CSCC — Audit Report / Information 2017

Dec 13, 2017

Our audit procedures performed for the ending inventory valuation included the following:

• 1. We assessed the appropriateness of the methodology used to calculate the write-down of inventory.
• 1. We verified the completeness of inventory used in the measurement of the net realizable value of inventory.
• 1. We verified the net realizable value of inventory by checking the related original evidence or supporting documents and performing our own recalculation of the net realizable value of inventory.
• 1. We checked whether inventory losses were recognized appropriately.

Other Matter

We have also audited the standalone financial statements of China Steel Chemical Corporation as of and for the years ended December 31, 2017 and 2016 on which we have issued an unmodified opinion.

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

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

In preparing the consolidated financial statements, management is responsible for assessing the Group'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 Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the supervisor, are responsible for overseeing the Group's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

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

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

• 1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• 1. 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 Corporation and its subsidiaries' internal control.
• 1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• 1. 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 Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• 1. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• 1. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the Group audit. We remain solely responsible for our audit opinion.

We 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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2017 and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors' report are Jui-Hsuan Hsu and Yu-Hsiang Liu.

Deloitte & Touche Taipei, Taiwan Republic of China

March 15, 2018

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with 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 consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors' report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors' report and consolidated financial statements shall prevail. As stated in Note 4 to consolidated financial statements, the additional footnote disclosures that are not required under generally accepted accounting principles were not translated into English.

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

	December 31, 2017		December 31, 2016			December 31, 2017		December 31, 2016
ASSETS	Amount	%	Amount	%	LIABILITIES AND EQUITY	Amount	%	Amount	%
CURRENT ASSETS					CURRENT LIABILITIES
Cash and cash equivalents (Notes 4 and 6)	\$ 733,720	6	\$ 1,371,824	14	Short-term borrowings (Note 18)	\$ 1,985,337	18	\$ 721,276	8
Financial assets at fair value through					Short-term bills payable (Note 18)	920,000	8	620,000	7
profit or loss - current (Notes 4 and 7)	2,209,270	20	766,794	8	Accounts payable	44,512	-	22,468	-
Available-for-sale financial assets -					Accounts payable - related parties (Note 28)	228,811	2	184,136	2
current (Notes 4 and 8)	154,945	1	190,044	2	Other payables (Notes 14, 19, 20 and 28)	830,092	7	900,028	9
Notes receivable (Notes 4 and 11)	47,724	-	15,494	-	Current tax liabilities (Note 24)	69,590	1	68,084	1
Accounts receivable, net (Notes 4, 5 and 11)	426,953	4	377,120	4	Other current liabilities	100,152	1	45,953	-
Accounts receivable - related parties
(Notes 4, 5, 11 and 28)	103,689	1	89,625	1	Total current liabilities	4,178,494	37	2,561,945	27
Other receivables (Note 28)	300,762	3	250,931	3
Inventories (Notes 4, 5 and 12)	554,005	5	464,018	5	NONCURRENT LIABILITIES
Other financial assets - current (Note 13)	-	-	271,668	3	Deferred tax liabilities (Notes 4, 5 and 24)	13,673	-	4,425	-
Other current assets	82,369	1	144,772	1	Net defined benefit liabilities (Notes 4
					and 20)	166,762	2	163,622	2
Total current assets	4,613,437	41	3,942,290	41	Other noncurrent liabilities (Note 17)	3,418	-	1,110	-
NONCURRENT ASSETS					Total noncurrent liabilities	183,853	2	169,157	2
Available-for-sale financial assets -
noncurrent (Notes 4, 5 and 8)	72,648	1	77,678	1	Total liabilities	4,362,347	39	2,731,102	29
Held-to-maturity financial assets -
noncurrent (Notes 4 and 9)	102,360	1	110,924	1	EQUITY ATTRIBUTABLE TO OWNERS OF THE
Debt investments with no active market -					CORPORATION (Note 21)
noncurrent (Notes 4 and 10)	92,922	1	95,389	1	Ordinary shares capital	2,369,044	21	2,369,044	25
Investments accounted for using equity					Capital surplus	755,849	7	732,977	7
method (Notes 4 and 15)	1,509,608	13	1,357,724	14	Retained earnings (Note 24)
Property, plant and equipment (Notes 4, 16,					Legal reserve	2,369,044	21	2,291,205	24
28 and 29)	3,200,754	29	2,576,874	27	Special reserve	150,593	1	242,136	3
Investment properties (Notes 4, 17 and 28)	563,513	5	563,513	6	Unappropriated earnings	1,164,646	11	1,069,083	11
Deferred tax assets (Notes 4 and 24)	49,732	-	57,495	1	Total retained earnings	3,684,283	33	3,602,424	38
Prepaid equipment (Note 29)	392,976	4	89,334	1	Other equity	(161,983)	(2)	(78,684)	(1)
Refundable deposits	7,000	-	5,201	-	Treasury shares	(125,656)	(1)	(125,656)	(1)
Other financial assets - noncurrent (Notes
13 and 17)	1,112	-	1,111	-	Total equity attributable to owners of
Long-term prepayments for lease (Note 28)	26,659	-	28,648	-	the Corporation	6,521,537	58	6,500,105	68
Other noncurrent assets (Notes 14 and 28)	602,816	5	655,581	7
Total noncurrent assets	6,622,100	59	5,619,472	59	NON-CONTROLLING INTERESTS (Note 21)	351,653	3	330,555	3
					Total equity	6,873,190	61	6,830,660	71
TOTAL	\$ 11,235,537	100	\$ 9,561,762	100	TOTAL	\$ 11,235,537	100	\$ 9,561,762	100

and 20)	166,762	2	163,622	2
NON-CONTROLLING INTERESTS (Note 21)	351,653	3	330,555	3
Total equity	6,873,190	61	6,830,660	71

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

	For the Year Ended December 31
	2017		2016
	Amount	%	Amount	%
OPERATING REVENUES (Notes 4, 22 and 28)	\$ 6,241,824	100	\$ 5,143,740	100
OPERATING COSTS (Notes 12, 20, 23 and 28)	4,651,712	75	3,677,473	72
GROSS PROFIT	1,590,112	25	1,466,267	28
OPERATING EXPENSES (Notes 20, 23 and 28) Selling and marketing expenses General and administrative expenses Research and development expenses	100,656 144,761 95,431	2 2 1	156,663 115,411 90,947	3 2 2
Total operating expenses	340,848	5	363,021	7
PROFIT FROM OPERATIONS	1,249,264	20	1,103,246	21
NON-OPERATING INCOME AND EXPENSES Other income (Notes 23 and 28) Other gains and losses (Notes 23 and 28) Share of the profit of associates (Note 4) Interest expense (Note 23)	67,764 (6,529) 68,403 (13,736)	1 - 1 -	46,143 14,387 53,691 (6,800)	1 - 1 -
Total non-operating income and expenses	115,902	2	107,421	2
PROFIT BEFORE INCOME TAX	1,365,166	22	1,210,667	23
INCOME TAX (Notes 4, 5 and 24)	157,655	3	171,707	3
NET PROFIT FOR THE YEAR	1,207,511	19	1,038,960	20
OTHER COMPREHENSIVE (INCOME) LOSS (Notes 20, 21 and 24) Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit plans Share of the other comprehensive income of	(12,847)	-	(21,846)	-
associates Income tax benefit relating to items that will not	(1,244)	-	(1,848)	-
be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign	2,184	-	3,714	-
operations	(86,752)	(2)	(30,883)	(1) (Continued)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

	For the Year Ended December 31
	2017		2016
	Amount	%	Amount	%
Unrealized losses on available-for-sale financial assets	\$ (15,629)	-	\$ (89,068)	(2)
Cash flow hedges Share of the other comprehensive income of	3,044	-	(3,044)	-
associates Income tax relating to items that may be	(10,022)	-	134,241	3
reclassified subsequently to profit or loss	(517)	-	517	-
Other comprehensive loss for the year, net of income tax	(121,783)	(2)	(8,217)	-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	\$ 1,085,728	17	\$ 1,030,743	20
NET PROFIT ATTRIBUTABLE TO:
Owners of the Corporation Non-controlling interests	\$ 1,159,836 47,675	18 1	\$ 1,030,904 8,056	20 -
	\$ 1,207,511	19	\$ 1,038,960	20
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the Corporation	\$ 1,064,630	17	\$ 1,034,588	20
Non-controlling interests	21,098	-	(3,845)	-
	\$ 1,085,728	17	\$ 1,030,743	20
EARNINGS PER SHARE (Note 25)
Basic Diluted	\$ 5.00 \$ 4.99		\$ 4.45 \$ 4.44

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

• 6 -

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars)

						Equity Attributable to Owners of the Corporation			Other Equity
					Retained Earnings		Exchange Differences on Translating	Unrealized Gains and Losses on				Total Equity Attributable to Owners
	Ordinary Share Capital	Capital Surplus	Legal Reserve	Special Reserve	Unappropriated Earnings	Total Retained Earnings	Foreign Operations	Available-for-sale Financial Assets	Cash Flow Hedges	Total Other Equity	Treasury Shares	of the Corporation	Non-controlling Interests	Total Equity
BALANCE AT JANUARY 1, 2016	\$ 2,369,044	\$ 657,295	\$ 2,167,302	\$ 242,136	\$ 1,248,132	\$ 3,657,570	\$ 39,724	\$ (142,072)	\$ -	\$ (102,348)	\$ (141,791)	\$ 6,439,770	\$ -	\$ 6,439,770
Appropriation of 2015 earnings (Note 21) Legal reserve Cash dividends - 45%	- -	- -	123,903 -	- -	(123,903) (1,066,070)	- (1,066,070)	- -	- -	- -	- -	- -	- (1,066,070)	- -	- (1,066,070)
	-	-	123,903	-	(1,189,973)	(1,066,070)	-	-	-	-	-	(1,066,070)	-	(1,066,070)
Change in capital surplus from investments in associates accounted for using equity method	-	42	-	-	-	-	-	-	-	-	-	42	-	42
Net profit for the year ended December 31, 2016	-	-	-	-	1,030,904	1,030,904	-	-	-	-	-	1,030,904	8,056	1,038,960
Other comprehensive income (loss) for the year ended December 31, 2016, net of income tax	-	-	-	-	(19,980)	(19,980)	(40,696)	66,989	(2,629)	23,664	-	3,684	(11,901)	(8,217)
Total comprehensive income (loss) for the year ended December 31, 2016	-	-	-	-	1,010,924	1,010,924	(40,696)	66,989	(2,629)	23,664	-	1,034,588	(3,845)	1,030,743
Disposal of the Corporation's shares held by subsidiaries	-	52,791	-	-	-	-	-	-	-	-	16,135	68,926	-	68,926
Adjustment to capital surplus from dividends paid to subsidiaries	-	22,849	-	-	-	-	-	-	-	-	-	22,849	-	22,849
Adjustment of non-controlling interests	-	-	-	-	-	-	-	-	-	-	-	-	334,400	334,400
BALANCE AT DECEMBER 31, 2016	2,369,044	732,977	2,291,205	242,136	1,069,083	3,602,424	(972)	(75,083)	(2,629)	(78,684)	(125,656)	6,500,105	330,555	6,830,660
Appropriation of 2016 earnings (Note 21) Legal reserve Special reserve Cash dividends - 45%	- - -	- - -	77,839 - -	- (91,543) -	(77,839) 91,543 (1,066,070)	- - (1,066,070)	- - -	- - -	- - -	- - -	- - -	- - (1,066,070)	- - -	- - (1,066,070)
	-	-	77,839	(91,543)	(1,052,366)	(1,066,070)	-	-	-	-	-	(1,066,070)	-	(1,066,070)
Change in capital surplus from investments in associates accounted for using equity method	-	23	-	-	-	-	-	-	-	-	-	23	-	23
Net profit for the year ended December 31, 2017	-	-	-	-	1,159,836	1,159,836	-	-	-	-	-	1,159,836	47,675	1,207,511
Other comprehensive income (loss) for the year ended December 31, 2017, net of income tax	-	-	-	-	(11,907)	(11,907)	(61,901)	(23,854)	2,456	(83,299)	-	(95,206)	(26,577)	(121,783)
Total comprehensive income (loss) for the year ended December 31, 2017	-	-	-	-	1,147,929	1,147,929	(61,901)	(23,854)	2,456	(83,299)	-	1,064,630	21,098	1,085,728
Adjustment to capital surplus from dividends paid to subsidiaries	-	22,849	-	-	-	-	-	-	-	-	-	22,849	-	22,849
BALANCE AT DECEMBER 31, 2017	\$ 2,369,044	\$ 755,849	\$ 2,369,044	\$ 150,593	\$ 1,164,646	\$ 3,684,283	\$ (62,873)	\$ (98,937)	\$ (173)	\$ (161,983)	\$ (125,656)	\$ 6,521,537	\$ 351,653	\$ 6,873,190

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)

