Stock Code:3596

$\mathbf{1}$

ARCADYAN TECHNOLOGY CORPORATION

Parent Company Only Financial Statements

With Independent Auditors' Report For the Years Ended December 31, 2018 and 2017

The independent auditors' report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' report and parent company only prevail.

Contents	Page
1. Cover Page	1
2. Table of Contents	2
3. Independent Auditors' Report	3
4. Balance Sheets	4
5. Statements of Comprehensive Income	5
6. Statements of Changes in Equity	6
7. Statements of Cash Flows	7
8. Notes to the Financial Statements
Company history (1)	8
(2) Approval date and procedures of the financial statements	8
(3) New standards, amendments and interpretations adopted	$8\sim16$
(4) Summary of significant accounting policies	$17 - 38$
(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty	38
Explanation of significant accounts (6)	$38 - 70$
Related-party transactions (7)	$70 - 73$
(8) Pledged assets	74
(9) Commitments and contingencies	74
(10) Losses Due to Major Disasters	74
(11) Subsequent Events	74
$(12)$ Other	74
(13) Other disclosures
(a) Information on significant transactions	$74 - 77$
(b) Information on investees	$77 - 78$
(c) Information on investment in mainland China	79
(14) Segment information	79
List of major account titles	$80 - 86$

KPMG

台北市11049信義路5段7號68樓(台北101大樓) Telephone 電話 + 886 (2) 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 11049, Taiwan (R.O.C.)

Fax 傳真 + 886 (2) 8101 6667 Internet 網址 kpmg.com/tw

Description of key audit matters:

Inventory is measured at the lower of cost and net realizable value. The Company is primarily engaged in the research, development, manufacture and sale of wireless networking products, integrated access devices, and digital home and mobile office multimedia gateway products. The significant change in supply and competitive market of demand may cause fluctuation in product price. Consequently, the book value of inventory may exceed its net realizable value. Therefore, the valuation of inventory is one of the key audit matters.

How the matter was addressed in our audit:

Our principal audit procedures included: assessing the rationality of the Company's accounting policies, such as the policy of provision for inventory loss due to price decline, obsolete, and slow moving inventories; inspecting the Company's inventory aging reports' accuracy and analyzing the changes of inventory aging which are in accordance with the Company's accounting policies; sampling and inspecting the Company's sales price, as well as verifying the calculation of the lower of cost or net realizable value; and assessing the disclosure of provision for inventory valuation and obsolescence was appropriate.

Provisions

Please refer to Note $(4)(n)$ and Note $(5)$ for the accounting policy of provisions, as well as the estimation and assumption uncertainly of provisions, respectively. Information regarding the provisions is shown in Note $(6)(k)$ of the financial statements.

Description of key audit matters:

Assessment of provisions is subject to significant judgment and estimation from management. Accounting estimate and assumption are included in the estimate of provision expenses as a percentage of sales.

How the matter was addressed in our audit:

Our principal audit procedures included: understanding the method of estimation of provision, the sources of the data; confirming the policy of Company whether it is in accordance with the accounting principles; confirming whether the accounting estimates were conducted and the disclosure of provision was appropriate; performing retrospective testing for the amount of provision, testing the method of estimation, and recalculating the rationality of amount of provision.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company'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 Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the 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.
1. 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 Company's internal control.
1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
1. 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 Company'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 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 Company to cease to continue as a going concern.
1. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
1. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the 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 financial statements of the current period 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 Kuan-Ying Kuo and Hsin-Fu Yen.

KPMG

Taipei, Taiwan (Republic of China) March 19, 2019

Notes to Readers

The accompanying parent company only financial statements are intended only to present the financial position, financial performance and cash flows in accordance with the 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 parent company only financial statements are those generally accepted and applied in the Republic of China.

Balance Sheets

(Expressed in Thousands of New Taiwan Dollars) December 31, 2018 and 2017

		December 31, 2018						December 31, 2018	December 31, 2017
	Assets	Amount	℅	December 31, $2017$ Amount %	×∣		Liabilities and Equity	℅ Amount	Amount	Š,
	Current assets:						Current liabilities:
$\frac{8}{100}$	Cash and cash equivalents (note (6)(a))	2,795,733 6	$\overline{17}$	2,629,945	22	2100	↔ Short-term borrowings (note (6)(j))	430,010
$\frac{10}{110}$	Current financial assets at fair value through profit or loss (note (6)(b))	35,071		3,192		2120	Current financial liabilities at fair value through profit or loss (note (6)(b))	3,143	11,227
1170	Notes and accounts receivable, net (note (6)(e))	3,987,392	25	2,550,263	ಸ	2170	Accounts payable	2,041,665	,297,572
1180	Accounts receivable from related parties, net (note (7))	1,818,220		899,227		2180	Accounts payable to related parties (note (7))	ន 3,460,018	1,222,303
1200	Other receivables	62,436		74,584		2230	Current tax liabilities (note (6)(m))	210,161	105,663
1210	Other receivables from related parties (note (7))	83,612		61,802		2250	Current provisions (note (6)(k))	175,023	190,804
1310	Inventories, net (note (6)(f))	3,176,782	20	1,906,837	$\tilde{e}$	2200	Other payables (note (7))	581,274	508,477
1410	Prepayments	43,300		19,831		2300	Other current liabilities	111.037	32,390
1470	Other current assets (note (8))	87,357		30,474				43 7,012,331	3.368,436	$\approx$
		12,089,903	$\frac{75}{2}$	8,176,155	%		Non-Current liabilities:
	Non-current assets:					2640	Non-current net defined benefit liability (note (6)(1))	88,565	93,679
1550	Investments accounted for using equity method (note $(6)(g)$ )	2,450,259	$\overline{15}$	2,130,589	$\frac{8}{10}$	2570	Deferred tax liabilities (note $(6)(m)$ )	58,840	50,850
151	Non-current financial assets at fair value through profit or loss (note (6)(b))	45,645						147.405	144,529
1544	Non-current financial assets at cost (note (6)(d))			48,709			Total liabilities	$\frac{4}{4}$ 7,159,736	3,512,965	$\frac{2}{3}$
1600	Property, plant and equipment (notes (6)(h) and (8))	1,459,348	o	1,482,133	$\overline{c}$		Equity (note (6)(n) and (0)):
1780	Intangible assets (note (6)(i)	55,133		63,463		3100	Ordinary share	$\mathbf{r}$ 1,936,190	1,891,190	$\tilde{=}$
1840	Deferred tax assets (note (6)(m))	109,537		99,919		3200	Capital surplus	2,794,174	2,656,323	22
1900	Other non-current assets	16,055		15,394		3300	Retained earnings	28 4,609,080	4,035,172	34
		4,135,977	$\frac{25}{2}$	3,840,207	$\frac{32}{3}$	3410	Exchange differences on translation of foreign financial statements	(53, 684)	(79, 288)	ε
						3490	Unearned employee benefit	(219, 616)	1
							Total equity	খ 9.066.144	8,503,397
	Total assets	S 16,225,880 100		12,016,362 1	劓		Total liabilities and equity	휇 \$ 16,225,880	12,016,362	휇

(English Translation of Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars, except net income per share amounts)

		2018		2017
		Amount	$\%$	Amount	℅
4000	Operating Revenues (notes $(6)(q)$ and $(7)$ ):
4100	Net sales revenue	\$21,708,946	99	14,838,702	100
4800	Other operating revenue	117,621	$\mathbf{1}$	73,241
		21,826,567	100	14,911,943	100
5000	Operating costs (notes $(6)(f)$ , $(6)(I)$ , $(7)$ and $(12)$ )	19,302,285	88	12,871,362	86
	Gross profit from operating	2,524,282	12	2,040,581	14
5910	Unrealized profit from sales	13,886	$\sim$	820	$\sim$
		2,510,396	12	2,039,761	14
	Operating expenses (notes $(6)(I)$ , $(7)$ and $(12)$ ):
6100	Selling expenses	396,631	2	296,407	2
6200	Administrative expenses	287,163	$\mathbf{1}$	233,366	2
6300	Research and development expenses	932,592	4	793,970	$\overline{5}$
	Total operating expenses	1,616,386	7	1,323,743	9
	Net operating income	894,010	5	716,018	5
	Non-operating income and expenses:
7100	Interest income	15,321		9,838
7230	Foreign exchange losses, net	(50,099)		(126, 474)	(1)
7225	Gains on disposals of investments (note $(6)(g)$ )			79,037	$\blacksquare$
7375	Share of profit of associates and joint ventures accounted for using equity method (note $(6)(g)$ )	115,221	1	241,120	2
7010	Other income	14,047		2,161
7271	Impairment loss on financial assets (note $(6)(d)$ )			(17, 838)
7510	Interest expense	(12, 835)		(741)	$\frac{1}{2}$
7590	Miscellaneous disbursements (note $(6)(g)$ )	(150)		(1, 592)	$\overline{\phantom{a}}$
7635	Gains on financial assets (liabilities) at fair value through profit or loss (note $(6)(c)$ )	67,878	$\sim$	(188, 082)	(1)
		149,383	-1 6	(2,571)	$\sim$ 5
7900	Profit before tax	1,043,393		713,447
7950	Less: Tax expense (note $(6)(m)$ )	171,874 871,519	5	106,204 607,243	-1 4
8300	Profit Other comprehensive income:

8310	Items that will not be reclassified to profit or loss
8311	Remeasurements of defined benefit plans	3,924		(4,711)
8349	Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss	1,056		801
	Total items that will not be reclassified to profit or loss	4,980		(3,910)
8360	Items that may be reclassified to profit or loss
8361	Exchange differences on translation	28,212		(76,994)
8380	Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for
	using equity method, components of other comprehensive income that will be reclassified to	(6)		20
	profit or loss
8399	Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss	(2,602)		12,976
	Total items that may be reclassified to profit or loss	25,604		(63,998)
8300	Other comprehensive income, net	30,584		(67,908)
	Total comprehensive income	902,103	5	539,335
	Earnings per share (note $(6)(p)$ )
9750	Basic earnings per share	S	4.61		3.21
9850	Diluted earnings per share		4.56		3.18

Maritana te Original he Financia $\frac{1}{2}$ $\sum_{i=1}^{n}$ $\ldots$	ARCADYAN TECHNOLOGY CORPORATION
Construction $\sqrt{E}$ . $\pi$

Statements of Changes in Equity

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

								Total other equity interest
							differences on Exchange
					Retained earnings		translation of	Unearned
						Total	foreign	employee	Total
	Ordinary	Capital	Legal	Special	Unappropriated	retained	financial	benefit and	other equity	Total
	shares	surplus	reserve	reserve	retained earnings	earnings	statements	others	interest	equity
Balance at January 1, 2017	891.190	2,655,927	566,921		3,602,482	4,169,403	15,242		(15,242)	8,701,278
Profit for the year ended December 31, 2017					607,243	607,243				607,243
Other comprehensive income for the year ended December 31, 2017					(3,910)	(3,910)	(63,998)		(63,998)	(67,908)
Comprehensive income for the year ended December 31, 2017					603,333	603,333	(63,998)		(63.998)	539,335
Appropriation and distribution of retained earnings:
Legal reserve appropriated			135,747
Special reserve appropriated				15,242	$(135,747)$ $(15,242)$ $(15,242)$
Cash dividends of ordinary shares						(737,564)				(737,564)
Changes in equity of associates and joint ventures accounted for using equity method		198								198
Disposal of subsidiaries or investments accounted for using equity method		(49)					$\left(48\right)$		$\left(48\right)$	(97)
Difference between consideration and carrying amount of subsidiaries acquired or
disposed		247								247
Balance at December 31, 2017	1,891,190	2,656,323	702,668	15,242	3,317,262	4,035,172	(79, 288)		(79, 288)	8,503,397
Profit for the year ended December 31, 2018					871,519	871,519				871,519
Other comprehensive income for the year ended December 31, 2018					4.980	4,980	25.604		25,604	30.584
Comprehensive income for the year ended December 31, 2018					876,499	876,499	25,604		25,604	902,103
Appropriation and distribution of retained earnings
Legal reserve appropriated			60,724
Special reserve appropriated				64,046
Cash dividends of ordinary shares					$(60, 724)$ $(64, 046)$ $(302, 591)$	(302, 591)				$(378, 239)$ 5,651
Changes in equity of associates and joint ventures accounted for using equity method		$(75,648)$ $5,651$
Difference between consideration and carrying amount of subsidiaries acquired or
disposed		$\circledast$								$\circledast$
Issuance of shares for employee restricted share	45,000	207,856						(252, 856)	$(252,856)$ $33,240$
Cost of employee restricted share								33,240		33,240
Balance at December 31, 2018	1,936,190	2,794,174	763,392	79,288	3,766,400	4,609,080	(53, 684)	(219, 616)	(273,300)	9,066,144

See accompanying notes to financial statements.

(English Translation of Financial Statements Originally Issued in Chinese)
ARCADYAN TECHNOLOGY CORPORATION

Statements of Cash Flows

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

	2018	2017
Cash flows from (used in) operating activities:
Profit before tax	\$ 1,043,393	713,447
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense	84,551	89,048
Amortization expense	24,505	31,473
Expected credit loss (gain) / Provision (reversal of provision) for bad debt expense	23,542	(11,705)
Interest expense	12,835	741
Interest income	(15,321)	(9,838)
Net loss (profit) on financial assets or liabilities at fair value through profit or loss	3,064
Share-based payments	33,240
Share of profit of associates and joint ventures accounted for using equity method	(115,221)	(241, 120)
Loss on disposal of property, plan and equipment	150	25
Gain on disposal of investments accounted for using equity method		(79, 037)
Impairment loss on financial assets		17,838
Impairment loss on non-financial assets		1,567
Unrealized profit from sales	13,886	820
Total adjustments to reconcile profit (loss)	65,231	(200, 188)
Changes in operating assets and liabilities:
Change in financial assets at fair value through profit or loss		42,294
Net loss (gain) on financial assets or liabilities mandatorily measured at fair value through profit or loss	(39,963)
Increase in notes and accounts receivable	(874, 834)	(228, 495)
Decrease (increase) in accounts receivable from related parties	(1,439,671)	1,106,870
Increase in other receivable	(9,027)	(39, 485)
Decrease (increase) in inventories	(1,325,570)	352,315
Decrease (increase) in prepayments	(23, 469)	10,629 8,981
Decrease in other current assets	13,322
Increase (decrease) in accounts payable	2,964,896	(261, 781)
Increase (decrease) in other payable and other current liabilities	83,698	(72, 802) (1,160)
Decrease in other operating liabilities	(1,190) (586, 577)	717,178
Total adjustments	456,816	1,430,625
Cash inflow generated from operations
Interest received	14,565 95,550	10,083 14,150
Dividends received Interest paid	(12, 205)	(741)
Income taxes paid	(70, 550)	(278, 185)
Net cash flows from operating activities	484,176	1,175,932
Cash flows from (used in) investing activities:
Acquisition of investments accounted for using equity method	(280, 036)	(11, 657)
Proceeds from disposal of investments accounted for using equity method		303,088
Acquisition of property, plant and equipment	(61, 828)	(35,003)
Proceeds from disposal of property, plant and equipment	669
Increase in refundable deposits	(14, 580)
Acquisition of intangible assets	(13, 737)	(12,350)
Increase in other non-current assets	(661)	(7, 848)
Net cash flows from (used in) investing activities	(370, 173)	236,230
Cash flows from (used in) financing activities:
Increase in short-term loans	430,010
Decrease in guarantee deposits received		(50)
Cash dividends paid	(378, 225)	(737, 564)
Net cash flows from (used in) financing activities	51,785	(737, 614)
Net increase in cash and cash equivalents	165,788	674,548
Cash and cash equivalents at beginning of period	2,629,945	1,955,397
Cash and cash equivalents at end of period	2,795,733	2,629,945

(English Translation of Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2018 and 2017

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

(1) Company history

Arcadyan Technology Corporation (the "Company") was incorporated in May 9, 2003 and merged with BroadNet Technology, Inc. on May 1, 2006.

