Stock Code ： 2409

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Financial Statements and

Independent Auditors’ Report

For the Years Ended December 31, 2019 and 2018

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.

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, 2019 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 of the Republic of China. 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: February 5, 2020

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, 2019 and 2018, the consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated statements of cash flows for the years ended December 31, 2019 and 2018, 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, 2019 and 2018, 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.

Emphasis of Matter

As stated in Note 3(1) to the consolidated financial statements, the Company has initially adopted the IFRS 16, “Leases” from January 1, 2019 and applied the modified retrospective approach with no restatement of comparative period amounts. Our conclusion is not modified in respect of this matter.

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(16) “Impairment – non-financial assets”, Note 5(2) and Note 5(3) “Critical accounting judgments and key sources of estimation and assumption uncertainty”, Note 6(9) “Property, plant and equipment”, Note 6(10) “Lease arrangements”, and Note 6(12) “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.

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.

Revenue recognition

Refer to Note 4(19) “Revenue from contracts with customers” and Note 6(21) “Revenue from contracts with customers” 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.

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.

3-1

Other Matters

AU Optronics Corp. has additionally prepared its parent-company-only financial statements as of and for the years ended December 31, 2019 and 2018, on which we have issued an unmodified audit opinion with the paragraph on emphasis of matter and unmodified audit opinion, respectively.

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:

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

3-2

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.
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) February 25, 2020

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.

3-3

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars)

December 31, 2019 2018 Assets Amount % Amount % Current assets: 1100 Cash and cash equivalents (Note 6(1)) $ 80,449,772 20 69,163,296 17 1110 Financial assets at fair value through profit or loss－current (Note 6(2)) 1,521,406 - 1,709,531 - 1170 Notes and accounts receivable, net (Note 6(4)) 30,308,675 8 44,647,981 11 1180 Accounts receivable from related parties, net (Notes 6(4)&7) 1,778,499 - 2,754,253 1 1210 Other receivables from related parties (Note 7) 3,956 - 12,945 - 1220 Current tax assets 79,886 - 69,156 - 130X Inventories (Note 6(5)) 23,460,072 6 26,309,104 6 1476 Other current financial assets (Notes 6(4)&8) 2,302,383 1 1,459,763 - 1479 Other current assets (Note 6(13)) 3,295,562 1 2,941,598 1 143,200,211 36 149,067,627 36 Noncurrent assets: 1517 Financial assets at fair value through other comprehensive income－ noncurrent (Note 6(3)) 7,545,171 2 6,979,925 2 1550 Investments in equity-accounted investees (Note 6(6)) 5,999,479 2 6,285,865 2 1600 Property, plant and equipment (Notes 6(9),7&8) 206,734,543 52 221,586,475 54 1755 Right-of-use assets (Note 6(10)) 12,207,768 3 - - 1760 Investment property (Note 6(11)) 1,555,130 - 730,306 - 1780 Intangible assets (Notes 6(7)&(12)) 12,808,326 3 13,377,263 3 1840 Deferred tax assets (Note 6(27)) 5,181,617 1 6,632,668 2 1900 Other noncurrent assets (Notes 6(13)&8) 2,405,346 1 5,171,646 1 254,437,380 64 260,764,148 64 Total Assets $ 397,637,591 100 409,831,775 100 December 31, 2019 2018 Liabilities and Equity Amount % Amount % Current liabilities: 2100 Short-term borrowings (Note 6(14)) $ 1,725,602 - 546,472 - 2120 Financial liabilities at fair value through profit or loss－current (Note 6(2)) 18,859 - 22,115 - 2170 Accounts payable 44,307,437 11 50,459,587 12 2180 Accounts payable to related parties (Note 7) 6,950,828 2 8,161,186 2 2213 Equipment and construction payable (Note 7) 6,316,902 2 11,231,333 3 2220 Other payables to related parties (Note 7) 40,584 - 27,998 - 2230 Current tax liabilities 1,523,879 - 3,094,253 1 2250 Provisions－current (Note 6(16)) 708,268 - 1,507,564 - 2280 Lease liabilities－current (Note 6(10)) 682,367 - - - 2399 Other current liabilities 18,718,165 5 24,291,532 6 2322 Current installments of long-term borrowings (Notes 6(15)&8) 9,535,198 3 29,595,931 7 90,528,089 23 128,937,971 31 Noncurrent liabilities: 2540 Long-term borrowings, excluding current installments (Notes 6(15)&8) 102,433,194 26 56,709,387 14 2550 Provisions－noncurrent (Note 6(16)) 1,053,290 - 1,030,485 - 2570 Deferred tax liabilities (Note 6(27)) 3,264,100 1 3,845,593 1 2580 Lease liabilities－noncurrent (Note 6(10)) 10,408,710 3 - - 2600 Other noncurrent liabilities (Note 6(18)) 1,973,459 - 2,029,651 1 119,132,753 30 63,615,116 16 Total liabilities 209,660,842 53 192,553,087 47 Equity:(Note 6(19)) Equity attributable to shareholders of AU Optronics Corp.: 3100 Common stock 96,242,451 24 96,242,451 23 3200 Capital surplus 60,544,474 15 60,622,043 15 3300 Retained earnings 22,903,722 6 46,845,991 11 3400 Other components of equity (2,005,384) (1) (847,770) - 3500 Treasury stock (1,013,423 ) - - - 176,671,840 44 202,862,715 49 Non-controlling interests: 36XX Non-controlling interests 11,304,909 3 14,415,973 4 Total equity 187,976,749 47 217,278,688 53 Total Liabilities and Equity $ 397,637,591 100 409,831,775 100	December 31,	December 31,
	2019	2018
		Amount % 546,472 - 22,115 - 50,459,587 12 8,161,186 2 11,231,333 3 27,998 - 3,094,253 1 1,507,564 - - - 24,291,532 6 29,595,931 7 128,937,971 31 56,709,387 14 1,030,485 - 3,845,593 1 - - 2,029,651 1 63,615,116 16 192,553,087 47 96,242,451 23 60,622,043 15 46,845,991 11 (847,770) - - - 202,862,715 49 14,415,973 4 217,278,688 53 409,831,775 100

See accompanying notes to the consolidated financial statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars, except for earnings per share)

2019	2018	% 101 1
Amount 270,794,105 2,002,411 268,791,694 268,335,751 455,943 3,751,070 7,363,234 9,809,587 20,923,891 (20,467,948 ) 5,320,271 (1,595,614) (3,251,370) 149,907 623,194 (19,844,754) 1,754,662 (21,599,416 ) 188,110 519,100 3,288 (37,622 ) 672,876 (2,505,864) (38,512) 459,729 (2,084,647 ) (1,411,771 ) (23,011,187 ) (19,185,258) (2,414,158 ) (21,599,416 ) (20,192,454) (2,818,733 ) (23,011,187 ) (2.00 ) (2.00 )	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
		100 91
		9
		1 3 3
		7
		2
		2 - (1) -
		1
		3 1
		2
		- - - -
		-
		- - -
		-
		-
		2
		3 (1 ) 2
		3 (1 ) 2

See accompanying notes to the consolidated financial statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars)

Equity Attributable to Shareholders of AU Optronics Corp.

Capital Stock		Retained Earnings	Retained Earnings	Retained Earnings		Other Components of Equity	Other Components of Equity		Equity Attributable to Shareholders of AU Optronics Corp.	Total Equity
Common Stock	Legal Reserve 3,439,686 - 3,439,686 3,235,942 - - - - - - - - - 6,675,628 1,016,060 - - - - - - - - - - - 7,691,688	Special Reserve - - - - - - - - - - - - - - - 847,770 - - - - - - - - - - 847,770	Unappropriated Earnings 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 (1,016,060 ) (847,770 ) (4,812,122 ) (19,185,258) 150,418 (19,034,840 ) - - - (95,307 ) - - 14,364,264		Cumulative Translation Differences (1,120,969) - (1,120,969 ) - - - (306,716 ) (306,716 ) - - (22,225 ) - - (1,449,910 ) - - - - (1,680,072 ) (1,680,072 ) - - - - - - (3,129,982 )	Unrealized Gains (Losses) on Financial Assets at Fair Value through Other Comprehensive Income - 1,303,816 1,303,816 - - - (751,760 ) (751,760 ) - - - 50,084 - 602,140 - - - - 522,458 522,458 - - - - - - 1,124,598	Unrealized Gains (Losses) on Available- for-sale Financial Assets	Subtotal
							1,377,031 (1,377,031 ) - - - - - - - - - - - - - - - - - - - - - - - - -	256,062 (73,215 ) 182,847 - - - (1,058,476 ) (1,058,476 ) - - (22,225 ) 50,084 - (847,770 ) - - - - (1,157,614 ) (1,157,614 ) - - - - - - (2,005,384 )	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 - - (4,812,122 ) (19,185,258) (1,007,196 ) (20,192,454 ) 547 (1,013,423 ) (40,085 ) (111,056 ) (22,282 ) - 176,671,840	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 - - (4,812,122 ) (21,599,416) (1,411,771 ) (23,011,187 ) 547 (1,013,423 ) (40,085 ) - - (425,669 ) 187,976,749



















				(95,307 ) - - 14,364,264

See accompanying notes to the consolidated financial statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars)

2019
Cash flows from operating activities:
Profit (loss) before income tax
$ (19,844,754)
Adjustments for:
- depreciation
35,693,033
- amortization
564,686
- gains on financial instruments at fair value through profit or loss
(41,065)
- interest expense
3,251,370
- interest income
(885,520)
- dividend income
(295,575)
- share of profit of equity-accounted investees
(149,907)
- gains on disposals of property, plant and equipment, net
(106,546)
- losses on disposals of investments and financial assets, net
13,154
- impairment losses on assets
2,298,646
- unrealized foreign currency exchange losses (gains)
(430,183)
- others
26,468
Changes in operating assets and liabilities:
- notes and accounts receivable
13,685,703
- receivables from related parties
984,744
- inventories
2,794,115
- other current assets
(926,326)
- accounts payable
(5,014,990)
- payables to related parties
(1,197,773)
- net defined benefit liability
(89,422)
- provisions
(759,948)
- other current liabilities
(4,906,788
)
Cash generated from operations
24,663,122
Cash received from interest income
919,840
Cash received from dividends
568,871
Cash paid for interest
(3,417,833)
Cash paid for income taxes
(2,003,361
)
Net cash provided by operating activities
20,730,639

2018
11,216,151
33,686,561
540,969

(406,507)
2,663,605

(841,615)

(468,263)

(311,714)
(1,923,044)
-
399,363

545,856
(132,537)
(3,702,504)
(826,893)
(1,654,060)

3,260,786

2,776,504

503,293

(82,176)

636,100
(3,679,040
)
42,200,835
815,890
670,234
(2,481,821)
(1,004,444
)
40,200,694
(Continued)

See accompanying notes to the consolidated financial statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

For the years ended December 31, 2019 and 2018 (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 Disposals of financial assets at fair value through other comprehensive income 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 Decrease (increase) in refundable deposits Increase in intangible assets Decrease (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 Payment of lease liabilities Guarantee deposits refunded Cash dividends Repurchase of treasury shares Net change of non-controlling interests and others Net cash provided by (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 $	2019 (3,668,175) 3,970,809 (47,182) - - 904,050 - - - (29,546,642) 170,880 49,670 (1,711) 55,945 (28,112,356 ) 2,576,584 (1,388,334) 79,880,000 (53,378,766) (694,922) (1,828) (4,812,122) (1,013,423) (425,122 ) 20,742,067 (2,073,874 ) 11,286,476 69,163,296 80,449,772	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

See accompanying notes to the consolidated financial statements

7-1

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018 (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 (“NYSE”) since May 2002. On and from October 1, 2019, AUO’s ADSs has delisted from the NYSE and begun trading on the overthe-counter (“OTC”) market.

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 February 5, 2020.

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, 2019.

New, Revised or Amended Standards and Interpretations	Effective Date Issued by IASB
Amendments to IFRS 9,Prepayment Features with Negative Compensation IFRS 16,Leases	January 1, 2019 January 1, 2019

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

New, Revised or Amended Standards and Interpretations	Effective Date Issued by IASB
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

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

IFRS 16, Leases

IFRS 16 sets out the accounting standards for leases, which replaces 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 is classified within financing activities; cash payments for interest portion is classified within operating activities. See Note 4(14) for an explanation of the Company’s accounting policies on leases.

When IFRS 16 became effective, as a lessee, the Company applied 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, therefore, has not been restated. The Company is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for a sublease. The Company has accounted for those leases in accordance with IFRS 16 starting from the date of initial application. On January 1, 2019, based on the assessment of the remaining contractual terms and conditions agreed in head leases and subleases, all of the Company’s subleases were classified as operating leases.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As at January 1, 2019, lease liabilities recognized for leases previously classified as an operating lease under IAS 17, except for leases of low-value asset and short-term leases, were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of initial application. Right-of-use assets were measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments relating to that lease. The Company also tested right-ofuse assets for impairment applying IAS 36.

In addition, the Company used the following practical expedients when applying IFRS 16 to leases.

a. Applied a single discount rate to a portfolio of leases with reasonably similar characteristics.
b. Applied the exemption not to recognize right-of-use assets and lease liabilities to leases for which the lease term ends within 12 months of the date of initial application.
c. Excluded initial direct costs from the measurement of the right-of-use assets at the date of initial application.
d. Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

For leases that were classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and the lease liability at the date of initial application were determined at the carrying amount of the lease asset and lease payable under IAS 17 as at December 31, 2018.

The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized by the Company at January 1, 2019 is 1.87%. The reconciliation between the lease liabilities recognized and the future minimum lease payments of non-cancellable operating leases on December 31, 2018 is presented as follows:

The future minimum lease payments of non-cancellable operating leases on December 31, 2018 $ Recognition exemption for short-term leases Other leases in scope of IFRS 16 Undiscounted amount on January 1, 2019 $ Discounted amount using the incremental borrowing rate on January 1, 2019 $ Finance lease liabilities recognized on December 31, 2018 Extension of lease that reasonably certain to be exercised Lease liabilities recognized on January 1, 2019 $	Amounts
	(in thousands) 5,942,211 (43,032) 125,328 6,024,507 5,445,818 2,496 7,241,212 12,689,526

The future minimum lease payments of non-cancellable operating
leases on December 31, 2018
$ Recognition exemption for short-term leases
Other leases in scope of IFRS 16
Undiscounted amount on January 1, 2019
$
Discounted amount using the incremental borrowing rate on January 1,
2019
$ Finance lease liabilities recognized on December 31, 2018
Extension of lease that reasonably certain to be exercised
Lease liabilities recognized on January 1, 2019
$

Amounts

(in thousands)

5,942,211
(43,032)
125,328

6,024,507

5,445,818
2,496
7,241,212

12,689,526

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table summarized the impacts of initially applying IFRS 16 on the Company’s assets, liabilities and equity as at January 1, 2019.

January 1, 2019 Carrying amount under IAS 17 and related standards and interpretations Adjustments from changes in accounting policies (in thousands) Other current assets $ 2,941,598 (6,638) Property, plant and equipment 221,586,475 (1,765) Right-of-use assets - 14,059,544 Other noncurrent assets 5,171,646 (1,364,111 ) Impacts to total assets $ 12,687,030 Lease liabilities–current $ - 708,167 Other current liabilities 24,291,532 (931) Lease liabilities–noncurrent - 11,981,359 Other noncurrent liabilities 2,029,651 (1,565 ) Impacts to total liabilities $ 12,687,030 Impacts to total equity $ -	January 1, 2019	January 1, 2019
		Adjustments from changes in accounting policies (in thousands) (6,638) (1,765) 14,059,544 (1,364,111 ) 12,687,030 708,167 (931) 11,981,359 (1,565 ) 12,687,030 -	Carrying amount under IFRS 16
			2,934,960 221,584,710 14,059,544 3,807,535 708,167 24,290,601 11,981,359 2,028,086

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

According to Ruling No. 1080323028 issued by the FSC on July 29, 2019, commencing from 2020, the Company is required to adopt the IFRSs that have been endorsed by the FSC with effective date from 2020. 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 3,Definition of a Business Amendments to IFRS 9, IAS 39 and IFRS 7,Interest Rate Benchmark Reform Amendments to IAS 1 and IAS 8,Definition of Material	January 1, 2020 January 1, 2020 January 1, 2020

The Company assesses that the initial adoption of the abovementioned standards would not have any material impact on its accounting policies.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

A summary of the new or/and amended IFRSs 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 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`,`Classification of Liabilities as Current or Non- Current	Subject to IASB’s announcement January 1, 2021 January 1, 2022

Note: The aforementioned new, revised and amended standards and interpretations are effective for annual periods beginning on or after the respective effective dates.

As of the date that the accompanying consolidated financial statements were issued, the Company continues in assessing the impact on its financial position and results of operations as a result of the application of abovementioned standards and interpretations. The related 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”).

(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));

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(ii) Financial assets at fair value through other comprehensive income (Note 6(3));
(iii) 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(18)).
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.

