AUO — Interim / Quarterly Report 2017

Nov 13, 2017

Stock Code ： 2409

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Interim Financial Statements

March 31, 2017 and 2016 (With Independent Auditors’ Review Report)

The auditors’ review 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 and Chinese language auditors’ review report and consolidated financial statements, the Chinese version shall prevail.

1

Independent Auditors’ Review Report

To the Board of Directors of AU Optronics Corp.:

We have reviewed the accompanying consolidated balance sheets of AU Optronics Corp. and its subsidiaries (“the Company”) as of March 31, 2017 and 2016, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2017 and 2016. These consolidated interim financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated interim financial statements based on our review.

We conducted our reviews in accordance with Statement on Auditing Standard No. 36, “Engagements to Review Financial Statements”. A review consists principally of inquiries of the Company’s personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with the generally accepted auditing standards, the objective of which is the expression of an opinion regarding the consolidated interim financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements referred to in the first paragraph in order for them to be in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Accounting Standard 34 “Interim Financial Reporting” endorsed by the Financial Supervisory Commission of the Republic of China.

We have audited the consolidated financial statements of the Company for the year ended December 31, 2016 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, in which we issued an unqualified opinion on February 13, 2017. In our opinion, the consolidated balance sheet as of December 31, 2016 and the related disclosures that extracted from the annual consolidated financial statements for the year ended December 31, 2016 included in the consolidated interim financial statements referred to above, in all material aspects, present fairly.

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

KPMG Hsinchu, Taiwan (Republic of China) April 26, 2017

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 International Financial Reporting Standards, International Accounting Standards, interpretations as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China.

The auditors’ review 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 and Chinese language auditors’ review report and consolidated financial statements, the Chinese version shall prevail.

2

Reviewed only, not audited in accordance with generally accepted auditing standards as of March 31, 2017 and 2016

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2017, December 31, 2016 and March 31, 2016 (Expressed in thousands of New Taiwan dollars)

March 31, 2017 Assets Amount % Current assets: 1100 Cash and cash equivalents (Note 6(1)) $ 85,483,584 20 1110 Financial assets measured at fair value through profit or loss－current (Note 6(2)) 372,674 - 1170 Notes and accounts receivable, net (Note 6(5)) 44,103,855 10 1180 Accounts receivable from related parties, net (Note 6(5)&7) 3,210,698 1 1210 Other receivables from related parties (Note 7) 20,429 - 1220 Current tax assets 94,283 - 130X Inventories (Note 6(6)) 25,645,396 6 1476 Other current financial assets (Note 6(1),(5)&8) 422,286 - 1460 Noncurrent assets held for sale (Note 6(8)) - - 1479 Other current assets (Note 6(11)) 6,415,428 2 165,768,633 39 Noncurrent assets: 1523 Available-for-sale financial assets－ noncurrent (Note 6(3)) 3,313,794 1 1543 Financial assets carried at cost－ noncurrent (Note 6(4)) 202,815 - 1550 Investments in equity-accounted investees (Note 6(7)) 5,154,302 1 1600 Property, plant and equipment (Note 6(8),7&8) 216,148,657 51 1760 Investment property (Note 6(9)&8) 465,868 - 1780 Intangible assets (Note 6(10)) 13,464,383 3 1840 Deferred tax assets 14,271,054 3 1900 Other noncurrent assets (Note 6(11)&8) 6,515,564 2 259,536,437 61 Total assets $ 425,305,070 100	March 31, 2017	December 31, 2016	March 31, 2016 Amount % 73,655,703 18 138,205 - 28,695,342 7 2,588,900 1 19,607 - 29,445 - 31,176,598 8 1,692,134 - 688,847 - 4,614,247 1 143,299,028 35 1,972,545 - 137,182 - 12,362,211 3 208,156,645 51 465,868 - 14,517,958 4 16,963,316 4 9,613,302 3 264,189,027 65 407,488,055 100 March 31, 2017 Liabilities and Stockholders’ Equity Amount % Current liabilities: 2100 Short-term borrowings (Note 6(12)) $ 1,659,769 - 2120 Financial liabilities measured at fair value through profit or loss－current (Note 6(2)) 19,154 - 2125 Hedging derivative financial liabilities －current (Note 6(2)) - - 2170 Notes and accounts payable 45,999,219 11 2180 Notes and accounts payable to related parties (Note 7) 7,918,566 2 2213 Equipment and construction payable 10,260,019 3 2220 Other payables to related parties (Note 7) 25,478 - 2230 Current tax liabilities 3,194,064 1 2250 Provisions－current (Note 6(14)) 1,271,848 - 2399 Other current liabilities 21,605,447 5 2322 Current installments of long-term borrowings (Note 6(13)&8) 17,232,000 4 109,185,564 26 Noncurrent liabilities: 2510 Hedging derivative financial liabilities －noncurrent (Note 6(2)) - - 2540 Long-term borrowings, excluding current installments (Note 6(13)&8) 104,547,412 25 2550 Provisions－noncurrent (Note 6(14)) 1,044,523 - 2570 Deferred tax liabilities 3,038,325 1 2600 Other noncurrent liabilities 1,838,942 - 110,469,202 26 Total liabilities 219,654,766 52 Equity:(Note 6(17)) Equity attributable to shareholders of AU Optronics Corp.: 3100 Common stock 96,242,451 22 3200 Capital surplus 60,015,004 14 3300 Retained earnings 33,721,389 8 3400 Other components of equity (1,783,798 ) - 188,195,046 44 Non-controlling interests: 36XX Non-controlling interests 17,455,258 4 Total equity 205,650,304 48 Total Liabilities and Equity $ 425,305,070 100	March 31, 2017	December 31, 2016	March 31, 2016
		Amount % 80,191,248 19 65,669 - 45,710,177 11 2,533,224 1 34,288 - 14,057 - 27,679,335 6 559,946 - 228,015 - 6,330,283 1 163,346,242 38 2,836,696 1 193,582 - 5,178,337 1 222,741,832 52 465,868 - 13,602,834 3 14,364,745 3 7,039,115 2 266,423,009 62 429,769,251 100			Amount % 526,723 - 896,998 - 3,540 - 51,148,055 13 8,823,065 2 12,647,041 3 27,341 - 949,890 - 1,783,407 - 22,385,488 5 18,074,627 4 117,266,175 27 - - 106,187,993 26 1,038,264 - 3,705,300 1 1,936,337 - 112,867,894 27 230,134,069 54 96,242,451 22 59,979,723 14 24,243,153 6 779,372 - 181,244,699 42 18,390,483 4 199,635,182 46 429,769,251 100	Amount % 1,766,510 - 644,930 - - - 46,758,370 11 8,207,071 2 8,642,098 2 22,833 - 2,579,575 1 4,139,110 1 21,304,603 6 36,125,898 9 130,190,998 32 10,194 - 70,422,090 17 1,091,332 - 4,824,906 1 3,591,005 1 79,939,527 19 210,130,525 51 96,242,451 24 60,336,171 15 14,929,977 4 3,963,269 1 175,471,868 44 21,885,662 5 197,357,530 49 407,488,055 100

See accompanying notes to the consolidated interim financial statements

3

Reviewed only, not audited in accordance with generally accepted auditing standards

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three months ended March 31, 2017 and 2016 (Expressed in thousands of New Taiwan dollars, except for earnings per share)

4110 Revenue $ 4190 Less: sales return and discount Net revenue(Note 6(19)&7) 5000 Cost of sales(Note 6(6),(20),(21)&7) Gross profit Operating expenses:(Note 6(20),(21)&7) 6100 Selling and distribution expenses 6200 General and administrative expenses 6300 Research and development expenses Total operating expenses Profit (loss) from operations Non-operating income and expenses: 7010 Other income (Note 6(22)&7) 7020 Other gains and losses (Note 6(2),(23)&7) 7050 Finance costs (Note 6(8)&(24)) 7060 Share of profit of equity-accounted investees (Note 6(7)) Total non-operating income and expenses 7900 Profit (loss) before income tax 7950 Less: income tax expense(Note 6(25)) 8200 Profit (loss) for the period 8300 Other comprehensive income:(Note 6(7),(17)&(25)) 8310 Items that will never be reclassified to profit or loss 8320 Equity-accounted investees – share of other comprehensive income 8349 Related tax 8360 Items that are or may be reclassified subsequently to profit or loss 8361 Foreign operations – foreign currency translation differences 8362 Net change in fair value of available-for-sale financial assets 8363 Effective portion of changes in fair value of cash flow hedges 8370 Equity-accounted investees – share of other comprehensive income (loss) 8399 Related tax 8300 Other comprehensive income (loss), net of tax 8500 Total comprehensive income (loss) for the period $ Profit (loss) attributable to: 8610 Shareholders of AU Optronics Corp. $ 8620 Non-controlling interests $ Total comprehensive income (loss) attributable to: 8710 Shareholders of AU Optronics Corp. $ 8720 Non-controlling interests $ Earnings per share(Note 6(26)) 9750 Basic earnings per share $ 9850 Diluted earnings per share $	Three months ended March 31,	Three months ended March 31,	Three months ended March 31,	% 100 -
	2017	% 100 - 100 80 20 1 2 3 6 14 2 (1) (1) - - 14 3 11 - - - (5) - - - 1 (4 ) (4 ) 7 11 - 11 8 (1 ) 7	2016
	Amount 88,845,125 288,309 88,556,816 71,124,067 17,432,749 947,616 1,987,240 2,480,486 5,415,342 12,017,407 1,481,205 (841,039) (724,351) 16,520 (67,665 ) 11,949,742 2,515,109 9,434,633 327 - 327 (4,488,836) 477,098 (21,992) (59,132) 638,603 (3,454,259 ) (3,453,932 ) 5,980,701 9,479,193 (44,560 ) 9,434,633 6,916,350 (935,649 ) 5,980,701 0.98 0.97		Amount 71,408,701 273,469 71,135,232 70,745,712 389,520 1,002,936 2,274,475 2,209,027 5,486,438 (5,096,918 ) 528,310 (291,105) (538,120) 112,805 (188,110 ) (5,285,028) 295,396 (5,580,424 ) - - - (1,406,198) (104,658) 545 (316,684) 273,035 (1,553,960 ) (1,553,960 ) (7,134,384 ) (5,477,326) (103,098 ) (5,580,424 ) (6,599,544) (534,840 ) (7,134,384 ) (0.57 ) (0.57 )
				100 99
				1
				2 3 3
				8
				(7 ) 1 - (1) -
				-
				(7) 1
				(8 ) - -
				-
				(2) - - - -
				(2 ) (2 ) (10 ) (8) -
				(8 ) (9) (1 ) (10 )

See accompanying notes to the consolidated interim financial statements

4

Reviewed only, not audited in accordance with generally accepted auditing standards AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the three months ended March 31, 2017 and 2016 (Expressed in thousands of New Taiwan dollars)

