Advantech - Annual Report 2018 | FinancialReports.eu

Advantech Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017 and Independent Auditors’ Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2018 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standard 10. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

Very truly yours, ADVANTECH CO., LTD.

By:

K. C. LIU Chairman March 8, 2019

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Advantech Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Advantech Co., Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the 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 of 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 International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. 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 for the year ended December 31, 2018. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters on the consolidated financial statements for the year ended December 31, 2018 were as follows:

Assessment of Provisions for Inventory Write-downs

Inventories as of December 31, 2018 amounted to NT$7,557,820 thousand and accounted for 17% of the total assets in the Group’s consolidated financial statements, which represented a material percentage of the total assets.

The inventories of the Group are measured at the lower of cost or net realizable value and according to the ratios of possible impairment for aged inventories. Due to the rapid changes in the technological environment and the significant size and variety of inventories, after analyzing the structure of provisions for inventory valuation, we noticed that the provisions were generated from obsolescent inventories which were aged longer. We considered the evaluation of inventory write-downs of aged inventories as having a significant impact on the Group’s consolidated financial statements. Therefore, the assessment of provisions for inventory write-downs was deemed to be one of the key audit matters.

Our audit procedures performed in respect of the above area included the following:

We assessed and analyzed the Group’s policies for the inventory write-downs provisions and compared them with other competitors’ policies to affirm the reasonableness and consistency of application.
We understand the internal control, evaluated and tested the design and operating effectiveness of the internal controls over the provisions for inventory write-downs.
We reviewed the historical inventory aging reports to trace the process for the usage and scrap of aged inventories in order to assess the reasonableness of percentages for recognizing aged inventories.
We verified the appropriateness of source data, parameters and logic used in the Group’s inventory aging analysis reports.

Sales Revenue

Since the Group operates in the highly competitive industry, we determined that revenue recognition of the Group carries risk due to the demand for the growth of sales and the need to remain competitive in the industry. Hence, the Group’s sales revenue from several product lines and customers whose sales increased materially in numbers and percentages was considered as a key audit matter.

Our audit procedures performed in respect of sales revenue included the following:

We analyzed the trend of the industry, categories of revenue, product lines and customer categories for two consecutive years to confirm whether there were any abnormal situations or centralized trading which might put revenue recognition at risk.
We interviewed personnel who operates the control activities and reviewed related internal vouchers to understand the processes of internal controls related to revenue-recognition and evaluate the design, implementation, and operating effectiveness of internal controls over revenue recognition. Tested such internal controls to obtain sufficient and appropriate audit evidence of the effectiveness of key controls.
We obtained details of accounts, analyzed balances and confirmed or reconciled them with general ledgers; tested the reconciliation between detailed and general ledgers and traced the reconciliation to acquire sufficient and appropriate evidence.
We determined the appropriate methods of sampling and sample sizes and audited sales orders, packing lists and export declarations in order to evaluate whether the amount of revenue is recognized accurately and in accordance with the regulations for the preparation of financial reports.
We audited the records and vouchers of collections to evaluate whether the amounts of collections are accurate and the payers of such collections and the recipients of the related orders are consistent in order to attest the reality of sales.
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Other Matter

We have also audited the parent company only financial statements of the Company as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion.

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 IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, 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 the audit committee, are responsible for overseeing the Group’s financial reporting process.

Auditors’ 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 auditors’ 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 the auditing standards generally accepted in the Republic of China will always detect a material misstatement when 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 the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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.
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.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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 auditors’ 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 auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.
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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.
Obtain sufficient and appropriate audit evidence regarding the financial information of 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.

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 for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ 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.

The engagement partners on the audit resulting in this independent auditors’ report are Jr-Shian Ke and Meng-Chieh Chiu.

Deloitte & Touche Taipei, Taiwan Republic of China

March 8, 2019

Notice to Readers

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

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

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss - current (Notes 4, 7 and 33) Available-for-sale financial assets - current (Notes 4, 10 and 33) Financial assets at amortized cost - current (Notes 4, 9 and 33) Debt investments with no active market - current (Notes 4, 12 and 35) Notes receivable (Notes 4 and 13) Trade receivables (Notes 4 and 13) Trade receivables from related parties (Note 34) Other receivables Inventories (Notes 4, 5 and 14) Other current assets (Note 20) Total current assets NON-CURRENT ASSETS Available-for-sale financial assets - non-current (Notes 4, 10 and 33) Financial assets at fair value through other comprehensive income - non-current (Notes 4, 8 and 33) Financial assets measured at cost - non-current (Notes 4 and 11) Investments accounted for using the equity method (Notes 4 and 16) Property, plant and equipment (Notes 4, 17 and 35) Goodwill (Notes 4, 5 and 18) Other intangible assets (Notes 4, 5 and 19) Deferred tax assets (Notes 4 and 26) Prepayments for business facilities Long-term prepayments for leases (Note 20) Other non-current assets (Note 31) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 21) Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 33) Notes payable and trade payables (Notes 4 and 34) Other payables (Note 22) Current tax liabilities (Notes 4 and 26) Short-term warranty provisions Current portion of long-term borrowings (Note 21) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Note 21) Deferred tax liabilities (Notes 4 and 26) Net defined benefit liabilities (Notes 4 and 23) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY Share capital Ordinary shares Advance receipts for share capital Total share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translation of foreign financial statements Unrealized gain on available-for-sale financial assets Unrealized gain on financial assets at fair value through other comprehensive income Other equity - unearned stock-based employee comprehensive Total other equity Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS Total equity TOTAL		2018		2017
		Amount % $ 6,633,161 15 2,098,552 5 - - 157,426 1 - - 1,461,404 3 6,870,878 16 18,969 - 45,956 - 7,557,820 17 522,407 1 25,366,573 58 - - 1,300,267 3 - - 2,431,522 6 9,782,781 22 2,840,001 6 1,095,899 2 501,260 1 273,386 1 297,665 1 47,718 - 18,570,499 42 $ 43,937,072 100 $ 87,581 - 6,139 - 5,810,904 13 3,662,199 8 1,611,886 4 196,782 1 9,626 - 761,473 2 12,146,590 28 45,784 - 1,798,914 4 255,545 1 149,653 - 2,249,896 5 14,396,486 33 6,982,275 16 4,680 - 6,986,955 16 7,073,348 16 5,655,613 13 369,655 1 10,015,895 23 16,041,163 37 (475,245) (1) - - (324,254) (1) 736 - (798,763) (2) 29,302,703 67 237,883 - 29,540,586 67 $ 43,937,072 100		Amount % $ 5,204,219 13 3,098,846 8 229,381 1 - - 38,908 - 1,255,781 3 6,596,030 16 14,067 - 75,298 - 6,242,251 15 445,791 1 23,200,572 57 1,430,854 4 - - 78,518 - 1,349,735 3 9,967,332 24 2,727,549 7 1,124,407 3 398,441 1 68,440 - 312,708 1 45,213 - 17,503,197 43 $ 40,703,769 100 $ 8,400 - 6,226 - 5,280,728 13 3,624,710 9 1,269,165 3 180,975 - - - 676,457 2 11,046,661 27 113,717 - 1,399,013 4 237,225 1 146,713 - 1,896,668 5 12,943,329 32 6,970,325 17 2,500 - 6,972,825 17 6,554,842 16 5,039,962 13 85,204 - 9,297,896 23 14,423,062 36 (463,479) (1) 93,824 - - - - - (369,655) (1) 27,581,074 68 179,366 - 27,760,440 68 $ 40,703,769 100

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

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 4 and 34) Sales Other operating revenue Total operating revenue OPERATING COSTS (Notes 14, 23, 25 and 34) GROSS PROFIT OPERATING EXPENSES (Notes 23, 25 and 34) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING PROFIT NON-OPERATING INCOME Share of the profit of associates accounted for using the equity method (Note 16) Interest income Gains on disposal of property, plant and equipment Gains on disposal of investments Foreign exchange gains (losses), net (Notes 25 and 36) Gains on financial instruments at fair value through profit or loss (Note 7) Dividend income Other income (Note 34) Finance costs (Note 25) Losses on financial instruments at fair value through profit or loss (Note 7) Impairment loss Other losses Total non-operating income PROFIT BEFORE INCOME TAX INCOME TAX EXPENSES (Note 26) NET PROFIT FOR THE YEAR		2018 Amount % $ 47,495,030 97 1,231,488 3 48,726,518 100 30,063,070 62 18,663,448 38 4,774,069 10 2,424,667 5 3,997,313 8 11,196,049 23 7,467,399 15 95,635 - 38,789 - 80,439 - 8,012 - 16,956 - 59,322 - 106,315 - 173,002 1 (4,685) - (39,710) - - - (6,985) - 527,090 1 7,994,489 16 1,677,741 3 6,316,748 13		2017
				Amount % $ 43,367,051 98 1,007,700 2 44,374,751 100 26,993,793 61 17,380,958 39 4,400,803 10 2,389,863 5 3,811,815 9 10,602,481 24 6,778,477 15 218,651 1 16,461 - 96,885 - 292,441 1 (76,098) - 207,795 - 122,220 - 95,772 - (12,117) - (84,658) - (112,120) - (10,166) - 755,066 2 7,533,543 17 1,384,254 3 6,149,289 14

(Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss (Notes 16, 23, 24 and 26): Remeasurement of defined benefit plans Share of the other comprehensive income (loss) of associates accounted for using the equity method Unrealized loss on investments in equity instruments as at fair value through other comprehensive income Income tax related to items that will not be reclassified Items that may be reclassified subsequently to profit or loss (Notes 16, 23, 24 and 26): Exchange differences on translation of foreign financial statements Unrealized gains (losses) on available-for-sale financial assets Share of the other comprehensive losses of associates Income tax related to items that may be reclassified subsequently to profit or loss Other comprehensive loss for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET PROFIT (LOSS) ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Company Non-controlling interests		2018 Amount % $ (20,858) - (14,942) - (445,333) (1) 6,316 - (30,455) - - - (11,074) - 23,883 - (492,463) (1) $ 5,824,285 12 $ 6,294,657 13 22,091 - $ 6,316,748 13 $ 5,807,959 12 16,326 - $ 5,824,285 12		2017
				Amount % $ (23,905) - (1,306) - - - 4,064 - (315,229) (1) (18,605) - (6,919) - 54,450 - (307,450) (1) $ 5,841,839 13 $ 6,156,516 14 (7,227) - $ 6,149,289 14 $ 5,850,991 13 (9,152) - $ 5,841,839 13 (Continued)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 27) Basic Diluted	2018 Amount % $ 9.02 $ 8.93	2017
		Amount % $ 8.84 $ 8.77

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

(Concluded)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

					Equity Attribut	able to Owners of the Co	mpany
Issued C	apital(Notes 24 and 28)	Total (N $ 6,330,841 - - - 633,074 8,910 - - - - - - - 6,972,825 - 6,972,825 - - - 14,130 - - - - - - - - - $ 6,986,955	Capital Surplus otes 4, 24 and 28) $ 6,058,884 - - - - 68,510 424,637 2,054 - 757 - - - 6,554,842 - 6,554,842 - - - 104,246 341,624 2,660 - 70,716 (740 ) - - - - $ 7,073,348		Retained Earnings (Not	es 4, 23 and 24)				Oth	er Equity (Note 24)
								F	Exchange on Differences on Translation of oreign Financial Statements $ (197,633) - - - - - - - - - - (265,846) (265,846) (463,479 ) - (463,479 ) - - - - - - - - - - (11,766) (11,766) - $ (475,245)	Unrealized Gain Financial Assets at Fair Value Through Other U Comprehensive A Income $ - - - - - - - - - - - - - - 123,254 123,254 - - - - - - - - - - (459,245) (459,245) 11,737 $ (324,254)	nrealized Gain on vailable-for-sale Financial Assets $ 112,429 - - - - - - - - - - (18,605) (18,605) 93,824 (93,824) - - - - - - - - - - - - - - $ -	Unearned Stock-based Employee Compensation $ - - - - - - - - - - - - - - - - - - - - - 736 - - - - - - - $ 736
A Share Capital for $ 6,330,741 - - - 633,074 6,510 - - - - - - - 6,970,325 - 6,970,325 - - - 11,950 - - - - - - - - - $ 6,982,275	dvance Receipts Ordinary Shares $ 100 - - - - 2,400 - - - - - - - 2,500 - 2,500 - - - 2,180 - - - - - - - - - $ 4,680			Legal Reserve $ 4,473,276 566,686 - - - - - - - - - - - 5,039,962 - 5,039,962 615,651 - - - - - - - - - - - - $ 5,655,613	Special Reserve $ - - 85,204 - - - - - - - - - - 85,204 - 85,204 - 284,451 - - - - - - - - - - - $ 369,655	Unappropriated Earnings $ 8,435,785 (566,686 ) (85,204 ) (3,988,367 ) (633,074 ) - - - - - 6,156,516 (21,074) 6,135,442 9,297,896 (34,002) 9,263,894 (615,651 ) (284,451 ) (4,600,414) - - - (14,716 ) - - 6,294,657 (15,687) 6,278,970 (11,737) $ 10,015,895	Total $ 12,909,061 - - (3,988,367 ) (633,074 ) - - - - - 6,156,516 (21,074) 6,135,442 14,423,062 (34,002) 14,389,060 - - (4,600,414) - - - (14,716 ) - - 6,294,657 (15,687) 6,278,970 (11,737) $ 16,041,163

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

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ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments to reconcile profit (loss): Depreciation expenses Amortization expenses Amortization expenses for prepayments of lease obligations Impairment loss recognized (reversed) for trade receivables Expected loss on credit impairment Net gain on financial assets or liabilities at fair value through profit or loss Compensation costs of employee share options Finance costs Interest income Dividend income Share of profit of associates accounted for using the equity method Gain on disposal of property, plant and equipment Gain on disposal of investments Impairment loss Changes in operating assets and liabilities Financial assets held for trading Notes receivable Trade receivables Trade receivables from related parties Other receivables Inventories Other current assets Notes payable and trade payables Net defined benefit liabilities Other payables Short-term warranty provisions Other current liabilities Other non-current liabilities Cash generated from operations Interest received Dividends received Interest paid Income tax paid Net cash generated from operating activities	2018 $ 7,994,489 567,706 165,406 8,844 - 19,432 (19,612) 341,624 4,685 (38,789) (106,315) (95,635) (80,439) (8,012) - 967,642 (205,623) (278,370) (4,902) 29,342 (1,310,932) (76,001) 510,358 (2,538) (3,165) 15,807 84,143 2,940 8,482,085 38,789 106,315 (3,093) (1,198,350) 7,425,746	2017 $ 7,533,543 587,293 228,062 8,741 3,030 - (123,137) 424,637 12,117 (16,461) (122,220) (218,651) (96,885) (292,441) 112,120 (2,866,686) (290,700) (193,567) (110) (61,523) (614,558) 40,203 270,599 960 (280,286) 13,853 15,583 5,115 4,078,631 16,461 122,220 (9,620) (1,196,403) 3,011,289 (Continued)

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ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at fair value through other comprehensive income Purchase of financial assets at amortized cost Purchase of available-for-sale financial assets Proceeds from sale of available-for-sale financial assets Proceeds from sale of debt investments with no active market Purchase of financial assets measured at cost Purchase of investments accounted for using the equity method Net cash flow on the acquisition of subsidiaries Dividends received from associates Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in refundable deposits Payments for intangible assets Decrease (increase) in prepayments for equipment Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Decrease (increase) in short-term loans Repayments of long-term borrowings Increase in guarantee deposits received Payments of cash dividends Exercise of employee share options Increase in non-controlling interests Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2018 $ (41,168) (116,998) - - - - (1,081,527) (60,322) 146,250 (574,229) 189,061 (2,151) (111,209) (116,865) (1,769,158) 79,481 (54,245) - (4,600,414) 118,376 104,910 (4,351,892) 124,246 1,428,942 5,204,219 $ 6,633,161	2017 $ - - (6,589,478) 9,872,540 26,485 (77,333) (615,000) (118,847) 75,026 (533,741) 146,582 6,858 (76,167) 12,820 2,129,745 (456,480) (22,733) 200 (3,988,367) 77,420 757 (4,389,203) (185,189) 566,642 4,637,577 $ 5,204,219

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

(Concluded)

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ADVANTECH CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

Advantech Co., Ltd. (the “Company”) is a listed company that was established in September 1981. It manufactures and sells embedded computing boards, industrial automation products and applied and industrial computers.

The Company’s shares have been listed on the Taiwan Stock Exchange since December 1999.

To improve the entire operating efficiency of the Company and its subsidiaries (collectively referred to as the “Group”), the Company’s board of directors resolved on June 30, 2009 to have a short-form merger with Advantech Investment and Management Service (“AIMS”). The effective merger date was July 30, 2009. As the surviving entity, the Company assumed all assets and liabilities of AIMS. On June 26, 2014, the Company’s board of directors resolved to have a whale-minnow merger with Netstar Technology Co., Ltd. (“Netstar”), an indirectly 95.51%-owned subsidiary through a wholly-owned subsidiary, Advantech Corporate Investment. The effective merger date was July 27, 2014. As the surviving entity, the Company assumed all assets and liabilities of Netstar.

The functional currency of the Company is the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the board of directors on March 8, 2019.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

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

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

1) Annual Improvements to IFRSs 2014-2016 Cycle

Several standards, including IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures,” were amended in this annual improvement.

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The amendments to IAS 28 clarify that when the Group (a non-investment entity) applies the equity method to account for its investment in an associate that is an investment entity, the Group may elect to retain the fair value of the investment interests in subsidiaries of the investment entity associate. The election should be made separately for each investment entity associate, at the later of the date that (a) the investment entity associate is initially recognized, (b) the associate becomes an investment entity, or (c) the investment entity associate first becomes a parent.

2) IFRS 9 “Financial Instruments” and related amendments

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

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as at January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Group’s financial assets and financial liabilities as at January 1, 2018.

Financial Assets Cash and cash equivalents Derivatives Mutual funds Equity securities Time deposits with original maturity of more than 3 months Notes receivable, trade receivables and other receivables	Measurement Category IAS 39 IFRS 9 Loans and receivables Amortized cost Held‑for‑trading Mandatorily at fair value through profit or loss (i.e. FVTPL) Held‑for‑trading Mandatorily at FVTPL Held‑for‑trading Mandatorily at FVTPL Held‑for‑trading Fair value through other comprehensive income (i.e. FVTOCI) - equity instruments Available‑for‑sale Mandatorily at FVTPL Available‑for‑sale FVTOCI - equity instruments Financial assets measured at cost FVTOCI - equity instruments Loans and receivables Amortized cost Loans and receivables Amortized cost	Carrying Amount IAS 39 IFRS 9 Remark $ 5,204,219 $ 5,204,219 - 5,084 5,084 - 2,794,858 2,794,858 - 101,325 101,325 197,579 197,579 a) 229,381 229,381 a) 1,430,854 1,430,854 a) 78,518 78,518 a) 38,908 38,908 b) 7,941,176 7,941,176 c)

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Financial Assets FVTPL Add: Reclassification from available-for-sale (IAS 39) required reclassification Fair value option elected on January 1, 2018 Less: Reclassification to FVTOCI - equity instruments (IFRS 9) FVTOCI Equity instruments Add: Reclassification from FVTPL (IAS 39) (including fair value option revoked) Add: Reclassification from available-for-sale (IAS 39) Add: Financial assets measured at cost (IAS 39) Amortized cost Add: Reclassification from loans and receivables (IAS 39) Financial Assets Investments accounted for using the equity method	IAS 39 Carrying Amount as of January 1, 2018 Reclassifi- cations Remea- surements IFRS 9 Carrying Amount as of January 1, 2018 $ 3,098,846 - $ 229,381 - - (197,579 ) - 3,098,846 31,802 - $ 3,130,648 - - 197,579 - - 1,430,854 - - 78,518 - - 1,706,951 - 1,706,951 - 13,184,303 - 13,184,303 $ 3,098,846 $ 14,923,056 $ - $ 18,021,902 IAS 39 Carrying Amount as of January 1, 2018 Adjustments Arising from Initial Application IFRS 9 Carrying Amount as of January 1, 2018 $ 1,349,735 $ (4,572 ) $ 1,345,163	Retained Earnings Effect on January 1, 2018 $ 87,115 (128,168 ) - $ (41,053 ) Retained Earnings Effect on January 1, 2018 $ 7,051	Other Equity Effect on January 1, 2018 Remark $ (87,115 ) a) 128,168 a) - b), c) $ 41,053 Other Equity Effect on January 1, 2018 Remark $ (11,623 ) d)

a) The Group elected to classify all of its investments in equity securities previously classified as available-for-sale and at FVTPL under IAS 39 as at FVTPL and FVTOCI under IFRS 9. As a result, the related other equity - unrealized gain (loss) on available-for-sale financial assets was reclassified to retained earnings and to other equity - unrealized gain (loss) on financial assets at FVTOCI in the amount of $41,053 thousand.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value.

b) Debt investments previously classified as debt investments with no active market and measured at amortized cost under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9 because, on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding, and these investments were held within a business model whose objective is to collect contractual cash flows.
c) Notes receivable, trade receivables and other receivables that were previously classified as loans and receivables under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9.
d) As a result of retrospective application of IFRS 9 by associates, there was a decrease in investments accounted for using the equity method of $4,572 thousand, a decrease in other equity - unrealized gain (loss) on financial assets at FVTOCI of $11,623 thousand and an increase in retained earnings of $7,051 thousand on January 1, 2018.
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3) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for the related disclosures.

In identifying performance obligations, IFRS 15 and the related amendments require that a good or service is distinct if it is capable of being distinct (for example, the Group regularly sells it separately) and the promise to transfer it is distinct within the context of the contract (i.e. the nature of the promise in the contract is to transfer each good or service individually rather than to transfer a combined output).