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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 and leasing of content management system and hardware (Taiwan ROC) Planning, design and development of construction for environmental protection and related project management (Taiwan ROC) Holding company (Israel) Sales and sales support of TFT-LCD panels (Netherlands) 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) Manufacturing and sales of solar wafers (Malaysia) Manufacturing and sales of ingots (Japan) Sales and sales support of TFT-LCD panels (United States)	Percentage of Ownership (%)	Percentage of Ownership (%)
			December 31, 2019 100.00 100.00 100.00 100.00 100.00 100.00 100.00 41.05(3) 100.00(4) 100.00 100.00 99.9991 100.00	December 31, 2018
AUO AUO AUO AUO AUO AUO AUO AUO, Konly and Ronly AUO and Konly ACTW ACTW SDMC 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) AU Optronics Europe B.V. (AUNL) Darwin Precisions Corporation (DPTW) AUO Crystal Corp. (ACTW) Sanda Materials Corporation (SDMC) AUO Crystal (Malaysia) Sdn. Bhd. (ACMK) M.Setek Co., Ltd. (M.Setek) AU Optronics Corporation America (AUUS)			100.00 100.00 100.00 100.00 100.00 100.00(1) 100.00(2) 41.05(3) 96.02(4) 100.00(5) 100.00 99.9991 100.00

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location 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, assembly and sales of TFT-LCD modules (PRC) Manufacturing, assembly and sales of TFT-LCD modules (PRC) Manufacturing and assembly of TFT- LCD modules; leasing (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 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) 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)	Percentage of Ownership (%)	Percentage of Ownership (%)
			December 31, 2019 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 - 100.00 100.00 100.00 100.00 100.00	December 31, 2018
AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB and DPTW AUSG AUSG AUSG AUXM AUSH AUSH	AU Optronics Corporation Japan (AUJP) AU Optronics Korea Ltd. (AUKR) AU Optronics Singapore Pte. Ltd. (AUSG) AU Optronics (Czech) s.r.o. (AUCZ)(6) 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)(6) AUO Green Energy America Corp. (AEUS) AUO Green Energy Europe B.V. (AENL) BriView (Xiamen) Corp. (BVXM) AUO Care Information Tech. (Suzhou) Co., Ltd. (A-Care) U-Fresh Technology (Suzhou) Co., Ltd. (UFSZ)			100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00(7)

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location 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) Planning, design and development of construction project for environmental protection and related project management (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) Development and sales of content management system and sales of related hardware (United Kingdom) Development and sales of content management system and sales of related hardware (United States) Holding company (Malaysia) Holding company (BVI) Holding company (BVI) Holding company (Mauritius) Holding company (Mauritius) Holding company (Samoa) Holding company (Samoa) Manufacturing of motorized treadmills (PRC) Manufacturing and sales of backlight modules and related parts (PRC)	Percentage of Ownership (%)	Percentage of Ownership (%)
			December 31, 2019 100.00 100.00 100.00(7) 100.00 100.00 100.00 100.00 100.00(7) 100.00(7) 100.00 100.00 - 100.00(6) 100.00 100.00 100.00 100.00 100.00	December 31, 2018
AUSH AUSH UFSZ CQIL CQHLD CQHLD CQHLD CQUS CQUS DPTW DPTW DPTW DPTW and FRVI FHVI FHVI FHVI FFMI FTMI	Edgetech Data Technologies (Suzhou) Corp., Ltd. (EDT) Mega Insight Smart Manufacturing (Suzhou) Corp., Ltd. (MIS) U-Fresh Environmental Technology (Shandong) Co., Ltd. (UFSD) ComQi Holdings Ltd. (CQHLD) ComQi UK Ltd. (CQUK) ComQi Inc. (CQUS) ComQi Canada Inc. (CQCA) JohnRyan Limited (JRUK) JohnRyan Inc. (JRUS) Darwin Precisions (L) Corp. (DPLB) Forhouse International Holding Ltd. (FHVI) Force International Holding Ltd. (FRVI)(6) Forefront Corporation (FFMI) Fortech International Corp. (FTMI) Forward Optronics International Corp. (FWSA) Prime Forward International Ltd. (PMSA) Forhouse Electronics (Suzhou) Co., Ltd. (FHWJ) Fortech Electronics (Suzhou) Co., Ltd. (FTWJ)			100.00(7) 100.00(7) - 100.00(1) 100.00(1) 100.00(1) 100.00(1) - - 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

(Continued)

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) Holding company (Hong Kong) Manufacturing 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 liquid crystal products and related parts (PRC)	Percentage of Ownership (%)	Percentage of Ownership (%)
			December 31, 2019 100.00 100.00 100.00 100.00 100.00 100.00 100.00	December 31, 2018
FWSA and FTMI PMSA DPLB DPLB DPHK DPHK BVLB	Suzhou Forplax Optronics Co., Ltd. (FPWJ) Fortech Electronics (Kunshan) Co., Ltd. (FTKS) Darwin Precisions (Hong Kong) Limited (DPHK) Darwin Precisions (Slovakia) s.r.o. (DPSK) Darwin Precisions (Suzhou) Corp. (DPSZ) Darwin Precisions (Xiamen) Corp. (DPXM) BriView (Hefei) Co., Ltd. (BVHF)			100.00 100.00 100.00 100.00 100.00 100.00 100.00

Note 1: 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. Refer to Note 6(7) for further details.
Note 2: As part of a business restructuring, AULB disposed all of its shareholdings in AUNL to AUO in December 2018. This was treated as an equity transaction as there was no change in control of AUNL by the Company.
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.
Note 4: As part of a business restructuring, Konly and Ronly successively disposed its shareholdings in ACTW to AUO in December 2018 and February 2019. 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.
Note 6: As of December 31, 2019, AETJ and FRVI were liquidated and AUCZ is still in the process of liquidation. After the liquidation of FRVI, its ownership in FFMI was transferred to DPTW.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

  - Note 7: UFSZ was incorporated in February 2018. EDT and MIS were incorporated in August 2018. UFSD was incorporated in May 2019. JRUK and JRUS were incorporated in October 2019.

(4) Foreign currency transactions and operations
a. Transactions in foreign currencies are translated to the respective functional currencies of the individual entities of the Company 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 non-monetary 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.

b. 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).
(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.
18 (Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

(7) Financial instruments
a. Financial assets
- (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

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

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.

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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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. 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.

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.

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.

(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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

b. 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.

(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.

(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.

c. 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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 progress 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 and joint ventures

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.

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 associates or joint ventures are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The consolidated financial statements include the Company’s share of the profit or loss and other comprehensive income of associates or joint ventures, after adjustments are made to align their accounting policies with those of the Company. When an associate or a joint venture 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 or joint venture as capital surplus provided that the ownership interest in the associate or joint venture remains unchanged.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The difference between acquisition cost and fair value of associates’ or joint ventures’ 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 or joint ventures 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.

The Company discontinues the use of the equity method from the date when its investment ceases to be an associate or a joint venture, 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 or joint venture 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 investee had directly disposed of the related assets or liabilities.

When the Company subscribes for additional shares in an associate or a joint venture 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 or joint venture. 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 or joint ventures 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 in an associate or a joint venture is reduced due to disposal of or disproportionate subscription to the shares, 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 would be required if the investee 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 or joint ventures. 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 or joint ventures are recognized in the Company’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Company.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

When the Company’s share of losses exceeds its interest in an associate or a joint venture, 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) 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 in non-operating income and expenses 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.

(12) 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

c. Depreciation

Depreciation is determined by depreciable amount allocated over the estimated useful lives of the respective assets, considering significant components of an individual asset on a straight-line basis. If a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. Depreciation 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.

Except for land, which is not depreciated, the estimated useful lives of the assets 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.

(13) Long-term prepaid rent (policy applicable before January 1, 2019)

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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(14) Leases

Leases (policy applicable from January 1, 2019)

a. Identifying a lease

A contract is, or contains, a lease when all the following conditions are satisfied:

(i) the contract involves the use of an identified asset, and the supplier does not have a substantive right to substitute the asset; and
(ii) the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use; and
(iii) the Company has the right to direct the use of the identified asset throughout the period of use.
b. As a lessee

Payments for leases of low-value assets and short-term leases are recognized as expenses on a straight-line basis during the lease term for which the recognition exemption is applied. Except for leases described above, a right-of-use asset and a lease liability shall be recognized for all other leases at the lease commencement date.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The lease liability is initially measured at the present value of the lease payments (including fixed payments and variable lease payments that depend on an index or a rate), discounted using the lessee’s incremental borrowing rate. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability, adjusted for any lease payments made at or before the commencement date, less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred in restoring the underlying asset.

The right-of-use asset is subsequently depreciated using the straight-line method over the shorter of the useful life of the right-of-use asset or the lease term. The lease liability is subsequently measured at amortized cost using the effective interest method. It is remeasured (i) if there is a change in the lease term; (ii) if there is a change in future lease payments arising from a change in an index or a rate; (iii) if there is a change in the amounts expected to be payable under a residual value guarantee; or (iv) if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in the circumstances aforementioned, a corresponding adjustment is made to the carrying amount of the right-of-use asset. However, if the carrying amount of the right-of-use asset is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Moreover, the lease liability is remeasured when lease modifications occur that decrease the scope of the lease. The Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognizes in profit or loss any gain or loss relating to the partial or full termination of the lease.

c. As 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 asset leased to others and recognized as an expense on a straight-line basis over the lease term.

Leases (policy applicable before January 1, 2019)

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.

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.

(15) 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(16) 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, right-of-use assets 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.

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.

(17) 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 items of property, plant and equipment. 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.

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

Management periodically assesses the obligation of all litigation and claims and relative legal costs. 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.

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

(18) Treasury shares

Where the Company repurchases its common stock that has been issued, the consideration paid, including all directly attributable costs is recorded as treasury share and deducted from equity. When treasury share is reissued, the excess of sales proceeds over cost is accounted for as capital surplus – treasury shares. If the sales proceeds are less than cost, the deficiency is accounted for as a reduction of capital surplus arising from similar types of treasury shares. If such capital surplus is insufficient to cover the deficiency, the remainder

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

is recorded as a reduction of retained earnings. The carrying amount of treasury share is calculated using the weighted-average cost of different types of repurchase.

If treasury share is retired, the weighted-average cost of the retired treasury share is written off against the par value and the capital surplus premium, if any, of the stock retired on a pro rata basis. If the weighted-average cost written off exceeds the sum of the par value and the capital surplus premium, the difference is accounted for as a reduction of capital surplus – treasury shares, or a reduction of retained earnings for any deficiency where capital surplus – treasury shares is insufficient to cover the difference. If the weightedaverage cost written off is less than the sum of the par value and the capital surplus premium, if any, of the stock retired, the difference is accounted for as an increase in capital surplus – treasury shares.

(19) Revenue from contracts with customers

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).

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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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(17) 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(17) 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)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(20) Government grants

a. 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.

b. 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.

c. 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.

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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

(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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 annual 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 annual 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.

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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 (loss) per share

Basic earnings (loss) 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.

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 of the operating segments 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

5. Critical Accounting Judgments and Key Sources of Estimations and Assumptions 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.

(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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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) Recognition 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

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.

(7) 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

6. Description of Significant Accounts

(1) Cash and Cash Equivalents

	December 31,	December 31,
	2019	2018
	(in thousands)
Cash on hand, demand deposits and checking accounts	$ 46,290,722	30,134,051
Time deposits	34,124,011	38,939,198
Government bonds with reverse repurchase agreements	35,039	90,047
	$ 80,449,772	69,163,296

Refer to Note 6(31) for the disclosure of credit risk, currency risk and sensitivity analysis of the financial instruments of the Company.

As at December 31, 2019 and 2018, no cash and cash equivalents were pledged with banks as collaterals.

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

		December	31,
		2019	2018
		(in thousands)
Financial assets mandatorily measured at FVTPL:
Foreign currency forward contracts	$	42,815	70,074
Structured deposits		1,478,591	1,639,457
	$	1,521,406	1,709,531
Financial liabilities held for trading:
Foreign currency forward contracts	$	18,859	22,115

The Company entered into derivative contracts to manage the exposure to currency risk arising from operating activities. Refer to Note 6(31) for the disclosure of the Company’s credit and currency risks related to financial instruments. As of December 31, 2019 and 2018, the Company’s outstanding foreign currency forward contracts were as follows:

	December 31, 2019	December 31, 2019
Contract item Sell USD / Buy NTD Sell USD / Buy JPY Sell USD / Buy CNY Sell USD / Buy SGD Sell USD / Buy MYR	Maturity date Jan. 2020 Jan. 2020 – Apr. 2020 Jan. 2020 – Jun. 2020 Jan. 2020 – Feb. 2020 Jan. 2020 – Mar. 2020	Contract amount
		(in thousands) USD176,600 / NTD5,319,611 USD47,292 / JPY5,150,510 USD61,500 / CNY432,823 USD39,276 / SGD53,372 USD703 / MYR2,905

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

	December 31, 2019	December 31, 2019
Contract item Sell CNY / Buy USD Sell EUR / Buy JPY Sell HKD / Buy USD	Maturity date Feb. 2020 – Mar. 2020 Jan. 2020 – Feb. 2020 Jan. 2020	Contract amount
		(in thousands) CNY1,935,305 / USD276,672 EUR23,000 / JPY2,788,285 HKD60,177 / USD7,721

	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

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

Investments in equity instruments at FVTOCI: Equity securities – listed stocks $ Equity securities – non-listed stocks $	December 31,	December 31,
	2019 2018 (in thousands) 7,356,501 6,803,900 188,670 176,025 7,545,171 6,979,925	2018
		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.

If the value of these equity securities appreciates or depreciates by 10% at the reporting date, other comprehensive income would increase or decrease by $754,517 thousand and $697,993 thousand for the years ended December 31, 2019 and 2018, respectively.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Notes and accounts receivable $ Less: loss allowance $ Notes and accounts receivable, net $ Accounts receivable from related parties, net $	December 31, 2019 2018 (in thousands) 32,104,912 47,453,087 (17,738 ) (50,853 ) 32,087,174 47,402,234 30,308,675 44,647,981 1,778,499 2,754,253

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 which was measured based on the aforementioned method, was as follows:

December 31, 2019	December 31, 2019	December 31, 2019
Carrying amount of notes and accounts receivable Weighted- average loss rate Loss allowance for lifetime expected credit losses (in thousands) (in thousands) 31,061,173 0.00% 1 1,010,918 0.00% 4 15,233 0.95% 145 32,087,324 150 December 31, 2018	Weighted- average loss rate	Loss allowance for lifetime expected credit losses
Carrying amount of notes and accounts receivable (in thousands) 46,529,408 862,373 11,090 475 47,403,346	Weighted- average loss rate	Loss allowance for lifetime expected credit losses
	0.00% 0.05% 0.98% 100%	(in thousands) 89 439 109 475 1,112

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In addition, there was objective evidence indicating that, under reasonable expectation, some of the notes and accounts receivable would not be recovered in total; therefore, the Company recognized a loss allowance of $17,588 thousand and $49,741 thousand as of December 31, 2019 and 2018, respectively.

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

		For the years	ended
		December	31,
		2019	2018
		(in thousands)
Balance at beginning of the year	$	50,853	93,053
Provisions (reversals) charged to (against) expense		(14,543)	(24,302)
Write-offs		(18,404)	(17,985)
Effect of changes in foreign currency exchange rates		(168 )	87
Balance at end of the year	$	17,738	50,853

The payment terms granted to customers are generally 25 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(31).

As at December 31, 2018, the Company did not sell its accounts receivables to banks. As at December 31, 2019, the Company’s accounts receivables sold and derecognized were as follows:

December 31, 2019

Underwriting bank CTBC bank Taipei Fubon Bank DBS Bank Bank of Taiwan	Factoring limit (in thousands) USD 152,000 USD 120,000 USD 154,000 USD 250,000	Amount sold and derecognized (in thousands) USD 18,526 USD 56,020 USD 56,730 USD 15,718	Amount advanced (in thousands) NTD 500,000 NTD 1,500,000 NTD 1,520,000 USD 14,000	Principal terms
				See Notes(a)~(d) See Notes(a)~(d) See Notes(a)~(d) See Notes(a)~(d)

Note (a): Under these facilities, the Company transferred accounts receivable to the respective underwriting banks, which are without recourse subject to the underwriting consents.

Note (b): The Company informed its customers pursuant to the respective facilities to make payment directly to the respective underwriting banks.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note (c): As of December 31, 2019, total outstanding receivables after the above transactions, net of fees charged by underwriting banks, of $487,754 thousand was recognized under other current financial assets. In addition, interest rate for the balance of advanced amount as of December 31, 2019 was ranging from 1.07% to 2.44%.

Note (d): To the extent of the amount transferred to the underwriting banks, risks of non-collection or potential payment default by customers in the event of insolvency are borne by respective banks. The Company is not responsible for the collection of receivables subject to these facilities, or for any legal proceedings and costs thereof in collecting these receivables. In case any commercial dispute between the Company and customers or other reasons results in the Company’s failure to perform the obligation under these facilities, the banks have requested the Company to issue promissory notes in the amounts equal to 10 percent of respective facilities or to transfer receivables in the amounts equal to 10 percent of respective facilities. Other than such arrangements, no collaterals were provided by the Company.

(5) Inventories

		December 31,	December 31,
		2019	2018
		(in thousands)
Finished goods	$	9,005,001	9,406,248
Work-in-progress		9,537,700	11,133,846
Raw materials		4,917,371	5,769,010
	$	23,460,072	26,309,104

For the years ended December 31, 2019 and 2018, the amounts recognized as cost of sales in relation to inventories were $268,335,751 thousand and $279,494,885 thousand, respectively. The net of provisions for inventories written down to net realizable value, which were also included in cost of sales, amounted to $33,451 thousand and $1,402,367 thousand for the years ended December 31, 2019 and 2018, respectively.

As at December 31, 2019 and 2018, none of the Company’s inventories was pledged as collateral.

(6) Investments in Equity-accounted Investees

		December	31,
		2019	2018
		(in thousands)
Associates	$	5,820,759	5,973,127
Joint ventures		178,720	312,738
	$	5,999,479	6,285,865

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

a. Associates

Name of associate Lextar Electronics Corp. (“Lextar”) Star Shining Energy Corporation (“SSEC”) Raydium Semiconductor Corporation (“Raydium”) Daxin Materials Corp. (“Daxin”) Star River Energy Corp. (“SREC”) Others	Principal activities Manufacturing and sales of Light Emitting Diode Investment IC design Research, manufacturing, and sales of display related chemicals Investment	Principal place of business Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC	December 31, 2019 Amount Ownership interest (in thousands) % $ 2,909,521 27 1,015,512 33 740,504 17 688,813 25 444,550 34 21,859 $ 5,820,759	December 31, 2018	December 31, 2018
			Amount	Amount	Ownership interest % 27 33 18 25 34
			(in thousands) $ 2,909,521 1,015,512 740,504 688,813 444,550 21,859 $ 5,820,759	(in thousands) $ 3,082,178 1,002,874 716,381 654,940 434,421 82,333 $ 5,973,127

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 $ Other comprehensive loss Total comprehensive income $	For the years ended December 31, 2019 2018 (in thousands) 195,865 307,992 (35,224 ) (15,477 ) 160,641 292,515

b. Joint ventures

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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company’s share of joint ventures’: Profit (loss) $ Other comprehensive income Total comprehensive income (loss) $	For the years ended December 31,	For the years ended December 31,
	2019 2018 (in thousands) (45,958) 3,722 - - (45,958 ) 3,722	2018
		3,722

As at December 31, 2019 and 2018, none of the Company’s investments in equity-accounted investees was pledged as collateral.