Balance at January 1, 2016 $ Loss for the period Other comprehensive income (loss), net of tax Total comprehensive income (loss) for the period Adjustments to capital surplus and retained earnings for changes in investees’ equity Group reorganization Changes in non-controlling interests Balance at March 31, 2016 $ Balance at January 1, 2017 $ Profit (loss) for the period Other comprehensive income (loss), net of tax Total comprehensive income (loss) for the period Adjustments to capital surplus and retained earnings for changes in investees’ equity Changes in non-controlling interests Balance at March 31, 2017 $			**Equity attributable to shareholders of AU Optronics Corp. **	**Equity attributable to shareholders of AU Optronics Corp. **	**Equity attributable to shareholders of AU Optronics Corp. **	**Equity attributable to shareholders of AU Optronics Corp. **	**Equity attributable to shareholders of AU Optronics Corp. **		Equity attributable to shareholders of AU Optronics Corp. 181,985,222 (5,477,326) (1,122,218 ) (6,599,544 ) 66,184 20,006 - 175,471,868 181,244,699 9,479,193 (2,562,843 ) 6,916,350 33,997 - 188,195,046	Non- controlling interests 22,651,183 (103,098) (431,742 ) (534,840 ) (271,868 ) 37,036 4,151 21,885,662 18,390,483 (44,560) (891,089 ) (935,649 ) (10,926 ) 11,350 17,455,258	Total equity 204,636,405 (5,580,424) (1,553,960 ) (7,134,384 ) (205,684 ) 57,042 4,151 197,357,530 199,635,182 9,434,633 (3,453,932 ) 5,980,701 23,071 11,350 205,650,304
	Capital Stock	Capital surplus 60,249,983 - - - 66,182 20,006 - 60,336,171 59,979,723 - - - 35,281 - 60,015,004	Retained earnings Legal reserve Unappropriated earnings Subtotal 2,164,596 18,242,681 20,407,277 - (5,477,326) (5,477,326) - 24 24 - (5,477,302 ) (5,477,302 ) - 2 2 - - - - - - 2,164,596 12,765,381 14,929,977 2,657,792 21,585,361 24,243,153 - 9,479,193 9,479,193 - 327 327 - 9,479,520 9,479,520 - (1,284 ) (1,284 ) - - - 2,657,792 31,063,597 33,721,389			Other components of equity		Subtotal 5,085,511 - (1,122,242 ) (1,122,242 ) - - - 3,963,269 779,372 - (2,563,170 ) (2,563,170 ) - - (1,783,798)
	Common stock 96,242,451 - - - - - - 96,242,451 96,242,451 - - - - - 96,242,451		Legal reserve 2,164,596 - - - - - - 2,164,596 2,657,792 - - - - - 2,657,792	Unappropriated **earnings **	Cumulative translation differences 5,612,885 - (1,022,227 ) (1,022,227 ) - - - 4,590,658 536,819 - (3,023,476 ) (3,023,476 ) - - (2,486,657)	Unrealized gains (losses) on available- for-sale financial assets (539,653 ) - (100,467 ) (100,467 ) - - - (640,120 ) 224,299 - 478,560 478,560 - - 702,859	Unrealized gains (losses) on cash flow hedges 12,279 - 452 452 - - - 12,731 18,254 - (18,254 ) (18,254 ) - - -
				18,242,681 (5,477,326) 24 (5,477,302 ) 2 - - 12,765,381 21,585,361 9,479,193 327 9,479,520 (1,284 ) - 31,063,597

See accompanying notes to the consolidated interim financial statements

5

Reviewed only, not audited in accordance with generally accepted auditing standards AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the three months ended March 31, 2017 and 2016 (Expressed in thousands of New Taiwan dollars)

		Three months ended	Three months ended	Three months ended
		March	31,
		2017		2016
Cash flows from operating activities:
Profit (loss) before income tax	$	11,949,742	(5,285,028)
Adjustments for:
Depreciation		9,840,230		9,663,583
Amortization		170,245		247,800
Interest expense		724,351		538,120
Interest income		(115,144)		(130,401)
Share of profit of equity-accounted investees		(16,520)		(112,805)
Losses (gains) on disposals of property, plant and equipment, net		314,444		(5,159)
Impairment losses on assets		-		709
Changes in fair values of financial instruments		(1,184,849)		167,256
Unrealized foreign currency exchange losses (gains)		633,660		(226,553)
Others		(24,358 )		-
Subtotal of income and expense items not affecting cash flows		10,342,059	10,142,550
Change in operating assets and liabilities:
- notes and accounts receivable		(1,716,387)		1,789,472
- receivables from related parties		(663,615)		(88,070)
- inventories		2,018,198		543,895
- other current assets		861,392		9,303,930
- notes and accounts payable		(2,538,833)	(3,378,800)
- payables to related parties		(906,362)	(1,125,281)
- net defined benefit liability		(33,918)		(30,577)
- provisions		(458,738)		(777,859)
- other current liabilities		(670,767 )	(3,392,088 )
Subtotal of net changes in operating assets and liabilities		(4,109,030 )		2,844,622
Subtotal of adjustment items		6,233,029	12,987,172
Cash generated from operations		18,182,771		7,702,144
Cash received from interest income		131,759		194,771
Cash paid for interest		(700,560)		(498,518)
Cash paid for income taxes		(328,596 )		(168,482 )
Net cash provided by operating activities		17,285,374		7,229,915
Cash flows from investing activities:
Acquisitions of financial assets carried at cost		(9,233)		(66,948)
Proceeds from disposals of equity-accounted investees		57		-
Acquisitions of property, plant and equipment		(9,952,738)	(10,384,760)
Proceeds from disposals of property, plant and equipment		411,020		9,251
Increase in prepayment for investments		(7,000)		-
Decrease (increase) in refundable deposits		28,822		(3,718)
Increase in intangible assets		(31,794)		(190,479)
Decrease (increase) in other financial assets		20,827		(1,030 )
Net cash used in investing activities		(9,540,039 )	(10,637,684 )
Cash flows from financing activities:
Increase in short-term borrowings		1,134,789		172,796
Proceeds from long-term borrowings		12,126,898	12,254,423
Repayments of long-term borrowings		(13,314,349)	(13,201,610)
Decrease in guarantee deposits received		(33,393)		(7,765)
Net change of non-controlling interests and others		11,350		(609,862 )
Net cash used in financing activities		(74,705 )	(1,392,018 )
Effect of exchange rate change on cash and cash equivalents		(2,378,294 )		(425,210 )
Net increase (decrease) in cash and cash equivalents		5,292,336	(5,224,997)
Cash and cash equivalents at beginning of the period		80,191,248	78,880,700
Cash and cash equivalents at end of the period	$	85,483,584	73,655,703

See accompanying notes to the consolidated interim financial statements

6

Reviewed only, not audited in accordance with generally accepted auditing standards as of March 31, 2017 and 2016 AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

March 31, 2017 and 2016 (Expressed in thousands of New Taiwan dollars, unless otherwise indicated)

1. Organization

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

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

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

2. The Authorization of Financial Statements

These consolidated interim financial statements were approved and authorized for issue by the Board of Directors of AUO on April 26, 2017.

3. Application of New 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 (IASs), and Interpretations that have been issued by the International Accounting Standards Board (“IASB”) (collectively, “IFRSs”) and endorsed by the FSC with effective date commencing from 2017.

	Effective Date
New, Revised or Amended Standards and Interpretations	Issued by IASB
Amendments to IFRS 10, IFRS 12 and IAS 28,Investments Entities:	January 1, 2016
Applying the Consolidation Exception
Amendments to IFRS 11,Joint Arrangements: Accounting for	January 1, 2016
Acquisitions of Interests in Joint Operations
IFRS 14,Regulatory Deferral Accounts	January 1, 2016
Amendments to IAS 1,Presentation of Financial Statements - Disclosure	January 1, 2016
Initiative

(Continued)

7

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

New, Revised or Amended Standards and Interpretations

Effective Date Issued by IASB

Amendments to IAS 16 and IAS 38,Clarification of Acceptable Methods of Depreciation and Amortization Amendments to IAS 16 and IAS 41,Agriculture: Bearer Plants Amendments to IAS 19,Defined Benefit Plans: Employee Contributions Amendments to IAS 27,Equity Method in Separate Financial Statements Amendments to IAS 36,Impairment of non-financial assets - Recoverable Amount Disclosures for Non-Financial Assets Amendments to IAS 39,Financial instruments - Novation of Derivatives and Continuation of Hedge Accounting Annual Improvements to IFRSs 2010 – 2012 Cycle and 2011 – 2013 Cycle Annual Improvements to IFRSs 2012 – 2014 Cycle IFRIC 21,Levies

January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2016 January 1, 2014 January 1, 2014 July 1, 2014 January 1, 2016 January 1, 2014

The adoption of aforementioned IFRSs has not had a significant impact on the Company’s consolidated interim financial statements.

• (2) Newly released or amended standards and interpretations issued by the IASB but not yet endorsed by the FSC

A summary of the new standards and amendments issued by the IASB but not yet endorsed by the FSC is set out below. The FSC has announced that the Company should apply IFRS 9 and IFRS 15 starting January 1, 2018. As of the date that the accompanying consolidated interim financial statements were issued, the FSC has not yet announced the effective dates of the other IFRSs.

New, Revised or Amended Standards and Interpretations

Effective Date **Issued by IASB **

Amendments to IFRS 2,Share-based payments - Classification and Measurement of Share-based Payment Transactions Amendments to IFRS 4,Insurance Contracts - Applying IFRS 9, Financial Instruments with IFRS 4, Insurance Contracts IFRS 9,Financial Instruments Amendments to IFRS 10 and IAS 28,Sale or Contribution of Assets between an Investor and its Associate or Joint Venture IFRS 15,Revenue from Contracts with Customers Amendments to IFRS 15,Revenue from Contracts with Customers - Clarifications to IFRS 15 IFRS 16,Leases

January 1, 2018 January 1, 2018 January 1, 2018 Subject to IASB’s announcement January 1, 2018 January 1, 2018 January 1, 2019

(Continued)

8

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

New, Revised or Amended Standards and Interpretations

Effective Date Issued by IASB

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

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

Except for the items discussed below, the Company believes that the initial adoption of aforementioned standards or interpretations will not have any significant impact on its accounting policies.

a. IFRS 9, Financial Instruments

IFRS 9 replaces the existing guidance in IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including replacing the “incurred loss” model with an “expected credit loss” model for calculating impairment on financial assets, and the new general hedge accounting requirements.

Under IFRS 9, a new “expected credit loss” model is used to measure the impairment of financial assets. A loss allowance for expected credit losses should be recognized on financial assets measured at amortized cost and financial assets mandatorily measured at fair value through other comprehensive income.

The main changes in hedge accounting are amendments to application requirements for hedge accounting. Compared with IAS 39, the main changes include: (i) enhancing types of transactions eligible for hedge accounting; (ii) changing the way hedging derivative instruments are accounted for; and (iii) replacing retrospective effectiveness assessment with the principle of economic relationship between the hedging instrument and the hedged item.

The Company has performed a preliminary assessment on adoption of IFRS 9 based on its positions at March 31, 2017, and does not expect that the new requirements, if applying at March 31, 2017, would have had a material impact on the measurement for the Company’s financial instruments. However, the impact of adopting IFRS 9 on the Company’s consolidated financial statements for the year 2018 will depend on the financial instruments that the Company holds then and the economic condition at the same time, as well as accounting judgments that the Company will make in the future.

(Continued)

9

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

• b. IFRS 15, Revenue from Contracts with Customers and related amendments

IFRS 15 establishes a five-step model framework for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18, Revenue , IAS 11, Construction Contracts , and a number of revenue-related interpretations.

When applying IFRS 15, the Company shall recognize revenue when a customer obtains control of the goods and services, by applying the following steps:

• (i) Identify the contract with the customer;

• (ii) Identify the performance obligations;

• (iii) Determine the transaction price;

• (iv) Allocate the transaction price to the performance obligations in the contracts; and (v) Recognize revenue when the entity satisfies a performance obligation.

When IFRS 15 and related amendments become effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with a recognition of cumulative effect of the initial adoption of this Standard at the date of initial adoption.

The Company is currently performing an assessment of the impact resulting from the adoption of IFRS 15, and considers that it does not have significant differences and influences on the current recognition of the Company’s revenue from contracts with customers. However, the impact of adopting IFRS 15 on the Company’s consolidated financial statements for the year 2018 will depend on the relative contracts with customers then.

• c. IFRS 16, Leases

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

Under IFRS 16, a lessee 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 and the interest of the lease liability are generally classified within financing activities.

When IFRS 16 becomes effective, as a lessee, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with a recognition of cumulative effect of the initial adoption of this Standard at the date of initial adoption. As a lessor, the Company is not required to make any adjustments for leases except it is an intermediate lessor in a sub-lease.

(Continued)

10

Notes to Consolidated Interim Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

The Company has performed a preliminary assessment and identification on whether its current operating leases are in the scope of IFRS 16, in which the main impact is that, in case a lease contract meets the lease definition in this Standard, the Company shall recognize an asset and a liability. The related impact of adoption IFRS 16 by the Company will be disclosed when the Company completes the assessment.