The Group provides service-type warranties in addition to assurance that its products comply with agreed-upon specifications. IFRS 15 requires such service to be considered as a performance obligation. Any transaction price allocated to a service-type warranty is recognized as revenue, and the related costs are recognized when such warranty service is performed.

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. Prior to the application of IFRS 15, receivables and deferred revenue were recognized when revenue was recognized for the contract under IAS 18.

The Group elects to retrospectively apply IFRS 15 to contracts that were not complete as of January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1, 2018.

For all contract modifications that occurred on or before December 31, 2017, the Group did not apply the requirements in IFRS 15 individually to each of the modifications, and the Group identified the performance obligations and determine and allocated transaction price in a manner that reflected the aggregate effect of all modifications that occurred on or before December 31, 2017. This reduced the complexity and cost of retrospective application and resulted in financial information that closely aligns with the financial information that would be available under IFRS 15 without the expedient.

4) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

In determining whether to recognize a deferred tax asset, the Group should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses as deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendments also stipulate that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Group’s assets for more than their carrying amount if there is sufficient evidence that it is probable that the Group will achieve the higher amount, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

In assessing a deferred tax asset, the Group assumes it will recover the asset at its carrying amount when estimating probable future taxable profit. The Group applied the above amendments retrospectively in 2018.

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5) IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

IAS 21 stipulated that a foreign currency transaction shall be recorded on initial recognition in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. IFRIC 22 further explains that the date of the transaction is the date on which an entity recognizes a non-monetary asset or non-monetary liability from payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine the date of the transaction for each payment or receipt of advance consideration.

The Group applied IFRIC 22 prospectively to all assets, expenses and income recognized on or after January 1, 2018 within the scope of the Interpretation.

b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019

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New, Amended or Revised Standards and Interpretations Effective Date
(the “New IFRSs”) Announced by IASB (Note 1)
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New, Amended or Revised Standards and Interpretations (the “New IFRSs”)	Effective Date Announced by IASB (Note 1)
Annual Improvements to IFRSs 2015-2017 Cycle	January 1, 2019
Amendments to IFRS 9 “Prepayment Features with Negative	January 1, 2019 (Note 2)
Compensation”
IFRS 16 “Leases”	January 1, 2019
Amendments to IAS 19 “Plan Amendment, Curtailment or	January 1, 2019 (Note 3)
Settlement”
Amendments to IAS 28 “Long-term Interests in Associates and Joint	January 1, 2019
Ventures”
IFRIC 23 “Uncertainty Over Income Tax Treatments”	January 1, 2019

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.
Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
1) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17, IFRIC 4 and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

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The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts, are recognized as expenses on a straight-line basis. Prepaid lease payment for acquiring land use right in China is recognized as long-term prepaid lease. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. The Group will apply IAS 36 to all right-of-use assets.

The Group expects to apply the following practical expedients:

a) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
b) The Group will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.
c) The Group will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.
d) The Group will use hindsight, such as in determining lease terms, to measure lease liabilities.

The Group as lessor

The Group will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

Anticipated impact on assets, liabilities and equity

	Carrying	Carrying	Carrying	Adjustments	Adjustments	Adjusted
	Amount as of			Arising from		Carrying
	December		31,		Initial	Amount as of
		2018		Application		January 1, 2019
Right-of-use assets	$		-	$	683,787	$683,787
Total effect on assets	$		-	$	683,787	$ 683,787
Lease liabilities - current	$		-	$	38,165	$ 38,165
Lease liabilities - non-current			-		645,622	645,622
Total effect on liabilities	$		-	$	683,787	$ 683,787

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2) IFRIC 23 “Uncertainty Over Income Tax Treatments”

IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Group should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Group concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Group should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Group should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the Group expects to better predict the resolution of the uncertainty. The Group has to reassess its judgments and estimates if facts and circumstances change.

Upon initial application of IFRIC 23, the Group will recognize the cumulative effect of retrospective application in retained earnings on January 1, 2019.

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

The amendments clarified that IFRS 9 shall be applied to account for other financial instruments in an associate to which the equity method is not applied. These included long-term interests that, in substance, form part of the Group’s net investment in an associate.

Upon initial application of the above amendments, the Group will recognize the cumulative effect of retrospective application in retained earnings on January 1, 2019.

4) Amendments to IFRS 9 “Prepayment Features with Negative Compensation”

IFRS 9 stipulated that if a contractual term of a financial asset permits the issuer (i.e. the debtor) to prepay a debt instrument or permits the holder (i.e. the creditor) to put a debt instrument back to the issuer before maturity and the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination, the financial asset has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. The amendments further explained that reasonable compensation may be paid or received by either of the parties, i.e. a party may receive reasonable compensation when it chooses to terminate the contract early.

Upon initial application of the above amendments, the Group will recognize the cumulative effect of retrospective application in retained earnings on January 1, 2019.

5) Annual Improvements to IFRSs 2015-2017 Cycle

Several standards, including IFRS 3, IFRS 11, IAS 12 and IAS 23 “Borrowing Costs”, were amended in this annual improvement. IAS 23 was amended to clarify that, if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, the related borrowing costs shall be included in the calculation of the capitalization rate on general borrowings. Upon initial application of the above amendment, the related borrowing costs will be included in the calculation starting from 2019.

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

The amendments stipulate that, if a plan amendment, curtailment or settlement occurs, the current service cost and the net interest for the remainder of the annual reporting period are determined using the actuarial assumptions used for the remeasurement of the net defined benefit liabilities (assets). In addition, the amendments clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Group will apply the above amendment prospectively.

Except for the above impact, as of the date the financial statements were authorized for issue, the Company assesses the significant impact that the application of other standards and interpretations will have no significant influence on the Company’s financial position and financial performance.

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

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Effective Date
New IFRSs Announced by IASB (Note 1)
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New IFRSs	Effective Date Announced by IASB (Note 1)
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020 (Note 2)
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets	To be determined by IASB
between An Investor and Its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”	January 1, 2021
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020 (Note 3)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.
1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments stipulate that, when the Group sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate, the gain or loss resulting from the transaction is recognized in full. Also, when the Group loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full.

Conversely, when the Group sells or contributes assets that do not constitute a business to an associate, the gain or loss resulting from the transaction is recognized only to the extent of the Group’s interest as an unrelated investor in the associate, i.e. the Group’s share of the gain or loss is eliminated. Also, when the Group loses control of a subsidiary that does not contain a business but retains significant influence over an associate, the gain or loss resulting from the transaction is recognized only to the extent of the Group’s interest as an unrelated investor in the associate, i.e. the Group’s share of the gain or loss is eliminated.

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2) Amendments to IFRS 3 “Definition of a Business”

The amendments clarify that, to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process applied to the input that together significantly contribute to the ability to create outputs. The amendments narrow the definitions of outputs by focusing on goods and services provided to customers, and the reference to an ability to reduce costs is removed. Moreover, the amendments remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs. In addition, the amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.
c. Classification of current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.
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Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within 12 months after the reporting period; and
3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Assets and liabilities that are not classified as current are classified as non-current.

d. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries). Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective dates of acquisitions up to the effective dates of disposals, as appropriate. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

See Note 15 and Table 7 and Table 8 for the detailed information of subsidiaries (including the percentage of ownership and main businesses).

e. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as they are incurred.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of the measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted retrospectively during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date.

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f. Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which cases, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

For the purpose of presenting consolidated financial statements, the functional currencies of the group entities (including subsidiaries and associates that use currencies which are different from the currency of the Company) are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income (attributed to the owners of the Company and non-controlling interests as appropriate).

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising from the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognized in other comprehensive income.

g. Inventories

Inventories consist of raw materials, supplies, finished goods and work in process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at the weighted-average cost on the balance sheet date.

h. Investments in associates

An associate is an entity over which the Group has significant influence.

The Group uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of the equity of associates.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

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When the Company subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Group’s ownership interest is reduced due to its additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate and is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Group’ consolidated financial statements only to the extent that interests in the associate are not related to the Group.

i. Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment loss.

Property, plant and equipment in the course of construction are measured at cost less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such assets are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for their intended use.

Freehold land is not depreciated.

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

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On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

j. Goodwill

Goodwill arising from the acquisition of a business is measured at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as “cash-generating units”) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. Any impairment loss recognized for goodwill is not reversed in subsequent periods.

If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation which is disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

k. Intangible assets
1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

2) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

3) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

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l. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the assets may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

m. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to an acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

a) Measurement categories

2018

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

i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

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Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 33.

ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, and trade receivables at amortized cost, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:

i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and
ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

iii. Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

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

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2017

Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, available-for-sale financial assets, and loans and receivables.

i. Financial assets at fair value through profit or loss

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

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 33.

ii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amounts of available-for-sale monetary financial assets (relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments) are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investments are disposed of or are determined to be impaired.

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

iii. Loans and receivables

Loans and receivables (including trade receivables and cash and cash equivalent) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

b) Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables), investments in debt instruments that are measured at FVTOCI, lease receivables, as well as contract assets.

The Group always recognizes lifetime expected credit losses (i.e. ECLs) for trade receivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

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Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

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

2017

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

Financial assets carried at amortized cost, such as trade receivables, are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience with collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 90 days, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

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

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

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties.

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

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In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to impairment is recognized in other comprehensive income. In respect of available-for-sale debt securities, impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

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

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When trade receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

c) Derecognition of financial assets

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

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2) Equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue costs.

The repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of the Company’s own equity instruments.

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3) Financial liabilities

a) Subsequent measurement

Except the following situations, all financial liabilities are measured at amortized cost using the effective interest method:

Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at fair value through profit or loss when such financial liabilities are either held for trading or is designated as at fair value through profit or loss. Fair value is determined in the manner described in Note 33.

b) Derecognition of financial liabilities

The difference between the carrying amount of a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

4) Derivative financial instruments

The Group enters into forward contracts to manage its exposure to foreign exchange rate risks.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedging relationship. When the fair value of a derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial instrument is negative, the derivative is recognized as a financial liability.

Before 2018, derivatives embedded in non-derivative host contracts were treated as separate derivatives when they met the definition of a derivative; their risks and characteristics were not closely related to those of the host contracts; and the contracts were not measured at FVTPL. Starting from 2018, derivatives embedded in hybrid contracts that contain financial asset hosts that is within the scope of IFRS 9 are not separated; instead, the classification is determined in accordance with the entire hybrid contract. Derivatives embedded in non-derivative host contracts that are not financial assets that is within the scope of IFRS 9 (e.g. financial liabilities) are treated as separate derivatives when they meet the definition of a derivative; their risks and characteristics are not closely related to those of the host contracts; and the host contracts are not measured at FVTPL.

n. Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products at the best estimate by the management of the Company of the expenditures required to settle the Group’s obligations.

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o. Revenue recognition

2018 Contracts applicable to IFRS 15

The Group identifies contracts with the customers, allocates transaction price to the performance obligations and recognizes revenue when the performance obligations are satisfied.

For contracts where the period between the date when the Group transfers a promised good or service to a customer and the date on which the customer pays for that good or service is one year or less, the Group does not adjust the promised amount of consideration for the effects of a significant financing component.

1) Revenue from sale of goods

Revenue from sale of goods comes from sales of embedded computing boards, industrial automation products and applied and industrial computers.

Sales of the above products are majorly recognized as revenue under contracts when the goods are shipped because it is the time when the customer has full discretion over the manner of distribution and the price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence. Trade receivables are recognized concurrently.

The Group does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

2) Revenue from rendering services

Revenue from rendering services comes from developing products and extended warranty services. Such revenue is recognized when services are provided.

Contracts prior to 2018 without retrospective application of IFRS 15

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowances for sales returns and liabilities for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

1) Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
c) The amount of revenue can be measured reliably;
d) It is probable that the economic benefits associated with the transaction will flow to the Group; and
e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of the materials’ ownership.

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2) Rendering of services

Service income is recognized when services are provided.

Revenue from a contract to provide services is recognized with reference to the stage of completion of the contract.

3) Dividends and interest income

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

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

p. Leasing

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

1) The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

2) The Group as lessee

Operating lease payments are recognized as expenses on a straight-line basis over the lease term.

q. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

r. Employee benefits
1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services.

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered services entitling them to the contributions.

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Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and past service cost) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur or when the plan amendment or curtailment occurs. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

s. Employee share options

Employee share options granted to employee and others providing similar services.

The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Group’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vested immediately.

At the end of each reporting period, the Group revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options.

t. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

According to the Income Tax Law, an additional tax of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. If a temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit, the resulting deferred tax asset or liability is not recognized. In addition, a deferred tax liability is not recognized on taxable temporary differences arising from the initial recognition of goodwill.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carryforwards and unused tax credits for purchases of machinery, equipment and technology, research and development expenditures, and personnel training expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

a. Inventory write-downs

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realizable value is based on current market conditions and historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

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b. Significant influence over associates

As Note 16 Investments accounted for using the equity method describes that several companies are associates of the Group although the Group only holds less than 20% of the voting power in each of these companies, and the Group has significant influence over these companies as it can obtain its representatives in the board of directors according to the investment contract.

c. Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The calculation of the value in use requires management to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalents (time deposits with original maturities less than three months)		December 31	December 31
		2018 $ 76,179 5,350,844 1,206,138 $ 6,633,161	2017 $ 70,453 4,942,396 191,370 $ 5,204,219

The market rate intervals of cash in bank, at the end of the reporting period were as follows:

Demand deposits Time deposits with original maturities of less than three months	December 31
	2018 2017 0%-6.5% 0.0001%-6.9% 1.0%-5.2% 1.35%-2.3%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Financial assets held for trading Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts Non-derivative financial assets Domestic quoted shares Foreign quoted shares Mutual funds		December 31	December 31
		2018 $ - - - - -	2017 $ 5,084 289,570 9,334 2,794,858 3,098,846 (Continued)

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Financial assets mandatorily classified as at FVTPL Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts Non-derivative financial assets Domestic quoted shares Foreign quoted shares Mutual funds Financial liabilities at FVTPL-current Financial liabilities held for trading Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts Financial assets mandatorily classified as at FVTPL Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts		December 31	December 31
		2018 $ 5,198 202,622 5,270 1,885,462 2,098,552 $ 2,098,552 $ - 6,139 $ 6,139	2017 $ - - - - - $ 3,098,846 $ 6,226 - $ 6,226 (Concluded)

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows:

					Notional Amount
			Currency	Maturity Date	(In Thousands)
December	31,	2018
Sell			EUR/NTD	2019.01-2019.04	EUR12,600/NTD448,286
			EUR/USD	2019.01-2019.02	EUR400/USD459
			JPY/NTD	2019.01-2019.05	JPY380,000/NTD104,301
			RMB/NTD	2019.01-2019.04	RMB67,000/NTD295,236
December	31,	2017
Sell			EUR/NTD	2018.01-2018.05	EUR14,000/NTD499,225
			EUR/USD	2018.01-2018.04	EUR1,500/USD1,805
			JPY/NTD	2018.01-2018.05	JPY500,000/NTD134,549
			RMB/NTD	2018.01-2018.03	RMB77,000/NTD346,212

The Group entered into foreign exchange forward contracts during the years ended December 31, 2018 and 2017 to manage exposures due to exchange rate fluctuations of foreign-currency denominated assets and liabilities. Because these contracts did not meet the criteria for hedge effectiveness, they were not subject to hedge accounting.

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8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME -

2018

	December 31,	December 31,
		2018
Non-current
Investments in equity instruments at FVTOCI	$	1,300,267
Investments in equity instruments at FVTOCI:
	December 31,
		2018
Non-current
Domestic investments
Listed shares and emerging market shares
Ordinary shares - ASUSTek Computer Inc.	$	955,001
Ordinary shares - Allied Circuit Co., Ltd.		226,501
Unlisted shares
Ordinary shares - BroadTec System Inc.		3,879
Ordinary shares - BiosenseTek Corp.		-
Ordinary shares - Juguar Technology		4,743
Ordinary shares - Taiwan DSC PV Ltd.		-
		1,190,124
Foreign investments
Shanghai Shangchuang Xinwei Investment Management Co., Ltd.		107,328
JamaPro Co., Ltd.		2,815
		110,143
	$	1,300,267

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale under IAS 39. Refer to Notes 3, 10 and 11 for information related to their reclassification and comparative information for 2017.

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

	December 31,
	2018
Current
Domestic investments
Time deposits with original maturity of more than 3 months	$ 157,426

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The market interest rates of the time deposits with original maturities of more than three months were 0.2%-2.3%. The time deposits with original maturities of more than 3 months were classified as debt investments with no active market under IAS 39. Refer to Notes 3 and 12 for information related to their reclassification and comparative information for 2017.

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

	December 31,	December 31,
		2017
Current
Domestic investments
Quoted shares	$	219,000
Foreign investments
Quoted shares		10,381
	$	229,381
Non-current
Domestic investments
Quoted shares	$	1,419,479
Unlisted shares		11,375
	$	1,430,854

11. FINANCIAL ASSETS MEASURED AT COST - 2017

	December 31,
	2017
Non-current
Private equity	$ 78,518
Classified according to financial asset measurement categories
Available-for-sale financial assets	$ 78,518

The Group measured the private equity with the costs at the end of the reporting period, because there was a significant range of reasonable estimates for fair values and the probability for each estimate cannot be assessed reasonably. Therefore, the management of the Group determined that the fair value of the private equity was not reliably measured.

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12. DEBT INVESTMENTS WITH NO ACTIVE MARKET- 2017

		December 31,
		2017
Time deposits	with original maturities of more than three months	$ 38,908

The market interest rates of the time deposits with original maturities of more than three months were 1.00%-2.30% per annum as of December 31, 2017.

For information on pledged debt investments with no active market, refer to Note 35.

13. NOTES RECEIVABLE AND TRADE RECEIVABLES

Notes receivable-operating Trade receivables At amortized cost Gross carrying amount Less: Allowance for impairment loss		December 31	December 31
		2018 $ 1,461,404 $ 6,958,369 (87,491) $ 6,870,878	2017 $ 1,255,781 $ 6,686,485 (90,455) $ 6,596,030

Trade Receivables

For the year ended December 31, 2018

At amortized cost

The average credit period of the sales of goods was 30-90 days. No interest was charged on trade receivables. In order to minimize credit risk, the management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of a lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial positions, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery of the receivable, e.g. when the debtor has been placed under liquidation, or when the trade receivables are over 1 year past due, whichever occurs earlier. For trade receivables that have been proposed a full amount of impairment loss, the Group

40 -

continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Group’s provision matrix.

December 31, 2018

Not Past Due Less than 90 Days Expected credit loss rate 0.41% 0.14% Gross carrying amount $ 5,358,360 $ 1,488,386 Loss allowance (Lifetime ECL) (21,319) (2,056) Amortized cost $ 5,337,041 $ 1,486,330	90 to 180 Days 31.39% $ 53,879 (16,913) $ 36,966	180 to 360 Days 69.02% $ 34,029 (23,488) $ 10,541	Over 360 Days 100% $ 23,715 (23,715) $ -	Total % $ 6,958,369 (87,491)
				$ 6,870,878

The movements of the loss allowance of trade receivables were as follows:

	For the Year
	Ended
	December 31,
	2018
Balance at January 1, 2018 - per IAS 39	$ 90,455
Adjustment on initial application of IFRS 9	-
Balance at January 1, 2018 - per IFRS 9	90,455
Add: Net remeasurement of loss allowance	19,432
Less: Amounts written off*	(21,605)
Foreign exchange gains and losses	(791)
Balance at December 31, 2018	$ 87,491

The Group wrote off trade receivables and related loss allowance of $21,605 thousand due to the fact that the customers’ trade receivables have been aged more than 2 years and the legal attest letters were served without receivables collected.

For the year ended December 31, 2017

The Group applied the same credit policy in 2018 and 2017. The Group recognized an allowance for impairment loss of 100% against all receivables over 1 year because historical experience was that receivables that are past due beyond 1 year were not recoverable. Allowance for impairment loss was recognized against trade receivables between 91 days and 1 year based on estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

For some trade receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss, because there was no significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances.

41 -

The aging of receivables was as follows:

	December 31,
	2017
Not overdue	$ 5,663,891
Overdue
1 to 90 days	924,551
91 to 360 days	64,669
Over 360 days	33,374
	$ 6,686,485

The above aging schedule was based on the number of past due days from the end of the credit term.

The aging of receivables that were past due date but not impaired was as follows:

					December 31,	December 31,
						2017
1 to 30 days					$	763,822
31 to 60 days						117,935
61 to 90 days						42,794
					$	924,551
The above aging schedule was based on the number	of past due days from the			end of the	credit	term.
The movements of the allowance for doubtful trade	receivables were as follows:
	Individually		Collectively
	Assessed for		Assessed for
	Impairment		Impairment			Total
Balance at January 1, 2017	$	13,686	$	87,668	$	101,354
Add: Impairment losses recognized on
receivables		185		2,845		3,030
Less: Amounts written off during the period as
uncollectible		(12,158)		(1,575)		(13,733)
Impairment losses recognized from business
combination		-		37		37
Foreign exchange translation gains and losses		-		(233)		(233)
Balance at December 31, 2017	$	1,713	$	88,742	$	90,455

42 -

14. INVENTORIES

Raw materials Work in process Finished goods Inventories in transit		December 31	December 31
		2018 $ 3,773,265 1,533,978 1,531,644 718,933 $ 7,557,820	2017 $ 3,122,276 1,235,097 1,335,817 549,061 $ 6,242,251

The costs of inventories recognized as costs of goods sold for the years ended December 31, 2018 and 2017 were $29,631,016 thousand and $26,610,027 thousand, respectively.

The costs of inventories decreased by $630,341 thousand and $577,528 thousand as of December 31, 2018 and 2017, respectively, when stated at the lower of cost or net realizable value.

15. SUBSIDIARIES

Subsidiaries included in the consolidated financial statements.

