ABILITY — Audit Report / Information 2018

Nov 9, 2018

ABILITY ENTERPRISE CO., LTD. AND SUBSIDIARIES AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2018 AND 2017

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For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR18000452

To the Board of Directors and Shareholders of Ability Enterprise Co., Ltd. and subsidiaries

Opinion

We have audited the accompanying consolidated balance sheets of Ability Enterprise Co., Ltd. and subsidiaries (the “Group”) as at December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

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Assessment of allowance for inventory valuation loss

Description

Refer to Note 4(13) for accounting policies on inventory valuation, Note 5(2) for the uncertainty of accounting estimates and assumptions applied on inventory valuation, and Note 6(6) for details of inventory. As of December 31, 2018, the balances of the Group’s inventory and allowance for inventory valuation loss were NT$1,722,124 thousand and NT$386,022 thousand, respectively.

The Group is primarily engaged in the manufacture and sales of digital camera, optical products and components. Due to rapid changes in technology innovations, short life cycles of electronic products and fluctuations in market prices, there is higher risk of incurring inventory valuation losses or obsolescence. The Company recognises inventories at the lower of cost and net realisable value; for inventories which are separately identified as obsolete and damaged, the Company recognises loss through net realisable value. An allowance for inventory valuation loss mainly arises from inventories aged over a certain period and separately identified obsolete inventory. As the amount of inventory is material, inventory items are numerous, and the net realisable value of obsolete and damaged inventories is subject to management judgement, we consider the assessment of the allowance for inventory valuation loss a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

• Ascertained whether the policies on allowance for inventory valuation losses are reasonable and consistently applied in all the periods.

• Understood the determination method of the net realisable value, sampled and tested whether the net realisable values were calculated in accordance with the abovementioned method.

• Discussed with management the estimated net realisable value of separately identified obsolete and damaged inventories, obtained and corroborated against supporting documents and recalculated the allowance provision.

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Impairment assessment of property, plant and investment property

Description

Refer to Notes 4(15) and (16) for accounting policies on property, plant and equipment and investment property, Note 5(2) for the uncertainty of accounting estimates and assumptions applied on property, plant and equipment impairment, and Notes 6(9) and (10) for account details of property, plant and equipment and investment property. As of December 31, 2018, the balance of property, plant and equipment and investment property totaled to NT$4,128,331 thousand.

The property, plant and equipment and investment property primarily consist of land, buildings and structures amounting to NT$4,128,331 thousand, constituting 37% of total assets. The domestic property value has been significantly affected by the factors of market supply and demand situation, natural disasters, government policies, economic situation and the uncertainty of property valuation as well as the risk of asset impairment. Thus, we consider the impairment assessment of property, plant and equipment and investment property a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the impairment assessment of property, plant and equipment and investment property:

• Verified external information (or the most recent transaction price for similar property) to identify any potential impairment indicators for property, plant and equipment and investment property.

• Assessed the reasonableness of the recoverable amounts of property, plant and equipment and investment property, and evaluated the impairment assessment based on the most recent transaction price for similar property.

Other matter – Scope of the audit

We did not audit the financial statements of a wholly-owned consolidated subsidiary and investments accounted for using equity method that are included in the financial statements, which statements reflect total assets (including investments accounted for using equity method) of NT$130,807 thousand and NT$4,020 thousand , constituting 1.18% and 0.03% of consolidated total assets as of December 31, 2018 and 2017, respectively, operating revenues of NT$9,470 thousand and NT$0, constituting 0.12% and 0% of the consolidated total net operating revenue for the years then ended, respectively，and the related share of profit (loss) of associates and joint ventures accounted for under equity method of (NT$13,213)

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thousand and NT$954 thousand, constituting 1.34% and 0.21% of consolidated total comprehensive income (loss) for the years then ended, respectively. Those financial statements were audited by other independent accountants whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on the audit reports of the other independent accountants.

Other matter – Parent company only financial reports

We have audited and expressed an unmodified opinion with other matter section on the parent company only financial statements of Ability Enterprise Co., Ltd. as at and for the years ended December 31, 2018 and 2017.

Responsibilities of management and those charged with governance for 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 the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when

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it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Juanlu, Man-Yu Audrey Tseng For and on behalf of PricewaterhouseCoopers, Taiwan March 25, 2019

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The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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ABILITY ENTERPRISE CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

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December 31, 2018 December 31, 2017
Assets Notes AMOUNT % AMOUNT %
Current assets
1100 Cash and cash equivalents 6(1) $ 1,788,055 16 $ 2,245,124 18
1120 Current financial assets at fair 6(3)
value through other
comprehensive income 637,214 6 - -
1125 Available-for-sale financial assets 12(4)
- current - - 766,516 6
1136 Current financial assets at 6(4)
amortised cost 547,106 5 - -
1170 Accounts receivable, net 6(5), 7 and 12(4) 1,127,134 10 1,704,379 13
130X Inventory 6(6) 1,336,102 12 1,501,394 12
1470 Other current assets 6(7) 355,164 3 642,450 5
11XX Total current assets 5,790,775 52 6,859,863 54
Non-current assets
1517 Non-current financial assets at 6(3)
fair value through other
comprehensive income 676,421 6 - -
1523 Available-for-sale financial assets 12(4)
- non-current - - 930,238 7
1543 Financial assets carried at cost - 12(4)
non-current - - 214,145 2
1550 Investments accounted for under 6(8)
equity method 12,293 - 4,020 -
1600 Property, plant and equipment 6(9) and 8 3,539,946 32 3,989,763 31
1760 Investment property - net 6(10) 588,385 5 598,602 5
1780 Intangible assets 6(11) 159,027 2 5,606 -
1840 Deferred income tax assets 6(27) 178,209 2 83,896 -
1900 Other non-current assets 6(13) 103,032 1 120,278 1
15XX Total non-current assets 5,257,313 48 5,946,548 46
1XXX Total assets $ 11,048,088 100 $ 12,806,411 100
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ABILITY ENTERPRISE CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

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December 31, 2018 December 31, 2017
Liabilities and Equity Notes AMOUNT % AMOUNT %
Current liabilities
2100 Short-term borrowings 6(14) $ 438,647 4 $ 339,757 3
2170 Accounts payable 7 1,850,064 17 2,330,406 18
2200 Other payables 6(15) 779,586 7 871,050 7
2230 Current income tax liabilities 13,432 - 53,894 -
2300 Other current liabilities 6(18)(23) 360,715 3 422,370 3
21XX Total current liabilities 3,442,444 31 4,017,477 31
Non-current liabilities
2600 Other non-current liabilities 6(16) 82,865 1 82,991 1
25XX Total non-current liabilities 82,865 1 82,991 1
2XXX Total liabilities 3,525,309 32 4,100,468 32
Equity
Equity attributable to owners of
parent
Share capital
3110 Share capital - common stock 6(19) 2,823,628 26 2,823,650 22
Capital surplus 6(20)
3200 Capital surplus 1,563,455 14 1,563,069 13
Retained earnings 6(21)
3310 Legal reserve 1,655,947 15 1,634,181 13
3320 Special reserve - - 101,662 1
3350 Unappropriated retained earnings 1,645,054 15 2,242,829 17
Other equity interest 6(22)
3400 Other equity interest ( 426,178) ( 4) 151,951 1
31XX Equity attributable to owners
of the parent 7,261,906 66 8,517,342 67
36XX Non-controlling interest 260,873 2 188,601 1
3XXX Total equity 7,522,779 68 8,705,943 68
3X2X Total liabilities and equity $ 11,048,088 100 $ 12,806,411 100
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The accompanying notes are an integral part of these consolidated financial statements.

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ABILITY ENTERPRISE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except for (loss) earnings per share amount)

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Year ended December 31
2018 2017
Items Notes AMOUNT % AMOUNT %
4000 Sales revenue 6(23) and 7 $ 7,635,028 100 $ 11,201,600 100
5000 Operating costs 6(6)(26) and 7 ( 6,988,737) ( 92) ( 9,785,428) ( 87)
5950 Net operating margin 646,291 8 1,416,172 13
Operating expenses 6(26)
6100 Selling expenses ( 118,959) ( 2) ( 117,375) ( 1)
6200 General and administrative
expenses ( 531,966) ( 7) ( 527,242) ( 5)
6300 Research and development
expenses ( 727,055) ( 9) ( 706,702) ( 6)
6450 Impairment gain and reversal of 12(2)
impairment loss determined in
accordance with IFRS 9 ( 8,172) - - -
6000 Total operating expenses ( 1,386,152) ( 18) ( 1,351,319) ( 12)
6900 Operating (loss) profit ( 739,861) ( 10) 64,853 1
Non-operating income and
expenses
7010 Other income 6(24) 175,212 2 158,640 1
7020 Other gains and losses 6(25) 48,463 1 9,392 -
7050 Finance costs ( 6,659) - ( 5,558) -
7060 Share of profit/(loss) of 6(8)
associates and joint ventures
accounted for under equity
method 8,273 - 954 -
7000 Total non-operating income
and expenses 225,289 3 163,428 1
7900 (Loss) profit before income tax ( 514,572) ( 7) 228,281 2
7950 Income tax benefit (expense) 6(27) 89,047 1 ( 21,883) -
8200 (Loss) profit for the year ($ 425,525) ( 6) $ 206,398 2
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ABILITY ENTERPRISE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except for (loss) earnings per share amount)

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Year ended December 31
2018 2017
Items Notes AMOUNT % AMOUNT %
Other comprehensive income
Components of other
comprehensive income that will
not be reclassified to profit or
loss
8311 Actuarial (losses) gains on 6(16)
defined benefit plans ($ 1,345) - $ 4,291 -
8316 Unrealised gain on financial 6(3)
assets measured at fair value
through other comprehensive
income ( 616,491) ( 8) - -
8349 Income tax related to 6(27)
components of other
comprehensive income that will
not be reclassified to profit or
loss 2,109 - ( 730) -
8310 Other comprehensive (loss)
income that will not be
reclassified to profit or loss ( 615,727) ( 8) 3,561 -
Components of other
comprehensive income that will
be reclassified to profit or loss
8361 Financial statements translation
differences of foreign operations 53,622 1 ( 285,779) ( 3)
8362 Unrealised gain on valuation of 12(4)
available-for-sale financial
assets - - 536,391 5
8360 Other comprehensive income
that will be reclassified to
profit or loss 53,622 1 250,612 2
8300 Other comprehensive (loss)
income for the year ($ 562,105) ( 7) $ 254,173 2
8500 Total comprehensive (loss)
income for the year ($ 987,630) ( 13) $ 460,571 4
(Loss) profit attributable to:
8610 Owners of the parent ($ 463,048) ( 6) $ 217,663 2
8620 Non-controlling interest 37,523 - ( 11,265) -
($ 425,525) ( 6) $ 206,398 2
Comprehensive (loss) income
attributable to:
8710 Owners of the parent ($ 1,021,497) ( 13) $ 474,693 4
8720 Non-controlling interest 33,867 - ( 14,122) -
($ 987,630) ( 13) $ 460,571 4
Earnings per share 6(28)
9750 Basic earnings per share ($ 1.64) $ 0.77
9850 Diluted earnings per share ($ 1.64) $ 0.77
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The accompanying notes are an integral part of these consolidated financial statements.

