AUO — Interim / Quarterly Report 2017

Nov 13, 2017

Stock Code ： 2409

AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Interim Financial Statements

September 30, 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 September 30, 2017 and 2016 and the related consolidated statements of comprehensive income for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, as well as the consolidated statements of changes in equity and cash flows for the nine months ended September 30, 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) October 25, 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 September 30, 2017 and 2016 AU OPTRONICS CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

September 30, 2017, December 31, 2016 and September 30, 2016 (Expressed in thousands of New Taiwan dollars)

September 30, 2017 Assets Amount % Current assets: 1100 Cash and cash equivalents (Note 6(1)) $ 107,655,802 24 1110 Financial assets measured at fair value through profit or loss－current (Note 6(2)) 48,033 - 1170 Notes and accounts receivable, net (Note 6(5)) 46,536,065 10 1180 Accounts receivable from related parties, net (Note 6(5)&7) 1,775,469 - 1210 Other receivables from related parties (Note 7) 15,910 - 1220 Current tax assets 128,487 - 130X Inventories (Note 6(6)) 25,020,777 6 1476 Other current financial assets (Note 6(5)&8) 513,521 - 1460 Noncurrent assets held for sale (Note 6(8)) - - 1479 Other current assets (Note 6(11)) 7,224,024 2 188,918,088 42 Noncurrent assets: 1523 Available-for-sale financial assets－ noncurrent (Note 6(3)) 4,094,541 1 1543 Financial assets carried at cost－ noncurrent (Note 6(4)) 207,815 - 1550 Investments in equity-accounted investees (Note 6(7)) 5,208,551 1 1600 Property, plant and equipment (Note 6(8),7&8) 217,139,275 49 1760 Investment property (Note 6(9)&8) 465,868 - 1780 Intangible assets (Note 6(10)) 13,313,504 3 1840 Deferred tax assets 14,303,958 3 1900 Other noncurrent assets (Note 6(11)&8) 5,587,466 1 260,320,978 58 Total assets $ 449,239,066 100	September 30, 2017	December 31, 2016	September 30, 2016 Amount % 74,053,448 18 123,857 - 40,657,080 10 2,644,476 1 37,189 - 13,994 - 27,013,082 6 840,622 - - - 6,554,109 1 151,937,857 36 2,506,433 1 137,182 - 5,258,633 1 213,186,688 51 465,868 - 14,020,842 3 16,748,707 4 15,387,554 4 267,711,907 64 419,649,764 100 September 30, 2017 Liabilities and Stockholders’ Equity Amount % Current liabilities: 2100 Short-term borrowings (Note 6(12)) $ 2,947,482 1 2120 Financial liabilities measured at fair value through profit or loss－current (Note 6(2)) 286,441 - 2125 Hedging derivative financial liabilities－ current (Note 6(2)) - - 2170 Notes and accounts payable 48,717,316 11 2180 Notes and accounts payable to related parties (Note 7) 7,686,176 2 2213 Equipment and construction payable 10,181,671 2 2220 Other payables to related parties (Note 7) 15,750 - 2230 Current tax liabilities 7,663,902 2 2250 Provisions－current (Note 6(14)) 896,360 - 2399 Other current liabilities 24,126,613 5 2322 Current installments of long-term borrowings (Note 6(13)&8) 18,125,897 4 120,647,608 27 Noncurrent liabilities: 2510 Hedging derivative financial liabilities－ noncurrent (Note 6(2)) - - 2540 Long-term borrowings, excluding current installments (Note 6(13)&8) 101,996,107 23 2550 Provisions－noncurrent (Note 6(14)) 1,033,149 - 2570 Deferred tax liabilities 3,402,831 1 2600 Other noncurrent liabilities 1,842,838 - 108,274,925 24 Total liabilities 228,922,533 51 Equity:(Note 6(17)) Equity attributable to shareholders of AU Optronics Corp.: 3100 Common stock 96,242,451 21 3200 Capital surplus 60,023,850 13 3300 Retained earnings 47,016,220 11 3400 Other components of equity 594,263 - 203,876,784 45 Non-controlling interests: 36XX Non-controlling interests 16,439,749 4 Total equity 220,316,533 49 Total Liabilities and Equity $ 449,239,066 100	September 30, 2017	December 31, 2016	September 30, 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 % 1,392,772 - 29,075 - - - 50,744,458 12 8,423,979 2 9,034,418 2 18,323 - 2,428,812 1 3,010,600 1 18,953,758 4 24,742,393 6 118,778,588 28 5,437 - 101,217,725 24 1,115,848 - 4,155,465 1 2,067,431 1 108,561,906 26 227,340,494 54 96,242,451 23 59,975,957 14 15,459,084 4 1,422,806 - 173,100,298 41 19,208,972 5 192,309,270 46 419,649,764 100

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 and nine months ended September 30, 2017 and 2016 (Expressed in thousands of New Taiwan dollars, except for earnings per share)

Three months ended September 30, 2017 2016 Amount % Amount % 4110 Revenue $ 88,100,057 101 86,140,217 100 4190 Less: sales return and discount 704,622 1 122,898 - Net revenue(Note 6(19)&7) 87,395,435 100 86,017,319 100 5000 Cost of sales(Note 6(6),(20),(21)&7) 72,082,935 82 74,709,360 87 Gross profit 15,312,500 18 11,307,959 13 Operating expenses:(Note 6(20),(21)&7) 6100 Selling and distribution expenses 1,010,340 1 914,448 1 6200 General and administrative expenses 2,096,653 2 2,408,939 3 6300 Research and development expenses 2,462,537 3 2,225,308 3 Total operating expenses 5,569,530 6 5,548,695 7 Profit from operations 9,742,970 12 5,759,264 6 Non-operating income and expenses: 7010 Other income (Note 6(22)&7) 1,065,544 1 581,671 1 7020 Other gains and losses (Note 6(2),(8),(23)&7) 289,024 - (285,197) - 7050 Finance costs (Note 6(8)&(24)) (681,448) (1) (698,412) (1) 7060 Share of profit of equity-accounted investees (Note 6(7)) 90,563 - 62,358 - Total non-operating income and expenses 763,683 - (339,580 ) - 7900 Profit (loss) before income tax 10,506,653 12 5,419,684 6 7950 Less: income tax expense(Note 6(25)) 2,282,846 3 804,072 1 8200 Profit (loss) for the period 8,223,807 9 4,615,612 5 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 (2) - 6 - 8349 Related tax - - - - (2 ) - 6 - 8360 Items that are or may be reclassified subsequently to profit or loss 8361 Foreign operations – foreign currency translation differences 1,416,073 2 (2,749,612) (3) 8362 Net change in fair value of available-for-sale financial assets (277,333) - 355,798 - 8363 Effective portion of changes in fair value of cash flow hedges - - 3,009 - 8370 Equity-accounted investees – share of other comprehensive income (loss) 8,869 - (299,164) - 8399 Related tax (201,898 ) - 439,131 1 945,711 2 (2,250,838 ) (2 ) 8300 Other comprehensive income (loss), net of tax 945,709 2 (2,250,832 ) (2 ) 8500 Total comprehensive income (loss) for the period $ 9,169,516 11 2,364,780 3 Profit (loss) attributable to: 8610 Shareholders of AU Optronics Corp. $ 8,855,749 10 4,898,015 5 8620 Non-controlling interests (631,942 ) (1 ) (282,403 ) - $ 8,223,807 9 4,615,612 5 Total comprehensive income (loss) attributable to: 8710 Shareholders of AU Optronics Corp. $ 9,467,718 11 3,206,588 4 8720 Non-controlling interests (298,202 ) - (841,808 ) (1 ) $ 9,169,516 11 2,364,780 3 Earnings per share(Note 6(26)) 9750 Basic earnings per share $ 0.92 0.51 9850 Diluted earnings per share $ 0.91 0.51

Nine months ended September 30, 2017 2016 Amount % Amount % 261,751,716 101 237,910,348 100 1,387,065 1 666,894 - 260,364,651 100 237,243,454 100 210,498,583 81 219,981,636 93 49,866,068 19 17,261,818 7 2,890,771 1 2,913,838 1 6,155,953 2 6,950,643 3 7,382,938 3 6,619,300 3 16,429,662 6 16,483,781 7 33,436,406 13 778,037 - 3,151,444 1 1,610,157 1 (547,504) - (917,437) - (2,118,070) (1) (1,798,611) (1) 178,178 - 222,352 - 664,048 - (883,539 ) - 34,100,454 13 (105,502) - 7,495,525 3 1,662,884 1 26,604,929 10 (1,768,386 ) (1 ) 712 - 244 - - - - - 712 - 244 - (1,949,726) (1) (6,148,206) (2) 1,257,846 1 436,271 - (21,992) - 5,302 - (47,667) - (638,798) - 275,492 - 1,051,080 - (486,047 ) - (5,294,351 ) (2 ) (485,335 ) - (5,294,107 ) (2 ) 26,119,594 10 (7,062,493 ) (3 ) 28,164,726 11 (1,151,718) (1) (1,559,797 ) (1 ) (616,668 ) - 26,604,929 10 (1,768,386 ) (1 ) 27,980,329 11 (4,814,081) (2) (1,860,735 ) (1 ) (2,248,412 ) (1 ) 26,119,594 10 (7,062,493 ) (3 ) 2.93 (0.12 ) 2.83 (0.12 )

