Form 6-K

1934 Act Registration No. 1-14700

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2018

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F  ☒            Form 40-F  ☐

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes  ☐            No  ☒

(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82:             .)

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Taiwan Semiconductor Manufacturing Company Ltd.
Date: August 17, 2018     By  

/s/ Lora Ho

      Lora Ho
      Senior Vice President & Chief Financial Officer


  

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

  
  

Consolidated Financial Statements for the

Six Months Ended June 30, 2018 and 2017 and

Independent Auditors’ Review Report

  

 


LOGO   

LOGO

 

Deloitte & Touche

20F, Taipei Nan Shan Plaza

No. 100, Songren Rd.,

Xinyi Dist., Taipei 11073, Taiwan

 

Tel:+886 (2) 2725-9988

Fax:+886 (2) 4051-6888

www.deloitte.com.tw

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

Introduction

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and its subsidiaries (collectively, the “Company”) as of June 30, 2018 and 2017, the related consolidated statements of comprehensive income for the three months ended June 30, 2018 and 2017 and for the six months ended June 30, 2018 and 2017, the consolidated statements of changes in equity and cash flows for the six months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with Statement of Auditing Standards No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects the consolidated financial position of the Company as of June 30, 2018 and 2017, its consolidated financial performance for the three months ended June 30, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the six months ended June 30, 2018 and 2017 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

 

- 1 -


The engagement partners on the reviews resulting in this independent auditors’ review report are Mei Yen Chiang and Yu Feng Huang.

 

LOGO    LOGO

Deloitte & Touche

Taipei, Taiwan

Republic of China

August 14, 2018

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ review report and consolidated financial statements shall prevail.

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

     June 30, 2018
(Reviewed)
     December 31, 2017
(Audited)
     June 30, 2017
(Reviewed)
 
     Amount      %      Amount      %      Amount      %  
                 

ASSETS

                 

CURRENT ASSETS

                 

Cash and cash equivalents (Note 6)

   $ 632,229,880        31      $ 553,391,696        28      $ 570,466,958        29  

Financial assets at fair value through profit or loss (Note 7)

     1,205,036               569,751               4,995,251         

Financial assets at fair value through other comprehensive income (Note 8)

     102,027,608        5                              

Available-for-sale financial assets (Note 9)

                   93,374,153        5        76,252,652        4  

Held-to-maturity financial assets (Note 10)

                   1,988,385               7,210,380         

Financial assets at amortized cost (Note 11)

     13,427,398        1                              

Hedging derivative financial assets (Note 13)

                   34,394               24,517         

Hedging financial assets (Note 13)

     31,692                                     

Notes and accounts receivable, net (Note 14)

     87,096,847        4        121,133,248        6        109,893,282        6  

Receivables from related parties (Note 34)

     1,099,472               1,184,124               436,001         

Other receivables from related parties (Note 34)

     3,185,522               171,058               1,532,321         

Inventories (Note 15)

     99,032,077        5        73,880,747        4        61,010,525        3  

Other financial assets (Note 35)

     13,393,142        1        7,253,114               2,450,135         

Other current assets (Note 19)

     6,314,005               4,222,440               3,777,530         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

     959,042,679        47        857,203,110        43        838,049,552        42  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NONCURRENT ASSETS

                 

Financial assets at fair value through other comprehensive income (Note 8)

     5,694,784                                     

Held-to-maturity financial assets (Note 10)

                   18,833,329        1        20,529,204        1  

Financial assets at amortized cost (Note 11)

     7,476,874                                     

Financial assets carried at cost (Note 12)

                   4,874,257               4,313,269         

Investments accounted for using equity method (Note 16)

     15,663,648        1        17,861,488        1        18,976,025        1  

Property, plant and equipment (Note 17)

     1,034,268,062        50        1,062,542,322        53        1,077,626,759        54  

Intangible assets (Note 18)

     13,792,211        1        14,175,140        1        14,118,892        1  

Deferred income tax assets (Note 4)

     13,632,059        1        12,105,463        1        10,010,278        1  

Refundable deposits

     2,110,444               1,283,414               742,707         

Other noncurrent assets (Note 19)

     1,732,193               2,983,120               2,067,091         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total noncurrent assets

     1,094,370,275        53        1,134,658,533        57        1,148,384,225        58  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

   $ 2,053,412,954        100      $ 1,991,861,643        100      $ 1,986,433,777        100  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

LIABILITIES AND EQUITY

                 

CURRENT LIABILITIES

                 

Short-term loans (Notes 20 and 32)

   $ 30,835,300        1      $ 63,766,850        3      $ 54,745,200        3  

Financial liabilities at fair value through profit or loss (Note 7)

     1,057,719               26,709               82,552         

Hedging derivative financial liabilities (Note 13)

                   15,562               19         

Hedging financial liabilities (Note 13)

     30,718                                     

Accounts payable

     29,711,846        1        28,412,807        1        24,509,899        1  

Payables to related parties (Note 34)

     951,332               1,656,356               1,101,776         

Salary and bonus payable

     10,047,025        1        14,254,871        1        10,042,918        1  

Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 24 and 31)

     34,462,523        2        23,419,135        1        33,376,142        2  

Payables to contractors and equipment suppliers

     39,602,732        2        55,723,774        3        50,376,846        2  

Cash dividends payable (Note 24)

     207,519,110        10                      181,626,763        9  

Income tax payable (Note 4)

     28,789,175        1        33,479,311        2        33,463,459        2  

Provisions (Note 21)

                   13,961,787        1        13,818,216        1  

Long-term liabilities - current portion (Note 22)

     15,900,000        1        58,401,122        3        79,865,605        4  

Accrued expenses and other current liabilities (Notes 23, 25, 32 and 34)

     64,089,684        3        65,588,396        3        40,497,750        2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current liabilities

     462,997,164        22        358,706,680        18        523,507,145        27  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NONCURRENT LIABILITIES

                 

Bonds payable (Notes 22 and 32)

     83,400,000        4        91,800,000        5        99,300,000        5  

Long-term bank loans

                                 16,940         

Deferred income tax liabilities (Note 4)

     242,158               302,205               160,709         

Net defined benefit liability (Note 4)

     8,765,705        1        8,850,704        1        8,556,640         

Guarantee deposits (Notes 23 and 32)

     5,365,159               7,586,790               10,818,377        1  

Others

     2,007,483               1,855,621               1,708,321         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total noncurrent liabilities

     99,780,505        5        110,395,320        6        120,560,987        6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     562,777,669        27        469,102,000        24        644,068,132        33  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

                 

Capital stock (Note 24)

     259,303,805        13        259,303,805        13        259,303,805        13  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Capital surplus (Note 24)

     56,307,720        3        56,309,536        3        56,282,780        3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retained earnings (Note 24)

                 

Appropriated as legal capital reserve

     276,033,811        14        241,722,663        12        241,722,663        12  

Appropriated as special capital reserve

     26,907,527        1                              

Unappropriated earnings

     886,529,173        43        991,639,347        49        802,672,760        40  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     1,189,470,511        58        1,233,362,010        61        1,044,395,423        52  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Others (Note 24)

     (15,080,494      (1      (26,917,818      (1      (18,296,511      (1
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equity attributable to shareholders of the parent

     1,490,001,542        73        1,522,057,533        76        1,341,685,497        67  

NON-CONTROLLING INTERESTS

     633,743               702,110               680,148         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity

     1,490,635,285        73        1,522,759,643        76        1,342,365,645        67  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

   $ 2,053,412,954        100      $ 1,991,861,643        100      $ 1,986,433,777        100  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

(Reviewed, Not Audited)

 

 

     For the Three Months Ended June 30      For the Six Months Ended June 30  
     2018      2017      2018      2017  
     Amount      %      Amount      %      Amount      %      Amount      %  
                       

NET REVENUE (Notes 25, 34 and 39)

   $ 233,276,811        100      $ 213,855,212        100      $ 481,355,482        100      $ 447,769,612        100  

COST OF REVENUE (Notes 15, 31 and 34)

     121,688,707        52        105,101,969        49        244,792,684        51        217,530,703        49  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

GROSS PROFIT BEFORE UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES

     111,588,104        48        108,753,243        51        236,562,798        49        230,238,909        51  

UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES

     (57,170             (44,589             (174,325             (40,619       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

GROSS PROFIT

     111,530,934        48        108,708,654        51        236,388,473        49        230,198,290        51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

OPERATING EXPENSES (Notes 31 and 34)

                       

Research and development

     19,891,553        8        19,057,456        9        40,320,147        8        38,469,849        8  

General and administrative

     5,070,594        2        4,927,159        2        9,922,302        2        10,174,762        2  

Marketing

     1,477,977        1        1,382,199        1        2,926,069        1        2,878,686        1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     26,440,124        11        25,366,814        12        53,168,518        11        51,523,297        11  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Note 31)

     (662,664      (1      (86,439             (1,964,863             (67,202       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

INCOME FROM OPERATIONS (Note 39)

     84,428,146        36        83,255,401        39        181,255,092        38        178,607,791        40  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NON-OPERATING INCOME AND EXPENSES

                       

Share of profits of associates

     266,493               618,451               948,284               1,285,261         

Other income (Note 26)

     3,729,835        2        2,626,210        1        6,884,477        1        4,731,189        1  

Foreign exchange gain (loss), net (Note 38)

     2,330,616        1        (551,533             1,653,636               (451,738       

Finance costs (Note 27)

     (628,284             (839,913             (1,436,250             (1,656,577       

Other gains and losses, net (Note 28)