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ABILITY ENTERPRISE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

2017 Balance at January 1, 2017 Profit for 2017 Other comprehensive income (loss) for 2017 Total comprehensive income (loss) for 2017 Appropriations of 2016 earnings Legal reserve Special reserve Cash dividends Compensation cost of share-based payment Adjustments to changes in vested number of restricted stock Redemption of employee restricted stock Balance at December 31, 2017 2018 Balance at January 1, 2018 Effects of retrospective application and retrospective restatement Balance at January 1, 2018 after adjustments Loss for 2018 Other comprehensive income (loss) for 2018 Total comprehensive income (loss) for 2018 Appropriations of 2017 earnings Special reserve Reveral of special reserve Cash dividends Changes in ownership interests in subsidiaries Increase in non-controlling interests Adjustments to changes in vested number of restricted stock Redemption of employee restricted stock Balance at December 31, 2018	Notes 6(21) 6(17) 6(17) 12(4) 6(21) 6(17)					Equityatt	ri	butable to owners	of	theparent					Non-controlling interest $ 202,723 ( 11,265 ) ( 2,857 ) ( 14,122 ) - - - - - - $ 188,601 $ 188,601 - 188,601 37,523 ( 3,656 ) 33,867 - - - - 38,405 - - $ 260,873	Total equity $ 8,494,801 206,398 254,173 460,571 - - ( 254,171 ) 2,730 2,012 - $ 8,705,943 $ 8,705,943 ( 7,614 ) 8,698,329 ( 425,525 ) ( 562,105 ) ( 987,630 ) - - ( 225,892 ) ( 797 ) 38,405 364 - $ 7,522,779
		Share capital - common stock $ 2,825,279 - - - - - - - - ( 1,629 ) $ 2,823,650 $ 2,823,650 - 2,823,650 - - - - - - - - - ( 22 ) $ 2,823,628		Total capital surplus, additional paid-in capital $ 1,560,123 - - - - - - - 2,012 934 $ 1,563,069 $ 1,563,069 - 1,563,069 - - - - - - - - 364 22 $ 1,563,455				RetainedEarnings			Other equity interest ($ 104,533 ) - 253,613 253,613 - - - 2,871 - - $ 151,951 $ 151,951 ( 18,861 ) 133,090 - ( 559,268 ) ( 559,268 ) - - - - - - - ($ 426,178 )	Treasury stocks ($ 695 ) - - - - - - - - 695 $ - $ - - - - - - - - - - - - - $ -	Total $ 8,292,078 217,663 257,030 474,693 - - ( 254,171 ) 2,730 2,012 - $ 8,517,342 $ 8,517,342 ( 7,614 ) 8,509,728 ( 463,048 ) ( 558,449 ) ( 1,021,497 ) - - ( 225,892 ) ( 797 ) - 364 - $ 7,261,906
						Legal reserve $ 1,595,556 - - - 38,625 - - - - - $ 1,634,181 $ 1,634,181 - 1,634,181 - - - 21,766 - - - - - - $ 1,655,947	Special reserve $ - - - - - 101,662 - - - - $ 101,662 $ 101,662 - 101,662 - - - - ( 101,662 ) - - - - - $ -

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

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ABILITY ENTERPRISE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit before tax Adjustments Income and expenses having no effect on cash flows Expected credit loss Gain on reversal of allowance for bad debts Impairment loss Depreciation Amortisation Compensation cost of share-based payment Gain on valuation of financial assets and liabilities Gain on disposal of property, plant, equipment Share of profit or loss of associates and joint ventures accounted for under equity method Interest expense Interest income Compensation income Dividend income Changes in assets/liabilities relating to operating activities Changes in operating assets Accounts receivable, net Inventories Other current assets Net changes in liabilities relating to operating activities Accounts payable Other payables Other current liabilities Other non-current liabilities Cash (outflow) inflow generated from operations Interest received Dividends received Income tax paid Interest paid Net cash flows (used in) from operating activities

Notes 2018 2017 ($ 514,572 ) $ 228,281 12(2) 8,172 - 12(4) - ( 155 ) 6(25) 52,108 - 6(26) 354,163 339,978 6(26) 8,555 4,033 6(17) - 2,730 12(4) - ( 1,908 ) 6(25) ( 68,856 ) ( 19,282 ) 6(8) ( 8,273 ) ( 954 ) 6,659 5,558 6(24) ( 34,759 ) ( 26,344 ) 6(25) - ( 36,000 ) 6(24) ( 107,897 ) ( 100,707 ) 560,269 191,542 239,180 ( 133,844 ) ( 133,284 ) ( 11,793 ) ( 541,180 ) ( 160,325 ) ( 110,265 ) 6,737 ( 83,643 ) ( 32,392 ) ( 1,490 ) ( 1,102 ) ( 375,113 ) 254,053 34,759 26,344 107,897 100,707 ( 43,602 ) ( 70,511 ) ( 6,659 ) ( 5,558 ) ( 282,718 ) 305,035

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ABILITY ENTERPRISE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at amortised cost Increase in other current assets Proceeds from disposal of current financial assets at fair value through profit or loss Acquisition of financial assets measured at cost Proceeds from disposal of property, plant and equipment Acquisition of property, plant and equipment Acquisition of intangible assets Decrease in other non-current assets Net cash in acquisition of subsidiaries Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Decrease in other non-current liabilities Payment of cash dividends Redemption of employee restricted stock Subsidiaries’ capital increase for acquiring non- controlling interest Net cash flows used in financing activities Net effect of changes in foreign currency exchange rates Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Notes 2018 2017 ($ 104,181 ) $ - - ( 83,790 ) - 7,178 12(4) - ( 118,392 ) 290,997 55,757 6(30) ( 181,446 ) ( 417,382 ) 6(11) ( 9,293 ) ( 6,717 ) 16,933 410 ( 136,798 ) - ( 123,788 ) ( 562,936 ) 81,890 10,742 ( 245 ) ( 3,592 ) 6(21) ( 225,892 ) ( 254,171 ) 6(17) ( 22 ) ( 934 ) 38,405 - ( 105,864 ) ( 247,955 ) 55,301 ( 270,159 ) ( 457,069 ) ( 776,015 ) 2,245,124 3,021,139 $ 1,788,055 $ 2,245,124

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

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ABILITY ENTERPRISE CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANISATION

Ability Enterprise Co., Ltd. (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Act of the Republic of China (R.O.C.). The Company and its subsidiaries (collectively referred herein as the “Group”) merged with Viewquest Technologies Inc. on January 1, 2003. On August 28, 2007, the Board of Directors agreed to set September 1, 2007 as the record date for the acquisition of the Office Automation Business Group by the Company’s subsidiary, Ability International Investment Co., Ltd., through the issuance of new shares. The Company disposed its ownership in Ability International Investment Co., Ltd. promptly after the acquisition. The Company is mainly engaged in the manufacturing, purchases and sales of digital cameras, optical product components and film/video accessories.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on March 25, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting

New standards, interpretations and amendments as endorsed by FSC effective from 2018 are as follows:

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New Standards,Interpretations and Amendments

Effective date by International AccountingStandards Board

Amendments to IFRS 2, ‘Classification and measurement of share- based payment transactions’ Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts’ IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’ Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts with customers’ Amendments to IAS 7, ‘Disclosure initiative’ Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised losses’ Amendments to IAS 40, ‘Transfers of investment property’ IFRIC 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IAS 28, ‘Investments in associates and joint ventures’

January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and operating results based on the Group’s assessment. IFRS 9, ‘Financial instruments’

• (a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

• (b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance).

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The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

• (c) The Group has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Notes 12(4) B and C.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Group

New standards, interpretations and amendments as endorsed by FSC effective from 2019 are as follows:

the Group New standards, interpretations and amendments as endorsed by FSC follows:	effective from 2019 are as
New Standards,Interpretations and Amendments	Effective date by International AccountingStandards Board
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and operating results based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete. IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors. The Group expects to recognise the lease contract of lessees in line with IFRS 16. However, the Group intends not to restate the financial statements of prior period (referred herein as the “modified retrospective approach”), and the effects will be adjusted. On January 1, 2019, it is expected that ‘right-of-use asset’ (including reclassification of long-term prepaid rents) and lease liability will be increased by $110,151 and $37,927, respectively, and long-term prepaid rents (shown as ‘Other current liabilities’ will be decreased by $72,224.

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New Standards,Interpretations and Amendments	Effective date by International AccountingStandards Board
Amendments to IAS 1 and IAS 8, ‘Disclosure Initiative -Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’	January 1, 2020 January 1, 2020 January 1, 2021 To be determined by International Accounting Standards Board

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation

• A. Except for the following items, these consolidated financial statements have been prepared under the historical cost convention:

• (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

• (b) Financial assets and liabilities at fair value though other comprehensive income Available-forsale financial assets measured at fair value.

• (c) Liabilities on cash-settled share-based payment arrangements measured at fair value.

• (d) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.

• B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

• C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Group has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognised as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended

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December 31, 2017 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 11 (‘IAS 11’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. Please refer to Notes 12(4) and (5) for details of significant accounting policies and details of significant accounts.

• (3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

  • (a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

  • (b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

  • (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

  • (d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.

