FEDS - Annual Report 2018 | FinancialReports.eu

Far Eastern Department Stores, Ltd. and Subsidiaries

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

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2018 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standards 10 “Consolidated and Separate Financial Statements.” Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

Very truly yours,

FAR EASTERN DEPARTMENT STORES, LTD.

DOUGLAS HSU Chairman

March 20, 2019

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Far Eastern Department Stores, Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Far Eastern Department Stores, Ltd. and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”).

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

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 Consolidated Financial Statements section of our report. We are independent of the Group 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 consolidated financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters for the Group’s consolidated financial statements for the year ended December 31, 2018 are stated as follows:

Evaluation of Impairment Loss of Goodwill

As of December 31, 2018, the goodwill of the Group was NT$3,302,782 thousand, accounted for 3% of total consolidated assets, which is material to the consolidated financial statements. Under IAS 36, management must test impairment annually.

The goodwill of the Group mainly derived from the merger and acquisition of operating segments in mainland China. When testing goodwill for impairment, management should evaluate whether the recoverable amount is higher than the carrying amount. In determining the recoverable amount, management should estimate the future cash flows from operating segments in mainland China and determine the optimal discount rate. Significant assumptions involve both judgments made by management and material estimation uncertainty. Thus, the evaluation of impairment loss of goodwill is considered a key audit matter. For the accounting policy related to impairment loss of the goodwill, refer to Notes 4, 5 and 19 of the accompanying consolidated financial statements.

Our key audit procedures for the aforementioned key audit matter are as follows:

We evaluated the expertise, competency and independence of external valuation specialists mandated by management. We verified the qualification of valuation specialists to ensure their objectivity and assignment were not influenced or restricted, and the methodology conducted was under regulation.
We understood the process of management’s estimation of the future sales growth rate and profit margin predicted by the operating segments in mainland China.
As a consideration for the assessment reliability in the year of 2019 and for succeeding years, we compared 2018 budget and actual operating results of the operating segments in mainland China, estimating the accuracy of management's historical forecast.
We confirmed whether management used the appropriate discount rate to assess impairments by using the same evaluation model to calculate the weighted average cost of capital ratio and whether the weighted average cost of capital used by management was significantly different.

Fair Value Evaluation of Investment Properties

As of December 31, 2018, the carrying amount of investment properties was NT$8,690,640 thousand, accounting for 8% of total consolidated assets, which is material to the consolidated financial statements. The Group’s investment properties are subsequently measured using the fair value model. The fair value evaluation involved significant accounting estimation and judgment. As a result, the fair value evaluation of investment property is considered to be a key audit matter. Refer to Notes 4, 5 and 18 to the accompanying consolidated financial statements for the relevant detailed information.

Our key audit procedures for the aforementioned key audit matter are as follows:

We evaluated the expertise, competency and independence of external valuation specialists mandated by management. We verified the qualification of valuation specialists to ensure that their objectivity and assignment were not influenced or restricted, and the methodology conducted was under regulation.
We reviewed significant lease contracts and compared relevant market rentals to assess the reasonableness of cash flow forecasts.
We assessed the reasonableness of the valuer’s assumptions and methods used in the valuation.

Others Matter

We have also audited the parent company only financial statements of Far Eastern Department Stores, Ltd. as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion.

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

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

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

Those charged with governance, including members of the audit committee, are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 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 Shu-Chuan Yeh and Ming-Hsing Cho.

Deloitte & Touche Taipei, Taiwan Republic of China

March 20, 2019

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss - current (Note 7) Financial assets at fair value through other comprehensive income - current (Notes 8 and 36) Available-for-sale financial assets - current (Notes 10 and 36) Financial assets at amortized cost - current (Notes 9 and 36) Debt investments with no active market - current (Notes 12 and 36) Notes receivable (Note 13) Trade receivables (Note 13) Trade receivables from related parties (Notes 13 and 35) Other receivables (Notes 13 and 35) Current tax assets (Note 30) Inventories (Note 14) Prepayments (Notes 20 and 35) Other current assets (Notes 21 and 35) Total current assets NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income - non-current (Notes 8 and 36) Available-for-sale financial assets - non-current (Notes 10 and 36) Financial assets at amortized cost- non-current (Notes 9 and 36) Financial assets measured at cost - non-current (Note 11) Debt investments with no active market - non-current (Notes 12 and 36) Investments accounted for using the equity method (Notes 16 and 36) Property, plant and equipment (Notes 17, 35 and 36) Investment properties (Notes 18 and 36) Intangible assets (Note 19) Deferred tax assets (Note 30) Long-term prepayments for lease (Notes 20 and 35) Other non-current assets (Notes 21 and 35) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 22, 35 and 36) Short-term bills payable (Notes 22 and 36) Contract liabilities - current (Note 28) Notes payable Trade payables Trade payables to related parties (Note 35) Other payables (Notes 24, 27 and 35) Current tax liabilities (Note 30) Provisions - current (Note 25) Advance receipts (Note 35) Deferred revenue - current (Note 24) Current portion of bonds payable (Note 23) Current portion of long-term borrowings (Notes 22 and 36) Other current liabilities (Notes 24 and 35) Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 22 and 36) Provisions - non-current (Note 25) Deferred tax liabilities (Note 30) Net defined benefit liabilities (Note 26) Other non-current liabilities (Notes 24 and 35) Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE GROUP Share capital Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Treasury shares Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS Total equity TOTAL		2018 Amount % $ 14,594,847 14 437,747 - 244,785 - - - 2,077,919 2 - - 2,287 - 1,582,273 2 155,942 - 2,159,355 2 5,655 - 2,729,234 3 977,014 1 85,798 - 25,052,856 24 3,960,014 4 - - 227,400 - - - - - 8,678,647 8 43,532,941 42 8,690,640 8 3,449,258 3 772,100 1 7,704,464 8 1,678,021 2 78,693,485 76 $ 103,746,341 100 $ 12,957,612 13 3,480,365 3 7,525,468 7 3,683 - 17,579,453 17 104,999 - 3,687,578 4 609,796 1 6,592 - 354,277 - - - - - - - 320,947 - 46,630,770 45 15,090,000 15 24,909 - 2,114,362 2 808,480 1 1,387,430 1 19,425,181 19 66,055,951 64 14,169,406 14 3,315,420 3 3,166,880 3 2,656,286 2 2,081,772 2 7,904,938 7 4,231,252 4 (97,110) - 29,523,906 28 8,166,484 8 37,690,390 36 $ 103,746,341 100		2017
				Amount % $ 16,116,484 15 496,455 1 - - 233,523 - - - 1,914,388 2 1,131 - 1,113,758 1 126,364 - 1,784,033 2 3,079 - 2,583,275 2 870,134 1 69,068 - 25,311,692 24 - - 2,944,887 3 - - 608,037 - 227,000 - 8,444,059 8 43,699,225 41 8,738,216 8 5,059,516 5 719,578 1 8,176,674 8 1,779,567 2 80,396,759 76 $ 105,708,451 100 $ 13,084,956 12 2,514,700 3 - - 3,071 - 18,285,105 17 127,880 - 4,250,840 4 539,394 1 6,828 - 7,456,419 7 83,761 - 998,149 1 3,500,000 3 264,545 - 51,115,648 48 13,258,102 13 26,465 - 1,915,480 2 945,908 1 1,588,670 1 17,734,625 17 68,850,273 65 14,169,406 13 3,315,931 3 3,013,281 3 2,643,743 3 2,274,946 2 7,931,970 8 3,678,521 3 (97,110) - 28,998,718 27 7,859,460 8 36,858,178 35 $ 105,708,451 100