	For the Year Ended			December 31
		2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income tax	\$	1,365,166	\$	1,210,667
Adjustments for:
Depreciation expense		264,945		268,573
Amortization expense		8,500		8,596
Impairment loss recognized on (reversal of) accounts receivable		(27,446)		30,486
Net gain on fair value change of financial assets designated as at fair
value through profit or loss		(93,514)		(13,835)
Net gain on fair value change of financial assets and liabilities held
for trading		(83,112)		(27,244)
Interest expense		13,736		6,800
Interest income		(12,638)		(12,210)
Dividend income		(32,674)		(27,025)
Share of the profit of associates		(74,593)		(61,918)
Loss on disposal of property, plant and equipment		407		867
Gain on disposal of investments		(16,587)		(115,936)
Write-down of inventories		13,114		30,674
Changes in operating assets and liabilities
Financial instruments held for trading		(127,832)		(137,024)
Notes receivable		(32,088)		(7,092)
Accounts receivable Accounts receivable - related parties		(22,289) (14,064)		(51,280) (19,155)
Other receivables		(67,808)		(833)
Inventories		(103,154)		(80,474)
Other current assets		(797)		(27,904)
Accounts payable		22,044		(694)
Accounts payable - related parties		44,675		24,646
Other payables		(2,668)		105
Other current liabilities		54,199		(738)
Net defined benefit liabilities		(9,707)		(8,029)
Cash generated from operations		1,065,815		990,023
Income taxes paid		(137,471)		(193,947)
Net cash generated from operating activities		928,344		796,076
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets designated as at fair value through profit
or loss		(2,050,054)		(799,958)
Proceeds from disposal of financial assets designated as at fair value
through profit or loss		952,462		926,372
Proceeds from disposal of available-for-sale financial assets		38,095		299,292
Proceeds from the capital reduction on available-for-sale financial
assets		2,992		3,757
Acquisition of debt investments with no active market		(18,451)		(24,269)
Proceeds from disposal of debt investments with no active market		20,000		120,419
				(Continued)

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)

	For the Year Ended	December 31
	2017	2016
Proceeds from the capital return on investment accounted for using
equity method	\$ 20,000	\$ -
Acquisition of investments accounted for using equity method Increase in prepayment for investments	(170,000) -	(90,000) (63,200)
Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment	(1,212,019) 4	(424,040) 1,656
Increase in refundable deposits	(1,799)	(1,248)
Decrease (increase) in other financial assets	271,794	(146,415)
Increase in other noncurrent assets	(486)	(3,179)
Interest received	13,185	12,868
Dividends received from associates	61,467	68,655
Dividends received from others	32,674	27,025
Net cash used in investing activities	(2,040,136)	(92,265)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings	7,624,623	3,413,623
Repayments of short-term borrowings	(6,360,562)	(2,705,298)
Increase in short-term bills payable	770,000	-
Decrease in short-term bills payable	(470,000)	(135,000)
Increase in other noncurrent liabilities	2,308	-
Dividends paid	(1,066,070)	(1,065,660)
Proceeds from disposal of treasury shares	-	68,926
Interest paid	(13,088)	(6,712)
Increase in non-controlling interests	-	100,320
Net cash generated from (used in) financing activities	487,211	(329,801)
EFFECT OF EXCHANGE RATE CHANGES ON THE BALANCE OF
CASH AND CASH EQUIVALENTS HELD IN FOREIGN
CURRENCIES	(13,523)	(9,841)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS	(638,104)	364,169
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR	1,371,824	1,007,655
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	\$ 733,720	\$ 1,371,824

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

China Steel Chemical Corporation (the "Corporation") was incorporated by China Steel Corporation (CSC) and other shareholders in February 1989. The Corporation started operations in May 1993, and CSC is the parent company that has substantive control over the Corporation. As of December 31, 2017 and 2016, CSC owned 29.04% of the Corporation's voting shares. The Corporation mainly engages in the production, processing and sales of coal tar distillation products, Naphtha products and coke products; in addition, it also trades related upstream and downstream products.

The shares of the Corporation have been listed and have been traded on the Taiwan Stock Exchange since November 1998.

The Corporation's functional currency is the New Taiwan dollar; the consolidated financial statements of the Corporation and its subsidiaries are presented in New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Corporation's board of directors and authorized for issue on March 15, 2018.

3. APPLICATION OF NEW AND AMENDED STANDARDS AND INTERPRETATIONS

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the "IFRSs") endorsed and issued into effect by the FSC

Except for the following, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC did not have any material impact on the Corporation and its subsidiaries' accounting policies:

Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include an emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president of the Corporation and its subsidiaries, or is the spouse or second immediate family of the chairman of the board of directors or president of the Corporation and its subsidiaries, are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationships with whom the Corporation and its subsidiaries have significant transactions. If the transaction amount or balance with a specific related party is 10% or more of the Corporation and its subsidiaries' respective total transaction amount or balance, such transactions should be separately disclosed by the name of each related party.

When the amendments are applied retrospectively from January 1, 2017, the disclosures of related party transactions and impairment of goodwill are enhanced. Refer to Note 28 for the related disclosures.

b. The Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2018

New IFRSs	Effective Date Announced by IASB (Note 1)
Annual Improvements to IFRSs 2014-2016 Cycle	Note 2
IFRS 9 "Financial Instruments"	January 1, 2018
Amendments to IFRS 9 and IFRS 7 "Mandatory Effective Date of	January 1, 2018
IFRS 9 and Transition Disclosures"
IFRS 15 "Revenue from Contracts with Customers"	January 1, 2018
Amendments to IFRS 15 "Clarifications to IFRS 15 Revenue from	January 1, 2018
Contracts with Customers"
Amendment to IAS 7 "Disclosure Initiative"	January 1, 2017
Amendments to IAS 12 "Recognition of Deferred Tax Assets for	January 1, 2017
Unrealized Losses"
Amendments to IAS 40 "Transfers of Investment Property"	January 1, 2018
IFRIC 22 "Foreign Currency Transactions and Advance	January 1, 2018
Consideration"

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
• Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendments to IAS 28 are retrospectively applied for annual periods beginning on or after January 1, 2018.
• 1) IFRS 9 "Financial Instruments" and related amendments

Classification, measurement and impairment of financial assets

With regard to financial assets, all recognized financial assets that are within the scope of IAS 39 "Financial Instruments: Recognition and Measurement" are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Corporation and its subsidiaries' debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

a) For debt instruments, if they are held within a business model whose objective is to collect contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with any impairment loss recognized in profit or loss. Interest revenue is recognized in profit or loss by using the effective interest method;

b) For debt instruments, if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gains or losses are recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above measurements, all other financial assets are measured at fair value through profit or loss. However, the Corporation and its subsidiaries may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

The Corporation and its subsidiaries analyzed the facts and circumstances of its financial assets that exist at December 31, 2017 and performed the assessment of the impact of IFRS 9 on the classification and measurement of financial assets. Under IFRS 9:

• a) Listed shares, emerging market shares, and unlisted shares classified as available-for-sale will be classified as at fair value through profit or loss or designated as at fair value through other comprehensive income. When the financial assets are designated as at fair value through other comprehensive income, the fair value gains or losses accumulated in other equity will be transferred directly to retained earnings instead of being reclassified to profit or loss on disposal.
• b) Debt investments classified as held-to-maturity financial assets will be classified as at fair value through profit or loss under IFRS 9, because on initial recognition, the contractual cash flows are not solely payments of principal and interest on the principal outstanding.
• c) Debt investments classified as debt investments with no active market and measured at amortized cost will be classified as measured at amortized cost under IFRS 9, because on initial recognition, the contractual cash flows are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is to collect the contractual cash flows.

IFRS 9 requires impairment loss on financial assets to be recognized by using the "Expected Credit Losses Model". A loss allowance is required for financial assets measured at amortized cost, investments in debt instruments measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 "Revenue from Contracts with Customers", certain written loan commitments and financial guarantee contracts. A loss allowance for 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full-lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full-lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Corporation and its subsidiaries take into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

The Corporation and its subsidiaries have performed a preliminary assessment that it will apply the simplified approach to recognize full-lifetime expected credit losses for trade receivables, contract assets and lease receivables. In relation to debt instrument investments and financial guarantee contracts, the Corporation and its subsidiaries will assess whether there has been a significant increase in credit risk to determine whether to recognize 12-month or full-lifetime expected credit losses.

The Corporation and its subsidiaries elect not to restate prior reporting periods when applying the requirements for the classification, measurement and impairment of financial assets under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application and will provide the disclosures related to the classification and the adjustment information upon initial application of IFRS 9.

The anticipated impact on assets, liabilities and equity of retrospective application of the requirements for the classification, measurement and impairment of financial assets as of January 1, 2018 is set out below:

	Carrying Amount as of December 31, 2017	Adjustments Arising from Initial Application	Adjusted Carrying Amount as of January 1, 2018
Impact on assets, liabilities and equity
Available-for-sale financial assets - current	\$ 154,945	\$ (154,945)	\$ -
Available-for-sale financial assets - noncurrent	72,648	(72,648)	-
Financial assets at fair value through profit or loss - current	2,209,270	26,841	2,236,111
Financial assets at fair value through other comprehensive income - current	-	128,104	128,104
Financial assets at fair value through profit or loss - noncurrent Held-to-maturity financial assets -	-	153,940	153,940
noncurrent Debt investments with no active market -	102,360	(102,360)	-
noncurrent	92,922	(92,922)	-
Financial assets measured at cost -noncurrent	-	92,922	92,922
Total effect on assets	\$ 2,632,145	\$ (21,068)	\$ 2,611,077
Retained earnings Unrealized gain / (loss) on available - for	\$ 3,684,283	\$ (45,689)	\$ 3,638,594
- sale financial assets Unrealized gain / (loss) on financial assets	(98,937)	98,937	-
at fair value through other comprehensive income	-	(74,316)	(74,316)
Total effect on equity	\$ 3,585,346	\$ (21,068)	\$ 3,564,278

2) IFRS 15 "Revenue from Contracts with Customers" and related amendments

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

When applying IFRS 15, the Corporation and its subsidiaries recognize revenue by applying the following steps:

• a) Identify the contract with the customer;
• b) Identify the performance obligations in the contract;
• c) Determine the transaction price;
• d) Allocate the transaction price to the performance obligations in the contract; and
• e) Recognize revenue when the Corporation and its subsidiaries satisfy a performance obligation.

In identifying performance obligations, IFRS 15 and the related amendments require that a good or service is distinct if it is capable of being distinct (for example, the Corporation and its subsidiaries regularly sell it separately) and the promise to transfer it is distinct within the context of the contract (i.e. the nature of the promise in the contract is to transfer each good or service individually rather than to transfer a combined output).

The Corporation and its subsidiaries elect to retrospectively apply IFRS 15 to contracts that are not complete on January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1, 2018. In addition, the Corporation and its subsidiaries will disclose the difference between the amount that results from applying IFRS 15 and the amount that results from applying current standards for 2018.

The anticipated impact on assets, liabilities and equity when retrospectively applying IFRS 15 as of January 1, 2018 is detailed below:

	Carrying	Adjustments	Adjusted
	Amount as of	Arising from	Carrying
	December 31,	Initial	Amount as of
	2017	Application	January 1, 2018
Other current liabilities Contract liabilities - current Other noncurrent liabilities Contract liabilities - noncurrent	\$ 100,152 - 3,418 -	\$ (94,627) 94,627 (1,110) 1,110	\$ 5,525 94,627 2,308 1,110
Total effect on liabilities	\$	\$	\$
	103,570	-	103,570

3) Amendments to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Losses"

The amendments clarify that the difference between the carrying amount of a debt instrument measured at fair value and its tax base gives rise to a temporary difference, even though there are unrealized losses on that asset, irrespective of whether the Corporation and its subsidiaries expect to recover the carrying amount of the debt instrument by sale or by holding it and collecting contractual cash flows.

In addition, in determining whether to recognize a deferred tax asset, the Corporation and its subsidiaries should assess a deductible temporary difference in combination with all of its other deductible temporary differences, unless the tax law restricts the utilization of losses as deduction against income of a specific type, in which case, a deductible temporary difference is assessed in combination only with other deductible temporary differences of the appropriate type. The amendments also stipulate that, when determining whether to recognize a deferred tax asset, the estimate of probable future taxable profit may include some of the Corporation and its subsidiaries' assets for more than their carrying amount if there is sufficient evidence that it is probable that the Corporation and its subsidiaries will achieve the higher amount, and that the estimate for future taxable profit should exclude tax deductions resulting from the reversal of deductible temporary differences.

In assessing a deferred tax asset, the Corporation and its subsidiaries currently assume it will recover the asset at its carrying amount when estimating probable future taxable profit; the amendments will be applied retrospectively in 2018.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Corporation and its subsidiaries assessed that the application of other standards and interpretations will not have a significant impact on the Corporation and its subsidiaries' financial position and financial performance.

c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs	Effective Date Announced by IASB (Note 1)
Annual Improvements to IFRSs 2015-2017 Cycle	January 1, 2019
Amendments to IFRS 9 "Prepayment Features with Negative Compensation"	January 1, 2019 (Note 2)
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture"	To be determined by IASB
IFRS 16 "Leases"	January 1, 2019 (Note 3)
IFRS 17 "Insurance Contracts"	January 1, 2021
Amendments to IAS 19 "Plan Amendment, Curtailment or Settlement"	January 1, 2019 (Note 4)
Amendments to IAS 28 "Long-term Interests in Associates and Joint Ventures"	January 1, 2019
IFRIC 23 "Uncertainty Over Income Tax Treatments"	January 1, 2019

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
• Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.
• Note 3: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting from January 1, 2019.
• Note 4: The Corporation and its subsidiaries shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
• 1) IFRS 16 "Leases"

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

Under IFRS 16, if the Corporation and its subsidiaries are a lessee, they shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Corporation and its subsidiaries may elect to apply the accounting method similar to the accounting for operating leases under IAS 17 to low-value and short-term leases. On the consolidated statements of comprehensive income, the Corporation and its subsidiaries should present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed by using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities and interest are classified within financing activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Corporation and its subsidiaries as lessor.