  • (e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. The fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

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B. Subsidiaries included in the consolidated financial statements:

Name of investor	Name of subsidiary	Main business activities	Ownership (%)	Ownership (%)	Description
			December 31, 2018	December 31, 2017
The Company	ABILITY ENTERPRISE (BVI) CO., LTD. (ABILITY (BVI))	Holding company	100.00	100.00
The Company	ACTION PIONEER INTERNATIONAL LTD. (ACTION)	Trading service	100.00	100.00
The Company	VIEWQUEST TECHNOLOGIES INTERNATIONAL INC. (VQ (US))	Sales of computer accessories, photography equipment and electronic components	100.00	100.00
The Company	VIEWQUEST TECHNOLOGIES (BVI) INC. (VQ (BVI))	Manufacturing and trading of computer accessories, photography equipment and electronic components	100.00	100.00
The Company	Ability International Investment Co., Ltd. (Ability International Investment)	Investments	100.00	100.00
The Company	AndroVideo INC.	Development, manufacturing and trading of digital surveillance	100.00	-	Note 1
The Company	E-PIN OPTICAL INDUSTRY CO., LTD. (E-PIN)	Sales of optical products and electronic components	54.61	53.01	Note 2
ABILITY (BVI)	Ability Technology (Dongguan) Co., Ltd. (Ability (Dongguan))	Sales of digital still cameras	100.00	100.00
ABILITY (BVI)	Jiujiang Viewquest Electronics Inc. (JiujiangViewquest)	Sales of digital still cameras	100.00	100.00

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Name of investor	Name of subsidiary	Main business activities	Ownership (%)	Ownership (%)	Description
			December 31, 2018	December 31, 2017
VQ (BVI)	VIEWQUEST TECHNOLOGIES (DONGGUAN) CO., LTD. (VIEWQUEST TECHNOLOGIES)	Sales of digital still cameras	100.00	100.00
E-PIN	E-PIN OPTICAL INDUSTRY (M.) SDN. BHD. (E-PIN (M.))	Manufacturing of precision lens	100.00	100.00
E-PIN	ALL VISION TECHNOLOGY SDN. BHD. (AVT)	Manufacturing of precision lens	100.00	100.00
E-PIN	E-PIN OPTICAL INDUSTRY CO., LTD. (E-PIN)	Trading	100.00	100.00
E-PIN	ALL VISION HOLDING LTD. (ALL VISION)	Holding company	100.00	100.00
E-PIN	JIAPIN INVESTMENT CO., LTD. (JIAPIN INVESTMENT)	Investments	100.00	100.00
ALL VISION	EVERLIGHT DEVELOPMENT CORPORATION (EVERLIGHT)	Holding company	100.00	100.00
ALL VISION	E-SKY HOLDING LTD. (E-SKY)	Holding company	73.04	73.04
EVERLIGHT	NANJING EVERLIGHT PHOTONICS TECHNOLOGY CO., LTD. (NANJING EVERLIGHT)	Development and manufacturing of various types of precision lens	55.45	55.45
E-SKY	ZHONGSHAN SHANXIN ACCURATE INDUSTRY CO. (ZHONGSHAN SHANXIN)	Development and manufacturing of various types of precision lens	100.00	100.00
E-SKY	NANJING E-PIN OPTICAL CO., LTD. (NANJING E-PIN)	Development and manufacturing of various types of precision lens	72.22	72.22

Note 1: Please refer to Note 6(29) for details.

Note 2: The Board of Directors of E-PIN OPTICAL INDUSTRY CO., LTD. on May 12, 2017 has resolved to increase capital by issuing common stock of 6,960 thousand shares with par value of $10 and a premium issuance price of NT$13 (in dollars) per share. The capital increase was set effective on November 23, 2018 as resolved by the Board of Directors on September 28, 2018. As the Company did not acquire shares proportionately amounting to $52,871, the shareholding ratio was 54.61% after the acquisition.

• C. Subsidiaries not included in the consolidated financial statements: None.

• D. Adjustments for subsidiaries with different balance sheet dates: None.

• E. Significant restrictions: None.

• F. Subsidiaries that have non-controlling interests that are material to the Group: None.

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(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan dollars, which is the Company’s functional and the Group’s presentation currency.

• A. Foreign currency transactions and balances

• (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

• (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

• (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

• (d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within ‘other gains and losses’.

• B. Translation of foreign operations

• (a) The operating results and financial position of all the group entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

  • i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

  • ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

  • iii. All resulting exchange differences are recognised in other comprehensive income.

• (b) When the foreign operation partially disposed of or sold is an associate or joint arrangement, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, if the Group retains partial interest in the former foreign associate or jointly controlled entity after losing significant influence over the former foreign associate, or losing joint control of the former joint arrangement, such transactions should be accounted for as disposal of all interest in these

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foreign operations.

• (c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Group retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

(5) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

• (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

• (b) Assets held mainly for trading purposes;

• (c) Assets that are expected to be realised within twelve months from the balance sheet date;

• (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

• (a) Liabilities that are expected to be paid off within the normal operating cycle;

• (b) Liabilities arising mainly from trading activities;

• (c) Liabilities that are to be paid off within twelve months from the balance sheet date;

• (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(6) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

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

• A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.

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• D. The Group recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

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

• A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:

• (a) The objective of the Group’s business model is achieved both by collecting contractual cash flows and selling financial assets; and

• (b) The assets’ contractual cash flows represent solely payments of principal and interest.

• B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value:

• The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

• (9) Financial assets at amortised cost

• A. Financial assets at amortised cost are those that meet all of the following criteria:

• (a) The objective of the Group’s business model is achieved by collecting contractual cash flows.

• (b) The assets’ contractual cash flows represent solely payments of principal and interest.

• B. On a regular way purchase or sale basis, financial assets at amortised cost are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognised in profit or loss when the asset is derecognised or impaired.

• D. The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

• (10) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.

• B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

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• (11) Impairment of financial assets

• For debt instruments measured at fair value through other comprehensive income and financial assets at amortised cost including accounts receivable that have a significant financing component, at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

(12) Derecognition of financial assets

The Group derecognises a financial asset when one of the following conditions is met:

• A. The contractual rights to receive the cash flows from the financial asset expire.

• B. The contractual rights to receive cash flows of the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.

• C. The contractual rights to receive cash flows of the financial asset have been transferred and, the Group has not retained control of the financial asset.

• (13) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The cost of finished goods and work in process comprises raw materials, direct labour, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

• (14) Investments accounted for using equity method / associates

• A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 per cent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.

• B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

• C. When changes in an associate’s equity do not arise from profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the

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associate, the Group recognises change in ownership interests in the associate in ‘capital surplus’ in proportion to its ownership.

• D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

• E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital surplus’ and ‘investments accounted for under the equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.

• F. When the Group disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, then the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

• (15) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

• B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a

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change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

are as follows:
Buildings and structures	30	~	50 years
Machinery and equipment	5	~	20 years
Mold equipment	1	~	2 years
Other equipment	1	~	20 years

(16) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 50 years.

(17) Intangible assets

• A. Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 2 to 5 years.

• B. Goodwill arises in a business combination accounted for by applying the acquisition method.

• C. Other intangible assets are mainly customer relationships and technology and amortised using the straight-line method over 0.5~7 years.

(18) Impairment of non-financial assets

• A. The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

• B. The recoverable amounts of goodwill with an indefinite useful life. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognised in profit or loss shall not be reversed in the following years.

• C. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

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(19) Borrowings

Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

(20) Notes and accounts payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

• B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(21) Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability specified in the contract is discharged or cancelled or expires.

(22) Provisions

Warranty provision is recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses.

(23) Employee benefits

• A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

• B. Pensions

• (a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

• (b) Defined benefit plans

• i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit

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obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of highquality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Group uses interest rates of government bonds (at the balance sheet date) instead.

• ii. Remeasurements arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

• C. Employees’ compensation and directors’ remuneration

Employees’ compensation and directors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

• (24) Employee share based payment

• A. For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

• B. Restricted stocks:

  • (a) Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over thevesting period.

  • (b) For restricted stocks where those stocks do not restrict distribution of dividends to employees and employees are not required to return the dividends received if they resign during the vesting period, the Group recognises the fair value of the dividends received by the employees who are expected to resign during the vesting period as compensation cost at the date of dividends declared.

  • (c) For restricted stocks where employees have to pay to acquire those stocks, if employees resign during the vesting period, they must return the stocks to the Group and the Group must refund their payments on the stocks, the Group recognises the payments from the employees

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who are expected to resign during the vesting period as liabilities at the grant date, and recognises the payments from the employees who are expected to be eventually vested with the stocks in ’capital surplus - others’.

(25) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

• D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.

(26) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are approved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(27) Revenue recognition

A. Sales of goods

The Group manufactures and sells digital cameras and optical products. Sales are recognised when control of the products has transferred, being when the products are delivered to the

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customer, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.

• B. Sales of services

• The Group provides product research and development services. Revenue from delivering services is recognised under the percentage-of-completion method when the outcome of services provided can be estimated reliably. The stage of completion of a service contract is measured by the percentage of the actual services performed as of the financial reporting date to the total services to be performed. If the outcome of a service contract cannot be estimated reliably, contract revenue is recognised only to the extent that contract costs incurred are likely to be recoverable.

• C. Incremental costs of obtaining a contract Given that the contractual period lasts less than one year, the Group recognises the incremental costs of obtaining a contract as an expense when incurred although the Group expects to recover those costs.

(28) Business combinations

• A. The Group uses the acquisition method to account for business combinations. The consideration transferred for an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued at the acquisition date, plus the fair value of any assets and liabilities resulting from a contingent consideration arrangement. All acquisitionrelated costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. For each business combination, the Group measures at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to the proportionate share of the entity’s net assets in the event of liquidation at either fair value or the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other non-controlling interests should be measured at the acquisition-date fair value.

• B. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets acquired and the liabilities assumed is recorded as goodwill at the acquisition date.

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(29) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

(1) Critical judgements in applying the Group’s accounting policies

None.

(2) Critical accounting estimates and assumptions

• A. Impairment assessment of tangible assets

The Group assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Group strategy might cause material impairment on assets in the future.

As of December 31, 2018, the Group recognised property, plant and equipment, net of impairment loss. Please refer to Note 6(9).

• B. Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

As of December 31, 2018, the carrying amount of inventories is described in Note 6(6).

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6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and revolving funds Checking accounts and demand deposits Time deposits	December 31,2018 3,253 $ 1,753,475 31,327 1,788,055 $	December 31,2017
		3,537 $ 2,173,725 67,862
		2,245,124 $

• A. The Group associates with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. The Group has no cash and cash equivalents pledged to others.

(2) Financial assets at fair value through profit or loss

B. The Group has no cash and cash equivalents pledged to others. Financial assets at fair value through profit or loss
Items Current items: Financial assets mandatorily measured at fair value through profit or loss Unlisted stocks Valuation adjustment	December 31,2018
	130 $ 130) (
	- $

• A. The Group has no financial assets at fair value through profit or loss pledged to others.