2017 Amount % 261,751,716 101 1,387,065 1 260,364,651 100 210,498,583 81 49,866,068 19 2,890,771 1 6,155,953 2 7,382,938 3 16,429,662 6 33,436,406 13 3,151,444 1 (547,504) - (2,118,070) (1) 178,178 - 664,048 - 34,100,454 13 7,495,525 3 26,604,929 10 712 - - - 712 - (1,949,726) (1) 1,257,846 1 (21,992) - (47,667) - 275,492 - (486,047 ) - (485,335 ) - 26,119,594 10 28,164,726 11 (1,559,797 ) (1 ) 26,604,929 10 27,980,329 11 (1,860,735 ) (1 ) 26,119,594 10 2.93 2.83

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 nine months ended September 30, 2017 and 2016 (Expressed in thousands of New Taiwan dollars)

Balance at January 1, 2016 $ Appropriation of earnings Legal reserve Cash dividends distributed to shareholders 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 September 30, 2016 $ Balance at January 1, 2017 $ Appropriation of earnings Legal reserve Cash dividends distributed to shareholders 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 September 30, 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 - (3,368,486 ) (1,151,718) (3,662,363 ) (4,814,081 ) (722,363 ) 20,006 - 173,100,298 181,244,699 - (5,389,577 ) 28,164,726 (184,397 ) 27,980,329 41,333 - 203,876,784	Non- controlling interests 22,651,183 - - (616,668) (1,631,744 ) (2,248,412 ) (1,063,279 ) 37,036 (167,556 ) 19,208,972 18,390,483 - - (1,559,797) (300,938 ) (1,860,735 ) 5,606 (95,605 ) 16,439,749	Total equity 204,636,405 - (3,368,486 ) (1,768,386) (5,294,107 ) (7,062,493 ) (1,785,642 ) 57,042 (167,556 ) 192,309,270 199,635,182 - (5,389,577 ) 26,604,929 (485,335 ) 26,119,594 46,939 (95,605 ) 220,316,533
	Capital Stock	Capital surplus 60,249,983 - - - - - (294,032 ) 20,006 - 59,975,957 59,979,723 - - - - - 44,127 - 60,023,850	Retained earnings Legal reserve Unappropriated earnings Subtotal 2,164,596 18,242,681 20,407,277 493,196 (493,196 ) - - (3,368,486 ) (3,368,486 ) - (1,151,718) (1,151,718) - 342 342 - (1,151,376 ) (1,151,376 ) - (428,331 ) (428,331 ) - - - - - - 2,657,792 12,801,292 15,459,084 2,657,792 21,585,361 24,243,153 781,894 (781,894 ) - - (5,389,577 ) (5,389,577 ) - 28,164,726 28,164,726 - 712 712 - 28,165,438 28,165,438 - (2,794 ) (2,794 ) - - - 3,439,686 43,576,534 47,016,220			Other components of equity		Subtotal 5,085,511 - - - (3,662,705 ) (3,662,705 ) - - - 1,422,806 779,372 - - - (185,109 ) (185,109 ) - - 594,263
	Common stock 96,242,451 - - - - - - - - 96,242,451 96,242,451 - - - - - - - 96,242,451		Legal reserve 2,164,596 493,196 - - - - - - - 2,657,792 2,657,792 781,894 - - - - - - 3,439,686	Unappropriated **earnings **	Cumulative translation differences 5,612,885 - - - (4,102,491 ) (4,102,491 ) - - - 1,510,394 536,819 - - - (1,428,127 ) (1,428,127 ) - - (891,308 **) **	Unrealized gains (losses) on available- for-sale financial assets (539,653 ) - - - 435,386 435,386 - - - (104,267 ) 224,299 - - - 1,261,272 1,261,272 - - 1,485,571	Unrealized gains (losses) on cash flow hedges 12,279 - - - 4,400 4,400 - - - 16,679 18,254 - - - (18,254 ) (18,254 ) - - -
				18,242,681 (493,196 ) (3,368,486 ) (1,151,718) 342 (1,151,376 ) (428,331 ) - - 12,801,292 21,585,361 (781,894 ) (5,389,577 ) 28,164,726 712 28,165,438 (2,794 ) - 43,576,534

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 nine months ended September 30, 2017 and 2016 (Expressed in thousands of New Taiwan dollars)

Cash flows from operating activities: Profit (loss) before income tax $ Adjustments for: Depreciation Amortization Interest expense Interest income Dividend income Share of profit of equity-accounted investees Losses (gains) on disposals of property, plant and equipment, net Losses (gains) on disposals of investments and financial assets, net Impairment losses on assets Changes in fair values of financial instruments Unrealized foreign currency exchange losses (gains) Others Subtotal of income and expense items not affecting cash flows Change in operating assets and liabilities: - notes and accounts receivable - receivables from related parties - inventories - other current assets - notes and accounts payable - payables to related parties - net defined benefit liability - provisions - other current liabilities Subtotal of net changes in operating assets and liabilities Subtotal of adjustment items Cash generated from operations Cash received from interest income Cash received from dividend income Cash paid for interest Cash paid for income taxes Net cash provided by operating activities Cash flows from investing activities: Acquisitions of financial assets carried at cost Proceeds from disposals of available-for-sale financial assets Acquisitions of equity-accounted investees Proceeds from disposals of equity-accounted investees Acquisitions of property, plant and equipment Proceeds from disposals of property, plant and equipment Increase in refundable deposits Increase in intangible assets Increase in other financial assets Net cash used in investing activities Cash flows from financing activities: Increase (decrease) in short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Decrease in guarantee deposits received Cash dividends Net change of non-controlling interests and others Net cash provided by (used in) financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period $	Nine months ended September 30,	Nine months ended September 30,
	2017 34,100,454 27,243,163 486,013 2,118,070 (419,805) (248,514) (178,178) 71,245 (42,933) - (592,921) 638,458 (19,589 ) 29,055,009 (2,056,128) 776,133 2,500,765 1,292,730 (1,724,992) (1,148,480) (90,339) (874,615) 1,739,306 414,380 29,469,389 63,569,843 449,560 421,550 (1,879,493) (895,403 ) 61,666,057 (14,233) - (27,000) 56 (26,288,568) 1,067,490 (405,997) (196,781) (9,520 ) (25,874,553 ) 2,420,759 23,964,657 (27,276,663) (42,468) (5,389,577) (95,605 ) (6,418,897 ) (1,908,053 ) 27,464,554 80,191,248 107,655,802	2016
		(105,502 ) 28,673,520 741,457 1,798,611 (367,077) (107,141) (222,352) (74,815) 356,103 34,739 (434,251) (511,678) (6,014 ) 29,881,102 (9,459,239) (161,228) 4,485,665 6,277,160 136,440 (912,883) (88,512) (1,782,938) (7,252,708 ) (8,758,243 ) 21,122,859 21,017,357 389,116 311,492 (1,549,127) (1,382,976 ) 18,785,862 (66,948) 9,917 (240,500) 3,577,419 (37,882,734) 741,215 (22,344) (187,020) (18,500 ) (34,089,495 ) (200,942) 56,190,666 (37,799,702) (27,737) (3,368,486) (2,688,806 ) 12,104,993 (1,628,612 ) (4,827,252) 78,880,700 74,053,448

See accompanying notes to the consolidated interim financial statements

6

Reviewed only, not audited in accordance with generally accepted auditing standards as of September 30, 2017 and 2016 AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

September 30, 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 October 25, 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 (“IAS”), and Interpretations that have been issued by the International Accounting Standards Board (“IASB”) (collectively, “IFRSs”) and endorsed by the FSC, with effect 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 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 initial adoption of aforementioned IFRSs endorsed by the FSC has not had a significant impact on the Company’s consolidated interim financial statements.