     (2,539,198      (1      1,008,851               (1,774,010             1,424,040         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non-operating income and expenses

     3,159,462        2        2,862,066        1        6,276,137        1        5,332,175        1  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

INCOME BEFORE INCOME TAX

     87,587,608        38        86,117,467        40        187,531,229        39        183,939,966        41  

INCOME TAX EXPENSE (Notes 4 and 29)

     15,294,233        7        19,846,815        9        25,450,280        5        30,048,406        7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME

     72,293,375        31        66,270,652        31        162,080,949        34        153,891,560        34  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 24 and 29)

                       

Items that will not be reclassified subsequently to profit or loss:

                       

Unrealized loss on investments in equity instruments at fair value through other comprehensive income

     (869,369                           (888,876                     

Gain (loss) on hedging instruments

     (21,939                           15,343                       

Share of other comprehensive income of associates

     5,551                             5,613                       

Income tax benefit (expense) related to items that will not be reclassified subsequently

     (2,821                           36,385                       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (888,578                           (831,535                     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Items that may be reclassified subsequently to profit or loss:

                       

Exchange differences arising on translation of foreign operations

     20,310,158        8        1,353,774        1        13,833,672        3        (19,889,820      (4

Changes in fair value of available-for-sale financial assets

                   28,397                             (65,073       

Cash flow hedges

                   18,997                             18,997         

Unrealized loss on investments in debt instruments at fair value through other comprehensive income

     (282,360                           (1,009,770      (1              

Share of other comprehensive income (loss) of associates

     116,455               3,027               77,103               (58,630       

Income tax benefit related to items that may be reclassified subsequently

                   6,041                             52,441         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     20,144,253        8        1,410,236        1        12,901,005        2        (19,942,085      (4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income (loss) for the period, net of income tax

     19,255,675        8        1,410,236        1        12,069,470        2        (19,942,085      (4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

   $ 91,549,050        39      $ 67,680,888        32      $ 174,150,419        36      $ 133,949,475        30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

                       

Shareholders of the parent

   $ 72,290,539        31      $ 66,271,019        31      $ 162,075,161        34      $ 153,899,917        34  

Non-controlling interests

     2,836               (367             5,788               (8,357       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 72,293,375        31      $ 66,270,652        31      $ 162,080,949        34      $ 153,891,560        34  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

                       

Shareholders of the parent

   $ 91,545,881        39      $ 67,680,017        32      $ 174,141,933        36      $ 133,954,807        30  

Non-controlling interests

     3,169               871               8,486               (5,332       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 91,549,050        39      $ 67,680,888        32      $ 174,150,419        36      $ 133,949,475        30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

(Reviewed, Not Audited)

 

 

     For the Three Months Ended June 30      For the Six Months Ended June 30  
     2018      2017      2018      2017  
    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to

Shareholders of

the Parent

 
           

EARNINGS PER SHARE (NT$, Note 30)

           

Basic earnings per share

   $ 2.79      $ 2.56      $ 6.25      $ 5.94  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share

   $ 2.79      $ 2.56      $ 6.25      $ 5.94  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.    (Concluded)

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars, Except Dividends Per Share)

(Reviewed, Not Audited)

 

 

    Equity Attributable to Shareholders of the Parent              
                                              Others                    
                                                         

Unrealized

Gain (Loss)

on

Financial

Assets at Fair

Value

Through

Other

Comprehensive

Income

                                           
                                             

Foreign

Currency

Translation

Reserve

   

Unrealized

Gain (Loss)
from

Available-
for-sale

Financial
Assets

               

Unearned

Stock-Based

Employee

Compensation

                         
   

 

Capital Stock - Common Stock

          Retained Earnings    

Cash
Flow

Hedges
Reserve

   

Gain (Loss)

on

Hedging

Instruments

                         
   

Shares

(In Thousands)

    Amount     Capital
Surplus
   

Legal Capital

Reserve

   

Special Capital

Reserve

   

Unappropriated

Earnings

    Total     Total     Total    

Non-controlling

Interests

   

Total

Equity

 
                                 

BALANCE, JANUARY 1, 2018

    25,930,380     $ 259,303,805     $ 56,309,536     $ 241,722,663     $     $ 991,639,347     $ 1,233,362,010     $ (26,697,680   $ (214,074   $     $ 4,226     $     $ (10,290   $ (26,917,818   $ 1,522,057,533     $ 702,110     $ 1,522,759,643  

Effect of retrospective application

                                  1,556,319       1,556,319             214,074       (524,915     (4,226     4,226             (310,841     1,245,478       342       1,245,820  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED BALANCE, JANUARY 1, 2018

    25,930,380       259,303,805       56,309,536       241,722,663             993,195,666       1,234,918,329       (26,697,680           (524,915           4,226       (10,290     (27,228,659     1,523,303,011       702,452       1,524,005,463  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Appropriations of prior year’s earnings

                                 

Legal capital reserve

                      34,311,148             (34,311,148                                                                  

Special capital reserve

                            26,907,527       (26,907,527                                                                  

Cash dividends to shareholders - NT$8 per share

                                  (207,443,044     (207,443,044                                               (207,443,044           (207,443,044
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

                      34,311,148       26,907,527       (268,661,719     (207,443,044                                               (207,443,044           (207,443,044
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the six months ended June 30, 2018

                                  162,075,161       162,075,161                                                 162,075,161       5,788       162,080,949  

Other comprehensive income (loss) for the six months ended June 30, 2018, net of income tax

                                              13,910,521             (1,857,564           13,815             12,066,772       12,066,772       2,698       12,069,470  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the six months ended June 30, 2018

                                  162,075,161       162,075,161       13,910,521             (1,857,564           13,815             12,066,772       174,141,933       8,486       174,150,419  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Disposal of investments in equity instruments at fair value through other comprehensive income

                                  (79,935     (79,935                 79,935                         79,935                    

Basis adjustment for loss on hedging instruments

                                                                      (2,605           (2,605     (2,605           (2,605

(Continued)

 

- 6 -


    Equity Attributable to Shareholders of the Parent              
                                              Others                    
                                                         

Unrealized

Gain (Loss)

on

Financial

Assets at Fair

Value

Through

Other

Comprehensive

Income

                                           
                                             

Foreign

Currency

Translation

Reserve

   

Unrealized

Gain (Loss)
from

Available-
for-sale

Financial
Assets

               

Unearned

Stock-Based

Employee

Compensation

                         
   

 

Capital Stock - Common Stock

          Retained Earnings    

Cash
Flow

Hedges
Reserve

   

Gain (Loss)

on

Hedging

Instruments

                         
   

Shares

(In Thousands)

    Amount     Capital
Surplus
   

Legal Capital

Reserve

   

Special Capital

Reserve

   

Unappropriated

Earnings

    Total     Total     Total    

Non-controlling

Interests

   

Total

Equity

 

Adjustments to share of changes in equities of associates

        $     $ (1,856   $     $     $     $     $     $     $     $     $     $ 4,063     $ 4,063     $ 2,207     $     $ 2,207  

Donation from shareholders

                40                                                                         40       6       46  

Decrease in non-controlling interests

                                                                                              (77,201     (77,201
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JUNE 30, 2018

    25,930,380     $ 259,303,805     $ 56,307,720     $ 276,033,811     $ 26,907,527     $ 886,529,173     $ 1,189,470,511     $ (12,787,159   $     $ (2,302,544   $     $ 15,436     $ (6,227   $ (15,080,494   $ 1,490,001,542     $ 633,743     $ 1,490,635,285  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JANUARY 1, 2017

    25,930,380     $ 259,303,805     $ 56,272,304     $ 208,297,945     $     $ 863,710,224     $ 1,072,008,169     $ 1,661,237     $ 2,641     $     $ 105     $     $     $ 1,663,983     $ 1,389,248,261     $ 802,865     $ 1,390,051,126  

Appropriations of prior year’s earnings

                                 

Legal capital reserve

                      33,424,718             (33,424,718                                                                  

Cash dividends to shareholders - NT$7 per share

                                  (181,512,663     (181,512,663                                               (181,512,663           (181,512,663
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

                      33,424,718             (214,937,381     (181,512,663                                               (181,512,663           (181,512,663
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) for the six months ended June 30, 2017

                                  153,899,917       153,899,917                                                 153,899,917       (8,357     153,891,560  

Other comprehensive income (loss) for the six months ended June 30, 2017, net of income tax

                                              (19,947,752     (14,089           16,731                   (19,945,110     (19,945,110     3,025       (19,942,085
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the six months ended June 30, 2017

                                  153,899,917       153,899,917       (19,947,752     (14,089           16,731                   (19,945,110     133,954,807       (5,332     133,949,475  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments to share of changes in equities of associates

                7,715                                                             (15,384     (15,384     (7,669           (7,669

From share of changes in equities of subsidiaries

                2,761                                                                         2,761       (2,761      

Decrease in non-controlling interests

                                                                                              (114,624     (114,624
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JUNE 30, 2017

    25,930,380     $ 259,303,805     $ 56,282,780     $ 241,722,663     $     $ 802,672,760     $ 1,044,395,423     $ (18,286,515   $ (11,448   $     $ 16,836     $     $ (15,384   $ (18,296,511   $ 1,341,685,497     $ 680,148     $ 1,342,365,645  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

(Concluded)

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Six Months Ended June 30  
     2018      2017  
     

CASH FLOWS FROM OPERATING ACTIVITIES

     

Income before income tax

   $ 187,531,229      $ 183,939,966  

Adjustments for:

     

