AUO — Audit Report / Information 2018

Nov 13, 2018

Stock Code ： 2409

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Financial Statements and

Independent Auditors’ Report

For the Years Ended December 31, 2018 and 2017

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

1

Representation Letter

The entities that are required to be included in the combined financial statements of AU Optronics Corp. as of and for the year ended December 31, 2018 under the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with the International Financial Reporting Standard No. 10, “Consolidated Financial Statements” endorsed by the Financial Supervisory Commission. In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, AU Optronics Corp. and its subsidiaries do not prepare a separate set of combined financial statements.

Hereby declare

Company Name: AU Optronics Corp. Chairman: Shuang-Lang (Paul) Peng Date: January 28, 2019

2

Independent Auditors’ Report

To the Board of Directors of AU Optronics Corp.:

Opinion

We have audited the consolidated financial statements of AU Optronics Corp. and its subsidiaries (“the Company”), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, the consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated statements of cash flows for the years ended December 31, 2018 and 2017, and notes to the consolidated financial statements including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for each of the years then ended, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRS”), International Accounting Standards (“IAS”), Interpretations developed by the International Financial Reporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Impairment of long-term non-financial assets (including goodwill)

Refer to Note 4(17) “Impairment – non-financial assets”, Note 5(2) and Note 5(3) “Critical accounting judgments and key sources of estimation and assumption uncertainty”, Note 6(13) “Property, plant and equipment”, and Note 6(15) “Intangible assets” to the consolidated financial statements.

Description of key audit matter:

The Company operates in an industry with high investment costs, has goodwill through the acquisition of subsidiaries, and may experience volatility in response to changes in the external market; hence, it is important to assess the impairment of its long-term non-financial assets (including goodwill). The impairment assessment includes identifying cash-generating units, determining a valuation model, determining significant assumptions, and computing recoverable amounts. With the complexity of the impairment assessment process and the involvement of significant management judgment regarding assumptions used, this is one of the key areas our audit focused on.

3

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures included understanding and testing the Company’s controls surrounding the impairment assessment and testing process; assessing whether there are impairment indications for the identified cash-generating units of the Company and its related assets; understanding and assessing the appropriateness of the valuation model used by the management in the impairment assessment and the significant assumptions used to determine related assets’ future cash flows projection, useful lives, and weighted-average cost of capital; retrospectively reviewing the accuracy of assumptions used in prior-period estimates and performing a sensitivity analysis of key assumptions and results; in addition to the above audit procedures, appointing specialists to evaluate the appropriateness of the weighted-average cost of capital used and related assumptions; performing an inquiry of the management and identifying any event after the balance sheet date if able to affect the results of the impairment assessment; and assessing the adequacy of the Company’s disclosures of its policy on impairment of noncurrent non-financial assets and other related disclosures.

Recognition of deferred tax assets

Refer to Note 4(23) “Income taxes”, Note 5(5) “Critical accounting judgments and key sources of estimation and assumption uncertainty”, and Note 6(31) “Income taxes” to the consolidated financial statements.

Description of key audit matter:

The recognition of deferred tax assets for the related unused tax losses, unused tax credits, and deductible temporary differences arising from operating entities located in other areas is based on management estimates of its future available taxable profits and the probability that the related deferred tax assets will be realized. This is one of the key areas our audit focused on.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures included understanding and testing the controls surrounding the Company’s assessment process for recognition of deferred tax assets; understanding the Company’s significant operating entities for which deferred tax assets are recognized and assessing the management estimates for assumptions used in the future cash flow projection and future taxable profits calculation; retrospectively reviewing the accuracy of assumptions used in prior-period estimates of future cash flow projection and assessing whether there are any other matters that will affect the recognition of deferred tax assets; and assessing the adequacy of the Company’s disclosures regarding its deferred tax asset recognition policy and other related disclosures.

Revenue recognition

Refer to Note 4(19) “Revenue from contracts with customers (policy applicable from January 1, 2018)”, Note 4(20) “Revenue recognition”, Note 6(24) “Revenue from contracts with customers”, and Note 6(25) “Revenue” to the consolidated financial statements.

Description of key audit matter:

Revenue is recognized when the control over a product has been transferred to the customer as specified in each individual contract with customers. The Company recognizes revenue depending on the various sales terms in each individual contract with customers to ensure the performance obligation has been satisfied by transferring control over a product to a customer. In addition, the Company operates in an industry in which sales revenue is easily influenced by various external factors such as supply and demand of the market, and this may impact the recognition of revenue. Consequently, this is one of the key areas our audit focused on.

4

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures included understanding and testing the Company’s controls surrounding revenue recognition; assessing whether appropriate revenue recognition policies are applied through comparison with accounting standards and understanding the Company’s main revenue types, its related sales agreements, and sales terms; on a sample basis, inspecting contracts with customers or customers’ orders and assessing whether the accounting treatment of the related contracts (including sales terms) is applied appropriately; performing a test of details of sales revenue and understanding the rationale for any identified significant sales fluctuations and any significant reversals of revenue through sales discounts and sales returns which incurred within a certain period before or after the balance sheet date; and assessing the adequacy of the Company’s disclosures of its revenue recognition policy and other related disclosures.

Other Matters

AU Optronics Corp. has additionally prepared its parent-company-only financial statements as of and for the years ended December 31, 2018 and 2017, on which we have issued an unmodified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRS, IAS, IFRIC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

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

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

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

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

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

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

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

5

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

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

3. Obtained sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Company 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 communicated 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 identified during our audit.

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

The engagement partners on the audit resulting in this independent auditors’ report are Wei, Shing-Hai and Lu, Chien-Hui.

KPMG Hsinchu, Taiwan (Republic of China) January 28, 2019

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance, and cash flows in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRS, IAS, IFRIC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

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

6

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars)

December 31, 2018 2017 Assets Amount % Amount % Current assets: 1100 Cash and cash equivalents (Note 6(1)) $ 69,163,296 17 105,020,616 24 1110 Financial assets at fair value through profit or loss－current (Note 6(2)) 1,709,531 - 70,366 - 1170 Notes and accounts receivable, net (Note 6(6)) 44,647,981 11 38,738,211 9 1180 Accounts receivable from related parties, net (Notes 6(6)&7) 2,754,253 1 1,853,062 - 1210 Other receivables from related parties (Note 7) 12,945 - 54,093 - 1220 Current tax assets 69,156 - 27,431 - 130X Inventories (Note 6(7)) 26,309,104 6 24,854,323 6 1476 Other current financial assets (Notes 6(6)&8) 1,459,763 - 518,329 - 1460 Noncurrent assets held for sale (Note 6(8)) - - 2,407,980 1 1479 Other current assets (Notes 6(9)&(16)) 2,941,598 1 6,631,130 1 149,067,627 36 180,175,541 41 Noncurrent assets: 1517 Financial assets at fair value through other comprehensive income－noncurrent (Note 6(3)) 6,979,925 2 - - 1523 Available-for-sale financial assets－noncurrent (Note 6(4)) - - 4,170,319 1 1543 Financial assets carried at cost－noncurrent (Note 6(5)) - - 177,815 - 1550 Investments in equity-accounted investees (Note 6(9)) 6,285,865 2 5,597,287 1 1600 Property, plant and equipment (Notes 6(13),7&8) 221,586,475 54 224,933,089 51 1760 Investment property (Notes 6(14), (20)&8) 730,306 - 717,823 - 1780 Intangible assets (Note 6(15)) 13,377,263 3 13,170,892 3 1840 Deferred tax assets (Note 6(31)) 6,632,668 2 7,069,014 2 1900 Other noncurrent assets (Notes 6(9), (16)&8) 5,171,646 1 5,439,504 1 260,764,148 64 261,275,743 59 Total assets $ 409,831,775 100 441,451,284 100 December 31, 2018 2017 Liabilities and Equity Amount % Amount % Current liabilities: 2100 Short-term borrowings (Note 6(17)) $ 546,472 - 3,424,376 1 2120 Financial liabilities at fair value through profit or loss－current (Note 6(2)) 22,115 - 106,597 - 2170 Notes and accounts payable 50,459,587 12 46,888,691 10 2180 Notes and accounts payable to related parties (Note 7) 8,161,186 2 7,664,731 2 2213 Equipment and construction payable (Note 7) 11,231,333 3 12,131,121 3 2220 Other payables to related parties (Note 7) 27,998 - 21,161 - 2230 Current tax liabilities 3,094,253 1 1,656,734 - 2250 Provisions－current (Note 6(19)) 1,507,564 - 819,232 - 2399 Other current liabilities 24,291,532 6 26,368,732 6 2322 Current installments of long-term borrowings (Notes 6(18)&8) 29,595,931 7 8,155,234 2 128,937,971 31 107,236,609 24 Noncurrent liabilities: 2540 Long-term borrowings, excluding current installments (Notes 6(18)&8) 56,709,387 14 102,452,776 24 2550 Provisions－noncurrent (Note 6(19)) 1,030,485 - 1,066,731 - 2570 Deferred tax liabilities (Note 6(31)) 3,845,593 1 3,519,642 1 2600 Other noncurrent liabilities (Note 6(21)) 2,029,651 1 1,930,411 - 63,615,116 16 108,969,560 25 Total liabilities 192,553,087 47 216,206,169 49 Equity:(Note 6(22)) Equity attributable to shareholders of AU Optronics Corp.: 3100 Common stock 96,242,451 23 96,242,451 22 3200 Capital surplus 60,622,043 15 60,540,326 14 3300 Retained earnings 46,845,991 11 51,115,529 11 3400 Other components of equity (847,770 ) - 256,062 - 202,862,715 49 208,154,368 47 Non-controlling interests: 36XX Non-controlling interests 14,415,973 4 17,090,747 4 Total equity 217,278,688 53 225,245,115 51 Total Liabilities and Equity $ 409,831,775 100 441,451,284 100	December 31,	December 31,
	2018	2017
		Amount % 3,424,376 1 106,597 - 46,888,691 10 7,664,731 2 12,131,121 3 21,161 - 1,656,734 - 819,232 - 26,368,732 6 8,155,234 2 107,236,609 24 102,452,776 24 1,066,731 - 3,519,642 1 1,930,411 - 108,969,560 25 216,206,169 49 96,242,451 22 60,540,326 14 51,115,529 11 256,062 - 208,154,368 47 17,090,747 4 225,245,115 51 441,451,284 100

See accompanying notes to the consolidated financial statements

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AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars, except for earnings per share)

4110 Revenue $ 4190 Less: sales return and discount Net revenue(Notes 6(24),(25)&7) 5000 Cost of sales(Notes 6(7),(20),(26),(27)&7) Gross profit Operating expenses:(Notes 6(10),(20),(23),(26),(27)&7) 6100 Selling and distribution expenses 6200 General and administrative expenses 6300 Research and development expenses Total operating expenses Profit from operations Non-operating income and expenses: 7010 Other income (Notes 6(28)&7) 7020 Other gains and losses (Notes 6(8),(10),(12),(13),(29)&7) 7050 Finance costs (Notes 6(13)&(30)) 7060 Share of profit of equity-accounted investees (Note 6(9)) Total non-operating income and expenses 7900 Profit before income tax 7950 Less: income tax expense(Note 6(31)) 8200 Profit for the year 8300 Other comprehensive income:(Notes 6(9),(21),(22)&(31)) 8310 Items that will never be reclassified to profit or loss 8311 Remeasurement of defined benefit obligations 8316 Unrealized loss on equity investments at fair value through other comprehensive income 8320 Equity-accounted investees – share of other comprehensive income 8349 Related tax 8360 Items that are or may be reclassified subsequently to profit or loss 8361 Foreign operations – foreign currency translation differences 8362 Net change in fair value of available-for-sale financial assets 8363 Effective portion of changes in fair value of cash flow hedges 8370 Equity-accounted investees – share of other comprehensive loss 8399 Related tax 8300 Other comprehensive income (loss), net of tax 8500 Total comprehensive income for the year $ Profit (loss) attributable to: 8610 Shareholders of AU Optronics Corp. $ 8620 Non-controlling interests $ Total comprehensive income (loss) attributable to: 8710 Shareholders of AU Optronics Corp. $ 8720 Non-controlling interests $ Earnings per share(NT$, Note 6(32)) 9750 Basic earnings per share $ 9850 Diluted earnings per share $	2018	% 101 1 100 91 9 1 3 3 7 2 2 - (1) - 1 3 1 2 - - - - - - - - - - - - 2 3 (1 ) 2 3 (1 ) 2	2017	% 101 1 100 82 18 1 2 3 6 12 1 - (1) - - 12 3 9 - - - - - (1) - - - - (1 ) (1 ) 8 10 (1 ) 9 9 (1 ) 8
	Amount 309,798,066 2,163,677 307,634,389 279,494,885 28,139,504 3,946,509 7,978,267 9,546,863 21,471,639 6,667,865 5,412,125 1,488,052 (2,663,605) 311,714 4,548,286 11,216,151 3,256,256 7,959,895 (56,956) (756,287) 4,239 38,908 (770,096 ) (785,772) - - (19,716) 191,809 (613,679 ) (1,383,775 ) 6,576,120 10,160,598 (2,200,703 ) 7,959,895 9,085,260 (2,509,140 ) 6,576,120 1.06 1.04		Amount 343,461,163 2,432,896 341,028,267 279,986,522 61,041,745 3,888,969 8,158,940 9,854,712 21,902,621 39,139,124 3,829,897 (976,560) (2,867,861) 239,006 224,482 39,363,606 9,105,118 30,258,488 (98,091) - 243 16,675 (81,173 ) (2,255,410) 1,146,422 (21,992) (62,327) 314,297 (879,010 ) (960,183 ) 29,298,305 32,359,417 (2,100,929 ) 30,258,488 31,754,733 (2,456,428 ) 29,298,305 3.36 3.24

See accompanying notes to the consolidated financial statements

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AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars)

Balance at January 1, 2017 Appropriation of earnings Legal reserve Cash dividends distributed to shareholders Profit (loss) for the year Other comprehensive income (loss), net of tax Total comprehensive income for the year Adjustments to capital surplus and retained earnings for changes in investees’ equity Differences between consideration and carrying amount arising from disposal of interest in subsidiary Changes in non-controlling interests Balance at December 31, 2017 Adjustments on initial application of new standards Adjusted balance at January 1, 2018 Appropriation of earnings Legal reserve Cash dividends distributed to shareholders Profit (loss) for the year Other comprehensive income (loss), net of tax Total comprehensive income for the year Deemed contributions from shareholders Adjustments for changes in investees’ equity Group reorganization Disposal of equity investments at fair value through other comprehensive income Changes in non-controlling interests Balance at December 31, 2018				Equity Attributable to	Shareholders o	**f AU Optronics Corp. **	**f AU Optronics Corp. **	**f AU Optronics Corp. **		Equity Attributable to Shareholders of AU Optronics Corp. 181,244,699 - (5,389,577 ) 32,359,417 (604,684 ) 31,754,733 26,317 518,196 - 208,154,368 (195 ) 208,154,173 - (14,436,368 ) 10,160,598 (1,075,338 ) 9,085,260 33,304 29,047 (2,701 ) - - 202,862,715	Non- controlling Interests 18,390,483 - - (2,100,929) (355,499 ) (2,456,428 ) (6,262 ) (518,196 ) 1,681,150 17,090,747 - 17,090,747 - - (2,200,703) (308,437 ) (2,509,140 ) - (20,996 ) 2,701 - (147,339 ) 14,415,973	Total Equity 199,635,182 - (5,389,577 ) 30,258,488 (960,183 ) 29,298,305 20,055 - 1,681,150 225,245,115 (195 ) 225,244,920 - (14,436,368 ) 7,959,895 (1,383,775 ) 6,576,120 33,304 8,051 - - (147,339 ) 217,278,688
	Capital Stock Common Stock $ 96,242,451 - - - - - - - - 96,242,451 - 96,242,451 - - - - - - - - - - $ 96,242,451	Capital Surplus 59,979,723 - - - - - 42,407 518,196 - 60,540,326 - 60,540,326 - - - - - 33,304 28,889 19,524 - - 60,622,043	R	etained Earnings Unappropriated Earnings Subtotal 21,585,361 24,243,153 (781,894 ) - (5,389,577 ) (5,389,577 ) 32,359,417 32,359,417 (81,374 ) (81,374 ) 32,278,043 32,278,043 (16,090 ) (16,090 ) - - - - 47,675,843 51,115,529 73,020 73,020 47,748,863 51,188,549 (3,235,942 ) - (14,436,368 ) (14,436,368 ) 10,160,598 10,160,598 (16,862 ) (16,862 ) 10,143,736 10,143,736 - - 158 158 - - (50,084 ) (50,084 ) - - 40,170,363 46,845,991		Other Components of Equity			Subtotal 779,372 - - - (523,310 ) (523,310 ) - - - 256,062 (73,215 ) 182,847 - - - (1,058,476 ) (1,058,476 ) - - (22,225 ) 50,084 - (847,770 )
			Legal Reserve 2,657,792 781,894 - - - - - - - 3,439,686 - 3,439,686 3,235,942 - - - - - - - - - 6,675,628	Unappropriated **Earnings **	Cumulative Translation Differences 536,819 - - - (1,657,788 ) (1,657,788 ) - - - (1,120,969) - (1,120,969 ) - - - (306,716 ) (306,716 ) - - (22,225 ) - - (1,449,910 )	Unrealized Gains (Losses) on Financial Assets at Fair Value through Other Comprehensive Income	Unrealized Gains (Losses) on Available- for-sale Financial Assets 224,299 - - - 1,152,732 1,152,732 - - - 1,377,031 (1,377,031 ) - - - - - - - - - - - -	Unrealized Gains (Losses) on Cash Flow Hedges 18,254 - - - (18,254 ) (18,254 ) - - - - - - - - - - - - - - - - -
				21,585,361 (781,894 ) (5,389,577 ) 32,359,417 (81,374 ) 32,278,043 (16,090 ) - - 47,675,843 73,020 47,748,863 (3,235,942 ) (14,436,368 ) 10,160,598 (16,862 ) 10,143,736 - 158 - (50,084 ) - 40,170,363		-
						-
						-
						- -
						-
						-
						-
						-
						- 1,303,816
						1,303,816
						-
						-
						- (751,760 )
						(751,760 )
						-
						-
						-
						50,084
						-
						602,140

See accompanying notes to the consolidated financial statements

9

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars)

2018 Cash flows from operating activities: Profit before income tax $ 11,216,151 Adjustments for: - depreciation 33,686,561 - amortization 540,969 - gains on financial instruments at fair value through profit or loss (406,507) - interest expense 2,663,605 - interest income (841,615) - dividend income (468,263) - share of profit of equity-accounted investees (311,714) - gains on disposals of property, plant and equipment, net (1,923,044) - gains on disposals of investments and financial assets, net - - impairment losses on assets 399,363 - unrealized foreign currency exchange losses 545,856 - others (132,537) Changes in operating assets and liabilities: - notes and accounts receivable (3,702,504) - receivables from related parties (826,893) - inventories (1,654,060) - other current assets 3,260,786 - notes and accounts payable 2,776,504 - payables to related parties 503,293 - net defined benefit liability (82,176) - provisions 636,100 - other current liabilities (3,679,040 ) Cash generated from operations 42,200,835 Cash received from interest income 815,890 Cash received from dividends 670,234 Cash paid for interest (2,481,821) Cash paid for income taxes (1,004,444 ) Net cash provided by operating activities 40,200,694

2017 39,363,606 35,801,230 628,606 (795,098) 2,867,861 (612,210) (248,514) (239,006) (330,814) (42,788) 1,046,668 776,962 (126,760) 4,643,577 659,522 2,607,580 1,572,360 (2,489,088) (1,164,514) (103,668) (911,810) 3,974,959 86,878,661 628,223 421,550 (2,551,944) (1,013,159 ) 84,363,331 (Continued)

See accompanying notes to the consolidated financial statements

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AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

For the years ended December 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars)

Cash flows from investing activities: Acquisitions of financial assets at fair value through profit or loss Disposals of financial assets at fair value through profit or loss Acquisitions of financial assets at fair value through other comprehensive income Proceeds from disposals of financial assets at fair value through other comprehensive income Acquisitions of financial assets carried at cost Proceeds from return of capital by financial assets carried at cost Acquisitions of available-for-sale financial assets Acquisitions of equity-accounted investees Proceeds from disposals of equity-accounted investees Proceeds from return of capital by equity-accounted investees Net cash outflow arising from acquisition of subsidiaries Net cash inflows resulting from disposals of subsidiaries Acquisitions of property, plant and equipment Proceeds from disposals of property, plant and equipment Increase in refundable deposits Increase in intangible assets Increase in other financial assets Net cash used in investing activities Cash flows from financing activities: Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Guarantee deposits refunded Cash dividends Net change of non-controlling interests and others Net cash used in financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at January 1 Cash and cash equivalents at December 31 $	2018 (2,509,528) 924,567 (3,452,722) 59,021 - - - (684,756) - 99,200 (448,488) 51,387 (34,770,263) 6,408,057 (169,666) - (4,635 ) (34,497,826 ) 2,526,082 (5,343,976) 4,271,566 (28,736,527) (13,402) (14,436,368) (114,035 ) (41,846,660 ) 286,472 (35,857,320) 105,020,616 69,163,296	2017 - - - - (14,233) 32,000 (187,201) (397,000) 56 - - 276,393 (43,881,660) 1,149,649 (404,233) (196,781) (44,469 ) (43,667,479 ) 10,548,495 (7,644,568) 34,872,615 (47,443,813) (34,654) (5,389,577) 1,681,150 (13,410,352 ) (2,456,132 ) 24,829,368 80,191,248 105,020,616

See accompanying notes to the consolidated financial statements

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the years ended December 31, 2018 and 2017 (Expressed in thousands of New Taiwan dollars, unless otherwise indicated)

1. Organization

AU Optronics Corp. (“AUO”) was founded on August 12, 1996 and is located in Hsinchu Science Park, the Republic of China (“ROC”). AUO’s main activities are the research, development, production and sale of thin film transistor liquid crystal displays (“TFT-LCDs”) and other flat panel displays used in a wide variety of applications. AUO also engages in the production and sale of solar modules and systems. AUO’s common shares have been publicly listed on the Taiwan Stock Exchange since September 2000, and its American Depositary Shares (“ADSs”) have been listed on the New York Stock Exchange since May 2002.

On September 1, 2001, October 1, 2006 and October 1, 2016, Unipac Optoelectronics Corp. (“Unipac”), Quanta Display Inc. (“QDI”) and Taiwan CFI Co., Ltd. (“CFI”) were merged with and into AUO, respectively. AUO is the surviving Company, whereas Unipac, QDI and CFI were dissolved.

The consolidated financial statements comprise AUO and its subsidiaries (collectively as “the Company”).

2. The Authorization of Financial Statements

These consolidated financial statements were approved and authorized for issue by the Board of Directors of AUO on January 28, 2019.

3. Application of New and Revised Standards, Amendments and Interpretations

• (1) Impact of adoption of new, revised or amended standards and interpretations endorsed by the Financial Supervisory Commission, ROC (“FSC”)

In preparing the accompanying consolidated financial statements, the Company has adopted the following International Financial Reporting Standards (“IFRS”), International Accounting Standards (“IAS”), Interpretations developed by the International Financial Reporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) issued by the International Accounting Standards Board (“IASB”) (collectively, “IFRSs”) and endorsed by the FSC with effective date from January 1, 2018.

New, Revised or Amended Standards and Interpretations	Effective Date Issued by IASB
Amendments to IFRS 2,Share-based Payments - Classification and Measurement of Share-based Payment Transactions Amendments to IFRS 4,Insurance Contracts - Applying IFRS 9, Financial Instruments with IFRS 4, Insurance Contracts	January 1, 2018 January 1, 2018

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

New, Revised or Amended Standards and Interpretations

Effective Date Issued by IASB

IFRS 9,Financial Instruments IFRS 15,Revenue from Contracts with Customers Amendments to IAS 7,Statement of Cash Flows - Disclosure Initiative Amendments to IAS 12,Income Taxes - Recognition of Deferred Tax Assets for Unrealized Losses Amendments to IAS 40,Transfers of Investment Property Annual Improvements to IFRSs 2014 – 2016 Cycle: Amendments to IFRS 12,Disclosure of Interests in Other Entities Amendments to IFRS 1,First-time Adoption of International Financial Reporting Standards_and amendments to IAS 28, _Investments in Associates and Joint Ventures IFRIC 22,Foreign Currency Transactions and Advance Consideration

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

Except for the items discussed below, the adoption of abovementioned standards and interpretations has not had a material impact on the Company’s accounting policies.

a. IFRS 9, Financial Instruments

IFRS 9 replaces the current standards on accounting for financial instruments, IAS 39, Financial Instruments: Recognition and Measurement . IFRS 9 contains three principal classification categories for financial assets: at amortized cost, at fair value through other comprehensive income (“FVTOCI”) and at fair value through profit or loss (“FVTPL”). Under IFRS 9, the classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. This Standard eliminates the classification of financial assets under IAS 39 which are held to maturity, loans and receivables and available for sale. In addition, IAS 39 has an exception for the measurement of investments in equity instruments (and its derivatives) that do not have a quoted market price in an active market and for which fair value cannot therefore be measured reliably; such financial instruments are measured at cost. IFRS 9 removes this exception and requires that all equity instruments (and its derivatives) should be measured at fair value.

See note 4(7) for an explanation of the Company’s accounting policies on how it classifies and measures financial assets and accounts for related gains and losses under IFRS 9. In addition, the adoption of IFRS 9 has not had a material impact on the Company’s accounting policies related to financial liabilities.

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Under IFRS 9, a new “expected credit loss” model is used to measure the impairment of financial assets, which replaces the “incurred loss” model in IAS 39. The new impairment model applies to financial assets at amortized cost and contract assets that result from transactions that are within the scope of IFRS 15, but not to investments in equity instruments.

See note 4(7) for an explanation of the Company’s accounting policies related to the impairment of financial assets under IFRS 9.

Upon the initial application of IFRS 9, the Company elected not to restate comparative information for prior reporting period with respect to the classification and measurement (including impairment) changes. The cumulative effect of initially applying this Standard was recognized in retained earnings and the components of other equity as at January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9, and therefore is not comparable to the information presented for 2018 under IFRS 9.

The following tables set out measurement categories, carrying amounts and related reconciliation for each class of the Company’s financial assets as at January 1, 2018 when retrospectively applying IFRS 9 (no change in measurement categories and carrying amounts for financial liabilities).

Financial assets Cash and cash equivalents Derivatives Investments in equity instruments Receivables, net (including related parties) Other financial assets, refundable deposits and restricted cash in banks Long-term receivables	IAS 39	IAS 39	IFRS 9	IFRS 9	Note
	Measurement category Carrying amount (in thousands) Loans and receivables $ 105,020,616 Held for trading 70,366 Available-for-sale 4,348,134 Loans and receivables 40,645,366 Loans and receivables 1,107,757 Loans and receivables 1,790,400	Carrying amount	Measurement category Carrying amount (in thousands) Amortized cost $ 105,020,616 Mandatorily at FVTPL 70,366 FVTOCI 4,348,134 Amortized cost 40,645,366 Amortized cost 1,107,757 Amortized cost 1,790,400	Carrying amount
					(i)

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Carrying amount as of December 31, 2017 under IAS 39 Reclassifi- cation Remeasure- ment Carrying amount as of January 1, 2018 under IFRS 9 (in thousands) Financial assets at FVTOCI $ - - - - Equity instruments - Reclassification from available-for- sale financial assets (including financial assets carried at cost) - 4,348,134 - 4,348,134 $ - 4,348,134 - 4,348,134 Carrying amount as of December 31, 2017 under IAS 39 Adjustments on initial application of new standards Carrying amount as of January 1, 2018 under IFRS 9 (in thousands) Investments in equity- accounted investees $ 5,597,287 (195 ) 5,597,092	Carrying amount as of December 31, 2017 under IAS 39	Carrying amount as of December 31, 2017 under IAS 39	Reclassifi- cation	Reclassifi- cation	Remeasure- ment	Carrying amount as of January 1, 2018 under IFRS 9	Adjustments to retained earnings on January 1, 2018	Adjustments to other equity on January 1, 2018	Note
			- 4,348,134				- 73,020 73,020 Adjustments to retained earnings on January 1, 2018	- (73,020 ) (73,020 ) Adjustments to other equity on January 1, 2018	(i) Note
	$		4,348,134
		$ 5,597,287		(in thousands) (195 ) 5,597,092			-	(195 )	(ii)

• (i) The equity investments that previously classified as available-for-sale financial assets (including financial assets measured at cost) under IAS 39 were classified as at FVTPL or designated as at FVTOCI under IFRS 9 considering the Company’s －

• strategy for holding these equity investments. The related other equity unrealized gains (losses) on available-for-sale financial assets of $1,404,832 thousand was －

• reclassified to other equity unrealized gains (losses) on financial assets at fair value through other comprehensive income. Additionally, since no impairment assessment is required for the aforementioned equity investments which are designated as at FVTOCI under IFRS 9, the impairment losses recognized and carried in retained earnings for these investments under IAS 39 were adjusted with －

• a decrease of $73,020 thousand in other equity unrealized gains (losses) on financial assets at fair value through other comprehensive income and an increase of $73,020 thousand in retained earnings on January 1, 2018 upon transition to IFRS 9.

• (ii) In connection with the retrospective adjustment made upon initial application of IFRS 9 by associates which account for using equity method, corresponding adjustments are made by the Company on January 1, 2018, which resulted in a decrease of investments in equity-accounted investees amounting to $195 thousand, －

• a decrease in other equity unrealized gains (losses) on financial assets at fair value through other comprehensive income of $27,996 thousand and an increase in －

• other equity unrealized gains (losses) on available-for-sale financial assets of $27,801 thousand.

