Compal - Audit Report / Information 2019

Stock Code:2324

COMPAL ELECTRONICS, INC.

Parent Company Only Financial Statements

With Independent Auditors’ Report For the Years Ended December 31, 2019 and 2018

Address: No.581 & 581-1, Ruiguang Rd., Neihu District, Taipei, Taiwan Telephone: (02)8797-8588

		Contents	Page
1.	Cover Page		1
2.	Table of Contents		2
3.	Independent Auditors’ Report		3
4.	Balance Sheets		4
5.	Statements of Comprehensive Income		5
6.	Statements of Changes in Equity		6
7.	Statements of Cash Flows		7
8.	Notes to the Parent-Company-Only Financial Statements
	(1)	Company history	8
	(2)	Approval date and procedures of the financial statements	8
	(3)	New standards, amendments and interpretations adopted	8`～`11
	(4)	Summary of significant accounting policies	11`～`31
	(5)	Significant accounting assumptions and judgments, and major	31`～`32
		sources of estimation uncertainty
	(6)	Explanation of significant accounts	32`～`66
	(7)	Related-party transactions	66`～`73
	(8)	Pledged assets	73
	(9)	Commitments and contingencies	73
	(10)	Losses due to major disasters	73
	(11)	Subsequent events	73
	(12)	Other	73`～`74
	(13)	Other disclosures
		(a) Information on significant transactions	74`～`75, 86~95
		(b) Information on investees	75, 96~101
		(c) Information on investment in Mainland China	75, 102~104
	(14)	Segment information	75
9.	List	of major accounting items	76`～`85

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Independent Auditor’s Report

To COMPAL ELECTRONICS, INC.:

Opinion

We have audited the financial statements of COMPAL ELECTRONICS, INC. (the “ Company” ), which comprise the balance sheets as of December 31, 2019 and 2018, the statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2019 and 2018, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended December 31, 2019 and 2018, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audit of the financial statements as of and for the year ended December 31, 2019 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, Rule No. 1090360805 issued by the Financial Supervisory Commission, and the auditing standards generally accepted in the Republic of China. Furthermore, we conducted our audit of the financial statements as of and for the year ended December 31, 2018 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

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

Account receivable valuation

Please refer to Note (4)(f) for the accounting policy of accounts receivable. Information of account receivable valuation are shown in Note (6)(e) of the financial statements.

3-1

Description of key audit matters:

The Company devotes to develop new product lines and customers in emerging countries, and the credit risks of these customers are higher than other world leading enterprises. Therefore, valuation of accounts receivable has been identified as a key audit matter.

Our key audit procedures performed in respect of the above area included the following:

In order to evaluate the reasonableness of the Company's estimations for bad debts, our key audit procedures included reviewing if the measurement of impairment loss of accounts receivable is accordance with accounting policy, examining the historical recovery records, analyzing the aging of accounts receivable, and the current credit status of customers, as well as inspecting the amount collected in the subsequent period.

2. Inventory valuation

Please refer to Note (4)(g) and Note (5) for the accounting policy of inventory valuation, as well as the estimation and assumption uncertainty of the valuation of inventory, respectively. Information of estimation of the valuation of inventory are disclosed in Note (6)(g) of the financial statements.

Description of key audit matters:

The inventory is measured at the lower of cost or net realizable value. The short life cycle of electronic products may cause significant changes in customers’ demand and sales of related products. Consequently, the book value of inventory may be lower than the net realizable value of inventory. Therefore, the valuation of inventory is one of the key audit matters.

Our key audit procedures performed in respect of the above area included the following:

In order to verify the rationality of assessment of inventory valuation estimated by the Company, our key audit procedures included reviewing the consistency of prior year and accounting policy, inspecting the Company's inventory aging reports, analyzing the change of inventory aging, as well as verifying the inventory aging reports and the calculation of lower of cost or net realizable value.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

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

3-2

Auditor’s Responsibilities for the Audit of the Financial Statements

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

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

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than the one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

3-3

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Szu-Chuan Chien and Yiu-Kwan Au.

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KPMG

Taipei, Taiwan (Republic of China) March 30, 2020

Notes to Readers

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

COMPAL ELECTRONICS, INC.

Balance Sheets

December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (note (6)(a)) 1110 Current financial assets at fair value through profit or loss (note (6)(b)) 1136 Current financial assets at amortized cost (note (6)(d)) 1170 Notes and accounts receivable, net (note (6)(e)) 1180 Notes and accounts receivable due from related parties, net (notes (6)(e) and 7) 1200 Other receivables, net (notes (6)(f) and 7) 1310 Inventories (note (6)(g)) 1470 Other current assets Non-current assets: 1550 Investments accounted for using equity method (note (6)(h)) 1510 Non-current financial assets at fair value through profit or loss (note (6)(b)) 1517 Non-current financial assets at fair value through other comprehensive income (note (6)(c)) 1600 Property, plant and equipment (note (6)(j)) 1755 Right-of-use assets (note (6)(k)) 1780 Intangible assets 1840 Deferred tax assets (note (6)(q)) 1990 Other non-current assets Total assets	December 31, 2019 Amount % $ 13,459,969 4.0 149,888 - - - 176,967,731 52.4 1,052,131 0.3 3,110,607 0.9 50,048,069 14.9 734,434 0.2 245,522,829 72.7 83,430,169 24.7 71,097 - 3,019,393 0.9 2,620,638 0.8 1,387,615 0.4 438,334 0.1 1,166,808 0.4 126,605 - 92,260,659 27.3 $ 337,783,488 100.0	December 31, 2018 Amount % 20,446,378 5.7 284,768 0.1 350,000 0.1 189,496,594 53.3 1,318,230 0.4 1,418,750 0.4 51,517,159 14.5 541,027 0.1 265,372,906 74.6 83,299,238 23.5 23,745 - 3,731,918 1.0 2,128,181 0.6 - - 378,745 0.1 760,580 0.2 117,500 - 90,439,907 25.4 355,812,813 100.0 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note (6)(l)) 2130 Current contract liabilities (note (6)(u)) 2170 Notes and accounts payable 2180 Notes and accounts payable to related parties (note 7) 2200 Other payables (note 7) 2230 Current tax liabilities 2280 Current lease liabilities (note (6)(n)) 2300 Other current liabilities 2365 Current refund liabilities 2322 Long-term borrowings, current portion (note (6)(m)) Non-Current liabilities: 2540 Long-term borrowings(note (6)(m)) 2570 Deferred tax liabilities (note (6)(q)) 2580 Non-current lease liabilities (note (6)(n)) 2640 Non-current net defined benefit liability (note (6)(p)) 2670 Non-current liabilities, others (note (6)(h)) Total liabilities Equity (notes (6)(r) and (6)(s)): 3110 Ordinary share 3200 Capital surplus 3300 Retained earnings 3400 Other equity interest 3500 Treasury shares Total equity Total liabilities and equity	December 31, 201	9		December 31, 2018 Amount % 51,305,682 14.4 1,405,452 0.4 77,050,816 21.7 78,376,843 22.0 8,392,511 2.4 1,787,434 0.5 - - 587,308 0.2 1,480,446 0.4 17,496,250 4.9 237,882,742 66.9 10,900,000 3.0 386,555 0.1 - - 621,581 0.2 298,289 0.1 12,206,425 3.4 250,089,167 70.3 44,071,466 12.4 9,932,434 2.8 60,060,381 16.9 (7,459,388) (2.1) (881,247) (0.3) 105,723,646 29.7 355,812,813 100.0
			Amount	%

See accompanying notes to financial statements.

COMPAL ELECTRONICS, INC.

Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

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

4000 Net sales revenue (notes (6)(u) and 7) 5000 Cost of sales (notes (6)(g), (6)(p), 7 and 12) Gross profit 5910 Less: Unrealized profit (loss) from sales Gross profit Operating expenses: (notes (6)(o), (6)(p) and 12) 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Net operating income Non-operating income and expenses: 7020 Other gains and losses, net (note (6)(w)) 7050 Finance costs 7190 Other income (notes (6)(o) and (6)(w)) 7370 Share of profit of associates and joint ventures accounted for using equity method(note (6)(h)) Total non-operating income and expenses 7900 Profit from continuing operations before tax 7950 Less: Income tax expenses (note (6)(q)) Profit 8300 Other comprehensive income: 8310 Components of other comprehensive income (loss) that will not be reclassified to profit or loss 8311 Gains (losses) on remeasurements of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8330 Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8380 Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income 8500 Total comprehensive income Earnings per share (note 6(t)) 9750 Basic earnings per share 9850 Diluted earnings per share	2019	% 100.0 97.3 2.7 - 2.7 0.4 0.3 1.1 1.8 0.9 - (0.2) 0.1 0.1 - 0.9 0.1 0.8 - - - - - (0.2) - - (0.2) (0.2) 0.6 1.60 1.58	2018 Amount % 911,050,122 100.0 889,171,625 97.6 21,878,497 2.4 (2,344) - 21,880,841 2.4 3,157,897 0.3 2,389,356 0.3 9,396,882 1.0 14,944,135 1.6 6,936,706 0.8 (126,030) - (1,938,044) (0.2) 887,354 0.1 4,198,330 0.4 3,021,610 0.3 9,958,316 1.1 1,044,951 0.1 8,913,365 1.0 (20,189) - (1,096,846) (0.1) (212,493) - (69,926) - (1,259,602) (0.1) 1,853,763 0.1 (229,339) - - - 1,624,424 0.1 364,822 - 9,278,187 1.0 2.05 2.02
	Amount $916,280,028 891,431,772 24,848,256 (893) 24,849,149 3,532,483 2,318,452 10,461,262 16,312,197 8,536,952 (420,923) (1,969,101) 653,839 1,022,912 (713,273) 7,823,679 867,780 6,955,899 (32,645) 120,897 359,147 3,056 444,343 (1,620,812) (322,922) - (1,943,734) (1,499,391) $ 5,456,508 $ $

See accompanying notes to financial statements.

COMPAL ELECTRONICS, INC. Statements of Changes in Equity For the years ended December 31, 2019 and 2018 (Expressed in Thousands of New Taiwan Dollars)

Ordinary shares	Capital surplus		Retained	earnings	earnings				Total other equity interest	Total other equity interest	Total other equity interest		Treasury shares Total equity
		Legal reserve	Special reserve	Unappropriated retained earnings		Total retained earnings	Exchange differences on translation of foreign financial statements		Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income		Unearned employee benefit and others	Total other equity interest
$ 44,191,916 - - - - - - - - - (120,450) - - 44,071,466 - - - - - - - - - - - $ 44,071,466	10,938,773 - -	18,252,861 - -	4,339,549 - -		34,458,787 8,913,365 14,094 8,927,459 (574,953) (4,491,599) (4,407,147) - (521,643) (1,156) 36,141 - (1,024,470) 32,401,419 6,955,899 (30,420) 6,925,479 (891,336) 1,363,317 (4,407,147) - - (27,199) - (4,824,910) 30,539,623	57,051,197 8,913,365 14,094		(3,477,376) - 1,624,424 1,624,424 - - - - - - - - - (1,852,952) - (1,942,028) (1,942,028) - - - - - - - - (3,794,980)		(5,847,823) - (1,273,696) (1,273,696) - - - - 489,483 1,130 - - 1,024,470 (5,606,436) - 474,763 474,763 - - - - - - - 4,824,910 (306,763)	(79,856) - - - - - - - - - 79,856 - - - - (1,706) (1,706) - - - - - - - - (1,706)	(9,405,055) - 350,728 350,728 - - - - 489,483 1,130 79,856 - 1,024,470 (7,459,388) - (1,468,971) (1,468,971) - - - - - - - 4,824,910 (4,103,449)	(881,247) 101,895,584 - 8,913,365 - 364,822 - 9,278,187 - - - - - (4,407,147) - (881,429) - (64,866) - (485) - (156,219) - 60,021 - - (881,247) 105,723,646 - 6,955,899 - (1,499,391) - 5,456,508 - - - - - (4,407,147) - (881,429) - 43,473 - (22,439) - 60,021 - - (881,247) 105,972,633
	-	-	-			8,927,459
		574,953 - - - - - - - -	- 4,491,599 - - - - - - -
		18,827,814 - -	8,831,148 - -
		-	-
		891,336 - - - - - - -
		19,719,150

See accompanying notes to financial statements.

COMPAL ELECTRONICS, INC.

Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities:
Profit before tax
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation and amortization
Increase in expected credit loss
Net gain on financial assets or liabilities at fair value through profit or loss
Finance cost
Interest income
Dividend income
Compensation cost of share-based payments
Share of profit of subsidiaries, associates and joint ventures accounted for using equity method
Loss on disposal of investments
Others
Total adjustments to reconcile profit (loss)
Changes in operating assets and liabilities:
Changes in operating assets:
Decrease (increase) in financial assets at fair value through profit or loss
Decrease (increase) in notes and accounts receivable
Decrease (increase) in other receivables
Decrease (increase) in inventories
Decrease (increase) in other current assets
Total changes in operating assets
Changes in operating liabilities:
Increase (decrease) in notes and accounts payable
Increase (decrease) in other payables
Increase (decrease) in refund liabilities
Increase (decrease) in contract liabilities
Increase (decrease) in other current liabilities
Others
Total changes in operating liabilities
Total changes in operating assets and liabilities
Total adjustments
Cash inflow (outflow) generated from operations
Interest received
Dividends received
Interest paid
Income taxes paid
Net cash flows from (used in) operating activities
Cash flows from (used in) investing activities:
Redemption from financial assets at amortized cost
Acquisition of financial assets at fair value through profit or loss and through other comprehensive income
Proceeds from disposal of financial assets at fair value through profit or loss and through other comprehensive income
Acquisition of investments accounted for using equity method
Proceeds from disposal of investments accounted for using equity method
Proceeds from capital reduction of investments
Acquisition of property, plant and equipment
Increase in other receivables due from related parties
Acquisition of intangible assets
Others
Net cash flows from (used in) investing activities
Cash flows from (used in) financing activities:
Increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Payment of lease liabilities
Cash dividends paid
Others
Net cash flows from (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

2019
2018
$ 7,823,679
9,958,316
1,017,058
456,117
1,537
1,065
(14,195)
(95,526)
1,969,101
1,938,044
(184,607)
(332,905)
(71,778)
(212,129)
-
(156,219)
(1,022,912)
(4,198,330)
(8,990)
-
(48)
-
1,685,166
(2,599,883)
(149,888)
-
12,793,425
(23,179,534)
(316,517)
(629,912)
1,469,090
(8,531,796)
(193,407)
63,537
13,602,703
(32,277,705)
(6,363,500)
11,759,347
1,176,316
1,172,349
(297,945)
40,154
(527,630)
(212,174)
(238,828)
(77,610)
(11,365)
(12,315)
(6,262,952)
12,669,751
7,339,751
(19,607,954)
9,024,917
(22,207,837)
16,848,596
(12,249,521)
231,795
314,650
536,175
592,252
(2,147,529)
(1,769,911)
(450,537)
(684,300)
15,018,500
(13,796,830)
350,000
350,000
(74,992)
(131,622)
1,152,409
865,964
(341,107)
(29,558)
18,034
-
22,426
8,054
(761,929)
(203,186)
(1,587,080)
(321,840)
(384,816)
(521,722)
(6,244)
(10,572)
(1,613,299)
5,518
(11,941,882)
9,919,682
66,503,625
34,258,000
(69,249,875)
(32,994,950)
(414,856)
-
(5,288,576)
(5,288,576)
(46)
-
(20,391,610)
5,894,156
(6,986,409)
(7,897,156)
20,446,378
28,343,534
$
13,459,969
20,446,378

See accompanying notes to financial statements.

COMPAL ELECTRONICS, INC.

Notes to the Parent-Company-Only Financial Statements

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

Compal Electronics, Inc. (the “Company”) was incorporated in June 1984 as a company limited by shares and registered under the Ministry of Economic Affairs, R.O.C. The address of the Company's registered office is No.581 and No.581-1 Ruiguang Rd., Neihu Dist., Taipei City, Taiwan. In accordance with Article 19 of the Business Mergers and Acquisitions Act, the Company merged its subsidiary, Compal Communications, Inc. (“CCI”) (the “Merger”), pursuant to the resolutions of the Board of Directors in November, 2013. The Company was the surviving company and CCI was the dissolved company. The effective date of the Merger was February 27, 2014. The Company is primarily involved in the manufacture and sale of notebook personal computers (“notebook PCs”), monitors, LCD TVs, mobile phones and various components and peripherals.

(2) Approval date and procedures of the financial statements:

The accompanying parent-company-only financial statements were authorized for issuance by the Board of Directors and issued on March 30, 2020.

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

are effective for annual periods beginning on or after January 1, 2019.
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
IFRS 16 “Leases”	January 1, 2019
IFRIC 23 “Uncertainty over Income Tax Treatments”	January 1, 2019
Amendments to IFRS 9 “Prepayment features with negative compensation”	January 1, 2019
Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”	January 1, 2019
Amendments to IAS 28 “Long-term interests in associates and joint ventures”	January 1, 2019
Annual Improvements to IFRS Standards 2015–2017 Cycle	January 1, 2019

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of significant changes are as follows:

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

(i) IFRS 16“Leases”

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The Company applied IFRS 16 using the modified retrospective approach, there was no effect on retained earnings on January 1, 2019. The details of the changes in accounting policies are disclosed below,

1) Definition of a lease

Previously, the Company determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Company assesses whether a contract is or contains a lease based on the definition of a lease, as explained in note (4)(k).

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Company applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

2) As a lessee

As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Company. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company’ s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments – the Company applied this approach to all leases.

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

－ Applied a single discount rate to a portfolio of leases with similar characteristics.
－ Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

－ Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
－ Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
Leases previously classified as finance leases

For leases that were classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and the lease liability at January 1, 2019 are determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.

3) As a lessor

The Company is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor. The Company accounted for its leases in accordance with IFRS 16 from the date of initial application.

4) Impacts on financial statements

On transition to IFRS 16, the Company recognized additional $821,816 thousands of right-of-use assets and lease liabilities. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 1.2%.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application, and lease liabilities recognized in the statement of financial position at the date of initial application disclosed as follows:

application disclosed as follows:
Operating lease commitment at December 31, 2018 as disclosed in the Company’s financial statements Discounted using the incremental borrowing rate at January 1, 2019 Finance lease liabilities recognized as at December 31, 2018 Lease liabilities recognized at January 1, 2019	January 1, 2019
	$ 837,450 $ 821,816 - $ 821,816

(b) The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020 in accordance with Rule No. 1080323028 issued by the FSC on July 29, 2019:

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”	January 1, 2020
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020

The Company assesses that the adoption of the above mentioned standards would not have any material impact on its financial statements.

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (“IASB”), but have yet to be endorsed by the FSC:

Board (“IASB”), but have yet to be endorsed by the FSC:
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between	Effective date to
an Investor and Its Associate or Joint Venture”	be determined
	by IASB
IFRS 17 “Insurance Contracts”	January 1, 2021
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	January 1, 2022

The Company is evaluating the impact of its initial adoption of the above-mentioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

(4) Summary of significant accounting policies:

The significant accounting policies presented in the parent-company-only financial statements are summarized as follows. The following accounting policies were applied consistently throughout the periods presented in the parent-company-only financial statements.

(a) Statement of compliance

These parent-company-only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

(b) Basis of preparation

(i) Basis of measurement

Except for the following significant accounts in the statement of financial position, the parentcompany-only financial statements have been prepared on the historical cost basis:

1) Financial instruments measured at fair value through profit or loss are measured at fair value;
2) Financial instruments measured at fair value through other comprehensive income are measured at fair value;

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

3) The defined benefit liability (or asset) is recognized as plan assets less the present value of the defined benefit obligation and the effect of the asset ceiling mentioned in note (4)(q).