Depreciation expense

     140,813,756        116,099,116  

Amortization expense

     2,092,805        2,065,459  

Reversal of expected credit losses on investments in debt instruments

     (1,453       

Finance costs

     1,436,250        1,656,577  

Share of profits of associates

     (948,284      (1,285,261

Interest income

     (6,726,119      (4,588,686

Loss (gain) on disposal or retirement of property, plant and equipment, net

     793,090        (15,343

Gain on disposal of intangible assets, net

     (436       

Impairment loss on property, plant and equipment

     488,336         

Impairment loss on financial assets

            12,032  

Loss on financial instruments at fair value through profit or loss, net

     60,541         

Loss on disposal of investments in debt instruments at fair value through other comprehensive income, net

     512,267         

Loss on disposal of available-for-sale financial assets, net

            59,311  

Gain on disposal of financial assets carried at cost, net

            (4,753

Unrealized gross profit on sales to associates

     174,325        40,619  

Loss (gain) on foreign exchange, net

     2,098,700        (6,377,351

Dividend income

     (158,358      (142,503

Loss (gain) arising from fair value hedges, net

     (7,725      23,494  

Changes in operating assets and liabilities:

     

Financial instruments at fair value through profit or loss

     1,241,998        1,159,461  

Notes and accounts receivable, net

     31,318,729        15,263,197  

Receivables from related parties

     84,652        533,558  

Other receivables from related parties

     14,353        8,492  

Inventories

     (25,171,076      (12,328,292

Other financial assets

     (4,930,978      1,844,118  

Other current assets

     (1,388,497      (143,032

Other noncurrent assets

     56,329        (433,328

Accounts payable

     1,093,210        (1,398,358

Payables to related parties

     (705,024      (160,398

Salary and bonus payable

     (4,207,846      (3,638,899

Accrued profit sharing bonus to employees and compensation to directors and supervisors

     11,043,388        10,482,136  

Accrued expenses and other current liabilities

     (14,314,806      4,823,091  

Provisions

            (4,192,045

Net defined benefit liability

     (84,999      5,232  
  

 

 

    

 

 

 

Cash generated from operations

     322,208,357        303,307,610  

Income taxes paid

     (31,709,079      (38,899,186
  

 

 

    

 

 

 

Net cash generated by operating activities

     290,499,278        264,408,424  
  

 

 

    

 

 

 

(Continued)

 

- 8 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Six Months Ended June 30  
     2018      2017  
     

CASH FLOWS FROM INVESTING ACTIVITIES

     

Acquisitions of:

     

Financial instruments at fair value through profit or loss - debt instruments

   $ (212,254    $  

Financial assets at fair value through other comprehensive income

     (47,523,622       

Available-for-sale financial assets

            (48,350,281

Held-to-maturity financial assets

            (1,695,771

Financial assets carried at cost

            (475,184

Property, plant and equipment

     (131,528,345      (207,694,057

Intangible assets

     (1,391,186      (1,970,729

Proceeds from disposal or redemption of:

     

Financial instruments at fair value through profit or loss - debt instruments

     63,150         

Financial assets at fair value through other comprehensive income

     39,921,113         

Available-for-sale financial assets

            36,338,151  

Held-to-maturity financial assets

            11,350,000  

Financial assets at amortized cost

     498,542         

Financial assets carried at cost

            50,180  

Property, plant and equipment

     116,927        170,029  

Intangible assets

     492         

Proceeds from return of capital of investments in equity instruments at fair value through other comprehensive income

     127,878         

Derecognition of hedging derivative financial instruments

            6,496  

Derecognition of hedging financial instruments

     162,699         

Interest received

     6,635,893        4,432,649  

Proceeds from government grants - property, plant and equipment

            436,587  

Other dividends received

     139,342        124,835  

Dividends received from investments accounted for using equity method

     233,439        163,408  

Refundable deposits paid

     (2,110,165      (378,335

Refundable deposits refunded

     1,331,308        42,008  
  

 

 

    

 

 

 

Net cash used in investing activities

     (133,534,789      (207,450,014
  

 

 

    

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

     

Decrease in short-term loans

     (33,743,725      (290,110

Repayment of bonds

     (50,524,900      (10,000,000

Repayment of long-term bank loans

            (4,840

Interest paid

     (1,542,784      (1,383,051

Guarantee deposits received

     639,802        848,259  

Guarantee deposits refunded

     (1,800,830      (1,718,541

Donation from shareholders

     46         

Decrease in non-controlling interests

     (1,135      (524
  

 

 

    

 

 

 

Net cash used in financing activities

     (86,973,526      (12,548,807
  

 

 

    

 

 

 

 

(Continued)

 

- 9 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Six Months Ended June 30  
     2018      2017  

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

   $ 8,847,221      $ (15,196,478
  

 

 

    

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

     78,838,184        29,213,125  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     553,391,696        541,253,833  
  

 

 

    

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 632,229,880      $ 570,466,958  
  

 

 

    

 

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.    (Concluded)

 

- 10 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 and 2017

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

(Reviewed, Not Audited)

 

 

1.

GENERAL

Taiwan Semiconductor Manufacturing Company Limited (TSMC), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. TSMC is a dedicated foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks.

On September 5, 1994, TSMC’s shares were listed on the Taiwan Stock Exchange (TWSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).

The address of its registered office and principal place of business is No. 8, Li-Hsin Rd. 6, Hsinchu Science Park, Taiwan. The principal operating activities of TSMC’s subsidiaries are described in Note 4.

 

2.

THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on August 14, 2018.

 

3.

APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

 

  a.

Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

Except for the following, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC did not have a significant effect on TSMC and its subsidiaries’ (collectively as the “Company”) accounting policies:

 

  1)

IFRS 9 “Financial Instruments” and related amendment

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Please refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets and financial liabilities

The Company elects not to restate prior reporting period when applying the requirements for the classification, measurement and impairment of financial assets and financial liabilities under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application.

 

- 11 -


The impact on measurement categories, carrying amount and related reconciliation for each class of the Company’s financial assets and financial liabilities when retrospectively applying IFRS 9 on January 1, 2018 is detailed below:

 

   

Measurement Category

  Carrying Amount        
Financial Assets   IAS 39   IFRS 9   IAS 39     IFRS 9     Note  
         

Cash and cash equivalents

 

Loans and receivables

 

Amortized cost

  $ 553,391,696     $ 553,391,696       (1)  

Derivatives

 

Held for trading

 

Mandatorily at fair value through profit or loss (FVTPL)

    569,751       569,751    
 

Hedging instruments

 

Hedging instruments

    34,394       34,394    

Equity securities

 

Available-for-sale

 

Fair value through other comprehensive income (FVTOCI)

    7,422,311       8,389,438       (2)  

Debt securities

 

Available-for-sale

 

Mandatorily at FVTPL

          779,489       (3)  
   

FVTOCI

    90,826,099       90,046,610       (3)  
 

Held-to-maturity

 

Amortized cost

    20,821,714       20,813,462       (4)  

Notes and accounts receivable (including related parties), other receivables and refundable deposits

 

Loans and receivables

 

Amortized cost

    131,024,958       131,269,731       (1)  
Financial Liabilities                          

Derivatives

 

Held for trading

 

Held for trading

    26,709       26,709    
 

Hedging instruments

 

Hedging instruments

    15,562       15,562    

Short-term loans, accounts payable (including related parties), payables to contractors and equipment suppliers, accrued expenses and other current liabilities, bonds payable and guarantee deposits

 

Amortized cost

 

Amortized cost

    340,501,266       340,501,266    

 

Financial Assets   

Carrying

Amount as of

December 31,

2017 (IAS 39)

    

Reclassifi-

cations

    

Remea-

surements

    

Carrying

Amount as of

January 1, 2018
(IFRS 9)

    

Retained

Earnings

Effect on

January 1,

2018

    

Other Equity

Effect on

January 1,

2018

     Note  
                    

FVTPL

   $ 569,751      $      $      $ 569,751      $      $     

- Debt instruments

                    

Add: From available for sale

            779,489               779,489        (10,085      10,085        (3)  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    
     569,751        779,489               1,349,240        (10,085      10,085     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

FVTOCI

                                            

- Equity instruments

                    

Add: From available for sale

            7,422,311        967,127        8,389,438        1,294,528        (325,858      (2)  

- Debt instruments

                    

Add: From available for sale

            90,046,610               90,046,610        (30,658      30,658        (3)  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    
            97,468,921        967,127        98,436,048        1,263,870        (295,200   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Amortized cost

                                            

Add: From held to maturity

            20,821,714        (8,252      20,813,462        (8,252             (4)  

Add: From loans and receivables

            684,416,654        244,773        684,661,427        244,773               (1)  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    
            705,238,368        236,521        705,474,889        236,521            
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Hedging instruments

     34,394                      34,394                   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total

   $ 604,145      $ 803,486,778      $ 1,203,648      $ 805,294,571      $ 1,490,306      $ (285,115   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

    

Carrying

Amount as of

December 31,
2017

(IAS 39)

     Adjustments
Arising from
Initial
Application
    

Carrying

Amount as of

January 1,
2018

(IFRS 9)

    

Retained

Earnings

Effect on

January 1,

2018

    

Other Equity

Effect on

January 1,

2018

     Note
                 

Investments accounted for using equity method

   $ 17,861,488      $ 8,258      $ 17,869,746      $ 33,984      $ (25,726    (5)

 

- 12 -


  (1)

Cash and cash equivalents, notes and accounts receivable (including related parties), other receivables and refundable deposits that were classified as loans and receivables under IAS 39 are now classified at amortized cost with assessment of future 12-month or lifetime expected credit loss under IFRS 9. As a result of retrospective application, the adjustments would result in a decrease in loss allowance for accounts receivable of NT$244,773 thousand and an increase in retained earnings of NT$244,773 thousand on January 1, 2018.