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

b. IFRS 15, Revenue from Contracts with Customers

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, using a five-step model framework to determine the method, timing and amount of revenue recognized. This Standard replaces existing revenue recognition guidance, including IAS 18, Revenue , IAS 11, Construction Contracts , and the related interpretations. See note 4(19) for an explanation of the relevant accounting policies. The nature and impact of the change in accounting policies are detailed below:

• (i) Sales of goods

Under IFRS 15, revenue for the sale of goods is recognized when a customer obtains control of the goods. For contracts that permit a customer to return goods, revenue is recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

For contracts with volume discounts to customers, under IFRS 15, revenue is recognized on a net basis of contract price less estimated volume discounts, and only to the extent that it is highly probable that a significant reversal will not occur.

Under IFRS 15, a refund liability (presented under other current liabilities) is measured at the amount of consideration received (or receivable) for which an entity does not expect to be entitled. The refund liability shall be updated at the end of each reporting period for changes in circumstances.

• (ii) Rendering of services

Under IFRS 15, for rendering of services, the consideration of the entire contract is allocated on a basis of a relative stand-alone selling price of the services. The stand-alone selling price is determined based on the list price of service at which the Company sells that service separately.

The Company elected to apply this Standard retrospectively only to contracts that are not completed at the date of initial application, and elected not to restate the comparative information for prior reporting period. Upon the initial application of this Standard, there was no cumulative effect and no adjustment was made to retained earnings on January 1, 2018.

The following tables summarize the impacts of adopting IFRS 15 on the Company’s consolidated financial statements for the year ended December 31, 2018.

15

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(i) Related impacts to the consolidated balance sheets

December 31, 2018 Carrying amount under IAS 18 and related standards and interpretations Adjustments from changes in accounting policies Carrying amount under IFRS 15 (in thousands) Notes and accounts receivable, net $ 42,801,513 1,846,468 44,647,981 Accounts receivable from related parties, net 2,754,253 - 2,754,253 Impacts to total assets $ 1,846,468 Other current liabilities $ 22,445,064 1,846,468 24,291,532 Impacts to total liabilities $ 1,846,468 January 1, 2018 Carrying amount under IAS 18 and related standards and interpretations Adjustments from changes in accounting policies Carrying amount under IFRS 15 (in thousands) Notes and accounts receivable, net $ 38,738,211 1,721,331 40,459,542 Accounts receivable from related parties, net 1,853,062 13,218 1,866,280 Impacts to total assets $ 1,734,549 Other current liabilities $ 26,368,732 1,734,549 28,103,281 Impacts to total liabilities $ 1,734,549	December 31, 2018	December 31, 2018	December 31, 2018
			Carrying amount under IFRS 15
			44,647,981 2,754,253 24,291,532
		Adjustments from changes in accounting policies (in thousands) 1,721,331 13,218 1,734,549 1,734,549 1,734,549	Carrying amount under IFRS 15
			40,459,542 1,866,280 28,103,281

16

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(ii) Related impacts to the consolidated statement of cash flows

For the year ended December 31, 2018 Carrying amount under IAS 18 and related standards and interpretations Adjustments from changes in accounting policies Carrying amount under IFRS 15 (in thousands) Notes and accounts receivable $ (3,577,367) (125,137) (3,702,504) Receivables from related parties (840,111) 13,218 (826,893) Other current liabilities (3,790,959) 111,919 (3,679,040) Impacts to net cash provided by (used in) operating activities $ - Impacts to net increase (decrease) in cash and cash equivalents $ -	For the year ended December 31, 2018	For the year ended December 31, 2018	For the year ended December 31, 2018
		Adjustments from changes in accounting policies (in thousands) (125,137) 13,218 111,919 - -	Carrying amount under IFRS 15
			(3,702,504) (826,893) (3,679,040)

The above-mentioned reconciliation items represent volume discounts which the Company expects it may occur. Prior to the application of IFRS 15, the amount of the reconciliation item was recognized as a reduction of receivables. Under IFRS 15, such amount was recorded as a refund liability (presented under other current liabilities).

Notwithstanding the aforementioned difference, there are no material differences between the consolidated statement of comprehensive income prepared under IAS 18, IAS 11 and the related interpretations and the one prepared under IFRS 15 upon the initial application.

c. Amendments to IAS 7, Disclosure Initiative

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

The Company has disclosed a reconciliation between the opening and closing balances for liabilities with changes from financing activities in note 6(18) to meet the requirement as stated above.

(Continued)

17

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• (2) Impact of the IFRSs that have been endorsed by the FSC but not yet in effect

According to Ruling No. 1070324857 issued on July 17, 2018 by the FSC, commencing from 2019, the Company is required to adopt the IFRSs that have been endorsed by the FSC with effective date from January 1, 2019. The related new, revised or amended standards and interpretations are set out below:

New, Revised or Amended Standards and Interpretations	Effective Date **Issued by IASB **
Amendments to IFRS 9,Prepayment Features with Negative Compensation IFRS 16,Leases Amendments to IAS 19,Plan Amendment, Curtailment or Settlement Amendments to IAS 28,Long-term Interests in Associates and Joint Ventures IFRIC 23,Uncertainty over Income Tax Treatments Annual Improvements to IFRSs 2015 – 2017 Cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Except for the items discussed below, the Company believes that the initial adoption of abovementioned standards or interpretations would not have a material impact on its accounting policies.

IFRS 16, Leases

IFRS 16 sets out the accounting standards for leases that will replace IAS 17, Leases and the related interpretations.

Upon the initial application of IFRS 16, if the Company is a lessee, it is required to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with exception for leases of low-value assets and short-term leases which the Company may elect to apply the accounting method similar to the accounting for operating lease under IAS 17. Additionally, a depreciation expense charged on the right-of-use asset and an interest expense accrued on the lease liability, for which interest is computed by using effective interest method, are recognized separately on the statement of comprehensive income. On the statement of cash flows, cash payments for the principal amount of the lease liability will be classified within financing activities; cash payments for interest portion will be classified within operating activities.

When IFRS 16 becomes effective, as a lessee, the Company will apply this Standard using the modified retrospective approach with the cumulative effect of the initial application of this Standard recognized at the date of initial application. Comparative financial information will not be restated. As a lessor, the Company is not required to make any adjustments for leases except it is an intermediate lessor in a sub-lease.

(Continued)

18

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company has performed an assessment and identification over its current operating leases whether they are in scope of IFRS 16. The main impact to the Company may arise from its lease contracts of land and plant which are currently accounted as operating lease. Please refer to note 6(20) for the related disclosures. The Company has identified whether a contract that contains a lease meets the definition of a lease under this Standard, and if so, a right-of-use asset and a lease liability will be recognized. The Company estimated that the right-of-use asset and the lease liability would increase by $14,059,544 thousand and $12,689,526 thousand, respectively, at January 1, 2019 as a result of the application of IFRS 16.

• (3) The IFRSs issued by the IASB but not yet endorsed by the FSC

A summary of the new standards and amendments issued by the IASB but not yet endorsed by the FSC is set out below.

New, Revised or Amended Standards and Interpretations	Effective Date Issued by IASB
Amendments to IFRS 3,Business Combinations Amendments to IFRS 10 and IAS 28,Sale or Contribution of Assets between an Investor and its Associate or Joint Venture IFRS 17,Insurance Contracts Amendments to IAS 1 and IAS 8,Definition of Material	January 1, 2020 Subject to IASB’s announcement January 1, 2021 January 1, 2020

As of the date that the accompanying consolidated financial statements were issued, the Company continues in assessing the potential impact on its financial position and results of operations as a result of the application of abovementioned standards and interpretations. The potential impact will be disclosed when the assessment is complete.

4. Summary of Significant Accounting Policies

The significant accounting policies applied in the preparation of these consolidated financial statements are set out as below. The significant accounting policies have been applied consistently to all periods presented in these consolidated financial statements.

(1) Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations”) and the IFRSs endorsed by the FSC with effective dates (hereinafter referred to as “TIFRSs”).

(Continued)

19

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Basis of preparation

• a. Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the consolidated balance sheets:

• (i) Financial instruments at fair value through profit or loss (including derivative financial instruments) (note 6(2));

• (ii) Financial assets at fair value through other comprehensive income (note 6(3));

• (iii) Available-for-sale financial assets measured at fair value (note 6(4)); and

• (iv) Defined benefit asset (liability) is recognized as the fair value of the plan assets less the present value of the defined benefit obligation (note 6(21)).

• b. Functional and presentation currency

The functional currency of each individual consolidated entity is determined based on the primary economic environment in which the entity operates. The Company’s consolidated financial statements are presented in New Taiwan Dollar (“NTD”), which is also AUO’s functional currency. All financial information presented in NTD has been rounded to the nearest thousand, unless otherwise noted.

(3) Basis of consolidation

• a. Principle of preparation of the consolidated financial statements

The Company includes in its consolidated financial statements the results of operations of all controlled entities in which the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. All significant inter-company transactions, income and expenses are eliminated in the consolidated financial statements.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Total comprehensive income (loss) in a subsidiary is allocated to the shareholders of AUO and the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Subsidiaries’ financial statements are adjusted to align the accounting policies with those of the Company.

(Continued)

20

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Changes in the Company’s ownership interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Company’s investment and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between such adjustment and the fair value of the consideration paid or received is recognized directly in equity and attributed to shareholders of AUO.

Upon the loss of control, the Company derecognizes the carrying amounts of the assets and liabilities of the subsidiary and non-controlling interests. Any interest retained in the former subsidiary is remeasured at fair value when control is lost. The gain or loss is measured as the difference between: (i) the aggregate of the fair value of the consideration received and the fair value of any retained investment in the former subsidiary at the date when the Company loses control; and (ii) the aggregate of the carrying amount of the former subsidiary’s assets (including goodwill), liabilities and non-controlling interests at the date when the Company loses control. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Company had directly disposed of the related assets or liabilities.

• b. List of subsidiaries in the consolidated financial statements were as follows:

Name of Investor	Name of Subsidiary	Main Activities and Location Holding and trading company (Malaysia) Venture capital investment (Taiwan ROC) Venture capital investment (Taiwan ROC) Sales of content management system and hardware; leasing (Taiwan ROC) Planning, design and development of construction for environmental protection and related project management (Taiwan ROC) Holding company (Israel) Manufacturing, design and sales of TFT-LCD modules, TV set, backlight modules and related parts (Taiwan ROC) Manufacturing and sales of ingots and solar wafers (Taiwan ROC) Holding company (Taiwan ROC) Sales support of TFT-LCD panels (Netherlands)	Percentage of Ownership (%)	Percentage of Ownership (%)
			December 31, 2018 100.00 100.00 100.00 100.00 100.00 100.00(2) 41.05(3) 96.02(4) 100.00(5) 100.00(6)	December 31, 2017
AUO AUO AUO AUO AUO AUO AUO, Konly and Ronly AUO, Konly and Ronly AUO, Konly, Ronly and ACTW AUO and AULB	AU Optronics (L) Corp. (AULB) Konly Venture Corp. (Konly) Ronly Venture Corp. (Ronly) Space Money Inc. (SMI) U-Fresh Technology Inc. (UTI) ComQi Ltd. (CQIL) Darwin Precisions Corporation (DPTW) AUO Crystal Corp. (ACTW) Sanda Materials Corporation (SDMC) AU Optronics Europe B.V. (AUNL)			100.00 100.00 100.00 100.00 100.00(1) - 41.05(3) 96.03 99.9950 100.00

(Continued)

21

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location Renewable energy power generation (Taiwan ROC) Solar power generation (Taiwan ROC) Manufacturing and sales of solar wafers (Malaysia) Manufacturing and sales of ingots (Japan) Sales and sales support of TFT-LCD panels (United States) Sales support of TFT-LCD panels (Japan) Sales support of TFT-LCD panels (South Korea) Holding company and sales support of TFT-LCD panels (Singapore) Assembly of solar modules (Czech Republic) Sales support of TFT-LCD panels (PRC) Manufacturing and assembly of TFT- LCD modules (PRC) Manufacturing and assembly of TFT- LCD modules (PRC) Manufacturing and assembly of TFT- LCD modules (PRC) Repairing of TFT-LCD modules (Slovakia Republic) Manufacturing TFT-LCD panels based on low temperature polysilicon technology (Singapore) Manufacturing and sales of TFT-LCD panels (PRC) Research and development and IP related business (United States) Holding company (Malaysia) Manufacturing and sales of solar modules (PRC) Sales and sales support of solar-related products (United States) Sales support of solar-related products (Netherlands) Manufacturing and sales of liquid crystal products and related parts (PRC)	Percentage of Ownership (%)	Percentage of Ownership (%)
			December 31, 2018 -(7) -(8) 100.00 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00 100.00 100.00 100.00 100.00 100.00 100.00	December 31, 2017
Konly Konly ACTW SDMC AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB and DPTW AUSG AUSG AUSG AUXM	LiGen Power Corporation (LGPC) ChampionGen Power Corporation (CGPC) AUO Crystal (Malaysia) Sdn. Bhd. (ACMK) M.Setek Co., Ltd. (M.Setek) AU Optronics Corporation America (AUUS) AU Optronics Corporation Japan (AUJP) AU Optronics Korea Ltd. (AUKR) AU Optronics Singapore Pte. Ltd. (AUSG) AU Optronics (Czech) s.r.o. (AUCZ) AU Optronics (Shanghai) Co., Ltd. (AUSH) AU Optronics (Xiamen) Corp. (AUXM) AU Optronics (Suzhou) Corp., Ltd. (AUSZ) AU Optronics Manufacturing (Shanghai) Corp. (AUSJ) AU Optronics (Slovakia) s.r.o. (AUSK) AFPD Pte., Ltd. (AUST) AU Optronics (Kunshan) Co., Ltd. (AUKS) a.u. Vista Inc. (AUVI) BriView (L) Corp. (BVLB) AUO Energy (Tianjin) Corp. (AETJ)(7) AUO Green Energy America Corp. (AEUS) AUO Green Energy Europe B.V. (AENL) BriView (Xiamen) Corp. (BVXM)			100.00 100.00(1) 100.00 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00 100.00 100.00 100.00 100.00 100.00 100.00

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location Design, development and sales of software and hardware for health care industry (PRC) Planning, design and development of construction project for environmental protection and related project management (PRC) Design and sales of software and hardware integration system and equipment relating to intelligent manufacturing (PRC) Development and licensing of software relating to intelligent manufacturing, and related consulting services (PRC) Holding company (United Kingdom) Sales support of content management system (United Kingdom) Sales of content management system and hardware (United States) Research and development of content management system (Canada) Holding company (Malaysia) Holding company (BVI) Holding company (BVI) Holding company (Mauritius) Holding company (Samoa) Holding company (Samoa) Holding company (Mauritius) Holding company (Mauritius) Manufacturing of motorized treadmills (PRC) Manufacturing and sales of backlight modules and related parts (PRC) Manufacturing and sales of backlight modules and related parts (PRC)	Percentage of Ownership (%)	Percentage of Ownership (%)
			December 31, 2018 100.00 100.00(1) 100.00(1) 100.00(1) 100.00(2) 100.00(2) 100.00(2) 100.00(2) 100.00 100.00 100.00 100.00 100.00 100.00 -(7) 100.00 100.00 100.00 -(7)	December 31, 2017
AUSH AUSH AUSH AUSH CQIL CQHLD CQHLD CQHLD DPTW DPTW DPTW FHVI FHVI FHVI FHVI FRVI FFMI FTMI FTMI	AUO Care Information Tech. (Suzhou) Co., Ltd. (A-Care) U-Fresh Technology (Suzhou) Co., Ltd. (UFSZ) Edgetech Data Technologies (Suzhou) Corp., Ltd. (EDT) Mega Insight Smart Manufacturing (Suzhou) Corp., Ltd. (MIS) ComQi Holdings Ltd. (CQHLD) ComQi UK Ltd. (CQUK) ComQi Inc. (CQUS) ComQi Canada Inc. (CQCA) Darwin Precisions (L) Corp. (DPLB) Forhouse International Holding Ltd. (FHVI) Force International Holding Ltd. (FRVI) Fortech International Corp. (FTMI) Forward Optronics International Corp. (FWSA) Prime Forward International Ltd. (PMSA) Full Luck Precisions Co., Ltd. (FLMI) Forefront Corporation (FFMI) Forhouse Electronics (Suzhou) Co., Ltd. (FHWJ) Fortech Electronics (Suzhou) Co., Ltd. (FTWJ) Fortech Optronics (Xiamen) Co., Ltd. (FTXM)			100.00(1) - - - - - - - 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location Manufacturing and sales of precision plastic parts (PRC) Manufacturing and sales of backlight modules and related parts (PRC) Manufacturing and sales of precision metal parts (PRC) Holding company (Hong Kong) Manufacturing, assembly and sales of automotive parts (Slovakia Republic) Manufacturing and sales of backlight modules and related parts (PRC) Manufacturing and sales of backlight modules and related parts (PRC) Manufacturing and sales of backlight modules and related parts (PRC) Manufacturing and sales of liquid crystal products and related parts (PRC)	Percentage of Ownership (%)	Percentage of Ownership (%)
			December 31, 2018 100.00 100.00 -(7) 100.00 100.00 100.00 100.00 -(7) 100.00	December 31, 2017
FWSA and FTMI PMSA FLMI DPLB DPLB DPHK DPHK DPHK BVLB	Suzhou Forplax Optronics Co., Ltd. (FPWJ) Fortech Electronics (Kunshan) Co., Ltd. (FTKS) Full Luck (Wujiang) Precisions Co., Ltd. (FLWJ) Darwin Precisions (Hong Kong) Limited (DPHK) Darwin Precisions (Slovakia) s.r.o. (DPSK) Darwin Precisions (Suzhou) Corp. (DPSZ) Darwin Precisions (Xiamen) Corp. (DPXM) Darwin Precisions (Chengdu) Corp. (DPCD) BriView (Hefei) Co., Ltd. (BVHF)			100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

• Note 1: UTI was incorporated in January 2017. CGPC was incorporated in May 2017. A-Care was incorporated in September 2017. UFSZ was incorporated in February 2018. EDT and MIS were incorporated in August 2018.

• Note 2: In March 2018, the Company acquired 100% of the shareholdings of CQIL and its subsidiaries (hereinafter referred to as “ComQi”) and therefore, obtained control over ComQi. Please refer to note 6(10) for further details.

• Note 3: Although the Company did not own more than 50% of the DPTW’s ownership interests, it was considered to have de facto control over the main operating policies of DPTW. As a result, DPTW was accounted for as a subsidiary of the Company. Please refer to note 6(11) for further details.

• Note 4: As part of a business restructuring, Konly and Ronly disposed its shareholdings in ACTW to AUO, respectively, during December 2018. This was treated as an equity transaction as there was no change in control of ACTW by the Company.

• Note 5: As part of a business restructuring, AUO, Konly and Ronly disposed all of their shareholdings in SDMC to ACTW during the second quarter of 2018. This was treated as an equity transaction as there was no change in control of SDMC by the Company.

(Continued)

24

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 6: As part of a business restructuring, AULB disposed all of its shareholdings in AUNL to AUO during December 2018. This was treated as an equity transaction as there was no change in control of AUNL by the Company.

• Note 7: As part of a business restructuring, DPCD, FTXM, FLMI, FLWJ, AETJ and LGPC have been resolved by their respective boards of directors for dissolution. As of December 31, 2018, except AETJ is still in the process of liquidation, the other entities have been liquidated.

• Note 8: The Company disposed all of its shareholdings in CGPC to Star Shining Energy Corporation (“SSEC”), an associate of the Company, in September 2018. Please refer to note 6(12) for further details.

(4) Foreign currency

In preparing the financial statements of each individual consolidated entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date and the resulting exchange differences are included in profit or loss for the year. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date when the fair value was determined. The resulting exchange differences are included in profit or loss for the year except for those arising from the retranslation of nonmonetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items in foreign currencies that are measured at historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences arising from the effective portion of changes in the fair value of derivatives that are designated and qualified as cash flow hedges are recognized in other comprehensive income.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign operations are translated into NTD using the exchange rates at each reporting date. Income and expenses of foreign operations are translated at the average exchange rates for the period unless the exchange rates fluctuate significantly during the period; in that case, the exchange rates at the dates of the transactions are used. Foreign currency differences are recognized in other comprehensive income and accumulated in equity (attributed to shareholders of AUO and non-controlling interests as appropriate).

25

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• (5) Classification of current and non-current assets and liabilities

An asset is classified as current when:

• a. The asset expected to realize, or intends to sell or consume, in its normal operating cycle;

• b. The asset primarily held for the purpose of trading;

• c. The asset expected to realize within twelve months after the reporting date; or

• d. Cash and cash equivalent excluding the asset restricted to be exchanged or used to settle a liability for at least twelve months after the reporting date.

All other assets are classified as non-current.

A liability is classified as current when:

• a. The liability expected to settle in its normal operating cycle;

• b. The liability primarily held for the purpose of trading;

• c. The liability is due to be settled within twelve months after the reporting date; or

• d. The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments, do not affect its classification.

All other liabilities are classified as non-current.

• (6) Cash and cash equivalents

Cash comprises cash balances and demand deposits. Cash equivalents comprise short-term highly liquid investments that are readily convertible into known amount of cash and are subject to an insignificant risk of changes in their fair value. Time deposits with short-term maturity but not for investments and other purposes and are qualified with the aforementioned criteria are classified as cash equivalent.

26

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) Financial instruments

• a. Financial assets (policy applicable from January 1, 2018)

• (i) Classification of financial assets

The Company classifies financial assets into the following categories: financial assets at amortized cost, financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss. When, and only when, the Company changes its business model for managing financial assets it shall reclassify all affected financial assets.

• (a) Financial assets at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as measured at fair value through profit or loss:

• i. it is held within a business model whose objective is to hold financial assets to collect contractual cash flows; and

• ii. its contractual terms 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 initially recognized at fair value, plus any directly attributable transaction costs. Subsequently, these assets are measured at amortized cost using the effective interest method, less any impairment losses. Interest income, foreign exchange gains and losses, and recognition (reversal) of impairment losses, are recognized in profit or loss.

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

On initial recognition, the Company is able to make an irrevocable election to present subsequent changes in the fair value of investments in equity instruments that is not held for trading in other comprehensive income. This election is made on an instrument-by-instrument basis.

27 (Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Such financial assets are initially recognized at fair value, plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein are recognized in other － comprehensive income and accumulated in equity unrealized gains (losses) on financial assets at fair value through other comprehensive income, except for dividends deriving from equity investments which are recognized in profit or loss (unless the dividend clearly represents a recovery of part of the cost of the investment). When an investment is derecognized, the cumulative gain or loss in equity will not be reclassified to profit or loss, instead, is reclassified to retained earnings.

Dividends on investments in equity instruments are recognized on the date that the Company’s right to receive the dividends is established.

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

All financial assets not classified as at amortized cost or at fair value through other comprehensive income as described above are measured at fair value through profit or loss. This includes all derivative financial assets.

Such financial assets are initially recognized at fair value, and attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, they are measured at fair value and changes therein are recognized in profit or loss.

• (ii) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses on financial assets at amortized cost (including cash and cash equivalents, receivables, refundable deposits and other financial assets, etc.) and contract assets.

The expected credit loss is the weighted average of credit losses with the respective risks of a default occurring on the financial instrument as the weights.

The Company measures the loss allowance for a financial instrument at an amount equal to lifetime expected credit losses, except for the financial instrument that is determined to have low credit risk at the reporting date and the credit risk thereof has not increased significantly since initial recognition, which is measured at an amount equal to the 12-month expected credit losses. For trade receivables and contract assets, the Company measures their loss allowances at an amount equal to lifetime expected credit losses.

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

When determining whether the credit risk of a financial asset has increased significantly since initial recognition, the Company considers reasonable and supportable information that is relevant. This includes both qualitative and quantitative information and analysis, based on the Company’s historical experience and credit assessment as well as forward-looking information.

In the circumstance that a financial asset is past due or the borrower is unlikely to pay its credit obligations to the Company in full, the Company considers the credit risk on that financial asset has significantly increased, or further, to be in default.

At each reporting date, the Company assesses whether financial assets at amortized cost are credit-impaired. A financial asset is “credit-impaired” when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Loss allowances for financial assets are deducted from the gross carrying amount of the assets. The recognition or reversal of the loss allowance is recognized in profit or loss.

• (iii) De-recognition of financial assets

The Company derecognizes financial assets when the contractual rights to the cash flows from the asset expire, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets to another entity.

• b. Financial assets (policy applicable before January 1, 2018)

• (i) Classification of financial assets

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

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

The Company has certain financial assets to hedge its exposure to foreign exchange risk arising from operating and financing activities. When a financial asset is not effective as a hedge, the Company accounts for it as a financial asset at fair value through profit or loss.

(Continued)

29

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(b) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as available-for-sale or are not classified as receivables or financial assets at fair value through profit or loss. Available-for-sale financial assets are recognized initially at fair value, plus any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, dividend income and foreign currency differences related to monetary financial assets, are recognized in other comprehensive income and presented within equity in unrealized gains (losses) on available-for-sale financial assets. When an investment is derecognized, the cumulative gain or loss in equity is reclassified to profit or loss. A regular way, purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are carried at their cost less any impairment losses.

Cash dividends on equity instruments are recognized in profit or loss on the date that the Company’s right to receive dividends is established.

(c) Receivables

Receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Receivables comprise trade receivables and other receivables. Such assets are recognized initially at fair value, plus any directly attributable transaction costs. Subsequently, receivables are measured at amortized cost using the effective interest method, less any impairment. If the effect of discounting is immaterial, the short-term receivables are measured at the original amount.

(ii) Impairment of financial assets

Financial assets not measured at fair value through profit or loss are assessed at each reporting date for indicators of impairment. Financial assets are considered to be impaired if an objective evidence indicates that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of those assets have been negatively impacted.

(Continued)

30

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

When an available-for-sale equity security is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss. Such impairment losses are not reversed through profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income and accumulated in other components of equity.

For receivables, the Company first assesses whether objective evidence of impairment exists that are individually significant. If there is objective evidence that an impairment loss has occurred, the amount of impairment loss is assessed individually. For receivables other than those aforementioned, the Company groups those assets and collectively assesses them for impairment. An impairment loss for trade receivables is reflected in an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off from the allowance account. If any subsequent recovery of receivable previously written off can be related objectively to an event occurring after the impairment loss was recognized, it is credited against the allowance account and recognized in profit or loss.

For equity instruments without a quoted market price in an active market, the objective evidence of impairment includes the investees’ financial information, current operating result, future business plans and relevant industry and public market information. An impairment loss for this kind of equity instruments is reduced from the carrying amount and any impairment loss recognized is not reversed through profit or loss in subsequent periods.

Bad debt expenses and reversal of allowance for doubtful debts for trade receivables are recognized in general and administrative expenses while impairment losses and reversal of impairment for financial assets other than receivables are recognized in other gains and losses.

(iii) De-recognition of financial assets

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

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

(Continued)

31

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

c. Financial liabilities

• (i) Classification of financial liabilities

The Company classifies financial liabilities into the following categories: financial liabilities at fair value through profit or loss and other financial liabilities.

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

The Company designates financial liabilities as held for trading for the purpose of hedging exposure to foreign exchange risk arising from operating and financing activities. When a financial liability is not effective as a hedge the Company accounts for it as a financial liability at fair value through profit or loss.

The Company designates financial liabilities, other than the one mentioned above, as at fair value through profit or loss at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities in this category are subsequently measured at fair value and changes therein, which takes into account any interest expense, are recognized in profit or loss and presented under non-operating income and expenses.

(b) Other financial liabilities

Financial liabilities not classified as held for trading, or not designated as at fair value through profit or loss (including loans and borrowings, trade and other payables), are measured at fair value, plus any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method, except for insignificant recognition of interest expense from short-term borrowings and payables. Interest expense not capitalized as an asset cost is recognized in profit or loss and presented under non-operating income and expenses.

• (ii) De-recognition of financial liabilities

The Company derecognizes financial liabilities when the contractual obligation has been discharged, cancelled or expired. The difference between the carrying amount and the consideration paid or payable, including any non-cash assets transferred or liabilities assumed is recognized in profit or loss and presented under nonoperating income and expenses.

(Continued)

32

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

d. Offsetting of financial assets and liabilities

The Company presents financial assets and liabilities on a net basis in the consolidated balance sheet when the Company has the legally enforceable rights to offset, and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

(8) Inventories

The cost of inventories includes all necessary expenditures and charges for bringing the inventory to a stable, useable and marketable condition and location. The production overhead is allocated to finished goods and work in process based on the normal capacity of the production facilities. Subsequently, inventories are measured at the lower of cost and net realizable value. Cost is determined using the weighted-average method. Net realizable value is calculated based on the estimated selling price less all estimated costs of completion and the estimated costs necessary to make the sale.

(9) Noncurrent assets held for sale

Noncurrent assets are classified as held for sale when their carrying amounts are expected to be recovered primarily through sale rather than through continuing use. Such noncurrent assets must be available for immediate sale in their present condition and the sale is highly probable within one year. When classified as held for sale, the assets are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale and subsequent gains or losses on re-measurement are recognized in profit or loss. However, subsequent gains are not recognized in excess of the cumulative impairment loss that has been recognized.

When intangible assets and property, plant and equipment are classified as held for sale, they are no longer amortized or depreciated. In addition, once an equity-accounted investee is classified as held for sale, it is no longer equity accounted.

(10) Investments in associates

Associates are those entities in which the Company has the power to exercise significant influence, but not control or joint control, over their financial and operating policies.