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

According to Ruling No. 1060025773 issued on July 14, 2017 by the FSC, commencing from 2018, the Company is required to adopt the IFRSs that have been endorsed by the FSC with effective date from 2018. The related new, revised or amended standards and interpretations are set out below:

New, Revised or Amended Standards and Interpretations

Effective Date **Issued by IASB **

Amendments to IFRS 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 IFRS 15,Revenue from Contracts with Customers Amendments to IAS 7,Statement of Cash Flows - Disclosure Initiative Amendments to IAS 12,Income Taxes - Recognition of Deferred Tax Assets for Unrealized Losses Amendments to IAS 40,Transfers of Investment Property

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

(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 **
Annual Improvements to IFRSs 2014 – 2016 Cycle: Amendments to IFRS 12,Disclosure of Interests in Other Entities Amendments to IFRS 1,First-time Adoption of International Financial Reporting Standards_and amendments to IAS 28, _Investments in Associates and Joint Ventures IFRIC 22,Foreign Currency Transactions and Advance Consideration	January 1, 2017 January 1, 2018 January 1, 2018

Except for the items discussed below, the Company believes that the initial adoption of abovementioned 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.

IFRS 9 classifies financial assets into three categories which are measured at amortized cost, measured at fair value through other comprehensive income and measured at fair value through profit or loss. This Standard eliminates the classification of financial assets under IAS 39 which are held to maturity, loans and receivables and available for sale. In addition, IAS 39 has an exception for the measurement of investments in equity instruments (and derivatives with such instruments) that do not have a quoted market price in an active market and whose fair value cannot be reliably measured; such financial instruments are measured at cost. IFRS 9 removes this exception and requires that all equity instruments (and their derivatives) should be measured at fair value.

The Company had equity instruments classified as available-for-sale and financial assets carried at cost at September 30, 2017, which shall be measured at fair value under IFRS 9. The Company’s equity investments are held for long-term strategic purposes, and, provided that the purpose of holding at the initial adoption of IFRS 9 is remained the same, it is optional to designate the equity investments as measured at fair value through other comprehensive income. Except dividend income is recognized in profit or loss, all gains or losses arising from subsequent change of fair value are recognized in other comprehensive income, and there is no requirement for impairment assessment. No gains or losses will be reclassified to profit or loss on derecognition of the financial assets.

(Continued)

9

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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. If the credit risk of the abovementioned financial instruments has increased significantly since initial recognition, a loss allowance is measured at an amount equal to lifetime expected credit losses; otherwise, the loss allowance is measured at an amount equal to the 12month expected credit losses. If the financial instrument is determined to have low credit risk at the reporting date, it may assume that the credit risk thereof has not increased significantly since initial recognition. However, lifetime expected credit loss measurement always applies to trade receivables without a significant financing component.

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.

When IFRS 9 becomes 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. However, the requirements for hedge accounting in IFRS 9 are generally applied prospectively.

The Company is currently revamping its accounting procedures and internal control over financial reporting in accordance with the requirement of this Standard, and also, is assessing the potential impact to the Company as a result of the initial adoption of IFRS 9. Based on the Company’s preliminary view, the initial adoption of IFRS 9 would not have 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.

b. IFRS 15, Revenue from Contracts with Customers

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.

(i) Sales of goods

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

(Continued)

10

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

Under IFRS 15, a refund liability is recognized for the amount expected to be returned to customers such as adjustments to price, volume discounts and sales with a right of return.

• (ii) Rendering of services

Under IFRS 15, for rendering of services, the consideration of the entire contract is allocated on a basis of a relative stand-alone selling price of the services.

• (iii) Transition

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 revamping its accounting procedures and internal control over financial reporting in accordance with the requirement of this Standard, and also, is assessing the potential impact to the Company resulting from the initial adoption of IFRS 15. Based on the Company’s preliminary view, the initial adoption of IFRS 15 would 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. Amendments to IAS 7, Disclosure Initiative

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

The Company is expected to disclose a reconciliation between the opening and closing balances for liabilities arising from financing activities to meet the requirement as stated above.

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

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

New, Revised or Amended Standards and Interpretations	Effective Date Issued by IASB
Amendments to IFRS 10 and IAS 28,Sale or Contribution of Assets between an Investor and its Associate or Joint Venture	Subject to IASB’s announcement

(Continued

11

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

New, Revised or Amended Standards and Interpretations	Effective Date **Issued by IASB **
IFRS 16,Leases IFRS 17,Insurance Contracts IFRIC 23,Uncertainty over Income Tax Treatments Amendments to IFRS 9,Prepayment Features with Negative Compensation Amendments to IAS 28,Long-term Interests in Associates and Joint Ventures	January 1, 2019 January 1, 2021 January 1, 2019 January 1, 2019 January 1, 2019

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

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.

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 of 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.

(Continued)

12

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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 and issued into effect by the FSC for application.

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) 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)	Percentage of Ownership (%)	Percentage of Ownership (%)	Percentage of Ownership (%)
			September 30, 2017 100.00 100.00 100.00 - 100.00 100.00(1)	December 31, 2016	September 30, 2016
AUO AUO AUO AUO AUO AUO	AU Optronics (L) Corp. (AULB) Konly Venture Corp. (Konly) Ronly Venture Corp. (Ronly) Taiwan CFI Co., Ltd. (CFI) (Previously named as “Toppan CFI (Taiwan) Co., Ltd. (Toppan CFI)”) Space Money Inc. (SMI) U-Fresh Technology Inc. (UTI)			100.00 100.00 100.00 -(4) 100.00 -	100.00 100.00 100.00 100.00 100.00 -

(Continued)

13

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location 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) 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) Manufacturing and assembly of TFT-LCD modules (PRC) Manufacturing and assembly of TFT-LCD modules (PRC) Manufacturing and assembly of TFT-LCD modules (PRC)	Percentage of Ownership (%)	Percentage of Ownership (%)	Percentage of Ownership (%)
			September 30, 2017 51.04 99.99 96.04 100.00 - 100.00 100.00 100.00(1) 100.00 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	December 31, 2016	September 30, 2016
AUO, Konly and Ronly AUO, Konly and Ronly AUO, Konly and Ronly Konly Konly Konly Konly Konly ACTW SDMC AULB AULB AULB AULB AULB AULB AULB AULB AULB AULB	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) ChampionGen Power Corporation (CGPC) AUO Crystal (Malaysia) Sdn. Bhd. (ACMK) M.Setek Co., Ltd. (M.Setek) AU Optronics Corporation America (AUUS) AU Optronics Corporation Japan (AUJP) AU Optronics 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) AU Optronics (Xiamen) Corp. (AUXM) AU Optronics (Suzhou) Corp., Ltd. (AUSZ) AU Optronics Manufacturing (Shanghai) Corp. (AUSJ)			51.04 99.99 96.31 100.00 -(5) 100.00 100.00 - 100.00 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	51.04 99.99 96.44 100.00 100.00 100.00 100.00(1) - - 100.00 99.9991 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

(Continued)

14

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Name of Investor	Name of Subsidiary	Main Activities and Location 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 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) Development, design and sale of health care total solution (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) 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)	Percentage of Ownership (%)	Percentage of Ownership (%)	Percentage of Ownership (%)
			September 30, 2017 100.00 100.00 51.00 100.00 100.00 100.00 100.00(1) 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00(2) 100.00	December 31, 2016	September 30, 2016
AULB AULB AULB AULB AULB and DPTW AUXM AUSH DPTW DPTW DPTW FHVI FHVI FHVI FHVI FRVI FFMI FTMI FTMI FWSA and FTMI	AU Optronics (Slovakia) s.r.o. (AUSK) AFPD Pte., Ltd. (AUST) AU Optronics (Kunshan) Co., Ltd. (AUKS) a.u. Vista Inc. (AUVI) BriView (L) Corp. (BVLB) BriView (Xiamen) Corp. (BVXM) AUO Care Management (Suzhou) Co., Ltd. (A-Care) 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) Fortech Electronics (Suzhou) Co., Ltd. (FTWJ) Fortech Optronics (Xiamen) Co., Ltd. (FTXM) Suzhou Forplax Optronics Co., Ltd. (FPWJ)			100.00 100.00 51.00 100.00 100.00 100.00 - 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00	100.00 100.00 51.00 100.00 100.00 100.00(3) - - 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

(Continued)

15

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 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 (%)	Percentage of Ownership (%)	Percentage of Ownership (%)
			September 30, 2017 100.00 100.00(2) 100.00 100.00 100.00 100.00 100.00(2) 100.00 100.00 100.00 100.00	December 31, 2016	September 30, 2016
PMSA FLMI DPLB DPLB DPHK DPHK DPHK BVLB AUSG AUSG AUSG	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(2) 100.00 100.00 100.00 100.00 100.00(2) 100.00 100.00 100.00 100.00	100.00 100.00(2) 100.00 100.00(1) 100.00 100.00 100.00(2) 100.00 100.00 100.00 100.00

• Note 1: TGPC was incorporated in April 2016. DPSK was incorporated in May 2016. UTI was incorporated in January 2017. CGPC was incorporated in May 2017. A-Care was incorporated in September 2017.

