ASCENT — Annual Report 2018

Nov 13, 2018

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS WITH REPORT OF INDEPENDENT AUDITORS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

Address: 9F-7, No. 57, Fuxing N. Rd., Songshan Dist., Taipei City, Taiwan, (R.O.C.) Telephone: 886-2-2773-0678

The reader is advised that these consolidated financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES INDEX

Items	Pages
Cover	1
Index	$\overline{2}$
Representation Letter	3
Report of Independent Auditors	$4 - 8$
Consolidated Balance Sheets	$9 - 10$
Consolidated Statements of Comprehensive Income	11
Consolidated Statements of Changes in Equity	12
Consolidated Statements of Cash Flows	13
Notes to Consolidated Financial Statements	14-81

REPRESENTATION LETTER

The entities included in the consolidated financial statements as of December 31, 2018 and for the year then ended prepared under the International Financial Reporting Standards, No.10 are the same as the entities to be included in the combined financial statements of the Company, if any to be prepared, pursuant to the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises (referred to as "Combined Financial Statements"). Also, the footnotes disclosed in the Consolidated Financial Statements have fully covered the required information in such Combined Financial Statements. Accordingly, the Company did not prepare any other set of combined financial statements than the Consolidated Financial Statements.

Very truly yours,

Chuwa Wool Industry Co., (Taiwan) Ltd.

Chairman: Chen, Shih-Hsiu

March 5, 2019

Independent Auditors' Report Translated from Chinese

To Chuwa Wool Industry Co., (Taiwan) Ltd.

Opinion

We have audited the accompanying consolidated balance sheets of Chuwa Wool Industry Co., (Taiwan) Ltd. and its subsidiaries (the "Group") as of December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2018 and 2017, and notes to the consolidated financial statements, including the summary of significant accounting policies (together "the consolidated financial statements").

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and their consolidated financial performance and cash flows for the years ended December 31, 2018 and 2017, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed and became effective by Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of 2018 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Disclosure on Fair Value of Investment Properties

The Group's investment property are measured initially at cost method. The fair value of investment property is largely dependent on valuation method and accounting assumption. Therefore, the disclosure of investment property's fair value is a key matter when conducting the audit of the consolidated financial statements.

The audit procedures we performed regarding disclosure of investment property's fair value included but not limited to: evaluating the external appraiser's independence and the appropriateness of the investment property accounting policies, enlisting the assistance from our internal specialists to review the evaluation reports provided by external appraiser and assessing the reasonability of evaluation methodology elected and key assumptions.

We also considered the appropriateness of the relevant disclosure included in Notes $6(8)$ to the consolidated financial statements.

Emphasis of Matter - Applying for New Accounting Standards

As described in Note 3 to the consolidated financial statements, the Group adopted the International Financial Reporting Standards 9 "Financial Instruments" and 15 "Revenue from Contracts with Customers" on January 1, 2018 and elected not to restate the consolidated financial statements for prior periods. Our conclusion is not modified in respect of this matter.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by Financial Supervisory Commission of the Republic of China and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including audit committee or supervisors, are responsible for overseeing the financial reporting process of the Group.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with 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 consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• 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 internal control of the Group.
• 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 ability to continue as a going concern of the Group. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• 1. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the accompanying notes, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• 1. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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 2018 consolidated financial statements and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other

We have audited and expressed an unqualified opinion including an Other Matter Paragraph on the consolidated financial statements of Chuwa Wool Industry Co., (Taiwan) Ltd. as of and for the years ended December 31, 2018 and 2017.

Hsu, Jung-Huang

Huang, Chien-Che

Ernst & Young, Taiwan

March 5, 2019

Notice to Readers

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

Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, Ernst & Young cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

	English Translation of Consolidated Financial Statements Originally Issued in Chinese
	CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES (Expressed in Thousands of New Taiwan Dollars) CONSOLIDATED BALANCE SHEETS December 31, 2018 and 2017 (Note)
		As of December 31,
Assets	Notes	2018	2017 (Note)
Current assets
Cash and cash equivalents	4, 6(1), 12	\$28,479	\$1,304,769
Financial assets at fair value through profit or loss-current	4, 12	10,355	11,172
Financial assets at amortized cost-current		1,098,080
Accounts receivable, net	$4, 6(2), 12$ $4, 6(3), 12$ $4, 12$	11,171	2,960
Other receivables		411	519
Current tax assets	4,6(17)	684	528
Inventories	4,6(4)		15,933
Prepayments	6(5)	160,268	758
Non-current assets classified as held for sale, net	4,6(6)	650,537
Other current assets		100	100
Total current assets		1,960,085	1,336,739
Non-current assets
Property, plant and equipment	4,6(7)	2,716	78,033
Investment property, net	4,6(8)	28,769	658,317
Intangible asssets	$\overline{\phantom{a}}$	35	$\overline{49}$
Deferred tax assets	4, 6(17)	4,286	506
Refundable deposits		1,121
Total non-current assets		36,927	736,982
Total assets		\$1,997,012	\$2,073,721

$\frac{1}{2}$

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

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3).

$\sigma$

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

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3).

$\overline{10}$

English Translation of Consolidated Financial Statements Originally Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2018 and 2017 (Note)

(Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share)

	Notes	For the Years Ended December 31
		2018	2017 (Note)
Operating revenues	4, 6(11)	\$264,022	\$263,220
Operating costs	6(14), 7	255,558	249,358
Gross profit		8,464	13,862
Operating expenses
Selling expenses		2,456	1,856
Administrative expenses	4, 6(9), 6(13), 6(14), 7	75,377	27,170
Expected credit losses	6(12)	83	$\blacksquare$
Total operating expenses		77,916	29,026
Operating loss		(69, 452)	(15, 164)
Non-operating income and expenses
Other income	6(15)	5,279	11,728
Other gains and losses	6(15)	(7,073)	(3,288)
Finance costs	6(15)	(88)	(136)
Total non-operating income and expenses		(1, 882)	8,304
Loss before income tax		(71, 334)	(6, 860)
Income tax benefit (expense)	6(17)	2,519	(12)
Net loss		(68, 815)	(6, 872)
Other comprehensive income (loss)	4, 6(16)
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign financial statements		(59)
Income tax related to items may be reclassified subsequently		12
Total other comprehensive income, net of tax		(47)
Total comprehensive income		\$(68, 862)	\$(6, 872)
Net loss attributable to:
Owners of parent		\$(68, 815)	\$(6, 872)
Comprehensive income attributable to:
Owners of parent		\$(68, 862)	\$(6,872)
Earning per share (NTD)
Basic earnings per share	6(18)
Loss from continuing operations		\$(0.75)	\$(0.07)

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

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3).

English Translation of Consolidated Financial Statements Originally Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2018 and 2017 (Note)

(Expressed in Thousands of New Taiwan Dollars)

Equity Attributable to Owners of Parant

	Capital			Retained Earnings			Other Equity
Items	Common Stock	Capital Suplus	Legal Reserve	Special Reserve	Unappropriated Earnings	Total	Foreign Financial Translation of Difference on Statements Exchange	Equity Total
Balance as of January 1, 2017	\$920,000	\$8,686	\$222,587	\$212,275	\$600,309	\$1,035,171	မာ	\$1,963,857
Appropriations of 2016 earnings:
Legal reserve			2,547		(2,547)
Cash dividends					(46,000)	(46,000)		(46,000)
Net loss for the year ended December 31, 2017					(6, 872)	(6, 872)		(6, 872)
Other comprehensive income for the year ended December 31, 2017
Total comprehensive income (loss)		ľ			(6,872)	(6, 872)		(6, 872)
Balance as of December 31, 2017	\$920,000	\$8,686	\$225,134	\$212,275	\$544,890	\$982,299	∽	\$1,910,985
Balance as of January 1, 2018	\$920,000	\$8,686	\$225,134	\$212,275	\$544,890	\$982,299	မှ	\$1,910,985
Net loss for the year ended December 31, 2018					(68, 815)	(68, 815)		(68, 815)
Other comprehensive income (loss) for the year ended December 31, 2018		t					(47)	(47)
Total comprehensive income (loss)		t			(68, 815)	(68, 815)	$\binom{47}{4}$	(68, 862)
Balance as of December 31, 2018	\$920,000	\$8,686	\$225,134	\$212,275	\$476,075	\$913,484	$\frac{1}{2}$	\$1,842,123

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

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3).

English Translation of Consolidated Financial Statements Originally Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2018 and 2017 (Note) (Expressed in Thousands of New Taiwan Dollars)

$\bar{\gamma}$

	2018	2017 (Note)
Cash flows from operating activities:
Net loss before income tax:	\$(71,334)	\$(6,860)
Adjustments:
Adjustment items of income and expenses:
Depreciation expense	5,551	5,968
Amortization expense	14	33
Bad debt reversal		(98)
Expected credit loss	83
Net loss (gain) of financial assets and liabilities at fair value through profit or loss	1,341	(1,106)
Interest expense	88	136
Interest income	(4,696)	(8,258)
Dividend income	(522)	(417)
Loss on disposal of property, plant and equipment	86
Loss on disposal of investment property	5,070
Impairment loss of investment property		3,100
Changes in operating assets and liabilities:
Accounts receivable	(8,294)	9,774
Other receivables	118	(122)
Inventories	15,933	(2,322)
Prepayments	(159, 510)	2,077
Other current assets		21
Notes payable	(535)	259
Other payables	(6,013)	(8,093)
Other current liabilities	(581)	249
Cash outflow from operating activities	(223, 201)	(5,659)
Interest paid	(88)	(136)
Income tax (paid) refund	(996)	863
Net cash used in operating activities	(224, 285)	(4,932)
Cash flows from investing activities:
Acquisition of financial assets at amortized cost	(1,098,080)
Acquisition of financial assets at fair value through profit or loss	(524)
Acquisition of property, plant and equipment	(2,153)
Proceeds from disposal of property, plant and equipment	1,019
Proceeds from disposal of investment property	44,755
Decrease (increase) in refundable deposits	(1,044)	17
Interest received	4,686	8,172
Dividend received	522	417
Net cash (used in) provided by investing activities	(1,050,819)	8,606
Cash flows from financing activities:
Increase (decrease) in guarantee deposits	(1, 127)	56
Cash dividends paid		(46,000)
Net cash used in financing activities	(1, 127)	(45, 944)
Effect of exchange rate changes on cash and cash equivalents	(59)
Decrease in cash and cash equivalents	(1,276,290)	(42, 270)
Cash and cash equivalents at beginning of year	1,304,769	1,347,039
Cash and cash equivalents at end of year	\$28,479	\$1,304,769

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

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3).