When IFRS 16 becomes effective, the Corporation and its subsidiaries may elect to apply this standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this standard recognized at the date of initial application.

2) IFRIC 23 "Uncertainty Over Income Tax Treatments"

IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Corporation and its subsidiaries should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Corporation and its subsidiaries conclude that it is probable that the taxation authority will accept an uncertain tax treatment, the Corporation and its subsidiaries should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Corporation and its subsidiaries should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the entity expects to better predict the resolution of the uncertainty. The Corporation and its subsidiaries have to reassess its judgments and estimates if facts and circumstances change.

On initial application, the Corporation and its subsidiaries shall apply IFRIC 23 either retrospectively to each prior reporting period presented, if this is possible without the use of hindsight, or retrospectively with the cumulative effect of the initial application of IFRIC 23 recognized at the date of initial application.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Corporation and its subsidiaries are continuously assessing the possible impact that the application of other standards and interpretations will have on the Corporation and its subsidiaries' financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

For readers' convenience, the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the ROC. If inconsistencies arise between the English version and the Chinese version or if differences arise in the interpretations between the two versions, the Chinese version of the consolidated financial statements shall prevail. However, the accompanying consolidated financial statements do not include English translation of the additional footnote disclosures that are not required under generally accepted accounting principles but are required by the Securities and Futures Bureau for their oversight purposes.

a. Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

b. Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis except for the financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of the plan assets.

The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• 3) Level 3 inputs are unobservable inputs for the asset or liability.
• c. Classification of Current and Noncurrent Assets and Liabilities

Current assets include:

• 1) Assets held primarily for the purpose of trading;
• 2) Assets are realized within twelve months after the balance sheet date; and
• 3) Cash and cash equivalents unless the asset is restricted from being used for an exchange or used to settle a liability for more than twelve months after the balance sheet date.

Current liabilities include:

• 1) Liabilities held primarily for the purpose of trading;
• 2) Liabilities expected to be settled within twelve months after the balance sheet date; and
• 3) Liabilities without an unconditional right to defer settlement for at least twelve months after the balance sheet date.

Assets and liabilities that are not classified as current are classified as noncurrent.

• d. Basis of Consolidation
• 1) Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Corporation and the entities controlled by the Corporation (its subsidiaries).

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Corporation.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

Total comprehensive income of subsidiaries is attributed to the owners of the Corporation and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

2) Subsidiaries included in consolidated financial statements

Refer to Note 14 for the detail information of subsidiaries (including the percentage of ownership and main business).

e. Foreign Currencies

In preparing the financial statements of each individual consolidated entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the closing rates. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise expect for exchange difference on transactions entered into in order the hedge certain foreign currency risks.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are recognized in profit or loss for the year except for exchange difference arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the financial statements of foreign subsidiaries are translated into the presentation currency - New Taiwan dollars as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income accumulated in equity attributed to the owners of the Corporation and non-controlling interests as appropriate.

f. Inventories

Inventories consist of raw materials, supplies, work-in-process, finished goods, etc. Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost.

g. Investments in Associates

An associate is an entity over which the Corporation and its subsidiaries have significant influence and that is neither a subsidiary nor an interest in a joint venture.

The Corporation and its subsidiaries use the equity method to account for their investments in associates. Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Corporation and its subsidiaries' share of the profit or loss and other comprehensive income of the associate. The Corporation and its subsidiaries also recognize the changes in the share of equity of associates.

When the Corporation and its subsidiaries subscribe for additional new shares of an associate at a percentage different from their existing ownership percentage, the resulting carrying, amount of the investment will differs from the existing amount of the Corporation and its subsidiaries' proportionate interest in the associate. The Corporation and its subsidiaries record such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus changes in the share of equity of associates. If the Corporation and its subsidiaries' ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment is a deduction to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is deducted from to retained earnings.

When the Corporation and its subsidiaries' share of losses of an associate equals or exceeds their interest in that associate (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Corporation and its subsidiaries' net investment in the associate), the Corporation and its subsidiaries discontinue recognizing their share of further losses. Additional losses and liabilities are recognized only to the extent that the Corporation and its subsidiaries have incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

When impairment loss is evaluated, the entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is deducted from the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment has subsequently increased.

The Corporation and its subsidiaries discontinue the use of the equity method from the date on which their investment ceases to be an associate. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Corporation and its subsidiaries account for all amount previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities.

When the Corporation and its subsidiaries transact with their associates, profits or losses on the transactions are recognized in the consolidated financial statements only to the extent of interests in the associate that are not related to the Corporation and its subsidiaries.

h. Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment loss.

Property, plant and equipment in the course of construction are carried at cost. Cost includes professional fees and borrowing costs eligible for capitalization. Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use and depreciated.

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

i. Investment Properties

Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties also include land held for a currently undetermined future use.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated

impairment loss. Depreciation is recognized using the straight-line method.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

j. Impairment of Tangible Assets

At each balance sheet date, the Corporation and its subsidiaries review the carrying amounts of their tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Corporation and its subsidiaries estimate the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to the cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized on the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

k. Financial Instruments

Financial assets and financial liabilities are recognized when the Corporation and its subsidiaries become a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

a) Measurement category

Financial assets held by the Corporation and its subsidiaries include financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity investments and loans and receivables.

i Financial assets at fair value through profit or loss

Financial assets is classified as at fair value through profit or loss when it is either held for trading or it is designated as at fair value through profit or loss.

A financial asset may be designated as at fair value through profit or loss upon initial recognition if:

• i) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• ii) The financial asset forms part of the Corporation and its subsidiaries' financial asset, which is managed and its performance is evaluated on a fair value basis, in accordance with the Corporation and its subsidiaries' documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
• iii) The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 27.

ii Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and reclassified in profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized when the Corporation and its subsidiaries' right to receive the dividends is established.

iii Held-to-maturity investments

Structured notes and corporate bonds, which are above specific credit ratings and the Corporation and its subsidiaries have positive intent and ability to hold to maturity, are classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

iv Loans and receivables

Loans and receivables (including cash and cash equivalents, notes and accounts receivable, net (including related parties), other receivables, debt investments with no active market, refundable deposits and other financial assets) are measured at amortized cost using the effective interest method, less any impairment. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalent includes time deposits and commercial papers with original maturity within three months from the date of acquisition, high liquidity, readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

b) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Financial assets carried at amortized cost, such as accounts receivable, are assessed for impairment on a collective basis even if there is no objective evidence of impairment individually. Objective evidence of impairment for a portfolio of receivables could include the Corporation and its subsidiaries' past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the securities below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as default or delinquency in interest or principal payments, higher probability that the borrower will enter bankruptcy or financial re-organization, or there is disappearance of an active market for that financial asset because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of accounts receivable, where the carrying amount is reduced through the use of an allowance account.

c) Derecognition of financial assets

The Corporation and its subsidiaries derecognize a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

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

2) Equity instruments

Equity instruments issued by the Corporation and its subsidiaries are classified as equity in accordance with the substance of the contractual arrangements and the definitions of an equity instrument.

Equity instruments issued by the Corporation and its subsidiaries are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Corporation's own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Corporation's own equity instruments.

• 3) Financial liabilities
• a) Subsequent measurement

All financial liabilities are measured at amortized cost using the effective interest method.

b) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

l. Hedge Accounting

The Corporation and its subsidiaries designate certain hedging instruments (non-derivatives in respect of foreign currency risk) as cash flow hedges.

The effective portion of changes in the fair value that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss.

The associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in the same period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses that were recognized in other comprehensive income are removed from equity and included in the initial cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued prospectively when the Corporation and its subsidiaries revoke the designated hedging relationship; when the hedging instrument expires or is sold, terminated, or exercised; or when the hedging instrument no longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been previously recognized in other comprehensive income from the period when the hedge was effective remains separately in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

m. Treasury Shares

Shares of the Corporation held by subsidiaries are reclassified to treasury shares from investments accounted for using equity method at the acquisition cost.

n. Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowance for sales returns and liability for returns are recognized at the time of sale based on the seller's reliable estimate of future returns and based on past experience and other relevant factors.

1) Sale of goods

Sales revenue is recognized when goods are delivered and the ownership of the goods has been transferred as follows: domestic sale - when products are delivered; export sales-when the sales conditions of a contract are fulfilled.

The Corporation and its subsidiaries do not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve transfer of risks and rewards of materials ownership.

2) Rendering of services

Service revenue is recognized when services are provided.

3) Dividend and interest income

Dividend income from investments is recognized when the shareholder's right to receive payment has been established provided that it is probable that the economic benefits will flow to the Corporation and its subsidiaries and the amount of income can be measured reliably.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the applicable effective interest rate.

o. Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The operating leases are as follows:

1) The Corporation and its subsidiaries as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

2) The Corporation and its subsidiaries as lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term. Contingent rents are recognized as an expense in the period in which they are incurred.

p. Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time that the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

• q. Employee Benefits
• 1) Shore-term employee benefits

Liabilities recognized in respect of shore-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost), and net interest on the net defined benefit liability are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses, and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability represents the actual deficit in the Corporation and its subsidiaries' defined benefit plan.

r. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years' tax liabilities are added to or deducted from the current year's tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Corporation and its subsidiaries are able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at each balance sheet date and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Corporation and its subsidiaries expect, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities.

3) Current tax and deferred tax for the year

Current tax and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also recognized in other comprehensive income or directly in equity respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Corporation and its subsidiaries' accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

a. Income taxes

Since the earnings are expected to be used for expanding foreign operations in the future and will not be remitted inward in the foreseeable future, the Corporation did not recognize deferred tax liabilities on earnings of both NT\$295,253 thousand as of December 31, 2017 and 2016, respectively. The realization of deferred income tax liabilities mainly depends on the scale of operation expansion in the future. If the actual investment amount in the future is less than the expected investment amount, a significant income tax reversal will occur and such reversal amount will be recognized in profit and loss upon occurrence. The unrecognized deferred income tax liability related to the invested subsidiaries amounted to both NT50,193 thousand as of December 31, 2017 and 2016, respectively.

b. Estimated impairment of accounts receivable

When there is objective evidence of impairment loss, the Corporation and its subsidiaries take into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. If the actual future cash flows are less than expected, a material impairment loss may arise.

c. Fair value of financial instruments

As described in Note 27, the management of the Corporation and its subsidiaries exercise judgment to select adequate evaluation techniques for assessing market price of financial instruments. The Corporation and its subsidiaries adopt the common evaluation techniques of market participants; also, the assumption on derivative financial instruments is based on market price and is adjusted according to the characteristics of the instruments. Debt instruments fair value is estimated in accordance with the cash flow discount approach; also, the assumption is based on the observable market prices or interest rates (if applicable). The fair value of emerging or unlisted equity instruments is estimated in accordance with the invested company's financial position and operating results, recent trading price, the quotation of the same equity instruments without market price, and quotation of similar instruments with market price. The detailed assumptions of the evaluation techniques are disclosed in Note 27. The management of the Corporation and its subsidiaries believe that the selected evaluation techniques and assumptions can appropriately help determine the fair value of financial instruments.

d. Write-down of inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

6. CASH AND CASH EQUIVALENTS

	December 31
	2017			2016
Cash on hand	\$	400	\$	430
Checking accounts and demand deposits		456,350		203,631
Cash equivalents
Time deposits with original maturities less than three months		276,970		1,006,446
Commercial papers		-		161,317
	\$	733,720	\$	1,371,824

The market rate intervals of cash in bank and cash equivalents at the balance sheet date were as follows:

	December 31
	2017	2016
Demand deposits (%)	0.001-0.5	0.05-0.35
Time deposits (%)	1.55-3.12	0.975-6.6
Commercial papers (%)	-	0.898

	December 31
	2017	2016
Financial assets designated as at FVTPL
Non-derivative financial assets
Mutual funds	\$ 1,450,894	\$ 292,942
Domestic quoted shares	5,970	36,488
Foreign quoted shares	40,898	-
	1,497,762	329,430
Financial assets held for trading
Non-derivative financial assets
Domestic quoted shares	556,538	437,364
Mutual funds	154,970	-
	711,508	437,364
	\$ 2,209,270	\$ 766,794

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS - CURRENT

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

	December 31
	2017	2016
Current
Domestic investments quoted shares	\$ 154,945	\$ 190,044
Noncurrent
Domestic investments Emerging market shares Unquoted ordinary shares	\$ 16,327 56,321	\$ 19,386 58,292
	\$ 72,648	\$ 77,678

9. HELD-TO-MATURITY FINANCIAL ASSETS - NONCURRENT

		December 31
	2017	2016
Foreign investment
Structured bonds	\$ 102,360	\$ 110,924

The Corporation and its subsidiaries' investments in foreign structured bonds at the balance sheet date were as follows:

	December 31
	2017	2016
Total par value (in thousand USD)	\$ 3,440	\$ 3,440
Coupon rates (%)	7-9	7-9
Average years to maturity	8-11 years	9-12 years

Starting from January 1, 2012, the issuer of the bonds has gradually redeemed and the Corporation and its subsidiaries have gradually disposed of its bond investments. Since the amounts of the bonds disposal of were not significant, the classification of the remaining bonds investments classified as held-to-maturity is not affected. As of December 31, 2017 and 2016, there was no dispose of held-to-maturity financial assets during the past three years.