• B. Information relating to credit risk of financial assets at fair value through profit or loss is provided in Note 12(2).

• C. Information on financial assets at fair value through profit or loss as of December 31, 2017 is provided in Note 12(4).

(3) Financial assets at fair value through other comprehensive income – non-current

Items Current items: Equity instruments Listed stocks Valuation adjustment Non-current items: Equity instruments Listed stocks Unlisted stocks Valuation adjustment	December 31,2018
	844,299 $ 207,085) (
	637,214 $
	636,816 $ 225,982
	862,798 186,377) (
	676,421 $

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• A. The Group has elected to classify equity investments that are considered to be strategic investments or steady dividend income as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $1,313,635 as at December 31, 2018.

• B. Amounts recognised in profit or loss and other comprehensive income in relation to the financial assets at fair value through other comprehensive income are listed below:

Equity instruments at fair value through other December 31, 2018 comprehensive income Fair value change recognised in other comprehensive income ($ 616,491)

• C. As at December 31, 2018, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at fair value through other comprehensive income held by the Group was $1,313,635.

• D. The Group has no financial assets at fair value through other comprehensive income pledged to others as collateral.

• E. Information relating to credit risk of financial assets at fair value through other comprehensive income is provided in Note 12(2).

• F. Information on available-for-sale financial assets and financial assets at cost as of December 31, 2017 is provided in Note 12(4).

(4) Financial assets at amortised cost - current

2017 is provided in Note 12(4). Financial assets at amortised cost-current
Items Current items: Time deposits with initial maturity over three months	December 31,2018
	547,106 $

• A. Amounts recognised in profit or loss in relation to financial assets at amortised cost are listed below:

below:
Interest income	2018
	10,631 $

• B. Information relating to credit risk is provided in Note 12(2).

• C. The information on December 31, 2017 is provided in Note 6(7).

(5) Accounts receivable

Accounts receivable
	December	31,2018		December	31,2017
Accounts receivable	$	1,288,576	$		1,857,670
Less: Allowance for bad debts	(	173,783)	(		165,611)
Accounts receivable, related parties		12,341			12,320
Accounts receivable, net	$	1,127,134		$	1,704,379

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Not past due 1 to 90 days 91 to 180 days Over 180 days	December 31,2018 890,654 $ 236,416 43 173,804 1,300,917 $	December 31,2017
		1,413,651 $ 286,577 3,701 166,061
		1,869,990 $

The above ageing analysis was based on past due date.

• A. The Group has no accounts receivable pledged to others.

• B. As at December 31, 2018, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the accounts receivable held by the Group was $1,127,134.

• C. Information relating to credit risk of accounts receivable is provided in Note 12(2).

(6) Inventories

Inventories
Merchandise Finished goods Work in process Raw materials Inventory in transit Merchandise Finished goods Work in process Raw materials Inventory in transit		December 31,2018
	Allowance for Cost valuation loss 144,950 $ 9,923) ($ 409,873 75,488) ( 181,470 8,048) ( 957,275 292,563) ( 28,556 - 1,722,124 $ 386,022) ($ December 31,2017		Book value
			135,027 $ 334,385 173,422 664,712 28,556
			1,336,102 $
	Allowance for Cost valuation loss 200,736 $ 5,103) ($ 508,453 85,053) ( 131,430 6,962) ( 845,050 145,798) ( 58,641 - 1,744,310 $ 242,916) ($		Book value
			195,633 $ 423,400 124,468 699,252 58,641
			1,501,394 $

The cost of inventories recognised as expense for the year: 2018 Cost of goods sold 6,725,083 $ Loss on decline in market value 143,106 Other operating costs 120,548 6,988,737 $	2017
	9,584,252 $ 121,543 79,633
	9,785,428 $

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(7) Other current assets

Other current assets
Investments accounted for using equity method Time deposits with maturity over three months Other receivables Others Associates Altasec Technology Corporation (Altasec Technology) Ever Pine International Ltd. (BVI) (EVER PINE)	December 31,2018 - $ 185,757 169,407 355,164 $ December 31,2018 12,293 $ - 12,293 $		December 31,2017 442,925 $ 120,011 79,514 642,450 $ December 31,2017 4,020 $ - 4,020 $
		12,293 $ -		4,020 $ -
		12,293 $		4,020 $

(8) Investments accounted for using equity method

• A. The above investment was accounted for using equity method as of December 31, 2018 and 2017 based on the investee’s financial statements audited by other independent accountants.

• B. The carrying amount of the Group’s interests in all individually immaterial associates and the Group’s share of the operating results are summarised below:

Total comprehensive income

d below:
2018 27,578 $	2017
	3,180 $

The Group’s share in profit (loss) recognised under the equity method for the years ended December 31, 2018 and 2017 was $8,273 and $954, respectively.

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(9) Property, plant and equipment

January1,2018 Cost Accumulated depreciation and impairment 2018 Opening net book amount Additions Acquired from business combination Reclassifictaion Disposals Depreciation Impaiment loss Net exchange differences Closing net book amount At December 31, 2018		Land	Buildings and structures	Machinery	Mold equipment	Other equipment and Construction in progress		Total
	1,358,413 $ - 1,358,413 $ 1,358,413 $ - - - 39,114) ( - - - 1,319,299 $ 1,319,299 $ - 1,319,299 $		2,656,704 $ 557,143) ( 2,099,561 $ 2,099,561 $ 271 - 2,108) ( 169,675) ( 83,219) ( - 12,418) ( 1,832,412 $ 2,449,244 $ 616,832) ( 1,832,412 $	2,359,217 $ 1,970,368) ( 388,849 $ 388,849 $ 78,720 719 - 8,326) ( 131,868) ( 52,108) ( 3,579) ( 272,407 $ 2,173,482 $ 1,901,075) ( 272,407 $	1,693,258 $ 1,669,631) ( 23,627 $ 23,627 $ 94,364 2,088 - - 105,212) ( - - 14,867 $ 954,373 $ 939,506) ( 14,867 $	608,404 $ 489,091) ( 119,313 $ 119,313 $ 8,091 2,580 - 5,026) ( 23,647) ( - 350) ( 100,961 $ 608,448 $ 507,487) ( 100,961 $	8,675,996 $ 4,686,233) ( 3,989,763 $ 3,989,763 $ 181,446 5,387 2,108) ( 222,141) ( 343,946) ( 52,108) ( 16,347) ( 3,539,946 $ 7,504,846 $ 3,964,900) ( 3,539,946 $
Cost Accumulated depreciation and impairment

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January1,2017 Cost Accumulated depreciation and impairment 2017 Opening net book amount Additions Reclassification Disposals Depreciation Net exchange differences Closing net book amount At December 31, 2017		Land	Buildings and structures		Machinery	Mold equipment	Other equipment and Construction in progress	Total
	1,343,071 $ - 1,343,071 $ 1,343,071 $ 22,230 - 6,888) ( - - 1,358,413 $ 1,358,413 $ - 1,358,413 $		1,845,374 $ 503,235) ( 1,342,139 $ 1,342,139 $ 255,077 609,478 24,303) ( 65,799) ( 17,031) ( 2,099,561 $ 2,656,704 $ 557,143) ( 2,099,561 $	2,474,714 $ 1,943,837) ( 530,877 $ 530,877 $ 29,850 - 4,502) ( 153,677) ( 13,699) ( 388,849 $ 2,359,217 $ 1,970,368) ( 388,849 $		1,788,413 $ 1,743,706) ( 44,707 $ 44,707 $ 67,409 - - 88,488) ( 1) ( 23,627 $ 1,693,258 $ 1,669,631) ( 23,627 $	1,250,984 $ 577,095) ( 673,889 $ 673,889 $ 78,816 609,478) ( 782) ( 21,797) ( 1,335) ( 119,313 $ 608,404 $ 489,091) ( 119,313 $	8,702,556 $ 4,767,873) ( 3,934,683 $ 3,934,683 $ 453,382 - 36,475) ( 329,761) ( 32,066) ( 3,989,763 $ 8,675,996 $ 4,686,233) ( 3,989,763 $
Cost Accumulated depreciation and impairment

A. Impairment information about the property, plant and equipment is provided in Note 6(12).

B. Information about the property, plant and equipment that were pledged to others as collateral is provided in Note 8.

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(10) Investment property

At January1,2018 Cost Accumulated depreciation and impairment 2018 Opening net book amount Depreciation Closing net book amount At December 31, 2018 Cost Accumulated depreciation and impairment At January1,2017 Cost Accumulated depreciation and impairment 2017 Opening net book amount Depreciation Closing net book amount At December 31, 2017 Cost Accumulated depreciation and impairment	Land 257,174 $ - ( 257,174 $ 257,174 $ - ( 257,174 $ 257,174 $ - ( 257,174 $ Land 257,174 $ - ( 257,174 $ 257,174 $ - ( 257,174 $ 257,174 $ - ( 257,174 $	Buildings and structures 521,053 $ 179,625) ( 341,428 $ 341,428 $ 10,217) ( 331,211 $ 521,053 $ 189,842) ( 331,211 $ Buildings and structures 521,053 $ 169,408) ( 351,645 $ 351,645 $ 10,217) ( 341,428 $ 521,053 $ 179,625) ( 341,428 $	Total 778,227 $ 179,625) 598,602 $ 598,602 $ 10,217) 588,385 $ 778,227 $ 189,842) 588,385 $ Total 778,227 $ 169,408) 608,819 $ 608,819 $ 10,217) 598,602 $ 778,227 $ 179,625) 598,602 $

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• A. Rental income from the lease of the investment property and direct operating expenses arising from the investment property are shown below:

from the investment property are shown below:
Rental income from the lease of the investment property Direct operating expenses arising from the investment property that generated rental income in the period	2018 32,260 $ 10,217 $	2017
		31,380 $
		10,217 $

B.The fair value of the investment property held by the Group as at December 31, 2018 and 2017 was $1,696,894 and $1,616,301, respectively, which was based on the valuations of the market prices of property sold in similar districts.