1. History and organization

Chuwa Wool Industry Co., (Taiwan) Ltd. (the "Company") was incorporated in the Republic of China (R.O.C.) on August 1964. The major business of the Company are manufacturing and sales of wool tops, superwash wool tops, superwash loose wool and real estate for lease. The Company's common shares were publicly listed on the Taiwan Stock Exchange ("TWSE") in May 1989. The Company's registered office and main operations base are located in at 9F-7, No. 57, Fuxing N. Rd., Songshan Dist., Taipei City, Taiwan (R.O.C.). Roo Hsing Co., Ltd. is the ultimate controlling entity of the company and its subsidiaries.

1. Date and procedures of authorization of financial statements for issue

The consolidated financial statements of the Company and its subsidiaries ("the Group") for the years ended December 31, 2018 and 2017 were authorized for issue in accordance with a resolution of the Board of Directors on March 5, 2019.

• 1. Newly issued or revised standards and interpretations
• A. Changes in accounting policies resulting from applying for the first time certain standards and amendments

The Group applied for the first time International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are recognized by Financial Supervisory Commission ("FSC") and become effective for annual periods beginning on or after January 1, 2018. The nature and the impact of each new standard and amendment that has a material effect on the Group is described below:

(1) IFRS 15 Revenue from Contracts with Customers" (including Amendments to IFRS 15 "Clarifications to IFRS 15 Revenue from Contracts with Customers")

IFRS 15 replaces IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations. In accordance with the transition provision in IFRS 15, the Group elected to recognize the cumulative effect of initially applying IFRS 15 at the date of initial application (January 1, 2018). The Group also elected to apply this standard retrospectively only to contracts that are not completed contracts at the date of initial application.

The Group's principal activities consist of the sale of goods. The impacts arising from the adoption of IFRS 15 on the Group are summarized as follows:

• (a) Please refer to Note 4 for the accounting policies before or after January 1, 2018.
• (b) Before January 1, 2018, revenue from sale of goods was recognized when goods have been delivered to the buyer. Starting from January 1, 2018, in accordance with IFRS 15, the Group recognized revenue when (or as) the Group satisfies a performance obligation by transferring a promised good to a customer. IFRS 15 has no impact on the Group's revenue recognition from sale of goods. However, for some contracts, if the Group has the right to transfer the goods to customers but does not has a right to an amount of consideration that is unconditional, these contacts should be presented as contract assets, which is different from the accounting treatment of recognizing account receivables before the date of initial application. Besides, loss allowance for contract assets was assessed in accordance with IFRS 9. Part of the consideration was received from customers upon signing the contract, then the Group has the obligation to provide the services subsequently. Before 1 January 2018, the Group recognized the consideration received in advance from customers under other current liabilities. Starting from 1 January 2018, in accordance with IFRS 15, it should be recognized as contract liabilities. The amount reclassified from other current liabilities to contracts liabilities of the Group as at the date of initial application was NT\$173 thousand.
• (c) Please refer to Note 4, Note 5 and Note 6 for additional disclosure note required by IFRS 15.
• (2) IFRS 9 "Financial Instruments"

IFRS 9 "Financial Instruments" replaces IAS 39 "Financial Instruments: Recognition and Measurement". In accordance with the transition provision in IFRS 9, the Group elected not to restate prior periods at the date of initial application (January 1, 2018). The adoption of IFRS 9 has the following impacts on the Group:

(a) The Group adopted IFRS 9 since January 1, 2018 and it adopted IAS 39 before January 1, 2018. Please refer to Note 4 for more details on accounting policies.

(b) In accordance with the transition provision in IFRS 9, the assessment of the business model and classification of financial assets into the appropriate categories are based on the facts and circumstances that existed as at January 1, 2018. The classifications of financial assets and its carrying amounts as at January 1, 2018 are as follow:

IAS 39		IFRS 9
Measurement categories	Carrying amounts	Measurement categories	Carrying amounts
Fair value through profit or loss		\$11,172 Fair value through profit or loss	\$11,172
At amortized cost		At amortized cost (including cash	1,308,237
Loans and receivables (including	1,308,237	and cash equivalents but excluding
cash and cash equivalents but		cash on hand, account receivables
excluding cash on hand, account		and other receivables)
receivables and other receivables)
Total	\$1,319,409	Total	\$1,319,409

(c) The transition adjustments from IAS 39 to IFRS 9 for the classifications of financial assets and financial liabilities as at January 1, 2018 are as follow:

IAS 39		IFRS 9
Class of financial instruments	Carrying amounts	Class of financial instruments	Carrying amounts	Difference	Retained earnings Adjustment	Other components of equity Adjustment
Financial assets at fair value through profit or loss (Note 1) Held-for-trading	\$11,172	Measured at fair value	\$11,172	$S-$	$S-$	$S-$
Subtotal Loans and receivables (Note 2)	11,172	through profit or loss
Cash and cash equivalents (excluding cash on hand)	1,304,758	Cash and cash equivalents (excluding cash on hand)	1,304,758
Account receivables	2,960	Account receivables	2,960	$\blacksquare$
Other receivables	519	Other receivables	519
Subtotal	1,308,237
Total	\$1,319,409	Total	\$1,319,409		$S-$	$S-$

Notes:

• 1. In accordance with IAS 39, financial assets classified as held for trading which measured at fair value through profit or loss include investments in stocks of listed companies. In accordance with IFRS 9, as the cash flow characteristics for investments in stocks of listed companies are not solely payments of principal and interest on the principal amounts outstanding, they are classified as financial assets mandatorily measured at fair value through profit or loss, the change of classifications did not change the carrying amounts of these investments.
• 1. In accordance with IAS 39, the cash flow characteristics for held-to-maturity investments and loans and receivables are solely payments of principal and interest on the principal amount outstanding. The assessment of the business model is based on the facts and circumstances that existed as at January 1, 2018. These financial assets were measured at amortized cost as they were held within a business model whose objective was to hold financial assets in order to collect contractual cash flows. Besides, in accordance with IFRS 9, there was no adjustment arisen from the assessment of impairment losses for the aforementioned assets as at January 1, 2018. Therefore, there is no impact on the carrying amount as at January 1, 2018.
• (d) Please refer to Note 4, Note 5, Note 6 and Note 12 for the related disclosures required by IFRS 7 and IFRS 9.
• (3) IFRIC 22 "Foreign Currency Transactions and Advance Consideration"

The interpretation clarifies that when applying paragraphs 21 and 22 of IAS 21 "The Effects of Changes in Foreign Exchange Rates", in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the entity initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration.

The Group originally recorded their foreign currency sales transactions based on the exchange rate on the date of revenue recognition and converted into its functional currency. The exchange difference was recognized when the foreign currency advance payment was written off. The Group elected to postpond the application of this interpretation prospectively on January 1, 2018. This change in accounting principle did not impact the Group's recognition and measurement.

B. Standards or interpretations issued, revised or amended, by International Accounting Standards Board ("IASB") which are endorsed by FSC, but not yet adopted by the Group as at the end of the reporting period are listed below.

		Effective for annual
	Newly issued/amendments/revised standards and	periods beginning on
Items	interpretations	or after
1	IFRS 16 "Leases"	January 1, 2019
$\overline{2}$	IFRIC 23 "Uncertainty Over Income Tax Treatments"	January 1, 2019
3	IAS 28 "Investment in Associates and Joint Ventures"	January 1, 2019
	Amendments to IAS 28
4	Compensation Negative with Prepayment Features	January 1, 2019
	(Amendments to IFRS 9)
5	Improvements to International Financial Reporting Standards	January 1, 2019
	$(2015 - 2017$ cycle)
6	Plan Amendment, Curtailment or Settlement (Amendments to	January 1, 2019
	IAS 19)

$(1)$ IFRS 16"Leases"

The new standard requires lessees to account for all leases under one single accounting model (except for short-term or low-value asset lease exemptions), which is for lessees to recognize right-of-use assets and lease liabilities on the balance sheet and the depreciation expense and interest expense associated with those leases in the consolidated statements of comprehensive income. Besides, lessors' classification remains unchanged as operating or finance leases, but additional disclosure information is required.

(2) IFRIC 23 "Uncertainty Over Income Tax Treatments"

The Interpretation clarifies application of recognition and measurement requirements in IAS 12 "Income Taxes" when there is uncertainty over income tax treatments.

(3) IAS 28 Threstment in Associates and Joint Ventures" — Amendments to IAS 28

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture before it applies IAS 28, and in applying IFRS 9, does not take account of any adjustments that arise from applying IAS 28.

(4) Prepayment Features with Negative Compensation (Amendments to IFRS 9)

The amendment allows financial assets with prepayment features that permit or require a party to a contract either to pay or receive reasonable compensation for the early termination of the contract, to be measured at amortized cost or at fair value through other comprehensive income.

(5) Improvements to International Financial Reporting Standards (2015-2017 cycle):

IFRS 3 "Business Combinations"

The amendments clarify that an entity that has joint control of a joint operation shall remeasure its previously held interest in a joint operation when it obtains control of the business.

