CyberPower - Annual Report 2018 | FinancialReports.eu

Cyber Power Systems, Inc.

Financial Statements for the Years Ended December 31, 2018 and 2017 and Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Cyber Power Systems, Inc.

Opinion

We have audited the accompanying financial statements of Cyber Power Systems, Inc. (the “Company”), which comprise the balance sheets as of December 31, 2018 and 2017, the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and other regulations.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matter of the financial statements for the year ended December 31, 2018 of Cyber Power Systems, Inc. is stated as follows:

Assessment of Inventory

As of December 31, 2018, the balance of inventory amounted to $1,490,180 thousand. The Company sells its products to the American and European regions with focus on the retail market. The Company gives reasonable credit terms to its customers, thus, the net amount of inventory accounted for 17% of the Company’s total asset value. Since the assessment of impairment loss on obsolete stock is subject to management’s judgment, it has been identified as the key audit matter for this year.

Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. When the net realizable value is lower than the cost of inventory, the Company recognizes the loss on the write-down; besides, the loss on obsolete inventory is estimated according to the aging and the physical conditions of the inventory.

We paid particular attention to the loss due to RMA (Return Materials Authorization), because it takes a relatively longer time to sell these returned goods.

We assessed the effectiveness of the following internal control operations. We understood:

Whether the loss on inventory impairment was recognized regularly according to the Company’s policy.
Whether the assessment was reviewed by responsible personnel.

We selected samples from the inventory list on the balance sheet date and verified that the stated value does not exceed the net realizable value. We also analyzed the inventory turnover to assess the reasonableness of the policy. Besides, we verified the inventory aging of selected samples and recalculated the estimated amount of impairment.

Refer to Note 4(e) - Summary of Significant Accounting Policies, Note 5 - Critical Accounting Judgments and Key Sources of Estimation Uncertainty and Note 10 Inventories for other related explanations.

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

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

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

Those charged with governance, including the audit supervisors, are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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

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

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

We also provide those charged with governance with a statement that we have complied with the 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 financial statements for the year ended December 31, 2018 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 Chin-Yen Wang and Chin-Chuan Shih.

Deloitte & Touche Taipei, Taiwan Republic of China March 25, 2019

Notice to Readers

The accompanying financial statements are intended only to present the 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 financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying 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 financial statements shall prevail.

CYBER POWER SYSTEMS, INC.

BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 3, 4, 6 and 30) Notes receivable from unrelated parties (Notes 3, 4, 9 and 30) Trade receivables from unrelated parties (Notes 3, 4, 9 and 30) Trade receivables from related parties (Notes 3, 4, 9, 30 and 31) Other receivables from unrelated parties (Notes 3, 9 and 30) Other receivables from related parties (Notes 3, 9, 30 and 31) Inventories (Notes 4, 5 and 10) Other current assets (Notes 15 and 31) Other current financial assets (Notes 30 and 32) Total current assets NON-CURRENT ASSETS Financial assets at amortized cost - non-current (Notes 3, 4, 7 and 30) Debt investments with no active market - non-current (Notes 4, 8 and 30) Investments accounted for using the equity method (Notes 4, 11 and 31) Property, plant and equipment (Notes 4, 12, 31 and 32) Investment properties (Notes 4, 13 and 32) Other intangible assets (Notes 4 and 14) Deferred tax assets (Notes 4 and 24) Other non-current assets (Notes 8 and 15) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 16, 30 and 32) Trade payables to unrelated parties (Notes 17 and 30) Trade payables to related parties (Notes 17, 30 and 31) Other payables (Notes 18 and 30) Current tax liabilities (Notes 4 and 24) Provisions - current (Notes 4 and 19) Other current liabilities (Note 18) Current portion of long-term borrowings (Notes 16, 30 and 32) Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 16, 30 and 32) Deferred tax liabilities (Notes 4 and 24) Net defined benefit liabilities - non-current (Notes 4 and 20) Other non-current liabilities (Notes 18 and 30) Total non-current liabilities Total liabilities EQUITY (Note 21) Share capital Ordinary shares Capital surplus Share premium Employee share options Retained earnings Legal reserve Special reserve Unappropriated earnings Other equity Exchange differences on translating foreign operations Total equity TOTAL		2018 Amount % $ 1,270,520 15 620 - 725,619 8 1,203,628 14 5,400 - 95,576 1 1,490,180 17 36,419 - 43,000 1 4,870,962 56 243 - - - 953,992 11 1,292,252 15 1,459,775 17 2,800 - 102,355 1 773 - 3,812,190 44 $ 8,683,152 100 $ 1,520,000 17 659,279 8 428,725 5 346,984 4 88,234 1 73,017 1 7,909 - 420,000 5 3,544,148 41 680,000 8 6,043 - 12,048 - 6,939 - 705,030 8 4,249,178 49 809,510 9 1,359,259 16 38,983 - 556,276 7 83,219 1 1,661,815 19 (75,088) (1) 4,433,974 51 $ 8,683,152 100		2017
				Amount % $ 1,149,859 14 3,735 - 655,368 8 1,499,802 18 4,216 - 100,754 1 905,528 11 45,176 - 548,920 6 4,913,358 58 - - 243 - 663,189 8 1,218,144 15 1,529,445 18 2,800 - 116,948 1 1,073 - 3,531,842 42 $ 8,445,200 100 $ 1,660,000 20 689,013 8 335,522 4 241,622 3 95,343 1 58,335 1 5,412 - - - 3,085,247 37 1,100,000 13 1,709 - 10,479 - 1,809 - 1,113,997 13 4,199,244 50 809,510 10 1,359,259 16 38,983 - 498,751 6 43,440 - 1,579,232 19 (83,219) (1) 4,245,956 50 $ 8,445,200 100

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

CYBER POWER SYSTEMS, INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 4, 22 and 31) OPERATING COSTS (Notes 10, 23 and 31) GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES REALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 4, 20, 23, 28 and 31) Selling and marketing expenses General and administrative expenses Research and development expenses Expected credit loss Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Notes 4, 23 and 31) Other income Other gains and losses Finance costs Share of profit of subsidiaries, associates and joint ventures Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 24) NET PROFIT		2018 Amount % $ 5,637,670 100 4,315,669 77 1,322,001 23 (274,742) (5) 376,374 7 1,423,633 25 363,788 6 233,201 4 317,708 6 (48) - 914,649 16 508,984 9 46,805 1 113,346 2 (27,191) - 79,652 1 212,612 4 721,596 13 (136,853) (2) 584,743 11		2017
				Amount % $ 5,873,261 100 4,264,259 73 1,609,002 27 (376,374) (6) 390,214 7 1,622,842 28 295,296 5 188,900 3 273,168 5 - - 757,364 13 865,478 15 31,712 1 (156,233) (3) (13,695) - 7,418 - (130,798) (2) 734,680 13 (159,423) (3) 575,257 10 (Continued)

CYBER POWER SYSTEMS, INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Note 20) Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using the equity method Income tax relating to items that will not be reclassified subsequently to profit or loss (Note 24) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (Note 25) From continuing operations Basic Diluted		2018 Amount % $ (1,569) - 902 - 566 - (101) - 8,131 - 8,030 - $ 592,773 11 $ 7.22 $ 7.17		2017
				Amount % $ (1,741) - (31) - 296 - (1,476) - (39,779) (1) (41,255) (1) $ 534,002 9 $ 7.11 $ 7.06



		$		$

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

(Concluded)

CYBER POWER SYSTEMS, INC.

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

BALANCE AT JANUARY 1, 2017 Appropriation of 2016 earnings Legal reserve Special reserve Cash dividends distributed by the Company Actual disposals or acquisitions of interests in subsidiaries Net profit for the year ended December 31, 2017 Other comprehensive loss for the year ended December 31, 2017, net of income tax Total comprehensive income (loss) for the year ended December 31, 2017 Issue of ordinary shares under employee share options BALANCE AT DECEMBER 31, 2017 Appropriation of 2017 earnings Legal reserve Special reserve Cash dividends distributed by the Company Net profit for the year ended December 31, 2018 Other comprehensive loss for the year ended December 31, 2018, net of income tax Total comprehensive income (loss) for the year ended December 31, 2018 BALANCE AT DECEMBER 31, 2018		Share Capital Capital Ordinary Shares Collected in Advance $ 809,025 $ 255 - - - - - - - - - - - - - - 485 (255) 809,510 - - - - - - - - - - - - - $ 809,510 $ -	CapitalSurplus Share Premium Employee Share Options $ 1,358,307 $ 39,370 - - - - - - - - - - - - - - 952 (387) 1,359,259 38,983 - - - - - - - - - - - - $ 1,359,259 $ 38,983	Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $ 425,803 $ - $ 1,513,020 72,948 - (72,948) - 43,440 (43,440) - - (384,517) - - (6,664) - - 575,257 - - (1,476) - - 573,781 - - - 498,751 43,440 1,579,232 57,525 - (57,525) - 39,779 (39,779) - - (404,755) - - 584,743 - - (101) - - 584,642 $ 556,276 $ 83,219 $ 1,661,815	Other Equity Exchange Differences on Translating Foreign Operations $ (43,440) - - - - - (39,779) (39,779) - (83,219) - - - - 8,131 8,131 $ (75,088)	Total Equity $ 4,102,340 - - (384,517) (6,664) 575,257 (41,255) 534,002 795 4,245,956 - - (404,755) 584,743 8,030 592,773 $ 4,433,974
		Ordinary Shares $ 809,025 - - - - - - - 485 809,510 - - - - - - $ 809,510

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

CYBER POWER SYSTEMS, INC.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments to: Depreciation expenses Expected credit loss reversed on trade receivables Impairment loss reversed on trade receivables Finance costs Interest income Share of profit of subsidiaries, associates and joint ventures Loss on disposal of property, plant and equipment Recognition of provisions Write-down of inventories (reversal of write-down of inventories) Unrealized gain on transactions with subsidiaries, associates and joint ventures Realized gain on transactions with subsidiaries, associates and joint ventures Net (gain) loss on foreign currency exchange Changes in operating assets and liabilities Notes receivable Trade receivables Other receivables Inventories Other current assets Other items of operating activities Trade payables Other payables Other current liabilities Cash generated from operations Interest received Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of debt investments with no active market Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in refundable deposits Net cash outflow on acquisition of subsidiaries Decrease (increase) in other financial assets Net cash generated from (used in) investing activities	2018 $ 721,596 39,563 (48) - 27,191 (22,398) (79,652) 1,998 14,682 8,350 274,742 (376,374) (32,771) 3,115 226,360 3,614 (593,002) 8,566 (84) 66,979 105,733 2,092 400,252 22,412 (27,023) (124,469) 271,172 - (46,029) 30 300 (100,486) 505,920 359,735	2017 $ 734,680 24,914 - (89) 13,695 (13,838) (7,418) 6 15,218 (26,838) 376,374 (390,214) 62,084 (1,751) (206,000) 22,795 (176,434) 3,969 252 (34,457) 30,732 (2,378) 425,302 13,827 (12,390) (162,497) 264,242 (243) (2,648,176) - 46 (37,964) (505,920) (3,192,257) (Continued)

CYBER POWER SYSTEMS, INC.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from long-term borrowings Proceeds from guarantee deposits received Dividends paid to owners of the Company Proceeds from employee share options Net cash (used in) generated from financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2018 $ - (140,000) - 5,130 (404,755) - (539,625) 29,379 120,661 1,149,859 $ 1,270,520	2017 $ 1,660,000 - 1,100,000 1,809 (384,517) 795 2,378,087 (87,105) (637,033) 1,786,892 $ 1,149,859

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

(Concluded)

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NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CYBER POWER SYSTEMS, INC.

1. GENERAL INFORMATION

Cyber Power Systems, Inc. (the “Company”) was established in the Republic of China (ROC) in 1997. The Company mainly manufactures and sells uninterruptible power systems (UPS).