(ii) Functional and presentation currency

The functional currency of the Company is determined based on the primary economic environment in which the Company operates. The parent-company-only financial statements are presented in New Taiwan Dollar, which is the Company’ s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(c) Foreign currency
(i) Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the reporting date.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation.

Foreign currency differences arising on retranslation are recognized in profit or loss, except for the following differences which are recognized in other comprehensive income arising on the retranslation:

1) fair value through other comprehensive income financial assets financial assets;
2) a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or
3) qualifying cash flow hedges to the extent the hedge is effective
(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Company’s functional currency at exchange rates of the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company’ s functional currency at average rate. Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation differences in equity.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to noncontrolling interest. When the Company disposes of only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.

(d) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

(i) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
(ii) It holds the asset primarily for the purpose of trading;
(iii) It expects to realize the asset within twelve months after the reporting period; or
(iv) The asset is cash and cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

(i) It expects to settle the liability in its normal operating cycle;
(ii) It holds the liability primarily for the purpose of trading;
(iii) The liability is due to be settled within twelve months after the reporting period; or
(iv) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not impact its classification.
(e) Cash and cash equivalents

Cash comprise cash on hand and demand deposits. Cash equivalents are subject to an insignificant risk of changes in their fair value, and are used by the Company in the management of its short-term commitments.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The time deposits which meet the above definition and are held for the purpose of meeting shortterm cash commitments rather than for investment or other purposes are reclassified as cash equivalents.

(f) Financial instruments
(i) Financial assets

Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVTPL”).

The Company shall reclassify all affected financial assets only when it changes its business model for managing its financial assets.

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

2)
Fair value through other comprehensive income (“FVOCI”)

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Some accounts receivables are held within a business model whose objective is achieved by both collecting contractual cash flows and selling by the Company, therefore, those receivables are measured at FVOCI and presented as accounts receivable.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’ s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

A financial asset measured at FVOCI is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses, and impairment losses, deriving from debt investments are recognized in profit or loss; whereas dividends deriving from equity investments are recognized as income in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses of financial assets measured at FVOCI are recognized in OCI. On derecognition, gains and losses accumulated in OCI of debt investments are reclassified to profit or loss. However, gains and losses accumulated in OCI of equity investments are reclassified to retain earnings instead of profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Dividend income derived from equity investments is recognized on the date that the Company’s right to receive payment is established, which in the case of quoted securities is normally the date the shareholders' meeting approved the earning distribution.

3) Fair value through profit or loss (“FVTPL”)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

4) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, financial assets measured at amortized costs, notes and accounts receivable, other receivable, guarantee deposit and other financial assets), debt investments measured at FVOCI, and accounts receivable measured at FVOCI.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The Company measures loss allowances at an amount equal to lifetime expected credit loss (“ECL”), except for the following which are measured as 12-month ECL:

debt securities that are determined to have low credit risk at the reporting date; and
other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’ s historical experience and informed credit assessment as well as forwardlooking information.

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of “ investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings”.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 90 days past due or the borrower is unlikely to pay its credit obligations to the Company in full.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘ credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. An evidence that a financial asset is credit-impaired includes the following observable data:

significant financial difficulty of the borrower or issuer;
a breach of contract such as a default or being more than 90 days past due;
the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;
it is probable that the borrower will enter bankruptcy or other financial reorganization; or
the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Company recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

5) Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a debt instrument in its entirety, the Company recognizes the difference between its carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in “other equity – unrealized gains or losses on fair value through other comprehensive income”, in profit or loss, and presented it in the line item of non-operating income.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

On derecognition of a financial asset other than in its entirety, the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss, and presented in the line item of non-operating income and expenses. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

(ii) Financial liabilities and equity instruments

1) Classification of debt or equity

Debt or equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual agreement.

Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized as the amount of consideration received, less, the direct cost of issuing.

Interest and loss or gain related to financial liabilities are recognized as profit or loss and are reported under non-operating income and expenses. Financial liabilities are reclassified as equity when converted, and conversions do not generate profit or loss.

2) Financial liabilities at fair value through profit or loss

A financial liability is classified in this category if acquired principally for the purpose of selling in the short term. This type of financial liability is measured at fair value at the time of initial recognition, and attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss, and are included in non-operating income or expenses.

3) Other financial liabilities

Financial liabilities not classified as held-for-trading or designated as at fair value through profit or loss, which comprise loans and borrowings, and trade and other payable, are measured at fair value, plus, any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method other than significant interest on short-term loans and payables. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in non-operating income or expenses.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

4) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligation has been discharged, cancelled or expired. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in nonoperating income or expenses.

5) Offsetting of financial assets and liabilities

The Company presents financial assets and liabilities on a net basis when the Company has the legally enforceable right to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

(iii) Derivative financial instruments

The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are initially measured at fair value. Any attributable transaction costs thereof are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and are included in the line item of non-operating income. When a derivative is designated as, and effective for, a hedging instrument, its timing of recognition in profit or loss is determined based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is classified as a financial asset, whereas when the fair value is negative, it is classified as a financial liability.

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the non-financial asset’ s host contract are not closely related to the embedded derivatives and the host contract is not measured at FVTPL.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average-cost principle and includes expenditure incurred in acquiring the inventories, production or transition costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less, the estimated costs of completion and selling expenses.

(h) Investment in associates

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

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

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The parent-company-only financial statements include the Company’s share of the profit or loss and other comprehensive income of equity-accounted investees after adjustments to align the accounting policies with those of the Company from the date that significant influence commences until the date that significant influence ceases. When changes in an associate’s equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Company’ s ownership percentage of the associate, the Company recognizes the changes in ownership interests of its associate in capital surplus in proportion to its ownership.

Unrealized profits resulting from the transactions between the Company and an associate are eliminated to the extent of the Company’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

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

The Company shall discontinue the use of the equity method from the date when its investment ceases to be an associate or a joint venture. The Company shall measure the retained interest at fair value. The difference between the fair value of retained interest and proceeds from disposal, and the carrying amount of the investment at the date the equity method was discontinued is recognized in profit or loss. The Company shall account for all the amounts previously recognized in other comprehensive income in relation to that investment on the same basis as would have been required if the associates had directly disposed of the related assets or liabilities. If a gain or loss previously recognized in other comprehensive income would be reclassified to profit or loss on the disposal of the related assets or liabilities, the entity shall reclassify the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. If an entity’s ownership interest in an associate or a joint venture is reduced while the entity continues to apply the equity method, the entity shall reclassify the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest to profit or loss.

If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Company shall continue to apply the equity method without remeasuring the retained interest.

When the Company subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the net assets of the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus, however, when the balance of the capital surplus arising from the investment was insufficient, the difference charged or credited to retained earnings. If the Company’s ownership interest is reduced due to the additional subscription to the shares of associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

(i) Investment in subsidiaries

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

When preparing the parent-company-only financial statements, investment in subsidiaries which are controlled by the Company is accounted for using the equity method. Under the equity method, the amounts of net income, other comprehensive income and equity attributable to shareholders of the Company in the parent-company-only financial statement are equal to those in the consolidated financial statements.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions

(j) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately, unless the useful life and the depreciation method of a significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized as other gains and losses.

(ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

(iii) Depreciation

The depreciable amount of an asset is determined after deducting its residual amount, and it shall be allocated on a systematic basis over its useful life. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss.

The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is reasonably certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

1) Buildings: 35~50 years
2) Building improvement: 8~15 years
3) Research equipment: 3 years
4) Other equipment: 0.5~5 years

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change is accounted for as a change in an accounting estimate.

(k) Leases

Applicable after January 1, 2019

(i) Identifying a lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and
2) the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
3) the Company has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of an asset if either:
－ the Company has the right to operate the asset and the providers do not have the right to vary; or
－ the Company designed the asset in a way that predetermines how and for what purpose it will be used.

At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Company has elected not to separate non-lease components and account for the lease and non-

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

lease components as a single lease component.

(ii) As a lessee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

－
fixed payments, including in-substance fixed payments;
－ variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
－ amounts expected to be payable under a residual value guarantee; and
－ payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

－
there is a change in future lease payments arising from the change in an index or rate; or
－ there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee; or
－ there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying assets, or
－ there is a change of its assessment on whether it will exercise an extension or termination option; or
－
there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

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

The Company presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

The Company has elected not to recognize right-of-use assets and lease liabilities for shortterm leases of machinery and office equipment that have a lease term of 12 months or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(iii) As a lessor

When the Company acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

Applicable before January 1, 2019

(i) As lessor

Lease income from operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

(ii) As lessee

Operating leases are not recognized in the Company’s balance sheets.

Payments made under operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

(l) Intangible assets
(i) Goodwill
- 1) Initial recognition

Goodwill arising from acquisition of subsidiaries is included in intangible assets. The

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

measurement of initial recognition of goodwill, please refer to note (4)(t).

2) Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses.

Goodwill related to an investment accounted for using equity method is included in the carrying amount of the investment, and not allocated to any asset, including goodwill, forms part of the carrying amount of the investment accounted for using the equity method.

(ii) Research & Development

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

Expenditures arising from the development phase shall be recognized as an intangible asset if all the conditions described below can be demonstrated; otherwise, they will be recognized in profit or loss as incurred.

1) The technical feasibility of completing the intangible asset so that it will be available for use or sale.
2) Its intention to complete the intangible asset and use or sell it.
3) Its ability to use or sell the intangible asset.
4) How the intangible asset will generate probable future economic benefits.
5) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
6) Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Capitalized expenditure arising from the development phase is measured at cost less accumulated amortization and accumulated impairment losses.

(iii) Other intangible assets

Other intangible assets that are acquired by the Company are measured at cost, less accumulated amortization and any accumulated impairment losses.

(iv) Subsequent expenditure

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

(v) Amortization

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The amortizable amount is the cost of an asset, or other amount substituted for cost, less its residual value.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with all indefinite useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

1) Patents: the shorter of contract period and estimated useful lives
2) Computer software: 1~3 years

The residual value, the amortization period, and the amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be accounted for as changes in accounting estimates.

(m) Impairment of non-derivative financial assets

Non-derivative financial assets except for inventories, deferred tax assets, and assets arising from employee benefits are assessed at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Company shall estimate the recoverable amount of the asset. If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use) for the individual asset, then the Company will have to determine the recoverable amount for the asset's cash-generating unit.

The Company assesses goodwill and intangible assets, which have indefinite useful lives and are not available for use, on an annual basis and recognizes an impairment loss on excess of carrying value over the recoverable amount.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less costs to sell and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’ s cash-generating units, or groups of cashgenerating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units or group of units. If the carrying amount of the cash-generating units exceeds the recoverable amount of the unit, the entity shall recognize the impairment loss and the impairment loss shall be allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.

The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount. That increase is a reversal of an impairment loss.

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

(n) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(o) Treasury stock

Repurchased shares are recognized under treasury shares (a contra-equity account) based on its repurchase price (including all directly accountable costs), and net of tax. Gains on disposal of treasury shares should be recognized under Capital Reserve – Treasury Shares Transactions; losses on disposal of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings. The carrying amount of treasury shares should be calculated using the weighted average different types of repurchase.

During the cancellation of treasury shares, Capital Reserve – Share Premiums and Share Capital should be debited proportionately. Gains on cancellation of treasury shares should be recognized under existing capital reserves arising from similar types of treasury shares; losses on cancellation of treasury shares should be offset against existing capital reserves arising from similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings.

(p) Recognition of revenue

(i) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company’ s main types of revenue are explained below.

1) Sale of goods

The Company manufactures and sells electronic products to electronic products brand vendor. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’ s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

The Company assesses sales discounts based on historical experience, management's judgment and other known reasons. Such allowances are recognized as a deduction of

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

sales revenue in the same period in which sales are made. The aforementioned provisions are expected to settle over the next year. A refund liability is recognized for expected discounts payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales of electronic products are made with a credit term which is consistent with the market practice.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

2) Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(q) Employee benefits

(i) Defined contribution plans

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

(ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

If the benefits of a plan are improved, the pension cost incurred from the portion of the increased benefit relating to past service by employees, is recognized immediately in profit or loss.

Re-measurement of net defined benefit liability (asset) (including actuarial gains, losses and the return on plan asset and changes in the effect of the asset ceiling, excluding any amounts included in net interest) is recognized in other comprehensive income (loss). The effect of re-

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

measurement of the defined benefit plan is charged to retained earnings.

The Company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets and change in the present value of defined benefit obligation.

(iii) Short term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(r) Share-based payment

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

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

(s)

Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss.

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the following exceptions:

(i) Assets and liabilities that are initially recognized but are not related to the business combination and have no effect on net income or taxable gains (losses) during the transaction.
(ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.
(iii) Initial recognition of goodwill.

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

(i) The entity has the legal right to settle tax assets and liabilities on a net basis; and
(ii) the taxing of deferred tax assets and liabilities fulfill one of the below scenarios:
1) levied by the same taxing authority; or
2) levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset should be recognized for the carry-forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated every year on the financial reporting date, and they shall be adjusted based on the probability that future taxable profit that will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

The surtax on unappropriated earnings is recoded as current tax expense in the following year after the resolution to appropriate retained earnings is approved in a stockholders’ meeting.

(t) Business combination

Goodwill is measured as an aggregation of the consideration transferred (which generally is measured at fair value at the acquisition date) and as an amount of any non-controlling interest in the acquiree, net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed (generally at fair value). If the residual balance is negative, the Company shall re-assess whether it has correctly identified all of the assets acquired and liabilities assumed, and recognize a gain on the bargain purchase thereafter.

All the transaction costs incurred for the business combination are recognized immediately as the Company’s expenses when incurred, except for the issuance of debt or equity instruments.

If the business combination is achieved in stages, the Company shall measure any non-controlling equity interest in the acquire, either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Other non-controlling interest is measured (1) at fair value at the acquisition date or (2) by using other valuation techniques acceptable under the IFRS as endorsed by the FSC.

In a business combination achieved in stages, the Company shall re-measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss. In prior reporting periods, the Company may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

that was recognized in other comprehensive income shall be recognized on the same basis as would be required if the Company had disposed directly of the previously held equity interest. If the disposal of the equity interest required a reclassification to profit or loss, such an amount shall be reclassified to profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the Company shall retrospectively adjust the provisional amounts recognized at the acquisition date, or recognize additional assets or liabilities to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date.

(u) Earnings per share

The Company discloses the basic and diluted earnings per share attributable to ordinary equity holders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholder of the Company divided by weighted average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the Company divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. Dilutive potential ordinary shares comprise restricted employee stock and employee compensation not yet approved by the Board of Directors.

(v) Operating segments

The operating segment information is disclosed within the consolidated financial statements but not disclosed in the parent-company-only financial statements.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the financial statements in conformity with the IFRSs 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.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

There are no critical judgments in applying the accounting policies that have significant effect on the amounts recognized in the financial statements. In addition, information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

(a) Recognition and measurement of refund liabilities

Because of the sales returns and allowances, the Company records refund liabilities (sales returns and allowances provisions) for estimated returns and other allowances in the same period the related revenue is recorded. The estimate is made based on historical experience, market and economic conditions, and any other known factors using the expected value or the most likely amount, and it

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

could be different from actual sales returns and allowances, therefore, the management periodically reviews the adequacy of the estimation used.

(b) Valuation of inventories

As inventories are stated at the lower of cost or net realizable value, the net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial changes, there may be significant differences in the net realizable value of inventories. Refer to note (6)(g) for further description of the valuation of inventories.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

		December	December
		31, 2019	31, 2018
Cash on hand	$	1,527	1,596
Checking accounts and demand deposits		3,523,187	3,972,558
Time deposits		9,885,255	15,609,214
Bonds purchased under resale agreements		50,000	863,010
	$	13,459,969	20,446,378

Please refer to note (6)(x) for the disclosure of the exchange rate risk, the interest rate risk and the fair value sensitivity analysis of the financial assets and liabilities of the Company.

(b) Financial assets and liabilities at fair value through profit or loss

		December	December
		31, 2019	31, 2018
Mandatorily measured at fair value through profit or loss:
Non-derivative financial assets
Structured deposits	$	149,888	-
Stock listed in domestic markets		-	284,768
Stock unlisted in domestic markets		24,350	-
Fund in domestic or foreign market		46,747	23,745
Total	$	220,985	308,513
Current	$	149,888	284,768
Non-current		71,097	23,745
	$	220,985	308,513

The market risk related to the financial instruments please refer to note (6)(x).

As of December 31, 2019 and 2018, the Company did not provide any aforementioned financial

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

assets as collaterals for its loans.

		December	December
		31, 2019	31, 2018
Equity investments at fair value through other comprehensive
income:
Stock listed in domestic markets	$	1,614,565	2,383,976
Stock listed in foreign markets		448,110	400,184
Stock unlisted in domestic markets		914,507	896,395
Stock unlisted in foreign markets		42,211	51,363
Total	$	3,019,393	3,731,918

The purpose that the Company invests in the abovementioned equity securities is for long-term strategies, but rather for trading purpose. Therefore, these equity securities are designated as at FVOCI.

For the year ended December 31, 2019, the Company had sold all of its shares in PrimeSensor Technology Inc., Macroblock Inc., and Innolux Corporation (“Innolux”), which were measured at fair value through other comprehensive income. The fair value of the shares was $845,202 when disposed and the cumulative losses amounted to $4,824,910, which had been transferred to retained earnings from other comprehensive income.

For the year ended December 31, 2018, the Company has sold parts of its shares held in Innolux Corporation measured at fair value through other comprehensive income. The fair value of the shares was $291,435 when disposed, and the cumulative losses amounted to $1,024,470, which had been transferred to retained earnings from other comprehensive income.

If there is an increase (decrease) in the market price by 5% on the reporting date of the equity securities hold by the Company, the increase (decrease) in other comprehensive income (pre-tax) for the years ended December 31, 2019 and 2018, will be $150,970 and $186,596, respectively. These analyses are performed on the same basis for the period and assume that all other variables remain the same.

The Company’s information of market risk please refer to note (6)(x).

As of December 31, 2019 and 2018, the Company did not provide any financial assets at fair value through other comprehensive income as collaterals for its loans.

(d) Current financial assets measured at amortized costs

		December	December
		31, 2019	31, 2018
Common bonds – Taiwan Star Telecom Corporation Limited
(“Taiwan Star”)	$	-	350,000

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The Company has assessed that these financial assets are held to maturity to collect contractual cash flows, which consist solely of payments of principal and interest on the principal amount outstanding. Therefore, these investments were classified as financial assets measured at amortized cost.

As of December 31, 2018, the Company did not provide the aforementioned financial assets as collaterals for its loans.

(e) Notes and accounts receivable

		December	December
		31, 2019	31, 2018
Notes receivable from operating activities	$	1,104	1,218
Accounts receivable – measured as amortized cost		154,482,480	171,635,955
Accounts receivable – fair value through other comprehensive
income		27,170,468	22,896,211
		181,654,052	194,533,384
Less: allowance for uncollectible accounts		(3,634,190)	(3,718,560)
	$	178,019,862	190,814,824
Notes and accounts receivable	$	176,967,731	189,496,594
Notes and accounts receivable – related parties	$	1,052,131	1,318,230

The Company has assessed a portion of its trade receivables that was held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; therefore, such trade receivables were measured at fair value through other comprehensive income.

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information.