IFRS 11 "Joint Arrangements"

The amendments clarify that an entity that participates in, but does not have joint control of, a joint operation does not remeasure its previously held interest in a joint operation when it obtains joint control of the business.

IAS 12 "Income Taxes"

The amendments clarify that an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.

IAS 23 "Borrowing Costs"

The amendments clarify that an entity should treats as part of general borrowings any borrowing made specifically to obtain an asset when the asset is ready for its intended use or sale.

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

The amendments clarify that when a change in a defined benefit plan is made (such as amendment, curtailment or settlement, etc.), the entity should use the updated assumptions to remeasure its net defined benefit liability or asset.

The abovementioned standards and interpretations were issued by IASB and endorsed by FSC so that they are applicable for annual periods beginning on or after 1 January 2019. Apart from item (1) explained below, the remaining standards and interpretations have no material impact on the Group.

$(1)$ IFRS 16 "Leases"

IFRS 16 "Leases" replaces 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". The impact arising from the adoption of IFRS 16 on the Group are summarized as follows:

(a) For the definition of a lease, the Group elects not to reassess whether a contract is, or contains, a lease at the date of initial application (January 1, 2019) in accordance with the transition provision in IFRS 16. Instead, the Group is permitted to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 but not to apply IFRS 16 to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4.

The Group is a lessee and elects not to restate comparative information in accordance with the transition provision in IFRS 16. Instead, the Group recognizes the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the date of initial application.

I. Leases classified as operating leases

For leases that were classified as operating leases applying IAS 17, the Group expects to measure and recognize those leases as lease liability on January 1, 2019 at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate on January 1, 2019 and; the Group chooses, on a leaseby-lease basis, to measure the right-of-use asset at either:

• i. its carrying amount as if IFRS 16 had been applied since the commencement date, but discounted using the lessee's incremental borrowing rate on January $1, 2019$ ; or
• ii. an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before January 1, 2019.

The Group expects the right-of-use asset will increase by NT\$7,459 thousands and the lease liability will increase by NT\$7,459 thousands on January 1, 2019.

• (b) The additional disclosures of lessee and lessor required by IFRS 16 will be disclosed in the relevant notes.
• C. Standards or interpretations issued, revised or amended, by IASB but not yet endorsed by FSC at the date of issuance of the Group's financial statements are listed below.

	New, Revised or Amended Standards and	Effective Date issued by
Items	Interpretations	IASB
a	IFRS 10 "Consolidated Financial Statements" and IAS 28	To be determined by
	"Investments in Associates and Joint Ventures" — Sale or	IASB
	Contribution of Assets between an Investor and its
	Associate or Joint Ventures
$\mathbf b$	IFRS 17 "Insurance Contracts"	January 1, 2021
$\mathbf{C}$	Definition of a Business (Amendments to IFRS 3)	January 1, 2020
d	Definition of Material (Amendments to IAS 1 and 8)	January 1, 2020

(1) IFRS 10 "Consolidated Financial Statements" and IAS 28 "Investments in Associates and Joint Ventures" - Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures, in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and losses arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint ventures. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized in full. IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors' interests in the associate or joint venture.

(2) IFRS 17 "Insurance Contracts"

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a group of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The fulfilment cash flows comprise of the following:

• (a) estimates of future cash flows;
• (b) Discount rate: an adjustment to reflect the time value of money and the financial risks related to the future cash flows, to the extent that the financial risks are not included in the estimates of the future cash flows; and
• (c) a risk adjustment for non-financial risk.

The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims. Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

(3) Definition of a Business (Amendments to IFRS 3)

The amendments clarify the definition of a business in IFRS 3 Business Combinations. The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition.

IFRS 3 continues to adopt a market participant's perspective to determine whether an acquired set of activities and assets is a business. The amendments clarify the minimum requirements for a business; add guidance to help entities assess whether an acquired process is substantive; and narrow the definitions of a business and of outputs; etc.

(4) Definition of a Material (Amendments to IAS 1 and 8)

The main amendment is to clarify new definition of material. It states that "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users.

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Group's financial statements were authorized for issue, the local effective dates are to be determined by FSC. The above mentioned standards and interpretations have no material impact on the Group.

4. Summary of significant accounting policies

(1) Statement of compliance

The consolidated financial statements of the Group for the years ended 31 December 2018 and 2017 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers ("the Regulations") and International Financial Reporting Standards, International Accounting Standards, and Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by the FSC.

(2) Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The consolidated financial statements are expressed in thousands of New Taiwan Dollars ("NT\$") unless otherwise stated.

(3) Basis of consolidation

Preparation principle of consolidated financial statement

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

• $A_r$ power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
• exposure, or rights, to variable returns from its involvement with the investee, and $B₁$
• the ability to use its power over the investee to affect its returns $C_{\cdot}$

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• the contractual arrangement with the other vote holders of the investee A.
• rights arising from other contractual arrangements $B.$
• the Group's voting rights and potential voting rights $C_{\cdot}$

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

Subsidiaries are fully consolidated from the acquisition date, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using uniform accounting policies. All intra-group balances, income and expenses, unrealized gains and losses and dividends resulting from intra-group transactions are eliminated in full.

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.

Total comprehensive income of the subsidiaries is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

If the Group loses control of a subsidiary, it:

• derecognizes the assets (including goodwill) and liabilities of the subsidiary; A.
• derecognizes the carrying amount of any non-controlling interest; $B_r$
• C. recognizes the fair value of the consideration received;
• recognizes the fair value of any investment retained; D.
• recognizes any surplus or deficit in profit or loss; and E.
• reclassifies the parent's share of components previously recognized in other $F_r$ comprehensive income to profit or loss.

The consolidated entities are listed as follows:

			Percentage of ownership (%)
Investor	Subsidiary	Main businesses	Dec. 31, 2018	Dec. 31.2017	Note
The Company	HCW Investment Co., Ltd.	Investment	100%	$\blacksquare$
	CW Investment One Limited	Investment holding	100%	-

Note:

• 1. The Company established and acquired 100% share of HCW Investment Co., Ltd. in August 2018.
• 1. The Company established and acquired 100% share of CW Investment One Limited in July 2018.
• (4) Foreign currency transactions

The Group's consolidated financial statements are presented in NT\$, which is also the Company's functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

• A. Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.
• Foreign currency items within the scope of IFRS 9 Financial Instruments (Before January B. 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement) are accounted for based on the accounting policy for financial instruments.
• C. Exchange differences arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

(5) Translation of financial statements in foreign currency

While preparing the Group consolidated financial statements, the assets and liabilities of foreign operations are translated into NT\$ at the closing rate of exchange prevailing at the reporting date and their income and expenses are translated at an average rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. The partial disposals are accounted for as disposals when the partial disposal involves the loss of control of a subsidiary that includes a foreign operation and when the retained interest after the partial disposal of an interest in a joint arrangement or a partial disposal of an interest in an associate that includes a foreign operation is a financial asset that includes a foreign operation.

On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to the non-controlling interests in that foreign operation. In partial disposal of an associate or jointly controlled entity that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

(6) Current and non-current distinction

An asset is classified as current when:

• A. The Group expects to realize the asset, or intends to sell or consume it, in its normal operating cycle
• The Group holds the asset primarily for the purpose of trading B.
• The Group expects to realize the asset within 12 months after the reporting period $C_{\cdot}$
• The asset is cash or cash equivalent unless the asset is restricted from being exchanged or D. used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

• The Group expects to settle the liability in its normal operating cycle A.
• The Group holds the liability primarily for the purpose of trading $B_r$
• The liability is due to be settled within twelve months after the reporting period $C_{\cdot}$
• The Group does not have an unconditional right to defer settlement of the liability for at D. 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.

All other liabilities are classified as non-current.

(7) Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highly liquid time deposits (including ones that have maturity within 3 months) or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(8) Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities within the scope of IFRS 9 Financial Instruments (Before January 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement) are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Financial instruments: Recognition and Measurement A.

The accounting policy from January 1, 2018 as follow:

The Group accounts for regular way purchase or sales of financial assets on the trade date.

The Group classified financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

• (a) the Group's business model for managing the financial assets and
• (b) the contractual cash flow characteristics of the financial asset.

Financial assets at amortized cost

A financial asset is measured at amortized cost if both of the following conditions are met and presented as note receivables, accounts receivable financial assets at amortized cost and other receivables etc., on balance sheet as at the reporting date:

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

Such financial assets are subsequently measured at amortized cost (the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount and adjusted for any loss allowance) and is not part of a hedging relationship. A gain or loss is recognized in profit or loss when the financial asset is derecognized, through the amortization process or in order to recognize the impairment gains or losses.

Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

• (a) purchased or originated credit-impaired financial assets. For those financial assets, the Group applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
• (b) financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Group applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Financial assets at fair value through profit or loss

Financial assets were classified as measured at amortized cost or measured at fair value through other comprehensive income based on aforementioned criteria. All other financial assets were measured at fair value through profit or loss and presented on the balance sheet as financial assets measured at fair value through profit or loss.

Such financial assets are measured at fair value, the gains or losses resulting from remeasurement is recognized in profit or loss which includes any dividend or interest received on such financial assets.

The accounting policy before January 1, 2018 as follow:

The Group accounts for regular way purchase or sales of financial assets on the trade date.

Financial assets of the Group are classified as financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables. The Group determines the classification of its financial assets at initial recognition.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated as at fair value through profit or loss.

