1.

You have disclosed that you acquired 80% of the outstanding shares of SGM on September 26, 2014 and contractually agreed to purchase the remaining 20% outstanding on the one year anniversary of the acquisition date. We note you recorded a liability representing the fair value of the future payment, as opposed to recording a non-controlling interest to represent the 20% ownership interest outstanding upon consolidation. Furthermore, we note you revised the liability throughout fiscal year 2015 to reflect changes in fair value, and finally reduced the liability to $36 million according to the new agreement finalized in the fourth quarter of fiscal year 2015. Upon payment to acquire the remaining 20%, you recognized an “extinguishment gain of $26,650” in the fiscal quarter ended April 3, 2016. Please provide us with an analysis to support your accounting treatment of the 20% outstanding interest upon initial acquisition of SGM as well as the subsequent accounting for changes in fair value and gain recognition throughout fiscal year 2015 and upon payment in the first quarter of fiscal year 2016. As part of your response, tell us how you considered FASB ASC 810-10-45-15 through 17 regarding non-controlling interest and FASB ASC 810-10-45-23 regarding changes in a parent’s ownership interest that do not result in a change in control of the subsidiary.

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•	RMB 2,416,800,000 paid at first closing for 80% of shares

•	RMB 604,200,000 paid at second closing (one-year from first closing) for the remaining 20% of shares (Second Tranche payment)

a.	The parent has a fixed-price forward contract to buy the other 20 percent at a stated future date. (Derivative 1)

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(A)

The contractual amount to be paid for the remaining 20% of the shares of RMB 604,200,000 was $95.9 million, as converted to USD using the one-year forward foreign exchange rate of 6.30 RMB/USD. The Share Purchase Agreement also stipulated that the SGM selling shareholders were entitled to dividends on the 20% of the shares they held based upon a portion of the distributable net profits of SGM for the period that these shares remained outstanding (from the date of initial acquisition to the expected date of the second closing). The payment to be made for the remaining 20% of the shares, as well as the estimated payments to be made for dividends, were discounted using an estimate of the Company’s one-year borrowing rate, in order to determine the present value. The resulting present value of $100.1 million, which was recorded upon the initial acquisition in September 2014, was considered an approximation of the fair value of the liability.

(B)

On March 31, 2015, in connection with negotiations for the working capital and net debt adjustments as required per the original share purchase agreement, the Company entered into a Settlement Agreement with the SGM shareholders, whereby it was agreed that the purchase price for the second tranche payment be reduced by RMB 139,600,000, or $22.3 million using the current RMB/USD exchange rate of 6.25, as settlement for certain amounts that were due to Hershey under the agreement. At this time, we also reduced the estimate of dividends to be paid for 2014 and 2015, based on SGM’s lower level of earnings. These adjustments, along with foreign currency remeasurement and other minor true-ups, reduced the fair value of the liability to $76.8 million at the end of the first quarter of 2015.

(C)

On the basis of ongoing negotiations with the SGM shareholders, the Company entered into a new Share Purchase Agreement on December 15, 2015, which reduced the cash purchase price for the remaining 20% of the outstanding shares to RMB 235,307,795 (converted to $35.8 million using the current RMB/USD exchange rate of 6.58). In addition, in a Miscellaneous Agreement entered into on the same date, it was agreed that the SGM selling shareholders would retain a warehouse in Yudong, that had originally been committed as part of the initial acquisition, as partial settlement for the liability. The liability was reduced by the net book value of the Yudong warehouse (approximately $8.2 million), which was deemed to be a reasonable approximation of fair value. After adjusting the recorded liability for these amounts, the remaining balance of $26.7 million was adjusted as an extinguishment gain.

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a.	The debtor pays the creditor and is relieved of its obligation for the liability. Paying the creditor includes the following:

1.	Delivery of cash

2.	Delivery of other financial assets

3.	Delivery of goods or services

4.	Reacquisition by the debtor of its outstanding debt securities whether the securities are cancelled or held as so-called treasury bonds.

b.	The debtor is legally released from being the primary obligor under the liability, either judicially or by the creditor. For purposes of applying this Subtopic, a sale and related assumption effectively accomplish a legal release if nonrecourse debt (such as certain mortgage loans) is assumed by a third party in conjunction with the sale of an asset that serves as sole collateral for that debt.

•	the Company is responsible for the adequacy and accuracy of the disclosure in the filing;

•	Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and

•	the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.