The Company is primarily engaged in the research, development, manufacture and sale of wireless networking products, integrated access devices, and digital home and mobile office multimedia gateway products.

(2) Approval date and procedures of the financial statements:

These financial statements were authorized for issuance by the Board of Directors on March 19, 2019.

(3) New standards, amendments and interpretations adopted:

The impact of the International Financial Reporting Standards ("IFRSs") endorsed by the Financial $(a)$ Supervisory Commission, R.O.C. ("FSC") which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018.

New, Revised or Amended Standards and Interpretations	Effective date per IASB
Amendment to IFRS 2 "Clarifications of Classification and Measurement of Share-based Payment Transactions"	January 1, 2018
Amendments to IFRS 4 "Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts"	January 1, 2018
IFRS 9 "Financial Instruments"	January 1, 2018
IFRS 15 "Revenue from Contracts with Customers"	January 1, 2018
Amendment to IAS 7 "Statement of Cash Flows -Disclosure Initiative"	January 1, 2017
Amendment to IAS 12 "Income Taxes- Recognition of Deferred Tax Assets for Unrealized Losses"	January 1, 2017
Amendments to IAS 40 "Transfers of Investment Property"	January 1, 2018
Annual Improvements to IFRS Standards 2014-2016 Cycle:
Amendments to IFRS 12	January 1, 2017
Amendments to IFRS 1 and Amendments to IAS 28	January 1, 2018
IFRIC 22 "Foreign Currency Transactions and Advance Consideration"	January 1, 2018

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows:

IFRS 15 "Revenue from Contracts with Customers" $(i)$

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 "Revenue" and IAS 11 "Construction Contracts". The Company applies this standard retrospectively with the cumulative effect, it need not restate those contracts, but instead, continues to apply IAS 11. IAS 18 and the related Interpretations for comparative reporting period. The Company recognizes the cumulative effect upon the initially application of this Standard as an adjustment to the opening balance of retained earnings on January 1, 2018.

The following are the nature and impacts on changing of accounting policies:

Sales of goods $1)$

For the sale of the Company's products, revenue is currently recognized when the goods are delivered to the customers' premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods.

For certain contracts that permit a customer to return an item, the Company adjusts the expected return portion when recognizing the income, and recognizes a refund liability and an asset for recovery. Under IFRS 15, the Company will reclassify a refund liability and an asset for recovery.

$2)$ Impacts on financial statements

The following tables summarize the impacts of adopting IFRS15 on the Company's financial statements:

			December 31, 2018			January 1, 2018
Impacted line items on the balance sheet		Balances prior to the adoption of IFRS 15	Impact of changes in accounting policies	Balance upon adoption of IFRS 15	Balances prior to the adoption of IFRS 15	Impact of changes in accounting policies	Balance upon adoption of IFRS 15
Notes and accounts receivable, net (including) related parties)	S.	5,755,193	50.419	5,805,612	3.449.490	65,037	3,514,527
Inventories, net		3,219,496	(42, 714)	3,176,782	1,906,837	(55, 625)	1,851,212
Other current assets		44.643	42,714	87.357	30.474	55,625	86,099
Impact on assets			50,419			65,037
Other current liabilities	\$	60,618	50,419	111.037	32.390	65,037	97.427
Impact on liabilities			50,419			65,037

		For the year ended December 31, 2018
Impacted line items on the statement of cash flows Cash flows from (used in) operating activities:	Balance without adoption of IFRS 15	Impact of changes in accounting polices	Balance with adoption of IFRS 15
Adjustments:
Decrease (increase) in notes and accounts receivable, net (including related parties)	\$ (2,329,123)	14,618	(2,314,505)
Increase in inventory	(1,312,659)	(12,911)	(1,325,570)
Decrease in other current assets	411	12,911	13,322
Increase (decrease) in other payable and other current liabilities	98,317	(14,618)	83,699
Impact on net cash flows from (used in) operating activities

(ii) IFRS 9 "Financial Instruments"

IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and Measurement" which contains classification and measurement of financial instruments, impairment and hedge accounting.

As a result of the adoption of IFRS 9, the Company adopted the consequential amendments to IAS 1 "Presentation of Financial Statements" which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Company's approach was to include the impairment of trade receivables in administrative expenses. Additionally, the Company adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosures that are applied to disclosures about 2018 but generally have not been applied to comparative information.

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

Classification of financial assets and financial liabilities $1)$

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Company classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note $(4)(g)$ .

The adoption of IFRS 9 did not have any a significant impact on its accounting policies on financial liabilities.

$(2)$ Impairment of financial assets

IFRS 9 replaces the 'incurred loss' model in IAS 39 with the 'expected credit loss' (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than they are under IAS $39$ – please see note (4)(f).

$3)$ Hedge accounting

The Company has elected to adopt the new general hedge accounting model in IFRS 9, which requires the Company to ensure that hedge accounting relationships are aligned with its risk management objectives and strategy, and apply a more qualitative and forward-looking approach to assessing hedge effectiveness.

The Company uses forward foreign exchange contracts to hedge the variability in its cash flows arising from the changes in foreign exchange rates relating to foreign currency borrowings, receivables, sales and inventory purchases. The Company designates only the change in fair value of the spot element of the forward exchange contract as the hedging instrument in cash flow hedging relationships. The effective portion of changes in fair value of hedging instruments is accumulated in a cash flow hedge reserve as a separate component of equity.

Under IAS 39, the change in fair value of the forward element of the forward exchange contracts ('forward points') was recognized immediately in profit or loss. However, under IFRS 9, the forward points are separately accounted for as a cost of hedging; they are recognized in OCI and accumulated in a cost of hedging reserve as a separate component within equity.

Under IAS 39, for all cash flow hedges, the amounts accumulated in the cash flow hedge reserve were reclassified to profit or loss as reclassification adjustment in the same period as the hedged expected cash flows affected the profit or loss. However, under IFRS 9, for cash flow hedges of foreign currency risk associated with forecast inventory purchases, the amounts accumulated in the cash flow hedge reserve are instead included directly in the initial cost of the inventory item when it is recognized. The same approaches also apply under IFRS 9 to the amounts accumulated in the costs of hedging reserve.

For an explanation of how the Company applies hedge accounting under IFRS 9, please see note $(4)(f)$ .

$4)$ Transition

The adoption of IFRS 9 have been applied retrospectively, except as described below,

Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as on January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.
The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.
$-$ The determination of the business model within which a financial asset is held.
The designation of certain investments in equity instruments not held for trading as at FVOCI.
If an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then the Company assumed that the credit risk on its asset will not increase significantly since its initial recognition.
All hedging relationships designated under IAS 39 on December 31 2017 met the criteria for hedge accounting under IFRS 9 on January 1, 2018, and are therefore, regarded as continuing hedging relationships.
5) Classification of financial assets on the date of initial application of IFRS 9

The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Company's financial assets as of January 1, 2018.

	IAS39		IFRS9
Financial Assets	Measurement categories	Carrying Amount	Measurement categories	Carrying Amount
Cash and equivalents	Loans and receivables		2,629,945 Amortized cost	2,629,945
Derivative instruments	Designated as at FVTPL		3.192 Mandatorily at FVTPL	3.192
Debt securities	Financial assets at cost (note 1)		48.709 Mandatorily at FVTPL	48,709
Trade and other receivables	Loans and receivables (note 2)		3.449.490 Amortized cost	3,449,490
Other financial assets	Loans and receivables		136.386 Amortized cost	136,836

Note 1: These equity securities (including financial assets measured at cost) represent investments that the Company intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Company has designated these investments at the date of initial application as measured at FVTPL.
Note2: Trade and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortized cost.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on 1 January, 2018.

		2017.12.31 IAS 39 Carrying Amount	Reclassifications	2018.1.1 IFRS 9 Carrying Amount
Fair value through profit or loss
Beginning balance of FVTPL (IAS 39)	\$	3,192
Additions - equity instruments:
From financial assets measured at cost			48,709
Total		3,192	48,709	51,901
Amortized cost
Beginning balance of cash and cash equivalents, bond investment without an active market, trade and other receivables, and other financial assets (IAS39)	s	6,264,530
Subtractions:
To FVTPL - fair value option elected			(48,709)
Total		6,264,530	(48,709)	6,215,821

(iii) Amendments to IAS 7 "Disclosure Initiative"

$\mathcal{L}$

The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes.

To satisfy the new disclosure requirements, the Company present a reconciliation between the opening and closing balances for liabilities with changes arising from financing activities as note $(6)(v)$ .

(iv) Amendments to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Loss"

The amendments clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value.

There was no material impact on the financial reports.

The impact of IFRS endorsed by FSC but not yet effective $(b)$

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019 in accordance with Ruling No. 1070324857 issued by the FSC on July 17, 2018:

New, Revised or Amended Standards and Interpretations	Effective date per IASB
IFRS 16 "Leases"	January 1, 2019
IFRIC 23 "Uncertainty over Income Tax Treatments"	January 1, 2019
Amendments to IFRS 9 "Prepayment features with negative compensation"	January 1, 2019
Amendments to IAS 19 "Plan Amendment, Curtailment or Settlement"	January 1, 2019
Amendments to IAS 28 "Long-term interests in associates and joint ventures"	January 1, 2019
Annual Improvements to IFRS Standards 2015-2017 Cycle	January 1, 2019

IFRS 16 "Leases" $(i)$

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of lowvalue items. The lessor accounting remains similar to the current standard $-$ i.e. the lessors will continue to classify leases as finance or operating leases.

$\overline{1}$ Determining whether an arrangement contains a lease

On transition to IFRS 16, the Company can choose to apply either of the following:

÷, IFRS 16 definition of a lease to all its contracts; or
a practical expedient that does not need any reassessment whether a contract is, or contains, a lease.

The Company plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

$2)$ Transition

As a lessee, the Company can apply the standard using either of the following:

retrospective approach; or
modified retrospective approach with optional practical expedients.

The lessee applies the election consistently to all of its leases.

On January 1, 2019, the Company plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.

When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Company chooses to elect the following practical expedients:

apply a single discount rate to a portfolio of leases with similar characteristics.
adjust the right-of-use assets, based on the amount reflected in IAS 37 onerous contract provision, immediately before the date of initial application, as an alternative to an impairment review.
apply the exemption not to recognize the right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.
exclude the initial direct costs from measuring the right-of-use assets at the date of initial application.
use hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
$3)$ So far, the most significant impact identified is that the Company will have to recognize the new assets and liabilities for the operating leases of its offices, warehouses, and factory facilities. The Company estimated that the right-of-use assets and the lease liabilities to increase by \$6,635 thousand and \$6,635 thousand respectively, as well as the retained earnings to decrease by \$0 thousand on January 1, 2019. No significant impact is expected for the Company's finance leases. Besides, The Company does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant. Also, the Company is not required to make any adjustments for leases where the Company is the intermediate lessor in a sublease.

(ii) IFRIC 23 Uncertainty over Income Tax Treatments

In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates, an entity shall assume that a taxation authority will examine the amounts it has the right to examine and have a full knowledge on all related information when making those examinations.

If an entity concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the entity shall determine the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates consistently with the tax treatment used or planned to be used in its income tax filings. Otherwise, an entity shall reflect the effect of uncertainty for each uncertain tax treatment by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty.

The actual impact of adopting the standards may change depending on the economic conditions and events which may occur in the future.

$(c)$ The impact of IFRS issued by IASB but not yet endorsed by the FSC

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

New, Revised or Amended Standards and Interpretations	Effective date per IASB
Amendments to IFRS 3 "Definition of a Business"	January 1, 2020
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"	Effective date to be determined by IASB
IFRS 17 "Insurance Contracts"	January 1, 2021
Amendments to IAS 1 and IAS 8 "Definition of Material"	January 1, 2020

Those which may be relevant to the Company are set out below:

Issuance / Release Dates	Standards or Interpretations	Content of amendment
October 31, 2018	8 "Definition of Material"	Amendments to IAS 1 and IAS The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until has featured elsewhere in IFRS now Standards. In addition, the explanations accompanying the definition have been improved. Finally, the amendments ensure that the definition of material is consistent across all IFRS Standards.

The Company is evaluating the impact on its financial position and financial performance upon the initial adoption of the abovementioned standards or interpretations. The results thereof will be disclosed when the Company completes its evaluation.

$(4)$ Summary of significant accounting policies:

The significant accounting policies presented in the financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements.

Statement of compliance $(a)$

These annual financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers ("the Regulations").

Basis of preparation $(b)$
Basis of measurement $(i)$

Except for the following significant accounts, the financial statements have been prepared on the historical cost basis:

$\left| \right|$ Financial instruments (including derivative financial instruments) measured at fair value through profit or loss are measured at fair value;
Hedging financial assets are measured at fair value; $2)$
The defined benefit liability (or assets) is recognized as the fair value of plan assets less $3)$ the present value of the defined benefit obligation and the effect of the asset ceiling (please refer to note $4(1)$ ).
Functional and presentation currencies $(ii)$

The functional currency of is determined based on the primary economic environment in which the Company operates. The Company's financial statements are presented in New Taiwan Dollars, which is the Company's functional currency. All financial information presented in New Taiwan Dollars has been rounded to the nearest thousand.

Foreign currencies $(c)$
$(i)$ Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currency of Company at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on retranslation are recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

· Fair value through other comprehensive income (Available-for-sale) equity investment;
A financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or
· Qualifying cash flow hedges to the extent that the hedge is effective.
(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Company's functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company's functional currency at average rate. Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation reserve in equity.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planed nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.

$(d)$ Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; $(i)$
It holds the asset primarily for the purpose of trading; $(ii)$
(iii) It expects to realize the asset within twelve months after the reporting period; or
(iv) The asset is cash and cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

$(i)$ It expects to settle the liability in its normal operating cycle;
$(ii)$ It holds the liability primarily for the purpose of trading:
(iii) The liability is due to be settled within twelve months after the reporting period; or
(iv) It does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
$(e)$ Cash and cash equivalents

Cash comprise cash on hand and demand deposits. Cash equivalents are subject to an insignificant risk of changes in their fair value, and are used by the Company in the management of its short-term commitments.

The time deposits which meet the above definition and are held for the purpose of meeting shortterm cash commitments rather than for investment or other purposes are reclassified as cash equivalents.

Financial instruments $(f)$
$(i)$ Financial assets (applicable from January 1, 2018)

Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL).

The Company shall reclassify all affected financial assets only when it changes its business model for managing its financial assets.

$1)$ Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

it is held within a business model whose objective is to hold assets to collect contractual cash flows: and
is contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

$2)$ Fair value through other comprehensive income (FVOCI)

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Some accounts receivables are held within a business model whose objective is achieved by both collecting contractual cash flows and selling by the Company, therefore, those receivables are measured at FVOCI and presented as accounts receivable.

$3)$ Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets and accounts receivable (except for those presented as accounts receivable but measured at FVTPL). On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

Impairment of financial assets $4)$

The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and accounts receivable, leases receivable, guarantee deposit paid and other financial assets), debt investments measured at FVOCI, accounts receivable and contract assets.

The Company measures loss allowances at an amount equal to life time expected credit loss (ECL), except for the following which are measured as 12-month ECL:

debt securities that are determined to have low credit risk at the reporting date; and

other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to life time ECL.

Life time ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company's historical experience and informed credit assessment as well as forwardlooking information.

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of 'investment grade which is considered to be BBB- or higher per Standard & Poor's, Baa3 or higher per Moody's or twA or higher per Taiwan Ratings'.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 90 days past due or the borrower is unlikely to pay its credit obligations to the Company in full.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ' credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

significant financial difficulty of the borrower or issuer;

a breach of contract such as a default or being more than 90 days past due;

the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider:
it is probable that the borrower will enter bankruptcy or other financial reorganization; _or

the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Company recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company's procedures for recovery of amounts due.

$5)$ Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a debt instrument in its entirety, the Company recognizes the difference between its carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in "other equity – unrealized gains or losses on fair value through other comprehensive income", in profit or loss, and presented it in the line item of non-operating income and expenses in the statement of comprehensive income.