A financial asset is classified as held for trading if:

• (a) it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
• (b) on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of shortterm profit-taking; or
• (c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial asset at fair value through profit or loss; or a financial asset may be designated as at fair value through profit or loss when doing so results in more relevant information, because either:

• (a) it eliminates or significantly reduces a measurement or recognition inconsistency; or
• (b) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

Financial assets at fair value through profit or loss are measured at fair value with changes in fair value recognized in profit or loss. Dividends or interests on financial assets at fair value through profit or loss are recognized in profit or loss (including those received during the period of initial investment).

If financial assets do not have quoted prices in an active market and their far value cannot be reliably measured, then they are classified as financial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as at the reporting date.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Group upon initial recognition designates as available for sale, classified as at fair value through profit or loss, or those for which the holder may not recover substantially all of its initial investment.

Loans and receivables are separately presented on the balance sheet as receivables or debt instrument investments for which no active market exists. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or transaction costs. The effective interest method amortization is recognized in profit or loss.

Impairment of financial assets $B_r$

The accounting policy from January 1, 2018 as follow:

The Group recognizes a loss allowance for expected credit losses on financial asset measured at amortized cost.

The Group measures expected credit losses of a financial instrument in a way that reflects:

• (a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
• (b) the time value of money; and
• (c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

The loss allowance is measures as follow:

• (a) At an amount equal to 12-month expected credit losses: the credit risk on a financial asset has not increased significantly since initial recognition or the financial asset is determined to have low credit risk at the reporting date. In addition, the Group measures the loss allowance at an amount equal to lifetime expected credit losses in the previous reporting period, but determines at the current reporting date that the credit risk on a financial asset has increased significantly since initial recognition is no longer met.
• (b) At an amount equal to the lifetime expected credit losses: the credit risk on a financial asset has increased significantly since initial recognition or financial asset that is purchased or originated credit-impaired financial asset.
• (c) For trade receivables or contract assets arising from transactions within the scope of IFRS 15, the Group measures the loss allowance at an amount equal to lifetime expected credit losses.

At each reporting date, the Group needs to assess whether the credit risk on a financial asset has increased significantly since initial recognition by comparing the risk of a default occurring at the reporting date and the risk of default occurring at initial recognition. Please refer to Note 12 for further details on credit risk.

The accounting policy before January 1, 2018 as follow:

The Group assesses at each reporting date whether there is any objective evidence that a financial asset other than the financial assets at fair value through profit or loss is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more loss events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset. The carrying amount of the financial asset impaired, other than receivables impaired which are reduced through the use of an allowance account, is reduced directly and the amount of the loss is recognized in profit or loss.

Other loss events include:

• (a) significant financial difficulty of the issuer or obligor; or
• (b) a breach of contract, such as a default or delinquency in interest or principal payments; _or
• (c) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
• (d) the disappearance of an active market for that financial asset because of financial difficulties.

For loans and receivables measured at amortized cost, the Group first assesses individually whether objective evidence of impairment exists individually for financial asset that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exits for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. Interest income is accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Receivables together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to profit or loss.

Derecognition of financial assets $C_{\cdot}$

A financial asset is derecognized when:

• (a) The rights to receive cash flows from the asset have expired
• (b) The Group has transferred the asset and substantially all the risks and rewards of the asset have been transferred
• (c) The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

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

Financial liabilities and equity D.

Classification between liabilities or equity

The Group classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

Financial liabilities

Financial liabilities within the scope of IFRS 9 Financial Instruments (before January 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement) are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

Offsetting of financial instruments $E_{\cdot}$

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(9) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or A.
• In the absence of a principal market, in the most advantageous market for the asset or B. liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

(10) Inventories

Inventories are valued at lower of cost and net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accounted for as follows:

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Starting from January 1, 2018, rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

(11) Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction that is highly probable within one year from the date of classification and the asset or disposal group is available for immediate sale in its present condition. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortized.

(12) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. 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 is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 Property, plant and equipment. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings	$8{\sim}49$ years
Machinery and equipment	$15{\sim}20$ years
Transportation equipment	5 years
Office equipment	$3{\sim}23$ years
Leased assets	5years
Leasehold improvements	The shorter of lease terms or economic useful lives

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

(13) Investment property

Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are measured using the cost model in accordance with the requirements of IAS 16 for that model, other than those that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

$8\sim60$ years Buildings

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of derecognition.

The Group transfers to or from investment properties depending on their actual use.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

$(14)$ Leases

Group as a lessee

Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

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

Group as a lessor

Leases in which the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Rental revenue generated from operating lease is recognized over the lease term using the straight line method. Contingent rents are recognized as revenue in the period in which they are earned.

(15) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss for the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite. All of the Group's intangible assets are intangible assets with finite lives.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

Gains or losses arising from derecognition of an intangible asset are recognized in profit or loss.

Computer software

The cost of computer software is amortized on a straight-line basis over the estimated useful life (4 years).

(16) Impairment of non-financial assets

The Group assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cashgenerating unit's ("CGU") fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the higher of its fair value less costs of disposal and its value in use.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

(17) Revenue recognition

The accounting policy from January 1, 2018 as follow:

The Group's revenue arising from contracts with customers are primarily related to sale of goods and rendering of services. The accounting policies are explained as follow:

Sale of goods

Revenue from the sale of goods is recognized when the goods is transferred and delivered to the customers. (When the significant risks and rewards of ownership of the goods have passed to the customers.) The main goods of Group sold are wool tops, superwash wool tops, and superwash loose wool. Revenue from the sale of goods is recognized on contractual considerations basis.

The credit period of the Group's sale of goods is from 30 to 90 days. For the contracts, when the Group transfers the goods to customers and has a right to an amount of consideration that is unconditional, the contracts are recognized as accounts receivables. The Group usually collects the payments shortly after transfer of goods to customers; therefore, there is no significant financing component to the contract.

The accounting policy after January 1, 2018 as follow:

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. The following specific recognition criteria must also be met before revenue is recognized:

Sale of goods

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

• the significant risks and rewards of ownership of the goods have passed to the buyer; A.
• neither continuing managerial involvement nor effective control over the goods sold have $B_r$ been retained:
• C. the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the D. entity; and
• $E.$ the costs incurred in respect of the transaction can be measured reliably.

Rental income

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

Interest income

For all financial assets measured at amortized cost (including loans and receivables), interest income is recorded using the effective interest rate method and recognized in profit or loss.

Dividends income

Revenue is recognized when the Group's right to receive the payment is established.

(18) Post-employment benefits

For the defined contribution plan, the Company and its domestic subsidiaries will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Group recognizes expenses for the defined contribution plan in the period in which the contribution becomes due. In addition, foreign subsidiaries make the contribution and recognizes as expenses according to the local specific rates.

(19) Income taxes

Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss.

The income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders' meeting.

Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

• A. Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
• In respect of taxable temporary differences associated with investments in subsidiaries, B. where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilized, except:

• Where the deferred tax asset relating to the deductible temporary difference arises from $A_{\cdot}$ the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
• In respect of deductible temporary differences associated with investments in subsidiaries, $\mathbf{B}$ . deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

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

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

5. Significant accounting judgements, estimates and assumptions

The preparation of the Group's consolidated financial statements require management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumption and estimate could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

$(1)$ Judgement

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the consolidated financial statements:

Operating lease commitment $-$ Group as the lessor A.

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.

Inventories B.

Inventories are valued at the lower of cost and net realizable value item by item. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The judgement of net realizable value based on historical experience and exchange rate.

(2) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment of non-financial assets $A₁$

An impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date less incremental costs that would be directly attributable to the disposal of the asset or CGU. The value in use calculation is based on a discounted cash flow model. The cash flows projections are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different cash generating units, including a sensitivity analysis, are further explained in Note 6.

Revenue recognition – sales returns and allowance B.

Starting from January 1, 2018:

The Group estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue. In assessing the aforementioned sales returns and allowance, revenue is recognized to the extent it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.

Before January 1, 2018:

The Group estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue.

C. Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group company's domicile.

Deferred tax assets are recognized for all carry-forward of unused tax losses and unused tax credits and deductible temporary differences to the extent that it is probable that taxable profit will be available or there are sufficient taxable temporary differences against which the unused tax losses, unused tax credits or deductible temporary differences can be utilized. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies.

D. Accounts receivables-estimation of impairment loss

Starting from January 1, 2018:

The Group estimates the impairment loss of accounts receivables at an amount equal to lifetime expected credit losses. The credit loss is the present value of the difference between the contractual cash flows that are due under the contract (carrying amount) and the cash flows that expects to receive (evaluate forward looking information). However, as the impact from the discounting of short-term receivables is not material, the credit loss is measured by the undiscounted cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details.

Before January 1, 2018:

The Group considers the estimation of future cash flows when there is objective evidence showed indications of impairment. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. However, as the impact from the discounting of short-term receivables is not material, the impairment of short-term receivables is measured as the difference between the asset's carrying amount and the estimated undiscounted future cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details.

$E.$ Inventories

Estimates of net realisable value of inventories take into consideration that inventories may be damaged, become wholly or partially obsolete, or their selling prices have declined. The estimates are based on the most reliable evidence available at the time the estimates are made.

6. Contents of significant accounts

(1) Cash and cash equivalents

	As of December 31,
	2018	2017
Cash on hand	\$30	\$11
Demand deposits	28,449	114,240
Time deposits		1,190,518
Total	\$28,479	\$1,304,769

(2) Financial assets at amortized cost - current

		As of December 31,
	2018	2017 (Note)
Time deposits	\$1,000,000
Foreign debt instrument	98,080
Total	\$1,098,080

Note: The Group adopted IFRS 9 since January 1, 2018. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 9.

(3) Accounts receivable, net

	As of December 31,
	2018	2017
Accounts receivable	\$11,284	\$2,990
Less: loss allowance	(113)	(30)
Total	\$11,171	\$2,960

Accounts receivable were not pledged.

