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We provide healthcare packages of bundled services principally comprising a combination of medical examination, disease screening and other services to our corporate customers. The healthcare package normally expires within one year from the date of purchase and does not include right of return.
We allocate revenues from the sale of bundled services to each of the revenue streams discussed above using the relative selling price of each component service based on our best estimate. Revenue recognition criteria with respect to each component service included in the bundled services is identical to as if the component services are sold on a standalone basis.
Consolidation of Variable Interest Entities
Foreign ownership of healthcare and Internet-based businesses in China is subject to significant restrictions under current PRC laws and regulations. The PRC government regulates these industries through strict business licensing requirements and other government regulations. These laws and regulations also include limitations on foreign ownership in PRC companies that operate healthcare and Internet-based businesses. Specifically, foreign investment in Internet-based businesses is categorized as restricted and foreign investors are not allowed to own more than a 50% equity interest in an entity conducting an Internet-based business pursuant to the Administrative Rules for Foreign Investment in Telecommunication Enterprises. Also, foreign investment in the healthcare industry was categorized as restricted and foreign investors were not allowed to own more than a 70% equity interest in an entity conducting a healthcare-based business pursuant to the Interim Measures for Administration of Sino-foreign Joint Venture and Cooperative Medical Institutions which took effect in July 2000. In addition, the Interim Measures for Administration of Sino-foreign Joint Venture and Cooperative Medical Institutions also set certain qualification requirements for foreign investors, such as requiring such investors possession of and investment and operation experience in the medical sector. Although an amendment inDecember 2011 to the Catalog of Industries for Guiding Foreign Investment recategorized foreign investment in the healthcare sector from restricted to permitted and various other subsequent regulations and rules state that restrictions on foreign investment in the healthcare sector should be lifted, restrictions on foreign investment in the healthcare sector still exist in practice, and the amendments have not been implemented at the provincial or municipal level in many cases and therefore many local governments continue to follow the previous rules and impose a 70% foreign ownership limit and foreign investor qualification requirements when approving and registering medical institutions. See Item 4.B. Business Overview Government Regulations Regulations Relating to Foreign Investment in the Value-Added Telecommunications Industry, and Item 4.B. Business Overview Government Regulations Regulations Relating to Foreign Investment in Our Industry. Therefore we still operated through our VIE entities. Beijing iKang, Zhejiang iKang and Yuanhua WFOE hold the power to direct the activities of the VIE entities that most significantly affect our economic performance and bear the economic risks and receive the economic benefits of the VIE entities through a series of contractual arrangements with iKang Holding, iKang Hangzhou Xixi, Yuanhua Information and Beijing Jiandatong and/or their nominee shareholders, including:
· exclusive business cooperation agreement;
· exclusive call option agreement;
· share pledge agreement;
· powers of attorney; and
· spousal consent letter.