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

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

OPERATING REVENUES (Notes 28 and 35) OPERATING COSTS (Notes 14, 29 and 35) GROSS PROFIT OPERATING EXPENSES (Notes 26, 29 and 35) Selling and marketing expenses General and administrative expenses Expected credit loss Total operating expenses OPERATING PROFIT NON-OPERATING INCOME AND EXPENSES Other income (Note 29) Other gains and losses (Notes 17, 19, 29 and 35) Finance costs (Notes 29 and 35) Share of profit for loss of associates accounted for using the equity method Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Note 30) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) (Notes 26, 27 and 30) Items that will not be reclassified subsequently to profit or loss: Unrealized gain on investments in equity instruments at fair value through other comprehensive income Remeasurement of defined benefit plans Share of other comprehensive income (loss) of associates accounted for using the equity method Income tax relating to items that will not be reclassified subsequently to profit or loss		2018 Amount % $ 39,242,551 100 19,091,584 49 20,150,967 51 923,663 2 15,056,030 39 (16,055) - 15,963,638 41 4,187,329 10 530,849 1 (1,743,179) (4) (437,280) (1) 11,396 - (1,638,214) (4) 2,549,115 6 898,620 2 1,650,495 4 534,199 2 (50,328) - 409,335 1 23,366 - 916,572 3		2017
				Amount % $ 41,166,982 100 20,673,607 50 20,493,375 50 1,036,753 3 16,369,898 40 - - 17,406,651 43 3,086,724 7 213,248 - (116,574) - (445,376) (1) (39,180) - (387,882) (1) 2,698,842 6 853,820 2 1,845,022 4 - - (78,408) - (3,666) - 13,325 - (68,749) - (Continued)

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Unrealized loss on available-for-sale financial assets Share of other comprehensive income (loss) of associates accounted for using the equity method Other comprehensive (loss) income for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET PROFIT ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company Non-controlling interests EARNINGS PER SHARE (Note 31) Basic Diluted		2018 Amount % $ (14,562) - - - 5,267 - (9,295) - 907,277 3 $ 2,557,772 7 $ 1,318,150 3 332,345 1 $ 1,650,495 4 $ 2,029,426 5 528,346 2 $ 2,557,772 7 $ 0.94 $ 0.93		2017
				Amount % $ 53,290 - (140,221) - (3,528) - (90,459) - (159,208) - $ 1,685,814 4 $ 1,535,986 3 309,036 1 $ 1,845,022 4 $ 1,363,957 3 321,857 1 $ 1,685,814 4 $ 1.09 $ 1.09


		$		$
		$		$
		$		$
		$		$
		$		$

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

(Concluded)

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

	Equity Attri	butable to Owners of the Company	butable to Owners of the Company
Share Capital Capital Surplus (Note 27) (Note 27) $ 14,169,406 $ 3,319,868 - - - - - - - - - - - - - - - - - (3,937) 14,169,406 3,315,931 - - 14,169,406 3,315,931 - - - - - - - - - - - - - - - - - - - (511) - - $ 14,169,406 $ 3,315,420	Retained Earnings (Note 27) Unappropriated Legal Reserve Special Reserve Earnings $ 2,899,856 $ 2,529,594 $ 2,013,557 113,425 - (113,425 ) - 114,149 (114,149 ) - - (991,858 ) - - - 113,425 114,149 (1,219,432) - - 1,535,986 - - (55,150) - - 1,480,836 - - (15) 3,013,281 2,643,743 2,274,946 - - 92,444 3,013,281 2,643,743 2,367,390 153,599 - (153,599 ) - 12,543 (12,543 ) - - (1,416,940 ) - - - 153,599 12,543 (1,583,082) - - 1,318,150 - - (24,850) - - 1,293,300 - - - - - (28) - - 4,192 $ 3,166,880 $ 2,656,286 $ 2,081,772		Other Equity (Note 27)	ain on Property Treasury Shares Revaluation (Note 27) $ 2,170,970 $ (97,110) - - - - - - - - - - - - - - - - - - 2,170,970 (97,110 ) - - 2,170,970 (97,110) - - - - - - - - - - - - - - - - - - - - - - $ 2,170,970 $ (97,110)
		Exchange U Differences on Translating A Foreign Operations F $ 58,273 - - - - - - 27,775 27,775 - 86,048 - 86,048 - - - - - - 4,606 4,606 - - - $ 90,654	Unrealized Gain (Loss) on Financial Assets at Fair nrealized Gain Value Through (Loss) on Other vailable-for-sale Comprehensive G inancial Assets Income $ 1,566,157 $ - - - - - - - - - - - - - (144,654) - (144,654) - - - 1,421,503 - (1,421,503) 1,242,300 - 1,242,300 - - - - - - - - - - - - - 731,520 - 731,520 - - - - - (4,192) $ - $ 1,969,628

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

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

		2018	2017
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income tax	$	2,549,115 $	2,698,842
Adjustments for:
Depreciation expenses		2,355,319	2,650,811
Amortization expenses		51,903	44,687
Expected credit loss reversed on trade receivables		(16,055)	-
Impairment loss reversal on receivables		-	(7,062)
Net (gain) loss on financial assets or liabilities at fair value through
profit or loss		(10,443)	2,851
Finance costs		437,280	445,376
Interest income		(128,124)	(74,855)
Dividend income		(152,720)	(138,393)
Share of (profit) loss of associates accounted for using the equity
method		(11,396)	39,180
Loss on disposal of property, plant and equipment		26,487	223,336
Loss on disposal of investment properties		90,621	-
Loss on disposal of intangible assets		-	3,261
Gain on disposal of non-current assets held for sale		-	(6,628)
Gain on disposal of investments		-	(428,971)
Impairment loss recognized on financial assets		-	2,055
Impairment loss recognized on intangible assets		1,630,000	1,205,840
Impairment loss recognized on property, plant and equipment		38,047	2,040
Unrealized gain on physical inventory and slow-moving inventories		(18,415)	(1,734)
(Gain) loss on changes in fair value of investment properties		(43,045)	9,061
Amortization of prepayments		5,582	25,903
Amortization of prepayments for lease		337,503	325,824
Reversal of deferred revenue		-	(92,267)
Reversal of unrealized purchase discounts		433	(1,506)
Net changes in operating assets and liabilities
Financial assets held for trading		-	5,009
Decrease in financial assets mandatorily classified as at fair value
through profit or loss		69,151	-
Notes receivable		(1,156)	14,763
Trade receivables		(465,119)	(355,141)
Trade receivables from related parties		(26,163)	36,721
Other receivables		(319,715)	52,691
Inventories		(127,977)	181,071
Prepayments		36,461	148,600
Other current assets		(16,730)	10,249
Contract liabilities - current		361,734	-
Notes payable		612	(34,821)
Trade payables		(705,652)	2,034,431
Trade payables to related parties		(22,881)	14,063
Other payables		(718,428)	(979,615)
Reversal of provisions		(2,045)	(13,548)
			(Continued)

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FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

Deferred revenue Advance receipts Other current liabilities Net defined benefit liabilities Cash generated from operations Dividends received Interest paid Interest received Income tax returned Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets measured at cost Proceeds from sale of debt investments with no active market Acquisition of investments accounted for using the equity method Acquisition of available-for-sale assets Proceeds from sale of available-for-sale financial assets Decrease in prepaid long-term investments Proceeds from disposal of non-current assets held for sale Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Payments for intangible assets Payments for investment properties Decrease in other non-current assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayments of short-term borrowings Proceeds from short-term bills payable Repayments of short-term bills payable Repayments of bond payables Proceeds from long-term borrowings Repayments of long-term borrowings Decrease in other non-current liabilities Dividends paid to owners of the Company Dividends paid to non-controlling interests Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES	2018 $ - 120,205 56,402 (191,239) 5,189,552 290,342 (436,417) 115,480 194 (672,202) 4,486,949 (163,931) - - - - 49,288 - (2,257,557) 606 (63,726) - (82,785) (2,518,105) 174,720,516 (174,820,679) 26,313,358 (25,347,693) (1,000,000) 75,821,898 (77,490,000) (26,346) (1,414,847) (256,698) (3,500,491) 10,010	2017 $ 83,761 71,379 (14,111) (92,161) 8,090,992 238,940 (431,023) 67,559 3,125 (799,617) 7,169,976 - (1,324,877) (286,655) (92,331) 1,171,836 84,174 13,500 (1,825,793) 1,940 (53,748) (1,481) 77,909 (2,235,526) 137,230,416 (133,883,006) 29,826,307 (30,002,553) - 67,111,036 (71,280,600) (35,184) (992,035) (267,424) (2,293,043) (34,864) (Continued)