Note 2: As part of a business restructuring, DPCD, FLWJ and FTXM have been resolved by their respective boards of directors for liquidation. The liquidation is still in process for these entities as of September 30, 2017.

• Note 3: As part of a business restructuring, BVLB 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 4: On October 1, 2016, CFI was amalgamated to AUO and dissolved on that day.

• Note 5: Konly disposed all its shareholdings in EGPC to Star River Energy Corporation (“SREC”) in October, 2016.

(Continued)

16

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(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.

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.

(Continued)

17

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(1) Cash and Cash Equivalents

Cash on hand, demand deposits and checking accounts $ Time deposits Government bonds with reverse repurchase agreements **$ **	September 30, 2017 46,510,388 53,942,331 7,203,083 107,655,802	December 31, 2016 (in thousands) 42,389,461 37,676,746 125,041 80,191,248	September 30, 2016 44,998,510 28,919,862 135,076 74,053,448

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

As at September 30, 2017, December 31, 2016 and September 30, 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 $ Hedging derivative financial liabilities – noncurrent: Interest rate swap contracts $	September 30, 2017 48,033 286,441 - -	December 31, 2016 (in thousands) 65,669 896,998 3,540 -	September 30, 2016 123,857
			29,075
			-
			5,437

(Continued)

18

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

As of September 30, 2017, December 31, 2016 and September 30, 2016, outstanding foreign currency forward contracts were as follows:

	September 30, 2017	September 30, 2017
Contract item Sell USD / Buy NTD Sell USD / Buy JPY Sell NTD / Buy JPY Sell USD / Buy CNY Sell EUR / Buy JPY Sell EUR / Buy CZK Sell USD / Buy MYR Sell CNY / Buy JPY Sell USD / Buy SGD	Maturity date Oct. 2017 – Nov. 2017 Oct. 2017 – Apr. 2018 Nov. 2017 Oct. 2017 – Feb. 2018 Oct. 2017 – Dec. 2017 Oct. 2017 Oct. 2017 – Dec. 2017 Oct. 2017 – Mar. 2018 Oct. 2017	Contract amount
		(in thousands) USD543,000 / NTD16,343,583 USD120,907 / JPY13,325,604 NTD1,464,393 / JPY5,360,000 USD125,200 / CNY839,257 EUR90,000 / JPY11,789,644 EUR3,980 / CZK103,690 USD833 / MYR3,524 CNY178,186 / JPY2,881,027 USD4,268 / SGD5,738

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

(Continued)

19

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

	September 30, 2016	September 30, 2016
Contract item Sell USD / Buy NTD Sell USD / Buy JPY Sell USD / Buy CNY Sell EUR / Buy JPY Sell EUR / Buy CZK Sell EUR / Buy USD Sell USD / Buy MYR Sell JPY / Buy NTD Sell CNY / Buy USD Sell EUR / Buy NTD Sell CNY / Buy JPY Sell USD / Buy SGD	Maturity date Oct. 2016 – Nov. 2016 Oct. 2016 – Jan. 2017 Oct. 2016 – Feb. 2017 Oct. 2016 – Nov. 2016 Oct. 2016 – Nov. 2016 Nov. 2016 Oct. 2016 – Jan. 2017 Dec. 2016 Oct. 2016 – Nov. 2016 Oct. 2016 Oct. 2016 – Feb. 2017 Oct. 2016 – Dec. 2016	Contract amount
		(in thousands) USD374,000 / NTD11,735,621 USD91,911 / JPY9,351,766 USD62,000 / CNY414,516 EUR39,000 / JPY4,465,933 EUR3,400 / CZK91,890 EUR47,000 / USD53,957 USD458 / MYR1,883 JPY4,760,000 / NTD1,468,466 CNY283,235 / USD42,289 EUR16,000 / NTD569,680 CNY421,272 / JPY6,372,352 USD109,710 / SGD149,505

Net gains (losses) of foreign currency forward contracts were as follows:

Unrealized gains (losses) $ Realized gains **$ **	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) (44,789) (321,146) 592,921 434,251 9,586 601,729 830,806 374,962 (35,203 ) 280,583 1,423,727 809,213	Nine months ended September 30,	Nine months ended September 30,
	2017 (44,789) 9,586 (35,203 )		2016
			434,251 374,962
		1,423,727	809,213

AUO entered into interest rate swap contracts with several banks to manage interest rate risk exposure arising from financing activities. As of September 30, 2017, there was no outstanding interest rate swap contract. As of December 31, 2016 and September 30, 2016, AUO’s total notional amount of outstanding interest rate swap contracts amounted to $1,760,000 thousand and $1,760,000 thousand, respectively, and all of which were related to effective hedges. For the nine months ended September 30, 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)

20

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

	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) September 30, 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 Oct. 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 $ (5,437)	Expected period of cash flows Oct. 2016 – Aug. 2017

• －

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

September 30, 2017 Equity securities – listed company $ 4,094,541 Financial Assets Carried at Cost－noncurrent September 30, 2017 Equity securities – unlisted company $ 207,815	December 31, 2016 (in thousands) 2,836,696 December 31, 2016 (in thousands) 193,582	September 30, 2016
		2,506,433
		September 30, 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)

21

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

September 30, 2017 Notes and accounts receivable $ 49,557,650 Less: allowance for doubtful accounts (105,419) allowance for sales returns and discounts (1,140,697 ) $ 48,311,534 Notes and accounts receivable, net $ 46,536,065 Accounts receivable from related parties, net $ 1,775,469	December 31, 2016 (in thousands) 49,201,632 (104,617) (853,614 ) 48,243,401 45,710,177 2,533,224	September 30, 2016
		44,228,039 (99,188) (827,295 )
		43,301,556
		40,657,080
		2,644,476

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

September 30, 2017 Past due less than 60 days $ 210,102 Past due 61~180 days 30,677 Past due over 180 days - $ 240,779	December 31, 2016 (in thousands) 531,327 9,505 1,020 541,852	September 30, 2016 639,935 7,627 17,842 665,404

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

Balance at beginning of the period$ Provisions (reversals) charged to (against) expense Write-offs Effect of changes in foreign currency exchange rates Balance at end of the period **$ **	Nine months ended September 30,	Nine months ended September 30,	Nine months ended September 30,
	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 (2,873) 5,122 26,042 13,203 (2) - - (7,409 (482 ) (963 ) (1,158 ) (1,387 38,455 66,964 36,598 62,590	2016
	Individually assessed for impairment 41,812 (2,873) (2) (482 ) 38,455	Individually assessed for impairment	Collectively assessed for impairment 58,183 13,203 (7,409 (1,387 62,590

(Continued)

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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.

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

	September 30, 2017	September 30, 2017	September 30, 2017
Underwriting bank Chinatrust Commercial Bank Taishin Bank Bank of Taiwan Taipei Fubon Bank E. Sun Bank DBS Bank Taishin Bank	Factoring limit Amount advanced Amount sold and derecognized (in thousands) USD 200,000 - - USD 80,000 - - USD 250,000 - - USD 120,000 - - USD 50,000 - - USD 154,000 - - USD 35,000 - USD 10,175 December 31, 2016			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 80,000 USD 250,000 USD 120,000 USD 100,000 USD 184,000 USD 35,000	Amount advanced (in thousands) - - - - - - -	Amount sold and derecognized - - - - - - 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)

(Continued)

23

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

	September 30, 2016	September 30, 2016	September 30, 2016
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 75,000 USD 120,000 USD 100,000 USD 166,000 USD 35,000	Amount advanced (in thousands) USD 16,000 USD 16,000 EUR 17,200 - USD 20,000 USD 20,000 USD 16,000 -	Amount sold and derecognized USD 17,859 USD 17,859 EUR 20,258 - USD 22,468 USD 22,286 USD 16,069 USD 7,672	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)

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 September 30, 2017, December 31, 2016 and September 30, 2016, total outstanding receivables after the above assignment transactions, net of fees charged by underwriting banks, of $309,356 thousand, $283,694 thousand and $615,937 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.

(Continued)

24

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(6) Inventories

September 30, 2017 Finished goods $ 9,077,343 Work-in-progress 10,542,342 Raw materials 5,401,092 $ 25,020,777	December 31, 2016 (in thousands) 9,532,199 11,100,347 7,046,789 27,679,335	September 30, 2016 9,676,947 11,138,652 6,197,483
		27,013,082

For the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, the amounts of inventories that were charged to cost of sales were $72,005,871 thousand, $75,540,686 thousand, $210,029,121 thousand and $221,774,913 thousand, respectively, and the net of provisions (reversals) that charged to (against) cost of sales in the consolidated statement of comprehensive income for inventories written down to net realizable value amounted to $77,064 thousand, $(831,326) thousand, $469,462 thousand and $(1,793,277) thousand for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, respectively.