(11) Intangible assets

Software At January1,2018 Cost 61,116 $ Accumulated amortisation and impairment 55,510) ( 5,606 $ 2018 Opening net book amount 5,606 $ Additions－acquired separately 9,293 Additions－acquired through business combinations - Amortisation charge 3,763) ( Net exchange differences 1) ( Closing net book amount 11,135 $ At December 31,2018 Cost 70,396 $ Accumulated amortisation and impairment 59,261) ( 11,135 $

Goodwill Others Total - $ - $ 61,116 $ - - 55,510) ( - $ - $ 5,606 $ - $ - $ 5,606 $ - - 9,293 115,084 37,600 152,684 - 4,792) ( 8,555) ( - - 1) ( 115,084 $ 32,808 $ 159,027 $ 115,084 $ 37,600 $ 223,080 $ - 4,792) ( 64,053) ( 115,084 $ 32,808 $ 159,027 $

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Software At January1,2017 Cost 54,413 $ Accumulated amortisation and impairment 51,486) ( 2,927 $ 2017 Opening net book amount 2,927 $ Additions－acquired separately 6,717 Amortisation charge 4,033) ( Effect of changes on exchange rate 5) ( Closing net book amount 5,606 $ At December 31,2017 Cost 61,116 $ Accumulated amortisation and impairment 55,510) ( 5,606 $	Goodwill - $ - - $ - $ - - - - $ - $ - - $	Others Total - $ 54,413 $ - 51,486) ( - $ 2,927 $ - $ 2,927 $ - 6,717 - 4,033) ( - 5) ( - $ 5,606 $ - $ 61,116 $ - 55,510) ( - $ 5,606 $

(12) Impairment of non-financial assets

• A. The Group recognised impairment loss for the years ended December 31, 2018 and 2017 of

• $52,108 and $0, respectively. Details of such loss are as follows:

Impairment loss－ machinery	Recognised in Recognised other comprehensive inprofit or loss income 52,108 $ - $ 2018	Recognised in Recognised other comprehensive inprofit or loss income - $ - $ 2017

• B. The impairment loss reported by operating segments is as follows:

Impairment loss - optical manufacturing segment	Recognised in Recognised other comprehensive inprofit or loss income 52,108 $ - $ 2018	Recognised in Recognised other comprehensive inprofit or loss income - $ - $ 2017

The product demand decreased due to the highly competitive market and the Group faded out mobile camera module field in 2018. The Group adjusted book values based on recoverable amounts after management assessment, and recognised impairment loss amounting to $52,108.

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• (13) Long-term prepaid rent (shown as ‘Other non-current assets’)

During the years ended December 31, 2003 and 2002, the Group signed a land use contract with the People’s Government of Liaobu of Dongguan City in Guangdong province, PRC and Nanjing HiTech Economic Development Zone General Corporation for the use of land at Huanan Industrial Park and Nanjing New & High Technology Industry Development Zone with a term of 50 years. All rentals had been paid on the contract date.

Short-term borrowings Land use rights Type of borrowings Secured bank borrowings Unsecured bank borrowings Type of borrowings Secured bank borrowings Unsecured bank borrowings	December 31,2018 27,881 $ 410,766 438,647 $ December 31,2017 41,699 $ 298,058 339,757 $	December 31,2018 December 31,2017 72,224 $ 75,604 $ Interest rate range Collateral 5.22%~6.57% Buildings and Structures 0.90%~5.95% - Interest rate range Collateral 5.003%~5.39% Buildings and structures 1.19%~5.38% -

Land use rights

(14) Short-term borrowings

For details of unused short-term lines of credit, please refer to Note 12 (2).

(15) Other payables

Other payables
Employees’ salary and compensation payable Tax payable Construction payable Service fees payable Accrued employees’ compensation and directors’ and supervisors’ remuneration Other payables	December 31,2018 543,807 $ 7,418 3,999 2,234 - 222,128 779,586 $	December 31,2017
		573,334 $ 16,189 37,456 49,265 23,177 171,629
		871,050 $

(16) Pensions

A.(a)The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company and its domestic subsidiaries contribute monthly an amount equal to 2% of the employees’ monthly salaries and wages to

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the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company and its domestic subsidiaries would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company and its domestic subsidiaries will make contribution for the deficit by next March.

(b)The amounts recognised in the balance sheet are determined as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability	December 31,2018 103,386 $ 53,079) ( 50,307 $	December 31,2017 102,321 $ 51,149) ( 51,172 $

(c)Changes in present value of funded obligations are as follows:

	Present value of defined	Present value of defined		Fair value of	Fair value of			Net defined
		benefit obligations			plan assets		benefit liability
Year ended December 31, 2018
Balance at January 1	$	102,321	($		51,149)	$		51,172
Interest expense (income)		1,589	(		758)			831
		103,910	(		51,907)			52,003
Remeasurements:
Return on plan assets
(excluding amounts included in
interest income or expense)
Change in demographic assumptions		2,266			-			2,266
Change in financial assumptions		4,894			-			4,894
Experience adjustments	(	4,231)	(		1,584)	(		5,815)
		2,929	(		1,584)			1,345
Pension fund contribution		-	(		3,041)	(		3,041)
Paid pension	(	3,453)			3,453			-
Balance at December 31	$	103,386	($		53,079)	$		50,307

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	Present value of defined	Present value of defined		Fair value of	Fair value of			Net defined
		benefit obligations			plan assets		benefit liability
Year ended December 31, 2017
Balance at January 1	$	119,306	($		61,613)	$		57,693
Interest expense (income)		2,082	(		1,033)			1,049
		121,388	(		62,646)			58,742
Remeasurements:
Return on plan assets
(excluding amounts included in
interest income or expense)
Change in demographic assumptions	(	4,396)			-	(		4,396)
Change in financial assumptions		3,397			-			3,397
Experience adjustments	(	3,662)			370	(		3,292)
	(	4,661)			370	(		4,291)
Pension fund contribution		-	(		3,279)	(		3,279)
Paid pension	(	14,406)			14,406			-
Balance at December 31	$	102,321	($		51,149)	$		51,172

(d)The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorised by the Regulator. The Company and domestic subsidiaries have no right to participate in managing and operating that fund and hence the Company and domestic subsidiaries are unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2018 and 2017 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

• (e)The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	2018 1.125%~1.28% 1.75%~3%	2017
		1.25%~1.6%
		1.75%~3%

Assumptions regarding future mortality experience are set based on the published statistics and experience in the 5[th] Taiwan Standard Ordinary Experience Mortality Table.

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Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

December 31, 2018 Effect on present value of defined benefit obligation December 31, 2017 Effect on present value of defined benefit obligation	Increase 0.5% Decrease 0.5% 7,769) ($ 8,539 $ 7,984) ($ 8,802 $ Discount rate	Future salaryincreases	Future salaryincreases
	Increase 0.5% 7,769) ($ 7,984) ($	Increase 0.5% 8,343 $ 8,628 $	Decrease 0.5%
			7,674) ($
			7,910) ($

The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

• (f)Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2019 are $2,858.

• (g)As of December 31, 2018, the weighted average duration of that retirement plan is 17 years. The analysis of timing of the future pension payment was as follows:

The analysis of timing of the future pension payment was as follows:
Within 1 year 1-2 year(s) 2-5 years Over 5 years	7,984 $ 9,903 23,552 59,382
	100,821 $

B.(a)Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

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  - (b)The Group’s mainland subsidiaries have a defined contribution plan. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentages of employees’ monthly salaries and wages. Other than the monthly contributions, the Group has no further obligations.

  - (c)The pension costs under the defined contribution pension plans of the Group for the years ended December 31, 2018 and 2017 were $38,523 and $37,470, respectively.

• (17) Share-based payment

• A. For the years ended December 31, 2018 and 2017, the Group’s share-based payment arrangements were as follows:

Type of arrangement Grant date Quantity granted Contract period Vesting conditions Restricted stocks to employees (Note) 2014.05.21 22,000 3 years 3 years’ service

The above share-based payment arrangements are equity settled.

Note: The restricted stocks issued by the Group cannot be transferred during the vesting period, but voting right and dividend right are not restricted on these stocks. Employees are required to return the stocks but not required to return the dividends received if they resign during the vesting period.

• B. For the Company’s restricted stocks to employees plan, the fair value on the grant date is estimated using the Black-Scholes option-pricing model. The weighted-average parameters used in the estimation of the fair value are as follows:

Type of arrangement Restricted stocks to employees plan Restricted stocks to employees plan Restricted stocks to employees plan	Expiration After 1 year After 2 years After 3 years	Stock price (indollars) $20.90 $20.90 $20.90	Exercise price (indollars) $10 $10 $10	Price volatility 22.22% 21.15% 25.67%	Dividends 8.22% - -	Interest rate 1.4628% 1.6421% 1.9488%	Fair value per unit (indollars)
							$8.4358 $6.3536 $4.9827

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• C. Expenses incurred on share-based payment transactions are shown below:

Equity-settled	2018 - $	2017 2,730 $

• D. The Group has purchased 2 thousand shares and 93 thousand shares at $10 per share, which amounted to $22 and $934, during 2018 and 2017, respectively, for employees who have resigned during the vesting period. As of December 31, 2018 and 2017, the retirement of employee restricted stocks purchased had been completed.

(18) Provisions (shown as ‘Other current liabilities’)

restricted stocks purchased had been completed. Provisions (shown as‘Other current liabilities’)
Warranty At January 1 Reversal of provisions ( At December 31	2018 136,439 $ 30,279) ( 106,160 $	2017
		222,181 $ 85,742)
		136,439 $

(19) Share capital

As of December 31, 2018, the Company’s authorised capital was $5,400,000, consisting of 540 million shares of ordinary stock, and the paid-in capital was $2,823,628 with a par value of $10 (in dollars) per share.

(20) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

At January 1, 2018 Employee restricted shares At December 31, 2018 At January 1, 2017 Employee restricted shares At December 31, 2017	Share premium 1,245,854 $ 581 1,246,435 $ Sharepremium 1,214,046 $ 31,808 1,245,854 $	Treasury share transactions 219,206 $ - 219,206 $ Treasury share transactions 219,206 $ - 219,206 $	Capital reserve from gain on disposalofassets 56 $ - 56 $ Capital reserve from gain on disposal of assets 56 $ - 56 $	Employee stockoptions 97,738 $ - 97,738 $ Employee stock options 97,738 $ - 97,738 $	Employee restricted shares 215 $ 195) ( 20 $ Employee restricted shares 29,077 $ 28,862) ( 215 $

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(21) Retained earnings

• A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses. Then, 10% of the remaining amount shall be set aside as legal reserve until the legal reserve equals the total capital stock balance and the Company shall appropriate or reverse special reserve when necessary. The appropriation of the remainder along with beginning unappropriated earnings is the accumulated distributable earnings for shareholders, which shall be proposed by the Board of Directors and resolved by the shareholders.