On derecognition of a part of debt instrument in which the part transferred qualifies for derecognition in its entirety, the previous carrying amount of the financial asset shall be allocated between the part that continues to be recognized and the part that is derecognized, on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized, and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income, shall be recognized in profit or loss, and presented it in the line item of non-operating income and expenses in the statement of comprehensive income.

Financial assets (policy applicable before January 1, 2018) $(ii)$

The Company classifies financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets.

$1)$ Financial assets at fair value through profit or loss

A financial asset is classified in this category if acquired principally for the purpose of selling or repurchasing in the short term. This type of financial asset is measured at fair value at the time of initial recognition, and attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein, which take into account any dividend and interest income, are recognized in profit or loss, and are included in non-operating income and expenses. A regular way purchase or sale of financial assets shall be recognized and derecognized as applicable using trade-date accounting.

Investments in equity instruments that do not have a quoted price in an active market and whose fair values cannot be reliably measured, are measured at their cost less impairment loss, and are included in financial assets at cost.

$2)$ Available-for sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the other categories of financial assets. Available-for-sale financial assets are recognized initially at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value, and changes therein, other than impairment losses, interest income calculated using the effective interest method, dividend income, and foreign currency differences on available-for-sale debt instruments, are recognized in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, and is included in nonoperating income and expenses. A regular way purchase or sale of financial assets shall be recognized and derecognized as applicable using trade-date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at amortized cost, and are included in financial assets measured at cost.

Dividend income is recognized in profit or loss on the date that the Company's right to receive payment is established, which in the case of quoted securities is normally the exdividend date. Such dividend income is included in non-operating income and expenses.

$3)$ Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprised trade receivables, other receivables, and refundable deposits. Such assets are recognized initially at fair value, plus, any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less, any impairment losses other than insignificant interest on short-term receivables. A regular way purchase or sale of financial assets shall be recognized and derecognized as applicable using trade-date accounting.

Interest income is recognized in profit or loss, and it is included in non-operating income and expenses.

$4)$ Impairment of financial assets

A financial asset is impaired if, and only if, there is an objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be estimated reliably.

The objective evidence that financial assets are impaired includes default or delinguency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is accounted for as objective evidence of impairment.

All individually significant receivables are assessed for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Company uses historical trends of the probability of default, the timing of recoveries, and the amount of loss incurred, adjusted for management's judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than those suggested by historical trends.

An impairment loss in respect of a financial asset measured at cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss is not reversible in subsequent periods.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate.

An impairment loss in respect of a financial asset is deducted from the carrying amount, except for trade receivables, for which an impairment loss is reflected in an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off from the allowance account. Any subsequent recovery of receivable written off is recorded in the allowance account. Changes in the amount of the allowance account are recognized in profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss.

If, in a subsequent period, the amount of the impairment loss of a financial asset measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss to the extent that the carrying value of the asset does not exceed its amortized cost before the impairment was recognized at the reversal date.

Impairment losses recognized on an available-for-sale equity security are not reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income, and accumulated in other equity.

Impairment losses and recoveries are recognized in profit or loss. Recovery and loss on doubtful debts of account receivables is included in operating expense, others are included in non-operating income and expense.

Derecognition of financial assets 5)

The Company derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in other equity – unrealized gains or losses from available-for-sale financial assets is recognized in profit or loss, and included in non-operating income or expenses.

The Company separates the part that continues to be recognized and the part that is derecognized based on the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income shall be recognized in profit or loss, and is included in non-operating income or expenses. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is derecognized based on the relative fair values of those parts.

(iii) Financial liabilities and equity instruments
Classification of debt or equity $1)$

Debt or equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual agreement.

Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized as the amount of consideration received, less, the direct cost of issuing.

Interest related to the financial liability is recognized in profit or loss, and is included in non-operating income or expenses. On conversion, the financial liability is reclassified to equity, and no gain or loss is recognized.

Financial liabilities at fair value through profit or loss $2)$

A financial liability is classified in this category if it is classified as held for trading or is designated as such on initial recognition.

Financial liabilities are classified as held for trading if acquired principally for the purpose of selling in the short term.

Attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss, and included in statement of comprehensive income. Unless it is a financial liability designated as at fair value through profit or loss for which the amount of its change in fair value that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, expect for an accounting mismatch in profit or loss.

Other financial liabilities $3)$

Financial liabilities not classified as held for trading or designated as at fair value through profit or loss are measured at fair value, plus any directly attributable transaction costs at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in non-operating income or expenses.

$4)$ Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligation has been discharged or cancelled, or expires. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in nonoperating income or expenses.

$5)$ Offsetting of financial assets and liabilities

The Company presents financial assets and liabilities on a net basis when the Company has the legally enforceable right to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

(iv) Derivative financial instruments and hedge accounting (policy applicable from January 1, 2018)

The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are initially measured at fair value. Any attributable transaction costs thereof are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and are included in the line item of non-operating income and expenses in the statement of comprehensive income. When a derivative is designated as, and effective for, a hedging instrument, its timing of recognition in profit or loss is determined based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is classified as a financial asset, whereas when the fair value is negative, it is classified as a financial liability.

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the non-financial asset's host contract are not closely related to the embedded derivatives and the host contract is not measured at $FVTPL$ .

The Company designates its hedging instruments, including derivatives, embedded derivatives, and nonderivative instruments for a hedge of a foreign currency risk, as a fair value hedge, cash flow hedge, or hedge of a net investment in a foreign operation. Foreign exchange risks of firm commitments are treated as fair value hedges.

At initial designated hedging relationships, the Company documents the risk management objectives and strategy for undertaking the hedge. The Company also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged items and hedging instrument are expected to offset each other.

The Company shall discontinue hedge accounting prospectively only when the hedging relationship (or a part of a hedging relationship) ceases to meet the qualifying criteria (after taking into account any rebalancing of the hedging relationship, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised.

$1)$ Cash flow hedges

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in "other equity $-\gamma$ gains (losses) on hedging instruments". The effective portion of changes in the fair value of the derivative that is recognized in other comprehensive income is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss, and is presented in the line item of non-operating income and expenses in the statement of comprehensive income.

The Company designates only the change in fair value of the spot element of the forward exchange contract as the hedging instrument in cash flow hedging relationships. The change in fair value of the forward element of the forward exchange contracts is separately accounted for as a cost of hedging and accumulated in a separate component within equity.

When the hedged item is recognized in profit or loss, the amount accumulated in equity and retained in other comprehensive income is reclassified to profit or loss in the same period or in the periods during which the hedged item affects the profit or loss, and is presented in the same accounting item with the hedged item recognized in the consolidated statement of comprehensive income. However, for a cash flow hedge of a forecast transaction recognized as a nonfinancial asset or liability, the amount accumulated in "other equity $-\$ gains (losses) on hedging instruments" and retained in other comprehensive income is reclassified as the initial cost of the nonfinancial asset or liability. In addition, if that amount is a loss and the Company expects that all or a portion of that loss will not be recovered in future periods, it shall immediately reclassify the amount in profit or loss.

When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the cash flow hedge reserve (and costs of hedging) remains in equity until the hedged future cash flows are no longer expected to occur. Otherwise, that amount would be adjusted within the carrying amount of the non-financial item. For other cash flow hedges, it is reclassified to profit or loss in the same period or in the periods as the hedged expected future cash flows affect the profit or loss. However, if the hedged future cash flows are no longer expected to occur, the amount shall immediately be reclassified from cash flow reserve (and the cost of hedging reserve) to profit or loss.

Derivative financial instruments, including hedge accounting (policy applicable before January $(v)$ $1, 2018$

Except for the following items, the Company applies the same accounting policies as applicable from January 1, 2018.

For all cash flow hedges, including hedges of transactions resulting in the recognition of nonfinancial items, the amounts accumulated in the cash flow hedge reserve were reclassified to profit or loss in the same period or periods during which the hedged expected future cash flows affected profit or loss. Furthermore, for cash flow hedges that were terminated before January 1, 2018, forward points were recognized immediately in profit or loss.

Inventories $(g)$

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is calculated using the weighted-average-cost principle and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less, the estimated costs of completion and selling expenses.

Investment in associates $(h)$

Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition, less, any accumulated impairment losses.

The financial statements include the Company's share of the profit or loss and other comprehensive income of equity accounted investees after adjustments to align the accounting policies with those of the Company from the date that significant influence commences until the date that significant influence ceases. When the associates incur changes in equity arising from non-profit-or-loss items and other comprehensive income, the Company recognizes the changes in equity proportionately to shareholding percentage as capital surplus.

Unrealized profits resulting from the transactions between the Company and an associate are eliminated to the extent of the Company's interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

When the Company's share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee.

$(i)$ Investments in subsidiaries

The subsidiaries in which the Company holds controlling interest are accounted for under equity method in the non-consolidated financial statements. Under equity method, the net income, other comprehensive income and equity in the non-consolidated financial statement are the same as those attributable to the owners of the parent in the consolidated financial statements.

The changes in ownership of the subsidiaries are recognized as equity transaction.

$(i)$ Property, plant and equipment
$(i)$ Recognition and measurement

Items of property, plant and equipment are measured at cost, less, accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. The cost of a self-constructed asset comprises material, labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that is eligible for capitalization. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately, unless the useful life and the depreciation method of a significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized in profit or loss, under net other income and expenses.

$(ii)$ Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

(iii) Depreciation

The depreciable amount of an asset is determined after deducting its residual amount, and it shall be allocated on a systematic basis over its useful life. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss.

The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is reasonably certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

Buildings: 50 years $1)$
$2)$ Machinery and equipment: $3\n-6$ years
$3)$ Research equipment: $3\neg 6$ years
$4)$ Modeling equipment: $2 \sim 3$ years
$5)$ Other equipment: $1 \sim 10$ years

The main construction of property, plant and equipment are factory buildings and firefighting facilities. All facilities are depreciated by using the useful life depreciation method.

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change(s) is accounted for as a change in an accounting estimate.

$(k)$ Lease

Payments made under operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

Contingent rent is recognized as expense in the periods in which it is incurred.

$(1)$ Intangible assets

$(i)$ Goodwill
$1)$ Initial recognition

Goodwill arising from acquisition of subsidiaries is included in intangible assets.

$2)$ Subsequent measurement

Goodwill is measured at cost, less any accumulated impairment losses.

Goodwill related to an associate or a joint venture is included in the carrying amount of the investment, and not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment in the associate or joint venture.

(ii) Research & Development

During the research phase, activities are carried out to obtain and understand new scientific or technical knowledge. Expenditures during this phase are recognized in profit or loss as incurred.

Expenditures arising from the development phase shall be recognized as an intangible asset if all the conditions described below can be demonstrated; otherwise, they will be recognized in profit or loss as incurred.

The technical feasibility of completing the intangible asset so that it will be available for $1)$ use or sale.
Its intention to complete the intangible asset and use or sell it. $2)$
$3)$ Its ability to use or sell the intangible asset.
$4)$ How the intangible asset will generate probable future economic benefits.
The availability of adequate technical, financial and other resources to complete the $5)$ development and to use or sell the intangible asset.
$6)$ Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Capitalized development expenditure is measured at cost, less accumulated amortization and any accumulated impairment losses.

(iii) Other intangible assets

Other intangible assets that are acquired by the Company are measured at cost, less accumulated amortization and any accumulated impairment losses.

(iv) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

$(v)$ Amortization

The amortizable amount is the cost of an asset or other amount substituted for cost, less, its residual value.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with all indefinite useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

$1)$ Authorization fee: amortized over the contract period by using the straight-line method.
Computer software: 1~10 years $2)$

The residual value, amortization period, and amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be accounted for as changes in accounting estimates.

$(m)$ Impairment – non-derivative financial assets

The Company assesses non-derivative financial assets (other than inventories, deferred tax assets, assets arising from employee benefits and non-current assets classified as held for sale) for impairment for and estimates the recoverable amounts for any impaired assets at the end of each reporting period. If it is not possible to determine the recoverable amount (fair value, less, cost to sell and value in use) for the individual asset, then the Company will have to determine the recoverable amount for the asset's cash-generating unit.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less, costs to sell or its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount, as a reversal of a previously recognized impairment loss.

$(n)$ Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

A provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

Under the first-time adoption of IFRIC 21 "Levies", the Group recognized liabilities when the activity that triggers payment of the levy in accordance with the relevant legislation occurs.

Revenue from contracts with customers (policy applicable from January 1, 2018) $\overline{O}$

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company's main types of revenue are explained below.

$(i)$ Sale of goods-electronic components

The Company manufactures and sells broadband network products, wireless network products, digital home appliance. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

Financing components $(ii)$

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(p) Revenue (policy applicable before January 1, 2018)

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized. The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement.

Employee benefits $(q)$
Defined contribution plans $(i)$

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Company's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the pension cost incurred from the portion of the increased benefit relating to past service by the employees is recognized in profit or loss. To the extent that the benefits vest immediately, the expense is recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Company can reclassify the amounts recognized in other comprehensive income to retained earnings or other equity. If the amounts recognized in other comprehensive income are transferred to other equity, they shall not be reclassified to profit or loss or recognized in retained earnings in a subsequent period. Net interest expense and other expenses related to the defined benefit plans are recognized in retained earnings.

The Company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation.

(iii) Short term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed when related service are provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

$(r)$ Share-based payment

The grant-date fair value of share-based payment awards granted to employee is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards whose the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of award that meet the related service and non-market performance conditions at the vesting date.

For share-based payment awards with non-vesting conditions, the grant-date fair value of the sharebased payment is measured to reflect such conditions, and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities over the period that the employees become unconditionally entitled to payment. The liability is re-measured at each reporting date and settlement date. Any changes in the fair value of the liability are recognized as personnel expenses in profit or loss.

Income Taxes $(s)$

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations, or those recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss.

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate; they also include tax adjustments related to prior years.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the following exceptions:

Assets and liabilities that are initially recognized but are not related to the business $(i)$ combination and have no effect on net income or taxable gains (losses) during the transaction.
Temporary differences arising from equity investments in subsidiaries or joint ventures where $(ii)$ there is a high probability that such temporary differences will not reverse.
(iii) Initial recognition of goodwill.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to be applied to the period when the asset is realized or the liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

The entity has the legal right to settle tax assets and liabilities on a net basis; and $(i)$
the taxing of deferred tax assets and liabilities fulfill one of the below scenarios: $(ii)$
$1)$ levied by the same taxing authority; or
levied by different taxing authorities, but where each such authority intends to settle tax $2)$ assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset should be recognized for the carry-forward of unused tax losses, unused tax credits, and deductible temporary differences, to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated every year on the financial reporting date, and they shall be adjusted based on the probability that the future taxable profit that will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

The 10% surtax on unappropriated earnings is recoded as current tax expense in the following year after the resolution to appropriate retained earnings is approved in a stockholders' meeting.

$(t)$ Business combination

Goodwill is measured as an aggregation of the consideration transferred (which generally is measured at fair value at the acquisition date) and as an amount of any non-controlling interest in the acquiree, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed (generally at fair value). If the residual balance is negative, the Company shall re-assess whether it has correctly identified all of the assets acquired and liabilities assumed, and recognize a gain on the bargain purchase thereafter.

All the transaction costs incurred for business combination are recognized immediately as the Company's expenses when incurred, except for the issuance of debt or equity instruments.

If the business combination is achieved in stages, the Company shall measure any non-controlling equity interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets.

In a business combination achieved in stages, the Company shall re-measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss. In prior reporting periods, the Company may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognized in other comprehensive income shall be recognized on the same basis as would be required if the Company had disposed directly of the previously held equity interest. If the disposal of the equity interest required a reclassification to profit or loss, such an amount shall be reclassified to profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the Company shall retrospectively adjust the provisional amounts recognized at the acquisition date, or recognize additional assets or liabilities to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date.