The entities included in the consolidated statements are listed below.

Investor
Investee
Nature of Activities
The Company
AAC (BVI)
Investment and management service
ATC
Sale of industrial automation products
Advanixs Corporation
Production and sale of industrial automation
products
Advantech Corporate Investment
Investment holding company
AEUH
Investment and management services
ASG
Sale of industrial automation products
AAU
Sale of industrial automation products
AJP
Sale of industrial automation products
AMY
Sale of industrial automation products
AKR
Sale of industrial automation products
ABR
Sale of industrial automation products
AIN
Sale of industrial automation products
AdvanPOS
Production and sale of POS systems
LNC
Production and sale of machines with
computerized numerical controls
AMX
Sale of industrial automation products
Advantech Innovative Design Co.,
Ltd.
Product design
BEMC
Sale of industrial network communications
systems
B+B
Sale of industrial network communications
systems
AiST
Design, develop and sale of intelligent service
AKST
Production and sale of intelligent medical
displays
ATH
Production of computers
AVN
Sale of industrial automation products
ARU
Production and sales of industrial automation
products
AKR
AKST
Production and sale of intelligent medical
displays

% of Ownership
December 31
2018
2017
Remark
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
a
100.00
100.00
a
100.00
100.00
a
100.00
100.00
a
100.00
100.00
a
80.00
80.00
a
99.99
99.99
a
100.00
100.00
a
64.10
81.17
l
100.00
100.00
a
100.00
100.00
a
-
60.00
m
60.00
-
m
100.00
100.00
a
76.00
36.00
a, b
51.00
-
a, c
60.00
-
a, g
100.00
-
a, n
24.00
24.00
a, b
(Continued)

43 -

Investor
Investee
Nature of Activities
Advantech
Corporate
Cermate
Manufacturing of electronic parts, computer,
and peripheral devices
Investment
Huan Yan, Jhih-Lian Co., Ltd.
Service plan for combination of related
technologies of water treatment and
applications of Internet of Things
Yun Yan, Wu-Lian Co., Ltd.
Industrial equipment Networking in Greater
China
ATC
ATC (HK)
Investment and management services
ATC (HK)
AKMC
Production and sale of components of
industrial automation products
Advanixs Kun Shan Corp.
Production and sale of industrial automation
products
AAC (BVI)
ANA
Sale and fabrication of industrial automation
products
AAC (HK)
Investment and management service
SIoT (Cayman)
Design, development and sale of IoT
intelligent system service
ANA
BEMC
Sale of industrial network communications
B+B
Sale of industrial network communications
AAC (HK)
ACN
Sale of industrial automation products
AiSC
Production and sale of industrial automation
products
AXA
Development and production of software
products
SIoT (Cayman)
SIoT (China)
Technology development consulting and
services in the field of intelligent
technology
A-DLoG
Design, R&D and sale of industrial
automation vehicles and related products
ACN
Hangzhou Advantofine
Automation Co., Ltd.
Processing and sale of industrial automation
products
AXA
Development and production of software
products
AiSC
SIoT (China)
Technology development consulting and
services in the field of intelligent
technology
AEUH
AEU
Sale of industrial automation products
APL
Sale of industrial automation products
AEU
A-DLoG
Design, R&D and sale of industrial
automation vehicles and related products
ASG
ATH
Production of computers
AID
Sale of industrial automation products
Cermate
Land Mark
General investment
Land Mark
Cermate (Shanghai)
Sale of industrial electronic equipment
Cermate (Shenzhen)
Production of LCD touch panel, USB cable,
and industrial computer
LNC
Better Auto
General investment
Better Auto
Famous Now
General investment
Famous Now
LNC Dong Guan Co., Ltd.
Production and sale of industrial automation
products
BEMC
Avtek
General investment
Avtek
B+B
General investment
B+B
BBI
Sale of industrial network communications
systems
Quatech
Sale of industrial network communications
systems
IMC
Sale of industrial network communications
systems
BBI
B&B Electronics
Sale of industrial network communications
systems
B+B (CZ)
Manufacturing of cellular and automation
solutions
Conel Automation
Sale of industrial network communications
systems
B&B DMCC
Sale of industrial network communications
systems
B&B Electronics
B+B (CZ)
Manufacturing of cellular and automation
solutions
B+B (CZ)
Conel Automation
Sale of industrial network communications
systems

% of Ownership
December 31
2018
2017
Remark
55.00
55.00
50.00
-
a, d
50.00
-
a, d
100.00
100.00
100.00
100.00
-
100.00
i
100.00
100.00
100.00
100.00
100.00
-
a, h
-
40.00
m
40.00
-
m
100.00
100.00
100.00
100.00
-
100.00
a, e
99.00
-
a, h
100.00
-
j
-
100.00
a, f
100.00
-
a, e
-
100.00
k
100.00
100.00
100.00
100.00
a
-
100.00
j
49.00
51.00
a, c
100.00
100.00
a
100.00
100.00
a
100.00
100.00
a
90.00
90.00
100.00
100.00
100.00
100.00
100.00
100.00
-
100.00
o
-
100.00
o
100.00
100.00
-
100.00
o
100.00
100.00
100.00
100.00
99.99
99.99
1.00
1.00
100.00
100.00
0.01
0.01
99.00
99.00
(Concluded)

44 -
Remark a: Not significant subsidiaries and their financial statements had not been audited. Management of the Group believes that there would not be material impacts had the financial statements of these subsidiaries been audited.
Remark b: In the first quarter of 2017, the Group acquired 60% of the equity of AKST with an acquisition of 24% and 36% of AKST’s equity by the Company and AKR, respectively. In the fourth quarter of 2018, the Company acquired 40% of the equity of AKST, which led the Company’s equity investment in AKST increase from 36% to 76%.
Remark c: In the first quarter of 2018, the Group acquired 49% of the equity of ATH, which led the Group’s equity investment in ATH increase from 51% to 100%. After the Group increased capital and adjusted its investment structure in ATH, the Company and ASG held 51% and 49% of the equity of ATH, respectively.
Remark d: In the first quarter of 2018, Advantech Corporate Investment founded Huan Yan, Jhih-Lian Co., Ltd. and Yun Yan, Wu-Lian Co., Ltd. and acquired 50% of the equity in each of these subsidiaries.
Remark e: In the first quarter of 2018, the Group adjusted its investment structure and ACN directly held 100% of the equity of AXA.
Remark f: In the first quarter of 2018, Hangzhou Advantofine Automation Co., Ltd. was liquidated.
Remark g: In the second quarter of 2018, the Group acquired 60% of the equity of AVN.
Remark h: In the second quarter of 2018, the Group founded SIoT (Cayman) and SIoT (China).
Remark i: In the second quarter of 2018, Advanixs Kun Shan Corp. were merged by AKMC. Advanixs Kun Shan Corp. ceased to exist and is currently carrying out liquidation procedures.
Remark j: In the third quarter of 2018, the Group adjusted its investment structure and SIoT (Cayman) acquired 100% shares of the equity of A-DloG.
Remark k: In the third quarter of 2018, AiSC invested SIoT (China) and held 1% of the equity of SIoT (China).
Remark l: In the first and the third quarters of 2018, the Group sold 1.11% and 15.96% of the equity of LNC, which led the Group’s equity investment in LNC to decrease from 81.17% to 64.10%.
Remark m: In the fourth quarter of 2018, the Group adjusted its investment structure, and BEMC was liquidated. The Company directly holds B+B at the moment.
Remark n: In the fourth quarter of 2018, the Group founded ARU.
Remark o: In the fourth quarter of 2018, Avtek and Quatech were in the process of liquidation.
45 -

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

Associates that are not individually material Listed companies Axiomtek Co., Ltd. (“Axiomtek”) Winmate Inc. (“Winmate”) AzureWare Technologies, Inc. (“AzureWare”) Nippon RAD Inc. (Nippon RAD) Mildex Optical Inc. (“Mildex”) Unlisted companies AIMobile Co., Ltd. (“AIMobile”) Deneng Scientific Research Co., Ltd. (“Deneng”) Jan Hsiang Electronics Co., Ltd. (“Jan Hsiang”) CDIB Innovation Accelerator Co., Ltd. (“CDIB”) DotZero Co., Ltd. (“DotZero”) iLink Co., Ltd. (“iLink”) Shanghai Yanle Co., Ltd. (“Yanle”)		December 31	December 31
		2018 $ 619,411 542,761 534,780 298,700 183,210 65,012 14,100 8,010 147,109 4,629 9,407 4,393 $ 2,431,522	2017 $ 622,604 544,960 - - - 84,140 15,457 10,447 72,127 - - - $ 1,349,735

In the fourth quarters of 2017, the Group paid cash $540,000 thousand for 16.62% of the equity of Winmate. The Group had significant influence over Winmate.

In the first quarter of 2018, the Group subscribed for 19.65% of the equity of AzureWave Technologies, Inc. through a private placement with the approval of the board of directors. The Group has significant influence over AzureWave Technologies, Inc.

In the second quarter of 2018, the Group paid cash of $299,960 thousand for 19% equity of Nippon RAD. The Group had significant influence over Nippon RAD with the approval of the broad of directors.

In the second quarter of 2018, the Group paid cash of $10,067 thousand for 25% equity of iLink Co., Ltd. The Group had significant influence over iLink Co., Ltd.

In the third quarter of 2018, the Group paid cash of $4,392 thousand for 45% equity of Shanghai Yanle Co., Ltd. The Group had significant influence over Shanghai Yanle Co., Ltd.

In the third quarter of 2018, the Group paid cash of $4,900 thousand for a 49% equity of DotZero Co., Ltd. The Group had significant influence over DotZero Co., Ltd.

In the fourth quarter of 2018, the Group paid cash of $202,948 thousand for a 15% equity of Mildex Optical Inc. The Group had significant influence over Mildex Optical Inc.

In response to the application of IFRS 9 in 2018, Winmate and Axiomtek applied retroactively on January 1, 2018 and the Group recognized related changes according to ratio of shareholding and thus increased its retained earnings by $7,051 thousand and decreased unrealized gain on financial assets at fair value through other comprehensive income by $11,623 thousand.

46 -

Aggregate information of associates that are not individually material

The Group’s share of: Profit from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) for the year	For the Year Ended	For the Year Ended	December 31
		2018 $ 95,635 (26,016) $ 69,619	2017 $ 218,651 (8,225) $ 210,426

Except for financial statements of Axiomtek and Nippon RAD which have been audited or reviewed, investments were accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on financial statements which have not been audited. Management believes there is no material impact on the equity method accounting or the calculation of the share of profit or loss and other comprehensive income from the financial statements of above companies which have not been audited.

17. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Depreciation expenses Disposals Acquisitions through business combinations Reclassifications Impairment losses Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Depreciation expenses Disposals Acquisitions through business combinations Reclassifications Effect of foreign currency exchange differences Balance at December 31, 2018 Carrying amounts at December 31, 2018	Freehold Land $ 2,948,580 - (22,017 ) 29,007 - (11,590) $ 2,943,980 $ - - - - - - - $ - $ 2,943,980 $ 2,943,980 - (15,930 ) - - 6,077 $ 2,934,127 $ - - - - - - $ - $ 2,934,127	Buildings $ 7,080,989 196,264 (13,424 ) 44,460 6,716 (40,459) $ 7,274,546 $ 1,228,673 193,563 (5,741 ) 741 5,295 - (7,835) $ 1,414,696 $ 5,859,850 $ 7,274,546 18,769 (54,831 ) - - (42,752) $ 7,195,732 $ 1,414,696 199,740 (7,147 ) - - (16,007) $ 1,591,282 $ 5,604,450	Equipment $ 1,631,738 48,483 (120,407 ) 24,903 55,809 (5,601) $ 1,634,925 $ 1,155,669 115,809 (111,114 ) 15,453 5,571 7,183 (2,077) $ 1,186,494 $ 448,431 $ 1,634,925 166,934 (92,652 ) 57 14,212 (13,540) $ 1,709,936 $ 1,186,494 110,418 (65,293 ) 5 (50,630 ) (8,381) $ 1,172,613 $ 537,323	Office Equipment $ 862,409 60,256 (93,374 ) 6,163 6,002 (10,833) $ 830,623 $ 644,435 86,120 (85,344 ) 4,671 7,724 1,031 (7,393) $ 651,244 $ 179,379 $ 830,623 88,061 (46,949 ) 524 (19,262 ) (2,976) $ 850,021 $ 651,244 75,835 (44,304 ) 151 (26,094 ) (2,086) $ 654,746 $ 195,275	Other Facilities $ 1,605,230 143,068 (46,807 ) 4,952 39,873 (16,734) $ 1,729,582 $ 1,053,622 191,801 (45,520 ) 3,948 1,506 542 (7,752) $ 1,198,147 $ 531,435 $ 1,729,582 158,409 (59,958 ) 1,483 (76,318 ) (9,935) $ 1,743,263 $ 1,198,147 181,713 (52,241 ) 738 (86,966 ) (7,249) $ 1,234,142 $ 509,121	Construction in Progress $ 43,289 85,670 (1,387 ) - (123,521 ) 206 $ 4,257 $ - - - - - - - $ - $ 4,257 $ 4,257 180,634 (7,287 ) - (170,403 ) (4,716) $ 2,485 $ - - - - - - $ - $ 2,485	Total $ 14,172,235 533,741 (297,416 ) 109,485 (15,121 ) (85,011) $ 14,417,913 $ 4,082,399 587,293 (247,719 ) 24,813 20,096 8,756 (25,057) $ 4,450,581 $ 9,967,332 $ 14,417,913 612,807 (277,607 ) 2,064 (251,771 ) (67,842) $ 14,435,564 $ 4,450,581 567,706 (168,985 ) 894 (163,690 ) (33,723) $ 4,652,783 $ 9,782,781

47 -

As a result of the actual sales growth post the business combination of AKST, a subsidiary of the Company, missed expectations, AKST had continuous losses for the year ended December 31, 2017. In addition, the future operations of AKST are not forecasted to be optimistic. Hence, the future cash flows are estimated to decrease. The Company carried out a review of the recoverable amount of that related assets and determined that the carrying amount exceeded the recoverable amount. The review led to the recognition of an impairment loss of $8,756 thousand, which was recognized in other gains and losses for the year ended December 31, 2017.

The above items of property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives as follows:

Buildings
Main buildings	20-60 years
Electronic equipment	5 years
Engineering systems	5 years
Equipment	2-8 years
Office equipment	2-8 years
Other facilities	2-10 years

Property, plant and equipment pledged as collateral for borrowings are set out in Note 35.

18. GOODWILL

Cost Balance at January 1 Additional amounts recognized from business combinations occurring during the year (Note 29) Adjustments for goodwill after acquisition (Note 29) Effect of foreign currency exchange differences Balance at December 31 Accumulated impairment losses Balance at January 1 Impairment losses recognized during the year Effect of foreign currency exchange differences Balance at December 31 Carry amount at December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,828,958 65,207 - 43,624 $ 2,937,789 $ (101,409) - 3,621 $ (97,788) $ 2,840,001	2017 $ 2,845,831 79,713 18,075 (114,661) $ 2,828,958 $ - (97,788) (3,621) $ (101,409) $ 2,727,549

The Group acquired AKST in January 2017. In the second quarter of 2017, after obtaining the audited financial statements of AKST for the year ended December 31, 2016, the Group paid the remaining installment of US$600 thousand and adjusted the goodwill on the acquisition based on those audited financial statements. The actual sales growth post the business combination of AKST, a subsidiary of the Company, did not turn out as expected; AKST had continuous losses for the year ended December 31, 2017. An impairment loss for goodwill amounted to $97,788 thousand and was recognized for the year ended December 31, 2017.

48 -

19. OTHER INTANGIBLE ASSETS

Trademarks Client Relationships Cost Balance at January 1, 2017 $ 525,656 $ 522,604 Additions - - Disposals - - Acquisitions through business combinations - - Effect of foreign currency exchange differences (31,152) (26,027) Balance at December 31, 2017 $ 494,504 $ 496,577 Accumulated amortization and impairment Balance at January 1, 2017 $ - $ 124,345 Amortization expenses - 29,259 Disposals - - Impairment losses recognized - - Effect of foreign currency exchange differences - 2,936 Balance at December 31, 2017 $ - $ 156,540 Carrying amounts at December 31, 2017 $ 494,504 $ 340,037 Cost Balance at January 1, 2018 $ 494,504 $ 496,577 Additions - - Disposals - - Acquisitions through business combinations - - Effect of foreign currency exchange differences 12,543 10,886 Balance at December 31, 2018 $ 507,047 $ 507,463 Accumulated amortization and impairment Balance at January 1, 2018 $ - $ 156,540 Amortization expenses - 29,147 Disposals - - Effect of foreign currency exchange differences - 1,649 Balance at December 31, 2018 $ - $ 187,336 Carrying amounts at December 31, 2018 $ 507,047 $ 320,127	Technology Licenses $ 435,473 - - - (20,595) $ 414,878 $ 186,118 58,825 - - (2,642) $ 242,301 $ 172,577 $ 414,878 - - - 8,721 $ 423,599 $ 242,301 43,708 - 4,003 $ 290,012 $ 133,587	Others $ 617,967 77,986 (211,991) 9,921 (37,243) $ 456,640 $ 473,797 139,978 (211,707) 5,576 (68,293) $ 339,351 $ 117,289 $ 456,640 111,209 (20,427) 70 5,566 $ 553,058 $ 339,351 92,551 (20,427) 6,445 $ 417,920 $ 135,138	Total $ 2,101,700 77,986 (211,991) 9,921 (115,017) $ 1,862,599 $ 784,260 228,062 (211,707) 5,576 (67,999) $ 738,192 $ 1,124,407 $ 1,862,599 111,209 (20,427) 70 37,716 $ 1,991,167 $ 738,192 165,406 (20,427) 12,097 $ 895,268 $ 1,095,899

Other intangible assets were amortized on a straight-line basis over their estimated useful lives as follows:

Customers relationships	4-15 years
Technology licenses	5-8 years
Others	1-5 years

The actual sales growth post the business combination of AKST, a subsidiary of the Company, did not turn out as expected; AKST had continuous losses for the year ended December 31, 2017. An impairment loss for intangible assets amounted to $5,576 thousand and was recognized for the year ended December 31, 2017.

49 -

20. PREPAYMENTS FOR LEASES

Current assets (included in other current assets) Non-current assets		December 31	December 31
		2018 $ 8,673 297,665 $ 306,338	2017 $ 8,854 312,708 $ 321,562

Lease prepayments are for the Group’s land-use right in mainland China.

21. BORROWINGS

a. Short-term borrowings

Secured borrowings Bank loans Unsecured borrowings Line of credit borrowings		December	31
		2018 $ - 87,581 $ 87,581	2017 $ 8,400 - $ 8,400

The weighted average effective interest rates on bank loans was 1.38%-3.15% and 2.87% per annum as of December 31, 2018 and 2017, respectively.

b. Long-term borrowings

Secured borrowings Bank loans Other loans Less: Current portions Long-term borrowings		December 31	December 31
		2018 $ - 55,410 55,410 (9,626) $ 45,784	2017 $ 50,258 63,459 113,717 - $ 113,717

The long-term borrowings are borrowings of the subsidiary AKST. The effective interest rate of line of secured borrowings was 1.60%-2.75% per annum as of December 31, 2017.

Other borrowings are loans from the government. As of December 31, 2017, the effective interest rate was 2.91%-3.16% per annum.

With demand of borrowings, the Group pledged time deposits, freehold land and buildings refer to Note 35.

50 -

22. OTHER LIABILITIES

Other payables Payables for salaries or bonuses Payables for employee benefits Payables for royalties Others (Note)		December 31	December 31
		2018 $ 2,143,770 207,175 107,409 1,203,845 $ 3,662,199	2017 $ 2,324,441 180,617 118,347 1,001,305 $ 3,624,710

Note: Including marketing expenses and freight expenses.

23. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company and its domestic subsidiaries of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

For certain subsidiaries with a few or no employees, they have not established a set of policies for employee retirement and therefore not recognized related retirement expenses.

Except for those aforementioned subsidiaries, the rest of overseas subsidiaries recognized retirement expenses when making contribution to the retirement plan in accordance with local laws.

b. Defined benefit plans

The defined benefit plan adopted by the Company and Cermate of the Group in accordance with the Labor Standards Law, is operated by the government of the ROC. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company and Cermate Technologies Inc. each contribute amounts equal to 2% of total monthly salaries and wages to a pension fund administered by pension fund monitoring committees. Pension contributions are deposited in the Bank of Taiwan in the committees’ name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy.