• B. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• C. The Company’s dividend policy is adopted taking into consideration the Company’s financial structure, future capital expenditures, future cash flows and assurance of the Company’s competitiveness in the market. In accordance with the dividend policy, cash dividends shall account for at least 10% of the total dividends distributed.

• D. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

• E. The Company recognised dividends amounting to $254,171 during 2017. On June 11, 2018, the shareholders resolved for the distribution of dividends from 2017 earnings in the amount of $225,892 at $0.8 (in dollars) per share.

• F. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(26).

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(22) Other equity items

Other equity items
Operating revenue Financial statements translation differences of foreign operations At January 1 89,939) ($ Effect of retrospective application and retrospective restatement - -Group 57,223 Revaluation - At December 31 32,716) ($ Financial statements translation differences of foreign operations At January 1 192,839 $ -Group - Revaluation 282,778) ( Employee restricted shares -Compensation cost - At December 31 89,939) ($ Currency translation differences: Currency translation differences: Sales revenue Service revenue			2018
		Financial statements translation differences of foreign operations	Unrealised gains/losses on available-for- sale financial assets
		Financial statements translation differences of foreign operations		Unrealised gains/losses on available-for- sale financial assets
			($ $		294,501) - 536,391 - 241,890 2018
				$

(23) Operating revenue

A. Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods and services over time and at a point in time in the following main business segment:

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2018 Total segment revenue Inter-segment revenue Revenue from external customer contracts Timing of revenue At a point in time Over time	Optical manufacturing segment 12,152,115 $ 5,502,200) ( 6,649,915 $ 6,321,619 $ 328,296 6,649,915 $	Strategic investingsegment 1,507,054 $ 521,941) ( 985,113 $ 985,113 $ - 985,113 $	Total 13,659,169 $ 6,024,141) ( 7,635,028 $ 7,306,732 $ 328,296 7,635,028 $

B. Contract liabilities

The Group has recognised the following revenue-related contract liabilities:

	December 31,2018
Contract liabilities - advance sales receipts (shown as Other current
liabilities)	104,278 $
C. Revenue recognised that was included in the contract liability balance at the beginning of the
year

	year
(24) (25)	Other income Other gains and losses Advance sales receipts 2018 Rental revenue 32,556 $ Interest income 34,759 Dividend income 107,897 175,212 $ 2018 Gains on disposal of property, plant and equipment 68,856 $ Net currency exchange gain (loss) 22,576 Depreciation on investment property 10,217) ( Impairment loss 52,108) ( Grants revenue - Other gains 19,356 48,463 $	December 31,2018 104,362 $ 2017
		31,589 $ 26,344 100,707 158,640 $ 2017
		19,282 $ 67,828 ( 10,217 ( - 36,000 32,155
		9,392 $

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(26) Employee benefit, depreciation and amortisation expenses

Employee benefit expenses Wages and salaries Labor and health insurance fees Pension costs Other personnel expenses Depreciation (Note) Amortisation	2018 1,319,836 $ 103,355 39,354 95,034 343,946 8,555	2017
		1,357,484 $ 112,615 38,519 70,401 329,761 4,033

• Note: For the years ended December 31, 2018 and 2017, depreciation on investment property amounted to $10,217 for both years and was shown as other gains and losses.

• A. According to the Articles of Incorporation of the Company, when distributing earnings, the Company shall distribute bonus to the employees and pay remuneration. The ratio shall not be lower than 8% and shall not be higher than 15% for employees’ compensation and shall not be higher than 1.5% for directors’ and supervisors’ remuneration.

• B. For the years ended December 31, 2018 and 2017, employees’ compensation was accrued at $0 and $19,518, respectively; while directors’ and supervisors’ remuneration was accrued at $0 and $3,659, respectively. The aforementioned amounts were recognised in salary expenses.

• Employees’ compensation and directors’ and supervisors’ remuneration for 2017 amounting to $19,518 and $3,659, respectively, as resolved at the shareholders’ meeting were in agreement with those amounts recognised in the 2017 financial statements. The employees’ compensation and directors’ and supervisors’ remuneration will be distributed in the form of cash. Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved by the board of directors and shareholders during their meeting will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

• (27) Income tax

• A. Income tax expense (benefit)

  • (a) Components of income tax expense:

tax ome tax expense (benefit) Components of income tax expense:
2018 Current tax on profits for the year 31,158 $ Prior year income tax overestimation 35,226) ( Origination and reversal of temporary differences 79,394) ( Impact of change in tax rate 12,810) ( Land value increment tax 7,225 Income tax (benefit) expense 89,047) ($	2017
	24,593 $ 6,699) ( 3,989 - - 21,883 $

• (b) The income tax (charge)/credit relating to components of other comprehensive income is as follows:

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Remeasurement of defined benefit obligations Impact of change in tax rate	2018 269) ($ 1,840) ( 2,109) ($	2017 730 $ - 730 $

B. Reconciliation between income tax expense and accounting profit

		2018		2017
Tax calculated based on profit before tax and
statutory tax rate	($	79,930)	$	64,719
Tax effect of permanent differences		33,656	(	50,933)
Effect of estimated assessment of tax	(	35,226)	(	6,699)
Tax effect of change in income tax rate	(	1,962)		14,796
Land value increment tax		7,225		-
Impact of change in tax rate	(	12,810)		-
Income tax (benefit) expense	($	89,047)	$	21,883

C. Amounts of deferred tax assets as a result of temporary differences are as follows:

Deferred tax assets: Fees for after sales Adjustment of bad debts for tax purposes Employee benefits Taxable loss Others Deferred tax assets: Fees for after sales Adjustment of bad debts for tax purposes Employee benefits Others	2018
	Recognised in Recognised in other comprehensive January1 profit or loss income 23,195 $ 1,963) ($ - $ 26,808 7,145 - 10,610 - 2,109 - 80,360 - 23,283 6,662 - 83,896 $ 92,204 $ 2,109 $ 2017	December 31
		21,232 $ 33,953 12,719 80,360 29,945
		178,209 $
	Recognised in Recognised in other comprehensive January1 profit or loss income 31,012 $ 7,817) ($ - $ 26,319 489 - 11,340 - 730) ( 19,944 3,339 - 88,615 $ 3,989) ($ 730) ($	December 31
		23,195 $ 26,808 10,610 23,283
		83,896 $

D. Expiration dates of unused net taxable loss and amounts of unrecognised deferred tax assets are

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as follows:

(a) Companies located in Taiwan:

December 31, 2018

	December 31,2018	December 31,2018
Year incurred	Amount filed/assessed Unusedamount 171,184 $ 103,594 $ 72,056 72,056 401,799 401,799 645,039 $ 577,449 $ December 31,2017			Unrecognised deferredtax assets 103,594 $ 72,056 - 175,650 $	Expiry year 2021 2022 2028
2011 2012 2018
Year incurred	Amount filed/assessed 167,284 $ 72,056 91,382 330,722 $	Unusedamount 167,284 $ 72,056 91,382 330,722 $		Unrecognised deferredtax assets 167,284 $ 72,056 91,382 330,722 $	Expiry year 2021 2022 2027
2011 2012 2017

• (b) In accordance with the tax regulations in Malaysia, the loss carryforward of the consolidated subsidiary, ALL VISION TECHNOLOGY SDN. BHD, audited by other independent accountants, had no expiration date. As of December 31, 2018 and 2017, the unused loss carryforward amounted to $523,972 and $519,075, respectively.

• E. The amounts of deductible temporary differences that are not recognised as deferred tax assets are as follows:

are as follows:
Deductible temporary differences	December 31,2018 1,277,971 $	December 31,2017
		1,299,279 $

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• F. The Company has not recognised taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2018 and 2017, the amounts of temporary differences unrecognised as deferred tax liabilities were $418,813 and $423,542, respectively.

• G. The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority.

• H. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China on February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

• (28) (Loss) earnings per share

change in income tax rate. 8)(Loss) earnings per share
Basic loss per share Loss attributable to ordinary shareholders of the parent ( Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Assumed conversion of all dilutive potential ordinary shares Employee compensation Employee restricted shares Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares		2018	Loss per share(in dollars) 1.64) $ Earnings per share(in dollars) 0.77 $ 0.77 $
	Amount after tax 463,048) $	Weighted average number of ordinary shares outstanding (shares in thousands) 282,347 ( 2017
	Amount after tax 217,663 $ 217,663 $	Weighted average number of ordinary shares outstanding (shares in thousands) 281,061 1,095 29 282,185

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(29) Business combinations

• A. In order to enforce AIoT and smart surveillance photography market layout, the Group acquired 100% of the share capital of AndroVideo Inc. for $140,000 and obtained control over AndroVideo Inc. (referred herein as “AndroVideo”) on August 31, 2018. The Group is focused on research and development, manufacturing, and trading of digital monitoring system. The Group is expected to enforce its market position after the acquisition.

• B. The following table summarises the consideration paid for AndroVideo and the fair values of the assets acquired and liabilities assumed at the acquisition date:

		December 31,2018
Purchase consideration
Cash paid	$	140,000
Fair value of the identifiable assets acquired
and liabilities assumed
Cash		3,202
Accounts receivable		853
Inventories		32,868
Other current assets		3,451
Property, plant and equipment		5,387
Other non-current assets		1,337
Other short-term borrowings	(	17,000)
Accounts payable	(	12,038)
Other current liabilities	(	30,744)
Other intangible assets		37,600
Total identifiable net assets		24,916
Goodwill	$	115,084

(30) Supplemental cash flow information

Investing activities with partial cash payments

Supplemental cash flow information Investing activities with partial cash payments Goodwill	$	115,084
Purchase of property, plant and equipment Compensation revenue Cash paid during the year	2018 181,446 $ - 181,446 $	2017
		453,382 $ 36,000) (
		417,382 $

(31) Changes in liabilities from financing activities

Changes in liabilities from financing activities arose from changes in cash flow from financing activities for the years ended December 31, 2018 and 2017. Please refer to statements of cash flows for the details.

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7. RELATED PARTY TRANSACTIONS

(1)Names of related parties and relationship

ATED PARTY TRANSACTIONS ames of related parties and relationship
Names of relatedparties Altasec Technology Corporation (Altasec Technology) AVY Precision Technology Inc. (AVY Precision) AVY Co., Ltd. (AVY) Shine Trade International Ltd. (Shine Trade) Taichiba International Ltd. (Taichiba)	Relationshipwith the Company
	Associate Other related party Other related party Other related party Other related party

(2)Significant related party transactions

The following disclosures are based on transactions with counterparties who are considered as related parties.