(7) 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.

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 for the year ended December 31, 2018.

The following table summarized 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

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 should 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 might have to pay was 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 for the year ended December 31, 2018.

b. Identifiable assets acquired and liabilities assumed

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

Cash $ 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

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(8) Disposal of Subsidiary

The Company disposed all its shareholdings in ChampionGen Power Corporation to SSEC in September 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 $	Amounts (in thousands) 70,516 48,148 (19,933 ) 98,731

(9) Property, Plant and Equipment

For	theyear ended	December 31, 2019	December 31, 2019
Adjustments on initial application of new standards	Additions Disposal or write off (in thousands) - - 325,184 (9,075) 1,320,958 (9,123,165) 4,910,462 (5,764,497 ) 6,556,604 (14,896,737 ) 4,195,265 (9,021) 27,348,497 (9,080,856) 5,575,376 (5,747,362 ) 37,119,138 (14,837,239 ) 18,469,787 (4,837 )		Reclassification, effect of change in exchange rate and others (675) (1,838,220) 13,450,424 1,561,968	Balance, End of Yaer
- - - (2,620 ) (2,620 ) - - (855 ) (855 ) -				8,858,648 119,697,249 841,581,837 35,834,437
		(14,896,737 )	13,173,497	1,005,972,171
		(9,021) (9,080,856) (5,747,362 )	(1,046,822) (2,808,161) (271,736 )	39,170,748 737,292,828 27,646,410
	37,119,138 18,469,787	(14,837,239 )	(4,126,719 )	804,109,986
		(4,837 )	(19,993,301 )	4,872,358
				206,734,543

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

	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

As of December 31, 2019 and 2018, 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 2019, the Company wrote down certain machineries and equipment with extremely low utilization resulting from the decline in the application for certain products associated with its display segment and recognized an impairment loss of $52,829 thousand.

In 2019 and 2018, the Company wrote down certain long-term assets with extremely low capacity utilization associated with its energy segment and recognized impairment losses of $14,949 thousand and $399,363 thousand, respectively.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In 2019, ACTW has experienced significant fluctuations in its industry with oversupply capacity worldwide resulting in lower capacity utilization; therefore, the management performed impairment assessment of ACTW and its subsidiaries, as a CGU, over its longterm assets with recoverable amount determined based on the value in use. Based on the assessment performed as of December 31, 2019, the carrying amount of the CGU was determined to be higher than its estimated recoverable amount; consequently, an impairment loss of $2,232,739 thousand was recognized.

Impairment losses as mentioned above were recognized in non-operating income and expenses in the consolidated statements of comprehensive income.

The estimated recoverable amount of 2019 was calculated by pre-tax discount rate of 10.63%.

The following table summarized the Company’s capitalized borrowing costs and the interest rate range applied for the capitalization:

Capitalized borrowing costs $ Interest rates applied for capitalization	For the years ended December 31,	For the years ended December 31,
	2019 2018 (in thousands) 141,966 421,618 1.07%~ 5.71% 1.04%~ 5.59%	2018
		1.04%~ 5.59%

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

(10) Lease Arrangements

a. Lessees
(i) Right-of-use assets

		December 31,
		2019
		(in thousands)
Carrying amount of right-of-use assets
Land	$	11,595,815
Buildings		575,724
Other equipment		36,229
	$	12,207,768

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

		For the year
		ended
		December 31,
		2019
		(in thousands)
Additions to right-of-use assets	$	192,655
Depreciation charge for right-of-use assets
Land	$	566,982
Buildings		238,969
Other equipment		66,590
	$	872,541

(ii) Lease liabilities

December 31, 2019

Future minimum lease payments Less than one year $ 879,518 Between one and five years 2,874,682 More than five years 9,588,087 $ 13,342,287 Lease liabilities－current Lease liabilities－noncurrent	Interests (in thousands) 197,151 678,576 1,375,483 2,251,210 $ $	Present value of minimum lease payments
		682,367 2,196,106 8,212,604
		11,091,077
		682,367
		10,408,710

(iii) Significant lease agreements

AUO has entered into various land lease agreements with Hsinchu Science Park Bureau, Central Science Park Administration Bureau and Southern Taiwan Science Park Bureau, respectively, for the construction of plant for operations. All lease amounts are adjusted in accordance with the land value announced by the government from time to time. In 2019, AUO modified one of its lease contracts due to the decrease of the scope of the lease, and therefore, the carrying amount of the right-of-use asset was reduced by $1,064,094 thousand. The difference between the remeasurement of the lease liability and the reduction of the right-ofuse asset was recognized in profit or loss.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(iv) Sublease of right-of-use assets

The Company subleased part of its right-of-use assets under operating leases. In 2019, the income from sublease was $8,199 thousand. Right-of-use assets that meet the definition of investment properties are reclassified to investment properties. Refer to Note 6(11) for further information on investment properties.

(v) Additional lease information

The Company applies the recognition exemption to account for short-term leases and leases of low-value assets, primarily for some leases of office buildings and other sporadic leasing. The amounts recognized in profit or loss during the lease term were as follows:

Expenses relating to short-term leases $ Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets $	For the year ended December 31, 2019
	(in thousands) 15,832
	315

Total cash outflow for the Company’s leases in which it acts as a lessee for the year ended December 31, 2019 was $920,666 thousand.

b. Lessor

The Company leased out its investment properties and part of its land, buildings and equipment and did not transfer substantially all the risks and rewards incidental to their ownership to the lessees, therefore, those leases were recognized as operating leases. Refer to Note 6(24) for the information of rental income from operating leases. In addition, the direct costs relating to the aforementioned operating leases amounted to $3,007 thousand for the year ended December 31, 2019.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The maturity analysis of undiscounted operating lease receivable for the abovementioned assets are as follows:

			December 31,
			2019
			(in thousands)
Year	1	$	110,905
Year	2		110,316
Year	3		110,025
Year	4		106,272
Year	5		105,721
Year	6 onwards		2,079,849
Total	undiscounted operating lease receivable	$	2,623,088

Refer to Note 6(17) for the Company’s respective information as lessor and lessee as of December 31, 2018.

(11) Investment Property

For the year ended December 31, 2019

Cost: Land $ Buildings Right-of-use assets Accumulated depreciation: Buildings Right-of-use assets Net carrying amounts $ Fair Value $	Balance, Beginning of Year 730,306 - - 730,306 - - - 730,306 2,252,170	Additions Reclassification and effect of change in exchange rate (in thousands) - (667) - 1,418,652 - 28,570 - 1,446,555 7,363 612,618 302 1,448 7,665 614,066	Balance, End of Year
			729,639 1,418,652 28,570
			2,176,861
			619,981 1,750
			621,731
			1,555,130
			4,057,848

For the year ended December 31, 2018

Land Fair Value

53 Balance, Beginning of Year $ 717,823 $ 2,213,184	( Additions Reclassification and effect of change in exchange rate (in thousands) - 12,483	Balance, End of Year
		730,306
		2,252,170
		Continued)

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In order to enhance the utilization of the Company’s assets and to increase its working capital, AUSJ leased its buildings and right-of-use assets to third party in 2019, and has reclassified the aforementioned assets totaling $832,886 thousand from property, plant and equipment and right-of-use assets 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.

The fair value measurement was categorized as a level 3 fair value based on the inputs in the valuation techniques used. 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. 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 significant inputs used in the fair value measurement were as follows:

Overall capital interest rate Rate of return Capitalization rate	December 31,	December 31,
	2019 2.53% 15.00% 8.00%~12.00%	2018
		1.86% 10.00% 12.00%

As at December 31, 2019 and 2018, there was no investment property that was pledged as collateral.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(12) Intangible Assets

Cost: Goodwill $ Patent and technology fee Others Accumulated amortization and impairment loss: Goodwill Patent and technology fee Others Net carrying amounts $ Balance, Beginning of Year Cost: Goodwill $ 11,456,176 Patent and technology fee 12,275,548 Others - 23,731,724 Accumulated amortization and impairment loss: Goodwill 175,581 Patent and technology fee 10,385,251 Others - 10,560,832 Net carrying amounts $ 13,170,892	For	theyear ended	theyear ended	theyear ended
	Balance, Beginning of Year Additions Effect of change in exchange rate (in thousands) 12,056,500 - - 12,271,742 1,711 (7,140) 150,436 - - 24,478,678 1,711 (7,140 ) 175,581 - - 10,903,269 436,815 (1,178) 22,565 127,871 - 11,101,415 564,686 (1,178 ) 13,377,263 For theyear ended December 31, 2018
Balance, Beginning of Year 11,456,176 12,275,548 -	Additions - - - - - 518,404 22,565 540,969	Effect of change in consolidated entities (in thousands) 600,324 - 150,436 750,760 - - - -	Effect of change in exchange rate - (3,806) - (3,806 ) - (386) - (386 )	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
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(7) for the relevant information.

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

55 Display business $	December 31,	December 31,
	(Continued 2019 2018 (in thousands) 11,880,919 11,880,919	2018
		(Continued

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 years ended December 31, 2019 and 2018 were 12.25% and 11.57%, respectively, based on industry weighted average cost of capital. The cash flow projections 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 for subsequent years, which were negative 0.5% and negative 1% for the years ended December 31, 2019 and 2018, 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 assessment for the years ended December 31, 2019 and 2018, no impairment losses were recognized as the recoverable amount of the CGU was higher than its carrying value.

(13) Other Current Assets and Other Noncurrent Assets

Refundable and overpaid tax $ Refundable deposits Prepayment for equipment Prepayments for purchases Long-term receivables Long-term prepaid rents Others Less: current Noncurrent $	December 31, 2019 2018 (in thousands) 1,458,170 1,351,646 663,911 716,097 453,300 650,727 158,521 230,793 5,812 930,001 - 1,364,111 2,961,194 2,869,869 5,700,908 8,113,244 (3,295,562 ) (2,941,598 ) 2,405,346 5,171,646

The long-term prepaid rents were reclassified to right-of-use assets on January 1, 2019 upon the initial adoption of IFRS 16. See Note 3(1).

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(14) Short-term Borrowings

Unsecured borrowings $ Unused credit facilities $ Interest rate range	December 31,	December 31,
	2019 2018 (in thousands) 1,725,602 546,472 37,982,721 43,533,037 1.20%~ 4.35% 2.54%~ 4.35%	2018
		43,533,037
		2.54%~ 4.35%

(15) 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 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 facilities Interest rate range	Durations From Feb. 2019 to Feb. 2024 $ From Mar. 2019 to Apr. 2023 From May 2017 to May 2022 From Apr. 2016 to Apr. 2019 From Feb. 2015 to Feb. 2019 From Jul. 2018 to Oct. 2019 From Feb. 2016 to Jan. 2019 From Nov. 2015 to Nov. 2023 From Apr. 2017 to Aug. 2023 From Apr. 2017 to Apr. 2032 $ $	December 31,	December 31,
		2019 2018 (in thousands) 42,000,000 - 23,000,000 - 10,000,000 10,000,000 - 36,175,000 - 5,912,000 - 210,000 - 1,775,236 21,500,826 27,743,519 8,050,310 2,976,158 7,671,932 1,990,175 112,223,068 86,782,088 (254,676 ) (476,770 ) 111,968,392 86,305,318 (9,535,198 ) (29,595,931 ) 102,433,194 56,709,387 32,265,575 79,933,812 1.00%~ 5.43% 1.07%~ 6.32%	2018
			86,782,088 (476,770 )
			86,305,318 (29,595,931 )
			56,709,387
			79,933,812
			1.07%~ 6.32%

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, 2019.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

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 TIFRSs, such as current ratio, leverage ratio, interest coverage ratio, tangible net worth and others as specified in the loan agreements. As of December 31, 2019 and 2018, the Company complied with all financial covenants required under each of the loan agreements.

Refer to Note 6(31) 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.

(16) Provisions

Warranties(i) Balance at January 1, 2019 $ 1,463,869 Additions (Reversals) 251,512 Usage (422,976) Effect of change in exchange rate (159 ) Balance at December 31, 2019 1,292,246 Less: current (486,517 ) Noncurrent $ 805,729 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) 431,228 642,952 (116,094) (252,208) (156,521) (63,661) (6,312 ) (10,072 ) 152,301 317,011 (152,301 ) (69,450 ) - 247,561 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
		2,538,049 (116,790) (643,158) (16,543 ) 1,761,558 (708,268 ) 1,053,290 1,885,963 1,083,051 (446,951) 15,986 2,538,049 (1,507,564 ) 1,030,485

(i) The provisions for warranties for the years ended December 31, 2019 and 2018 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(17) Operating Leases

a. Lessees

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

Less than one year $ Between one and five years More than five years $	December 31, 2018
	(in thousands) 927,351 2,928,983 2,085,877
	5,942,211

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.

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 for the year ended December 31, 2018.

b. Lessor

The Company leased its investment properties to third parties under operating lease. Refer to Note 6(11) for further information on investment properties.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Less than one year $ Between one and five years More than five years $	December 31, 2018 (in thousands) 105,788 423,150 2,188,728 2,717,666

In addition to the above-mentioned, the Company also leased partial offices to others. See Note 6(24) for rental income. Repair and maintenance expenses incurred from aforementioned operating leases for the year ended December 31, 2018 amounted to $1,723 thousand.

(18) 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.

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, 2019 2018 (in thousands) (3,155,988) (3,257,962) 2,542,831 2,367,273 (613,157 ) (890,689 )

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(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 2019 2018 (3,257,962 ) (3,128,927 ) (4,104) (5,289) (39,337) (49,598) - - (43,441 ) (54,887 ) 89,851 (15,795) (206,995) (178,212) 228,466 84,437 - - 111,322 (109,570 ) - - 33,936 36,915 157 (1,493 ) 34,093 35,422 (3,155,988 ) (3,257,962 )	Fair value of plan assets 2019 2018 (in thousands) 2,367,273 2,213,018 - - - - 28,880 35,408 28,880 35,408 - - - - - - 76,788 52,614 76,788 52,614 101,019 102,831 (31,129) (36,598) - - 69,890 66,233 2,542,831 2,367,273	Net defined benefit asset(liability)	Net defined benefit asset(liability)
	2019 (3,257,962 ) (4,104) (39,337) - (43,441 ) 89,851 (206,995) 228,466 - 111,322 - 33,936 157 34,093 (3,155,988 )		2019 (890,689 ) (4,104) (39,337) 28,880 (14,561 ) 89,851 (206,995) 228,466 76,788 188,110 101,019 2,807 157 103,983 (613,157 )	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 )

(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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of December 31, 2019, the Fund deposited in the Committee’s name in the Bank of Taiwan amounted to $2,542,854 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,
	2019 0.18%~0.88% 0.77%~4.49%	2018
		0.21%~1.22% 0.77%~4.49%

The Company anticipates contributing $100,799 thousand to the defined benefit plans in the next year starting from January 1, 2020.

As at December 31, 2019, the weighted-average duration of the defined benefit obligation was between 5 years to 20 years.

(b) Sensitivity analysis

Reasonably possible changes at December 31, 2019 and 2018 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, 2019 Changes in assumptions + 0.25% - 0.25% (in thousands) (150,970 ) 159,425 156,774 (148,385 )	December 31, 2018
		Changes in assumptions + 0.25% - 0.25% (in thousands) (160,307 ) 169,544 166,250 (158,100 )

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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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, 2019 and 2018, these companies set aside, $977,908 thousand and $1,024,700 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 $784,169 thousand and $923,378 thousand for the years ended December 31, 2019 and 2018, respectively, for the defined contribution plans based on their respective local government regulations.

(19) 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, 2019 and 2018.

AUO’s issued common stock, with par value of $10 per share, both amounted to $96,242,451 thousand as at December 31, 2019 and 2018.

On September 9, 2019, AUO’s Board of Directors approved the delisting of ADSs from the NYSE and trading on the OTC market. On and from October 1, 2019, AUO’s ADSs has begun trading on the OTC market. As of December 31, 2019, AUO has issued 50,123 thousand ADSs, which represented 501,229 thousand shares of its common stock.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

b. Capital surplus

The components of capital surplus were as follows:

From common stock $ From convertible bonds From others $	December 31, 2019 2018 (in thousands) 52,756,091 52,756,091 6,049,862 6,049,862 1,738,521 1,816,090 60,544,474 60,622,043

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 net profit 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.

Distribution of earnings

In accordance with AUO’s Articles of Incorporation, after payment of income taxes and offsetting accumulated deficits, the legal reserve shall be set aside 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 or reversed. The remaining current-year earnings together with accumulated undistributed earnings from preceding years can be distributed according to relevant laws and AUO’s Articles of Incorporation.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 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 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AUO’s appropriations of earnings for 2018 had been approved in the shareholders’ meeting held on June 14, 2019. The appropriations and dividends per share were as follows:

Legal reserve $ Special reserve Cash dividends to shareholders $	For fiscalyear 2018	For fiscalyear 2018
	Appropriation of earnings Dividends per share (in thousands, except for per share data) 1,016,060 847,770 4,812,122 $0.50 6,675,952	Dividends per share

The aforementioned appropriation of earnings for 2018 was consistent with the resolutions of the board of directors’ meeting held on March 22, 2019.