As at September 30, 2017, December 31, 2016 and September 30, 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:

September 30, 2017 Associates $ 4,893,993 Joint ventures 314,558 $ 5,208,551	December 31, 2016 (in thousands) 4,853,325 325,012 5,178,337	September 30, 2016 4,891,450 367,183
		5,258,633

Except as described below, there was no significant change in the Company’s investments in equity-accounted investees for the nine months ended September 30, 2017 and 2016. Refer to note 6(7) of the consolidated financial statements for the year ended December 31, 2016 for the related disclosures.

(Continued)

25

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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	September 30, 2017 Amount Ownership interest (in thousands) % $ 3,106,291 27 695,291 18 528,673 34 536,876 25 26,862 $ 4,893,993	December 31, 2016	December 31, 2016	December 31, 2016	September 30, 2016	September 30, 2016
				Amount		Ownership interest Amount Ownership interest % (in thousands) % 25 $ 3,197,149 25 18 581,596 17 34 528,672 34 25 497,297 25 86,736 $ 4,891,450		Ownership interest
				(in thousands) $ 3,082,856 712,829 531,805 525,835 - $ 4,853,325			(in thousands) % $ 3,197,149 25 581,596 17 528,672 34 497,297 25 86,736 $ 4,891,450
					$ 4,853,325

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 income (loss) for the period Total comprehensive income for the period **$ **	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 87,916 60,467 187,076 97,238 8,867 (26,627 ) (46,955 ) (51,048 ) 96,783 33,840 140,121 46,190
	2017 87,916 8,867 96,783

b. Joint ventures

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.

(Continued)

26

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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 September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 2,647 1,891 (8,898) 125,114 - (3,370 ) - (318,345 ) 2,647 (1,479 ) (8,898 ) (193,231 )	Nine months ended September 30,	Nine months ended September 30,
	2017 2,647 - 2,647	2017	2016 125,114 (318,345 ) (193,231 )

As at September 30, 2017, December 31, 2016 and September 30, 2016, none of the Company’s investments in equity-accounted investees was pledged as collateral.

(8) Property, Plant and Equipment

Movements in the cost, depreciation and impairment of the Company’s property, plant and equipment for the nine months ended September 30, 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 **$ **	Nine months ended September 30, 2017	Nine months ended September 30, 2017	Nine months ended September 30, 2017
	Balance, Beginning of Period 8,873,981 130,595,844 798,046,434 32,419,736 969,935,995 173,397 36,028,301 698,110,663 26,154,173 760,466,534 13,272,371 222,741,832	Additions Disposal, write off, reclassification and others (in thousands) 865,956 (466,350) 373,975 (4,374,893) 1,300,591 1,581,580 3,188,676 (5,937,116 ) 5,729,198 (9,196,779 ) - (173,397) 2,409,787 (4,585,096) 20,774,120 (12,824,106) 4,059,256 (6,414,709 ) 27,243,163 (23,997,308 ) 18,204,777 (17,093,898 )	Balance, End of Period
			9,273,587 126,594,926 800,928,605 29,671,296
			966,468,414
			- 33,852,992 706,060,677 23,798,720
			763,712,389
			14,383,250
			217,139,275

(Continued)

27

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Cost: Land $ Buildings Machinery and equipment Other equipment Accumulated depreciation and impairment loss: Land Buildings Machinery and equipment Other equipment Prepayments for purchase of land and equipment, and construction in progress Net carrying amounts **$ **	Nine months ended September 30, 2016	Nine months ended September 30, 2016	Nine months ended September 30, 2016
	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) 522 140,930 821 (1,243,378) 1,689,843 7,214,155 3,767,915 (5,363,667 ) 5,459,101 748,040 - 9,206 2,311,978 678,115 22,647,630 (7,553,583) 3,747,959 (7,660,355 ) 28,707,567 (14,526,617 ) 30,289,302 (17,914,414 )	Balance, End of Period
			9,253,738 120,913,797 787,923,326 32,652,253
			950,743,114
			194,095 35,782,039 710,049,078 26,303,306
			772,328,518
			34,772,092
			213,186,688

Except as described below, there was no significant change in the Company’s property, plant and equipment for the nine months ended September 30, 2017 and 2016. Refer to note 6(8) of the consolidated financial statements for the year ended December 31, 2016 for the related disclosures.

In December 2016, M.Setek decided to dispose part of its land and buildings to TAKEEI Corporation and other companies, and has reclassified certain of the aforementioned assets which met the requirement of IFRS 5 for reclassification as noncurrent assets held for sale. Disposal transactions of aforementioned land and buildings were completed in between March to August 2017. The selling price (net of costs of disposal) and gain on disposal were $842,038 thousand and $216,748 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 September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 186,175 192,359 497,686 341,019	Nine months ended September 30,	Nine months ended September 30,
	2017 186,175		2016
			341,019

(Continued)

28

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

The interest rates applied for the abovementioned capitalization, ranged from 1.09% to 5.18% and 1.09% to 4.37% for the nine months ended September 30, 2017 and 2016, respectively.

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

(9) Investment Property

Land $	September 30, 2017 465,868	December 31, 2016 (in thousands) 465,868	September 30, 2016
			465,868

There were no significant additions, disposals and recognition or reversal of impairment losses on the Company’s investment property for the nine months ended September 30, 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.

(10) Intangible Assets

September 30, 2017 Goodwill $ 11,456,176 Patent and technology fee 12,275,548 Less: accumulated amortization and impairment loss (10,418,220 ) $ 13,313,504	December 31, 2016 (in thousands) 11,456,176 12,078,767 (9,932,109 ) 13,602,834	September 30, 2016
		11,456,176 12,078,767 (9,514,101 )
		14,020,842

(Continued)

29

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

There were no significant additions, disposals and recognition or reversal of impairment losses on the Company’s intangible assets for the nine months ended September 30, 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

September 30, 2017 Prepayment for equipment $ 472,211 Refundable and overpaid tax 3,103,340 Long-term prepaid rents 1,870,838 Prepayments for purchases 2,555,608 Long-term receivables 1,857,746 Refundable deposits 527,372 Others 2,424,375 12,811,490 Less: current (7,224,024 ) Noncurrent $ 5,587,466	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	September 30, 2016
		8,406,276 3,207,904 1,975,456 3,429,899 1,915,886 151,041 2,855,201
		21,941,663 (6,554,109 )
		15,387,554

(12) Short-term Borrowings

Unsecured borrowings $ Unused credit facility $ Interest rate	September 30, 2017 2,947,482 39,913,546 1.57%~ 4.39%	December 31, 2016 (in thousands) 526,723 33,877,442 4.35%~ 4.39%	September 30, 2016
			1,392,772
			36,868,994
			1.03%~ 4.35%

(Continued)

30

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 May 2017 to May 2022 From Feb. 2013 to Mar. 2017 From Dec. 2009 to Oct. 2016 From Feb. 2016 to Feb. 2019 From Sep. 2014 to Jun. 2017 From Nov. 2015 to Nov. 2023 From Jan. 2012 to Apr. 2022 From Apr. 2016 to Apr. 2032 $ $	September 30, 2017 22,704,000 37,500,000 17,216,000 500,000 - - 2,395,868 - 27,645,717 12,103,390 527,762 120,592,737 (470,733 ) 120,122,004 (18,125,897 ) 101,996,107 49,835,132 1.09%~ 5.15%	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%	September 30, 2016 25,800,000 22,000,000 23,672,000 - 7,596,757 5,937,182 3,000,000 3,166,956 18,215,527 16,949,873 97,726 126,436,021 (475,903 ) 125,960,118 (24,742,393 ) 101,217,725 36,053,138 1.09%~ 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 September 30, 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)

31

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(14) Provisions

Warranties Balance at January 1, 2017 $ 1,528,898 Additions (Reversals) 260,030 Usage (204,995) Effect of change in exchange rate 145 Balance at September 30, 2017 1,584,078 Less: current (800,708 ) Noncurrent $ 783,370 Balance at January 1, 2016 $ 1,819,519 Additions (Reversals) (123,634) Usage (145,383) Effect of change in exchange rate (4 ) Balance at September 30, 2016 1,550,498 Less: current (717,316 ) Noncurrent $ 833,182 Current $ 756,079 Noncurrent 772,819 Balance at December 31, 2016 $ 1,528,898	Litigation, claims and others (in thousands) 1,292,773 95,382 (1,025,032) (17,692 ) 345,431 (95,652 ) 249,779 4,316,817 597,325 (2,111,246) (226,946 ) 2,575,950 (2,293,284 ) 282,666 1,027,328 265,445 1,292,773	Total 2,821,671 355,412 (1,230,027) (17,547 ) 1,929,509 (896,360 ) 1,033,149 6,136,336 473,691 (2,256,629) (226,950 ) 4,126,448 (3,010,600 ) 1,115,848 1,783,407 1,038,264 2,821,671

• a. Provisions for warranties

The provisions for warranties for the nine months ended September 30, 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 nine months ended September 30, 2017 and 2016. Refer to note 6(16) of the consolidated financial statements for the year ended December 31, 2016 for the details.