The loss allowance provision of the Company were determined as follows:

Credit rating Carrying amount of notes and accounts receivable Level A $ 173,733,360 Level B 4,296,955 Level C 3,623,737 $ 181,654,052		December 31, 2019	December 31, 2019
		Weighted- average ECL rate 0% 0.243% 100%	Lifetime ECLs Credit- impaired - No 10,453 No 3,623,737 Yes 3,634,190

December 31, 2018

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Credit rating Carrying amount of notes and accounts receivable Level A $ 187,485,567 Level B 3,424,080 Level C 3,623,737 $ 194,533,384	Weighted- average ECL rate 0% 2.769% 100%	Lifetime ECLs Credit- impaired - No 94,823 No 3,623,737 Yes 3,718,560

The aging analysis of notes and accounts receivable, were determined as follows:

December 31, 2019 Overdue 1 to 180 days $ 497,543	December 31, 2018
	1,770,814

The movement in the allowance for notes and accounts receivable were as follow:

Balance at January 1 Impairment losses recognized Amounts written off Balance at December 31	2019 2018 $ 3,718,560 3,717,495 1,537 1,065 (85,907) - $ 3,634,190 3,718,560

Allowance for uncollectible account is the balance of accounts receivables which are uncollectable. Except for evaluating the situation of the customers’ payment records and widely analyzing the credit rating of customers, the Company also takes all the necessary procedures for collection. The Company believes that there is no doubt for the recovery of the due but unimpaired account receivable, therefore, no allowance recognized.

The Company entered into accounts receivable factoring agreements with banks. As of December 31, 2019 and 2018, except for the amount used under the actual sales amount in thousand accordance with certain agreements, the factoring amount granted by the banks was USD 1,000,000 thousands and USD 950,000 thousands, respectively. Based on the agreements, the Company is not responsible for guaranteeing the ability of the accounts receivable obligor to make payment when it is affected by credit risk. Thus, this is a non-recourse accounts receivable factoring. The Company derecognized the above account receivables because it has transferred substantially all of the risks and rewards of their ownership and it does not have any continuing involvement in them. After the transfer of the accounts receivable, the Company can request partial advanced amount, while the interest calculated at an agreed rate is paid to the bank in the period during the time of receiving advance and the accounts receivable is collected. The remaining amounts with no advance are received when the accounts receivable are settled by the customers. As of December 31, 2019 and 2018, account receivable factored were recovered and derecognized since the conditions of derecognition were met.

The Company, customers, and banks signed the three-party contracts in which the banks purchase

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

accounts receivable from the Company. The total amount of the accounts receivable should not exceed the facility limit provided by the banks to the Company’s customers. Based on the contracts, the banks have no right to request the Company to repurchase the accounts receivable. Thus, this is a non-recourse accounts receivable transfer. As of December 31, 2019 and 2018, accounts receivable factored were recovered and derecognized since the conditions of derecognition were met.

The details of the factored accounts receivable at the reporting date were as follows:

		December	31, 2019
Purchaser Financial Institution	Accounts transferred $ 25,672,764	Amount advanced Unpaid Paid - 25,672,764 December	Amount recognized in other receivables - 31, 2018	Collateral -	Amount derecognized Interest rate 25,672,764 2.21%~2.80%
		Unpaid -
Purchaser Financial Institution		Amount advanced Unpaid Paid - 32,098,074	Amount recognized in other receivables -	Collateral -	Amount derecognized Interest rate 32,098,074 3.02%~3.52%
		Unpaid -

As of December 31, 2019 and 2018, the Company did not provide any aforementioned notes and accounts receivable as collaterals.

(f) Other receivables

		December	December
		31, 2019	31, 2018
Other receivables - loans to subsidiaries	$	1,719,000	301,137
Other receivables - related parties		149,120	144,455
Others		1,242,487	973,158
	$	3,110,607	1,418,750

As of December 31, 2019 and 2018, none of other receivables were past due.

(g) Inventories

		December	December
		31, 2019	31, 2018
Finished goods	$	13,454,860	18,779,873
Work in progress		152,421	44,008
Raw materials		36,440,788	32,693,278
	$	50,048,069	51,517,159

(i) During the years ended December 31, 2019 and 2018, inventory cost recognized as cost of

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

sales amounted to $891,431,772 and $889,171,625, respectively.

(ii) The Company reversed its allowance for inventory valuation loss amounting to $66,336 due to the sale and disposal of its obsolete inventories in the year ended December 31, 2019. The write-down of inventories to net realizable value amounted to $171,790, in the year ended December 31, 2018.
(iii) As of December 31, 2019 and 2018, the Company did not provide any inventories as collaterals for its loans.
(h) Investments accounted for using equity method

A summary of the Company’s financial information for equity-accounted investees at the reporting date is as follows:

date is as follows:
		December	December
		31, 2019	31, 2018
Subsidiaries	$	79,267,709	79,891,379
Associates		2,615,406	2,619,501
		81,883,115	82,510,880
Plus: Other receivables–related parties		659,296	494,744
Credit balance of investment in equity method (other non-
current liability)		891,274	298,023
Less: unrealized profits or losses		(3,516)	(4,409)
	$	83,430,169	83,299,238

(i) Subsidiaries

Please refer to the consolidated financial statement for the year ended December 31, 2019.

(ii) Associates

1) The fair value of the shares of listed company based on the closing price was as follow:

		December	December
		31, 2019	31, 2018
Allied Circuit Co., Ltd. (“Allied Circuit”)	$	1,076,719	621,653
Avalue Technology Inc. (“Avalue”)		1,147,839	586,743
	$	2,224,558	1,208,396

2) The Company’s share of the net gain (loss) of associates was as follows:

The Company’s share of the gain of associates	2019 2018 $ 70,378 483,812

3) The Company’ s financial information for investments accounted for using the equity method that are individually immaterial was as follows:

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COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Carrying amount of individually immaterial associates The Company’s share of the net income (loss) of associates: Profit from continuing operations Other comprehensive income (loss) Total comprehensive income (loss)	December 31, 2019 December 31, 2018 $ 2,615,406 2,619,501 2019 2018 $ 70,378 483,812 (158,336) (97,800) $ (87,958) 386,012

4) In October 2019, the Company had sold part of its shares held in Avalue Technology Inc. (“Avalue”), with a consideration (net of costs of disposal) amounting to $18,034. The transaction has been completed and the price has been fully recovered, wherein the Company recognized a gain of $8,990, which was accounted for as other gain and loss.

(iii) As of December 31, 2019 and 2018, the Company did not provide any investments accounted for using equity method as collaterals for its loans.

(i) Changes in subsidiaries’ equity

(i) Changes in ownership interests while retaining control (increase in ownership interest)

The Company’s subsidiary, Arcadyan Technology Corp. (“Arcadyan”), purchased shares of other subsidiaries from non-controlling interest amounting to $634, in 2018.

The following summarizes the effect of changes in equity of the parent due to changes in the ownership interest of the subsidiaries:

Acquisition of non-controlling interest (carrying amount) Consideration paid for the non-controlling interest Difference Capital surplus – changes in ownership interests in subsidiaries	2018 $ 631 (634) $ (3) $ (3)

(ii) Changes in subsidiaries’ equity did not result in the Company’s loss of control
1) Subsidiaries’ employee stock options exercised

Compal Broadband Network Inc. (“CBN”) issued 69 thousand and 351 thousand new shares because of its employees’ exercised stock options in 2019 and 2018, respectively, resulting in a decrease in the ownership of the Company and its subsidiaries in CBN by 0.07% and 0.41%, respectively.

2) Issuance of new shares for cash of subsidiaries

The Company and its subsidiaries purchased newly issued shares of Arcadyan amounting

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

to $323,917 at a percentage different from its existing ownership percentage in the fourth quarter of 2019, resulting in a decrease in the ownership of the Company and its subsidiaries in Arcadyan by 0.37%.

The Company and its subsidiaries did not purchase newly issued shares of CBN in the fourth quarter of 2018, resulting in a decrease in the ownership of the Company and its subsidiaries in CBN by 7.27%.

3) Issuance and cancellation of subsidiaries’ restricted shares

Arcadyan canceled 84 thousand restricted shares and issued 4,500 thousand restricted new shares in the years ended December 31, 2019 and 2018, respectively, resulting in an increase of 0.01% and a decrease of 0.84% interest, respectively, of the ownership of the Company and its subsidiaries in Arcadyan.

4) The following summarizes the effect of changes in equity of the parent due to changes in the ownership interest of subsidiaries:

Capital surplus – changes in ownership interest in subsidiaries Retained earnings	2019 2018 $ 43,473 (32,703) - (32,160) $ 43,473 (64,863)

(j) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company for the years ended December 31, 2019 and 2018, were as follows:

Cost: Balance on January 1, 2019 Additions Disposals and derecognitions Reclassifications Balance on December 31, 2019 Balance on January 1, 2018 Additions Disposals and derecognitions Reclassifications Balance on December 31, 2018	Land	Buildings and building improvement	Other equipment	Under construction and prepayment for purchase of equipment Total
	$ 1,047,797 - - - $ 1,047,797 $ 1,047,797 - - - $ 1,047,797	2,194,761 138,731 (6,637) 63,420 2,390,275 2,173,951 18,716 (476) 2,570 2,194,761	2,112,018 343,873 (137,960) 64,147 2,382,078 2,002,114 124,095 (62,516) 48,325 2,112,018	36,487 5,391,063 279,325 761,929 - (144,597) (127,567) - 188,245 6,008,395 27,007 5,250,869 60,375 203,186 - (62,992) (50,895) - 36,487 5,391,063

Depreciation and impairments loss:

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Balance on January 1, 2019 Depreciation for the period Disposals and derecognitions Balance on December 31, 2019 Balance on January 1, 2018 Depreciation for the period Disposals and derecognitions Balance on December 31, 2018 Carrying amounts: Balance on December 31, 2019 Balance on January 1, 2018 Balance on December 31, 2018	Land	Buildings and building improvement	Other equipment	Under construction and prepayment for purchase of equipment Total
	$ - - - $ - $ - - - $ - $ 1,047,797 $ 1,047,797 $ 1,047,797	1,368,955 80,891 (6,112) 1,443,734 1,312,069 57,362 (476) 1,368,955 946,541 861,882 825,806	1,893,927 185,219 (135,123) 1,944,023 1,846,528 108,965 (61,566) 1,893,927 438,055 155,586 218,091	- 3,262,882 - 266,110 - (141,235) - 3,387,757 - 3,158,597 - 166,327 - (62,042) - 3,262,882 188,245 2,620,638 27,007 2,092,272 36,487 2,128,181

As of December 31, 2019 and 2018, the Company did not provide property, plant and equipment as collateral for its borrowing.

(k) Right-of-use assets

The Company leases many assets including buildings and vehicles. Information about leases for which the Company as a lessee is presented below:

Buildings
Cost:
Balance on January 1, 2019
$ -
Adjustment on initial application of IFRS 16
781,756
Balance on January 1, 2019 per IFRS 16
781,756
Additions
979,422
Deductions
(73,832)
Balance on December 31, 2019
$
1,687,346
Depreciation:
Balance on January 1, 2019
$ -
Adjustment on initial application of IFRS 16
-
Balance on January 1, 2019 per IFRS 16
-
Depreciation for the period
407,103
Deductions
(73,832)
Balance on December 31, 2019
$
333,271
Carrying amount:
Balance on January 1, 2019
$
781,756
Balance on December 31, 2019
$
1,354,075

Vehicles
Total
-
-
40,060
821,816
40,060
821,816
12,098
991,520
(2,038)
(75,870)
50,120
1,737,466
-
-
-
-
-
-
18,618
425,721
(2,038)
(75,870)
16,580
349,851
40,060
821,816
33,540
1,387,615

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The Company leases land, offices, warehouses and factory facilities under an operating lease for the year ended December 31, 2018, please refer to note (6)(o).

(l) Short-term borrowings

The details of short-term borrowings were as following:

		December	December 31,
		31, 2019	2018
Unsecured bank loans	$	39,363,800	51,305,682
Unused credit line for short-term borrowings	$	57,478,000	40,694,000
Range of interest rates		0.66%~2.49%	0.72%~3.56%

For information on the Company’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(x).

(m) Long-term borrowings

The details of long-term borrowings were as follows:

	December 31, 2019 Annual range of interest rates Maturity year Amount	December 31, 2019 Annual range of interest rates Maturity year Amount
Currency	Annual range of interest rates
TWD	0.73%~1.18% 2020~2023 $ 25,650,000 (18,150,000) $ 7,500,000 $ 11,807,000 December 31, 2018 Annual range of interest rates Maturity year Amount
Currency	Annual range of interest rates	Maturity year
TWD	0.79%~1.22%	2019~2021 $ 28,396,250 (17,496,250) $ 10,900,000 $ 5,414,750

For information on the Company’s interest risk, foreign currency risk and liquidity risk, please refer to note (6)(x).

(n) Lease liabilities

	December
	31, 2019
$	387,499

Current

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Non-current	$	1,010,933	1,010,933
For the maturity analysis, please refer to note (6)(x).
The amounts recognized in profit or loss was as follows:
		2019
Interest on lease liabilities	$		13,549
Expenses relating to leases of low-value assets, excluding short-term leases of
low-value assets	$		3,325
The amounts recognized in the statement of cash flows for the Company was as	follows:
		2019
Total cash outflow for leases	$	431,730

(i) Building leases

The Company leases buildings for its office and factory space, typically run for a period of 1~8 years.

(ii) Other leases

The Company leases vehicles with lease terms of 1~5 years.

The Company also leases some equipments and vehicles with contract terms of 1~3 years. These leases are short-term or leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

(o) Operating lease – Company as lessee

The rental payables of the non-cancellable operating lease was as follows:

		December
		31, 2018
Less than one year	$	264,145
Between one and five years		257,020
	$	521,165

The Company leased several office areas under operating leases with the leasing terms from 1 to 5 years and had an option to renew the leases when the leases expired.

For the year ended December 31, 2018, expenses recognized in profit or loss under operating leases amounted to $297,582.

The lease contract includes those of the land and building, with their residual values being assumed by the landlord. The rental is regularly adjusted based on the current market price. Based on the risks and rewards of leased assets not transferred to the Company, the Company recognized the lease as operating lease.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

(p) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligations at present value and plan assets at fair value were as follows:

as follows:
		December	December
		31, 2019	31, 2018
Present value of defined benefit obligations	$	(1,270,206)	(1,246,221)
Fair value of plan assets		626,953	624,640
Net defined benefit liabilities	$	(643,253)	(621,581)

The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average salary for the six months prior to retirement.

1) Composition of plan assets

The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Labor Pension Fund Supervisory Committee. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with interest rates offered by local banks.

The balance of the Company’ s labor pension reserve account in the Bank of Taiwan amounted to $620,933 (excluding the ending balance of interest receivable) as of December 31, 2019. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in the present value of the defined benefit obligations

The movements in the present value of defined benefit obligations for the Company were as follows:

Defined benefit obligations on January 1 Current service costs and interest Remeasurements of net benefit liabilities Benefit paid by the plan Defined benefit obligations on December 31	2019 2018 $ (1,246,221) (1,220,613) (21,108) (22,168) (53,073) (37,000) 50,196 33,560 $ (1,270,206) (1,246,221)

3) Movements of the fair value of defined benefit plan assets

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The movements in the fair value of the defined benefit plan assets for the Company were as follows:

Fair value of plan assets on January 1 Expected return on plan assets Remeasurements of net benefit plan assets Contributions paid by the employer Benefits paid by the plan Fair value of plan assets on December 31	2019 2018 $ 624,640 608,482 7,875 8,141 20,428 16,811 24,206 24,766 (50,196) (33,560) $ 626,953 624,640

4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company were as follows:

Current service cost Net interest on the net defined benefit liability (asset) Cost of sales Selling expenses Administrative expenses Research and development expenses	2019 2018 $ 5,314 5,635 7,919 8,392 $ 13,233 14,027 $ 517 436 631 745 3,239 3,395 8,846 9,451 $ 13,233 14,027

5) Actuarial assumptions

The following were the Company’s principal actuarial assumptions at the reporting date:

Discount rate Future salary increase rate	December 31, 2019 December 31, 2018 0.90% 1.30% 3.00% 3.00%

The expected allocation payment made by the Company to the defined benefit plans for the one year period after the reporting date is $24,554.

The weighted-average lifetime of the defined benefit plan is 9.9 years.

6) Sensitivity analysis

If the main actuarial assumptions had changed, the impact on the present value of the

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

defined benefit obligation shall be as follows:

December 31, 2019 Discount rate Future salary increasing rate December 31, 2018 Discount rate Future salary increasing rate	Effects to the defined benefit obligation
	Increased 0.25% Decreased 0.25% (30,821) 31,967 31,239 (30,287) (31,218) 32,390 31,779 (30,797)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation on the net defined benefit liabilities in the balance sheets.

The method and assumption used in the sensitivity analysis is consistent with prior period.

(ii) Defined contribution plans

The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates the labor pension at a specific percentage to the Bureau of the Labor Insurance without additional legal or constructive obligations.

The Company recognized the pension costs under the defined contribution method amounting to $335,403 and $306,912 for the years ended December 31, 2019 and 2018, respectively. Payment was made to the Bureau of Labor Insurance.

(q) Income taxes

(i) Income tax expenses

1) The amount of income tax for the years ended December 31, 2019 and 2018, was as follows:

Current tax expense Recognized during the period Undistributed earnings additional tax Tax credit of investment	2019 2018 $ 934,581 1,010,943 274,317 - (438,511) (183,384)

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

			770,387	827,559
	Deferred tax expense
	Recognition and reversal of temporary differences		97,393	292,600
	Adjustment in tax rate		-	(75,208)
			97,393	217,392
	Income tax expense	$	867,780	1,044,951
2)	The amount of income tax recognized in other comprehensive income for the years ended
	December 31, 2019 and 2018, was as follows:
			2019	2018
	Items that will not be reclassified subsequently to profit
	or loss:
	Remeasurement of defined benefit obligation	$	(6,529)	(32,146)
	Unrealized gains (losses) on equity instruments at fair
	value through other comprehensive income		9,585	(37,780)
		$	3,056	(69,926)
3)	The income tax expense that was reconciled between the actual income tax expense and
	profit before tax for the years ended December 31, 2019	and 2018, was as follows:

Profit before tax Income tax calculated based on tax rate Undistributed earnings additional tax Adjustment in tax rate Estimated tax effect of tax exemption on investment income, net Realized investment loss Investment tax credit Changes in temporary differences Adjustment of estimated difference and other Income tax expense	2019 2018 $ 7,823,679 9,958,316 $ 1,564,736 1,991,663 274,317 - - (75,208) (55,294) (877,600) (25,237) (133,869) (438,511) (183,384) (211,637) (56,660) (240,594) 380,009 $ 867,780 1,044,951

(ii) Deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2019 and 2018 were as follows:

Deferred tax assets: Balance on January 1, 2019 Recognized in profit or loss	Exchange differences on translation	Refund liabilities	Contract liabilities	Unrealized exchange losses, net	Others Total 301,251 760,580 (1,092) 399,699 (Continued)
	$ 9,823 -

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Recognized in other comprehensive income Balance on December 31, 2019 Balance on January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2018 Deferred tax liabilities: Balance on January 1, 2019 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2019 Balance on January 1, 2018 Recognized in profit or loss Recognized in other comprehensive income Balance on December 31, 2018	- $ 9,823 $ 9,823 - - $ 9,823 Unrealized exchange gains, net	-		- 120,603 259,546 (81,521) - 178,025 Others	- 59,429 176,283 (11,328) - 164,955 Total (386,555) (497,092) (9,585) (893,232) (543,621) 119,286 37,780 (386,555)	- 670,265 365,646 (259,120) - 106,526	6,529 6,529 306,688 1,166,808 253,814 1,065,112 15,291 (336,678) 32,146 32,146 301,251 760,580
		Unrealized exchange gains, net
	$ - (497,092) - $ (497,092) $ (171,868) 171,868 - $ -			(386,555) - (9,585) (396,140) (371,753) (52,582) 37,780 (386,555)

(iii) Unrecognized deferred tax assets

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

		December	December
		31, 2019	31, 2018
Tax effect of deductible temporary differences	$	398,919	362,131

The Company assesses and considers that some of the income tax reduction items may be unrealized, hence they are not recognized as deferred tax assets.