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FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

2018 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $ (1,521,637) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 16,116,484 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 14,594,847 The accompanying notes are an integral part of the consolidated financial statements.	2017 $ 2,606,543 13,509,941 $ 16,116,484 (Concluded)

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

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

Far Eastern Department Stores, Ltd. (the “Company” or “FEDS”) was incorporated in the Republic of China (ROC) in August 31, 1967, and operates a nationwide chain of department stores. The Company’s shares have been listed on the Taiwan Stock Exchange since October 11, 1978.

The consolidated financial statements of the Company and its subsidiaries, collectively referred to as the “Group”, are presented in the Company’s functional currency, the New Taiwan dollars.

2. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements were approved by the board of directors and authorized for issue on March 30, 2019.

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

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

Except for the following, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’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 Group 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 Group’s financial assets and financial liabilities as of January 1, 2018.

Financial Assets
Cash and cash equivalents
Equity securities

Mutual funds

Debt investments with no
active market

Notes receivable, trade
receivables and other
receivables

Refundable deposits

Financial Assets
FVTPL
Add: Reclassification from
available-for-sale (IAS 39)
Required reclassification
Fair value option elected at
January 1, 2018
FVTOCI
Equity instruments
Add: Reclassification from
available-for-sale (IAS 39)
Amortized cost
Add: Reclassification from loans and
receivables (IAS 39)
Investments accounted for
using the equity method

Measurement Category
Carrying Amount
IAS 39
IFRS 9
IAS 39
IFRS 9
Remark
Loans and receivables
Amortized cost
$ 16,116,484 $ 16,116,484
d)
Held‑for‑trading
Mandatorily at FVTPL
86,191
86,191
Available‑for‑sale
Mandatorily at FVTPL
-
-
a)
Available‑for‑sale
Fair value through other
comprehensive income
(FVTOCI) - equity
instruments
3,786,477
3,670,630
a)
Held‑for‑trading
Mandatorily at FVTPL
410,264
410,264
Loans and receivables
Amortized cost
2,141,388
2,141,388
b)
Loans and receivables
Amortized cost
3,015,999
3,019,075
c)
Loans and receivables
Amortized cost
1,655,510
1,655,510
d)
IAS 39
Carrying
Amount as of
January 1, 2018 Reclassifications
Re-
measurements
IFRS 9
Carrying
Amount as of
January 1, 2018
Retained
Earnings
Effect on
January 1, 2018
Other Equity
Effect on
January 1, 2018
Remark
$ 496,455
$ -
$ -
$ 496,455
$ -
$ -

-

-

-

-

-

-
a)

496,455

-

-

496,455

-

-

-

3,786,447

(115,847)

3,670,600

90,897

(206,744)
a)

-

22,929,381

3,076

22,932,457

3,076

-
b)

8,444,059

-

26,012

8,470,071

(1,529)

27,541
e)
$ 8,940,514
$26,715,828
$ (86,759)
$ 35,569,583
$ 92,444
$ (179,203)

a) The Group elected to classify all of its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTPL and FVTOCI under IFRS 9. And the Group recognized under IAS 39 impairment loss on certain investments in equity securities previously classified as available-for-sale and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required. As a result, the related other equity - unrealized gain on available-for-sale financial assets was reclassified to retained earnings in the amount of $90,897 thousand and to other equity - unrealized loss on financial assets at FVTOCI in the amount of $90,897 thousand on January 1, 2018.

Investments in unlisted shares previously measured at cost under IAS 39 have been classified at FVTPL and designated as at FVTOCI under IFRS 9 and were remeasured at fair value. The Group recognized under IAS 39 impairment loss on certain investments in equity securities previously classified as FVTPL and the loss was accumulated in retained earnings. Consequently, a decrease of $115,847 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized loss on financial assets at FVTOCI on January 1, 2018.

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b) Debt investments previously classified as debt investments with no active market and measured at amortized cost under IAS 39 are classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.
c) 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. As a result of retrospective application, the adjustments comprised an decrease in the loss allowance of $3,076 thousand and a increase in retained earnings of $3,076 thousand on January 1, 2018.
d) Cash and cash equivalents and refundable deposits 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.
e) For investments in associates accounted for using the equity method, the adjustments comprised an increase in impact on IFRS of $26,012 thousand impacting the IFRS and a decrease of $1,529 thousand in retained earnings and an increase of $27,541 thousand in unrealized gain on other equity- FVTOCI.
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.

Under IFRS 15, the Group does not obtain control of the specified goods or services before they are transferred to the customers and, therefore, is acting as an agent in the transaction. Prior to the application of IFRS 15, the Group determined whether it was a principal or an agent based on its exposure to the significant risks and rewards of ownership of the goods or services and considered itself as a principal in the transaction.

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. Currently, the receivable and the deferred revenue are recognized when revenue is recognized for contracts under IAS 18.

The Group elected only to retrospectively apply IFRS 15 to contracts that were not complete as of January 1, 2018 and didn’t to restate the comparative information in 2017.

The impact on assets, liabilities and equity as of January 1, 2018 from the initial application of IFRS 15 is set out below:

As Originally Stated Adjustments Arising from Initial Application Provisions $ 7,456,419 $ (7,079,973) Deferred revenue - current 83,761 (83,761) Contract liabilities - current - 7,163,734 Total effect on liabilities $ 7,540,180 $ -	Restated $ 376,446 - 7,163,734 $ 7,540,180

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Had the Group applied IAS 18 in the current year, the following adjustments should be made to reflect the line items and balances under IAS 18.

Impact on assets, liabilities and equity for current year

	December 31,	December 31,
		2018
Decrease in contract liabilities - current	$	(7,525,468)
Increase in provisions		7,440,666
Increase in deferred revenue		84,802
Increase (decrease) in liabilities	$	-
Impact on total comprehensive income for current year
	For the Year
		Ended
	December 31,
		2018
Increase in operating revenue	$	1,621,857
Increase in operating costs		1,621,857
Increase in net profit for the year	$	-

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

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

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

4) IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

IAS 21 stipulated that a foreign currency transaction shall be recorded on initial recognition in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. IFRIC 22 further explains that the date of the transaction is the date on which an entity recognizes a non-monetary asset or non-monetary liability from payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine the date of the transaction for each payment or receipt of advance consideration.

16 -
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

by the FSC for application starting from 2019
New IFRSs Annual Improvements to IFRSs 2015-2017 Cycle Amendment to IFRS 9 "Advance Repayment Characteristics with Negative Compensation" IFRS 16 “Leases” Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” IFRIC 23 “Uncertainty over Income Tax Treatments”	Effective Date Announced by IASB (Note 1)
	January 1, 2019 January 1, 2019 (Note 2) January 1, 2019 January 1, 2019 (Note 3) January 1, 2019 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 Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.
1) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group 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 Group as lessee

Upon initial application of IFRS 16, the Group 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 consolidated 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 consolidated statements of comprehensive income, the Group 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 consolidated 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. Prepaid lease payments for land use rights of land are recognized as prepayments for leases. The difference between the actual payments and the expenses, as adjusted for lease incentives, is recognized as other payables and other non-current liabilities. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows. Leased assets and finance lease payables are recognized for contracts classified as finance leases.