 

  (2)

As equity investments that were previously classified as available-for-sale financial assets under IAS 39 are not held for trading, the Company elected to designate all of these investments as at FVTOCI under IFRS 9. As a result, the related other equity-unrealized gain or loss on available-for-sale financial assets of NT$228,304 thousand is reclassified to increase other equity - unrealized gain or loss on financial assets at FVTOCI.

 

      

As equity investments previously measured at cost under IAS 39 are remeasured at fair value under IFRS 9, the adjustments would result in an increase in financial assets at FVTOCI of NT$967,127 thousand, an increase in other equity-unrealized gain or loss on financial assets at FVTOCI of NT$968,670 thousand and a decrease in non-controlling interests of NT$1,543 thousand on January 1, 2018.

 

      

For those equity investments previously classified as available-for-sale financial assets (including measured at cost financial assets) under IAS 39, the impairment losses that the Company had recognized have been accumulated in retained earnings. Since these investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, the adjustments would result in a decrease in other equity - unrealized gain or loss on financial assets at FVTOCI of NT$1,294,528 thousand and an increase in retained earnings of NT$1,294,528 thousand on January 1, 2018.

 

  (3)

Debt investments were previously classified as available-for-sale financial assets under IAS 39. Under IFRS 9, except for debt instruments of NT$779,489 thousand whose contractual cash flows are not solely payments of principal and interest on the principal outstanding and therefore are classified as at FVTPL with the related other equity-unrealized gain or loss on available-for-sale financial assets of NT$10,085 thousand being consequently reclassified to decrease retained earnings, the remaining debt investments are classified as at FVTOCI with assessment of future 12-month expected credit loss because these investments are held within a business model whose objective is both to collect the contractual cash flows and sell the financial assets. The related other equity-unrealized gain or loss on available-for-sale financial assets of NT$434,403 thousand is reclassified to decrease other equity-unrealized gain or loss on financial assets at FVTOCI. As a result of retrospective application of future 12-month expected credit loss, the adjustments would result in an increase in other equity - unrealized gain or loss on financial assets at FVTOCI of NT$30,658 thousand and a decrease in retained earnings of NT$30,658 thousand on January 1, 2018.

 

  (4)

Debt investments previously classified as held-to-maturity financial assets and measured at amortized cost under IAS 39 are classified as measured at amortized cost with assessment of future 12-month expected credit loss under IFRS 9 because the contractual cash flows are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is to collect the contractual cash flows. As a result of retrospective application of future 12-month expected credit loss, the adjustments would result in an increase in loss allowance of NT$8,252 thousand and a decrease in retained earnings of NT$8,252 thousand on January 1, 2018.

 

- 13 -


  (5)

With the retrospective adoption of IFRS 9 by associates accounted for using equity method, the corresponding adjustments made by the Company would result in an increase in investments accounted for using equity method of NT$8,258 thousand, a decrease in other equity- unrealized gain or loss on financial assets at FVTOCI of NT$23,616 thousand, a decrease in other equity- unrealized gain or loss on available-for-sale financial assets of NT$2,110 thousand and an increase in retained earnings of NT$33,984 thousand on January 1, 2018.

Hedge accounting

The Company prospectively apply the requirements for hedge accounting upon initial application of IFRS 9. In addition, due to the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers, all derivative and non-derivative financial assets and financial liabilities which are designated as hedging instruments are presented as financial assets and financial liabilities for hedging starting 2018.

 

  2)

IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18, “Revenue,” IAS 11, “Construction Contracts,” and a number of revenue-related interpretations. Please refer to Note 4 for information relating to the relevant accounting policies.

The Company elected only to retrospectively apply IFRS 15 to contracts that were not completed on January 1, 2018 and elected not to restate prior reporting period with the cumulative effect of the initial application recognized at the date of initial application.

The impact on assets, liabilities and equity when retrospectively applying IFRS 15 on January 1, 2018 is detailed below:

 

    

Carrying
Amount as of
December 31,
2017

(IAS 18 and
Revenue-related
Interpretations)

    

Adjustments
Arising

from Initial
Application

     Carrying
Amount as of
January 1, 2018
(IFRS 15)
     Note  
           

Inventories

   $ 73,880,747      $ (19,746    $ 73,861,001        (1)  

Contract assets

            34,177        34,177        (1)  

Investments accounted for using equity method

     17,861,488        19,483        17,880,971        (1)  
     

 

 

       

Total effect on assets

      $ 33,914        
     

 

 

       

Provisions - current

     13,961,787      $ (13,961,787             (2)  

Accrued expenses and other current liabilities

     65,588,396        13,961,787        79,550,183        (2)  
     

 

 

       

Total effect on liabilities

      $        
     

 

 

       

Retained earnings

     1,233,362,010      $ 32,029        1,233,394,039        (1)  

Non-controlling interests

     702,110        1,885        703,995        (1)  
     

 

 

       

Total effect on equity

      $ 33,914        
     

 

 

       

 

- 14 -


  (1)

Prior to the application of IFRS 15, the Company recognizes revenue based on the accounting treatment of the sales of goods. Under IFRS 15, certain subsidiaries and associates accounted for using equity method will change to recognize revenue over time because customers are deemed to have control over the products when the products are manufactured. As a result, the Company will recognize contract assets (classified under other current assets) and adjust related assets and equity accordingly.

 

  (2)

Prior to the application of IFRS 15, the Company recognized the estimation of sales returns and allowance as provisions. Under IFRS 15, the Company recognizes such estimation as refund liability (classified under accrued expenses and other current liabilities).

The following table shows the amount affected in the current period by the application of IFRS 15 as compared to IAS 18:

Impact on Assets, Liabilities and Equity

 

        

June 30,

2018

 
    

Decrease in inventories

     $ (17,365

Increase in contract assets

       32,090  

Increase in investments accounted for using equity method

       35,977  
    

 

 

 

Total effect on assets

     $ 50,702  
    

 

 

 

Decrease in provisions - current

     $ (17,961,777

Increase in accrued expenses and other current liabilities

       17,961,503  

Increase in income tax payable

       3,000  
    

 

 

 

Total effect on liabilities

     $ 2,726  
    

 

 

 

Increase in retained earnings

     $ 46,409  

Increase in non-controlling interests

       1,567  
    

 

 

 

Total effect on equity

     $ 47,976  
    

 

 

 

Impact on Total Comprehensive Income

 

   

Three Months
Ended
June 30,

2018

     Six Months
Ended
June 30,
2018
 
    

Increase in net revenue

  $ 1,907      $ 32,364  

Increase in cost of revenue

    (927      (17,365

Increase in share of the profit or loss of associates

    10,076        35,977  

Increase in income tax expense

    (196      (3,000
 

 

 

    

 

 

 

Increase in net income for the period

  $ 10,860      $ 47,976  
 

 

 

    

 

 

 

Increase in net income/total comprehensive income attributable to:

    

Shareholders of the parent

  $ 10,758      $ 46,409  

Non-controlling interests

    102        1,567  
 

 

 

    

 

 

 
  $ 10,860      $ 47,976  
 

 

 

    

 

 

 

 

- 15 -


  3)

Please refer to Note 32 for the disclosure of amendment to IAS 7 “Disclosure Initiative”

 

  b.

Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers for application starting from 2019 and the IFRSs issued by IASB and endorsed by FSC with effective date starting 2019

 

New, Amended or Revised Standards and Interpretations

(the “New IFRSs”)

  

Effective Date

Announced by IASB (Note 1)

  

Annual Improvements to IFRSs 2015-2017 Cycle

   January 1, 2019

Amendments to IFRS 9 “Prepayment Features with Negative Compensation”

   January 1, 2019 (Note 2)

IFRS 16 “Leases”

   January 1, 2019

Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”

   January 1, 2019 (Note 3)

Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures”

   January 1, 2019

IFRIC 23 “Uncertainty over Income Tax Treatments”

   January 1, 2019

 

  Note 1:

Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

  Note 2:

The FSC permits the election for early adoption of the amendments starting from 2018.

  Note 3:

The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

Except for the following items, the Company believes that the adoption of aforementioned standards or interpretations will not have a significant effect on the Company’s accounting policies.

 

  1)

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Upon initial application of IFRS 16, if the Company is a lessee, it will recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Company may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Company will present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for both the principal and interest portion of the lease liability will be classified within financing activities. Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

 

- 16 -


Under initial application of IFRS 16, the Company may elect to apply this standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this standard recognized at the date of initial application.

 

  c.

The IFRSs issued by IASB but not yet endorsed and issued into effect by FSC

 

New, Revised or Amended Standards and Interpretations

  

Effective Date Issued by IASB

  

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

   To be determined by IASB

As of the date the accompanying consolidated financial statements were issued, the Company continues in evaluating the impact on its financial position and financial performance as a result of the initial adoption of the aforementioned standards or interpretations. The related impact will be disclosed when the Company completes the evaluation.

 

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2017.

For the convenience of readers, the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language consolidated financial statements shall prevail.

Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34, “Interim Financial Reporting,” endorsed and issued into effect by the FSC. The consolidated financial statements do not present all the disclosures required for a complete set of annual consolidated financial statements prepared under the IFRSs endorsed and issued into effect by the FSC (collectively, “Taiwan-IFRSs”).

Basis of Consolidation

The basis of preparation and the basis for the consolidated financial statements

The basis of preparation and the basis for the consolidated financial statements applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2017.