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

4. Summary of Significant Accounting Policies

(1) Statement of compliance

The accompanying consolidated interim 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 IAS 34, Interim Financial Reporting , as endorsed by the FSC. The consolidated interim financial statements do not present all the disclosures required for a complete set of annual consolidated financial statements prepared under the IFRSs endorsed by the FSC with effective dates.

Except as described below, the significant accounting policies applied in the consolidated interim financial statements are the same as those applied in the consolidated financial statements for the year ended December 31, 2016, and have been applied consistently to all periods presented in the consolidated interim financial statements. Refer to note 4 of the consolidated financial statements for the year ended December 31, 2016 for the details.

(2) Basis of consolidation

Principles of preparation of the consolidated interim financial statements are the same as those applied in the consolidated financial statements for the year ended December 31, 2016. Refer to note 4(3) of the consolidated financial statements for the year ended December 31, 2016.

List of subsidiaries in the consolidated interim financial statements was 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)	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
			March 31, 2017 100.00 100.00 100.00	December 31, 2016
AUO AUO AUO	AU Optronics (L) Corp. (AULB) Konly Venture Corp. (Konly) Ronly Venture Corp. (Ronly)			100.00 100.00 100.00	100.00 100.00 100.00

(Continued)

11

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location Manufacturing and sale of color filters (Taiwan ROC) Sale of TFT-LCD panels; leasing (Taiwan ROC) Design, development and implementation of environmentally friendly projects and solutions (Taiwan ROC) Manufacturing, design and sale of TFT-LCD modules, TV set, backlight modules and related parts (Taiwan ROC) Holding company (Taiwan ROC) Manufacturing and sale of ingots and solar wafers (Taiwan ROC) Renewable energy power generation (Taiwan ROC) Solar power generation (Taiwan ROC) Renewable energy power generation (Taiwan ROC) Renewable energy power generation (Taiwan ROC) Manufacturing and sale of solar wafers (Malaysia) Manufacturing and sale of ingots (Japan) Sales and sales support of TFT-LCD panels (United States) Sales support of TFT-LCD panels (Japan) Sales support of TFT-LCD panels (Netherlands) 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)	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 - -(6) 100.00 100.00 100.00 100.00 100.00(2) - - 51.04 51.04 47.38(1) 99.99 99.99 99.99 96.31 96.31 96.54 100.00 100.00 100.00 - -(7) 100.00 100.00 100.00 100.00 100.00 100.00(2) - 100.00 100.00 100.00 99.9991 99.9991 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 - -(6) 100.00 100.00 100.00 100.00 100.00(2) - - 51.04 51.04 47.38(1) 99.99 99.99 99.99 96.31 96.31 96.54 100.00 100.00 100.00 - -(7) 100.00 100.00 100.00 100.00 100.00 100.00(2) - 100.00 100.00 100.00 99.9991 99.9991 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 - -(6) 100.00 100.00 100.00 100.00 100.00(2) - - 51.04 51.04 47.38(1) 99.99 99.99 99.99 96.31 96.31 96.54 100.00 100.00 100.00 - -(7) 100.00 100.00 100.00 100.00 100.00 100.00(2) - 100.00 100.00 100.00 99.9991 99.9991 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
			March 31, 2017 - 100.00 100.00(2) 51.04 99.99 96.31 100.00 - 100.00 100.00 100.00 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00	December 31, 2016
AUO AUO AUO AUO, Konly and Ronly AUO, Konly and Ronly AUO, Konly and Ronly Konly Konly Konly Konly ACTW SDMC AULB AULB AULB AULB AULB AULB AULB	Taiwan CFI Co., Ltd. (CFI) (Previously named as “Toppan CFI (Taiwan) Co., Ltd. (Toppan CFI)”) Space Money Inc. (SMI) U-Fresh Technology Inc. (UTI) Darwin Precisions Corporation (DPTW) Sanda Materials Corporation (SDMC) AUO Crystal Corp. (ACTW) Fargen Power Corporation (FGPC) Evergen Power Corporation (EGPC) LiGen Power Corporation (LGPC) TronGen Power Corporation (TGPC) AUO Crystal (Malaysia) Sdn. Bhd. (ACMK) M.Setek Co., Ltd. (M.Setek) AU Optronics Corporation America (AUUS) AU Optronics Corporation Japan (AUJP) AU Optronics Europe B.V. (AUNL) AU Optronics Korea Ltd. (AUKR) AU Optronics Singapore Pte. Ltd. (AUSG) AU Optronics (Czech) s.r.o. (AUCZ) AU Optronics (Shanghai) Co., Ltd. (AUSH)			-(6) 100.00 - 51.04 99.99 96.31 100.00 -(7) 100.00 100.00(2) 100.00 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00	100.00 100.00 - 47.38(1) 99.99 96.54 100.00 100.00 100.00 - 100.00 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00

(Continued)

12

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location Manufacturing and assembly of TFT-LCD modules (PRC) Manufacturing and assembly of TFT-LCD modules (PRC) Manufacturing and assembly of TFT-LCD modules (PRC) Repairing of TFT-LCD modules; injecting and stamping parts; manufacturing and sale of mold (Slovakia Republic) Manufacturing TFT-LCD panels based on low temperature polysilicon technology (Singapore) Manufacturing and sale of liquid crystal products and related parts (PRC) Manufacturing and sale of TFT-LCD panels (PRC) Research and development and IP related business (United States) Holding company (Malaysia) Manufacturing and sale of liquid crystal products and related parts (PRC) Holding company (Malaysia) Holding company (BVI) Holding company (BVI) Holding company (Mauritius) Holding company (Samoa) Holding company (Samoa) Holding company (Mauritius) Holding company (Mauritius) Manufacturing of motorized treadmills (PRC)	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 - -(5) 51.00(5) 51.00 51.00 51.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00(4) 100.00(4) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 - -(5) 51.00(5) 51.00 51.00 51.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00(4) 100.00(4) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 - -(5) 51.00(5) 51.00 51.00 51.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00(4) 100.00(4) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
			March 31, 2017 100.00 100.00 100.00 100.00 100.00 - 51.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	December 31, 2016
AULB AULB AULB AULB AULB AULB AULB AULB AULB and DPTW AUXM DPTW DPTW DPTW FHVI FHVI FHVI FHVI FRVI FFMI	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) Huizhou Bri-King Optronics Co., Ltd. (BKHZ) AU Optronics (Kunshan) Co., Ltd. (AUKS) a.u. Vista Inc. (AUVI) BriView (L) Corp. (BVLB) BriView (Xiamen) Corp. (BVXM) Darwin Precisions (L) Corp. (DPLB) Forhouse International Holding Ltd. (FHVI) Force International Holding Ltd. (FRVI) Fortech International Corp. (FTMI) Forward Optronics International Corp. (FWSA) Prime Forward International Ltd. (PMSA) Full Luck Precisions Co., Ltd. (FLMI) Forefront Corporation (FFMI) Forthouse Electronics (Suzhou) Co., Ltd. (FHWJ)			100.00 100.00 100.00 100.00 100.00 -(5) 51.00 100.00 100.00 100.00(4) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	100.00 100.00 100.00 100.00 100.00 51.00(5) 51.00 100.00 100.00 100.00(4) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location Manufacturing and sale of light guide plates, backlight modules and related parts (PRC) Manufacturing and sale of light guide plates, backlight modules and related parts (PRC) Manufacturing and sale of precision plastic parts (PRC) Manufacturing and sale of light guide plates, backlight modules and related parts (PRC) Manufacturing and sales of precision metal parts (PRC) Holding company (Hong Kong) Manufacturing, assembly and sale of automotive parts (Slovakia Republic) Manufacturing and sale of backlight modules and related parts (PRC) Manufacturing and sale of backlight modules and related parts (PRC) Manufacturing and sale of backlight modules and related parts (PRC) Manufacturing and sale of liquid crystal products and related parts (PRC) Manufacturing and sale of solar modules (PRC) Sale and sales support of solar-related products (United States) Sales support of solar modules (Netherlands)	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00(3) 100.00(3) 100.00(3) 100.00 100.00 100.00 100.00 100.00(2) - 100.00 100.00 100.00 100.00 100.00 100.00 100.00(3) 100.00(3) 100.00(3) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00(3) 100.00(3) 100.00(3) 100.00 100.00 100.00 100.00 100.00(2) - 100.00 100.00 100.00 100.00 100.00 100.00 100.00(3) 100.00(3) 100.00(3) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	Percentage of Ownership (%) March 31, 2017 December 31, 2016 March 31, 2016 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00(3) 100.00(3) 100.00(3) 100.00 100.00 100.00 100.00 100.00(2) - 100.00 100.00 100.00 100.00 100.00 100.00 100.00(3) 100.00(3) 100.00(3) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
			March 31, 2017 100.00 100.00 100.00 100.00 100.00(3) 100.00 100.00 100.00 100.00 100.00(3) 100.00 100.00 100.00 100.00	December 31, 2016
FTMI FTMI FWSA and FTMI PMSA FLMI DPLB DPLB DPHK DPHK DPHK BVLB AUSG AUSG AUSG	Fortech Electronics (Suzhou) Co., Ltd. (FTWJ) Fortech Optronics (Xiamen) Co., Ltd. (FTXM) Suzhou Forplax Optronics Co., Ltd. (FPWJ) Fortech Electronics (Kunshan) Co., Ltd. (FTKS) Full Luck (Wujiang) Precisions Co., Ltd. (FLWJ) Darwin Precisions (Hong Kong) Limited (DPHK) Darwin Precisions (Slovakia) s.r.o. (DPSK) Darwin Precisions (Suzhou) Corp. (DPSZ) Darwin Precisions (Xiamen) Corp. (DPXM) Darwin Precisions (Chengdu) Corp. (DPCD) BriView (Hefei) Co., Ltd. (BVHF) AUO Energy (Tianjin) Corp. (AETJ) AUO Green Energy America Corp. (AEUS) AUO Green Energy Europe B.V. (AENL)			100.00 100.00 100.00 100.00 100.00(3) 100.00 100.00(2) 100.00 100.00 100.00(3) 100.00 100.00 100.00 100.00	100.00 100.00 100.00 100.00 100.00(3) 100.00 - 100.00 100.00 100.00(3) 100.00 100.00 100.00 100.00

Note 1: Although the Company did not own more than 50% of DPTW’s ownership interests for the three months ended March 31, 2016, it was considered to have de facto control over the operating policies of DPTW. As a result, DPTW was accounted for as a subsidiary of the Company.

Note 2: TGPC was incorporated in April 2016. DPSK was incorporated in May 2016. UTI was incorporated in January 2017.

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

• Note 3: As part of a business restructuring, DPCD and FLWJ have been resolved by their respective boards of directors for liquidation. The liquidation is still in process for these entities as of March 31, 2017.

• Note 4: As part of a business restructuring, BVLB has disposed all its shareholdings in wholly owned subsidiary, BVXM, to AUXM in March 2016. This was treated as an equity transaction as there was no change in control of BVXM by the Company.

• Note 5: BKHZ was liquidated in 2016.

• Note 6: On October 1, 2016, CFI was amalgamated to AUO and dissolved on that day.

• Note 7: Konly has disposed all its shareholdings in EGPC to Star River Energy Corporation (“SREC”) in October, 2016.

• (3) Employee benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially-determined pension cost rate at the end of prior fiscal year, adjusted for significant market fluctuations subsequent to the end of prior fiscal year and for significant curtailments, settlements, or other significant one-time events.

• (4) Income taxes

The Company measures and discloses interim period income tax expense in accordance with paragraph B12 of IAS 34, Interim Financial Reporting .

Income tax expense is best estimated by multiplying pre-tax income of the interim period by a projected annual effective tax rate, and is recognized as current tax expense.

Income taxes that are recognized directly in equity or other comprehensive income are measured in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding tax bases at the tax rates that are expected to be applied in the year in which the asset is realized or the liability is settled.

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

The preparation of the consolidated interim financial statements in conformity with the Regulations and IAS 34, Interim Financial Reporting , as endorsed by the FSC 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.