51 -

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Deficit Net defined benefit liabilities Movements in net defined benefit liabilities were as follows: Present Value of the Defined Benefit Obligation Balance at January 1, 2017 $ 347,702 Service cost Current service cost 2,137 Past service cost 4,589 Net interest expense (income) 4,787 Recognized in profit or loss 11,513 Remeasurement Return on plan assets (excluding amounts included in net interest) - Actuarial loss Changes in demographic assumptions 20,380 Experience adjustments 2,983 Recognized in other comprehensive income 23,363 Contributions from the employer - Benefits paid (8,997) Balance at December 31, 2017 373,581 Service cost Current service cost 2,400 Net interest expense (income) 5,143 Recognized in profit or loss 7,543 Remeasurement Return on plan assets (excluding amounts included in net interest) - Actuarial gain or loss Changes in demographic assumptions 6,812 Changes in financial assumptions 11,527 Experience adjustments 6,192 Recognized in other comprehensive income 24,531 Contributions from the employer - Benefits paid (11,039) Balance at December 31, 2018 $ 394,616		December 31
	2018 2017 $ 394,616 $ 373,581 (139,071) (136,356) 255,545 237,225 $ 255,545 $ 237,225 Fair Value of the Plan Assets Net Defined Benefit Liabilities (Assets) $ (135,342) $ 212,360 - 2,137 - 4,589 (1,920) 2,867 (1,920) 9,593 542 542 - 20,380 - 2,983 542 23,905 (8,633) (8,633) 8,997 - (136,356) 237,225 - 2,400 (1,893) 3,250 (1,893) 5,650 (3,673) (3,673) - 6,812 - 11,527 - 6,192 (3,673) 20,858 (8,188) (8,188) 11,039 - $ (139,071) $ 255,545

52 -

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,372 905 1,436 1,937 $ 5,650	2017 $ 1,192 1,464 1,452 5,485 $ 9,593

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate(s) Expected rate(s) of salary increase	December 31
	2018 2017 1.125%-1.375% 1.375%-1.500% 3.000%-3.250% 3.000%-3.250%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2018 $ (11,723) $ 12,218 $ 11,770 $ (11,358)	2017 $ (11,389) $ 11,878 $ 11,472 $ (11,062)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

53 -

Expected contributions to the plan for the next year Average duration of the defined benefit obligation		December	31
	2018 2017 $ 9,477 $ 1,945 12.5-15.4 years 12.6-15.5 years

24. EQUITY

a. Share capital

Ordinary shares

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2018 800,000 $ 8,000,000 698,696 $ 6,986,955	2017 800,000 $ 8,000,000 697,283 $ 6,972,825

Fully paid ordinary shares, which have a par value of NT$10, carry one vote per share and carry a right to dividends.

The changes in shares are due to employees’ exercise of their employee share options.

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (1) Issuance of ordinary shares Conversion of bonds The difference between consideration received or paid and the carrying amount of subsidiaries’ net assets during actual disposal or acquisition Share of changes in capital surplus of associates May be used to offset a deficit only Changes in percentage of ownership interests in subsidiaries (2) Employee share options Employees’ share compensation Share of changes in capital surplus of associates May not be used for any purpose Employee share options		December 31	December 31
		2018 $ 3,396,888 931,849 88,560 55 4,263 1,519,818 78,614 27,890 1,025,411 $ 7,073,348	2017 $ 3,396,888 931,849 17,844 - 5,003 1,241,557 78,614 25,285 857,802 $ 6,554,842

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1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).
2) Such capital surplus arises from the effect of changes in ownership interest in a subsidiary resulting from equity transactions other than actual disposal or acquisition, or from changes in capital surplus of subsidiaries accounted for by using equity method.

c. Retained earnings and dividends policy

Under the dividends policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation and remuneration of directors after amendment, refer to employees’ compensation and remuneration of directors in Note 25, d.

The Company operates in an industry related to computers, and its business related to network servers is new but with significant potential for growth. Thus, in formulating its dividends policy, the Company takes into account the overall business and industry conditions and trends, its objective of enhancing the shareholders’ long-term interests, and the sustainability of the Company’s growth. The policy also requires that share dividends be less than 75% of total dividends to retain internally generated cash within the Company in order to finance future capital expenditures and working capital requirements.

An appropriation of earnings to a legal reserve should be made until the legal reserve equals the Company’s paid-in capital. The legal reserve may be used to offset deficits. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and in the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company.

The appropriation of earnings for 2017 and 2016 have been approved in the shareholders’ meetings on May 24, 2018 and May 26, 2017, respectively, were as follows:

Legal reserve Special reserve Cash dividends Share dividends	Appropriation of Earnings For the Year Ended December 31 2017 2016 $ 615,651 $ 566,686 284,451 85,204 4,600,414 3,988,367 - 633,074	Dividends Per Share (NT$)
		For the Year Ended December 31
		2017 2016 $ - $ - - - 6.6 6.3 - 1.0

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The appropriations of earnings for 2018, which have been proposed by the Company’s board of directors on March 8, 2019. The appropriations and dividends per share were as follows:

	Appropriation	Appropriation	Dividends Per
	of	Earnings	Share (NT$)
Legal reserve	$	629,466	$ -
Special reserve		429,108	-
Cash dividends		4,751,129	6.8

The appropriations of earnings for 2018 are subject to the resolution of the shareholders in their meeting to be held on May 28, 2019.

d. Special reserves

Beginning at January 1 Appropriations in respect of Debits to other equity items Balance at December 31	For the Year Ended	For the Year Ended	December 31
		2018 $ 85,204 284,451 $ 369,655	2017 $ - 85,204 $ 85,204

e. Other equity items
1) Exchange differences on translating the financial statements of foreign operations

For the Year Ended 2018 Balance at January 1 $ (463,479) Effect of change in tax rate 16,752 Recognized during the period Exchange differences arising on translating the financial statements of foreign entities (19,659) Share of those of associates accounted for using the equity method (8,859) Other comprehensive income recognized for the period (11,766) Balance at December 31 $ (475,245) Unrealized gain (loss) from available-for-sale financial assets Balance at January 1, 2017 Recognized during the period Unrealized gain arising on revaluation of available-for-sale financial assets Share from subsidiaries accounted for using the equity method Reclassification adjustment Disposal of available-for-sale financial assets Other comprehensive income recognized for the period Balance at December 31, 2017 Adjustment on initial application of IFRS 9 Balance at January 1, per IFRS 9	For the Year Ended	December 31
		2017 $ (197,633) - (260,103) (5,743) (265,846) $ (463,479) $ 112,429 163,398 (16,927) (165,076) (18,605) 93,824 (93,824) $ -

2) Unrealized gain (loss) from available-for-sale financial assets
56 -
3) Unrealized gain or loss on Financial Assets at FVTOCI

		For the Year	For the Year
			Ended
		December 31,
			2018
	Balance at January 1 per IAS 39	$	-
	Adjustment on initial application of IFRS 9		123,254
	Balance at January 1 per IFRS 9		123,254
	Recognized during the period
	Unrealized loss - equity instruments		(445,333)
	Share of those of associates accounted for using the equity method		(13,912)
	Other comprehensive income recognized for the period		(459,245)
	Cumulative unrealized gain (loss) of equity instruments transferred to retained
	earnings due to disposal		11,737
	Balance at December 31	$	(324,254)
4)	Unearned employee benefits compensation
		For the Year
			Ended
		December 31,
			2018
	Balance at January 1	$	-
	Share from associates accounted for using the equity method		736
	Balance at December 31	$	736

f. Non-controlling interests

Balance at January 1 Share of profit (loss) for the year Other comprehensive income during the year Exchange difference on translation of foreign financial statements Remeasurement on defined benefit plans Non-controlling interests arising from decreasing investment in subsidiaries (Note 30) Non-controlling interests arising from increasing investment in subsidiaries (Note 30) Non-controlling interests arising from acquisition of subsidiary, AKST (Note 29) Non-controlling interests arising from acquisition of subsidiary, AVN (Note 29) Employees’ holding outstanding vest share option related non-controlling interests issued by subsidiaries Balance at December 31	For the Year Ended	For the Year Ended	December 31
		2018 $ 179,366 22,091 (5,880) 115 56,829 (22,701) - 7,257 806 $ 237,883	2017 $ 173,315 (7,227) (1,852) (73) - - 15,203 - - $ 179,366

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25. NET PROFIT FROM CONTINUING OPERATIONS

a. Finance costs

Interest on bank loans Others b. Depreciation and amortization An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses	For the Year Ended	For the Year Ended	December 31
	2018 $ 2,237 2,448 $ 4,685 For the Year Ended		2017 $ 7,193 4,924 $ 12,117 December 31
		2018 $ 151,782 415,924 $ 567,706 $ 831 292 131,465 32,818 $ 165,406	2017 $ 148,165 439,128 $ 587,293 $ 5,011 196 191,842 31,013 $ 228,062

c. Employee benefits expense

Short-term benefits Post-employment benefits Defined contribution plans Defined benefit plans (Note 23) Share-based payments Equity-settled Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 8,319,973 316,488 5,650 322,138 341,624 736,112 $ 9,719,847 $ 2,076,967 7,642,880 $ 9,719,847	2017 $ 7,913,000 284,432 9,593 294,025 424,637 604,702 $ 9,236,364 $ 2,052,280 7,184,084 $ 9,236,364

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d. Employees’ compensation and remuneration of directors

According to the Articles of Incorporation of the Company, the Company accrued employees’ compensation at the rates of no less than 5% and remuneration of directors at the rates of no higher than 1%, of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2018 and 2017, which have been approved by the Company’s board of directors on March 8, 2019 and March 2, 2018, respectively, were as follows:

Employees’ compensation Remuneration of directors	For the Year Ended December 31
	2018 2017 $ 275,000 $ 273,000 10,600 10,600

If there is a change in the amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate.

There is no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

e. Gain or loss on foreign currency exchange

Foreign exchange gains Foreign exchange losses Net losses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,088,910 (1,071,954) $ 16,956	2017 $ 871,608 (947,706) $ (76,098)

26. INCOME TAXES

a. Major components of tax expense recognized in profit or loss

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior year Deferred tax In respect of the current year Adjustments to deferred tax attributable to changes in tax rates and laws Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,540,532 64,158 (254,230) 1,350,460 143,835 183,446 327,281 $ 1,677,741	2017 $ 1,284,064 37,047 (3,954) 1,317,157 15,786 51,311 67,097 $ 1,384,254

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A reconciliation of accounting profit and income tax expense is as follows:

Profit before tax from continuing operations Income tax expense calculated at the statutory rate Nondeductible expenses in determining taxable income Tax-exempt income Income tax on unappropriated earnings Land value increment tax Investment credits in the current year Loss carryforwards in the current year Unrecognized deductible temporary differences Adjustments for prior years’ tax Effect of tax rate changes Others Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 7,994,489 1,923,694 713 (83,676) 64,158 4,562 (158,726) (260) (1,137) (254,230) 183,446 (803) $ 1,677,741	2017 $ 7,533,543 1,691,459 544 (264,323) 37,047 7,733 (86,891) (7,859) 11,174 (3,954) - (676) $ 1,384,254

In 2017, the applicable corporate income tax rate used by the group entities in the ROC is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5% while the applicable tax rate used by subsidiaries in China is 25%, except for subsidiaries qualified for 15% preferential tax rate for Hi-Tech Industries. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

As the status of the 2019 appropriations of earnings is uncertain, the potential income tax consequences of 5% income tax rate of the 2018 unappropriated earnings are not reliably determinable.

b. Income tax recognized in other comprehensive income

Deferred tax Effect of change in tax rate In respect of the current year Translation of foreign operations Remeasurement on defined benefit plans	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ (18,897) (4,171) (7,131) $ (30,199)	2017 $ - (54,450) (4,064) $ (58,514)

c. Current tax liabilities

Current tax liabilities Income tax payable		December 31	December 31
		2018 $ 1,611,886	2017 $ 1,269,165

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d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2018

Deferred tax assets Temporary differences Unrealized gross profit Unrealized loss on inventory write-downs Exchange differences on translation of foreign financial statements Loss carryforwards Defined benefit obligation Unrealized exchange losses (gains) Unrealized warranty liabilities Remeasurement of defined benefit plans Allowance for impaired receivables Sales allowance Others Deferred tax liabilities Temporary differences Undistributed earnings of subsidiaries Remeasurement of defined benefit plans Financial assets -FVTPL Exchange differences arising on translating of the financial statements of foreign entities Unrealized exchange gains Property, plant and equipment Intangible assets and goodwill Others	Opening Balance Recognized in Profit or Loss Recognized in Other Compre- hensive Income $ 75,876 $ 60,150 $ - 49,176 24,939 - 95,080 - 23,883 45,472 53 - 15,423 2,294 - 3,007 (2,447) - 24,072 1,221 - 15,544 - 6,915 4,504 (690) - - 3,090 70,287 (16,589) - $ 398,441 $ 72,021 $ 30,798 $ 1,170,423 $ 418,232 $ - 3,391 - 599 - 87 12,853 (9,177) - 384 2,196 - 5,849 (696) - 205,258 (11,436) - 855 96 - $ 1,399,013 $ 399,302 $ 599	Closing Balance $ 136,026 74,115 118,963 45,525 17,717 560 25,293 22,459 3,814 3,090 53,698
		$ 501,260
		$ 1,588,655 3,990 87 3,676 2,580 5,153 193,822 951
		$ 1,798,914

For the year ended December 31, 2017

					Recognized in	Recognized in
						Other
					Compre-
		Opening	Recognized in			hensive		Business		Closing
		Balance	Profit or Loss			Income	Combination			Balance
Deferred tax assets
Temporary differences
Unrealized gross profit	$	44,996	$	30,880	$	-	$	-	$	75,876
Unrealized loss on inventory
write-downs		74,052		(24,876)		-		-		49,176
Exchange differences arising on
translating of the financial
statements of foreign entities		45,115		(4,485)		54,450		-		95,080
Loss carryforwards		88,481		(43,009)		-		-		45,472
Defined benefit obligation		16,524		(1,101)		-		-		15,423
									(Continued)

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Unrealized exchange losses (gains) Unrealized warranty liabilities Remeasurement of defined benefit plans Allowance for impaired receivables Others Deferred tax liabilities Temporary differences Undistributed earnings of subsidiaries Remeasurement of defined benefit plans Exchange differences arising on translating of the financial statements of foreign entities Unrealized exchange losses (gains) Property, plant and equipment Intangible assets and goodwill Others	Opening Balance Recognized in Profit or Loss Recognized in Other Compre- hensive Income Business Combination $ 1,615 $ 1,392 $ - $ - 20,618 3,454 - - 11,544 (64) 4,064 - 436 4,068 - - 65,775 305 - 4,207 $ 369,156 $ (33,436) $ 58,514 $ 4,207 $ 990,571 $ 179,852 $ - $ - 3,646 (255) - - - 12,853 - - 2,827 (2,443) - - 9,783 (3,934) - - 355,416 (150,158) - - 444 (2,254) - 2,665 $ 1,362,687 $ 33,661 $ - $ 2,665	Closing Balance $ 3,007 24,072 15,544 4,504 70,287
		$ 398,441
		$ 1,170,423 3,391 12,853 384 5,849 205,258 855
		$ 1,399,013

(Concluded)

e. Unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets

Loss carryforwards Expire in 2024 Expire in 2026 Information about unused investment credits As of December 31, 2018, investment tax credits comprised:		December	31
		2018 $ - 20,415 $ 20,415	2017 $ 3,056 24,165 $ 27,221

f. Information about unused investment credits

		Remaining
		Creditable	Expiry
Laws and Statutes	Tax Credit Source	Amount	Year
Statute for Upgrading Industries	Research and development	$ 1,459	2020
	expenditures

g. Income tax assessments

The Company’s tax returns through 2014 have been assessed by the tax authorities.

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27. EARNINGS PER SHARE

Unit: NT$ Per Share

Basic earnings per share Diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 9.02 $ 8.93	2017 $ 8.84 $ 8.77

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share Earnings used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 6,294,657 $ 6,294,657	2017 $ 6,156,516 $ 6,156,516

Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares)

Weighted average number of ordinary shares in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee share options Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 697,744 5,797 1,501 705,042		2017 696,802 3,949 1,479 702,230

If the Group offered to settle compensation paid to employees in cash or shares, the Group assumed the entire amount of the compensation will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

28. SHARE-BASED PAYMENT ARRANGEMENTS

Qualified employees of the Company and its subsidiaries were granted 8,000 options in 2018, 6,500 options in 2016 and 5,000 options in 2014. Each option entitles the holder to subscribe for one thousand ordinary shares of the Company. The holders of these shares include employees whom meet certain criteria set by the Company, from both domestic and overseas subsidiaries in which the Company directly or indirectly invests over 50%. Options issued in 2018, 2016 and 2014 are all valid for six years. All are exercisable at certain percentages after the second anniversary year from the grant date. The exercise prices granted in 2018 was the share price on the exercise date; the exercise prices of those granted in 2016 and 2014 were both NT$100 per share. For any subsequent changes in the Company’s capital surplus, the exercise price and the number of options will be adjusted accordingly.

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Information on employee share options was as follows:

Balance at January 1 Options granted Options exercised Balance at December 31 Options exercisable, end of year Weighted-average fair value of options granted (NT$)	For the Year Ended December 31	For the Year Ended December 31
	2018 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 9,378 $ 95.15 8,000 202.50 (1,413) 83.78 15,965 143.64 7,965 84.53 $ 49.15	2017
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 10,269 $ 98.20 - - (891) 86.89 9,378 95.15 2,878 84.20 $ -

The weighted-average share price at the date of exercise of share options for the years ended December 31, 2018 and 2017 were from NT$196 to NT$226 and from NT$204 to NT$266, respectively.

Information about outstanding options as of December 31, 2018 and 2017 was as follows:

Issuance in 2018 Issuance in 2016 Issuance in 2014	For the Year Ended December 31	For the Year Ended December 31
	2018 Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 202.5 5.58 85.6 3.45 81.5 1.63	2017
		Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ - - 88.5 4.45 84.2 2.63

Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

	2018	2017	2015
Grant-date share price (NT$)	$202.5	$235	$239.5
Exercise price (NT$)	$202.5	$100	$100
Expected volatility	28.42%-28.73%	31.42%-32.48%	28.18%-29.19%
Expected life (in years)	4-4.5	4-5.5	4-5.5
Expected dividends yield	0%	0%	0%
Risk-free interest rate	0.67%-0.69%	0.52%-0.65%	1.07%-1.30%

Expected volatility was based on the historical share price volatility over the past 5 years.

Compensation costs recognized were $341,624 thousand and $424,637 thousand for the years ended December 31, 2018 and 2017, respectively.

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Qualified employees of the subsidiary, LNC, were granted 108 options in May 2018 and 1,092 options in June 2017. Each option entitles the holder to subscribe for one thousand ordinary shares of the Company. The holders of these shares include employees whom meet certain criteria set by the subsidiary, LNC. The options granted are valid for 5 years and exercisable at certain percentages after the one anniversary from the grant date.

Information on employee share options was as follows:

Employee Share Options Balance at January 1 Options granted Options exercised Balance at December 31 Options exercisable, end of the year Weighted-average fair value of options granted (NT$)	2018 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 980 $ 20 108 20 (274) - 814 20 - $ 2.17	2017
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) - $ - 1,092 20 (112) - 980 20 - $ 2.07

Information about outstanding options as of December 31, 2018 was as follows:

Employee Share Options Issuance in 2018 Issuance in 2017	December 31	December 31
	2018 Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ 20 3.53 20 2.42	2017
		Exercise Price (NT$) Weighted- average Remaining Contractual Life (Years) $ - - 20 3.42

Options granted were priced using the Black-Scholes pricing model, and the inputs to the model were as follows:

	2018	2017
Grant-date share valuation (NT$)	$17.29	$16.11
Exercise price (NT$)	$20	$20
Expected volatility	21.36%-25.43%	25.6%-29.45%
Expected life (in years)	2.5-4	2.5-4
Expected dividend yield	1.04	-
Risk-free interest rate	0.60%-0.67%	0.64%-0.74%

In August 2018, the Company modified all of its outstanding options. The valid life was adjusted from 4 to 5 years. The incremental fair values of NT$0.38 in June 2017 and NT$0.34 in May 2018 will be recognized as expenses in the rest of each of their vesting period within 2.42 and 3.33 years. LNC used the inputs noted above to measure the fair value of the old and new options.

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Issuance in 2018

	Before	After
	Adjustment	Adjustment
Grant-date share valuation (NT$)	$17.86	$17.86
Exercise price (NT$)	$20	$20
Expected volatility	20.04%-23.67%	21.57%-24.70%
Expected life (in years)	2.17-3.67	2.67-4.17
Expected dividend yield	1.01	1.01
Risk-free interest rate	0.57%-0.65%	0.61%-0.67%

Issuance in 2017

	Before	After
	Adjustment	Adjustment
Grant-date share valuation (NT$)	$17.86	$17.86
Exercise price (NT$)	$20	$20
Expected volatility	19.35%-21.61%	19.89%-23.34%
Expected life (in years)	1.38-2.76	1.88-3.26
Expected dividend yield	-	-
Risk-free interest rate	0.49%-0.61%	0.54%-0.64%

29. BUSINESS COMBINATIONS

a. Subsidiaries acquired

			Proportion of
			Voting Equity
		Date of	Interests	Consideration
	Principal Activity	Acquisition	Acquired (%)	Transferred
Kostec Co., Ltd.	Production and sale of	January 20, 2017	60	$	120,592
(“AKST”)	intelligent medical
	display
Advantech Vietnam	Sales of industrial	June 6, 2018	60	$	76,092
Technology Company	computer
Limited (AVN)

The Group’s market strategy is to develop R&D technology of global medical displays. The Group acquired 60% of the share equity of Kostec Co., Ltd. (“AKST”) to expand its global intelligent medical market.