 

- 17 -


The subsidiaries in the consolidated financial statements

The detail information of the subsidiaries at the end of reporting period was as follows:

 

           

Establishment

and Operating

Location

  Percentage of Ownership    
Name of Investor   Name of Investee   Main Businesses and Products  

June 30,

2018

  December 31,
2017
 

June 30,

2017

  Note

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and other semiconductor devices

 

San Jose, California, U.S.A.

  100%   100%   100%  
 

TSMC Europe B.V. (TSMC Europe)

 

Customer service and supporting activities

 

Amsterdam, the Netherlands

  100%   100%   100%   a)
 

TSMC Japan Limited (TSMC Japan)

 

Customer service and supporting activities

 

Yokohama, Japan

  100%   100%   100%   a)
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and supporting activities

 

Seoul, Korea

  100%   100%   100%   a)
 

TSMC Partners, Ltd. (TSMC Partners)

 

Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry and other investment activities

 

Tortola, British Virgin Islands

  100%   100%   100%   a)
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

 

Tortola, British Virgin Islands

  100%   100%   100%  
 

TSMC China Company Limited (TSMC China)

 

Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices

 

Shanghai, China

  100%   100%   100%  
 

TSMC Nanjing Company Limited (TSMC Nanjing)

 

Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices

 

Nanjing, China

  100%   100%   100%   b)
 

VisEra Technologies Company Ltd. (VisEra Tech)

 

Engaged in manufacturing electronic spare parts and in researching, developing, designing, manufacturing, selling, packaging and testing of color filter

 

Hsin-Chu, Taiwan

  87%   87%   87%  
 

VentureTech Alliance Fund II, L.P.
(VTAF II)

 

Investing in new start-up technology companies

 

Cayman Islands

  98%   98%   98%   a)
 

VentureTech Alliance Fund III, L.P.
(VTAF III)

 

Investing in new start-up technology companies

 

Cayman Islands

  98%   98%   98%   a)
 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

 

Hamburg, Germany

  100%   100%   100%   a), c)

TSMC Partners

 

TSMC Development, Inc. (TSMC Development)

 

Investing in companies involved in the manufacturing related business in the semiconductor industry

 

Delaware, U.S.A.

  100%   100%   100%  
 

TSMC Technology, Inc. (TSMC Technology)

 

Engineering support activities

 

Delaware, U.S.A.

  100%   100%   100%   a)
 

TSMC Design Technology Canada Inc. (TSMC Canada)

 

Engineering support activities

 

Ontario, Canada

  100%   100%   100%   a)
 

InveStar Semiconductor Development Fund, Inc. (ISDF)

 

Investing in new start-up technology companies

 

Cayman Islands

  97%   97%   97%   a), d)
 

InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)

 

Investing in new start-up technology companies

 

Cayman Islands

  97%   97%   97%   a), d)

TSMC Development

 

WaferTech, LLC (WaferTech)

 

Manufacturing, selling and testing of integrated circuits and other semiconductor devices

 

Washington, U.S.A.

  100%   100%   100%  

VTAF III

 

Mutual-Pak Technology Co., Ltd. (Mutual-Pak)

 

Manufacturing of electronic parts, wholesaling and retailing of electronic materials, and researching, developing and testing of RFID

 

New Taipei, Taiwan

  39%   39%   58%   a), e)
 

Growth Fund Limited (Growth Fund)

 

Investing in new start-up technology companies

 

Cayman Islands

  100%   100%   100%   a)

 

  Note a:

This is an immaterial subsidiary for which the consolidated financial statements are not reviewed by the Company’s independent auditors.

  Note b:

Under the investment agreement entered into with the municipal government of Nanjing, China, the Company will make an investment in Nanjing in the amount of approximately US$3 billion to establish a subsidiary operating a 300mm wafer fab with the capacity of 20,000 12-inch wafers per month, and a design service center.

  Note c:

TSMC Solar Europe GmbH is under liquidation procedures.

  Note d:

ISDF and ISDF II are under liquidation procedures.

  Note e:

Starting December 2017, the Company no longer had the majority of voting power and control over Mutual-Pak. As a result, Mutual-Pak is no longer consolidated and is accounted for using the equity method.

Financial Assets

The classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Regular way purchases or sales of financial assets are recognized and derecognized on a trade date or settlement date basis for which financial assets were classified in the same way, respectively. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

 

- 18 -


  a.

Category of financial assets and measurement

2018

Financial assets are classified into the following categories: financial assets at FVTPL, investments in debt instruments and equity instruments at FVTOCI, and financial assets at amortized cost.

 

  1)

Financial asset at FVTPL

For certain financial assets which include debt instruments that do not meet the criteria of amortized cost or FVTOCI, it is mandatorily required to measure them at FVTPL. Any gain or loss arising from remeasurement is recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest earned on the financial asset.

 

  2)

Investments in debt instruments at FVTOCI

Debt instruments with contractual terms specifying that cash flows are solely payments of principal and interest on the principal amount outstanding, together with objective of collecting contractual cash flows and selling the financial assets, are measured at FVTOCI.

Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment gains or losses on investments in debt instruments at FVTOCI are recognized in profit or loss. Other changes in the carrying amount of these debt instruments are recognized in other comprehensive income and will be reclassified to profit or loss when these debt instruments are disposed.

 

  3)

Investments in equity instruments at FVTOCI

On initial recognition, the Company may irrevocably designate investments in equity investments that is not held for trading as at FVTOCI.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity.

Dividends on these investments in equity instruments at FVTOCI are recognized in profit or loss when the Company’s right to receive the dividends is established, unless the Company’s right clearly represent a recovery of part of the cost of the investment.

 

  4)

Measured at amortized cost

Cash and cash equivalents, debt instrument investments, notes and accounts receivable (including related parties), other receivables and refundable deposits are measured at amortized cost.

Debt instruments with contractual terms specifying that cash flows are solely payments of principal and interest on the principal amount outstanding, together with objective of holding financial assets in order to collect contractual cash flows, are measured at amortized cost.

Subsequent to initial recognition, financial assets measured at amortized cost are measured at amortized cost, which equals to carrying amount determined by the effective interest method less any impairment loss.

 

- 19 -


2017

Financial assets are classified into the following specified categories: Financial assets at FVTPL, held-to-maturity financial assets, available-for-sale financial assets and loans and receivables.

 

  1)

Financial asset at FVTPL

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.

 

  2)

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as available-for-sale or are not classified as (a) loans and receivables, (b) held-to-maturity financial assets or (c) financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Interest income from available-for-sale monetary financial assets and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established.

Available-for-sale equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period. Such equity instruments are subsequently remeasured at fair value when their fair value can be reliably measured, and the difference between the carrying amount and fair value is recognized in profit or loss or other comprehensive income.

 

  3)

Held-to-maturity financial assets

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method less any impairment.

 

  4)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables including cash and cash equivalents, notes and accounts receivable and other receivables are measured at amortized cost using the effective interest method, less any impairment, except for those loans and receivables with immaterial discounted effect.

 

- 20 -


  b.

Impairment of financial assets

2018

At the end of each reporting period, a loss allowance for expected credit loss is recognized for financial assets at amortized cost (including accounts receivable) and for investments in debt instruments that are measured at FVTOCI.

The loss allowance for accounts receivable is measured at an amount equal to lifetime expected credit losses. For financial assets at amortized cost and investments in debt instruments that are measured at FVTOCI, when the credit risk on the financial instrument has not increased significantly since initial recognition, a loss allowance is recognized at an amount equal to expected credit loss resulting from possible default events of a financial instrument within 12 months after the reporting date. If, on the other hand, there has been a significant increase in credit risk since initial recognition, a loss allowance is recognized at an amount equal to expected credit loss resulting from all possible default events over the expected life of a financial instrument.

The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the financial asset.

2017

Financial assets, other than those carried at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Those financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, their estimated future cash flows have been affected.

For financial assets carried at amortized cost, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. The Company assesses the collectability of receivables by performing the account aging analysis and examining current trends in the credit quality of its customers.

For financial assets carried at amortized cost, the amount of the impairment loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the financial assets at the date the impairment loss is reversed does not exceed what the amortized cost would have been had the impairment loss not been recognized.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the year.

In respect of available-for-sale equity instruments, impairment losses previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to the recognition of an impairment loss is recognized in other comprehensive income and accumulated under the heading of unrealized gains or losses from available-for-sale financial assets.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

 

- 21 -


The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account.

 

  c.

Derecognition of financial assets

2018

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset to another entity.

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2017

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset to another entity.

On derecognition of a financial asset in its entirety, the difference between the financial asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

Hedge Accounting

 

  a.

Fair value hedges

The Company designates certain hedging instruments, such as interest rate futures contracts, to partially hedge against the price risk caused by changes in interest rates in the Company’s investments in fixed income securities as fair value hedge. Changes in the fair value of hedging instrument that are designated and qualify as fair value hedges are recognized in profit or loss immediately, together with any changes in the fair value of the hedged asset that are attributable to the hedged risk.

 

  b.

Cash flow hedges

The Company designates certain hedging instruments, such as forward exchange contracts, to partially hedge its foreign exchange rate risks associated with certain highly probable forecast transactions (capital expenditures). The effective portion of changes in the fair value of hedging instruments is recognized in other comprehensive income. When the forecast transactions actually take place, the associated gains or losses that were recognized in other comprehensive income are removed from equity and included in the initial cost of the hedged items. The gains or losses from hedging instruments relating to the ineffective portion are recognized immediately in profit or loss.

