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Alibaba Group Initial Public Offering: A Case Study of Financial Reporting Issues

Q1. What are the potential risks and benefits for U.S. shareholders when investing in Chinese companies with VIE structures? If the Chinese government liberalizes the rules for foreign investment and allows private companies to directly list on U.S. stock exchanges, then would VIEs still be necessary?

Q2. Under what conditions is a company required to consolidate its financial statements? (Please provide ASC citation)

Q3. Using information in the Alibaba case, describe Alibabas ownership structure as it relates to VIE? Why did Alibaba create these entities? Describe the ownership rights associated with these entities.

Alibaba Group Initial Public Offering: A Case Study of Financial Reporting Issues Qing L. Burke Tim V. Eaton Miami University INTRODUCTION n September 19, 2014, Alibaba Group Holding Limited (Alibaba Group), the Chinese e-commerce giant founded in 1999, had an initial public offering (IPO) of American depository shares at $68 per share on the New York Stock Exchange. Based on this offering price, this deal raised $25 billion for Alibaba Group, making it the world's largest IPO (Barreto 2014). The scope of Alibaba Group's IPO has drawn particular attention to the risks and opportunities of investing in this company as well as other U.S.-listed Chinese companies. This case will first provide a brief background on Alibaba Group, and then explore important aspects associated with its IPO in the U.S Corporate Overview Since the launch of Alibaba.com in 1999 by Jack Ma in his apartment in Hangzhou, China, Alibaba Group has established a portfolio of companies operating in wholesale and retail online marketplaces as well as Internet-based businesses offering advertising and marketing services, electronic payments, cloud-based computing, and network services as well as mobile solutions. Alibaba Group has developed an ecosystem around its platform that consists of buyers, sellers, third-party service providers, strategic alliance partners, and investee companies. Table 1 shows important milestones in Alibaba Group's history (http://www.alibabagroup.com/en/about/history) Alibaba Group Initial Public Offering: A Case Study of Financial Reporting Issues Qing L. Burke Tim V. Eaton Miami University INTRODUCTION n September 19, 2014, Alibaba Group Holding Limited (Alibaba Group), the Chinese e-commerce giant founded in 1999, had an initial public offering (IPO) of American depository shares at $68 per share on the New York Stock Exchange. Based on this offering price, this deal raised $25 billion for Alibaba Group, making it the world's largest IPO (Barreto 2014). The scope of Alibaba Group's IPO has drawn particular attention to the risks and opportunities of investing in this company as well as other U.S.-listed Chinese companies. This case will first provide a brief background on Alibaba Group, and then explore important aspects associated with its IPO in the U.S Corporate Overview Since the launch of Alibaba.com in 1999 by Jack Ma in his apartment in Hangzhou, China, Alibaba Group has established a portfolio of companies operating in wholesale and retail online marketplaces as well as Internet-based businesses offering advertising and marketing services, electronic payments, cloud-based computing, and network services as well as mobile solutions. Alibaba Group has developed an ecosystem around its platform that consists of buyers, sellers, third-party service providers, strategic alliance partners, and investee companies. Table 1 shows important milestones in Alibaba Group's history (http://www.alibabagroup.com/en/about/history)

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