In preparing the consolidated interim financial statements, critical accounting judgments and key sources of estimation uncertainty used by management in the application of accounting policies are consistent with those described in note 5 of the consolidated financial statements for the year ended December 31, 2016.

15

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

6. Description of Significant Accounts

Except as described below, the description of significant accounts in the accompanying consolidated interim financial statements is not materially different from those described in note 6 of the consolidated financial statements for the year ended December 31, 2016.

(1) Cash and Cash Equivalents

March 31, 2017 Cash on hand, demand deposits and checking accounts $ 45,375,861 Time deposits 38,492,468 Government bonds with reverse repurchase agreements 1,615,255 $ 85,483,584	December 31, 2016 (in thousands) 42,389,461 37,676,746 125,041 80,191,248	March 31, 2016
		43,074,246 29,681,161 900,296
		73,655,703

Refer to note 6(28) for the disclosure of currency risk and sensitivity analysis of the financial assets and liabilities of the Company.

As of March 31, 2016, deposits not qualifying as cash and cash equivalents amounting to $1,166,000 thousand were classified as other current financial assets.

As of March 31, 2017, December 31, 2016 and March 31, 2016, no cash and cash equivalents were pledged with banks as collaterals.

(2) Derivative Financial Instruments and Hedging Instruments

• a. Derivative Financial Instruments

Financial assets measured at fair value through profit or loss – current: Foreign currency forward contracts $ Financial liabilities measured at fair value through profit or loss – current: Foreign currency forward contracts $ Hedging derivative financial liabilities – current: Interest rate swap contracts $	March 31, 2017 372,674 19,154 -	December 31, 2016 (in thousands) 65,669 896,998 3,540	March 31, 2016
			138,205
			644,930
			-

16

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

March 31, December 31, March 31, 2017 2016 2016

(in thousands)

Hedging derivative financial liabilities – noncurrent: Interest rate swap contracts $ - - 10,194

As of March 31, 2017, December 31, 2016 and March 31, 2016, outstanding foreign currency forward contracts were as follows:

March 31, 2017 Contract item Maturity date Contract amount (in thousands) Sell USD / Buy NTD Apr. 2017 – May 2017 USD781,000 / NTD23,925,931 Sell USD / Buy JPY Apr. 2017 – May 2017 USD59,256 / JPY6,647,304 Sell NTD / Buy JPY Jun. 2017 NTD1,467,892 / JPY5,390,000 Sell USD / Buy CNY Apr. 2017 – Jul. 2017 USD70,200 / CNY485,787 Sell EUR / Buy JPY Apr. 2017 – Jun. 2017 EUR112,000 / JPY13,527,645 Sell EUR / Buy CZK Apr. 2017 – May 2017 EUR3,320 / CZK89,171 Sell USD / Buy MYR Apr. 2017 – Jun. 2017 USD819 / MYR3,638 Sell CNY / Buy USD Apr. 2017 – Jul. 2017 CNY196,992 / USD28,400 Sell EUR / Buy NTD May 2017 EUR21,000 / NTD689,272 Sell CNY / Buy JPY Apr. 2017 – Oct. 2017 CNY483,704 / JPY7,811,032 Sell USD / Buy SGD Apr. 2017 USD4,025 / SGD5,627

December 31, 2016 Contract item Maturity date Contract amount (in thousands) Sell USD / Buy NTD Jan. 2017 – Feb. 2017 USD711,000 / NTD22,687,304 Sell USD / Buy JPY Jan. 2017 – Mar. 2017 USD126,730 / JPY13,860,716 Sell NTD / Buy JPY Mar. 2017 NTD1,474,085 / JPY5,400,000 Sell USD / Buy CNY Jan. 2017 – Jun. 2017 USD96,000 / CNY662,180 Sell EUR / Buy JPY Mar. 2017 EUR90,000 / JPY10,693,738 Sell EUR / Buy CZK Jan. 2017 – Feb. 2017 EUR3,190 / CZK85,791 Sell EUR / Buy USD Mar. 2017 EUR41,000 / USD44,148 Sell USD / Buy MYR Jan. 2017 – Mar. 2017 USD741 / MYR3,296 Sell JPY / Buy NTD Mar. 2017 JPY50,000 / NTD13,725 Sell CNY / Buy USD Jan. 2017 – Apr. 2017 CNY359,763 / USD52,189 Sell EUR / Buy NTD Jan. 2017 EUR5,000 / NTD171,967 Sell CNY / Buy JPY Jan. 2017 – Jul. 2017 CNY588,583 / JPY9,068,273 Sell USD / Buy SGD Jan. 2017 USD170,157 / SGD245,680

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

March 31, 2016

Contract item Sell USD / Buy NTD Sell USD / Buy JPY Sell NTD / Buy JPY Sell NTD / Buy USD Sell USD / Buy CNY Sell EUR / Buy JPY Sell EUR / Buy CZK Sell USD / Buy SGD Sell EUR / Buy USD Sell USD / Buy MYR Sell JPY / Buy USD Sell JPY / Buy NTD	Maturity date Apr. 2016 – May 2016 Apr. 2016 – Jul. 2016 Apr. 2016 – May 2016 Apr. 2016 – Aug. 2016 Apr. 2016 – Aug. 2016 Apr. 2016 – May 2016 Apr. 2016 – May 2016 Apr. 2016 May 2016 Apr. 2016 – Jun. 2016 Apr. 2016 Apr. 2016 – May 2016	Contract amount
		(in thousands) USD63,000 / NTD2,067,867 USD107,747 / JPY12,131,880 NTD455,230 / JPY1,551,000 NTD109,720 / USD3,320 USD275,400 / CNY1,793,869 EUR55,000 / JPY6,921,064 EUR3,250 / CZK87,756 USD5,810 / SGD7,928 EUR47,000 / USD51,267 USD717 / MYR2,919 JPY50,000 / USD445 JPY31,100,000 / NTD8,440,585

Net gains (losses) of foreign currency forward contracts were as follows: Unrealized gains (losses) $ Realized gains $	Three months ended March 31, 2017 2016 (in thousands) 1,184,849 (167,256) 466,519 392,763 1,651,368 225,507

AUO entered into interest rate swap contracts with several banks to manage interest rate risk exposure arising from financing activities. As of March 31, 2017, there was no outstanding interest rate swap contract. As of December 31, 2016 and March 31, 2016, AUO’s total notional amount of outstanding interest rate swap contracts amounted to $1,760,000 thousand and $2,560,000 thousand, respectively, and all of which were related to effective hedges. For the three months ended March 31, 2017 and 2016, no unrealized gains or losses resulting from change in fair value of interest rates swap contracts were recognized in profit and loss.

b. Hedge accounting

The Company entered into Plain Vanilla type interest rate swap contracts as the primary hedging instrument. The Company paid interest based on fixed rate and received market floating-rate from the counterparty. The aforementioned hedging contracts were intended to protect the Company from the risk of future cash flow fluctuation of debt bearing floating interest rate. These contracts were designated as cash flow hedges and met the criteria for hedge accounting.

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Details of hedged items designated as cash flow hedges and their respective hedging derivative financial instruments were as follows:

	December 31, 2016
Hedged item Long-term borrowings with floating interest rate	Hedging instrument Fair value of hedging instrument (in thousands) Interest rate swap contracts $ (3,540) March 31, 2016	Expected period of cash flows Jan. 2017 – Aug. 2017	Expected period of recognition in comprehensive income
			Jan. 2017 – Aug. 2017 Expected period of recognition in comprehensive income Apr. 2016 – Aug. 2017
Hedged item Long-term borrowings with floating interest rate	Hedging instrument Fair value of hedging instrument (in thousands) Interest rate swap contracts $ (10,194)	Expected period of cash flows Apr. 2016 – Aug. 2017

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

March 31, 2017 Equity securities– listed company $ 3,313,794 Financial Assets Carried at Cost－noncurrent March 31, 2017 Equity securities– unlisted company $ 202,815	December 31, 2016 (in thousands) 2,836,696 December 31, 2016 (in thousands) 193,582	March 31, 2016
		1,972,545
		March 31, 2016
		137,182

• －

• (4) Financial Assets Carried at Cost noncurrent

Given that the probabilities for each assumption in the range of estimated fair value of the aforementioned investments held by the Company cannot be reasonably determined, the Company had determined that the fair value thereof could not be reliably measured and therefore were measured at cost less any impairment loss at period-end.

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

March 31, 2017 Notes and accounts receivable $ 48,032,686 Less: allowance for doubtful accounts (103,006) allowance for sales returns and discounts (615,127 ) $ 47,314,553 Notes and accounts receivable, net $ 44,103,855 Accounts receivable from related parties, net $ 3,210,698	December 31, 2016 (in thousands) 49,201,632 (104,617) (853,614 ) 48,243,401 45,710,177 2,533,224	March 31, 2016 32,416,294 (95,271) (1,036,781 ) 31,284,242 28,695,342 2,588,900

Aging analysis of notes and accounts receivable, which were past due but not impaired, was as follows:

March 31, 2017 Past due less than 60 days $ 304,784 Past due 61~180 days 1,282 Past due over 180 days 272 $ 306,338	December 31, 2016 (in thousands) 531,327 9,505 1,020 541,852	March 31, 2016
		914,089 28,892 38,433 981,414

The movement in the allowance for doubtful accounts was as follows:

Balance at beginning of the period $ Provisions (reversals) charged to (against) expense Effect of changes in foreign currency exchange rates Balance at end of the period **$ **	Three months ended March 31, 2017 2016 Individually assessed for impairment Collectively assessed for impairment Individually assessed for impairment Collectively assessed for impairment (in thousands) 41,812 62,805 11,714 58,183 1,627 (712) 27,127 (734) (1,514 ) (1,012 ) (473 ) (546 ) 41,925 61,081 38,368 56,903
	Individually assessed for impairment 41,812 1,627 (1,514 ) 41,925

The payment terms granted to customers are generally 30 to 60 days from the end of the month during which the invoice is issued. The Company evaluates possible uncollected amounts and uses allowance for doubtful accounts to record its doubtful receivable expenses. When evaluating the allowances, the Company considers the historical experience, the customer credits and the account aging analysis. While it is determined a receivable is uncollectible, receivable balances is offset against the allowance for doubtful accounts.

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

The Company entered into financing facilities with banks to factor certain of its accounts receivable without recourse, details of which were as follows:

March 31, 2017

Underwriting bank Chinatrust Commercial Bank Taishin Bank Bank of Taiwan Taipei Fubon Bank E. Sun Bank DBS Bank Taishin Bank	Factoring limit USD 230,000 USD 80,000 USD 250,000 USD 120,000 USD 50,000 USD 154,000 USD 35,000	Amount advanced (in thousands) USD - USD - USD - EUR - USD - USD - USD - USD -	Amount sold and derecognized USD - USD - USD - EUR - USD - USD - USD - USD 4,865	Principal terms
				See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(d) and (f)

	December 31, 2016	December 31, 2016	December 31, 2016
Underwriting bank Chinatrust Commercial Bank Taishin Bank Bank of Taiwan Taipei Fubon Bank E. Sun Bank DBS Bank Taishin Bank	Factoring limit Amount advanced (in thousands) USD 230,000 USD - USD 80,000 USD - USD 250,000 USD - EUR - USD 120,000 USD - USD 100,000 USD - USD 184,000 USD - USD 35,000 USD - March 31, 2016		Amount sold and derecognized USD - USD - USD - EUR - USD - USD - USD - USD 8,780	Principal terms
				See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(d) and (f)
Underwriting bank Chinatrust Commercial Bank Taishin Bank Bank of Taiwan Taipei Fubon Bank E. Sun Bank DBS Bank Taishin Bank	Factoring limit USD 230,000 USD 180,000 USD 250,000 USD 75,000 USD 60,000 USD 166,000 USD 35,000	Amount advanced (in thousands) NTD 660,000 NTD 660,000 USD 20,000 EUR 18,000 USD 20,000 USD - USD 20,000 USD -	Amount sold and derecognized USD 22,376 USD 22,376 USD 20,000 EUR 18,000 USD 22,274 USD - USD 20,051 USD 2,320	Principal terms
				See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(c) and (e) See notes(a)~(d) and (f)

(Continued)

21

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

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

• Note (c): As of March 31, 2017, December 31, 2016 and March 31, 2016, total outstanding receivables after the above assignment transactions, net of fees charged by underwriting banks, of $147,484 thousand, $283,694 thousand and $271,760 thousand, respectively, were classified under other current financial assets.