The Company’s shares have been listed on the Taiwan Stock Exchange (“TWSE”) since December 2009.

The financial statements are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Company’s board of directors on March 21, 2019.

3. APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS 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 Financial Supervisory Commission (FSC)

Except for the following, whenever applied, 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 would not have any material impact on the Company’s accounting policies:

1) IFRS 9 “Financial Instruments” and related amendments

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as of January 1, 2018, the Company has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

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The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Company’s financial assets and financial liabilities as of January 1, 2018.

				Measurement Category	Measurement Category	Measurement Category	Measurement Category		Carrying Amount	Carrying Amount	Carrying Amount
Financial Assets				IAS 39		IFRS 9			IAS 39		IFRS 9	Remark
Cash and cash equivalents		Loans and receivables			Amortized		cost	$	1,149,859		$ 1,149,859
Time deposits with original		Loans and receivables			Amortized		cost			243	243
maturities of more than 3	months
Notes receivable, trade receivables		Loans and receivables			Amortized		cost		2,260,839		2,260,839	*
and other receivables
Other financial assets		Loans and receivables			Amortized		cost		548,920		548,920
		IAS 39						IFRS 9		Retained
		Carrying						Carrying		Earnings	Other Equity
		Amount as	of	Reclassifi-	Remeasure-			Amount as of		Effect on	Effect on
Financial Assets	January 1, 2018			cations		ments		January 1, 2018	January 1, 2018		January 1, 2018	Remark
Amortized cost
Add: Reclassification from loans and
receivables (IAS 39)		$	-	$ 3,959,861	$		-		$	-	$ -
			-	3,959,861			-	$ 3,959,861		-	-
		$	-	$ 3,959,861	$		-	$ 3,959,861	$	-	$ -

Notes receivable, trade receivables and other receivables that were previously classified as loans and receivables under IAS 39 are classified as at amortized cost with an assessment of expected credit losses under IFRS 9.
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 supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for related accounting policies.

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 Company regularly sells 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 Company provides service-type warranties in addition to the assurance that products comply with agreed-upon specifications. IFRS 15 requires such services to be considered as a performance obligation. Any transaction price allocated to a service-type warranty is recognized as revenue, and the related costs are recognized when the warranty service is performed. Prior to the application of IFRS 15, the transaction price of the aforementioned transaction was fully recognized as revenue when the products were sold, and a corresponding provision was recognized for the expected warranty cost.

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. Prior to the application of IFRS 15, receivables were recognized or deferred revenue was reduced when revenue was recognized for the relevant contract under IAS 18.

For a sale with a right of return, the Company recognizes a refund liability (i.e. other liabilities) and a right to recover a product (i.e. other assets) when recognizing revenue. Prior to the application of IFRS 15, return provisions and inventories - return receivables were recognized when recognizing revenue.

The Company elected to retrospectively apply IFRS 15 to contracts that were not complete as of January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1, 2018.

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The Company elected to retrospectively apply IFRS15 on January 1, 2018 and management believes that there is no material impact on assets, liabilities and equity.

b. 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 by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations Effective Date (the “New IFRSs”) Announced by IASB (Note 1) Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019 Amendments to IFRS 9 “Prepayment Features with Negative January 1, 2019 (Note 2) Compensation” IFRS 16 “Leases” January 1, 2019 Amendments to IAS 19 “Plan Amendment, Curtailment or January 1, 2019 (Note 3) Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint January 1, 2019 Ventures” 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: The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 、 IFRIC 4 and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Company will elect to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Company as lessee

Upon initial application of IFRS 16, the Company will recognize right-of-use assets, or investment properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for all leases on the balance sheets except for those whose payments under low-value asset and short-term leases will be recognized as expenses on a straight-line basis. On the statements of comprehensive income, the Company will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts, including property interest qualified as investment properties, are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating

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activities on the statements of cash flows. Leased assets and finance lease payables are recognized for contracts classified as finance leases.

The Company anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets will be measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payment. The Company will apply IAS 36 to all right-of-use assets.

The Company expects to apply the following practical expedients:

1) The Company will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
2) The Company will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.
3) The Company will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.
4) The Company will use hindsight, such as in determining lease terms, to measure lease liabilities.

For leases currently classified as finance leases under IAS 17, the carrying amounts of right-of-use assets and lease liabilities on January 1, 2019 will be determined as at the carrying amounts of the respective leased assets and finance lease payables as of December 31, 2018.

The Company as lessor

The Company will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

Anticipated impact on assets, liabilities and equity

	Carrying	Carrying	Carrying	Adjustments	Adjustments	Adjusted
	Amount as of			Arising from		Carrying
	December		31,		Initial	Amount as of
		2018		Application		January 1, 2019
Right-of-use assets	$		-	$	5,264	$ 5,264
Total effect on assets	$		-	$	5,264	$ 5,264
Lease liabilities - current	$		-	$	3,805	$ 3,805
Lease liabilities - non-current			-		1,459	1,459
Total effect on liabilities	$		-	$	5,264	$ 5,264

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Except for the above impacts, as of the date the consolidated financial statements were authorized for issue, the Company continues assessing other possible impacts that the application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Company’s financial position and financial performance and will disclose these other impacts when the assessment is completed.

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

New IFRSs Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 and IAS 8 “Definition of Material”	Effective Date Announced by IASB (Note 1)
	January 1, 2020 (Note 2) To be determined by IASB January 1, 2021 January 1, 2020 (Note 3)

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 Company shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
Note 3: The Company shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

Except for the above impact, as of the date the financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

b. Basis of preparation

The financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, 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.
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When preparing these parent company only financial statements, the Company used the equity method to account for its investment in subsidiaries, associates and joint ventures. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same as the amounts attributable to the owner of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatments between the parent company only basis and consolidated basis were made to investments accounted for using the equity method, the share of profit or loss of subsidiaries, associates and joint ventures, the share of other comprehensive income of subsidiaries, associates and joint ventures and related equity items, as appropriate, in these parent company only financial statements.

c. Classification of current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorized for issue; and
3) Liabilities for which the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Assets and liabilities that are not classified as current are classified as non-current.

d. Foreign currencies

In preparing the Company’s financial statements, transactions in currencies other than the Company’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise.

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 included in profit or loss for the period except for exchange differences 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 translated using the exchange rate at the date of the transaction.

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For the purpose of presenting the Company’s financial statements, the functional currencies of the Company’s foreign operations (including subsidiaries, associates, joint ventures and branches in other countries that use currencies which are different from the currency of the Company) are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and 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.

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising from the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognized in other comprehensive income.

e. Inventories

Inventories consist of raw materials, supplies, semi-finished goods, finished goods and work in process and 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. The 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 on the balance sheet date.

f. Investments in subsidiaries

The Company uses the equity method to account for its investments in subsidiaries.

A subsidiary is an entity (including structured entities) that is controlled by the Company.

Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary. The Company also recognizes the changes in the Company’s share of equity of subsidiaries attributable to the Company.

Changes in the Company’s ownership interest in a subsidiary that do not result in the Company losing control of the subsidiary are accounted for as equity transactions. The Company recognizes directly in equity any difference between the carrying amount of the investment and the fair value of the consideration paid or received.

When the Company’s share of losses of a subsidiary exceeds its interest in that subsidiary (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 Company’s net investment in the subsidiary), the Company continues recognizing its share of further losses.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the financial statements of the invested company as a whole. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Company recognizes the reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

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Profits or losses resulting from downstream transactions are eliminated in full only in the parent company only financial statements. Profits and losses resulting from upstream transactions and transactions between subsidiaries are recognized only in the parent company’s financial statements only to the extent of interests in the subsidiaries that are not related to the Company.

g. Property, plant and equipment

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

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates 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.

h. Investment properties

Investment properties are properties held to earn rental and/or for capital appreciation.

Investment properties are initially measured 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.

i. Intangible assets

Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

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

j. Impairment of tangible and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets, to determine whether there is any indication that those assets have suffered any 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 Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

The 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.

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k. Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes 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 issuance 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

2018

Financial assets are classified as financial assets at amortized cost

Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

i. The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
ii. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, notes receivables, trade receivables and other receivables at amortized cost, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

2017

Financial assets are classified as loans and receivables.

Loans and receivables (including trade receivables, cash and cash equivalents, debt investments with no active market and other financial assets) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

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b) Impairment of financial assets

2018

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables).

The Company always recognizes lifetime expected credit losses (ECLs) for trade receivables, discounts and loans and lease receivables. For all other financial instruments, the Company recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

2017

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

For financial assets measured at amortized cost, such as trade receivables, such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, and as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

For financial assets measured 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.

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The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When trade receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectable trade receivables that are written off against the allowance account.

c) Derecognition of financial assets

The Company derecognizes 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.

Before 2018, 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 which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

2) 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 a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

l. Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

m. Revenue recognition

2018

The Company identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

For contracts where the period between the date on which the Company transfers a promised good or service to a customer and the date on which the customer pays for that good or service is one year or less, the Company does not adjust the promised amount of consideration for the effects of a significant financing component.

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1) Revenue from the sale of goods

Revenue from the sale of goods comes from sales of uninterruptible power systems. Sales of uninterruptible power systems are recognized as revenue when the goods are delivered to the customer’s specific location because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence. Trade receivables are recognized concurrently.

The Company does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

2) Interest income

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company 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.

2017

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. Allowances for sales returns and liabilities 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

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

a) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
b) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
c) The amount of revenue can be measured reliably;
d) It is probable that the economic benefits associated with the transaction will flow to the Company; and
e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Company does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials’ ownership.

2) Interest income

n. 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.

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1) The Company as lessor

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

2) The Company as lessee

Operating lease payments are recognized as expenses on a straight-line basis over the lease term.

o. Borrowing costs

Borrowing costs directly attributable to an acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as 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 that which is stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

p. Employee benefits

1) Short-term employee benefits

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

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under 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 liabilities (assets) are recognized as employee benefits expense in the period in which 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 it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

q. Employee share options

The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Company’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vested immediately.

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When restricted shares for employees are issued, other equity - unearned employee benefits is recognized on the grant date, with a corresponding adjustment to capital surplus - restricted shares for employees.

At the end of each reporting period, the Company revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options and capital surplus - restricted shares for employees.

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 unappropriated earnings is provided for as income tax in the year the shareholders approve to retain 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 recognized for taxable temporary differences associated with investments in subsidiaries, except where the Company is 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 the end of each reporting period 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 assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period 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 liabilities are settled or the assets are realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred taxes for the year

Current and deferred taxes 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 and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively.

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5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company’s 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.

Write-down of Inventories

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

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalents (investments with original maturities of less than 3 months) Time deposits		December 31	December 31
		2018 $ 845 993,240 276,435 $ 1,270,520	2017 $ 982 613,197 535,680 $ 1,149,859

The market rate intervals of bank deposits at the end of the reporting period were as follows:

Time deposits FINANCIAL ASSETS AT AMORTIZED COST - 2018 Non-current Domestic investments Time deposits with original maturities of more than 3 months	December 31
	2018 2017 2.73%-3.40% 1.68%-2.30% December 31, 2018 $ 243

7. FINANCIAL ASSETS AT AMORTIZED COST - 2018

The interest rate for time deposits with original maturities of more than 3 months was 1.09% as at the end of the reporting period. The time deposits were classified as debt investments with no active market under IAS 39. Refer to Notes 3 and 8 for information relating to their reclassification and comparative information for 2017.

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8. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

	December 31,	December 31,
		2017
Non-current
Time deposits with original maturities of more than 3 months	$	243

The market interest rate of time deposits with original maturities of more than 3 months was 1.09% as of December 31, 2017.

9. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

Notes receivable At amortized cost Gross carrying amount Less: Allowance for impairment loss Notes receivable - operating Trade receivables At amortized cost Gross carrying amount Gross carrying amount from related parties Less: Allowance for impairment loss Other receivables Loan receivables - floating rate Tax refund receivables Others		December 31	December 31
		2018 $ 620 - $ 620 $ 620 $ 725,937 1,203,628 (318) $ 1,929,247 $ 93,203 2,208 5,565 $ 100,976	2017 $ 3,735 - $ 3,735 $ 3,735 $ 655,734 1,499,802 (366) $ 2,155,170 $ 100,248 3,036 1,686 $ 104,970

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a. Trade receivables

In 2018

At amortized cost

The Company’s sales agreements typically provide payment terms. No interest was charged on trade receivables. The Company uses other publicly available financial information or its own trading records to rate its major customers. In order to minimize credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Company’s credit risk was significantly reduced.

The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date.

The Company writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, when the debtor has been placed under liquidation, or when the trade receivables are days past due. For trade receivables that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Company’s provision matrix.

December 31, 2018

Expected credit loss rate Gross carrying amount Loss allowance (lifetime ECL) Amortized cost	Less than 90 Days Credit Classification 0%-1% $ 638,026 (261) $ 637,765	91 to 180 Days Credit Classification 0%-5% $ 87,798 (51) $ 87,747	181 to 360 Days Credit Classification 5%-100% $ 113 (6) $ 107	Over 1 Year Credit Classification 100% $ - - $ -	Total $ 725,937 (318) $ 725,619

The above aging schedule was based on the invoice date.

The movements of the loss allowance of trade receivables were as follows:

Balance at January 1, 2018 per IFRS 9 Less: Expected credit loss recovered Balance at December 31, 2018	2018 $ 366 (48) $ 318

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The movements of the loss allowance of overdue receivables were as follows:

			2018
Balance	at January 1, 2018 per IFRS 9	$	2,618
Foreign	exchange translation gains and losses		84
Balance	at December 31, 2018	$	2,702

Overdue receivables were classified under other assets and an allowance for doubtful accounts was recognized.

In 2017

The Company’s sales agreements typically provide payment terms. No interest was charged on trade receivables. In determining the recoverability of a trade receivable, the Company considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. The Company recognized an allowance for impairment loss of 100% against all receivables past due over 1 year because historical experience was that receivables that were past due beyond 1 year were not recoverable. Allowance for impairment loss was recognized against trade receivables past due less than 1 year based on the estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

For some of the trade receivable balances that were past due at the end of the reporting period, the Company 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 Company did not hold any collateral or other credit enhancements over these balances nor did it have a legal right to offset against any amounts owed by the Company to the counterparty.

The aging of receivables was as follows:

	December 31,
	2017
Less than 90 days	$ 1,489,575
91-180 days	660,993
181-360 days	4,968
Over 360 days	-
	$ 2,155,536

The above aging schedule was based on the invoice date.

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

	December 31,	December 31,
		2017
Less than 90 days	$	21,989
91-180 days		84,591
181-360 days		5
Over 360 days		-
	$	106,585

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The above aging schedule was based on the invoice date.

The movements of the allowance for doubtful trade receivables were as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ - $ 455 Less: Impairment losses reversed - (89) Balance at December 31, 2017 $ - $ 366	Total $ 455 (89) $ 366

The movements of the allowance for overdue receivables were as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ 2,837 $ - Less: Foreign exchange translation gains (219) - Balance at December 31, 2017 $ 2,618 $ -	Total $ 2,837 (219) $ 2,618

The Company recognized the accumulated impairment loss on trade receivables amounting to $2,618 thousand as of December 31, 2017. This amount was mainly related to customers that were experiencing severe financial difficulties. The Company did not hold any collateral over these balances.

b. Other receivables

Loans receivable - floating rate comprised of short-term financing provided to Best Top (Shenzhen), Inc., Cyber Power Systems (India) Pvt. Ltd., CyberPower Systems GmbH and Cyber Power Systems S.A. DE C.V., refer to Note 31 for the details.

10. INVENTORIES

Finished goods Semi-finished goods Work in process Raw materials		December 31	December 31
		2018 $ 725,357 388,206 12,547 364,070 $ 1,490,180	2017 $ 526,164 59,768 1,771 317,825 $ 905,528

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 were $4,315,669 thousand and $4,264,259 thousand, respectively.

The cost of goods sold included inventory write-downs of $8,350 and the reversal of inventory write-downs of $26,838 thousand for the years ended December 31, 2018 and 2017. The reversals of previous write-downs for the year ended December 31, 2017 resulted from increased selling prices in certain markets.

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11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Name of Subsidiaries Unlisted companies Cyber Power Systems (USA), Inc. Broad Win International Investment Co., Ltd. Fast Wind International Limited Cliquefie Co., Ltd. Cyber Power Systems Manufacturing, Inc.		December 31	December 31
		2018 $ 264,238 528,309 150,063 317 11,065 $ 953,992	2017 $ 91,454 452,637 118,189 909 - $ 663,189

As the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by the Company were as follows:

Name of Subsidiaries Cyber Power Systems (USA), Inc. Broad Win International Investment Co., Ltd. Fast Wind International Limited Cliquefie Co., Ltd. Cyber Power Systems Manufacturing, Inc.	December 31
	2018 2017 100% 100% 100% 100% 100% 100% 95% 95% 100% -

For disclosures on Cyber Power Systems Manufacturing, Inc., refer Note 11 to the Company’s 2018 consolidated financial statements.

Refer to Note 35 Table 5 for the details of the subsidiaries indirectly held by the Company.

The investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2018 and 2017 were based on the subsidiaries’ financial statements audited by the auditors for the same years.

12. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2018 Additions Disposals Reclassification Balance at December 31, 2018 Accumulated depreciation Balance at January 1, 2018 Depreciation expense Disposals Reclassification Balance at December 31, 2018 Carrying amounts at December 31, 2018 Cost Balance at January 1, 2017 Additions Disposals Reclassification Balance at December 31, 2017	Freehold Land $ 776,909 - - 38,705 $ 815,614 $ - - - - $ - $ 815,614 $ 79,636 - - 697,273 $ 776,909	Buildings $ 415,850 20,563 (14,462 ) 56,958 $ 478,909 $ 32,422 13,652 (13,735 ) 502 $ 32,841 $ 446,068 $ 47,857 230 - 367,763 $ 415,850	Machinery Equipment $ 41,011 6,970 (74 ) - $ 47,907 $ 36,556 2,856 (74 ) - $ 39,338 $ 8,569 $ 42,809 2,117 (3,915 ) - $ 41,011	Transportation Equipment $ 672 - (672 ) - $ - $ 672 - (672 ) - $ - $ - $ 672 - - - $ 672	Office Equipment $ 50,287 11,192 (16,065 ) - $ 45,414 $ 42,199 6,276 (15,889 ) - $ 32,586 $ 12,828 $ 46,628 4,451 (792 ) - $ 50,287	Leasehold Improvements $ 6,846 - (5,924 ) - $ 922 $ 5,279 206 (4,800 ) - $ 685 $ 237 $ 6,375 471 - - $ 6,846	Other Equipment i $ 159,373 7,304 (11,972 ) - $ 154,705 $ 152,207 5,533 (11,971 ) - $ 145,769 $ 8,936 $ 155,069 4,304 - - $ 159,373	Construction- n-progress and Ready for inspection Total $ 36,531 $ 1,487,479 - 46,029 - (49,169 ) (36,531) 59,132 $ - $ 1,543,471 $ - $ 269,335 - 28,523 - (47,141 ) - 502 $ - $ 251,219 $ - $ 1,292,252 $ - $ 379,046 36,531 48,104 - (4,707 ) - 1,065,036 $ 36,531 $ 1,487,479 (Continued)

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Accumulated depreciation Balance at January 1, 2017 Depreciation expense Disposals Balance at December 31, 2017 Carrying amounts at December 31, 2017	Freehold Land $ - - - $ - $ 776,909	Buildings $ 27,135 5,287 - $ 32,422 $ 383,428	Machinery Equipment $ 38,430 2,041 (3,915) $ 36,556 $ 4,455	Transportation Equipment $ 670 2 - $ 672 $ -	Office Equipment $ 38,426 4,559 (786) $ 42,199 $ 8,088	Leasehold Improvements $ 3,938 1,341 - $ 5,279 $ 1,567	Other Equipment i $ 146,114 6,093 - $ 152,207 $ 7,166	Construction- n-progress and Ready for inspection Total $ - $ 254,713 - 19,323 - (4,701) $ - $ 269,335 $ 36,531 $ 1,218,144 (Concluded)

The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings	3-47 years
Machinery equipment	3-4 years
Transportation equipment	3 years
Office equipment	3-6 years
Leasehold improvements	2-5 years
Other equipment	3 years

The material components of buildings primarily include office and interior construction which are depreciated on a straight-line basis over their estimated useful lives of 5-47 years.

All of the Company’s property, plant and equipment are held under freehold interests. Property, plant and equipment pledged as collateral for bank borrowings are set out in Note 32.

13. INVESTMENT PROPERTIES

Cost Balance at January 1, 2018 Additions Transferred to property, plant and equipment Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Depreciation expenses Transferred to property, plant and equipment Balance at December 31, 2018 Carrying amount at December 31, 2018	Completed Investment Properties $ 1,535,036 - (59,132) $ 1,475,904 $ (5,591) (11,040) 502 $ (16,129) $ 1,459,775 (Continued)

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Completed Investment Properties

Cost Balance at January 1, 2017 Additions Reclassification Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Depreciation expenses Balance at December 31, 2017 Carrying amount at December 31, 2017	$ - 332 1,534,704 $ 1,535,036 $ - (5,591) $ (5,591) $ 1,529,445 (Concluded)

The investment properties held by the Company are depreciated using the straight line method over their estimated useful lives of 47 years.

The fair values of the Company’s investment properties as of December 31, 2018 and 2017 were $1,591,121 thousand and $1,663,111 thousand. Management of the Company used the valuation model that market participants would use in determining the fair value. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

All of the Company’s investment properties are held under freehold interests. The investment properties pledged as collateral for bank borrowings are set out in Note 32.

14. OTHER INTANGIBLE ASSETS

Cost Balance at January 1, 2017 Additions Balance at December 31, 2017 Additions Balance at December 31, 2018 Accumulated amortization and impairment Balance at January 1, 2017 Amortization expense Balance at December 31, 2017 Amortization expense Balance at December 31, 2018	Amount $ 2,800 -
	2,800 -
	$ 2,800
	$ - -
	- -
	$ -

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Other intangible assets are considered to have an indefinite useful life. It will not be amortized until its useful life is determined to be finite. Instead it will be tested for impairment annually and whenever there is an indication that it may be impaired.

15. OTHER ASSETS

Current Prepayments Others Non-current Overdue receivables Allowance for impairment loss - overdue receivables Refundable deposits		December	31
		2018 $ 18,739 17,680 $ 36,419 $ 2,702 (2,702) 773 $ 773	2017 $ 25,947 19,229 $ 45,176 $ 2,618 (2,618) 1,073 $ 1,073

16. BORROWINGS

a. Short-term borrowings

Unsecured borrowings Line of credit borrowings Secured borrowings (Note 32) Bank loans		December 31	December 31
		2018 $ 1,520,000 - $ 1,520,000	2017 $ 1,200,000 460,000 $ 1,660,000

The range of weighted average effective interest rates on bank loans was 0.85%-1.17% and 0.80%-1% per annum as of December 31, 2018 and 2017, respectively.

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b. Long-term borrowings

Secured borrowings (Note 32) Fubon Bank (1) Unsecured borrowings KGI Bank (2) Less: Current portions		December 31	December 31
		2018 $ 800,000 300,000 (420,000) $ 680,000	2017 $ 800,000 300,000 - $ 1,100,000

1) As of December 31, 2018 and 2017, the weighted average effective interest rate of the bank borrowings secured by the Company’s freehold land and buildings (see Note 32) was both 1.2% per annum, and the borrowing is repayable by April 7, 2024.
2) During 2017, the Company acquired new bank borrowing facilities in the amount of $300,000 thousand, with a floating rates of 0.99% to 1.04% per annum. Interest is paid monthly, and the principal will be repayable by October 2019.