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. Treasury shares

According to the resolution approved by the board of directors’ meeting held on September 9, 2019, AUO expects to repurchase 125,000 thousand shares as treasury shares transferred to employees in accordance with Securities and Exchange Act requirements. The related information on treasury share transactions was as follows:

For the year ended December 31, 2019	For the year ended December 31, 2019
Reason for reacquisition Transferring to employees	Number of shares, Beginning of Year Additions Reductions (in thousands of shares) - 125,000 -	Number of shares, End of Year
		125,000

Pursuant to the Securities and Exchange Act, the number of shares repurchased shall not exceed 10 percent of the number of the company’s issued and outstanding shares, and the total amount repurchased shall not exceed the sum of the company’s retained earnings, share premium, and realized capital surplus. Also, the shares repurchased for transferring to employees shall be transferred within five years from the date of reacquisition and those shares not transferred within the five-year period are to be retired.

In accordance with the Securities and Exchange Act, treasury shares held by AUO shall not be pledged, and do not hold any shareholder rights before their transfer.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

f. Other components of equity

Balance at January 1, 2019 $ 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 Related tax Balance atDecember 31, 2019 $	Cumulative translation differences (1,449,910) (2,043,931) - (38,512) (9,098) 411,469 (3,129,982 )	Unrealized gains (losses) on financial assets at FVTOCI (in thousands) 602,140 - 519,100 3,358 - - 1,124,598	Total (847,770) (2,043,931) 519,100 (35,154) (9,098) 411,469
			(2,005,384 )

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 )

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

g. 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 losses on financial assets at FVTOCI Effect of acquisition of non-controlling interests Proceeds from subsidiaries capital increase and others Balance at the end of the year $	For the years ended December 31, 2019 2018 (in thousands) 14,415,973 17,090,747 (2,414,158) (2,200,703) 111,056 (20,996) (404,575) (306,963) - (1,474) (389,430) - (13,957 ) (144,638 ) 11,304,909 14,415,973

(20) Share-based Payments

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

ACTW Option Plan

a. 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

b. The related employee benefit expenses and capital surplus recognized on ACTW’s employee stock options were nil and $167 thousand for the years ended December 31, 2019 and 2018, respectively.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

c. 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

d. Information about ACTW’s outstanding stock options is as follows:

For theyears ended December 31, 2019 2018 Weighted- average exercise price (per share) Number of options (shares) Weighted- average exercise price (per share) Number of options (shares) Outstanding at January 1 $ 10 13,291,000 $ 10 16,601,000 Options exercised 10 (11,995,000) 10 (2,260,000) Options expired - (1,296,000 ) - (1,050,000 ) Outstanding at December 31 - - 10 13,291,000 Exercisable at December 31 - 13,291,000 Revenue from Contracts with Customers For theyear ended December 31, 2019 Display segment Energy segment Total segments (in thousands) Primary geographical markets: PRC (including Hong Kong) $ 97,084,436 1,277,799 98,362,235 Taiwan 78,394,325 4,835,269 83,229,594 Singapore 38,526,625 7,666 38,534,291 Japan 19,877,671 1,046,332 20,924,003 Others 22,784,165 4,957,406 27,741,571 $ 256,667,222 12,124,472 268,791,694	For theyears ended December 31, 2019 2018 Weighted- average exercise price (per share) Number of options (shares) Weighted- average exercise price (per share) Number of options (shares) Outstanding at January 1 $ 10 13,291,000 $ 10 16,601,000 Options exercised 10 (11,995,000) 10 (2,260,000) Options expired - (1,296,000 ) - (1,050,000 ) Outstanding at December 31 - - 10 13,291,000 Exercisable at December 31 - 13,291,000 Revenue from Contracts with Customers For theyear ended December 31, 2019 Display segment Energy segment Total segments (in thousands) Primary geographical markets: PRC (including Hong Kong) $ 97,084,436 1,277,799 98,362,235 Taiwan 78,394,325 4,835,269 83,229,594 Singapore 38,526,625 7,666 38,534,291 Japan 19,877,671 1,046,332 20,924,003 Others 22,784,165 4,957,406 27,741,571 $ 256,667,222 12,124,472 268,791,694	For theyears ended December 31, 2019 2018 Weighted- average exercise price (per share) Number of options (shares) Weighted- average exercise price (per share) Number of options (shares) Outstanding at January 1 $ 10 13,291,000 $ 10 16,601,000 Options exercised 10 (11,995,000) 10 (2,260,000) Options expired - (1,296,000 ) - (1,050,000 ) Outstanding at December 31 - - 10 13,291,000 Exercisable at December 31 - 13,291,000 Revenue from Contracts with Customers For theyear ended December 31, 2019 Display segment Energy segment Total segments (in thousands) Primary geographical markets: PRC (including Hong Kong) $ 97,084,436 1,277,799 98,362,235 Taiwan 78,394,325 4,835,269 83,229,594 Singapore 38,526,625 7,666 38,534,291 Japan 19,877,671 1,046,332 20,924,003 Others 22,784,165 4,957,406 27,741,571 $ 256,667,222 12,124,472 268,791,694	For theyears ended December 31, 2019 2018 Weighted- average exercise price (per share) Number of options (shares) Weighted- average exercise price (per share) Number of options (shares) Outstanding at January 1 $ 10 13,291,000 $ 10 16,601,000 Options exercised 10 (11,995,000) 10 (2,260,000) Options expired - (1,296,000 ) - (1,050,000 ) Outstanding at December 31 - - 10 13,291,000 Exercisable at December 31 - 13,291,000 Revenue from Contracts with Customers For theyear ended December 31, 2019 Display segment Energy segment Total segments (in thousands) Primary geographical markets: PRC (including Hong Kong) $ 97,084,436 1,277,799 98,362,235 Taiwan 78,394,325 4,835,269 83,229,594 Singapore 38,526,625 7,666 38,534,291 Japan 19,877,671 1,046,332 20,924,003 Others 22,784,165 4,957,406 27,741,571 $ 256,667,222 12,124,472 268,791,694
2019
Weighted- average exercise price (per share)	Number of options (shares)
	Display segment 97,084,436 78,394,325 38,526,625 19,877,671 22,784,165 256,667,222	Energy segment (in thousands) 1,277,799 4,835,269 7,666 1,046,332 4,957,406 12,124,472	Total segments
			98,362,235 83,229,594 38,534,291 20,924,003 27,741,571
			268,791,694

(21) Revenue from Contracts with Customers

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For theyear ended December 31, 2019	For theyear ended December 31, 2019	For theyear ended December 31, 2019
Display segment Energy segment Total segments (in thousands) 87,269,763 - 87,269,763 69,305,510 - 69,305,510 39,522,268 - 39,522,268 60,569,681 - 60,569,681 - 12,124,472 12,124,472 256,667,222 12,124,472 268,791,694 33,142,985 - 33,142,985 223,524,237 12,124,472 235,648,709 256,667,222 12,124,472 268,791,694 For theyear ended December 31, 2018		Total segments
		87,269,763 69,305,510 39,522,268 60,569,681 12,124,472
		268,791,694
		33,142,985 235,648,709
		268,791,694
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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(22) 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 did not accrue remuneration to employees and directors due to the loss making position for the year ended December 31, 2019.

AUO accrued remuneration to employees based on the profit before income tax excluding the remuneration to employees and directors for the period, multiplied by the percentage resolved by board of directors. For the year ended December 31, 2018, AUO estimated the remuneration to employees amounting to $1,215,696 thousand. 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 2018 in the amounts of $1,215,696 thousand and $27,780 thousand, respectively, in cash for payment had been approved in the meeting of board of directors held on March 22, 2019. The aforementioned approved amounts are the same as the amounts charged against earnings of 2018.

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.

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

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(23) The Nature of Expenses

	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
	2019		2018
Recognized in cost of sales $23,538,794 1,439,339 1,399,297 3,075,827 31,599,910 436,815	Recognized in operating expenses	Total	Recognized in operating expenses
	7,286,093 477,905 377,341 559,544 4,093,123 127,871		7,798,555 497,859 381,607 617,828 3,706,146 22,566

(24) 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,
	2019 2018 (in thousands) 879,053 832,621 6,467 8,994 488,811 628,401 295,575 468,263 2,734,987 2,716,197 915,378 757,649 5,320,271 5,412,125	2018
		5,412,125

(25) Other Gains and Losses

Foreign exchange gains (losses), net $ Gains on valuation of financial instruments at FVTPL, net Gains (losses) on disposals of investments and financial assets, net Gains on disposals of property, plant and equipment, net Impairment losses on assets Gains (losses) from litigation and others $	For the years ended December 31, 2019 2018 (in thousands) (168,499) (41,391) 381,620 507,532 (13,154) - 106,546 1,923,044 (2,298,646) (399,363) 396,519 (501,770 ) (1,595,614 ) 1,488,052

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(26) Finance Costs

Interest expense on bank borrowings $ Interest expense on lease liabilities Interest expense on others $	For the years ended December 31,	For the years ended December 31,
	2019 2018 (in thousands) 2,714,080 2,442,872 209,607 - 327,683 220,733 3,251,370 2,663,605	2018
		2,663,605

(27) Income Taxes

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.

a. Income tax expenses

The components of income tax expense for the years ended December 31, 2019 and 2018 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,	For the years ended December 31,
	2019 2018 (in thousands) 745,844 2,400,949 (258,671 ) (127,281 487,173 2,273,668 584,559 (632,785 682,930 1,998,662 - (383,289 1,267,489 982,588 1,754,662 3,256,256	2018
		2,273,668
		(632,785 1,998,662 (383,289
		982,588
		3,256,256

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Income taxes expense (benefit) recognized directly in other comprehensive income for the years ended December 31, 2019 and 2018 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 $	For the years ended December 31, 2019 2018 (in thousands) 37,622 (38,908 ) (459,729 ) (191,809 )

Reconciliation of the expected income tax expense (benefit) calculated based on the ROC statutory income tax rate compared with the actual income tax expense as reported in the consolidated statements of comprehensive income for the years ended December 31, 2019 and 2018, 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,
2019
2018
(in thousands)

(3,968,951)
2,243,230
690
1,279,810
38,756
(484,055)
-
(383,289)
(75,209)
774,165
43,202
(165,663)
5,947,778
138,969
(258,672)
(127,281)
27,068
(19,630
)

1,754,662
3,256,256
(8.84)%
29.03%

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

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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,
	2019 2018 (in thousands) 3,620,044 2,638,778 981,360 853,837 32,445,130 28,697,671 37,046,534 32,190,286	2018
		32,190,286

As of December 31, 2019, the unused investment tax credits include $974,909 thousand and $6,297 thousand from AUST and ACMK, respectively, with no expiration and $154 thousand from a domestic subsidiary, UTI.

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, 2019, the expiration period for abovementioned unrecognized deferred tax assets of unused tax losses carryforwards were as follows:

Year of assessment 2011 2012 2013 2014 2015 2016 2017 2018 2019 (estimated) $	Unrecognized deferred tax assets (in thousands) $ 2,904,785 11,042,933 1,747,050 2,347,376 2,159,621 4,259,267 2,314,089 1,279,958 4,390,051 32,445,130	Expiration inyear
		2020 ~ 2021 2021 ~ 2022 2022 ~ 2023 2023 ~ 2024 2020 ~ 2025 2020 ~ 2026 2021 ~ 2026 2023 ~ 2028 2023 ~ 2029

As of December 31, 2019, the aggregate taxable temporary differences associated with investments in subsidiaries not recognized as deferred tax liabilities amounted to $277,670 thousand.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Deferred tax assets Deferred tax liabilities Total December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 (in thousands) Investment tax credits $ 385,728 542,115 - - 385,728 542,115 Tax losses carryforwards 2,223,440 2,760,163 - - 2,223,440 2,760,163 Unrealized loss and expenses 166,393 310,192 (5,321) (5,556) 161,072 304,636 Inventories write-down 879,267 1,027,680 - - 879,267 1,027,680 Foreign investment gains under the equity method - - (1,043,486) (1,049,091) (1,043,486) (1,049,091) Accumulated amortization of goodwill in accordance with local tax laws - - (2,213,429) (2,213,429) (2,213,429) (2,213,429) Remeasurement of defined benefit plans 157,216 194,838 - - 157,216 194,838 Foreign operations – foreign currency translation differences 886,062 426,333 - - 886,062 426,333 Others 483,511 1,371,347 (1,864 ) (577,517 ) 481,647 793,830 $ 5,181,617 6,632,668 (3,264,100 ) (3,845,593 ) 1,917,517 2,787,075 January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Effect of change in consolidated entities, exchange rate and others December 31, 2018 Recognized in profit or loss Recognized in other comprehensive income Effect of change in consolidated entities, exchange rate and others December 31, 2019 (in thousands) Deferred tax assets (liabilities): Investment tax credits $ 656,480 (132,840) - 18,475 542,115 (148,453) - (7,934) 385,728 Tax losses carryforwards 3,942,012 (1,181,429) - (420) 2,760,163 (534,477) - (2,246) 2,223,440 Unrealized loss and expenses 222,739 81,893 - 4 304,636 (143,534) - (30) 161,072 Inventories write-down 644,887 386,558 - (3,765) 1,027,680 (148,035) - (378) 879,267 Foreign investment losses (gains) under the equity method (890,153) (158,938) - - (1,049,091) 5,605 - - (1,043,486) Accumulated amortization of goodwill in accordance with local tax laws (1,881,415) (332,014) - - (2,213,429) - - - (2,213,429) Remeasurement of defined benefit plans 155,930 - 38,908 - 194,838 - (37,622) - 157,216 Foreign operations – foreign currency translation differences 234,524 - 191,809 - 426,333 - 459,729 - 886,062 Others 464,368 354,182 - . (24,720 ) 793,830 (298,595 ) - . (13,588 ) 481,647 $ 3,549,372 (982,588 ) 230,717 (10,426 ) 2,787,075 (1,267,489 ) 422,107 (24,176 ) 1,917,517	Deferred tax assets Deferred tax liabilities Total December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 (in thousands) Investment tax credits $ 385,728 542,115 - - 385,728 542,115 Tax losses carryforwards 2,223,440 2,760,163 - - 2,223,440 2,760,163 Unrealized loss and expenses 166,393 310,192 (5,321) (5,556) 161,072 304,636 Inventories write-down 879,267 1,027,680 - - 879,267 1,027,680 Foreign investment gains under the equity method - - (1,043,486) (1,049,091) (1,043,486) (1,049,091) Accumulated amortization of goodwill in accordance with local tax laws - - (2,213,429) (2,213,429) (2,213,429) (2,213,429) Remeasurement of defined benefit plans 157,216 194,838 - - 157,216 194,838 Foreign operations – foreign currency translation differences 886,062 426,333 - - 886,062 426,333 Others 483,511 1,371,347 (1,864 ) (577,517 ) 481,647 793,830 $ 5,181,617 6,632,668 (3,264,100 ) (3,845,593 ) 1,917,517 2,787,075 January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Effect of change in consolidated entities, exchange rate and others December 31, 2018 Recognized in profit or loss Recognized in other comprehensive income Effect of change in consolidated entities, exchange rate and others December 31, 2019 (in thousands) Deferred tax assets (liabilities): Investment tax credits $ 656,480 (132,840) - 18,475 542,115 (148,453) - (7,934) 385,728 Tax losses carryforwards 3,942,012 (1,181,429) - (420) 2,760,163 (534,477) - (2,246) 2,223,440 Unrealized loss and expenses 222,739 81,893 - 4 304,636 (143,534) - (30) 161,072 Inventories write-down 644,887 386,558 - (3,765) 1,027,680 (148,035) - (378) 879,267 Foreign investment losses (gains) under the equity method (890,153) (158,938) - - (1,049,091) 5,605 - - (1,043,486) Accumulated amortization of goodwill in accordance with local tax laws (1,881,415) (332,014) - - (2,213,429) - - - (2,213,429) Remeasurement of defined benefit plans 155,930 - 38,908 - 194,838 - (37,622) - 157,216 Foreign operations – foreign currency translation differences 234,524 - 191,809 - 426,333 - 459,729 - 886,062 Others 464,368 354,182 - . (24,720 ) 793,830 (298,595 ) - . (13,588 ) 481,647 $ 3,549,372 (982,588 ) 230,717 (10,426 ) 2,787,075 (1,267,489 ) 422,107 (24,176 ) 1,917,517	Deferred tax assets Deferred tax liabilities Total December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 (in thousands) Investment tax credits $ 385,728 542,115 - - 385,728 542,115 Tax losses carryforwards 2,223,440 2,760,163 - - 2,223,440 2,760,163 Unrealized loss and expenses 166,393 310,192 (5,321) (5,556) 161,072 304,636 Inventories write-down 879,267 1,027,680 - - 879,267 1,027,680 Foreign investment gains under the equity method - - (1,043,486) (1,049,091) (1,043,486) (1,049,091) Accumulated amortization of goodwill in accordance with local tax laws - - (2,213,429) (2,213,429) (2,213,429) (2,213,429) Remeasurement of defined benefit plans 157,216 194,838 - - 157,216 194,838 Foreign operations – foreign currency translation differences 886,062 426,333 - - 886,062 426,333 Others 483,511 1,371,347 (1,864 ) (577,517 ) 481,647 793,830 $ 5,181,617 6,632,668 (3,264,100 ) (3,845,593 ) 1,917,517 2,787,075 January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Effect of change in consolidated entities, exchange rate and others December 31, 2018 Recognized in profit or loss Recognized in other comprehensive income Effect of change in consolidated entities, exchange rate and others December 31, 2019 (in thousands) Deferred tax assets (liabilities): Investment tax credits $ 656,480 (132,840) - 18,475 542,115 (148,453) - (7,934) 385,728 Tax losses carryforwards 3,942,012 (1,181,429) - (420) 2,760,163 (534,477) - (2,246) 2,223,440 Unrealized loss and expenses 222,739 81,893 - 4 304,636 (143,534) - (30) 161,072 Inventories write-down 644,887 386,558 - (3,765) 1,027,680 (148,035) - (378) 879,267 Foreign investment losses (gains) under the equity method (890,153) (158,938) - - (1,049,091) 5,605 - - (1,043,486) Accumulated amortization of goodwill in accordance with local tax laws (1,881,415) (332,014) - - (2,213,429) - - - (2,213,429) Remeasurement of defined benefit plans 155,930 - 38,908 - 194,838 - (37,622) - 157,216 Foreign operations – foreign currency translation differences 234,524 - 191,809 - 426,333 - 459,729 - 886,062 Others 464,368 354,182 - . (24,720 ) 793,830 (298,595 ) - . (13,588 ) 481,647 $ 3,549,372 (982,588 ) 230,717 (10,426 ) 2,787,075 (1,267,489 ) 422,107 (24,176 ) 1,917,517	Deferred tax assets Deferred tax liabilities Total December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 (in thousands) Investment tax credits $ 385,728 542,115 - - 385,728 542,115 Tax losses carryforwards 2,223,440 2,760,163 - - 2,223,440 2,760,163 Unrealized loss and expenses 166,393 310,192 (5,321) (5,556) 161,072 304,636 Inventories write-down 879,267 1,027,680 - - 879,267 1,027,680 Foreign investment gains under the equity method - - (1,043,486) (1,049,091) (1,043,486) (1,049,091) Accumulated amortization of goodwill in accordance with local tax laws - - (2,213,429) (2,213,429) (2,213,429) (2,213,429) Remeasurement of defined benefit plans 157,216 194,838 - - 157,216 194,838 Foreign operations – foreign currency translation differences 886,062 426,333 - - 886,062 426,333 Others 483,511 1,371,347 (1,864 ) (577,517 ) 481,647 793,830 $ 5,181,617 6,632,668 (3,264,100 ) (3,845,593 ) 1,917,517 2,787,075 January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Effect of change in consolidated entities, exchange rate and others December 31, 2018 Recognized in profit or loss Recognized in other comprehensive income Effect of change in consolidated entities, exchange rate and others December 31, 2019 (in thousands) Deferred tax assets (liabilities): Investment tax credits $ 656,480 (132,840) - 18,475 542,115 (148,453) - (7,934) 385,728 Tax losses carryforwards 3,942,012 (1,181,429) - (420) 2,760,163 (534,477) - (2,246) 2,223,440 Unrealized loss and expenses 222,739 81,893 - 4 304,636 (143,534) - (30) 161,072 Inventories write-down 644,887 386,558 - (3,765) 1,027,680 (148,035) - (378) 879,267 Foreign investment losses (gains) under the equity method (890,153) (158,938) - - (1,049,091) 5,605 - - (1,043,486) Accumulated amortization of goodwill in accordance with local tax laws (1,881,415) (332,014) - - (2,213,429) - - - (2,213,429) Remeasurement of defined benefit plans 155,930 - 38,908 - 194,838 - (37,622) - 157,216 Foreign operations – foreign currency translation differences 234,524 - 191,809 - 426,333 - 459,729 - 886,062 Others 464,368 354,182 - . (24,720 ) 793,830 (298,595 ) - . (13,588 ) 481,647 $ 3,549,372 (982,588 ) 230,717 (10,426 ) 2,787,075 (1,267,489 ) 422,107 (24,176 ) 1,917,517
	- - - - - - (37,622) 459,729 - . 422,107	(7,934) (2,246) (30) (378) - - - - (13,588 ) (24,176 )	385,728 2,223,440 161,072 879,267 (1,043,486) (2,213,429) 157,216 886,062 481,647 1,917,517