17 -

The Group 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.

Except for the leases of investment properties mentioned below, 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 payments. Except for the following practical expedients which are to be applied, the Group will apply IAS 36 to all right-of-use assets.

Part of the lease which is currently accounted for as an operating lease under IAS 17, qualifies as an investment property. A lease liability for that leasehold building will be recognized and measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Related right-of-use assets will be measured at fair value and presented as investment properties and any difference will be recognized under retained earnings. There will not be any adjustments made for lease which is currently accounted for as an investment property.

The Group expects to apply the following practical expedients:

a) The Group will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.
b) The Group will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.
c) The Group 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 Group as lessor

Except for sublease transactions, the Group 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.

The Group subleased its leasehold part of land and building to a third party. Such sublease is classified as an operating lease under IAS 17. The Group will assess the sublease classification on the basis of the remaining contractual terms and conditions of the head lease and sublease on January 1, 2019.

18 -

Anticipated impact on assets, liabilities and equity

Prepayments Investments accounted for using the equity method Property, plant and equipment Right-of-use assets Investment properties Long-term prepayments for lease Other non-current assets Total effect on assets Lease liabilities - current Other payables Lease liabilities - non-current Other liabilities - non-current Total effect on liabilities Retained earnings Non-controlling interests Total effect on equity	Carrying Amount as of December 31, 2018 $ 977,014 8,678,647 43,532,941 - 8,690,640 7,704,464 1,678,021 $ 71,261,727 $ - 3,687,578 - 1,387,430 $ 5,075,008 $ 7,904,938 8,166,484 $ 16,071,422	Adjustments Arising from Initial Application Adjusted Carrying Amount as of January 1, 2019 $ (367,914) $ 609,100 (46) 8,678,601 (9,643,083) 33,889,858 39,904,197 39,904,197 537,429 9,228,069 (1,659,632) 6,044,832 120,557 1,798,578 $ 28,891,508 $ 100,153,235 $ 2,720,757 $ 2,720,757 (78,571) 3,609,007 27,636,174 27,636,174 (893,861) 493,569 $ 29,384,499 $ 34,459,507 $ (333,240) $ 7,571,698 (159,751) 8,006,733 $ (492,991) $ 15,578,431

2) IFRIC 23 “Uncertainty over Income Tax Treatments”

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

Except for the above impacts, as of the date the consolidated financial statements were authorized for issue, the Group 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 Group’s financial position and financial performance and will disclose these other impacts when the assessment is completed.

19 -
c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date New IFRSs Announced by IASB (Note 1) Amendments to IFRS 3 “Definition of a Business” January 1, 2020 (Note 2) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 and IAS 8 “Definition of Material” 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 Group 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 Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

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

Basis of Preparation

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

The fair value measurements, 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:

a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c. Level 3 inputs are unobservable inputs for the asset or liability.
20 -

Classification of Current and Non-current Assets and Liabilities

Current assets include:

a. Assets held primarily for the purpose of trading;
b. Assets expected to be realized within 12 months after the reporting period; and
c. 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:

a. Liabilities held primarily for the purpose of trading;
b. 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
c. Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

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

Basis of Consolidation

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

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Total comprehensive income of subsidiaries is attributed to the shareholders of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to shareholders of the parent.

See Note 15 and Table 8 for details on subsidiaries, including the percentages of their ownership and main businesses.

Refer to Table 1 for the diagram of intercompany relationships of the consolidated financial statements for the year ended December 31, 2018.

Foreign Currencies

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

21 -

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.

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

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including the subsidiaries and associates in other countries or subsidiaries which use currencies that are different from the Group) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income (as appropriate attributed to owners of the Group and non-controlling interests, respectively).

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Group are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Inventories

Inventories are stated at the lower of cost or net realizable value, using the retail method. 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.

Investment in Associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. The Group uses the equity method of accounting to recognize its investments in associates.

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

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

22 -

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

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Group continues to apply the equity method and does not remeasure the retained interest.

When the Group transact with its associate, profits and losses resulting from the transactions with the associate are recognized in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

Property, Plant and Equipment

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

Property, plant and equipment in the course of construction are measured at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for their intended use.

Depreciation on 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 method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. Assets are depreciated over the shorter of their lease terms and their useful lives using the straight-line method.

On derecognition of the property, plant and equipment, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss for the year.

Investment Properties

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

Investment properties are initially measured at cost (including transaction costs), and are subsequently measured using the fair value model. Gains or losses arising from changes in the fair value of investment properties are recognized in profit or loss for the period in which they arise.

23 -

Investment properties under construction of which the fair value is not reliably measurable are stated at cost less accumulated impairment loss until either such time as the fair value becomes reliably measureable or construction is completed (whichever comes earlier).

Investment properties are recorded as property, plant and equipment on or after the beginning of owner-occupation.

For a transfer from property, plant and equipment to investment property at the end of owner-occupation, any difference between the fair value of the property at the transfer date and its previous carrying amount is recognized in other comprehensive income.

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

Goodwill

Goodwill arising from the acquisition of a business is measured at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributable goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal, and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Intangible Assets

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis during their expected useful lives. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

When the Group has a right to charge for usage of concession infrastructure (as a consideration for providing construction services in a service concession arrangement), it recognizes this as an intangible asset. The intangible asset is subsequently measured at cost less accumulated amortization and any accumulated impairment loss.

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

24 -

Impairment of Tangible and Intangible Assets Other than Goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets other than goodwill to determine any indication of impairment loss on these assets. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the smallest group of cash-generating units on a reasonable and consistent allocation basis.

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. The impairment loss is recognized in profit or loss.

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

Financial Instruments

Financial assets and financial liabilities are recognized when the Group entity 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 FVTPL) 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 FVTPL are recognized immediately in profit or loss.

Financial assets

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

a. Measurement categories

2018

Financial assets are classified into the following categories: financial assets at FVTPL, financial assets at amortized cost and investments in equity instruments at FVTOCI.

1) Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 34.

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2) Financial assets at amortized cost

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

a) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
b) 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, trade receivables at amortized cost and refundable deposits, 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, repurchase bonds and commercial paper 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.

3) Investments in equity instruments at FVTOCI

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: financial assets at FVTPL, available-for-sale financial assets and loans and receivables.

1) Financial assets at FVTPL

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 34.

2) Available-for-sale financial assets

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

Available-for-sale financial assets are measured at fair value. Dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income. When the investments are disposed of or are determined to be impaired, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss.

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Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and presented as a separate line item as financial assets measured at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value of such financial assets is recognized in other comprehensive income. Any impairment losses are recognized in profit and loss.

3) Loans and receivables

Loans and receivables (including notes receivable, trade receivables, other receivables, cash and cash equivalents, debt investments with no active market and refundable deposits) 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.

Cash equivalents include time deposits and commercial paper 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.

b. Impairment of financial assets and contract assets

2018

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

The Group always recognizes lifetime expected credit losses (ECLs) for trade receivables. For all other financial instruments, the Group 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 Group 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 Group 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 FVTPL, 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 that, as a result of one or more events that occurred after the initial recognition of such financial assets, the estimated future cash flows of the investment have been affected.

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Financial assets at amortized cost, such as trade receivables and other receivables, 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 Group’s past experience with collecting payments as well as observable changes in national or local economic conditions that correlate with defaults on receivables, and other situations.

For a financial asset at amortized cost, the amount of the impairment loss recognized is the difference between such an asset’s carrying amount and the present value of its estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For a financial asset 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 on which the impairment is reversed) does not exceed what the amortized cost would have been had the impairment not been recognized.

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

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

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

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to impairment is recognized in other comprehensive income. In respect of available-for-sale debt securities, impairment loss is subsequently reversed through profit or loss if an increase in the fair value of such an investment can be objectively related to an event occurring after the recognition of the impairment loss.

