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 Registrants 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 |
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Consolidated Financial Statements for the Six Months Ended June 30, 2018 and 2017 and Independent Auditors Review Report |
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.
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) |
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Amount | % | Amount | % | Amount | % | |||||||||||||||||||
ASSETS |
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CURRENT ASSETS |
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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 | | ||||||||||||||||||
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Total current assets |
959,042,679 | 47 | 857,203,110 | 43 | 838,049,552 | 42 | ||||||||||||||||||
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NONCURRENT ASSETS |
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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 | | ||||||||||||||||||
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Total noncurrent assets |
1,094,370,275 | 53 | 1,134,658,533 | 57 | 1,148,384,225 | 58 | ||||||||||||||||||
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TOTAL |
$ | 2,053,412,954 | 100 | $ | 1,991,861,643 | 100 | $ | 1,986,433,777 | 100 | |||||||||||||||
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LIABILITIES AND EQUITY |
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CURRENT LIABILITIES |
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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 | ||||||||||||||||||
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Total current liabilities |
462,997,164 | 22 | 358,706,680 | 18 | 523,507,145 | 27 | ||||||||||||||||||
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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 | | ||||||||||||||||||
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Total noncurrent liabilities |
99,780,505 | 5 | 110,395,320 | 6 | 120,560,987 | 6 | ||||||||||||||||||
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Total liabilities |
562,777,669 | 27 | 469,102,000 | 24 | 644,068,132 | 33 | ||||||||||||||||||
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EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT |
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Capital stock (Note 24) |
259,303,805 | 13 | 259,303,805 | 13 | 259,303,805 | 13 | ||||||||||||||||||
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Capital surplus (Note 24) |
56,307,720 | 3 | 56,309,536 | 3 | 56,282,780 | 3 | ||||||||||||||||||
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Retained earnings (Note 24) |
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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 | ||||||||||||||||||
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1,189,470,511 | 58 | 1,233,362,010 | 61 | 1,044,395,423 | 52 | |||||||||||||||||||
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Others (Note 24) |
(15,080,494 | ) | (1 | ) | (26,917,818 | ) | (1 | ) | (18,296,511 | ) | (1 | ) | ||||||||||||
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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 | | ||||||||||||||||||
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Total equity |
1,490,635,285 | 73 | 1,522,759,643 | 76 | 1,342,365,645 | 67 | ||||||||||||||||||
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TOTAL |
$ | 2,053,412,954 | 100 | $ | 1,991,861,643 | 100 | $ | 1,986,433,777 | 100 | |||||||||||||||
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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 | ||||||||||||||||||||||||
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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 | ) | | ||||||||||||||||||||
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GROSS PROFIT |
111,530,934 | 48 | 108,708,654 | 51 | 236,388,473 | 49 | 230,198,290 | 51 | ||||||||||||||||||||||||
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OPERATING EXPENSES (Notes 31 and 34) |
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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 | ||||||||||||||||||||||||
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Total operating expenses |
26,440,124 | 11 | 25,366,814 | 12 | 53,168,518 | 11 | 51,523,297 | 11 | ||||||||||||||||||||||||
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OTHER OPERATING INCOME AND EXPENSES, NET (Note 31) |
(662,664 | ) | (1 | ) | (86,439 | ) | | (1,964,863 | ) | | (67,202 | ) | | |||||||||||||||||||
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INCOME FROM OPERATIONS (Note 39) |
84,428,146 | 36 | 83,255,401 | 39 | 181,255,092 | 38 | 178,607,791 | 40 | ||||||||||||||||||||||||
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NON-OPERATING INCOME AND EXPENSES |
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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 | | |||||||||||||||||||||
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Total non-operating income and expenses |
3,159,462 | 2 | 2,862,066 | 1 | 6,276,137 | 1 | 5,332,175 | 1 | ||||||||||||||||||||||||
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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 | ||||||||||||||||||||||||
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NET INCOME |
72,293,375 | 31 | 66,270,652 | 31 | 162,080,949 | 34 | 153,891,560 | 34 | ||||||||||||||||||||||||
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OTHER COMPREHENSIVE INCOME (LOSS) (Notes 24 and 29) |
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Items that will not be reclassified subsequently to profit or loss: |
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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 | | | | |||||||||||||||||||||||
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(888,578 | ) | | | | (831,535 | ) | | | | |||||||||||||||||||||||
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Items that may be reclassified subsequently to profit or loss: |
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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 | | ||||||||||||||||||||||||
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20,144,253 | 8 | 1,410,236 | 1 | 12,901,005 | 2 | (19,942,085 | ) | (4 | ) | |||||||||||||||||||||||
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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 | ) | ||||||||||||||||||||||