 

- 22 -


2018

The Company prospectively discontinues hedge accounting only when the hedging relationship ceases to meet the qualifying criteria; for instance when the hedging instrument expires or is sold, terminated or exercised.

2017

Hedge accounting was discontinued prospectively when the Company revoked the designated hedging relationship, when the hedging instrument expired or was sold, terminated, or exercised; or no longer met the criteria for hedge accounting.

Revenue Recognition

2018

The Company identifies the contract with the customers, and recognizes revenue when performance obligations are satisfied.

Revenue from the sale of goods is mainly recognized when a customer obtains control of promised goods, at which time the goods are delivered to the customer’s specific location and performance obligation is satisfied.

Revenue from sale of goods is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Provision for estimated sales returns and other allowances is generally made and adjusted based on historical experience and the consideration of varying contractual terms to recognize refund liabilities, which is classified under accrued expenses and other current liabilities.

In principle, payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month of when the invoice is issued. Due to the short term nature of the receivables from sale of goods with the immaterial discounted effect, the Company measures them at the original invoice amounts without discounting.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

 

   

The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

 

   

The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

 

   

The amount of revenue can be measured reliably;

 

   

It is probable that the economic benefits associated with the transaction will flow to the Company; and

 

   

The costs incurred or to be incurred in respect of the transaction can be measured reliably.

In principle, payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month of when the invoice is issued. Due to the short term nature of the receivables from sale of goods with the immaterial discounted effect, the Company measures them at the original invoice amounts without discounting.

 

- 23 -


Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established, provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Retirement Benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. The interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the pre-tax income of the interim period. When tax rate changes during the interim period, the effect of the change in tax rate relating to transactions recognized outside scope of profit or loss is recognized in full in the period in which the change in tax rate occurs. The effect of the change in tax rate relating to transactions recognized in profit or loss is incorporated into estimation of the average annual income tax rate, with corresponding effect recognized throughout the interim periods.

 

5.

CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

Except for the following paragraphs, the same critical accounting judgments and key sources of estimates and uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2017.

For Level 3 fair value measurement on equity investments, the Company determines the estimated fair value by selecting appropriate valuation methods primarily based on investees’ financial positions, operation results and recent financing activities, the market transaction prices of the similar investments, market conditions and the required discount factors. As such, the estimated fair value may be different from the actual disposal price in the future. The Company reassesses the fair value measurement quarterly based on the market conditions to ensure the appropriateness of the fair value measurement.

Please refer to Note 33 for information about the valuation techniques and inputs used in determining the fair value of various investments.

 

6.

CASH AND CASH EQUIVALENTS

 

    

June 30,

2018

     December 31,
2017
    

June 30,

2017

 
        

Cash and deposits in banks

   $ 627,258,280      $ 551,919,770      $ 570,466,958  

Repurchase agreements collateralized by corporate bonds

     4,551,750                

Commercial paper

     419,850        695,901         

Agency bonds

            776,025         
  

 

 

    

 

 

    

 

 

 
   $ 632,229,880      $ 553,391,696      $ 570,466,958  
  

 

 

    

 

 

    

 

 

 

 

- 24 -


Deposits in banks consisted of highly liquid time deposits that were readily convertible to known amounts of cash and were subject to an insignificant risk of changes in value.

 

7.

FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

 

    

June 30,

2018

     December 31,
2017
    

June 30,

2017

 
Financial assets         

Mandatorily measured at FVTPL

        

Agency bonds/ Agency mortgage-backed securities

   $ 717,735      $      $  

Forward exchange contracts

     356,335                

Asset-backed securities

     130,966                
  

 

 

    

 

 

    

 

 

 
     1,205,036                
  

 

 

    

 

 

    

 

 

 

Held for trading

        

Forward exchange contracts

            569,751        209,435  
  

 

 

    

 

 

    

 

 

 

Designated as at FVTPL

        

Time deposit

                   4,725,106  

Forward exchange contracts

                   60,710  
  

 

 

    

 

 

    

 

 

 
                   4,785,816  
  

 

 

    

 

 

    

 

 

 
   $ 1,205,036      $ 569,751      $ 4,995,251  
  

 

 

    

 

 

    

 

 

 
Financial liabilities         

Held for trading

        

Forward exchange contracts

   $ 1,057,719      $ 26,709      $ 82,552  
  

 

 

    

 

 

    

 

 

 

The Company entered into derivative contracts to manage exposures due to fluctuations of foreign exchange rates. These derivative contracts did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge accounting treatment for these derivative contracts.

Outstanding forward exchange contracts consisted of the following:

 

          Contract Amount  
     Maturity Date    (In Thousands)  
     

June 30, 2018

     

Sell NT$/Buy EUR

   July 2018 to September 2018      NT$8,748,750/EUR248,000  

Sell NT$/Buy JPY

   July 2018 to August 2018      NT$6,661,029/JPY24,396,000  

Sell US$/Buy RMB

   July 2018 to August 2018      US$698,000/RMB4,540,519  

Sell US$/Buy NT$

   July 2018 to August 2018      US$962,500/NT$28,710,052  

Sell US$/Buy JPY

   July 2018      US$34,627/JPY3,796,536  

Sell US$ /Buy EUR

   July 2018      US$5,301/EUR4,530  

Sell US$/Buy GBP

   July 2018      US$55/GBP41  

Sell RMB/Buy US$

   July 2018 to August 2018      RMB2,050,582/US$315,000  

(Continued)

 

- 25 -


          Contract Amount  
     Maturity Date    (In Thousands)  
     

December 31, 2017

     

Sell NT$/Buy EUR

   January 2018 to February 2018      NT$6,002,786/EUR169,000  

Sell NT$/Buy JPY

   February 2018      NT$996,294/JPY3,800,000  

Sell US$/Buy JPY

   January 2018      US$2,191/JPY246,724  

Sell US$/Buy RMB

   January 2018      US$558,000/RMB3,679,575  

Sell US$/Buy NT$

   January 2018 to February 2018      US$1,661,500/NT$49,673,320  

Sell RMB /Buy EUR

   January 2018      RMB38,967/EUR4,994  

Sell RMB/Buy JPY

   January 2018      RMB409,744/JPY7,062,536  

Sell RMB/Buy GBP

   January 2018      RMB3,637/GBP413  

June 30, 2017

     

Sell NT$/Buy EUR

   July 2017      NT$5,591,846/EUR164,500  

Sell NT$/Buy JPY

   July 2017      NT$7,413,646/JPY27,100,000  

Sell US$/Buy EUR

   July 2017      US$89,202/EUR79,000  

Sell US$/Buy JPY

   July 2017      US$53,585/JPY6,000,000  

Sell US$/Buy NT$

   July 2017 to August 2017      US$277,700/NT$8,440,651  

Sell US$/Buy RMB

   July 2017 to September 2017      US$557,000/RMB3,805,715  

(Concluded)

Investments in debt instruments at FVTOCI were classified as available-for-sale financial assets under IAS 39. Refer to Notes 3 and 9 for information relating to their reclassification and comparative information for 2017.

 

8.

FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME-2018

 

    

June 30,

2018

 
  

Investments in debt instruments at FVTOCI

  

Corporate bonds

   $ 40,298,039  

Agency bonds/ Agency mortgage-backed securities

     35,043,747  

Asset-backed securities

     14,321,226  

Government bonds

     10,370,874  

Commercial paper

     228,618  
  

 

 

 
     100,262,504  
  

 

 

 

Investments in equity instruments at FVTOCI

  

Non-publicly traded equity investments

     5,694,784  

Publicly traded stocks

     1,765,104  
  

 

 

 
     7,459,888  
  

 

 

 
   $ 107,722,392  
  

 

 

 

Current

   $ 102,027,608  

Non-current

     5,694,784  
  

 

 

 
   $ 107,722,392  
  

 

 

 

These investments in equity instruments are held for medium to long-term purposes and therefore are accounted for as FVTOCI.

 

- 26 -


For the six months ended June 30, 2018, the Company sold shares of stocks for NT$206,165 thousand mainly because the strategic purpose no longer exists and the non-publicly traded investee has been merged. The related other equity-unrealized gain or loss on financial assets at FVTOCI of NT$79,935 thousand were transferred to decrease retained earnings.

Dividends from equity investments designated as at FVTOCI recognized during the three months and six months ended June 30, 2018 were NT$157,905 thousand and NT$158,358 thousand, respectively, all related to investments held at the end of the reporting period.

As of June 30, 2018, the cumulative loss allowance for expected credit loss of NT$29,807 thousand is recognized under investments in debt instruments at FVTOCI. Refer to Note 33 for information relating to their credit risk management and expected credit loss.

Investments in equity and debt instruments at FVTOCI were classified as available-for-sale financial assets and cost methods (only for equity instruments) under IAS 39. Refer to Notes 3, 9 and 12 (only for equity instruments) for information relating to their reclassification and comparative information for 2017.

 

9.

AVAILABLE-FOR-SALE FINANCIAL ASSETS-2017

 

     December 31,
2017
     June 30,
2017
 
     

Corporate bonds

   $ 40,165,148      $ 32,784,516  

Agency bonds/Agency mortgage-backed securities

     29,235,388        21,861,711  

Asset-backed securities

     13,459,545        12,005,502  

Government bonds

     7,817,723        6,607,624  

Publicly traded stocks

     2,548,054        2,635,124  

Commercial paper

     148,295        358,175  
  

 

 

    

 

 

 
   $ 93,374,153      $ 76,252,652  
  

 

 

    

 

 

 

 

10.