The Group acquired 60% of the shares of Advantech Vietnam Technology Company Limited (AVN) in order to expand its industrial automation products sales in theVietnam market.

b. Consideration transferred

Cash Contingent consideration arrangement (2), (3)	AVN $ 76,092 - $ 76,092	AKST $ 120,592 30,420 $ 151,012

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1) The Group acquired 60% in AVN in the second quarter of the year ended 2018.
2) The Group acquired 60% equity in AKST with a partial payment of $102,517 thousand in the first quarter of the year ended December 31, 2017. Subsequently, after obtaining the audited financial statements of AKST for the year ended December 31, 2016, the Group made an additional payment of $18,075 thousand (US$600 thousand) for the full amount of the investment. In addition, the Group adjusted the goodwill based on the identifiable net assets and liabilities in AKST’s audited financial statements.
3) Under a contingent consideration arrangement, the Group is required to pay the seller an additional US$500 thousand in 2017 and 2018, respectively, if AKST’s revenue exceeds the agreed amount.
c. Assets acquired and liabilities assumed at the dates of acquisitions

Current assets Cash and cash equivalents Trade receivables Inventories Debt investments with no active market - current Other current assets Non-current assets Plant and equipment Intangible assets Deferred tax assets Other non-current assets Current liabilities Short-term borrowings Trade and other payables Current portion of long-term borrowings Other current liabilities Non-current liabilities Long-term borrowings Deferred tax liabilities	AVN $ 15,770 16,701 4,637 - 615 1,170 70 - 354 - (20,302) - (873) - - $ 18,142	AKST $ 1,745 20,426 30,457 54,324 2,877 84,672 9,921 4,207 926 (8,100) (26,748) (22,733) (1,646) (109,656) (2,665) $ 38,007

d. Non-controlling interests

The non-controlling interest (40% ownership interest in AVN and AKST) recognized at the acquisition date was measured by reference to the identifiable net assets of the non-controlling interest and amounted to $7,257 thousand and $15,203 thousand for each.

e. Goodwill recognized on acquisitions

Consideration transferred Less: Fair value of identifiable net assets acquired Goodwill recognized on acquisitions	AVN $ 76,092 (10,885) $ 65,207	AKST $ 120,592 (22,804) $ 97,788

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The goodwill recognized in the acquisitions of AVN and AKST mainly represents the control premium included in the costs of the combinations. In addition, the consideration paid for the combinations effectively included amounts attributed to the benefits of expected synergies, revenue growth, future market development and the assembled workforces of AVN and AKST. These benefits are not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

f. Net cash outflow on acquisitions of subsidiaries

Consideration paid in cash Less: Cash and cash equivalent balances acquired	AVN $ 76,092 (15,770) $ 60,322	AKST $ 120,592 (1,745) $ 118,847

g. Impact of acquisitions on the results of the Group

The results of the acquirees since the acquisition dates included in the consolidated statements of comprehensive income were as follows:

Revenue Profit (loss)	For the Year Ended	For the Year Ended	For the Year Ended	December 31
		2018 AVN $ 52,048 $ 1,793		2017
				AKST $ 147,194 $ (45,988)

30. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

a. In the first and third quarters of 2018, the Group sold 1.11% and 15.96% of the equity in LNC, respectively, decreasing the Group’s equity interest from 81.17% to 64.10%.
b. In the first quarter of 2018, the Group acquired 49% of the equity in ATH, increasing the Group’s equity interest from 51% to 100%.
c. In the fourth quarter of 2018, the Group acquired 40% of the equity of AKST, increasing the Group’s equity interest in AKST from 36% to 76%.

The above transactions were accounted for as equity transactions, since the Group did not cease to have control over these subsidiaries.

Cash consideration received (paid) The proportionate share of the carrying amount of the net assets of the subsidiary transferred to (from) non-controlling interests Differences recognized from equity transactions		For the Year Ended December 31, 2018	For the Year Ended December 31, 2018	For the Year Ended December 31, 2018
		ATH $ (21,926) 22,701 $ 775	LNC $ 126,770 (56,829) $ 69,941	Total $ 104,844 (34,128) $ 70,716 (Continued)

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For the Year Ended December 31, 2018 ATH LNC Total Line items adjusted for equity transactions Capital surplus - difference between consideration received or paid and carrying amount of the subsidiaries’ net assets during actual disposal or acquisition $ 775 $ 69,941 $ 70,716 (Concluded)

31. OPERATING LEASE ARRANGEMENTS

The Group as Lessee

Lease arrangements

The Group leased offices in the U.S.A., Europe and Japan from third parties; the lease contracts, which will end between 2012 and 2017, are renewable upon expiry.

As of December 31, 2018 and 2017, refundable deposits (recognized as other non-current assets) for the operating leases were $36,303 thousand and $25,812 thousand, respectively.

Recognized as expenses

Rental expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 186,068	2017 $ 147,187

32. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Group’s overall strategy remains unchanged in both 2018 and 2017.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity of the Group (comprising issued capital, reserves, retained earnings, other equity, and non-controlling interests).

The Group is not subject to any externally imposed capital requirements.

Key management personnel of the Group review the capital structure on a quarterly basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of dividends paid to shareholders, the number of new shares issued, and the amount of new debt issued.

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33. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments measured at fair value on a recurring basis
1) Fair value hierarchy

December 31, 2018 Financial assets at FVTPL Derivative financial assets Securities listed in ROC Securities listed in other country Mutual funds Financial assets at FVTOCI Investments in equity instruments at FVTOCI Securities listed in ROC Unlisted securities - ROC Unlisted shares in other country Financial liabilities at FVTPL Derivative financial liabilities December 31, 2017 Financial assets at FVTPL Derivative financial assets Non-derivative financial assets held for trading Mutual funds Available-for-sale financial assets Securities listed in ROC Equity securities Unlisted securities - ROC Equity securities Securities listed in other countries Equity securities Financial liabilities at FVTPL Derivative financial liabilities	Level 1 $ - 202,622 5,270 1,885,462 $ 2,093,354 $ 1,181,502 - - $ 1,181,502 $ - Level 1 $ - 298,904 2,794,858 $ 3,093,762 $ 1,638,479 - 10,381 $ 1,648,860 $ -	Level 2 $ 5,198 - - - $ 5,198 $ - - - $ - $ 6,139 Level 2 $ 5,084 - - $ 5,084 $ - - - $ - $ 6,226	Level 3 $ - - - - $ - $ - 8,622 110,143 $ 118,765 $ - Level 3 $ - - - $ - $ - 11,375 - $ 11,375 $ -	Total $ 5,198 202,622 5,270 1,885,462
				$ 2,098,552
				$ 1,181,502 8,622 110,143
				$ 1,300,267
				$ 6,139
				Total $ 5,084 298,904 2,794,858
				$ 3,098,846
				$ 1,638,479 11,375 10,381
				$ 1,660,235
				$ 6,226

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There were no transfers between Levels 1 and 2 in the current and prior periods.

2) Reconciliation of Level 3 fair value measurements of financial instruments

For the year ended December 31, 2018

Financial assets Balance at January 1, 2018 Reclassification Recognized in other comprehensive income Balance at December 31, 2018 For the year ended December 31, 2017 Financial assets Balance at January 1, 2017 Purchase Balance at December 31, 2017	Financial Assets at Fair Value Through Other Comprehensive Income	Financial Assets at Fair Value Through Other Comprehensive Income
	Equity Instruments Total $ - $ - 89,893 89,893 28,872 28,872 $ 118,765 $ 118,765 Available-for-sale Financial Assets
	Equity Instruments $ 9,375 2,000 $ 11,375	Total $ 9,375 2,000 $ 11,375

3) Valuation techniques and inputs applied for Level 2 fair value measurement

Derivatives held by the Group were foreign currency forward contracts, whose fair values were calculated using discounted cash flow. Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

4) Valuation techniques and inputs applied for Level 3 fair value measurement

The fair values of unlisted equity securities - ROC were using income approach. In this approach, the discounted cash flow method was used to capture the present value of the expected future economic benefits to be derived from the ownership of these investees.

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b. Categories of financial instruments

Financial assets
Fair value through profit or loss (FVTPL)
Held for trading
Designated as at FVTPL
Mandatorily at FVTPL
Loans and receivables (Note 1)
Available-for-sale financial assets (Note 2)
Financial assets at amortized cost (Note 3)
Financial assets at FVTOCI equity instrument
Financial liabilities
Fair value through profit or loss (FVTPL)
Held for trading
Mandatorily at FVTPL
Measured at amortized cost (Note 4)

December 31

2018
2017
$ -
$ 303,988
-
2,794,858
2,098,552
-
-
13,184,303
-
1,738,753
15,187,794
-
1,300,267
-
-
6,226
6,139
-
9,616,094
9,027,555

Note 1: The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market - current, notes receivable, trade receivables, trade receivables from related parties and other receivables.
Note 2: The balances include the carrying amount of available-for-sale financial assets measured at cost.
Note 3: The balances included financial assets measured at amortized cost, which comprise cash and cash equivalents, financial assets at amortized cost - current, notes receivable, trade receivables, trade receivables from related parties, and other receivables.
Note 4: The balances included financial liabilities measured at amortized cost, which comprise short-term borrowings, notes payable and trade payables, other payables, current portion of long-term borrowings and long-term borrowings.
c. Financial risk management objectives and policies

The Group’s major financial instruments included equity investments, trade receivables, trade payables, and borrowings. The Group’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk, and liquidity risk.

The Group sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Group’s policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. The Group did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

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The Corporate Treasury function reports quarterly to the board of directors on the Group’s current derivative instrument management.

1) Market risk

The Group’s activities exposed it primarily to financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below). The Group entered into a variety of derivative financial instruments to manage its exposure to foreign currency risk.

There had been no change to the Group’s exposure to market risks or the manner in which these risks were managed and measured.

a) Foreign currency risk

The Group undertook operating activities and investment of foreign operations denominated in foreign currencies, which exposed it to foreign currency risk. The Group manages the risk that fluctuations in foreign currency could have on foreign-currency denominated assets and future cash flow by using forward exchange contracts, which allow the Group to mitigate but not fully eliminate the effect.

The maturities of the Company’s forward exchange contracts were less than six months and these contracts did not meet the criteria for hedge accounting.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) are set out in Note 36. As for the carrying amounts of derivatives exposing to foreign currency risk at the end of the reporting period, refer to Note 7.

Sensitivity analysis

The Group was mainly exposed to the U.S. dollar, Euro and Renminbi.

The following table details the Group’s sensitivity to a 5% increase in the New Taiwan dollar (i.e. the functional currency) against the relevant foreign currencies. The sensitivity rate used when reporting foreign currency risk internally to key management personnel and representing management’s assessment of the reasonably possible change in foreign exchange rates is 5%. The sensitivity analysis included only outstanding foreign currency denominated monetary items and foreign currency exchange forward contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting period for a 5% change in exchange rates. The range of the sensitivity analysis included cash and cash equivalents, trade receivables and trade payables. A positive number below indicates an increase in pre-tax profit associated with the New Taiwan dollar weakening 5% against the relevant currency. For a 5% strengthening of the New Taiwan dollar against the relevant currency, there would be an equal and opposite impact on pre-tax profit, and the balances below would be negative.

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U.S. Dollar Impact Euro Impact Renminbi Impact
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	U.S. Dollar Impact	Euro Impact	Renminbi Impact
Profit or loss	For the Year Ended December 31 2018 2017 $ 86,067 $ 108,887 (Note 1) (Note 1)	For the Year Ended December 31 2018 2017 $ 48,477 $ 57,967 (Note 2) (Note 2)	For the Year Ended December 31
			2018 2017 $ 40,381 $ 23,642 (Note 3) (Note 3)

Note 1: This was mainly attributable to the exposure outstanding on U.S. dollar-denominated cash, trade receivables, and trade payables, which were not hedged at the end of the reporting period.

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Note 2: This was mainly attributable to the exposure outstanding on Euro-denominated cash, trade receivables, and trade payables, which were not hedged at the end of the reporting period.
Note 3: This was mainly attributable to the exposure outstanding on Renminbi-denominated cash, trade receivables and trade payables, which were not hedged at the end of the reporting period.

b) Interest rate risk

The Group’s floating-rate bank savings and borrowings are exposed to risk of changes in interest rates. The Group does not operate hedging instruments for interest rates. The Group’s management monitors fluctuations in market interest rates regularly. If it is needed, the management might perform necessary procedures for significant interest rate risks to control the risks from fluctuations in market interest rates.

The Group’s fixed-rate bank deposits and borrowings are exposed to fair value interest rate risk; however, the only fixed-rate bank deposits expected risk is insignificant.

The carrying amount of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis	December 31
	2018 2017 $ 1,363,564 $ 230,278 - 42,698 4,527,415 4,452,477 142,991 79,419

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50-basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2018 and 2017 would have increased by $21,922 thousand and $21,865 thousand, respectively. Had interest rates been 50 basis points lower for the same years, the Group’s pre-tax profit would have decreased by the same respective amounts. The source of the negative effects would have been mainly the floating-interest rates on bank savings.

c) Other price risk

The Group was exposed to equity price risk through its investments in listed equity securities. The Group manages this exposure by maintaining a portfolio of investments with different risks. The Group’s equity price risk was mainly concentrated on equity instruments trading in the Taiwan Stock Exchange.

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Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 1% higher, pre-tax profits for the years ended December 31, 2018 would have increased by $2,079 thousand, as a result of changes in the fair value of held-for-trading investments and the pre-tax other comprehensive income for the years ended December 31, 2018 and 2017 would have increased by $13,002 thousand, as a result of changes in fair value of financial assets at fair value through other comprehensive income. Had equity prices been 1% lower for the same years, the pre-tax profit and other comprehensive income for would have decreased by the same respective amounts.

If equity prices had been 1% higher, pre-tax profits for the years ended December 31, 2017 would have increased by $2,989 thousand as a result of the changes in fair value of held-for-trading investments, and the pre-tax other comprehensive income for the years ended December 31, 2017 would have increased by $16,602 thousand as a result of the changes in fair value of available-for-sale investments. Had equity prices been 1% lower for the same period, the pre-tax profit and other comprehensive income would have decreased by the same respective amounts.

The Group had lower sensitivity toward equity prices mainly because it disposed of partial shares in 2017.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which would cause a financial loss to the Group due to failure of counterparties to discharge an obligation provided by the Group could arise from the carrying amount of the respective recognized financial assets as stated in the balance sheets.

In order to minimize credit risk, the management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance are made for irrecoverable amounts. In this regard, the management believes the Group’s credit risk as significantly reduced.

Trade receivables consisted of a large number of customers, spread across diverse industries and geographical areas and, thus, no concentration of credit risk was observed.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liquidity. The Group had available unutilized short-term bank loan facilities set out in section (c) below.

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Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and continuously monitoring forecast and actual cash flows as well as matching the maturity profiles of financial assets and liabilities.

a) Liquidity and interest risk rate tables for non-derivative financial liabilities

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on agreed repayment dates.

To the extent that interest flows are at floating rate, the undiscounted amounts was derived from the interest rate curve at the end of the reporting period.

December 31, 2018

On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 7,036,567 Variable interest rate liabilities 337 $ 7,036,904 December 31, 2017 On Demand or Less than 1 Month Non-derivative financial liabilities Non-interest bearing $ 6,683,438 Variable interest rate liabilities 192 Fixed interest rate liabilities 66 $ 6,683,696	1-3 Months $ 1,601,148 20,649 $ 1,621,797 1-3 Months $ 1,170,810 8,777 132 $ 1,179,719	Over 3 Months to 1 Year Over 1 Year- 5 Years $ 835,388 $ - 70,407 67,039 $ 905,795 $ 67,039 Over 3 Months to 1 Year Over 1 Year- 5 Years $ 1,051,190 $ - 1,543 86,001 592 43,280 $ 1,053,325 $ 129,281

The amounts included above for variable interest rate instruments for non-derivative financial assets and liabilities were subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

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b) Liquidity and interest risk rate table for derivative financial liabilities

The following tables detailed the Group’s liquidity analysis for its derivative financial instruments. The tables were based on the undiscounted contractual net cash inflows and outflows on derivative instruments that require gross settlement.

December 31, 2018

Over 3 Months to 1 Year Total $ 205,677 $ 861,923 207,128 862,864 $ (1,451) $ (941) Over 3 Months to 1 Year Total $ 281,423 $ 1,033,698 281,365 1,034,840 $ 58 $ (1,142) December 31	Over 3 Months to 1 Year Total $ 205,677 $ 861,923 207,128 862,864 $ (1,451) $ (941) Over 3 Months to 1 Year Total $ 281,423 $ 1,033,698 281,365 1,034,840 $ 58 $ (1,142) December 31	Over 3 Months to 1 Year Total $ 205,677 $ 861,923 207,128 862,864 $ (1,451) $ (941) Over 3 Months to 1 Year Total $ 281,423 $ 1,033,698 281,365 1,034,840 $ 58 $ (1,142) December 31
$	2018 67,581 3,955,919 4,023,500 55,410	2017 $ - 4,034,100 $ 4,034,100 $ 122,117
$
$

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34. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

a. Names and categories of related parties

Name Related Party Category Axiomtek Co., Ltd. Associate AIMobile Co., Ltd. Associate Deneng Scientific Research Co., Ltd. Associate Jan Hsiang Electronics Co., Ltd. Associate Winmate Inc. Associate AzureWave Technologies, Inc. Associate i-Link Co., Ltd. Associate Mildex Optical Inc. Associate Nippon RAD Inc. Associate Advantech Foundation Other related party K&M Investment Co., Ltd. Other related party AIDC Investment Corp. Other related party Ke Chang Liu Other related party (chairman’s second immediate family) Li Ting Huang Other related party (spouse of chairman’s second immediate family)

b. Sales of goods

Related Party Category/Name Associates	For the Year Ended	For the Year Ended	December 31
		2018 $ 109,246	2017 $ 64,487

c. Purchases of goods

Related Party Category/Name Associates	For the Year Ended	For the Year Ended	December 31
		2018 $ 148,410	2017 $ 66,871

d. Receivables from related parties (excluding loans to related parties)

Related Party Line Item Category/Name Trade receivables from related parties Associates		December	31
		2018 $ 18,969	2017 $ 14,067

The outstanding trade receivables from related parties are unsecured. For the years ended December 31, 2018 and 2017, no impairment loss was recognized for trade receivables from related parties.

e. Payables to related parties (excluding loans from related parties)

Related Party Line Item Category/Name Trade payables Associates		December	31
		2018 $ 27,653	2017 $ 19,499

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The outstanding trade payables to related parties are unsecured.

f. Acquisitions of property, plant and equipment

Related Party Category/Name Associates	Purchase Price	Purchase Price	Purchase Price
	For the Year Ended		December 31
		2018 $ -	2017 $ 8,381

g. Disposal of property, plant and equipment

Related Party Category/Name Other related parties		Proceeds For the Year Ended December 31 2018 2017 $ - $ 74,397		Gain (Loss) on Disposal	Gain (Loss) on Disposal
				For the Year Ended December 31
		2018 $ -		2018 $ -	2017 $ 66,531

h. Other transactions with related parties

Related Party Category/Name Research and development expenses Associates	Operating Expenses	Operating Expenses	Operating Expenses
	For the Year Ended		December 31
		2018 $ 11,672	2017 $ 23,709

Research and development expenses incurred between the Group and its associates were charged according to the agreed remuneration and payment terms on the contracts. For the rest of transactions with related parties, since normal payment terms with related parties were not stipulated, the payment terms were based on mutual agreement.

Related Party Category/Name Rental income Other related parties Other Other related parties	Other Income	Other Income	Other Income
	For the Year Ended		December 31
		2018 $ 60 $ 2,702	2017 $ 60 $ 2,702

Lease contracts formed between the Group and its associates were based on market rental prices and had normal payment terms. Revenue contracts for technical services formed between the Company and its associates were based on market prices and had payment terms on the contracts. For the rest of transactions with related parties, since normal payment terms with related parties were not stipulated, the payment terms were based on mutual agreement.

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i. Compensation of key management personnel

Short-term employee benefits Post-employment benefits Share-based payments	For the Year Ended	For the Year Ended	December 31
		2018 $ 45,159 199 32,568 $ 77,926	2017 $ 46,617 201 9,653 $ 56,471

The remuneration of directors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

35. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets of AKST were provided as collateral for bank borrowings:

Pledge deposits (recognized as debt investments with no active market) Property, plant and equipment		December	31
		2018 $ - 67,068 $ 67,068	2017 $ 29,982 69,552 $ 99,534

36. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

December 31, 2018

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 211,836 30.715 (USD:NTD) RMB 493,302 4.472 (RMB:NTD) EUR 24,059 35.200 (EUR:NTD) USD 15,998 6.8683 (USD:RMB)	Carrying Amount $ 6,506,543 2,206,044 846,877 491,378 $ 10,050,842 (Continued)

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Foreign Currencies Exchange Rate Financial liabilities Monetary items USD $ 142,257 30.715 (USD:NTD) RMB 246,686 4.472 (RMB:NTD) USD 29,534 6.8683 (USD:RMB)	Carrying Amount $ 4,369,424 1,103,178 907,135 $ 6,379,737 (Concluded)

December 31, 2017

Unit: In Thousands for Currencies, Except Exchange Rates

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 204,045 29.760 (USD:NTD) RMB 370,046 4.5650 (RMB:NTD) EUR 32,336 35.5770 (EUR:NTD) USD 18,340 6.5192 (USD:RMB) Financial liabilities Monetary items USD 120,900 29.760 (USD:NTD) RMB 190,006 4.5650 (RMB:NTD) USD 28,310 6.5192 (USD:RMB)	Carrying Amount $ 6,072,379 1,689,260 1,150,192 545,801
	$ 9,457,632
	$ 3,597,984 867,377 842,512
	$ 5,307,873

For the years ended December 31, 2018 and 2017, realized and unrealized net foreign exchange gains (losses) were $16,956 thousand and $(76,098) thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the group entities.

37. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and b. information on investees:
1) Financing provided to others. (Table 1)
2) Endorsement/guarantee provided. (Table 2)
3) Marketable securities held. (Table 3)
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4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital. (Table 4)
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital. (None)
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital. (None)
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 5)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 6)
9) Trading in derivative instruments. (Notes 7 and 33)
10) Significant transactions between the Company and subsidiaries. (Table 10)
11) Name, locations, and other information of investees. (Table 7)
12) Organization chart. (Table 9)
c. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area. (Table 8)
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, their prices, payment terms, and unrealized gains or losses. (Tables 1, 5 and 6)

38. SEGMENT INFORMATION

Information reported to the chief operating decision maker (“CODM”) for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. The Group’s segment information which is disclosed is as follows:

Industrial internet of things services (IIoT): Focus on the market of industry internet-of-things;
Embedded board and design-in services (EIoT): Provide services involving embedded boards, systems and peripheral hardware and software;
Allied design manufacture services (Allied DMS): Including Networks and Communications, data acquisition and control, and provide the customized collaboration designs and services;
Intelligent services (SIoT): Provide services involving digital logistic, digital healthcare and intelligent retail;
Global customer services (AGS &APS): Global repair, technical support and warranty services.
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The CODM considers each service as a separate operating segment. But for financial statements presentation purposes, these individual operating segments have been aggregated into a single operating segment, taking into account the following factors:

a. These operating segments have similar long-term gross profit margins; and
b. The nature of the products and production processes are similar.