c. Assessments by the tax authorities

As of December 31, 2019, the tax authorities have completed the examination of income tax returns of AUO through 2017.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(28) Earnings (Loss) per Share

Basic earnings (loss) per share Profit (loss) attributable to AUO’s shareholders $ Weighted-average number of common shares outstanding during the year Basic earnings (loss) per share (NT$) $ Diluted earnings (loss) per share Profit (loss) attributable to AUO’s shareholders $ Weighted-average number of common shares outstanding during the year Effect of employee remuneration in stock Diluted earnings (loss) per share (NT$) $	For the years ended December 31,	For the years ended December 31,
	2019 (in thousands, share (19,185,258 ) 9,597,268 (2.00 ) (19,185,258 ) 9,597,268 - 9,597,268 (2.00 )	2018
		except for per data) 10,160,598 9,624,245 1.06 10,160,598 9,624,245 164,609 9,788,854 1.04

Since AUO incurred net loss for the year ended December 31, 2019, there were no potential ordinary shares with dilutive effect for the year.

(29) Cash Flow Information

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

Long-term borrowings (including current installments) Short-term borrowings Guarantee deposits (in thousands) Balance at January 1, 2019 $ 86,305,318 546,472 816,512 Cash flows 26,501,234 1,188,250 (1,828) Non-cash changes: Increase (decrease) in lease liabilities - - - Changes in exchange rate (1,059,445) (9,120) (29,228) Amortization on transaction costs 221,285 - - Balance at December 31, 2019 $ 111,968,392 1,725,602 785,456		Lease liabilities 12,689,526 (694,922) (872,224) (31,303) - 11,091,077	Total liabilities from financing activities 100,357,828 26,992,734 (872,224) (1,129,096) 221,285 125,570,527

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Balance at January 1, 2018 $ Cash flows Non-cash changes: Changes in exchange rate Amortization on transaction costs Balance at December 31, 2018 $	Long-term borrowings (including current installments) 110,608,010 (24,464,961) 27,663 134,606 86,305,318	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

(30) 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 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.

Disclosures of fair value are not required for the financial instruments abovementioned and lease liabilities. Other than those, the carrying amount and fair value of other financial instruments of the Company as of December 31, 2019 and 2018 were as follows:

December 31, 2019 December 31, 2018 Carrying Amount Fair Value Carrying Amount Fair Value (in thousands) Financial assets: Financial assets at FVTPL: Financial assets mandatorily measured at FVTPL $ 1,521,406 1,521,406 1,709,531 1,709,531 Financial assets at FVTOCI 7,545,171 7,545,171 6,979,925 6,979,925 Financial assets at amortized cost: Long-term receivables 5,812 5,812 930,001 930,001 Refundable deposits 663,911 663,911 716,097 716,097 Financial liabilities: Financial liabilities at FVTPL: Financial liabilities held for trading 18,859 18,859 22,115 22,115 Financial liabilities at amortized cost: Long-term borrowings (including current installments) 111,968,392 111,968,392 86,305,318 86,305,318 Guarantee deposits 785,456 785,456 816,512 816,512	December 31, 2018	December 31, 2018
	Carrying Amount	Fair Value
		1,709,531 6,979,925 930,001 716,097 22,115 86,305,318 816,512

(Continued)

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 receivables 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.

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 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).
(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).

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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, 2019 Financial assets at FVTPL: Financial assets mandatorily measured at FVTPL $ - Financial assets at FVTOCI 7,356,501 Financial assets at amortized cost: Long-term receivables - Financial liabilities at FVTPL: Financial liabilities held for trading - 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 -	Level 2 Level 3 (in thousands) 1,521,406 - - 188,670 5,812 - 18,859 - 1,709,531 - - 176,025 930,001 - 22,115 -	Total 1,521,406 7,545,171 5,812 18,859 1,709,531 6,979,925 930,001 22,115

There were no transfers between Level 1 and 2 for the years ended December 31, 2019 and 2018.

d. Reconciliation for fair value measurements categorized within Level 3

Financial assets at FVTOCI－equity instruments without active market Balance at beginning of the year $ Adjustments on initial application of IFRS 9 Net gains (losses) included in other comprehensive income Purchases Disposals Effect of exchange rate change Balance at end of the year $	For the years ended December 31,	For the years ended December 31,
	2019	2018

(Continued)

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.

Inter-relationship between significant Valuation Significant unobservable inputs and Item technique unobservable inputs fair value measurement Financial assets at Market approach � Price-Book ratio � The higher the priceFVTOCI–equity (0.7~2.95 at Dec. 31, book ratio is, the instruments without 2019 and 0.99~5.2 at higher the fair value is. active market Dec. 31, 2018) �

The higher the price-
� Price-Earnings ratio earnings ratio is, the (7.85~31.28 at Dec. higher the fair value is. 31, 2019 and � The greater degree of
14.69~112.13 at lack of marketability
Dec. 31, 2018) is, the lower the fair
� Discount for lack of value is. marketability (20%~28% at Dec. 31, 2019 and 20% at Dec. 31, 2018)

(31) 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)

AU OPTRONICS CORP. AND SUBSIDIARIES

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, 2019 and 2018, the Company’s five largest customers accounted for 38.7% and 36.6%, respectively, of the Company’s consolidated net revenue. There is no other significant concentration of credit risk.

Refer to Note 6(4) for expected credit loss analysis of accounts receivable and the movement in the loss allowance of accounts receivable.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

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, 2019.

(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.

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, 2019 Non-derivative financial liabilities Short-term borrowings $ Long-term borrowings (including current installments) Guarantee deposits Derivative financial instruments Foreign currency forward contracts－inflows Foreign currency forward contracts－outflows $	Contractual cash flows 1,725,602 119,185,207 785,456 (8,731,109) 8,727,770 121,692,926	2020.1.1~ 2020.12.31 1,725,602 12,149,855 23,510 (8,731,109) 8,727,770 13,895,628	2021.1.1~ 2022.12.31 2023.1.1~ 2024.12.31 (in thousands) - - 55,120,591 50,630,751 11,187 - - - - - 55,131,778 50,630,751	2025 and thereafter
				- 1,284,010 750,759 - -
				2,034,769

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2018 Non-derivative financial liabilities Short-term borrowings $ Long-term borrowings (including current installments) Guarantee 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

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

As at December 31, 2019, the management believes the Company’s existing unused credit facilities under its existing loan agreements, together with net cash flows expected to be generated from its operating activities, will be sufficient for the Company to fulfill its payment obligations. Therefore, management believes that the Company does not have significant liquidity risk.

(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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 one year, and do not meet the criteria for hedge accounting.

I. Exposure of currency risk

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

December 31, 2019 December 31, 2018 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 $ 1,499,405 30.1350 45,184,570 2,092,501 30.8020 64,453,216 JPY 22,122,120 0.2768 6,123,403 11,872,572 0.2775 3,294,639 EUR 46,595 33.7422 1,572,218 29,681 35.2036 1,044,878 Non-monetary items USD 1,726 30.1350 52,013 2,799 30.8020 86,215 RMB - 4.3155 - 20,258 4.4813 90,782 Financial liabilities Monetary items USD 1,515,582 30.1350 45,672,064 1,188,175 30.8020 36,598,166 JPY 22,187,729 0.2768 6,141,563 25,296,499 0.2775 7,019,778 EUR 239 33.7422 8,064 209 35.2036 7,358	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2018	December 31, 2018	December 31, 2018
	Foreign currency amounts	Exchange rate	NTD	Foreign currency amounts	Exchange rate	NTD
						(in thousands) 64,453,216 3,294,639 1,044,878 86,215 90,782 36,598,166 7,019,778 7,358

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, 2019 and 2018, while all other variables were remained constant, would have increased or decreased the net profit before tax for the years ended December 31, 2019 and 2018 as follows:

		For the years	ended
		December	31,
		2019	2018
		(in thousands)
1% of depreciation	$	10,585	251,674
1% of appreciation		(10,585)	(251,674)

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

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, 2019 and 2018 were $168,499 thousand and $41,391 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.

Assuming the amount of floating-rate debts at the end of the reporting period had been outstanding for the entire year and 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, 2019 and 2018 by $280,558 thousand and $216,955 thousand, respectively.

(c) Equity price risk

See Note 6(3) for disclosure of equity price risk analysis.

(32) 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)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

		December 31,	December 31,
		2019	2018
		(in thousands)
Short-term borrowings	$	1,725,602	546,472
Long-term borrowings (including current installments)		111,968,392	86,305,318
Total liabilities		209,660,842	192,553,087
Total equity		187,976,749	217,278,688
Debt-to-equity ratio		112%	89%
Net debt-to-equity ratio(i)		18%	8%

(i) Net debt-to-equity ratio is defined as short-term borrowings plus long-term borrowings less cash and cash equivalents and 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 other 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 related party Relationship with the Company

Lextar Electronics Corporation (“Lextar”) Associate Lextar Electronics (Suzhou) Co., Ltd. (“LESZ”) Subsidiary of Lextar Lextar Electronics (Xiamen) Co., Ltd. (“LEXM”) Subsidiary of Lextar Lextar Electronics (Chuzhou) Corp. (“LEXCZ”) Subsidiary of Lextar Wellybond Corporation (“WBC”) Subsidiary of Lextar TRENDYLITE CORPORATION Subsidiary of Lextar (“TRENDYLITE”) Raydium Semiconductor Corporation (“Raydium”) Associate Raydium Semiconductor (Kunshan) Co., Ltd. Subsidiary of Raydium (“RKS”)

Associate Subsidiary of Raydium

Dazzo Technology Corporation (“Dazzo”) Subsidiary of Raydium[(i)] Star River Energy Corp. (“SREC”) Associate Sungen Power Corporation (“SGPC”) Subsidiary of SREC Evergen Power Corporation (“EGPC”) Subsidiary of SREC

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of related party

Star Shining Energy Corporation (“SSEC”) Fargen Power Corporation (“FGPC”) Sheng Li Energy Corporation (“SLEC”) ChampionGen Power Corporation (“CGPC”) TronGen Power Corporation (“TGPC”) Ri Ji Power Corporation (“RJPC”) Ri Jing Power Corporation (“RGPC”) Mao Zheng Energy Corporation (“MZEC”) Mao Xin Energy Corporation (”MXEC”) Sheng Feng Power Corporation (”SFPC) WishMobile, Inc. (“WMI”) Daxin Materials Corp. (“Daxin”) Darwin Summit Co., Ltd. (“DSC”) Ubitech Inc. (“Ubitech”) BVCH Optronics (Sichuan) Corp. (“BVCH”) Evonik Forhouse Optical Polymers Corp. (“EFOP”) Wibase Industrial Solutions Inc. (“WIS”)

Qisda Corporation (“Qisda”)

Qisda Vietnam Co., Ltd. (“QVH”) 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 Technology (Shanghai) Co., Ltd. (“BQls”) Guru Systems (Suzhou) Co., Ltd. (“GSS”) BenQ GURU Corp. (“GST”)

Relationship with the Company

Associate Subsidiary of SSEC Subsidiary of SSEC Subsidiary of SSEC[(ii)] Subsidiary of SSEC Subsidiary of SSEC Subsidiary of SSEC Subsidiary of SSEC Subsidiary of SSEC Subsidiary of SSEC Associate Associate Associate Associate Joint venture[(iii)] Joint venture DPTW represented as a director of WIS Corporate shareholder of AUO of which accounts for AUO using the equity method 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

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Name of related party Relationship with the Company

BenQ Material (Suzhou) Co., Ltd. (“BMS”) Subsidiary of Qisda Suzhou BenQ Hospital Co., Ltd. (“QCHS”) Subsidiary of Qisda DFI Inc. (“DFI”) Subsidiary of Qisda Data Image Corporation (“DIC”) Subsidiary of Qisda Data Image (Suzhou) Corporation (“DICSZ”) Subsidiary of Qisda Sysage Technology Co., Ltd. (“Sysage”) Subsidiary of Qisda BenQ Foundation Substantive related party AUO Foundation Substantive related party

(i) Dazzo was merged with and into Raydium, an associate of the Company, on April 1, 2019
(ii) The Company disposed all its shareholdings in CGPC to SSEC, an associate of the Company, in September 2018. Refer to Note 6(8) for the relevant disclosures.
(iii) BVCH had been liquidated in December 2019.

(2) Compensation to key management personnel

Key management personnel’s compensation comprised:

		For the years	ended
		December	31,
		2019	2018
		(in thousands)
Short-term employee benefits	$	243,203	345,019
Post-employment benefits		2,633	2,547
	$	245,836	347,566

(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,
		2019	2018	2019	2018
			(in thousands)
Associates	$	1,227,987	1,898,336	280,009	696,423
Others		10,347,963	12,050,450	1,498,490	2,057,830
	$	11,575,950	13,948,786	1,778,499	2,754,253

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The collection terms for sales to related parties were 25 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

				Accounts payable	to related
		Purchases		parties
		For the years	ended
		December	31,	December	31,
		2019	2018	2019	2018
			(in thousands)
Associates	$	8,664,439	9,185,563	2,825,292	3,664,742
Joint ventures		1,027,147	1,449,636	72,942	-
Others		17,077,497	18,589,791	4,052,594	4,496,444
	$	26,769,083	29,224,990	6,950,828	8,161,186

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

		Acquisitionprices
		For the years ended
		December 31,
		2019 2018
		(in thousands)
Associates	$	6,555 6,527
Others		17,436 4,449
	$	23,991 10,976

d. Disposal of property, plant and equipment

Others $	Proceeds from disposal For the years ended December 31, 2019 2018 (in thousands) 835 -	Gain on disposal	Gain on disposal
		For the years ended December 31,
		2019 2018 (in thousands) 72 -	2018

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

e. Other related party transactions

Transaction type	Type of relatedparty Associates $ Others $ Associates $ Others $	December 31,	December 31,
		2019 2018 (in thousands) 2,727 8,161 1,229 4,784 3,956 12,945 13,980 18,148 35,991 10,027 49,971 28,175	2018
Other receivables due from related parties Other payables due to related parties (including payables for equipment)

Transaction type	For the years ended December 31,	For the years ended December 31,
	2019 2018 (in thousands) 52,227 55,044 6,611 6,611 83,477 66,748 24,110 24,474 166,425 152,877 17,980 18,580 223 1,060 7,996 8,789 26,199 28,429 20,157 37,155 36 567 59,287 29,336 79,480 67,058	2018
Rental income Administration and other income Other expenses
		152,877
		18,580 1,060 8,789
		28,429
		37,155 567 29,336
		67,058

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, 2019 and 2018, the Company had received cash dividends from related parties of $566,865 thousand and $668,228 thousand, respectively.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 Machinery and equipment	Pledged to secure Customs duties and guarantee for warranties $ Long-term borrowings Long-term borrowings $	December 31,	December 31,
		2019 2018 (in thousands) 35,809 91,753 28,423,642 27,696,480 42,968,184 37,317,602 71,427,635 65,105,835	2018
			65,105,835

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

9. Significant Contingent Liabilities and Unrecognized Commitments

The significant commitments and contingencies of the Company as of December 31, 2019, in addition to those disclosed in other notes to the consolidated financial statements, were as follows:

(1) Outstanding letters of credit

As at December 31, 2019, the Company had the following outstanding letters of credit for the purpose of purchasing machinery and equipment and materials:

Currency USD JPY	December 31, 2019
	(in thousands) 5,768 1,951,409

(2) Technology licensing agreements

Starting in 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(3) Purchase commitments

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.