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

(Continued)

33

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The difference between acquisition cost and fair value of associates’ identifiable assets and liabilities as of the acquisition date is accounted for as goodwill. Goodwill is included in the original investment cost of acquired associates and is not amortized. If the fair value of identified assets and liabilities is in excess of acquisition cost, the remaining excess over acquisition cost is recognized as a gain in profit or loss.

If an equity security is not acquired through cash, that is, by providing services or other assets, then the fair value of such security or the fair value of the services or assets surrendered, whichever is more objectively determinable, is the purchase price of the security. If an equity investment of associates is acquired by providing subsequent services and the cost is determined based on the fair value of such services, the Company defers and recognizes revenue using a reasonable amortization method over the future period when the service is rendered.

The consolidated financial statements include the Company’s share of the profit or loss and other comprehensive income of associates, after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases. When an associate incurs changes in its equity not derived from profit or loss and other comprehensive income, the Company recognizes all the equity changes in proportion to its ownership interest in the associate as capital surplus provided that the ownership interest in the associate remains unchanged.

The Company discontinues the use of the equity method from the date when the Company ceases to have significant influence over an associate, and then measures the retained interests at fair value at that date. The difference between the carrying amount of the investment at the date the equity method was discontinued and the fair value of the retained interests along with any proceeds from disposing of a part interest in the associate is recognized in profit or loss. Moreover, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that investment on the same basis as would be required if the associate had directly disposed of the related assets or liabilities. If the Company’s ownership interest in an associate is reduced, but the Company continues to apply the equity method, the Company shall reclassify to profit or loss the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest on the same basis as mentioned above.

If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Company continues to account for the investment using equity method and does not remeasure the interest previously held.

(Continued)

34

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

When the Company subscribes for additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the net assets of the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the capital surplus arising from investment accounted for under the equity method in associates is insufficient to offset with the said corresponding amount, the differences will be charged or credited to retained earnings. If the Company’s ownership interest is reduced due to circumstances as mentioned above, the proportionate amount of the gains or losses previously recognized in other comprehensive income relating to that associate or joint venture shall be reclassified to profit or loss on the same basis as would be required if the associate or joint venture had directly disposed of the related assets or liabilities.

At the end of each reporting period, if there is any indication of impairment, the entire carrying amount of the investment including goodwill is tested for impairment as a single asset, by comparing its recoverable amount with its carrying amount. An impairment loss recognized forms part of the carrying amount of the investment in associates. Accordingly, any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

Profits and losses resulting from the transactions between the Company and associates are recognized in the Company’s consolidated financial statements only to the extent of interests in the associate that are not related to the Company.

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

(11) Investments in joint ventures

Joint venture is a joint arrangement whereby the Company and other parties agreed to share the control of the arrangement, and have rights to the net assets of the arrangement. Unanimous consent from the parties sharing control is required when making decisions for the relevant activities of the arrangement. Investments in joint venture are accounted for in the Company’s consolidated financial statements under the equity method.

35

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(12) Investment property

Investment property is the property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost on initial recognition. Subsequent to initial recognition, investment properties are measured using the cost model. Depreciation is charged and recognized based on the depreciable amount. Depreciation methods, useful lives and residual values are in accordance with the policy of property, plant and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment property.

An investment property is reclassified to property, plant and equipment at its carrying amount when the use of the investment property changes.

(13) Property, plant and equipment

• a. Recognition and measurement

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

When part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item and the useful life or the depreciation method of the significant part is different from another significant part of that same item, it is accounted for as a separate item (significant component) of property, plant and equipment.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and is recognized in profit or loss.

• b. Subsequent costs

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. Ongoing repairs and maintenance expenses are recognized in profit or loss as incurred.

36

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

c. Depreciation

Excluding land, depreciation is provided over the estimated useful lives of the respective assets, considering significant components of an individual asset, on a straight-line basis less any residual value. If a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. The depreciation charge is recognized in profit or loss.

Leased assets are depreciated over their useful lives if it is reasonably certain that the Company will obtain ownership by the end of the lease term. Otherwise, leased assets are depreciated over the shorter of the lease term and their useful lives.

The estimated useful lives of the assets, except for land are as follows:

• (i) Buildings: 20~50 years

• (ii) Machinery and equipment: 3~10 years

• (iii) Other equipment: 3~6 years

Depreciation methods, useful lives, and residual values are reviewed at each annual reporting date and, if necessary, adjusted as appropriate. Any changes therein are accounted for as changes in accounting estimates.

• d. Reclassification to investment property

A property is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment purpose.

• (14) Long-term prepaid rent

Long-term prepaid rent is for the right to use of land (classified as other noncurrent assets), which is amortized over the shorter of economic useful life or the covenant period on a straight-line basis.

• (15) Leases

• a. Lessor

Lease income from an operating lease is recognized in profit or loss on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and recognized as an expense on a straight-line basis over the lease term.

(Continued)

37

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• b. Lessee

Payments made under operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease.

• (16) Intangible assets

• a. Goodwill

Goodwill is recognized when the purchase price exceeds the fair value of identifiable net assets acquired in a business combination. Goodwill is measured at cost less accumulated impairment losses.

Equity-method goodwill is included in the carrying amounts of the equity investments. The impairment losses for the goodwill within the equity-accounted investees are accounted for as deductions of carrying amounts of investments in equity-accounted investees.

• b. Research and development

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

Expenditure arising from development is capitalized as an intangible asset when the Company demonstrates all of the following:

• (i) the technical feasibility of completing the intangible asset so that it will be available for use or sale;

• (ii) its intention to complete the intangible asset and use or sell it;

• (iii) its ability to use or sell the intangible asset;

• (iv) the probability that the intangible asset will generate probable future economic benefits;

• (v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

• (vi) its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Development expenditure which fails to meet the criteria for recognition as an intangible asset is reflected in profit or loss when incurred. Capitalized development expenditure is measured at cost less accumulated amortization and any accumulated impairment losses.

(Continued)

38

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

c. Other intangible assets

Other intangible assets acquired are measured at cost less accumulated amortization and any accumulated impairment losses.

• d. Subsequent expenditure

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

e. Amortization

The depreciable amount of an intangible asset is the cost less its residual value. Other than goodwill and intangible assets with indefinite useful life, an intangible asset with a finite useful life is amortized over 3 to 20 years using the straight-line method from the date that the asset is made available for use. The amortization charge is recognized in profit or loss.

The residual value, amortization period, and amortization method are reviewed at least annually at each annual reporting date, and any changes therein are accounted for as changes in accounting estimates.

• (17) Impairment – non-financial assets

Other than inventories, deferred tax assets and noncurrent assets held for sale, the carrying amounts of the Company’s investment property measured at cost and other long-term nonfinancial assets (property, plant and equipment and other intangible assets with finite useful lives), are reviewed at the reporting date to determine whether there is any indication of impairment. When there is an indication of impairment exists for the aforementioned assets, the recoverable amount of the asset is estimated. If it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit (“CGU”) to which the asset has been allocated to.

In performing an impairment test for other long-term non-financial assets, the estimated recoverable amount is evaluated in terms of an asset or a CGU. Any excess of the carrying amount of the asset or its related CGU over its recoverable amount is recognized as an impairment loss. The recoverable amount of an asset or a CGU is the higher of its fair value less costs of disposal and its value in use.

(Continued)

39

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

If there is evidence that the accumulated impairment loss of an asset other than goodwill and intangible assets with indefinite useful lives in prior years no longer exists or has decreased, the amount previously recognized as an impairment loss is reversed, and the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount. The increased carrying amount shall not 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.

For goodwill and intangible assets with indefinite useful lives or that are not yet available for use, are required to be tested for impairment at least annually. Any excess of the carrying amount of the asset over its recoverable amount is recognized as an impairment loss.

For the purpose of impairment test, goodwill acquired in a business combination is allocated to CGUs that are expected to benefit from the synergies of the combination. If the recoverable amount of a CGU is less than its carrying amount, the difference is allocated first to reduce the carrying amount of any goodwill allocated to the unit, then the carrying amounts of the other assets in the unit on a pro rata basis. The impairment loss recognized on goodwill is not reversed in a subsequent period.

(18) Provisions

A provision is recognized when the Company has a present obligation arising from a past event, it is probable that the Company will be required to make an outflow of resources embodying economic benefits to settle the obligation, and the amount of the obligation can be estimated reliably. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as interest expense.

a. Warranties

A provision for warranties is recognized when the underlying products or services are sold. The provision is weighting factors based on historical experience of warranty claims rate and other possible outcomes against their associated probabilities.

b. Decommissioning obligation

The Company is subject to decommissioning obligations related to certain assets. Such decommissioning obligations are primarily attributable to clean-up costs, including deconstruction, transportation, and recover costs. The unwinding of the discount based on original discount rate is recognized in profit or loss as interest expense over the periods with corresponding increase in the carrying amounts of the accrued decommissioning costs. The carrying amount of the accruals at the end of the assets’ useful lives is the same as the estimated decommissioning costs.

(Continued)

40

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

c. Onerous contracts

A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract.

d. Loss contingencies

Provision for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recognized when it is probable the present obligation as a result of a past event will result in an outflow of resources and the amount can be reasonably estimated. Management periodically assesses the obligation of all litigation and claims and relative legal costs.

Provisions recognized are the best estimates of the expenditure for settling the present obligation at each reporting date.

• (19) Revenue from contracts with customers (policy applicable from January 1, 2018)

Revenue is measured based on the consideration that the Company expects to be entitled in the transfer of goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The following is a description of the Company’s major revenues:

a. Sales of goods

Revenue is recognized when the control over a product has been transferred to the customer. The transfer of control refers to the product has been delivered to and accepted by the customer without remaining performance obligations from the Company. Delivery occurs when the product has been shipped to the specified location and the risk of loss over the product has been transferred to the customer, as well as when the product has been accepted by the customer according to the terms of sales contract, or when the Company has objective evidence that all criteria for acceptance have been satisfied.

For certain contracts with volume discounts offer to customers, revenue is recognized on a net basis of contract price less estimated volume discounts, and only to the extent that it is highly probable that a significant reversal will not occur. The amount of volume discounts is estimated based on the expected value with reference to the historical experience, and is recorded as refund liability (presented under other current liabilities).

(Continued)

41

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Trade receivable is recognized when the Company is entitled for unconditional right to receive payment upon delivery of goods to customers. The consideration received in advance from the customer according to the sales contract but without delivery of goods is recognized as a contract liability, for which revenue is recognized when the control over the goods is transferred to the customer.

The Company provides standard warranties for goods sold and has obligation to refund payments for defective goods, in which the Company has recognized provisions for warranties to fulfill the obligation. Refer to note 4(18) for further details.

• b. Construction contracts

For construction contracts, revenue is recognized progressively based on the progress towards complete satisfaction of contract activities, and only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If the Company cannot reasonably measure its progress towards complete satisfaction of performance obligations in accordance with the construction contracts, revenue is recognized only to the extent of contract costs incurred that it is expected to be recoverable.

The consideration is paid by the customer according to the agreed payment terms. The excess of the amount that has been recognized as revenue over the amount that the Company has issued a bill is recognized as a contract asset. When the entitlement to the payment becomes unconditional, the contract asset is transferred to receivables.

A contract liability is recognized for an advance consideration that the Company has billed to customers arising from construction contracts. When the construction is completed and accepted by the customers, the contract liability is transferred to revenue.

If there are changes in circumstances, the estimates of revenue, cost and the progress towards complete satisfaction of contract will be amended. Any changes therein are recognized in profit or loss during the period in which the changes and amendments are made.

The Company provides standard warranties for construction contracts and has recognized provisions for warranties to fulfill the obligation. Refer to note 4(18) for further details.

• c. Financing components

The Company expects that the length of time when the Company transfers the goods or services to the customer and when the customer pays for those goods or services will be less than one year. Therefore, the amount of consideration is not adjusted for the time value of money.

(Continued)

42

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(20) Revenue recognition

• a. Goods sold (policy applicable before January 1, 2018)

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

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement.

• b. Government grants

• (i) Grants for compensating the research and development expenditures

Grants that compensate the Company for research and development expenditures are recognized in profit or loss on a systematic basis in the periods in which the expenses are recognized.

• (ii) Grants related to the purchase of assets

Grants related to the purchase of assets are set up as deferred income and are recognized in profit or loss on a systematic basis over the useful life of the assets.

• (iii) Other grants

Other grants from government that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss of the period in which it becomes receivable.

• (21) Employee benefits

• a. Defined contribution plans

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

(Continued)

43

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

b. Defined benefit plans

The Company’s net obligation in respect of defined benefit pension plans is calculated separately for each benefit plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. Discount rate is determined by reference to the yield rate of Taiwan government bonds at the reporting date. The calculation of defined benefit obligations is performed annually by a qualified actuary using the Projected Unit Credit Cost Method.

Remeasurements of the net defined benefit liability (asset) which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized in other comprehensive income in the period in which they occur, and which then are reflected in retained earnings and will not be reclassified to profit or loss.

c. Short-term employee benefits

Short-term employee benefit obligations, which are due to be settled within twelve months are measured on an undiscounted basis and are expensed as the related service is provided.

The expected cost of cash bonus or profit-sharing plans, which is anticipated to be paid within one year, are recognized as a liability when the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(22) Share-based payment arrangements

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

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

(Continued)

44

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(23) Income taxes

Income tax expense comprises current and deferred taxes.

a. Current taxes

Current taxes comprise the expected tax payable or receivable on the taxable income or losses for the year and any adjustments to tax payable or receivable in respect of previous years. It is measured using the statutory tax rate or the actual legislative tax rate at the reporting date.

In accordance with the ROC Income Tax Act, undistributed earnings from the companies located in the Republic of China, if any, is subject to an additional surtax. The surtax on unappropriated earnings is expensed in the year the shareholders approved the distributions which is the year subsequent to the year the earnings arise.

b. Deferred taxes

Deferred taxes are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax liabilities are recognized for temporary difference of future taxable income. Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized.

Deferred tax assets are reviewed at each reporting date, by considering global economic environment, industry environment, statutory tax deduction years and projected future taxable income, and reduced to the extent that it is no longer probable that future taxable profits will be available to allow all or part of the deferred tax asset to be recovered. Deferred tax assets which originally not recognized is also reviewed at each reporting date and recognized to the extent that it is probable that future taxable profits will be available to allow all or part of the deferred tax asset to be recovered.

Deferred taxes liabilities for taxable temporary differences related to investments in subsidiaries, associates and joint arrangements are recognized, unless the Company is able to control the timing of the reversal of the taxable temporary differences and it is probable that they will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when the reverse, using the statutory tax rate or the actual legislative tax rate on the reporting date. Deferred tax assets and liabilities are offset only if certain criteria are met.

45

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Current taxes and deferred taxes are recognized in profit or loss except to the extent that it relates to items recognized directly in equity or other comprehensive income.

(24) Business combinations

The consideration transferred in the acquisition is measured at fair value, as are identifiable net assets acquired. Goodwill is measured as the excess of the aggregate of the fair value of consideration transferred and the amount of any non-controlling interests in the acquiree over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred and the amount of any non-controlling interests in the acquiree, after reassessing all of the assets acquired and all of the liabilities assumed being properly identified, the difference is recognized in profit or loss as a gain on bargain purchase.

Acquisition-related costs are expensed as incurred, except that the costs are related to the issue of debt or equity instruments.

Non-controlling interests in an acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation are measured, on a case-by-case basis, at either fair value or the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s net identifiable assets. All other components of non-controlling interests shall be measured at their acquisition-date fair values, unless another measurement basis is required by TIFRSs.

Any contingent consideration included in the consideration transferred is recognized at fair value at the date of acquisition. Subsequent changes to the fair value of the contingent consideration during the measurement period shall adjust to the cost of the acquisition and the resulting goodwill retrospectively. An adjustment made during the measurement period is to reflect additional information obtained by the Company about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date. The accounting treatment for those changes to the fair value of the contingent consideration that are not measurement period adjustments is depending on the classification of the contingent consideration. If the contingent consideration is classified as equity, it is not remeasured and the subsequent settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value are recognized in profit or loss.

(25) Earnings per share

Basic earnings per share is computed by dividing profit or loss attributable to the shareholders of AUO by the weighted-average number of common shares outstanding during the period. In computing diluted earnings per share, profit or loss attributable to the shareholders of AUO and the weighted-average number of common shares outstanding during the period are adjusted for the effects of dilutive potential common stock, assuming dilutive share equivalents had been issued.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The weighted-average outstanding shares are retroactively adjusted for the effects of stock dividends transferred from retained earnings or capital surplus to common stock.

• (26) Operating segments

An operating segment is a component of an entity that engages in business activities from which it may earn revenue and incur expenses (including revenues and expenses relating to transactions with other components of the same entity). Operating results are reviewed regularly by the Company’s chief operating decision maker (“CODM”) to make decisions pertaining to the allocation of resources to the segment and to assess its performance. Meanwhile, discrete financial information for operating results is available.

5. Critical Accounting Judgments and Key Sources of Estimation and Assumption Uncertainty

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

Estimates and underlying assumptions are reviewed by management on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments, estimates and assumptions in applying accounting policies that have the significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

• (1) Estimate of provisions

Provision for warranty is estimated when product revenue is recognized. The estimate has been made based on the quantities within the warranty period, the historical and anticipated warranty claims rate associated with similar products and services, and the projected unit cost of maintenance. The Company regularly reviews the basis of the estimate and if necessary, amends it as appropriate. There could be a significant impact on provision for warranty for any changes of the basis of the estimate.

Provision for unsettled litigation and claims is recognized when it is probable that it will result in an outflow of the Company’s resources and the amount can be reasonably estimated. While the ultimate resolution of litigation and claims cannot be predicted with certainty, the final outcome or the actual cash outflow may be materially different from the estimated liability.

(Continued)

47

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Impairment of long-term non-financial assets, other than goodwill

In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill, the Company is required to make subjective judgments in determining the independent cash flows, useful lives, expected future income and expenses related to the specific asset groups with the consideration of the usage mode of asset and the nature of industry. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges or reversal in future years.

(3) Impairment of goodwill

The assessment of impairment of goodwill requires the Company to make subjective judgment to determine the identified CGUs, allocate the goodwill to relevant CGUs and estimate the recoverable amount of relevant CGUs.

(4) Measurement of defined benefit obligations

Accrued pension liabilities and the resulting pension expenses under defined benefit pension plans are calculated using the Projected Unit Credit Cost Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, long-term average future salary increase, etc. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

(5) Realization of deferred tax assets

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which those deferred tax assets can be utilized. Assessment of the realization of the deferred tax assets requires management’s subjective judgment and estimate, including the future revenue growth and profitability, the sources of taxable income, the amount of tax credits can be utilized and feasible tax planning strategies. Changes in the global economic environment, the industry trends and relevant laws and regulations may result in adjustments to the deferred tax assets.

(6) Estimate of variable consideration of revenue (applicable from January 1, 2018)

The Company estimates the amount of variable consideration by using methods either the expected value or the most likely amount based on historical experience, market and economic situation and any known factors that would significantly affect the estimates. The amount of variable consideration is recognized as a reduction of revenue in the same period the related revenue is recognized. The Company periodically reviews the reasonableness of the estimated variable consideration. However, the adequacy of estimations may be affected by factors such as market price competition and the evolution of product technology, which could result in significant adjustments to the variable consideration.

(Continued)

48

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• (7) Estimate of allowance for sales returns and discounts (applicable before January 1, 2018)

The Company records a provision as the deduction of revenue for estimated future sales returns and other allowances in the same period the related revenue is recognized. Estimated sales returns and other allowances are generally made and adjusted based on historical experience, management’s judgment and any known factors that would significantly affect the allowance, and management periodically reviews the reasonableness of the estimates.

(8) Valuation of inventories

As inventories are stated at the lower of cost or net realizable value, the Company estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions of future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories.

6. Description of Significant Accounts

(1) Cash and Cash Equivalents

	December 31,	December 31,
	2018	2017
	(in thousands)
Cash on hand, demand deposits and checking accounts	$ 30,134,051	40,871,878
Time deposits	38,939,198	57,438,459
Government bonds with reverse repurchase agreements	90,047	6,710,279
	$ 69,163,296	105,020,616

Refer to note 6(34) for the disclosure of credit risk, currency risk and sensitivity analysis of the financial instruments of the Company.

As at December 31, 2018 and 2017, no cash and cash equivalents were pledged with banks as collaterals.

(Continued)

49

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Financial Assets and Liabilities at Fair Value through Profit or Loss

		December	31,
		2018	2017
		(in thousands)
Financial assets mandatorily measured at FVTPL:
Foreign currency forward contracts	$	70,074	-
Structured deposits		1,639,457	-
Financial assets held for trading:
Foreign currency forward contracts		-	70,366
	$	1,709,531	70,366
Financial liabilities held for trading:
Foreign currency forward contracts	$	22,115	106,597

The Company entered into derivative contracts to manage the exposure to currency risk arising from operating activities. Refer to note 6(34) for the disclosure of the Company’s credit, currency and interest rate risks related to financial instruments. As of December 31, 2018 and 2017, the Company’s outstanding foreign currency forward contracts were as follows:

	December 31, 2018	December 31, 2018
Contract item Sell USD / Buy NTD Sell USD / Buy JPY Sell NTD / Buy JPY Sell USD / Buy CNY Sell EUR / Buy JPY Sell EUR / Buy USD Sell EUR / Buy CZK Sell USD / Buy MYR Sell CNY / Buy JPY Sell USD / Buy SGD Sell CNY / Buy USD	Maturity date Jan. 2019 Jan. 2019 – Apr. 2019 Jan. 2019 – Mar. 2019 Jan. 2019 – Jun. 2019 Jan. 2019 Jan. 2019 Jan. 2019 – Mar. 2019 Jan. 2019 – Mar. 2019 Jan. 2019 – Feb. 2019 Jan. 2019 Jan. 2019 – Feb. 2019	Contract amount
		(in thousands) USD223,000 / NTD6,858,785 USD147,470 / JPY16,493,633 NTD2,054,260 / JPY7,400,000 USD87,000 / CNY597,420 EUR12,000 / JPY1,536,180 EUR28,500 / USD32,441 EUR3,240 / CZK84,081 USD879 / MYR3,670 CNY60,800 / JPY981,383 USD5,793 / SGD7,940 CNY853,328 / USD124,000

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(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

	December 31, 2017	December 31, 2017
Contract item Sell USD / Buy NTD Sell USD / Buy JPY Sell USD / Buy CNY Sell EUR / Buy JPY Sell EUR / Buy CZK Sell USD / Buy MYR Sell JPY / Buy NTD Sell CNY / Buy JPY Sell USD / Buy SGD	Maturity date Jan. 2018 – Feb. 2018 Jan. 2018 – Jun. 2018 Jan. 2018 – Apr. 2018 Jan. 2018 – Feb. 2018 Jan. 2018 – Mar. 2018 Jan. 2018 – Mar. 2018 Jan. 2018 Jan. 2018 – Apr. 2018 Jan. 2018	Contract amount
		(in thousands) USD213,100 / NTD6,377,672 USD304,926 / JPY34,092,055 USD137,000 / CNY903,800 EUR65,000 / JPY8,691,815 EUR3,280 / CZK83,502 USD931 / MYR3,811 JPY10,000,000 / NTD2,654,220 CNY86,623 / JPY1,443,259 USD5,480 / SGD7,366

(3) Financial Assets at Fair Value through Other Comprehensive Income

Investments in equity instruments at FVTOCI: Equity securities – listed stocks $ Equity securities – non-listed stocks $	December 31, 2018
	(in thousands) 6,803,900 176,025
	6,979,925

The purpose that the Company invests in the abovementioned equity securities is for longterm strategies, but rather for trading purpose. Therefore, those equity securities are designated as financial assets at FVTOCI, whereas, were presented under available-for-sale financial assets and financial assets carried at cost as of December 31, 2017. Please refer to note 6(4) and note 6(5).

If the value of these equity securities appreciates or depreciates by 10% at the reporting date, other comprehensive income would increase or decrease by $697,993 thousand for the year ended December 31, 2018, respectively.

－ (4) Available-for-sale Financial Assets noncurrent

Equity securities – listed stocks

December 31, 2017 (in thousands) $ 4,170,319

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Available-for-sale securities held by the Company were publicly traded equity shares. If the share price of these securities appreciates or depreciates by 10% at the reporting date, other comprehensive income would increase or decrease by $417,032 thousand for the year ended December 31, 2017, respectively.

The abovementioned investments held by the Company were presented under financial assets at FVTOCI (refer to note 6(3)) as of December 31, 2018.

－ (5) Financial Assets Carried at Cost noncurrent

Financial Assets Carried at Cost－noncurrent
Equity securities – non-listed stocks $	December 31, 2017
	(in thousands) 177,815

Given that the probabilities for each assumption in the range of estimated fair value of the aforementioned investments held by the Company cannot be reasonably determined, the Company had determined that the fair value thereof cannot be reliably measured and therefore were measured at cost less any impairment loss as of December 31, 2017. The aforementioned investments were presented under financial assets at FVTPL or financial assets at FVTOCI (refer to note 6(3)) as of December 31, 2018.

(6) Notes and Accounts Receivable, net (Including Related and Unrelated Parties)

Notes and accounts receivable $ Less: loss allowance Less: allowance for sales returns and discounts $ Notes and accounts receivable, net $ Accounts receivable from related parties, net $	December 31, 2018 2017 (in thousands) 47,453,087 42,021,402 (50,853) (93,053) - (1,337,076 ) 47,402,234 40,591,273 44,647,981 38,738,211 2,754,253 1,853,062

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(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of December 31, 2018, the Company measures loss allowance for notes and accounts receivable using the simplified approach under IFRS 9 with the lifetime expected credit losses. Analysis of expected credit losses as of December 31, 2018, which was measured based on the aforementioned method, was as follows:

Carrying amount of accounts receivable (in thousands) Not past due $ 46,529,408 Past due less than 60 days 862,373 Past due 61~180 days 11,090 Past due over 180 days 475 $ 47,403,346	Weighted- average loss rate 0.00% 0.05% 0.98% 100%	Loss allowance for lifetime expected credit losses
		(in thousands) 89 439 109 475 1,112

In addition, the Company recognized a loss allowance amounting to $49,741 thousand as of December 31, 2018 for notes and accounts receivable with gross carrying amount of $49,741 thousand, as there was objective evidence indicating that, under reasonable expectation, it would not be recovered in total.

As of December 31, 2017, the Company measured the allowance for doubtful debts for notes and accounts receivable using the incurred loss model. Aging analysis of notes and accounts receivable, which were past due but not impaired, as of December 31, 2017, was as follows:

			December 31,
			2017
			(in thousands)
Past due	less than 60 days	$	560,016
Past due	61~180 days		12,790
		$	572,806

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The movement of the loss allowance for notes and accounts receivable was as follows:

Balance at beginning of the year (IAS 39) $ Adjustments on initial application of IFRS 9 Provisions (reversals) charged to (against) expense Write-offs Effect of changes in foreign currency exchange rates Balance at end of the year $	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
	2018 93,053 - (24,302) (17,985) 87 50,853	2017
		Individually assessed for impairment Collectively assessed for impairment (in thousands) 41,812 62,805 (28,236) 18,396 (6) - (805 ) (913 ) 12,765 80,288	Collectively assessed for impairment
			80,288

The payment terms granted to customers are generally 30 to 60 days from the end of the month during which the invoice is issued. This term is consistent with practices in our industry, and thus, no financing components involved.

Information about the Company’s exposure to credit risk is included in note 6(34).

The Company entered into financing facilities with banks to factor certain of its accounts receivable without recourse. As at December 31, 2018, the Company did not sell its trade receivables to banks. As at December 31, 2017, the Company’s trade receivables sold and derecognized were as follows:

	December 31, 2017	December 31, 2017	December 31, 2017
Underwriting bank Taishin Bank	Factoring limit USD 35,000	Amount advanced (in thousands) -	Amount sold and derecognized USD 6,382	Principal terms
				See notes(a)~(e)

Note (a): Under this facility, the Company transferred accounts receivable to the underwriting bank, which is without recourse subject to the underwriting consent.

Note (b): The Company informed its customers pursuant to the facility to make payment directly to the underwriting bank.

Note (c): As of December 31, 2017, total outstanding receivables after the above transaction, net of fees charged by underwriting bank, of $190,451 thousand were recognized under other current financial assets.

54 (Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note (d): To the extent of the amount transferred to the underwriting bank, risks of non-collection or potential payment default by customers in the event of insolvency are borne by the bank. The Company is not responsible for the collection of receivables subject to the facility, or for any legal proceedings and costs thereof in collecting these receivables.

Note (e): The Company bears all risks deriving from the customers except credit risk.

(7) Inventories

		December 31,	December 31,
		2018	2017
		(in thousands)
Finished goods	$	9,406,248	10,095,820
Work-in-progress		11,133,846	9,405,677
Raw materials		5,769,010	5,352,826
	**$ **	26,309,104	24,854,323

For the years ended December 31, 2018 and 2017, the amounts recognized as cost of sales in relation to inventories were $279,494,885 thousand and $279,986,522 thousand, respectively. The net of provisions for inventories written down to net realizable value, which were also included in cost of sales, amounted to $1,402,367 thousand and $72,466 thousand for the years ended December 31, 2018 and 2017, respectively.

As at December 31, 2018 and 2017, none of the Company’s inventories was pledged as collateral.