• 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.

• Note (e): 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.

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

(6) Inventories

March 31, 2017 Finished goods $ 8,333,016 Work-in-progress 11,166,086 Raw materials 6,146,294 $ 25,645,396	December 31, 2016 (in thousands) 9,532,199 11,100,347 7,046,789 27,679,335	March 31, 2016 12,161,108 12,269,704 6,745,786
		31,176,598

For the three months ended March 31, 2017 and 2016, the amounts of inventories that were charged to cost of sales were $71,042,582 thousand and $69,880,389 thousand, respectively, and the net of provisions that charged to cost of sales in the consolidated statement of comprehensive income for inventories written down to net realizable value amounted to $81,485 thousand and $865,323 thousand for the three months ended March 31, 2017 and 2016, respectively.

(Continued)

22

Notes to Consolidated Interim Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

As of March 31, 2017, December 31, 2016 and March 31, 2016, none of the Company’s inventories was pledged as collateral.

(7) Investments in equity-accounted Investees

Investments in equity-accounted investees at the reporting dates consisted of the following:

March 31, 2017 Associates $ 4,844,100 Joint ventures 310,202 $ 5,154,302	December 31, 2016 (in thousands) 4,853,325 325,012 5,178,337	March 31, 2016
		4,794,284 7,567,927
		12,362,211

Except as described below, there was no significant change in the Company’s investments in equity-accounted investees for the three months ended March 31, 2017 and 2016. Refer to note 6(7) of the consolidated financial statements for the year ended December 31, 2016 for the related disclosures.

a. Associates

Name of associate Lextar Electronics Corp. (“Lextar”) Raydium Semiconductor Corporation (“Raydium”) SREC Daxin Materials Corp. (“Daxin”) Others	Principal activities Manufacturing and sales of Light Emitting Diode IC design Holding company Research, manufacturing, and sales of display related chemicals	Principal place of business Taiwan ROC Taiwan ROC Taiwan ROC Taiwan ROC	March 31, 2017 Amount Ownership interest (in thousands) % $ 3,046,888 26 719,684 18 527,537 34 549,991 25 - $ 4,844,100	March 31, 2017 Amount Ownership interest (in thousands) % $ 3,046,888 26 719,684 18 527,537 34 549,991 25 - $ 4,844,100	December 31, 2016	December 31, 2016	December 31, 2016	March 31, 2016	March 31, 2016
			Amount		Amount		Ownership interest Amount Ownership interest % (in thousands) % 25 $ 3,316,902 24 18 603,532 16 34 260,207 35 25 498,206 25 115,437 $ 4,794,284		Ownership interest
			(in thousands) $ 3,046,888 719,684 527,537 549,991 - $ 4,844,100		(in thousands) $ 3,082,856 712,829 531,805 525,835 - $ 4,853,325			(in thousands) % $ 3,316,902 24 603,532 16 260,207 35 498,206 25 115,437 $ 4,794,284
				$ 4,844,100		$ 4,853,325

(Continued)

23

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

There is no individually significant associate for the Company. The following table summarized the amount recognized by the Company at its share of those associates.

The Company’s share of: Profit for the period $ Other comprehensive loss for the period Total comprehensive income (loss) for the period **$ **	Three months ended March 31, 2017 2016 (in thousands) 26,626 21,118 (58,805 ) (19,128 ) (32,179) 1,990

b. Joint ventures

Name of joint ventures AUO SunPower Sdn. Bhd. (“AUSP”) Others	Principal activities Principal place of business Manufacturing and sales of solar power products Malaysia	March 31, 2017 Amount Ownership interest (in thousands) % $ - - 310,202 $ 310,202	December 31, 2016
			Amount

AUO, through its subsidiary AUSG, entered into a joint venture agreement with SunPower Technology, Ltd. (“SPTL”) which is 100% owned by SunPower Corporation. In accordance with the joint venture agreement, the Company acquired its 50% ownership interests of AUSP on July 5, 2010 (co-investment date) by contributing technology with an estimated fair value of US$30,000 thousand and agreed to contribute additional cash over time. The total cash payments made by the Company amounted to US$180,069 thousand. In September 2016, AUSG disposed of its entire 50% interest in AUSP to SPTL. Refer to note 6(7) of the consolidated financial statements for the year ended December 31, 2016 for the related disclosures.

There is no individually significant joint venture for the Company. The following table summarized the amount recognized by the Company at its share of those joint ventures.

The Company’s share of: Profit (loss) for the period $ Other comprehensive loss for the period Total comprehensive income (loss) for the period **$ **	Three months ended March 31, 2017 2016 (in thousands) (10,106) 91,687 - (297,556 ) (10,106 ) (205,869 )

As of March 31, 2017, December 31, 2016 and March 31, 2016, none of the Company’s investments in equity-accounted investees was pledged as collateral.

(Continued)

24

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(8) Property, Plant and Equipment

Movements in the cost, depreciation and impairment of the Company’s property, plant and equipment for the three months ended March 31, 2017 and 2016 were as follows:

Cost: Land $ Buildings Machinery and equipment Other equipment Accumulated depreciation and impairment loss: Land Buildings Machinery and equipment Other equipment Prepayments for purchase of land and equipment, and construction in progress Net carrying amounts $ Cost: Land $ Buildings Machinery and equipment Other equipment Accumulated depreciation and impairment loss: Land Buildings Machinery and equipment Other equipment Prepayments for purchase of land and equipment, and construction in progress Net carrying amounts **$ **	Three months ended March 31, 2017	Three months ended March 31, 2017
	Balance, Beginning of Period Additions Disposal, write off, reclassification and others (in thousands) 8,873,981 558,956 (29,360) 130,595,844 24,805 (2,278,550) 798,046,434 569,232 (7,124,887) 32,419,736 955,352 (2,259,661) 969,935,995 2,108,345 (11,692,458) 173,397 - (4,002) 36,028,301 806,136 (1,200,242) 698,110,663 7,667,023 (7,159,634) 26,154,173 1,367,071 (2,333,829 ) 760,466,534 9,840,230 (10,697,707) 13,272,371 5,595,300 (3,461,839) 222,741,832 Three months ended March 31, 2016		Balance, End of Period
			9,403,577 128,342,099 791,490,779 31,115,427
			960,351,882
			169,395 35,634,195 698,618,052 25,187,415
			759,609,057
			15,405,832
			216,148,657
	Balance, Beginning of Period 9,112,286 122,156,354 779,019,328 34,248,005 944,535,973 184,889 32,791,946 694,955,031 30,215,702 758,147,568 22,397,204 208,785,609	Additions Disposal, write off, reclassification and others (in thousands) - 58,473 - (235,263) 977,257 5,228,127 1,109,531 (2,191,511 ) 2,086,788 2,859,826 - 8,425 779,361 893,460 7,685,663 (1,080,106) 1,198,559 (4,116,090 ) 9,663,583 (4,294,311) 7,668,123 (7,874,429)	Balance, End of Period
			9,170,759 121,921,091 785,224,712 33,166,025
			949,482,587
			193,314 34,464,767 701,560,588 27,298,171
			763,516,840
			22,190,898
			208,156,645

25

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Except as described below, there was no significant change in the Company’s property, plant and equipment for the three months ended March 31, 2017 and 2016. Refer to note 6(8) of the consolidated financial statements for the year ended December 31, 2016 for the related disclosures.

M.Setek reclassified part of its land and buildings as noncurrent assets held for sale in the consolidated balance sheet as of December 31, 2016 and the disposal transaction was completed in March 2017. The selling price (net of costs of disposal) and gain on disposal were $330,536 thousand and $106,141 thousand, respectively.

The capitalized borrowing costs in connection with the expenditures on the acquisition and construction of property, plant and equipment were as follows:

Capitalized borrowing costs $	Three months ended March 31,	Three months ended March 31,
	2017 2016 (in thousands) 140,313 46,972	2016

The interest rates applied for the abovementioned capitalization, ranged from 1.09% to 4.79% and 1.17% to 4.37% for the three months ended March 31, 2017 and 2016, respectively.

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

(9) Investment Property

Land $	March 31, 2017 465,868	December 31, 2016 (in thousands) 465,868	March 31, 2016
			465,868

There were no significant additions, disposals and recognition or reversal of impairment losses on the Company’s investment property for the three months ended March 31, 2017 and 2016. For other relevant information, refer to note 6(9) of the consolidated financial statements for the year ended December 31, 2016.

The fair value of the Company’s investment property was not materially different from those disclosed in note 6(9) of the consolidated financial statements for the year ended December 31, 2016.

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

26

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(10) Intangible Assets

March 31, 2017 Goodwill $ 11,456,176 Patent and technology fee 12,110,561 Less: accumulated amortization and impairment loss (10,102,354 ) $ 13,464,383	December 31, 2016 (in thousands) 11,456,176 12,078,767 (9,932,109 ) 13,602,834	March 31, 2016 11,456,176 12,091,911 (9,030,129 )
		14,517,958

There were no significant additions, disposals and recognition or reversal of impairment losses on the Company’s intangible assets for the three months ended March 31, 2017 and 2016. Information on amortization for the periods presented is disclosed in note 6(21). For other relevant information, refer to note 6(10) of the consolidated financial statements for the year ended December 31, 2016.

(11) Other Current Assets and Other Noncurrent Assets

March 31, 2017 Prepayment for equipment $ 700,266 Refundable and overpaid tax 2,486,797 Long-term prepaid rents 1,839,912 Prepayments for purchases 3,246,053 Long-term receivables 1,852,246 Refundable deposits 104,614 Others 2,701,104 12,930,992 Less: current (6,415,428 ) Noncurrent $ 6,515,564	December 31, 2016 (in thousands) 463,910 3,015,534 1,940,489 3,360,869 1,974,271 133,221 2,481,104 13,369,398 (6,330,283 ) 7,039,115	March 31, 2016 6,414,789 2,618,953 2,109,141 1,347,326 - 132,471 1,604,869
		14,227,549 (4,614,247 )
		9,613,302

(12) Short-term Borrowings

Unsecured borrowings $ Unused credit facility $ Interest rate	March 31, 2017 1,659,769 31,440,791 1.10%~ 4.39%	December 31, 2016 (in thousands) 526,723 33,877,442 4.35%~ 4.39%	March 31, 2016 1,766,510
			31,346,254
			1.01%~ 1.46%

(Continued)

27

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(13) 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 Standard Chartered Bank and others Bank of China and others Unsecured loans Mortgage loans Less: transaction costs Less: current portion Unused credit facility Interest rate range	Durations From Feb. 2015 to Feb. 2020 $ From Apr. 2016 to Apr. 2021 From Jan. 2014 to Jan. 2019 From Feb. 2013 to Mar. 2017 From Dec. 2009 to Oct. 2016 From Sep. 2011 to Sep. 2016 From Feb. 2016 to Feb. 2019 From Sep. 2014 to Mar. 2019 From Nov. 2015 to Nov. 2023 From Jul. 2011 to Aug. 2019 From Apr. 2016 to Apr. 2021 $ $	March 31, 2017 25,800,000 32,600,000 20,444,000 - - - 2,696,072 848,820 24,166,350 15,575,355 92,727 122,223,324 (443,912 ) 121,779,412 (17,232,000 ) 104,547,412 29,381,109 1.09%~ 4.90%	December 31, 2016 (in thousands) 25,800,000 25,000,000 23,672,000 7,596,757 - - 3,000,000 2,358,776 21,216,394 16,005,955 95,727 124,745,609 (482,989 ) 124,262,620 (18,074,627 ) 106,187,993 43,228,323 1.09%~ 4.90%	March 31, 2016
				25,800,000 - 26,900,000 11,056,757 11,881,032 7,360,950 3,000,000 3,260,482 2,628,611 15,212,349 - 107,100,181 (552,193 ) 106,547,988 (36,125,898 ) 70,422,090 71,673,930 1.17%~ 4.90%

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

Refer to note 8 for assets pledged as collateral to secure the aforementioned long-term borrowings. For other relevant information, refer to note 6(14) of the consolidated financial statements for the year ended December 31, 2016.