17. TRADE PAYABLES

Trade payables Operating		December 31	December 31
		2018 $ 1,088,004	2017 $ 1,024,535

The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

18. OTHER LIABILITIES

Current Other payables Payables for employees’ compensation and remuneration of directors and supervisors Payables for salaries and bonuses Payables for export (import) fees and freight Others		December 31	December 31
		2018 $ 46,600 75,118 46,969 178,297 $ 346,984	2017 $ 49,253 65,608 51,591 75,170 $ 241,622 (Continued)

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Other liabilities Advance receipts Receipts under custody Non-current Other liabilities Guarantee deposits received		December 31	December 31
		2018 $ 3,899 4,010 $ 7,909 $ 6,939	2017 $ 3,336 2,076 $ 5,412 $ 1,809 (Concluded)

19. PROVISIONS

Current Warranties Customer returns and rebates Warranties Balance at January 1, 2017 $ 20,694 Additional provisions recognized (reversed) 37,641 Balance at December 31, 2017 $ 58,335 Balance at January 1, 2018 $ 58,335 Additional provisions recognized 14,682 Balance at December 31, 2018 $ 73,017		December	31
	2018 $ 73,017 - $ 73,017 Customer Returns and Rebates $ 22,423 (22,423) $ -		2017 $ 58,335 - $ 58,335 Total $ 43,117 15,218 $ 58,335 $ 58,335 14,682 $ 73,017

a. The provision for warranty claims represents the present value of management’s best estimate of the future outflow of economic benefits that will be required under the Company’s obligations for warranties under the legislation on the local sale of goods. The estimate had been made on the basis of historical warranty trends and may vary as a result of new materials, altered manufacturing processes or other events affecting product quality.
b. The provision for customer returns and rebates was based on historical experience, management’s judgments and other known reasons for which estimated product returns and rebates may occur in the year. The provision was recognized as a reduction of operating income in the periods the related goods were sold.
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20. RETIREMENT BENEFIT PLANS

a. Defined contribution plan

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

b. Defined benefit plan

The defined benefit plan adopted by the Company in accordance with the Labor Standards Law is operated by the government of the ROC. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributes amounts equal to 2% 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 Company 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 Company 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 Company has no right to influence the investment policy and strategy.

The amounts included in the balance sheets in respect of the Company’s defined benefit plan were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December	31
		2018 $ 18,524 (6,476) $ 12,048	2017 $ 16,425 (5,946) $ 10,479

Movements in net defined benefit liabilities were as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of	Benefit
	Obligation	the Plan Assets	Liabilities
Balance at January 1, 2017	$ 14,355	$ (5,617)	$	8,738
Service cost
Current service cost	164	-		164
Interest expense (income)	179	(72)		107
Recognized in profit or loss	343	(72)		271
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	14		14
Actuarial (gain) loss
Changes in demographic assumptions	988	-		998
Changes in financial assumptions	-	-		-
Experience adjustments	729	-		729
Recognized in other comprehensive income	1,727	14		1,741
Contributions from the employer	-	(271)		(271)
Balance at December 31, 2017	16,425	(5,946)		10,479
				(Continued)

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	Present Value	Present Value
	of the Defined				Net	Defined
	Benefit		Fair	Value of	Benefit
	Obligation		the Plan Assets		Liabilities
Service cost
Current service cost	$	163	$	-	$	163
Interest expense (income)		168		(39)		129
Recognized in profit or loss		331		(39)		292
Remeasurement
Return on plan assets (excluding amounts
included in net interest)		-		(199)		(199)
Actuarial (gain) loss
Changes in demographic assumptions		1,020		-		1,020
Changes in financial assumptions		251		-		251
Experience adjustments		497		-		497
Recognized in other comprehensive income		1,768		(199)		1,569
Contributions from the employer		-		(292)		(292)
Balance at December 31, 2018	$	18,524	$	(6,476)	$	12,048
					(Concluded)

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

Selling and marketing expenses General and administrative expenses Research and development expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 35 35 222 $ 292	2017 $ 36 33 202 $ 271

Through the defined benefit plans under the Labor Standards Law, the Company 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 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 salaries of the plan participants will increase the present value of the defined benefit obligation.
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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:

Discount rate(s) Expected rate(s) of salary increase	December 31
	2018 2017 1.125% 1.250% 3.500% 3.500%

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:

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2018 $ (533) $ 559 $ 538 $ (517)	2017 $ (484) $ 507 $ 489 $ (469)

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.

Expected contributions to the plan for the next year Average duration of the defined benefit obligation		December	31
	2018 $ 304 11.69 years		2017 $ 281 11.9 years

21. EQUITY

a. Share capital

Ordinary shares

Shares authorized (in thousands of shares) Shares authorized (in thousands of dollars) Shares issued and fully paid (in thousands of shares) Shares issued and fully paid (in thousands of dollars)		December 31	December 31
		2018 360,000 $ 3,600,000 80,951 $ 809,510	2017 360,000 $ 3,600,000 80,951 $ 809,510

The shares issued had a par value of $10 and have the rights to vote and receive dividends.

The authorized shares include 20,000 thousand shares allocated for the exercise of employee share options.

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b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital* Issuance of ordinary shares May be used to offset a deficit only Issuance of ordinary shares (reclassified by capital surplus - employee share options) May not be used for any purpose Employee share options		December 31	December 31
		2018 $ 1,330,733 28,526 38,983 $ 1,398,242	2017 $ 1,330,733 28,526 38,983 $ 1,398,242

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

c. Retained earnings and dividend policy

Under the dividend policy as set forth in the amended Articles, where the Company made a 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 a 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 Company’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 bonuses to shareholders. For the policies on the distribution of employees’ compensation and remuneration of directors and supervisors after the amendment, refer to employees’ compensation and remuneration of directors and supervisors in Note 23-f.

The Company’s Articles also stipulate a dividend policy whereby the total cash dividends distributed should not be lower than 10% of the total shareholders’ bonuses.

An appropriation of earnings to a legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. The legal reserve may be used to offset deficits. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company. When deductible items of other equity are reversed afterwards, the Company is allowed to distribute earnings on the revolving part.

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The appropriations of earnings for 2017 and 2016 approved in the shareholders’ meetings on June 12, 2018 and June 20, 2017, respectively, were as follows:

Legal reserve Special reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2017 2016 $ 57,525 $ 72,948 39,779 43,440 404,755 384,517	Dividends Per Share (NT$)
		For the Year Ended December 31
		2017 2016 $ - $ - - - 5.00 4.75

The appropriation of earnings for 2018 had been proposed by the Company’s board of directors on March 21, 2019. The appropriation of earnings and dividends per share were as follows:

	Appropriation	Appropriation	Dividends Per	Dividends Per
	of	Earnings	Share	(NT$)
Legal reserve	$	58,474	$	-
Special reserve		-		-
Cash dividends		429,040		5.30

The appropriation of earnings for 2018 was resolved in the shareholders’ meeting held on June 11, 2019.

d. Special reserve

Balance at January 1 Appropriation in respect of: Debit to other equity items Balance at December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 43,440 39,779 $ 83,219	2017 $ - 43,440 $ 43,440

22. REVENUE

Revenue from contracts with customers Revenue from sale of goods	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 5,637,670	2017 $ 5,873,261

a. Contract information

The Company’s customary business practices and regulations allow customers to return or take discount on the electronic equipment in certain regional market. The amount of returns and allowances is estimated using the most likely amount, taking into account the transaction records with the customers in the past and the Company’s accumulated historical experience. The refund liability (presented in other current liabilities) and the related right to recover products from customers (presented in other current assets) are recorded accordingly.

For information about warranty liability on defective electronic equipment, refer to Notes 4 and 19.

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b. Contact balances

December 31, 2018

Trade receivables (Note 9) $ 1,929,867

23. NET PROFIT (LOSS) FROM CONTINUING OPERATIONS

a. Other income

For the Year Ended	For the Year Ended	December 31
2018 $ 11,858 21,618 773 7 22,398 12,549 $ 46,805 For the Year Ended		2017 $ 823 12,828 1,002 8 13,838 17,051 $ 31,712 December 31
2018 $ (1,998) 115,349 (5) $ 113,346 For the Year Ended		2017 $ (6) (155,348) (879) $ (156,233) December 31
	2018 $ 27,171 - 20 $ 27,191	2017 $ 20,397 (6,702) - $ 13,695

b. Other gains and losses
c. Finance costs

Capitalized interest amount Capitalization rate	For the Year Ended December 31
	2018 2017 $ - $ 6,702 - 0.80%

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d. Depreciation and amortization

Property, plant and equipment Investment property An analysis of depreciation by function Operating costs Operating expenses e. Employee benefits expense	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 28,523 11,040 $ 39,563 $ 5,532 34,031 $ 39,563	2017 $ 19,323 5,591 $ 24,914 $ 6,095 18,819 $ 24,914

Post-employment benefits (Note 20) Defined contribution plans Defined benefit plans Short-term benefits Total employee benefits expense An analysis of employee benefits expense by function Operating expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 13,888 292 14,180 416,907 $ 431,087 $ 431,087	2017 $ 13,362 271 13,633 371,655 $ 385,288 $ 385,288

f. Employees’ compensation and remuneration of directors and supervisors

The Company accrued employees’ compensation and remuneration of directors and supervisors at rates of no less than 2% and no higher than 2%, 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, 2018 and 2017 which have been approved by the Company’s board of directors on March 21, 2019 and March 23, 2018, respectively, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31
	2018 2017 5.21% 5.50% 0.86% 0.80%

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Amount

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31	For the Year Ended December 31
	2018 Cash $ 40,000 6,600	2017
		Cash $ 42,070 6,000

If there is a change in the amounts after the annual financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2017 and 2016 which have been approved by the Company’s board of directors on March 23, 2018 and March 30, 2017, respectively, were as follows:

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31	For the Year Ended December 31
	2017 Cash Share $ 45,500 $ - 6,000 -	2016
		Cash Share $ 49,200 $ - 5,000 -

The actual amounts of employees’ compensation and remuneration of directors and supervisors that were paid for 2017 and 2016 and recognized in the financial statements were as follows:

Amounts approved in the board of directors’ meeting Amounts recognized in the annual financial statements	For the Year Ended December 31	For the Year Ended December 31
	2017 Employees’ Compensation Remuneration of Directors and Supervisors $ 45,500 $ 6,000 42,070 6,000	2016
		Employees’ Compensation Remuneration of Directors and Supervisors $ 49,200 $ 5,000 51,090 5,109

The differences were adjusted to profit and loss for the years ended December 31, 2018 and 2017.

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Company’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

g. Gains or losses on foreign currency exchange

Foreign exchange gains Foreign exchange losses	For the Year Ended	For the Year Ended	December 31
		2018 $ 186,896 (71,547) $ 115,349	2017 $ 53,461 (208,809) $ (155,348)

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24. INCOME TAXES RELATING TO CONTINUING OPERATIONS

a. Major components of tax expense recognized in profit or loss

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior years Deferred tax In respect of the current year Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2018 $ 119,617 7,175 (9,432) 117,360 19,493 $ 136,853	2017 $ 126,876 22,497 (39,964) 109,409 50,014 $ 159,423

A reconciliation of accounting profit and income tax expense is as follows:

Profit before tax from continuing operations Income tax expense calculated at the statutory rate Permanent differences Income tax on unappropriated earnings Unrecognized deductible temporary differences Effect of tax rate changes Adjustments for prior years’ tax Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2018 $ 721,596 $ 144,319 3,384 7,175 (5,453) (3,140) (9,432) $ 136,853	2017 $ 734,680 $ 124,896 1,199 22,497 843 49,952 (39,964) $ 159,423

In 2017, the applicable corporate income tax rate used by the Company in the ROC is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%.