(8) Noncurrent Assets Held for Sale

In October 2017, in relation to compulsory imposition under regulatory plan and urban construction plan, FTKS has entered into a compensation agreement with Kunshan Economic and Technology Development Zone. The imposed land use right, plant buildings and its related appendages have been reclassified as noncurrent assets held for sale and presented separately in the consolidated balance sheet as at December 31, 2017. The disposal transaction was completed in March 2018. The selling price (net of costs of disposal) and gain on disposal amounted to $983,082 thousand and $561,815 thousand, respectively. As of December 31, 2018, the proceeds from disposal have been fully received.

In December 2017, in order to enhance the utilization of the Company’s assets and to increase its working capital, BVHF has entered into a real estate transfer agreement with Hefei Heng Chuang Intelligent Technology Co., Ltd. to dispose its land use right, plant buildings and its related appendages. The aforementioned assets have been reclassified as noncurrent assets held for sale and presented separately in the consolidated balance sheet as at December 31, 2017. The disposal transaction was completed in June 2018. The selling price (net of costs of disposal) and gain on disposal amounted to $2,204,576 thousand and $228,754 thousand, respectively. As of December 31, 2018, the proceeds from disposal have been fully received.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(9) Investments in equity-accounted Investees

		December	31,
		2018	2017
		(in thousands)
Associates	$	5,973,127	5,286,487
Joint ventures		312,738	310,800
	$	6,285,865	5,597,287

a. Associates

Name of associate Lextar Electronics Corp. (“Lextar”) Raydium Semiconductor Corporation (“Raydium”) Star River Energy Corp. (“SREC”) Daxin Materials Corp. (“Daxin”) SSEC Others	Principal activities Principal place of business Manufacturing and sales of Light Emitting Diode Taiwan ROC IC design Taiwan ROC Holding company Taiwan ROC Research, manufacturing, and sales of display related chemicals Taiwan ROC Holding company Taiwan ROC	December 31, 2018 Amount Ownership interest (in thousands) % $ 3,082,178 27 716,381 18 434,421 34 654,940 25 1,002,874 33 82,333 $ 5,973,127	December 31, 2017	December 31, 2017
		Amount	Amount	Ownership interest % 27 18 34 25 37
		(in thousands) $ 3,082,178 716,381 434,421 654,940 1,002,874 82,333 $ 5,973,127	(in thousands) $ 3,104,955 678,908 533,840 573,571 369,153 26,060 $ 5,286,487

None of the above associates is considered individually material to the Company. The following table summarized the amount recognized by the Company at its share of those associates.

The Company’s share of associates’: Profit for the year $ Other comprehensive loss for the year Total comprehensive income for the year $	For the years ended December 31, 2018 2017 (in thousands) 307,992 251,699 (15,477 ) (62,084 ) 292,515 189,615

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

b. Joint ventures

In September 2016, AUSG disposed of its entire 50% interest in AUO SunPower Sdn. Bhd., a joint venture of the Company, to SunPower Technology, Ltd. for total selling price of $5,408,546 thousand (US$170,100 thousand). The selling price will be settled with repayment of installments over the years. As of December 31, 2018 and 2017, the outstanding selling price amounting to US$60,000 thousand and US$61,100 thousand, respectively, which will be received in cash at US$30,000 thousand and US$30,000 thousand in year 2019 and 2020, respectively, are classified under other current assets and other noncurrent assets by its liquidity.

None of the joint ventures is considered individually material to the Company. The following table summarized the amount recognized by the Company at its share of those joint ventures.

The Company’s share of joint ventures’: Profit (loss) for the year $ Other comprehensive income for the year Total comprehensive income (loss) for the year $	For the years ended December 31, 2018 2017 (in thousands) 3,722 (12,693) - - 3,722 (12,693 )

As at December 31, 2018 and 2017, none of the Company’s investments in equity-accounted investees was pledged as collateral.

(10) Acquisition of Subsidiaries

In March 2018, the Company obtained control over ComQi by acquiring 100% of shareholdings of ComQi. ComQi is engaged in integration service of content management system and hardware. Through the acquisition of ComQi, the Company expects to be able to provide a total solution for the upstream and downstream of public information displays.

If the acquisition had taken place on January 1, 2018, management estimated that the Company’s consolidated revenue and net profit for the year ended December 31, 2018 would have been $307,673,560 thousand and $7,956,563 thousand, respectively. In determining these amounts, management had assumed that the fair value adjustments that arose on the acquisition date would have been the same if the acquisition had taken place on January 1, 2018. The aforementioned pro-forma information is presented for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Company that would have been achieved had the acquisition been completed on January 1, 2018, nor is it intended to be a projection of future results.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Acquisition-related costs of $12,191 thousand on legal fees and due diligence fees were expensed and recognized in operating expenses in the consolidated statement of comprehensive income.

The following table summarizes each major class of consideration transferred, the assets acquired and liabilities assumed at the acquisition date and the amount of goodwill recognized.

a. Consideration transferred

		Amounts
		(in thousands)
Cash	$	467,920
Contingent consideration		283,354
	$	751,274

In accordance with the terms of the contingent consideration, in the event that ComQi’s annual net revenue and annual recurring revenue for the year ended December 31, 2018 are greater than the agreed revenue targets in the agreement, the Company will pay additional consideration of USD4,000 thousand and USD7,000 thousand, respectively, to the original shareholders of ComQi. Under the arrangement of the contingent consideration, the potential undiscounted amount of the contingent payment that the Company may have to pay in the future is between USD0 and USD11,000 thousand.

The fair value of the contingent consideration estimated using Monte Carlo simulation amounted to $283,354 thousand. The fair value measurement was based on the significant unobservable inputs in the market and categorised as a Level 3 fair value under IFRS 13. The significant inputs in the valuation technique used are discount rate of 8.5%, revenue volatility rate of 30.8% and AUO’s credit spread of 0.88%.

As ComQi’s annual net revenue and annual recurring revenue for the year ended December 31, 2018 were not greater than the agreed revenue targets in the agreement, the Company remeasured the fair value of the contingent consideration and determined the value was zero. The change in the fair value of the contingent consideration of $283,354 thousand was not a measurement period adjustment, and therefore, was recognized under other gains and losses in the consolidated statement of comprehensive income.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• b. Identifiable assets acquired and liabilities assumed

The following table summarizes the fair value of identifiable assets acquired and liabilities assumed recognized at the acquisition date:

Cash and cash equivalents $ Accounts receivable and other current assets Property, plant and equipment Intangible assets Accounts payable and other current liabilities Other liabilities $	Fair value (in thousands) 19,432 36,851 3,712 150,436 (57,361) (2,120 ) 150,950

• c. Goodwill arising from the acquisition for which is attributable mainly to the synergies expected to be achieved from integrating ComQi into the Company’s existing business has been recognized as follows:

Consideration transferred $ Less: Fair value of identifiable net assets $	Amounts (in thousands) 751,274 (150,950 ) 600,324

The Company will continue to review the aforesaid matters during the measurement period. If new information obtained within one year from the acquisition date about facts and circumstances that existed at the acquisition date which leads to an adjustment to the above amounts, or any additional provisions as at the acquisition date, then the accounting for the acquisition will be revised.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(11) Disposal of Part of Ownership Interest in Subsidiary without Losing Control

In November 2017, the Company disposed its ownership interest in DPTW totaling of 9.99% with consideration (net of costs of disposal) amounting to $1,776,984 thousand in cash. The effect of changes in ownership interest of the subsidiary which is attributable to owners of the parent is summarized as follows:

Consideration received $ Carrying amount of the equity interest disposed of Capital surplus – changes in ownership interest of subsidiary Other equity – effect from foreign currency translation differences arising from foreign operations Capital surplus – differences between consideration and carrying amount arising from disposal of interest in subsidiary $	For the year ended December 31, 2017
	(in thousands) 1,776,984 (1,190,529) (12,099) (56,160 ) 518,196

(12) Disposal of Subsidiaries

The Company disposed all its shareholdings in CGPC to SSEC, an associate of the Company, in Sepember 2018 with consideration amounting to $116,000 thousand in cash. The gain on disposal amounting to $17,269 thousand was recognized under other gains and losses in the consolidated statement of comprehensive income.

The carrying amounts of the assets and liabilities of the subsidiary disposed of by the Company were as follows:

Cash and cash equivalents $ Other current assets Payable for equipment Net assets disposed of $	Amounts (in thousands) 70,516 48,148 (19,933 )
	98,731

The Company disposed all its shareholdings in Fargen Power Corporation and TronGen Power Corporation to SSEC in December 2017 with consideration amounting to $480,000 thousand in cash. The gain on disposal amounting to $76,331 thousand was recognized under other gains and losses in the consolidated statement of comprehensive income.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The carrying amounts of the assets and liabilities of the subsidiaries disposed of by the Company were as follows:

Cash and cash equivalents $ Accounts receivable and other receivables Other current assets Property, plant and equipment Other assets Payable for equipment Accrued expense and other current liabilities Long-term borrowings Net assets disposed of $	Amounts (in thousands) 203,607 4,513 38,649 260,828 54,397 (71,076) (3,062) (84,187 ) 403,669

(13) Property, Plant and Equipment

Cost: Land $ Buildings Machinery and equipment Other equipment Accumulated depreciation and impairment loss: Buildings Machinery and equipment Other equipment Prepayments for purchase of land and equipment, and construction in progress Net carrying amounts $		For theyear ended December 31, 2018	For theyear ended December 31, 2018	For theyear ended December 31, 2018
	Balance, Beginning of Year 9,008,659 124,010,869 800,164,310 29,359,148 962,542,986 33,825,375 707,334,411 23,717,580 764,877,366 27,267,469 224,933,089	Additions - 53,706 2,145,769 5,077,326 7,276,801 3,097,807 25,620,993 5,367,124 34,085,924 26,228,260	Disposal or write off (in thousands) (161,728) (5,271,527) (13,164,282) (1,775,217 ) (20,372,754 ) (1,754,678) (12,828,449) (1,775,840 ) (16,358,967 ) -	Reclassification, effect of change in exchange rate and others 12,392 2,426,312 46,787,823 2,467,867 51,694,394 862,822 1,706,393 782,123 3,351,338 (47,095,020 )	Balance, End of Year
					8,859,323 121,219,360 835,933,620 35,129,124
					1,001,141,427
					36,031,326 721,833,348 28,090,987
					785,955,661
					6,400,709
					221,586,475

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Cost: Land $ Buildings Machinery and equipment Other equipment Accumulated depreciation and impairment loss: Land Buildings Machinery and equipment Other equipment Prepayments for purchase of land and equipment, and construction in progress Net carrying amounts $		For theyear ended December 31, 2017	For theyear ended December 31, 2017	For theyear ended December 31, 2017
	Balance, Beginning of Year 8,873,981 130,595,844 798,046,434 32,419,736 969,935,995 173,397 36,028,301 698,110,663 26,154,173 760,466,534 13,272,371 222,741,832	Additions 865,956 433,269 1,827,188 4,140,108 7,266,521 - 3,216,571 27,946,301 5,655,026 36,817,898 36,289,529	Disposal or write off (in thousands) (675,811) (3,786,388) (14,844,436) (7,900,925 ) (27,207,560 ) (54,186) (3,785,921) (14,694,674) (7,883,150 ) (26,417,931 ) (29,206 )	Reclassification and effect of change in exchange rate (55,467) (3,231,856) 15,135,124 700,229 12,548,030 (119,211) (1,633,576) (4,027,879) (208,469 ) (5,989,135 ) (22,265,225 )	Balance, End of Year
					9,008,659 124,010,869 800,164,310 29,359,148
					962,542,986
					- 33,825,375 707,334,411 23,717,580
					764,877,366
					27,267,469
					224,933,089

As of December 31, 2018 and 2017, a non-irrigated farmland located in LongTan plant amounted to $23,671 thousand was registered in the name of a farmer due to regulations. An agreement of pledge had been signed between the Company and the farmer clarifying the rights and obligations of each party.

In order to enhance the utilization of the Company’s assets and to increase its working capital, AUSK disposed its land, plant buildings and related appendages to third party in December 2018 with consideration (net of costs of disposal) amounting to $3,029,191 thousand. The gain on disposal was amounting to $1,080,720 thousand.

In 2017, the Company wrote down certain machineries and equipment with low utilization resulting from the decline in the application for certain products associated with its display segment and recognized an impairment loss of $895,954 thousand.

In 2018 and 2017, the Company wrote down certain long-term assets with lower capacity utilization associated with its energy segment and recognized impairment losses of $399,363 thousand and $120,714 thousand, respectively.

The capitalized borrowing costs were $421,618 thousand and $624,235 thousand for the years ended December 31, 2018 and 2017, respectively. The interest rates applied for the capitalization, ranged from 1.04% to 5.59% and 1.09% to 5.24% for the years ended December 31, 2018 and 2017, respectively.

Certain property, plant and equipment were pledged as collateral, see note 8.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(14) Investment Property

Land $ Fair Value $ Land $ Fair Value $		For theyear ended December 31, 2018	For theyear ended December 31, 2018
	Balance, Beginning of Year 717,823 2,213,184	Additions Disposal Reclassification and effect of change in exchange rate (in thousands) - - 12,483 For theyear ended December 31, 2017		Balance, End of Year
				730,306
				2,252,170
	Balance, Beginning of Year 465,868 1,402,040	Additions -	Disposal Reclassification and effect of change in exchange rate (in thousands) - 251,955	Balance, End of Year
				717,823
				2,213,184

In relation to the cessation of polysilicon production, M.Setek leased part of its lands to third party in 2017, and has reclassified those lands amounting to $251,955 thousand from property, plant and equipment to investment property.

The fair value of investment property is based on a valuation performed by a qualified independent appraiser who holds a recognized and relevant professional qualification and has recent valuation experience in the location and category of the investment property being valued. The valuation is performed using income approach, sales comparison approach and land development analysis approach with reference to available market information.

Income approach determines the fair value of the investment property based on the projected cash flows from the Company’s estimated future rentals collected and discounted using the capitalization rate of the property. The capitalization rate used in the valuation was 12%. Sales comparison approach is through comparison, analysis, adjustment and other means of value for comparable properties to estimate the value of the investment property. Land development analysis approach determine the fair value of investment property based on the value prior to development or construction, after deducting the direct cost, indirect cost, capital interest and profit during the development period, and also consider total sales price of properties after completion of development or construction. It also incorporates the possibility of changes in utility of land through development or improvement in accordance with legal use and density of the land. The overall capital interest rate and the rate of return used in the valuation were 1.86% and 10%, respectively.

Certain investment property were pledged as collateral, see note 8.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(15) Intangible Assets

Cost: Goodwill $ Patent and technology fee Others Accumulated amortization and impairment loss: Goodwill Patent and technology fee Others Net carrying amounts $ Cost: Goodwill $ Patent and technology fee Accumulated amortization and impairment loss: Goodwill Patent and technology fee Net carrying amounts **$ **		For theyear ended December 31, 2018	For theyear ended December 31, 2018	For theyear ended December 31, 2018
	Balance, Beginning of Year 11,456,176 12,275,548 - 23,731,724 175,581 10,385,251 - 10,560,832 13,170,892	Additions Effect of change in consolidated entities Effect of change in exchange rate (in thousands) - 600,324 - - - (3,806) - 150,436 - - 750,760 (3,806 ) - - - 518,404 - (386) 22,565 - - 540,969 - (386 ) For theyear ended December 31, 2017			Balance, End of Year
					12,056,500 12,271,742 150,436 24,478,678 175,581 10,903,269 22,565
					11,101,415
					13,377,263
	Balance, Beginning of Year 11,456,176 12,078,767 23,534,943 175,581 9,756,528 9,932,109 13,602,834	Additions - 196,781 196,781 - 628,606 628,606	Effect of change in consolidated entities (in thousands) - - - - - -	Effect of change in exchange rate - - - - 117 117	Balance, End of Year
					11,456,176 12,275,548
					23,731,724
					175,581 10,385,251 10,560,832 13,170,892

The Company acquired goodwill and other intangible assets arising from the business combination in March 2018. Please refer to note 6(10) for the relevant information.

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Notes to Consolidated Financial Statements

For the purpose of impairment test, the following table shows the information of the operating business that the Company’s goodwill allocating to.

Display business $	December 31,	December 31,
	2018 2017 (in thousands) 11,880,919 11,280,595	2017

The Company’s goodwill has been tested for impairment at least once at the end of the annual reporting period. The recoverable amount was determined based on value in use of the operating business.

The key assumptions used in the estimation of the recoverable amount included discount rate and terminal growth rate. The annual discount rates for the year 2018 and 2017 were 11.57% and 11.35%, respectively, based on industry weighted average cost of capital. The cash flow projection for the year 2018 and 2017 were determined based on the financial budgets approved by management covering the future five-year period and extrapolated with a steady annual terminal growth rate of negative 1% for subsequent years, respectively. The key assumptions abovementioned represents the management’s forecast of the future for the related industry by considering the history information from internal and external sources.

Based on the impairment assessments for the years ended December 31, 2018 and 2017, no impairment losses were recognized as the recoverable amount of the cash-generating unit was higher than its carrying value.

(16) Other Current Assets and Other Noncurrent Assets

Prepayment for equipment $ Refundable and overpaid tax Long-term prepaid rents Prepayments for purchases Long-term receivables Refundable deposits Others Less: current Noncurrent $	December 31, 2018 2017 (in thousands) 650,727 457,201 1,351,646 3,291,235 1,364,111 1,412,026 230,793 2,053,554 930,001 1,790,400 716,097 515,148 2,869,869 2,551,070 8,113,244 12,070,634 (2,941,598 ) (6,631,130 ) 5,171,646 5,439,504

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(17) Short-term Borrowings

Unsecured borrowings $ Unused credit facility $ Interest rate	December 31,	December 31,
	2018 2017 (in thousands) 546,472 3,424,376 43,533,037 35,866,924 2.54%~ 4.35% 3.62%~ 4.35%	2017
		35,866,924
		3.62%~ 4.35%

(18) Long-term Borrowings

Bank or agent bank Syndicated loans: Bank of Taiwan and others Bank of Taiwan and others Bank of Taiwan and others Bank of Taiwan and others First Commercial Bank and others Bank of China and others Unsecured loans Secured loans Less: transaction costs Less: current portion Unused credit facility Interest rate range	Durations From Feb. 2015 to Aug. 2019 $ From Apr. 2016 to Apr. 2021 From May 2017 to May 2022 From Jul. 2018 to Jul. 2023 From Feb. 2016 to Jan. 2019 From Nov. 2015 to Nov. 2023 From May 2016 to Aug. 2023 From Apr. 2017 to Apr. 2032 $ $	December 31,	December 31,
		2018 2017 (in thousands) 5,912,000 22,704,000 36,175,000 37,500,000 10,000,000 10,000,000 210,000 - 1,775,236 2,395,868 27,743,519 27,800,680 2,976,158 10,203,390 1,990,175 441,035 86,782,088 111,044,973 (476,770 ) (436,963 ) 86,305,318 110,608,010 (29,595,931 ) (8,155,234 ) 56,709,387 102,452,776 79,933,812 37,220,839 1.07%~ 6.32% 1.25%~ 5.16%	2017
			111,044,973 (436,963 )
			110,608,010 (8,155,234 )
			102,452,776
			37,220,839
			1.25%~ 5.16%

The Company entered into the aforementioned long-term loan arrangements with banks and financial institutions to finance capital expenditures for purchase of machinery and equipment, and to fulfill working capital, as well as to repay the matured debts. A commitment fee is negotiated with the leading banks of syndicated loans, and is calculated based on the committed-to-withdraw but unused balance, if any. No commitment fees were paid for the year ended December 31, 2018.

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Notes to Consolidated Financial Statements

These credit facilities contain covenants that require the Company to maintain certain financial ratios, calculating based on the Company’s annual consolidated financial statements prepared in accordance with Taiwan Financial Reporting Standards, such as current ratio, leverage ratio, interest coverage ratio, tangible net worth and others as specified in the loan agreements. As of December 31, 2018 and 2017, the Company complied with all financial covenants required under each of the loan agreements.

Refer to note 6(34) for detailed information of exposures to interest rate, currency, and liquidity risks. Refer to note 8 for assets pledged as collateral to secure the aforementioned long-term borrowings.

The reconciliation of liabilities to cash flows arising from financing activities was as follows:

Long-term borrowings Balance at January 1, 2018 $ 110,608,010 Cash flows (24,464,961) Non-cash changes: Changes in exchange rate 27,663 Amortization on transaction costs 134,606 Balance at December 31, 2018 $ 86,305,318 (19) Provisions	Short-term borrowings Guarantee deposits (in thousands) 3,424,376 838,482 (2,817,894) (13,402) (60,010) (8,568) - - 546,472 816,512	Total liabilities from financing activities
		114,870,868 (27,296,257) (40,915) 134,606 87,668,302

Warranties(i) Balance at January 1, 2018 $ 1,546,960 Additions (Reversals) 176,092 Usage (259,109) Effect of change in exchange rate (74 ) Balance at December 31, 2018 1,463,869 Less: current (686,424 ) Noncurrent $ 777,445	Litigation and claims Others (in thousands) 89,520 249,483 336,061 570,898 - (187,842) 5,647 10,413 431,228 642,952 (431,228 ) (389,912 ) - 253,040	Total
		1,885,963 1,083,051 (446,951) 15,986 2,538,049 (1,507,564 ) 1,030,485

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Warranties(i) Balance at January 1, 2017 $ 1,528,898 Additions (Reversals) 315,760 Usage (297,829) Effect of change in exchange rate 131 Balance at December 31, 2017 1,546,960 Less: current (725,366 ) Noncurrent $ 821,594	Litigation and claims Others (in thousands) 1,027,328 265,445 90,945 4,346 (1,025,032) - (3,721 ) (20,308 ) 89,520 249,483 (89,520 ) (4,346 ) - 245,137	Total
		2,821,671 411,051 (1,322,861) (23,898 ) 1,885,963 (819,232 ) 1,066,731

(i) The provisions for warranties for the years ended December 31, 2018 and 2017 were estimated based on historical experience of warranty claims rate associated with similar products and services. The Company expects most warranty claims will be made within two years from the date of the sale of the product.

(20) Operating Leases

• a. Lessees

Future minimum lease payments under non-cancellable operating leases as of December 31, 2018 and 2017 were as follows:

Less than one year $ Between one and five years More than five years $	December 31,	December 31,
	2018 2017 (in thousands) 927,351 858,207 2,928,983 3,070,676 2,085,877 3,491,748 5,942,211 7,420,631	2017
		7,420,631

AUO entered into various operating lease agreements for land with Hsinchu Science Park Bureau beginning from March 1, 1994 for a period of 20 years, with renewal option upon expiration. AUO had on July 2003 and November 2006, entered into various operating lease for land with Central Science Park Administration Bureau for period from July 28, 2003 till December 31, 2023 and November 9, 2006 till December 31, 2025. All lease amounts are adjusted in accordance with the land value announced by the government from time to time.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AUO had also on February 2008 and October 2018, respectively, renewed its lease agreements with Hsinchu Science Park Bureau and Southern Taiwan Science Park Bureau, respectively, for the lands in Longtan Science Park and Kaohsiung Science Park. The period covers from February 9, 2008 till December 31, 2027 and October 23, 2018 till October 22, 2038, respectively. All lease amounts are adjusted in accordance with the land value announced by the government from time to time.

Rental expense for operating leases amounted to $1,064,263 thousand and $1,081,731 thousand for the years ended December 31, 2018 and 2017, respectively.

b. Lessor

The Company leased its investment properties to third parties under operating lease. Refer to note 6(14) for further information on investment properties.

Future minimum lease receivables under non-cancellable operating leases as of December 31, 2018 and 2017 were as follows:

Less than one year $ Between one and five years More than five years $	December 31,	December 31,
	2018 2017 (in thousands) 105,788 46,538 423,150 404,695 2,188,728 2,189,936 2,717,666 2,641,169	2017
		2,641,169

In addition to the above-mentioned, the Company also leased partial offices to others. See note 6(28) for rental income for the years ended December 31, 2018 and 2017. Repair and maintenance expenses incurred from aforementioned operating leases for the years ended December 31, 2018 and 2017 amounted to $1,723 thousand and $18,396 thousand, respectively.

(21) Employee Benefits

a. Defined benefit plans

Pursuant to the ROC Labor Standards Act, AUO has established a defined benefit pension plan covering their full-time employees in the ROC. This plan provides for retirement benefits to retiring employees based on years of service and the average salaries and wages for the six-month period before the employee’s retirement. The funding of this retirement plan by AUO is contributed monthly based on a certain percentage of employees’ total salaries and wages. The fund is deposited with Bank of Taiwan.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

M.Setek has established defined benefit pension plans providing for retirement benefits to retiring employees based on years of service, position, and certain other factors in accordance with the regulations of its country of establishment.

• (i) Reconciliation for AUO’s and M.Setek’s present value of defined benefit obligation and the fair value of plan assets

Present value of defined benefit obligation $ Fair value of plan assets Net defined benefit liability $	December 31, 2018 2017 (in thousands) (3,257,962) (3,128,927) 2,367,273 2,213,018 (890,689 ) (915,909 )

• (ii) Movement in net defined benefit asset (liability)

Balance at January 1, $ Included in profit or loss Service cost Interest cost Expected return on plan assets Included in other comprehensive income Remeasurements (loss) gain: Actuarial (loss) gain arising from: - demographic assumptions - financial assumptions - experience adjustment Return on plan assets excluding interest income Other Contributions paid by the employer Benefits paid Effect of changes in exchange rates and others **Balance at December 31, $ **	Defined benefit obligation 2018 2017 (3,128,927 ) (3,027,176 ) (5,289) (6,242) (49,598) (53,624) - - (54,887 ) (59,866 ) (15,795) (21,054) (178,212) (126,708) 84,437 66,016 - - (109,570 ) (81,746 ) - - 36,915 37,528 (1,493 ) 2,333 35,422 39,861 (3,257,962 ) (3,128,927 **) **	Fair value of plan assets 2018 2017 (in thousands) 2,213,018 2,105,690 - - - - 35,408 37,902 35,408 37,902 - - - - - - 52,614 (16,345 ) 52,614 (16,345 ) 102,831 102,870 (36,598) (17,099) - - 66,233 85,771 2,367,273 2,213,018	Net defined benefit asset(liability)	Net defined benefit asset(liability)
	2018 (3,128,927 ) (5,289) (49,598) - (54,887 ) (15,795) (178,212) 84,437 - (109,570 ) - 36,915 (1,493 ) 35,422 (3,257,962 **) **		2018 (915,909 ) (5,289) (49,598) 35,408 (19,479 ) (15,795) (178,212) 84,437 52,614 (56,956 ) 102,831 317 (1,493 ) 101,655 (890,689 )	2017
				(921,486 ) (6,242) (53,624) 37,902 (21,964 ) (21,054) (126,708) 66,016 (16,345 ) (98,091 ) 102,870 20,429 2,333 125,632 (915,909 )

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(iii) Plan assets

Pursuant to the ROC Labor Standards Act, AUO contributes an amount based on a certain percentage of employees’ total salaries and wages paid every month to its pension fund (the “Fund”), which is administered by the Bureau of Labor Fund, Ministry of Labor and supervised by the employees’ pension plan committee (the “Committee”) and deposited in the Committee’s name with Bank of Taiwan. Under the ROC Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, the minimum return on the plan assets should not be lower than the average interest rate on two-year time deposits published by the local banks. The government is not only responsible for the determination of the investment strategies and policies, but also for any shortfall in the event that the rate of return is less than the required rate of return.

As of December 31, 2018, the Fund deposited in the Committee’s name in the Bank of Taiwan amounted to $2,367,273 thousand. Information on utilization of labor pension funds, including the yield rate of funds and the component of plan assets are available at the Bureau of Labor Funds, Ministry of Labor website.

Under the defined benefit plans in Japan, M.Setek is responsible to pay to employees when they are retired.

• (iv) Defined benefit obligation

• (a) Principal actuarial assumptions

Discount rate Rate of increase in future salary	December 31,	December 31,
	2018 0.21%~1.22% 0.77%~4.49%	2017
		0.21%~1.60% 0.77%~4.49%

The Company anticipates contributing $102,831 thousand to the defined benefit plans in the next year starting from January 1, 2019.

As at December 31, 2018, the weighted-average duration of the defined benefit obligation was between 5 years to 20 years.

(Continued)

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Notes to Consolidated Financial Statements

• (b) Sensitivity analysis

Reasonably possible changes at December 31, 2018 and 2017 to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

Discount rate $ Rate of increase in future salary $	December 31, 2018 Changes in assumptions + 0.25% - 0.25% (in thousands) (160,307 ) 169,544 166,250 (158,100 )	December 31, 2017
		Changes in assumptions + 0.25% - 0.25% (in thousands) (158,160 ) 167,594 164,867 (156,470 )

In practical, the relevant actuarial assumptions are correlated to each other. The approach to develop the sensitivity analysis as above is the same approach to recognize the net defined benefit liability in the balance sheet.

The approach to develop the sensitivity analysis and its relevant actuarial assumptions are the same as those in previous year.

b. Defined contribution plans

Commencing July 1, 2005, pursuant to the ROC Labor Pension Act (the “Act”), employees who elected to participate in the Act or joined the Company after July 1, 2005, are subject to a defined contribution plan under the Act. Under the defined contribution plan, AUO and its subsidiaries located in the ROC contribute monthly at a rate of no less than six percent of the employees’ monthly salaries and wages to the employee’s individual pension fund account at the ROC Bureau of Labor Insurance. The Company’s foreign subsidiaries have set up their retirement plans, if necessary, based on their respective local government regulations.

AUO and its subsidiaries in the ROC have set up defined contribution plans in accordance with the Act. For the years ended December 31, 2018 and 2017, these companies set aside, $1,024,700 thousand and $1,003,063 thousand, respectively, of the pension costs under the pension plan to the ROC Bureau of the Labor Insurance. Except for the aforementioned companies, other foreign subsidiaries recognized pension expenses of $923,378 thousand and $892,109 thousand for the years ended December 31, 2018 and 2017, respectively, for the defined contribution plans based on their respective local government regulations.

