMB58.5 million, RMB788.7 million and RMB26.7 million, respectively.

 

For the years ended December 31, 2016 and 2017, the leasing revenue were RMB863.7 million and RMB3.03 billion, and funding costs were RMB187.2 million and RMB1.14 billion, respectively. The leasing revenue and funding costs were immaterial for the years ended December 31, 2015.

 

F- 66

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**28.**          **Restricted net assets**

 

The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC laws and regulations permit payments of dividends by the Company’s subsidiaries, VIEs and subsidiaries of VIEs registered in the PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.

 

In accordance with the laws applicable to the Foreign Investment Enterprises established in the PRC, the Company’s subsidiaries registered as wholly-owned foreign enterprise have to make appropriations from their net income based on PRC accounting standards to reserve funds including general reserve fund, enterprise expansion fund and staff bonus and welfare fund. The appropriation to the general reserve fund must be at least 10% of the net income based on PRC accounting standards until such appropriations for the fund reach 50% of the registered capital of the entity. Appropriations to the enterprise expansion fund and staff bonus and welfare fund are made at the discretion of the respective entity.

 

In addition, in accordance with the PRC Company Laws, the Company’s VIEs and subsidiaries of VIEs, registered as Chinese domestic companies, must make appropriations from their net income based on PRC accounting standards to non-distributable reserve funds including statutory surplus fund and discretionary surplus fund. The appropriation to the statutory surplus fund must be at least 10% of the net income based on PRC accounting standards until such appropriations for the fund reached 50% of the registered capital of the entity. Appropriation to the discretionary surplus fund is made at the discretion of the respective entity. In addition, registered capital is also restricted from withdrawal in the PRC.

 

As of December 31, 2017, the Company’s subsidiaries, VIEs and subsidiaries of VIEs registered in the PRC had registered capital and reserve funds appropriated of RMB20.11 billion.

 

As a result of these PRC laws and regulations that require annual appropriations of 10% of net income to be set aside, prior to payments of dividends as general reserve fund or statutory reserve fund, the Company’s subsidiaries, VIEs and subsidiaries of VIEs registered in the PRC are restricted in their ability to transfer a portion of their net assets to the Company in the form of dividends, loans and advances. Even though the Company currently does not require any such dividends, loans or advances from the PRC entities for working capital and other funding purposes, the Company may in the future require additional cash resources from them due to changes in business conditions, funding of future acquisitions and development, or merely to declare and pay dividends or distributions to its shareholders.

 

F- 67

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**29.**          **Parent company only condensed financial information**

 

The Company performed a test on the restricted net assets of consolidated subsidiaries, VIEs and subsidiaries of VIEs in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial information for the parent company only. The subsidiaries did not pay any dividend to the Company for the years presented. Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted. The footnote disclosures contain supplemental information relating to the operations of the Company, as such, these statements should be read in conjunction with the notes to the consolidated financial statements of the Company.

 

The Company did not have significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2017.

 

F- 68

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**29.**         **Parent company only condensed financial information (continued)**

 