(Continued)

32

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 at December 31, 2016 and 2015.

For the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, the Company set aside $5,496 thousand, $7,163 thousand, $16,490 thousand and $21,198 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 September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, these companies set aside $258,704 thousand, $235,381 thousand, $744,698 thousand and $702,389 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 $221,241 thousand, $291,510 thousand, $659,163 thousand and $873,245 thousand for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 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 at September 30, 2017, December 31, 2016 and September 30, 2016.

AUO’s issued and outstanding common stock, with par value of $10 per share, all amounted to $96,242,451 thousand as at September 30, 2017, December 31, 2016 and September 30, 2016.

AUO’s ADSs were listed on the New York Stock Exchange. Each ADS represents 10 shares of common stock. As of September 30, 2017, AUO had issued 36,878 thousand ADSs, which represented 368,779 thousand shares of its common stock.

(Continued)

33

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

b. Capital surplus

The components of capital surplus were as follows:

September 30, 2017 From common stock $ 52,756,091 From convertible bonds 6,049,862 From others 1,217,897 $ 60,023,850	December 31, 2016 (in thousands) 52,756,091 6,049,862 1,173,770 59,979,723	September 30, 2016 52,756,091 6,049,862 1,170,004 59,975,957

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

In accordance with AUO’s amended Articles of Incorporation approved in the annual shareholders’ meeting held on June 15, 2017, 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.

(Continued)

34

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

Pursuant to relevant laws or regulations or as requested by the local authority, 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.

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

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

(Continued)

35

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

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 September 30, 2017 $ Balance at January 1, 2016 $ 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 Realized gain on sales of securities reclassified to profit or loss Related tax Balance at September 30, 2016 $	Cumulative translation differences 536,819 (1,630,897) - - (51,093) 253,863 (891,308 ) 5,612,885 (4,408,897) - - (368,752) (270,696) 945,854 1,510,394	Unrealized gains (losses) on available- for-sale financial assets Unrealized gains (losses) on cash flow hedges (in thousands) 224,299 18,254 - - - (21,992) 1,257,846 - 3,426 - - 3,738 1,485,571 - (539,653) 12,279 - - - 5,302 439,147 - (885) - (2,876) - - (902 ) (104,267 ) 16,679	Total
			779,372 (1,630,897) (21,992) 1,257,846 (47,667) 257,601 594,263 5,085,511 (4,408,897) 5,302 439,147 (369,637) (273,572) 944,952 1,422,806

(Continued)

36

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

• f. Non-controlling interests, net of tax

Balance at beginning of the period $ Equity attributable to non-controlling interests: Loss for the period Adjustment of changes in ownership of investees Foreign currency translation differences Remeasurement of defined benefit plans Cash dividends from subsidiaries Proceeds from subsidiaries capital increase Proceeds from capital return upon dissolution of subsidiary Redemption of subsidiary treasury shares Balance at end of the period **$ **

Nine months ended September 30, 2017 2016 (in thousands) 18,390,483 22,651,183 (1,559,797) (616,668) 5,606 (160,610) (300,938) (1,631,646) - (98) (107,225) (87,749) 11,620 9,590 - (89,397) - (865,633 ) 16,439,749 19,208,972

(18) Share-based Payments

There was no significant change in the Company’s share-based payments for the nine months ended September 30, 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 September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 84,068,048 82,713,750 251,935,524 229,131,803 3,327,387 3,303,569 8,429,127 8,111,651 87,395,435 86,017,319 260,364,651 237,243,454	Nine months ended September 30,	Nine months ended September 30,
	2017 84,068,048 3,327,387 87,395,435		2016
			229,131,803 8,111,651
			237,243,454

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.

(Continued)

37

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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 and nine months ended September 30, 2017, AUO accrued the remuneration to employees amounting to $1,096,555 thousand and $3,521,919 thousand, respectively. Remuneration to directors was estimated based on the amount expected to pay and recognized together with the remuneration to employees as cost of sales or operating expenses. Additionally, AUO did not accrue any remuneration to employees and directors due to net loss for the nine months ended September 30, 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.

(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 September 30,	Three months ended September 30,	Three months ended September 30,	Three months ended September 30,
		2017	Total Recognized in cost of sales (in thousands) 9,243,590 6,312,233 502,106 319,824 485,441 430,563 830,562 601,135 8,569,902 8,329,333 142,577 245,561		2016
	Recognized in cost of sales	Recognized in operating expenses		Recognized in cost of sales	Recognized in operating expenses	Total
	7,111,439 378,909 394,299 700,173 7,516,932 142,577	2,132,151 123,197 91,142 130,389 1,052,970 -			1,896,335 117,518 103,491 136,833 1,066,296 -	8,208,568 437,342 534,054 737,968 9,395,629 245,561

(Continued)

38

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Employee benefits expenses: Salaries and wages Labor and health insurances Retirement benefits Other employee benefits Depreciation Amortization		Nine months ended September	Nine months ended September	Nine months ended September	30,
		2017	Total Recognized in cost of sales (in thousands) 28,812,841 18,674,136 1,463,271 993,458 1,420,351 1,309,661 2,373,276 1,857,498 27,243,163 25,540,386 486,013 741,457		2016
	Recognized in cost of sales 22,083,032 1,098,377 1,155,599 1,998,190 24,090,282 486,013	Recognized in operating expenses			Recognized in operating expenses	Total
		6,729,809 364,894 264,752 375,086 3,152,881 -			5,749,575 356,951 287,171 432,277 3,133,134 -	24,423,711 1,350,409 1,596,832 2,289,775 28,673,520 741,457

(22) Other Income

Interest income on bank deposits $ Interest income on government bonds with reverse repurchase agreements and others Rental income, net Dividend income Grants Other income **$ **	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 145,078 110,258 407,603 365,252 6,918 99 12,202 1,825 146,166 141,492 394,474 395,318 248,514 107,141 248,514 107,141 363,977 149,388 1,726,852 319,176 154,891 73,293 361,799 421,445 1,065,544 581,671 3,151,444 1,610,157	Nine months ended September 30,	Nine months ended September 30,
	2017 145,078 6,918 146,166 248,514 363,977 154,891 1,065,544		2016
			365,252 1,825 395,318 107,141 319,176 421,445
		3,151,444	1,610,157

(Continued)

39

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

(23) Other Gains and Losses

Foreign exchange gains (losses), net$ Gains (losses) on valuation of financial instruments measured at fair value through profit or loss, net Gains (losses) on disposals of investments and financial assets, net Gains (losses) on disposals of property, plant and equipment, net Litigation losses and others **$ **	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 145,770 (194,511) (1,283,092) (584,897) (35,203) 280,583 1,423,727 809,213 42,876 (356,103) 42,933 (356,103) 154,151 56,372 (71,245) 74,815 (18,570 ) (71,538 ) (659,827 ) (860,465 ) 289,024 (285,197 ) (547,504 ) (917,437 )	Nine months ended September 30,	Nine months ended September 30,
	2017 145,770 (35,203) 42,876 154,151 (18,570 ) 289,024		2016
			(584,897) 809,213 (356,103) 74,815 (860,465 ) (917,437 )

(24) Finance Cost

Interest expense on bank borrowings $ Interest expense on others **$ **	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 600,827 522,168 1,851,371 1,503,042 80,621 176,244 266,699 295,569 681,448 698,412 2,118,070 1,798,611	Nine months ended September 30,	Nine months ended September 30,
	2017 600,827 80,621 681,448		2016
			1,503,042 295,569
			1,798,611

(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.

(Continued)

40

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

The components of income tax expense were as follows:

Current income tax expense Current year $ Adjustment to prior years and others Deferred tax expense Temporary differences Investment tax credit and tax losses carryforwards Total income tax expense **$ **	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 2,279,375 687,020 7,428,741 1,452,986 3,471 2,238 66,784 95,084 2,282,846 689,258 7,495,525 1,548,070 - 64,892 - 64,892 - 49,922 - 49,922 - 114,814 - 114,814 2,282,846 804,072 7,495,525 1,662,884	Nine months ended September 30,	Nine months ended September 30,
	2017 2,279,375 3,471 2,282,846 - - - 2,282,846		2016
			1,452,986 95,084
		7,495,525	1,548,070
		- -	64,892 49,922
		-	114,814
		7,495,525	1,662,884

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 September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 201,898 (393,264) (271,754) (952,004) - 451 (3,738) 902 - (46,318 ) - (99,978 ) 201,898 (439,131 ) (275,492 ) (1,051,080 )	Nine months ended September 30,	Nine months ended September 30,
	2017 201,898 - - 201,898		2016
			(952,004) 902 (99,978 )
			(1,051,080 )

As of September 30, 2017, the tax authorities have completed the examination of income tax returns of AUO through 2015.