The Company should recognized all the business combination cost as current expense except for issuance bond or equity instruments.

Earnings per share $(u)$

The Company discloses the basic and diluted earnings per share attributable to ordinary equity holders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. Dilutive potential ordinary shares comprise employee stock options, employee restricted shares and employee compensation and remuneration not yet approved by the Board of Directors.

(v) Operating segments

Please refer to the Company's consolidated financial statements for the years ended December 31,2018 and 2017, for further details.

Significant accounting assumptions and judgments, and major sources of estimation uncertainty: $(5)$

The preparation of the financial statements in conformity with the Regulations requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

There are no critical judgments in applying the accounting policies that have significant effects on the amounts recognized in the financial statements.

Information about assumptions and estimation uncertainties made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is as follows:

Inventory valuation $(a)$

As inventories are supposed to be measured based on the lower of cost or net realizable value, which is based on the estimated sales price; therefore, the value of inventories may vary due to the nature of the industry. Please refer to note $(6)(f)$ of the financial statement for inventory valuation.

$(b)$ Recognition and measurement of provisions

Provision for warranty is estimated when product revenue is recognized. The estimate has been made based on the estimate of provision expenses as a percentage of sales. The Company reviews regularly the basis of the estimate, and if necessary, amends it as appropriate. There could be a significant impact on the provision for warranty for any changes in the basis of the estimate. Please refer to note $(6)(k)$ of the financial statement for recognition and measurement of provisions.

(6) Explanation of significant accounts:

Cash and cash Equivalents $(a)$

	December 31, 2018	December 31, 2017
Cash on hand	1.521	1,333
Checking accounts and demand deposits	1,794,212	2,428,612
Time deposits	1,000,000	200,000
	2,795,733	2,629,945

Please refer to note $6(s)$ for the interest rate risk and the fair value sensitivity analysis of the financial assets and liabilities of the Company.

(b) Financial assets and liabilities at fair value through profit or loss
$(i)$ Details are as follows:

		December 31, 2018	December 31, 2017
Current financial assets mandatorily measured at fair value through profit or loss:
Derivative instruments not used for hedging
Forward exchange contracts	\$	9,898
Currency swap contracts		1,642
Financial assets held for trading:
Stocks listed on domestic markets		23,531
Derivative instruments not used for hedging			3,192
Total		35,071	3,192
Non-current financial assets mandatorily measured at fair value through profit or loss:
Non-derivative financial assets:
Fund unlisted on domestic markets		45,645
Current financial liabilities mandatorily measured at fair value through profit or loss:
Derivative instrument not used for hedging:
Forward exchange contracts	\$	3,143
Financial liabilities held for trading:
Derivative instruments not used for hedging			11,227
Total	S	3,143	11,227

(ii) Derivative financial instruments not designated as hedging instruments:

The Company uses derivative financial instruments to hedge foreign exchange risk the Company is exposed to arising from its operating activities. The Company held the following derivative financial instruments not designated as hedging instruments presented as held-fortrading financial assets. The following derivative financial instruments were classified as mandatorily measured financial assets at fair value through profit or loss on December 31, 2018 and held-for-trading financial instruments in December 31, 2017:

		December 31, 2018
	Contract amount (in thousands)	Currency	Maturity date
Derivative financial assets:
Foreign exchange contracts:
Forward exchange sold	EUR 28,000	EUR to USD	January 14, 2019~ March 28, 2019
Swap contracts:
Currency swap	USD 20,000	USD to NTD	February 14, 2019
Derivative financial liabilities:
Foreign exchange contracts:
Forward exchange sold	EUR 15,000	EUR to USD	February 26, 2019 $\sim$ March 28, 2019
		December 31, 2017
	Contract amount (in thousands)	Currency	Maturity date
Derivative financial assets:
Foreign exchange contracts:
Forward exchange purchased	USD 2,000	USD to MXN	January 30, 2018
Derivative financial liabilities:
Foreign exchange contracts:
Forward exchange sold	EUR 24,000	EUR to USD	January 12, 2018~ April 13, 2018

Please refer to note $(6)(s)$ for the exposure to credit risk of the financial instruments.

As of December 31, 2018 and 2017, the Company did not provide any aforementioned financial assests as colleterals.

$(c)$ Derivative financial instruments used for hedging
$(i)$ Cash flow hedge

Foreign exchange risk

The Company's strategy is to enter into forward exchange contracts to hedge its foreign currency exposure risk in relation to the forecast sales. As of December 31, 2018 and 2017, the Company did not enter into any hedge contract.

$(ii)$ Adjustments on reclassification from other comprehensive income

As of December 31, 2018 and 2017, the details of adjustments on reclassification from other comprehensive income were as follows:

		2018	2017
Cash flow hedge
Profit (loss) in current year	S	3.655	(92,679)
Less: Net income (loss) of adjustments on reclassification from other comprehensive income which belongs to net
income (loss)		3.655	(92,679)

(iii) For the years ended in 2018 and 2017, the ineffective portion of cash flow hedge recognized in loss amounted of \$559 and \$48,715, recorded under the "Gain (losses) on financial assets (liabilities) at fair value through profit or loss".
(iv) For the years ended December 31, 2018 and 2017, gain or loss of adjustments from reclassification of other equity, deriving from the changes of fair-value hedge instruments, were recognized under sales in income statement.
$(d)$ Financial assets carried at cost – noncurrent

	December
	31, 2017
Fund unlisted in domestic markets	48,709

The aforementioned stock unlisted on domestic and foreign markets held by the Company are $(i)$ measured at cost less accumulated impairment losses on December 31, 2017. These investments were classified as financial assets at fair value through profit or loss on December 31, 2018, please refer to $6(b)$ .
$(ii)$ As of December 31, 2017, parts of the value of the Company's financial assets carried at cost had indications of impairment losses; therefore, the Company recognized the impairment loss of \$17,838, which was recorded under "Non-operating income and Expenses".
(iii) As of December 31, 2017, the Company did not provide any financial assets carried at costnoncurrent as collaterals.
$(e)$ Notes and accounts receivable

		December 51. 2018	December 31, 2017
Notes receivable from operating activities	S	15,460	15,108
Accounts receivable – measured at amortized cost		3,998,682	2,559,363
		4,014,142	2,574,471
Less: allowance for uncollectible accounts		(26,750)	(3,330)
allowance for sales return			(20, 878)
		3,987,392	2,550,263

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables on December 31, 2018. To measure the expected credit losses, notes and accounts receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provision in Taiwan as of December 31, 2018 was determined as follows:

Credit rating	Gross carrying amount	Weighted- average loss rate	Loss allowance provision	Credit impaired
Level A	\$ 1,330,938	$0\%$	$\blacksquare$	No
Level B	2,213,789	$0.1\%$	2,230	No
Level C	449,389	$1\%$	4,494	No
Level D~E		$\overline{\phantom{a}}$	-	۰
Level F	20,026	100%	20,026	Yes
Total	4,014,142		26,750

The aging analysis of notes and accounts receivable was as follows:

	December 31, 2018
Overdue $1 \sim 30$ days	543,177 S
Overdue $31 - 60$ days	10,505
Overdue $61 - 90$ days	40
Overdue $91~180$ days	1,179
Overdue over 181 days	30,696
	585,597 S

As of December 31, 2017, the Company applies the incurred loss model to consider the loss allowance provision of notes and accounts receivable, and the aging analysis of notes and accounts receivable, which were past due but not impaired, was as follows:

	December 31, 2017
Overdue $1 \sim 30$ days	377,437 S
Overdue $31 - 60$ days	92,878
Overdue $61 - 90$ days	27,768
Overdue $91~180$ days
Overdue over 181 days	15,613
	513,696 S

The movement of allowance for notes and accounts receivable for the years ended December 31, 2018 and 2017 were as follows:

		2017
	2018	Individually assessed impairment	Collectively assessed impairment
Balance at January 1, 2018 and 2017 per IAS 39	3.330	7.827	7,208
Adjustment on initial application of IFRS 9
Balance at January 1, 2018 per IFRS 9	3,330
Impairment loss recognized (Reversal of Impairment)	23,420	(7, 827)	(3,878)
Balance at December 31, 2018 and 2017	26,750		3,330

As of December 31, 2018 and 2017, the Company did not provide any aforementioned notes and accounts receivable as collaterals.

The Company entered into accounts receivable factoring agreements with banks. Based on the agreements, the Company is not responsible for guaranteeing the ability of the account receivable obligor to make payment when it is affected by credit risk. Thus, this is non-recourse accounts receivable factoring. After the transfer of the accounts receivable, the Company can request partial proceeds, while the interest calculated at an agreed rate is paid to the bank until the account receivable is paid. The remaining amounts are received when the accounts receivable are paid by the customers. As of December 31, 2018 and 2017, there was no unreceived balance of discounted accounts receivable.

$(f)$ Inventories
$(i)$ A summary of the Company's financial information for inventions at the reporting date were as follows:

		December 31, 2018	December 31, 2017
Raw materials	S	609,837	802,709
Work in progress		1,025	849
Finished goods		2,565,920	,103,279
	S	3,176,782	1,906,837

(ii) Inventory cost recognized as cost of sales for the years ended December 31, 2018 and 2017 were as follows:

	2018	2017
Cost of sales	$$19,317,784$ 12,819,030
Inventory valuation loss and obsolescence	(15.499)	52,332
	\$19,302,285	12,871,362

In 2018, the reversal of write-downs amounted to \$15,499 due to selling or disposal of inventories. In 2017, the write-downs of inventories to net realizable value amounted to \$52,332.

(iii) As of December 31, 2018 and 2017, the Company did not provide any inventories as collaterals for its loans.
$(g)$ Investments accounted for using equity method
$(i)$ A summary of the Company's financial information for equity-accounted investees at the reporting date were as follows:

	December 31, 2018	December 31, 2017
Subsidiaries	2,435,799	2,117,006
Associates	14.460	13.583
	2,450,259 -8	2,130,589

(ii) Subsidiaries

Please refer to the consolidated financial statements of the year 2018.

(iii) The following is the related information of significant associate

			Principal place of Effective ownership interest
		business/		and voting right
		Country of			December 31, December 31,
Name	Nature of the relationship	incorporation	2018		2017
Compal Broadband	Manufacturing and sale of	Taiwan		$1\%$	$1\%$ (Note)
	Network Inc. ("CBN") broadband networking product

Note: The Company disposed 15% of CBN's equity on September 29, October 31, and December 25, 2017, respectively, and the total disposal price was \$303,088. The gains on disposals amounted to \$79,037, and were recorded under gains on disposals of investments. The aforementioned gains on disposals include the amount recorded under other comprehensive income and capital surplus reclassified to profit or loss.

The following table summarizes the information of the Company's material associate adjusted for any differences in accounting policies and reconciles the information to the carrying amount of the Company's interest in the associate.

Summarized financial information of Compal Broadband Network Inc. $1)$

		December 31, 2018	December 31, 2017
Current assets	\$	2,908,124	4,147,391
Non current assets		241,869	285,032
Current liabilities		(1,335,206)	(2,884,239)
Non current liabilities		(115)	(71)
	S	1,814,672	1,548,113
Net assets belongs to non-controlling interest	S
Net assets belongs to investee company	S	1,814,672	1,548,113
		2018	2017
Revenue	\$	5,316,072	6,817,464
Profit from continuing operations		184,370	182,145
Other comprehensive income		(18)	124
Total comprehensive income	\$	184,352	182,269
Other comprehensive income belongs to non- controlling interest	\$
Other comprehensive income belongs to investee company	S	184,352	182.269
		2018	2017
Beginning balance of net assets owned by the Company	\$	13,583	219,723
Capital increase by cash dividends		(957)	(2,742)
Comprehensive income attributable to the Company		1,614	20,647
Disposal			(224, 051)
Changes on net value from investment in associates by equity method		220	6
Ending balance of net assets owned by the Company		14,460	13,583
Unrealized capital surplus of investee company - share of employee stock option certificates		$\overline{20}$	95
Share of net assets of affiliates (the carrying amount of the Company's interests)	\$	14,480	13,678

(iv) The Company's equity-accounted investment in all individually immaterial associates and the Company's share of the operating results are summarized below:

	December 31, 2018	December 31, 2017
The carrying amount of the Company's interests in all individually immaterial associates
The Company's share of the net income (loss) of associates:
	2018	2017

Profit (loss) from continuing operations		(4, 171)

Parts of the value of the Company's associates accounted for using equity method had indications of impairment losses; therefore, the Company recognized the impairment loss of \$1,567 in 2017, which was recorded under "Non-operating income and expense".

(v) As of December 31, 2018 and 2017, the Company did not provide any investment accounted for using equity method as collaterals.
Property, plant and equipment $(h)$

The cost, depreciation, of the property, plant and equipment and of the Company for the years ended December 31, 2018 and 2017 were as follows:

		Land	Buildings and construction	Machinery and equipment	Research and development equipment	Molding equipment	Leasehold improvement and other equipment	Under construction and prepayment for purchase of equipment	Total
Cost or deemed cost:
Balance at January 1, 2018	S.	463,262	826,069	217,179	310,194	148,276	226,548	7,055	2,198,583
Additions				180	47,259	2,449	4,162	11,774	65,824
Reclassifications			2,059				(800)	(4, 497)	(3,238)
Disposals and derecognitions				(3,080)	(11, 912)	(7, 376)	(1, 804)		(24, 172)
Balance at December 31,2018		463,262	828,128	214,279	345,541	143,349	228,106	14,332	2,236,997
Balance at January 1, 2017	s	463,262	826,069	220,137	291,163	139,356	224,935	5,339	2,170,261
Additions					21,313	8,577	4,313	2,059	36,262
Reclassifications						343		(343)
Disposals and derecognitions				(2,958)	(2, 282)		(2,700)		(7,940)
Balance at December 31, 2017		463,262	826,069	217,179	310,194	148,276	226,548	7,055	2,198,583
Depreciation and impairment loss:
Balance at January 1, 2018	\$		46,435	215,758	241,364	130,131	82,762		716,450
Depreciation			18,104	628	27,050	12,073	26,696		84,551
Disposals and derecognitions				(3,074)	(11,229)	(7,320)	(1, 729)		(23, 352)
Balance at December 31, 2018			64,539	213,312	257,185	134,884	107,729		777,649
Balance at January 1, 2017	\$		27,727	217,745	218,512	114,529	56,804		635,317
Depreciation			18,708	968	25,131	15,602	28,639		89,048
Disposals and derecognitions				(2,955)	(2,279)		(2,681)		(7, 915)
Balance at December 31, 2017	s		46,435	215,758	241,364	130,131	82,762		716,450

Carrying amounts:	Land	Buildings and construction	Machinery and equipment	Research and development equipment	Molding equipment	Leasehold improvement and other equipment	Under construction and prepayment for purchase of equipment	Total
Balance at December 31, 2018	463,262	763,589	967	88,356	8,465	120,377	14,332	1,459,348
Balance at January 1, 2017	463,262	798,342	2,392	72,651	24,827	168,131	5,339	1,534,944
Balance at December 31, 2017	463,262	779,634	1,421	68.830	18,145	143,786	7,055	1,482,133

As of December 31, 2018 and 2017, part of the Company's property, plant and equipment are provided as collateral for long-term borrowings. Please see note 8.