(Continued)

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Notes to Consolidated Financial Statements

(22) Capital and Other Components of Equity

• a. Common stock

AUO’s authorized common stock, with par value of $10 per share, both amounted to $100,000,000 thousand as at December 31, 2018 and 2017.

AUO’s issued and outstanding common stock, with par value of $10 per share, both amounted to $96,242,451 thousand as at December 31, 2018 and 2017.

AUO’s ADSs were listed on the New York Stock Exchange. Each ADS represents 10 shares of common stock. As of December 31, 2018, AUO has issued 51,674 thousand ADSs, which represented 516,741 thousand shares of its common stock.

• b. Capital surplus

The components of capital surplus were as follows:

From common stock $ From convertible bonds From others $	December 31, 2018 2017 (in thousands) 52,756,091 52,756,091 6,049,862 6,049,862 1,816,090 1,734,373 60,622,043 60,540,326

According to the ROC Company Act, capital surplus, including premium from stock issuing and donations received, shall be applied to offset accumulated deficits before it can be distributed by issuing common stock as stock dividends or by cash according to the proportion of shareholdings. Pursuant to the ROC Regulations Governing the Offering and Issuance of Securities by Securities Issuers, the total sum of capital surplus capitalized per annum shall not exceed 10 percent of the paid-in capital.

c. Legal reserve

According to the ROC Company Act, 10 percent of the annual earnings after payment of income taxes shall be allocated as legal reserve until the accumulated legal reserve equals the paid-in capital. When a company incurs no loss, it may, pursuant to a resolution to be adopted by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by cash, only the portion of legal reserve which exceeds 25 percent of the paid-in capital may be distributed.

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Notes to Consolidated Financial Statements

d. Distribution of earnings

In accordance with AUO’s Articles of Incorporation, where 10 percent of the annual earnings, after payment of income taxes and offsetting accumulated deficits, if any, shall be set aside as a legal reserve until the accumulated legal reserve equals AUO’s paid-in capital. In addition, a special reserve in accordance with applicable laws and regulations shall also be set aside. The remaining current-year earnings together with accumulated undistributed earnings from preceding years can be distributed after the earnings distribution plan proposed by the board of directors is approved by resolution of the shareholders’ meeting.

AUO’s dividend policy is to pay dividends from surplus considering factors such as AUO’s current and future investment environment, cash requirements, domestic and overseas competitive conditions and capital budget requirements, while taking into account shareholders’ interest, maintenance of balanced dividend and AUO’s long-term financial plan. If the current-year retained earnings available for distribution reach 2% of the paid-in capital of AUO, dividend to be distributed shall be no less than 20% of the current-year retained earnings available for distribution. If the current-year retained earnings available for distribution do not reach 2% of the paid-in capital of AUO, AUO may decide not to distribute dividend. The cash portion of the dividend, which may be in the form of cash and stock, shall not be less than 10% of the total dividend distributed during the year. The dividend distribution ratio aforementioned could be adjusted by the shareholders’ meeting after taking into consideration factors such as finance, business and operations, etc.

Pursuant to relevant laws or regulations or as requested by the local authority, total net debit balance of the other components of equity shall be set aside from current earnings as special reserve, and not for distribution. Subsequent decrease pertaining to items that are accounted for as a reduction to the other components of equity shall be reclassified from special reserve to undistributed earnings.

AUO’s appropriations of earnings for 2016 had been approved in the shareholders’ meeting held on June 15, 2017. The appropriations and dividends per share were as follows:

Legal reserve $ Cash dividends to shareholders $	For fiscalyear 2016	For fiscalyear 2016
	Appropriation of earnings Dividends per share (in thousands, except for per share data) 781,894 5,389,577 $0.56 6,171,471	Dividends per share

(Continued)

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Notes to Consolidated Financial Statements

The aforementioned appropriation of earnings for 2016 was consistent with the resolutions of the board of directors’ meeting held on March 22, 2017.

AUO’s appropriations of earnings for 2017 had been approved in the shareholders’ meeting held on June 15, 2018. The appropriations and dividends per share were as follows:

Legal reserve $ Cash dividends to shareholders $	For fiscalyear 2017	For fiscalyear 2017
	Appropriation of earnings Dividends per share (in thousands, except for per share data) 3,235,942 14,436,368 $1.50 17,672,310	Dividends per share

The aforementioned appropriation of earnings for 2017 was consistent with the resolutions of the board of directors’ meeting held on March 23, 2018.

Information on the approval of board of directors and shareholders for AUO’s appropriations of earnings are available at the Market Observation Post System website.

e. Other components of equity

Balance at January 1, 2018 $ Adjustments on initial application of new standards Foreign operations – foreign currency translation differences Net change in fair value of financial assets at FVTOCI Equity-accounted investees – share of other comprehensive income Realized gain on sales of securities reclassified to profit or loss Cumulative unrealized loss of equity instruments transferred to retained earnings due to disposal Group reorganization Related tax Balance at December 31, 2018 $	Cumulative translation differences (1,120,969) - (336,902) - (19,716) (107,457) - (22,225) 157,359 (1,449,910 **) **	Unrealized gains (losses) on financial assets at FVTOCI Unrealized gains (losses) on available- for-sale financial assets (in thousands) - 1,377,031 1,303,816 (1,377,031) - - (754,813) - 3,053 - - - 50,084 - - - - - 602,140 -	Total
			256,062 (73,215) (336,902) (754,813) (16,663) (107,457) 50,084 (22,225) 157,359 (847,770 )

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Balance at January 1, 2017 $ Foreign operations – foreign currency translation differences Effective portion of changes in fair value of cash flow hedges Net change in fair value of available- for-sale financial assets Equity-accounted investees – share of other comprehensive income Related tax Balance at December 31, 2017 $	Cumulative translation differences 536,819 (1,882,545) - - (68,637) 293,394 (1,120,969 **) **	Unrealized gains (losses) on available- for-sale financial assets Unrealized gains (losses) on cash flow hedges (in thousands) 224,299 18,254 - - - (21,992) 1,146,422 - 6,310 - - 3,738 1,377,031 -	Total 779,372 (1,882,545) (21,992) 1,146,422 (62,327) 297,132 256,062

• f. Non-controlling interests, net of tax

Balance at the beginning of the year $ Equity attributable to non-controlling interests: Loss for the year Adjustment of changes in ownership of investees Foreign currency translation differences Unrealized loss on financial assets at FVTOCI Remeasurement of defined benefit plans Group reorganization Effect of disposal of interest in subsidiary to non- controlling interests Others Balance at the end of the year $

For the years ended December 31, 2018 2017 (in thousands) 17,090,747 18,390,483 (2,200,703) (2,100,929) (20,996) (6,262) (306,963) (355,700) (1,474) - - 201 2,701 - - 1,258,788 (147,339 ) (95,834 ) 14,415,973 17,090,747

(23) Share-based Payments

The Company’s employee stock option plans were as follows:

• a. DPTW Option Plan

DPTW 2011 Employee stock option plan was fully expired on January 6, 2017.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Information about DPTW’s outstanding stock options is as follows:

Outstanding at January 1 Options expired Outstanding at December 31 Exercisable at December 31	For the year ended December 31, 2017 Weighted-average exercise price (per share) Number of options (shares) $ 19.04 2,913,000 - (2,913,000 ) - - -
	Weighted-average exercise price (per share) $ 19.04 - -

• b. ACTW Option Plan

• (i) The key terms and conditions related to the grants under ACTW’s outstanding employee stock option plan were disclosed as follows:

2014 Employee stock option plan	Grant date	Total number of options issued (units in thousands)	Contractual life of options	Exercisable period	Exercise price (per share)
	Sep. 1, 2014	20	Sep.1, 2014 – Aug. 31, 2019	After Aug. 31, 2016	$10

ACTW 2012 Employee stock option plan was fully expired on August 31, 2017.

• (ii) The related employee benefit expenses and capital surplus recognized on ACTW’s employee stock options were $167 thousand and $474 thousand for the years ended December 31, 2018 and 2017, respectively.

• (iii) The fair value of the employee stock options granted by ACTW was measured at the dates of grant using the Binomial option pricing model. The valuation information was as follows:

Expected volatility Risk-free interest rate Expected duration Fair value at the grant date	2014 Employee Stock Option Plan
	38.88% 1.1648% 5 years NT$0.20/per share

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(iv) Information about ACTW’s outstanding stock options is as follows:

Outstanding at January 1 Options exercised Options expired Outstanding at December 31 Exercisable at December 31	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
	2018			2017
	Weighted- average exercise price (per share) $ 10 10 - 10	Number of options (shares)		Weighted- average exercise price (per share) $ 10 10 - 10	Number of options (shares)
		16,601,000 (2,260,000) (1,050,000 ) 13,291,000			29,209,000 (1,162,000) (11,446,000 )
					16,601,000
		13,291,000			12,425,000

(24) Revenue from Contracts with Customers

Primary geographical markets: PRC (including Hong Kong) $ Taiwan Singapore Japan Others $ Major products: Products for Televisions $ Products for Mobile PCs and Devices Products for Monitors Products for Commercial and Others(i) Solar Products $ Major customers: Customer A $ Others (individually not greater than 10%) **$ **	For theyear ended December 31, 2018	For theyear ended December 31, 2018	For theyear ended December 31, 2018
	Display segment 112,542,529 93,126,115 39,363,415 19,748,373 26,004,322 290,784,754 113,194,567 74,375,305 47,024,353 56,190,529 - 290,784,754 35,358,013 255,426,741 290,784,754	Energy segment (in thousands) 1,089,508 6,231,767 7,515 1,418,491 8,102,354 16,849,635 - - - - 16,849,635 16,849,635 - 16,849,635 16,849,635	Total segments
			113,632,037 99,357,882 39,370,930 21,166,864 34,106,676
			307,634,389
			113,194,567 74,375,305 47,024,353 56,190,529 16,849,635
			307,634,389
			35,358,013 272,276,376
			307,634,389

(i) Others include sales from products for other applications and sales of raw materials, components and from service charges.

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Notes to Consolidated Financial Statements

Refer to note 6(25) and note 14 for revenue related information for the year ended December 31, 2017.

(25) Revenue

Sale of goods $ Other operating revenue $	For the year ended December 31, 2017
	(in thousands) 329,584,136 11,444,131
	341,028,267

Refer to note 6(24) for the disaggregation of revenue for the year ended December 31, 2018.

(26) Remuneration to Employees and Directors

According to AUO’s Articles of Incorporation, AUO should distribute remuneration to employees and directors no less than 5% and no more than 1% of annual profits before income tax, respectively, after offsetting accumulated deficits, if any. Only employees, including employees of affiliate companies that meet certain conditions are entitled to the abovementioned remuneration which to be distributed in stock or cash. The said conditions and distribution method are decided by board of directors or the personnel authorized by board of directors.

AUO accrued remuneration to employees based on the profit before income tax excluding the remuneration to employees and directors for each period, multiplied by the percentage resolved by board of directors. For the years ended December 31, 2018 and 2017, AUO estimated the remuneration to employees amounting to $1,215,696 thousand and $4,062,114 thousand, respectively. Remuneration to directors was estimated based on the amount expected to pay and recognized together with the remuneration to employees as cost of sales or operating expenses. If remuneration to employees is resolved to be distributed in stock, the number of shares is determined by dividing the amount of remuneration by the closing price of the shares (ignoring ex-dividend effect) on the day preceding the board of directors’ meeting. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are accounted for as a change in accounting estimate and adjusted prospectively to next year’s profit or loss.

Remuneration to employees and directors for 2017 in the amounts of $4,062,114 thousand and $132,604 thousand, respectively, in cash for payment had been approved in the meeting of board of directors held on March 23, 2018. The aforementioned approved amounts are the same as the amounts charged against earnings of 2017.

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Notes to Consolidated Financial Statements

Remuneration to employees and directors for 2016 in the amounts of $1,107,486 thousand and $24,226 thousand, respectively, in cash for payment had been approved in the meeting of board of directors held on March 22, 2017. The aforementioned approved amounts are the same as the amounts charged against earnings of 2016.

The information about AUO’s remuneration to employees and directors is available at the Market Observation Post System website.

(27) Additional Information of Expenses by Nature

Employee benefits expenses: Salaries and wages Labor and health insurances Retirement benefits Other employee benefits Depreciation Amortization		For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
		2018			2017
	Recognized in cost of sales $ 27,135,370 1,511,793 1,585,950 3,222,160 29,980,415 518,403	Recognized in operating expenses	Total		Recognized in operating expenses	Total
		7,798,555 497,859 381,607 617,828 3,706,146 22,566			8,838,450 490,166 360,762 507,512 4,140,951 -	37,818,321 1,967,688 1,917,136 3,197,324 35,801,230 628,606

(28) Other Income

Interest income on bank deposits $ Interest income on government bonds with reverse repurchase agreements and others Rental income, net Dividend income Grants Others $	For the years ended December 31,	For the years ended December 31,
	2018 2017 (in thousands) 832,621 591,995 8,994 20,215 628,401 531,442 468,263 248,514 2,716,197 1,801,585 757,649 636,146 5,412,125 3,829,897	2017
		3,829,897

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Notes to Consolidated Financial Statements

(29) Other Gains and Losses

Foreign exchange losses, net $ Gains on valuation of financial instruments at FVTPL, net Gains on disposals of investments and financial assets, net Gains on disposals of property, plant and equipment, net Impairment losses on assets Litigation losses and others $	For the years ended December 31, 2018 2017 (in thousands) (41,391) (1,364,929) 507,532 1,646,034 - 42,788 1,923,044 330,814 (399,363) (1,046,668) (501,770 ) (584,599 ) 1,488,052 (976,560 )

(30) Finance Costs

Interest expense on bank borrowings $ Interest expense on others $	For the years ended December 31,	For the years ended December 31,
	2018 2017 (in thousands) 2,442,872 2,519,839 220,733 348,022 2,663,605 2,867,861	2017
		2,867,861

(31) Income Taxes

According to the amendment to the ROC Income Tax Act enacted on February 7, 2018, an increase in the corporate income tax rate from 17% to 20% is applicable to AUO and its domestic subsidiaries starting from fiscal year 2018 and beyond.

The Company cannot file a consolidated tax return under local regulations. Therefore, AUO and its subsidiaries calculate their income taxes liabilities individually on a stand-alone basis using the enacted tax rates in their respective tax jurisdictions.

(Continued)

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Notes to Consolidated Financial Statements

a. Income tax expenses

The components of income tax expense for the years ended December 31, 2018 and 2017 were as follows:

Current income tax expense: Current year $ Adjustment to prior years and others Deferred tax expense (benefit): Temporary differences Investment tax credit and tax losses carryforwards Effect of changes in statutory income tax rate Total income tax expense $	For the years ended December 31, 2018 2017 (in thousands) 2,400,949 936,960 (127,281 ) 766,122 2,273,668 1,703,082 (632,785) (102,892) 1,998,662 7,504,928 (383,289 ) - 982,588 7,402,036 3,256,256 9,105,118

Income taxes expense (benefit) recognized directly in other comprehensive income for the years ended December 31, 2018 and 2017 were as follows:

Items that will never be reclassified to profit or loss: Remeasurement of defined benefit obligations $ Items that are or may be reclassified subsequently to profit or loss: Foreign operations – foreign currency translation differences $ Cash flow hedges $	For the years ended December 31, 2018 2017 (in thousands) (38,908 ) (16,675 ) (191,809) (310,559) - (3,738 ) (191,809 ) (314,297 )

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Notes to Consolidated Financial Statements

Reconciliation of the expected income tax expense (benefit) calculated based on the ROC statutory income tax rate compared with the actual income tax expense (benefit) as reported in the consolidated statements of comprehensive income for the years ended December 31, 2018 and 2017, was as follows:

Income tax expense at AUO’s statutory tax rate $ Tax on undistributed earnings, net Effect of different subsidiaries income tax rate Effect of changes in statutory income tax rate Share of profit (loss) of equity-accounted subsidiaries Net of non-taxable income and non-deductible expense Effect of change of unrecognized deductible temporary differences, tax losses carryforwards, and investment tax credits Adjustments to prior year Others Income tax expense $ Effective tax rate

For the years ended December 31, 2018 2017 (in thousands) 2,243,230 6,691,813 1,279,810 167,517 (484,055) 348,192 (383,289) - 774,165 (702,601) (165,663) (43,470) 138,969 1,847,601 (127,281) 765,113 (19,630 ) 30,953 3,256,256 9,105,118 29.03% 23.13%

The above reconciliation is prepared based on each individual entity of the Company and presented on an aggregate basis.

• b. Deferred tax assets and liabilities

Deferred tax assets have not been recognized in respect of the following items.

Deductible temporary differences $ Unused investment tax credits Unused tax losses carryforwards $	December 31,	December 31,
	2018 2017 (in thousands) 2,638,778 2,770,941 853,837 706,648 28,697,671 25,868,554 32,190,286 29,346,143	2017
		29,346,143

The unused investment tax credits with no expiration for the year ended December 31, 2018 from AUST and ACMK were $837,960 thousand and $15,877 thousand, respectively.

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Notes to Consolidated Financial Statements

Tax loss carryforwards is utilized in accordance with the relevant jurisdictional tax laws and regulations. Net losses from foreign subsidiaries are approved by tax authorities in respective jurisdiction to offset future taxable profits. Under the ROC tax laws, approved tax losses of AUO and its domestic subsidiaries can be carried forward for 10 years to offset future taxable profits.

As of December 31, 2018, the expiration period for abovementioned unrecognized deferred tax assets of unused tax losses carryforwards were as follows:

Year of assessment 2009 $ 2010 2011 2012 2013 2014 2015 2016 2017 2018 (estimated) $	Unrecognized deferred tax assets (in thousands) 8,662 602,694 1,143,264 10,532,962 1,748,462 2,416,663 4,291,923 4,339,100 2,356,880 1,257,061 28,697,671	Expiration inyear
		2019 2019 2020 ~ 2021 2021 ~ 2022 2022 ~ 2023 2019 ~ 2024 2019 ~ 2025 2020 ~ 2026 2021 ~ 2027 2023 ~ 2028

As of December 31, 2018, the aggregate taxable temporary differences associated with investments in subsidiaries not recognized as deferred tax liabilities amounted to $15,301 thousand.

The components of and changes in deferred tax assets and liabilities were as follows:

Investment tax credits $ Tax losses carryforwards Unrealized loss and expenses Inventories write-down Foreign investment gains under the equity method Accumulated amortization of goodwill in accordance with local tax laws Remeasurement of defined benefit plans Others **$ **	Deferred	tax assets	Deferred tax liabilities	Deferred tax liabilities	Total	Total
	December 31, 2018	December 31, 2017	December 31, 2018	December 31, 2017	December 31, 2018	December 31, 2017
	542,115 2,760,163 310,192 1,027,680 - - 194,838 1,797,680 6,632,668	656,480 3,942,012 284,084 644,887 - - 155,930 1,385,621 7,069,014			542,115 2,760,163 304,636 1,027,680 (1,049,091) (2,213,429) 194,838 1,220,163 2,787,075	656,480 3,942,012 222,739 644,887 (890,153) (1,881,415) 155,930 698,892
						3,549,372

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Notes to Consolidated Financial Statements

Deferred tax assets (liabilities): Investment tax credits $ Tax losses carryforwards Unrealized loss and expenses Inventories write-down Foreign investment losses (gains) under the equity method Accumulated amortization of goodwill in accordance with local tax laws Remeasurement of defined benefit plans Cash flow hedges Others **$ **	January 1, 2017 840,112 11,324,417 367,091 587,346 (1,091,023) (1,881,415) 139,255 (3,738) 377,400 10,659,445	Recognized in profit or loss (121,696) (7,383,232) (140,760) 57,791 200,870 - - - (15,009 ) (7,402,036 **) **	Recognized in other comprehensive income	Effect of change in consolidated entities, exchange rate and others	December 31, 2017 Recognized in profit or loss (in thousands) 656,480 (132,840) 3,942,012 (1,181,429) 222,739 81,893 644,887 386,558 (890,153) (158,938) (1,881,415) (332,014) 155,930 - - - 698,892 354,182 3,549,372 (982,588 **) **	Recognized in other comprehensive income	Effect of change in consolidated entities, exchange rate and others	December 31, 2018
			- - - - - - 16,675 3,738 310,559	(61,936) 827 (3,592) (250) - - - - 25,942 (39,009 **) **		- - - - - - 38,908 - 191,809 230,717	18,475 (420) 4 (3,765) - - - - (24,720 ) (10,426 **) **	542,115 2,760,163 304,636 1,027,680 (1,049,091) (2,213,429) 194,838 - 1,220,163
			330,972					2,787,075

c. Assessments by the tax authorities

As of December 31, 2018, the tax authorities have completed the examination of income tax returns of AUO through 2016.

(32) Earnings per Share

Basic earnings per share Profit attributable to AUO’s shareholders $ Weighted-average number of common shares outstanding during the year Basic earnings per share $ Diluted earnings per share Profit attributable to AUO’s shareholders $ Weighted-average number of common shares outstanding during the year Effect of employee remuneration in stock Diluted earnings per share **$ **	For the years ended December 31,	For the years ended December 31,
	2018 (in thousands, share 10,160,598 9,624,245 1.06 10,160,598 9,624,245 164,609 9,788,854 1.04	2017
		except for per data) 32,359,417 9,624,245 3.36 32,359,417 9,624,245 347,903 9,972,148 3.24

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(33) Financial Instruments

• a. Fair value and carrying amount

The carrying amounts of the Company’s current non-derivative financial instruments, including financial assets at amortized cost (loans and receivables) and financial liabilities at amortized cost, were considered to approximate their fair value due to their short-term nature. This methodology applies to cash and cash equivalents, receivables or payables (including related parties), other current financial assets, and short-term borrowings.

Except for aforementioned financial instruments, the carrying amount and fair value of other financial instruments of the Company as of December 31, 2018 and 2017 were as follows:

December 31, 2018 December 31, 2017 Carrying Amount Fair Value Carrying Amount Fair Value (in thousands) Financial assets: Financial assets at FVTPL: Financial assets mandatorily measured at FVTPL $ 1,709,531 1,709,531 - - Financial assets held for trading - - 70,366 70,366 Financial assets at FVTOCI 6,979,925 6,979,925 - - Available-for-sale financial assets－ noncurrent - - 4,170,319 4,170,319 Financial assets at amortized cost (loans and receivables): Long-term receivables 930,001 930,001 1,790,400 1,790,400 Refundable deposits 716,097 716,097 515,148 515,148 Financial liabilities: Financial liabilities at FVTPL: Financial liabilities held for trading 22,115 22,115 106,597 106,597 Financial liabilities at amortized cost: Long-term borrowings (including current installments) 86,305,318 86,305,318 110,608,010 110,608,010 Guarantee deposits 816,512 816,512 838,482 838,482	December 31, 2018	December 31, 2018	December 31, 2017	December 31, 2017
	Carrying Amount	Fair Value	Carrying Amount	Fair Value
				- 70,366 - 4,170,319 1,790,400 515,148 106,597 110,608,010 838,482

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• b. Valuation techniques and assumptions applied in fair value measurement

The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market prices. The fair values of other financial assets and financial liabilities without quoted market prices are estimated using valuation approach. The estimates and assumptions used are the same as those used by market participants in the pricing of financial instruments.

Fair value of foreign currency forward contract is measured based on the maturity date of each contract with quoted spot rate and quoted swap points from Reuters quote system.

Fair value of structured investment product is measured based on the discounted future cash flows arising from principal consideration and probable gains estimate to be received.

Fair value of long-term receivable is determined by discounting the expected cash flows at a market interest rate.

The refundable deposits and guarantee deposits are based on carrying amount as there is no fixed maturity.

The fair value of floating-rate long-term borrowings approximates to their carrying value.

The Company refers to the quoted spot rates from Reuters quote system for US Dollar’s closing price and other currencies’ buy rates, which has been applied consistently to all periods presented and served as the basis for retranslation of the fair value of abovementioned financial instruments that denominated in foreign currencies.

• c. Fair value measurements recognized in the consolidated balance sheets

The Company determines fair value based on assumptions that market participants would use in pricing an asset or a liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• (i) Level 1 inputs: Unadjusted quoted prices for identical assets or liabilities in active markets.

• (ii) Level 2 inputs: Other than quoted prices included within Level 1, inputs are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

(Continued)

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Notes to Consolidated Financial Statements

• (iii) Level 3 inputs: Derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair value measurement level of an asset or a liability within their fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

Level 1 December 31, 2018 Financial assets at FVTPL: Financial assets mandatorily measured at FVTPL $ - Financial assets at FVTOCI 6,803,900 Financial assets at amortized cost: Long-term receivables - Financial liabilities at FVTPL: Financial liabilities held for trading - December 31, 2017 Financial assets at FVTPL: Financial assets held for trading $ - Available-for-sale financial assets－ noncurrent 4,170,319 Loans and receivables: Long-term receivables - Financial liabilities at FVTPL: Financial liabilities held for trading -	Level 2 Level 3 (in thousands) 1,709,531 - - 176,025 930,001 - 22,115 - 70,366 - - - 1,790,400 - 106,597 -	Total
		1,709,531 6,979,925 930,001 22,115 70,366 4,170,319 1,790,400 106,597

There were no transfers between Level 1 and 2 for the years ended December 31, 2018 and 2017.

d. Reconciliation for fair value measurements categorized within Level 3

Financial assets at FVTOCI－equity instruments without quoted market prices Balance at the beginning of the year $ Adjustments on initial application of IFRS 9 Net gains included in other comprehensive income Purchases Disposals Balance at the end of the year $	For the year ended December 31, 2018
	(in thousands) - 177,815 9,990 34,157 (45,937 ) 176,025

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• e. Description of valuation processes and quantitative disclosures for fair value measurements categorized within Level 3

The Company’s management reviews the policy and procedures of fair value measurements at least once at the end of the annual reporting period, or more frequently as deemed necessary. When a fair value measurement involves one or more significant inputs that are unobservable, the Company monitors the valuation process discreetly and examines whether the inputs are used the most relevant market data available.

Item Financial assets at FVTOCI–equity investments without active market	Valuation technique Market approach	Significant unobservable inputs � Price-Book ratio (0.99~5.2 at Dec. 31, 2018) � Price-Earnings ratio (14.69~112.13 at Dec. 31, 2018) � Discount for lack of marketability (20% at Dec. 31, 2018)	Inter-relationship between significant unobservable inputs and fairvalue measurement
			� The higher the price- book ratio is, the higher the fair value is. � The higher the price- earnings ratio is, the higher the fair value is. � The greater degree of lack of marketability is, the lower the fair value is.

(34) Financial Risk Management

• a. Risk management framework

The managerial officers of related divisions are appointed to review, control, trace and monitor the strategic risks, financial risks and operational risks faced by the Company. The managerial officers report to executive officers the progress of risk controls from time to time and, if necessary, report to the board of directors, depending on the extent of impact of risks.

• b. Financial risk information

Hereinafter discloses information about the Company’s exposure to variable risks, and the goals, policies and procedures of the Company’s risk measurement and risk management.

(Continued)

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Notes to Consolidated Financial Statements

The Company is exposed to the following risks due to usage of financial instruments:

• (i) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company’s exposures to credit risk are mainly from:

• (a) The carrying amount of financial assets recognized in the consolidated balance sheets.

• (b) The amount of contingent liabilities as a result from the Company providing financial guarantee to its customers.

The Company’s potential credit risk is derived primarily from cash in bank, cash equivalents and trade receivables. The Company deposits its cash and cash equivalent investments with various reputable financial institutions of high credit quality. The Company also entered into reverse repurchase agreements with securities firms or banks in Taiwan covering government bonds that classified as cash equivalents. There should be no major concerns for the performance capability of trading counterparts. Management performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution. Management believes that there is a limited concentration of credit risk in cash and cash equivalent investments.

The majority of the Company’s customers are in high technology industries. Management continuously evaluates and controls the credit quality, credit limit and financial strength of its customers to ensure any overdue receivables are taken necessary procedures. The Company also flexibly makes use of prepayments, accounts receivable factoring and credit insurance as credit enhancement instruments. If necessary, the Company will request collaterals or assurance from its customers in order to reduce the credit risk from particular customers.

Additionally, on the reporting date, the Company reviews the recoverability of its receivables to provide appropriate valuation allowances. Consequently, management believes there is a limited concentration of its credit risk.

For the years ended December 31, 2018 and 2017, the Company’s five largest customers accounted for 36.6% and 39.0%, respectively, of the Company’s consolidated net revenue. There is no other significant concentration of credit risk.

Refer to note 6(6) for expected credit loss analysis of accounts receivable and the movement in the loss allowance of accounts receivable.

(Continued)

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Notes to Consolidated Financial Statements

For credit of guarantee, the Company’s policy is to provide financial guarantees only to subsidiaries. Refer to note 13(1)b. for information about endorsements or guarantees provided by the Company to its subsidiaries as of December 31, 2018.

(ii) Liquidity risk

Liquidity risk is the risk that the Company has no sufficient working capital and unused credit facilities to meet its obligations associated with matured financial liabilities, that may resulting from an economic downturn or uneven demand and supply in the market and cause a significant decrease in product selling prices and market demands.

Liquidity risk of the Company is monitored through its corporate treasury department which tracks the development of the actual cash flow position for the Company and uses input from a number of sources in order to forecast the overall liquidity position both on a short and long term basis. Corporate treasury invests surplus cash in money market deposits with appropriate maturities to ensure sufficient liquidity is available to meet liabilities when due, without incurring unacceptable losses or risking damage to the Company’s reputation. As at December 31, 2018, the Company’s working capital together with existing unused credit facilities under its existing loan agreements will be sufficient to fulfill all of its contractual obligations. Therefore, management believes that there is no liquidity risk resulting from incapable of financing to fulfill the contractual obligations.