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TOTAL COMPREHENSIVE INCOME FOR THE PERIOD |
$ | 91,549,050 | 39 | $ | 67,680,888 | 32 | $ | 174,150,419 | 36 | $ | 133,949,475 | 30 | ||||||||||||||||||||
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|||||||||||||||||
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 | ) | | ||||||||||||||||||||||
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|||||||||||||||||
$ | 72,293,375 | 31 | $ | 66,270,652 | 31 | $ | 162,080,949 | 34 | $ | 153,891,560 | 34 | |||||||||||||||||||||
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|||||||||||||||||
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 | ) | | |||||||||||||||||||||||
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$ | 91,549,050 | 39 | $ | 67,680,888 | 32 | $ | 174,150,419 | 36 | $ | 133,949,475 | 30 | |||||||||||||||||||||
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(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 the Parent |
Income Attributable to the Parent |
Income Attributable to 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 | ||||||||
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|||||||||
Diluted earnings per share |
$ | 2.79 | $ | 2.56 | $ | 6.25 | $ | 5.94 | ||||||||
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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) Available- Financial |
Unearned Stock-Based Employee Compensation |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock - Common Stock |
Retained Earnings | Cash Hedges |
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 | ||||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||
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Appropriations of prior years 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 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||
Total |
| | | 34,311,148 | 26,907,527 | (268,661,719 | ) | (207,443,044 | ) | | | | | | | | (207,443,044 | ) | | (207,443,044 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
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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 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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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 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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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) Available- Financial |
Unearned Stock-Based Employee Compensation |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock - Common Stock |
Retained Earnings | Cash Hedges |
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 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||
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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 years 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 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
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Total |
| | | 33,424,718 | | (214,937,381 | ) | (181,512,663 | ) | | | | | | | | (181,512,663 | ) | | (181,512,663 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||
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 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
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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 | |||||||||||||||||||||||||||||||||||||||||||||||
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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 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||
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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 | |||||
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|||||
Cash generated from operations |
322,208,357 | 303,307,610 | ||||||
Income taxes paid |
(31,709,079 | ) | (38,899,186 | ) | ||||
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|||||
Net cash generated by operating activities |
290,499,278 | 264,408,424 | ||||||
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(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 | ||||||
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|
|||||
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, TSMCs 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 TSMCs 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 Companys 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 |
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, (IAS 39) |
Adjustments Arising from Initial Application |
Carrying Amount as of January 1, (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 (IAS 18 and |
Adjustments from Initial |
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 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 Companys 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. |
Investing in new start-up technology companies |
Cayman Islands |
98% | 98% | 98% | a) | ||||||||
VentureTech Alliance Fund III, L.P. |
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 Companys 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 Companys right to receive the dividends is established, unless the Companys 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 Companys 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 assets carrying amount and the present value of estimated future cash flows, discounted at the financial assets 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 assets 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 assets 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 assets 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 assets 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 Companys 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 customers 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 shareholders 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 Companys 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 Companys 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 Companys 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 Companys 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 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 counterpartys 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 Companys 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 Companys 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 |
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 Companys 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 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 |
$ | |