Intangible Assets $(i)$

$\bar{z}$

Changes in cost and accumulated amortization of intangible assets for the years ended December 31, 2018 and 2017, were as follows:

		Goodwill	Authorization fee	Computer software and others	Total
Cost:
Balance at January 1, 2018	\$	6,556	57,688	60,174	124,418
Additions				13,737	13,737
Reclassifications				2,438	2,438
Disposals			(7,173)	(10, 948)	(18, 121)
Balance at December 31, 2018	\$	6,556	50,515	65,401	122,472
Balance at January 1, 2017	\$	6,556	62,088	61,391	130,035
Additions				12,350	12,350
Disposals			(4,400)	(13, 567)	(17, 967)
Balance at December 31, 2017	\$	6,556	57,688	60,174	124,418
Accumulated amortization:
Balance at January 1, 2018	\$		27,982	32,973	60,955
Amortization			7,346	17,159	24,505
Disposals			(7, 173)	(10, 948)	(18, 121)
Balance at December 31, 2018	S		28,155	39,184	67,339
Balance at January 1, 2017	\$		22,736	24,713	47,449
Amortization			9,646	21,827	31,473
Disposals			(4,400)	(13, 567)	(17, 967)
Balance at December 31, 2017	S		27,982	32,973	60,955
Book value:
Balance at December 31, 2018	\$	6,556	22,360	26,217	55,133
Balance at January 1, 2017	\$	6,556	39,352	36,678	82,586
Balance at December 31, 2017	\$	6,556	29,706	27,201	63,463

$(i)$ Amortization expenses

The amortization of intangible assets is included in the statements of comprehensive income:

	2018	2017
Cost of sales	1.612	2.540
Operating expenses	22,893	28,933

(ii) As of December 31, 2018 and 2017, the Company did not provide any intangible assets as collaterals.

Short-term borrowings $(j)$

	December 31, 2018	December 31, 2017
Credit loans	430.010
Unused credit line for short-term borrowings	S 4,238,114	4,062,107
Annual interest rates	$0.45\%$ ~2.93%	-

For the information on the Company's interest risk, foreign currency risk and liquidity risk, please see note $(6)(s)$ .

(k) Provisions

$\mathcal{L}^{\mathcal{L}}$

	Warranties
Balance at January 1, 2018	\$	190,804
Provisions made		162,166
Provisions used		(162, 931)
Provisions reversed		(15,016)
Balance at December 31, 2018		175,023
Balance at January 1, 2017	\$	195,803
Provisions made		140,362
Provisions used		(106, 827)
Provision reversed		(38, 534)
Balance at December 31, 2017	S	190,804

Provisions related to sales of products are assessed based on the historical experience.

Employee benefits $(1)$

Defined benefit plans $(i)$

The present value of the defined benefit obligations and the fair value adjustments of plan assets for the Company were as follows:

	December 31, 2018	December 31, 2017
Present value of defined benefit obligations	201.154	198,032
Fair value of plan assets	(112, 589)	(104, 353)
Net defined benefit liability	88,565	93,679

The Company makes defined benefit plan contributions to the pension fund account at the Bank of Taiwan that provides pensions for employees upon retirement. The plans (cover by the Labor Standards Law) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement.

$1)$ Composition of plan assets

The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Labor Pension Fund Supervisory Committee. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with interest rates offered by local banks.

The Company's Bank of Taiwan labor pension reserve account balance amounted to \$112,589 at the end of the reporting period. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Labor Pension Fund Supervisory Committee.

2) Movements in present value of the defined benefit obligations

The movements in present value of defined benefit obligations for the Company were as follows:

	2017
Balance at January 1	198,032	189,401
Current service costs and interest	4.577	4,325
Actuarial gains (losses)	(1.455)	4.306
Balance at December 31	201,154	198,032

Movements of defined benefit plan assets $3)$

The movements in the present value of the defined benefit plan assets for the Company were as follows:

		2018	2017
Fair value of plan assets at January 1	S	104,353	99,273
Contributions made		4,067	4,102
Expected return on plan assets		1,700	1,383
Remeasurement in net defined benefit liability (assets)		2,469	(405)
Fair value of plan assets at December 31		112,589	104,353
Actual return on plan assets		4,169	978

$4)$ Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company were as follows:

	2018	2017
Service cost	\$ 1,388	1,731
Net interest of net liabilities (assets) for defined benefit obligations	3,189	2,594
Expected return on plan assets	(1,700)	(1, 383)
	2,877	2,942
Cost of sales	\$ 381	434
Selling expenses	241	335
Administrative expenses	485	376
Research and development expenses	1,770	1,797
	2,877	2,942

5) Actuarial gains and losses recognized in other comprehensive income

The Company's actuarial gains and losses recognized in other comprehensive income, before tax for the years ended December 31, 2018 and 2017, were as follows:

	2018	2017
Cumulative amount at January 1	61.372	56.661
Recognized	(3.924)
Cumulative amount at December 31	57,448	61.372

Actuarial assumptions $6)$

The following are the Company's principal actuarial assumptions: a)
$i)$ Present value of defined benefit obligations

		December 31, 2018	December 31, 2017
	Discount rate as of December 31	1.375 %	1.625%
	Future salary increasing rate	3.000 $%$	3.000 $%$
11)	Defined benefit plan cost
		2018	2017
	Discount rate as of December 31	$1.625 \%$	1.375 %
	Future salary increasing rate	3,000 $%$	3.000 $\%$

The expected allocation payment made by the Company to the defined benefit plans for the one year period after the reporting date was \$4,066.

The weighted-average duration of the defined benefit obligation is 15.58 years.

$7)$ Sensitivity analysis

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

	Increased 0.25%	Decreased 0.25%
December $31, 2018$
Discount rate	(5,928)	6,182
Future salary increasing rate	5,967	(5,755)
December 31, 2017
Discount rate	(5, 844)	6,103
Future salary increasing rate	5,899	(5,684)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2018 and 2017.

8) There were no payment for pension made by the Company for the years ended December 31, 2018 and 2017.

(ii) Defined contribution plans

The Company allocate 6% of each employee's monthly wages to the labor pension personal account at the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Company allocates a fixed amount to the Bureau of the Labor Insurance without additional legal or constructive obligations.

The Company and all subsidiaries in domestic recognized the pension costs under the defined contribution method amounting to \$32,591 and \$30,800 for the years ended December 31, 2018 and 2017, respectively. Payment was made to the Bureau of Labor Insurance.

(m) Income taxes

The Company According to the amendments to the "Income Tax Act" enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, an increase in the corporate income tax rate from 17% to 20% is applicable upon filing the corporate income tax return commencing FY 2018.

$(i)$ Income tax expense (benefit)
$1)$ The amount of income tax for the years ended December 31, 2018 and 2017 were as follows:

	2018	2017
Current tax expense (benefit)
Recognized during the period	\$ 188,307	81,053
10% surtax on unappropriated earnings	17,597	45,545
Adjustment for prior periods	(30, 856)	(27, 389)
	175,048	99,209
Deferred tax expense
Origination and reversal of temporary differences	(3,174)	6,995
	(3,174)	6,995
Income tax expense	171,874	106,204

The amount of income tax recognized in other comprehensive income for the years ended $2)$ December 31, 2018 and 2017 were as follows:

		2017
Foreign currency translation differences for foreign operations	2.602	(12,976)
Defined benefit plan actuarial gains (losses)	(1.056)	(801)
	1,546	(13, 777)

Reconciliation of income tax and profit before tax for the years ended December 31, $3)$ 2018 and 2017 were as follows:

		2018	2017
	Tax rate	Amount	Tax rate	Amount
Profit excluding income tax	20	1,043,393 S.	17	713,447
Income tax using the Company's domestic tax rate		208,679		121,286
Adjustment in tax rate		(5, 847)
Tax-exempt income		(12, 143)		(54, 816)
Changes in unrecognized temporary differences		(2, 553)		4,409
Under (over) provision in prior periods		(30, 856)		(27, 389)
10% surtax on unappropriated earnings		17,597		45,545
Other		(3,003)		17,169
		S 171,874		106,204

Deferred tax assets and liabilities $(ii)$

The Company was able to control the timing of the reversal of the temporary differences associated with investments in subsidiaries on December 31, 2018 and 2017. Also, the management considered it probable that the temporary differences would not be reversed in the foreseeable future. Hence, such temporary differences were not recognized under deferred tax liabilities.

$\bar{1}$ Unrecognized deferred tax liabilities: None.
$2)$ Unrecognized deferred tax assets:

Details of unrecognized under deferred tax assets are as follows:

		December 31.	December 31,
	2018		2017
Tax effect of deductible temporary differences		31,867	29,257

The management considered that the temporary differences would probably not be reversed in the foreseeable future. Therefore, such temporary differences were not recognized under deferred tax assets.

$3)$ Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2018 and 2017 were as follows:

		Investment income recognized under the equity method (overseas)	Others	Total
Deferred Tax Liabilities:
Balance at January 1,2018	\$	40,749	10,101	50,850
Recognized in profit or loss		18,091	(10, 101)	7,990
Balance at December 31, 2018	\$	58,840		58,840
Balance at January 1,2017	\$	25,854		25,854
Recognized in profit or loss		14,895	10,101	24,996
Balance at December 31, 2017	S	40,749	10,101	50,850
			Foreign

		Defined benefit plans	LOI CINN currency translation adjustment	Loss on inventory valuation	Unrealized exchange losses, net	Others	Total
Deferred Tax Assets:
Balance at January 1,2018	\$	10.430	15,613	7.289	27,767	38,820	99,919
Recognized in profit or loss				911	5,995	4,258	11,164
Recognized in other comprehensive income		1,056	(2,602)				(1, 546)
Balance at December 31, 2018	S	11,486	13,011	8,200	33,762	43,078	109,537
Balance at January 1,2017	\$	9.629	2,637	4,255	14,706	36,914	68,141
Recognized in profit or loss				3.034	13,061	1.906	18,001
Recognized in other comprehensive income		801	12,976				13,777
Balance at December 31, 2017	S	10,430	15,613	7,289	27,767	38,820	99,919

(iii) The ROC tax authorities have examined the income tax expenses of the Company through 2015.
Capital and other equities $(n)$

As of December 31, 2018 and 2017, the authorized common stocks were both \$2,500,000, of which 193,619 and 189,119 thousand shares, respectively, were issued. All issued shares were paid up upon issuance.

Ordinary shares $(i)$

Reconciliation of shares outstanding for 2018 and 2017 were as follows:


(in thousands of shares)	2018	2017
Balance on January 1	189.119	189,119
Issue of employee restricted share	4.500	-
Balance on December 31	193.619	189,119

$\ddot{\phantom{a}}$

(ii) Capital surplus

The balances of capital surplus were as follows:

		December 31, 2018	December 31, 2017
Additional paid-in capital	S	2,575,896	2,651,544
Difference between consideration and carry amount of subsidiaries disposed		3,698	3,706
Changes in equity of associates and joint ventures accounted for using equity method		6,724	1,073
Issue of employee restricted share		207,856
		2,794,174	2,656,323

According to the ROC Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring paid-in capital in excess of par value should not exceed 10% of the total common stock outstanding.

The resolution of shareholders' meeting decided to distribute the cash dividends amounting to \$75,648 (\$0.4 per share) through capital surplus on June 21, 2018.

(iii) Retained earnings

The Company's article of incorporation stipulate that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve. The legal reserve can be exempted if it equals the paid-in capital, besides, special reserves are supposed to be set aside or reversed in accordance with the relevant regulations or as required by the government. And then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders' meeting for approval.

According to the Company's stable dividend policy, the type of dividends should be determined after considering the business environment, operating performance, financial structure, etc. Cash dividends to stockholders shall not be lower than 10% of total cash and stock dividends.

Legal reverse $1)$

In accordance with the Company Act as amended, 10 percent of net income after tax should be set aside as legal reserve, until it is equal to authorized capital. If the Company experienced profit for the year, the distribution of the statutory earnings reserve, either by new shares or by cash, shall be decided at the shareholders meeting, and the distribution amount is limited to the portion of legal reserve which exceeds 25 percent of the paid-in capital.

$2)$ Special reverse

A portion of current-period earnings and undistributed prior-period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should be equal to the total net current-period reduction of other shareholders' equity resulting from the carrying amount of special earnings reserve as stated above. Similarly, a portion of undistributed prior period earnings shall be reclassified as a special earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other shareholders' equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders' equity shall qualify for additional distributions.

(iv) Earnings distributed

Earnings distribution for 2017 and 2016 was approved by the shareholders during their annual meeting held on June 21, 2018 and June 13, 2017, respectively. The relevant dividend distribution to shareholders, employee bonus and the directors' remuneration were as follows:

	2017		2016
	Amount per share	Total amount	Amount per share	Total amount
Cash dividends distributed to common shareholders	1.60S	302,591	3.9	737.564

Share-based payment $(0)$
The Company-Employee restricted share $(i)$

At the meeting held on June 21, 2018, the Company's Board of Directors decided to issue 4,500,000 shares of employee restricted shares to those the Company's full-time employees who meet certain requirements. The restricted shares have been registered with and approved by the Securities and Futures Bureau of FSC. The Board of Directors decided to issue all the restricted shares on November 6, 2018, which is also the effective date of the share issuance.

3,500,000 shares of the aforementioned restricted shares are issued without consideration. 30%, 30% and 40% of the 3,500,000 restricted shares are vested respectively when the employees continue to provide service for at least 2 year, 3 years and 4 years from the registration and the effective date, and at the same time, meet the performance requirement. In addition, when earnings per share in two continuous and complete fiscal years from the registration and effective date are no less than 4 New Taiwan Dollars and at the same time, the employees with the restricted shares meet the performance requirement, the other 1,000,000 shares of the restricted shares are vested 100% at the date the shareholders approved the financial statements for the second fiscal year. If the earnings per share in continuous and complete fiscal years from the registration and effective date are between 3 to 4 New Taiwan Dollars and at the same time, the employees with the restricted shares meet the performance requirement, the restricted shares are vested 75% at the date the shareholders approved the financial statements for the second fiscal year. If the earnings per share in two continuous and complete fiscal years from the registration and effective date are less than 3 New Taiwan Dollars, the employees with the restricted shares whether or not meet the performance requirement, the restricted shares are vested 0% at the date the shareholders approved the financial statements for the second fiscal year. The earnings per share mentioned above are calculated based on the profit approved by the shareholders, and the weighted average number of ordinary shares outstanding at the date of the restricted shares have been approved by the authority.

After the issuance, the restricted shares are kept by a trust, which is appointed by the Company, before they are vested. These restricted shares shall not be sold, transferred. pledged, gifted or by any other means of disposal to third parties during the custody period. The voting rights of these shares are executed by the custodian, and the custodian shall act based on the law and regulations. If the shares remain unvested after the vesting period, the Company will redeem all the unvested shares without consideration and cancel the shares thereafter. Restricted shares could receive cash and stock dividends, and could join cash injection. The aforementioned new shares are not considered as restricted shares.

The information of the Company's restricted shares is as follows:

Unit: in thousands of shares

	2018
Outstanding unit at January 1
Granted during the period	4.500
Outstanding unit at December 31	4,500

Employee restricted shares are evaluated by the market price of \$57.4 as their fair value on the granted date, accordingly, will increase the capital surplus amounting to \$252,856. As of December 31, 2018, the unearned employee benefit was \$219,616.

The compensation cost related to the restricted share amounted to \$33,240 for the year ended December 31, 2018.

Earnings per share $(p)$

$(i)$ Basic earnings per share

The calculation of basic earnings per share for the year 2018 and 2017 were as follows:

$1)$ Profit attributable to ordinary shareholders of the Company

		2018	2017
	Profit attributable to ordinary shareholders of the Company	871,519	607,243
2)	Weighted-average number of ordinary shares (thousands)
		2018	2017
	Weighted-average number of ordinary shares at December 31	189,119	189,119
	Basic earnings per share (dollars)	4.61	3.21

$(ii)$ Diluted earnings per share

$\hat{\mathcal{L}}$

The calculation of diluted earnings per share for the year 2018 and 2017 was as follows:

$1)$ Profit attributable to ordinary shareholders of the Company (diluted)

Profit attributable to ordinary shareholders of the Company(basic) (diluted) 871,519 2) Weighted-average number of ordinary shares (diluted) (thousands) 2018 2017 Weighted-average number of outstanding ordinary shares (basic) 189,119 Effect of employee bonuses 1,659 Effect of employee restricted shares unvested 470 Weighted-average number of ordinary shares (diluted) 191,248 Diluted earnings per share (dollars) 4.56		2018	2017
			607,243


			189,119
			1,859

			190,978
			3.18

$(a)$ Revenue from contracts with customers

Details of revenue $(i)$

	2018
	Networking Product Segment	Total
Primary geographical markets
Europe	\$ 12,235,162	12,235,162
America	3,290,606	3,290,606
Asia and others	6,300,799	6,300,799
	S 21,826,567	21,826,567
Major products:
Networking products	\$ 18,013,340	18,013,340
Digital Set-top-box products	3,374,584	3,374,584
Materials and others	438,643	438,643
	S 21,826,567	21,826,567
Contract balances (ii)
	December 31, 2018	January 1, 2018
Accounts receivable	\$ 5,832,362	3,517,857
Less: allowance for impairment	(26, 750)	(3,330)
Total	5,805,612	3,514,527

For details on accounts receivable and allowance for impairment, please refer to note $(6)(e)$ .