The following, except for payables (including related parties) and equipment and construction payable, are the contractual maturities of other financial liabilities. The amounts include estimated interest payments (except for short-term borrowings) but exclude the impact of netting agreements.

December 31, 2018 Non-derivative financial liabilities: Short-term borrowings $ Long-term borrowings (including current installments) Refundable deposits Derivative financial instruments: Foreign currency forward contracts－inflows Foreign currency forward contracts－outflows $	Contractual cash flows 546,472 92,485,536 816,512 (12,453,853) 12,436,885 93,831,552	2019.1.1~ 2019.12.31 546,472 31,854,500 36,977 (12,453,853) 12,436,885 32,420,981	2020.1.1~ 2021.12.31 2022.1.1~ 2023.12.31 (in thousands) - - 45,935,987 14,395,139 - - - - - - 45,935,987 14,395,139	2024 and thereafter
				- 299,910 779,535 - -
				1,079,445

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Notes to Consolidated Financial Statements

December 31, 2017 Non-derivative financial liabilities: Short-term borrowings $ Long-term borrowings (including current installments) Refundable deposits Derivative financial instruments: Foreign currency forward contracts－inflows Foreign currency forward contracts－outflows $	Contractual cash flows 3,424,376 119,344,944 838,482 (22,124,574) 22,170,245	2018.1.1~ 2018.12.31 3,424,376 10,941,692 33,510 (22,124,574) 22,170,245	2019.1.1~ 2020.12.31 2021.1.1~ 2022.12.31 (in thousands) - - 68,455,501 33,892,568 9,902 - - - - - 68,465,403 33,892,568	2023 and thereafter - 6,055,183 795,070 - - 6,850,253
	123,653,473	14,445,249

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

(iii) Market risk

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

The Company buys and sells derivatives, and also incurs financial assets and liabilities, in order to manage market risks. All such transactions are executed in accordance with the Company’s handling procedures for conducting derivative transactions, and also monitored by internal audit department.

(a) Currency risk

The Company is exposed to currency risk on foreign currency denominated financial assets and liabilities arising from operating, financing and investing activities such that the Company uses forward exchange contracts to hedge its currency risk. Gains and losses derived from the foreign currency fluctuations on underlying assets and liabilities are likely to offset. However, transactions of derivative financial instruments help minimize the impact of foreign currency fluctuations, but the risk cannot be fully eliminated.

The Company periodically examines portions exposed to currency risks for individual asset and liability denominated in foreign currency and uses forward contracts as hedging instruments to hedge positions exposed to risks. The contracts have maturity dates that do not exceed six months, and do not meet the criteria for hedge accounting.

(Continued)

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Notes to Consolidated Financial Statements

• I. Exposure of currency risk

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

December 31, 2018 December 31, 2017 Foreign currency amounts Exchange rate NTD Foreign currency amounts Exchange rate NTD (in thousands) (in thousands) (in thousands) (in thousands) Financial assets Monetary items USD $ 2,092,501 30.8020 64,453,216 2,084,406 29.840 62,198,675 JPY 11,872,572 0.2775 3,294,639 10,228,194 0.2644 2,704,334 EUR 29,681 35.2036 1,044,878 46,517 35.632 1,657,494 Non-monetary items USD 2,799 30.8020 86,215 3,300 29.840 98,472 RMB 20,258 4.4813 90,782 19,426 4.5697 88,771 Financial liabilities Monetary items USD 1,188,175 30.8020 36,598,166 1,048,371 29.840 31,283,391 JPY 25,296,499 0.2775 7,019,778 27,100,546 0.2644 7,165,384 EUR 209 35.2036 7,358 418 35.632 14,894	December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2017	December 31, 2017	December 31, 2017
	Foreign currency amounts	Exchange rate	NTD	Foreign currency amounts	Exchange rate	NTD
						(in thousands) 62,198,675 2,704,334 1,657,494 98,472 88,771 31,283,391 7,165,384 14,894

II. Sensitivity analysis

The Company’s exposure to foreign currency risk arises mainly from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, trade receivables, loans and borrowings and trade payables that are denominated in foreign currency. Depreciation or appreciation of the NTD by 1% against the USD, EUR and JPY at December 31, 2018 and 2017, while all other variables were remained constant, would have increased or decreased the net profit before tax for the years ended December 31, 2018 and 2017 as follows:

		For the years	ended
		December	31,
		2018	2017
		(in thousands)
1% of depreciation	$	251,674	280,968
1% of appreciation		(251,674)	(280,968)

(Continued)

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Notes to Consolidated Financial Statements

III. Foreign exchange gain (loss) on monetary items

With varieties of functional currencies within the consolidated entities of the Company, the Company disclosed foreign exchange gain (loss) on monetary items in aggregate. The aggregate of realized and unrealized foreign exchange losses for the years ended December 31, 2018 and 2017 were $41,391 thousand and $1,364,929 thousand, respectively.

(b) Interest rate risk

The Company’s exposure to changes in interest rates is mainly from floatingrate long-term debt obligations. Any change in interest rates will cause the effective interest rates of long-term borrowings to change and thus cause the future cash flows to fluctuate over time. The Company will, depending on the market condition, enter into and designate interest rate swaps as hedges of the variability in cash flows attributable to interest rate risk.

The following sensitivity analysis is determined based on the exposure to interest rate risk. For floating-rate debts, the analysis assumes that the balances of outstanding debts at the end of the reporting period had been outstanding for the entire year.

For the Company’s floating-rate debts, assuming all other variables were remained constant, an increase or a decrease in the interest rate by 0.25% would have resulted in a decrease or an increase in the net profit before tax for the years ended December 31, 2018 and 2017 by $216,955 thousand and $277,612 thousand, respectively.

(c) Equity price risk

See note 6(3) and note 6(4) for disclosure of equity price risk analysis.

(35) Capital Management

Through clear understanding and managing of significant changes in external environment, related industry characteristics, and corporate growth plan, the Company manages its capital structure to ensure it has sufficient financial resources to sustain proper liquidity, to invest in capital expenditures and research and development expenses, to repay debts and to distribute dividends in accordance to its plan. The management pursues the most suitable capital structure by monitoring and maintaining proper financial ratios as below. The Company aims to enhance the returns of its shareholders through achieving an optimized debt-toequity ratio from time to time.

(Continued)

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Notes to Consolidated Financial Statements

	December 31,	December 31,
	2018	2017
	(in thousands)
Total liabilities	$ 192,553,087	216,206,169
Total equity	217,278,688	225,245,115
Interest-bearing debts	86,851,790	114,032,386
Debt-to-equity ratio	89%	96%
Interest-bearing debt-to-equity ratio	40%	51%
Net debt-to-equity ratio(i)	8%	4%

(i) Net debt-to-equity ratio is defined as interest-bearing debts less cash and cash equivalents divided by total equity.

7. Related-party Transactions

All inter-company transactions and balances between AUO and its subsidiaries are eliminated in the consolidated financial statements and are not disclosed in this note. The transactions between the Company and its related parties are set out as follows:

(1) Name and relationship of related parties

The following is a summary of related parties that have had transactions with the Company during the periods presented in the consolidated financial statements.

Name of relatedparty Lextar Electronics Corporation (“Lextar”) Lextar Electronics (Suzhou) Co., Ltd. (“LESZ”) Lextar Electronics (Xiamen) Co., Ltd. (“LEXM”) Lextar Electronics (Chuzhou) Corp. (“LEXCZ”) Wellybond Corporation (“WBC”) Raydium Semiconductor Corporation (“Raydium”) Dazzo Technology Corporation (“Dazzo”) Star River Energy Corp. (“SREC”) Sungen Power Corporation (“SGPC”) Evergen Power Corporation (“EGPC”) Star Shining Energy Corporation (“SSEC”) Fargen Power Corporation (“FGPC”) Sheng Li Energy Corporation (“SLEC”) ChampionGen Power Corporation (“CGPC”)

Relationship with the Company

Associate of the Company Subsidiary of Lextar Subsidiary of Lextar Subsidiary of Lextar Subsidiary of Lextar Associate of the Company Subsidiary of Raydium Associate of the Company Subsidiary of SREC Subsidiary of SREC Associate of the Company Subsidiary of SSEC Subsidiary of SSEC Subsidiary of SSEC(i)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of relatedparty TronGen Power Corporation (“TGPC”) WishMobile, Inc. (“WMI”) Daxin Materials Corp. (“Daxin”) Darwin Summit Co., Ltd. (“DSC”) BVCH Optronics (Sichuan) Corp. (“BVCH”) Evonik Forhouse Optical Polymers Corp. (“EFOP”) Wibase Industrial Solutions Inc. (“WIS”) Qisda Corporation (“Qisda”) BenQ Corporation (“BenQ”) BenQ Materials Corp. (“BMC”) Qisda (Suzhou) Co., Ltd. (“QCSZ”) Qisda Electronics (Suzhou) Co., Ltd. (“QCES”) Qisda Optronics (Suzhou) Co., Ltd. (“QCOS”) Qisda Japan Co., Ltd. (“QJTO”) BenQ Europe B.V. (“BQE”) BenQ Asia Pacific Corp. (“BQP”) BenQ America Corporation (“BQA”) Mainteq Europe B.V. (“MQE”) BenQ Co., Ltd. (“BQC”) BenQ Logistic (Shanghai) Co., Ltd. (“BQls”) BenQ Guru Software Co., Ltd. (“GSS”) BenQ Guru Corporation (“GST”) BenQ Material (Suzhou) Co., Ltd. (“BMS”) Daxon Biomedical (Suzhou) Co., Ltd. (“DTB”) Suzhou BenQ Hospital Co., Ltd. (“QCHS”) DFI Inc. (“DFI”) BenQ Foundation

Relationship with the Company

Subsidiary of SSEC Associate of the Company Associate of the Company Associate of the Company Joint venture of the Company Joint venture of the Company DPTW represented as a director of WIS AUO’s director Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Substantive related party

(i) The Company disposed all its shareholdings in CGPC to SSEC, an associate of the Company, in September 2018. Refer to note 6(12) for the related disclosures.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

• (2) Compensation to key management personnel

Key management personnel’s compensation comprised:

		For the years	ended
		December	31,
		2018	2017
		(in thousands)
Short-term employee benefits	$	345,019	566,231
Post-employment benefits		2,547	2,244
	$	347,566	568,475

• (3) Except for otherwise disclosed in other notes to the consolidated financial statements, the Company’s significant related party transactions and balances were as follows:

• a. Sales

				Accounts receivable	Accounts receivable
		Sales		from relatedparties
		For the years	ended
		December	31,	December 31,
		2018	2017	2018	2017
			(in thousands)
Associates	$	1,898,336	1,216,868	696,423	184,948
Others		12,050,450	11,959,720	2,057,830	1,668,114
	**$ **	13,948,786	13,176,588	2,754,253	1,853,062

The collection terms for sales to related parties were 30 to 55 days from the end of the month during which the invoice is issued. The pricing for sales to related parties were not materially different from those with third parties.

b. Purchases

				Notes and accounts payable	Notes and accounts payable
		Purchases		to relatedparties
		For the years	ended
		December	31,	December 31,
		2018	2017	2018	2017
			(in thousands)
Associates	$	9,185,563	8,667,555	3,664,742	3,233,050
Joint ventures		1,449,636	1,057,106	-	-
Others		18,589,791	17,549,228	4,496,444	4,431,681
	**$ **	29,224,990	27,273,889	8,161,186	7,664,731

(Continued)

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Notes to Consolidated Financial Statements

The payment terms for purchases from related parties were 30 to 120 days. The pricing and payment terms with related parties were not materially different from those with third parties.

• c. Acquisition of property, plant and equipment

		For the years	ended
		December	31,
		2018	2017
		(in thousands)
Associates	$	6,527	1,549
Others		4,449	2,801
	$	10,976	4,350

• d. Disposal of property, plant and equipment and others

Others $	Proceeds from disposal Gains on disposal For the years ended December 31, For the years ended December 31, 2018 2017 2018 2017 (in thousands) - 3,352 - 2,212	Gains on disposal	Gains on disposal
		For the years ended December 31,
	2018 -		2017
			2,212

• e. Other related party transactions

Transaction type	Type of relatedparty Associates $ Others $ Associates $ Joint ventures Others **$ **	December 31,	December 31,
		2018 2017 (in thousands) 8,161 47,746 4,784 6,347 12,945 54,093 18,148 9,009 - 292 10,027 15,137 28,175 24,438	2017
Other receivables due from related parties Other payables due to related parties (including payables for equipment)
			54,093
			9,009 292 15,137
			24,438

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Notes to Consolidated Financial Statements

Transaction type	Type of relatedparty Associates $ Joint ventures Others: BMC Others $ Associates $ Joint ventures Others $ Associates $ Joint ventures Others **$ **	For the years ended December 31,	For the years ended December 31,
		2018 2017 (in thousands) 55,044 48,223 6,611 6,611 66,748 62,787 24,474 19,640 152,877 137,261 18,580 14,311 1,060 - 8,789 9,246 28,429 23,557 37,155 28,017 567 1,389 29,336 35,040 67,058 64,446	2017
Rental income Administration and other income Rental and other expenses
			137,261
			14,311 - 9,246
			23,557
			28,017 1,389 35,040
			64,446

The Company leased portion of its facilities to related parties. The collection term was 15 days from quarter-end, and the pricing was not materially different from that with third parties.

For the years ended December 31, 2018 and 2017, the Company had received cash dividends from related parties of $668,228 thousand and $420,547 thousand, respectively.

8. Pledged Assets

The carrying amounts of the assets which the Company pledged as collateral were as follows:

Pledged assets Restricted cash in banks(i) Land and building (including investment property) Machinery and equipment	Pledged to secure Customs duties and guarantee for warranties $ Long-term borrowings Long-term borrowings **$ **	December 31,	December 31,
		2018 2017 (in thousands) 91,753 87,105 27,696,480 42,031,020 37,317,602 17,143,591 65,105,835 59,261,716	2017
			59,261,716

(i) Classified as other current financial assets and other noncurrent assets by its liquidity.

(Continued)

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Notes to Consolidated Financial Statements

9. Significant Contingent Liabilities and Unrecognized Commitments

The significant commitments and contingencies of the Company as of December 31, 2018, in addition to those disclosed in other notes to the consolidated financial statements, were as follows:

• (1) As at December 31, 2018, the Company had the following outstanding letters of credit for the purpose of purchasing machinery and equipment and materials:

Currency USD JPY	December 31, 2018
	(in thousands) 9,417 727,211

• (2) Starting 1998, AUO has entered into technical collaboration, patent licensing, and/or patent cross licensing agreements with Fujitsu Display Technologies Corp. (subsequently assumed by Fujitsu Limited), Toppan Printing Co., Ltd. (“Toppan Printing”), Semiconductor Energy Laboratory Co., Ltd., Japan Display Inc. (formerly Japan Display East Inc./Hitachi Displays, Ltd.), Panasonic Liquid Crystal Display Co., Ltd. (formerly IPS Alpha Technology, Ltd.), LG Display Co., Ltd., Sharp Corporation, Samsung Electronics Co., Ltd., Hydis Technologies Co., Ltd., Seiko Epson Corporation and others. AUO believes that it is in compliance with the terms and conditions of the aforementioned agreements.

• (3) In April 2011, AUO signed a long-term materials supply agreement with Korean OCI Company Ltd. (“OCI”), under which, AUO and OCI agreed on the supply of certain polysilicon. Purchase prices were determined and adjusted through negotiation on each order basis between both parties. AUO paid proportionate prepayments in three installments to OCI in 2011. In May 2015 and December 2016, the supply agreement was amended and the amended effective term is from April 15, 2011 to December 31, 2020.

• (4) Starting from 2006, DPTW has entered into a long-term materials supply agreement with Evonik Forhouse Optical Polymers Corp. (“EFOP”), a joint venture of the Company. Under the agreement, DPTW and EFOP agreed on the supply of certain optical-grade molding compounds at agreed prices and quantities.

• (5) As at December 31, 2018, significant outstanding purchase commitments for construction in progress, property, plant and equipment totaled $19,983,507 thousand.

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Notes to Consolidated Financial Statements

• (6) There were civil lawsuits filed against AUO, AUUS and various manufacturers in the TFTLCD industry in the United States and Canada alleging, among other things, antitrust violations. As of January 28, 2019, AUO and AUUS have reached settlement agreements with the relevant plaintiffs. In addition to the above cases in the United States and Canada, a lawsuit was filed by certain consumers in Israel against certain LCD manufacturers including AUO in the District Court of the Central District in Israel (“Israeli Court”). The defendants contested various issues including whether the lawsuit was properly served. In December 2016, the Israeli Court overturned the original decision and revoked the permission for this case to serve out of Israeli jurisdiction. The plaintiffs lodged an appeal to the Israeli Supreme Court but the Israeli Supreme Court overruled the appeal in August 2017. In January 2018, the parties reached a settlement agreement and agreed to commence the required proceedings for withdrawing the lawsuit. A lawsuit was filed in September 2018 by the Government of Puerto Rico on its own behalf and on behalf of all consumers and governmental agencies of Puerto Rico against certain LCD manufacturers including AUO and AUUS in the Superior Court of San Juan, Court of First Instance alleging unjust enrichment and claiming unspecified monetary damages. AUO has retained counsel to handle the related matter and intends to defend this lawsuit vigorously, and at this stage, the final outcome of these matters is uncertain. AUO is reviewing the merits of this lawsuit on an on-going basis.

• (7) At the end of February 2017, one of AUO’s subsidiaries in the PRC, AUSZ received an administrative complaint filed by Shenzhen China Star Optoelectronics Technology Co., Ltd. (“CSOT”) alleging that AUSZ infringes two PRC patents, and the complaint requests that AUSZ cease the alleged infringing act. Based on the Company’s preliminary assessment, it believes that its subsidiary does not infringe the two PRC patents as alleged, and further that the two PRC patents appear to be invalid. In response to such administrative complaint, AUSZ has filed a request to invalidate the two PRC patents accordingly. In April 2017, CSOT filed civil lawsuits in the Intermediate People’s Court of Shenzhen Municipality against the subsidiary claiming infringement of the same two PRC patents. In June 2017, CSOT filed civil lawsuits in the No.1 Intermediate People’s Court of Chongqing Municipality against the subsidiary claiming infringement of three PRC patents (including one of the above mentioned PRC patents). CSOT requested that AUSZ ceases the alleged infringing act and claimed approximate RMB49.91 million for economic loss for each of the said respective four PRC patents and compensation for reasonable fees and litigation expenses such as notarization fees and attorney fees incurred by CSOT. On September 24, 2017, the relevant parties reached a settlement agreement and agreed to withdraw relevant legal proceedings.

• (8) In July 2018, Vista Peak Ventures, LLC (“VPV”) filed three lawsuits in the United States District Court for the Eastern District of Texas against AUO, claiming infringement of certain of VPV’s patents in the United States relating to the manufacturing of TFT-LCD panels. In the complaints, VPV seeks, among other things, unspecified monetary damages for past damages and an injunction against future infringement. While AUO intends to defend the suits vigorously, the ultimate outcome of the three matters is uncertain. AUO is reviewing the merits of the lawsuits on an on-going basis.

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Notes to Consolidated Financial Statements

As of January 28, 2019, the Company has made certain provisions with respect to certain of the above lawsuits as the management deems appropriate, considering factors such as the nature of the litigation or claims, the materiality of the amount of possible loss, the progress of the cases and the opinions or views of legal counsel and other advisors. Management will reassess all litigation and claims at each reporting date based on the facts and circumstances that exist at that time, and will make additional provisions or adjustments to previous provisions. The ultimate amount cannot be ascertained until the relevant cases are closed. The ultimate resolution of the legal proceedings and/or lawsuits cannot be predicted with certainty. While management intends to defend certain of the lawsuits described above vigorously, there is a possibility that one or more legal proceedings or lawsuits may result in an unfavorable outcome to the Company. In addition to the matters described above, the Company is also a party to other litigations or proceedings that arise during the ordinary course of business. Except as mentioned above, the Company, to its knowledge, is not involved as a defendant in any material litigation or proceeding which could be expected to have a material adverse effect on the Company’s business or results of operations.

10. Significant Disaster Losses: None.

11. Subsequent Event: None.

12. Others

Since 2010, there have been environmental proceedings relating to the development project of the Central Taiwan Science Park in Houli, Taichung, which AUO’s second 8.5-generation fab is located at. The proceedings were initiated by six residents in Houli District, Taichung City (the “Plaintiffs”) to object the administrative dispositions of the environmental assessment and development approval issued in 2010 by the Environmental Protection Administration (“EPA”) of the Executive Yuan of Taiwan to the third phrase development area in the Central Taiwan Science Park (the “Project”). On August 8, 2014, the Plaintiffs reached a settlement with the defendants (i.e. the governmental authorities, including the EPA of the Executive Yuan of Taiwan, the Ministry of Science and Technology (former National Science Council of the ROC Executive Yuan) and the Central Taiwan Science Park Development Office) in the Taipei High Administrative Court. The second phase environmental impact assessment for the Project continues to proceed. On December 14, 2017, the EPA of the Executive Yuan of Taiwan held the third review meeting of the investigation group. The review meeting reached the conclusion of suggesting approval for the Project. On November 6, 2018, the EPA approved the Project, but on December 6, 2018, five residents in Houli District, Taichung City filed administrative appeal to the Appeals Review Committee of the Executive Yuan requesting a withdrawal of the approval. Currently management does not believe that this event will have a material adverse effect on the Company’s operation and will continue to monitor the development of this event.

(Continued)

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Notes to Consolidated Financial Statements

13. Additional Disclosures

• (1) Information on significant transactions:

Following are the additional disclosures required by the Regulations for the Company for the year ended December 31, 2018.

• a. Financings provided: Please see Table 1 attached.

• b. Endorsements / guarantees provided: Please see Table 2 attached.

• c. Marketable securities held (excluding investment in subsidiaries, associates and joint ventures): Please see Table 3 attached.

• d. Individual marketable securities acquired or disposed of with costs or prices exceeding NT$300 million or 20% of the paid-in capital: Please see Table 4 attached.

• e. Acquisition of individual real estate with costs exceeding NT$300 million or 20% of the paid-in capital: None.

• f. Disposal of individual real estate with prices exceeding NT$300 million or 20% of the paid-in capital: Please see Table 5 attached.

• g. Purchases from or sales to related parties with amounts exceeding NT$100 million or 20% of the paid-in capital: Please see Table 6 attached.

• h. Receivables from related parties with amounts exceeding NT$100 million or 20% of the paid-in capital: Please see Table 7 attached.

• i. Information about trading in derivative instruments: Please see note 6(2).

• j. Business relationship between the parent and the subsidiaries and significant intercompany transactions: Please see Table 8 attached.

• (2) Information on investees (excluding information on investment in Mainland China): Please see Table 9 attached.

• (3) Information on investment in Mainland China:

• a. The related information on investment in Mainland China: Please see Table 10.1 and 10.2 attached.

• b. Upper limit on investment in Mainland China: Please see Table 10.1 and 10.2 attached.

(Continued)

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Notes to Consolidated Financial Statements

• c. Significant transactions:

Significant direct or indirect transactions with the investees in Mainland China for the year ended December 31, 2018, for which intercompany transactions were eliminated upon consolidation, are disclosed in note 13(1) “Information on significant transactions”.

14. Segment Information

(1) Operating segment information

The Company has two operating segments: display and energy (formerly named “solar”). The display segment generally is engaged in the research, development, design, manufacturing and sale of flat panel displays and most of our products are TFT-LCD panels. The energy segment primarily is engaged in the design, manufacturing and sale of ingots, solar wafers and solar modules, as well as providing technical engineering services and maintenance services for solar system projects.

Segment results are excluding non-operating income and expenses and income tax expense (benefit). There are no differences between the consolidated financial statements for the years ended December 31, 2018 and 2017 with the financial results received by the Company’s chief operating decision maker. The accounting policies for the operating segments are the same as those used in preparation of the consolidated financial statements of the Company. The Company uses the net revenue, profit (loss) from operations and segment profit (loss) excluding depreciation and amortization as the basis of segment performance assessment.

Net revenue from external customers $ Segment profit (loss) $ Net non-operating income and expenses Consolidated profit before income tax Segment profit (loss) excluding depreciation and amortization $ Segment assets	For theyear ended	For theyear ended	**December 31, **	2018
	Display segment 290,784,754 7,792,505 40,773,745	Energy segment Adjustment and elimination (in thousands) 16,849,635 - (1,124,640 ) - $ 121,650 - $		Total segments
				307,634,389
				6,667,865 4,548,286
				11,216,151
				40,895,395
				409,831,775

(Continued)

104

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Net revenue from external customers $ Segment profit (loss) $ Net non-operating income and expenses Consolidated profit before income tax Segment profit (loss) excluding depreciation and amortization $ Segment assets	For theyear ended	For theyear ended	**December 31, **	2017
	Display segment 322,335,330 39,971,375 74,787,838	Energy segment Adjustment and elimination (in thousands) 18,692,937 - (832,251 ) - $ 781,122 - $		Total segments
				341,028,267 39,139,124 224,482 39,363,606 75,568,960 441,451,284

(2) Geographic information

a. Net revenue from external customers

		For the year ended
		December 31, 2017
Region		(in thousands)
PRC (including Hong Kong)	$	125,341,648
Taiwan		108,288,387
Singapore		35,939,290
Japan		32,739,262
Others		38,719,680
	$	341,028,267

Refer to note 6(24) for net revenue from external customers for the year ended December 31, 2018.

b. Consolidated noncurrent assets [(][i] [)]

	December 31,	December 31,
	2018	2017
Region	(in thousands)
Taiwan	$ 172,639,349	165,377,866
PRC (including Hong Kong)	61,284,667	67,846,109
Others	6,941,674	11,037,333
	$ 240,865,690	244,261,308

(i) Noncurrent assets are not inclusive of financial instruments, deferred tax assets, and prepaid pension.

105

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(3) Major customer information

Customer A $	For the year ended December 31, 2017	For the year ended December 31, 2017
	Amount (in thousands) 43,645,518	% of consolidated net revenue
		13

Refer to note 6(24) for net revenue disaggregated by major customers for the year ended December 31, 2018.

• (4) Product information

Information of the Company’s net revenue from external customers was as follows:

		For the year ended
		December 31, 2017
		(in thousands)
Products for Televisions	$	152,442,198
Products for Mobile PCs		56,209,501
Products for Mobile Devices		14,858,803
Products for Monitors		45,696,144
Products for Commercial and Others(ii)		53,128,684
Solar Products		18,692,937
	$	341,028,267

• (ii) Others include sales from products for other applications and sales of raw materials, components and from service charges.

Refer to note 6(24) for net revenue disaggregated by major products for the year ended December 31, 2018.

106

AU OPTRONICS CORP. AND SUBSIDIARIES

Financings Provided

For the year ended December 31, 2018

(Amount in thousands of New Taiwan Dollars)

Table 1

**No. **	Financing Company	Borrowing Company	Financial Statement Account	Related Party	Maximum Balance for the Period (Note 3)	Ending Balance (Notes 1 and 2)	Amount Actually Drawn Down (Note 1 and 4)	Interest Rate	Nature of Financing	Transaction Amounts	Reason for Financing	Allowance for Bad Debt	Collateral	Collateral	Financing Limits for Each Borrowing Company (Note 1 and 5)	Limits on Financing Company’s Total Financing Amount (Note 1and 5)
													Item	Value
0 0 0 1 1 2 2	AUO AUO AUO AULB AULB AUXM AUXM	ACTW AUKS AUSK AUSK AUKS AUKS BVHF	Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties	Yes Yes Yes Yes Yes Yes Yes	2,000,000 3,200,000 1,321,446 1,114,233 3,360,975 3,809,105 1,055,498	2,000,000 295,590 - 1,003,303 3,360,975 3,809,105 -	- - - 1,003,303 - 896,260 -	Markup rate on short-term financing cost Markup rate on short-term financing cost Markup rate on short-term financing cost Markup rate on short-term financing cost Markup rate on short-term financing cost Markup rate on short-term financing cost Markup rate on short-term financing cost	Needs for short-term financing Needs for short-term financing Needs for short-term financing Needs for short-term financing Needs for short-term financing Needs for short-term financing Needs for short-term financing	- - - - - - -	Operating capital Operating capital Operating capital Operating capital Operating capital Operating capital Operating capital	- - - - - - -	- - - - - - -	- - - - - - -	20,286,272 20,286,272 20,286,272 53,679,085 21,471,634 5,252,404 5,252,404	81,145,086 81,145,086 81,145,086 53,679,085 21,471,634 5,252,404 5,252,404

107

**No. **	Financing Company	Borrowing Company	Financial Statement Account	Related Party	Maximum Balance for the Period (Note 3)	Ending Balance (Notes 1 and 2)	Amount Actually Drawn Down (Note 1 and 4)	Interest Rate	Nature of Financing	Transaction Amounts	Reason for Financing	Allowance for Bad Debt	Collateral	Collateral	Financing Limits for Each Borrowing Company (Note 1 and 5)	Limits on Financing Company’s Total Financing Amount (Note 1 and 5)
													Item	Value
3 4 4 5 5 6 7 8	AUSJ AUSZ AUSZ DPSZ DPSZ DPXM FPWJ FTKS	AUKS BVHF AUKS AUKS BVHF BVHF BVHF BVHF	Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties	Yes Yes Yes Yes Yes Yes Yes Yes	1,507,567 586,388 4,481,300 450,020 304,922 258,011 152,461 199,372	1,434,016 - 4,481,300 448,130 - - - -	1,120,325 - 1,792,520 448,130 - - - -	Markup rate on short-term financing cost Markup rate on short-term financing cost Markup rate on short-term financing cost Adjusted by base lending rate of People’s Bank of China Adjusted by base lending rate of People’s Bank of China Adjusted by base lending rate of People’s Bank of China Adjusted by base lending rate of People’s Bank of China Adjusted by base lending rate of People’s Bank of China	Needs for short-term financing Needs for short-term financing Needs for short-term financing Needs for short-term financing Needs for short-term financing Needs for short-term financing Needs for short-term financing Needs for short-term financing	- - - - - - - -	Operating capital Operating capital Operating capital Operating capital Operating capital Operating capital Operating capital Operating capital	- - - - - - - -	- - - - - - - -	- - - - - - - -	1,539,156 5,221,115 5,221,115 738,495 738,495 1,840,655 264,994 538,375	1,539,156 5,221,115 5,221,115 738,495 738,495 1,840,655 264,994 538,375

108

**No. **	Financing Company	Borrowing Company	Financial Statement Account	Related Party	Maximum Balance for the Period (Note 3)	Ending Balance (Notes 1 and 2)	Amount Actually Drawn Down (Note 1 and 4)	Interest Rate	Nature of Financing	Transaction Amounts	Reason for Financing	Allowance for Bad Debt	Collateral	Collateral	Financing Limits for Each Borrowing Company (Note 1 and 5)	Limits on Financing Company’s Total Financing Amount (Note 1 and 5)
													Item	Value
9	FTWJ	FHWJ	Other receivables from related parties	Yes	208,292	89,626	89,626	Adjusted by base lending rate of People’s Bank of China	Needs for short-term financing	-	Operating capital	-	-	-	2,239,397	2,239,397

Note 1: Amounts denominated in foreign currencies are translated into New Taiwan Dollars using the exchange rates at the reporting date.