(Continued)

28

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(14) Provisions

Warranties Balance at January 1, 2017 $ 1,528,898 Additions (Reversals) 40,380 Usage (38,917) Effect of change in exchange rate (115 ) Balance at March 31, 2017 1,530,246 Less: current (734,762 ) Noncurrent $ 795,484 Balance at January 1, 2016 $ 1,819,519 Additions (Reversals) (128,993) Usage (40,632) Effect of change in exchange rate (1 ) Balance at March 31, 2016 1,649,893 Less: current (849,574 ) Noncurrent $ 800,319 Current $ 756,079 Noncurrent 772,819 Balance at December 31, 2016 $ 1,528,898	Litigation, claims and others (in thousands) 1,292,773 99,033 (559,234) (46,447 ) 786,125 (537,086 ) 249,039 4,316,817 317,357 (925,591) (128,034 ) 3,580,549 (3,289,536 ) 291,013 1,027,328 265,445 1,292,773	Total 2,821,671 139,413 (598,151) (46,562 ) 2,316,371 (1,271,848 ) 1,044,523 6,136,336 188,364 (966,223) (128,035 ) 5,230,442 (4,139,110 ) 1,091,332 1,783,407 1,038,264 2,821,671

• a. Provisions for warranties

The provisions for warranties for the three months ended March 31, 2017 and 2016 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.

• b. Provisions for litigation, claims and others

The provisions for litigation, claims and others are expected to be paid over the years in accordance with the outcome of litigation and claims and settlement agreements. See note 9(6) for further information.

(15) Operating Leases

There was no significant addition in the Company’s operating lease contracts for the three months ended March 31, 2017 and 2016. Refer to note 6(16) of the consolidated financial statements for the year ended December 31, 2016 for the details.

(Continued)

29

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(16) Employee Benefits

• a. Defined benefit plans

Subsequent to December 31, 2016, there was no significant market volatility, significant curtailment, reimbursement and settlement or other significant one-time events. Therefore, the pension cost in the consolidated interim financial statements was measured and disclosed by the Company according to the pension cost valued by actuary as of December 31, 2016 and 2015.

For the three months ended March 31, 2017 and 2016, the Company set aside $5,502 thousand and $6,959 thousand, respectively, of the pension costs under the defined benefit plans.

• b. Defined contribution plans

AUO and its subsidiaries in the ROC have set up defined contribution plans in accordance with the ROC Labor Pension Act. For the three months ended March 31, 2017 and 2016, these companies set aside $238,276 thousand and $234,252 thousand, respectively, of the pension costs under the pension plan to the ROC Bureau of the Labour Insurance. Except for the aforementioned companies, other foreign subsidiaries recognized pension expenses of $227,182 thousand and $321,591 thousand for the three months ended March 31, 2017 and 2016, respectively, for the defined contribution plans based on their respective local government regulations.

(17) Capital and Other Components of Equity

• a. Common stock

AUO’s authorized common stock, with par value of $10 per share, all amounted to $100,000,000 thousand as of March 31, 2017, December 31, 2016 and March 31, 2016.

AUO’s issued and outstanding common stock, with par value of $10 per share, all amounted to $96,242,451 thousand as of March 31, 2017, December 31, 2016 and March 31, 2016.

AUO’s ADSs were listed on the New York Stock Exchange. Each ADS represents 10 shares of common stock. As of March 31, 2017, AUO had issued 71,387 thousand ADSs, which represented 713,874 thousand shares of its common stock.

(Continued)

30

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

b. Capital surplus

The components of capital surplus were as follows:

March 31, 2017 From common stock $ 52,756,091 From convertible bonds 6,049,862 From others 1,209,051 $ 60,015,004	December 31, 2016 (in thousands) 52,756,091 6,049,862 1,173,770 59,979,723	March 31, 2016
		52,756,091 6,049,862 1,530,218
		60,336,171

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 used to issue common stock as stock dividends or distribute cash as cash dividends according to the proportion of shareholdings. Pursuant to the ROC Regulations Governing the Offering and Issuance of Securities by Securities Issuers, the total sum of capital surplus capitalized per annum shall not exceed 10 percent of the paid-in capital.

c. Legal reserve

According to the ROC Company Act, 10 percent of the annual earnings after payment of income taxes due and offsetting accumulated deficits, if any, 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.

d. Distribution of earnings and dividend policy

In accordance with AUO’s amended Articles of Incorporation approved in the annual shareholders’ meeting held on June 16, 2016, where 10 percent of the annual earnings, after payment of income taxes due and offsetting accumulated deficits, if any, shall be set aside as a legal reserve until the accumulated legal reserve equals AUO’s paid-in capital. In addition, a special reserve in accordance with applicable laws and regulations shall also be set aside. The remaining current-year earnings together with accumulated undistributed earnings from preceding years can be distributed after the earnings distribution plan proposed by the board of directors is approved by resolution of the shareholders’ meeting.

Pursuant to relevant laws or regulations or as requested by the local authority, a special reserve equivalent to the total net balance of items that are accounted for as a reduction to the other components of shareholders’ equity shall be set aside from current earnings, and not distributed. Amounts of subsequent decrease pertaining to the total net balance of items that are accounted for as a reduction to the other shareholders’ equity shall be reversed accordingly from special reserve to undistributed earnings.

(Continued)

31

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

AUO’s appropriations of earnings for 2015 had been approved in the shareholders’ meeting held on June 16, 2016. The appropriations and dividends per share were as follows:

Legal reserve $ Cash dividends to shareholders $	For fiscalyear 2015	For fiscalyear 2015
	Appropriation of earnings Dividends per share (in thousands, except for per share data) 493,196 3,368,486 $0.35 3,861,682	Dividends per share

The aforementioned appropriations of earnings for 2015 was consistent with the resolutions of the board of directors’ meeting held on March 10, 2016.

AUO’s appropriations of earnings for 2016 have been approved in the meeting of the board of directors held on March 22, 2017. The appropriations and dividends per share were as follows:

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

The appropriations of earnings for 2016 are to be presented for approval in AUO’s 2017 annual shareholders’ meeting.

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

• e. Other components of equity

Balance at January 1, 2017 $ Foreign operations – foreign currency translation differences Effective portion of changes in fair value of cash flow hedges Net change in fair value of available-for-sale financial assets Equity-accounted investees – share of other comprehensive income Related tax Balance at March 31, 2017 $	Cumulative translation differences 536,819 (3,542,182) - - (60,594) 579,300 (2,486,657 )	Unrealized gains (losses) on available- for-sale financial assets Unrealized gains (losses) on cash flow hedges (in thousands) 224,299 18,254 - - - (21,992) 477,098 - 1,462 - - 3,738 702,859 -	Total
			779,372 (3,542,182) (21,992) 477,098 (59,132) 583,038 (1,783,798 )

(Continued)

32

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

			Unrealized	Unrealized	Unrealized
			gains (losses)
			on available-				Unrealized
		Cumulative	for-sale				gains (losses)
		translation	financial				on cash flow
		differences	assets				hedges		Total
				(in thousands)
Balance at January 1, 2016	$	5,612,885	(539,653)				12,279			5,085,511
Foreign operations – foreign
currency translation differences		(945,230)	-				-			(945,230)
Effective portion of changes in fair
value of cash flow hedges		-	-				545			545
Net change in fair value of
available-for-sale financial assets		-	(104,658)				-			(104,658)
Equity-accounted investees – share
of other comprehensive income		(320,875)		4,191			-			(316,684)
Related tax		243,878	-				(93 )			243,785
Balance at March 31, 2016	$	4,590,658	(640,120 )				12,731			3,963,269
Non-controlling interests, net	of	tax
							Three months ended
							March 31,
							2017		2016
							(in thousands)
Balance at beginning of the period					$		18,390,483		22,651,183
Equity attributable to non-controlling interests:
Loss for the period							(44,560)		(103,098)
Adjustment of changes in ownership of investees							(10,926)			(24,324)
Foreign currency translation differences							(891,089)		(431,718)
Proceeds from subsidiaries capital increase							11,350			4,150
Redemption of subsidiary treasury shares							-		(210,508)
Others							-			(23 )
Balance at end of the period					**$ **		17,455,258		21,885,662

f. Non-controlling interests, net of tax

(18) Share-based Payments

There was no significant change in the Company’s share-based payments for the three months ended March 31, 2017 and 2016. Refer to note 6(19) of the consolidated financial statements for the year ended December 31, 2016 for the related information.

(19) Revenue

Sale of goods $ Other operating revenue $	Three months ended March 31,	Three months ended March 31,
	2017 2016 (in thousands) 86,204,022 68,709,837 2,352,794 2,425,395 88,556,816 71,135,232	2016
		71,135,232

(Continued)

33

Notes to Consolidated Interim Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

Refer to note 13 for further revenue information by operating segment.

(20) Remuneration to Employees and Directors

According to AUO’s Articles of Incorporation, AUO should distribute remuneration to employees and directors not less than 5% and not more than 1% of annual profits, respectively, after offsetting accumulated deficits, if any. Only employees, including employees of affiliate companies that meet certain conditions are subject to the abovementioned remuneration which to be distributed in stock or cash. The said conditions and distribution method are decided by board of directors or the personnel authorized by board of directors.

AUO accrued remuneration to employees based on the profit before income tax excluding the remuneration to employees and directors for each period, multiplied by the percentage resolved by board of directors. For the three months ended March 31, 2017, AUO accrued the remuneration to employees amounting to $1,189,544 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. Additionally, AUO did not accrue any remuneration to employees and directors due to net loss for the three months ended March 31, 2016. 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 2016 in the amounts of $1,107,486 thousand and $24,226 thousand, respectively, in cash for payment had been approved in the meeting of board of directors held on March 22, 2017. The aforementioned approved amounts are the same as the amounts charged against earnings of 2016.

Remuneration to employees and directors for 2015 in the amounts of $665,815 thousand and $13,316 thousand, respectively, in cash for payment had been approved in the meeting of board of directors held on March 10, 2016. The aforementioned approved amounts are the same as the amounts charged against earnings of 2015.

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

(Continued)

34

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(21) Additional Information of Expenses by Nature

Employee benefits expenses: Salaries and wages Labor and health insurances Retirement benefits Other employee benefits Depreciation Amortization		Three months ended March 31,	Three months ended March 31,	Three months ended March 31,	Three months ended March 31,
		2017	Total		2016
	Recognized in cost of sales 7,027,941 354,200 383,257 408,203 8,784,595 170,245	Recognized in operating expenses		Recognized in cost of sales 6,511,766 340,915 470,373 605,209 8,628,689 247,800	Recognized in operating expenses	Total
		2,321,593 121,494 87,703 92,508 1,055,635 -	9,349,534 475,694 470,960 500,711 9,840,230 170,245		1,926,802 119,263 92,429 118,614 1,034,894 -	8,438,568 460,178 562,802 723,823 9,663,583 247,800

(22) Other Income

Interest income on bank deposits $ Interest income on government bonds with reverse repurchase agreements and others Rental income, net Grants Insurance compensation and others $	Three months ended March 31,	Three months ended March 31,
	2017 2016 (in thousands) 114,667 127,879 477 2,522 121,729 135,046 1,149,358 27,625 94,974 235,238 1,481,205 528,310	2016
		528,310

(23) Other Gains and Losses

Foreign exchange losses, net $ Gains on valuation of financial instruments measured at fair value through profit or loss, net Gains (losses) on disposals of property, plant and equipment, net Litigation losses and others $	Three months ended March 31,	Three months ended March 31,
	2017 2016 (in thousands) (1,539,985) (114,112) 1,651,368 225,507 (314,444) 5,159 (637,978 ) (407,659 ) (841,039 ) (291,105 )	2016
		(291,105 )

35

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(24) Finance Costs

Interest expense on bank borrowings $ Interest expense on others $	Three months ended March 31,	Three months ended March 31,
	2017 2016 (in thousands) 638,365 484,673 85,986 53,447 724,351 538,120	2016
		538,120

(25) 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.