10. DEBT INVESTMENTS WITH NO ACTIVE MARKET - NONCURRENT

	December 31
	2017	2016
Corporate Bonds - Cayman Ton Yi Industrial Holdings Limited (a)	\$ 41,085	\$ 41,553
Corporate Bonds - Haikou Meilan International Airport (b)	13,682	13,841
Corporate Bonds - ICBCIL Finance Company Ltd. (c)	9,563	-
Corporate Bonds - Industrial & Commercial Bank of China Ltd. (d)	9,545	-
Corporate Bonds - Ping An Insurance Company of China Limited (e)	8,961	9,066
Corporate Bonds - GAZPROM Bank (f)	6,071	6,579
Subordinated financial bonds - Australia and New Zealand Bank (g)	4,015	4,350
Subordinated financial bonds - Sunny Bank (h)	-	20,000
	\$ 92,922	\$ 95,389

• a. In February 2015, the subsidiaries bought corporate bonds issued by Cayman Ton Yi Industrial Holdings Limited with an effective interest rate of 4.2%; and the par value was RMB9,000 thousand. The bonds will mature in February 2018.
• b. In June 2016, the subsidiaries bought corporate bonds issued by Haikou Meilan International Airport Company Limited with an effective interest rate of 7.25%; and the par value was USD455 thousand. The bonds will mature in June 2018.
• c. In April 2017, the subsidiary bought corporate bonds issued by ICBCIL Finance Company Ltd. with an effective interest rate of 3.9%; and the par value was RMB2,095 thousand. The bonds will mature in June 2018.
• d. In May 2017, the subsidiary bought subordinated financial bonds issued by Industrial & Commercial Bank of China Ltd. with an effective interest rate of 3.9%; and the par value was RMB2,091 thousand. The bonds will mature in June 2018.
• e. In February 2016, the subsidiaries bought corporate bonds issued by Ping An Insurance Company of China Limited with and effective interest rate of 4.75%; and the par value was USD298 thousand. The bonds will mature in November 2018.

• f. In June 2014, the subsidiaries bought corporate bonds issued by GAZPROM BANK with an effective interest rate of 7.496%; and the par value was USD204 thousand. The bonds will mature in December 2023.

• g. In July 2014, the subsidiaries bought subordinated bonds issued by Australia and New Zealand Bank with an effective interest rate of 0.99615%; and the par value was USD135 thousand. The bonds will mature in December 2021.

• h. In April 2010, the subsidiaries bought subordinated financial bonds issued by Sunny Bank with an effective interest rate of 3.25%; and the par value was NT\$20,000 thousand. The bonds matured in April 2017.

11. NOTES AND ACCOUNTS RECEIVABLE, NET (INCLUDING RELATED PARTIES)

	December 31
	2017	2016
Notes receivable
Operating	\$ 47,724	\$ 15,494
Accounts receivable (including related parties) Less: Allowance for impairment loss	\$ 533,682 3,040	\$ 497,231 30,486
	\$ 530,642	\$ 466,745

The Corporation and its subsidiaries grant an average period of 30 days - 90 days for credit sales of goods. The Corporation and its subsidiaries assess allowance for bad debt by referring to the doubtful account aging analysis, historical experience, and the current financial situation of the client and any change in the client's credit quality.

The aging of receivables was as follows:

	December 31
	2017	2016
Not past due	\$ 514,332	\$ 465,481
Up to 30 days	10,104	1,185
31-60 days	775	-
61-180 days	2,046	79
181-365 days	-	30,486
More than 366 days	6,425	-
	\$ 533,682	\$ 497,231

Above analysis was based on the days past due from the end of the credit term.

For the accounts receivable balances that were past due at the end of the reporting period, the Corporation and its subsidiaries did not recognize an allowance for impairment loss because there was no significant change in credit quality and the amounts were still considered recoverable. The Corporation and its subsidiaries did not hold any collateral or other credit enhancements for these balances.

The accounts receivable that were past due and individually impaired (before subtracting the allowance for bad debt) were as follows:

	December 31
	2017	2016
181-365 days More than 366 days	\$ - 6,425	\$ 30,486 -
	\$ 6,425	\$ 30,486

The aging of receivables that were past due but not impaired was as follows:

	December 31
	2017	2016
Up to 30 days 31-60 days	\$ 10,104 775	\$ 1,185 -
61-180 days	2,046	79
	\$ 12,925	\$ 1,264

The movements of the allowance for impairment loss were as follows:

	Individually Assessed for Impairment	Collectively Assessed for Impairment	Total
Balance at January 1, 2017 Impairment losses reversal of receivables	\$ 30,486 (27,446)	\$ - -	\$ 30,486 (27,446)
Balance at December 31, 2017	\$ 3,040	\$ -	\$ 3,040
Balance at January 1, 2016 Impairment losses recognized on receivables	\$ - 30,486	\$ - -	\$ - 30,486
Balance at December 31, 2016	\$ 30,486	\$ -	\$ 30,486

12. INVENTORIES

	December 31
	2017	2016
Finished goods	\$ 372,600	\$ 326,265
Work in progress	48,938	67,972
Raw materials	45,489	21,362
Supplies	86,978	48,419
	\$ 554,005	\$ 464,018

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2017 and 2016 was NT\$4,590,410 thousand and NT\$3,623,249 thousand, respectively. The cost of goods sold included inventory write-downs of NT\$13,114 thousand and NT\$30,674 thousand, respectively.

13. OTHER FINANCIAL ASSETS

	December 31
	2017	2016
Current
Time deposits with original maturities more than three months Deposits of designated hedging foreign-currency	\$ - -	\$ 184,822 86,846
	\$ -	\$ 271,668
Non-Current
Deposits for projects (Note 17)	\$ 1,112	\$ 1,111

The unrealized gains and losses arising from this foreign currency valuation were recognized in other comprehensive income under cash flow hedges. The period of expected cash flow in the next 12 months from the foreign currency deposit is the same as the payment period of the equipment. The unrealized gains and losses are expected to realize as depreciation expenses along with the depreciation of the equipment.

Movements of unrealized gains and losses arising from the valuation of other financial assets for the cash flow hedge were as follows:

	For the Year End December 31
	2017	2016
Balance, beginning of year Recognized in other comprehensive income Transferred to prepaid equipment	\$ (3,044) 126 2,918	\$ - (3,196) 152
Balance, end of year	\$ -	\$ (3,044)

14. SUBSIDIARIES

The consolidated entities were as follows:

			Percentage of Ownership (%)
Investor	Investee	Main Businesses	December 31, 2017	December 31, 2016
China Steel Chemical Corporation (CSCC)	Ever Wealthy International Corporation (EWI)	General investment	100	100
	Ever Glory International Co., Ltd. (EGI)	International trading	100	100
	Formosa Ha Tinh CSCC (Cayman) International Limited (CSCCC)	International trading	50	50
Ever Wealthy International Corporation	China Steel Carbon Materials Technology Co., Ltd. (CSCM)	General investment	100	100
China Steel Carbon Materials Technology Co., Ltd.	Changzhou China Steel New Materials Technology Co., Ltd. (CCSNM)	Processing and trading of asphalt mesocarbon microbeads product sorting	100	100

In October 2015, the Corporation entered into a joint venture and collaboration agreement with Formosa Ha Tinh (Cayman) and Formosa Ha Tinh Steel Corporation (Formosa Ha Tinh). According to the agreement, CSCCC was to be established through a joint investment from the Corporation and Formosa Ha Tinh (Cayman) in which the Corporation would own 50% of the equity. CSCCC mainly engages in the processing and sale of the by-products produced by Formosa Ha Tinh such as coal tar products, naphtha products and coke. CSCCC was established in January 2016 with a paid-in capital of USD10,000 thousand from the Corporation. As of December 31, 2017, USD3,000 thousand has been paid to this account.

According to the joint venture and collaboration agreement, CSCCC should pay USD\$18,580 thousand to Formosa Ha Tinh to acquire the underwriting premium from Formosa Ha Tinh for its produced coal tar products, naphtha products and coke (listed under other noncurrent assets). As of December 31, 2017, this account has not been paid and is listed under other payables.

15. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

The Corporation and its subsidiaries' investments accounted for by equity method were as follows:

	December 31
	2017	2016
Material associates
CHC Resources Corporation (CHC)	\$ 259,959	\$ 254,736
Transglory Investment Corporation (TIC)	545,501	524,338
	805,460	779,074
Associates that are not individually material	704,148	578,650
	\$ 1,509,608	\$ 1,357,724

a. Material associates

		Voting Rights	Proportion of Ownership and (%)
		December 31
	Name of Associate	2017	2016
CHC		6	6
TIC		9	9

The Corporation and its subsidiaries held more than 20% of the shares with CSC and fellow subsidiaries and accounted for using the equity method.

The investments accounted for using equity method and the Corporation's share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2017 and 2016 were based on the associates' financial statements audited by the auditors for the same years.

Fair values (Level 1) of investments in associates with available published price quotation are summarized as follows:

	December 31
	2017	2016
CHC	\$ 805,583	\$ 722,294

The summarized financial information below represents amounts shown in the associates' financial statements prepared in accordance with IFRSs adjusted by the Corporation and its subsidiaries for equity accounting purposes.

CHC

	December 31
	2017	2016
Current assets Noncurrent assets Current liabilities Noncurrent liabilities Equity Non-controlling interests	\$ 2,436,204 5,302,660 (2,432,308) (866,764) 4,439,792 (135,835)	\$ 2,010,396 5,013,276 (2,210,509) (477,266) 4,335,897 (118,418)
	\$ 4,303,957	\$ 4,217,479
Proportion of the Corporation and its subsidiaries' ownership (%)	6	6
Equity attributable to the Corporation and its subsidiaries	\$ 259,959	\$ 254,736
Carrying amount	\$ 259,959	\$ 254,736
	For the Year Ended December 31 2017	2016
Operating revenue	\$ 7,266,100	\$ 6,851,222
Net profit for the year Other comprehensive income (loss)	\$ 787,433 (42,719)	\$ 621,760 32,038
Total comprehensive income	\$ 744,714	\$ 653,798
TIC

	December 31
	2017	2016
Current assets Noncurrent assets Current liabilities	\$ 644 6,429,601 (500,883)	\$ 1,725 6,396,510 (698,910)
Equity	\$ 5,929,362	\$ 5,699,325
Proportion of the Corporation and its subsidiaries' ownership (%)	9	9
Equity attributable to the Corporation and its subsidiaries	\$ 545,501	\$ 524,338
Carrying amount	\$ 545,501	\$ 524,338

	For the Year Ended December 31
	2017	2016
Operating income	\$ 223,579	\$ 129,963
Net profit for the year Other comprehensive income	\$ 203,611 26,426	\$ 108,668 1,770,528
Total comprehensive income	\$ 230,037	\$ 1,879,196

b. Aggregate information of associates that are not individually material

	For the Year Ended December 31
	2017	2016
The Corporation and its subsidiaries' share of
Net profit for the year	\$ 9,861	\$ 14,866
Other comprehensive loss	(11,150)	(19,138)
Total comprehensive loss	\$ (1,289)	\$ (4,272)

16. PROPERTY, PLANT AND EQUIPMENT

For the Year Ended December 31, 2017

	Land	Buildings	Machinery and Equipment	Transportatio n Equipment	Other Equipment	Construction in Progress	Total
Cost
Balance at January 1, 2017 Additions Disposals Effect of foreign currency exchange differences	\$ 1,145,237 - - -	\$ 467,277 105,421 (88) -	\$ 3,587,378 98,569 (13,315) (158)	\$ 94,165 3,311 (115) (19)	\$ 110,579 2,541 (270) (168)	\$ 371,085 679,709 - -	\$ 5,775,721 889,551 (13,788) (345)
Balance at December 31, 2017	\$ 1,145,237	\$ 572,610	\$ 3,672,474	\$ 97,342	\$ 112,682	\$ 1,050,794	\$ 6,651,139
Accumulated depreciation
Balance at January 1, 2017 Depreciation expense Disposals Effect of foreign currency exchange differences	\$ - - - -	\$ 237,889 27,157 (87) -	\$ 2,820,825 217,039 (12,908) (12)	\$ 63,676 9,308 (113) (5)	\$ 76,457 11,441 (269) (13)	\$ - - - -	\$ 3,198,847 264,945 (13,377) (30)
Balance at December 31, 2017	\$ -	\$ 264,959	\$ 3,024,944	\$ 72,866	\$ 87,616	\$ -	\$ 3,450,385
Carrying amount at December 31, 2017	\$ 1,145,237	\$ 307,651	\$ 647,530	\$ 24,476	\$ 25,066	\$ 1,050,794	\$ 3,200,754