Accounts receivable are generally on 30~90 days terms. The Group adopted IFRS 9 for impairment assessment since January 1, 2018. Please refer to Note $6(12)$ for more details on impairment of accounts receivable. The Group adopted IAS 39 for impairment assessment before January 1, 2018. The movements in the provision for impairment of accounts receivable and information of aging analysis for 2017 are as follows:

Individually	Collectively
impaired	impaired	Total
$S-$	\$128	\$128
$\overline{\phantom{0}}$	(98)	(98)
\$-	\$30	\$30

Aging analysis of accounts receivable that are past due as at the end of the reporting period but not impaired is as follows:

			Past due but not impaired
	Neither past due
	nor	$\leq$ 30	$31 - 60$	$61 - 90$	$91 - 120$	$>=121$
As of	impaired	days	days	days	days	days	Total
Dec 31, 2017	\$2,960	$\mathsf{S}$ -	\$-	\$-	$\mathcal{S}$ -	\$-	\$2,960

(4) Inventories

	As of December 31,
	2018	2017
Finished goods	$\mathsf{\$}$	\$9,312
Raw materials	$\blacksquare$	6,621
Total	$\mathbb{S}^-$	\$15,933

For the years ended December 31, 2018 and 2017, the Group recognized cost of inventories of NT\$244,339 thousand and NT\$238,465 thousand, respectively.

No inventories were pledged.

(5) Prepayments

As of December 31,
2018
\$268	\$190
	568
160,000
\$160,268	\$758

Other prepayments are the refundable downpayment for purchasing property, plant and equipment.

(6) Non-current assets classified as held for sale, net

	Land	Buildings	Total
Cost:
As of Jan 1, 2018	$S-$	\$-	\$-
Transferred from investment property	530,745	119,792	650,537
As of Dec 31, 2018	\$530,745	\$119,792	\$650,537
			107.12.31
Liabilities related to non-current assets
classified as held for sale
Deferred tax liabilities $-$ Provision of
land value increment tax			\$145,900

• (a) No non-current assets held for sale were pledged.
• (b) To integrate resource and make better use of assets, the Group planned to dispose of the land and building in Gongjian W. Rd., Qidu Dist., Keelung City, resolved at the special shareholder's meeting held on November 28, 2018 and at the board meeting held on December 21, 2018. A buyer is confirmed and the disposal is anticipated to be completed within a year, so the Group reclassified the investment property at carrying amount of NT\$574,927 thousand to non-current assets classified as available for sale. In addition, deferred tax liabilities from provision for land value increment tax in the amount of NT\$145,900 thousand were reclassified as liabilities related to non-current assets classified as available for sale.
• (c) The Group intended to dispose of the land and building located on Sec. 2, Tiding Blvd., Neihu Dist., Taipei City within three months. The Group was searching for buyers and anticipated to complete the sale within a year, so the Group reclassified the investment property at carrying amount of NT\$75,600 thousand to non-current assets classified as available for sale.

(7) Property, plant and equipment

			Machinery	Office	Transportation		Leasehold
	Land	Buildings	and equipment	equipment	equipment		Leased assets improvements	Total
Cost:
As of Jan 1, 2018	\$60,952	\$18,102	\$10,968	\$4,394	\$5,720	\$222	\$-	\$100,358
Additions					255		1,898	2,153
Disposals				(4, 394)	(1, 443)	(222)		(6,059)
Transferred to
investment property	(60, 891)	(17, 792)						(78, 683)
As of Dec 31, 2018	\$61	\$310	\$10,968	$S-$	\$4,532	$\mathbb{S}^-$	\$1,898	\$17,769
As at Jan 1, 2017	\$60,952	\$18,102	\$10,968	\$4,394	\$5,720	\$222	\$-	\$100,358
Additions
Disposals
As of Dec 31, 2018	\$60,952	\$18,102	\$10,968	\$4,394	\$5,720	\$222	\$-	\$100,358
Depreciation and impairment:
As of Jan 1, 2018	$S-$	\$3,024	\$10,949	\$3,931	\$4,269	\$152	$\mathsf{s}\text{-}$	\$22,325
Depreciation		267	3	82	254	18	53	677
Disposals				(4,013)	(771)	(170)		(4,954)
Transferred to
investment property		(2,995)						(2,995)
As of Dec 31, 2018	\$-	\$296	\$10,952	$S-$	\$3,752	$S-$	\$53	\$15,053
As of Jan 1, 2017	\$-	\$2,668	\$10,939	\$3,605	\$3,990	\$115	\$-	\$21,317
Depreciation		356	10	326	279	37		1,008
Disposals
As of Dec 31, 2017	$\mathbb{S}^-$	\$3,024	\$10,949	\$3,931	\$4,269	\$152	\$-	\$22,325
Net carrying amount
as of:
Dec 31, 2018	\$61	\$14	\$16	\$-	\$780	\$-	\$1,845	\$2,716
Dec 31, 2017	\$60,952	\$15,078	\$19	\$463	\$1,451	\$70	$\mathbb{S}$ -	\$78,033

Components of buildings of the Group are mainly buildings and improvements, which are depreciated over 49 years, 8, and 20 years, respectively, depending on their useful lives.

None of aforementioned property, plant and equipment were pledged.

(8) Investment property

	Land	Buildings	Total
Cost:
As of Jan 1, 2018	\$541,506	\$271,661	\$813,167
Additions from acquisitions
Disposals	(45,350)	(10, 814)	(56, 164)
Transfers from property, plant and equipment	60,891	17,792	78,683
Transfers to non-current assets held for sale	530,745	(267,069)	(797, 814)
As of Dec 31, 2018	\$26,302	\$11,570	\$37,872
As of Jan 1, 2017	\$541,506	\$271,661	\$813,167
Additions from acquisitions
Disposals
Transfers from property, plant and equipment
Transfers to non-current assets held for sale
As of Dec 31, 2017	\$541,506	\$271,661	\$813,167
Depreciation and impairment:
As of Jan 1, 2018	\$6,679	\$148,171	\$154,850
Depreciation		4,874	4,874
Impairment losses
Disposals	(5,269)	(1,070)	(6,339)
Transfers from property, plant and equipment		2,995	2,995
Transfers to non-current assets held for sale		(147, 277)	(147, 277)
As of Dec 31, 2018	\$1,410	\$7,693	\$9,103
As of Jan 1, 2017	\$5,269	\$141,521	\$146,790
Depreciation		4,960	4,960
Impairment losses	1,410	1,690	3,100
Disposals
Transfers from property, plant and equipment
Transfers to non-current assets held for sale
As of Dec 31, 2017	\$6,679	\$148,171	\$154,850
Net carrying amount as of:
Dec 31, 2018	\$24,892	\$3,877	\$28,769
Dec 31, 2017	\$534,827	\$123,490	\$658,317

	For the years ended December 31,
	2018	2017
Rental income from investment property	\$15,481	\$16,641
Less:
Direct operating expenses from investment property generating rental income	(3,687)	(4,027)
Direct operating expenses from investment property not generating rental income	(2,636)	(1, 859)
Total	\$9,158	\$10,755

No investment property was pledged.

Investment properties held by the Group are not measured at fair value but for which the fair value is disclosed. The fair value measurements of the investment properties are categorized within Level 3. The fair value of investment properties is NT\$103,081 thousand and NT\$1,464,349 thousand, as of December 31, 2018 and 2017, respectively. The fair value of investment properties valued by an independent external appraiser on basis of direct capitalization method and comparison approach, and the inputs are listed:

	As of December 31,
	2018	2017
Discount rate		$4.78 - 5.18\%$ 3.845 $-4.345\%$
Capitalisation rate		$1.67 \sim 2.64\%$ $1.02 \sim 1.59\%$

(9) Post-employment benefits

Defined contribution plan

The employee pension plan under the Labor Pension Act of the R.O.C. ("the Act") is a defined contribution plan. Under the Act, the Group makes a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Group has made a monthly contribution of 6% of the monthly wages of the employees to the employees' personal pension accounts at Bureau of Labor Insurance in accordance with the Act.

Expenses under the defined contribution plan for the years ended December 31, 2018 and 2017 are NT\$777 thousand and NT\$447 thousand, respectively.

(10) Equities

(a) Common stock

The Company's authorized capital was both NT\$1,100,000 thousand as of December 2018 and 2017. The Company's issued capital was both NT\$920,000 thousand as of December 2018 and 2017, each at a par value of NT\$10. The company has issued both 100,000 thousand common stock as of December 2018 and 2017 in installments.

(b) Capital surplus

	As of December 31,
	2018	2017
Treasury share transactions	\$8,516	\$8,516
Other	170	170
Total	\$8,686	\$8,686

According to the Company Act, the capital reserve shall not be used except for making good the deficit of the company. When a company incurs no loss, it may distribute the capital reserves related to the income derived from the issuance of new shares at a premium or income from endowments received by the company. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them.

(c) Retained earnings and dividend policies

According to the Company's Articles of Incorporation, current year's earnings, if any, shall be distributed in the following order:

• I. Payment of all taxes and dues;
• II. Offset prior years' operation losses;
• III. Set aside 10% of the remaining amount after deducting items I and II as legal reserve;
• IV. Set aside or reverse special reserve in accordance with law and regulations; and
• V. The distribution of the remaining portion, if any, will be recommended by the Board of Directors and resolved in the shareholders' meeting.

The policy of dividend distribution should reflect factors such as the current and future investment environment, fund requirements, domestic and international competition and capital budgets; as well as the interest of the shareholders, share bonus equilibrium and long-term financial planning etc. The Board of Directors shall make the distribution proposal annually and present it at the shareholders' meeting.

