DISCUSSION OF RECENTLY ADOPTED ACCOUNTING STANDARD AND
NON-GAAP
MEASURES
On January 1, 2018, the Company adopted ASU
2016-01
Financial Instruments-Overall
(Subtopic
825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities, which requires that equity investments, except for those accounted for under the equity method or those that result
in consolidation of the investee, be measured at fair value, with subsequent changes in fair value recognized in net income.
The accounting standard also
includes a transition requirement on presentation that requires the amounts reported in accumulated other comprehensive income for equity securities that exist as of the date of adoption previously classified as
available-for-sale
to be reclassified to retained earnings.
As a result, upon adoption of this new standard,
Noah recorded a cumulative effect adjustment from other comprehensive income to retained earnings of RMB251.6 million (US$38.7 million), net of tax, for the unrealized gains related to equity securities previously classified as
available-for-sale
securities. This adjustment had no overall impact on shareholders equity; however, since these net unrealized gains are now included within retained
earnings, they will not appear as realized gains on Noahs consolidated income statement when sold.
The future impact to Noahs consolidated
income statement from period to period will vary depending upon the level of volatility in the performance of the securities held in Noahs equity portfolio and the overall market. ASU
2016-01
does not
affect the treatment of equity investments accounted for under the equity method or those that result in consolidation of the investee.
In addition to
disclosing financial results prepared in accordance with U.S. GAAP, the Companys earnings release contains
non-GAAP
financial measures excluding the effects of all forms of share-based compensation and
fair value changes of equity investments (unrealized) and adjusting for sale of equity securities. See Reconciliation of GAAP to
Non-GAAP
Results at the end of this press release.
The
non-GAAP
financial measures disclosed by the Company should not be considered a substitute for financial measures
prepared in accordance with U.S. GAAP. The financial results reported in accordance with U.S. GAAP and reconciliation of GAAP to
non-GAAP
results should be carefully evaluated. The
non-GAAP
financial measures used by the Company may be prepared differently from and, therefore, may not be comparable to similarly titled measures used by other companies.
When evaluating the Companys operating performance in the periods presented, management reviewed the foregoing
non-GAAP
net income attributable to Noah shareholders and per diluted ADS and
non-GAAP
net margin attributable to Noah shareholders to supplement U.S. GAAP financial
data. As such, the Companys management believes that the presentation of the
non-GAAP
financial measures provides important supplemental information to investors regarding financial and business trends
relating to its results of operations in a manner consistent with that used by management.
ABOUT NOAH HOLDINGS LIMITED
Noah Holdings Limited (NYSE: NOAH) is a leading wealth and asset management service provider in China with a focus on global investment and asset allocation
services for high net worth individuals and enterprises. In the first nine months of 2018, Noah distributed RMB84.9 billion (US$12.4 billion) of financial products. Through Gopher Asset Management, Noah had assets under management of
RMB164.1 billion (US$23.9 billion) as of September 30, 2018.
Noahs wealth management business primarily distributes onshore and offshore
fixed income, private equity, secondary market equity and insurance products. Noah delivers customized financial solutions to clients through a network of 1,559 relationship managers across 287 branches and
sub-branches
in 83 cities in mainland China, and serves the international investment needs of its clients through offices in Hong Kong, Taiwan, United States, Canada, Australia and Singapore. The
Companys wealth management business had 236,906 registered clients as of September 30, 2018. As a leading alternative asset manager in China, Gopher Asset Management manages private equity, real estate, secondary market equity, credit and
other investments denominated in Renminbi and other currencies. The Company also provides other financial services, including lending services, online wealth management and payment technology services.
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