Income tax expense is best estimated by multiplying pre-tax income of the interim period by a projected annual effective tax rate as forecasted by the management.

The components of income tax expense were as follows:

Current income tax expense Current year $ Adjustment to prior years and others $	Three months ended March 31,	Three months ended March 31,
	2017 2016 (in thousands) 2,515,015 275,109 94 20,287 2,515,109 295,396	2016
		295,396

Income taxes expense (benefit) recognized in other comprehensive income were as follows:

Items that are or may be reclassified subsequently to profit or loss: Foreign operations – foreign currency translation differences $ Cash flow hedges Equity-accounted investees – share of other comprehensive income $	Three months ended March 31,	Three months ended March 31,
	2017 2016 (in thousands) (634,865) (222,429 (3,738) 93 - (50,699 (638,603 ) (273,035	2016
		(273,035

36

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

As of March 31, 2017, the tax authorities have completed the examination of income tax returns of AUO through 2014.

Information on the integrated income tax system was as follows:

March 31, 2017 December 31, 2016 March 31, 2016 (in thousands) Unappropriated earnings generated after 1998 $ 31,063,597 21,585,361 12,765,381 Balance of the imputation credit account $ 4,083,362 4,083,362 4,025,832 2016 (Estimated) 2015 (Actual) Creditable ratios for distribution of AUO’s earnings for ROC resident shareholders 18.92% 26.29% The abovementioned integrated income tax information is prepared in accordance with Decree No. 10204562810 announced on October 17, 2013 by the ROC Ministry of Finance. Earnings per Share Three months ended March 31, 2017 2016 (in thousands, except for per share data) Basic earnings per share Profit (loss) attributable to AUO’s shareholders $ 9,479,193 (5,477,326 ) Weighted-average number of common shares outstanding during the period 9,624,245 9,624,245 Basic earnings per share $ 0.98 (0.57 ) Diluted earnings per share Profit (loss) attributable to AUO’s shareholders $ 9,479,193 (5,477,326 ) Weighted-average number of common shares outstanding during the period 9,624,245 9,624,245 Effect of employee remuneration in stock 182,763 - 9,807,008 9,624,245 Diluted earnings per share $ 0.97 (0.57 )	March 31, 2017 December 31, 2016 March 31, 2016 (in thousands) Unappropriated earnings generated after 1998 $ 31,063,597 21,585,361 12,765,381 Balance of the imputation credit account $ 4,083,362 4,083,362 4,025,832 2016 (Estimated) 2015 (Actual) Creditable ratios for distribution of AUO’s earnings for ROC resident shareholders 18.92% 26.29% The abovementioned integrated income tax information is prepared in accordance with Decree No. 10204562810 announced on October 17, 2013 by the ROC Ministry of Finance. Earnings per Share Three months ended March 31, 2017 2016 (in thousands, except for per share data) Basic earnings per share Profit (loss) attributable to AUO’s shareholders $ 9,479,193 (5,477,326 ) Weighted-average number of common shares outstanding during the period 9,624,245 9,624,245 Basic earnings per share $ 0.98 (0.57 ) Diluted earnings per share Profit (loss) attributable to AUO’s shareholders $ 9,479,193 (5,477,326 ) Weighted-average number of common shares outstanding during the period 9,624,245 9,624,245 Effect of employee remuneration in stock 182,763 - 9,807,008 9,624,245 Diluted earnings per share $ 0.97 (0.57 )	March 31, 2017 December 31, 2016 March 31, 2016 (in thousands) Unappropriated earnings generated after 1998 $ 31,063,597 21,585,361 12,765,381 Balance of the imputation credit account $ 4,083,362 4,083,362 4,025,832 2016 (Estimated) 2015 (Actual) Creditable ratios for distribution of AUO’s earnings for ROC resident shareholders 18.92% 26.29% The abovementioned integrated income tax information is prepared in accordance with Decree No. 10204562810 announced on October 17, 2013 by the ROC Ministry of Finance. Earnings per Share Three months ended March 31, 2017 2016 (in thousands, except for per share data) Basic earnings per share Profit (loss) attributable to AUO’s shareholders $ 9,479,193 (5,477,326 ) Weighted-average number of common shares outstanding during the period 9,624,245 9,624,245 Basic earnings per share $ 0.98 (0.57 ) Diluted earnings per share Profit (loss) attributable to AUO’s shareholders $ 9,479,193 (5,477,326 ) Weighted-average number of common shares outstanding during the period 9,624,245 9,624,245 Effect of employee remuneration in stock 182,763 - 9,807,008 9,624,245 Diluted earnings per share $ 0.97 (0.57 )
	2017 (in thousands, share 9,479,193 9,624,245 0.98 9,479,193 9,624,245 182,763 9,807,008 0.97	2016
		except for per data) (5,477,326 ) 9,624,245 (0.57 ) (5,477,326 ) 9,624,245 - 9,624,245 (0.57 )

The abovementioned integrated income tax information is prepared in accordance with Decree No. 10204562810 announced on October 17, 2013 by the ROC Ministry of Finance.

(26) Earnings per Share

The employee remuneration distributed in the form of stock was not taken into above consideration for the calculation of diluted earnings per share for the three months ended March 31, 2016 due to its anti-dilutive effect.

(Continued)

37

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(27) Financial Instruments

• a. Fair value and carrying amount

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

Except for aforementioned financial instruments, the carrying amount and fair value of other financial instruments of the Company as of March 31, 2017, December 31, 2016 and March 31, 2016 were as follows:

March 31, 2017 Carrying Amount Fair Value Financial assets: Available-for-sale financial assets－noncurrent $ 3,313,794 3,313,794 Foreign currency forward contracts 372,674 372,674 Refundable deposits 104,614 104,614 Financial liabilities: Long-term borrowings (including current installments) 121,779,412 121,779,412 Foreign currency forward contracts 19,154 19,154 Interest rate swap contracts - - Guarantee deposits received 773,531 773,531	**March 31, 2017 **	**March 31, 2017 **	**December 31, 2016 **	**December 31, 2016 **	**March 31, 2016 **	**March 31, 2016 **
	Carrying **Amount **	**Fair Value **	Carrying **Amount **	**Fair Value **	Carrying **Amount **	**Fair Value **
		3,313,794 372,674 104,614 121,779,412 19,154 - 773,531			1,972,545 138,205 132,471 106,547,988 644,930 10,194 918,098	1,972,545 138,205 132,471 106,547,988 644,930 10,194 918,098

• 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 vales 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 interest rate swap contract is measured based on reasonable valuation model and assumptions with reference to market valuation information provided by counterparties, i.e. financial institutions.

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

(Continued)

38

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

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

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

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

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

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

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

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

Level 1 March 31, 2017 Assets: Available-for-sale financial assets－ noncurrent $ 3,313,794 Foreign currency forward contracts - Liabilities: Foreign currency forward contracts - December 31, 2016 Assets: Available-for-sale financial assets－ noncurrent $ 2,836,696 Foreign currency forward contracts - Liabilities: Foreign currency forward contracts - Interest rate swap contracts -	Level 2 Level 3 (in thousands) - - 372,674 - 19,154 - - - 65,669 - 896,998 - 3,540 -	Total
		3,313,794 372,674 19,154 2,836,696 65,669 896,998 3,540

(Continued)

39

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Level 1 March 31, 2016 Assets: Available-for-sale financial assets－ noncurrent $ 1,972,545 Foreign currency forward contracts - Liabilities: Foreign currency forward contracts - Interest rate swap contracts -	Level 2 Level 3 (in thousands) - - 138,205 - 644,930 - 10,194 -	Total
		1,972,545 138,205 644,930 10,194

There were no transfers between Level 1 and 2 for the three months ended March 31, 2017 and 2016.

(28) Financial Risk Management

Except as described below, both the goals and policies of the Company’s financial risk management and the Company’s exposure to credit risk, liquidity risk and market risk were not materially different from those disclosed in note 6(29) of the consolidated financial statements for the year ended December 31, 2016.

Refer to note 6(5) for the information about past-due aging analysis.

a. Exposure of currency risk

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

March 31, 2017 December 31, 2016 Foreign currency amounts Exchange rate NTD Foreign currency amounts Exchange rate NTD (in thousands) (in thousands) (in thousands) (in thousands) Financial assets Monetary items USD $ 2,155,342 30.315 65,339,192 2,287,148 32.312 73,902,326 JPY 22,526,374 0.2709 6,102,395 20,236,416 0.2773 5,611,558 EUR 111,021 32.358 3,592,403 106,660 33.895 3,615,241 Non-monetary items USD 3,300 30.315 100,040 3,000 32.312 96,936 RMB 19,414 4.4044 85,507 20,758 4.6391 96,298 Financial liabilities Monetary items USD 939,111 30.315 28,469,144 1,099,799 32.312 35,536,705 JPY 21,515,128 0.2709 5,828,448 26,820,343 0.2773 7,437,281 EUR 873 32.358 28,233 987 33.895 33,454	March 31, 2017	March 31, 2017	March 31, 2017	December 31, 2016	December 31, 2016	December 31, 2016	March 31, 2016	March 31, 2016	March 31, 2016
	Foreign currency amounts	Exchange rate	NTD	Foreign currency amounts	Exchange rate	NTD	Foreign currency amounts	Exchange rate	NTD
					32.312 0.2773 33.895 32.312 4.6391 32.312 0.2773 33.895	(in thousands) 73,902,326 5,611,558 3,615,241 96,936 96,298 35,536,705 7,437,281 33,454	(in thousands) 1,428,557 56,647,970 63,014 226,084 20,580 740,729 26,555,641 1,828	32.282 0.2868 36.730 32.282 4.9946 32.282 0.2868 36.730	(in thousands) 46,116,677 16,246,638 2,314,504 7,298,440 102,788 23,912,214 7,616,158 67,142

(Continued)

40

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

• b. Sensitivity analysis

The Company’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, trade 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, JPY and RMB at March 31, 2017 and March 31, 2016, while all other variables were remained constant, would have increased or decreased the net profit before tax for the three months ended March 31, 2017 and 2016 as follows:

		Three months ended
		March 31,
		2017 2016
		(in thousands)
1% of depreciation	$	407,082 330,824
1% of appreciation		(407,082) (330,824)

• c. 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 three months ended March 31, 2017 and 2016 were $1,539,985 thousand and $114,112 thousand, respectively.

(29) Capital Management

The objectives, policies and procedures of the Company’s capital management have been applied consistently with those described in the consolidated financial statements for the year ended December 31, 2016. Also, there was no significant change in the Company’s capital management information as disclosed for the year ended December 31, 2016. Refer to note 6(30) of the consolidated financial statements for the year ended December 31, 2016 for the relevant information.

7. Related-party Transactions

AUO is the ultimate parent company of the Company’s subsidiaries. All inter-company transactions and balances are eliminated in the consolidated interim financial statements and are not disclosed in the 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 interim financial statements.