$(r)$ Remuneration to employees and directors

Based on the Company's articles of incorporation, if there is any profit in a fiscal year, it shall be distributed to employees as remuneration in an amount of not less than five percent (5%) and to directors as remuneration in an amount of not more than two percent $(2\%)$ of such profits. In the event that the Company has accumulated losses, the Company shall reserve an amount to offset its accumulated losses. Employees who are entitled to receive the above mentioned employee remuneration, in share or cash, include the employees of the subsidiaries of the Company who meet certain specific requirement.

For the years ended December 31, 2018 and 2017, the Company accrued and recognized its employee remuneration of \$104,047 and \$71,221, and directors' remuneration of \$8,643 and \$6,673, respectively. The estimated amounts mentioned above are based on the net profit before tax without the remuneration to employees and directors of each respective ending period, multiplied by the percentage of remuneration to employees and directors as specified in the Company's articles. The estimations were recorded under operating expenses during 2018 and 2017.

The Company accrued its remuneration to employee and directors amounting to \$71,221 and \$6,673 in 2017, respectively. There were no differences between the amounts approved in the Board of Directors' meeting and those recognized in the 2017 financial statements. Related information can be accessed through the Market Observation Post System website.

Financial instruments $(s)$
$(i)$ Credit risk
- Exposure to credit risk $1)$

The carrying amount of financial assets represents the maximum amount exposed to credit risk.

Concentration of credit risk $2)$

The Company's customers are mainly from the high-tech industry; therefore, the Company does not concentrate on a specific customer and the sales regions are widely spread, thus, there should be no concern on the significant concentrations of accounts receivable credit risk. And in order to mitigate accounts receivable credit risk, the Company constantly assesses the financial status of its customers, wherein it does not require its customers to provide any collateral.

$3)$ Credit risk

For credit risk exposure of note and trade receivables, please refer to note $(6)(e)$ .

Other financial assets at amortized cost includes other receivables and time deposits. All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses. Regarding how the financial instruments are considered to have low credit risk, please refer to note $(4)(f)$ . In addition, the counterparties of the time deposits held by the Company are the financial institutions with investment grade credit ratings. Therefore, the credit risk is considered to be low.

The loss allowance provision as of December 31, 2018 was determined as follows:

	Other receivable
Balance on January 1 per IFRS 9	$\overline{\phantom{a}}$
Impairment loss recognized
Balance on December 31

$(ii)$ Liquidity risk

The following are the contractual maturities of financial liabilities, excluding estimated interest payments.

	Carrying Amount	Contractual cash flows	Within a year
December 31, 2018
Non-derivative financial liabilities
Unsecured bank loans	\$ 430,010	(430,010)	(430,010)
Notes and accounts payable	5,501,765	(5,501,765)	(5,501,765)
Other payables	164,655	(164, 655)	(164, 655)
Derivative financial liabilities
Forward exchange contracts:	3,143
Outflow		(528,000)	(528,000)
Inflow		527,512	527,512
	6,099,573	(6,096,918)	(6,096,918)
December 31, 2017
Non-derivative financial liabilities
Notes and accounts payable	\$ 2,536,869	(2, 536, 869)	(2, 536, 869)
Other payables	221,677	(221,677)	(221,677)
Derivative financial liabilities
Forward exchange contracts:	11,227
Outflow		(853, 680)	(853,680)
Inflow		845,988	845,988
	2,769,773	(2,766,238)	(2,766,238)

The Company is not expecting that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.

(iii) Currency risk

Exposure to foreign currency risk $1)$

The Company's significant exposure to foreign currency risk was as follows:

		December 31, 2018			December 31, 2017
	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate	TWD
Financial assets
Monetary items
USD	\$	150.454 USD/TWD $=30.715$	4,621,195		109,369 USD/TWD $=29.76$	3,254,821
EUR		53,265 EUR/TWD $= 35.2$	1,874,931		31,004 EUR/TWD $=35.57$	1,102,812
Financial liabilities
USD		192,086 USD/TWD $=30.715$	5,899,921		85,263 USD/TWD $=29.76$	2,537,427

(Continued)

Sensitivity analysis $2)$

The Company's exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, trade and other receivables (including related parties), loans and borrowings, accounts payable (including related parties) and other payables (including related parties) that are denominated in foreign currency. The analysis assumes that all other variables remain constant. A strengthening (weakening) 5% of each foreign currency against the functional currency on December 31, 2018 and 2017 would have affected the net profit before tax as follows. The analysis is performed on the same basis for both periods:

	December 31, 2018		December 31, 2017
USD (against the TWD)
Strengthening 5%	S.	(63,936)	35,870
Weakening 5%		63,936	(35,870)
EUR (against the TWD)
Strengthening 5%	S	93.746	55,141
Weakening 5%		(93,746)	(55, 141)

$3)$ Exchange gains and losses of monetary items

As the Company deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. In 2018 and 2017, the foreign exchange gain or loss, including both realized and unrealized, amounted to $\$(50,099)$ and $\$(126,474)$ , respectively.

(iv) Interest rate analysis

The Company's risk exposure to interest rate on financial assets and liabilities was as follows:

	Book value
	December 31, 2018	December 31, 2017
Fixed rate financial instrument:
Financial assets	1,000,000	200,000
Variable rate financial instrument:
Financial assets	1,794,154	2,428,576
Financial liabilities	430,010

The following sensitivity analysis is based on the risk exposure to interest rate on the nonderivative financial instruments on the reporting date. Regarding the assets and liabilities with variable interest rates, the analysis is on the basis of the assumption that the amount of assets and liabilities outstanding at the reporting date were outstanding throughout the year. The rate of change is expressed as the interest rate increase or decrease by 0.25% when reporting to management internally, which also represents management of the Company's assessment on the reasonably possible interval of interest rate change.

If the interest rate had increased or decreased by 0.25%, the net profit before tax would have increased or decreased by \$3,410 and \$6,071 for the years ended December 31 ,2018 and 2017, respectively, which would be mainly resulted from the bank savings and borrowings with variable interest rates.

Fair value $(v)$
The kinds of financial instruments and fair value $1)$

The carrying amount and fair value of the Company's financial assets and liabilities financial instruments used for hedging, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and for equity investments that has no quoted prices in the active markets and whose fair value cannot be reliably measured, disclosure of fair value information is not required :

			December 31, 2018
			Fair Value
	Book value	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or loss:
Derivative financial assets	\$ 11,540		11,540		11,540
Non derivative financial assets mandatorily measured at fair value through profit or loss	69,176	23,531		45,645	69,176
Subtotal	80,716
Financial assets measured at amortized cost:
Cash and cash equivalents	2,795,733
Notes and Accounts receivable, net	5,805,612
Other receivables	146,048
Subtotal	8,747,393
Total	8,828,109
Financial liabilities at fair value through profit or loss
Derivative financial liabilities	\$ 3,143		3,143		3,143
Financial liabilities measured at amortized cost
Short-term borrowings	430,010
Notes and Accounts payable	5,501,765
Other payables	164,655
Subtotal	6,096,430
Total	6,099,573

$\overline{\phantom{a}}$

			December 31, 2017
			Fair Value
	Book value	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or loss
Derivative financial assets	\$ 3,192		3,192		3,192
Financial assets at cost	48,709
Subtotal	51,901
Loans and receivables
Cash and cash equivalents	2,629,945
Notes and Accounts receivable, net	3,449,490
Other receivables	136,386
Subtotal	6,215,821
Total	6,267,722
Financial liabilities at fair value through profit or loss
Derivative financial liabilities	\$ 11,227		11,227		11,227
Financial liabilities at amortized cost through profit or loss
Notes and Accounts payable	2,536,869
Other payables	221,677
Subtotal	2,758,546
Total	2,769,773

$2)$ Fair value valuation techniques of financial instruments not measured at fair value

The Company's estimates financial instruments that not measured at fair value by methods and assumptions as follows:

$a)$ Financial assets measured at amortized cost (debt instrument Investment without on active market) and financial liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

Fair value valuation technique of financial instruments measured at fair value $3)$
Non-derivative financial instruments $a)$

Financial instruments trade in active markets are based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and onthe-run bonds from Taipei Exchange can be used as a basis to determine the fair value of the listed companies' equity instrument and debt instrument of the quoted price in an active market.

Fair value measured by a valuation technique can be extrapolated from similar financial instruments, the discounted cash flow method, or other valuation technique including a model using observable market data at the reporting date.

The Company holds the unquoted equity investments of financial instruments without an active market. The measurement of fair value of the equity instruments is based on the Guideline Public Company method, which mainly assumes the evaluation by the price to book value ratio of similar public company and by the discount for lack of marketability. The estimation has been adjusted by the effect resulting from the discount for lack of marketability of the securities.

Derivative financial instruments $b)$

Measurement of fair value of derivative instruments is based on the valuation techniques that are generally accepted by the market participants. For instance, discount method or option pricing models. Fair value of forward currency exchange is usually determined by using the forward currency rate.

$4)$ Transfers between Level 1 and Level 2

There were no transfers from one level to another in 2018 and 2017.

Reconciliation of Level 3 fair values $5)$

	At fair value through profit or loss
Opening balance, January 1, 2018	Non derivative mandatorily measured at fair value through profit or loss (held-for-trading financial assets
	\$
Total gains and losses recognized:
In profit or loss	(3,064)
Reclassified	48,709
Ending Balance, December 31, 2018	45,645

For the years ended December 31, 2018 and 2017, total gains and losses that were included in "unrealized gains and losses from financial assets (liabilities) at fair value through profit or loss" were as follows:

	2018
Total gains and losses recognized:
In profit or loss, and including "unrealized gains"	(3,064)
and losses from financial assets (liabilities) at fair value
through profit or loss"

$6)$ Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Company's financial instruments that use Level 3 inputs to measure fair value include "financial assets measured at fair value through profit or loss - debt investments".

The majority of the Company's fair value is classified as a third level with only a single significant unobservable input value, and only an equity instrument investment without an active market has multiple significant unobservable inputs. The significant unobservable inputs of equity instrument investments in an inactive market are independent of each other and therefore are not interrelated.

Quantified information of significant unobservable inputs was as follows:

Item	Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value measurement
Financial assets measured Net Asset Value		· Net Asset Value	Not applicable
at fair value through	Method
profit or loss -(Available
for sale financial assets)-
equity investment without
an active market

$(t)$ Financial risk management
$(i)$ Briefings

The Company is exposed to the following risks arising from financial instruments:

$1)$ Credit risk
$2)$ Liquidity risk
3) Market risk

In this note expressed the information on risk exposure and objectives, policies and procedures of risk measurement and management. For detailed information, please refer to the related notes of each risk.

$(ii)$ Structure of risk management

The Company's risk management policies are set for identifying and analyzing the risk that the Company confronts for setting the appropriate amount of the risk and complying with the policies. The Company continually reviews the risk management policies to reflect the market condition and the changes of the Company's operation. The Company develops a disciplined and constructive environment and makes employees understand their rules and obligations through training, management guidelines, and operating procedures.

Audit Committee ensures that the monitoring of the management is in compliance with the Company's risk management policies and procedures, and reviews the appropriateness of the related risk management framework. The Company's internal auditors assist the Audit Committee to supervise and review the control and procedures of the risk management periodically and aperiodically, and report the findings to the Audit Committee and the Board of Directors.

(iii) Credit risk

Credit risk is the risk on the financial loss to the Company if a customer or a counterparty fails to meet its contractual obligations. It rises principally from the Company's receivables from customers and investment in debt securities.

$\overline{1}$ Accounts receivable and other receivables

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, and these limits are reviewed periodically.

The Company's customers are mainly from the communications industry. And in order to monitor the credit risk of accounts receivable, the Company constantly assesses the financial status of the customers, and requests the customers to provide guarantee or security if necessary. The Company regularly accesses the collectability of accounts receivable and recognizes the allowance for accounts receivable. The impairment losses are always within management's expectation.

The Company set the allowance for bad debt account to reflect the estimated losses for trade and other receivables. The allowance for bad debt account is based on extensive analysis for customers' creditworthiness and historical collection record.

$(2)$ Investments

The credit risks exposure in the bank deposits and other financial instruments are measured and monitored by the Company's finance department. Since the Company's transaction counterparties and the contractually obligated counterparties are banks, financial institutes and corporate organizations with good credits, there are no compliance issues, and therefore, no significant credit risk.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Company manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company's management supervises the banking facilities and ensures in compliance with the terms of the loan agreements. The loans and borrowings from the bank form an important source of liquidity for the Company. As of December 31, 2018 and 2017, for the information of the unused credit lines of shortterm, please see note $(4)(i)$ .

$(v)$ Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

In order to manage market risk, there are some financial liabilities incurred by the Company from its buying and selling of derivatives. All such transactions are carried out within the guidelines set by the Risk Management Committee. Generally, the Company seeks to apply hedge accounting in order to manage volatility in profit or loss.

$1)$ Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currencies of the Company, primarily USD and EUR.

The Company designates the spot element of forward foreign exchange contracts to hedge its currency risk. Most of these contracts have a maturity of less than one year from the reporting date. The forward elements of forward exchange contracts are excluded from designation as the hedging instrument and are separately accounted for as a cost of hedging, which is recognized in equity in a cost of hedging reserve. The Company's policy is for the critical terms of the forward exchange contracts to align with the hedged item.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in cash flows of the hedged item using the hypothetical derivative method.

In these hedge relationships, the main sources of ineffectiveness are:

the effect of the counterparty and the Company's own credit risk on the fair value of the forward foreign exchange contracts, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in exchange rates; and
changes in the timing of the hedged transactions.

Interest rate risk $(2)$

The Company borrows funds with a stable combination of fix and variable interest rates to maintain its interest rate risk. The Company periodically assess these hedge activities to provide the best cost effect and risk assessment.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the reference interest rates, tenors, repricing dates and maturities and the notional or par amounts. The Company assesses whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in cash flows of the hedged item using the hypothetical derivative method

In these hedge relationships, the main sources of ineffectiveness are:

the effect of the counterparty and the Company's own credit risk on the fair value of the swaps which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in interest rates; and
differences in repricing dates between the swaps and the borrowings.
(u) Capital management

The Company maintains the capital based on the current operating characteristics of the industry, future development and changes in external environment to assure there is financial resource and operating plan to support working capital, capital expenditures, research & development expense, debt redemption and dividend payment and so on. The management decides the optimized capital structure by using the appropriate debt-to-equity ratio. To maintain a strong capital base, the Company enhances the return on equity by optimizing debt-to-equity ratio. The Company's debt-toequity ratio at the end of the reporting date is as follows:

	December 31, 2018
Total liabilities	7,159,736	3,512,965
Total equity	9,066,144	8,503,397
Debt-to-equity ratio	79 %	41 %

As of December 31, 2018, there were no changes in the Company's approach to capital management.

As of December 31, 2018, the debt-to-equity ratio raised because the accounts payable increased by the demand for material preparation in response to the growth of sales orders.

(v) Investing and financing activities not affecting current cash flow

The Company's investing and financing activities which did not affect the current cash flow in the years ended December 31, 2018 and 2017, and reconciliation of liabilities arising from financing activities were as follows:

		December 31.
2018	Cash flows	2018
$\overline{\phantom{a}}$	430.010	430,010
$\blacksquare$	430.010	430,010

(7) Related-party transactions:

$(a)$ Parent company and ultimate controlling party

Compal Electronics Inc. is both the parent company of the consolidated entity and the ultimate controlling party of the Company. It owns 35 percent of all shares outstanding of the Company, and it has issued the Consolidated Financial Statements Available for Public Use.