As at December 31, 2019, significant outstanding purchase commitments for construction in progress, property, plant and equipment totaled $7,639,758 thousand.

(4) Litigation

a. Antitrust civil actions lawsuits in the United States and other jurisdictions

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. In April 2019, the Central District Court of Israel in Lod approved the settlement. In May 2014, LG Electronics Nanjing Display Co., Ltd. and seven of its affiliates filed a lawsuit in Seoul Central District Court against certain LCD manufacturers including AUO, alleging overcharge and claiming damages. AUO does not believe service has been properly made, but in order to protect its rights, AUO has retained counsel to handle the related matter, and at this stage, the final outcome of these matters is uncertain. AUO has been reviewing the merits of this lawsuit on an on-going basis.

In September 2018, AUUS received a complaint filed 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

b. Alleged patent infringements

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. On September 27, 2019, the relevant parties reached a settlement agreement, and all pending lawsuits that have been filed by VPV against AUO were dismissed on October 10, 2019.

As of February 5, 2020, 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:

On February 5, 2020, AUO’s Board of Directors resolved to acquire common shares of ADLINK Technology Inc. through tender offer. The tender offer consideration for each common share is NT$57 in cash. The planned acquisition amount is 65,249 thousand shares of ADLINK. The tender offer period will run from February 7, 2020 to March 12, 2020.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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.

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, 2019.

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: None.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

g. Purchases from or sales to related parties with amounts exceeding NT$100 million or 20% of the paid-in capital: Please see Table 5 attached.
h. Receivables from related parties with amounts exceeding NT$100 million or 20% of the paid-in capital: Please see Table 6 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 7 attached.
(2) Information on investees (excluding information on investment in Mainland China): Please see Table 8 attached.
(3) Information on investment in Mainland China:
a. The related information on investment in Mainland China: Please see Table 9.1 and 9.2 attached.
b. Upper limit on investment in Mainland China: Please see Table 9.1 and 9.2 attached.
c. Significant transactions:

Significant direct or indirect transactions with the investees in Mainland China for the year ended December 31, 2019, for which intercompany transactions were eliminated upon consolidation, are disclosed in “Information on significant transactions”.

14. Segment Information

(1) Operating segment information

The Company has two operating segments: display and energy. 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, 2019 and 2018 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.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For theyear	ended December 31, 2019	ended December 31, 2019
Display segment 256,667,222 (19,484,401 ) 15,753,181 For theyear	Energy segment Total segments (in thousands) 12,124,472 268,791,694 (983,547 ) (20,467,948) 623,194 $ (19,844,754 ) 36,590 15,789,771 $ 397,637,591 ended December 31, 2018 Energy segment Total segments (in thousands) 16,849,635 307,634,389 (1,124,640 ) 6,667,865 4,548,286 $ 11,216,151 121,650 40,895,395 $ 409,831,775	Total segments
Display segment 290,784,754 7,792,505 40,773,745	Energy segment (in thousands) 16,849,635 (1,124,640 ) $ 121,650 $
		307,634,389 6,667,865 4,548,286 11,216,151 40,895,395 409,831,775

(2) Geographic information
a. Net revenue from external customers: See Note 6(21).
b. Consolidated noncurrent assets[(i)]

	December 31,	December 31,
	2019	2018
	(in thousands)
Region
Taiwan	$ 174,518,271	172,639,349
PRC (including Hong Kong)	54,890,846	61,284,667
Others	6,301,996	6,941,674
	$ 235,711,113	240,865,690

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

(3) Major customer and product information: See Note 6(21).

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Financings Provided

For the year ended December 31, 2019

(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 (Notes 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 (Notes 1 and 5)	Limits on Financing Company’s Total Financing Amount (Notes 1 and 5)
													Item	Value
0	AUO	ACTW	Other	Yes	3,500,000	1,725,000	1,200,000	Markup rate on	Needs for	-	Operating	-	-	-	17,667,184	70,668,736
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

0	AUO	AUKS	Other	Yes	1,524,810	1,294,650	-	Markup rate on	Needs for	-	Operating	-	-	-	17,667,184	70,668,736
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

1	AULB	AUSK	Other	Yes	-	-	-	Markup rate on	Needs for	-	Operating	-	-	-	53,221,601	53,221,601
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

1	AULB	AUKS	Other	Yes	10,633,245	10,572,975	2,805,075	Markup rate on	Needs for	-	Operating	-	-	-	21,288,641	21,288,641
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

2	AUXM	BVHF	Other	Yes	-	-	-	Markup rate on	Needs for	-	Operating	-	-	-	5,359,511	5,359,511
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

2	AUXM	AUKS	Other	Yes	5,272,980	4,962,825	3,452,400	Markup rate on	Needs for	-	Operating	-	-	-	5,359,511	5,359,511
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

3	BVXM	AUKS	Other	Yes	434,010	431,550	-	Markup rate on	Needs for	-	Operating	-	-	-	509,196	509,196
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

4	AUSJ	UFSZ	Other	Yes	92,090	86,310	-	Markup rate on	Needs for	-	Operating	-	-	-	3,783,730	3,783,730
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

4	AUSJ	AUKS	Other	Yes	1,467,264	1,380,960	949,410	Markup rate on	Needs for	-	Operating	-	-	-	1,513,492	1,513,492
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

(Continued)

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 (Notes 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 (Notes 1 and 5)	Limits on Financing Company’s Total Financing Amount (Notes 1 and 5)
													Item	Value
4	AUSJ	A-Care	Other	Yes	46,045	43,155	-	Markup rate on	Needs for	-	Operating	-	-	-	3,783,730	3,783,730
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

5	AUSZ	AUKS	Other	Yes	5,272,980	4,962,825	4,099,725	Markup rate on	Needs for	-	Operating	-	-	-	5,886,493	5,886,493
			receivables					short-term	short-term		capital
			from related					financing cost	financing
			parties

6	DPSZ	AUKS	Other	Yes	460,450	431,550	-	Adjusted by	Needs for	-	Operating	-	-	-	711,740	711,740
			receivables					base lending	short-term		capital
			from related					rate of People’s	financing
			parties					Bank of China

7	FTKS	AUKS	Other	Yes	450,170	431,550	431,550	Adjusted by	Needs for	-	Operating	-	-	-	540,321	540,321
			receivables					base lending	short-term		capital
			from related					rate of People’s	financing
			parties					Bank of China

8	FTWJ	FHWJ	Other	Yes	92,090	64,733	64,733	Adjusted by	Needs for	-	Operating	-	-	-	2,071,120	2,071,120
			receivables					base lending	short-term		capital
			from related					rate of People’s	financing
			parties					Bank of China

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 among 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, AUSJ and BVXM: 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 a company shall not exceed the net worth of the lending company as stated in its latest audited financial statement.
d. DPSZ, FTWJ 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 and the total amount lendable to each of such borrowers shall not exceed the net worth of the lending company.

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Endorsements/Guarantees Provided

For the year ended December 31, 2019

(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 (Notes 4 and 5)	Maximum Endorsement/ Guarantee Balance for the Period (Note 2)	Ending Balance (Notes 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 (Notes 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	AUO	AUKS	2	88,335,920	16,140,185	15,317,737	11,507,216	-	8.67%	176,671,840	Yes	No	Yes
1	AUXM	AUO	3,4	13,398,777	2,302,250	-	-	-	-	13,398,777	No	Yes	No
		&AUST
1	AUXM	AUO	3	13,398,777	9,577,360	6,257,475	-	-	46.70%	13,398,777	No	Yes	No
2	AUSJ	AUO	3	3,783,730	1,473,440	-	-	-	-	3,783,730	No	Yes	No
3	AUSZ	AUO	3	14,716,233	7,275,110	4,401,810	-	-	29.91%	14,716,233	No	Yes	No
3	AUSZ	AUO	3,4	14,716,233	1,519,485	-	-	-	-	14,716,233	No	Yes	No
		&AUSK

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

A company with which it does business.
A company in which the Company directly and indirectly holds more than 50% of the voting shares.
A company that directly and indirectly holds more than 50% of the voting shares in the Company.
Companies in which the Company holds, directly or indirectly, 90% or more of the voting shares.
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.
A company that all capital contributing shareholders make endorsements/guarantees for their jointly invested company in proportion to their shareholding percentages.
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.

100

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Marketable Securities Held (Excluding Investment in Subsidiaries, Associates and Joint Ventures)

December 31, 2019

(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, 2019	December 31, 2019		Maximum Shareholding in the Interim
				Shares	Carrying Amount	Percentage of Ownership	Fair Value
AUO	Stock	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 FVTPL－current Financial assets at FVTOCI— noncurrent Financial assets at FVTOCI— noncurrent	1,700	- 7,140,410 - CNY 6,250 CNY 70,488 CNY 100,642 CNY 171,493 42,123 - -	17.00% 17.04% 2.22% 2.16% - - - 1.80% 5.33% 10.87%	- 7,140,410 - CNY 6,250 CNY 70,488 CNY 100,642 CNY 171,493 42,123 - -	17.00% 17.04% 2.22% 2.16% - - - 2.80% 6.13% 10.87%
	BenQ ESCO Corp.
AUO	Stock	Related party		335,231
	Qisda
AULB	Stock	-		3
	Abakus Solar AG
AUSH	Stock	-		352
	T-powertek
	Optronics Co., Ltd.
DPSZ	Structured deposit	-		-
FPWJ	Structured deposit	-		-
FTKS	Structured deposit	-		-
Konly	Stock	-		609
	PlayNitride Inc.
Konly	Stock	-		13
	SnapBizz
	CloudTech Pte.
	Ltd.
Konly	Stock	-	Financial assets at FVTPL－noncurrent	4,000
	a2peak power Co.,
	Ltd.

101

(Continued)

Name of Holder	Type and Name of Marketable Securities	Relationship with the Securities Issuer	Financial Statement Account		December 31, 2019	December 31, 2019		Maximum Shareholding in the Interim
				Shares	Carrying Amount	Percentage of Ownership	Fair Value
Konly	Stock	-	Financial assets at FVTPL－noncurrent 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 FVTOCI— noncurrent Financial assets at FVTOCI— noncurrent	1,500	- -	2.63% 8.52% 4.01% 0.52% 5.15% 12.11% 16.13% 4.59% 10.00% 19.89%	- - 7,345 216,091	3.26% 8.52% 4.01% 0.52% 5.15% 12.11% 16.13% 4.59% 10.00% 19.89%
	ChenFeng
	Optronics
	Corporation
Konly	Stock	-		4,200
	UniBright
	Chemical Co., Ltd.
Konly	Stock	-		2,407	7,345
	Azotek Co., Ltd.
Konly	Stock	Related party		10,145	216,091
	Qisda
Konly	Stock	-		1,667	-		-
	ATS International
	Inc.
DPTW	Stock	Related party		4,700	56,400		56,400
	Wibase Industrial
	Solutions Inc.
DPTW	Stock	-		150	1,500		1,500 8,649 34,968 10,714
	Evertrust
	Technology Ltd.
DPTW	Stock	-		7,000	8,649
	D8AI Holdings
	Corporation
DPTW	Stock	-		2,914	34,968
	HUAI I Precision
	Technology Co.,
	Ltd.
DPTW	Stock	-	Financial assets at FVTOCI— noncurrent	2	10,714
	Disign
	Incorporated

102

(Continued)

Name of Holder	Type and Name of Marketable Securities	Relationship with the Securities Issuer	Financial Statement Account		December 31, 2019	December 31, 2019		Maximum Shareholding in the Interim
				Shares	Carrying Amount	Percentage of Ownership	Fair Value
Ronly	Stock	-	Financial assets at FVTPL－noncurrent	600	-	1.22% 0.49%	- -	1.22% 0.49%
	UniBright
	Chemical Co., Ltd.
Ronly	Stock	-	Financial assets at FVTPL－noncurrent	41	-
	Exploit
	Technology Co.,
	Ltd.

103

(Continued)

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, 2019

(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	Disposal	Ending Balance	Ending Balance	Note
					Shares	Amount	Shares	Amount	Shares	Amount	Carrying Amount	Gain/Loss on Disposal	Shares	Amount
AUO	Stock	Investments in	- - - -	- - - -	378,193 - - -	5,005,774 - CNY 91,753 CNY 274,091	40,390 - - -	549,393 CNY 140,000 CNY 200,000 CNY 510,000	- - - -	- CNY 71,331 CNY 194,885 CNY 621,552	- CNY 71,331 CNY 194,885 CNY 621,552	- - - -	418,583 - - -	2,805,441 CNY 70,488 CNY 100,642 CNY 171,493	1 2 2 2
	ACTW	equity-
		accounted
		investees
DPSZ	Structured	Financial assets
	deposit	at FVTPL－
		current
FPWJ	Structured	Financial assets
	deposit	at FVTPL－
		current
FTKS	Structured	Financial assets
	deposit	at FVTPL－
		current

Note 1: a. As part of a business restructuring, AUO acquired all shares of ACTW from Konly and other shareholders.

b. The ending balance includes the recognition of investment gain (loss), foreign currency translation differences and capital surplus, etc. under the equity method. Note 2: The ending balance includes the gain/loss on valuation of the financial asset.

104

(Continued)

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, 2019

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

Table 5

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)
			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 AUO AUO AUO AUO	BMC Raydium Qisda Daxin DPTW AUCZ AUSZ AUST AUSK AULB AUKS AUXM TGPC QCSZ QCOS FGPC DPXM	Subsidiary of Qisda Associate Corporate shareholder of AUO of which accounts for AUO using the equity method Associate Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of SSEC Subsidiary of Qisda Subsidiary of Qisda Subsidiary of SSEC Subsidiary of AUO	Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Sales Sales Sales Sales Sales	4,049,902 980,406 8,306,875 2,665,305 6,101,237 129,946 35,474,816 5,692,940 134,558 956,615 12,385,120 25,695,562 (161,763) (7,126,336) (244,442) (663,428) (130,396)	2% 1% 4% 1% 3% - 18% 3% - - 6% 13% - (3)% - - -	EOM 90 days EOM 120 days EOM 45 days EOM 120 days EOM 60 days EOM 45 days EOM 45 days EOM 45 days EOM 45 days EOM 45 days EOM 30 days EOM 45 days EOM 25 days EOM 55 days EOM 55 days EOM 25 days EOM 45 days	- - - - - - - - - - - - - - - - -		(988,782) (238,957) (1,437,067) (831,009) (887,617) - (9,447,956) (873,769) (19,847) (381,063) (2,151,131) (8,029,959) 109,566 930,165 27,621 76,082 7,822	(2)%
										-
										(3)%

										(2)%
										(2)%
										-
										(19)%
										(2)%
										-
										(1)%
										(4)%
										(16)%
										-
										3%
										-
										-
										-
AUO	DPTW	Subsidiary of AUO	Sales	(413,290)	-	EOM 45 days	-		43,577	-

105

(Continued)

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)
			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 ACMK AUCZ AUKS AUKS AUKS AULB AULB AULB AUNL AUSH AUSK AUST AUSZ AUSZ	BenQ AUXM AUUS AUSZ AUNL RGPC ACTW ACTW AUO AUSZ Qisda AUO AUO AUSZ AUXM AUO AUO AUO AUO Raydium Qisda	Subsidiary of Qisda Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of SSEC Subsidiary of AUO Subsidiary of AUO Ultimate parent company Subsidiary of AUO Corporate shareholder of AUO of which accounts for AUO using the equity method Ultimate parent company Ultimate parent company Subsidiary of AUO Subsidiary of AUO Ultimate parent company Ultimate parent company Ultimate parent company Ultimate parent company Associate Corporate shareholder of AUO of which accounts for AUO using the equity method	Sales Sales Sales Sales Sales Sales Sales Purchases Sales Purchases Purchases Sales Sales Sales Sales Purchases Sales Sales Sales Purchases Purchases	(2,571,371) (989,043) (131,140) (1,036,086) (696,101) (109,168) (581,352) USD 36,650 CZK (99,079) CNY 130,338 CNY 23,017 CNY (2,770,165) USD (30,931) USD (11,445) USD (18,769) EUR 20,734 CNY (31,870) EUR (4,275) USD (184,271) CNY 560,109 CNY 569,724	(1)% - - - - - - 93% (100)% 8% 1% (100)% (72)% (11)% (17)% 100% (97)% (84)% (100)% 8% 8%	EOM 55 days EOM 45 days EOM 75 days EOM 45 days EOM 45 days EOM 25 days EOM 45 days OA 60 days EOM 45 days EOM 60 days EOM 120 days EOM 30 days EOM 45 days EOM 45 days EOM 45 days EOM 45 days End of quarter 25 days EOM 45 days EOM 45 days EOM 120 days EOM 120 days	- - - - - - - - - - - - - - - - - - - - -		399,935 - 36,724 - 136,045 - 82,862 USD (5,971) - CNY (42,137) CNY (10,475) CNY 500,963 USD 8,711 - - EUR (4,009) - EUR 746 USD 28,995 CNY (222,287) CNY (235,978)	1%
										-
										-
										-
										-
										-
										-
										(92)%
										-
										(6)%
										(2)%

										100%
										100%
										-
										-
										(100)%
										-

										82%
										100%
										(10)%
										(10)%

AUSZ	DPTW	Subsidiary of AUO	Purchases	CNY 178,762	3%	EOM 120 days	-		CNY (67,252)	(3)%

106

(Continued)