For a financial asset measured at cost, the amount of the impairment loss is measured as the difference between such an asset’s carrying amount and the present value of its estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade 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 uncollectible trade receivables that are written off against the allowance account.

c. Derecognition of financial assets

The Group 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.

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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. On derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2017

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.

Financial liabilities

a. Subsequent measurement

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.

Provisions

The amount recognized as a provision is the best estimate 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. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

Revenue Recognition

2018

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

Revenue from the sale of goods are recognized as revenue when the goods are shipped or delivered 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.

When other party participates providing in goods or services to customers, the Group obtains control of the specified goods or services before they are transferred to the customers and, therefore, is acting as a principal in the transaction. On the contrary, the other party is acting as an agent. As the principal, the total amount of the consideration that is expected to be obtained in exchange for the transfer of goods or services is recognized as income. As an agent, the amount of any fees or commissions that the other party expected to obtain in exchange for the provision of goods or services, recognized as income. The charge or commission of the Group may be the net amount of the consideration. The income retained by the Group in exchange for goods or services is the amount retained after payment to the other party.

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Customer Loyalty Program, the Group offers award credits which can be used for future purchases when the customer shops. The award credits provides a material right to the customer. The transaction price allocated to the award credits is recognized as a contract liability when collected and will be recognized as revenue when the award credits is redeemed or has expired.

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 provided the seller can reliably estimate future returns based on previous experience and other relevant factors.

a. Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

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

Sales of goods that result in award credits for customers, under the Group’s award scheme, are accounted for as multiple element revenue transactions and the fair value of the consideration received or receivable is allocated between the goods supplied and the award credits granted. The consideration allocated to the award credits is measured by reference to their fair value, the amount for which the award credits could be sold separately. Such consideration is not recognized as revenue at the time of the initial sale transaction but is deferred and recognized as revenue when the award credits are redeemed and the Group’s obligations have been fulfilled.

b. Commissions from concessionaires’ sales

Commissions from concessionaires’ sales are recognized as goods are sold.

c. Maintenance and promotion fee income

According to contract agreements, maintenance and promotion fee income are recognized on the right to receive the income signed or as services are provided.

d. Dividend and interest income

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

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group 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 effective interest rate applicable.

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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.

a. The Group as a lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and amortized on a straight-line basis over the lease term.

Lease incentives included in the operating lease are recognized as an asset. The aggregate cost of incentives is recognized as a reduction of rental income on a straight-line basis over the lease term.

Contingent rents arising under operating leases are recognized as income in the period in which they are incurred.

b. The Group as lessee

Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance sheets as a finance lease obligation.

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

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis. When lease incentives are received to enter into finance leases, such incentives are recognized as a reduction of minimum lease payments.

Contingent rents arising under operating leases are recognized as an expense in the period in which they are incurred.

c. Leasehold land and buildings

When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group. The minimum lease payments are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

If the allocation of the lease payments can be made reliably, each element is accounted for separately in accordance with its lease classification. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease unless it is clear that both elements are operating leases; in which case the entire lease is classified as an operating lease.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time 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.

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

Retirement Benefit Costs

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

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

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Group’s defined benefit plan. 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.

Taxation

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

a. Current tax

According to the Income Tax Law, an additional tax on unappropriated earnings is provided for in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current period’s income tax expenses.

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group 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. Deductible temporary differences associated with these investments are recognized only to the extent that it is probable that there will be sufficient taxable profits against which to use the temporary differences and are expected to reverse in deferred tax assets in the foreseeable future.

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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 Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

c. Current and deferred tax 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.

When current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’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 estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

a. Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

b. Impairment assessment of tangible and intangible assets other than goodwill

For impairment tests of assets, the Group evaluates and decides the independent cash flows of certain assets, useful lives of those assets and their probable future profit or loss based on subjective judgment, asset-usage models and department store industry characteristics. Any change in national and local economic conditions or the Group’s strategy may cause a significant impairment loss.

c. Fair value measurements and valuation processes

Third-party qualified valuers were engaged to perform the fair value evaluation of the Group’s investment properties using the appropriate valuation techniques for fair value measurements.

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The valuers of the Group determined the appropriate inputs by referring to the analyses of the financial position and the operation results of investees, recent transaction prices and prices of the same equity instruments not quoted in active markets in the vicinity of the Group’s investment properties. If there are changes in the actual inputs in the future which differ from expectation, the fair value might vary accordingly. The Group updates inputs every quarter to confirm the appropriateness of the fair value measurement.

Information on the valuation techniques and inputs used in determining the fair value of investment properties is disclosed in Note 18.

6. CASH AND CASH EQUIVALENTS

Cash on hand and revolving funds Checking accounts and demand deposits Cash equivalents (investments with original maturities of less than 3 months) Time deposits Commercial papers		December 31	December 31
		2018 $ 343,068 5,816,392 6,608,013 1,827,374 $ 14,594,847	2017 $ 279,775 11,299,067 3,688,023 849,619 $ 16,116,484

The market rate intervals of cash in bank and commercial papers at the end of the reporting period are as follows:

Cash in bank Commercial papers	December 31
	2018 2017 0.010%-3.201% 0.001%-2.025% 0.550%-0.630% 0.380%-0.560%

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

Financial assets mandatorily classified as at FVTPL Non-derivative financial assets Beneficiary certificates Listed and over-the-counter (OTC) shares Financial assets held for trading Non-derivative financial assets Beneficiary certificates Listed and over-the-counter (OTC) shares		December 31	December 31
		2018 $ 344,481 93,266 $ 437,747 $ - - $ -	2017 $ - - $ - $ 410,264 86,191 $ 496,455

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8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

	December 31,	December 31,
		2018
Investments in equity instruments at FVTOCI
Domestic investments
Listed and OTC shares	$	3,631,653
Unlisted shares		564,243
		4,195,896
Foreign investments
Unlisted shares		8,903
	$	4,204,799
Current	$	244,785
Non-current		3,960,014
	$	4,204,799

a. These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale under IAS 39. Refer to Note 3 and Note 10 for information relating to their reclassification and comparative information for 2017.
b. Refer to Note 36 for information relating to investments in equity instruments at FVTOCI pledged as security.

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

	December 31,
	2018
Time deposits with original maturities of more than 3 months	$ 2,024,919
Pledged deposits	280,000
Money Lodged at Courts	400
	$ 2,305,319
Current	$ 2,077,919
Non-current	227,400
	$ 2,305,319

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December 31, 2018

	At Amortized
	Cost
Gross carrying amount	$ 2,305,319
Less: Allowance for impairment loss	-
Amortized cost	$ 2,305,319

The credit risk of financial instruments such as bank deposits is measured and monitored by the accounting department. The Group chooses the transaction object and the other party performs good credit with the bank.

a. The interest rates for financial assets at amortized cost were from 0.30% to 2.10% 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 Note 3 and Note 12 for information relating to their reclassification and comparative information for 2017.
b. Refer to Note 36 for information relating to investments in financial assets at amortized cost pledged as security.

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

	December 31,	December 31,
		2017
Listed and OTC shares	$	3,178,410
Current	$	233,523
Non-current		2,944,887
	$	3,178,410

a. On August 18, 2017, the Group sold its shareholdings of Far Eastern International Bank amounting to 25,771 thousand shares using the block trading - paired trade method to the subsidiary of Far Eastern New Century Corporation - Yuan Tong Investment Co., Ltd. and recognized a gain of $74,341 thousand on the disposal of the investment.
b. In December 2017, the Group sold its shareholdings of Asia Cement Corporation amounting to 18,000 thousand shares to its related party - Tranquil Enterprise Ltd., and recognized a gain of $198,471 thousand on the disposal of the investment.
c. In December 2017, the Group sold its shareholdings of Far Eastern New Century amounting to 9,217 thousand shares to its related party - Far Eastern Medical Foundation, and recognized a gain of $107,918 thousand on the disposal of the investment.
d. Refer to Note 36 for information relating to available-for-sale financial assets pledged as security.
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11. FINANCIAL ASSETS MEASURED AT COST - 2017

	December 31,
	2017
Non-current
Domestic unlisted ordinary shares	$ 599,134
Overseas unlisted ordinary shares	8,903
	$ 608,037

Management believed that the above unlisted equity investments held by the Group had fair values which cannot be reliably measured, because the range of reasonable fair value estimates was so significant. Therefore, they were measured at cost less impairment at the end of the reporting period.