(iv) Unrecognized deferred tax assets and liabilities related to investments in subsidiaries

The temporary differences associated with investment in subsidiaries were not recognized as deferred income tax assets and liabilities as the Company has the ability to control the reversal of these temporary differences which are not expected to reverse in the foreseeable future.

As of December 31, 2019 and 2018, the aggregate deductible temporary differences relating to investments in subsidiaries not recognized as deferred tax assets amounted to $1,894,891 and $2,162,721, respectively.

As of December 31, 2019 and 2018, the aggregate taxable temporary differences relating to investments in subsidiaries not recognized as deferred tax liabilities amounted to $53,620,982

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

and $54,430,545, respectively.

(v) Examination and approval

The Company’s tax returns for the year through 2017 were assessed by the Taipei National Tax Administration.

(r) Capital and other equities

As of December 31, 2019 and 2018, the Company’ s authorized common stock consisting of 6,000,000 thousand shares with a par value of 10 New Taiwan dollar per share amounted to $60,000,000 of which 4,407,147 thousand shares were issued. All issued shares were paid up upon issuance.

(i) Ordinary shares

In 2015, the Company issued its employee restricted shares amounting to $493,600, wherein the amount of $120,450 had been cancelled due to failure in meeting the vested requirements in the year ended December 31, 2018. As of December 31, 2018, the registration procedure had been completed.

(ii) Capital surplus

The balances of capital surplus were as follows:

The balances of capital surplus were as follows:
		December	December
		31, 2019	31, 2018
Additional paid-in capital	$	6,302,490	7,183,919
Treasury share transactions		2,481,885	2,421,864
Difference between consideration and carrying amount arising
from acquisition or disposal of subsidiaries		36,766	36,766
Recognition of changes in ownership interests in subsidiaries		59,115	15,642
Changes in equity of associates and joint ventures accounted
for using equity method		279,003	274,243
	$	9,159,259	9,932,434

In accordance with the ROC Company Act, realized capital reserves can only be used to increase the common stock or distributed as cash dividends after offsetting losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital reserves to be reclassified under share capital shall not exceed 10% of the actual share capital amount.

The Company’s shareholders’ meeting held on June 21, 2019 and June 22, 2018, approved to distribute the cash dividend of $881,429 (representing 0.2 New Taiwan dollars per share), by using the additional paid-in capital.

A resolution was approved during the Board of Directors’ meeting held on March 30, 2020 to distribute the cash dividend of $881,429, with representing 0.2 New Taiwan dollars per share,

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

by using the additional paid-in capital. The related information can be accessed through the Market Observation Post system website after the Board of Directors’ meeting.

(iii) Retained earnings

Based on the Company’s articles of incorporation amended on June 21, 2019, if there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The Board of Directors may set aside a certain amount to cope with the business operation conditions, and shall prepare the proposal for distribution of the balance amount thereof after a resolution has been adopted and then allocated by the Board of Directors. The Company authorizes the Board of Directors to distribute all or part of the dividends and bonuses, capital surplus or legal reserve in cash after a resolution has been adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors; and in addition thereto a report of such distribution shall be submitted to the General shareholders’ meeting.

Based on the Company’s articles of incorporation before amended on June 21, 2019, if there is any profit after closing of books in a given year, the Company shall first defray tax due, cover accumulated losses and set aside ten percent of it as legal reserve and then set aside or reverse a special reserve in accordance with laws and regulations. The balance of earnings available for distribution is composed of the remainder of the said profit and the unappropriated retained earnings of previous years. The earnings appropriation proposal to distribute dividend and bonus shall be proposed by the Board of Directors and approved by the General Shareholders Meeting. The rest of the unappropriated retained earnings shall be reserved.

The lifecycle of the industry of the Company is in the growing stage. To consider the need of the Company for the future capital, capital budget, long-term financial planning, domestic and foreign competition, the need of shareholders for cash flow and other factors, if there is any profit after close of books, the dividend and bonus to be distributed to shareholdres shall not be less than thirty percent of profit after tax for such year and the cash dividend allocated by the Company each year shall not be lower than ten percent of the total dividend (including cash and share dividend) for such year.

According to the law, when there is a deduction from stockholders' equity (excluding treasury stock and unearned employee benefit) during the year, an amount equal to the deduction item is set aside as a special reserve before the earnings are appropriated. A special reserve is made available for earning distribution only after the deduction of the related shareholders’ equity has been reversed.

1) Legal reverse

When a company incurs no loss, it may, in pursuant to a resolution to be adopted by the shareholders’ meeting as required, distribute its legal reserve by issuing new shares and distributing stock dividends or distributing cash to shareholders. Only the portion of the legal reserve which exceeds 25% of the paid-in capital may be distributed.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

2) Special reverse

In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portion of current earnings and previous unappropriated earnings shall be set aside as a special reserve during earnings distribution. The amount to be set aside should equal the total amount of contra accounts that are accounted for as deductions to other equity interests. A portion of previous unappropriated earnings shall be set aside as a special reserve, which should not be distributed, to account for cumulative changes to other equity interests pertaining to prior periods. The special reserve shall be made available for appropriation when the net deductions of other equity interests are reversed in the subsequent periods.

3) Earnings distribution

Earnings distribution for 2018 and 2017 was approved by the shareholders during their annual meeting held on June 21, 2019 and June 22, 2018, respectively. The relevant information was as follows:

Cash dividends distributed to common shareholders	2018 2017 Amount per share Total amount Amount per share Total amount $ 1.0 4,407,147 1.0 4,407,147
	Amount per share $ 1.0

Earnings distribution for 2019 was approved by the Board of Directors on March 30, 2020. The relevant information was as follows:

Cash dividends distributed to common shareholders from the unappropriated earnings	2019	2019
	Amount per share $ 1.0	Total amount
		4,407,147

The related information of the earnings distribution for the year ended December 31, 2019, can be accessed through the Market Observation Post System website after the related meeting.

(iv) Treasury stock

The subsidiaries of the Company did not sell the ordinary shares of the Company in the years ended December 31, 2019 and 2018. As of December 31, 2019, Panpal and Gempal, subsidiaries of the Company, held 50,017 thousand shares of ordinary shares of the Company, recorded as the Company’s treasury stock, with a book value of 17.6 New Taiwan dollars per share. The total cost was $881,247. The fair value of the ordinary shares of the Company was 18.85 and 17.45 New Taiwan dollars per share as of December 31, 2019 and 2018, respectively.

Pursuant to the Securities and Exchange Act, the number of treasury shares purchased cannot exceed 10% of the number of shares issued. The total purchase cost cannot exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus. The shares

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

purchased for the purpose of transferring to employees shall be transferred within three years from the date of share repurchase. Those not transferred within the said limit shall be deemed as not issued by the Company and it should be cancelled. Furthermore, treasury stock cannot be pledged for debts, and treasury stock does not carry any shareholder rights until it is transferred.

(v) Other equity interests (net-of-taxes)

Balance on January 1, 2019 The Company Subsidiaries Associates Balance on December 31, 2019 Balance on January 1, 2018 The Company Subsidiaries Associates Balance on December 31, 2018	Exchange differences on transaction of foreign operation financial statements	Unrealized gain (loss) from financial assets at fair value through other comprehensive income	Unearned compensation for restricted employee shares and others Total
	$ (1,852,952) (1,620,812) (52,530) (268,686) $ (3,794,980) (3,477,376) 1,853,763 (67,150) (162,189) $ (1,852,952)	(5,606,436) 4,936,223 252,170 111,280 (306,763) (5,847,823) (34,596) 401,300 (125,317) (5,606,436)	- (7,459,388) - 3,315,411 (1,706) 197,934 - (157,406) (1,706) (4,103,449) (79,856) (9,405,055) 79,856 1,899,023 - 334,150 - (287,506) - (7,459,388)

(s) Share-based payment

At the meeting held on June 20, 2014, the Company’s Shareholders’ Meeting adopted a resolution to issue 100,000 thousand new shares of employee restricted stock with no consideration to those full time employees who meet certain requirements. The first issuance of 50,000 thousand shares had been approved by the FSC on October 30, 2014. Moreover, the Company’ s Board of Directors resolved to issue 49,980 thousand shares on January 22, 2015, and 49,360 thousand shares had actually been issued, in which the effective date of the share issuance was on February 25, 2015.

40%, 30% and 30% of the aforementioned restricted shares are vested, respectively, when the employees continue to provide service for at least 2 years, 3 years and 4 years from the registration and effective date and in the meantime, meet the performance requirement. After the issuance, the restricted shares are kept by a trust, which is appointed by the Company, before they are vested. These restricted shares shall not be sold, pledged, transferred, gifted or by any other means of disposal to third parties during the custody period. The voting rights of these shares are executed by the custodian, and the custodian shall act based on law and regulations. If the shares remain unvested after the vesting period, the Company will purchase all the unvested shares without consideration and cancel the shares thereafter. Restricted shares could receive cash and stock dividends. The aforementioned cash and stock dividends are not considered as restricted.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The information of the Company’s restricted shares (in thousands) is as follows:

Outstanding shares on January 1 Vested during the period Canceled during the period Outstanding shares on December 31	2018 23,571 (11,526) (12,045) -

For the year ended December 31, 2018, due to the failure in meeting the vested requirements of the employee restricted shares, the Company reversed compensation cost amounted to $156,219 and － capital surplus employee restricted shares amounted to $318,209. Besides, due to meet the vested requirements of the employee restricted shares, the Company recognized capital surplus–additional paid-in capital amounted to $155,601.

(t) Earnings per share

The Company’s basic and diluted earnings per share are calculated as follows:

Basic earnings per share:
Profit attributable to ordinary shareholders of the Company
Weighted-average number of outstanding ordinary shares (in
thousands)
Diluted earnings per share:
Profit attributable to ordinary shareholders of the Company (after
adjustment of potential diluted ordinary shares)
Weighted-average number of outstanding ordinary shares of
potential diluted ordinary shares
Weighted-average number of outstanding ordinary shares (in
thousands)
Effect of potential diluted common stock
Employee compensation (in thousands)
Employee restricted shares (in thousands)
Weighted-average number of ordinary shares (after adjustment of
potential diluted ordinary shares) (in thousands)
(u)
Revenue from contracts with customers
(i)
Disaggregation of revenue
Primary geographical markets:
United states

2019
2018
$
6,955,899
8,913,365
4,357,130
4,356,448
$
6,955,899
8,913,365
4,357,130
4,356,448
49,860
59,637
-
682
4,406,990
4,416,767
2019
2018
IT Product
Segment
IT Product
Segment
$ 376,228,186
361,991,920
(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Netherlands	98,084,239	109,185,154
China	90,543,393	110,187,798
United Kingdom	43,940,021	43,573,507
Others	307,484,189	286,111,743
	$ 916,280,028	911,050,122
Major products`：`
5C related electronic products	$ 915,421,296	910,647,211
Others	858,732	402,911
	$ 916,280,028	911,050,122

(ii) Contract balance

December 31, 2019 Notes and accounts receivable (including related parties) $ 181,654,052 Less: allowance for impairment (3,634,190) Total $ 178,019,862 Contract liabilities $ 877,822	December 31, 2018 January 1, 2018 194,553,384 171,353,850 3,718,560 (3,717,495) 190,834,824 167,636,355 1,405,452 1,617,626

For the details on accounts receivable and allowance for impairment, please refer to note (6)(e).

The amount of revenue recognized for the years ended December 31, 2019 and 2018 that was included in the contract liability balance at the beginning of the period were $1,405,452 and $1,585,446, respectively.

The major change in the balance of contract assets and contract liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received.

(v) Employees’ and directors’ compensations

Based on the Company’ s articles of incorporation, if there is any profit in a fiscal year, the Company’s pre-tax profits in such fiscal year, prior to deduction of compensations to employees and directors, shall be distributed to employees as compensations in an amount of not less than two percent (2%) thereof and to directors as compensations in an amount of not more than two percent (2%) of such profits. In the event that the Company has accumulated losses, the Company shall reserve an amount to offset accumulated losses. The compensations to employees as mentioned above may be distributed in the form of stock or cash. Employees entitled to receive the said stock or cash may include the employees of the Company’s subordinate companies pursuant to the Company Act (Employees entitled to receive the said stock or cash may include the employees of the Company’ s subordinate companies who meet certain conditions after the Company’ s articles of incorporation amended on June 21, 2019).

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The Company accrued and recognized its employee compensation of $731,322 and $930,857, respectively, and directors’ compensation of $38,672 and $49,223 for the years ended December 31, 2019 and 2018, respectively. The estimated amounts mentioned above are based on the net profit before tax without the compensations to employees and directors of each respective ending period, multiplied by the percentage of the compensation to employees and directors, which was approved by the management. The estimations are recorded under operating expenses and cost. The differences between the amounts estimated and recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in the distribution year. If the Board of Directors approve to distribute employee compensation in the form of stock, the number of the shares of the employee compensation is based on the closing price of the day before the Board of Directors’ meeting, the related information can be accessed through the Market Observation Post System website. There is no differences between the amount approved in the Board of Directors’ meeting and those recognized in the financial statements in 2019 and 2018.

There is no differences between the amount estimated and recognized in the financial statements in 2018. The related information can be accessed through the Market observation Post System website.

(w) Non-operating income and expenses

(i) Other income

The other income for the years ended December 31, 2019 and 2018, were as follows:

Interest income Financial assets at amortized cost Bank deposits Others Dividend revenue Overdue payable reversed as other income Sale of expensed assets Other revenue	2019 2018 $ 2,992 9,992 141,195 316,199 40,420 6,714 71,778 212,129 - 37,657 275,412 162,265 122,042 142,398 $ 653,839 887,354

(ii) Other gains and losses

The other gains and losses for the years ended December 31, 2019 and 2018, were as follows:

Losses on disposal of investments Gains (losses) on financial assets and liabilities at fair value through profit or loss, net Foreign currency exchange gains (losses), net Others	2019 2018 $ 8,990 - 55,140 97,682 (484,552) (221,786) (501) (1,926) $ (420,923) (126,030)

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

(x) Financial instruments

(i) Credit risk
1) The carrying amount of financial assets represents the maximum amount exposed to credit risk.

The Company’s customers are mainly from the high-tech industry. The Company does not concentrate on a specific customer and the sales regions are widely spread, thus there should be no concern on the significant concentrations of accounts receivable credit risk. And in order to mitigate accounts receivable credit risk, the Company constantly assesses the financial status of the customers.

2) Receivables and debt securities

Information of exposure to credit risk of notes and accounts receivable, please refer to note (6)(e).

Other financial assets at amortized cost includes other receivables, investments in corporate bonds and time deposits. These financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses (Regarding how the financial instruments are considered to have low credit risk, please refer to note (4)(f)). Due to the counter parties and the performing parties of the Company’s time deposits are financial institutions with investment grade and above, these time deposits are considered to have low credit risk.

(ii) Liquidity risk

The following are the contractual maturities of financial liabilities. In addition to lease liabilities, excluding estimated interest payments.

Carrying Amount December 31, 2019 Non-derivative financial liabilities Unsecured borrowings $ 65,013,800 Notes and accounts payable 149,064,159 Other payables 5,814,027 Lease liabilities-current and non-current 1,398,432 $ 221,290,418 December 31, 2018 Non-derivative financial liabilities Unsecured borrowings $ 79,701,932 Notes and accounts payable 155,427,659 Other payables 5,044,541 $ 240,174,132	Contractual cash flows (65,013,800) (149,064,159) (5,814,027) (1,444,217) (221,336,203) (79,701,932) (155,427,659) (5,044,541) (240,174,132)	Within 1 year (57,513,800) (149,064,159) (5,814,027) (402,010) (212,793,996) (68,801,932) (155,427,659) (5,044,541) (229,274,132)	1~ 2 years Over 2 years (1,925,000) (5,575,000) - - - - (306,979) (735,228) (2,231,979) (6,310,228) (8,600,000) (2,300,000) - - - - (8,600,000) (2,300,000)

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

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

(iii) Currency risk
1) Exposure to foreign currency risk

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

Financial assets Monetary items USD to TWD Non-monetary items THB to TWD Financial liabilities Monetary items USD to TWD	December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2018 Foreign currency Exchange rate TWD 6,889,285 30.715 211,604,389 423,027 0.946 400,184 6,819,596 30.715 209,463,891	December 31, 2018 Foreign currency Exchange rate TWD 6,889,285 30.715 211,604,389 423,027 0.946 400,184 6,819,596 30.715 209,463,891
	Foreign currency $ 6,580,212 446,859 6,021,076	Exchange rate 29.98 1.0028 29.98	TWD		Exchange rate TWD 30.715 211,604,389 0.946 400,184 30.715 209,463,891
			197,274,756 448,110 180,511,858

2) 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, accounts receivable, other receivables, loans and borrowings, accounts payable, and other payables that are denominated in foreign currency. Assuming all other variable factors remain constant, a strengthening (weakening) 5% of appreciation (depreciation) of the each major foreign currency against the Company’s functional currency as of December 31, 2019 and 2018, would have increased (decreased) the net profit before tax as follows. The analysis is performed on the same basis for both periods.

		December	December
		31, 2019	31, 2018
USD (against the TWD)
Strengthening 5%	$	838,145	107,025
Weakening 5%		(838,145)	(107,025)

3) Exchange gains and losses of monetary items

As the Company deals with diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. For the years ended December 31, 2019 and 2018, the foreign exchange losses, including both realized and unrealized, amounted to $484,552 and $221,786, respectively.

(iv) Interest rate analysis

The interest risk exposure from financial assets and liabilities has been disclosed in the note of

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

liquidity risk management.

The following sensitivity analysis is based on the risk exposure to interest rate on the derivative and non-derivative financial instruments on the reporting date. Regarding the assets and liabilities with variable interest rates, the analysis is on the basis of the assumption that the amount of assets and liabilities outstanding at the reporting date were outstanding throughout the year. The rate of change is expressed as the interest rate increase or decrease by 0.25%, when reporting to management internally, which also represents the assessment of the Company’s management for the reasonably possible interval of interest rate change.

Assuming all other variable factors remaining constant, if the interest rate had increased or decreased by 0.25%, the impact to the net profit before tax would be as follows for the years ended December 31, 2019 and 2018, which would be mainly resulted from the bank savings and borrowings with variable interest rates.

Interest increased by 0.25% Interest decreased by 0.25%	2019 2018 $ (30,454) (30,511) 30,454 30,511

(v) Fair value information
1) The categories and fair value of financial instruments

The Company’s financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income were measured at fair value on a recurring basis. The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It shall not include fair value information of the financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value and investments in equity instruments which do not have any quoted price in an active market in which the fair value cannot be reasonably measured.