Note 2: The ending balance represents the amounts approved by the Board of Directors.

Note 3: The maximum balance for the period represents the highest amount in New Taiwan Dollar announced or occurred during the period.

Note 4: All inter-company transactions between AUO and its subsidiaries have been eliminated in the consolidated financial statements.

Note 5: The policy for the limit on total financing amount and the financing limit for any individual entity are prescribed as follows:

• a. AUO: The total amount available for lending purposes shall not exceed 40% of AUO’s net worth as stated in its latest audited financial statement. The total amount for lending to a company shall not exceed 10% of AUO’s net worth as stated in its latest audited financial statement.

• b. AULB, AUSZ, AUXM and AUSJ: The total amount available for lending purposes shall not exceed 40% of the net worth of the lending company as stated in its latest audited financial statement. The total amount for lending to a company shall not exceed 40% of the net worth of the lending company as stated in its latest audited financial statement.

• c. In the event that the financing is between foreign subsidiaries whose voting shares are 100% owned, directly or indirectly, by AUO, the aggregate amount available for lending to such borrowers and total amount lendable to each of such borrowers both shall not exceed the net worth of the lending company as stated in its latest audited financial statement.

• d. DPSZ, DPXM, FTWJ, FPWJ and FTKS: The total amount available for lending purposes shall not exceed 40% of the net worth of the lending company. The total amount for lending to a company shall not exceed 40% of the net worth of the lending company.

• e. In the event that the financing is between foreign subsidiaries whose voting shares are 100% owned, directly and indirectly, by DPTW, the aggregate amount available for lending to such borrowers shall not exceed the net worth of the lending company, and the total amount lendable to each of such borrowers shall not exceed the net worth of the lending company.

109

AU OPTRONICS CORP. AND SUBSIDIARIES Endorsements/ Guarantees Provided

For the year ended December 31, 2018 (Amount in thousands of New Taiwan Dollars)

Table 2

No.	Endorser/ Guarantor	Guaranteed Party	Guaranteed Party	Limits on Endorsement/ Guarantee Amount Provided for Each Party (Note 4 and 5)	Maximum Endorsement/ Guarantee Balance for the Period (Note 2)	Ending Balance (Note 3 and 4)	Amount Actually Drawn Down (Note 4)	Amount of Endorsement/ Guarantee Collateralized by Properties	Ratio of Accumulated Endorsement/ Guarantee to Net Worth per Latest Financial Statements	Maximum Endorsement/ Guarantee Amount Allowable (Note 4 and 5)	Endorsement/ Guarantee Provided by Parent Company to Subsidiary	Endorsement/ Guarantee Provided by Subsidiary to Parent Company	Endorsement/ Guarantee Provided to Subsidiaries in Mainland China
		Name	Nature of Relationship (Note 1)
0 1 1 2 3 3	AUO AUXM AUXM AUSJ AUSZ AUSZ	AUKS AUO and AUST AUO AUO AUO and AUSK AUO	2 3、4 3 3 3、4 3	101,431,358 13,131,010 13,131,010 3,847,889 13,052,787 13,052,787	16,785,917 2,345,550 9,757,488 1,501,152 1,548,063 7,411,938	15,799,613 2,240,650 9,321,104 1,434,016 1,478,829 7,080,454	14,942,284 - - - - 1,344,390	- - - - - -	7.79% 17.06% 70.99% 37.27% 11.33% 54.24%	202,862,715 13,131,010 13,131,010 3,847,889 13,052,787 13,052,787	Yes No No No No No	No Yes Yes Yes Yes Yes	Yes No No No No No

Note 1: The relationship between the endorser/ guarantor and the guaranteed party:

1. A company with which it does business.

2. A company in which the Company directly and indirectly holds more than 50% of the voting shares.

3. A company that directly and indirectly holds more than 50% of the voting shares in the Company.

4. Companies in which the Company holds, directly or indirectly, 90% or more of the voting shares.

5. A company that fulfills its contractual obligations by providing mutual endorsements/ guarantees for another company in the same industry or for joint builders for purposes of undertaking a construction project.

6. A company that all capital contributing shareholders make endorsements/ guarantees for their jointly invested company in proportion to their shareholding percentages.

7. Companies in the same industry provide among themselves joint and several security for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other.

Note 2: The maximum endorsement/ guarantee balance for the period represents the highest amount in New Taiwan Dollar announced or occurred during the period. Note 3: The ending balance represents the amounts approved by the Board of Directors.

• Note 4: Amounts denominated in foreign currencies are translated into New Taiwan Dollars using the exchange rates at the reporting date.

Note 5: The policy for the limit of total endorsement/ guarantee amount and the limit on endorsement/ guarantee amount provided to each party are prescribed as follows:

• a. AUO: The total endorsement/ guarantee amount provided shall not exceed the net worth of AUO as stated in its latest audited financial statement. The aggregate amount of endorsement/ guarantee provided to each guaranteed party shall not exceed 50% of AUO’s net worth as stated in its latest audited financial statement.

• b. AUSZ, AUXM and AUSJ: The total endorsement/ guarantee amount provided and the aggregate amount of endorsement/ guarantee provided to each guaranteed party both shall not exceed the net worth of the endorser/ guarantor as stated in its latest audited financial statement.

110

AU OPTRONICS CORP. AND SUBSIDIARIES Marketable Securities Held (Excluding Investment in Subsidiaries, Associates and Joint Ventures)

December 31, 2018

(Amount in thousands of New Taiwan Dollars and foreign currencies indicated, and shares in thousands)

Table 3

Name of Holder	Type and Name of Marketable Securities	Relationship with the Securities Issuer	Financial Statement Account		December 31, 2018	December 31, 2018		The Highest Ownership during the Year	Note
				Shares	Carrying Amount	Percentage of Ownership	Fair Value
AUO AUO AULB AUSH FPWJ FTKS Konly Konly Konly Konly	Stock BenQ ESCO Corp. Stock Qisda Stock Abakus Solar AG Shareholding T-powertek Optronics Co., Ltd. Structured deposit Structured deposit Stock PlayNitride Inc. Stock SnapBizz Cloudtech Pvt. Ltd. Stock a2peak power Co., Ltd. Stock Chen Feng Optronics Corporation	Related party Related party - - - - - - -	Financial assets at FVTPL— noncurrent Financial assets at FVTOCI— noncurrent Financial assets at FVTPL— noncurrent Financial assets at FVTOCI— noncurrent Financial assets at FVTPL－current Financial assets at FVTPL－current Financial assets at FVTOCI— noncurrent Financial assets at FVTOCI— noncurrent Financial assets at FVTPL－ noncurrent Financial assets at FVTPL－ noncurrent	1,700 335,231 3 - - - 609 13 4,000 1,500	- 6,604,041 - CNY 6,250 CNY 91,753 CNY 274,091 42,123 33,501 - -	17.00% 17.04% 2.22% 2.16% - - 2.80% 6.13% 10.87% 3.26%	- 6,604,041 - CNY 6,250 CNY 91,753 CNY 274,091 42,123 33,501 - -	17.00% 17.04% 2.22% 2.50% - - 3.28% 6.13% 10.87% 3.26%

111

Name of Holder	Type and Name of Marketable Securities	Relationship with the Securities Issuer	Financial Statement Account		December 31, 2018	December 31, 2018		The Highest Ownership during the Year	Note
				Shares	Carrying Amount	Percentage of Ownership	Fair Value
Konly Konly Konly Konly DPTW DPTW Ronly Ronly	Stock UniBright Chemical Co., Ltd. Stock Azotek Co., Ltd. Stock ATS International Inc. Stock Qisda Stock Wibase Industrial Solutions Inc. Stock D8AI Holdings Corporation Stock UniBright Chemical Co., Ltd. Stock Exploit Technology Co., Ltd.	- - - Related party Related party - - -	Financial assets at FVTPL－ noncurrent Financial assets at FVTOCI－ noncurrent Financial assets at FVTOCI－ noncurrent Financial assets at FVTOCI－ noncurrent Financial assets at FVTOCI－ noncurrent Financial assets at FVTOCI－ noncurrent Financial assets at FVTPL－current Financial assets at FVTPL－current	4,200 2,006 1,667 10,145 4,700 7,000 600 41	- 7,345 - 199,859 56,400 8,649 - -	8.52% 4.01% 5.15% 0.52% 12.11% 4.59% 1.22% 0.49%	- 7,345 - 199,859 56,400 8,649 - -	8.52% 4.01% 5.15% 0.52% 12.11% 5.00% 1.22% 0.49%

112

AU OPTRONICS CORP. AND SUBSIDIARIES

Individual Marketable Securities Acquired or Disposed of with Costs or Prices Exceeding NT$300 Million or 20% of the Paid-in Capital

For the year ended December 31, 2018

(Amount in thousands of New Taiwan Dollars and foreign currencies indicated, and shares in thousands)

Table 4

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending Balance	Ending Balance	Note
					Shares	Amount	Shares	Amount	Shares	Amount	Carrying Amount	Gain/Loss on Disposal	Shares	Amount
AUO AUO AUO AUO Konly DPSZ FPWJ FTKS ACTW	Stock SSEC Stock CQIL Stock Qisda Stock ACTW Stock ACTW Structured deposit Structured deposit Structured deposit Stock SDMC	Investments in equity-accounted investees Investments in equity-accounted investees Financial assets at FVTOCI－ noncurrent Investments in equity-accounted investees Investments in equity-accounted investees Financial assets at FVTPL－current Financial assets at FVTPL－current Financial assets at FVTPL－current Investments in equity-accounted investees	- The original shareholders - - - - - - -	- - - - - - - - -	35,000 - 186,364 331,450 53,577 - - - -	349,199 - 3,941,588 5,068,459 819,283 - - - -	58,000 39,974 148,867 46,743 - - - - 151,834	580,000 821,138 3,418,633 635,810 - CNY 100,000 CNY 90,000 CNY 370,000 2,338,470	- - - - 43,455 - - - -	- - - - 591,081 CNY 100,367 - CNY 102,331 -	- - - - 591,545 CNY 100,367 - CNY 102,331 -	- - - - - - - - -	93,000 39,974 335,231 378,193 10,122 - - - 116,836	942,094 766,795 6,604,041 5,005,774 133,974 - CNY 91,753 CNY 274,091 1,987,129	3 2 1 6 6 5 5 4

113

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending Balance	Ending Balance	Note
					Shares	Amount	Shares	Amount	Shares	Amount	Carrying Amount	Gain/Loss on Disposal	Shares	Amount
AUO	Stock SDMC	Investments in equity-accounted investees	-	-	151,827	2,312,272	-	-	151,827	2,338,360	2,406,420	-	-	-	4

• Note 1: The ending balance includes unrealized gain (loss) on equity investments at fair value through other comprehensive income.

• Note 2: The acquisition amount of $69,864 thousand is to participate in CQIL’s capital injection after the merger. The ending balance includes the recognition of investment gain (loss) and foreign currency translation differences under the equity method.

• Note 3: The acquisition amount is to participate in SSEC’s capital injection. The ending balance includes the recognition of investment gain (loss) and capital surplus under the equity method.

• Note 4: a. As part of a business restructuring, AUO, Konly and Ronly disposed all of their shareholdings in SDMC to ACTW during the second quarter of 2018. This was treated as an equity transaction as there was no change in control of SDMC by the Company.

• b. The ending shares include the return of capital of SDMC totaling 34,998 thousand shares. The ending balance includes proceeds from return of capital, cash dividend, and the recognition of investment gain (loss) and foreign currency translation differences under the equity method.

• Note 5: The ending balance includes the gain/loss on valuation of the financial asset.

• Note 6: a. As part of a business restructuring, Konly and Ronly disposed its shareholdings in ACTW to AUO, respectively, during December 2018. This was treated as an equity transaction as there was no change in control of ACTW by the Company.

• b. The ending balance includes the recognition of investment gain (loss), foreign currency translation differences and capital surplus, etc. under the equity method.

114

AU OPTRONICS CORP. AND SUBSIDIARIES

Disposal of Individual Real Estate with Costs Exceeding NT$300 Million or 20% of the Paid-in Capital For the year ended December 31, 2018

(Amount in thousands of New Taiwan Dollars and foreign currencies indicated)

Table 5

Company Name	Property	Date of the Event	Date of Original Acquisition	Carrying Amount	Transaction Amount	Status of Proceeds Collection	Gain (Loss) on Disposal	Counterparty	Relationship	Purpose of Disposal	Pricing Reference	Other Terms	Note
AUSK BVHF FTKS	Land and buildings Land and buildings Land and buildings	November 2018 December 2017 October 2017	February 2010 February 2011 to February 2017 August 2004 to December 2016	EUR 54,764 CNY 433,171 413,878	EUR 85,139 CNY 483,322 CNY 215,527	EUR 84,395 CNY 483,322 CNY 215,527	EUR 30,375 CNY 50,151 561,815	ZNO Slovakia s.r.o. Hefei Heng Chuang Intelligent Technology Co., Ltd. The Administration Committee of Kunshan Economic and Technology Development Zone	Third party Third party Third party	To enhance the utilization of assets To enhance the utilization of assets To meet the regulatory plan and urban construction plan required by Kunshan Economic and Technology Development Zone	Real estate valuation report Real estate valuation report Real estate valuation report	None None None

115

AU OPTRONICS CORP. AND SUBSIDIARIES

Purchases from or Sales to Related Parties with Amounts Exceeding NT$100 Million or 20% of the Paid-in Capital For the year ended December 31, 2018

(Amount in thousands of New Taiwan Dollars and foreign currencies indicated)

Table 6

Company Name	Counterparty	Relationship		Transaction Details	Transaction Details		Transactions with Terms Different from Others	Transactions with Terms Different from Others	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchases/ Sales	Amount (Note 2)	Percentage of Total Purchases/Sales	Credit Terms	Unit Price (Note 1)	Credit Terms (Note 1)	Ending Balance (Note 2)	Percentage of Total Notes/Accounts Receivable (Payable)
AUO AUO AUO AUO AUO AUO AUO AUO AUO AUO AUO AUO AUO	ACTW AUCZ AUKS AULB AUSK BMC DPTW Daxin Qisda Lextar Raydium AUST ACTW	Subsidiary held by AUO and Konly Subsidiary 100% held by AULB Subsidiary 51% held by AULB Subsidiary 100% held by AUO Subsidiary 100% held by AULB Subsidiary of Qisda Subsidiary held by AUO, Konly and Ronly Equity-accounted investee held by Konly and Ronly AUO's director Equity-accounted investee held by AUO, Konly and Ronly Equity-accounted investee held by Konly Subsidiary 100% held by AULB Subsidiary held by AUO and Konly	Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Sales	125,605 398,004 12,170,274 60,863,968 118,955 5,011,966 10,037,876 3,086,760 8,924,867 209,869 904,598 6,361,928 (772,213)	- - 6% 30% - 2% 5% 1% 4% - - 3% -	OA 45 days OA 45 days OA 45 days OA 45 days OA 45 days OA 90 days OA 60 days OA 120 days OA 45 days OA 120 days OA 120 days OA 45 days OA 30 days	- - - - - - - - - - - - -		(15,837) (57,498) (2,019,995) (21,213,644) (14,925) (1,350,707) (2,431,371) (1,078,356) (1,539,995) (71,233) (427,851) (1,025,313) 61,675	- - (3)% (35)% - (2)% (4)% (2)% (3)% - (1)% (2)% -

116

Company Name	Counterparty	Relationship		Transaction Details	Transaction Details		Transactions with Terms Different from Others	Transactions with Terms Different from Others	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchases/ Sales	Amount (Note 2)	Percentage of Total Purchases/Sales	Credit Terms	Unit Price (Note 1)	Credit Terms (Note 1)	Ending Balance (Note 2)	Percentage of Total Notes/Accounts Receivable (Payable)
AUO AUO AUO AUO AUO AUO AUO AUO AUO AUO ACMK AUCZ AUKS AUKS AUKS AULB AULB AULB AULB AULB AULB AULB	BVXM BenQ CGPC DPTW DPXM FGPC QCOS QCSZ SGPC TGPC ACTW AUO AUSZ AUXM AUO BMC DPTW Qisda Raydium AUO AUXM AUSZ	Subsidiary 100% held by AUXM Subsidiary of Qisda Subsidiary of SSEC Subsidiary held by AUO, Konly and Ronly Subsidiary 100% held by DPHK Subsidiary of SSEC Subsidiary of Qisda Subsidiary of Qisda Subsidiary of SREC Subsidiary of SSEC Subsidiary held by AUO and Konly Ultimate parent company Subsidiary 100% held by AULB Subsidiary 100% held by AULB Ultimate parent company Subsidiary of Qisda Subsidiary held by AUO, Konly and Ronly AUO's director Equity-accounted investee held by Konly Ultimate parent company Subsidiary 100% held by AULB Subsidiary 100% held by AULB	Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Purchases Sales Purchases Purchases Sales Purchases Purchases Purchases Purchases Sales Sales Sales	(1,036,445) (3,590,347) (259,246) (265,229) (321,831) (964,403) (233,352) (7,732,441) (460,244) (184,534) USD 43,008 CZK (294,485) CNY 83,084 CNY 46,302 CNY (2,682,858) USD 68,583 USD 67,437 USD 82,680 USD 126,863 USD (2,015,977) USD (10,774) USD (12,025)	- (1)% - - - - - (3)% - - 93% (100)% 5% 3% (100)% 2% 2% 2% 3% (100)% - -	OA 45 days EOM 55 days EOM 25 days EOM 45 days EOM 45 days EOM 25 days EOM 55 days EOM 55 days EOM 25 days EOM 25 days OA 60 days OA 45 days OA 60 days OA 60 days OA 45 days OA 90 days EOM 120 days OA 120 days OA 120 days OA 45 days OA 45 days OA 45 days	- - - - - - - - - - - - - - - - - - - - - -		229,242 532,512 142,800 31,259 21,667 196,141 41,401 1,347,828 316,757 834 USD (8,799) CZK 45,547 CNY (33,447) CNY (648) CNY 450,089 USD (18,854) USD (24,222) USD (31,686) USD (50,192) USD 922,752 USD 8,503 USD 10,716	- 1% - - - - - 3% 1% - (95)% 100% (5)% - 100% (2)% (2)% (3)% (5)% 98% 1% 1%

117

Company Name	Counterparty	Relationship		Transaction Details	Transaction Details		Transactions with Terms Different from Others	Transactions with Terms Different from Others	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchases/ Sales	Amount (Note 2)	Percentage of Total Purchases/Sales	Credit Terms	Unit Price (Note 1)	Credit Terms (Note 1)	Ending Balance (Note 2)	Percentage of Total Notes/Accounts Receivable (Payable)
AUSH AUSJ AUSK AUST AUSZ AUSZ AUSZ AUUS AUXM AUXM AUXM AUXM BVHF BVHF BVHF BVHF BVXM BVXM	AUO AULB AUO AUO AULB AUKS AULB AUO AULB AUKS AULB BVXM Lextar Raydium DPTW DPTW DPXM AUXM	Ultimate parent company Subsidiary 100% held by AUO Ultimate parent company Ultimate parent company Subsidiary 100% held by AUO Subsidiary 51% held by AULB Subsidiary 100% held by AUO Ultimate parent company Subsidiary 100% held by AUO Subsidiary 51% held by AULB Subsidiary 100% held by AUO Subsidiary 100% held by AUXM Equity-accounted investee held by AUO, Konly and Ronly Equity-accounted investee held by Konly Subsidiary held by AUO, Konly and Ronly Subsidiary held by AUO, Konly and Ronly Subsidiary 100% held by DPHK Subsidiary 100% held by AULB	Sales Sales Sales Sales Purchases Sales Sales Sales Purchases Sales Sales Sales Purchases Purchases Purchases Sales Purchases Purchases	CNY (29,861) CNY (82,301) EUR (3,738) USD (211,476) CNY 82,910 CNY (83,084) CNY (1,758,886) USD (5,082) CNY 74,006 CNY (46,301) CNY (1,148,773) CNY (24,240) CNY 59,656 CNY 24,052 CNY 89,387 CNY (653,258) CNY 38,496 CNY 24,240	(98)% (100)% (69)% (100)% 30% (4)% (95)% (100)% 22% (4)% (93)% (2)% 13% 5% 19% (100)% 11% 7%	OA 45 days OA 45 days OA 45 days OA 45 days OA 45 days OA 60 days OA 45 days OA 30 days OA 45 days OA 60 days OA 45 days OA 45 days EOM 120 days EOM 90 days EOM 60 days EOM 60 days OA 120 days OA 45 days	- - - - - - - - - - - - - - - - - -		- - EUR 613 USD 33,287 CNY (73,544) CNY 33,447 CNY 339,075 - CNY (58,356) CNY 648 CNY 235,260 CNY 7,107 CNY (20,754) CNY (6,360) CNY (241,581) CNY 430,596 CNY (15,928) CNY (7,107)	- - 16% 100% (19)% 9% 91% - (26)% - 95% 3% (6)% (2)% (64)% 100% (14)% (6)%

118

Company Name	Counterparty	Relationship		Transaction Details	Transaction Details		Transactions with Terms Different from Others	Transactions with Terms Different from Others	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchases/ Sales	Amount (Note 2)	Percentage of Total Purchases/Sales	Credit Terms	Unit Price (Note 1)	Credit Terms (Note 1)	Ending Balance (Note 2)	Percentage of Total Notes/Accounts Receivable (Payable)
BVXM DPSZ DPSZ DPXM DPXM DPXM DPXM DPXM FTWJ FTWJ FTWJ M.Setek ACTW ACTW ACTW ACTW UTI DPTW	AUO DPTW DPTW Lextar AUO DPTW BVXM DPTW DPTW Lextar DPTW ACTW AUO M.Setek AUO ACMK AUO AUO	Ultimate parent company Subsidiary held by AUO, Konly and Ronly Subsidiary held by AUO, Konly and Ronly Equity-accounted investee held by AUO, Konly and Ronly Ultimate parent company Subsidiary held by AUO, Konly and Ronly Subsidiary 100% held by AUXM Subsidiary held by AUO, Konly and Ronly Subsidiary held by AUO, Konly and Ronly Equity-accounted investee held by AUO, Konly and Ronly Subsidiary held by AUO, Konly and Ronly Subsidiary held by AUO and Konly Ultimate parent company Subsidiary 99.9991% held by SDMC Ultimate parent company Subsidiary 100% held by ACTW Ultimate parent company Ultimateparent company	Purchases Purchases Sales Purchases Purchases Purchases Sales Sales Purchases Purchases Sales Sales Purchases Purchases Sales Sales Sales Purchases	CNY 233,645 CNY 46,155 CNY (244,732) CNY 93,244 CNY 69,600 CNY 40,829 CNY (38,496) CNY (1,956,961) CNY 219,491 CNY 53,137 CNY (825,281) JPY (5,129,949) 773,368 1,400,989 (121,373) (1,197,270) (165,959) 261,444	68% 27% (84)% 7% 5% 3% (2)% (96)% 31% 8% (82)% (100)% 18% 33% (2)% (19)% (74)% 1%	OA 45 days EOM 60 days EOM 90 days EOM 120 days EOM 45 days EOM 60 days OA 120 days EOM 60 days EOM 60 days EOM 120 days EOM 90 days OA 45 days OA 30 days OA 45 days OA 45 days OA 60 days OA 60 days EOM 45 days	- - - - - - - - - - - - - - - - - -		CNY (51,155) CNY (10,055) CNY 69,383 CNY (42,159) CNY (4,896) CNY (368,034) CNY 15,928 CNY 935,836 CNY (286,964) CNY (19,693) CNY 551,170 JPY 1,969,947 (61,675) (545,849) 15,867 271,015 6,522 (30,133)	(43)% (28)% 82% (5)% (1)% (47)% 2% 97% (57)% (4)% 87% 100% (7)% (65)% 1% 25% 40% (1)%

119

Company Name	Counterparty	Relationship		Transaction Details	Transaction Details		Transactions with Terms Different from Others	Transactions with Terms Different from Others	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchases/ Sales	Amount (Note 2)	Percentage of Total Purchases/Sales	Credit Terms	Unit Price (Note 1)	Credit Terms (Note 1)	Ending Balance (Note 2)	Percentage of Total Notes/Accounts Receivable (Payable)
DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW	FTWJ DPSZ DPXM EFOP BVHF BVHF QCES AUO AULB DPXM FTWJ DPSZ	Subsidiary 100% held by FTMI Subsidiary 100% held by DPHK Subsidiary 100% held by DPHK Equity-accounted investee held by DPTW Subsidiary 100% held by BVLB Subsidiary 100% held by BVLB Subsidiary of Qisda Ultimate parent company Subsidiary 100% held by AUO Subsidiary 100% held by DPHK Subsidiary 100% held by FTMI Subsidiary 100% held by DPHK	Purchases Purchases Purchases Purchases Purchases Sales Sales Sales Sales Sales Sales Sales	3,740,260 1,116,381 8,869,212 1,449,636 2,968,106 (406,330) (283,204) (10,115,728) (2,015,968) (185,130) (1,002,942) (210,629)	18% 5% 42% 7% 14% (2)% (1)% (48)% (10)% (1)% (5)% (1)%	EOM 90 days EOM 90 days EOM 60 days Payment in advanced EOM 60 days EOM 60 days EOM 120 days OA 60 days EOM 120 days EOM 60 days EOM 60 days EOM 60 days	- - - - - - - - - - - -		(1,131,005) (301,590) (2,356,456) - (774,031) 105,625 95,563 2,244,059 746,099 21,574 204,056 39,520	(23)% (6)% (47)% - (15)% 2% 2% 47% 16% - 4% 1%

Note 1: Transaction terms with the related parties were determined in accordance with mutual agreements when there were no similar transactions with related parties. Except for the event aforesaid, other transaction terms with related parties were similar to those with third parties.

Note 2: All inter-company transactions between AUO and its subsidiaries have been eliminated in the consolidated financial statements.