$(b)$ Name and relationship with related parties

The followings are entities that have had transactions with related party during the periods covered in the consolidated financial statements.

Name of related party	Relationship with the Company
Compal Electronics, Inc.	Parent company
Arcadyan Technology N.A. Corp. (Arcadyan USA)	Subsidiaries
Arcadyan Germany Technology GmbH (Arcadyan Germany)	$^{\prime\prime}$
Arcadyan Holding (BVI) Corp. (Arcadyan Holding)	$^{\prime\prime}$
ZHI-PAL Technology Inc. (ZHI-PAL)	$^{\prime\prime}$
Tatung Technology Inc. (TTI)	$^{\prime\prime}$
AcBel Telecom Inc. (AcBel Telecom)	$^{\prime\prime}$
Arcadyan Technology Corporation Korea (Arcadyan Korea)	$^{\prime\prime}$
Arcadyan do Brasil Ltda (Arcadyan Brasil)	$^{\prime\prime}$
Arcadyan Technology Limited (Arcadyan UK)	$\eta$
Arcadyan Technology Australia Pty Ltd (Arcadyan AU)	$^{\prime\prime}$
Kinpo Group Management Service Company (Kinpo Group Management)	The chairman of the entity's ultimate parent company is the same as that of the Company.

Name of related party	Relationship with the Company
Sinoprime Global Inc. (Sinoprime)	Grandson company
Arcadyan Technology (Shanghai) Corp. (SVA)	$^{\prime\prime}$
Arch Holding (BVI) Corp. (Arch Holding)	$^{\prime\prime}$
Compal Networking (Kunshan) Co., Ltd. (CNC)	$^{\prime\prime}$
Tatung Technology of Japan Co., Ltd. (TTJC)	$^{\prime\prime}$
Quest International Group Co., Ltd. (Quest)	$^{\prime\prime}$
Exquisite Electronic Co., Ltd. (Exquisite)	$^{\prime\prime}$
Tatung Home Appliance (Wujiang) Co., Ltd. (TCH)	$^{\prime\prime}$
Leading Images Ltd. (Leading Images)	$^{\prime\prime}$
Great Arch Group Ltd. (Great Arch)	$^{\prime\prime}$
Astoria Networks GmbH (Astoria GmbH)	$^{\prime\prime}$
AcBel Polytech Inc. (AcBel)	The chairman of the entity's ultimate parent company is the same as that of the Company.

Compal Display Electronics (Kunshan) Co., Ltd.

Significant related party transactions $(c)$

$\hat{\boldsymbol{\beta}}$

Sale of goods to related parties $(i)$

The amounts of significant sales transactions between the Company and related parties were as follows:

$\bar{H}$

		2018	2017
Subsidiaries:
Arcadyan Germany	S	2,457,020	2,324,292
Arcadyan Australia		1,329,743	32,629
Other subsidiaries		507,914	794,608
Other related parties		21,881	۰
	S	4,316,558	3,151,529

Sales prices for subsidiaries and other related parties were similar to those of the third-party customers. The collection period was 45-120 days for the aforementioned related parties.

(ii) Processing cost

	2018	2017
Subsidiaries:
Sinoprime	\$ $\blacksquare$	1,345,277
CNC	11,249,751	5,222,446
	11,249,751	6,567,723

The Company sold raw materials to related parities due to the demand of processing raw materials. The related revenue and cost had been eliminated in the financial statements, had not been considered as selling raw materials and purchasing finished goods. Any revenue from selling materials is recognized in other receivable.

(iii) Other expenditures

Parent company and other related parties provided technical support, professional services and other services for the Company, and the related expenses for the years ended December 31, 2018 and 2017 were as follows:

	2018
Parent company	\$ 3,561	8,148
Subsidiaries	66,042	58,586
Other related parties	1.116	.309
	70,719	68,043

(iv) Receivable from relate parties

The receivables from related parties were as follows:

Account	Related party categories		December 31, 2018	December 31, 2017
Accounts receivable	Subsidiaries:
	Arcadyan Germany	\$	805,017	788,304
	Arcadyan Australia		727,600	$\overline{a}$
	Other subsidiaries		285,603	110,923
		Я	1,818,220	899,227
Other receivable	Subsidiaries:
	Arcadyan Australia	\$	35,470
	Other subsidiaries		14,259	14,159
			49,729	14,159

(v) Payable to related parties

$(vi)$

The payables to related parties were as follows:

Account	Related party categories		December 91, 2018	Decenidel 914 2017
Accounts payable	Subsidiaries:
	CNC	\$	3,404,030	1,168,057
	Sinoprime		55,986	54,246
	Other related parties
		S	3,460,018	1,222,303
Other payable	Subsidiaries	\$	16,702	37,709
	Other related parties		259	154
			16,961	37,863
Loans to related parties

Doomhow 21

	December 31, 2018	December 31, 2017
Subsidiaries:
Arcadyan Brazil	33,883	47,643

The Company has granted loans to related parties and the interest rates were set based on the average interest rates of the short-term loans that the Company borrowed from financial institutions in the current year. All the loans are not guaranteed loans. There is \$97 interest receivable for the year ended December 31, 2018, which is recognized in other receivable and no need to record a bad debt expense after assessment.

(vii) Guarantees and endorsements to related parties

The Company signed guarantees and endorsements amount of USD 8,000 to the bank due to the need of operating Acradyan Brasil for the year ended December 31, 2018 and 2017

$(d)$ Key management personnel compensation

Key management personnel compensation comprised:

	2018	2017
Short-term employee benefits	70.707	59,175
Post-employment benefits	1.047	$1,!003$
Share-based payments	12.616	$\blacksquare$
	84,370	60,178

Please refer to note $(6)(o)$ for further explanations related to share-based payment transactions.

Doomhon 21

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Assets	Subject	December 31, 2018	December 31, 2017
$Property - land$	Long-term loans (note)	463,262	463,262
Other current asset	Bail for court mandatory execution	41,090	26,510
		504,352	489,772

Note: Long-term loans had been settled in 2015, but the assets of property-land still were pledged as collaterals.

(9) Commitments and contingencies: None

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

$(12)$ Other:

(a) The followings are the summary statement of current period employee benefits, depreciation and amortization expenses by function:

By function	2018				2017
By item	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Employee benefits
Salary	69,244	903,836	973,080	70,099	737,688	807,787
Labor and health insurance	4,734	60,023	64,757	5,402	56,122	61,524
Pension	2,987	32,481	35,468	3,426	30,316	33,742
Remuneration		8,643	8,643		6,673	6,673
Others	2,240	28,267	30,507	2,351	23,880	26,231
Depreciation	16,299	68,252	84,551	20,708	68,340	89,048
Amortization	1,612	22,893	24,505	2,540	28,933	31,473

The average number of employee of the Company in 2018 and 2017 were 599 and 573, respectively, including 7 and 7 directors, respectively, who were not adjunct employees.

(13) Other disclosures:

Information on significant transactions: $(a)$

The following is the information on significant transactions required by the "Regulations Governing" the Preparation of Financial Reports by Securities Issuers" for the Company for 2018:

Loans to other parties: $(i)$

Unit: thousand dollars

Number	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount period	Range of interest the period	Purposes of fund financing for the (note 1)	Transaction Reasons amount for business during the rates during borrower between two parties	for short- term financing	Collateral Item Value	Individual funding loan limits financing (note 2)	Maximum limit of fund (note 2)
$\Omega$	The	Arcadyan do	Other	Yes	245,720	245,720	33,787	1%		307,150				245,720 3,626,457
		Company Brasil Ltda	receivables		(USD8,000)	(USD8,000)(USD1,100)				(USD10,000)
		Arcadvan	$\boldsymbol{\eta}$	Yes	122,860	122,860		1%		1,535,750		$\sim$		1,228,600 3,626,457
		Technology				(USD4,000) (USD4,000)				(USD50,000)
		Australia
		Pty Ltd
	IArcadyan CNC		$^{\prime\prime}$	Yes	522,155	522,155		1%	$\overline{2}$	-	Operating		970,670	970,670
	anihloH				USD17,000) (USD17,000)						demand

Note 1: Number 1 represents the business relationship with the Company, number 2 represents the short-term financing facility, if necessary.
Note 2: According to the policy of the Company on Lending Funds to Other Parties,

control. The total amount of loans to the form of Science and the Company's endorsements/guarantes for the borrower upon calculation.

Note 3: According to the policy of Arcadyan Holding on Loaning Funds to Others, the amo

Guarantees and endorsements for other parties: $(ii)$

Unit: thousand dollars

			Counter-party of guarantee and endorsement	Limitation on	Highest				Ratio of accumulated amounts of		Parent company	Subsidiary ' guarantees	lendorsementsl Endorsements/ guarantees to
	Name of		with the	amount of guarantees and for a specific	balance for guarantees and Relationship endorsements endorsements endorsements during	Balance of guarantees and as of reporting	Actual usage amount during the	Property pledged for guarantees and 'endorsements	guarantees and endorsements to net worth of the latest financial	Maximum amount for guarantees and	endorsements/ guarantees to third parties on behalf of subsidiary	to third parties on behalf of parent company	third parties on behalf of companies in Mainland China (note 2)
	No. guarantor	Name	Company	enterprise	the period	date	period	(Amount)	statements	endorsements	(note 2)	(note 2)
$0$ The			Arcadyan do 100% Owned	1.208.819	245,720	245,720			2.71%	3.626.457			N
	Company	Brasil Ltda	subsidiary		(USD8.000)	(USD8,000)

Note 1: According to the policy of the Company for Endorsements and Guarantee, the total amount shall not exceed 40% of the net worth of the latest financial statements audited or reviewed by Certified Public Accountants,

(iii) Securities held as of (excluding investment in subsidiaries, associates and joint ventures):

Unit: thousand dollars/thousand shares

Name of	Category and					Ending balance
holder	name of security	Relationship with company	Account title	Shares/Units (thousands)	Carrving value	Percentage of ownership (%)	Fair value	Note
The Company	Geo Things Inc.	-	Financial assets at fair value	200		8.94 %
			through profit or loss-noncurrent
$\boldsymbol{n}$	AirHop Communication, Inc.			1,152		6.61 %
$\boldsymbol{n}$	Adant Technologies Inc.			349		5.51 %
$\boldsymbol{\eta}$	IOT Eye, Inc.			60		6.00%
$\boldsymbol{H}$	TIEF Fund, L.P.				45,645	7.49 %	45,645
$\eta$	Hitron Technologies		Financial assets at fair value	543	10.426	0.24%	10,426
			through profit or loss-current
$\boldsymbol{H}$	Richwave Technology			110	5,115	0.18%	5,115
	Wistron Newsh Cornoration			1001	7.990	$0.03\%$	7.990

Note 1: The carrying amount included the cumulative impairment.

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT\$300 million or 20% of the capital stock: None
(v) Acquisition of individual real estate with amount exceeding the lower of NT\$300 million or 20% of the capital stock: None
(vi) Disposal of individual real estate with amount exceeding the lower of NT\$300 million or 20% of the capital stock:None
(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT\$100 million or 20% of the capital stock:

					Transaction details		Transactions with others			terms different from Notes/Accounts receivable (pavable)
Name of company	Counter party	Nature of relationship	Purchase/ Sale	Amount	Percentage of total purchases/ sales	Payment terms	Unit price	Pavment terms	Ending balance	Percentage of total notes/account s receivable (payable)	Note
The Company	Arcadyan Germany	Subsidiary	(Sales)	(2,457,020)		$(11)$ % Net 120 days from delivery			805,017	14 %
$^{\prime\prime}$	Arcadyan USA	$\prime\prime$	(Sales)	(496, 199)		$(2)\%$ Net 60 days from the end of the month of delivery			104,031	2%
$\boldsymbol{\mathit{H}}$	Arcadyan AU.	$^{\prime\prime}$	(Sales)	(1,329,743)		(6)% Net 45 days from the end of the month of delivery			727,600	$13\%$
$\prime\prime$	CNC	$\theta$	Purchases	11,249,751	35 %	$\boldsymbol{\eta}$	According to cost plus pricing	÷,	(3,404,030)	(40)%	Note 1
CNC	The Company	Parent company	(Sales)	(11, 249, 751)	(100)%	$\boldsymbol{\eta}$	$\boldsymbol{\eta}$		3,404,030	98 %	Note 1
$\boldsymbol{\mathit{H}}$	TCH	With the same ultimate parent company	(Sales)	(164, 591)		$(1)$ % Net 90 days from the end of the month of delivery	٠	×	64,808	2%	Note 1
$\boldsymbol{\eta}$	Acbel Polytech	The chairmen of the entitys ultimate parent company is the same as that of the Company	Purchases	108,030		1 % Net 120 days from the end of the months of delivery		٠	(79, 455)	(2)%
Arcadyan Germany	The Company	Parent company	Purchases	2,457,020		100 % Net 120 days from delivery			(805, 017)	(100)%
Arcadyan USA	$\mathbf{u}$	$\mathbf{u}$	Purchases	496,199		100 % Net 60 days from the end of the month of deliverv			(104, 031)	(100)%
Arcadyan lau	$^{\prime\prime}$	$\boldsymbol{\eta}$	Purchases	1,329,743		100 % Net 45 days from the end of the month of delivery	÷,		(727, 600)	(100)%
ΓСΗ	TTI	With the same ultimate parent company	(Sales)	(383,948)		(100)% Net 60 days from the end of the month of delivery	According to cost plus pricing	٠	351,268	100 %	Note 1
$^{\prime\prime}$	CNC	$\boldsymbol{\eta}$	Purchases	164,591		3 % Net 90 days from the end of the month of delivery			(64, 808)	(59)%	Note 1
TTI	ltch	$\boldsymbol{\eta}$	Purchases	383,948		4 % Net 60 days from the end of the month of delivery			(351, 268)	(28)%	Note 1

Note 1: The ending balance derived from the transactions on processing and sales of raw material.

Unit: thousand dollars

(viii) Receivables from related parties with amounts exceeding the lower of NT\$100 million or 20% of the capital stock:

÷.

Name of		Nature of	Ending	Turnover!		Overdue	Amounts received in
company	Counter-party	relationship	balance	rate	Amount	Action taken	subsequent period (note 3) for bad debts
The Company	Arcadyan Germamy	Subsidiary	805,017	3.08			581,083
$^{\prime\prime}$	Arcadyan USA	$^{\prime\prime}$	104.031	4.32			11,688
$\boldsymbol{\eta}$	Arcadyan AU	$\boldsymbol{\eta}$	727,600	3.54			521,951
$\boldsymbol{\eta}$	TTI	$\boldsymbol{\prime}$	172,161	0.11			169,496
CNC	The Company	Parent company	(Note 2) 3,404,030 (Note 1)	2.46			2,311,269
TCH	ltti	With the same	351,268	10.14			351,268
		ultimate parent	(Note 1)
		company
TTI	TCH	$\boldsymbol{\eta}$	207.119 (Note 2)	12.43			207,119

Note 1: The ending balance was accounts receivable derived from processing raw material.

Note 2: The ending balance was other receivable derived from purchasing on behalf of related parties.

Note 3: Balance as of February 27, 2019.