(Continued)

41

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Information on the integrated income tax system was as follows:

September 30, 2017 Unappropriated earnings generated after 1998 $ 43,576,534 Balance of the imputation credit account $ 3,065,807 Creditable ratios for distribution of AUO’s earnings for ROC resident shareholders	December 31, 2016 September 30, 2016 (in thousands) 21,585,361 12,801,292 4,083,362 3,878,285 2016 (Actual) 2015 (Actual) 19.27% 26.29%	December 31, 2016 September 30, 2016 (in thousands) 21,585,361 12,801,292 4,083,362 3,878,285 2016 (Actual) 2015 (Actual) 19.27% 26.29%
		3,878,285
		2015 (Actual)
		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.

(26) Earnings per Share

Basic earnings per share Profit (loss) attributable to AUO’s shareholders $ Weighted-average number of common shares outstanding during the period Basic earnings per share $ Diluted earnings per share Profit (loss) attributable to AUO’s shareholders $ Weighted-average number of common shares outstanding during the period Effect of employee remuneration in stock Diluted earnings per share **$ **	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands, except for per share data) 8,855,749 4,898,015 28,164,726 (1,151,718 ) 9,624,245 9,624,245 9,624,245 9,624,245 0.92 0.51 2.93 (0.12 ) 8,855,749 4,898,015 28,164,726 (1,151,718 ) 9,624,245 9,624,245 9,624,245 9,624,245 90,252 - 317,028 - 9,714,497 9,624,245 9,941,273 9,624,245 0.91 0.51 2.83 (0.12 )	Nine months ended September 30,	Nine months ended September 30,
			2016
			9,624,245
		2.93 28,164,726	(0.12 ) (1,151,718 )
		9,624,245 317,028	9,624,245 -
		9,941,273	9,624,245
		2.83	(0.12 )

(Continued)

42

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 September 30, 2017, December 31, 2016 and September 30, 2016 were as follows:

September 30, 2017 Carrying Amount Fair Value Financial assets: Available-for-sale financial assets－ noncurrent $ 4,094,541 4,094,541 Foreign currency forward contracts 48,033 48,033 Long-term receivables 1,857,746 1,857,746 Refundable deposits 527,372 527,372 Financial liabilities: Long-term borrowings (including current installments) 120,122,004 120,122,004 Foreign currency forward contracts 86,441 286,441 Interest rate swap contracts - - Guarantee deposits received 834,607 834,607	**September 30, 2017 **	**September 30, 2017 **	**December 31, 2016 **	**December 31, 2016 **	**September 30, 2016 **	**September 30, 2016 **
	Carrying **Amount **	**Fair Value **	Carrying **Amount **	**Fair Value **	Carrying **Amount **	**Fair Value **
		4,094,541 48,033 1,857,746 527,372 120,122,004 286,441 - 834,607			2,506,433 123,857 1,915,886 151,041 125,960,118 29,075 5,437 866,948	2,506,433 123,857 1,915,886 151,041 125,960,118 29,075 5,437 866,948

• 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.

(Continued)

43

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

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

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

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

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

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

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

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

• (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 September 30, 2017 Assets: Available-for-sale financial assets－ noncurrent $ 4,094,541 Foreign currency forward contracts - Long-term receivables - Liabilities: Foreign currency forward contracts -	Level 2 Level 3 (in thousands) - - 48,033 - 1,857,746 - 286,441 -	Total
		4,094,541 48,033 1,857,746 286,441

(Continued)

44

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Level 1 December 31, 2016 Assets: Available-for-sale financial assets－ noncurrent $ 2,836,696 Foreign currency forward contracts - Long-term receivables - Liabilities: Foreign currency forward contracts - Interest rate swap contracts - September 30, 2016 Assets: Available-for-sale financial assets－ noncurrent $ 2,506,433 Foreign currency forward contracts - Long-term receivables - Liabilities: Foreign currency forward contracts - Interest rate swap contracts -

Level 2

There were no transfers between Level 1 and 2 for the nine months ended September 30, 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:

Financial assets Monetary items USD $ JPY EUR Non-monetary items USD RMB	September 30, 2017	September 30, 2017	September 30, 2017	Dec	ember 31, 2	016	**September 30, **	**September 30, **	2016
	Foreign currency amounts	Exchan ge rate	NTD	Foreign currency amounts	Exchange rate	NTD	Foreign currency amounts	Exchange rate	NTD
	(in thousands) 2,204,193 20,772,482 78,930 3,300 19,192	30.405 0.2707 35.829 30.405 4.5697	(in thousands) 67,018,488 5,623,111 2,827,983 100,337 87,702	(in thousands) 2,287,148 20,236,416 106,660 3,000 20,758	32.312 0.2773 33.895 32.312 4.6391				(in thousands) 60,128,422 10,811,989 2,319,712 94,068 99,415

(Continued)

45

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Financial liabilities Monetary items USD JPY EUR	September 30, 2017	September 30, 2017	September 30, 2017	Dec	ember 31, 2	016	**September 30, **	**September 30, **	2016
	Foreign currency amounts	Exchan ge rate	NTD	Foreign currency amounts	Exchange rate	NTD	Foreign currency amounts	Exchange rate	NTD
	(in thousands) 1,065,108 26,166,293 2,155	30.405 0.2707 35.829	(in thousands) 32,384,609 7,083,216 77,211	(in thousands) 1,099,799 26,820,343 987	32.312 0.2773 33.895				(in thousands) 33,729,712 8,754,516 55,276

• 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 and JPY at September 30, 2017 and 2016, while all other variables were remained constant, would have increased or decreased the net profit before tax for the nine months ended September 30, 2017 and 2016 as follows:

		Nine months ended
		September 30,
		2017 2016
		(in thousands)
1% of depreciation	$	359,245 307,206
1% of appreciation		(359,245) (307,206)

• 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 gains (losses) for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016 were $145,770 thousand, $(194,511) thousand, $(1,283,092) thousand and $(584,897) 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.

(Continued)

46

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

7. Related-party Transactions

All inter-company transactions and balances between AUO and its subsidiaries 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.

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[(ii)] Daxin Materials Corp. (“Daxin”) Associate of the Company Ichijo Seisakusyo Co., Ltd. (“Ichijo”) Associate of the Company AUO SunPower Sdn. Bhd. (“AUSP”) Joint venture of the Company[(iii)] 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 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

(Continued)

47

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Name of relatedparty BenQ Logistic (Shanghai) Co., Ltd. (“BQls”) BenQ Guru Software Co., Ltd. (“GSS”) BenQ Guru Corporation (“GST”) BenQ Material (Suzhou) Co., Ltd. (“BMS”) Daxon Biomedical (Suzhou) Co., Ltd. (“DTB”) Nanjing BenQ Hospital Co., Ltd. (“QCHN”) Suzhou BenQ Hospital Co., Ltd. (“QCHS”) BenQ Foundation	Relationship with the Company
	Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Subsidiary of Qisda Substantive related party

• (i) 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.

• (ii) The Company disposed all its shareholdings in EGPC to SREC in October 2016.

• (iii) In September 2016, the Company disposed of its entire 50% interest in AUSP to SPTL. Refer to note 6(7) for the related disclosures.

• (2) Compensation to key management personnel

Key management personnel’s compensation comprised:

Short-term employee benefits $ Post-employment benefits **$ **	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 25,779 24,395 78,198 73,766 605 514 1,811 1,586 26,384 24,909 80,009 75,352	Nine months ended September 30,	Nine months ended September 30,
	2017 25,779 605 26,384		2016
			73,766 1,586
			75,352

• (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

Associates $ Joint ventures Others **$ **	Sales	Sales	Sales
	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 452 40,648 1,077,166 481,133 - 1,230,606 - 4,123,894 2,684,147 3,617,788 9,524,111 9,247,825 2,684,599 4,889,042 10,601,277 13,852,852	Nine months ended September 30,
	2017 452 - 2,684,147 2,684,599		2016
			481,133 4,123,894 9,247,825
		10,601,277	13,852,852

(Continued)

48

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

		Accounts receivable from	Accounts receivable from	Accounts receivable from
			relatedparties
		September	December	September
		30, 2017	31, 2016	30, 2016
			(in thousands)
Associates	$	7,153	58,755	48,586
Others		1,768,316	2,474,469	2,595,890
	$	1,775,469	2,533,224	2,644,476

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

Associates $ Joint ventures Others **$ **	Purchases	Purchases	Purchases
	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 2,221,998 2,552,785 6,526,902 7,441,130 255,650 1,250,854 741,208 3,484,781 4,354,716 4,595,642 13,115,071 13,399,781 6,832,364 8,399,281 20,383,181 24,325,692	Nine months ended September 30,
	2017 2,221,998 255,650 4,354,716 6,832,364		2016
			7,441,130 3,484,781 13,399,781
			24,325,692

	Notes and accounts payable to	Notes and accounts payable to	Notes and accounts payable to
		relatedparties
	September	December	September
	30, 2017	31, 2016	30, 2016
		(in thousands)
Associates	$ 3,282,857	3,734,927	3,729,662
Joint ventures	-	-	1,547
Others	4,403,319	5,088,138	4,692,770
	$ 7,686,176	8,823,065	8,423,979

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.