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)
			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)
AUSZ AUSZ AUSZ AUSZ AUSZ AUSZ AUUS AUUS AUXM AUXM AUXM AUXM AUXM AUXM AUXM AUXM AUXM AUXM BVHF BVHF BVHF BVXM DPSZ DPSZ DPXM DPXM DPXM	AUO AULB BMC AULB AUKS AUO AUO AUO Raydium Lextar AULB AUO BMC DPXM DPTW AULB BVXM AUO DPTW Lextar DPTW AUXM DPTW DPTW DPTW AUO AUXM	Ultimate parent company Subsidiary of AUO Subsidiary of Qisda Subsidiary of AUO Subsidiary of AUO Ultimate parent company Ultimate parent company Ultimate parent company Associate Associate Subsidiary of AUO Ultimate parent company Subsidiary of Qisda Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Ultimate parent company Subsidiary of AUO Associate Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Ultimate parent company Subsidiary of AUO	Purchases Purchases Purchases Sales Sales Sales Purchases Sales Purchases Purchases Purchases Purchases Purchases Purchases Purchases Sales Sales Sales Purchases Purchases Sales Purchases Purchases Sales Purchases Purchases Sales	CNY 227,034 CNY 75,930 CNY 274,748 CNY (36,846) CNY (130,338) CNY (7,869,533) USD 4,555 USD (5,539) CNY 377,685 CNY 42,203 CNY 125,815 CNY 194,961 CNY 180,358 CNY 43,398 CNY 308,620 CNY (27,290) CNY (760,742) CNY (5,704,904) CNY 52,126 CNY 30,865 CNY (381,196) CNY 759,427 CNY 24,407 CNY (134,962) CNY 24,058 CNY 28,887 CNY (43,246)	3%	EOM 45 days EOM 45 days EOM 90 days EOM 45 days EOM 60 days EOM 45 days EOM 75 days EOM 30 days EOM 120 days EOM 120 days EOM 45 days EOM 45 days EOM 90 days EOM 120 days EOM 120 days EOM 45 days EOM 45 days EOM 45 days EOM 60 days EOM 120 days EOM 60 days EOM 45 days EOM 60 days EOM 90 days EOM 60 days EOM 45 days EOM 120 days	- - - - - - - - - - - - - - - - - - - - - - - -		- - CNY (82,462) - CNY 42,137 CNY 2,196,988 USD (1,215) - CNY (130,325) CNY (18,499) - - CNY (46,691) CNY (13,923) CNY (115,982) - CNY 183,553 CNY 1,865,262 CNY (36,531) CNY (5,229) CNY 88,590 CNY (182,131) CNY (2,649) CNY 36,326 CNY (19,029) CNY (1,936) CNY 13,923	-
					1%					-
					4%					(4)%
					-					-
					(2)%					2%
					(95)%					88%
					100%					(100)%
					(56)%					-
					7%					(7)%
					1%					(1)%
					2%					-
					3%					-
					3%					(2)%
					1%					(1)%
					5%					(6)%
					-					-
					(12)%					9%
					(88)%					91%
					21%					(58)%
					12%					(8)%
					(100)%					100%
					100%					(100)%
					25%					(7)%
					(76)%					70%
					3%					(7)%
					4%					(1)%
					(4)%					3%
DPXM	DPTW	Subsidiary of AUO	Sales	CNY (1,074,429)	(89)%	EOM 90 days	-		CNY 384,021	83%

107

(Continued)

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)
			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)
FTWJ FTWJ FTWJ M.Setek ACTW ACTW ACTW UTI DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW DPTW	DPTW Lextar DPTW ACTW AUO M.Setek ACMK AUO BVHF AUO EFOP FTWJ DPXM DPSZ DPXM FTWJ DPSZ BVHF AUXM AUO QCES Darwin Summit Corporation, Ltd.	Subsidiary of AUO Associate Subsidiary of AUO Subsidiary of AUO Ultimate parent company Subsidiary of AUO Subsidiary of AUO Ultimate parent company Subsidiary of AUO Ultimate parent company Joint Venture Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Subsidiary of AUO Ultimate parent company Subsidiary of Qisda Associate	Purchases Purchases Sales Sales Purchases Purchases Sales Sales Purchases Purchases Purchases Purchases Purchases Purchases Sales Sales Sales Sales Sales Sales Sales Sales	CNY 116,790 CNY 57,349 CNY (765,048) JPY (5,215,104) 581,454 1,480,568 (1,079,766) (150,409) 1,726,072 410,921 1,027,147 3,428,533 4,819,703 606,434 (107,170) (521,864) (110,489) (236,590) (1,379,316) (6,456,889) (208,913) (100,201)	21%	EOM 60 days EOM 120 days EOM 90 days EOM 45 days EOM 45 days EOM 45 days OA 60 days EOM 60 days EOM 60 days EOM 45 days EOM 45 days EOM 90 days EOM 90 days EOM 90 days EOM 60 days EOM 60 days EOM 60 days EOM 60 days EOM 120 days EOM 60 days EOM 120 days EOM 90 days	- - - - - - - - - - - - - - - - - - - - - -		CNY (283,725) CNY (22,443) CNY 552,530 JPY 1,643,976 (82,862) (455,053) 179,946 15,093 (143,375) (43,343) (72,942) (998,087) (1,390,592) (156,919) 36,730 196,827 11,445 9,589 501,004 845,012 80,000 42,033	(57)%
					10%					(5)%
					(90)%					91%
					(99)%					100%
					17%					(11)%
					43%					(62)%
					(22)%					22%
					(69)%					89%
					13%					(5)%
					3%					(1)%
					7%					(2)%
					25%					(32)%
					35%					(45)%
					4%					(5)%
					(1)%					1%
					(3)%					7%
					(1)%					-
					(2)%					-
					(9)%					18%
					(42)%					31%
					(1)%					3%
					(1)%					2%

DPTW	AUSZ	Subsidiary of AUO	Sales	(797,366)	(5)%	EOM 120 days	-		290,507	11%

Note 1: Transaction terms with related parties were similar to those with third parties, except for particular transactions with no similar transactions to compare with. For those transactions, transaction terms were determined in accordance with mutual agreements.

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

108

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Receivables from Related Parties with Amounts Exceeding NT$100 Million or 20% of the Paid-in Capital December 31, 2019

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

Table 6

					Overdue Receivables	Overdue Receivables	Amounts
Company			Ending Balance of	Turnover	Amount	Action Taken	Received in	Allowance
	Counterparty	Relationship	Receivables				Subsequent	for Bad
Name				Rate
			(Note 3)				Period	Debts
							(Note 1)
AUO	TGPC	Subsidiary of SSEC	109,566	2.93	-	-	-	-
AUO	ACTW	Subsidiary of AUO	1,284,439	(Note 2)	-	-	-	-
AUO	BenQ	Subsidiary of Qisda	399,935	5.52	114	Will be collected in next period	-	-
AUO	AUNL	Subsidiary of AUO	136,045	10.23	16	Collected in subsequent period	70,516	-
AUO	QCSZ	Subsidiary of Qisda	930,165	6.26	935	Will be collected in next period	-	-
AUKS	AUO	Ultimate parent company	CNY 500,963	5.83	CNY 28,896	Collected in subsequent period	CNY 240,556	-
AULB	AUO	Ultimate parent company	USD 9,189	(Note 2)	USD 8,711	Will be collected in next period	-	-
AULB	AUKS	Subsidiary of AUO	USD 95,056	(Note 2)	-	-	-	-
AUSJ	AUKS	Subsidiary of AUO	CNY 224,528	(Note 2)	-	-	-	-
AUST	AUO	Ultimate parent company	USD 28,995	5.92	-	-	-	-
AUSZ	AUKS	Subsidiary of AUO	CNY 1,016,582	(Note 2)	CNY 14,634	Collected in subsequent period	CNY 16,118	-
AUSZ	AUO	Ultimate parent company	CNY 2,196,989	(Note 2)	CNY 27,024	Collected in subsequent period	CNY 1,511,352	-
AUXM	BVXM	Subsidiary of AUO	CNY 183,895	(Note 2)	CNY 1,421	Collected in subsequent period	CNY 106,300	-
AUXM	AUKS	Subsidiary of AUO	CNY 818,914	(Note 2)	CNY 137	Collected in subsequent period	CNY 250
AUXM	AUO	Ultimate parent company	CNY 1,865,262	6.10	CNY 93,824	Collected in subsequent period	CNY 1,082,848	-
BVHF	DPTW	Subsidiary of AUO	CNY 88,996	(Note 2)	CNY 49,549	Will be collected in next period	-	-
DPSZ	DPTW	Subsidiary of AUO	CNY 36,326	2.55	-	-	-	-
DPXM	DPTW	Subsidiary of AUO	CNY 384,031	(Note 2)	-	-	CNY 24,417	-

109

(Continued)

					Overdue Receivables	Overdue Receivables	Amounts
Company			Ending Balance of	Turnover	Amount	Action Taken	Received in	Allowance
	Counterparty	Relationship	Receivables				Subsequent	for Bad
Name				Rate
			(Note 3)				Period	Debts
							(Note 1)
FTKS	AUKS	Subsidiary of AUO	CNY 101,547	(Note 2)	-	-	-	-
FTWJ	DPTW	Subsidiary of AUO	CNY 552,530	1.39	-	-	CNY 97,667	-
M.Setek	ACTW	Subsidiary of AUO	JPY 1,643,976	5.75	JPY 418,115	Will be collected in next period	-	-
ACTW	M.Setek	Subsidiary of AUO	220,875	-	-	-	-	-
ACTW	ACMK	Subsidiary of AUO	188,510	(Note 2)	-	-	-	-
DPTW	AUSZ	Subsidiary of AUO	290,507	5.49	-	-	-	-
DPTW	FTWJ	Subsidiary of AUO	1,230,770	(Note 2)	29,182	Collected in subsequent period	414,948	-
DPTW	AUXM	Subsidiary of AUO	501,004	5.36	-	-	-	-
DPTW	AUO	Ultimate parent company	845,532	(Note 2)	71,466	Will be collected in next period	-	-
DPTW	BVHF	Subsidiary of AUO	157,802	(Note 2)	-	-	-	-

Note 1: Until the end of January 2020.

Note 2: The ending balance includes other receivables from transactions not related to ordinary sales. Note 3: All inter-company transactions among AUO and its subsidiaries have been eliminated in the consolidated financial statements.

110

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Business Relationship and Significant Intercompany Transactions For the year ended December 31, 2019

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

Table 7

						Inter-company Transactions	Inter-company Transactions
N			Ntr f Rltinhi				Percentage of
	Company			Financial
		Cntrrt
o.	Name	ouepay	aue o eaosp	Statement	Amount	Trading Terms	Consolidated
							Net Revenue or
				Account			Total Assets

0	AUKS	AUO	Subsidiary to parent	Net revenue	CNY 2,770,165	The prices of inter-company sales are not comparable with	5%
						those of third parties. The credit term isEOM30 days.
0	AUKS	AUO	Subsidiary to parent	Receivables from	CNY 500,963	-	1%
				related parties
1	AULB	AUKS	Subsidiary to subsidiary	Receivables from	USD 95,056	-	1%
				related parties
2	AUST	AUO	Subsidiary to parent	Net revenue	USD 184,271	The prices of inter-company sales are not comparable with	2%
						those of third parties. The credit term isEOM45 days.
3	AUSZ	AUO	Subsidiary to parent	Net revenue	CNY 7,869,533	The prices of inter-company sales are not comparable with	13%
						those of third parties. The credit term isEOM45 days.
3	AUSZ	AUO	Subsidiary to parent	Receivables from	CNY 2,196,989	-	2%
				related parties
3	AUSZ	AUKS	Subsidiary to subsidiary	Receivables from	CNY 1,016,582	-	1%
				related parties
4	AUXM	AUO	Subsidiary to parent	Net revenue	CNY 5,704,904	The prices of inter-company sales are not comparable with	9%
						those of third parties. The credit term isEOM45 days.
4	AUXM	BVXM	Subsidiary to subsidiary	Net revenue	CNY 760,742	The prices of inter-company sales are not comparable with	1%
						those of third parties. The credit term isEOM45 days.
4	AUXM	AUKS	Subsidiary to subsidiary	Receivables from	CNY 818,914	-	1%
				related parties
4	AUXM	AUO	Subsidiary to parent	Receivables from	CNY 1,865,262	-	2%
				related parties

111

(Continued)

						Inter-company Transactions	Inter-company Transactions
N			Ntr f Rltinhi				Percentage of
	Company			Financial
		Cntrrt
o.	Name	ouepay	aue o eaosp	Statement	Amount	Trading Terms	Consolidated
							Net Revenue or
				Account			Total Assets

5	BVHF	DPTW	Subsidiary to subsidiary	Net revenue	CNY 381,196	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 1,074,429	The prices of inter-company sales are not comparable with	2%
						those of third parties. The credit term is EOM 90 days.
7	FTWJ	DPTW	Subsidiary to subsidiary	Net revenue	CNY 765,048	The prices of inter-company sales are not comparable with	1%
						those of third parties. The credit term is EOM 90 days.
7	FTWJ	DPTW	Subsidiary to subsidiary	Receivables from	CNY 552,530	-	1%
				related parties
8	M.Setek	ACTW	Subsidiary to subsidiary	Net revenue	JPY 5,215,104	The prices of inter-company sales are not comparable with	1%
						those of third parties. The credit term isEOM45 days.
9	DPTW	AUXM	Subsidiary to subsidiary	Net revenue	1,379,316	The prices of inter-company sales are not comparable with	1%
						those of third parties. The credit term isEOM120 days.
9	DPTW	AUO	Subsidiary to parent	Net revenue	6,456,889	The prices of inter-company sales are not comparable with	2%
						those of third parties. The credit term isEOM60 days.

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.

112

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Information on Investees (Excluding Information on Investment in Mainland China) For the year ended December 31, 2019

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

Table 8

				Original Investment Amount	Original Investment Amount	December 31, 2019	December 31, 2019	December 31, 2019			Investor’s Share
									Maximum	Net Income
Investor	Investee	Location	Main Activities	December 31,	December 31,		Percentage of	Carrying Amount	Shareholding	(Loss) of	of Profit (Loss)	Note
Company	Company					Shares					of Investee
				2019	2018		Ownership	(Notes 1 and 2)	in the Interim	Investee	(Notes 1 and 2)
AUO	AULB	Malaysia	Holding and trading	59,058,698	59,058,698	1,882,189	100.00%	53,221,601	100.00%	1,367,091	1,481,004	Subsidiary
			company
AUO	AUNL	Netherlands	Sales and sales support of	24,275	24,275	50	100.00%	37,774	100.00%	13,707	13,707	Subsidiary
			TFT-LCD panels
AUO	Konly	Taiwan ROC	Venture capital investment	4,227,070	4,227,070	284,302	100.00%	5,208,936	100.00%	171,825	171,825	Subsidiary
AUO	Ronly	Taiwan ROC	Venture capital investment	1,778,692	1,778,692	154,757	100.00%	2,049,860	100.00%	9,126	9,126	Subsidiary
AUO	DPTW	Taiwan ROC	Design, manufacturing, and	3,569,155	3,569,155	190,108	28.56%	3,156,574	28.56%	(190,141)	(54,311)	Subsidiary
			sales of TFT-LCD modules,
			backlight modules, TV set
			and related parts
AUO	ACTW	Taiwan ROC	Manufacturing and sales of	15,687,921	15,138,528	418,583	100.00%	2,805,441	100.00%	(2,648,071)	(2,614,702)	Subsidiary
			ingots and solar wafers									(Note 4)
AUO	SREC	Taiwan ROC	Investment	379,040	379,040	37,904	32.01%	424,653	32.01%	110,266	35,300	Associate
AUO	Lextar	Taiwan ROC	Manufacturing and sales of	881,076	881,076	78,418	15.10%	1,642,746	15.33%	(309,651)	(46,855)	Associate
			Light Emitting Diode
AUO	SMI	Taiwan ROC	Sales and leasing of content	30,000	30,000	3,000	100.00%	18,247	100.00%	(11,025)	(11,025)	Subsidiary
			management system and
			hardware
AUO	UTI	Taiwan ROC	Planning, design and	100,000	50,000	10,000	100.00%	88,906	100.00%	(11,183)	(11,183)	Subsidiary
			development of construction
			for environmental protection
			and related project
			management
AUO	SSEC	Taiwan ROC	Investment	930,000	930,000	93,000	31.00%	953,966	31.00%	73,407	22,756	Associate
AUO	CQIL	Israel	Holding company	876,659	821,138	39,974	100.00%	576,111	100.00%	(54,995)	(182,866)	Subsidiary
Konly	DPTW	Taiwan ROC	Design, manufacturing, and	703,795	703,795	42,598	6.40%	707,303	6.40%	(190,141)	(12,170)	Subsidiary
			sales of TFT-LCD modules,
			backlight modules, TV set
			and related parts

113

(Continued)

				Original Investment Amount	Original Investment Amount	December 31, 2019	December 31, 2019	December 31, 2019			Investor’s Share
									Maximum	Net Income
Investor	Investee	Location	Main Activities	December 31,	December 31,		Percentage of	Carrying Amount	Shareholding	(Loss) of	of Profit (Loss)	Note
Company	Company					Shares					of Investee
				2019	2018		Ownership	(Notes 1 and 2)	in the Interim	Investee	(Notes 1 and 2)
Konly	ACTW	Taiwan ROC	Manufacturing and sales of	-	589,793	-	-	-	2.50%	(2,648,071)	(2,381)	Subsidiary
			ingots and solar wafers									(Note 4)
Konly	SREC	Taiwan ROC	Investment	17,760	17,760	1,776	1.50%	19,897	1.50%	110,266	1,654	Associate
Konly	Raydium	Taiwan ROC	IC design	175,857	175,857	11,454	17.10%	740,504	17.63%	674,300	117,334	Associate
Konly	Daxin	Taiwan ROC	Research, manufacturing and	154,748	154,748	19,114	18.61%	517,812	18.61%	650,420	121,032	Associate
			sales of display related
			chemicals
Konly	Lextar	Taiwan ROC	Manufacturing and sales of	450,674	450,674	26,133	5.03%	547,439	5.11%	(309,651)	(15,614)	Associate
			Light Emitting Diode
Konly	Ubitech	Taiwan ROC	Development and sales of	27,000	27,000	357	26.31%	1,262	26.31%	(7,584)	(16,854)	Associate
	Inc.		software for POS system
Konly	SSEC	Taiwan ROC	Investment	60,000	60,000	6,000	2.00%	61,546	2.00%	73,407	1,468	Associate
Konly	WishMobile,	Taiwan ROC	Developing and providing	15,000	15,000	2,500	12.50%	5,899	12.50%	1,334	(7,932)	Associate
	Inc.		CRM APP
Konly	SkyREC	BVI	Data consulting service for	46,016	46,016	188	16.12%	4,304	16.12%	(14,143)	(38,982)	Associate
	Ltd.		retail
Ronly	DPTW	Taiwan ROC	Design, manufacturing, and	845,510	845,510	40,509	6.09%	672,617	6.09%	(190,141)	(11,573)	Subsidiary
			sales of TFT-LCD modules,
			backlight modules, TV set
			and related parts
Ronly	Daxin	Taiwan ROC	Research, manufacturing and	70,021	70,021	6,312	6.15%	171,001	6.15%	650,420	39,969	Associate
			sales of display related
			chemicals
Ronly	Lextar	Taiwan ROC	Manufacturing and sales of	323,431	323,431	34,338	6.61%	719,336	6.71%	(309,651)	(20,517)	Associate
			Light Emitting Diode
DPTW	BVLB	Malaysia	Holding company	1,051,289	1,051,289	36,000	29.71%	242,935	29.71%	(133,388)	(39,630)	Subsidiary
DPTW	DPLB	Malaysia	Holding company	4,362,627	4,362,627	92,267	100.00%	6,172,423	100.00%	(27,931)	(17,834)	Subsidiary
DPTW	FHVI	BVI	Holding company	2,362,321	2,362,321	22,006	100.00%	4,008,112	100.00%	96,028	20,304	Subsidiary
DPTW	FRVI	BVI	Holding company	-	274,700	-	-	-	100.00%	6,200	6,029	Subsidiary
												(Note 5)
DPTW	FFMI	Mauritius	Holding company	274,700	-	653	100.00%	93,524	100.00%	6,200	-	Subsidiary
												(Note 5)
DPTW	EFOP	Taiwan ROC	Manufacturing and sales of	338,729	338,729	33,873	49.00%	178,719	49.00%	(88,238)	(43,237)	Joint
			polymer plasticized raw									Venture
			materials
DPTW	Darwin	Thailand	International trade	3,740	3,740	40	40.00%	10,394	40.00%	7,765	3,106	Associate
	Summit
	Corporation,
	Ltd.