		December 31, 2019 Fair Value	December 31, 2019 Fair Value	December 31, 2019 Fair Value
Book value
		Level 1 - 1,614,565 448,110 - - -	Level 2 149,888 - - - - 27,170,468	Level 3 Total 71,097 220,985 - 1,614,565 - 448,110 914,507 914,507 42,211 42,211 - 27,170,468
	1,614,565 448,110 914,507 42,211 27,170,468
	30,189,861

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Financial assets measured at amortized
cost
Cash and cash equivalents		13,459,969	-	-	-	-
Notes and accounts receivable, net		149,797,263	-	-	-	-
Notes and accounts receivable due from
related parties, net		1,052,131	-	-	-	-
Other receivables		3,110,607	-	-	-	-
Guarantee deposits		126,605	-	-	-	-
Subtotal		167,546,575
Total	$	197,957,421
Financial liabilities measured at
amortized cost
Short-term borrowings	$	39,363,800	-	-	-	-
Notes and accounts payable		74,138,921	-	-	-	-
Notes and accounts payable to related
parties		74,925,238	-	-	-	-
Other payables		5,814,027	-	-	-	-
Lease liabilities–current and non-current		1,398,432	-	-	-	-
Long-term borrowings current portion		18,150,000	-	-	-	-
Long-term borrowings		7,500,000	-	-	-	-
Deposits received		220	-	-	-	-
Total	$	221,290,638

		December 31, 2018 Fair Value	December 31, 2018 Fair Value	December 31, 2018 Fair Value
Book value
		Level 1 284,768 2,383,976 400,184 - - - - - - - -	Level 2 - - - - - 22,896,211 - - - - -	Level 3 Total 23,745 308,513 - 2,383,976 - 400,184 896,395 896,395 51,363 51,363 - 22,896,211 - - - - - - - - - - (Continued)
	2,383,976 400,184 896,395 51,363 22,896,211
	26,628,129
	20,446,378 350,000 166,600,383 1,318,230 1,418,750

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

		December 31, 2018 Fair Value	December 31, 2018 Fair Value	December 31, 2018 Fair Value
	Book value
		Level 1 - - - - - - - -	Level 2 - - - - - - - -	Level 3 Total - - - - - - - - - - - - - - - -
117,500 190,251,241 $ 217,187,883 $ 51,305,682 77,050,816 78,376,843 5,044,541 17,496,250 10,900,000 266 $ 240,174,398	117,500
	190,251,241

2) Fair value valuation technique of financial instruments not measured at fair value

The Company estimates financial instruments that not measured at fair value by methods and assumption as follows:

a) Financial assets measured at amortized cost and financial liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

3) Fair value valuation technique of financial instruments measured at fair value
a) Non-derivative financial instruments

Financial instruments trade in active markets is based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and on-therun bonds from Taipei Exchange can be used as a base to determine the fair value of the listed companies’ equity instrument and debt instrument of the quoted price in an active market.

If a quoted price of a financial instrument can be obtained in time and often from exchanges, brokers, underwriters, industrial union, pricing institute, or authorities and such price can reflect those actual trading and frequently happen in the market, then the financial instrument is considered to have a quoted price in an active market. If a financial instrument is not in accord with the definition mentioned above, then it is considered to be without a quoted price in an active market. In general, market with low trading volume or high bid-ask spreads is an indication of a non-active market.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The fair value of the listed company is determined by reference to the market quotation.

The measurements on fair value of the financial instruments without an active market are determined using the valuation technique or the quoted market price of its competitors. Fair value measured using the valuation technique can be extrapolated from similar financial instruments, discounted cash flow method, or other valuation techniques which include the model used in calculating the observable market data at the balance sheet date.

The measurement of fair value of a non-active market financial instruments held by the Company which do not have quoted market prices are based on the comparable market approach, with the use of key assumptions of price-book ratio multiple or earnings multiple of comparable listed companies as its basic measurement. These assumptions have been adjusted for the effect of discount without the marketability of the equity securities.

b) Derivative financial instruments

Measurement of the fair value of derivative instruments is based on the valuation techniques that are generally accepted by the market participants. For instance, discount method or option pricing models. Fair value of forward currency exchange is usually determined by using the forward currency rate.

4) Transfer from one level to another

The Company held an investment in equity of Crystalvue Medical Corporation (“Crystalvue”), with a fair value of $18,736 and $11,287, which were classified as fair value through other comprehensive income as of December 31, 2019 and 2018, respectively. The investment was categorized as level 3 as of December 31, 2018, because the shares were not listed on the exchange market and was measured by significant unobservable inputs. In December 2019, Crystalvue’s shares were listed in the exchange market, wherein they are actively traded. Currently, the equity shares have a quoted market price in an active market; therefore, the category was transferred from level 3 to level 1 as of December 31, 2019.

There was no transfer from one level to another in 2018.

5) Changes in level 3

The change in level 3 at fair value in the years ended December 31, 2019 and 2018, were as follow:

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Balance on January 1, 2019 Total gains and losses recognized: In profit or loss In other comprehensive income Purchased Disposal Proceeds of capital reduction of investment Transferred out form level 3 Balance on December 31, 2019 Balance on January 1, 2018 Total gains and losses recognized: In other comprehensive income Purchased Proceeds of capital reduction of investment Balance on December 31, 2018	Financial assets at fair value through profit or loss $ 23,745 (8,244) - 55,596 - - - $ 71,097 $ - - - 23,745 - $ 23,745	Financial assets at fair value through other comprehensive income Total 947,758 971,503 - (8,244) 18,468 18,468 19,396 74,992 (791) (791) (7,615) (7,615) (20,498) (20,498) 956,718 1,027,815 1,335,885 1,335,885 - - (487,950) (487,950) 107,877 131,622 (8,054) (8,054) 2,291,697 2,315,442

For the years ended December 31, 2019 and 2018, total gains and losses that were included in “other comprehensive income, before tax, of equity instruments at fair value through other comprehensive income” were as follows:

		2019	2018
Total gains and losses recognized:
In profit or loss before tax (as “other gains and losses,
net”)	$	(8,244)	-
In other comprehensive income (as “other
comprehensive income, before tax, equity
instruments at fair value through other
comprehensive income”)	$	17,677	(487,950)

6) The quantified information for significant unobservable inputs (level 3) used in fair value measurement

The Company’ s financial instruments that use level 3 input to measure fair values – include financial assets at fair value through other comprehensive income equity – instruments, financial assets at fair value through profit or loss equity securities investment and available-for-sale financial assets – equity investment.

Most of fair value measurements of the Company which are categorized as equity investment into level 3 have several significant unobservable inputs. Significant unobservable inputs of equity investments without quoted price are independent of each other.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The quantified information for significant unobservable inputs was as follows:

Inter-relationships between significant Valuation Significant unobservable inputs technique unobservable inputs and fair value Comparable Price-Book ratio The higher the market approach multiples (1.4~5.64, multiple is, the (Price-Book ratio 1.33~5.86, higher the fair value multiples method respectively, on will be. and Multiples of December 31, 2019 and earnings method) 2018) Multiples of earnings (3.12~11.24, 2.32~2.95, respectively, on December 31, 2019 and 2018) Lack-of-Marketability The higher the discount rate multiple is, the (35%~85%, and higher the fair value 40%~82%, will be. respectively, on The higher the LackDecember 31, 2019 and of-Marketability 2018) discount rate is, the lower the fair value will be. Net asset value Net asset value Inapplicable

Item

Financial assets at fair value through other comprehensive － income equity investment without an active market

Financial assets at fair Net asset value Net asset value Inapplicable value through other method comprehensive income Financial assets at fair Net asset value Net asset value Inapplicable value through profit method － or loss investment in private placement

7) Sensitivity analysis for fair value of financial instruments using level 3 inputs

The Company’s fair value measurement on financial instruments is reasonable. However, the measurement would be different if different valuation models or valuation parameters are used. For financial instruments using level 3 inputs, if the valuation parameters changed, the impact on other comprehensive income or loss are as follows:

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

December 31, 2019 Financial assets at fair value through other comprehensive income December 31, 2018 Financial assets at fair value through other comprehensive income	Input Price-Book ratio multiples Multiples of earnings Lack-of-Marketability discount rate Price-Book ratio multiples Multiples of earnings Lack-of-Marketability discount rate	Move up or down	Other comprehensive income
			Favorable change Unfavorable change $ 25,552 24,531 $ 14,707 12,746 $ 6,589 6,548 $ 24,924 24,935 $ 18,629 17,648 $ 4,913 4,925
		5% 5% 5% 5% 5% 5%

The favorable and unfavorable changes reflect the movement of the fair value, in which the fair value is calculated by using the different unobservable inputs in the valuation technique. The table above shows the effects of one unobservable input, without considering the inter-relationships with another unobservable input for financial instrument, if there are one or more unobservable inputs.

(y) Financial risk management

(i) Overview

The Company is exposed to the following risks arising from financial instruments:

1) Credit risk
2) Liquidity risk
3) Market risk

In this note expressed the information on risk exposure and objectives, policies and procedures of risk measurement and management of the Company. For detailed information, please refer to the related notes of each risk.

(ii)Structure of risk management

The Company’ s finance management department provides business services for the overall internal department. It sets the objectives, policies and processes for managing the risk and the methods used to measure the risk arising from both the domestic and international financial market operations.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

The Company minimizes the risk exposure through derivative financial instruments. The Board of Directors regulated the use of derivative financial instruments in accordance with the Company’s policy about risks arising from financial instruments such as currency risk, interest rate risk, credit risk, the use of derivative and non-derivative financial instruments and the investments of excess liquidity. The internal auditors of the Company continue with the review of the amount of the risk exposure in accordance with the Company’s policies and the risk management policies and procedures. The Company has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation.

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities.

1) Accounts receivable and other receivables

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, and these limits are reviewed periodically.

2) Investments

The credit risks exposure in the bank deposits, investments with fixed income and other financial instruments are measured and monitored by the Company’s finance department. Since the Company’ s transaction counterparties and the contractually obligated counterparties are banks, financial institutes and corporate organizations with good credits, there are no compliance issues, and therefore, no significant credit risk.

3) Guarantees

Pursuant to the Company’s policies, it is only permissible to provide financial guarantees to subsidiaries and companies that the Company has business with. As of December 31, 2019 and 2018, the guarantees provide to the subsidiaries amounted to $255,662 and $325,179, respectively.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities which be settled by delivering cash or another financial asset.

The Company manages and maintains sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company’ s management supervises the banking facilities and ensures in compliance with the terms of the loan agreements. Please refer to notes (6)(l) and (6)(m) for unused credit lines of short-term and long-term borrowings as of December 31, 2019 and 2018.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

(v) Market risk

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

1) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Company, primarily USD.

As for other monetary assets and liabilities denominated in other foreign currencies, when short-term imbalance takes place, the Company buys or sells foreign currencies at spot rate to ensure that the net exposure is kept on an acceptable level.

2) Interest rate risk

The Company borrows funds on fixed and variable interest rates, which has a risk exposure to changes in fair value and cash flow. Therefore, the Company manages the interest rates risk by maintaining an adequate combination of fixed and variable interest rates.

3) Other price risk

The Company is exposed to equity price risk arising from investments in listed equity securities.

(z) Capital management

The policy of capital management made by the Board of Directors is to maintain a strong capital base so as to stabilize the confidence of the investors, creditors and the public market and to sustain future development of the business. Capital consists of ordinary shares, capital surplus and retained earnings. The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Company monitors the capital structure by way of periodical review the debt ratio. As of December 31, 2019 and 2018, the debt ratio was as follows:

Total liabilities Total assets Debt ratio	December 31, 2019 December 31, 2018 $ 231,810,855 250,089,167 $ 337,783,488 355,812,813 69 % 70 %

The Company could purchase its own shares in the public market in accordance with the corresponding rules and regulations. The timing of the purchases depends on market prices.

As of December 31, 2019, there were no changes in the Company’ s approach of capital

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

management.

(aa) Investing and financing activities not affecting current cash flow

The Company’s investing and financing activities which did not affect the current cash flow in the year ended December 31, 2019 were acquisition of right-of-use assets by leasing, please refer to note (6)(k).

There were no investing and financing activities which did not affect the current cash flow in the year ended December 31, 2018.

Reconciliation of liabilities arising from financial activities were as follows:

Short-term borrowings Long-term borrowings Lease liabilities Guarantee deposits Total liabilities from financing activities Long-term borrowings Short-term borrowings Guarantee deposits Total liabilities from financing activities	January 1, 2019 $ 51,305,682 28,396,250 821,816 266 $ 80,524,014 January 1, 2018 $ 41,386,000 27,133,200 266 $ 68,519,466	Cash flow (11,941,882) (2,746,250) (414,856) (46) (15,103,034) Cash flow 9,919,682 1,263,050 - 11,182,732	Non-cash changes December 31, 2019 - 39,363,800 - 25,650,000 991,472 1,398,432 - 220 991,472 66,412,452 Non-cash changes December 31, 2018 - 51,305,682 - 28,396,250 - 266 - 79,702,198

(7) Related-party transactions:

(a) Name and relationship with related parties

The following are the subsidiaries and entities that have transactions with related party during the periods covered in the parent-company-only financial statements.

Name of related party	Country of incorporation
Panpal Technology Corp. (“Panpal”)	The Company’s subsidiary
Gempal Technology Corp. (“Gempal”)	The Company’s subsidiary
Hong Ji Capital Co., Ltd. (“Hong Ji”)	The Company’s subsidiary
Hong Jin Investment Co., Ltd. (“Hong Jin”)	The Company’s subsidiary
Zhaopal Investment Co., Ltd. (“Zhaopal”)	The Company’s subsidiary
Yongpal Investment Co., Ltd. (“Yongpal”)	The Company’s subsidiary
Kaipal Investment Co., Ltd. (“Kaipal”)	The Company’s subsidiary

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Name of related party Country of incorporation Accesstek, Inc. (“ATK”) The Company’s subsidiary Arcadyan The Company’s subsidiary Rayonnant Technology Co., Ltd. (“Rayonnant Technology”) The Company’s subsidiary HengHao Technology Co., Ltd. (“HengHao”) The Company’s subsidiary Ripal Optortronics Co., Ltd. (“Ripal”) The Company’s subsidiary Auscom Engineering Inc. (“Auscom”) The Company’s subsidiary Just International Ltd. (“Just”) The Company’s subsidiary Compal International Holding Co., Ltd. (“CIH”) The Company’s subsidiary Compal Electronics (Holding) Ltd. (“CEH”) The Company’s subsidiary Bizcom Electronics, Inc. (“Bizcom”) The Company’s subsidiary Flight Global Holding Inc. (“FGH”) The Company’s subsidiary High Shine Industrial Corp. (“HSI”) The Company’s subsidiary Compal Europe (Poland) Sp. z o.o. (“CEP”) The Company’s subsidiary Big Chance International Co., Ltd. (“BCI”) The Company’s subsidiary Compal Rayonnant Holdings Limited (“CRH”) The Company’s subsidiary Core Profit Holdings Limited (“CORE”) The Company’s subsidiary Compalead Electronics B.V. (“CPE”) The Company’s subsidiary Compalead Eletronica do Brasil Industria e Comercio Ltda. (“CEB”) The Company’s subsidiary Compal Display Holding (HK) Limited (“CDH (HK)”) The Company’s subsidiary Compal Electronics International Ltd. (“CII”) The Company’s subsidiary Compal International Ltd. (“CPI”) The Company’s subsidiary Compal Electronics (China) Co., Ltd. (“CPC”) The Company’s subsidiary Compal Optoelectronics (Kunshan) Co., Ltd. (“CPO”) The Company’s subsidiary Compal System Trading (Kunshan) Co., Ltd. (“CST”) The Company’s subsidiary Smart International Trading Ltd. (“Smart”) The Company’s subsidiary Amexcom Electronics Inc. (“AEI”) The Company’s subsidiary Mexcom Electronics, LLC (“MEL”) The Company’s subsidiary Mexcom Technologies, LLC (“MTL”) The Company’s subsidiary CENA Electromex, S.A. de C.V. (“CMX”) (Note) The Company’s subsidiary Compal International Holding (HK) Limited (“CIH (HK)”) The Company’s subsidiary Jenpal International Ltd. (“Jenpal”) The Company’s subsidiary Prospect Fortune Group Ltd. (“PFG”) The Company’s subsidiary

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Name of related party

Country of incorporation

Compal Electronics Technology (Kunshan) Co., Ltd. (“CET”) The Company’s subsidiary Compal Information (Kunshan) Co., Ltd. (“CIC”) The Company’s subsidiary Compal Information Technology (Kunshan) Co., Ltd. (“CIT”) The Company’s subsidiary Kunshan Botai Electronics Co., Ltd. (“BT”) The Company’s subsidiary Compal Information Research and Development (Nanjing) Co., Ltd. (“CIN”) The Company’s subsidiary Compal Digital Technology (Kunshan) Co., Ltd. (“CDT”) The Company’s subsidiary Compower Global Service Co., Ltd. (“CGS”) The Company’s subsidiary Compal Investment (Jiansu) Co., Ltd. (“CIJ”) The Company’s subsidiary Compal Display Electronics (Kunshan) Co., Ltd. (“CDE”) The Company’s subsidiary Etrade Management Co., Ltd. (“Etrade”) The Company’s subsidiary Webtek Technology Co., Ltd. (“Webtek”) The Company’s subsidiary Forever Young Technology Inc. (“Forever”) The Company’s subsidiary Unicom Global, Inc. (“UCGI”) The Company’s subsidiary Palcom International Corporation (“Palcom”) The Company’s subsidiary Compal Communication (Nanjing) Co., ltd. (“CCI Nanjing”) The Company’s subsidiary Compal Digital Communication (Nanjing) Co., Ltd. (“CDCN”) The Company’s subsidiary Compal Wireless Communication (Nanjing) Co., Ltd. (“CWCN”) The Company’s subsidiary Hanhelt Communication (Nanjing) Co., Ltd. (“Hanhelt”) The Company’s subsidiary Giant Rank Trading Ltd. (“GIA”) The Company’s subsidiary OptoRite Inc. The Company’s subsidiary MSI-ATK Otpics Holding Corporation (“MSI-ATK”) The Company’s subsidiary Maitek (BVI) Corporation (“Maitek”) The Company’s subsidiary Arcadyan Technology N.A. Corp. (“Arcadyan USA”) The Company’s subsidiary Arcadyan Germany Technology GmbH (“Arcadyan Germany”) The Company’s subsidiary Arcadyan Technology Corporation Korea (“Arcadyan Korea”) The Company’s subsidiary Arcadyan Holding (BVI) Corp. (“Arcadyan Holding”) The Company’s subsidiary Arcadyan do Brasil Ltda. (“Arcadyan Brasil”) The Company’s subsidiary Arcadyan Technology Limited (“Arcadyan UK”) The Company’s subsidiary Arcadyan Technology Australia Pty Ltd. (“Arcadyan AU”) The Company’s subsidiary Zhi-pal Technology Inc. (“Zhi-pal”) The Company’s subsidiary Tatung Technology Inc. (“TTI”) The Company’s subsidiary AcBel Telecom Inc. (“AcBel Telecom”) The Company’s subsidiary

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Name of related party Country of incorporation CBN The Company’s subsidiary Speedlink Tradings Limited (“Speedlink”) The Company’s subsidiary Compal Broadband Networks Belgium BVBA (“CBNB”) The Company’s subsidiary Compal Broadband Networks Netherlands B.V. (“CBNN”) The Company’s subsidiary Sinoprime Global Inc. (“Sinoprime”) The Company’s subsidiary Arcadyan Technology (Vietnam) Co., Ltd. (“Arcadyan Vietnam”) The Company’s subsidiary Arcadyan Technology (Shanghai) corp. (“SVA Arcadyan”) The Company’s subsidiary Arch Holding (BVI) Corp. (“Arch Holding”) The Company’s subsidiary Compal Networking (Kunshan) Co., Ltd. (“CNC”) The Company’s subsidiary Leading Images Ltd. (“Leading Images”) The Company’s subsidiary Astoria Networks GmbH (“Astoria GmbH”) The Company’s subsidiary Quest International Group Co., Ltd. (“Quest”) The Company’s subsidiary Exquisite Electronic Co., Ltd. (“Exquisite”) The Company’s subsidiary Tatung Home Appliances (Wujiang) Co., Ltd. (“THAC”) The Company’s subsidiary Tatung Technology of Japan Co., Ltd. The Company’s subsidiary Intelligent Universal Enterprise Ltd. (“IUE”) The Company’s subsidiary Goal Reach Enterprises Ltd. (“Goal”) The Company’s subsidiary Compal (Vietnam) Co., Ltd. (“CVC”) The Company’s subsidiary Compal Development &Management (Vietnam) Co., Ltd. (“CDM”) The Company’s subsidiary Allied Power Holding Corp. (“APH”) The Company’s subsidiary Primetek Enterprises Limited (“PEL”) The Company’s subsidiary Rayonnant Technology (HK) Co., Ltd. (“Rayonnant Technology (HK)”) The Company’s subsidiary Royonnant Technology (Taicang) Co., Ltd. (“Rayonnant Technology The Company’s subsidiary (Taicang)”) HengHao Holdings A Co., Ltd. (“HHA”) The Company’s subsidiary HengHao Holdings B Co., Ltd. (“HHB”) The Company’s subsidiary HengHao Trading Co., Ltd. The Company’s subsidiary HengHao Optoelectronics Technology (Kunshan) Co., Ltd. The Company’s subsidiary LUCOM Display Technology (Kunshan) Limited (“Lucom”) The Company’s subsidiary Center Mind International Co., Ltd. (“CMI”) The Company’s subsidiary Prisco International Co., Ltd. (“PRI”) The Company’s subsidiary Compal Electronic (Sichuan) Co., Ltd. (“CIS”) The Company’s subsidiary Compal Electronic (Chongqing) Co., Ltd. (“CEQ”) The Company’s subsidiary

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Name of related party Country of incorporation Compal Electronic (Chengdu) Co., Ltd. (“CEC”) The Company’s subsidiary Compal Management (Chengdu) Co., Ltd. (“CMC”) The Company’s subsidiary Compal Smart Device (Chongqing) Co., Ltd. (“CSD”) The Company’s subsidiary Billion Sea Holdings Limited (“BSH”) The Company’s subsidiary Mithera Capital Io LP (“Mithera”) The Company’s subsidiary Fortune Way Technology Corp. (“FWT”) The Company’s subsidiary General Life Biotechnology Co., Ltd. (“GLB”) The Company’s subsidiary Mactech Co., Ltd. (“Mactech”) The Company’s subsidiary Rapha Bio Ltd. (“Rapha”) The Company’s subsidiary Compal Electronics India Private Limited (“CEIN”) The Company’s subsidiary Shennona Corporation (“Shennona”) The Company’s subsidiary Unicore BioMedical Co., Ltd. (“Unicore”) The Company’s subsidiary Raycore Biotech Co., Ltd. (“Raycore”) The Company’s subsidiary Hippo Screen Neurotech Co., Ltd. (“Hippo Screen”) The Company’s subsidiary Shennona Co., Ltd. (“Shennona TW”) The Company’s subsidiary Aco Smartcare Co., Ltd. (“Aco Smartcare”) The Company’s subsidiary AcBel Polytech Inc. (AcBel) and its subsidiaries (“AcBel”) The same Chairman of the Board with the Company Avalue An associate Crownpo Technology Inc (“Crownpo”) An associate Kinpo Group Management Consultant Company (“Kinpo Group Management”) An associate Allied Circuit An associate LIZ Electronics (Kunshan) Co., Ltd. (“LIZ”) An associate Compal Connector Manufacture Ltd. (“CCM”) A joint venture company

Note: Since the disposal of CMX in August 2019, CMX is no longer a subsidiary of the Company.