Segment Revenue and Results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segment:

For the year ended December 31, 2018 Revenue from external customers Inter-segment revenue Segment revenue Eliminations Consolidated revenue Segment income Other revenue Other unamortized expense Other income and expense Finance costs Share of profits of associates accounted for using the equity method Profit before tax (continuing operations) For the year ended December 31, 2017 Revenue from external customers Inter-segment revenue Segment revenue Eliminations Consolidated revenue Segment income Other revenue Other unamortized expense Other income and expense Finance costs Share of profits of associates accounted for using the equity method Profit before tax (continuing operations)	Industrial Internet of Thing Services (IIoT) $ 16,653,946 - $ 16,653,946 $ - - $ 3,667,801 $ 14,763,233 - $ 14,763,233 $ - - $ 3,137,326	Embedded Boards and Design-in Services (EIoT) $ 13,253,892 - $ 13,253,892 $ - - $ 2,162,092 $ 11,906,429 - $ 11,906,429 $ - - $ 1,970,685	Allied Design Manufacture Services (Allied DMS) $ 8,099,529 - $ 8,099,529 $ - - $ 1,226,964 $ 9,005,011 - $ 9,005,011 $ - - $ 1,426,348	Intelligent Services (SIoT) $ 4,373,806 - $ 4,373,806 $ - - $ 260,715 $ 3,092,256 - $ 3,092,256 $ - - $ (67,163 )	Global Customer Services (AGS &APS) $ 6,333,069 - $ 6,333,069 $ - - $ 713,496 $ 5,543,311 - $ 5,543,311 $ - - $ 696,162	Others $ 12,276 - $ 12,276 $ - - $ (5,196 ) $ 64,511 - $ 64,511 $ - - $ (994 )	Total $ 48,726,518 - 48,726,518 - - 8,025,872 318,106 (558,473 ) 118,034 (4,685 ) 95,635 $ 7,994,489 $ 44,374,751 - 44,374,751 - 44,374,751 7,162,364 234,453 (383,887 ) 314,079 (12,117 ) 218,651 $ 7,533,543

Segment profit represented the profit before tax earned by each segment without allocation of central administration costs and directors’ and supervisors’ salaries, share of profits of associates, gain recognized on the disposal of interest in former associates, rental revenue, interest income, gain or loss on disposal of property, plant and equipment, gains or losses on disposal of financial instruments, exchange gains or losses, valuation gains or losses on financial instruments, finance costs and income tax expense. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

Revenue from Major Products and Services

The following is an analysis of the Group’s revenue from continuing operations from its major products and services.

Embedded boards and Chassis Industrial computer and industrial control After-sales service and others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 21,354,713 21,099,031 6,272,774 $ 48,726,518	2017 $ 20,973,947 17,896,638 5,504,166 $ 44,374,751

83 -

Geographical Information

The Group’s revenue from continuing operations from external customers by location of operations and information about its non-current assets by location of assets are detailed below.

Taiwan Asia USA Europe Others	Revenue from External Customers For the Year Ended December 31 2018 2017 $ 3,600,680 $ 3,454,198 20,014,992 18,696,453 14,211,217 13,277,208 8,485,831 7,170,151 2,413,798 1,776,741 $ 48,726,518 $ 44,374,751	Revenue from External Customers For the Year Ended December 31 2018 2017 $ 3,600,680 $ 3,454,198 20,014,992 18,696,453 14,211,217 13,277,208 8,485,831 7,170,151 2,413,798 1,776,741 $ 48,726,518 $ 44,374,751	Non-current Assets	Non-current Assets	Non-current Assets
			For the Year Ended December 31
		2018 $ 3,600,680 20,014,992 14,211,217 8,485,831 2,413,798 $ 48,726,518		2018 $ 7,763,053 3,156,225 2,992,980 421,419 3,773 $ 14,337,450	2017 $ 7,837,025 2,746,244 2,984,579 674,970 2,831 $ 14,245,649

Non-current assets exclude financial instruments and deferred tax assets.

Information about Major Customers

No customers contributed 10% or more to the Group’s revenue for both years ended December 31, 2018 and 2017.

84 -

TABLE 1

ADVANTECH CO., LTD. AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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(Note A)No. Lender Borrower Financial Statement Account Related Parties Highest Balance for the year Credit Line (Note D) Ending Balance Actual BorrowingEnding Balance Rate (%)Interest Financing Nature of Transaction Business Amount Reasons for Short-term Financing Impairment LossAllowance for Item Collateral Value Financing Limit for Each Borrower Financing LimitsAggregate
1 B+B (CZ) Conel Automation Trade receivables - related Yes $ 17,184 $ 16,392 $ 16,392 2 Short-term $ - Financing need $ - None None $ 116,545 $ 116,545
parties (CZK 12,000 (CZK 12,000 (CZK 12,000 financing (Note C) (Note C)
thousand ) thousand ) thousand )
2 B+B (CZ) Conel Automation Trade receivables - related Yes 6,830 6,830 6,830 2 Short-term - Financing need - None None 116,545 116,545
parties (CZK 5,000 (CZK 5,000 (CZK 5,000 financing (Note C) (Note C)
thousand ) thousand ) thousand )
3 LNC LNC Dong Guan Trade receivables - related Yes 30,000 30,000 - - Short-term - Financing need - None None 32,308 129,232
parties financing (Note D) (Note D)
4 B+B (CZ) Conel Automation Trade receivables - related Yes 4,098 4,098 4,098 2 Short-term - Financing need - None None 116,545 116,545
parties (CZK 3,000 (CZK 3,000 (CZK 3,000 financing (Note C) (Note C)
thousand ) thousand ) thousand )
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Note A: Investee companies are numbered sequentially from 1.

Note B: The exchange rates as of December 31, 2018 were CZK1=NT$1.366.

Note C: The financing limit for each borrower and for the aggregate financing were both 40%, of the B+B (CZ)’s net asset values, and were supervised by the Company.

Note D: The financing limit for each borrower and for the aggregate financing were 10% and 40%, respectively, of the LNC’s net asset values.

Note E: The maximum balance for the year and ending balance are approved by the board of directors of financiers.

Note F: All intercompany financing has been eliminated from consolidation.

85 -

TABLE 2

ADVANTECH CO., LTD. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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Endorsee/Guarantee Ratio of
Accumulated Endorsement/
Limits on Maximum Maximum Endorsement/ Endorsement/
Endorsement/ Amount Outstanding Amount Endorsement/ Collateral/ Guarantee Guarantee Guarantee
Endorsement/ Actual Guarantee to Given on
No. GuarantorEndorser/ Name Relationship Given on Behalf of Each PartyGuarantee Guaranteed During the Endorsed/ the End of the Guarantee at Year Borrowing Amount Guaranteed by CollateralsEndorsed/ Net Equity in Financial Latest Guarantee Allowable Amounts Parent on Given by Behalf of Subsidiaries on Behalf of Given by Companies in Mainland Behalf of
(Note A) Year Statements (Note B) Subsidiaries Parent China
(%)
0 The Company ANA Subsidiary $ 2,930,270 $ 928,650 $ 921,450 $ - $ - 3.14 $ 8,790,811 Y N N
(US$ 30,000 (US$ 30,000
thousand) thousand)
B+B Subsidiary 2,930,270 308,002 305,614 - - 1.04 8,790,811 Y N N
(US$ 9,950 (US$ 9,950
thousand) thousand)
B+B (CZ) Subsidiary 2,930,270 1,548 1,536 - - 0.01 8,790,811 Y N N
(US$ 50 (US$ 50
thousand) thousand)
AKST Subsidiary 2,930,270 123,820 122,860 67,581 - 0.42 8,790,811 Y N N
(US$ 4,000 (US$ 4,000
thousand) thousand)
AVN Subsidiary 2,930,270 30,955 30,715 - - 0.10 8,790,811 Y N N
(US$ 1,000 (US$ 1,000
thousand) thousand)
AKMC Subsidiary 2,930,270 185,730 184,290 - - 0.63 8,790,811 Y N Y
(US$ 6,000 (US$ 6,000
thousand) thousand)
Advanixs Corp. Subsidiary 2,930,270 49,528 49,144 - - 0.17 8,790,811 Y N N
(US$ 1,600 (US$ 1,600
thousand) thousand)
Cermate Subsidiary 2,930,270 30,955 30,715 - - 0.10 8,790,811 Y N N
(US$ 1,000 (US$ 1,000
thousand) thousand)
AiST Subsidiary 2,930,270 4,643 4,607 - - 0.02 8,790,811 Y N N
(US$ 150 (US$ 150
thousand) thousand)
AdvanPOS Subsidiary 2,930,270 30,955 30,715 - - 0.10 8,790,811 Y N N
(US$ 1,000 (US$ 1,000
thousand) thousand)
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(Continued)

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Endorsee/Guarantee Ratio of
Accumulated Endorsement/
Limits on Maximum Maximum Endorsement/ Endorsement/
Endorsement/ Amount Outstanding Amount Endorsement/ Collateral/ Guarantee Guarantee Guarantee
Endorsement/ Actual Guarantee to Given on
No. GuarantorEndorser/ Name Relationship Given on Behalf of Each PartyGuarantee Guaranteed During the Endorsed/ the End of the Guarantee at Year Borrowing Amount Guaranteed by CollateralsEndorsed/ Net Equity in Financial Latest Guarantee Allowable Amounts Parent on Given by Behalf of Subsidiaries on Behalf of Given by Companies in Mainland Behalf of
(Note A) Year Statements (Note B) Subsidiaries Parent China
(%)
A-DLoG Subsidiary $ 2,930,270 $ 35,890 $ 35,200 $ - $ - 0.12 8,790,811 Y N N
(EUR 1,000 (EUR 1,000
thousand) thousand)
ABR Subsidiary 2,930,270 46,433 46,073 - - 0.16 8,790,811 Y N N
(US$ 1,500 (US$ 1,500
thousand) thousand)
AAU Subsidiary 2,930,270 6,191 6,143 - - 0.02 8,790,811 Y N N
(US$ 200 (US$ 200
thousand) thousand)
AKR Subsidiary 2,930,270 1,548 1,536 - - 0.01 8,790,811 Y N N
(US$ 50 (US$ 50
thousand) thousand)
Shenzhen Cermate Subsidiary 2,930,270 17,025 16,893 - - 0.06 8,790,811 Y N Y
Technologies Inc. (US$ 550 (US$ 550
thousand) thousand)
ATJ Business 2,930,270 278,000 278,000 - - 0.95 8,790,811 N N N
relationship (JPY 1,000,000 (JPY 1,000,000
thousand) thousand)
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Note A: The limit on endorsements or guarantees provided on behalf of the respective party is 10% of the Company’s net asset value.

Note B: The maximum collateral or guarantee amount allowable is 30% of the Company’s net asset value.

Note C: The exchange rates as of December 31, 2018 were US$1=NT$30.715, EUR1=NT$35.20 and JPY1=NT$0.278.

Note D: The latest net equity is from the Group’s consolidated financial statements for the year ended December 31, 2018.

(Concluded)

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TABLE 3

ADVANTECH CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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Relationship with December 31, 2018
Holding Company Name Type and Name of Marketable Securities(Note E) the Holding Company Financial Statement Account Number of Shares Carrying Amount Ownership (%)Percentage of Fair Value Note
The Company Stock
ASUSTek Computer Inc. - Financial assets at fair value through other 4,739,461 $ 955,001 0.64 $ 955,001 Note A
comprehensive income or loss - non-current
Allied Circuit Co., Ltd. - 〃 1,200,000 73,440 2.41 73,440 Note A
Fund
Mega Diamond Money Market - Financial assets at fair value through profit or 97,030,420 1,215,005 - 1,215,005 Note B
loss - current
Capital Money Market - 〃 8,702,880 140,209 - 140,209 Note B
Advantech Corporate Investment Share
HwaCom System Inc. - Financial assets at fair value through profit or 5,175,000 60,806 5.00 60,806 Note A
loss - current
Phison Electronics Corporation - 〃 622,000 141,816 0.32 141,816 Note A
Contec - 〃 15,500 5,270 0.23 5,270 Note A
Allied Circuit Co., Ltd. - Financial assets at fair value through other 2,501,000 153,061 5.03 153,061 Note A
comprehensive income or loss - non-current
BroadTec System Inc. - 〃 225,000 3,879 7.50 3,879 Note C
BiosenseTek Corp. - 〃 37,500 - 1.79 - Note C
Juguar Technology - 〃 500,000 4,743 16.67 4,743 Note C
Taiwan DSC PV Ltd., - 〃 160,000 - 3.20 - Note C
Fund
Mega Diamond Money Market - Financial assets at fair value through profit or 11,354,027 142,174 - 142,174 Note B
loss - current
Advanixs Corporate Fund
Jih Sun Money Market - 〃 1,212,495 17,937 - 17,937 Note B
Mega Diamond Money Market - 〃 9,243,362 115,744 - 115,744 Note B
AiST Fund
Jih Sun Money Market - 〃 1,243,566 18,397 - 18,397 Note B
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(Continued)

88 -

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Note A: Market value was based on the closing price on December 31, 2018.

Note B: Market value was based on the net asset values of the open-ended mutual funds on December 31, 2018.

Note C: The fair values are estimated from the latest net equity from the financial statements.

Note D: Securities comprise shares, beneficiary certificates, and securities derived from the shares and beneficiary certificates under IFRS 9 “Financial Instruments”.

(Concluded)

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TABLE 4

ADVANTECH CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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Type and Name of Financial Statement Beginning Balance Acquisition Disposal Ending Balance
Company Name Marketable Securities Account Counterparty Relationship Shares Amount (Cost) Shares Amount Shares Amount Carrying Amount Gain (Loss) on Disposal Shares Amount (Cost)
The Company Fund
Mega Diamond Money Financial assets at fair value - - 28,879,553 $ 360,000 227,347,469 $ 2,840,000 159,196,602 $ 1,990,000 $ 1,987,181 $ 2,819 97,030,420 $ 1,212,819
Market through profit or loss
Capital Money Market Same as above - - 112,460,931 1,807,000 103,758,051 1,668,523 1,667,000 1,523 8,702,880 140,000
FSITC Money Market Same as above - - 1,578,638 280,000 4,675,444 830,000 6,254,082 1,111,781 1,110,000 1,781 - -
Advantech Corporate Fund
Investment FSITC Money Market Financial assets at fair value - - 2,926,124 519,001 112,606 20,000 3,038,730 539,603 539,001 602 - -
through profit or loss
Mega Diamond Money Same as above - - 49,657,452 619,000 4,959,289 62,000 43,262,714 541,000 539,415 1,585 11,354,027 141,585
Market
Share
AzureWave Technologies, Investments accounted for - Associate 5,492,000 90,439 24,107,000 488,124 - - - - 29,599,000 578,563
Inc. using the equity method
Advanixs Corporate Fund
Jih sun Money Market Financial assets at fair value - - 40,686,999 599,197 7,224,680 106,501 46,699,184 689,000 687,839 1,161 1,212,495 17,859
through profit or loss
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90 -

TABLE 5

ADVANTECH CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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Notes/Accounts
Transaction Details Abnormal Transaction
Receivable (Payable)
Buyer Related Party Relationship Note
Purchase/Sale Amount Total% to Payment Terms Unit Price Payment Terms Balance Ending Total% to
The Company AAU Subsidiary Sale $ 233,477 0.66 60-90 days Contract price No significant difference in terms for related parties $ 40,945 0.57
B+B Subsidiary Sale 152,070 0.43 45 days after month-end Contract price No significant difference in terms for related parties 19,051 0.26
AEU Subsidiary Sale 4,889,200 13.82 30 days after month-end Contract price No significant difference in terms for related parties 952,721 13.20
AJP Subsidiary Sale 905,025 2.56 60-90 days Contract price No significant difference in terms for related parties 154,814 2.14
ACN Subsidiary Sale 7,382,801 20.87 45 days after month-end Contract price No significant difference in terms for related parties 1,492,606 20.68 Note A
AKR Subsidiary Sale 997,566 2.82 60 days after invoice date Contract price No significant difference in terms for related parties 64,983 0.90
ANA Subsidiary Sale 9,347,710 26.42 45 days after month-end Contract price No significant difference in terms for related parties 1,906,993 26.42
ASG Subsidiary Sale 276,045 0.78 60-90 days Contract price No significant difference in terms for related parties 53,788 0.75
Advanixs Corp. Subsidiary Sale 805,007 2.28 60-90 days Contract price No significant difference in terms for related parties 139,159 1.93
A-DLoG Subsidiary Sale 608,339 1.72 30 days after invoice date Contract price No significant difference in terms for related parties 54,615 0.76
AIN Subsidiary Sale 114,063 0.32 60 days after month-end Contract price No significant difference in terms for related parties 53,791 0.75
SIoT (Cayman) Subsidiary Sale 320,260 0.91 Usual trade terms Contract price No significant difference in terms for related parties 266,621 3.69
ABR Subsidiary Sale 121,745 0.34 90 days after month-end Contract price No significant difference in terms for related parties 24,379 0.34
AMY Subsidiary Sale 139,369 0.39 45 days after month-end Contract price No significant difference in terms for related parties 11,028 0.15
AKMC Subsidiary Purchase (11,974,220) (48.41) Usual trade terms Contract price No significant difference in terms for related parties (1,533,444) 27.10
A-DLoG Subsidiary Purchase (181,902) (0.74) Usual trade terms Contract price No significant difference in terms for related parties (20,746) 0.37
AKMC The Company Parent company Sale 11,974,220 14.28 Usual trade terms Contract price No significant difference in terms for related parties 1,533,444 94.69
A-DLoG The Company Parent company Sale 181,902 58.06 Usual trade terms Contract price No significant difference in terms for related parties 20,746 12.99
AAU The Company Parent company Purchase (233,477) (88.51) 60-90 days Contract price No significant difference in terms for related parties (40,945) 83.71
B+B The Company Parent company Purchase (152,070) (18.02) 45 days after month-end Contract price No significant difference in terms for related parties (19,051) 50.77
AEU The Company Parent company Purchase (4,889,200) (74.34) 30 days after month-end Contract price No significant difference in terms for related parties (952,721) 64.68
AJP The Company Parent company Purchase (905,025) (90.22) 60-90 days Contract price No significant difference in terms for related parties (154,814) 92.26
ACN The Company Parent company Purchase (7,382,801) (77.59) 45 days after month-end Contract price No significant difference in terms for related parties (1,492,606) 83.69
AKR The Company Parent company Purchase (997,566) (62.8) 60 days after invoice date Contract price No significant difference in terms for related parties (64,983) 49.84
ANA The Company Parent company Purchase (9,347,710) (88.14) 45 days after month-end Contract price No significant difference in terms for related parties (1,906,993) 84.04
ASG The Company Parent company Purchase (276,045) (79.42) 60-90 days Contract price No significant difference in terms for related parties (53,788) 79.25
Advanixs Corp. The Company Parent company Purchase (805,007) (98.71) 60-90 days Contract price No significant difference in terms for related parties (139,159) 97.57
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(Continued)

91 -

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Notes/Accounts
Transaction Details Abnormal Transaction
Receivable (Payable)
Buyer Related Party Relationship Purchase/Sale Amount Total% to Payment Terms Unit Price Payment Terms Balance Ending Total% to Note
A-DLoG The Company Parent company Purchase $ (608,339) (75.41) 30 days after invoice date Contract price No significant difference in terms for related parties $ (54,615) 67.49
AIN The Company Parent company Purchase (114,063) (92.75) 60 days after invoice date Contract price No significant difference in terms for related parties (53,791) 94.41
SIoT (Cayman) The Company Parent company Purchase (320,260) (48.26) Usual trade terms Contract price No significant difference in terms for related parties (266,621) 70.29
ABR The Company Parent company Purchase (121,745) (67.12) 90 days after invoice date Contract price No significant difference in terms for related parties (24,379) 89.29
AMY The Company Parent company Purchase (139,369) (77.71) 45 days after month-end Contract price No significant difference in terms for related parties (11,028) 100.00
Cermate Shenzhen Cermate Related enterprise Sale 112,581 42.63 Usual trade terms Contract price No significant difference in terms for related parties 18,789 48.23
Technologies Inc.
AKMC ACN Related enterprise Sale 445,324 3.51 Usual trade terms Contract price No significant difference in terms for related parties 52,060 3.21
SIoT (Cayman) Related enterprise Sale 510,175 4.02 Usual trade terms Contract price No significant difference in terms for related parties 125,335 7.74
LNC LNC Dong Guan Related enterprise Sale 295,203 68.04 Usual trade terms Contract price No significant difference in terms for related parties 209,533 93.88
ACN AiSC Related enterprise Sale 171,787 1.59 Usual trade terms Contract price No significant difference in terms for related parties 42,659 1.89
B+B (CZ) AEU Related enterprise Sale 246,655 60.80 Usual trade terms Contract price No significant difference in terms for related parties 45,091 100.00
APL AEU Related enterprise Sale 106,733 97.67 Usual trade terms Contract price No significant difference in terms for related parties 10,013 88.31
SIoT (Cayman) AEU Related enterprise Sale 211,059 39.78 Usual trade terms Contract price No significant difference in terms for related parties 85,087 34.88
ANA Related enterprise Sale 235,886 44.45 Usual trade terms Contract price No significant difference in terms for related parties 125,737 25.78
Shenzhen Cermate Cermate Related enterprise Purchase (112,581) (38.62) Usual trade terms Contract price No significant difference in terms for related parties (18,789) 74.84
Technologies Inc.
ACN AKMC Related enterprise Purchase (445,324) (4.68) Usual trade terms Contract price No significant difference in terms for related parties (52,060) 2.92
SIoT (Cayman) AKMC Related enterprise Purchase (510,175) (128.23) Usual trade terms Contract price No significant difference in terms for related parties (125,335) 4.39
LNC Dong Guan LNC Related enterprise Purchase (295,203) (77.47) Usual trade terms Contract price No significant difference in terms for related parties (209,533) 92.32
AiSC ACN Related enterprise Purchase (171,787) (61.89) Usual trade terms Contract price No significant difference in terms for related parties (42,659) 78.96
AEU B+B (CZ) Related enterprise Purchase (246,655) (4.43) Usual trade terms Contract price No significant difference in terms for related parties (45,091) 3.51
APL Related enterprise Purchase (106,733) (1.92) Usual trade terms Contract price No significant difference in terms for related parties (10,013) 0.78
SIoT (Cayman) Related enterprise Purchase (211,059) (3.79) Usual trade terms Contract price No significant difference in terms for related parties (85,087) 6.62
ANA SIoT (Cayman) Related enterprise Purchase (235,886) (2.22) Usual trade terms Contract price No significant difference in terms for related parties (125,737) 5.54
----- End of picture text -----

Note A: Unrealized gain for the period was $2,883 thousand.