According to the Company Act, the Company needs to set aside amount to legal reserve unless where such legal reserve amounts to the total authorized capital. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal serve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

Following the adoption of TIFRS, the FSC on 6 April 2012 issued Order No. Financial-Supervisory-Securities-Corporate-1010012865, which sets out the following provisions for compliance:

On a public company's first-time adoption of the TIFRS, for any unrealized revaluation gains and cumulative translation adjustments (gains) recorded to shareholders' equity that the company elects to transfer to retained earnings by application of the exemption under IFRS 1, the company shall set aside an equal amount of special reserve. Following a company's adoption of the TIFRS for the preparation of its financial reports, when distributing distributable earnings, it shall set aside to special reserve, from the profit/loss of the current period and the undistributed earnings from the previous period, an amount equal to "other net deductions from shareholders' equity for the current fiscal year, provided that if the company has already set aside special reserve according to the requirements in the preceding point, it shall set aside supplemental special reserve based on the difference between the amount already set aside and other net deductions from shareholders' equity. For any subsequent reversal of other net deductions from shareholders' equity, the amount reversed may be distributed.

Details of the 2018 and 2017 earnings distribution and dividends per share as approved and resolved by the board of directors' meeting and shareholders' meeting on March 5, 2019 and June 8, 2018, respectively, are as follows:

		Appropriation of earnings Dividend per share (NT\$)
	2018	2018	2017
Legal reserve
Common stock-cash dividend	$\overline{\phantom{0}}$

Please refer to Note 6(14) for details on employees' compensation and remuneration to directors and supervisors.

(11) Operating revenue

	For the years ended
		December 31,
Revenue from contracts with customers	2018	2017
Sale of goods	\$248,483	\$246,495
Other operating revenues	58	85
Subtotal	248,541	246,580
Rental revenue	15,481	16,640
Total	\$264,022	\$263,220

Note: The Group has adopted IFRS 15 from January 1, 2018. The Group elected to apply the standard retrospectively by recognizing the cumulative effect of initially applying the standard at the date of initial application (January 1, 2018).

The Group has adopted IFRS 15 from January 1, 2018. Analysis of revenue from contracts with customers during the year is as follows:

(a) Disaggregation of revenue

	Sales Dept.	Lease Dept.	Other Dept.	Total
Sale of goods	\$248,541	\$-	\$-	\$248,541
Lease		15,481		15,481
Total	\$248,541	\$15,481	$S-$	\$264,022
Timing of revenue recognition:	Sales Dept.	Lease Dept.	Other Dept.	Total
At a point in time	\$248,541	\$-	$S-$	\$248,541
Over time		15,481		15,481
Total	\$248,541	\$15,481	$S-$	\$264,022

(b) Contract balances

I. Contract liabilities - current

	Beginning	Ending
	balance	balance	Difference
Sales of goods	\$173	$S-$	\$(173)

During the year, contract liabilities decreased as performance obligations are partially satisfied and NT\$173 thousand included in the contract liability balance at the beginning of the period was recognized as revenue during the year.

(c) Assets recognized from costs to acquire or fulfill a contract

None

(12) Expected credit losses

	For the years ended
	December 31,
	2018	$2017$ (Note)
Operating expenses – Expected credit losses
Accounts Receivable	\$83

Note: The Group adopted IFRS 9 since January 1, 2018. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 9.

Please refer to Note 12 for more details on credit risk.

The Group measures the loss allowance of its accounts receivable at an amount equal to lifetime expected credit losses. The assessment of the Group's loss allowance as at December 31, 2018 is as follow:

(a) the Group considers the grouping of accounts receivable by counterparties' credit rating, by geographical region and by industry sector and its loss allowance is measured by using a provision matrix, details are as follow:

Group 1	Overdue
	Not yet due	$\leq$ 30 days	31-60 days	61-90 days	91-120 days	$>=121$ days	Total
Gross carrying amount	\$11,284	$S-$	$S-$	$$-$	\$-	\$-	\$11,284
Loss ratio	1%
Lifetime expected credit
losses	113					$\overline{\phantom{a}}$	113
Subtotal	\$11,171	\$-	$S-$	\$-	\$-	$S-$	11,171
Carrying amount							\$11,171

The movement in the provision for impairment of accounts receivable during the year ended December 31, 2018 is as follows:

	Accounts
	receivable
Beginning balance (in accordance with IAS 39)	\$30
Transition adjustment to retained earnings
Beginning balance (in accordance with IFRS 9)	30
Addition/(reversal) for the current period	83
Write off
Ending balance

(13) Operating leases

(a) Operating lease commitments - Group as lessee

The Group has entered into commercial leases on certain motor vehicles and items of machinery. These leases have an average life of 3 to 5 years with no renewal option included in the contracts. There are no restrictions placed upon the Group by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases as of December 31, 2018 and 2017 are as follows:

	As of December 31,
	2018	2017
Not later than one year	\$2,410	\$-
Later than one year and not later than five years	5,397
Total	\$7,807	\$-

Operating lease expenses recognized are as follows:

2018	2017
\$1,387	\$-
	For the years ended December 31,

(b) Operating lease commitments - Group as lessor

The Group has entered into commercial leases on office. The remaining life is between 1 and 2 years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

Based on non-cancellable lease contracts, future minimum rentals receivable under non-cancellable operating leases as of December 31, 2018 and 2017 are as follows:

	As of December 31,
	2018	2017
Not later than one year	\$8,679	\$12,477
Later than one year and not later than five years	4,437	10,850
Total	\$13,116	\$23,327

(14) Summary statement of employee benefits, depreciation and amortization expenses by function during the three-month periods ended 31 March 2018 and 2017:

	As of December 31,
		2018			2017
	Operating	Operating	Total	Operating	Operating	Total
	costs	expenses	amount	costs	expenses	amount
Employee benefits expense
Salaries	\$-	\$22,314	\$22,314	$\mathsf{s}$ -	\$20,269	\$20,269
Labor and health insurance	۰	1,488	1,488		986	986
Pension		777	777	۰.	447	447
Director's emoluments	$\blacksquare$	2,415	2,415	-	540	540
Other employee benefits
expense
Depreciation	4,895	656	5,551	5,007	961	5,968
Amortization	٠	14	14		33	33

Note: The number of the Group's employees were 25 and 14, and the number of nonemployee directors were 4 and 5 as of December 31, 2018 and 2017, respectively.

According to the Articles of Incorporation, $4{\sim}5\%$ of profit of the current year is distributable as employees' compensation and no higher than 2% of profit of the current year is distributable as remuneration to directors and supervisors. However, the company's accumulated losses shall have been covered. The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees' compensation in the form of shares or in cash; and in addition to a report of such distribution is submitted to the shareholders' meeting. Information on the Board of Directors' resolution regarding the employees' compensation and remuneration to directors and supervisors can be obtained from the "Market Observation Post System" on the website of the TWSE.

The Company incurred net loss for the year ended December 31, 2018, so the Company did not need to estimate employees' compensation and remuneration to directors and supervisors.

The Company incurred net loss for the year ended December 31, 2017, so the Company did not need to estimate employees' compensation and remuneration to directors and supervisors.

(15) Non-operating income and expenses

(a) Other income

	For the years ended December 31,
	2018	2017
Interest income	(Note)	\$8,258
Bank savings	\$1,987	(Note)
Financial assets at amortized cost	2,704	(Note)
Other interest income
Gain on reversal of bad debts	(Note)	98
Dividend income	522	417
Others	61	2,955
Total	\$5,279	\$11,728

Note: The Group adopted IFRS 9 since January 1, 2018. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 9.

(b) Other gains and losses

	For the years ended
	December 31,
	2018	2017
Losses on disposal of property, plant and equipment	\$(86)	\$-
Losses on disposal of investment property	(5,070)
Foreign exchange losses, net	(564)	(1, 287)
Gains (losses) on financial assets at fair value through
profit or loss (Note)	(1,341)	1,106
Impairment losses		(3,100)
Others	(12)
Total	\$(7,073)	$$$ (3,288)

Note: Balance in the year of 2018 was arising from financial assets mandatorily measured at fair value through profit or loss, and balance in year of 2017 was arising from held for trading investment.

(c) Finance costs

	For the years ended
	December 31.
	2018	2017
Interest expenses

(16) Components of other comprehensive income

Components of other comprehensive income from January 1 to December 31, 2018 is as below:

				Income tax relating to
	Arising during the period	Reclassification adjustments during the period	Other comprehensive income(loss), before tax	components of other comprehensive income	Other comprehensive income(loss), net of tax
To be reclassified to profit or loss in subsequent periods:
Exchange differences resulting from translating the financial statements of foreign operations	\$(59)	\$-	\$(59)	\$12	\$(47)

$(17)$ Income tax

Based on the amendments to the Income Tax Act announced on February 7, 2018, the Company's applicable corporate income tax rate for the year ended 31 December 2018 has changed from 17% to 20%. The corporate income surtax on undistributed retained earnings has changed from 10% to 5%.