A. Operating revenue:

parties. A. Operating revenue:
		2018	2017
Sales of goods:
-Associates	$	73,116	$	41,125
Goods are sold based on the price lists in force and terms that would be available to third parties.
B. Purchases:
		2018	2017
Purchases of goods:
-Other related parties	$	89,858	$	196,654
Goods and services are purchased from other related parties on normal			commercial	terms and
conditions.

• C. Receivables from related parties:

conditions. C. Receivables from related parties:
D. Payable to related parties Accounts receivable: Associates Accounts payable -Other related parties	December 31,2018 12,341 $ December 31,2018 38,144 $	December 31,2017
		12,320 $
		December 31,2017
		75,330 $

The payables to related parties arise mainly from purchase transactions and are due 1~6 months after the date of purchase.

• E. Property transactions:

Purchase of property, plant and equipment:

after the date of purchase. Property transactions: Purchase of property, plant and equipment:
Associaties Other related parties	Years ended December 31,
	2018 - $ 7,572 7,572 $	2017
		382 $ 18,908 19,290 $

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(3)Key management compensation

(3)Key management compensation
PLEDGED ASSETS The Group’s assets pledged as collateral are as follows: 2018 Salaries and other short-term employee benefits 13,545 $ Post-employment benefits 611 Share-based payments - 14,156 $ Pledgedasset December31,2018 December31,2017 Land 1,256,394 $ 1,256,394 $ Buildings and structures 27,850 29,816 1,284,244 $ 1,286,210 $ Bookvalue	2017
	21,792 $ 674 329 22,795 $ Purpose Note Bank borrowings

8. PLEDGED ASSETS

Note: In order to jointly develop the operational headquarters with general contractors, the land of Xinzhuang Fuduxin Section was pledged to banks as collateral.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

None.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

A. Financial instruments by category

The Group classified financial assets at amortised cost (including cash and cash equivalents, current financial assets at amortised cost and accounts receivable) with carrying amount of $3,462,295, and financial liabilities at amortised cost (including short-term borrowings, accounts payable and other payables) with carrying amount of $3,068,297 under IFRS 9. The information on carrying amounts of financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income is provided in Note 6.

• B. Financial risk management policies

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• (a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial position and financial performance.

• (b) Risk management is carried out by a central treasury department (Group treasury) under policies approved by the board of directors. Group treasury identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Group operates internationally and is exposed to foreign exchange risk arising from the transactions of the Company and its subsidiaries used in various functional currency, primarily with respect to the USD and RMB. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.

• ii. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The companies are required to hedge their entire foreign exchange risk exposure with the Group treasury.

• iii. The Group treasury’s risk management policy is to hedge (mainly export sales and purchase of inventory and processing charges) in each major foreign currency for the subsequent quarter.

• iv. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies, and China as the main regional.

• v. The Group’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD; other certain subsidiaries’ functional currency: USD and RMB). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

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(Foreign currency: functional currency Financial assets Monetary items USD:NTD Financial liabilities Monetary items USD:NTD USD:RMB (Foreign currency: functional currency Financial assets Monetary items USD:NTD Financial liabilities Monetary items USD:NTD USD:RMB			December31,2018	December31,2018	December31,2018
	Foreign currency amount (inthousands) 57,805 $ 51,970 $ 42,643		Exchange Book value rate (NTD) 30.715 1,775,481 $ 30.715 1,596,251 $ 6.8632 292,665 December31,2017			Sensitivityanalysis
						Degree of variation 1% 1% 1%	Effect on profit or loss
	Foreign currency amount (in thousands) 97,545 $ 66,757 $ 47,653		Exchange rate 29.76 29.76 6.5342	Book value (NTD) 2,902,939 $ 1,986,688 $ 311,374
						Degree of variation 1% 1% 1%

• vi. Total exchange gain (loss), including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2018 and 2017 amounted to $22,576 and ($67,828), respectively.

Price risk

• i. The Group’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income and available-for-sale financial assets. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

• ii. The Group’s investments in equity securities comprise shares and open-end funds issued by the domestic and foreign companies. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 10% with all other variables held constant. For the years ended December 31, 2018 and 2017, other components of equity would have increased/decreased by $131,364 and $169,675, respectively, as a result of other comprehensive income classified as available-for-sale equity investment and equity

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investment at fair value through other comprehensive income.

Cash flow and fair value interest rate risk

• i. The Group’s main interest rate risk arises from bank borrowings with variable rates, which expose the Group to cash flow interest rate risk.

• ii. The Group’s borrowings are measured at amortised cost. The borrowings are periodically contractually repriced and to that extent are also exposed to the risk of future changes in market interest rates.

• iii. If the borrowing interest rate had increased/decreased by 1% with all other variables held constant, profit, net of tax for the years ended December 31, 2018 and 2017, would have increased/decreased by $4,386 and $3,398, respectively. The main factor is that changes in interest expense result from floating rate borrowings.

• (b) Credit risk

• i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms.

• ii. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the relevant management methods. The utilisation of credit limits is regularly monitored.

• iii. The Group adopts the assumption under IFRS 9, that is, if the contract payments were past due over 180 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition .

• iv. The Group classifies customer’s accounts receivable, contract assets and rents receivable in accordance with customer types. The Group applies the simplified approach using loss rate methodology to estimate expected credit loss.

• v. The Group used the forecastability to adjust the loss rates which is based on history and timely information within the specified period to estimate loss allowance for accounts receivable. Based on the consideration and information above, the Group does not expect any significant loss allowance for the accounts receivable due to loss rate.

• vi.Movements in relation to the Group applying the simplified approach to provide loss allowance for accounts receivable are as follows:

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At January 1_IAS 39 Adjustments under new standards At January 1_IFRS 9 Provision for impairment At December 31	2018
	165,611 $ - 165,611 8,172
	173,783 $

vii. Credit risk information for 2017 is provided in Note 12(4).

• (c) Liquidity risk

• i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (Note 6(15)) at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable, external regulatory or legal requirements, for example, currency restrictions.

• ii. Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts.

• iii. As of December 31, 2018 and 2017, the Group has the following undrawn borrowing facilities:

Fixed rate: Expiring within one year	December 31,2018 3,366,702 $	December 31,2017
		4,168,412 $

• iv. The table below analyses the Group’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for nonderivative financial liabilities and to the expected maturity date for derivative financial liabilities. The table below analyses the Group’s non-derivative financial liabilities, of which short-term borrowings, accounts payable and other payables is less than one year, and guarantee deposits received is more than one year.

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(3) Fair value information

• A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed stocks and beneficiary certificates is included in Level 1.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3: Unobservable inputs for the asset or liability.

The fair value of the Group’s investment in equity investment without active market is included in Level 3.

• B. Fair value information of investment property at cost is provided in Note 6(10).

• C. The carrying amounts of financial instruments not measured at fair value including cash and cash equivalents, financial assets at amortised cost-current, accounts receivable, short-term borrowings, accounts payable and other payables are approximate to their fair values.

• D. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities is as follows:

December 31, 2018 Assets: Recurring fair value measurements Available-for-sale financial assets Equity securities December 31, 2017 Assets: Recurring fair value measurements Available-for-sale financial assets Equity securities	Level 1 1,141,377 $ Level 1 1,696,754 $	Level 2 - $ Level 2 - $	Level 3 172,258 $ Level 3 - $	Total
				1,313,635 $
				Total
				1,696,754 $

• E. The methods and assumptions the Group used to measure fair value are as follows:

• (a) The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Listed shares

Market quoted price Closing price

• (b) Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be

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referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date (i.e. yield curves on the Taipei Exchange, average commercial paper interest rates quoted from Reuters).

• (c) When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange swap contracts and options, the Group adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.

• F. The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Group’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk, etc. In accordance with the Group’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the consolidated balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

• G. The Group takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Group’s credit quality.

• H. For the years ended December 31, 2018 and 2017, there was no transfer between Level 1 and Level 2.

• I. The following chart is the movement of Level 3 for the years ended December 31, 2018 and 2017:

2018 At January 1 - $ IFRS 9 translation adjustment 206,531 Recorded as unrealised gains (losses) on valuation of investments in equity instruments measured at fair value through other comprehensive income 34,863) ( Effect of exchange rate changes 590 At December 31 172,258 $	2017
	- $ - - -
	- $

• J. For the years ended December 31, 2018 and 2017, there was no transfer into or out from Level 3.

• K. Finance and accounting segment is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the

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exercisable price, and frequently calibrating valuation model, performing back-testing, updating inputs used to the valuation model and making any other necessary adjustments to the fair value.

• L. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Fair value at Significant Range Relationship December 31, Valuation unobservable (weighted of inputs to 2018 technique input average) fair value Non-derivative equity instruments: Unlisted shares $172,258 Net asset value Not applicable - Not applicable

• M.The Group has carefully assessed the valuation models and assumptions used to measure fair value. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used to valuation models have changed:

December 31, 2018

Input Financial assets Equity instrument Net asset value	Change ±1%	Favourable Unfavourable change change $ - $ - Recognised inprofit or loss	Favourable Unfavourable change change $ - $1,723 Recognised in other comprehensive income

(4) Effects on initial application of IFRS 9 and information on application of IAS 39 in 2017

• A. Summary of significant accounting policies adopted in 2017

• (a) Financial assets at fair value through profit or loss

  • i. They are financial assets held for trading or financial assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

    • (i) Hybrid (combined) contracts; or

    • (ii) They eliminate or significantly reduce a measurement or recognition inconsistency; or

    • (iii) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

  • ii. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.

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• iii. Financial liabilities at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognised in profit or loss.

• (b) Available for sale financial assets

• i. They are non-derivatives that are either designated in this category or not classified in any of the other categories.

• ii. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using trade date accounting.

• iii. They are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in ‘financial assets measured at cost’.

• (c) Loans and receivables

Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (d) Impairment of financial assets

• i. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

• ii. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:

  • (i) Significant financial difficulty of the issuer or debtor;

  • (ii) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

  • (iii) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates,

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and indicates that the cost of the investment in the equity instrument may not be recovered;

• (iv) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

• iii. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

• (i) Financial assets at amortised cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. 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 recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

• (ii) Financial assets at cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised by adjusting the carrying amount of the asset through the use of an impairment allowance account.