Note B: All intercompany gains and losses from investment have been eliminated from consolidation.

(Concluded)

92 -

TABLE 6

ADVANTECH CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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Overdue Amounts
Company Name Related Party Relationship Ending Balance Turnover Rate Received in Allowance for
(Note A) Amount Actions Taken Subsequent Impairment Loss
Period
The Company ACN Subsidiary $ 1,492,606 6.01 $ - - $ 617,135 $ -
AEU Subsidiary 952,721 4.22 - - 463,454 -
SIoT (Cayman) Subsidiary 266,621 4.56 - - 124,703 -
AJP Subsidiary 154,814 5.91 - - 33,479 -
AKMC Subsidiary 409,917 Note 1 - - 173,925 -
ANA Subsidiary 1,906,993 0.57 - - 860,020 -
Advanixs Corp. Subsidiary 139,159 5.76 - - 122,290 -
AKMC The Company Parent company 1,533,444 9.90 - - 1,067,271 -
LNC LNC Dong Guan Related enterprise 209,533 1.53 - - 11,323 -
SIoT (Cayman) ANA Related enterprise 125,737 0.65 - - 40,997 -
AKMC SIoT (Cayman) Related enterprise 125,335 8.14 - - 15,866 -
----- End of picture text -----

Note A: Sales revenue on materials delivered to subcontractors have been eliminated from consolidation.

Note B: All intercompany gains and losses from investment have been eliminated from consolidation.

93 -

TABLE 7

ADVANTECH CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars/Foreign Currency, Unless Stated Otherwise)

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Investment Amount Balance as of December 31, 2018 Net Income Investment
Investor Company Investee Company Location Main Businesses and Products December 31, December 31, Shares Percentage of Carrying (Loss) of the Gain (Loss) Note
2018 2017 Ownership Value Investee (Note A)
The Company AAC (BVI) BVI Investment and management service $ 2,332,397 $ 1,000,207 29,623,834 100.00 $ 5,932,170 $ 482,772 $ 460,156 Subsidiary
ATC BVI Sale of industrial automation products 998,788 998,788 33,850,000 100.00 3,718,200 310,451 313,722 Subsidiary
Advanixs Corporate Taipei, Taiwan Production and sale of industrial automation products 226,000 486,000 36,000,000 100.00 237,593 53,065 104,313 Subsidiary
Advantech Corporate Investment Taipei, Taiwan Investment holding company 1,400,000 1,400,000 150,000,000 100.00 1,590,325 39,830 39,752 Subsidiary
Axiomtek Taipei, Taiwan Production and sale of industrial automation products 249,059 249,059 20,537,984 25.76 619,411 406,923 105,097 Equity-meth investee
AdvanPOS Taipei, Taiwan Production and sale of POS system 266,192 460,572 1,000,000 100.00 297,296 (370) 895 Subsidiary (Note A)
LNC Taichung, Taiwan Production and sale of machines with computerized 304,865 431,634 19,230,000 64.10 433,078 4,061 3,069 Subsidiary
numerical control
Jan Hsiang Taipei, Taiwan Electronic parts and components manufacturing 3,719 3,719 655,500 28.50 8,010 54 54 Equity-meth investee (Note A)
AMX Mexico Sale of industrial automation products 4,922 4,922 - 100.00 222 639 639 Subsidiary (Note A)
AEUH Helmond, the Netherlands Investment and management service 1,219,124 1,219,124 25,961,250 100.00 900,798 101,355 101,355 Subsidiary
ASG Techplace, Singapore Sale of industrial automation products 27,134 27,134 1,450,000 100.00 108,015 18,154 18,154 Subsidiary (Note A)
ATH Thailand Production of computers 47,701 - 51,000 51.00 51,353 6,184 2,394 Subsidiary (Note A)
AAU Sydney, Australia Sale of industrial automation products 40,600 40,600 500,204 100.00 36,226 (4,729) (4,729) Subsidiary (Note A)
AJP Tokyo, Japan Sale of industrial automation products 15,472 15,472 1,200 100.00 332,224 50,427 50,427 Subsidiary (Note A)
AMY Malaysia Sale of industrial automation products 35,140 35,140 2,000,000 100.00 68,499 16,937 16,937 Subsidiary (Note A)
AKR Seoul, Korea Sale of industrial automation products 73,355 73,355 600,000 100.00 322,524 99,992 99,992 Subsidiary
ABR Sao Paulo, Brazil Sale of industrial automation products 43,216 43,216 1,794,996 80.00 67,328 18,354 14,683 Subsidiary (Note A)
Advantech Innovative Design Taipei, Taiwan Product design 10,000 10,000 1,000,000 100.00 10,066 25 25 Subsidiary (Note A)
Co., Ltd.
AiST Taipei, Taiwan Design, develop and sale of intelligent services 81,837 157,915 10,000,000 100.00 96,183 458 458 Subsidiary (Note A)
BEMC Delaware, USA Sale of industrial network communications systems - 1,968,044 - - - - - Subsidiary (Note B)
B+B Delaware, USA Sale of industrial network communications systems 1,968,044 1,968,044 230,647 60.00 1,951,772 12,367 4,646 Subsidiary (Note B)
AIN India Sale of industrial automation products 19,754 19,754 3,999,999 99.99 10,714 5,249 5,249 Subsidiary (Note A)
AIMobile Co., Ltd. Taipei, Taiwan Design and manufacture of industrial mobile systems 135,000 135,000 13,500,000 45.00 65,012 (42,506) (19,128) Equity-meth investee (Note A)
AKST Gangwon-do, Korea Production and sale of intelligent medical display 83,313 83,313 69,740 36.00 (27,036) (48,434) (27,036) Subsidiary (Note A)
Winmate Taipei, Taiwan Embedded System Modules 540,000 540,000 12,000,000 16.62 542,761 8,562 33,812 Equity-meth investee (Note A)
AVN Hanoi, Vietnam Sale of industrial automation products 76,092 - 8,100 60.00 76,539 2,385 1,076 Subsidiary (Note A)
Nippon RAD Inc. Tokyo, Japan R&D of IoT intelligent system 251,915 - 850,000 16.08 252,967 38,277 1,556 Equity-meth investee
ARU Moscow, Russia Production and sale of industrial automation products 23,822 - 500,000 100.00 21,402 (655) (655) Subsidiary (Note A)
AKR AKST Gangwon-do, Korea Production and sale of intelligent medical display 55,579 55,579 22,023 24.00 - (48,434) - Subsidiary (Note A)
Advantech Corporate Investment Cermate Taipei, Taiwan Manufacturing of electronic parts, computer, and 71,500 71,500 5,500,000 55.00 128,046 33,408 18,297 Subsidiary
peripheral devices
Deneng Taichung, Taiwan Installment and sale of electronic components and 18,095 18,095 658,000 39.69 14,100 (3,419) (1,357) Equity-meth investee (Note A)
software
CDIB Innovation Accelerator Taipei, Taiwan Investment holding company 150,000 75,000 7,500,000 17.86 147,109 (30,213) (5,395) Equity-meth investee (Note A)
Co., Ltd.
AzureWave Technologies, Inc. Taipei, Taiwan Wireless communication and digital image module 578,563 - 27,810,000 18.42 534,780 (118,427) (16,323) Equity-meth investee (Note A)
manufacturing and trading
Huan Yan, Jhih-Lian Co., Ltd. Taipei, Taiwan Combination of water treatment related technologies 5,000 - 500,000 50.00 4,971 (58) (29) Subsidiary (Note A)
and Internet of Things applications
Yun Yan, Wu-Lian Co., Ltd Taipei, Taiwan Industrial equipment Networking in Greater China 5,000 - 500,000 50.00 3,066 (3,868) (1,934) Subsidiary (Note A)
Nippon RAD Tokyo, Japan R&D of IoT intelligent system 49,733 - 154,310 2.92 45,733 38,277 - Equity-meth investee
i-Link Co., Ltd Taichung, Taiwan Intelligent medical integration 10,067 - 1,000,000 25.00 9,407 (38,020) (660) Equity-meth investee (Note A)
DotZero Co., Ltd Taichung, Taiwan Intelligent metal processing integration 4,900 - 490,000 49.00 4,629 (554) (271) Equity-meth investee (Note A)
Mildex Optical Inc. Kaohsiung, Taiwan Manufacturing of electronic parts 202,948 - 15,708,450 15.00 183,210 (43,120) (1,724) Equity-meth investee (Note A)
ATC ATC (HK) Hong Kong Investment and management service 1,212,730 1,212,730 57,890,679 100.00 3,780,776 355,324 358,595 Subsidiary
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(Continued)

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Note A: The respective entity is an immaterial subsidiary; its financial statements have not been audited, which does not result in a significant impact on the Group’s consolidated financial statements.

Note B: Due to organizational restricting, BEMC has been cleared after liquidation. The parent company will directly hold B+B.

Note C: All intercompany gains and losses from investment have been eliminated from consolidation.

Note D: Refer to Table 8 for investments in mainland China.

(Concluded)

95 -

TABLE 8

ADVANTECH CO., LTD. AND SUBSIDIARIES

INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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Investment Flows Accumulated
Accumulated Accumulated
Outflow of %
Investee Company Name Main Businesses and Products Total Amount of Paid-in Capital Investment Type (e.g., Direct or Indirect) from Taiwan Investment Outflow of as of Outflow Inflow December 31, from TaiwanInvestment as of (Loss) of the Net Income Investee Ownership of InvestmentDirect or Indirect Gain (Loss) Investment (Note A) December 31, Value as of Carrying 2018 Earnings as ofRemittance of December 31, Inward
January 1, 2018 2018 2018
Advantech Technology (China) Production and sale of US$ 43,750 Indirect $ 1,145,670 $ - $ - $ 1,145,670 $ 365,352 100 $ 368,623 $ 3,780,776 $ -
Company Ltd. (“AKMC”) components of thousand (US$ 37,300 (US$ 37,300
industrial automation (Note F) thousand) thousand)
products
Beijing Yan Hua Xing Ye Sale of industrial US$ 4,230 Indirect 163,772 - - 163,772 137,418 100 136,986 1,203,575 US$ 11,232
Electronic Science & automation products thousand (US$ 5,332 (US$ 5,332 thousand
Technology Co., Ltd. thousand) thousand)
(“ACN”)
Shanghai Advantech Intelligent Production and sale of US$ 8,000 Indirect 245,720 - - 245,720 (17,003) 100 (16,959) 663,662 -
Services Co., Ltd. (“AiSC”) industrial automation thousand (US$ 8,000 (US$ 8,000
products thousand) thousand)
Xi’an Advantech Software Ltd. Development and US$ 1,000 Indirect (Note C) - - (Note C) 13 100 13 29,887 -
(“AXA”) production of thousand (Note A)
software products
Hangzhou Advantofine Processing and sale of RMB 3,000 Indirect (Note D) - - (Note D) (320) - (320) - -
Automation Tech. Co., Ltd. industrial automation thousand (Note A)
products
Advanixs Kun Shan Corp. Production and sale of RMB 99,515 Indirect (Note G) - - (Note G) - - - - -
industrial automation thousand
products
LNC Dong Guan Co., Ltd. Production and sale of US$ 4,000 Indirect 98,104 - - 98,104 (13,004) 100 (12,880) 28,993 -
industrial automation thousand (US$ 3,194 (US$ 3,194
products thousand) thousand)
Shenzhen Cermate Production and sale of RMB 2,000 Indirect 9,460 - - 9,460 29,348 90 27,095 80,552 US$ 717
Technologies Inc. Human Machine thousand (US$ 308 (US$ 308 thousand
Interface thousand) thousand) RMB 1,743
thousand)
(Continued)
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Note B: The significant events, prices, payment terms and unrealized gains or losses generated on trading between the Company and its investees in Mainland China are described in Tables 5 and 6.

Note C: Remittance by ACN.

Note D: In the first quarter of 2018, Hangzhou Advantofine Automation Co., Ltd. was liquidated.

Note E: Included is the outflow of US$200 thousand on the investment in Yan Hua (Guang Zhou Bao Shui Qu) Co., Ltd. located in a free trade zone in Guang Zhou. When this investee was liquidated in September 2005, the outward investment remittance ceased upon the approval of the Ministry of Economic Affairs (MOEA). For each future capital return, the Company will apply to the MOEA for the approval of the return as well as reduce the accumulated investment amount by the return amount.

Note F: For AKMC, there was a capital increase of US$6,450 thousand out of earnings.

Note G: In the second quarter of 2018, Advanixs Kun Shan Corp. was acquired by AKMC, Advanixs Kun Shan Corp. was liquidated.

Note H: Remittance by AAC (BVI) and AiSC.

Note I: Remittance by AiSC; AiSC’s investments in associate accounted for using the equity method.

Note J: The exchange rate was US$1=NT$30.715 and RMB1=NT$4.472.

(Continued)

97 -

(Concluded)

Note K: The maximum allowable limit on investment was at 60% of the consolidated net asset value of the Company.

Note L: All intercompany gains and losses from investment have been eliminated from consolidation.

98 -

TABLE 9

ADVANTECH CO., LTD. AND SUBSIDIARIES

ORGANIZATION CHART DECEMBER 31, 2018 AND 2017

Intercompany relationships and percentages of ownership as of December 31, 2018 are shown below:

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100% 100% HK Advantech Technology Co., Ltd. 100% Advantech Technology (China)
Advantech Technology Co., Ltd. (“ATC”)
ATC (HK) Company Ltd. (“AKMC”)
80%
Advantech Brasil Ltd (“ABR”)
60% B+B SmartWorx Inc. (“B+B”) 1% Conel Automation s.r.o.
100% B&B IMC. LLC (“IMC”) CZ (“Conel Automation”)
40% 100% 99.99% 99%
Advantech B+B SmartWorx
s.r.o. CZ (“B+B (CZ)”)
100%
B+B SmartWorx Limited (“BBI”) 100% 0.01%
100% B&B Electronics Holdings LLC
Advantech Automation Corp. (BVI) 100% Advantech Corp. (“ANA”) (“B&B Electronics”)
(“AAC (BVI”)) 100%
B&B SmartWorx DMCC
100% 100% Beijing Yan Hua Xing Ye Electronic (“B&B DMCC”)
100%
Advantech Automation Corp. (HK) Science & Technology Co., Ltd. (“ACN”) Xi’an Advantech Software Ltd.
Limited (“AAC (HK)”) 100% (“AXA”)
Shanghai Advantech Intelligent Services 1%
Co., Ltd. (“AiSC”) Advantech Service-IoT
100%
Advantech Service IoT Holding Ltd. 99% (Shanghai) Co., Ltd.
Advantech 100% Advantech Electronics, S. De R.L. De C.V. (“SIoT Cayman”) (“SIoT China”)
Co., Ltd. (“AMX”) 100% 100%
(the 100% Advantech Europe B.V. (“AEU”) DLOG Gesellschaft für
Company) Advantech Europe Holding B.V. (“AEUH”) elektronische Datentechnik mbH
100% (“A-DLoG”)
100% Advantech Poland Sp z o.o. (“APL”)
Advantech Innovative Design Co., Ltd. 50%
Huan Yan, Jhih-Lian Co., Ltd.
100%
Advantech Intelligent Service (“AiST”) 50%
Yun Yan, Wu-Lian Co., Ltd.
100%
Advantech Corporate Investment 55% Cermate Technologies Inc. (“Cermate”) Landmark Co., Ltd.
76% (“Landmark”)
Advantech Kostec Co., Ltd. 100%
24%
(“AKST”) Advantech Kostec Co., Ltd.
(“AKST”)
100%
Advantech KR Co., Ltd. (“AKR”) 90% Shenzhen Cermate
49% Advantech Corporation (Thailand) Technologies Inc.
100% Co., Ltd. (“ATH”) (“Cermate (Shenzhen)”)
Advantech Co., Singapore Pte, Ltd.
(“ASG”) 100% 100%
100% Advantech International, PT. (“AID”) Cermate Technologies (Shanghai) Inc.
Advantech Japan Co., Ltd. (“AJP”)
(“Cermate (Shanghai)”)
100%
Advantech Australia Pty Ltd. (“AAU”)
100%
Advanixs Corp.
100% Advantech Co. Malaysia Sdn. Bhd
(“AMY”)
99.99% Advantech Industrial Computing India
Private Limited (“AIN”)
100% AdvanPOS Technology Co., Ltd.
(“AdvanPOS”)
64.10% 100% 100%
LNC Technology Co., Ltd. (“LNC”) Better Auto Holdings Limited Famous Now Limited
(“Better Auto”) (“Famous Now”)
51%
Advantech Corporation (Thailand) Co., Ltd. 100%
(“ATH”)
LNC Dong Guan Co., Ltd
60%
Advantech Vietnam Technology Company
Limited (“AVN”)
100%
Advantech Technology Limited Liability
Company (ARU)
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(Continued)

99 -

Intercompany relationships and percentages of ownership as of December 31, 2017 are shown below:

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----- Start of picture text -----

100% 100% HK Advantech Technology Co., Ltd. 100% Advantech Technology (China)
Advantech Technology Co., Ltd. (ATC)
ATC (HK) Company Ltd. (AKMC)
80% Advantech Brasil Ltd (ABR) Avtek Corporation (Avtek) 100% Advanixs Kun Shan Corp.
100% 100% (formerly Yeh-Chiang
60% Technology Kun Shan Co., Ltd.)
BEMC Holdings Corporation (BEMC) B+B SmartWorx Inc. (B+B) 1% Conel Automation s.r.o.
100% B&B IMC. LLC (IMC) CZ (Conel Automation)
40% 100% 99.99% 99%
Quatech, LLC (Quatech) Advantech B+B SmartWorx
s.r.o. CZ (B+B (CZ))
100%
B+B SmartWorx Limited (BBI) 100% 0.01%
100% B&B Electronics Holdings LLC
Advantech Automation Corp. (BVI) 100% Advantech Corp. (ANA) (B&B Electronics)
(AAC (BVI)) 100%
B&B SmartWorx DMCC (B&B
100% 100% Beijing Yan Hua Xing Ye Electronic 100% DMCC)
Advantech Automation Corp. (HK) Hangzhou Advantofine
Science & Technology Co., Ltd. (ACN)
Limited (AAC (HK)) 100% Automation Tech. Co., Ltd.
Shanghai Advantech Intelligent Services
Co., Ltd. (AiSC)
100% Xi’an Advantech Software Ltd. (AXA)
Advantech 100% Advantech Electronics, S. De R.L. De C.V.
Co., Ltd. (AMX) 100% Advantech Europe B.V. (AEU) 100% DLOG Gesellschaft für
(the 100% elektronische Datentechnik mbH
Company) Advantech Europe Holding B.V. (AEUH) (A-DLoG)
100%
100% Advantech Poland Sp z o.o. (APL)
Advantech Innovative Design Co., Ltd.
100%
Advantech Intelligent Service (AiST)
100% 55% Cermate Technologies Inc. (Cermate) Landmark Co., Ltd. (Landmark)
Advantech Corporate Investment 100%
36%
Kostec Co., Ltd.
(AKST)
24%
Kostec Co., Ltd.
100% 24% 90%
Advantech KR Co., Ltd. (AKR) Shenzhen Cermate
100% Advantech Co., Singapore Pte, Ltd. (ASG) 51% Advantech Corporation (Thailand) Co., Ltd. (ATH) (Cermate (Shenzhen))Technologies Inc.
100% 100%
Cermate Technologies
100% Advantech International, PT. (AID) (Shanghai) Inc.
Advantech Japan Co., Ltd. (AJP)
(Cermate (Shanghai))
100%
Advantech Australia Pty Ltd. (AAU)
100%
Advanixs Corp.
100%
Advantech Co. Malaysia Sdn. Bhd (AMY)
99.99%
Advantech Industrial Computing India
Private Limited (AIN)
100%
AdvanPOS Technology Co., Ltd.
(AdvanPOS)
81.17% 100% 100%
Advantech-LNC Technology Co., Ltd. Better Auto Holdings Limited Famous Now Limited
(ALNC) (Better Auto) (Famous Now)
100%
Advantech LNC Dong Guan Co., Ltd.
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(Concluded)