*Condensed balance sheets*

 
|                                                                                                                                                                                                                                                                                           |   | **As of December 31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                                                                                                                                                                                                                                           |   | **2016**                    |   | **2017** |   |
|                                                                                                                                                                                                                                                                                           |   | **RMB**                     |   | **RMB** |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Assets**                                                                                                                                                                                                                                                                                     |   |                        |   |   |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Current assets**                                                                                                                                                                                                                                                                             |   |                        |   |   |   |
| Cash and cash equivalents                                                                                                                                                                                                                                                                      |   | 154,020                     |   | 66,662 |   |
| Prepayments and other receivables                                                                                                                                                                                                                                                              |   | 13,046                      |   | 51,760 |   |
| **Total current assets**                                                                                                                                                                                                                                                                       |   | 167,066                     |   | 118,422 |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Non-current assets**                                                                                                                                                                                                                                                                         |   |                        |   |   |   |
| Investments in subsidiaries, VIEs and subsidiaries of VIEs                                                                                                                                                                                                                                     |   | 1,562,089                   |   | 6,429,473 |   |
| Investment in equity investees                                                                                                                                                                                                                                                                 |   | 48,276                      |   | 43,945 |   |
| Intangible assets, net                                                                                                                                                                                                                                                                         |   | 2,061,106                   |   | 1,431,226 |   |
| Due from subsidiaries, VIEs and subsidiaries of VIEs                                                                                                                                                                                                                                           |   | 6,583,747                   |   | 6,222,037 |   |
| **Total non-current assets**                                                                                                                                                                                                                                                                   |   | 10,255,218                  |   | 14,126,681 |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Total assets**                                                                                                                                                                                                                                                                               |   | 10,422,284                  |   | 14,245,103 |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Liabilities**                                                                                                                                                                                                                                                                                |   |                        |   |   |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Current liabilities**                                                                                                                                                                                                                                                                        |   |                        |   |   |   |
| Accruals and other payables                                                                                                                                                                                                                                                                    |   | 19,498                      |   | 73,807 |   |
| **Total current liabilities**                                                                                                                                                                                                                                                                  |   | 19,498                      |   | 73,807 |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Non-current liabilities**                                                                                                                                                                                                                                                                    |   |                        |   |   |   |
| Due to subsidiaries, VIEs and subsidiaries of VIEs                                                                                                                                                                                                                                             |   | 102                         |   | 2,134,755 |   |
| Convertible debt                                                                                                                                                                                                                                                                               |   | 859,166                     |   | 707,854 |   |
| **Total non-current liabilities**                                                                                                                                                                                                                                                              |   | 859,268                     |   | 2,842,609 |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Total liabilities**                                                                                                                                                                                                                                                                          |   | 878,766                     |   | 2,916,416 |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Shareholders’ Equity**                                                                                                                                                                                                                                                                  |   |                        |   |   |   |
| Ordinary shares(US$0.00004 par value;   1,250,000,000 shares authorized as of December 31, 2016 and 2017,   respectively; 70,726,025 shares issued and outstanding as of   December 31, 2016; 72,739,966 shares issued and outstanding as of   December 31, 2017, respectively) |   | 19                          |   | 19 |   |
| Additional paid-in capital                                                                                                                                                                                                                                                                     |   | 8,903,759                   |   | 12,220,493 |   |
| Treasury shares                                                                                                                                                                                                                                                                                |   | (41,888                     | )      | (20,411 | ) |
| Statutory reserve                                                                                                                                                                                                                                                                              |   | 89,841                      |   | 153,538 |   |
| Accumulated other comprehensive income                                                                                                                                                                                                                                                         |   | 742,302                     |   | 468,257 |   |
| Accumulated deficit                                                                                                                                                                                                                                                                            |   | (150,515                    | )      | (1,493,209 | ) |
| **Total shareholders’ equity**                                                                                                                                                                                                                                                            |   | 9,543,518                   |   | 11,328,687 |   |
|                                                                                                                                                                                                                                                                                           |   |                        |   |   |   |
| **Total liabilities and shareholders’ equity**                                                                                                                                                                                                                                            |   | 10,422,284                  |   | 14,245,103 |   |

 

F- 69

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**29.**         **Parent company only condensed financial information (continued)**

 