(ix) Trading in derivative instruments : Please refer to notes $(6)(b)$ and $(6)(c)$
$(b)$ Information on investees:

The following is the information on investees for the year 2018 (excluding information on investees in Mainland China):

Name of	Name of		Main		Original investment amount		Balance as of December 31, 2018 Percentage		Net income	Investment
investor	investee	Location	businesses and products	December 31, December 31, 2018	2017	Shares (thousands)	of ownership	Carrying value	(losses) of the Investee	Income (losses)	Note
The Company	Arcadyan Holding	British Virgin Islands	Investment activities	1,240,526	962,291	32,780	100%	1,221,252	59.092	55,317	Subsidiary
	The Company Arcadyan USAUSA		Selling of wireless networking products	23,055	23,055		100%	51,226	4,547	4,547	$\boldsymbol{u}$
The Company Arcadyan	Germany	Germany	Selling and technical support of wireless networking products	1,125	1,125	0,5	100%	64,388	11,439	11,439	$\mathbf{H}$
The Company	Arcadvan Korea	Korea	Selling of wireless networking products	2,879	2,879	20	100%	7,789	3,116	3,116	$\boldsymbol{\mu}$
The Company Arcadyan and ZHI-PAL Brasil		Brasil	Selling of wireless networking products	81,593	81,593	968	100%	14,381	(25, 526)	(25, 526)	$\boldsymbol{\eta}$
The Company	ZHI-PAL	Taipei City	Investment activities	48.000	48,000	34,980	100%	450,366	40,042	40,042	$\mu$
The Company	IT TI	Taipei City	Research and development, and selling digital home appliance	308,726	306,925	25,028	61%	583,890	45,883	28,760	$^{\prime\prime}$
The Company	AcBel Telecom	Taipei City	Investment activities	23,000	23,000	4,494	51%	33,952	(18,989)	(9,700)	$\prime$
The Company	Arcadyan UK	England	Technical support of wireless networking products	1,988	1,988	50	100%	2,683	317	317	$\boldsymbol{u}$
The Company Arcadyan AU		Australia	Selling of wireless networking products	1,161	1.161	50	100%	6,200	5,296	5,296	$\prime$

Unit: thousand dollars

$\sim$

Name of	Name of		Main		Original investment amount		Balance as of December 31, 2018
							Percentage		Net income	Investment
investor	investee	Location	businesses and products	2018	December 31, December 31, 2017	Shares thousands)	of ownership	Carrying value	(losses) of the Investee	Income (losses)	Note
The Company	$_{\rm CBN}$	Hsinchu City	Manufacturing and selling of broadband network products	11,925	11,925	533	1%	14,460	184,352		1,614 An invested company that evaluates under the equity method
The Company	Golden Smart home Technology	Taipei City	Selling of hardware and software integration of high-tech systems products	15,692	15,692	1,229	16%		(30, 339)		An invested company that evaluates under the equity method
Arcadyan Holding	Sinoprime	British Virgin Islands	Investment activities	277,971 (USD9,050)	1,536 (USD50)	9,050	100%	278,800 (USD9, 077)		874 Investment (USD29) gain (losses) recognized by Arcadyan Holding	Grandson company
$\prime$	Arch Holding	British Virgin Islands	Investment activities	338,203 (USD11, 011)	338,203 (USD11, 011)	35	100%	834,649 (USD27, 714)	52,580 (USD1, 744)	$\mathcal H$	$\prime$
TTI	Quest	Samoa	Investment activities	36,858 (USD1, 200)	36,858 (USD1, 200)	1,200	100%	65,774		25,977 Investment gain (losses) recognized by TTI	$\boldsymbol{u}$
TTI	TTJC	Japan	Selling digital home appliance	1,341	1,341		100%	765	(610)	$\boldsymbol{\prime}$	$\boldsymbol{H}$
Quest	Exquisite	Samoa	Investment activities	35,937 (USD1, 170)	35,937 (USD1, 170)	1,170	100%	72,272 (USD2, 353)		25,958 Investment (USD861) gain(losses) recognized by Ouest	$\boldsymbol{\eta}$
AcBel Telecom	Leading Images	British Virgin Islands	Investment activities	1,536 (USD50)	1,536 (USD50)	50	100%	9,931		$(18,420)$ Investment gain(losses) recognized by AcBel Telecom	$^{\prime\prime}$
AcBel Telecom	Great Arch	British Virgin Islands	Selling of wireless networking products	$(USD-)$	1,536 (USD50)		$-1/2$		(6)	$\boldsymbol{\eta}$	$\boldsymbol{u}$
Leading Images	Astoria GmbH Germany		Selling of wireless networking products	880 (EUR25)	880 (EUR25)	25	100%	9,522 (USD310)		(60) Investment $(USD(2))$ gain(losses) recognized by Leading Images	$\boldsymbol{H}$
ZHI-PAL	CBN	Hsinchu City	Manufacturing and selling of broadband network products	36,272	38,032	13,140	19.67%	356,317		184,352 Investment gain (losses) recognized by ZHI-PAL	An invested company that evaluates under equity method of subsidiary

Note 1: The amounts in New Taiwan Dollars were translated at the exchange rate of \$US30.149 / EUR\$35.605 based on the yearly average exchange rate for net income(losses) of the
investees, others were translated at the exch

Information on investment in mainland China: $(c)$
The names of investees in Mainland China, the main businesses and products, and other $(i)$ information:

				Accumulated	Accumulated outflow of					Accumu-
Name of investee	Main businesses and products	Total amount of paid-in capital	Method лf investm ent	outflow of investment from Taiwan as of January 1, 2017 Outflow Inflow	investment from Taiwan as of December 31. 2018	Net income (losses) of the investee	Percentage оf ownership	Investment income (losses)	Book value	lated remittance of earnings in current period	Note
SVA	Research and sale of wireless networking	402,367 (USD13, 100)	note 1	(Note 4) 565,770 (USD18,420)	565,770 (USD18, 420)	7,175 (USD238)	100%	7,175 (USD238)	126,607 (USD4, 122)		Note 3
CNC	products Manufacturing of wireless networking	382,402 (USD12, 450)	$\boldsymbol{\mathcal{H}}$	(Note 5) 338,203 (USD11, 011)	338,203 (USD11,011) ((USD1,744)	52,580	100%	52,580 (USD1, 744)	834,649 (USD27, 174)		$^{\prime\prime}$
lтсн	products Manufacturing of household electronics products	102,895 (USD3, 350)	notes 1 and 7	35,322 (USD1, 150)	35,322 (USD1, 150)	25,958 (USD861)	100%	25,958 (USD861)	71,750 (USD2, 336)		$^{\prime\prime}$

(In Thousands of New Taiwan Dollars US Dollars)

Note 1: Investment in Mainland China through companies registered in a third region.
Note 2: The amounts in New Taiwan Dollars were translated at the exchange rate of \$US30.149 based on the yearly average exchange rate for

Note 5: The Company paid US\$8,561 thousands and acquired 100% shares of CNC from Just through Areadyan Holding in 2007.
Note 6: The Company paid US\$8,561 thousands and acquired 100% shares of CNC from Just through Areadya

(ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31, 2018	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
939,303 (USD30,581)	939,303 (USD30,581)	5,439,686

Note: The amounts in New Taiwan Dollars were translated at the exchange rate of \$30.715 on December 31, 2018.

(iii) Significant transactions:

The significant inter-company transactions with the subsidiaries in Mainland China for the year ended December 31, 2018, which were eliminated in the preparation of consolidated financial statements, are disclosed in "Information on significant transactions".

(14) Segment information:

Please refer to the consolidated financial statements for the year ended 2018.

Statement of cash and cash equivalents

December 31, 2018

$\hat{\mathcal{A}}$

(Expressed in thousands of New Taiwan Dollars)

Item	Description	Amount
Cash on hand		1,521
Checking accounts and demand deposits	NTD	1,250,803
	Foreign currency (USD5,114 thousand, EUR9,873
	thousand and others)	543,409
Time deposits		1,000,000
Total		2,795,733
Note: The exchange rate: $USD1 = NTD30.715$
	$EUR1 = NTD35.2$

Statement of accounts receivable

Client Name	Description	Amount
IX Corporation		\$ 649,482
XI Corporation		532,426
IV Corporation		351,397
XII Corporation		331,105
VIII Corporation		324,625
V Corporation		262,066
VI Corporation		215,819
Other (note)		1,347,222
Total		4,014,142
Impairment loss on allowance		(26, 750)
Net amount		3,987,392
$\mathbf{M}$ and $\mathbf{M}$ are $\mathbf{M}$ and $\mathbf{M}$ and $\mathbf{M}$ are $\mathbf{M}$ and $\mathbf{M}$ are $\mathbf{M}$ and $\mathbf{M}$ are $\mathbf{M}$ and $\mathbf{M}$ are $\mathbf{M}$ and $\mathbf{M}$ are $\mathbf{M}$ and $\mathbf{M}$ are $\mathbf{M}$ and $\mathbf{M}$ are

Note: The amount of each item in others does not exceed 5% of the account balance.

$\sim$

Statement of inventories

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

	Amount
Item	Cost (note)	Net realizable value
Finished goods	2,565,920 \$	2,861,018
Work in progress	1,025	2,498
Raw material	609,837	638,037
	3,176,782	3,501,553

Note: Book value is the amount that the cost less the allowance for loss on inventory valuation.

ļ l

I

l

Statement of changes in investment accounted for using equity method

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

		Beginning Balance	Additions (Note2)			Decrease (Note3)				Ending Balance
Name of investee		shares Amount	shares	Amount	shares	Amount	Profit or loss of investment	(Notel) Other	shares	Percentage of holding shares	Amount	Net assets value	Pledge or collateral
Arcadyan Holding	23,780\$	857,855	9,000	278,235			55,317	29,845	32,780	100 %	,221,252	,248,906	None
Arcadyan USA	$\overline{\phantom{0}}$	58,550					4,547	(11, 871)		100 %	51,226
Arcadyan Germany	$\overline{0.5}$	53,637					11,439	(688)	ی 0.5	100 %	64,388	71,266 64,388
Arcadyan Korea		4,719					3,116	$\widetilde{\Theta}$		100 %	7,789	7,789
Arcadyan Brazil	965	43,697					(25, 527)	(4, 117)	965	99 %	14,053	14,382
Arcadyan UK	$\overline{50}$	2,452					317	$\mathscr{E}$	ິລ	100 %	2,683	2,683
Arcadyan AU	$\overline{50}$	1,185					5,296	(281)	$\frac{6}{5}$	100 %	6,200	6,200
ZHI-PAL	34,980	466,989				(62,090)	40,042	5,425	34,980	100 %	450,366	450,366
Ē	24,954	584,756	74	1,801		(32, 503)	28,760	1,076	25,028	61 %	583,890	585,637
AcBel Telecom	4,378	43,166	116				(9,700)	486	4,494	51%	33,952	33,952
CBN	533	13,583				(957)	1,614	220	533	$\frac{8}{1}$	14,460	14,480
Golden Smart home Technology	1,229						ī.		1,229	$^{96}$ 91
Total		$\frac{2.130,589}{2}$		280,036		(95,550)	115,22	19,963			2,450,259

Notel: Others are the adjustment of foreign currency exchange, the adjustment under equity method valuation and unrealized gross profit.
Note2: Acquisition of investments accounted for using the equity method.
Note3: Cash

Statement of changes in property, plant and equipment

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Please refer to note 6(h) for Property, plant and equipment.

Statement of accounts payable

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Client Name	Description	Amount
Accounts payable
Corporation A	unrelated parties/operating	\$ 642,922
Corporation G	$^{\prime\prime}$	280,230
Corporation AA	$^{\prime\prime}$	170,202
Corporation AB	$^{\prime\prime}$	115,161
Corporation AC	$^{\prime\prime}$	106,093
Corporation D	$^{\prime\prime}$	103,630
Others (Note)		623,427
		2,041,665

Note: The amount of each item in others does not exceed 5% of the account balance.

Statement of operating revenue

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Item	Quantity (in thousands)	Amount
Operating revenue:
Networking product segment	Note	\$	18,067,602
Digital set-top-box product segment			3,379,354
Materials and others			439,134
Less: Sales returns and discounts			(59, 523)
Net operating revenue			21,826,567

Note: Due to multi-categories, it's difficult to count.

$\bar{z}$

Statement of operating costs

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Item	Amount
Raw materials
Raw materials, beginning of year	\$ 886,245
Add: Purchases	9,388,747
Less: Raw materials, end of year	(667, 540)
Operating expense and others	(23, 755)
Raw material used	9,583,697
Processing cost, technical support fee and depreciation	11,366,981
Manufacturing Cost	20,950,678
Add: Work in progress, beginning of year	1,189
Less: Work in progress, end of year	(1,467)
Cost of finished goods	20,950,400
Add: Finished goods, beginning of year	1, 131, 486
Less: Finished goods, end of year	(2,588,962)
Operating expense and others	(146, 185)
Production and marketing costs	19,346,739
Gain on inventory valuation and others	(44, 454)
Operating costs	19,302,285

Statement of selling, administrative, research and development expenses

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Item	Selling expenses	Administrative expenses	Research and development expenses
Salaries	\$ 114,464	156,510	641,505
Import and export expense	116,165	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$
Warranty	25,346		$\overline{\phantom{a}}$
Service expense	37,770	14,910	16,091
Depreciation	2,684	30,485	35,083
Expected credit loss	23,542		-
Others (Note)	76,660	85,258	239,913
Total	396,631	287,163	932,592

Note: The amount of each item in others does not exceed 5% of the account balance.

AI assistant

Arcadyan — Annual Report 2018

52352_rns_2018-11-07_70fe839d-2736-4ca0-9dde-c8a341757de2.pdf

ARCADYAN TECHNOLOGY CORPORATION

Table of contents

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

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Notes to Readers

Balance Sheets

(Expressed in Thousands of New Taiwan Dollars) December 31, 2018 and 2017

(English Translation of Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars, except net income per share amounts)

(English Translation of Financial Statements Originally Issued in Chinese)ARCADYAN TECHNOLOGY CORPORATION

(English Translation of Financial Statements Originally Issued in Chinese) ARCADYAN TECHNOLOGY CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2018 and 2017

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

(1) Company history

(2) Approval date and procedures of the financial statements:

(3) New standards, amendments and interpretations adopted:

$2)$ Transition

(ii) IFRIC 23 Uncertainty over Income Tax Treatments

$(4)$ Summary of significant accounting policies:

$4)$ Impairment of financial assets

(iii) Depreciation

$(1)$ Intangible assets

$(n)$ Provisions

(p) Revenue (policy applicable before January 1, 2018)

$(t)$ Business combination

Earnings per share $(u)$

(v) Operating segments

Significant accounting assumptions and judgments, and major sources of estimation uncertainty: $(5)$

(6) Explanation of significant accounts:

(ii) Subsidiaries

Intangible Assets $(i)$

$(i)$ Amortization expenses

Employee benefits $(1)$

Movements of defined benefit plan assets $3)$

$4)$ Expenses recognized in profit or loss

5) Actuarial gains and losses recognized in other comprehensive income

Actuarial assumptions $6)$

(ii) Defined contribution plans

$3)$ Recognized deferred tax assets and liabilities

Ordinary shares $(i)$

(ii) Capital surplus

Earnings per share $(p)$

$(ii)$ Diluted earnings per share

$1)$ Profit attributable to ordinary shareholders of the Company (diluted)

$(a)$ Revenue from contracts with customers

Details of revenue $(i)$

$(r)$ Remuneration to employees and directors

$(ii)$ Liquidity risk

(iii) Currency risk

Sensitivity analysis $2)$

$3)$ Exchange gains and losses of monetary items

(iv) Interest rate analysis

Interest rate risk $(2)$

(v) Investing and financing activities not affecting current cash flow

(7) Related-party transactions:

Significant related party transactions $(c)$

(ii) Processing cost

(iv) Receivable from relate parties

(v) Payable to related parties

(8) Pledged assets:

(9) Commitments and contingencies: None

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

$(12)$ Other:

(13) Other disclosures:

Loans to other parties: $(i)$

Unit: thousand dollars

Guarantees and endorsements for other parties: $(ii)$

(iii) Securities held as of (excluding investment in subsidiaries, associates and joint ventures):

Unit: thousand dollars/thousand shares

(ii) Limitation on investment in Mainland China:

(14) Segment information:

Statement of cash and cash equivalents

December 31, 2018

Arcadyan Annual Report 2018

(English Translation of Financial Statements Originally Issued in Chinese)
ARCADYAN TECHNOLOGY CORPORATION