As the status of 2019 appropriation of earnings is uncertain, the potential income tax consequences of the 2018 unappropriated earnings are not reliably determinable.

b. Income tax recognized in other comprehensive income

Deferred tax Effect of change in tax rate In respect of the current period Remeasurement of defined benefit plans Total income tax recognized in other comprehensive income	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 252 314 $ 566	2017 $ - 296 $ 296

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c. Current tax assets and liabilities

Current tax liabilities Income tax payable		December	31
		2018 $ 88,234	2017 $ 95,343

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows: For the year ended December 31, 2018

Deferred tax assets Temporary differences Unrealized loss from subsidiaries Defined benefit obligation Unrealized loss on write-down of inventories Share of losses from subsidiaries Unrealized exchange loss Expenses Deferred tax liabilities Temporary differences Unrealized profit form subsidiaries Unrealized exchange gain	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income $ 97,724 $ (26,907) $ - 1,640 37 566 10,222 3,473 - 1,783 (1,783) - 5,579 (5,579) - - 15,600 - $ 116,948 $ (15,159) $ 566 $ 1,709 $ 1,800 $ - - 2,534 - $ 1,709 $ 4,334 $ -	Closing Balance $ 70,817 2,243 13,695 - - 15,600
		$ 102,355
		$ 3,509 2,534
		$ 6,043

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For the year ended December 31, 2017

Deferred tax assets Temporary differences Unrealized loss from subsidiaries Defined benefit obligation Unrealized loss on write-down of inventories Provision for sales returns and discounts Share of losses from subsidiaries Unrealized exchange loss Expense Deferred tax liabilities Temporary differences Unrealized profit from subsidiaries Unrealized exchange gain	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income $ 149,780 $ (52,056) $ - 1,344 - 296 14,784 (4,562) - 852 (852) - 860 923 - - 5,579 - 1,568 (1,568) - $ 169,188 $ (52,536) $ 296 $ - $ 1,709 $ - 4,231 (4,231) - $ 4,231 $ (2,522) $ -	Closing Balance $ 97,724 1,640 10,222 - 1,783 5,579 -
		$ 116,948
		$ 1,709 -
		$ 1,709

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

No deferred tax liabilities were recognized as the share of profit associated with investments in subsidiaries were not distributed.

f. Income tax assessments

The Company’s tax returns through 2016 have been assessed by the tax authorities.

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25. EARNINGS PER SHARE

Unit: NT$ Per Share

Basic earnings per share Diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 7.22 $ 7.17	2017 $ 7.11 $ 7.06

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

Net Profit for the Year

Earnings used in the computation of basic earnings per share Earnings used in the computation of diluted earnings per share Weighted Average Number of Ordinary Shares Outstanding	For the Year Ended	For the Year Ended	December 31
		2018 $ 584,743 $ 584,743	2017 $ 575,257 $ 575,257

Unit: In Thousand Shares

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employees’ bonuses in shares issued Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 80,951 623 81,574	2017 80,937 542 81,479

If the Company will use cash or shares to settle compensation or bonuses to employees, the Company will assume that the entire compensation or bonus will be settled in shares. If the effect of the resulting potential shares is dilutive, these shares will be included in the weighted average number of shares outstanding used in the computation of diluted earnings per share. This 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.

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26. SHARE-BASED PAYMENT ARRANGEMENTS

The Company did not issue any new employee share options during 2018 and 2017.

Information on employee share options was as follows:

Balance at January 1 Options granted Options forfeited Options exercised Options expired Balance at December 31 Options exercisable, end of year Weighted-average fair value of options granted ($)	The Plan of December 2012	The Plan of December 2012
	2018 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) - $ - - - - - - - - - - - - - $ -	2017
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 23.0 $ 34.60 - - - (23.0) 34.60 - - - - - - $ -

The weighted-average share price at the date of exercise of share options for the years ended December 31, 2017 was $101.79.

In the shareholders’ meeting held on June 20, 2017, the shareholders approved a restricted share plan for employees with a total amount of $6,000 thousand, consisting of 600 thousand shares. The restrictions on the rights of the employees who acquire the restricted shares but have not met the vesting conditions are as follows:

a. The employees should provide the restricted shares to the agency designated by the Company, which acts as the trust custodian and comply with all related procedures and prepare the required documents.
b. The employees may not sell, mortgage, transfer, present, pledge, or otherwise dispose of, restricted employee shares.
c. The rights of the restricted share plan for employees, including but not limited to, dividends, bonuses, the distribution rights of capital surplus, the right to subscription of new shares and voting rights etc., are the same as the ordinary shares issued by the Company.
d. The employees shall entrust the handling or execution of the related proposals, speech, voting rights and other equity-related matters in the shareholders’ meeting to the acting trust custody agency.

If an employee fails to meet the vesting conditions, the Company will recall or buy back and cancel his/her restricted shares.

The restricted share plan for employees was approved and implemented by Securities and Futures Bureau, Financial Supervisory Commission on May 11, 2018.

48 -

27. PARTIAL ACQUISITION OR DISPOSAL OF SUBSIDIARIES - WITHOUT LOSS OF CONTROL

In June 2017, the subsidiary of the Company - Broad Win International Investment Co., Ltd., subscribed for additional new shares of its second-tier subsidiary - Portal Star Co., Ltd. at a percentage different from its existing ownership percentage, increasing its continuing interest from 87.32% to 89.48%. In December 2017, the subsidiary subscribed for additional new shares of Portal Star Co., Ltd., increasing its continuing interest from 89.48% to 100%.

The above transactions were accounted for as equity transactions, since the Company did not cease to have control over these subsidiaries. Refer to Note 28 of the consolidated financial statements for the year ended December 31, 2018 for the details.

28. OPERATING LEASE ARRANGEMENTS

Operating leases relate to leases of office space, buildings, warehouses, and equipment with lease terms between 1 and 10 years.

The future minimum lease payments of non-cancellable operating lease commitments are as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December	31
		2018 $ 5,255 1,736 - $ 6,991	2017 $ 6,114 8,411 - $ 14,525

The lease payments recognized in profit or loss for the current period were as follows:

Minimum lease payments	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 6,416	2017 $ 13,018

29. CAPITAL MANAGEMENT

The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Company’s overall strategy remains unchanged.

The capital structure of the Company consists of net debt (borrowings offset by cash and cash equivalents) and equity attributable to owners of the Company (comprising issued capital, reserves, retained earnings and other equity).

The Company is not subject to any externally imposed capital requirements.

30. FINANCIAL INSTRUMENTS

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

Management believes the carrying amounts of financial assets and financial liabilities recognized in the financial statements which are not measured at fair value approximate their fair values.

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b. Categories of financial instruments

Financial assets Loans and receivables (1) Financial assets at amortized cost (2) Financial liabilities Amortized cost (3)	December 31
	2018 2017 $ - $ 3,959,861 3,342,398 - 3,940,209 3,913,105

1) The balances included loans and receivables measured at amortized cost, which comprised cash and cash equivalents, debt investments with no active market, notes and trade receivables, other receivables, and other financial assets.
2) The balances include financial assets at amortized cost, which comprise cash and cash equivalents, notes receivable and trade receivables, financial assets at amortized cost, and other receivables.
3) The balances included financial liabilities measured at amortized cost, which comprised short-term borrowings, notes and trade payables, other payables, current portion of long-term borrowings, long-term loans and guarantee deposits received.
c. Financial risk management objectives and policies

The Company’s major financial instruments included trade receivables, trade payables and borrowings. The Company’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, and monitors and manages the financial risks relating to the operations of the Company through internal risk reports that analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk.

The Company 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 Company’s policies approved by the board of directors, which provided written principles on foreign currency 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 Company did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

1) Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

There has been no change to the Company’s exposure to market risk or the manner in which these risks were managed and measured.

a) Foreign currency risk

The Company had foreign currency sales and purchases, which exposed the Company to foreign currency risk. Exchange rate exposures were managed within approved policy parameters utilizing foreign exchange forward contracts.

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The Company uses foreign exchange forward contracts to eliminate currency exposure. It is the Company’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximize hedge effectiveness.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities are set out in Note 34.

Sensitivity analysis

The Company is mainly exposed to the U.S. dollar and the Chinese Yuan.

The following table details the Company’s sensitivity to a 5% increase and decrease in the New Taiwan dollar (the functional currency) against the relevant foreign currencies. The sensitivity rate used when reporting foreign currency risk internally to key management personnel and representing management’s assessment of the reasonably possible change in foreign exchange rates is 5%. A positive (negative) number indicates an increase (decrease) in pre-tax profit associated with the New Taiwan dollar weakening (strengthening) 5% against relevant foreign currencies. Conversely, there would be an equal and opposite impact on pre-tax profit.

Profit or loss	USD Impact For the Year Ended December 31 2018 2017 $ 108,600 (i) $ 125,485 (i)	CNY Impact
		For the Year Ended December 31
		2018 2017 $ (17,778) (ii) $ (13,836) (ii)

i. This was mainly attributable to the exposure on outstanding USD bank deposits, and receivables and payables which were not hedged at the end of the reporting period.
ii. This was mainly attributable to the exposure on outstanding CNY bank deposits and payables which were not hedged at the end of the reporting period.
b) Interest rate risk

The Company was exposed to interest rate risk because the Company borrowed funds at both fixed and floating interest rates. The risk is managed by the Company based on the management’s knowledge and insight obtained from the financial markets to maintain an appropriate mix of fixed and floating rate borrowings.

The carrying amounts of the Company’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

Cash flow interest rate risk Fair value interest rate risk	December 31
	2018 2017 $ 1,100,000 $ 2,050,000 1,520,000 710,000

The Company was also exposed to cash flow interest rate risk in relation to variable-rate bank borrowings.

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Sensitivity analysis

The sensitivity analysis below was based on the Company’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 100 basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Company’s pre-tax profit for the years ended December 31, 2018 and 2017 would decrease/increase by $11,000 thousand and $20,500 thousand, respectively, which was mainly attributable to the Company’s exposure to interest rates on its variable-rate bank borrowings.

2) Credit risk

Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk (without consideration of the collaterals held as security or other credit enhancements, and irrevocable maximum exposure amounts), which would cause a financial loss to the Company due to the failure of the counterparty to discharge its obligation and due to the financial guarantees provided by the Company, could be equal to the total of the following:

a) The carrying amount of the respective recognized financial assets as stated in the balance sheets; and
b) The maximum amount the entity would have to pay if the financial guarantee is called upon, irrespective of the likelihood of the guarantee being exercised.

In order to minimize credit risk, the management of the Company has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for irrecoverable amounts.

Trade receivables consisted of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of trade receivables. Credit insurance will be purchased if necessary.

The Company’s concentration of credit risk of 21% and 19% of total trade receivables (non-related parties) as of December 31, 2018 and 2017, respectively, was related to the Company’s largest customer - A.

3) Liquidity risk

The Company manages liquidity risk by maintaining a level of cash and cash equivalents deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

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a) Liquidity and interest rate risk table for non-derivative financial liabilities

The following tables show the Company’s remaining contractual maturities for its non-derivative financial liabilities with agreed-upon repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

To the extent that interest flows are at floating rates, the undiscounted amount was derived from the interest rate curve at the end of the reporting period.