HELD-TO-MATURITY FINANCIAL ASSETS-2017

 

     December 31,
2017
    

June 30,

2017

 
     

Corporate bonds

   $ 19,338,764      $ 21,157,966  

Structured product

     1,482,950        1,520,700  

Commercial paper

            498,818  

Negotiable certificate of deposit

            4,562,100  
  

 

 

    

 

 

 
   $ 20,821,714      $ 27,739,584  
  

 

 

    

 

 

 

Current portion

   $ 1,988,385      $ 7,210,380  

Noncurrent portion

     18,833,329        20,529,204  
  

 

 

    

 

 

 
   $ 20,821,714      $ 27,739,584  
  

 

 

    

 

 

 

 

- 27 -


11.

FINANCIAL ASSETS AT AMORTIZED COST-2018

 

    

June 30,

2018

 
  

Corporate bonds

   $ 19,386,500  

Structured product

     1,526,500  

Less: Allowance for impairment loss

     (8,728
  

 

 

 
   $ 20,904,272  
  

 

 

 

Current portion

   $ 13,427,398  

Noncurrent portion

     7,476,874  
  

 

 

 
   $ 20,904,272  
  

 

 

 

Financial assets at amortized cost were classified as held-to-maturity financial assets under IAS 39. Refer to Notes 3 and 10 for information relating to their reclassification and comparative information for 2017. Refer to Note 33 for information relating to credit risk management and expected credit loss for financial assets at amortized cost.

 

12.

FINANCIAL ASSETS CARRIED AT COST-2017

The Company’s investment classified as financial assets carried at cost primarily consists of non-publicly traded equity investments. Since there is a wide range of estimated fair values of the Company’s investments in non-publicly traded equity investments, the Company concludes that the fair value cannot be reliably measured and therefore should be measured at the cost less any impairment.

The stock of Aquantia was listed in November 2017. Accordingly, the Company reclassified the aforementioned investment from financial assets carried at cost to available-for-sale financial assets.

 

13.

HEDGING FINANCIAL INSTRUMENTS

2018

 

    

June 30,

2018

 
  

Financial assets- current

  

Fair value hedges

  

Interest rate futures contracts

   $ 14,279  

Cash flow hedges

  

Forward exchange contracts

     17,413  
  

 

 

 
   $ 31,692  
  

 

 

 

Financial liabilities- current

  

Fair value hedges

  

Interest rate futures contracts

   $ 1,244  

Cash flow hedges

  

Forward exchange contracts

     29,474  
  

 

 

 
   $ 30,718  
  

 

 

 

 

- 28 -


Fair value hedge

The Company entered into interest rate futures contracts, which are used to partially hedge against the price risk caused by changes in interest rates in the Company’s investments in fixed income securities. The hedge ratio is adjusted in response to the changes in the financial market and capped at 100%.

On the basis of economic relationships, the Company expects that the value of the interest rate futures contracts and the value of the hedged financial assets will change in opposite directions in response to movements in interest rates.

The main source of hedge ineffectiveness in these hedging relationships is the credit risk of the hedged financial assets, which is not reflected in the fair value of the interest rate future contracts. No other sources of ineffectiveness emerged from these hedging relationships.

The following tables summarize the information relating to the hedges for interest rate risk as of June 30, 2018.

 

Hedging Instruments   

Contract Amount

(US$ in Thousands)

     Maturity     

Increase

(Decrease) in

Value Used for

Calculating

Hedge

Ineffectiveness

 
        

US treasury bonds interest rate futures contracts

   US$  217,100        September 2018      $ 99,363  

 

Hedged Items   

Asset Carrying Amount

as of June 30, 2018

    

Asset

Accumulated

Amount of Fair
Value

Hedge

Adjustments

    

Increase

(Decrease) in

Value Used for

Calculating

Hedge

Ineffectiveness

 
        

Financial assets at FVTOCI

   $ 13,914,694      $ (54,821    $ (91,638

The effect on comprehensive income for the six months ended June 30, 2018 is detailed below:

 

Comprehensive Income   

Amount of

Hedge

Ineffectiveness

Recognized in

Profit or Loss

    

Line Item in which

Hedge Ineffectiveness

is Included

 
     

Fair value hedge

   $ 7,725        Other gains and losses  

Cash flow hedge

The Company entered into forward exchange contracts to partially hedge foreign exchange rate risks associated with certain highly probable forecast transactions (capital expenditures). The hedge ratio is adjusted in response to the changes in the financial market and capped at 100%. The forward exchange contracts have maturities of 12 months or less.

 

- 29 -


On the basis of economic relationships, the Company expects that the value of forward exchange contracts and the value of the hedged transactions will change in opposite directions in response to movements in foreign exchange rates.

The main source of hedge ineffectiveness in these hedging relationships is driven by the effect of the counterparty’s own credit risk on the fair value of forward exchange contracts. No other sources of ineffectiveness emerged from these hedging relationships.

The following tables summarize the information relating to the hedges for foreign currency risk.

 

Hedging Instruments   

Contract Amount

(in Thousands)

     Maturity   

Increase

(Decrease) in

Value Used

for Calculating

Hedge

Ineffectiveness

 
        

Forward exchange contracts

   NT$ 3,575,476/EUR100,000      July 2018 to September 2018    $ 15,343  

 

Hedged items   

Increase

(Decrease) in

Value Used for

Calculating

Hedge

Ineffectiveness

    

Balance in

Other Equity

(Continuing

Hedges)

 
     

Cash flow hedge

     

Forecast transaction (capital expenditures)

     $            (15,343    $             15,436  

Refer to Note 24(d) for gain or loss arising from changes in the fair value of hedging instruments and the amount transferred to initial carrying amount of hedged items.

2017

The Company’s hedging policies for 2017 are the same as those mentioned previously in 2018, the instruments employed are as follows:

 

     December 31,
2017
    

June 30,

2017

 
     

Financial assets- current

     

Fair value hedges

     

Interest rate futures contracts

   $ 27,016      $ 4,783  

Cash flow hedges

     

Forward exchange contracts

     7,378        19,734  
  

 

 

    

 

 

 
   $     34,394      $             24,517  
  

 

 

    

 

 

 

(Continued)

 

- 30 -


     December 31,
2017
    

June 30,

2017

 
     

Financial liabilities- current

     

Fair value hedges

     

Interest rate futures contracts

   $      $ 19  

Cash flow hedges

     

Forward exchange contracts

     15,562         
  

 

 

    

 

 

 
   $ 15,562      $ 19  
  

 

 

    

 

 

 

(Concluded)

The Company entered into interest rate futures contracts, which are used to partially hedge against the price risk caused by changes in interest rates in the Company’s investments in fixed income securities.

The outstanding interest rate futures contracts consisted of the following:

 

Maturity Period   

Contract Amount

(US$ in Thousands)

 
  

December 31, 2017

  

March 2018

   US$  169,400  

June 30, 2017

  

September 2017

   US$ 115,000  

The Company entered into forward exchange contracts to partially hedge foreign exchange rate risks associated with certain highly probable forecast transactions (capital expenditures). These contracts have maturities of 12 months or less.

Outstanding forward exchange contracts consisted of the following:

 

     Maturity Date   

Contract Amount

(In Thousands)

 
     

December 31, 2017

     

Sell NT$/Buy EUR

   February 2018 to May 2018      NT$2,649,104/EUR75,000  

June 30, 2017

     

Sell NT$/Buy EUR

   October 2017      NT$329,400/EUR10,000  

 

- 31 -


14.

NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

June 30,

2018

     December 31,
2017
    

June 30,

2017

 
        

At amortized cost

        

Notes and accounts receivable

   $ 84,650,270      $ 121,604,989      $ 110,365,090  

Less: Loss allowance

     (63,527      (471,741      (471,808
  

 

 

    

 

 

    

 

 

 
     84,586,743        121,133,248        109,893,282  
  

 

 

    

 

 

    

 

 

 

At FVTOCI

     2,510,104                
  

 

 

    

 

 

    

 

 

 

Notes and accounts receivable, net

   $ 87,096,847      $ 121,133,248      $ 109,893,282  
  

 

 

    

 

 

    

 

 

 

The Company signed a contract with the bank to sell certain accounts receivable without recourse and transaction cost required. These accounts receivable are classified as at FVTOCI because they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.

2018

In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month when the invoice is issued. Aside from recognizing impairment loss for credit-impaired accounts receivable, the Company recognizes loss allowance based on the expected credit loss ratio of customers by different risk levels. Such risk levels are determined with factors of historical loss ratios and customers’ financial conditions, competitiveness and business outlook. For accounts receivable past due over 90 days without collaterals or guarantees, the Company recognizes loss allowance at full amount.

Aging analysis of notes and accounts receivable, net

 

                  

June 30,

2018

 
        

Not past due

         $   79,391,718  

Past due

        

Past due within 30 days

           7,323,783  

Past due 31-60 days

           140,500  

Past due 61-120 days

           57,183  

Past due over 121 days

           183,663  
        

 

 

 
         $ 87,096,847  
        

 

 

 

Movements of the loss allowance for accounts receivable

 

        

Balance at January 1, 2018 (IAS 39)

         $ 471,741  

Effect of retrospective application of IFRS 9

           (244,773
        

 

 

 

Balance at January 1, 2018 (IFRS 9)

           226,968  

Provision (Reversal)

           (163,437

Effect of exchange rate changes

           (4
        

 

 

 

Balance at June 30, 2018

         $ 63,527  
        

 

 

 

For the six months ended June 30, 2018, the loss allowance decreased mainly due to the decrease in the balance of accounts receivable.