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

	December 31,
	2017
Time deposits with original maturities of more than 3 months	$ 1,857,698
Pledged deposits	283,690
	$ 2,141,388
Current	$ 1,914,388
Non-current	227,000
	$ 2,141,388

a. As of December 31, 2017, the annual market rate intervals of debt investments with no active market were 0.30%-2.10%, respectively.
b. Refer to Note 36 for information relating to debt investments with no active market pledged as security.

13. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES (INCLUDING RELATED PARTIES)

a. Notes receivables

Operating Non-operating Less: Allowance for impairment loss		December	31
		2018 $ 776 3,305 (1,794) $ 2,287	2017 $ 638 2,287 (1,794) $ 1,131

The Group considers any change of the credit quality of notes receivable from the original credit date to the balance sheet date. If notes receivable was not redeemed at the expiration date while determining the recoverability of the notes receivable, a 100% allowance for losses will be included.

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b. Trade receivables

Trade receivables Less: Allowance for impairment loss		December 31	December 31
		2018 $ 1,867,787 (129,572) $ 1,738,215	2017 $ 1,376,505 (136,383) $ 1,240,122

The Group’s trade receivables pertained to revenue on credit cards and goods coupons. The average credit period for revenue from credit cards was 2 to 3 days, and for goods coupons, 15 days. In determining the recoverability of a trade receivable, the Group 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. Allowances for impairment loss were recognized against trade receivables based on estimated irrecoverable amounts determined with reference to past default experience of the counterparties and an analysis of their current financial position.

The Group’s revenue is derived from cash transactions. The revenue generated from the sales of debiting trade receivables is only recognized when authorization is given.

For the trade receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss, because there were no significant changes in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances.

The Group 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. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

The Group 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. For trade receivables that have been written off, the Group 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 Group’s provision matrix.

December 31, 2018

Not Past Due Expected credit loss rate 0.0003%- 0.0300% Gross carrying amount $ 1,651,442 Loss allowance (Lifetime ECL) (78) Amortized cost $ 1,651,364	Less than 30 Days 31 to 60 Days 61 to 90 Days Over 90 Days 0.0076-% 0.1500% 0.2200%- 0.3703% 1.0321%- 1.2200% 100% $ 84,940 $ 1,976 $ 41 $ 129,388 (101) (4) (1) (129,388) $ 84,839 $ 1,972 $ 40 $ -	Total $ 1,867,787 (129,572) $ 1,738,215

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

Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Less: Impairment losses reversed Balance at December 31, 2018	2018 $ 136,383 (3,445) 132,938 (3,366) $ 129,572

December 31, 2017

The aging of trade receivables is as follows:

	December 31,
	2017
Not overdue	$ 1,175,444
Days overdue
Up to 30 days	50,661
31 to 60 days	12,776
More than 60 days	137,624
	$ 1,376,505

The above aging schedule was based on the past due date.

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

	December 31,
	2017
Up to 30 days	$ 50,661
31 to 60 days	12,776
More than 60 days	1,241
	$ 64,678

The above aging schedule presented is based on the past due days from the end of the credit term.

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The movements of the allowance for impairment loss for trade receivables is as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ 11,307 $ 132,573 Add: Impairment losses recognized on receivables 30 - Less: Impairment losses reversed - (7,527) Balance at December 31, 2017 $ 11,337 $ 125,046	Total $ 143,880 30 (7,527) $ 136,383

c. Other receivables

Receivables Others Less: Allowance for impairment loss		December 31	December 31
		2018 $ 1,225,948 1,228,049 (294,642) $ 2,159,355	2017 $ 1,247,645 931,672 (395,284) $ 1,784,033

FEDS Development Ltd. (FEDS Development), Far Eastern Polytex (Holding) Corporation Ltd. (FEPC (Holding)) and Asia Cement (China) Holdings Corporation (ACHC (China)) intend to jointly invest in Yuan Ding Enterprise (Shanghai) Corporation (YDEC (Shanghai)) in order to hold and undertake the real estate development and construction of a commercial building in the Shanghai World Expo district.

FEPC (Holding) funded YDEC (Shanghai) through its 100% held subsidiary, Far Eastern New Century (China) Investment Corporation Ltd. (FENC (China)). The initial registered capital of YDEC (Shanghai) was RMB5 billion. FEDS Development plans to increase the investment after the completion rate of the construction of the commercial building reaches 25%. The ultimate percentage of ownership that FEDS Development held is expected to be 20%.

As of December 31, 2018 and 2017, FEDS Development agrees to offer a one-year loan to FENC (China) with a credit of RMB216,700 thousand, and also provides an unsecured and interest-free loan to YDEC (Shanghai) with a credit of RMB81,377 thousand and 59,000 thousand, respectively. Revolving lines of credit are allowed. As of December 31, 2018 and 2017, FENC (China) made a drawdown of RMB216,560 thousand, and YDEC (Shanghai) made a drawdown of RMB57,377 thousand. The actual borrowing amounts of these loans were recognized as other receivables within the Group.

The Group postulated that the potential benefits of the investment will exceed the prospective interest incomes arising from the loan. Thus, the loan’s terms of conditions were not regarded only as an independent transaction; the prospective benefits of the Group’s investment plans were also taken into consideration. Moreover, as the ultimate parent company of the borrowers is Far Eastern New Century Ltd. (FENC), the Group believes that the borrowers are able to repay the debts without offering pledges in terms of their financial positions.

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

40 -

On 18 February, 2019, YDEC (Shanghai) issued ordinary shares and registered a capital of RMB12.5 billion. FEDS Development invested an amount of RMB2.5 billion and the percentage of ownership was 20%.

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

December 31, 2018

Not Past Due Expected credit loss rate 0.0002%- 0.0200% Gross carrying amount $ 2,159,325 Loss allowance (Lifetime ECL) (4) Amortized cost $ 2,159,321	Less than 30 Days 31 to 60 Days 61 to 90 Days Over 90 Days 0.0063%- 0.1200% 0.1800%- 0.3046% 0.8361%- 0.9300% 100% $ 34 $ - $ - $ 294,638 - - - (294,638) $ 34 $ - $ - $ -	Total $ 2,453,997 (294,642)
		$ 2,159,355

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

Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Less: Impairment losses reversed Less: Amounts written off Foreign exchange gains and losses Balance at December 31, 2018	2018 $ 395,284 369 395,653 (12,689) (83,966) (4,356) $ 294,642

2017

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

	December 31,	December 31,
		2017
Up to 30 days	$	287
31 to 60 days		201
More than 60 days		1,101
	$	1,589

The above aging schedule presented is based on the past due days from the end of the credit term.