120

AU OPTRONICS CORP. AND SUBSIDIARIES Receivables from Related Parties with Amounts Exceeding NT$100 Million or 20% of the Paid-in Capital December 31, 2018

(Amount in thousands of New Taiwan Dollars and foreign currencies indicated)

Table 7

Company Name	Counterparty	Relationship	Ending Balance of Receivables (Note 3)	Turnover Rate	Overdue Receivables	Overdue Receivables	Amounts Received in Subsequent Period (Note 1)	Allowance for Bad Debts
					Amount	Action Taken
AUO AUO AUO AUO AUO AUO AUO AUO AUKS AULB AULB AULB AULB AUSJ AUST AUSZ AUSZ AUXM AUXM	CGPC BenQ AUSZ QCSZ SGPC AUXM FGPC BVXM AUO AUSK AUSZ AUO AUXM AUKS AUO AUKS AULB AUKS AULB	Subsidiary of SSEC Subsidiary of Qisda Subsidiary 100% held by AULB Subsidiary of Qisda Subsidiary of SREC Subsidiary 100% held by AULB Subsidiary of SSEC Subsidiary 100% held by AUXM Ultimate parent company Subsidiary 100% held by AULB Subsidiary 100% held by AULB Ultimate parent company Subsidiary 100% held by AULB Subsidiary 51% held by AULB Ultimate parent company Subsidiary 51% held by AULB Subsidiary 100% held by AUO Subsidiary 51% held by AULB Subsidiary 100% held by AUO	142,800 532,512 1,003,168 1,347,828 316,757 672,003 196,141 229,242 CNY 450,089 USD 32,601 USD 10,716 USD 928,892 USD 8,503 CNY 252,813 USD 33,287 CNY 438,946 CNY 339,075 CNY 204,068 CNY 235,260	3.63 5.54 - 7.45 2.91 - 7.73 6.65 6.65 (Note 2) 2.22 (Note 2) 2.49 (Note 2) 5.86 (Note 2) 5.07 (Note 2) 5.49	- 329 439 - - 15 78,960 16,576 CNY 22,514 - USD 3 USD 239,722 USD 28 - - CNY 9,000 CNY 79,612 CNY 70 CNY 56,559	- Will be collected in next period Will be collected in next period - - Will be collected in next period Will be collected in next period Will be collected in next period Collected in subsequent period - Collected in subsequent period Collected in subsequent period Collected in subsequent period - - Collected in subsequent period Collected in subsequent period Will be collected in next period Collected in subsequent period	- - - - - - - - CNY 226,444 - USD 151 USD 399,074 USD 383 - - CNY 15,367 CNY 137,899 - CNY 88,459	- - - - - - - - - - - - - - - - - - -

121

Company Name	Counterparty	Relationship	Ending Balance of Receivables (Note 3)	Turnover Rate	Overdue Receivables	Overdue Receivables	Amounts Received in Subsequent Period (Note 1)	Allowance for Bad Debts
					Amount	Action Taken
BVHF DPSZ DPSZ DPXM FTWJ M.Setek ACTW ACTW DPTW DPTW DPTW DPTW DPTW	DPTW DPTW AUKS DPTW DPTW ACTW M.Setek ACMK AULB FTWJ DPXM BVHF AUO	Subsidiary held by AUO, Konly and Ronly Subsidiary held by AUO, Konly and Ronly Subsidiary 51% held by AULB Subsidiary held by AUO, Konly and Ronly Subsidiary held by AUO, Konly and Ronly Subsidiary held by AUO and Konly Subsidiary 99.9991% held by SDMC Subsidiary 100% held by ACTW Subsidiary 100% held by AUO Subsidiary 100% held by FTMI Subsidiary 100% held by DPHK Subsidiary 100% held by BVLB Ultimate parent company	CNY 430,608 CNY 69,952 CNY 101,353 CNY 936,387 CNY 551,170 JPY 1,969,947 253,680 271,028 746,099 1,289,509 1,651,736 1,084,214 2,244,059	(Note 2) (Note 2) (Note 2) (Note 2) 1.41 5.14 - (Note 2) 2.58 (Note 2) (Note 2) (Note 2) 4.99	CNY 132,654 CNY 13,602 - - - JPY 351,991 - - - 31,755 571 507 193,164	Collected in subsequent period Collected in subsequent period - - - Will be collected in next period - - - Collected in subsequent period Collected in subsequent period Will be collected in next period Will be collected in next period	CNY 74,701 CNY 6,793 - CNY 225,757 CNY 136,443 - - - 167,759 429,550 1,038,715 - -	- - - - - - - - - - - - -

Note 1: Until the end of January 2019.

Note 2: The ending balance includes other receivables from transactions not related to ordinary sales.

Note 3: All inter-company transactions between AUO and its subsidiaries have been eliminated in the consolidated financial statements.

122

AU OPTRONICS CORP. AND SUBSIDIARIES

Business Relationship between the Parent and the Subsidiaries and Significant Intercompany Transactions

For the year ended December 31, 2018

(Amount in thousands of New Taiwan Dollars and foreign currencies indicated)

Table 8

						Inter-company Transactions
							Percentage of
	Company			Financial
No.	Name	**Counterparty **	Nature of Relationship	Statement	Amount	Trading Terms	Consolidated
							Net Revenue or
				Account			Total Assets
0	AUKS	AUO	Subsidiary to parent	Net revenue	CNY 2,682,858	The prices of inter-company sales are not comparable with	4%
						those of third parties. The credit term is OA 45 days.
1	AULB	AUO	Subsidiary to parent	Net revenue	USD 2,015,977	The prices of inter-company sales are not comparable with	20%
						those of third parties. The credit term is OA 45 days.
1	AULB	AUO	Subsidiary to parent	Receivables from	USD 928,892	-	7%
				related parties
2	AUST	AUO	Subsidiary to parent	Net revenue	USD 211,476	The prices of inter-company sales are not comparable with	2%
						those of third parties. The credit term is OA 45 days.
3	AUSZ	AULB	Subsidiary to subsidiary	Net revenue	CNY 1,758,886	The prices of inter-company sales are not comparable with	3%
						those of third parties. The credit term is OA 45 days.
4	AUXM	AULB	Subsidiary to subsidiary	Net revenue	CNY 1,148,773	The prices of inter-company sales are not comparable with	2%
						those of third parties. The credit term is OA 45 days.
5	BVHF	DPTW	Subsidiary to subsidiary	Net revenue	CNY 653,258	The prices of inter-company sales are not comparable with	1%
						those of third parties. The credit term is EOM 60 days.
6	DPXM	DPTW	Subsidiary to subsidiary	Net revenue	CNY 1,956,961	The prices of inter-company sales are not comparable with	3%
						those of third parties. The credit term is EOM 60 days.
6	DPXM	DPTW	Subsidiary to subsidiary	Receivables from	CNY 936,387	-	1%
				related parties
7	FTWJ	DPTW	Subsidiary to subsidiary	Net revenue	CNY 825,281	The prices of inter-company sales are not comparable with	1%
						those of thirdparties. The credit term is EOM 90 days.

123

						Inter-company Transactions
							Percentage of
	Company			Financial
No.	Name	**Counterparty **	Nature of Relationship	Statement	Amount	Trading Terms	Consolidated
							Net Revenue or
				Account			Total Assets
7	FTWJ	DPTW	Subsidiary to subsidiary	Receivables from	CNY 551,170	-	1%
				related parties
8	DPTW	AUO	Subsidiary to parent	Net revenue	10,115,728	The prices of inter-company sales are not comparable with	3%
						those of third parties. The credit term is OA 60 days.
8	DPTW	AULB	Subsidiary to subsidiary	Net revenue	2,015,968	The prices of inter-company sales are not comparable with	1%
						those of third parties. The credit term is EOM 120 days.
8	DPTW	AUO	Subsidiary to parent	Receivables from	2,244,059	-	1%
				relatedparties

Note 1: This table discloses the information on inter-company sales and receivables which are accounted for 1% or more of the consolidated net revenue or the consolidated total assets, respectively. The information of the corresponding inter-company purchases and payables is no more disclosed herein.

Note 2: All inter-company transactions have been eliminated in the consolidated financial statements.

124

AU OPTRONICS CORP. AND SUBSIDIARIES

Information on Investees (Excluding Information on Investment in Mainland China)

For the year ended December 31, 2018

(Amount in thousands of New Taiwan Dollars and foreign currencies indicated, and shares in thousands)

Table 9

Investor Company	Investee Company	Location	Main Activities	Original Investment Amount	Original Investment Amount	December 31, 2018	December 31, 2018	December 31, 2018	The Highest Ownership during the Year	Net Income (Loss) of Investee	Investor’s Share of Profit (Loss) of Investee (Note 1 and 2)	Note
				December 31, 2018	December 31, 2017	Shares	Percentage of Ownership	Carrying Amount (Note 1 and 2)
AUO AUO AUO AUO AUO AUO AUO AUO AUO AUO	AULB AUNL Konly Ronly DPTW ACTW SDMC SREC Lextar SMI	Malaysia Netherlands Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC	Holding and trading company Sales support of TFT- LCD panels Venture capital investment Venture capital investment Manufacturing, design and sales of TFT-LCD modules, TV set, backlight modules and related parts Manufacturing and sales of ingots and solar wafers Holding company Venture capital investment Manufacturing and sales of Light Emitting Diode Sales of content management system and hardware; leasing	59,058,698 24,275 4,227,070 1,778,692 3,569,155 15,138,528 - 379,040 881,076 30,000	59,058,698 - 4,227,070 1,778,692 3,569,155 14,502,718 4,954,843 473,800 881,076 30,000	1,882,189 50 284,302 149,412 190,108 378,193 - 37,904 78,418 3,000	100.00% 100.00% 100.00% 100.00% 28.56% 93.52% - 32.01% 15.33% 100.00%	53,565,171 25,464 5,296,190 2,076,069 3,369,060 5,005,774 - 414,978 1,740,230 29,272	100.00% 100.00% 100.00% 100.00% 28.56% 93.52% 99.99% 32.01% 15.33% 100.00%	971,698 1,775 193,482 59,387 321,898 (638,203) 237,563 88,937 49,292 (659)	857,785 - 193,482 59,387 91,946 (530,635) 20,675 28,472 7,551 (659)	Subsidiary Subsidiary (Note 7) Subsidiary Subsidiary Subsidiary Subsidiary (Note 8) Subsidiary (Note 4) Associate Associate Subsidiary

125

Investor Company	Investee Company	Location	Main Activities	Original Investment Amount	Original Investment Amount	December 31, 2018	December 31, 2018	December 31, 2018	The Highest Ownership during the Year	Net Income (Loss) of Investee	Investor’s Share of Profit (Loss) of Investee (Note 1 and 2)	Note
				December 31, 2018	December 31, 2017	Shares	Percentage of Ownership	Carrying Amount (Note 1 and 2)
AUO AUO AUO Konly Konly Konly Konly Konly Konly Konly Konly Konly Konly Konly Konly Konly	UTI SSEC CQIL DPTW ACTW SDMC SREC Raydium Daxin Lextar LGPC CGPC Ubitech Inc. SSEC WMI SkyREC Ltd.	Taiwan ROC Taiwan ROC Israel Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC BVI	Planning, design and development of construction for environmental protection and related project management Holding company Holding company Manufacturing, design and sales of TFT-LCD modules, TV set, backlight modules and related parts Manufacturing and sales of ingots and solar wafers Holding company Holding company IC design Research, manufacturing and sales of display related chemicals Manufacturing and sales of Light Emitting Diode Renewable energy power generation Solar power generation Development and sales of software for POS system Holding company Developing and providing CRM APP Data consulting service for retail	50,000 930,000 821,138 703,795 589,793 - 17,760 175,857 154,748 450,674 - - 27,000 60,000 15,000 46,016	50,000 350,000 - 703,795 3,121,856 18,844 22,200 175,857 154,748 450,674 100,000 10,000 27,000 20,000 - -	5,000 93,000 39,974 42,598 10,122 - 1,776 11,454 19,114 26,133 - - 357 6,000 2,500 188	100.00% 31.00% 100.00% 6.40% 2.50% - 1.50% 17.63% 18.61% 5.11% - - 26.31% 2.00% 12.50% 16.12%	50,888 942,094 766,795 754,916 133,974 - 19,444 716,380 492,348 579,925 - - 18,116 60,780 14,041 43,346	100.00% 35.00% 100.00% 6.40% 13.25% 0.0005% 1.50% 17.91% 18.61% 5.11% 100.00% 100.00% 26.31% 2.00% 12.50% 16.12%	1,682 41,302 (35,333) 321,898 (638,203) 237,563 88,937 561,869 655,535 49,292 87 (781) (11,370) 41,302 2,081 (11,878)	1,682 13,487 (55,132) 20,603 (78,728) - 1,334 99,333 121,984 2,516 87 (781) (7,944) 826 (729) (2,662)	Subsidiary Associate Subsidiary Subsidiary Subsidiary (Note 8) Subsidiary (Note 4) Associate Associate Associate Associate (Note 5) (Note 6) Associate Associate Associate Associate

126

Investor Company	Investee Company	Location	Main Activities	Original Investment Amount	Original Investment Amount	December 31, 2018	December 31, 2018	December 31, 2018	The Highest Ownership during the Year	Net Income (Loss) of Investee	Investor’s Share of Profit (Loss) of Investee (Note 1 and 2)	Note
				December 31, 2018	December 31, 2017	Shares	Percentage of Ownership	Carrying Amount (Note 1 and 2)
Ronly Ronly Ronly Ronly Ronly DPTW DPTW DPTW DPTW DPTW DPTW ACTW ACTW SDMC AULB AULB AULB	DPTW ACTW SDMC Daxin Lextar BVLB DPLB FHVI FRVI EFOP Darwin Summit Corporation Ltd. ACMK SDMC M.Setek AUUS AUJP AUNL	Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Malaysia Malaysia BVI BVI Taiwan ROC Thailand Malaysia Taiwan ROC Japan United States Japan Netherlands	Manufacturing, design and sales of TFT-LCD modules, TV set, backlight modules and related parts Manufacturing and sales of ingots and solar wafers Holding company Research, manufacturing and sales of display related chemicals Manufacturing and sales of Light Emitting Diode Holding company Holding company Holding company Holding company Manufacturing and sales of polymer plasticized raw materials International trade Manufacturing and sales of solar wafers Holding company Manufacturing and sales of ingots Sales and sales support of TFT-LCD panels Sales support of TFT- LCD panels Sales support of TFT- LCD panels	845,510 - - 70,021 323,431 1,051,289 4,362,627 2,362,321 274,700 338,729 3,740 449,975 1,988,488 23,596,368 USD 1,000 USD 276 -	845,510 292,430 2,107 70,021 323,431 1,051,289 4,384,080 2,544,294 274,700 338,729 - 449,975 - 24,001,168 USD 1,000 USD 276 USD 59	40,509 - - 6,312 34,338 36,000 92,267 22,006 8,200 33,873 40 46,196 116,836 11,404,184 1,000 1 -	6.09% - - 6.15% 6.71% 29.71% 100.00% 100.00% 100.00% 49.00% 40.00% 100.00% 100.00% 99.9991% 100.00% 100.00% -	717,894 - - 162,592 762,023 291,964 6,432,222 4,144,583 89,147 221,956 6,830 507,155 1,987,129 1,924,877 USD 1,902 USD 1,730 -	6.09% 0.81% 0.0004% 6.15% 6.71% 29.71% 100.00% 100.00% 100.00% 49.00% 40.00% 100.00% 100.00% 99.9991% 100.00% 100.00% 100.00%	321,898 (638,203) 237,563 655,535 49,292 141,027 6,014 489,776 4,322 (150) 584 44,131 237,563 240,137 USD 83 USD 78 USD 59	19,592 (3,458) - 40,284 3,306 41,898 21,786 597,366 4,152 (73) 234 44,131 186,296 240,135 USD 83 USD 78 USD 59	Subsidiary Subsidiary (Note 8) Subsidiary (Note 4) Associate Associate Subsidiary Subsidiary Subsidiary Subsidiary Joint Venture Associate Subsidiary Subsidiary (Note 4) Subsidiary Subsidiary Subsidiary Subsidiary (Note 7)

127

Investor Company	Investee Company	Location	Main Activities	Original Investment Amount	Original Investment Amount	December 31, 2018	December 31, 2018	December 31, 2018	The Highest Ownership during the Year	Net Income (Loss) of Investee	Investor’s Share of Profit (Loss) of Investee (Note 1 and 2)	Note
				December 31, 2018	December 31, 2017	Shares	Percentage of Ownership	Carrying Amount (Note 1 and 2)
AULB AULB AULB AULB AULB AULB AULB AUSG AUSG DPLB DPLB FHVI FHVI FHVI FHVI FRVI M.Setek M.Setek	AUKR AUCZ AUSK AUST AUVI BVLB AUSG AEUS AENL DPHK DPSK FTMI FWSA PMSA FLMI FFMI Ichijo Seisakusyo Co., Ltd. Langfang Songgong Semiconductor Co., Ltd.	South Korea Czech Republic Slovakia Republic Singapore United States Malaysia Singapore United States Netherlands Hong Kong Slovakia Republic Mauritius Samoa Samoa Mauritius Mauritius Japan PRC	Sales support of TFT- LCD panels Assembly of solar modules Repairing of TFT-LCD modules Manufacturing TFT- LCD panels based on low temperature polysilicon technology Research and development and IP related business Holding company Holding company and sales support of TFT- LCD panels Sales support of solar- related products Sales support of solar- related products Holding company Manufacturing, assembly and sales of automotive parts Holding company Holding company Holding company Holding company Holding company Manufacturing of semiconductor equipment and related parts Manufacturing and sales of monocrystalline solar wafers	USD 155 USD 20,531 USD 54,349 USD 321,161 USD 5,000 USD 85,171 USD 86,685 USD 3,510 USD 45 USD 103,785 USD 4,216 USD 6,503 USD 19,000 USD 39,673 - USD 8,200 JPY 5,000 JPY 619,952	USD 155 USD 20,531 USD 54,349 USD 384,900 USD 5,000 USD 85,171 USD 104,716 USD 9,510 USD 45 USD 104,484 USD 4,216 USD 7,103 USD 19,000 USD 39,673 USD 7,774 USD 8,200 JPY 5,000 JPY 619,952	- - - 907,114 5,000 85,171 266,268 9,510 - 10 - 6,503 19,000 31,993 - 653 - -	100.00% 100.00% 100.00% 100.00% 100.00% 70.29% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% - 100.00% 38.46% 56.00%	USD 963 USD 14,233 USD 67,675 USD 207,186 USD 5,619 USD 22,425 USD 64,307 USD 815 USD 189 USD 209,333 USD 3,268 USD 79,772 USD 14,440 USD 43,696 - USD 1,259 - -	100.00% 100.00% 100.00% 100.00% 100.00% 70.29% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 38.46% 56.00%	USD 91 USD 484 USD 30,747 USD 3,929 USD 169 USD 4,671 USD 258 USD (21) USD 21 USD 312 USD (113) USD 479 USD (573) USD 19,590 USD 341 USD 143 - -	USD 91 USD 484 USD 30,747 USD 3,929 USD 169 USD 3,283 USD 258 USD (21) USD 21 USD 312 USD (113) USD 479 USD (573) USD 19,590 USD 341 USD 143 - -	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary (Note 9) Subsidiary Subsidiary Subsidiary Subsidiary (Note 5) Subsidiary Associate (Note 3) Associate (Note 3)

128

Investor Company	Investee Company	Location	Main Activities	Original Investment Amount	Original Investment Amount	December 31, 2018	December 31, 2018	December 31, 2018	The Highest Ownership during the Year	Net Income (Loss) of Investee	Investor’s Share of Profit (Loss) of Investee (Note 1 and 2)	Note
				December 31, 2018	December 31, 2017	Shares	Percentage of Ownership	Carrying Amount (Note 1 and 2)
CQIL CQHLD CQHLD CQHLD	CQHLD CQUK CQUS CQCA	United Kingdom United Kingdom United States Canada	Holding company Sales support of content management system Sales of content management system and hardware Research and development of content management system	USD 4,071 - USD 1 -	- - - -	635,703 - 1 -	100.00% 100.00% 100.00% 100.00%	USD (11,735) USD (2,380) USD (8,384) USD (579)	100.00% 100.00% 100.00% 100.00%	USD (1,201) USD 427 USD (260) USD 584	USD (1,201) USD 427 USD (260) USD 584	Subsidiary Subsidiary Subsidiary Subsidiary

Note 1: All inter-company transactions between AUO and its subsidiaries have been eliminated in the consolidated financial statements.

• Note 2: Inclusive of the amortization of differences between the investment cost and the entity’s share of the net value of investee, and the effect of upstream and sidestream transactions.

Note 3: The carrying amount includes accumulated impairment loss.

• Note 4: As part of a business restructuring, AUO, Konly and Ronly disposed all of their shareholdings in SDMC to ACTW during the second quarter of 2018. Note 5: Have been liquidated.

Note 6: Konly disposed all its shareholdings in CGPC to SSEC, an associate of the Company, during the third quarter of 2018.

Note 7: As part of a business restructuring, AULB disposed all of its shareholdings in AUNL to AUO in December 2018.

Note 8: As part of a business restructuring, Konly and Ronly disposed its shareholdings in ACTW to AUO, respectively, in December 2018.

Note 9: The registration of the alteration of DPHK’s common stock has not been completed.

129

AU OPTRONICS CORP. AND SUBSIDIARIES Information on Investment in Mainland China

For the year ended December 31, 2018

(Amount in thousands of New Taiwan Dollars and foreign currencies indicated)

Table 10

1. AUO:

(1) Related information on investment in Mainland China

(1) R	elated informa	tion on inve	stment in M	ainland Ch	ina	ina
Investee Company	Main Activities	Total Amount of Paid-in Capital (Note 2)	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2018 (Note 2)	Investment Flows		Accumulated Outflow of Investment from Taiwan as of December 31, 2018 (Note 2)	Net Income (Loss) of Investee (Note 4 and 5)	% Ownership through Direct or Indirect Investment	The Highest Ownership during the Year	Investor’s Share of Profit (Loss) of Investee (Note 4 and 5)	Carrying Amount of the Investment as of December 31, 2018 (Note 2)	Accumulated Inward Remittance of Earnings as of December 31, 2018	Note
					Outflow	Inflow
A-Care AETJ AUKS AUSH AUSJ AUSZ	Design, development and sales of software and hardware for health care industry Manufacturing and sales of solar modules Manufacturing and sales of TFT- LCD panels Sales support of TFT-LCD panels Manufacturing and assembly of TFT-LCD modules Manufacturing and assembly of TFT-LCD modules	22,407 523,634 29,600,722 92,406 3,326,616 8,562,956	(Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1)	- - 15,096,368 30,802 2,464,160 6,160,400	- - - - - -	- - - - - -	- - 15,096,368 30,802 2,464,160 6,160,400	(7,457) 54 (4,826,713) 1,164 (131,634) 1,528,417	100% 100% 51% 100% 100% 100%	100% 100% 51% 100% 100% 100%	(7,457) 54 (2,461,624) 1,164 (201,026) 1,505,364	15,065 52,847 7,545,794 470,562 3,777,093 13,029,267	- - - - - -	Note 7 Note 7

130

Investee Company	Main Activities	Total Amount of Paid-in Capital (Note 2)	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2018 (Note 2)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2018 (Note 2)	Net Income (Loss) of Investee (Note 4 and 5)	% Ownership through Direct or Indirect Investment	The Highest Ownership during the Year	Investor’s Share of Profit (Loss) of Investee (Note 4 and 5)	Carrying Amount of the Investment as of December 31, 2018 (Note 2)	Accumulated Inward Remittance of Earnings as of December 31, 2018	Note
					Outflow	Inflow
AUXM BVCH BVHF BVXM EDT MIS UFSZ	Manufacturing and assembly of TFT-LCD modules Manufacturing and sales of liquid crystal products and related parts Manufacturing and sales of liquid crystal products and related parts Manufacturing and sales of liquid crystal products and related parts Design and sales of software and hardware integration system and equipment relating to intelligent manufacturing Development and licensing of software relating to intelligent manufacturing, and related consulting services Planning, design and development of construction project for environmental protection and project management	7,700,500 450,897 2,262,407 2,688,780 8,963 13,444 17,925	(Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1)	7,700,500 230,091 - - - - -	- - - - - - -	- - - - - - -	7,700,500 230,091 - - - - -	866,160 19,978 141,089 149,286 (2) (372) 300	100% 19% 100% 100% 100% 100% 100%	100% 19% 100% 100% 100% 100% 100%	856,698 3,796 141,089 149,286 (2) (372) 300	13,121,357 90,782 980,683 1,285,191 8,961 13,079 18,220	- - - - - - -	Note 7 Note 6

131

• (2) Upper limit on investment in Mainland China

(2) Upper limit on investment in Mainland China
Accumulated Investment in Mainland China as of December 31, 2018 (Note 2)	Investment Amounts Authorized by Investment Commission, MOEA (Note 2)	Upper Limit on Investment Stipulated by Investment Commission, MOEA (Note 3)
31,682,321 (USD1,028,580)	41,356,808 (USD1,335,003 and HKD60,000)	130,367,213

• Note 1: Indirect investments in Mainland China through companies registered in a third region.

• Note 2: Amounts denominated in foreign currencies are translated into New Taiwan Dollars using the exchange rates at the reporting date.

• Note 3: Pursuant to the Regulations Governing Permission for Investment and Technical Cooperation in the Mainland Area, AUO’s accumulated investments in Mainland China did not exceed the upper limit on investment amount or ratio stipulated by the Investment Commission, Ministry of Economic Affairs (“MOEA”).

• Note 4: Amounts were recognized based on the investees’ audited financial statements except for BVCH.

• Note 5: Amounts denominated in foreign currencies are translated into New Taiwan Dollars using the average exchange rates for the year of 2018.

• Note 6: BVHF is 100% owned by BVLB, a jointly-owned subsidiary of AUO and DPTW.

• Note 7: The share of profit (loss) of investee and the carrying amount of the investment as of December 31, 2018 both include the effect of sidestream transactions.

132

2. DPTW:

(1) Related information on investment in Mainland China

(1) Re	lated informa	tion on inve	stment in M	ainland Chi	na	na
Investee Company	Main Activities	Total Amount of Paid-in Capital (Note 4)	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2018 (Note 4)	Investment Flows		Accumulated Outflow of Investment from Taiwan as of December 31, 2018 (Note 4)	Net Income (Loss) of Investee (Note 2 and 6)	% Ownership through Direct or Indirect Investment	The Highest Ownership during the Year	Investor’s Share of Profit (Loss) of Investee (Note 2 and 6)	Carrying Amount of the Investment as of December 31, 2018 (Note 4)	Accumulated Inward Remittance of Earnings as of December 31, 2018 (Note 4)	Note
					Outflow	Inflow
BVHF DPSZ DPXM FHWJ FPWJ FTKS FTWJ FLWJ DPCD	Manufacturing and sales of liquid crystal products and related parts Manufacturing and sales of backlight modules and related parts Manufacturing and sales of backlight modules and related parts Manufacturing of motorized treadmills Manufacturing and sales of precision plastic parts Manufacturing and sales of backlight modules and related parts Manufacturing and sales of backlight modules and related parts Manufacturing and sales of precision metal parts Manufacturing and sales of backlight modules and related parts	2,262,407 770,050 2,156,140 200,213 893,258 1,108,872 1,078,070 - -	(Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1)	492,832 462,030 2,156,140 252,576 585,238 1,108,872 200,213 172,491 -	- - - - - - - - -	- - - - - - - (172,491) -	492,832 462,030 2,156,140 252,576 585,238 1,108,872 200,213 - -	141,089 56,544 (57,989) 4,322 (26,414) 591,428 (80,080) 4,468 165	29.71% 100% 100% 100% 100% 100% 100% - -	29.71% 100% 100% 100% 100% 100% 100% 100% 100%	141,089 56,544 (57,989) 4,322 (26,414) 591,428 (80,080) 4,468 165	980,683 1,846,236 4,601,637 38,760 662,485 1,345,937 2,239,397 - -	- 1,026,211 1,594,004 - - - 433,524 71,005 21,532	Note 5 Note 12 Note 8 Note 7 Note 9 Note 10

133

Investee Company	Main Activities	Total Amount of Paid-in Capital (Note 4)	Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2018 (Note 4)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2018 (Note 4)	Net Income (Loss) of Investee (Note 2 and 6)	% Ownership through Direct or Indirect Investment	The Highest Ownership during the Year	Investor’s Share of Profit (Loss) of Investee (Note 2 and 6)	Carrying Amount of the Investment as of December 31, 2018 (Note 4)	Accumulated Inward Remittance of Earnings as of December 31, 2018 (Note 4)	Note
					Outflow	Inflow
FTXM	Manufacturing and sales of backlight modules and related parts	-	(Note 1)	18,481	-	(18,481)	-	3,113	-	100%	3,113	-	871,148	Note 11

(2) Upper limit on investment in Mainland China

(2) Upper limit on investment in Mainland China
Accumulated Investment in Mainland China as of December 31, 2018 (Note 4)	Investment Amounts Authorized by Investment Commission, MOEA (Note 4)	Upper Limit on Investment Stipulated by Investment Commission, MOEA (Note 3)
5,257,901 (USD170,700)	5,800,109 (USD188,303)	7,076,909

• Note 1: Indirect investments in Mainland China through companies registered in a third region.

• Note 2: Amounts were recognized based on the investees’ audited financial statements.

• Note 3: Pursuant to the Regulations Governing Permission for Investment and Technical Cooperation in the Mainland Area, DPTW’s accumulated investments in Mainland China did not exceed the upper limit on investment amount or ratio stipulated by the Investment Commission, Ministry of Economic Affairs (“MOEA”).

• Note 4: Amounts denominated in foreign currencies are translated into New Taiwan Dollars using the exchange rates at the reporting date.

• Note 5: BVHF is 100% owned by BVLB, a jointly-owned subsidiary of AUO and DPTW. Accordingly, the share of profit (loss) of investee and the carrying amount of the investment as of December 31, 2018 disclosed in the table are presented based on 100% held.

• Note 6: Amounts denominated in foreign currencies are translated into New Taiwan Dollars using the average exchange rates for the year of 2018.

• Note 7: The amount of paid-in capital includes the capitalization of retained earnings amounting to USD28,500 thousand for the years from 2005 to 2007.

• Note 8: The paid-in capital of USD10,000 thousand injected from the offshore holding company was from FTWJ’s appropriation of earnings remitted to the offshore holding company.

• Note 9: The amount of accumulated inward remittance of earnings as of December 31, 2018 was the proceeds of USD2,305 thousand from FLWJ’s return of residual capital upon liquidation (exclusive of the original investment amount of USD5,600 thousand).

• Note 10: The amount of accumulated inward remittance of earnings as of December 31, 2018 was the proceeds from DPCD’s return of residual capital upon liquidation.

• Note 11: The amount of accumulated inward remittance of earnings as of December 31, 2018 included the proceeds of USD19,049 thousand (net of tax of USD360 thousand) from FTXM’s return of earnings and residual capital upon liquidation in 2018 and the proceeds of USD9,233 thousand (net of tax of USD977 thousand) from the appropriation of earnings in 2016, but did not include the return of the original investment of USD600 thousand in 2018 and USD3,150 thousand in 2013.

• Note 12: The amount of paid-in capital includes the capital injection of USD1,000 thousand from DPLB in 2010 and the capitalization of retained earnings of USD9,000 thousand from DPSZ in 2012.

134