The major components of income tax expense (income) are as follows:

Income tax expense (income) recognized in profit or loss

	For the years ended
	December 31,
	2018	2017
Current income tax expense:
Current income tax charge	\$42
Land value increment tax paid in current period	\$840
Deferred tax expense (income):
Deferred tax expense (income) relating to origination and
reversal of temporary differences	(3, 406)	12 1
Deferred tax expense (income) relating to changes in tax
rate or the imposition of new taxes	5
Total income tax expense (income)	\$(2,519)

Income tax relating to components of other comprehensive income

$\hat{\mathcal{A}}$

	For the years ended December 31,
	2018	2017
Deferred tax expense (income):
Exchange differences resulting from translating the
financial statements of foreign operations	\$(12)	\$-
Income tax relating to components of other comprehensive
mcome	\$0.12	S-

Reconciliation between tax expense and the product of accounting profit multiplied by applicable tax rates is as follows:

	For the years ended
		December 31,
	2018	2017
Accounting profit (loss) before tax from continuing
operations	\$(71,334)	\$(6,860)
Tax at the domestic rates applicable to profits in the	\$(14,350)	\$(1,166)
country concerned
Tax effect of revenues exempt from taxation	(954)	(322)
Tax effect of deferred tax assets/liabilities	11,940	1,500
Adjustments in respect of current income tax of prior periods	5
Land value increment tax paid in the current period	840
Total income tax expense (income) recognized in profit or
loss	\$(2,519)	\$12

Deferred tax assets (liabilities) relate to the following:

For the year ended December 31, 2018

	Beginning balance	Recognized in profit or loss	Recognized in other comprehensive income	Ending balance
Temporary differences
Provision for land value
increment tax (Note)	\$(145,900)	$\mathsf{S}$ -	$S-$	\$(145,900)
Fair value adjustment of
financial assets at fair value	(531)	174		(357)
Unrealized foreign exchange
gains	219	(760)		(541)
Unrealized foreign exchange
losses		146		146
Impairment on investment
property	287	51		338
Investments accounted for
using the equity method		3,790		3,790
Translation of the financial
statements of foreign
operation			12	12
Deferred tax income		\$3,401	\$12
Net deferred tax assets/(liabilities)	\$(145,925)			\$3,388
Reflected in balance sheet as follows:
Deferred tax assets	\$506			\$4,286
Deferred tax liabilities	\$(146, 431)			\$(898)
Liabilities related to non-current assets classified as held for
sale	$\mathsf{s}$ -			\$(145,900)

Note: Provision of land value increment tax amounted \$145,900 thousand is transferred to liabilities related to non-current assets classified as held for sale.

$\bar{z}$

For the year ended 31 December 2017

			Recognized in
			other
	Beginning		Recognized in comprehensive	Ending
	balance	profit or loss	income	balance
Temporary differences
Provision for land value
increment tax (Note)	\$(145,900)	$S-$	\$-	\$(145,900)
Fair value adjustment of
financial assets at fair value	(343)	(188)		(531)
Unrealized foreign exchange
gains (losses)	330	(111)		219
Impairment on investment
property		287		287
Deferred tax income/ (expense)		\$(12)	\$-
Net deferred tax assets/(liabilities) ${(145,913)}$				\$(145,925)
Reflected in balance sheet as
follows:
Deferred tax assets	\$330			\$506
Deferred tax liabilities	\$(146,243)			\$(146,431)

The following table contains information of the unused tax loss carry-forward of the Company:

		Unused tax losses as of
	Tax losses for the
Year	period	Dec 31, 2018	Dec 31, 2017	Expiration year
2014	\$6,576,975	\$6,576,975	\$6,576,975	2024
2015	80,944,019	80,944,019	80,944,019	2025
2016	4,395,671	4,395,671	4,395,671	2026
2017	8,403,800	8,403,800	8,403,800	2027
2018	59,178,700	59,178,700		2028
		\$159,499,165	\$100,320,465

Unrecognized deferred tax assets

As of December 31, 2018 and 2017, deferred tax assets that have not been recognized as they may not be used to offset taxable profits amounted to NT\$32,850 thousand and NT\$17,773 thousand, respectively.

The assessment of income tax returns

As of December 31, 2018, the income tax return of the Company is assessed and approved up to 2016.

(18) Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year.

	For the years ended December 31,
	2018	2017
Basic earnings per share:
Net loss of current period (in thousand NT\$)	\$(68,815)	\$(6,872)
Weighted average number of ordinary shares outstanding
for basic earnings per share (in thousands)	92,000	92,000
Basic earnings per share (NT\$)	\$(0.75)	\$(0.07)

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of the financial statements.

7. Related party transactions

Information of the related parties that had transactions with the Group during the financial reporting period is as follows:

Name and nature of relationship of the related parties

Name of the related parties	Nature of relationship of the related parties
Roo Hsing Co., Ltd.	Parent company and ultimate controlling entity
Mr. Chen, Shih-Hsiu	President of the Company
Mr. Sun, Yang	Director of the Company
Mr. Chen, Chih-Ying	President of the Company (Note 1)
Mr. Huang, Chin-Tsai	Director of the Company (Note 2)

Note:

• 1. The president was discharged because a legal entity director of the company replaced its representative on March 6, 2018.
• 1. The former director resigned at March 6, 2018

Significant transactions with the related parties

• (1) Asset transactions
• (a) Assets sold to related parties are as below:

From January 1 to December 31, 2018

		Carrying value
		Profit or loss
Related parties name	Asset name	time	Sales price	of the sale
Mr. Chen, Chih-Ying Company vehicle		\$381	\$1,000	\$619

From January 1 to December 31, 2017

None of such transactions.

(b) Assets bought from related parties are as below:

		Total amount of the
Related parties name	Asset name	transaction	Unpaid amount
Roohsing Co., Ltd.	Office equipments	\$148

From January 1 to December 31, 2017

None of such transactions.

(2) Key management personnel compensation

For the years ended
December 31,
2018	2017
\$980	\$10,402
19	99
\$999	\$10,501

1. Assets pledged as security

None.

9. Commitments and contingencies

None.

1. Losses due to major disasters

None.

11. Significant subsequent events

On 8 January 2019, the Group signed a contract to sell investment properties located on 6F., No. 293, Sec. 2, Tiding Blvd., Neihu Dist., Taipei City at NT\$81,680 thousand to three unrelated person.

12. Others

(1) Categories of financial instruments

Financial assets

	As of December 31,
	2018	2017
Financial assets at fair value through profit or loss:
Held for trading	(Notel)	\$11,172
Mandatorily measured at Fair value through profit or loss	\$10,355	(Note 1)
Financial assets at amortized cost (Note 2)	1,138,111	(Notel)
Loans and receivables (Note 3)		(Note 1) 1,308,237
Total	\$1,148,466 \$1,319,409
Financial liabilities	As of December 31,
	2018	2017
Financial liabilities at amortized cost:
Notes payable	$S-$	\$535
Other payables	5,381	11,394
Total	\$5,381	\$11,929

$\sim$

$\sim$

Note:

• 1. The Group adopted IFRS 9 since January 1, 2018. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 9.
• 1. Including cash and cash equivalents (exclude cash on hand), financial assets measured at amortized cost, accounts receivable, net and other receivables.
• 1. Including cash and cash equivalents (exclude cash on hand), accounts receivable, net and other receivables.

(2) Financial risk management objectives and policies

The Group's principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activates. The Group identifies measures and manages the aforementioned risks based on the Group's policy and risk appetite.

The Group has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant transactions, due approval process by the Board of Directors must be carried out based on related protocols and internal control procedures. The Group complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of the changes in market prices. Market prices comprise currency risk, interest rate risk and other price risk (such as equity instruments).

In practice, it is rarely the case that a single risk variable will change independently from other risk variable, there is usually interdependencies between risk variables. However, the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

Foreign currency risk

The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities (when revenue or expense are denominated in a different currency from the Group's functional currency).

The Group has certain foreign currency receivables to be denominated in the same foreign currency with certain foreign currency payables, therefore natural hedge is received. The Group also uses forward contracts to hedge the foreign currency risk on certain items denominated in foreign currencies. Hedge accounting is not applied as they did not qualify for hedge accounting criteria.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Group's profit is performed on significant monetary items denominated in foreign currencies as at the end of the reporting period. The Group's foreign currency risk is mainly related to the volatility in the exchange rates for USD and CNY. The information of the sensitivity analysis is as follows:

When NTD strengthens/weakens against USD by 1%, the profit or loss for the years ended December 31, 2018 and 2017 is increased/decreased by NT\$1,263 thousand and NT\$226 thousand, respectively.

When NTD strengthens/weakens against CNY by 1%, the profit or loss for the years ended December 31, 2018 and 2017 is increased/decreased by NT\$0 thousand and NT\$257 thousand, respectively.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's investments with floating rates categorized to financial assets at amortized cost.

The interest rate sensitivity analysis is performed on items exposed to interest rate risk as of the end of the reporting period, including investments with floating rates. At the reporting date, a change of 10 basis points of interest rate in a reporting period could cause the profit or loss for the years ended December 31, 2018 and 2017 to increase/decrease by NT\$29 thousand and NT\$114 thousand, respectively.

Equity price risk

The fair value of the Group's domestic listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group's listed securities are classified under held for trading financial assets. The Group manages the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Group's senior management on a regular basis. The Group's Board of Directors reviews and approves all equity investment decisions.

At the reporting date, a change of 1% in the price of the listed equity securities, mandatorily measured at fair value through profit or loss (2017: held for trading) could increase/decrease the Group's profit or loss for the year ended December 31, 2018 and 2017 by NT\$103 thousand and NT\$112 thousand, respectively.

(4) Credit risk management

Credit risk is the risk that a counterparty will not meet its obligations under a contract, leading to a financial loss. The Group is exposed to credit risk from operating activities (primarily for accounts receivables and notes receivables) and from its financing activities, including bank deposits and other financial instruments.

Credit risk is managed by each business unit subject to the Group's established policy, procedures and control relating to credit risk management. Credit limits are established for all counter parties based on their financial position, rating from credit rating agencies, historical experience, prevailing economic condition and the Group's internal rating criteria etc. Certain counter parties' credit risk will also be managed by taking credit enhancing procedures, such as requesting for prepayment or insurance.

As of December 31 2018 and 2017, amounts receivables from top ten customers represent 100% and 96% of the total accounts receivables of the Group, respectively. The credit concentration risk of other accounts receivables is insignificant.

Credit risk from balances with banks, fixed income securities and other financial instruments is managed by the Group's treasury in accordance with the Group's policy. The Group only transacts with counterparties approved by the internal control procedures, which are banks and financial institutions, companies and government entities with good credit rating. Consequently, there is no significant credit risk for these counter parties.

The Group adopted IFRS 9 to assess the expected credit losses since January 1, 2018. The loss allowance of accounts receivable is measured at lifetime expected credit losses.