For the Year Ended December 31, 2016

	Land	Buildings	Machinery and Equipment	Transportatio n Equipment	Other Equipment	Construction in Progress	Total
Cost
Balance at January 1, 2016 Additions Disposals Reclassification Effect of foreign currency exchange differences	\$ 1,145,237 - - - -	\$ 467,277 - - - -	\$ 3,533,139 82,458 (11,886) (13,953) (2,380)	\$ 106,538 3,674 (16,343) 423 (127)	\$ 96,860 1,203 (157) 13,530 (857)	\$ 75,841 295,244 - - -	\$ 5,424,892 382,579 (28,386) - (3,364)
Balance at December 31, 2016 Accumulated depreciation	\$ 1,145,237	\$ 467,277	\$ 3,587,378	\$ 94,165	\$ 110,579	\$ 371,085	\$ 5,775,721
Balance at January 1, 2016 Depreciation expense Disposals Reclassification Effect of foreign currency exchange differences	\$ - - - - -	\$ 213,287 24,602 - - -	\$ 2,612,853 220,576 (11,173) (1,209) (222)	\$ 66,950 11,245 (14,535) 72 (56)	\$ 63,568 12,150 (155) 1,137 (243)	\$ - - - - -	\$ 2,956,658 268,573 (25,863) - (521)
Balance at December 31, 2016	\$ -	\$ 237,889	\$ 2,820,825	\$ 63,676	\$ 76,457	\$ -	\$ 3,198,847
Carrying amount at December 31, 2016	\$ 1,145,237	\$ 229,388	\$ 766,553	\$ 30,489	\$ 34,122	\$ 371,085	\$ 2,576,874

The above items of property, plant and equipment are depreciated on a straight-line basis over the following useful lives:

Buildings
Main structure	2-50 years
Facility	5-25 years
Machinery and equipment
Power equipment	3-15 years
Examination equipment	3-10 years
Computer equipment	3-10 years
Transportation equipment
Transportation equipment	3-5 years
Telecommunication equipment	3-10 years
Other equipment
Extinguishment equipment	5-8 years
Air condition and utilities equipment	3-10 years
Monitoring, office and other equipment	3-10 years

17. INVESTMENT PROPERTIES

For the Year Ended December 31, 2017 and 2016

	Land	Buildings	Total
Cost
Balance at December 31, 2017 and 2016	\$ 572,338	\$ 47,665	\$ 620,003
Accumulated depreciation and impairment
Balance at December 31, 2017 and 2016	\$ 8,825	\$ 47,665	\$ 56,490
Carrying amount at December 31, 2017 and 2016	\$ 563,513	\$ -	\$ 563,513

Buildings classified as investment properties are depreciated on a straight line basis over 50 years.

The Corporation participated in "Qianzhen Residential Building Project" conducted by the fellow subsidiary China Prosperity Development Corporation and signed land purchase agreement cost NT\$10,525 thousand in June 2015 and recognized as investment properties. The Corporation also signed land purchase agreement with its employees. According to the purchase agreement, land prices received from employees were deposited in Bank of Taiwan and recognized as other financial assets - noncurrent with contra other noncurrent liabilities.

As of December 31, 2017 and 2016, the fair value of investment properties was both NT\$863,606 thousand. The fair value was based on the appraisal value presented by independent qualified professional appraiser using Level 3 inputs and with reference to comparison of the similar transaction price in the market, and by income approach and land developing analysis approach. The significant and unobservable inputs included the rate of capitalization of return and related fee rates in March 2015 and December 2015.

All of the Corporation's investment properties are held under freehold interests.

Please refer to Note 28 for the lease transactions conducted with related party.

18. BORROWINGS

a. Short-term borrowings

	December 31
	2017	2016
Bank loans - interest at 0.7%-2.2% p.a. and 0.7% p.a. as of December 31, 2017 and 2016, respectively	\$ 1,818,000	\$ 660,000
Letters of credit borrowings - interest at 0.99%-1.1% p.a. and 1.2% p.a. as of December 31, 2017 and 2016, respectively	167,337	61,276
	\$ 1,985,337	\$ 721,276

b. Short-term bills payable

	December 31
	2017	2016
Commercial papers - interest at 0.898% p.a. and 0.898% p.a. as of December 31, 2017 and 2016, respectively Less: Unamortized discounts	\$ 920,000 -	\$ 620,000 -
	\$ 920,000	\$ 620,000

The above commercial papers were secured by Mega Bills Finance Corporation, International Bills Finance Corporation and China Bills Finance Corporation.

19. OTHER PAYABLES

	December 31
		2017		2016
Royalties (Note 14)	\$	550,946	\$	597,140
Salaries and incentive bonus		98,446		84,097
Employees' compensation and remuneration of directors and
supervisors		61,862		58,229
Purchase of equipment		22,430		44,174
Outsourced repair and construction		33,380		33,668
Dividend payable		4,678		4,627
Others (soil remediation expenses, freight, commission and
insurance)		58,350		78,093
	\$	830,092	\$	900,028

20. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation adopted a pension plan under the Labor Pension Act (the "LPA"), which is a state-managed defined contribution plan. Under the LPA, the Corporation makes monthly contributions to employees' individual pension accounts at 6% of monthly salaries and wages.

The employees of a subsidiary in China make contributions in accordance with the local regulations. The subsidiary is required to contribute a specified percentage of payroll costs to the government. The only obligation of the subsidiary in China with respect to the retirement benefit plan is to make the specified contributions.

b. Defined benefit plans

The defined benefit plan adopted by the Corporation in accordance with the Labor Standards Law (the "LSL") is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Corporation contributes amounts equal to 12% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee's name. Before the end of each year, the Corporation assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Corporation is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor ("the Bureau"); the Corporation has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Corporation and its subsidiaries' defined benefit plans were as follows:

	December 31
	2017	2016
Present value of defined benefit obligation Fair value of plan assets	\$ 329,933 (161,560)	\$ 306,771 (141,694)
Net defined benefit liability	\$ 168,373	\$ 165,077
Current (included in other payables) Noncurrent	\$ 1,611 166,762	\$ 1,455 163,622
	\$ 168,373	\$ 165,077

Movements in net defined benefit liability were as follows:

	Present Value of the Defined Benefit Obligation	Fair Value of the Plan Assets	Net Defined Benefit Liability
For the Year Ended December 31, 2017
Balance at January 1, 2017	\$ 306,771	\$ (141,694)	\$ 165,077
Service cost Current service cost Interest expense (income) Recognized in profit or loss	6,767 4,218 10,985	- (2,076) (2,076)	6,767 2,142 8,909
Remeasurement Return on plan assets (excluding amounts included in net interest)	-	670	670 (Continued)

	Present Value of the Defined Benefit Obligation	Fair Value of the Plan Assets	Net Defined Benefit Liability
Actuarial loss - changes in demographic assumptions Actuarial loss - changes in financial	\$ 1,570	\$ -	\$ 1,570
assumptions	4,902	-	4,902
Actuarial loss - experience adjustments Recognized in other comprehensive income	5,705 12,177	- 670	5,705 12,847
Contributions from the employer	-	(18,460)	(18,460)
Balance at December 31, 2017	\$ 329,933	\$ (161,560)	\$ 168,373
For the Year Ended December 31, 2016
Balance at January 1, 2016	\$ 279,816	\$ (128,723)	\$ 151,093
Service cost
Current service cost	6,444	-	6,444
Interest expense (income)	4,547	(2,228)	2,319
Recognized in profit or loss	10,991	(2,228)	8,763
Remeasurement
Return on plan assets (excluding amounts
included in net interest) Actuarial loss - changes in demographic	-	1,084	1,084
assumptions	2,545	-	2,545
Actuarial loss - changes in financial
assumptions	9,484	-	9,484
Actuarial loss - experience adjustments	8,733	-	8,733
Recognized in other comprehensive income	20,762	1,084	21,846
Contributions from the employer	-	(16,625)	(16,625)
Benefits paid	(4,798)	4,798	-
Balance at December 31, 2016	\$ 306,771	\$ (141,694)	\$ 165,077 (Concluded)

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

	For the Year Ended December 31
	2017	2016
Operating costs	\$ 6,236	\$ 6,028
Selling and marketing expenses	956	992
General and administrative expenses	864	867
Research and development expenses	853	876
	\$ 8,909	\$ 8,763

Through the defined benefit plans under the LSL, the Corporation is exposed to the following risks:

1) Investment risk

The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

2) Interest risk

A decrease in the government and corporate bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan's debt investments.

3) Salary risk

The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

	December 31
	2017	2016
Discount rate (%) Expected rate of salary increase (%)	1.25 3	1.375 3

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

	December 31
	2017	2016
Discount rate
0.25% increase	\$ (9,725)	\$ (9,508)
0.25% decrease	\$ 10,131	\$ 9,922
Expected rate of salary increase
0.25% increase	\$ 9,780	\$ 9,589
0.25% decrease	\$ (9,441)	\$ (9,240)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

	December 31
	2017	2016
The expected contributions to the plan for the next year	\$ 19,794	\$ 18,551
The average duration of the defined benefit obligation	12.4 years	13.1 years

21. EQUITY

a. Ordinary share capital

	December 31
	2017	2016
Number of shares authorized (in thousands) Shares authorized	300,000 \$ 3,000,000	300,000 \$ 3,000,000
Number of shares issued and fully paid (in thousands) Shares issued	236,904 \$ 2,369,044	236,904 \$ 2,369,044

Fully paid ordinary shares, which have a par value of NT\$10, carry one vote per share and the right to dividends.

b. Capital surplus

	December 31
	2017	2016
May be used to offset deficits, distribute cash or transfer to share capital (see note below)
Additional paid-in capital	\$ 218	\$ 218
Treasury share transactions	230,172	230,172
May be used to offset deficits
Share of change in equity of associates	1,750	1,727
Treasury share transactions	523,709	500,860
	\$ 755,849	\$ 732,977

Note: Such capital surplus may be used to offset a deficit; in addition, when the Corporation has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Corporation's capital surplus and once a year).

In 2009, CSC had transferred its treasury shares to its subsidiaries' employees. The Corporation recognized a compensation cost and capital surplus of NT\$161 thousand. In July 2011, CSC issued ordinary shares for cash capital. Under the Company Law, CSC should reserve 10% of the shares for its employees and subsidiaries. The Corporation recognized NT\$57 thousand of compensation cost and capital surplus.

c. Retained earnings and dividend policy

Under the dividend policy, where the Corporation made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Corporation's board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders' meeting for distribution of dividends and bonus to shareholders.

The Corporation is currently in a growing industry environment and the Corporation intends to take advantage of the economic environment to seek for a sustainable operation. The Corporation's dividend policy is to focus on dividend stability and growth by referring to future operating conditions; also, the Corporation should distribute not less than 50% of distributable earnings, and cash dividend may not be less than 50% of the amount distributed.

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Corporation's paid-in capital. Legal reserve may be used to offset deficit. If the Corporation has no deficit and the legal reserve has exceeded 25% of the Corporation's paid-in capital, the excess may be transferred to capital or distributed in cash.

Under Rule No. 1010012865, Rule No. 1010047490 issued by the FSC and the directive titled "Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs", the Corporation should appropriate or reverse a special reserve. For the subsequent decrease in the deduction amount to stockholders' equity, any special reserve appropriated may be reversed to the extent that the net debit balance reverses.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Corporation.

The appropriation of earnings for 2016 and 2015 had been approved in the shareholder's meeting in June 2017 and 2016, respectively. The appropriations and dividends per share were as follows:

					Dividend Per Share
	Appropriation of Earnings					(NT\$)
	For the Year Ended			For		the Year Ended
	December 31			December 31
	2016		2015		2016		2015
Legal reserve	\$ 77,839	\$	123,903
Reversal of special reserve	(91,543)		-
Cash dividends	1,066,070		1,066,070	\$	4.5	\$	4.5

The appropriation of earnings for 2017 had been proposed by the Corporation's board of directors in March 2018. The appropriations and dividends per share were as follows:

	Appropriation of Earnings	Dividends Per Share (NT\$)
Legal reserve	\$ 115,984
Appropriation of special reserve	11,390
Cash dividends	1,018,689	\$ 4.3

In addition, the Corporation's board of directors resolved to distribute cash from legal reserve of NT\$71,071 thousand, NT\$0.3 per share, total NT\$4.6 per share.

The appropriations of earnings for 2017 are subject to the resolution in the shareholders' meeting to be held in June 2018.