(b) Transactions with key management personnel

Key management personnel remunerations comprised:

		2019	2018
Short-term employee benefits	$	482,308	487,007
Post-employment benefits		6,130	5,913
Share-based payments		-	(91,809)
	$	488,438	401,111

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

There are no termination benefits and other long-term benefits. Please refer to note (6)(s) for explanations related to share-based payments.

(c) Significant related-party transactions

(i) Sale of goods to related parties

The amounts of significant sales transactions between the Company and related parties were as follows:

follows:
		2019	2018
Subsidiaries	$	1,432,433	2,649,187
Associates		179	246
	$	1,432,612	2,649,433

Sales prices for related parties were similar to those of the third-party customers. The collection period was 45~180 days for related parties.

(ii) Purchase of goods from related parties

The amounts of significant purchase transactions between the Company and related parties were as follows:

		2019	2018
Subsidiaries
CSD	$	96,242,404	-
Others		296,062,338	287,509,094
		392,304,742	287,509,094
Associates		410	40
Other related parties		65,573	9,194
Joint venture		467	370
	$	392,371,192	287,518,698

Purchase prices and payment period from related parties were similar to those from third-party suppliers. The payment period was 60~120 days for related parties.

(iii) Product warranty service expenses

The product warranty service expenses paid to subsidiaries for the years ended December 31, 2019 and 2018, amounted to $292,959 and $278,993, respectively. As of December 31, 2019 and 2018, the unpaid warranty service expenses were record as other payables.

(iv) Technical service expense

The Company engaged its subsidiaries to research and develop of notebooks, and the related technical service expenses for the years ended December 31, 2019 and 2018, amounted to $170,657 and $154,412, respectively. As of December 31, 2019 and 2018, the unpaid technical service expenses were recorded as other payables.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

(v) Receivable due from relate parties

The receivables arising from the transactions mentioned above, the sale of machinery and equipment to related parties, and the purchasing of machinery, equipment and others on behalf of the related parties as of December 31, 2019 and 2018, were as follows:

	Related party		December	December
Account	categories		31, 2019	31, 2018
Notes and accounts receivable	Subsidiaries	$	1,052,131	1,318,230
Other receivables	Subsidiaries - UCGI		581,199	502,320
Other receivables	Subsidiaries - Others		27,155	18,278
Other receivables	Other related parties		62	-
Other receivables	Joint venture		-	120
			1,660,547	1,838,948
Less: Credit balance of investments
accounted for using equity
method			(459,296)	(376,263)
		$	1,201,251	1,462,685

As of December 31, 2019 and 2018, the Company’s investment accounted for using the equity method in subsidiaries was a credit balance, recorded as a deduction from other receivable (other receivables) – related party. Please refer to note (6)(h).

(vi) Payable to related parties

The payables to related parties as of December 31, 2019 and 2018, were as follows:

	Related party		December	December
Account	categories		31, 2019	31, 2018
Notes and accounts payable	Subsidiaries - CIT	$	31,847,665	161,883
Notes and accounts payable	Subsidiaries - Others		43,055,746	78,205,643
Notes and accounts payable	Associates		259	11
Notes and accounts payable	Other related parties		21,568	9,146
Notes and accounts payable	Joint venture		-	160
Other payables	Subsidiaries		339,318	199,328
Other payables	Associates		-	745
Other payables	Other related parties		-	274
		$	75,264,556	78,577,190

(vii) Loan to related parties

The interest rate of unsecured loans to subsidiaries was 1.20%~3.50%, and the Company had assessed that no bad debt expenses should be recognized. As of December 31, 2019 and 2018, the loans due to related parties were recorded as other receivables.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

	Related party		December	December
Account	categories		31, 2019	31, 2018
Other receivables	Subsidiaries - CEB	$	1,499,000	-
Other receivables	Subsidiaries - HengHao		200,000	199,618
Other receivables	Subsidiaries - UCGI		220,000	220,000
Less: Credit balance of investments
accounted for using the equity
method			(200,000)	(118,481)
		$	1,719,000	301,137

As of December 31, 2019 and 2018, the Company’s investment accounted for using the equity method in some subsidiaries was a credit balance, recorded as a deduction from other receivables – related parties (classified as other receivables). Please refer to note (6)(h).

(viii) Guarantees

As of December 31, 2019 and 2018, the guarantees provided to subsidiaries were $255,662 and $325,179, respectively.

(8) Pledged assets: None.

(9) Commitments and contingencies:

The details of commitments and contingencies were as follows:

(a) On May 17, 2017, Qualcomm Inc. filed a lawsuit to the Southern District Court of California, USA against the Group for not paying the royalties of the patent license agreement. The Group has filed counterclaims against Qualcomm Inc. based on the antitrust law in the same court on July 19, 2017. The lawsuits was settled on April 16, 2019. The Company had compromised and both parties had agreed to drop the lawsuits.
(b) In August 2019, Inventec Corporation filed a lawsuit to the Taiwan Taipei District Prosecutors Office against the Company concerning its former employees who joined the Company. This is deemed as an act of violation according to the Trade Secret Law and Copyright Law. The Company engaged lawyers to defend its right on this matter. Currently, the case is still in progress; therefore, the Company cannot make any reasonable estimation regarding the possible impact on its business operation.
(c) The Company entered into various patent license agreements with third parties, and was required to make royalty payments of a predetermined amount periodically.

(10) Losses due to major disasters: None

(11) Subsequent events: None

(12) Other:

The employee benefits, depreciation and amortization expenses by categorized function are summarized as

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

follows:

follows:
By function By item	2019			2018
	Operating costs	Operating expenses	Total	Operating costs	Operating expenses	Total
Employee benefits Salary Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization	677,649 51,188 17,972 - 136,787 93,277 5,980	8,450,610 571,822 330,664 48,630 402,952 598,554 319,247	9,128,259 623,010 348,636 48,630 539,739 691,831 325,227	322,825 27,602 12,469 - 48,089 15,342 40,050	8,227,841 517,757 308,470 59,182 385,959 150,985 249,740	8,550,666 545,359 320,939 59,182 434,048 166,327 289,790

For the years ended December 31, 2019 and 2018, the information on the number of employees and employee benefit expense of the Company is as follows:

Number of employees (Average salaries) Number of directors (non-employees) Average benefit expense of employees Average salary expense of employees Percentage of change in average salary expense of employees

(13) Other disclosures:

(a) Information on significant transactions

The following were the information on significant transactions required by the “ Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company for the year ended December 31, 2019:

(i) Loans to other parties: Please refer to Table 1
(ii) Guarantees and endorsements for other parties: Please refer to Table 2
(iii) Securities held as of December 31, 2019 (excluding investment in subsidiaries, associates and joint ventures): Please refer to Table 3
(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: Please refer to Table 4
(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(vi) Disposals of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None

(Continued)

COMPAL ELECTRONICS, INC. Notes to Consolidated Financial Statements

(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Please refer to Table 5
(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: Table 6
(ix) Trading in derivative instruments: None.
(b) Information on investees: Please refer to Table 7
(c) Information on investment in Mainland China: Please refer to Table 8

(14) Segment information:

Please refer to the consolidated financial report of 2019.

(Continued)

COMPAL ELECTRONICS, INC.

Statement of cash and cash equivalents

December 31, 2019

(Expressed in thousands of New Taiwan Dollars;

in dollars of Foreign Currency)

Item Cash on hand Checking account and demand deposits Time deposits Cash equivalents: Bonds purchased under resale agreements Total	Description Amount $ 1,527 TWD 98,383 Foreign currency (US$113,510,726 and others) 3,424,804 3,523,187 Foreign currency (US$327,000,000, Maturity date: 2020.1.2~ 2020.1.7) 9,803,460 (CNY$19,000,000, Maturity date: 2020.1.6~ 2020.3.2) 81,795 9,885,255 TWD(Maturity date: 2020.1.2~2020.1.3) 50,000 $ 13,459,969

Note: The exchange rate is 29.98 New Taiwan dollars for 1 US dollar;4.305 New Taiwan dollars for 1 CNY dollar.

COMPAL ELECTRONICS, INC.

Statement of notes and accounts receivable

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Item D Company E Company A Company C Company G Company B Company Others (Note) Less: allowance for uncollectible accounts Notes and accounts receivable, net	Description Amount Sales of non-related-parties $ 101,009,491 `〃` 24,891,952 `〃` 14,079,296 `〃` 12,692,996 `〃` 10,073,399 `〃` 9,050,623 `〃` 8,804,164 180,601,921 (3,634,190) $ 176,967,731

Note: The amount of individual client included in others does not exceed 5% of the account balance.

Statement of inventories

Item Finished goods Work in progress Raw materials Total

		Net Realizable
	Cost	Value
$	13,454,860	13,694,385
	152,421	152,421
	36,440,788	36,467,412
$	50,048,069	50,314,218

COMPAL ELECTRONICS, INC.

Statement of changes in accumulated impairment of investments accounted for using the equity method

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars; thousands of shares)

Investee Company Auscom Panpal Just CIH CEH Gempal Hong Ji Hong Jin Maxima Ventures l, Inc. ATK Allied Circuit Bizcom LIPO Crownpo Arcadyan FGH HSI Zhaopal Yongpal Kaipal Lead-Honor Optronics Co., Ltd. CBN Kinpo Group Management Rayonnant Technology CRH HengHao Infinno Technology Corp. CEP BCI APE CORE Unicore Ripal CPE Avalue Etrade Webtek Forever UCGI Palcom Mactech GLB Shennona Hippo Screen Shennona TW Aco Smartcare Subtotal Exchange differences on transaction of foreign financial statements Less: Treasury shares held by subsidiaries Unrealized profits or losses Subtotal Plus: Deduction of accounts receivable and other receivable`－`related parties Plus: Credit balance of investment in equity method Total	Beginning Balance Number of shares Amount (not including exchange differences on transaction of foreign financial statements 3,000 $ 135,590 500,000 5,941,971 48,010 8,252,466 53,001 35,479,344 1 3,906,656 90,000 1,920,264 100,000 1,070,753 29,500 330,469 126 4,961 899 10,374 10,158 331,178 100 454,679 98 677,539 3,739 76,971 41,305 2,065,133 89,755 4,927,347 42,700 737,228 135,800 6,190 118,850 5,509 51,050 3,110 2,772 (3) 29,060 782,396 300 4,538 29,500 43,764 12,500 104,879 63,815 (100,557) 5,650 21,553 136 19,975 90,820 5,857,011 31,253 926,089 147,000 7,395,104 20,000 164,648 6,000 51,798 6,427 839,756 15,240 599,634 46,900 (169,077) 100 685,089 50 1,567,245 10,000 (376,263) 10,000 109,663 21,756 246,787 15,000 260,934 2,500 4,738 - - - - - - 85,377,433 (1,985,306) (881,247) (4,409) 82,506,471 494,744 298,023 $ 83,299,238	Increase	(Note 1) Amount - 268,654 - - - 43,776 - 3,154 - - - - - - 81,907 - - - - - - - - - - 200,000 - - - 111,280 - - - - 4,761 - - - - - - - 3,107 42,000 6,000 90,000 854,639 - - 893 855,532	Decrease	(Note 2) Amount - 27,411 - - - 93,989 48,866 18,689 - - 57,456 - - 1,870 146,857 586 - 6,191 5,509 3,110 - 52,835 - - - - - - - 27,199 - - - - 49,139 - - - - 1,587 21,994 - - - - - 563,288 1,942,028 - - 2,505,316	Share of profit recognized 3,919 213,221 209,804 473,752 - 74,765 61,267 29,774 37 (1,826) 45,327 16,485 (125,098) (16,347) 278,206 131,815 (180,050) 1 - - - 4,619 90 22,907 27,806 (569,058) (4,354) 2,224 296,503 71,442 232,282 (18,984) 24,834 16,394 99,281 (311,924) (39,957) 1,497 (83,034) (2,453) 12,703 45,053 (7,150) (7,131) (1,708) (4,022) 1,022,912 - - - 1,022,912		Ending Balance (including impairment loss) Amount (not including exchange differences on transaction of foreign financial statements Exchange differences on transaction of foreign financial statements Ending Balance (including exchange differences on transaction of foreign statements Market Price / Net Value 139,509 (12,809) 126,700 126,700 6,396,435 (532,123) 5,864,312 5,896,656 8,462,270 (507,371) 7,954,899 7,954,899 35,953,096 (1,394,727) 34,558,369 34,545,520 3,906,656 (373,413) 3,533,243 3,531,243 1,944,816 (19,863) 1,924,953 1,946,801 1,083,154 (4,701) 1,078,453 1,078,453 344,708 (2,539) 342,169 342,169 4,998 (2,305) 2,693 2,693 8,548 (3) 8,545 8,545 319,049 (117) 318,932 1,076,719 (Note 4) 471,164 (24,969) 446,195 446,195 552,441 (44,275) 508,166 508,814 58,754 (2,985) 55,769 55,769 2,278,389 (18,329) 2,260,060 3,886,754 (Note 3) 5,058,576 (595,702) 4,462,874 4,462,874 557,178 (15,795) 541,383 569,345 - - - - - - - - - - - - (3) 3 - - 734,180 (121) 734,059 845,651 (Note 3) 4,628 - 4,628 5,786 66,671 (4,361) 62,310 62,310 132,685 (987) 131,698 131,698 (469,615) (15,459) (485,074) (485,074) 17,199 - 17,199 17,199 22,199 (4,827) 17,372 17,372 6,153,514 27,522 6,181,036 6,181,036 1,081,612 (20,166) 1,061,446 1,061,446 7,627,386 40,806 7,668,192 7,668,192 145,664 - 145,664 145,664 76,632 - 76,632 76,632 856,150 (32,721) 823,429 823,429 654,537 (7,964) 646,573 1,147,839 (Note 4) (481,001) (125,198) (606,199) (617,819) 645,132 (117,603) 527,529 527,529 1,568,742 (114,909) 1,453,833 1,453,833 (459,297) - (459,297) (459,297) 105,623 - 105,623 105,623 237,496 - 237,496 237,496 305,987 - 305,987 305,989 695 677 1,372 1,372 34,869 - 34,869 22,395 4,292 - 4,292 4,292 85,978 - 85,978 58,124 86,691,696 (3,927,334) 82,764,362 (3,927,334) - (881,247) (881,247) (3,516) (3,516) 81,879,599 81,879,599 659,296 891,274 83,430,169	Ending Balance (including impairment loss) Amount (not including exchange differences on transaction of foreign financial statements Exchange differences on transaction of foreign financial statements Ending Balance (including exchange differences on transaction of foreign statements Market Price / Net Value 139,509 (12,809) 126,700 126,700 6,396,435 (532,123) 5,864,312 5,896,656 8,462,270 (507,371) 7,954,899 7,954,899 35,953,096 (1,394,727) 34,558,369 34,545,520 3,906,656 (373,413) 3,533,243 3,531,243 1,944,816 (19,863) 1,924,953 1,946,801 1,083,154 (4,701) 1,078,453 1,078,453 344,708 (2,539) 342,169 342,169 4,998 (2,305) 2,693 2,693 8,548 (3) 8,545 8,545 319,049 (117) 318,932 1,076,719 (Note 4) 471,164 (24,969) 446,195 446,195 552,441 (44,275) 508,166 508,814 58,754 (2,985) 55,769 55,769 2,278,389 (18,329) 2,260,060 3,886,754 (Note 3) 5,058,576 (595,702) 4,462,874 4,462,874 557,178 (15,795) 541,383 569,345 - - - - - - - - - - - - (3) 3 - - 734,180 (121) 734,059 845,651 (Note 3) 4,628 - 4,628 5,786 66,671 (4,361) 62,310 62,310 132,685 (987) 131,698 131,698 (469,615) (15,459) (485,074) (485,074) 17,199 - 17,199 17,199 22,199 (4,827) 17,372 17,372 6,153,514 27,522 6,181,036 6,181,036 1,081,612 (20,166) 1,061,446 1,061,446 7,627,386 40,806 7,668,192 7,668,192 145,664 - 145,664 145,664 76,632 - 76,632 76,632 856,150 (32,721) 823,429 823,429 654,537 (7,964) 646,573 1,147,839 (Note 4) (481,001) (125,198) (606,199) (617,819) 645,132 (117,603) 527,529 527,529 1,568,742 (114,909) 1,453,833 1,453,833 (459,297) - (459,297) (459,297) 105,623 - 105,623 105,623 237,496 - 237,496 237,496 305,987 - 305,987 305,989 695 677 1,372 1,372 34,869 - 34,869 22,395 4,292 - 4,292 4,292 85,978 - 85,978 58,124 86,691,696 (3,927,334) 82,764,362 (3,927,334) - (881,247) (881,247) (3,516) (3,516) 81,879,599 81,879,599 659,296 891,274 83,430,169
	Number of shares	Number of shares - - - - - - - - - - - - - - - - - - - - - - - - - 20,000 - - - - - - - - - - - - - - - - 100 4,200 600 100,000		Number of shares - - - - - - - - - - - - - - - - - 135,800 118,850 51,050 - - - - - 63,800 - - - - - - - - 216 - - - - - - - - - - -			Number of shares	Amount (not including exchange differences on transaction of foreign financial statements 139,509 6,396,435 8,462,270 35,953,096 3,906,656 1,944,816 1,083,154 344,708 4,998 8,548 319,049 471,164 552,441 58,754 2,278,389 5,058,576 557,178 - - - (3) 734,180 4,628 66,671 132,685 (469,615) 17,199 22,199 6,153,514 1,081,612 7,627,386 145,664 76,632 856,150 654,537 (481,001) 645,132 1,568,742 (459,297) 105,623 237,496 305,987 695 34,869 4,292 85,978 86,691,696 (3,927,334) (881,247) (3,516) 81,879,599	Exchange differences on transaction of foreign financial statements (12,809) (532,123) (507,371) (1,394,727) (373,413) (19,863) (4,701) (2,539) (2,305) (3) (117) (24,969) (44,275) (2,985) (18,329) (595,702) (15,795) - - - 3 (121) - (4,361) (987) (15,459) - (4,827) 27,522 (20,166) 40,806 - - (32,721) (7,964) (125,198) (117,603) (114,909) - - - - 677 - - - (3,927,334)
	3,000 500,000 48,010 53,001 1 90,000 100,000 29,500 126 899 10,158 100 98 3,739 41,305 89,755 42,700 135,800 118,850 51,050 2,772 29,060 300 29,500 12,500 63,815 5,650 136 90,820 31,253 147,000 20,000 6,000 6,427 15,240 46,900 100 50 10,000 10,000 21,756 15,000 2,500 - - -						3,000 500,000 48,010 53,001 1 90,000 100,000 29,500 126 899 10,158 100 98 3,739 41,305 89,755 42,700 - - - 2,772 29,060 300 29,500 12,500 20,015 5,650 136 90,820 31,253 147,000 20,000 6,000 6,427 15,024 46,900 100 50 10,000 10,000 21,756 15,000 2,600 4,200 600 100,000

Note 1 ： Increase in current period included purchasing long-term investments, adjusting by using equity method of capital surplus, unrealized gains from financial assets measured at fair value through other comprehensive income, and subsidiaries received cash dividends from the parent company.