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The movements of the allowance for impairment loss for other receivables are as follows:

Individually Assessed for Impairment Balance at January 1, 2017 $ 133,731 Add: Impairment losses recognized on receivables 435 Less: Amounts written off as uncollectibles (6) Effect of exchange rate changes - Balance at December 31, 2017 $ 134,160 INVENTORIES Merchandise Allowance for inventory devaluation Allowance for losses on physical inventory Allowance for unrealized purchase discounts		Collectively Assessed for Impairment Total $ 266,322 $ 400,053 - 435 - (6) (5,198) (5,198) $ 261,124 $ 395,284 December 31	Collectively Assessed for Impairment Total $ 266,322 $ 400,053 - 435 - (6) (5,198) (5,198) $ 261,124 $ 395,284 December 31
		2018 $ 2,729,234 $ 80,831 $ 22,787 $ 3,437	2017 $ 2,583,275 $ 99,738 $ 22,295 $ 3,004

14. INVENTORIES

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 were $18,697,764 thousand and $20,333,921 thousand, respectively.

The cost of goods sold includes:

Reversed unrealized loss on physical inventory and slow-moving inventory Reversed unrealized purchase discounts	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 18,415 $ (433)	2017 $ 1,734 $ 1,506

15. SUBSIDIARIES

a. Subsidiaries included in the consolidated financial statements

The detailed information of the subsidiaries at the end of reporting period are as follows:

Investor
Investee
Main Businesses
Far Eastern Department Stores,
Far Eastern Ai Mai Co., Ltd.
Hypermarket
Ltd.
Bai Yang Investment Co., Ltd.
Investment
Bai Ding Investment Co., Ltd.
Investment
Yu Ming Advertising Agency Co., Ltd.
Advertising and importation
of certain merchandise
Far Eastern Hon Li Do Co., Ltd.
Building rental
FEDS Development Ltd.
Investment
Ya Tung Department Stores, Ltd.
Department store
Far Eastern CitySuper Co., Ltd.
Hypermarket
Pacific Liu Tong Investment Co., Ltd.
Investment
Asians Merchandise Company
Trading

Proportion of Ownership (%)
December 31
2018
2017
Remark
100
100
100
100
67
67
100
100
56
56
54
54
100
100
96
96
35
35
100
100
(Continued)

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Investor
Investee
Main Businesses
Bai Yang Investment Co., Ltd.
Pacific Liu Tong Investment Co., Ltd.
Investment
FEDS Asia Pacific Development Co., Ltd. Shopping mall
Bai Ding Investment Co., Ltd.
Investment
FEDS New Century Development Co.,
Ltd.
Shopping mall
FEDS Development Ltd.
Investment
Pacific China Holdings (HK) Limited
Investment
Far Eastern Big City Shopping Malls Co.,
Ltd.
Department store
Bai Ding Investment Co., Ltd.
Pacific Liu Tong Investment Co., Ltd.
Investment
Pacific Sogo Department Stores Co., Ltd. Department store
Far Eastern Hon Li Do Co., Ltd.
Building rental
Far Eastern CitySuper Co., Ltd.
Hypermarket
Yu Ming Advertising Agency
Co., Ltd.
Pacific Liu Tong Investment Co., Ltd.
Investment
Far Eastern Hon Li Do Co., Ltd. Pacific Liu Tong Investment Co., Ltd.
Investment
FEDS Development Ltd.
Shanghai Bai Ding Consultant &
Management Co., Ltd.
Consulting service
Chongqing FEDS Co., Ltd.
Department store
Ya Tung Department Stores, Ltd. Pacific Liu Tong Investment Co., Ltd.
Investment
FEDS Asia Pacific Development
Co., Ltd.
Pacific Liu Tong Investment Co., Ltd.
Investment
FEDS New Century Development Pacific Liu Tong Investment Co., Ltd.
Investment
Co., Ltd.
Chubei New Century Shopping Mall Co.,
Ltd.
Department store
Pacific Liu Tong Investment Co.,
Ltd.
Pacific Sogo Department Stores Co., Ltd. Department store
Pacific Sogo Department Stores Pacific China Holdings (HK) Limited
Investment
Co., Ltd.
Far Eastern Big City Shopping Malls Co.,
Ltd.
Department store
Pacific China Holdings (HK)
Limited
Pacific China Holdings Ltd.
Investment
Pacific China Holdings Ltd.
Shanghai Pacific Department Stores Co.,
Ltd.
Department store
Chengdu Quanxing Mansion Pacific
Department Store Co., Ltd.
Department store
Chongqing Metropolitan Plaza Pacific
Department Store Co., Ltd.
Department store
Chongqing Pacific Consultant &
Management Co., Ltd.
Consulting service
Bai Fa China Holdings (HK) Ltd.
Investment
Pacific (China) Investment Co., Ltd.
Investment
Pacific (China) Investment Co., Chengdu FEDS Co., Ltd.
Department store
Ltd.
Chengdu Beicheng FEDS Co., Ltd.
Department store
Dalian Pacific Department Store Co., Ltd. Department store

Proportion of Ownership (%)
December 31
2018
2017
Remark
2
2
70
70
33
33
100
100
1
46
46
40
40
40
40
13
13
1
1
44
44
-
-
-
-
-
-
100
100
100
100
1
1
2
2
2
2
100
100
1
79
79
60
60
60
60
100
100
73
73
100
100
100
100
100
100
100
100
2
100
100
100
100
4
-
100
3
100
100
(Concluded)

1) As of December 31, 2017, they were still in the startup period.
2) Bai Fa China Holdings (HK) Ltd. applied to discontinue operations in June 2017 due to non-operating plans in the short-term.
3) The board of directors approved to end operations in April 2017, and went into liquidation on October 27, 2017.
4) Considering market demand and supply, Chengdu FEDS Co., Ltd. (Chengdu FEDS) decided to reconstruct and transform the business operating scheme to improve effectiveness. Therefore, Chengdu FEDS has ended their operations since December 23, 2017.
b. Subsidiaries excluded from the consolidated financial statements

Investor Investee Main Businesses Pacific Sogo Department Stores Pacific Sogo Investment Co., Ltd. Investment Co., Ltd. Lian Ching Investment Co., Ltd. Investment	Proportion of Ownership (%) December 31 2018 2017 Remark - 100 2 50 50 1

1) The amount of Lian Ching Investment Co., Ltd. had been written off to zero, no liabilities were undertaken by the Group and the accounts are not disclosed in the consolidated financial statements.
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2) In November 2008, Pacific Sogo Department Stores Co., Ltd. (SOGO) applied to the Taiwan Taipei District Court (TTDC) for PSIC to be declared bankrupt, and the TTDC ruled PSIC bankrupt on December 30, 2010. On April 8, 2011, PSIC convened the first creditors’ meeting. Assets of PSIC had been sold successively since August 22, 2012, and the bankruptcy manager had consecutively completed the allocation of assets of PSIC. The TTDC also ruled that the bankruptcy proceedings be terminated and announced to the public on November 11, 2015. Three years from the date of the announcement, Pacific Sogo Investment Co., Ltd. is regarded as the legal personality eradication on November 11, 2017.

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

Associates that are not individually material Aggregate information of associates that are not individually material:		December 31	December 31
		2018 $ 8,678,647	2017 $ 8,444,059

The Group’s share of: Loss from continuing operations Other comprehensive loss Total comprehensive loss for the year	For the Year Ended	For the Year Ended	December 31
		2018 $ 11,396 414,602 $ 425,998	2017 $ (39,180) (7,194) $ (46,374)

In June 2018, Ding Ding Integrated Marketing Service Co., Ltd. (DDIM) undertook the registration of a capital reduction to offset the deficit, which resulted in a decrease in the Group’s equity in DDIM of 7,080 thousand shares.

In December 2018, Yuan Hsin Digital Payment Co., Ltd. (YHDP) undertook the registration of a capital reduction to offset the deficit, which resulted in a decrease in the Group’s equity in YHDP of 6,806 thousand shares.

In July 2017, Yuan Hsin Digital Payment Co., Ltd. (YHDP) undertook the registration of a capital reduction to offset the deficit, which resulted in a decrease in the Group’s equity in YHDP of 10,226 thousand shares. The Group acquired 15,000 thousand shares based on the percentage of ownership at $10 per share, and the investment amount totaled $150,000 thousand.