100 -

TABLE 10

ADVANTECH CO., LTD. AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS BETWEEN ADVANTECH CO., LTD. AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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Transaction Details
Flow of
Number % of Consolidated
(Note A) Company Name Counterparty Transaction Financial Statement Account Amount Payment Terms Assets/Revenue
(Notes B and D)
(Note C)
0 The Company AAC (HK) 1 Other receivables from related parties $ 48 45 days EOM -
AAU 1 Sales revenue 233,477 Normal -
AAU 1 Receivables from related parties 40,945 60-90 days -
AAU 1 Other revenue 2,372 Normal -
AAU 1 Other receivables from related parties 1,012 60-90 days -
ABR 1 Sales revenue 121,745 Normal -
ABR 1 Receivables from related parties 24,379 90 days EOM -
ABR 1 Other revenue 3,641 Normal -
ABR 1 Other receivables from related parties 961 90 days EOM -
ACN 1 Receivables from related parties 1,492,606 45 days EOM 3
ACN 1 Other receivables from related parties 92 45 days EOM -
ACN 1 Sales revenue 7,382,801 Normal 15
A-DLoG 1 Sales revenue 608,339 Normal 10
A-DLoG 1 Receivables from related parties 54,615 30 days after invoice date -
A-DLoG 1 Other revenue 4,265 Normal -
A-DLoG 1 Other receivables from related parties 1,850 30 days after invoice date -
AEU 1 Sales revenue 4,889,200 Normal 10
AEU 1 Receivables from related parties 952,721 30 days EOM 2
AEU 1 Other revenue 28,941 Normal -
AEU 1 Other receivables from related parties 10,176 30 days EOM -
AID 1 Sales revenue 23,731 Normal -
AID 1 Receivables from related parties 3,350 45 days after invoice date -
AID 1 Other receivables from related parties 151 45 days after invoice date -
AID 1 Other revenue 1,279 Normal -
AIN 1 Sales revenue 114,063 Normal -
AIN 1 Receivables from related parties 53,791 60 days EOM -
AIN 1 Other revenue 64 Normal -
AIN 1 Other receivables from related parties 38 60 days EOM -
AiSC 1 Sales revenue 59,358 Normal -
AJP 1 Sales revenue 905,025 Normal 2
AJP 1 Receivables from related parties 154,814 60-90 days -
AJP 1 Other revenue 6,493 Normal -
AJP 1 Other receivables from related parties 1,477 60-90 days -
(Continued)
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----- Start of picture text -----

Transaction Details
Flow of
Number % of Consolidated
(Note A) Company Name Counterparty Transaction Financial Statement Account Amount Payment Terms Assets/Revenue
(Notes B and D)
(Note C)
AKMC 1 Receivables from related parties $ 409,917 45 days EOM 1
AKMC 1 Other receivables from related parties 44 45 days EOM -
AKR 1 Sales revenue 997,566 Normal 2
AKR 1 Receivables from related parties 64,983 60 days after invoice date -
AKR 1 Other revenue 8,839 Normal -
AKR 1 Other receivables from related parties 2,374 60 days after invoice date -
AKST 1 Sales revenue 21,224 30 days EOM -
AMX 1 Other revenue 5,975 Normal -
AMY 1 Sales revenue 139,369 Normal -
AMY 1 Receivables from related parties 11,028 45 days EOM -
AMY 1 Other revenue 1,887 Normal -
AMY 1 Other receivables from related parties 369 45 days EOM -
ANA 1 Receivables from related parties 1,906,993 45 days EOM 4
ANA 1 Other revenue 38,798 Normal -
ANA 1 Other receivables from related parties 14,516 45 days EOM -
ANA 1 Sales revenue 9,347,710 Normal 19
APL 1 Sales revenue 18,137 Normal -
APL 1 Receivables from related parties 1,618 45 days EOM -
ASG 1 Sales revenue 276,045 Normal 1
ASG 1 Receivables from related parties 53,788 60-90 days -
ASG 1 Other revenue 2,586 Normal -
ASG 1 Other receivables from related parties 1,008 60-90 days -
ATH 1 Sales revenue 58,501 Normal -
ATH 1 Receivables from related parties 5,155 30 days after invoice date -
ATH 1 Other revenue 1,753 Normal -
ATH 1 Other receivables from related parties 292 30 days after invoice date -
AVN 1 Receivables from related parties 6,311 45 days EOM -
AVN 1 Sales revenue 21,375 Normal -
AVN 1 Other receivables from related parties 8 45 days EOM -
B+B 1 Sales revenue 152,070 Normal -
B+B 1 Receivables from related parties 19,051 60 days EOM -
B+B 1 Other revenue 5,801 Normal -
B+B 1 Other receivables from related parties 1,607 60 days EOM -
B+B (CZ) 1 Sales revenue 164 Normal -
B+B (CZ) 1 Other revenue 311 Normal -
B+B (CZ) 1 Other receivables from related parties 154 60 days EOM -
BBI 1 Other revenue 348 Normal -
BBI 1 Other receivables from related parties 154 45 days after invoice date -
SIoT (Cayman) 1 Sales revenue 320,260 Normal -
SIoT (Cayman) 1 Receivables from related parties 266,621 30 days EOM 1
(Continued)
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102 -

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Transaction Details
Flow of
Number % of Consolidated
(Note A) Company Name Counterparty Transaction Financial Statement Account Amount Payment Terms Assets/Revenue
(Notes B and D)
(Note C)
Cermate Technologies Inc. 1 Other revenue $ 1,200 Normal -
Cermate Technologies Inc. 1 Sales revenue 4 Normal -
Cermate Technologies Inc. 1 Other receivables from related parties 210 30 days EOM -
Advantech Corporate Investment 1 Rental revenue 36 Normal -
Advansus Corp. 1 Sales revenue 805,007 Normal 2
Advansus Corp. 1 Receivables from related parties 139,159 60-90 days -
Advansus Corp. 1 Rental revenue 3,000 Normal -
Advansus Corp. 1 Other receivables from related parties 2,582 60-90 days -
LNC 1 Other revenue 1,600 Normal -
LNC 1 Other receivables from related parties 440 60-90 days EOM -
LNC 1 Receivables from related parties 1,456 60-90 days EOM -
LNC 1 Sales revenue 3,957 Normal -
1 AAC (HK) The Company 2 Other receivables from related parties 2,033 45 days EOM -
The Company 2 Other revenue 7,910 Normal -
2 AAU The Company 2 Receivables from related parties 15 60-90 days -
The Company 2 Sales revenue 439 Normal -
3 ABR The Company 2 Receivables from related parties 678 30 days after invoice date -
The Company 2 Sales revenue 175 Normal -
4 ACN AEU 3 Receivables from related parties 1,538 30 days EOM -
AEU 3 Sales revenue 13,018 Normal -
AiSC 3 Sales revenue 171,787 Normal -
AiSC 3 Receivables from related parties 42,659 Immediate payment -
AKMC 3 Sales revenue 29,142 Normal -
AKMC 3 Receivables from related parties 6,676 60-90 days -
AKR 3 Receivables from related parties 43 45 days EOM -
AKR 3 Sales revenue 77 Normal -
ANA 3 Receivables from related parties 63 30 days EOM -
ANA 3 Sales revenue 690 Normal -
AXA 3 Other receivables from related parties 61 60 days EOM -
SIoT (China) 3 Receivables from related parties 63,094 30 days EOM -
SIoT (China) 3 Sales revenue 25,902 Normal -
The Company 2 Receivables from related parties 5,109 30 days EOM -
The Company 2 Sales revenue 6,829 Normal -
The Company 2 Other revenue 28,464 Normal -
5 ADL A-DLoG 3 Receivables from related parties 4,988 Normal -
The Company 2 Other receivables from related parties 36,568 30 days after invoice date -
The Company 2 Sales revenue 51,198 Normal -
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(Continued)

103 -

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----- Start of picture text -----

Transaction Details
Flow of
Number % of Consolidated
(Note A) Company Name Counterparty Transaction Financial Statement Account Amount Payment Terms Assets/Revenue
(Notes B and D)
(Note C)
6 A-DLoG AAU 3 Receivables from related parties $ 7 30 days after invoice date -
AAU 3 Sales revenue 1,132 Normal -
AEU 3 Receivables from related parties 4 30 days upon delivery -
AEU 3 Other revenue 2,353 Normal -
AEU 3 Sales revenue 2,421 Normal -
AEU 3 Other receivables from related parties 383 30 days EOM -
AKMC 3 Receivables from related parties 96 60 days after invoice date -
AKMC 3 Sales revenue 706 Normal -
AKR 3 Sales revenue 1,319 Normal -
AKR 3 Receivables from related parties 79 60 days EOM -
ANA 3 Receivables from related parties 1,089 30 days after invoice date -
ANA 3 Sales revenue 38,832 Normal -
APL 3 Sales revenue 1,199 Normal -
The Company 2 Other revenue 129 Normal -
The Company 2 Sales revenue 181,902 Normal -
The Company 2 Receivables from related parties 20,746 30 days after invoice date -
The Company 2 Other receivables from related parties 13,672 60 days EOM -
7 AEU AAU 3 Receivables from related parties 4 30 days EOM -
AAU 3 Sales revenue 4 Normal -
ACN 3 Receivables from related parties 7 30 days after invoice date -
ACN 3 Sales revenue 48 Normal -
A-DLoG 3 Sales revenue 62,019 Normal -
A-DLoG 3 Receivables from related parties 1,776 30 days upon delivery -
AIN 3 Sales revenue 19 Normal -
AIN 3 Receivables from related parties 14 45 days EOM -
AID 3 Sales revenue 31 Normal -
AJP 3 Sales revenue 129 Normal -
AKMC 3 Sales revenue 100 Normal -
AKMC 3 Receivables from related parties 106 30 days EOM -
AKR 3 Sales revenue 676 Normal -
AKR 3 Receivables from related parties 52 30 days after invoice date -
ANA 3 Sales revenue 7,658 Normal -
ANA 3 Receivables from related parties 97 30 days after invoice date -
APL 3 Sales revenue 4,689 Normal -
APL 3 Receivables from related parties 448 30 days after invoice date -
B+B 3 Receivables from related parties 35 45 days EOM -
BBI 3 Sales revenue 871 Normal -
BBI 3 Receivables from related parties 152 30 days after invoice date -
The Company 2 Sales revenue 27,134 Normal -
The Company 2 Receivables from related parties 3,165 30 days EOM -
The Company 2 Other revenue 18 Normal -
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(Continued)

104 -

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----- Start of picture text -----

Transaction Details
Flow of
Number % of Consolidated
(Note A) Company Name Counterparty Transaction Financial Statement Account Amount Payment Terms Assets/Revenue
(Notes B and D)
(Note C)
10 AID ASG 3 Receivables from related parties $ 399 45 days after invoice date -
ASG 3 Other revenue 4,291 Normal -
11 AIN The Company 2 Receivables from related parties 430 60 days EOM -
12 AiSC AAC (HK) 3 Other receivables from related parties 4,488 90 days -
ACN 3 Other receivables from related parties 34,454 Immediate payment -
ACN 3 Sales revenue 8,239 Normal -
ACN 3 Rental revenue 5,975 Normal -
ACN 3 Receivables from related parties 2 Immediate payment -
AKMC 3 Sales revenue 198 Normal -
SIoT (China) 3 Receivables from related parties 823 30 days EOM -
SIoT (China) 3 Sales revenue 1,183 Normal -
The Company 2 Receivables from related parties 1,094 45 days EOM -
14 AJP ACN 3 Sales revenue 81 Normal -
ACN 3 Receivables from related parties 62 45 days EOM -
AKMC 3 Sales revenue 16,094 Normal -
AKMC 3 Other receivables from related parties 2,914 60 days EOM -
The Company 2 Receivables from related parties 516 60-90 days -
The Company 2 Sales revenue 1,161 Normal -
The Company 2 Other revenue 70 Normal -
15 AKMC ACN 3 Sales revenue 445,324 Normal 1
ACN 3 Receivables from related parties 52,060 60-90 days -
ACN 3 Rental revenue 3,595 Normal -
Advansus Corp. 3 Receivables from related parties 554 30 days EOM -
Advansus Corp. 3 Sales revenue 3,704 Normal -
AEU 3 Sales revenue 6,194 Normal -
AEU 3 Receivables from related parties 627 30 days after invoice date -
AiSC 3 Sales revenue 11,631 Normal -
AiSC 3 Receivables from related parties 491 Immediate payment -
AKST 3 Receivables from related parties 44,243 30 days EOM -
AKST 3 Sales revenue 89,380 Normal -
ANA 3 Sales revenue 3,643 Normal -
ANA 3 Receivables from related parties 313 60-90 days -
SIoT (China) 3 Receivables from related parties 6,542 30 days EOM -
SIoT (China) 3 Sales revenue 12,039 Normal -
SIoT (Cayman) 3 Receivables from related parties 125,335 30 days EOM -
SIoT (Cayman) 3 Sales revenue 510,175 Normal 1
(Continued)
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Transaction Details
Flow of
Number % of Consolidated
(Note A) Company Name Counterparty Transaction Financial Statement Account Amount Payment Terms Assets/Revenue
(Notes B and D)
(Note C)
The Company 2 Sales revenue $ 11,974,220 Normal 25
The Company 2 Receivables from related parties 1,533,444 60 days EOM 3
Cermate Technologies Inc. 3 Receivables from related parties 180 60 days EOM -
Cermate Technologies Inc. 3 Sales revenue 678 Normal -
Cermate (Shenzhen) 3 Receivables from related parties 4,015 60 days EOM -
Cermate (Shenzhen) 3 Sales revenue 36,153 Normal -
16 AKR AKST 3 Sales revenue 18,370 Normal -
AJP 3 Sales revenue 88 Normal -
ASG 3 Sales revenue 4 Normal -
AVN 3 Receivables from related parties 94 30 days EOM -
AVN 3 Sales revenue 270 Normal -
The Company 2 Receivables from related parties 468 90 days EOM -
The Company 2 Sales revenue 590 Normal -
The Company 2 Other revenue 866 Normal -
17 AKST AEU 3 Sales revenue 8,548 Normal -
AKMC 3 Sales revenue 8,446 Normal -
AKMC 3 Receivables from related parties 895 30 days EOM -
AKR 3 Receivables from related parties 880 30 days EOM -
AKR 3 Sales revenue 800 Normal -
ANA 3 Sales revenue 8,260 Normal -
The Company 2 Receivables from related parties 5,474 30 days EOM -
The Company 2 Sales revenue 7,022 Normal -
18 AMX The Company 2 Other revenue 5,975 Normal -
19 AMY ATH 3 Sales revenue 51 Normal -
The Company 2 Receivables from related parties 215 45 days EOM -
20 ANA AAU 3 Receivables from related parties 14 60 days after invoice date -
AAU 3 Sales revenue 46 Normal -
A-DLoG 3 Sales revenue 9 Normal -
AEU 3 Receivables from related parties 4,862 60-90 days -
AID 3 Sales revenue 9 Normal -
AIN 3 Receivables from related parties 58 30 days after invoice date -
AIN 3 Sales revenue 57 Normal -
AKMC 3 Receivables from related parties 906 30 days EOM -
AKR 3 Sales revenue 2,198 Normal -
ASG 3 Sales revenue 22 Normal -
B+B 3 Rental revenue 145 Normal -
B+B 3 Receivables from related parties 730 60-90 days -
(Continued)
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Transaction Details
Flow of
Number % of Consolidated
(Note A) Company Name Counterparty Transaction Financial Statement Account Amount Payment Terms Assets/Revenue
(Notes B and D)
(Note C)
B+B 3 Sales revenue $ 6,128 Normal -
B+B (CZ) 3 Sales revenue 1,157 Normal -
The Company 2 Sales revenue 85,236 Normal -
The Company 2 Receivables from related parties 57,612 45 days EOM -
The Company 2 Other revenue 997 Normal -
22 APL A-DLoG 3 Receivables from related parties 1,405 30 days after invoice date -
AEU 3 Sales revenue 106,733 Normal -
AEU 3 Receivables from related parties 10,013 30 days after invoice date -
The Company 2 Receivables from related parties 446 30 days after invoice date -
The Company 2 Other revenue 482 Normal -
23 ASG AID 3 Sales revenue 34 Normal -
AKR 3 Sales revenue 41 Normal -
AMY 3 Sales revenue 8,513 Normal -
AMY 3 Receivables from related parties 126 30 days EOM -
ATH 3 Sales revenue 6,618 Normal -
ATH 3 Other revenue 1,628 Normal -
ATH 3 Receivables from related parties 51 30 days EOM -
The Company 2 Sales revenue 5 Normal -
The Company 2 Receivables from related parties 211 60-90 days -
The Company 2 Other revenue 702 Normal -
25 ATH ASG 3 Other revenue 4 Normal -
The Company 2 Sales revenue 5 Normal -
26 AUK The Company 2 Sales revenue 68,524 Normal -
27 AVN The Company 2 Sales revenue 487 Normal -
AKR 3 Sales revenue 31 Normal -
28 AXA ACN 3 Other receivables from related parties 8,944 30 days EOM -
ACN 3 Other revenue 822 Normal -
29 B+B AEU 3 Sales revenue 69,133 Normal -
AEU 3 Receivables from related parties 9,736 90 days EOM -
AEU 3 Sales revenue 13,987 Normal -
AKMC 3 Sales revenue 75 Normal -
ANA 3 Receivables from related parties 867 30 days EOM -
BBI 3 Other revenue 8,614 Normal -
BBI 3 Receivables from related parties 1,258 45 days EOM -
(Continued)
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Transaction Details
Flow of
Number % of Consolidated
(Note A) Company Name Counterparty Transaction Financial Statement Account Amount Payment Terms Assets/Revenue
(Notes B and D)
(Note C)
The Company 2 Sales revenue $ 90,576 Normal -
The Company 2 Receivables from related parties 19,241 90 days EOM -
30 B+B (CZ) AEU 3 Sales revenue 246,655 Normal 1
AEU 3 Receivables from related parties 45,091 45 days EOM -
AEU 3 Other revenue 4,493 Normal -
AEU 3 Other receivables from related parties 1,089 45 days EOM -
B+B 3 Sales revenue 40,154 Normal -
B+B 3 Receivables from related parties 1,452 45 days EOM -
Conel Automation 3 Other revenue 1,108 45 days EOM -
Conel Automation 3 Other receivables from related parties 229 45 days EOM -
Conel Automation 3 Sales revenue 84 Normal -
Conel Automation 3 Interest revenue 117 Normal -
Conel Automation 3 Receivables from related parties 20 45 days EOM -
The Company 2 Sales revenue 48,036 Normal -
The Company 2 Receivables from related parties 4,591 45 days EOM -
The Company 2 Other revenue 39 Normal -
31 BBI AEU 3 Sales revenue 56,264 Normal -
AEU 3 Receivables from related parties 12,612 60 days after invoice date -
B+B 3 Sales revenue 8,068 Normal -
B+B 3 Receivables from related parties 10,459 60 days after invoice date -
B+B 3 Other revenue 34,498 Normal -
The Company 2 Sales revenue 5,709 Normal -
The Company 2 Receivables from related parties 5,628 60 days after invoice date -
34 DMCC The Company 2 Other receivables from related parties 2,310 Immediate payment -
The Company 2 Other revenue 5,351 Normal -
35 SIoT (CN) ACN 3 Sales revenue 1,649 Normal -
AiSC 3 Receivables from related parties 5,790 60 days EOM -
AiSC 3 Sales revenue 7,733 Normal -
AEU 3 Receivables from related parties 85,087 45 days EOM -
AEU 3 Sales revenue 211,059 Normal -
ANA 3 Receivables from related parties 125,737 30 days EOM -
ANA 3 Sales revenue 235,886 Normal -
SIoT (China) 3 Receivables from related parties 8,897 60 days EOM -
ACN 3 Receivables from related parties 141 60 days EOM -
SIoT (China) 3 Sales revenue 15,870 Normal -
38 Cermate (Shanghai) Cermate (Shenzhen) 3 Sales revenue 1,049 Normal -
(Continued)
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Note A: The parent company and its subsidiaries are numbered as follows:

Advantech Co., Ltd. is numbered “0”.
Subsidiaries are numbered from “1” onward.

Note B: The flow of related-party transactions is as follows:

From the parent company to its subsidiary.
From the subsidiary to its parent company.
Between subsidiaries.

Note C: For assets and liabilities, amounts are shown as a percentage of the Group’s consolidated total assets as of December 31, 2018, while revenue, costs and expenses are shown as a percentage of the Group’s consolidated total operating revenue for the year ended December 31, 2018.

Note D: All intercompany transactions have been eliminated from consolidation.

(Concluded)

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AI assistant

Advantech — Annual Report 2018

52053_rns_2018-11-02_49463f06-e1ad-4492-9d34-cd83ce3b1a05.pdf

Advantech Co., Ltd. and Subsidiaries

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Sales Revenue

Other Matter

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Notice to Readers

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

ADVANTECH CO., LTD. AND SUBSIDIARIES

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ADVANTECH CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

Classification, measurement and impairment of financial assets

Definition of a lease

The Group as lessee

Anticipated impact on assets, liabilities and equity

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

e. Business combinations

f. Foreign currencies

m. Financial instruments

1) Financial assets

2018

i. Financial assets at FVTPL

ii. Available-for-sale financial assets

iii. Loans and receivables

2017

c) Derecognition of financial assets

2) Equity instruments

3) Financial liabilities

a) Subsequent measurement

Financial liabilities at fair value through profit or loss

4) Derivative financial instruments

n. Provisions

Contracts prior to 2018 without retrospective application of IFRS 15

2) Rendering of services

s. Employee share options

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

b. Significant influence over associates

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME -

2018

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

11. FINANCIAL ASSETS MEASURED AT COST - 2017

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET- 2017

13. NOTES RECEIVABLE AND TRADE RECEIVABLES

Trade Receivables

At amortized cost

December 31, 2018

14. INVENTORIES

15. SUBSIDIARIES

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

Aggregate information of associates that are not individually material

17. PROPERTY, PLANT AND EQUIPMENT

18. GOODWILL

19. OTHER INTANGIBLE ASSETS

20. PREPAYMENTS FOR LEASES

21. BORROWINGS

22. OTHER LIABILITIES

23. RETIREMENT BENEFIT PLANS

Advantech Annual Report 2018