Financial assets are written off when there is no realistic prospect of future recovery (the issuer or the debtor is in financial difficulties or bankruptcy).

When the credit risk on debt instrument investment has increased, the Group will dispose that investment in order to minimize the credit losses. When assessing the expected credit losses in accordance with IFRS 9, the evaluation of the forward-looking information (available without undue cost and effort) is mainly based on the macroeconomic information and the credit loss ratio is further adjusted if there is significant impact from forward-looking information.

(5) Liquidity risk management

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of cash and cash equivalents, highly liquid equity investments. The table below summarizes the maturity profile of the Group's financial liabilities based on the contractual undiscounted payments and earliest contractual maturity.

Non-derivative financial liabilities

	Less than 1 year	4 to 5 years 2 to 3 years		$>$ 5 years	Total
As of Dec 31, 2018
Other payables	\$5,381	$$-$	\$-	\$-	\$5,381
As of Dec 31, 2017
Notes payable	\$535	\$-	\$-	$S-$	\$535
Other payables	11,394	$\,$ $\,$	$\blacksquare$	$\blacksquare$	11,394

• (6) Fair values of financial instruments
• (a) The methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used by the Group to measure or disclose the fair values of financial assets and financial liabilities:

• I. The carrying amount of cash and cash equivalents, accounts receivables, accounts payable and other current liabilities approximate their fair value due to their short maturities.
• II. For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (including listed equity securities, beneficiary certificates, bonds and futures etc.) at the reporting date.
• (b) Fair value of financial instruments measured at amortized cost

The carrying amount of financial assets and liabilities measured at amortized cost approximate their fair value.

• (c) Fair value measurement hierarchy for financial instruments
• I. Definition of fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level $1 -$ Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date Level $2$ – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level $3$ – Unobservable inputs for the asset or liability

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization at the end of each reporting period.

II. Fair value measurement hierarchy of the Group's assets and liabilities

The Group does not have assets that are measured at fair value on a non-recurring basis. Fair value measurement hierarchy of the Group's assets and liabilities measured at fair value on a recurring basis is as follows:

As of December 31, 2018
	Level 1	Level 2	Level 3	Total
Financial assets at fair value:
Financial assets at fair value
through profit or loss
Stocks	\$10,355	\$-	$S-$	\$10,355
As of December 31, 2017
	Level 1	Level 2	Level 3	Total
Financial assets at fair value:
Financial assets at fair value
through profit or loss
Stocks	\$11,172	S-	\$-	\$11,172

There's no transfer between level 1 and level 2 for the years ended December 31, 2018 and 2017.

III. Fair value measurement hierarchy of the Group's assets and liabilities not measured at fair value but for which the fair value is disclosed

As of December 31, 2018
	Level 1	Level 2	Level 3	Total
Investment property (refer to
Note $6(8)$ )	\$-	$S-$	\$103,081	\$103,081
As of December 31, 2017
	Level 1	Level 2	Level 3	Total
Investment property (refer to
Note $6(8)$ )	$S-$	\$-	$$1,464,349$ $$1,464,349$

(7) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below:

	As of December 31, 2018
		Foreign
	Foreign currencies	exchange rate	NTD
Financial assets
Monetary items:
USD	\$4,120,132.73	30.650	\$126,282
		As of December 31, 2017
		Foreign
	Foreign currencies	exchange rate	NTD
Financial assets
Monetary items:
USD	\$761,130.40	29.750	\$22,644
CNY	5,652,547.36	4.547	25,702

The above information is disclosed based on the carrying amount of foreign currency (after conversion to functional currency).

(8) Capital management

The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

13. Other disclosure

• (1) Information at significant transactions
• (a) Financing provided to others: None.
• (b) Endorsement/Guarantee provided to others: None.
• (c) Securities held as of December 31, 2018: Please refer to Attachment 1.
• (d) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT\$300 million or 20 percent of the capital stock: None.
• (e) Acquisition of individual real estate with amount exceeding the lower of NT\$300 million or 20 percent of the capital stock: None.
• (f) Disposal of individual real estate with amount exceeding the lower of NT\$300 million or 20 percent of the capital stock: Please refer to Attachment 2.
• (g) Related party transactions for purchases and sales amounts exceeding the lower of NT\$100 million or 20 percent of the capital stock: None.
• (h) Receivables from related parties with amounts exceeding the lower of NT\$100 million or 20 percent of capital stock: None.
• (i) Derivative instrument transactions: None.
• (2) Information on investees: Please refer to Attachment 3.
• (3) Information on investments in Mainland China: None.

14. Segment information

For management purposes, the Group is organized into business units based on their products and services and has two reportable operating segments as follows:

• (1) Sales department: the department trades wool related products.
• (2) Lease department: the department leases real estate.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured based on accounting policies consistent with those in the consolidated financial statements. However, income taxes are managed on a group basis and are not allocated to operating segments.

(1) The following table presents segment profit and loss of the Group' operating segments:

For the years ended December 31, 2018

			Other operating	Adjustment and
	Sales department	Lease department	department	elimination		Consolidated
Revenue
External customer	\$248,541	\$15,481	\$-	\$-		\$264,022
Inter-segment		$\overline{\phantom{0}}$	$\blacksquare$	$\bullet$
Total revenue	\$248,541	\$15.481	\$-	\$-		\$264,022
Segment profit	\$3,531	\$4,263	\$-	\$(79,128)	(NOTE 1)	\$(71,334)

For the years ended December 31, 2017

			Other operating	Adjustment and
	Sales department	elimination Lease department department			Consolidated
Revenue
External customer	\$246,580	\$16,640	\$-	\$-		\$263,220
Inter-segment		$\overline{\phantom{0}}$	$\blacksquare$
Total revenue	\$246,580	\$16,640	\$-	\$-		\$263,220
Segment profit	\$7,120	\$5,747	\$-	\$(19,727)	(NOTE 2)	\$(6,860)

Note:

• Each department excluding non-operating income and expenses $$(1,882)$ thousand and $1.$ operating expenses excluding depreciation and amortization \$77,246 thousand.
• Each department excluding non-operating income and expenses \$8,304 thousand and 2. operating expenses excluding depreciation and amortization \$28,031 thousand.
• (2) Decision makers of the Group do not make decisions based on segment assets, so segment assets are not disclosed.
• (3) Geographical information

Revenue from external customers:

	For the years ended 31 December
	2018	2017
Taiwan	\$38,121	\$52,937
Japan	180,946	162,778
Korea	24,383	33,949
Malaysia	20,572	2,492
Others		11,064
Total	\$264,022	\$263,220

The revenue information above is based on the location of the customer.

Non-current assets:

As of 31 December
2018	2017
\$36,923	\$736,982

(4) Information about major customers

	For the years ended 31 December
	2018	2017
Customer A from sales department	\$136,967	\$129,051
Customer B from sales department	64,552	39.117

ATTACHMENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures):

			Note
			Fair value	\$9,815	540
In Thousands of New Taiwan Dollars		Percentage of	ownership (%)
	December 31, 2018		Carrying amount	\$9,815	540
			Shares	208,831	8,729
			Financial statement account	Financial assets at fair value through profit or loss - Current	Financial assets at fair value through profit or loss - Current
		Relationship	with the Company	None	None
			Type and name of securities	Chuwa Wool Industry Cathay Financial Holdings Co., Ltd. - Common Stock	Co., (Taiwan) Ltd. Cathay Financial Holdings Co., Ltd. - Preferred stock B
		Names of	companies held

79

English Translation of Consolidated Financial Statements Originally Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

ATTACHMENT 2: Disposal of individual real estate with amount exceeding the lower of NT\$300 million and 20 percent of the capital stock for the year ended December 31, 2018:

	commitments Other	None
In Thousands of New Taiwan Dollars	Price reference	and then negotiated by both Took valuation by Colliers International and Cushman & Wakefield as reference parties. Valuation is listed Ibelow:	NT\$1,669,694 by Colliers . Valuation of International	NT1,636,810 by Cushman 2. Valuation of & Wakefield
	Reason of disposal	Third Party Resource integration and better usage of asset
	Counterparty Relationship	Li Wan Asset Management Consultant Co., Ltd.
	from disposal Gain (Loss)	\$843,694
	collection proceeds Status of	\$171,889
	Transaction amount	\$1,718,889
	Carrying amount	\$574,937
	Date of original acquisition	September 1, 1965 March 28, 1984 March 1, 2015 July 2, 1992 June 8, 1995
	Transaction date	December 21, 2018
	Name of properties	located at Gongjian W. Rd., Qidu Dist., Keelung City
	Company	Chuwa Wool Industry Land and building Co., (Taiwan) Ltd.

Note 1: Valuation is listed in the "Price reference" column if valuation is required when assets are disposed.
Note 2: Transaction date refers to the contract date, payment date, closing date, resolution date, or earlier d

English Translation of Consolidated Financial Statements Originally Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

ATTACHMENT 3: Names, locations and related information of investee companies (Not including investment in Mainland China):

			Note	$$(417)$ Subsidiary		$(18, 534)$ Subsidiary
In Thousands of New Taiwan Dollars	Investment	income (loss)	recognized
	Net income	$(\text{loss})$ of	investee	\$(417)		(18, 534)
			Book value	\$99,583		12,222
	Investment as of December 31, 2018	Percentage of	ownership $(%)$	100%		100%
			Shares	$\frac{10,000,000}{\pi}$		100
		Beginning	balance			ı
	Original investment amount	Ending	balance	\$100,000		30,815
			Main business	Investment
			Location	Taiwan
			Investee Company	Chuwa Wool Industry HCW Investment Co., Ltd.		CW Investment One Limited British Virgin Islands Investment holding
			Investor Company		Co., (Taiwan) Ltd.