December 31, 2018

Less than 1 Year Non-derivative financial liabilities Non-interest bearing liabilities $ 1,320,209 Variable interest rate liabilities 420,000 Fixed interest rate liabilities 1,520,000 $ 3,260,209 December 31, 2017 Less than 1 Year Non-derivative financial liabilities Non-interest bearing liabilities $ 1,153,105 Variable interest rate liabilities 1,250,000 Fixed interest rate liabilities 410,000 $ 2,813,105 Financing facilities Unsecured bank loan facilities Amount used Amount unused Secured bank loan facilities Amount used Amount unused	1-2 Years $ - 160,000 - $ 160,000 1-2 Years $ - 266,667 300,000 $ 566,667	2-5 Years More than 5 Years Total $ - $ - $ 1,320,209 480,000 40,000 1,100,000 - - 1,520,000 $ 480,000 $ 40,000 $ 3,940,209 2-5 Years More than 5 Years Total $ - $ - $ 1,153,105 480,000 53,333 2,050,000 - - 710,000 $ 480,000 $ 53,333 $ 3,913,105 December 31 2018 2017 $ 1,820,000 $ 1,500,000 834,159 1,077,296 $ 2,654,159 $ 2,577,296 $ 800,000 $ 1,260,000 753,000 - $ 1,553,000 $ 1,260,000	2-5 Years More than 5 Years Total $ - $ - $ 1,320,209 480,000 40,000 1,100,000 - - 1,520,000 $ 480,000 $ 40,000 $ 3,940,209 2-5 Years More than 5 Years Total $ - $ - $ 1,153,105 480,000 53,333 2,050,000 - - 710,000 $ 480,000 $ 53,333 $ 3,913,105 December 31 2018 2017 $ 1,820,000 $ 1,500,000 834,159 1,077,296 $ 2,654,159 $ 2,577,296 $ 800,000 $ 1,260,000 753,000 - $ 1,553,000 $ 1,260,000	2-5 Years More than 5 Years Total $ - $ - $ 1,320,209 480,000 40,000 1,100,000 - - 1,520,000 $ 480,000 $ 40,000 $ 3,940,209 2-5 Years More than 5 Years Total $ - $ - $ 1,153,105 480,000 53,333 2,050,000 - - 710,000 $ 480,000 $ 53,333 $ 3,913,105 December 31 2018 2017 $ 1,820,000 $ 1,500,000 834,159 1,077,296 $ 2,654,159 $ 2,577,296 $ 800,000 $ 1,260,000 753,000 - $ 1,553,000 $ 1,260,000	More than 5 Years Total $ - $ 1,320,209 40,000 1,100,000 - 1,520,000 $ 40,000 $ 3,940,209 More than 5 Years Total $ - $ 1,153,105 53,333 2,050,000 - 710,000 $ 53,333 $ 3,913,105 December 31	More than 5 Years Total $ - $ 1,320,209 40,000 1,100,000 - 1,520,000 $ 40,000 $ 3,940,209 More than 5 Years Total $ - $ 1,153,105 53,333 2,050,000 - 710,000 $ 53,333 $ 3,913,105 December 31

				2018 $ 1,820,000 834,159 $ 2,654,159 $ 800,000 753,000 $ 1,553,000		2017 $ 1,500,000 1,077,296 $ 2,577,296 $ 1,260,000 - $ 1,260,000

b) Financing facilities

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31. TRANSACTIONS WITH RELATED PARTIES

Details of transactions between the Company and other related parties are disclosed below.

a. Related party name and category

Related Party Name Cyber Power Systems (USA), Inc. Cyber Power Systems B.V. Nitram SAS Cyber Power Systems S.A. DE C.V. Cyber Power Systems (INDIA) PVT, Ltd. Cyber Power Systems K. K. Cyber Power Technology (Shenzhen) Inc. Cyber Power Systems (HK) Limited Cyber Power (Shenzhen), Inc. Cyber Power Systems Manufacturing, Inc. Best Top (Shenzhen), Inc. Cyber Energy Co., Ltd.	Related Party Category
	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Substantive related party Substantive related party

b. Sales of goods

Line Items Related Party Category/Name Sales Subsidiary/Cyber Power Systems (USA), Inc. Subsidiary/others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,742,751 487,869 $ 3,230,620	2017 $ 3,051,298 440,426 $ 3,491,724

The pricing strategy of the Company for the sales to related parties varies according to the size and competitiveness of the market. The period of collection of trade receivables between the related parties is 120-180 days. The use of funds by enterprises is included in the grace period during the collection period, while the collection period for third parties is 30-90 days.

c. Purchases of goods

Related Party Category/Name Subsidiary/Cyber Power Systems (HK) Limited Substantive related parties/others	For the Year Ended	For the Year Ended	December 31
		2018 $ 757,844 21,455 $ 779,299	2017 $ 549,247 10,609 $ 559,856

Subsidiary: After referring to market practices, the payment term is 60 days.

Substantive related party: After referring to market practices, prepayment of the current estimated merchandise cost is made at the beginning of each month, and then the amount is offset against the actual processing cost at the end of each month.

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d. Operating costs

Line Item Related Party Category/Name Processing cost Subsidiary/Cyber Power (Shenzhen), Inc. Subsidiary/others Substantive related party/Best Top (Shenzhen), Inc. Manufacturing expense Substantive related party/others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 633,496 24,324 86,311 $ 744,131 $ 2,709	2017 $ 590,822 - 76,636 $ 667,458 $ 358

Subsidiary: Managed by the cost-plus method, and the estimated processing cost is prepaid at the beginning of each month, and offset against the actual processing cost at the end of month.

Substantive related party: After referencing the market price, the Company will follow the contract specifications set by both parties, and prepay the current estimated processing amount at the beginning of each month, and then offset against the actual processing cost at the end of month.

e. Other operating costs

Line Item Related Party Category/Name Inventory processing Subsidiary/Cyber Power (Shenzhen), Inc. cost Substantive related party/others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 24,149 2,187 $ 26,336	2017 $ 24,651 2,083 $ 26,734

The price is set according to the contract. The Company prepays the estimated amount at the beginning of every month, and then offset against the actual processing cost at the end of every month.

f. Other income

Related Party Category/Name Subsidiary/Cyber Power Systems B.V. Subsidiary/others Substantive related party/Cyber Energy Co., Ltd.	For the Year Ended	For the Year Ended	December 31
		2018 $ 5,352 1,648 6,984 $ 13,984	2017 $ 9,616 1,829 - $ 11,445

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g. Receivables from related parties (excluding loans to related parties)

Line Item Related Party Category/Name Trade receivables Subsidiary/Cyber Power Systems (USA), Inc. Subsidiary/others Substantive related party/others		December 31	December 31
		2018 $ 1,062,048 141,084 496 $ 1,203,628	2017 $ 1,356,700 143,102 - $ 1,499,802

The outstanding trade receivables from related parties are unsecured. For the years ended December 31, 2018 and 2017, no impairment loss was recognized on trade receivables from related parties.

December 31 Line Item Related Party Category/Name 2018 2017 Other receivables Substantive related party/others $ 2,373 $ 506 Payables to related parties (excluding borrowings from related parties) December 31 Line Item Related Party Category/Name 2018 2017 Trade payables Subsidiary/Cyber Power (Shenzhen), Inc. $ 344,676 $ 265,010 Subsidiary/Cyber Power Systems (HK) Limited 84,049 70,512 $ 428,725 $ 335,522		December 31	December 31
		2018 $ 344,676 84,049 $ 428,725	2017 $ 265,010 70,512 $ 335,522

h. Payables to related parties (excluding borrowings from related parties)

The outstanding trade payables to related parties are unsecured.

i. Prepayments

Related Party Category/Name Subsidiary/others Substantive related party/Best Top (Shenzhen), Inc. Loans to related parties Related Party Category/Name Other receivables (including principal and interest) Subsidiary/Cyber Power Systems (INDIA) PVT. Ltd. Subsidiary/CyberPower Systems GmbH Subsidiary/others Substantive related party/others	For the Year Ended	For the Year Ended	December 31
		2018 2017 $ 2,700 $ - 12,513 16,968 $ 15,213 $ 16,968 December 31
		2018 $ 57,740 26,488 8,975 - $ 93,203	2017 $ 55,767 27,659 7,110 9,712 $ 100,248

j. Loans to related parties
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Related Party Category/Name Interest revenue Subsidiary/Cyber Power Systems (INDIA) PVT. Ltd. Subsidiary/CyberPower Systems GmbH Subsidiary/Cyber Power Systems S.A. DE C.V. Substantive related party/others	For the Year Ended	For the Year Ended	December 31
		2018 $ 446 251 32 44 $ 773	2017 $ 546 275 132 49 $ 1,002

For the years ended December 31, 2018 and 2017, the Company provided financing to CyberPower Systems GmbH, Cyber Power Systems (INDIA) PVT. Ltd., and Best Top (Shenzhen), Inc. at interest rates of 0.91% and 0.9135%, respectively.

The Company reclassified trade receivables aged over 90 days and with normal credit terms from Cyber Power Systems S.A. DE C.V. and Cyber Power Systems (India) Pvt. Ltd. to other receivables, and imputed interest based on an interest rate of 0.91%.

k. Acquisitions of property, plant and equipment

Related Party Category Substantive related party	Purchase Price	Purchase Price	Purchase Price
	For the Year Ended		December 31
		2018 $ 6,166	2017 $ 1,820

l. Acquisition of additional interest in related parties

In July 2018, the Company acquired newly issued shares of Broad Win International Investment Co., Ltd. for $91,305 thousand, and the ownership percentage remained at 100%.

In September 2018, the Company paid $9,181 thousand in consideration to establish Cyber Power Manufacturing, Inc., acquiring 100% of the ownership

In June and December 2017, the Company acquired 100% of the newly issued shares of Broad Win International Investment Co., Ltd. for $22,355 thousand and $13,709 thousand, respectively, and the ownership percentage remained at 100%.

In November 2017, the Company acquired newly issued shares of Cliquefie Co., Ltd. for $1,900 thousand, and the ownership percentage remained at 95%.

m. Endorsements and guarantees

Endorsements and guarantees provided by the Company

Related Party Category/Name Subsidiary	December 31
	2018 2017 US$ 14,900 US$ 21,900 EUR 150 EUR 150 INR 230,000 INR 300,000

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n. Compensation of key management personnel

Short-term employee benefits	For the Year Ended	For the Year Ended	December 31
		2018 $ 22,601	2017 $ 20,824

The remuneration of directors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

32. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

Pledged time deposits (other financial assets - current) Property, plant and equipment and investment properties		December 31	December 31
		2018 $ 43,000 1,053,013 $ 1,096,013	2017 $ 548,920 1,110,551 $ 1,659,471

33. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

a. The Company had purchased inventories from Well Shin Technology Co., Ltd. (“Well Shin”) and commodities were later assessed as defective. The claims amounted to HK$10,312 thousand, which is the disputed amount for defective commodities. The amount of HK$7,789 thousand was settled and the rest has been accrued in accounts payable. The litigation risk in this case is that when unfavorable outcome occurs, the expected amount would be HK$2,523 thousand with 5% interest rate per annum (though the Company is deemed to settle interest first than the principal). The Company intends to defend the case to reduce its payment pursuant to the applicable laws. The rest of payment has been accrued in accounts payable.
b. The Company’s client, Arris Group, Inc. (“Arris Group”), has sued Cyber Power Systems (USA) and the Company for violating the contract, claiming that the product’s specifications failed to meet the requirements and did not fulfill the warranty obligations. After careful evaluation, it was found that both the use and design of commodities produced by the Company met the required regulations, and Arris Group’s consent was obtained before production. In addition, since the installation environment was unpredictable, the wear and tear of the commodities was considered within the normal range. Furthermore, to date Arris Group was unable to prove that there were abnormalities in the functionality or performance of the Company’s commodities within the warranty period. Based on the case, Arris Group demanded US$12,500 thousand as compensation. The maximum risk of litigation is compensation in full upon losing the case. Based on the warranty regulations indicated in the Illinois Law and Uniform Commercial Code (UCC), if the buyer did not file a lawsuit within four years after the merchandise was delivered, the warranty shall have expired. The Company would then propose the following arguments to the court:
1) The litigation that implicates Cyber Power Systems (USA) should be dismissed due to no cause of action.
2) Since the Company did not sign any contract and has no direct business activities in the Illinois state, the court has no jurisdiction to rule on the prosecution towards the Company. The lawyer is currently unable to assess the possibility of winning the case.
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c The Company issued checks as guarantees for loan commitments; the amounts as of December 31, 2018 and 2017 were as follows:

Financial guarantees to banks USD NTD		December 31	December 31
		2018 $ 24,300 $ 2,993,000	2017 $ 24,300 $ 2,183,000

34. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Company’s significant financial assets and liabilities denominated in foreign currencies (aggregated by the foreign currencies) other than functional currencies and related exchange rates between foreign currencies and respective functional currencies were as follows:

December 31, 2018

		Foreign		Carrying
		Currency	Exchange Rate	Amount
Financial assets
Monetary items
USD	$	91,278	30.715	$ 2,803,607
EUR		6,105	35.20	214,888
HKD		384	3.921	1,504
CNY		554	4.472	2,477
Non-monetary items
Subsidiary and investment using equity method
USD		8,601	30.715	264,238
EUR		4,263	35.20	150,063
CNY		118,137	4.472	528,309
PHP		19,173	0.5771	11,065
Financial liabilities
Monetary items
USD		20,563	30.715	631,587
HKD		42,580	3.921	166,955
CNY		80,061	4.472	358,032

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December 31, 2017

		Foreign		Carrying
		Currency	Exchange Rate	Amount
Financial assets
Monetary items
USD	$	106,836	29.76	$ 3,179,452
EUR		3,716	35.57	132,186
HKD		1,147	3.807	4,425
CNY		517	4.565	2,360
Non-monetary items
Investments accounted for using the equity
method
USD		3,073	29.76	91,454
EUR		3,323	35.57	118,189
CNY		99,154	4.565	452,637
Financial liabilities
Monetary items
USD		22,505	29.76	669,753
HKD		39,719	3.807	151,209
CNY		61,136	4.565	279,087

For the years ended December 31, 2018 and 2017, realized and unrealized net foreign exchange gains (losses) were $115,349 thousand and $(155,348) thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies.

35. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:
1) Financing provided to others: Table 1 (attached)
2) Endorsements/guarantees provided: Table 2 (attached)
3) Marketable securities held (excluding investments in subsidiaries, associates and joint ventures): None
4) Marketable securities acquired or disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 3 (attached)
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8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 4 (attached)
9) Trading in derivative instruments: None
10) Information on investees: Tables 5 to 8 (attached)
b. Information on investments in mainland China
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: Table 9 (attached)
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses: Table 10 (attached)
- a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
- b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
- c) The amount of property transactions and the amount of the resultant gains or losses.
- d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
- e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to the financing of funds.
- f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receipt of services.
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TABLE 1

CYBER POWER SYSTEMS, INC.

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Party	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate (%)	Nature of Financing	Business Transaction Amount	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limit	Note
													Item	Value
0	Cyber Power Systems, Inc.	Best Top (Shenzhen), Inc. CyberPower Systems GmbH Cyber Power Systems (INDIA) PVT, Ltd. Cyber Power Systems S.A. DE C.V.	Other receivables from related parties Other receivables from related parties Other receivables from related parties Other receivables from related parties	Yes Yes Yes Yes	$ 11,135 54,360 57,740 12,387	$ - 52,800 57,740 8,975	$ - 26,488 57,740 8,975	0.91 0.91 0.91 0.91	Business relationship Short-term financing Business relationship Business relationship	Processing cost $86,311 Purchases of goods $21,455 Inventory processing cost $2,187 Manufacturing expense $2,709 Research expense $3,970 Purchases of molds $6,166 - Sales of goods $28,484 Sales of goods $66,213	- Operating capital - -	$ - - - -	- - - -	$ - - - -	Note A Note B Note A Note A	Note C Note D Note C Note C

Note A: The limit is the business transaction amount for the previous year.

The business transaction amount for Best Top (Shenzhen), Inc. for the previous year comprises purchases of goods of $10,609 thousand, processing cost of $76,636 thousand, inventory processing cost of $2,083 thousand, manufacturing expense of $358 thousand, research expense of $6,161 thousand and purchases of molds of $1,820 thousand.

The business transaction amount for Cyber Power Systems (INDIA) PVT, Ltd. for the previous year comprises sales of goods of $50,730 thousand. The Company reported the improvement plan to the board of directors and presented it to the supervisors. Moreover, the Company will prepare to improve the excess of limits by the end of July 2019.

The business transaction amount for Cyber Power Systems S.A. DE C.V. for the previous year comprises sales of goods of $51,312 thousand.

Note B: Financing limit for each borrower is 10% of the net value of the financing company = $4,433,974 x 10% = $443,397.

Note C: Aggregate financing limits is 20% of the net value of the financing company = $4,433,974 x 20% = $886,795.

Note D: Aggregate financing limits is 40% of the net value of the financing company = $4,433,974 x 40% = $1,773,590.

62 -

TABLE 2

CYBER POWER SYSTEMS, INC.

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collateral	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China	Note
		Name	Relationship
0	Cyber Power Systems, Inc.	Cyber Power Systems (USA), Inc. Cyber Power Systems (INDIA) PVT, Ltd. CyberPower Systems GmbH	2 2 2	The limit is 30% of the net value of the financing company based on the latest audited financial statements. The limit is 30% of the net value of the financing company based on the latest audited financial statements. The limit is 30% of the net value of the financing company based on the latest audited financial statements.	$ 445,752 (US$ 14,400 thousand) 347,970 (US$ 7,000 thousand and INR 300,000 thousand) 20,748 (US$ 500 thousand and Euro 150 thousand)	$ 442,296 (US$ 14,400 thousand) Note B 101,223 (INR 230,000 thousand) Note B 20,638 (US$ 500 thousand and Euro 150 thousand) Note B	$ - 46,254 -	$ - - -	9.98 2.28 0.47	Note A Note A Note A	Y Y Y	N N N	N N N

Note A: Aggregate endorsement/guarantee limit is 50% of the net value of the financing company = $4,433,974 x 50% = $2,216,987.

Note B: The calculation of the maximum amount endorsed/guaranteed during the period and outstanding endorsement/guarantee at the end of the period was based on the average buy/sell closing exchange rate for the year ended December 31, 2018.

63 -

TABLE 3

CYBER POWER SYSTEMS, INC.

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Buyer	Related Party	Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
Cyber Power Systems, Inc.	Cyber Power Systems (USA), Inc. Cyber Power Systems B.V. Nitram SAS Cyber Power Systems (HK) Limited Cyber Power (Shenzhen), Inc.	Subsidiary Third-tier subsidiary Third-tier subsidiary Third-tier subsidiary Third-tier subsidiary	Sale Sale Sale Purchase Processing cost	$ (2,742,751) (158,876) (149,058) 757,844 633,496	(49) (3) (3) 18 15	Note Note Note Note Note	Note Note Note Note Note	Note Note Note Note Note	Accounts receivable $1,062,048 Accounts receivable $50,489 Accounts receivable $42,165 Accounts payable $(84,049) Accounts payable - processing cost $(325,988)	55 3 2 (8) (32)

Note: Terms of the transactions are as follows:

Purchases of goods

Cyber Power Systems (HK) Limited

Cyber Power Systems (HK) Limited: After referring to market practices, the payment term is 60 days.

2. Processing cost

Cyber Power (Shenzhen), Inc.

Cyber Power (Shenzhen), Inc.: Managed by the cost-plus method. The estimated processing cost is prepaid at the beginning of each month, and offset against the actual processing cost at the end of month.

3. Sales of goods

Cyber Power Systems (USA), Inc. Cyber Power Systems B.V. Nitram SAS

The pricing strategy of the Company for the sales to related parties varies according to the size and competitiveness of the market. The period of collection of trade receivables between the related parties is 120 to 180 days. The use of funds by enterprises is included in the grace period during the collection period, while the collection period for third parties is 30 to 90 days.

64 -

TABLE 4

CYBER POWER SYSTEMS, INC.

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Cyber Power Systems, Inc.	Cyber Power Systems (USA), Inc.	Subsidiary	$ 1,062,048	2.27	$ -	-	$ 449,305	$ -

65 -

TABLE 5

CYBER POWER SYSTEMS, INC.

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of	December 31, 2018	December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares	%	Carrying Amount
Cyber Power Systems, Inc. Broad Win International Investment Co., Ltd. Join Master Co., Ltd. Shining Pearl Co., Ltd. Fast Wind International Limited Global Way Co., Ltd. Full Star Co., Ltd. Grown Tech Co., Ltd. Global Win Co., Ltd.	Broad Win International Investment Co., Ltd. Cyber Power Systems (USA), Inc. Fast Wind International Limited Cliquefie Co., Ltd. Cyber Power Systems Manufacturing, Inc. Planet Technology Limited Join Master Co., Ltd. Portal Star Co., Ltd. Cyber Power Systems (HK) Limited Shining Pearl Co., Ltd. Cyber Power Systems K.K. Cyber Power Systems (INDIA) PVT, Ltd. Global Way Co., Ltd. Full Star Co., Ltd. Grown Tech Co., Ltd. Global Win Co., Ltd. Cyber Power Systems B.V. Nitram SAS CyberPower Systems GmbH Cyber Power Systems S.A. DE C.V.	Samoa. U.S.A. Mauritius Taiwan Philippines Samoa. British Virgin Islands Mauritius Hong Kong Mauritius Japan India Mauritius Mauritius Mauritius Belize City Netherlands France Germany Mexico	Investment Selling of uninterruptible power systems Investment Selling of electronic products Production of uninterruptible power systems Investment Investment Investment Selling of uninterruptible power systems Investment Selling of uninterruptible power systems Selling of uninterruptible power systems Investment Investment Investment Investment Selling of uninterruptible power systems Selling of uninterruptible power systems Selling of uninterruptible power systems Selling of uninterruptible power systems	$ 504,746 412,870 165,900 11,400 9,181 24,638 13,235 222,040 373 244,460 13,235 244,460 20,674 80,747 1,058 63,421 20,674 80,747 1,058 63,241	$ 413,441 412,870 165,900 11,400 - 24,638 13,235 130,735 373 244,460 13,235 244,460 20,674 80,747 1,058 63,421 20,674 80,747 1,058 63,421	16,495,329 13,000,000 4,438,245 1,140,000 10,000 1,000,000 3,944 7,338,000 100,000 8,000,000 3,800 48,767,742 430,000 1,870,400 25,000 1,700,831 7,000 1,819 1 1,700,831	100 100 100 95 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100	$ 528,309 264,238 150,063 317 11,065 359,124 23,837 155,998 71,218 (76,452) 23,837 (76,452) 38,707 113,640 (13,236) 42,884 38,707 113,640 (13,236) 42,884	$ (7,014) 52,581 32,897 (623) 1,780 22,832 3,497 (13,235) 20,904 (41,012) 3,497 (41,012) 9,610 15,039 4,560 3,688 9,610 15,039 4,560 3,688	$ (7,014) 52,581 32,897 (592) 1,780	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Second-tier subsidiary Second-tier subsidiary Second-tier subsidiary Second-tier subsidiary Second-tier subsidiary Third-tier subsidiary Third-tier subsidiary Second-tier subsidiary Second-tier subsidiary Second-tier subsidiary Second-tier subsidiary Third-tier subsidiary Third-tier subsidiary Third-tier subsidiary Third-tier subsidiary

66 -

TABLE 6

CYBER POWER SYSTEMS, INC.

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Party	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate (%)	Nature of Financing	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower	Aggregate Financing Limit	Note
													Item	Value
1	Cyber Power Systems (HK) Limited Cyber Power Systems (USA), Inc. Cyber Power Systems (HK) Limited	Cyber Power Technology (Shenzhen), Inc. Cyber Power Systems S.A. DE C.V. Cyber Energy (Shenzhen), Inc.	Other receivables from related parties Other receivables from related parties Other receivables from related parties	Yes Yes Yes	$ 513 8,685 37,052	$ - - 370	$ - - 370	0.91 0.91 0.91	Business relationship Business relationship Business relationship	Sales $ 421 Sales 20,174 Sales 36,235	- - -	$ - - -	- - -	$ - - -	(Note A) (Note A) (Note A)	(Note B) (Note C) (Note B)

Note A: The limit is the business transaction amount for the previous year.