• d. Other equity items
• 1) Exchange differences on translating the financial statement of foreign operations

	For the Year Ended December 31
	2017	2016
Balance, beginning of year Exchange differences arising on translating foreign	\$ (972)	\$ 39,724
operations	(60,175)	(18,982) (Continued)

	For the Year Ended December 31
	2017	2016
Share of exchange difference of associates accounted for using the equity method	\$ (1,726)	\$ (21,714)
Balance, end of year	\$ (62,873)	\$ (972) (Concluded)

2) Unrealized gains and losses on available-for-sale financial assets

	For the Year Ended December 31
	2017	2016
Balance, beginning of year	\$ (75,083)	\$ (142,072)
Unrealized gains and losses on available-for-sale financial assets	958	26,868
Reclassified to profit or loss on disposal of available-for-sale financial assets	(16,587)	(115,936)
Share of unrealized gains and losses on available-for-sale financial assets of associates accounted for using the
equity method	(8,225)	156,057
Balance, end of year	\$ (98,937)	\$ (75,083)

3) The effective portion of gains and losses on hedging instruments in a cash flow hedge

	For the Year Ended December 31
	2017	2016
Balance, beginning of year	\$ (2,629)	\$ -
Fair value changes of hedging instrument	126	(3,196)
Income tax relating to fair value changes	(21)	543
Fair value changes of hedging instruments transferred to adjust carrying amount of hedged items	2,918	152
Income tax relating to amounts transferred to adjust carrying amount of hedged items	(496)	(26)
Share of fair value changes of hedging instrument of associates accounted for using the equity method	(71)	(102)
Balance, end of year	\$ (173)	\$ (2,629)

e. Non-controlling interests

	For the Year Ended December 31
	2017	2016
Balance, beginning of year Attributable to non-controlling interests:	\$ 330,555	\$ -
Net profit for the year Exchange difference arising on translating foreign operation Non-controlling interest arising from acquisition of	47,675 (26,577)	8,056 (11,901)
subsidiaries	-	334,400
Balance, end of year	\$ 351,653	\$ 330,555

f. Treasury shares

The Corporation's shares acquired and held by subsidiary - EWI for the purpose of investment accounted for as treasury shares were as follows (number of shares in thousands):

For the Year Ended December 31, 2017

Beginning of Year			Decrease During the Year			End of Year
Number of Shares Held	Carrying Amount	Number of Shares Held	Carrying Amount	Selling Price	Number of Shares Held	Carrying Amount	Market Price
5,078	\$ 125,656	-	\$ -	\$ -	5,078	\$ 125,656	\$ 647,386

For the Year Ended December 31, 2016

Beginning of Year			Decrease During the Year			End of Year
Number of Shares Held	Carrying Amount	Number of Shares Held	Carrying Amount	Selling Price	Number of Shares Held	Carrying Amount	Market Price
5,730	\$ 141,791	652	\$ 16,135	\$ 68,926	5,078	\$ 125,656	\$ 604,227

The Corporation's shares held by the subsidiaries are accounted for as treasury shares with all shareholders' rights, except the rights to participate in the Corporation's capital increase in cash and right to vote.

22. OPERATING REVENUES

	For the Year Ended December 31
		2017		2016
Revenue from the sale of goods	\$	6,044,850	\$	4,903,069
Revenue from the rendering of services		64,795		74,881
Dividends income		26,468		25,150
Gain on disposal of investments		16,409		105,169
Net gain on fair value change of financial assets classified as held for
trading		83,112		27,244
Share of the profit of associates		6,190		8,227
	\$	6,241,824	\$	5,143,740

23. PROFIT BEFORE INCOME TAX

Profit before income tax consisted of following items:

a. Other income

	For the Year Ended December 31
	2017	2016
Rental revenue (Note 28) Interest income	\$ 16,176 12,638	\$ 15,828 12,210
		(Continued)

	For the Year Ended December 31
	2017	2016
Dividend income Others	\$ 6,206 32,744	\$ 1,875 16,230
	\$ 67,764	\$ 46,143 (Concluded)

b. Other gains and losses

	For the Year Ended December 31
	2017	2016
Net foreign exchange loss Loss on disposal of property, plant and equipment Gain on disposal of investments Gain on fair value change of financial assets designated as at	\$ (55,180) (407) 178	\$ (8,856) (867) 10,767
FVTPL Others	93,514 (44,634)	13,835 (492)
	\$ (6,529)	\$ 14,387

The components of net foreign exchange loss were as follows:

	For the Year Ended December 31
	2017	2016
Foreign exchange gain Foreign exchange loss	\$ 16,118 (71,298)	\$ 44,367 (53,223)
Net foreign exchange loss	\$ (55,180)	\$ (8,856)

c. Finance costs

For the Year Ended December 31
2017	2016
\$ 13,736	\$ 6,800

d. Depreciation and amortization

	For the Year Ended December 31
	2017	2016
Property, plant and equipment Long-term prepayments for lease	\$ 264,945 8,500	\$ 268,573 8,596
	\$ 273,445	\$ 277,169
An analysis of depreciation by function Operating costs Operating expenses	\$ 241,003 23,942	\$ 245,023 23,550
	\$ 264,945	\$ 268,573 (Continued)

		For the Year Ended December 31
		2017	2016
	An analysis of amortization by function Operating costs	\$ 8,500	\$ 8,596 (Concluded)
e.	Employee benefits expense
		For the Year Ended December 31 2017	2016
	Short-term employee benefits Salaries Labor and health insurance Others	\$ 385,036 20,594 11,578 417,208	\$ 326,708 17,582 9,869 354,159
	Post-employment benefits (Note 20) Defined contribution plans Defined benefit plans	6,048 8,909 14,957 \$ 432,165	5,302 8,763 14,065 \$ 368,224
	An analysis by function Operating costs Operating expenses	\$ 260,087 172,078 \$ 432,165	\$ 232,570 135,654 \$ 368,224

Employees' compensation and remuneration of directors and supervisors for the years ended December 31, 2017 and 2016

The Articles of Incorporation of the Corporation stipulated the Corporation to distribute employees' compensation and remuneration of directors and supervisors at the rates no less than 0.1% and no higher than 1%, respectively, of net profit before income tax, employees' compensation, and remuneration of directors and supervisors.

The employees' compensation and remuneration of directors and supervisors for the years ended December 31, 2017 and 2016 which have been approved by the Corporation's board of directors in March 2018 and 2017, respectively, were as follows:

		Cash
	For the Year Ended December 31
	2017	2016
Employees' compensation Remuneration of directors and supervisors	\$ 51,623 10,325	\$ 50,968 10,193

Material differences between such estimated amounts and the amounts resolved by the board of directors on or before the date the annual consolidated financial statements are authorized for issue are adjusted in the year the bonus and remuneration were recognized. If there is a change in the proposed amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in accounting estimate.

The appropriations of employees' compensation and remuneration of directors and supervisors for 2016 and 2015 having been resolved by the board of directors in March 2017 and 2016 and consolidated financial statements for 2016 and 2015 as follows:

	For the Year Ended December 31, 2016			For the Year Ended December 31, 2015
	Employees' Compensation	Remuneration of Directors and Supervisors	Employees' Compensation	Remuneration of Directors and Supervisors
The board of directors approved	\$	\$	\$	\$
amounts	50,968	10,193	55,757	11,151
Consolidated financial	\$	\$	\$	\$
statements amounts	48,941	9,788	55,732	11,146

Above items were recognized in profit and loss in 2017 and 2016.

Information on employees' compensation and remuneration of directors and supervisors resolved by the Corporation's board of directors is available at the Market Observation Post System website of the Taiwan Stock Exchange.

24. INCOME TAX

a. Income tax recognized in profit or loss

The major components of income tax expense were as follows:

For the Year Ended December 31
2017	2016
	\$ 165,108
	2,799
(7,549)	7,592
18,678	(3,792)
\$ 157,655	\$ 171,707
	\$ 146,526 -

The reconciliation of accounting profit and income tax expense was as follows:

	For the Year Ended December 31
		2017		2016
Profit before income tax	\$	1,365,116	\$	1,210,667
Income tax expense at the statutory rate	\$	211,556	\$	218,099
Tax-exempt income		(13,500)		(14,000)
Deductible income in determining taxable income		(32,852)		(51,235)
Additional income tax under the Alternative Minimum Tax Act		-		8,452
				(Continued)

	For the Year Ended December 31
	2017		2016
Income tax on unappropriated earnings Adjustments for prior years	\$	- \$ (7,549)	2,799 7,592
	\$ 157,655	\$	171,707 (Concluded)

The Corporation and its subsidiaries in the ROC are subject to the income tax rate of 17% under the Income Tax Law of the ROC; while the subsidiaries in China are subject to income tax rate of 25%. Tax rates applied by other subsidiaries operating in other jurisdictions are based on the tax laws in those jurisdictions.

In February 2018, it was announced by the President that the Income Tax Act in the ROC was amended and, starting from 2018, the corporate income tax rate will be adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%. Deferred tax assets and deferred tax liabilities recognized as at December 31, 2017 are expected to be adjusted and would increase by NT\$8,776 thousand and NT\$2,413 thousand, respectively, in 2018.

As the status of 2018 appropriation of earnings is uncertain, the potential income tax consequences of 2017 unappropriated earnings were not reliably determinable.

b. Income tax expense (benefit) recognized in other comprehensive income (loss)

	For the Year Ended December 31
	2017	2016
Recognized in other comprehensive income (loss):
Remeasurement on defined benefit pension plan	\$ (2,184)	\$ (3,714)
Fair value changes of cash flow hedges	21	(543)
Fair value changes of hedging instruments in cash flow hedges
transferred to adjust carrying amounts of hedged items	496	26
	\$ (1,667)	\$ (4,231)

c. Current tax liabilities

		December 31
	2017	2016
Current tax liabilities Income tax payable	\$ 69,590	\$ 68,084

d. Deferred tax assets and liabilities

Movements of deferred tax assets and liabilities were as follows:

For the Year Ended December 31, 2017

	Balance, Beginning of Year	Recognized in Profit or Loss	Recognized in Other Comprehensive Income	Balance, End of Year
Deferred tax assets
Temporary differences
Defined benefit liabilities	\$ 28,063	\$ (1,624)	\$ 2,184	\$ 28,623
Unrealized loss on inventories Difference between tax reporting and financial reporting - depreciation	15,434	(601)	-	14,833
methods Unrealized losses from	6,551	(275)	-	6,276
impairment loss	4,299	(4,299)	-	-
Foreign investment loss Unrealized losses from cash	2,631	(2,631)	-	-
flow hedges	517	-	(517)	-
	\$ 57,495	\$ (9,430)	\$ 1,667	\$ 49,732
Deferred tax liabilities
Temporary differences
Unrealized exchange gains, net	\$ 4,425	\$ (2,027)	\$ -	\$ 2,398
Foreign investment gain	-	11,275	-	11,275
	\$ 4,425	\$ 9,248	\$ -	\$ 13,673

For the Year Ended December 31, 2016

	Balance, Beginning of Year	Recognized in Profit or Loss	Recognized in Other Comprehensive Income	Balance, End of Year
Deferred tax assets
Temporary differences
Defined benefit liabilities	\$ 25,686	\$ (1,337)	\$ 3,714	\$ 28,063
Unrealized losses on inventories	15,434	-	-	15,434
Difference between tax reporting and financial reporting - depreciation
methods	6,796	(245)	-	6,551
Foreign investment loss Unrealized losses from	2,379	252	-	2,631
impairment loss Unrealized losses from cash	-	4,299	-	4,299
flow hedges	-	-	517	517
	\$ 50,295	\$ 2,969	\$ 4,231	\$ 57,495
Deferred tax liabilities
Temporary differences
Unrealized exchange gains, net	\$ 5,248	\$ (823)	\$ -	\$ 4,425

e. The aggregate amount of temporary differences of investments for which deferred tax liabilities have not been recognized

The taxable temporary differences of investments in subsidiaries for which no deferred tax liabilities have been recognized were both NT\$295,253 thousand as of December 31, 2017 and 2016, respectively.

f. Integrated income tax

	December 31
	2017	2016
Unappropriated earnings
Unappropriated earnings generated on and after January 1,
1998	Note	\$ 1,069,083
Shareholder-imputed credit account ("ICA")	Note	\$ 124,778
		For the Year Ended December 31
	2017	2016
		(Actual)
Creditable ratio for distribution of earnings (%)	Note	18.93

Note: Since the amended Income Tax Act announced in February 2018 abolished the imputation tax system, related information for 2017 is not applicable.

g. Income tax assessments

The Corporation's income tax returns through 2013 and the subsidiary EWI income tax returns through 2015 have been assessed by the tax authorities.

25. EARNINGS PER SHARE

The net profit and weighted average number of ordinary shares outstanding used in the computation of earnings per share were as follows:

Net profit for the year

	For the Year Ended December 31
	2017	2016
Net profit attributable to owners of the Corporation	\$ 1,159,836	\$ 1,030,904

Weighted average number of ordinary shares outstanding (in thousand shares)

		For the Year Ended December 31
	2017	2016
Weighted average number of ordinary shares outstanding Less: Number of treasury shares acquired by subsidiaries Weighted average number of ordinary shares used in computation of	236,904 5,078	236,904 5,112
basic earnings per share	231,826	231,792 (Continued)

	For the Year Ended December 31
	2017	2016
Plus: Effect of dilutive potential ordinary shares - employees' compensation	494	513
Weighted average number of ordinary shares used in the computation of diluted earnings per share	232,320	232,305 (Concluded)

Since the Corporation is allowed to settle compensation paid to employees by cash or shares, the Corporation assumed that the entire amount of the compensation will be settled in shares and the resulting potential shares are included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the shares have a dilutive effect. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

26. CAPITAL MANAGEMENT

The capital management of the Corporation and its subsidiaries is aimed at ensuring effective use of capital and ensuring a smooth operation and ensuring optimized debt and equity balance. The overall strategy of the Corporation and its subsidiaries have not significantly changed over the years. The capital structure of the Corporation and its subsidiaries consist of net liabilities and equity without any need for complying with other external capital requirements. The Corporation and its subsidiaries review capital structure on a quarterly basis, including the consideration of capital costs and related risks. Currently, the equity in the capital structure is greater than liabilities and it will be used to pay for dividends or debts; also, the Corporation and its subsidiaries have invested in financial instruments as part of capital and fund management.

27. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

Financial assets that have material difference between carrying amount and fair value.

	December 31
		2017		2016
	Carrying Amount	Fair Value	Carrying Amount	Fair Value
Financial assets
Held-to-maturity Financial assets	\$ 102,360	\$ 81,292	\$ 110,924	\$ 85,740

b. Fair value of financial instruments that are measured at fair value on a recurring basis

1) Fair value hierarchy

	Level 1	Level 2	Level 3	Total
December 31, 2017
Financial assets measured at fair value through profit or loss
Mutual funds Domestic quoted shares Foreign quoted shares	\$ 1,605,864 562,508 40,898	\$ - - -	\$ - - -	\$ 1,605,864 562,508 40,898
	\$ 2,209,270	\$ -	\$ -	\$ 2,209,270
Available-for-sale financial assets
Domestic quoted shares Emerging market shares Domestic unquoted shares	\$ 154,945 - -	\$ - - -	\$ - 16,327 56,321	\$ 154,945 16,327 56,321
	\$ 154,945	\$ -	\$ 72,648	\$ 227,593
December 31, 2016
Financial assets measured at fair value through profit or loss
Mutual funds	\$ 292,942	\$ -	\$ -	\$ 292,942
Domestic quoted shares	473,852	-	-	473,852
	\$ 766,794	\$ -	\$ -	\$ 766,794
Available-for-sale financial assets
Domestic quoted shares	\$ 190,044	\$ -	\$ -	\$ 190,044
Emerging market shares Domestic unquoted shares	- -	- -	19,386 58,292	19,386 58,292
	\$ 190,044	\$ -	\$ 77,678	\$ 262,722

There were no transfers between Level 1 and Level 2 for the years ended December 31, 2017 and 2016.

2) Reconciliation of Level 3 fair value measurements of financial assets

		Available-for-Sale Financial Assets Investments in Equity Instruments With No Active Market Price For the Year Ended December 31
	2017	2016
Balance, beginning of year Recognized in other comprehensive loss Transfer out Disposal Capital reduction	\$ 77,678 (659) - (1,379) (2,992)	\$ 394,166 (14,809) (297,922) - (3,757)
Balance, end of year	\$ 72,648	\$ 77,678

All gains and losses included in other comprehensive income were related to quoted shares held at the balance sheet date and were recognized as changes in unrealized gain or loss on available-for-sale financial assets.

• 3) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value measurement
• a) The fair value of emerging stocks was based on the closing price adjusted for liquidity risk premium.
• b) The fair value of unquoted stocks was based on the current net value.
• c. Categories of financial instruments

	December 31
	2017	2016
Financial assets
Measured at fair value through profit or loss
Designated as at fair value through profit or loss	\$ 1,497,762	\$ 329,430
Held for trading	711,508	437,364
Available-for-sale financial assets (including noncurrent)	227,593	267,722
Held-to-maturity investments	102,360	110,924
Loans and receivables 1)	1,713,882	2,478,363
Financial liabilities
Measured at amortized cost 2)	4,008,752	2,447,908

• 1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, other financial assets (including noncurrent), debt investments with no active market, notes and accounts receivable (including related parties), other receivables and refundable deposits.
• 2) The balances included financial liabilities measured at amortized cost, which comprise short-term borrowings, short-term bills payable, accounts payable (including related parties) and other payables.

d. Financial risk management objectives and policies

The Corporation and its subsidiaries' major financial instruments include equity and debt investments, accounts receivable, accounts payable, short-term borrowings and short-term bills payable. The Corporation and its subsidiaries' Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Corporation and its subsidiaries through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Corporation and its subsidiaries sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Corporation and its subsidiaries' policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. The Corporation and its subsidiaries did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

1) Market risk

The Corporation and its subsidiaries' activities exposed them primarily to the financial risks of changes in foreign currency exchange rates and interest rates. There had been no change to the Corporation and its subsidiaries' exposure to market risks or the manner in which these risks were managed and measured.

a) Foreign currency risk

The Corporation and its subsidiaries had sales in foreign currencies, which were exposed to foreign currency risk. Approximately 34% of the Corporation and its subsidiaries' sales revenues were denominated in currencies other than the functional currency. Exchange rate exposures were managed within approved policy parameters utilizing forward foreign exchange contracts or were mitigated by future receivables and payables denominated in the same foreign currency.

The carrying amounts of the Corporation and its subsidiaries foreign currency denominated monetary assets and monetary liabilities at the balance sheet date are set out in Note 30.

Sensitivity analysis

The Corporation and its subsidiaries were mainly exposed to the currencies USD and RMB. The following table details the Corporation and its subsidiaries' sensitivity to a 3% increase and decrease in the functional currency against the relevant foreign currencies. The sensitivity rate of 3% represents management's assessment of the reasonably possible change in foreign exchange rates.

The sensitivity analysis includes only the outstanding foreign monetary items at each balance sheet date. Scenario 1 in the following table indicates the profit and loss of the Corporation and its subsidiaries when the functional currency against the USD or RMB appreciated by 3%. Scenario 2 in the following table indicates the profit or loss of the Corporation and its subsidiaries when the functional currency against the USD or RMB depreciated by 3%.

	USD Effect (Note)		RMB Effect (Note)
		For the Year Ended December 31		For the Year Ended December 31
	2017	2016	2017	2016
Profit or loss in Scenario 1	\$ (13,538)	\$ (31,562)	\$ (5,049)	\$ (4,109)
Profit or loss in Scenario 2	13,538	31,562	5,049	4,109

Note: It was mainly derived from the cash and cash equivalents, receivables, debt investment with no active market, payables, and other payables denominated in foreign currency without cash flow hedging arranged at each balance sheet date by the Corporation and its subsidiaries.

Changes in the exchange rate sensitivity of the Corporation and its subsidiaries in 2017 mainly due to the decrease of USD and the increase of RMB assets. The management believes that the sensitivity analysis is not representative of the inherent risk of exchange rate since the foreign currency risk exposure at balance sheet date does not reflect the interim risk exposure; also, the sales denominated in USD and RMB will be affected by customer orders and shipping schedules; furthermore, the RMB exchange rate will vary depending on the assets investment position.

b) Interest rate risk

The loans of the Corporation and its subsidiaries are mainly less than twelve months short-term loans with an interest rate based on the NTD market interest rates; therefore, the interest rate sensitivity was low. In addition, the cash and cash equivalents of the Corporation and its subsidiaries were sufficient to settle bank loans at any time; therefore, interest rate risk was immaterial to the Corporation and its subsidiaries.

The carrying amounts of the Corporation and its subsidiaries' financial assets and financial liabilities with exposure to interest rates at the balance sheet date were as follows:

	December 31
	2017	2016
Cash flow interest rate risk Financial assets Financial liabilities	\$ 422,067 -	\$ 268,761 61,276

c) Other price risk

The Corporation and its subsidiaries are exposed to equity price risk through their investments in quoted shares, mutual funds, and emerging shares; the risk is managed by maintaining a portfolio of investments with different risks. The equity price risk of the Corporation and its subsidiaries was primarily concentrated on the share and fund market in Taiwan and it was evaluated by the closing price of the equity securities and net value of the mutual funds on a monthly basis.

Sensitivity analysis

The sensitivity analysis measures the exposure to equity price risk at the balance sheet date. Considering the market price fluctuation of the Corporation's main investment targets, the fluctuation of 6% was used for the sensitivity analysis of equity securities.

If equity prices had been 6% higher/lower for the years ended December 31, 2017 and 2016, respectively, the pre-tax profit for the years ended December 31, 2017 and 2016 would have been higher/lower by NT\$132,556 thousand and NT\$46,008 thousand, respectively, as a result of the fair value changes of financial assets at fair value through profit or loss, and the pre-tax other comprehensive income for the year ended December 31, 2017 and 2016 would have been higher/lower by NT\$9,297 thousand and NT\$11,403 thousand, respectively, as a result of the changes in fair value of available-for-sale financial assets.

2) Credit risk

Credit risk refers to the risk that counterparty will default resulting in financial loss to the Corporation and its subsidiaries. As at the balance sheet date, the Corporation and its subsidiaries' maximum exposure to credit risk is the carrying amount of accounts receivables on the consolidated balance sheets. The main customers of the Corporation and its subsidiaries were creditworthy. Annual credit investigation of the credit status of the customers is conducted and a credit report is issued. The business unit uses the credit report as basis for the rating of the customers and the credit line granted. In addition, the credit rating and customer credit status are compiled in a weekly report for use as reference of the business department. If necessary, the customers will be requested to provide collaterals or to pay cash for each transaction. The business department also understands the credit status of customers through external credit investigation and industry reports. The credit risk was immaterial to Corporation and its subsidiaries.

The Corporation and its subsidiaries' concentrations of credit risk in total of notes receivable and accounts receivable were as follows:

	December 31
	2017	2016
Customer A	\$ 91,644	\$ 79,428
Customer B	76,954	82,766
Customer C	42,155	57,682
	\$ 210,753	\$ 219,876

3) Liquidity risk

The Corporation and its subsidiaries have supported business operation through management and by maintaining sufficient cash and cash equivalents or easily realizable financial instruments. In addition, the Corporation and its subsidiaries signed line of credit contracts with financial institutions for a ready source of funds to support the business operation of the Corporation and its subsidiaries.

The equity of the Corporation and its subsidiaries is far greater than its liabilities; also, the bank credit lines have available unused amount; therefore, there is no liquidity risk.

The Corporation and its subsidiaries rely on bank borrowings as a significant source of liquidity. As of December 31, 2017 and 2016, the Corporation and its subsidiaries had available unutilized short-term bank loan facilities in the amounts of NT\$3.5 billion thousand and NT\$4.1 billion thousand, respectively.

28. TRANSACTIONS WITH RELATED PARTIES

Related Party Name Relationship with the Corporation China Steel Corporation The parent entity of the Corporation China Synthetic Rubber Corporation (CSRC) The key management of the Corporation Dragon Steel Corporation (DSC) Fellow subsidiaries China Steel Structure Corporation (CSSC) Fellow subsidiaries Chung Hung Steel Corporation Fellow subsidiaries China Steel Machinery Corporation Fellow subsidiaries CHC Resources Corporation Fellow subsidiaries Himag Magnetic Corporation Fellow subsidiaries Gau Ruel Investment Corporation Fellow subsidiaries China Steel Global Trading Corporation Fellow subsidiaries Steel Castle Technology Corporation Fellow subsidiaries Hung Li Steel Corporation Fellow subsidiaries Union Steel Development Corp. Fellow subsidiaries China Steel Security Corporation Fellow subsidiaries United Steel Engineering & Construction Corp. (VSEC) Fellow subsidiaries China Steel Precision Materials Corporation (CSPM) Fellow subsidiaries Chian Ecotek Corporation (CEC) Fellow subsidiaries Formosa Ha Tinh (Cayman) Limited (Formosa Ha Tinh (Cayman)) Other related parties Formosa Ha Tinh Steel Corporation (Formosa Ha Tinh) Other related parties

Details of transactions between the Corporation and its subsidiaries and other related parties were as follows:

a. Operating revenues

		For the Year Ended December 31
Account Items	Related Parties Types	2017	2016
Revenue from sales of goods	CSRC Parent entity Fellow subsidiaries	\$ 1,011,566 15,554 12,331	\$ 803,058 13,777 12,148
		\$ 1,039,451	\$ 828,983
Revenue from the rendering of services	Parent entity	\$ 64,553	\$ 74,881

Part of sales to the parent entity and fellow subsidiaries were charged at the cost plus additional percentage; sales to others were charged in accordance with the agreed pricing formula. Sales referred to above except for revenue from the rendering of services from the parent entity, did not have similar transactions for comparison; but not significantly different from regular trading.

b. Purchase of goods

		For the Year Ended December 31
	Related Parties Types	2017	2016
Parent entity		\$ 1,992,196	\$ 1,671,747
			(Continued)

		For the Year Ended December 31
	Related Parties Types	2017	2016
Fellow subsidiaries DSC Others		\$ 866,532 2,226 868,758	\$ 611,022 1,577 612,599
Formosa Ha Tinh		354,702	61,104
		\$ 3,215,656	\$ 2,345,450 (Concluded)

The Corporation and its parent entity had purchase contracts for light oil products and coal tar signed in March 2013 and July 2010 for a period of 5 years, respectively. In addition, the Corporation and a fellow subsidiary had a purchase contract for light oil products and coal tar signed in May 2008 for a period of 5 years; also, the contracts would be extended automatically for 5 years each time upon maturity if there was no objection raised by either party. The purchases referred to above were paid with an issued letter of credit at sight; also, any price adjustment according to market price would be settled separately.

In addition, the Corporation signed a contract with the parent entity in January 2008 for fine coke processing for a 5-year period; the contract would be extended automatically for 5 years each time upon maturity if there was no objection raised by either party.