*Condensed statements of comprehensive income*

 
|                                                                     |   | **For the year ended December 31,** |   |
|--------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                     |   | **2015**                                 |   | **2016** |   | **2017** |   |
|                                                                     |   | **RMB**                                  |   | **RMB** |   | **RMB** |   |
|                                                                     |   |                                     |   |   |   |   |   |
| Selling and administrative expenses                                      |   | (806,198                                 | )      | (689,656 | ) | (910,515 | ) |
| Other gains                                                              |   | 11                                       |   | 5 |   | 38,948 |   |
| **Loss from operations**                                                 |   | (806,187                                 | )      | (689,651 | ) | (871,567 | ) |
|                                                                     |   |                                     |   |   |   |   |   |
| Interest income                                                          |   | 11,201                                   |   | 1,209 |   | 1,592 |   |
| Interest expense                                                         |   | -                                        |   | (21,407 | ) | (77,158 | ) |
| Share of results of equity investees                                     |   | (4,782                                   | )      | (24,354 | ) | (52,055 | ) |
| Equity in profit/(loss) of subsidiaries, VIEs and subsidiaries of   VIEs |   | 292,776                                  |   | 192,858 |   | (611,926 | ) |
| **Loss before tax**                                                      |   | (506,992                                 | )      | (541,345 | ) | (1,611,114 | ) |
|                                                                     |   |                                     |   |   |   |   |   |
| **Net loss**                                                             |   | (506,992                                 | )      | (541,345 | ) | (1,611,114 | ) |
|                                                                     |   |                                     |   |   |   |   |   |
| **Other comprehensive loss**                                             |   |                                     |   |   |   |   |   |
|                                                                     |   |                                     |   |   |   |   |   |
| Foreign currency exchange gains/(losses), net of tax of nil              |   | 344,748                                  |   | 459,227 |   | (274,045 | ) |
|                                                                     |   |                                     |   |   |   |   |   |
| **Total comprehensive loss, net of tax**                                 |   | (162,244                                 | )      | (82,118 | ) | (1,885,159 | ) |

 

F- 70

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**BITAUTO HOLDINGS LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**

**FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017**

**(Amounts in thousands of Renminbi (“RMB”), except for share and per share data)**

 

**29.**         **Parent company only condensed financial information (continued)**

 

*Condensed statements of cash flows*

 
|                                                           |   | **For the year ended December 31,** |   |
|----------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                           |   | **2015**                                 |   | **2016** |   | **2017** |   |
|                                                           |   | **RMB**                                  |   | **RMB** |   | **RMB** |   |
|                                                           |   |                                     |   |   |   |   |   |
| Net cash provided by/(used in) operating activities            |   | 23,307                                   |   | (9,711 | ) | 104,295 |   |
| Net cash used in investing activities                          |   | (2,561,029                               | )      | (3,195,265 | ) | (238,475 | ) |
| Net cash provided by financing activities                      |   | 3,375,896                                |   | 2,198,272 |   | 354,821 |   |
|                                                           |   |                                     |   |   |   |   |   |
| Effect of exchange rate changes on cash and cash   equivalents |   | 111,329                                  |   | 148,031 |   | (307,999 | ) |
|                                                           |   |                                     |   |   |   |   |   |
| Increase/(Decrease) in cash and cash equivalents               |   | 949,503                                  |   | (858,673 | ) | (87,358 | ) |
| Cash and cash equivalents at beginning of the year             |   | 63,190                                   |   | 1,012,693 |   | 154,020 |   |
|                                                           |   |                                     |   |   |   |   |   |
| Cash and cash equivalents at end of the year                   |   | 1,012,693                                |   | 154,020 |   | 66,662 |   |

 

*Basis of presentation*

 

The Company’s accounting policies are the same as the Group’s accounting policies with the exception of the accounting for the investments in subsidiaries, VIEs and subsidiaries of VIEs.

 

For the Company only condensed financial information, the Company records its investments in subsidiaries, VIEs and subsidiaries of VIEs under the equity method of accounting as prescribed in ASC 323 “Investments-Equity Method and Joint Ventures”. Such investments are presented on the condensed balance sheets as “investment in subsidiaries, VIEs and subsidiaries of VIEs” and shares in the subsidiaries, VIEs and subsidiaries of VIEs’ profit are presented as “equity in profit of subsidiaries, VIEs and subsidiaries of VIEs” on the condensed statements of comprehensive income. The cash flows used in the investing activities are primarily associated with the loans to the subsidiaries, VIEs and subsidiaries of VIEs. The parent company only condensed financial information should be read in conjunction with the Group’ consolidated financial statements.

 

F- 71

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