(Continued)

49

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

• c. Acquisition of property, plant and equipment

Associates **$ **	Acquisitionprices	Acquisitionprices	Acquisitionprices
	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) - - 1,549 -	Nine months ended September 30,
	2017 -		2016
			-

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

Associates $ Others $ Associates $ Others **$ **	Proceeds from disposal	Proceeds from disposal	Proceeds from disposal
	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) - 926 - 926 2,044 - 3,341 - 2,044 926 3,341 926 Gains on disposal	Nine months ended September 30,
	2017 - 2,044 2,044		2016
			926 -
			926
	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) - 22 - 22 2,038 - 2,205 - 2,038 22 2,205 22	Nine months ended September 30,
	2017 - 2,038 2,038		2016
			22 -
			22

• e. Other related party transactions

Other September 30, 2017 Associates $ 11,820 Others 4,090 $ 15,910	Other	receivables due from relatedparties	receivables due from relatedparties
		December 31, 2016 (in thousands) 10,970 23,318 34,288	September 30, 2016
			7,924 29,265
			37,189

(Continued)

50

AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Associates Joint ventures Others Associates $ Joint ventures Others: BMC Others $ Associates $ Joint ventures Others $ Associates $ Joint ventures Others **$ **	Other payables due to relatedparties September 30, 2017 December 31, 2016 September 30, 2016 (in thousands) $ 5,454 16,218 6,940 180 406 369 10,116 10,717 11,014 $ 15,750 27,341 18,323 Rental income	Other payables due to relatedparties September 30, 2017 December 31, 2016 September 30, 2016 (in thousands) $ 5,454 16,218 6,940 180 406 369 10,116 10,717 11,014 $ 15,750 27,341 18,323 Rental income	Other payables due to relatedparties September 30, 2017 December 31, 2016 September 30, 2016 (in thousands) $ 5,454 16,218 6,940 180 406 369 10,116 10,717 11,014 $ 15,750 27,341 18,323 Rental income
	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 12,533 8,994 35,149 24,617 1,653 1,652 4,959 4,958 15,683 15,692 47,120 47,523 15,259 15,198 18,182 24,908 45,128 41,536 105,410 102,006 Administration and other income	Nine months ended September 30,
			2016
	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 3,677 2,339 10,598 7,918 - 2,743 - 8,302 4,598 2,572 6,350 3,570 8,275 7,654 16,948 19,790 Rental and other expenses	Nine months ended September 30,
			2016
			7,918 8,302 3,570
			19,790
	Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 (in thousands) 5,500 10,083 20,232 30,378 251 625 955 1,429 10,225 15,040 26,216 45,341 15,976 25,748 47,403 77,148	Nine months ended September 30,
	2017 5,500 251 10,225 15,976		2016
			30,378 1,429 45,341
			77,148

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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

For the nine months ended September 30, 2017 and 2016, the Company entitled for cash dividends declared by related parties of $420,547 thousand and $307,481 thousand, respectively. As of September 30, 2017 and 2016, the aforementioned dividends were all received.

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 **$ **	September 30, 2017 103,174 42,269,343 19,519,633 61,892,150	December 31, 2016 (in thousands) 93,379 52,076,840 27,058,442 79,228,661	September 30, 2016
				74,953 67,468,547 23,944,433
				91,487,933

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

9. Significant Contingent Liabilities and Unrecognized Commitments

The significant commitments and contingencies of the Company as of September 30, 2017, in addition to those disclosed in other notes to the consolidated interim financial statements, were as follows:

(1) As at September 30, 2017, the Company had the following outstanding letters of credit for the purpose of purchasing machinery and equipment and materials:

Currency USD JPY	September 30, 2017
	(in thousands) 16,001 895,904

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

• (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 at September 30, 2017, significant outstanding purchase commitments for construction in progress, property, plant and equipment totaled $42,904,861 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.

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.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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 October 25, 2017, AUO and AUUS have reached settlement agreements with the relevant plaintiffs. In addition to the above cases in the United States and Canada, a lawsuit was filed by certain consumers in Israel against certain LCD manufacturers including AUO in the District Court of the Central District in Israel (“Israeli Court”). The defendants contested various issues including whether the lawsuit was properly served. In December 2016, the Israeli Court overturned the original decision and revoked the permission for this case to serve out of Israeli jurisdiction. The plaintiffs lodged an appeal to the Israeli Supreme Court but the Israeli Supreme Court overruled the appeal in August 2017. Management is reviewing the merits of this matter on an on-going basis.

• (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, AUSZ received an administrative complaint filed by Shenzhen China Star Optoelectronics Technology Co., Ltd (“CSOT”) alleging that AUSZ infringes two PRC patents, and the complaint requests that AUSZ cease the alleged infringing act. Based on the Company’s 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. This matter is currently suspended pending the outcome of the invalidation proceeding. In April 2017, CSOT filed civil lawsuits in the Intermediate People’s Court of Shenzhen Municipality against the subsidiary claiming infringement of the same two PRC patents. In June 2017, CSOT filed civil lawsuits in the No.1 Intermediate People’s Court of Chongqing Municipality against the subsidiary claiming infringement of three PRC patents (including one of the above mentioned PRC patents). CSOT requested that AUSZ cease the alleged infringing act and claimed approximate RMB49.91 million for economic loss for each of the said respective PRC patents and compensation for reasonable fees and litigation expenses such as notarization fees and attorney fees incurred by CSOT. In September 2017, the relevant parties reached a settlement agreement and agreed to withdraw relevant legal proceedings.

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

As of October 25, 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

In October 2017, in connection with the regulatory plan and urban construction plan of Kunshan Economic and Technology Development District, FTKS entered into a compensation agreement for the compulsory imposition with the Administration Committee of Kunshan Economic and Technology Development District. The Administration Committee of Kunshan Economic and Technology Development District will compulsorily impose FTKS’s land use rights, buildings and its related appendages located at No.555, Tongfeng East Rd., Economic and Technology Development District, Kunshan City, Jiang Su Province, with consideration of RMB215,527 thousand. The gain on disposal is expected to be approximately RMB132,316 thousand and will only be recognized upon completion of the plant relocation and the transfer of land use rights.

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

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

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.

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 September 30, 2017 and 2016 and for the nine months ended September 30, 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 profit before income tax Segment profit (loss) excluding depreciation and amortization $ Segment assets	Three months ended	Three months ended	September 30, 2017	September 30, 2017
	Display Solar Adjustment and elimination Total segments (in thousands) 82,718,243 4,677,192 - 87,395,435 9,759,064 (16,094 ) - 9,742,970 763,683 $ 10,506,653 18,076,102 379,347 - 18,455,449 $ 449,239,066 Three months ended September 30, 2016			Total segments
	Display 80,613,980 5,937,162 15,119,737	Solar Adjustment and elimination (in thousands) 5,403,339 - (177,898 ) - $ 280,717 - $		Total segments
				86,017,319 5,759,264 (339,580 ) 5,419,684 15,400,454 419,649,764

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AU OPTRONICS CORP. AND SUBSIDIARIES

Notes to Consolidated Interim Financial Statements

Net revenue from external customers $ Segment profit (loss) $ Net non-operating income and expenses Consolidated profit before income tax Segment profit (loss) excluding depreciation and amortization $ Segment assets Net revenue from external customers $ Segment profit $ Net non-operating income and expenses Consolidated loss before income tax Segment profit excluding depreciation and amortization $ Segment assets	Nine months ended September 30, 2017	Nine months ended September 30, 2017	Nine months ended September 30, 2017
	Display Solar Adjustment and elimination Total segments (in thousands) 246,080,503 14,284,148 - 260,364,651 33,949,749 (513,343 ) - 33,436,406 664,048 $ 34,100,454 60,439,429 726,153 - 61,165,582 $ 449,239,066 Nine months ended September 30, 2016		Total segments
	Display 218,153,561 468,247 28,493,643	Solar Adjustment and elimination (in thousands) 19,089,893 - 309,790 - $ 1,699,371 - $	Total segments
			237,243,454 778,037 (883,539 ) (105,502 ) 30,193,014 419,649,764

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