Note 2 ： Decrease in current period included disposal of long-term investments, return of capital from liquidation, cash dividends distributed from long-term investments for using equity method, adjustment by equity method of capital surplus and retained earnings, remeasurement of defined benefit plans, and unrealized loss from financial assets measured at fair value through other comprehensive income.

Note 3 ： The unit price is calculated by the closing price of the Taiwan Stock Exchange as of December 31, 2019.

Note 4 ： The unit price is calculated by the closing price of Taipei Exchange as of December 31, 2019.

COMPAL ELECTRONICS, INC.

Statement of financial assets measured at fair value through other

comprehensive income - non-current

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Investee Company Kinpo Cal-Comp Electronics (Thailand) Public Co., Ltd. Innolux Taiwan Star Others Total	Beginning Balance Number of Shares Amount 124,044 $ 1,252,842 239,631 400,184 109,227 1,061,690 98,046 734,368 - 282,834 $ 3,731,918	Increase	(Note 1) Amount 341,120 47,926 - - 123,625 512,671	Decrease	(Note 2) Amount - - 1,061,690 53,926 109,580 1,225,196	Ending Balance Number of Shares Amount Collaterals or Pledged Assets 124,044 1,593,962 None 239,631 448,110 None - - None 98,046 680,442 None - 296,879 None 3,019,393
	Number of Shares	Number of Shares - - - - -		Number of Shares - - 109,227 - -		Number of Shares
	124,044 239,631 109,227 98,046 -					124,044 239,631 - 98,046 -

Note 1: Increase included purchasing financial assets at fair value through other comprehensive income and unrealized gains on financial instruments at fair value.

Note 2: Decrease included sale of financial assets at fair value through other comprehensive income, unrealized loss on financial instruments at fair value, deferred tax for unrealized loss and proceeds of capital reduction of investments.

COMPAL ELECTRONICS, INC.

Statement of property, plant and equipment

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Please refer to Note (6)(j).

Statement of short-term borrowings

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Creditor Cathay United Bank Hua Nan Commercial Bank, Ltd. Credit Agricole Corporate & Investment Bank Bank of Communications CO., Ltd. Sumitomo Mitsui Banking Corporation Citibank Taiwan, Ltd. The bank of Tokyo- Mitsubishi UFJ China Construction Bank Corporation Taishin International Bank CO., Ltd. Taipei Fubon Commercial Bank CO., Ltd.	Description Credit Loans `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃`	Contract Period 2019.12~2020.01 2019.12~2020.01 2019.12~2020.01 2019.12~2020.01 2019.10~2020.03 2019.12~2020.02 2019.12~2020.01 2019.12~2020.01 2019.12~2020.01 2019.12~2020.03	Interest Rate Note `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃`	Loan Commitments $ 4,497,000 4,000,000 7,495,000 2,998,000 7,495,000 8,844,100 4,497,000 2,923,050 3,000,000 1,948,700 $ 47,697,850	Collaterals or Pledged Assets Ending balance None 2,998,000 None 2,698,200 None 7,495,000 None 2,998,000 None 7,298,400 None 5,696,200 None 4,450,000 None 2,850,000 None 950,000 None 1,930,000 39,363,800

－ Note: The range of interest rates of afore mentioned loans were 0.66%~2.49%.

COMPAL ELECTRONICS, INC.

Statement of notes and accounts payable

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Suppliers		Amount
E Company	$	26,654,026
J Company		14,705,969
H Company		8,576,344
A Company		6,982,267
B Company		6,625,849
I Company		4,051,276
Others (Note)		6,543,190
Total	$	74,138,921

Note: The amount of individual vendor included in others does not exceed 5% of the account balance.

COMPAL ELECTRONICS, INC.

Statement of long-term borrowings

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Creditor The Shanghai Commercial & Savings Bank Bank of America Bank of Taiwan Mega International Commercial Bank Chang Hwa Bank Mizuho Bank CTBC Bank Co., Ltd. Far Eastern International Bank Bank SinoPac JihSun International Commercial Co., Ltd. KGI Bank	Loan Commitments $ 2,300,000 4,947,000 4,000,000 1,000,000 3,000,000 5,996,000 2,000,000 1,000,000 3,300,000 600,000 2,800,000 $ 30,943,000		Amount Loan within 1 year Loan more than 1 year 2,300,000 - 2,500,000 - 500,000 1,700,000 600,000 - 3,000,000 - 5,950,000 - 500,000 1,500,000 - 1,000,000 - 3,300,000 600,000 - 2,200,000 - 18,150,000 7,500,000	Amount Loan within 1 year Loan more than 1 year 2,300,000 - 2,500,000 - 500,000 1,700,000 600,000 - 3,000,000 - 5,950,000 - 500,000 1,500,000 - 1,000,000 - 3,300,000 600,000 - 2,200,000 - 18,150,000 7,500,000	Contract Period 2016.06~2020.06 2019.06~2020.06 2019.09~2021.09 2016.11~2020.11 2016.12~2020.12 2019.05~2021.05 2018.09~2021.09 2019.08~2022.08 2019.03~2023.03 2019.06~2022.06 2019.05~2022.05	Interest Rate Note `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃`	Amount Collaterals or Pledged Assets 2,300,000 None 2,500,000 None 2,200,000 None 600,000 None 3,000,000 None 5,950,000 None 2,000,000 None 1,000,000 None 3,300,000 None 600,000 None 2,200,000 None 25,650,000
			Loan within 1 year 2,300,000 2,500,000 500,000 600,000 3,000,000 5,950,000 500,000 - - 600,000 2,200,000 18,150,000

Note: The range of interest rates of aforementioned loans were 0.73%~1.18%.

Statement of lease liabilities

For the year ended December 31, 2019 and 2018

Item Buildings Vehicles Less Current portion Lease liabilities-Non Current	Description For office and factory space For operating activities	Lease term 1~8 years 1~5 years	Discount rate Ending balance % 1.2 $ 1,364,718 % 1.2 33,714 1,398,432 (387,499) $ 1,010,933

COMPAL ELECTRONICS, INC.

Statement of other payables

December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Item Payroll payables and year-end bonuses payable Technical service fee payables Others (Note) Total	Description Amount Payroll for December 2019, estimated year-end bonuses for 2019, and employees and directors’ compensations $ 3,576,372 612,723 Export expense payables and others 5,201,304 $ 9,390,399

Note: The amount of each item in others does not exceed 5% of the account balance.

Statement of operating revenue

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Item	Quantity		Amount
Sales revenue:
5C electronic products	Note	$	916,601,572
Others			212,141
Less: Sales return			(396,139)
Sales allowance			(996,278)
Net sales			915,421,296
Other operating revenue:
Service and processing revenue			858,732
Net sales revenue		$	916,280,028
Note: Due to multi-categories, it’s hard to be	classified in categories.

COMPAL ELECTRONICS, INC.

Statement of operating costs

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Item		Amount
Raw materials
Raw materials, beginning of the year	$	33,941,015
Add: Purchases		526,262,694
Less: Raw materials, end of the year		(37,621,576)
Transferred to operating expense		(16,203)
Cost of material sold		(2,439,579)
Scraps		(276,195)
Raw materials used		519,850,156
Direct labor		453,890
Manufacturing expenses		818,946
Total Manufacturing costs		521,122,992
Add: Work-in-process, beginning of the year		44,008
Less: Work-in-process, end of the year		(153,034)
Scraps		(1,557)
Cost of finished goods		521,012,409
Add: Finished goods, beginning of the year		18,817,650
Purchases		360,511,511
Others		115,866
Less: Finished goods, end of the year		(13,492,637)
Transferred to operating expense		(1,152,834)
Costs of sales of finished goods and processing costs		885,811,965
Maintenance costs		2,968,812
Cost of material sold		2,439,579
Allowance reversal for obsolescence loss and inventory valuation		(66,336)
Scrap loss of raw materials and finished goods		277,752
Cost of sales	$	891,431,772

COMPAL ELECTRONICS, INC.

Statement of operating expenses

For the year ended December 31, 2019

(Expressed in thousands of New Taiwan Dollars)

Item Selling expenses Payroll expenses $ 317,760 Export expenses 185,813 Royalty expenses 385,813 Research expenses - Shipping expenses 2,169,155 Sample expenses 357,029 Others (Note) 116,913 Total $ 3,532,483	Administrative expenses Research and development expenses 1,357,275 6,775,575 - - - - - 1,080,297 10,536 276 34 864 950,607 2,604,250 2,318,452 10,461,262

Note: The amount of each item in others does not exceed 5% of the account balance.

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Table 1 Loans to other parties:

(December 31, 2019)

Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)	Table 1 Loans to other parties: (December 31, 2019)
													(In Thousands of New Taiwan Dollars)
No.	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower	Transaction amount for business between two parties	Reasons for short- term financing	Allowance for bad debt	Collateral		Individual funding loan limits	Maximum limit of fund financing	Note
													Item	Value
0 0 0 0 1 2 3 3 4 4 5 6 6 7 8 9 9 9 9 10 11	The Company The Company The Company The Company CIH CPI CPC CPC CIT CIT PFG CPO CPO CET Panpal Arcadyan Arcadyan Arcadyan Arcadyan Zhi-pal Arcadyan Holding	CVC UCGI HengHao CEB CEP CVC CDE CIC CCI Nanjing Rayonnant (Taicang) CEB HengHao Kunshan CIT BT HengHao Acradyan Brasil Arcadyan UK Arcadyan AU Arcadyan Vietnam Acradyan Brasil CNC	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y	316,000 500,000 405,369 1,580,000 110,600 316,000 1,380,900 430,500 2,212,000 69,045 308,950 644,420 645,750 274,800 600,000 246,160 219,730 126,400 284,400 34,760 523,940	- 250,000 200,000 1,499,000 104,930 - 1,291,500 430,500 2,098,600 64,575 - 602,700 645,750 258,300 600,000 60,040 210,140 - 270,180 33,022 510,340	- 220,000 200,000 1,499,000 43,471 - 1,291,500 - 2,098,600 64,575 - 602,700 - 64,575 600,000 39,026 - - - - 510,340	3.20% 1.20% 1.2%~2.82% 3.50% 3.50% 3.20% 2.20% 2.20% 2.76% 4.35% 2.50% 4.35% 2.20% 2.20% 1.20% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Transaction for business between two parties Transaction for business between two parties Transaction for business between two parties Short-term financing Short-term financing	- - - - - - - - - - - - - - - - 4,503,000 1,501,000 600,400 - -	Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating demand Operating financing Operating demand Operating demand Operating demand Operating demand Operating financing - - - Operating financing Operating financing	- - - - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - -	21,194,526 21,194,526 21,194,526 21,194,526 34,545,521 890,733 2,096,417 2,096,417 20,539,992 20,539,992 435,070 2,777,160 2,777,160 4,625,117 5,896,656 2,180,945 2,180,945 1,200,800 480,320 41,642 2,003,996	42,389,053 42,389,053 42,389,053 42,389,053 34,545,521 890,733 2,096,417 2,096,417 20,539,992 20,539,992 435,070 2,777,160 2,777,160 4,625,117 5,896,656 4,361,890 4,361,890 4,361,890 4,361,890 166,568 2,003,996	(Note 1) (Note 1) (Note 1) (Note 1) (Note 2) (Note 3) (Note 4) (Note 4) (Note 5) (Note 5) (Note 6) (Note 7) (Note 7) (Note 8) (Note 9) (Note 10) (Note 10) (Note 10) (Note 10) (Note 11) (Note 12)

Note 1: According to the Company’ s Procedures of Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of the Company. When a short-term financing facility with the Company is necessary, the total amount for lending to any company shall not exceed 80% of the borrower’s net worth, nor shall it be more than 50% of the Company’s lendable amount limit, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, the total amount lendable to 100% directly or indirectly owned subsidiaries by the Company is unrestricted by
the aforesaid restriction of 80%, but the maximum amount shall not exceed 50% of the Company’s lendable limit, and shall be combined with the company’s amount of loans to others when calculating.
Note 2: According to CIH’s Procedures for Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of CIH. When a shortterm financing facility with CIH is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CIH’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIH, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating.

Note 3: According to CPI’s Procedures for Lending Funds to Other Parties, the total amount of loans to others shall not exceed 40% of the net worth of CPI. When a shortterm financing facility with CPI is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CPI’s total amount of lendable capital, and shall be combined with the company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPI, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Table 1 Loans to other parties:

(December	31, 2019)
Note 4:	According to CPC’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CPC. When a shortterm financing facility with CPC is
	necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CPC’s total amount of capital lent, and shall be combined with the
	company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not
	limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPC, and shall be combined with the company’s endorsements/guarantees for the borrower when
	calculating.
Note 5:	According to CIT’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CIT. When a shortterm financing facility with CIT is
	necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CIT’s total amount of capital lent, and shall be combined with the
	company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not
	limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CIT, and shall be combined with the company’s endorsements/guarantees for the borrower when
	calculating.
Note 6:	According to PFG’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of PFG. When a shortterm financing facility with PFG is
	necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of PFG’s total amount of lendable capital, and shall be combined with the
	company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not
	limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of PFG, and shall be combined with the company’s endorsements/guarantees for the borrower when
	calculating.
Note 7:	According to CPO’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CPO. When a shortterm financing facility with CPO is
	necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CPO’s total amount of lendable capital, and shall be combined with the
	company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not
	limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CPO, and shall be combined with the company’s endorsements/guarantees for the borrower when
	calculating.
Note 8:	According to CET’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of CET. When a shortterm financing facility with CET is
	necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of CET’s total amount of lendable capital, and shall be combined with the
	company’s endorsements/guarantees for calculation. In addition, when lending to the ultimate parent company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not
	limited by the two aforesaid restrictions, but the maximum amount shall not exceed the net worth of CET, and shall be combined with the company’s endorsements/guarantees for the borrower when
	calculating.
Note 9:	According to Panpal’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Panpal. When a shortterm financing facility with Panpal
	is necessary, the total amount for lending the borrower shall not exceed 80% of the borrower’s net worth, nor shall it exceed 50% of Panpal’s total amount of lendable capital, and shall be combined with
	the company’s endorsements/guarantees for calculation. In addition, when lending to the total amount lendable to 100% directly or indirectly owned subsidiaries by the Company, or the ultimate parent
	company’s 100% directly or indirectly owned overseas subsidiaries, the total amount of loans is not limited by the two aforesaid restrictions of 80%, but the maximum amount shall not exceed the of
	Panpal, and shall be combined with the company’s endorsements/guarantees for the borrower when calculating.
Note 10:	According to Arcadyan’s Procedures for Lending Funds to Other parties, the total amount of loans to others shall not exceed 40% of the net worth of Arcadyan. To borrowers having business relationship
	with Arcadyan, the total amount for lending the borrower shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the
	net worth of Arcadyan. Also, the amount shall be combined with the Arcadyan’ s endorsements/guarantees for the borrower when calculating. When a short-term financing facility is necessary, the
	borrower should be Arcadyan’s investee. The total amount for lending the borrower shall not exceed 80% of the net worth of the borrower, nor shall it exceed 20% of the net worth of Arcadyan, and shall
	be combined with the Arcadyan’s endorsements/guarantees for the borrower when calculating.
Note 11:	The total amount of loans to others shall not exceed 40% of the net worth of Zhi-pal. To borrowers having business relationship with Zhi-pal, the total amount for lending the borrower shall not exceed 80%
	of the transaction amount in the last fiscal year or the expecting amount for the current year, nor shall it exceed 20% of the net worth of Zhi-pal. When a short-term financing facility is necessary, the
	borrower should be Zhi-pal’s investee, and the total amount for lending the borrower shall not exceed 10% of the net worth of the borrower.
Note 12:	According to Arcadyan Holding’s Procedures of Lending Funds to Other Parties, the total amount of loans to others shall not exceed the net worth of Arcadyan Holding. When a short-term financing
	facility is necessary, the borrower should be Arcadyan Holding’s investee. The total amount for lending the borrower shall not exceed the net worth of Arcadyan Holding, and shall be combined with the
	Arcadyan Holding’s endorsements/ guarantees for the borrower when calculating.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Table 2 Guarantees and endorsements for other parties:

(December 31, 2019)

		(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
No.	Name of guarantor	Counter-party of guarantee and endorsement		Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements (Note 1)and(Note 4)	Parent company endorsements /guarantees to third parties on behalf of subsidiary	Subsidiary endorsements /guarantees to third parties on behalf of parent company	Endorsements / guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company
0 0 1	The Company The Company Arcadyan	CEB CEP Arcadyan Brasil	(Note 3) (Note 2) (Note 5)	26,493,158 26,493,158 1,453,963	63,200 260,766 246,160	59,960 195,702 -	59,960 195,702 -	- - -	0.06% 0.18% -	52,986,316 52,986,316 4,361,890	Y Y Y	- - -	- - -

Note 1: According to the Company’s Procedures for Endorsement and Guarantee, the total amount of endorsements/ guarantees the Company or the Group is permitted to make shall not exceed 50% of the Company’s net worth. Endorsements/ guarantees the Company and the Group are permitted to make for a single company shall not exceed 25% of the Company’s net worth. For entities having business relationship with the Company, the amount of endorsements/ guarantees for a single company shall not exceed 80% of the transaction amount in the last fiscal year or the expecting amount of the current year, and shall be combined with the amount lend to others when calculating. The amount of endorsements/ guarantees permitted to make between subsidiaries whose over 90% of its voting shares are owned, directly or indirectly, by the Company shall be no more than 10% of the net worth of the Company. The amount of endorsements/ guarantees permitted to make between directly or indirectly wholly owned subsidiaries is not limited by the aforementioned restriction, only the maximum amount shall be no more than 25% of the net worth of the Company. Note 2: Subsidiary whose over 50% common stock is directly owned.

