Common use of Summary of Significant Accounting Policies (Continued Clause in Contracts

Summary of Significant Accounting Policies (Continued. On November 23, 2010, the court released the restriction on the 95% equity interests in Quan Toodou and issued another Asset Conservatory Notification to restrict the transfer, disposal or payment of dividend on the 38% equity interests in Quan Toodou ("Frozen Equity"), which represents the plaintiff's claim of her portion of the community assets. The court did not specify the period of the conservatory measures and normally, it should be no longer than 2 years according to PRC judicial practice. Subsequently, the Company has evaluated the potential impact of the lawsuit on the contractual arrangements it has currently in place with ▇▇▇▇ ▇▇▇▇▇▇ based on the advice of its PRC legal counsel. Based on the advice from the Company's PRC legal counsel, the restrictions imposed under the conservatory measures did not impact the validity and performance of any of the agreements entered into between Reshuffle Shanghai and ▇▇. ▇▇▇▇ as the nominee shareholder of ▇▇▇▇ ▇▇▇▇▇▇ and between Reshuffle Shanghai and ▇▇▇▇ ▇▇▇▇▇▇. Consequently, prior to the litigation and issuance of the Asset Conservatory Notification, it did not impact the Company's previous accounting conclusion on the consolidation of ▇▇▇▇ ▇▇▇▇▇▇. Based on the advice of the Company's PRC legal counsel, upon the issuance of the conservatory measures as set out in the Asset Conservatory Notification, the Company concluded that all of these agreements discussed in Note 1 are still valid. While the overall performance of these agreements is still intact, certain restrictions have been imposed as a result of the conservatory measures on the following agreements: • Proxy Agreement—The conservatory measures prohibited the use of voting rights to transfer, dispose or distribute dividend on the Frozen Equity. However, Reshuffle Shanghai could continue to exercise full voting rights on all other matters, including making all the operational and financial decisions. • Option Agreement—the exercise of the option agreement was not allowed under the conservatory measure, however, the exercise under this agreement is subject to restrictions under the current PRC laws regardless of the conservatory measures. Given the PRC laws and regulations prohibit or restrict foreign ownership of companies that provide advertising services and hold ICP license and the License for Transmission of Audio-Visual Programs through the Internet at present, the Company is not allowed to exercise the option to acquire the equity interest in Quan Toodou until the PRC Laws allows foreign ownerships in Internet-related and mobile value-added service businesses. Therefore, the temporary restriction from the conservatory measures had no substantial impact on this agreement currently. • Equity Interest Pledge Agreement—while the transfer, disposal or dividend distribution on the pledged Frozen Equity upon exercise of Reshuffle Shanghai's right was prohibited by the conservatory measures, the pledge was still effective and the entire 95% of ▇▇. ▇▇▇▇'▇ holding in ▇▇▇▇ ▇▇▇▇▇▇ continued to be pledged in favor of Reshuffle Shanghai. • Loan Agreements—the transfer of the underlying equity interest collateralized related to Frozen Equity was prohibited (same as the Equity Interest Pledge Agreement).