The business transaction amount between Cyber Power Systems (USA), Inc. and Cyber Power Systems S.A. DE C.V. for the previous year comprises sales of goods $21,588 thousand.

The business transaction amount between Cyber Power Systems (HK) Limited and Cyber Power Technology (Shenzhen), Inc. for the previous year comprises sales of goods $1,163 thousand.

The business transaction amount between Cyber Power Systems (HK) Limited and Cyber Energy (Shenzhen), Inc. for the previous year comprises sales of goods $40,480 thousand.

Note B: Financing Limits is 20% of the net value of Cyber Power Systems (HK) Limited (based on the average of buy/sell HKD closing exchange rate) = $71,218 x 20% = $14,244. The additional investment in Cyber Energy (Shenzhen), Inc. was made in directly through third-tier subsidiary - Cyber Energy (Shenzhen), Inc. from the Company’s subsidiary - Broad Win International Investment Co., Ltd. under the approval of board of directors on March 23, 2018.

Note C: Financing Limits is 20% of the net value of Cyber Power Systems (USA), Inc. (based on the average of buy/sell USD closing exchange rate) = $486,363 x 20% = $97,273.

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TABLE 7

CYBER POWER SYSTEMS, INC.

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Buyer	Related Party	Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
Cyber Power Systems (USA), Inc. Cyber Power Systems B.V. Nitram SAS Cyber Power (Shenzhen), Inc. Cyber Power Systems (HK) Limited Cyber Power (Shenzhen), Inc. Dongguan Cyber Energy Co., Ltd.	Cyber Power Systems, Inc. Cyber Power Systems, Inc. Cyber Power Systems, Inc. Cyber Power Systems, Inc. Cyber Power Systems, Inc. Ning Yuan Xian Cyber Power, Inc. Cyber Energy (Shenzhen), Inc. Ning Yuan Xian Cyber Power, Inc. Cyber Power Systems (HK) Limited Cyber Energy Co., Ltd.	Investments accounted for using the equity method Investments accounted for using the equity method Investments accounted for using the equity method Investments accounted for using the equity method Investments accounted for using the equity method The same parent company The same parent company The same parent company The same parent company Substantive related party	Purchase Purchase Purchase Processing revenue Sale Purchase Purchase Processing cost Sale Sale	$ 2,742,751 158,876 149,058 (633,496) (757,844) 130,369 496,294 147,607 (103,956) (124,191)	100 100 98 (100) (91) 16 61 99 (45) (53)	Note A Note A Note A Note A Note A Note B Note B Note B Note B Note B	Note A Note A Note A Note A Note A Note B Note B Note B Note B Note B	Note A Note A Note A Note A Note A Note B Note B Note B Note B Note B	Accounts payable $(1,062,048) Accounts payable $(50,489) Accounts payable $(42,165) Accounts receivable $325,988 Accounts receivable $84,049 Accounts payable $(76,834) Prepayments $64,404 Estimated accounts payable $(13,161) Accounts receivable $21,699 Accounts receivable $104,822	(100) (100) (100) 100 75 (62) 100 (72) 16 78

Note A: Refer to Table 3.

Note B: Refer to Table 10.

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TABLE 8

CYBER POWER SYSTEMS, INC.

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Cyber Power (Shenzhen), Inc. Dongguan Cyber Energy Co., Ltd.	Cyber Power Systems, Inc. Cyber Energy Co., Ltd.	Investments accounted for using the equity method Substantive related party	Accounts receivable - processing cost $325,988 Accounts receivable $104,822	2.25 2.27	$ - -	- -	$ 95,329 86,199	$ - -

69 -

TABLE 9

CYBER POWER SYSTEMS, INC.

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Paid-in Capital	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2018	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investments from Taiwan as of December 31, 2018	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note E)	Carrying Amount as of December 31, 2018	Accumulated Repatriation of Investment Income as of December 31, 2018	Note
					Outflow	Inflow
Cyber Power (Shenzhen), Inc. Cyber Energy (Shenzhen), Inc. Ning Yuan Xian Cyber Power, Inc. Cyber Power Technology (Shenzhen), Inc. Dongguan Cyber Energy Co., Ltd.	Production of uninterruptible power systems Production of uninterruptible power systems Production of uninterruptible power systems Selling of uninterruptible power systems Production of uninterruptible power systems	$ 34,025 (US$ 1,000) 149,533 (US$ 5,000) 286,619 (CNY 62,000) 72,526 (US$ 2,338) 27,228 (CNY 6,000)	Note A Note B Note C Note D Note E	$ 24,638 (US$ 750) 59,411 (US$ 2,037) - - 71,324 (US$ 2,301) - -	$ - 91,305 (US$ 3,000) - - -	$ - - - - -	$ 24,638 (US$ 750) 150,716 (US$ 5,037) - - 71,324 (US$ 2,301) - -	$ 22,832 (7,843) 16,845 (5,392) (11,045)	100.00 100.00 100.00 100.00 100.00	$ 22,832 (7,843) 2,385 (5,392) (11,045)	$ 359,124 137,206 300,318 18,792 16,000	$ - - - - -

Note A: Parent company: Cyber Power Systems, Inc.; subsidiary: Broad Win International Investment Co., Ltd.; second-tier subsidiary: Planet Technology Limited; third-tier subsidiary: Cyber Power (Shenzhen), Inc.

Note B: Parent company: Cyber Power Systems, Inc.; subsidiary: Broad Win International Investment Co., Ltd.; second-tier subsidiary: Portal Star Co., Ltd.; third-tier subsidiary: Cyber Energy (Shenzhen), Inc.

Note C: The investment was made directly from Cyber Power (Shenzhen), Inc.

Note D: Parent company: Cyber Power Systems, Inc.; subsidiary: Broad Win International Investment Co., Ltd.; second-tier subsidiary: Portal Star Co., Ltd.; third-tier subsidiary: Cyber Power Technology (Shenzhen), Inc.

Note E: Dongguan Cyber Energy Co., Ltd. was established by Cyber Energy (Shenzhen), Inc. from its own fund.

Note F: Financial statements of these companies, which were audited by the accounting firm of the parent company.

Accumulated Outward Remittance for Investments in Mainland China as of December 31, 2018	Investment Amounts Authorized by the Investment Commission, MOEA	Upper Limit on the Amount of Investment Stipulated by the Investment Commission, MOEA
$ 246,678 (US$ 8,088)	$ 301,823 (US$ 10,088)	$ 2,660,384

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TABLE 10

CYBER POWER SYSTEMS, INC.

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD PARTY, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES

FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Relationship	Transaction Type	Amount		Transaction Details	Transaction Details	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Unrealized (Gain) Loss	Note
				Price	Payment Terms	Comparison with Normal Transactions	Ending Balance	%
Cyber Power (Shenzhen), Inc. The transactions between Cyber Power Systems (HK) Limited and Cyber Energy (Shenzhen), Inc. The transactions between Cyber Power Systems (HK) Limited and Ning Yuan Xian Cyber Power, Inc. The transactions between Cyber Power (Shenzhen), Inc. and Ning Yuan Xian Cyber Power, Inc. The transactions between Cyber Energy (Shenzhen), Inc. and Cyber Power Technology (Shenzhen), Inc. The transactions between Dongguan Cyber Energy Co., Ltd. and Cyber Energy (Shenzhen), Inc. The transactions between Dongguan Cyber Energy Co., Ltd. and Cyber Power Systems (HK) Limited The transactions between Dongguan Cyber Energy Co., Ltd. and Cyber Power Technology (Shenzhen), Inc. The transactions between Dongguan Cyber Energy Co., Ltd. and Cyber Energy Co., Ltd.	Third-tier subsidiary Second-tier subsidiary (Cyber Power Systems (HK) Limited) Second-tier subsidiary (Cyber Power Systems (HK) Limited) Third-tier subsidiary Third-tier subsidiary Third-tier subsidiary Third-tier subsidiary Third-tier subsidiary Substantive related party	Processing cost Other operating costs Sales of goods Purchases of goods Sales of goods Purchases of goods Processing cost Processing revenue Processing revenue Purchases of goods Sales of goods Purchases of goods Processing revenue Sales of goods	$ 633,496 24,149 36,235 496,294 25,181 130,369 147,607 20,474 1,962 71,635 103,956 17,674 8,015 124,191	Note A Note A Note B Note B Note B Note B Note A Note B Note C Note C Note C Note C Note D Note C	Note A Note A Note B Note B Note B Note B Note A Note B Note C Note C Note C Note C Note D Note C	Note A Note A Note B Note B Note B Note B Note A Note B Note C Note C Note C Note C Note D Note C	Accounts payable - processing cost $(325,988) Accounts payable $(18,688) Accounts receivable $16,392 Prepayments $64,404 Accounts receivable $10,305 Accounts payable $(76,834) Estimated accounts payable $(13,161) Accounts receivable $5,423 Accounts receivable $1,668 Accounts payable $(97,204) Accounts receivable $21,699 Accounts payable $(18,005) Accounts receivable $6,542 Accounts receivable $104,822	(30) (2) 15 100 9 (62) (72) 3 1 (31) 16 (6) 5 78	$ - - - - - 14,460 - - - - - - - -

(Continued)

71 -

Note A: Processing cost: Managed by the cost-plus method, and the estimated processing cost is prepaid at the beginning of each month, and offset against the actual processing cost at the end of month.

Other operating cost: According to the specifications set by both parties in the contract, the current estimated processing amount is prepaid at the beginning of each month, and then offset against the actual processing cost at the end of month.

Note B: The payment term is 60 days, the collection term is 90 days, according to the specifications set by both parties in the contract.

Note C: The payment term is 60 days, the collection term is 60 days, according to the specifications set by both parties in the contract.

Note D: After referring to market price, the Company will follow the specifications set by both parties in the contract and pay the actual processing cost at the end of each month.

Note E: Financing provided to an investee company in mainland China, either directly or indirectly through a third party: Table 6.

(Concluded)

72 -

AI assistant

CyberPower — Annual Report 2018

52355_rns_2018-11-13_14016405-c01f-44bc-be82-a160e5820109.pdf

Cyber Power Systems, Inc.

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Assessment of Inventory

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

Auditors’ Responsibilities for the Audit of the Financial Statements

Notice to Readers

CYBER POWER SYSTEMS, INC.

BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CYBER POWER SYSTEMS, INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CYBER POWER SYSTEMS, INC.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CYBER POWER SYSTEMS, INC.

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CYBER POWER SYSTEMS, INC.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CYBER POWER SYSTEMS, INC.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CYBER POWER SYSTEMS, INC.

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

3. APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS

Classification, measurement and impairment of financial assets

Definition of a lease

The Company as lessee

The Company as lessor

Anticipated impact on assets, liabilities and equity

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

k. Financial instruments

1) Financial assets

2018

b) Impairment of financial assets

2018

2017

2) Financial liabilities

a) Subsequent measurement

m. Revenue recognition

2018

2017

o. Borrowing costs

p. Employee benefits

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Write-down of Inventories

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL ASSETS AT AMORTIZED COST - 2018

8. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

9. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

a. Trade receivables

In 2018

At amortized cost

December 31, 2018

In 2017

b. Other receivables

10. INVENTORIES

11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

12. PROPERTY, PLANT AND EQUIPMENT

13. INVESTMENT PROPERTIES

Completed Investment Properties

14. OTHER INTANGIBLE ASSETS

15. OTHER ASSETS

16. BORROWINGS

a. Short-term borrowings

b. Long-term borrowings

17. TRADE PAYABLES

18. OTHER LIABILITIES

19. PROVISIONS

20. RETIREMENT BENEFIT PLANS

a. Defined contribution plan

b. Defined benefit plan

21. EQUITY

a. Share capital

Ordinary shares

b. Capital surplus

c. Retained earnings and dividend policy

CyberPower Annual Report 2018