Note 3: Subsidiary whose over 50% common stock is indirectly owned.

Note 4: According to Arcadyan's Procedures for Endorsement and Guarantee, the total amount shall not exceed 40% of the net worth for latest financial statements audited or reviewed by Certified Public Accountants, and the amount for a single company shall not exceed 1/3 of the total amount.

Note 5: Subsidiary whose 100% common stock is directly owned by Arcadyan.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Table 3 Securities held as of December 31, 2019 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2019)

(December 31, 2019)	(December 31, 2019)	(December 31, 2019)	(December 31, 2019)
					(In Thousands of shares/ units)
Name of holder	Category and name of security	Relationship with security issuer	Account name		Ending balance			Note
				Shares/Units (thousands)	Carrying value	Holding percentage (%)	Fair value
The Company Panpal Gempal	Taiwan Star Kinpo Electronics, Inc. (“Kinpo”) Cal-Comp Electronics (Thailand) Public Co., Ltd. HWA VI Venture Capital Corp. HWA Chi Venture Capital Corp. mProbe Ltd. Global BioPharma, Inc. Chen Feng Optoelectronics PrimeSensor Technology Inc. IIH Biomedical Venture Fund UBS Extendible Money Mkt Cert. Others Total Compal Electronics, Inc. Kinpo CDIB Partners Investment Holding Corp. AcBel Taiwan Biotech Co., Ltd. Others Total Compal Electronics, Inc. Lian Hong Art. Co., Ltd.	‑ The same chairman of the Company The same chairman of the Company ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ The parent company The same chairman of the Company ‑ The same chairman of the Company ‑ ‑ The parent company ‑	Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss and other comprehensive income Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current	98,046 124,044 239,631 290 842 4,000 2,000 6,685 861 2,500 - 31,648 23,172 54,000 5,677 4,897 18,369 2,140	680,442 1,593,962 448,110 25,397 23,933 40,920 34,260 97,866 7,266 24,350 149,888 113,984 __ 3,240,378 596,566 297,766 941,220 137,092 134,085 103,583 __ 2,210,312 346,262 65,670	3% 9% 5% 10% 11% 2% 3% 11% 3% 8% - 1% 2% 5% 1% 3% - 8%	680,442 1,593,962 448,110 25,397 23,933 40,920 34,260 97,866 7,266 24,350 149,888 596,566 297,766 941,220 137,092 134,085 346,262 65,670

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Table 3 Securities held as of December 31, 2019 (excluding investment in subsidiaries, associates and joint ventures): (December 31, 2019)

(December 31, 2019)	(December 31, 2019)	(December 31, 2019)	(December 31, 2019)
					(In Thousands of shares/ units)
Name of holder	Category and name of security	Relationship with security issuer	Account name		Ending balance			Note
				Shares/Units (thousands)	Carrying value	Holding percentage (%)	Fair value
Gempal Arcadyan Mactech HHB Mithera CPC CET CEC CEQ Hong Ji Hong Jin	Global BioPharma, Inc. Others Total SUYIN Optronics Co., Ltd. (“SUYIN Optronics”) SUYIN Optronics GeoThings Inc. AirHop Communication Inc. Adant Technologies Inc. IOT EYE, Inc. TIEF FUND L.P. Chimei Motor Electronics Co., LTD Total Taichung International Golf Country Club HWALLAR OPTRONICS (Fuzhou) CO., LTD. Beyond Limits, Inc. Structured deposits–SPD Bank Yield Plus Structured Deposit Structured deposits–SPD Bank Yield Plus Structured Deposit Structured deposits–Bank of Communications Yun Tong Cai Fu, Structured Deposit Structured deposits–Bank of Communications Yun Tong Cai Fu, Structured Deposit	‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑	Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-non- current Financial assets at fair value through other comprehensive income-non-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current	2,000 380 332 200 1,152 349 60 - 1,650 - 873 - - - -	34,265 2,699 __ 448,896 182 160 - - - - 44,262 49,500 __ 93,762 7,530 -	3% 1% 1% 9% 5% 5% 14% 7% 9% - 19% - - - - -	34,265 182 160 - - - - 44,262 49,500 7,530 - 134,910 394,013 437,840 219,070 129,647	(Note 1) (Note 1) (Note 1) (Note 1) (Note 1)
					134,910 394,013 437,840 219,070 129,647

Note 1:The carrying value is the remaining amount after deducting accumulated impairment.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Table 4 Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

(For the year ended December 31, 2019)

(For the year ended December 31, 2019)	(For the year ended December 31, 2019)	(For the year ended December 31, 2019)	(For the year ended December 31, 2019)	(For the year ended December 31, 2019)
					(In Thousands of New Taiwan Dollars)
Name of company	Category and name of security	Account name	Name of counter-party	Relationship with the company	Beginning Balance		Purchases		Sales				Others		Ending Balance
					Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Price	Cost	Gain (loss) on disposal	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount
CIT CIT CEC CIC CEQ The Company CPC The Company Panpal IUE CEQ CPO CPO CPO CIC CET CET CET BSH HSI	Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Structured deposits- Industrial Bank Structured Deposits Chipbond Chipbond Innolux Corporation CVC Structured deposits– SPD Bank Yield Plus Structured Deposit Structured deposits- Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits- Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits– SPD Bank Yield Plus Structured Deposit Structured deposits- Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits– SPD Bank Yield Plus Structured Deposit Structured deposits- Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits- The RMB "Open on schedule" Financial Product Structured deposits– SPD Bank Yield Plus Structured Deposit Structured deposits- Bank of Communications Yun Tong Cai Fu. Structured Deposit Structured deposits- The RMB "Open on schedule" Financial Product Structured deposits- Agricultural Bank of China "HuiLiFeng" customization RMB structured deposit HSI IUE	Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through other comprehensive income-non- current Investments accounted for using equity method Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Investments accounted for using equity method Investments accounted for using equity method	China CITIC Bank Industrial Bank Co.,Ltd - - - Issued for cash Shanghai Pudong Development Bank Bank of Communications Shanghai Pudong Development Bank Bank of Communications Bank of Communications Shanghai Pudong Development Bank Bank of Communications Bank of China Shanghai Pudong Development Bank Bank of Communications Bank of China Agricultural Bank of China Issued for cash Issued for cash	- - - - - - - - - - - - - - - - - - - -	4,593 109,227 5,251 - 30,000 30,000 - - - - - - - - - - - - - -	284,768 1,061,690 325,560 - 455,400 480,087 179,963 - - 576,466 260,029 259,705 448,948 480,285 - 179,699 - 225,651 676,881 451,154	- - - 37,000 37,000 37,000 - - - - - - - - - - - - - -	- - - 1,109,260 1,109,260 1,109,260 1,203,551 894,833 894,833 1,825,461 501,107 259,502 - - 447,417 1,073,801 447,417 1,118,542 447,417 223,708	4,593 109,227 5,251 - - - - - - - - - - - - - - - - -	307,207 763,181 344,843 - - - 989,834 910,892 910,892 2,196,103 633,487 526,798 451,877 482,449 456,614 1,265,163 450,405 1,360,587 1,129,780 667,681	307,207 763,181 344,843 - - - 979,843 894,833 894,833 2,174,447 626,384 519,004 447,416 478,736 447,417 1,252,768 447,417 1,342,250 1,118,542 671,125	- - - - - - 9,991 (Note 2) 16,059 (Note 2) 16,059 (Note 2) 21,656 (Note 2) 7,103 (Note 2) 7,794 (Note 2) 4,461 (Note 2) 3,713 (Note 2) 9,197 (Note 2) 12,395 (Note 2) 2,988 (Note 2) 18,337 (Note 2) 11,238 (Note 2) 6,556 (Note 2)	- - - - - - - - - - - - - - - - - - - -	22,439 (Note 1) (298,509) (Note 1) 19,283 (Note 1) - (Note 3) (202,793) (Note 3) (203,384) (Note 3) 333 (Note 1) 16,059 (Note 1) 16,059 (Note 1) 13,246 (Note 1) 1,998 (Note 1) 7,591 (Note 1) 2,929 (Note 1) 2,164 (Note 1) 9,197 (Note 1) 11,663 (Note 1) 2,988 (Note 1) 16,394 (Note 1) 5,482 (Note 1) 2,819 (Note 1)	- - - 37,000 67,000 67,000 - - - - - - - - - - - - - -	- - - 1,109,260 1,361,867 1,385,963 394,013 - - 219,070 129,647 - - - - - - - - -

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Table 4 Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

(For the year ended December 31, 2019)

(For the year ended December 31, 2019)	(For the year ended December 31, 2019)	(For the year ended December 31, 2019)	(For the year ended December 31, 2019)	(For the year ended December 31, 2019)
					(In Thousands of New Taiwan Dollars)
Name of company	Category and name of security	Account name	Name of counter-party	Relationship with the company	Beginning Balance		Purchases		Sales				Others		Ending Balance
					Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Price	Cost	Gain (loss) on disposal	Shares/ Units (thousands)	Amount	Shares/ Units (thousands)	Amount
CET CET Arcadyan	Structured deposits- Win-win Interest Rate Structure RMB Structural Deposits Structured deposits- SPD Bank Yield Plus Structured Deposit Arcadyan Holding	Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Investments accounted for using equity method	Shanghai Pudong Development Bank China CITIC Bank Issued for cash	- - -	32,780 - -	- - 1,221,252	- - 27,000	1,297,509 1,297,509 823,505	- - -	858,447 1,307,480 -	850,092 1,297,509 -	8,355 (Note 2) 9,971 (Note 2) -	- - -	(1,222) (Note 1) 9,971 (Note 1) (87,955) (Note 3)	59,780 - -	437,840 - 1,956,802

Note 1:Others were valuation gains and losses and foreign exchange gains and losses. Note 2:Including gains and losses on disposal and foreign exchange gains and losses.

Note 3:Including share of profit (loss) accounted for using equity method and exchange differences on translation of foreign financial statements.

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Table 5 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2019)

(For the year ended December 31, 2019)	(For the year ended December 31, 2019)	(For the year ended December 31, 2019)
			(In Thousands of New Taiwan Dollars)
Company Name	Counter party	Nature of relationship	Transaction details				Transactions with terms different from others		Notes/Accounts receivable (payable)		Note
			Purchase/ (Sale)	Amount	Percentage of total purchases/ (sales)	Payment terms	Unitprice	Payment Terms	Ending Balance	Percentage of total notes/accounts receivable (payable)
Just and its subsidiaries CIH and its subsidiaries CBN BCI and its subsidiaries The Company	UCGI CBN CIH and its subsidiaries Just and its subsidiaries HSI and its subsidiaries BCI and its subsidiaries Etrade and its subsidiaries Webtek Palcom Forever Webtek Compal Electronic, Inc. Forever Compal Electronic, Inc. CEB Forever Compal Electronic, Inc. Compal Electronic, Inc. CEB	Subsidiaries wholly owned by the Company The Company's subsidiaries Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company Subsidiaries wholly owned by the Company With the same ultimate parent company Parent company With the same ultimate parent company Parent company With the same ultimate parent company With the same ultimate parent company Parent company Parent company With the same ultimate parent company	Sale Sale Purchase Purchase Purchase Purchase Purchase Purchase Sale Purchase Sale Sale Sale Sale Sale Sale Purchase Sale Sale	(195,680) (962,973) 189,074,111 102,586,790 4,571,105 24,316,409 19,044,223 34,469,915 (105,081) 18,139,071 (24,375,017) (102,586,790) (6,892,761) (189,320,860) (196,173) (9,187,778) 959,522 (24,324,646) (1,962,595)	- (0.1)% 21.6% 11.7% 0.5% 2.8% 2.2% 3.9% - 2.1% (19.0)% (45.0)% (34.0)% (77.7)% - (20.1)% 52.0% (84.1)% (7.0)%	120 days 90 days 120 days 120 days 120 days 120 days Net 60 days from purchase Net 60 days from purchase Net 60 days from delivery Net 60 days from purchase Net 60 days from delivery 120 days Net 60 days from delivery 120 days 120 days Net 60 days from delivery Net 90 days from purchase 120 days 120 days	Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Markup based on BCI and its subsidiaries's cost Markup based on Etrade and its subsidiaries's cost Markup based on Webtek's cost Similar to non- related parties Markup based on Forever's cost According to markup pricing Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties According to markup pricing - Markup based on BCI and its subsidiaries's cost According to markup pricing	There is no significant difference There is no significant difference There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding There is no significant difference, and adjustments will be made based on demand for funding if necessary There is no significant difference, and adjustments will be made based on demand for funding if necessary Adjustments will be made based on demand for funding There is no significant difference Adjustments will be made based on demand for funding There is no significant difference	45,158 330,670 (51,022,067) (6,799,206) (2,369,841) (7,460,959) (5,904,962) (556,913) 22,720 (778,369) - 6,799,206 - 51,022,056 51,912 - (331,111) 7,460,959 772,909	- 0.2% (34.2)% (4.6)% (1.6)% (5.0)% (4.0)% (0.4)% - (0.5)% - 20.0% - 37.8% - - (64.0)% 78.4% 4.7%

(Continued)

COMPAL ELECTRONICS, INC. Notes to Parent-Company-Only Financial Statements

Table 5 Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (For the year ended December 31, 2019)

(For the year ended December 31, 2019)	(For the year ended December 31, 2019)	(For the year ended December 31, 2019)
			(In Thousands of New Taiwan Dollars)
Company Name	Counter party	Nature of relationship	Transaction details				Transactions with terms different from others		Notes/Accounts receivable (payable)		Note
			Purchase/ (Sale)	Amount	Percentage of total purchases/ (sales)	Payment terms	Unitprice	Payment Terms	Ending Balance	Percentage of total notes/accounts receivable (payable)
Webtek CEB Etrade and its subsidiaries Forever UCGI Palcom HSI and its subsidiaries Arcadyan CNC Acradyan Vietnam Acradyan Germany Acradyan USA Acradyan AU THAC TTI	Compal Electronic, Inc. Etrade and its subsidiaries JUST and its subsidiaries BCI and its subsidiaries CIH and its subsidiaries Webtek Compal Electronic, Inc. Compal Electronic, Inc. CIH and its subsidiaries JUST and its subsidiaries Compal Electronic, Inc. Compal Electronic, Inc. Compal Electronic, Inc. Acradyan Germany Acradyan USA Acradyan AU CNC Acradyan Vietnam Arcadyan THAC Arcadyan Arcadyan Arcadyan Arcadyan TTI CNC THAC	Parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company Parent company Parent company With the same ultimate parent company With the same ultimate parent company Parent company Parent company Parent company Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company With the same ultimate parent company	Sale Purchase Purchase Purchase Purchase Sale Sale Sale Purchase Purchase Purchase Purchase Sale Sale Sale Sale Purchase Purchase Sale Sale Sale Purchase Purchase Purchase Sale Purchase Purchase	(34,469,915) 10,091,875 24,375,017 1,944,054 202,987 (10,091,875) (19,044,223) (18,139,071) 9,187,778 6,892,761 195,680 105,081 (4,571,105) (1,465,691) (2,992,401) (2,444,741) 11,451,395 1,026,793 (11,451,395) (158,620) (1,026,793) 1,465,691 2,992,401 2,444,741 (378,225) 158,620 378,225	(100.0)% 29.0% 71.0% 17.1% 1.8% (35.0)% (65.0)% (85.0)% 43.0% 32.0% 68.2% 100.0% (100.0)% (5.0)% (11.0)% (9.0)% 31.0% (3.0)% (100.0)% (1.0)% (100.0)% 100.0% 100.0% 100.0% (100.0)% 2.0% 8.0%	Net 60 days from delivery Net 60 days from purchase Net 60 days from purchase 120 days 120 days Net 60 days from delivery Net 60 days from delivery Net 60 days from delivery Net 60 days from purchase Net 60 days from purchase 120 days Net 60 days from purchase 120 days Net 120 days from delivery Net 60 days from the end of the month of delivery Net 45 days from the end of the month of delivery Net 45 days from the end of the month of delivery Net 180 days from the end of the month of delivery Net 45 days from the end of the month of delivery Net 90 days from the end of the month of delivery Net 180 days from the end of the month of delivery Net 120 days from delivery Net 60 days from the end of the month of delivery Net 45 days from the end of the month of delivery Net 60 days from the end of the month of delivery Net 90 days from the end of the month of delivery Net 60 days from the end of the month of delivery	According to markup pricing According to markup pricing According to markup pricing Similar to non- related parties Similar to non- related parties According to markup pricing According to markup pricing According to markup pricing Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties Similar to non- related parties - - - According to markup pricing According to markup pricing According to markup pricing - - - - According to markup pricing - -	Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference There is no significant difference Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding Adjustments will be made based on demand for funding There is no significant difference There is no significant difference Adjustments will be made based on demand for funding - - - - - - - - - - - - -	556,913 - - (765,855) (51,677) - 5,904,962 778,369 - - (45,124) (22,720) 2,383,869 392,466 2,683,393 634,154 (3,117,484) (Note 2) 3,117,484 23,396 (Note 2) (392,466) (2,683,393) (634,154) (Note 3) (23,396) (Note 3)	100.0% - - (47.8)% (3.2)% - 100.0% 100.0% - - (86.5)% - 100.0% 6.0% 38.0% 9.0% (44.0)% - 99.0% 1.0% - (100.0)% (100.0)% (100.0)% - (54.0)% -	(Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1)

Note 1: The remaining balance is the net value of commissioned processing and sales of raw material.

Note 2: The amount of other receivables (other payables) on December 31, 2019 is 362,695 thousand dollars.

Note 3: The amount of unearned sales revenue (prepayment for purchases) on December 31,2019 is 103,079 thousand dollars.

(Continued)

COMPAL ELECTRONICS, INC.

Notes to Parent-Company-Only Financial Statements

Table 6 Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: (December 31, 2019)

(December 31, 2019)	(December 31, 2019)	(December 31, 2019)	(December 31, 2019)	(December 31, 2019)
					(In Thousands of New Taiwan Dollars)
Name of Company	Counter-party	Nature of relationship	Ending Balance	Turnover rate	Overdue		Amounts received in subsequentperiod		Allowance for bad debts
					Amount	Action taken
The Company Just and its subsidiaries CIH and its subsidiaries BCI and its subsidiaries BCI and its subsidiaries Forever Webtek Etrade and its subsidiaries HSI and its subsidiaries Arcadyan Arcadyan Arcadyan Arcadyan Arcadyan CNC	CBN Compal Electronic, Inc. Compal Electronic, Inc. Compal Electronic, Inc. CEB Compal Electronic, Inc. Compal Electronic, Inc. Compal Electronic, Inc. Compal Electronic, Inc. Arcadyan Germany Arcadyan USA Arcadyan AU Arcadyan Vietnam TTI Arcadyan	The Company's subsidiary Parent company Parent company Parent company With the same ultimate parent company Parent company Parent company Parent company Parent company Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary Arcadyan's subsidiary With the same ultimate parent company	330,670 6,799,206 51,022,056 7,460,959 772,909 778,369 556,913 5,904,962 2,383,869 392,466 2,683,393 634,154 362,695 (Note 3) 55,769 (Note 3) 3,117,484 (Note 4)	1.80 28.09 3.78 5.92 2.94 1.68 9.04 3.42 3.80 2.45 2.15 3.59 2.11 18.18 3.51	- - - - - - - - - - - - - - -	- - - - - - - - - - - - - - -	238,935 3,224,612 48,763,927 7,282,087 197,195 - - 5,843,969 - 75,366 708,279 509,314 - 18,864 450,187	(Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)	- - - - - - - - - - - - - - -

Note 1:Balance as of March 13, 2020.

Note 2:Balance as of February 21, 2020.

Note 3:Other receivables due to processing and sales of raw material. Note 4:Other receivables due to processing.

(Continued)