A subsidiary signed a purchase contract with other related parties in May 2016 for light oil products and coal tar for a 15-year period; the contract will be extended subject to the mutual agreement upon its expiration. The purchases referred to in this paragraph were paid with a telegraphic transfer and an issued letter of credit at sight; also, any price adjustment according to the market price will be settled separately.

c. Receivables from related parties

		December 31
Account Items	Related Parties Types	2017	2016
Accounts receivable - related parties	Parent entity Fellow subsidiaries CSRC	\$ 8,748 3,297 91,644 \$ 103,689	\$ 8,132 2,065 79,428 \$ 89,625
Other receivables	Parent entity Fellow subsidiaries Other related parties Formosa Ha Tinh (Cayman) Others	\$ 84,162 740 208,320 41	\$ 21,767 476 225,750 -
		\$ 293,263	\$ 247,993

No guarantee had been received for receivables from related parties. For the years ended December 31, 2017 and 2016, no impairment loss was recognized on receivables from related parties.

d. Payables to related parties

		December 31
Account Items	Related Parties Types	2017	2016
Accounts payable - related parties	Parent entity Fellow subsidiaries	\$ 228,663 148	\$ 183,869 267
		\$ 228,811	\$ 184,136
Other payables	Parent entity Fellow subsidiaries Other related parties	\$ 14,084 402	\$ 9,732 10,153
	Formosa Ha Tinh	550,946	597,140
		\$ 565,432	\$ 617,025

The outstanding accounts payable to related parties were unsecured.

e. Acquisitions of property, plant and equipment

		December 31
Related Parties Types / Name	2017	2016
Parent entity Subsidiaries		\$ 9,500	\$ -
CSSC		127,860	-
CEC		54,077	20,958
VSEC		48,265	35,473
Others		13,946	1,880
		244,148	58,311
		\$ 253,648	\$ 58,311

f. Long-term prepayments for lease

		December 31
	Related Parties Types	2017	2016
CSPM		\$ 26,659	\$ 28,648

A subsidiary prepaid plant rent to fellow subsidiary for a contract period of 45 years (ending in January 2059) and the annual rent amounted to NT\$3,778 thousand and NT\$4,179 thousand for the years ended December 31, 2017 and 2016, respectively.

f. Other related party transactions

1) Leased land and factories

The Corporation leased the current factory land from the parent entity under three contracts. The annual rent amount was calculated according to 3% of the announced total present value or 6% of the announced total land value. The three contracts were signed for periods of 5 years (ending in December 2020), 3 years (ending in December 2020), and 10 years (ending in June 2019). Rent was paid once every six months; the annual rent expense was both NT\$16,355 thousand for the years ended December 31, 2017 and 2016.

The Corporation leased the coke plant from the parent entity for periods of 3 years (ending in December 2020) with the rental paid once every six months; the annual rent expense was NT\$2,156 thousand and NT\$2,223 thousand for the years ended December 31, 2017 and 2016, respectively.

The Corporation and fellow subsidiary had signed a land and warehouse lease contract for a period ended August 2018; the annual rent expense was NT\$2,173 thousand and NT\$1,603 thousand for the years ended December 31, 2017 and 2016, respectively.

The Corporation and other non-related parties had no similar transactions available for comparison.

2) Leased office building

The Corporation had leased office buildings and office from the parent entity for a period up to October 2019 and March 2017, respectively; The lease of office already expired and no longer renewed. The annual rent expense was NT\$6,300 thousand and NT\$6,358 thousand in 2017 and 2016, respectively. The rent mentioned above was based on the negotiation between the two parties in the lease contract, and the payments follow the terms of the contract. There was no significant difference in the rent and in the terms between the above mentioned contract and the contracts signed with unrelated parties.

3) Rent Revenue

The Corporation and the parent entity had signed a land lease contract (located in Siaogang District, Kaohsiung City). The annual rent amount was calculated according to 3% of the announced total present value with the rent advanced every six months and for a period up to December 2020. The annual rent revenue (included in non-operating income - other income) were both NT\$12,317 thousand for the years ended December 31, 2017 and 2016.

4) Public fluid and reservoir

The Corporation's factory located inside the parent entity's plant; the primary energy needed for production was supplied by the parent entity. The Corporation paid the parent entity on a monthly basis expense for public fluid and reservoir, including electricity, wastewater treatment, waste gas treatment, consumption of steam, and coke ovens, in accordance with the market price or cost plus percentage. The expense mentioned above amounted to NT\$359,606 thousand and NT\$332,439 thousand for the years ended December 31, 2017 and 2016, respectively. The Corporation and other non-related parties had no similar transactions available for comparison.

5) Technical service fees

The Corporation commissioned the parent entity to provide technical services, including Isotropic graphite block material analysis, Ultra capacitor activated carbon electrode development, and the assessment of soft asphalt applied to fuel. The fees for technical services amounted to NT\$18,717 thousand and NT\$11,194 thousand for the years ended December 31, 2017 and 2016, respectively.

g. Compensation of key management personnel

	For the Year Ended December 31
	2017	2016
Short-term employee benefits Post-employment benefits	\$ 48,143 965	\$ 42,135 451
	\$ 49,108	\$ 42,586

The compensation of the directors and the other management was determined by the Remuneration Committee in accordance with the personal performance evaluation and market trends.

29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACTUAL COMMITMENTS

The Corporation and its subsidiaries' significant commitments and contingencies as of December 31, 2017 were as follows:

• a. Unused balance of the letter of credit issued by the Corporation for the purchase of raw materials and commodities in the amount of NT\$665,976 thousand.
• b. Property, plant and equipment construction contract signed for total amount of NT\$1,054,432 thousand, within which about NT\$363,044 thousand were not yet completed.

30. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the Corporation and its subsidiaries and the exchange rate between foreign currencies and respective functional currencies were disclosed.

The significant financial assets and liabilities denominated in foreign currencies were as follows:

	Foreign Currencies (In Thousands)		Exchange Rate	Carrying Amount (In Thousands of New Taiwan Dollars)
December 31, 2017
Monetary financial assets
USD	\$ 24,319	29.76	(USD:NTD)	\$ 723,730
RMB	28,793	4.565	(RMB:NTD)	131,442
RMB	9,345	0.1534	(RMB:USD)	42,658
Non-monetary financial assets Designated as at fair value through profit or loss
NTD	5,970	0.0336	(NTD:USD)	5,970
RMB	10,543	4.565	(RMB:NTD)	48,131
USD	35,054	29.76	(USD:NTD)	1,043,199
JPY	154,800	0.0089	(JPY:USD)	40,898
Monetary financial liabilities
USD	9,156	29.76	(USD:NTD)	272,474
RMB	1,267	4.565	(USD:RMB)	5,786
December 31, 2016
Monetary financial assets
USD	40,174	32.25	(USD:NTD)	1,295,608
RMB	20,719	4.617	(RMB:NTD)	95,662
RMB	9,081	0.1432	(RMB:USD)	41,926

(Continued)

	Foreign Currencies (In Thousands)		Exchange Rate		Carrying Amount (In Thousands of New Taiwan Dollars)
Non-monetary financial assets
Designated as at fair value through
profit or loss
NTD	\$	36,488	0.031	(NTD:USD)	\$	36,488
USD		3,001	32.25	(USD:NTD)		96,789
Monetary financial liabilities
USD		7,247	32.25	(USD:NTD)		233,701
USD		305	6.983	(USD:RMB)		9,851
RMB		135	4.617	(RMB:NTD)		623
						(Concluded)

For the years ended December 31, 2017 and 2016, realized and unrealized net foreign exchange gains and losses were losses NT\$55,180 thousand and losses NT\$8,856 thousand. It is impractical to disclose net foreign exchange gains or losses by each significant foreign currency due to the variety of the foreign currency transaction and functional currencies of the Corporation and its subsidiaries.

31. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Reported segments of the Corporation and its subsidiaries were as follows:

• a. CSCC / CCSNM Production and marketing of chemical products.
• b. EGI / CSCCC Trade of chemical products.
• c. EWI / CSCM Investments.
• d. Department income and operating results

The Corporation and its subsidiaries have the reporting segments analyzed as follows:

	CSCC / CCSCM	EGI/ CSCC (Cayman)	Ever Wealthy / CSCM	Adjustment and write-off	Consolidated
For the year ended December 31, 2017
Revenues from external customers Inter segment revenues	\$ 5,803,403 164,638	\$ 306,241 174,993	\$ 132,180 24,400	\$ - (364,031)	\$ 6,241,824 -
Segment revenues	\$ 5,968,041	\$ 481,234	\$ 156,580	\$ (364,031)	\$ 6,241,824
Segment income Interest income Share of profits of associates Other income Interest expense Other gains and losses Profit before income tax Income tax expense	\$ 1,020,693 6,781 299,222 51,435 (13,642) (47,244) 1,317,245 155,858	\$ 84,975 3,448 - 12,543 (137) 41,183 142,012 -	\$ 156,791 2,622 - 3,904 (170) (468) 162,679 1,797	\$ (13,195) (213) (230,819) (12,756) 213 - (256,770) -	\$ 1,249,264 12,638 68,403 55,126 (13,736) (6,529) 1,365,166 157,655
Net profit for the year	\$ 1,161,387	\$ 142,012	\$ 160,882	\$ (256,770)	\$ 1,207,511

(Continued)

	CSCC / CCSCM	EGI/ CSCC (Cayman)	Ever Wealthy / CSCM	Adjustment and write-off	Consolidated
For the year ended December 31, 2016
Revenues from external customers Inter segment revenue	\$ 4,629,091 349,113	\$ 348,859 -	\$ 165,790 58,106	\$ - (407,219)	\$ 5,143,740 -
Segment revenues	\$ 4,978,204	\$ 348,859	\$ 223,896	\$ (407,219)	\$ 5,143,740
Segment income Interest income Share of profits of associates Other income Interest expense Other gains and losses Profit before income tax Income tax expense	\$ 921,065 4,511 202,924 42,211 (6,973) 12,077 1,175,815 162,445	\$ 11,303 3,818 - 209 - 5,955 21,285 -	\$ 199,698 4,110 - 3,265 (56) (3,645) 203,372 9,262	\$ (28,820) (229) (149,233) (11,752) 229 - (189,805) -	\$ 1,103,246 12,210 53,691 33,933 (6,800) 14,387 1,210,667 171,707
Net profit for the year	\$ 1,013,370	\$ 21,285	\$ 194,110	\$ (189,805)	\$ 1,038,960 (Concluded)

Department interests refers to the profits earned by each department, excluding the administrative cost of the headquarters to be amortized and remuneration of directors and supervisors, rent income, interest income, loss from disposal of property, plant, and equipment, profit from disposal of noncurrent assets held for sale, profit from disposal of investment, net foreign currency exchange gain (loss), financial instruments valuation gains and losses, interest expense and income tax expenses, etc. These measurements and amount are provided to the chief operating decision-maker for allocating resources to each segment and for assessing their performance.

For the purpose of monitoring segment performance and allocating resources to each segment:

• 1) All assets, except investments in associates under equity method, other financial assets, and current and deferred income tax assets, are allocated to the reporting segments. The common assets of the reporting segments are allocated proportionally based on income generated by each reporting segment.
• 2) All liabilities, except loans and deferred income tax liabilities, are allocated to the reporting segments. The common liabilities of the reporting segments are allocated proportionally based on the assets of each reporting segment.
• e. Segment total assets and liabilities

	December 31
	2017	2016
Segment assets
Chemicals segment
Production and sales	\$ 8,004,551	\$ 6,416,376
Trading	1,458,234	1,510,592
Investment segment	1,772,752	1,634,794
	\$ 11,235,537	\$ 9,561,762
		(Continued)

	December 31
	2017	2016
Segment liabilities
Chemicals segment Production and sales Trading Investment segment	\$ 3,737,426 574,464 50,457	\$ 2,084,084 638,113 8,905
	\$ 4,362,347	\$ 2,731,102 (Concluded)

f. Revenue from major products and services

The main products and services revenue of the Corporation and its subsidiaries are analyzed as follows:

	For the Year Ended December 31
	2017	2016
Chemical product production and sale income	\$ 5,377,833	\$ 4,583,495
Trading income	667,017	319,574
Labor service income	64,795	74,881
Investment income	132,179	165,790
	\$ 6,241,824	\$ 5,143,740

g. Geographical information

The Corporation and its subsidiaries are operating business mainly in Taiwan and mainland China.

The revenue of the Corporation and its subsidiaries generated from external customers classified by the country and noncurrent assets classified by country were as follows:

		Revenue from External Customers
		For the Year Ended	Noncurrent Assets December 31
		December 31
	2017	2016	2017	2016
Taiwan	\$ 3,760,827	\$ 3,308,155	\$ 4,155,703	\$ 3,237,204
China	1,060,560	824,555	78,074	77,541
Australia	778,041	421,233	-	-
Others	642,396	589,797	552,941	599,205
	\$ 6,241,824	\$ 5,143,740	\$ 4,786,718	\$ 3,913,950

Noncurrent assets exclude financial instruments, investments accounted for using equity method, and deferred income tax assets.

h. Information about major customers

The external customers that accounted for more than 10% of the consolidated operating income of the Corporation and its subsidiaries in 2017 and 2016 were customers of CSCC (Chemicals segment). The main customers were as follows:

		For the year Ended December 31
		2017	2016
	Amount	Percentage of Operating Income (%)	Amount	Percentage of Operating Income (%)
Company A	\$ 1,011,566	16	\$ 803,058	16
Company B	778,041	12	421,233	8
Company C	644,037	10	532,071	10
Company D	560,051	9	503,318	10
	\$ 2,993,695	47	\$ 2,259,680	44