(Continued)

41

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Name of related party

Relationship with the Company

Lextar Electronics Corporation (“Lextar”) Associate of the Company Lextar Electronics (Suzhou) Co., Ltd. (“LESZ”) Subsidiary of Lextar Lextar Electronics (Xiamen) Co., Ltd. (“LEXM”) Subsidiary of Lextar Wellypower Optronics (Suzhou) Corporation Subsidiary of Lextar (“AOC”) Raydium Semiconductor Corporation (“Raydium”) Associate of the Company Dazzo Technology Corporation (“Dazzo”) Subsidiary of Raydium[(i)] Star River Energy Corp. (“SREC”) Associate of the Company Sungen Power Corporation (“SGPC”) Subsidiary of SREC Evergen Power Corporation (“EGPC”) Subsidiary of SREC Daxin Materials Corp. (“Daxin”) Associate of the Company AUO SunPower Sdn. Bhd. (“AUSP”) Joint venture of the Company BVCH Optronics (Sichuan) Corp. (“BVCH”) Joint venture of the Company Evonik Forhouse Optical Polymers Corp. (“EFOP”) Joint venture of the Company Wibase Industrial Solutions Inc. (“WIS”) (formerly DPTW represented as a director of iSAFE Technology Inc.) WIS Qisda Corporation (“Qisda”) AUO’s director Qisda Japan Co., Ltd. (“QJTO”) Subsidiary of Qisda BenQ Corporation (“BenQ”) Subsidiary of Qisda BenQ Materials Corp. (“BMC”) Subsidiary of Qisda Qisda (Suzhou) Co., Ltd. (“QCSZ”) Subsidiary of Qisda Qisda Electronics (Suzhou) Co., Ltd. (“QCES”) Subsidiary of Qisda Qisda Optronics (Suzhou) Co., Ltd. (“QCOS”) Subsidiary of Qisda BenQ ESCO Corp. (“BenQ ESCO”) Subsidiary of Qisda BenQ Europe B.V. (“BQE”) Subsidiary of Qisda BenQ Asia Pacific Corp. (“BQP”) Subsidiary of Qisda BenQ America Corporation (“BQA”) Subsidiary of Qisda Mainteq Europe B.V. (“MQE”) Subsidiary of Qisda BenQ Medical Technology Corp. (“TMC”) Subsidiary of Qisda BenQ Australia Pty Ltd. (“BQau”) Subsidiary of Qisda BenQ Co., Ltd. (“BQC”) Subsidiary of Qisda BenQ Logistic (Shanghai) Co., Ltd. (“BQls”) Subsidiary of Qisda BenQ Guru Software Co., Ltd. (“GSS”) Subsidiary of Qisda BenQ Guru Corporation (“GST”) Subsidiary of Qisda BenQ Material (Suzhou) Co., Ltd. (“BMS”) Subsidiary of Qisda Daxon Biomedical (Suzhou) Co., Ltd. (“DTB”) Subsidiary of Qisda Nanjing BenQ Hospital Co., Ltd. (“QCHN”) Subsidiary of Qisda Suzhou BenQ Hospital Co., Ltd. (“QCHS”) Subsidiary of Qisda BenQ Foundation Substantive related party

(i) On October 1, 2016, Raydium, the associate of the Company, issued its new shares in exchange for all outstanding shares of another associate of the Company, Dazzo.

(Continued)

42

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

• (2) Compensation to key management personnel

Key management personnel’s compensation comprised:

		Three months ended	Three months ended
		March 31,
		2017	2016
		(in thousands)
Short-term employee benefits	$	26,739	25,333
Post-employment benefits		601	558
	$	27,340	25,891

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

• a. Sales

Sales Three months ended March 31, 2017 2016 Associates $ 1,073,171 285,977 Joint ventures - 1,547,970 Others 3,258,681 2,827,201 $ 4,331,852 4,661,148	Accounts receivable from relatedparties	Accounts receivable from relatedparties
	March 31, 2017	March 31, 2016
		149,025 498,944 1,940,931 2,588,900

The collection terms for sales to related parties were month-end 30 to 55 days. The pricing for sales to related parties were not materially different from those with third parties.

b. Purchases

Purchases Three months ended March 31, 2017 2016 Associates $ 2,262,410 2,417,197 Joint ventures 279,736 1,300,427 Others 4,519,062 4,373,304 $ 7,061,208 8,090,928	Notes and accounts payable to relatedparties	Notes and accounts payable to relatedparties
	March 31, 2017 December 31, 2016 (in thousands) 3,371,942 3,734,927 - - 4,546,624 5,088,138 7,918,566 8,823,065	March 31, 2016
		3,648,810 232,708 4,325,553
		8,207,071

(Continued)

43

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

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

Others $	Proceeds from disposal Gains on disposal Three months ended March 31, Three months ended March 31, 2017 2016 2017 2016 (in thousands) 1,314 - 169 -	Gains on disposal	Gains on disposal
		Three months ended March 31,
	2017 1,314		2016
			-

• d. Other related party transactions

			Other	receivables due from	receivables due from	receivables due from
				relatedparties
		March	31,	December 31,		March 31,
		2017			2016	2016
				(in	thousands)
Associates	$	5,131			10,970		4,624
Joint ventures		-			-		4,467
Others		15,298			23,318		10,516
	$	20,429			34,288		19,607
			Other payables due to
				relatedparties
		March 31,		December 31,		March 31,
		2017			2016	2016
				(in thousands)
Associates	$	7,352			16,218		6,309
Joint ventures			139		406		379
Others		17,987			10,717		16,145
	$	25,478			27,341		22,833
					Rental income
					Three months ended
					March 31,
					2017	2016
					(in thousands)
Associates				$	10,002		7,186
Joint ventures					1,653		1,653
Others:
BMC					15,815		15,844
Others					1,392		8,473
				$	28,862		33,156

(Continued)

44

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

		Administration and
		other income
		Three months ended
		March 31,
		2017 2016
		(in thousands)
Associates	$	1,152 3,153
Joint ventures		- 3,133
Others		949 626
	$	2,101 6,912
		Rental and other expenses
		Three months ended
		March 31,
		2017 2016
		(in thousands)
Associates	$	7,221 10,312
Joint ventures		320 329
Others		9,543 18,005
	$	17,084 28,646

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.

8. Pledged Assets

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

Pledged assets Restricted cash in banks(i) Land and building (including investment property) Machinery, equipment and prepayments for equipment	Pledged to secure R&D projects, oil purchases and guarantees for foreign labors and customs duties $ Long-term borrowings Long-term borrowings **$ **	March 31, 2017 72,604 42,384,387 23,986,431 66,443,422	December 31, 2016 (in thousands) 93,379 52,076,840 27,058,442 79,228,661	March 31, 2016
				57,483 68,870,724 31,097,280
				100,025,487

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

45

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

9. Significant Contingent Liabilities and Unrecognized Commitments

The significant commitments and contingencies of the Company as of March 31, 2017, in addition to those disclosed in other notes to the consolidated interim financial statements, were as follows:

• (1) As of March 31, 2017, the Company had the following outstanding letters of credit for the purpose of purchasing machinery and equipment and materials:

Currency USD JPY	March 31, 2017
	(in thousands) 10,219 1,782,921

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

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

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

• (5) As of March 31, 2017, significant outstanding purchase commitments for construction in progress, property, plant and equipment totaled $28,378,351 thousand.

• (6) Since December 2006, AUO and certain of its subsidiaries, along with various competitors in the TFT-LCD industry, were under investigation for alleged violation of antitrust and competition laws of certain jurisdictions. Set forth below is a list of the material antitrust proceedings against AUO and certain of its subsidiaries.

46

(Continued)

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

United States

In 2012, the Northern California Court rendered judgment against AUO and AUUS regarding the alleged violations of Section 1 of the Sherman Act and imposed a fine of US$500 million against AUO. Such fine was fully paid by AUO as of December 31, 2015. The Northern California Court also placed AUO and AUUS on probation as well as assigned a monitor and required AUO to adopt an effective antitrust compliance program. The probationary period and monitorship ended in December 2016.

Antitrust Civil Actions Lawsuits

There were over 100 civil lawsuits filed against AUO, AUUS and various manufacturers in the TFT-LCD industry in the United States and Canada alleging, among other things, antitrust violations. As of April 26, 2017, AUO and AUUS have reached settlement agreements with the relevant plaintiffs, including a settlement with the state of Illinois in April 2016 and a settlement with the Costco Wholesale Corporation in September 2016. In addition to the above cases in the United States and Canada, a lawsuit was filed by certain consumers in Israel against certain LCD manufacturers including AUO in the District Court of the Central District in Israel (“Israeli Court”). The defendants contested various issues including whether the lawsuit was properly served. In December 2016, the Israeli Court overturned the original decision and revoked the permission for this case to serve out of Israeli jurisdiction. The decision of the Israeli Court is appealable but subject to the permission by the Supreme Court. The ultimate outcome of these matters is uncertain and will depend on further court proceedings.

• (7) In July and August of 2014, SunPower Technology, Ltd. (“SPTL”), AUO and AUSG submitted certain disputes for arbitration in the International Court of Arbitration of the International Chamber of Commerce in San Francisco, U.S. in connection with the joint venture agreement among the parties. The arbitration was amicably settled by the parties in September 2016. AUSG sold all of its shares in the joint venture company AUSP to SPTL at the price of US$170,100 thousand. Please see note 6(7)b. of the consolidated financial statements for the year ended December 31, 2016 for further details. The shares purchase price shall be paid by SPTL in accordance with the agreement and guaranteed by SunPower Corporation, SPTL’s parent company. The parties have reached amicable agreements regarding the relevant issues, including terminations of the joint venture agreement and relevant agreements and agreed to terminate the arbitration.

• (8) At the end of February 2017, one of AUO’s subsidiaries in the PRC received an administrative complaint filed by a competitor alleging that its subsidiary infringes two PRC patents, and the complaint requests that its subsidiary cease the alleged infringing act. Based on the Company’s initial investigation, it believes that its subsidiary does not infringe the two PRC patents as alleged, and further that the two PRC patents appear to be invalid. In response to such administrative complaint, its subsidiary has filed a request to invalidate the two PRC patents accordingly. While the subsidiary intends to defend against the complaint vigorously, the ultimate outcome of this matter is uncertain and will depend on further proceedings, and the amount of possible loss, if any, is currently not estimable. Management is reviewing the merits of this matter on an on-going basis. This matter is currently suspended pending the outcome of the invalidation proceeding.

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

As of April 26, 2017, 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

Except for otherwise disclosed in the other notes to the consolidated interim financial statements, there is no significant reportable subsequent event.

12. Others

• (1) Seasonality of operations

The Company’s operations are not materially influenced by seasonality or cyclicality.

• (2) 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 and which has been established since 2010. 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 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 Environmental Protection Administration 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. Primarily in light of the settlement and based on the principle of protection of reliance under the Administrative law and in light of the relevant approvals issued by the government to the Company, currently management does not believe that this event will have a material adverse effect on the Company’s operation and will continue to monitor the development of this event.

(Continued)

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Notes to Consolidated Interim Financial Statements

AU OPTRONICS CORP. AND SUBSIDIARIES

13. Segment Information

Operating segment information

The Company has two operating segments: display and solar. The display segment generally is engaged in the research, development, design, manufacturing and sale of flat panel displays and most of our products are TFT-LCD panels. The solar 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 three months ended March 31, 2017 and 2016 with the financial results received by the Company’s chief operating decision maker. The accounting policies for the operating segments are the same as those used in preparation of the consolidated financial statements of the Company. The Company uses the net revenue, profit (loss) from operations and segment profit (loss) excluding depreciation and amortization as the basis of segment performance assessment.

Net revenue from external customers $ Segment profit (loss) $ Net non-operating income and expenses Consolidated profit before income tax Segment profit (loss) excluding depreciation and amortization $ Segment assets Net revenue from external customers $ Segment profit (loss) $ Net non-operating income and expenses Consolidated loss before income tax Segment profit (loss) excluding depreciation and amortization $ Segment assets	Three months ended March 31, 2017	Three months ended March 31, 2017	Three months ended March 31, 2017
	Display Solar Adjustment and elimination Total segments (in thousands) 83,447,960 5,108,856 - 88,556,816 12,386,773 (369,366) - 12,017,407 (67,665 ) $ 11,949,742 21,974,286 53,596 - 22,027,882 $ 425,305,070 Three months ended March 31, 2016		Total segments
	Display 63,583,224 (5,245,015 ) 4,201,145	Solar Adjustment and elimination (in thousands) 7,552,008 - 148,097 - $ 613,320 - $	Total segments
			71,135,232 (5,096,918) (188,110 ) (5,285,028 ) 4,814,465 407,488,055

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