• (iii) Available-for-sale financial assets

The amount of the impairment loss is measured as the difference between the asset’s acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, and is reclassified from ‘other comprehensive income’ to ‘profit or loss’. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognised, such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance

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account.

• B. The reconciliations of carrying amount of financial assets transferred from December 31, 2017, IAS 39, to January 1, IFRS 9, were as follows:

IAS 39 Transferred into and measured at fair value through other comprehensive income-equity Fair value adjustment IFRS 9	Measured at fair value through other comprehensive Available-for Measured income-equity sale-equity at cost - $ $1,696,754 $214,145 1,910,899 1,696,754) ( 214,145) ( 7,614) ( - - 1,903,285 $ - $ - $	Total $1,910,899 - 7,614) ( $1,903,285	Retained Other earnings equity - $ - $ - - 11,247 18,861) ( 11,247 $ 18,861) ($ Effects

Under IAS 39, because the equity instruments, which were classified as available-for-sale financial assets, financial assets at cost, amounting to $1,696,754 and $214,145, respectively, were not held for the purpose of trading, they were reclassified as "financial assets at fair value through other comprehensive income (equity instruments)" amounting to $1,910,899, and accordingly, retained earnings was increased and other equity interest was decreased in the amounts of $11,247 and $18,861 on initial application of IFRS 9, respectively.

• C. The significant accounts as of December 31, 2017 are as follows:

• (a) Financial assets at fair value through profit or loss

Items Financial assets held for trading Listed stocks Valuation adjustment	December 31,2017
	- $ -
	- $

• i. The Group recognised net profit amounting to $1,980 on financial assets held for trading for the year ended December 31, 2017.

ii. The Group has no financial assets at fair value through profit or loss pledged to others.

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(b)Available-for-sale financial assets

Items		December	31,2017
Current items:
Listed stocks		$	818,048
Valuation adjustment	(		51,532)
		$	766,516
Non-current items:
Listed stocks		$	636,816
Valuation adjustment			293,422
		$	930,238

• i. The Group recognised $536,391 in other comprehensive income for fair value change to profit or loss for the year ended December 31, 2017.

• ii. The Group has no financial assets pledged to others.

• (c) Financial assets at cost

inancial assets at cost
Items		December 31,2017
Unlisted stocks	$	225,522
Accumulated impairment	(	11,377)
	$	214,145

• i. According to the Group’s intention, its investment in unlisted stocks should be classified as ‘available-for-sale financial assets’. However, as the company stocks are not traded in active market, and sufficient industry information of companies similar to company stocks or company stocks’ financial information cannot be obtained, the fair value of the investment in company stocks cannot be measured reliably. The Group classified those stocks as ‘financial assets measured at cost’.

• ii. On December 29, 2016, the Board of Directors of the Company resolved to invest in ABICO ASIA CAPITAL CORPORATION in the estimated amount of $100 million. As of December 31, 2017, the investment amounted to $100 million, and the shareholding ratio was 5.189%.

• iii. On December 22, 2017, the Board of Directors of the Company resolved to invest in REVL Inc. in the amount of USD 618 thousand (approximately NTD 18,392 thousand. As of December 31, 2017, the Group’s shareholding ratio was 2.059%.

• iv. The Group has no financial assets pledged to others.

• D. Credit risk information for the year ended December 31, 2017 are as follows:

• (a) Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, each local entity in the Group is responsible for managing and

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analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables.

• (b) For the year ended December 31, 2017, the implement of credit management is based on the regulations and management does not expect any significant losses from non-performance by these counterparties.

• (c) The credit quality of accounts receivable that were neither past due nor impaired was in the following categories based on the Group’s Credit Quality Control Policy:

Group A Group B Group C Group D	December 31,2017
	616,387 $ 190,367 496,290 110,607
	1,413,651 $

• Note: Credit quality is classified according to six indicators that include the business situation, debt-paying ability, managing ability, profit-earning ability, financial structure and cash flows. The customers’ total scores valued through each of the six indicators are ranked in a risk assessment range in a descending order as A, B, C and D level. If applied to external valuation to obtain D&B or Moody’s ratings, ranges are also classified into the following four levels as below.

Group A ： D&B rating 1 or Moody rating AAA/Aa/A1-A3.

• Group B ： D&B rating 2 or Moody rating Baal-3.

• Group C ： D&B rating 3 or Moody rating BA/B1-3. Group D ： D&B rating 4 or Moody rating below Caa.

• (d) The ageing analysis of financial assets that were past due but not impaired is as follows:

Up to 30 days 31 to 90 days 91 to 180 days Over 180 days	December 31,2017
	257,210 $ 29,367 3,701 450
	290,728 $

The above ageing analysis was based on past due date.

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• (e) Movement analysis of financial assets that were impaired is as follows:

• i. As of December 31, 2017, the Group’s accounts receivable that were impaired amounted to $165,611.

• ii. Movements on the Group’s provision for impairment of accounts receivable are as follows:

At January 1 Reversal of impairment loss At December 31	2017 Group provision 165,766 $ 155) ( 165,611 $

(5) Effects of initial application of IFRS 15 and information on application of IAS 18 in 2017

• A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below.

• (a) Sales of goods

  • i The Group is primarily engaged in manufacture and sales of digital camera, optical products and other related parts and components. Revenue is measured at the fair value of the consideration received or receivable taking into account of business tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. Revenue arising from the sales of goods is recognised when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

  • ii.The Group offers customers volume discounts and right of return for defective products.The Group estimates such discounts and returns based on historical experience. Provisions for such liabilities are recorded when the sales are recognised.

• (b) Sales of services

The Group provides product research and development services. Revenue from delivering services is recognised under the percentage-of-completion method when the outcome of services provided can be estimated reliably. The stage of completion of a service contract is measured by the percentage of the actual services performed as of the financial reporting date to the total services to be performed. If the outcome of a service contract cannot be estimated reliably, contract revenue should be recognised only to the extent that contract costs incurred are likely to be recoverable.

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• B. The revenue recognised by using above accounting policies for the year ended December 31, 2017 are as follows:

2017 are as follows:
Sales revenue Service revenue	2017
	10,985,857 $ 215,743
	11,201,600 $

• C. There is no effect on current balance sheet and comprehensive income statement if the Group continues adopting above accounting policies.

14. SEGMENT INFORMATION

(1) General information

The Group has classified the reportable operating segments based on management strategy. The Company’s operations and segmentation are classified according to the management strategy, and the current management strategy is divided into the optical manufacturing segment and the strategic investing segment. The Company’s main activities are the manufacturing and sales of optical products; the strategic investing segment focuses on sales of design and manufacturing of optical elements.

The Group’s management has determined the reportable operating segments based on the reports reviewed by the Board of Directors for decision making.

There is no significant change to the Group’s components, basis for segmentation, and basis for balancing the segments’ information for the year.

(2) Measurement of segment information

The Group’s operating decision-maker evaluates the performance of the operating segments based on their net operating profit. The basis of the measurement excludes effects of non-recurring expenditures from the operating segments and effects of unrealised gains/losses on financial products.

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(3) Information about segment profit or loss, assets and liabilities

The segment information provided to the chief operating decision-maker for the reportable segments is as follows:

Optical manufacturing segment Revenue Revenue from external customers 6,649,915 $ Revenue from internal customers - Total segment revenue 6,649,915 $ Inter-segment profit (loss) 812,219) ($ Segment income (loss): Depreciation and amortisation 289,483 $ Interest income Interest expense Income tax expense Segment assets Identifiable assets 8,731,307 $ Financial assets at fair value through other comprehensive income Investment accounted for under the equity method General assets Total assets Capital expenditures 114,343 $ Not included in the segments’ profits or losses for measurement, but are still provided to the chief operating decision-maker periodically:		2018

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2017

2017
Optical manufacturing Strategic Reconciliations Revenue segment investingsegment and offsets Revenue from external customers 10,389,284 $ 812,316 $ - $ Revenue from internal customers 9,339,317 489,766 9,829,083) ( Total segment revenue 19,728,601 $ 1,302,082 $ 9,829,083) ($ Inter-segment profit (loss) 32,619 $ 8,815) ($ 41,049 $ Segment income (loss): Depreciation and amortisation 264,242 $ 79,769 $ - $ Interest income Interest expense Income tax expense Segment assets Identifiable assets 9,944,914 $ 862,682 $ - $ Available-for-sale financial assets Financial assets measured at cost Investment accounted for under the equity method General assets Total assets Capital expenditures 405,755 $ 47,627 $ - $ Not included in the segments’ profits or losses for measurement, but are still provided to the chief operating decision-maker periodically:	Total
	11,201,600 $ -
	11,201,600 $
	64,853 $
	344,011 $
	26,344 $
	5,558 $
	21,883 $
	10,807,596 $ 1,696,754 214,145 4,020 83,896
	12,806,411 $
	453,382 $

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(4) Reconciliation for segment income (loss)

A reconciliation of adjusted consolidated net profit before tax and the reportable operating segments’

net profit for 2018 and 2017 is provided as follows:

		2018			2017
Reportable segments profit and loss	($		739,861)	$		64,853
Gain on financial instruments			-			1,908
Share of profit of associates and joint ventures
accounted for using the equity method			8,273			954
Finance costs - net	(		6,659)	(		5,558)
Others			223,675			166,124
Profit before tax and continued operations	($		514,572)	$		228,281

(5) Information on product and service

Refer to Note 6 (23) for the related information.

(6) Geographical information

Geographical information for 2018 and 2017 is as follows:

Japan Taiwan Others	Revenue Non-current assets 3,608,433 $ - $ 27,333 3,317,162 3,999,262 1,073,228 7,635,028 $ 4,390,390 $ 2018	Revenue Non-current assets 7,296,402 $ - $ 23,063 3,464,228 3,882,135 1,250,022 11,201,600 $ 4,714,250 $ 2017
	Revenue 3,608,433 $ 27,333 3,999,262 7,635,028 $	Revenue 7,296,402 $ 23,063 3,882,135 11,201,600 $

(7) Major customer information

Major customer information of the Group for 2018 and 2017 is as follows:

R Company AA Company EE Company A Company	Revenue Segment 1,646,386 $ Optical segment 1,133,150 Optical segment 1,123,446 Optical segment 541,781 Optical segment 2018	2017	2017
	Revenue 1,646,386 $ 1,133,150 1,123,446 541,781	Revenue 3,112,257 $ 1,374,102 2,305,586 1,678,065	Segment
			Optical segment Optical segment Optical segment Optical segment

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