 

- 32 -


2017

In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month of when the invoice is issued. The allowance for doubtful receivables is assessed by reference to the collectability of receivables by performing the account aging analysis, historical experience and current financial condition of customers.

Except for those impaired, for the rest of the notes and accounts receivable, the account aging analysis at the end of the reporting period is summarized in the following table. There was no impairment concern for the accounts receivable that were past due without recognizing a specific allowance for doubtful receivables since there was no significant change in the credit quality of its customers after the assessment. In addition, the Company has obtained guarantee against certain receivables.

Aging analysis of notes and accounts receivable, net

 

     December 31,
2017
    

June 30,

2017

 
     

Neither past due nor impaired

   $ 105,295,219      $ 102,621,332  

Past due but not impaired

     

Past due within 30 days

     13,984,125        3,770,828  

Past due 31-60 days

     929,672        1,723,349  

Past due 61-120 days

     582,821        1,777,773  

Past due over 121 days

     341,411         
  

 

 

    

 

 

 
   $ 121,133,248      $ 109,893,282  
  

 

 

    

 

 

 

Movements of the allowance for doubtful receivables

 

    

Individually

Assessed for

Impairment

    

Collectively

Assessed for

Impairment

     Total  
        

Balance at January 1, 2017

   $ 1,848      $ 478,270      $ 480,118  

Reversal/Write-off

     (1,848      (6,305      (8,153

Effect of exchange rate changes

            (157      (157
  

 

 

    

 

 

    

 

 

 

Balance at June 30, 2017

   $      $           471,808      $        471,808  
  

 

 

    

 

 

    

 

 

 

 

15.

INVENTORIES

 

    

June 30,

2018

     December 31,
2017
    

June 30,

2017

 
        

Finished goods

   $ 10,771,461      $ 9,923,338      $ 9,445,865  

Work in process

     73,688,538        53,362,160        42,817,413  

Raw materials

     10,151,101        7,143,806        5,866,098  

Supplies and spare parts

     4,420,977        3,451,443        2,881,149  
  

 

 

    

 

 

    

 

 

 
   $   99,032,077      $      73,880,747      $   61,010,525  
  

 

 

    

 

 

    

 

 

 

 

- 33 -


Write-down of inventories to net realizable value and reversal of write-down of inventories resulting from the increase in net realizable value were included in the cost of revenue, which were as follows:

 

     Three Months Ended June 30      Six Months Ended June 30  
     2018      2017      2018      2017  
                

Inventory losses (reversal of write-down of inventories)

   $ 365,574      $ (520,998    $ 1,066,014      $ (1,463,341
  

 

 

    

 

 

    

 

 

    

 

 

 

 

16.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Associates consisted of the following:

 

         Place of    Carrying Amount      % of Ownership and Voting
Rights Held by the Company
Name of Associate   Principal Activities   

Incorporation

and Operation

  

June 30,

2018

     December 31,
2017
    

June 30,

2017

    

June 30,

2018

  December 31,
2017
 

June 30,

2017

                    

Vanguard International Semiconductor Corporation (VIS)

 

Manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks

  

Hsinchu, Taiwan

   $ 7,991,101      $ 8,568,344      $ 7,956,845      28%   28%   28%

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

 

Manufacturing and selling of integrated circuits and other semiconductor devices

  

Singapore

     4,928,611        5,677,640        7,596,341      39%   39%   39%

Xintec Inc. (Xintec)

 

Wafer level chip size packaging and wafer level post passivation interconnection service

  

Taoyuan, Taiwan

     1,679,997        2,292,100        2,344,813      41%   41%   41%

Global Unichip Corporation (GUC)

 

Researching, developing, manufacturing, testing and marketing of integrated circuits

  

Hsinchu, Taiwan

     1,044,164        1,300,194        1,078,026      35%   35%   35%

Mutual-Pak

 

Manufacturing of electronic parts, wholesaling and retailing of electronic materials, and researching, developing and testing of RFID

  

New Taipei, Taiwan

     19,775        23,210             39%   39%  
       

 

 

    

 

 

    

 

 

        
        $ 15,663,648      $ 17,861,488      $ 18,976,025         
       

 

 

    

 

 

    

 

 

        

Starting December 2017, the Company no longer had the majority of voting power and control over Mutual-Pak. As a result, Mutual-Pak is no longer consolidated and is accounted for using the equity method.

The market prices of the investments accounted for using the equity method in publicly traded stocks calculated by the closing price at the end of the reporting period are summarized as follows. The closing price represents the quoted price in active markets, the level 1 fair value measurement.

 

Name of Associate   

June 30,

2018

     December 31,
2017
    

June 30,

2017

 
             

VIS

   $   32,402,800      $   30,638,751      $   27,853,410  
  

 

 

    

 

 

    

 

 

 

GUC

   $ 12,769,129      $ 11,905,404      $ 6,022,734  
  

 

 

    

 

 

    

 

 

 

Xintec

   $ 6,765,941      $ 9,180,759      $ 5,541,840  
  

 

 

    

 

 

    

 

 

 

 

- 34 -


17.

PROPERTY, PLANT AND EQUIPMENT

 

    

Land and Land

Improvements

     Buildings     

Machinery and

Equipment

     Office
Equipment
    

Equipment under

Installation and

Construction in
Progress

     Total  
                 

Cost

                 

Balance at January 1, 2018

   $ 3,983,243      $ 379,134,613      $ 2,487,752,265      $ 42,391,516      $ 167,353,490      $ 3,080,615,127  

Additions (Deductions)

            22,038,114        131,502,040        3,906,855        (44,079,362      113,367,647  

Disposals or retirements

            (18,624      (2,721,863      (337,434             (3,077,921

Effect of exchange rate changes

     22,649        365,959        2,414,939        51,032        (110,352      2,744,227  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2018

   $ 4,005,892      $ 401,520,062      $ 2,618,947,381      $ 46,011,969      $ 123,163,776      $ 3,193,649,080  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated depreciation and impairment

 

              

Balance at January 1, 2018

   $ 510,498      $ 194,446,521      $ 1,795,448,842      $ 27,666,944      $      $ 2,018,072,805  

Additions

     13,462        12,016,411        126,065,287        2,718,596               140,813,756  

Disposals or retirements

            (6,764      (1,823,921      (337,219             (2,167,904

Impairment

                   488,336                      488,336  

Effect of exchange rate changes

     15,454        323,661        1,793,585        41,325               2,174,025  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2018

   $ 539,414      $ 206,779,829      $ 1,921,972,129      $ 30,089,646      $      $ 2,159,381,018  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at January 1, 2018

   $ 3,472,745      $ 184,688,092      $ 692,303,423      $ 14,724,572      $ 167,353,490      $ 1,062,542,322  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at June 30, 2018

   $ 3,466,478      $ 194,740,233      $ 696,975,252      $ 15,922,323      $ 123,163,776      $ 1,034,268,062  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Cost                                          

Balance at January 1, 2017

   $ 4,049,292      $ 304,404,474      $ 2,042,867,744      $ 34,729,640      $ 387,199,675      $ 2,773,250,825  

Additions (Deductions)

            64,811,014        375,300,110        4,672,797        (248,117,207      196,666,714  

Disposals or retirements

            (36,957      (3,486,590      (317,146             (3,840,693

Reclassification

                   8,791        1,507               10,298  

Effect of exchange rate changes

     (46,417      (867,048      (3,532,198      (111,395      (62,640      (4,619,698
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2017

   $ 4,002,875      $ 368,311,483      $ 2,411,157,857      $ 38,975,403      $ 139,019,828      $ 2,961,467,446  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated depreciation and impairment

                 

Balance at January 1, 2017

   $ 524,845      $ 174,349,077      $ 1,577,377,509      $ 23,221,707      $      $ 1,775,473,138  

Additions

     14,012        9,400,481        104,345,520        2,339,103               116,099,116  

Disposals or retirements

            (28,816      (3,333,518      (317,093             (3,679,427

Reclassification

                   8,195        1,466               9,661  

Effect of exchange rate changes

     (29,236      (713,609      (3,239,046      (79,910             (4,061,801
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2017

   $ 509,621      $ 183,007,133      $ 1,675,158,660      $ 25,165,273      $      $ 1,883,840,687  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at June 30, 2017

   $ 3,493,254      $ 185,304,350      $ 735,999,197      $ 13,810,130      $ 139,019,828      $ 1,077,626,759  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The significant part of the Company’s buildings includes main plants, mechanical and electrical power equipment and clean rooms, and the related depreciation is calculated using the estimated useful lives of 20 years, 10 years and 10 years, respectively.

In the second quarter of 2018, the Company recognized an impairment loss of NT$488,336 thousand for certain machinery and equipment that was assessed to have no future use, and the recoverable amount of certain machinery and equipment was nil. Such impairment loss was recognized in other operating income and expenses.

 

- 35 -


18.

INTANGIBLE ASSETS

 

     Goodwill      Technology
License Fees
    

Software and
System Design

Costs

     Patent and
Others
     Total  
              

Cost

              

Balance at January 1, 2018

   $ 5,648,702      $ 10,443,257      $ 25,186,218      $ 5,716,146      $ 46,994,323  

Additions

            133,572        1,121,841        332,608        1,588,021  

Disposals or retirements

                   (65,173      (31,183      (96,356

Effect of exchange rate changes

     118,271        (1,257      2,209        3,268        122,491  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2018

   $ 5,766,973      $ 10,575,572      $ 26,245,095      $ 6,020,839      $ 48,608,479  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization and impairment

              

Balance at January 1, 2018

   $