114

(Continued)

				Original Investment Amount	Original Investment Amount	December 31, 2019	December 31, 2019	December 31, 2019			Investor’s Share
									Maximum	Net Income
Investor	Investee	Location	Main Activities	December 31,	December 31,		Percentage of	Carrying Amount	Shareholding	(Loss) of	of Profit (Loss)	Note
Company	Company					Shares					of Investee
				2019	2018		Ownership	(Notes 1 and 2)	in the Interim	Investee	(Notes 1 and 2)
ACTW	ACMK	Malaysia	Manufacturing and sales of	449,975	449,975	46,196	100.00%	537,395	100.00%	42,306	42,306	Subsidiary
			solar wafers
ACTW	SDMC	Taiwan ROC	Holding company	1,988,488	1,988,488	116,836	100.00%	1,948,642	100.00%	171,314	168,217	Subsidiary
SDMC	M.Setek	Japan	Manufacturing and sales of	23,596,398	23,596,368	11,404,184	99.9991%	1,946,295	99.9991%	188,831	188,830	Subsidiary
			ingots
AULB	AUUS	United States	Sales and sales support of	USD 1,000	USD 1,000	1,000	100.00%	USD 2,063	100.00%	USD 161	USD 161	Subsidiary
			TFT-LCD panels
AULB	AUJP	Japan	Sales support of TFT-LCD	USD 276	USD 276	1	100.00%	USD 1,765	100.00%	USD 1	USD 1	Subsidiary
			panels
AULB	AUKR	South Korea	Sales support of TFT-LCD	USD 155	USD 155	-	100.00%	USD 1,014	100.00%	USD 83	USD 83	Subsidiary
			panels
AULB	AUCZ	Czech	Assembly of solar modules	USD 20,531	USD 20,531	-	100.00%	USD 10,534	100.00%	USD (3,607)	USD (3,607)	Subsidiary
		Republic
AULB	AUSK	Slovakia	Repairing of TFT-LCD	USD 1,359	USD 54,349	-	100.00%	USD 22,879	100.00%	USD 246	USD 246	Subsidiary
		Republic	modules
AULB	AUST	Singapore	Manufacturing TFT-LCD	USD 276,543	USD 321,161	907,114	100.00%	USD 139,306	100.00%	USD 2,120	USD 2,120	Subsidiary
			panels based on low
			temperature polysilicon
			technology
AULB	AUVI	United States	Research and development	USD 5,000	USD 5,000	5,000	100.00%	USD 5,875	100.00%	USD 255	USD 255	Subsidiary
			and IP related business
AULB	BVLB	Malaysia	Holding company	USD 85,171	USD 85,171	85,171	70.29%	USD 19,073	70.29%	USD (4,313)	USD (3,032)	Subsidiary
AULB	AUSG	Singapore	Holding company and sales	USD 48,321	USD 86,685	266,268	100.00%	USD 34,448	100.00%	USD 903	USD 903	Subsidiary
			support of TFT-LCD panels
AUSG	AEUS	United States	Sales support of solar-related	USD 3,510	USD 3,510	9,510	100.00%	USD 814	100.00%	USD (1)	USD (1)	Subsidiary
			products
AUSG	AENL	Netherlands	Sales support of solar-related	USD 45	USD 45	-	100.00%	USD 174	100.00%	USD (12)	USD (12)	Subsidiary
			products
DPLB	DPHK	Hong Kong	Holding company	USD 103,785	USD 103,785	10	100.00%	USD 205,804	100.00%	USD (248)	USD (248)	Subsidiary
												(Note 6)
DPLB	DPSK	Slovakia	Manufacturing and sales of	USD 4,216	USD 4,216	-	100.00%	USD 2,546	100.00%	USD (655)	USD (655)	Subsidiary
		Republic	automotive parts
FHVI	FTMI	Mauritius	Holding company	USD 6,503	USD 6,503	6,503	100.00%	USD 75,756	100.00%	USD (2,786)	USD (2,786)	Subsidiary
FHVI	FWSA	Samoa	Holding company	USD 19,000	USD 19,000	19,000	100.00%	USD 14,364	100.00%	USD 146	USD 146	Subsidiary
FHVI	PMSA	Samoa	Holding company	USD 39,673	USD 39,673	31,993	100.00%	USD 44,825	100.00%	USD 1,832	USD 1,832	Subsidiary
FRVI	FFMI	Mauritius	Holding company	-	USD 8,200	-	-	-	100.00%	USD 200	USD 200	Subsidiary
												(Note 5)

115

(Continued)

				Original Investment Amount	Original Investment Amount	December 31, 2019	December 31, 2019	December 31, 2019			Investor’s Share
									Maximum	Net Income
Investor	Investee	Location	Main Activities	December 31,	December 31,		Percentage of	Carrying Amount	Shareholding	(Loss) of	of Profit (Loss)	Note
Company	Company					Shares					of Investee
				2019	2018		Ownership	(Notes 1 and 2)	in the Interim	Investee	(Notes 1 and 2)
M.Setek	Ichijo	Japan	Manufacturing of	JPY 5,000	JPY 5,000	-	38.46%	-	38.46%	-	-	Associate
	Seisakusyo		semiconductor equipment									(Note 3)
	Co., Ltd.		and related parts
CQIL	CQHLD	United	Holding company	USD 18,868	USD 4,071	635,709	100.00%	USD 18,491	100.00%	USD 4,811	USD 4,811	Subsidiary
		Kingdom
CQHLD	CQUK	United	Sales and sales support of	GBP 1,874	-	-	100.00%	USD 510	100.00%	USD 123	USD 123	Subsidiary
		Kingdom	content management system
CQHLD	CQUS	United States	Sales of content	USD 15,607	USD 1	11	100.00%	USD 3,863	100.00%	USD (1,873)	USD (1,873)	Subsidiary
			management system and
			hardware
CQHLD	CQCA	Canada	Research and development	CAD 1,310	-	-	100.00%	USD 550	100.00%	USD 88	USD 88	Subsidiary
			of content management
			system
CQUS	JRUK	United	Development and sales of	-	-	-	100.00%	-	100.00%	-	-	Subsidiary
		Kingdom	content management system
			and sales of related hardware
CQUS	JRUS	United States	Development and sales of	-	-	10	100.00%	-	100.00%	-	-	Subsidiary
			content management system
			and sales of related hardware

Note 1: All inter-company transactions among 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 acquired all shares of ACTW from Konly and other shareholders. Note 5: FRVI was liquidated in the fourth quarter of 2019. FRVI transferred all of its shareholdings in FFMI to DPTW. Note 6: The registration of the alteration of DPHK’s common stock has not been completed.

116

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Information on Investment in Mainland China

For the year ended December 31, 2019

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

Table 9

1. AUO ：

(1) Related information on investment in Mainland China

							Accumulated			Maximum	’	Carrying
				Accumulated
					Investment		Outflow of		%			Amount of	Accumulated
		Total Amount of Paid-in		Outflow of Investment	Flows		Investment	Net Income	Ownership		Investors Share of Profit	the	Inward
Investee Company	Main Activities	Capital	Method of Investment	from Taiwan as of January			from Taiwan as of December	(Loss) of Investee (Notes 4 and 5)	through Direct or Indirect	Shareholding in the Interim	(Loss) of Investee	Investment as of December	Remittance of Earnings as of December	Note
		(Note 2)		1, 2019 (Note 2)	Outflow	Inflow	31, 2019 (Note 2)		Investment		(Notes 4 and 5)	31, 2019 (Note 2)	31, 2019

A-Care	Design, development	43,155	(Note 1)	-	-	-	-	(18,772)	100%	100%	(18,772)	17,973	-
	and sales of software
	and hardware for
	health care industry
AETJ	Manufacturing and	-	(Note 1)	-	-	-	-	847	-	100%	847	-	-	Note 8
	sales of solar
	modules
AUKS	Manufacturing and	28,959,735	(Note 1)	14,769,465	-	-	14,769,465	(4,634,866)	51%	51%	(2,363,782)	4,985,961	-
	sales of TFT-LCD
	panels
AUSH	Sales support of TFT-	90,405	(Note 1)	30,135	-	-	30,135	(37,431)	100%	100%	(37,431)	417,037	-
	LCD panels
AUSJ	Manufacturing and	3,254,580	(Note 1)	2,410,800	-	-	2,410,800	81,056	100%	100%	152,141	3,783,730	-	Note 7
	assembly of TFT-
	LCD modules;
	leasing
AUSZ	Manufacturing,	8,377,530	(Note 1)	6,027,000	-	-	6,027,000	2,224,611	100%	100%	2,248,227	14,716,233	-	Note 7
	assembly and sales of
	TFT-LCD modules
AUXM	Manufacturing,	7,533,750	(Note 1)	7,533,750	-	-	7,533,750	781,059	100%	100%	790,751	13,398,777	-	Note 7
	assembly and sales of
	TFT-LCD modules

117

(Continued)

							Accumulated			Maximum	’	Carrying
				Accumulated
					Investment		Outflow of		%			Amount of	Accumulated
		Total Amount f Pidin		Outflow of Investment	Flows		Investment	Net Income	Ownership		Investors Share of Profit	the	Inward
Investee Company	Main Activities	o a- Capital	Method of Investment	from Taiwan as of January			from Taiwan as of December	(Loss) of Investee (Notes 4 and 5)	through Direct or Indirect	Shareholding in the Interim	(Loss) of Investee	Investment as of December	Remittance of Earnings as of December	Note
		(Note 2)		1, 2019 (Note 2)	Outflow	Inflow	31, 2019 (Note 2)		Investment		(Notes 4 and 5)	31, 2019 (Note 2)	31, 2019

BVCH	Manufacturing and	-	(Note 1)	225,108	-	-	225,108	(14,325)	-	19%	(2,722)	-	-	Note 8
	sales of liquid crystal
	products and related
	parts
BVHF	Manufacturing and	2,213,416	(Note 1)	-	-	-	-	(133,307)	100%	100%	(133,307)	815,781	-	Note 6
	sales of liquid crystal
	products and related
	parts
BVXM	Manufacturing and	2,589,300	(Note 1)	-	-	-	-	36,637	100%	100%	36,637	1,272,990	-
	sales of liquid crystal
	products and related
	parts
EDT	Design and sales of	21,578	(Note 1)	-	-	-	-	(4,886)	100%	100%	(4,886)	16,862	-
	software and
	hardware integration
	system and
	equipment relating to
	intelligent
	manufacturing
MIS	Development and	21,578	(Note 1)	-	-	-	-	(13,025)	100%	100%	(13,025)	8,659	-
	licensing of software
	relating to intelligent
	manufacturing, and
	related consulting
	services
UFSZ	Planning, design and	25,893	(Note 1)	-	-	-	-	(7,951)	100%	100%	(7,951)	18,506	-
	development of
	construction project
	for environmental
	protection and related
	project management
UFSD	Planning, design and	8,631	(Note 1)	-	-	-	-	(2,932)	100%	100%	(2,932)	5,802	-
	development of
	construction project
	for environmental
	protection and related
	project management

118

(Continued)

(2) Upper limit on investment in Mainland China

(2) Upper limit on investment in Mainland China
Accumulated Investment in Mainland China as ofDecember31, 2019 (Note 2)	Investment Amounts Authorized by the Investment Commission, MOEA (Note 2)	Upper Limit on Investment Stipulated by the Investment Commission, MOEA (Note 3)
30,996,258 (USD 1,028,580)	40,462,497 (USD 1,335,003 and HKD 60,000)	112,786,050

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 2019.
Note 6: BVHF is 100% owned by BVLB, a jointly-owned subsidiary of AUO and DPTW.
Note 7: Investor’s share of profit (loss) of investee and the carrying amount of the investment as of December 31, 2019 both include the effect of sidestream transactions.
Note 8: AETJ and BVCH were liquidated in the fourth quarter of 2019.

119

(Continued)

2. DPTW:

(1) Related information on investment in Mainland China

							Accumulated
				Accumulated	Investment		Outflow of		%			Carrying	Accumulated
		Total Amount f Pidi		Outflow of Investment	Flows		Investment	Net Income	Ownership	Maximum	Investor’s Share of Profit	Amount of the	Inward Remittance of
Investee Company	Main Activities	o a-n Capital	Method of Investment	from Taiwan as f 1			from Taiwan as of	(Loss) of Investee	through Direct or	Shareholding in the	(Loss) of I	Investment as of December	Earnings as of D	Note
		(Note 4)		o January , 2019	Outflow	Inflow	December	(Notes 2 and 6)	Indirect	Interim	nvestee (Notes 2 and 6)	31, 2019	ecember 31, 2019
				(Note 4)	(Note 4)	(Note 4)	31, 2019 (Note 4)		Investment			(Note 4)	(Note 4)

BVHF	Manufacturing and	2,213,416	(Note 1)	482,160	-	-	482,160	(133,307)	29.71%	29.71%	(133,307)	815,781	-	Note 5
	sales of liquid crystal
	products and related
	parts
DPSZ	Manufacturing and	753,375	(Note 1)	452,025	-	-	452,025	1,474	100%	100%	1,474	1,779,351	1,003,989	Note 9
	sales of backlight
	modules and related
	parts
DPXM	Manufacturing and	2,109,450	(Note 1)	2,109,450	-	-	2,109,450	(9,145)	100%	100%	(9,145)	4,422,562	1,559,487
	sales of backlight
	modules and related
	parts
FHWJ	Manufacturing of	195,878	(Note 1)	247,107	-	-	247,107	6,200	100%	100%	6,200	43,308	-
	motorized treadmills
FPWJ	Manufacturing and	873,915	(Note 1)	572,565	-	-	572,565	6,879	100%	100%	6,879	644,612	-	Note 8
	sales of precision
	plastic parts
FTKS	Manufacturing and	1,084,860	(Note 1)	1,084,860	-	-	1,084,860	56,654	100%	100%	56,654	1,350,802	-
	sales of backlight
	modules and related
	parts
FTWJ	Manufacturing and	1,054,725	(Note 1)	195,878	-	-	195,878	(88,537)	100%	100%	(88,537)	2,071,120	424,136	Note 7
	sales of backlight
	modules and related
	parts

120

(Continued)

(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, 2019(Note 4)	Investment Amounts Authorized by the Investment Commission, MOEA(Note 4)	Upper Limit on Investment Stipulated by the Investment Commission, MOEA(Note 3)
5,144,045(USD 170,700)	5,674,511(USD 188,303)	6,630,571

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, 2019 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 2019.
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 amount of paid-in capital includes the capital injection of USD10,000 thousand from the offshore holding company, which was originally from FTWJ’s appropriation of earnings.
Note 9: 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.

121

AI assistant

AUO — Audit Report / Information 2019

52062_rns_2019-12-30_ab7913ee-9809-4030-b27f-3c1a319e1daf.pdf

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Financial Statements and

Independent Auditors’ Report

Representation Letter

Independent Auditors’ Report

Opinion

Basis for Opinion

Emphasis of Matter

Key Audit Matters

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

Description of key audit matter:

How the matter was addressed in our audit:

Revenue recognition

Description of key audit matter:

How the matter was addressed in our audit:

Other Matters

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

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

Notice to Readers

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars)

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars, except for earnings per share)

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars)

Equity Attributable to Shareholders of AU Optronics Corp.

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars)

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

For the years ended December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the years ended December 31, 2019 and 2018 (Expressed in thousands of New Taiwan dollars, unless otherwise indicated)

1. Organization

2. The Authorization of Financial Statements

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

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

IFRS 16, Leases

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

4. Summary of Significant Accounting Policies

(1) Statement of compliance

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(ii) Impairment of financial assets

(iii) De-recognition of financial assets

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

b. Financial liabilities

(b) Other financial liabilities

c. Offsetting of financial assets and liabilities

AUO Audit Report / Information 2019