In June 2017, Far Eastern Electronic Commerce Co., Ltd. (FEEC) undertook the registration of a capital reduction to offset the deficit, which resulted in a decrease in the Group’s equity in FEEC of 20,398 thousand shares.

In April 2017, the Group subscribed for 13,665 thousand shares of FEEC, and the investment amount totaled $136,655 thousand. As the subscription was not based on the original percentage of ownership, the new percentage of ownership increased to 22.72% and the capital surplus was adjusted downwards in the amount of $5,427 thousand.

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In order to integrate the e-commerce business and resources to enhance competitiveness, the board of directors of FEEC approved the merger with Hiiir Inc. (Hiiir) on June 27, 2017. The merger record date was on August 1, 2017, with Hiiir as the surviving company and FEEC dissolved. Upon the completion of the aforesaid merger, the surviving company was renamed Yuanshi Digital Technology Co., Ltd. (YSDT). The Group acquired 2,082 thousand shares of YSDT in exchange for 3,238 thousand shares of FEEC. The percentage of ownership decreased from 22.72% to 2%. The management evaluated that the Group no longer had significant influence over YSDT, therefore, this investee had not been recognized using the equity method since August 2017. The aforementioned merger was applied and approved by the authorities on August 30, 2017.

Chongqing Pacific Consultant & Management Co., Ltd. (CPCM) invested RMB75,000 thousand in Chengdu Baiyang Industry Co., Ltd. (CDBI) and acquired 33% of the voting rights of CDBI. CPCM signed a contract to ensure long-term cooperation with its Joint Venture Partner, Chengdu Department Emporium Group Co., Ltd. (CDEG), and they agreed that CPCM would pay CDBI a security deposit of RMB425,000 thousand. Under the cooperation contract, the allocation of retained earnings of CDBI to CPCM will be at certain percentages stated in the contract and not at their respective percentages of ownership. The contract further states that CDBI should not be liquidated and CPCM should not transfer its equity (including voting rights) in CDBI to any party. The security deposit of RMB425,000 thousand can be transferred in stages as capital of CDBI and recognized as a long-term investment prepayment. When the percentage of the allocation of retained earnings, which had been requested by CDEG, exceeds a certain percentage of the allocation of retained earnings as stated in the contract, CPCM may simultaneously request to get back 50% of the allocated retained earnings and the security deposit. As of December 31, 2018, CDBI had returned RMB110,208 thousand to CPCM.

The investments in associates accounted for using 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 associates’ financial statements audited for the same years by other auditors.

Refer to Note 36 for the information on the carrying amounts of investments in associates accounted for using the equity method that were pledged as security.

17. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions (deductions) Disposals Transfer from investment properties Reclassification Effect of exchange differences Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Impairment losses Depreciation expense Effect of exchange differences Balance at December 31, 2017 Carrying amount at December 31, 2017 Cost Balance at January 1, 2018 Additions (deductions) Disposals Reclassification Effect of exchange differences Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Impairment losses Reclassification Depreciation expense Effect of exchange differences Balance at December 31, 2018 Carrying amount at December 31, 2018	Land $ 12,600,554 - - 1,119,585 - - $ 13,720,139 $ - - - - - $ - $ 13,720,139 $ 13,720,139 - - - - $ 13,720,139 $ - - - - - - $ - $ 13,720,139	Buildings $ 21,523,208 - - 290,193 - (29,681) $ 21,783,720 $ (6,891,514 ) - - (465,631 ) 27,388 $ (7,329,757) $ 14,453,963 $ 21,783,720 - - - (24,875 ) $ 21,758,845 $ (7,329,757 ) - (20,203 ) (465,749 ) - 23,396 $ (7,792,313) $ 13,966,532	Buildings and Facilities $ 9,516,346 206,227 (130,306 ) 6,789 25,481 - $ 9,624,537 $ (5,938,447 ) 126,865 - (679,089 ) - $ (6,490,671) $ 3,133,866 $ 9,624,537 245,549 (54,828 ) 101,027 - $ 9,916,285 $ (6,490,671 ) 48,386 (12,049 ) (656,425 ) (38 ) - $ (7,110,797) $ 2,805,488	Decorative Facilities $ 13,088,922 484,944 (1,101,880 ) 4,433 137,840 (70,741) $ 12,543,518 $ (9,710,758 ) 892,715 - (1,113,750 ) 53,808 $ (9,877,985) $ 2,665,533 $ 12,543,518 342,640 (208,224 ) 28,026 (36,967 ) $ 12,668,993 $ (9,877,985 ) 188,937 (4,104 ) (847,195 ) 38 33,306 $ (10,507,003) $ 2,161,990	Equipment Held under Finance Leases a $ 10,494,571 3,059 (36,464 ) - - - $ 10,461,166 $ (4,654,469 ) 36,464 - (327,324 ) - $ (4,945,329) $ 5,515,837 $ 10,461,166 - (3,268,803 ) 450,373 - $ 7,642,736 $ (4,945,329 ) 3,268,803 - (284,787 ) - - $ (1,961,313) $ 5,681,423	Plant, Transportation nd Miscellaneous Equipment $ 3,286,782 142,248 (191,383 ) - 22,872 (2,540) $ 3,257,979 $ (2,219,935 ) 174,525 (2,040 ) (270,408 ) 1,975 $ (2,315,883) $ 942,096 $ 3,257,979 179,365 (109,054 ) 28,418 (1,664 ) $ 3,355,044 $ (2,315,883 ) 107,203 (1,691 ) (243,050 ) (8,631 ) 1,310 $ (2,460,742) $ 894,302	Construction in Progress $ 2,531,322 748,036 - - (11,528 ) (39) $ 3,267,791 $ 3,267,791 $ 3,267,791 1,506,880 - (471,573 ) (31) $ 4,303,067 $ 4,303,067	Total $ 73,041,705 1,584,514 (1,460,033 ) 1,421,000 174,665 (103,001) $ 74,658,850 $ (29,415,123 ) 1,230,569 (2,040 ) (2,856,202 ) 83,171 $ (30,959,625) $ 43,699,225 $ 74,658,850 2,274,434 (3,640,909 ) 136,271 (63,537 )
								$ 73,365,109 $ (30,959,625 ) 3,613,329 (38,047 ) (2,497,206 ) (8,631 ) 58,012 $ (29,832,168) $ 43,532,941

45 -

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

Buildings 17-56 years Buildings and facilities 5-20 years Decorative facilities 3-20 years Equipment held under finance leases 35-50 years Plant, transportation, and miscellaneous equipment 3-12 years

AIMAI evaluated the prospective profits and determined to end operations of its Zhonggang branches in the first quarter of 2019. The impairment tests were applied to the property, plant and equipment of both branches based on their recoverable amounts, and $38,047 thousand was recognized as an impairment loss. Chengdu Beicheng FEDS Co., Ltd. evaluated the prospective profits and determined to end their operations in April 2017. The impairment tests were applied to property, plant and equipment based on their recoverable amounts, and $2,040 thousand was recognized as an impairment loss.

Refer to Note 36 for the information on the carrying amounts of property, plant and equipment that were pledged as security.

18. INVESTMENT PROPERTIES

Balance at January 1, 2017 Additions Transferred to property, plant and equipment Gain (loss) on changes in the fair value of investment properties Balance at December 31, 2017 Additions Gain (loss) on changes in the fair value of investment properties Balance at December 31, 2018	Land $ 6,734,252 - (1,119,585) 55,571 5,670,238 - 84,608 $ 5,754,846	Buildings and Facilities $ 3,432,544 1,481 (301,415) (64,632) 3,067,978 (90,621) (41,563) $ 2,935,794	Total $ 10,166,796 1,481 (1,421,000) (9,061) 8,738,216 (90,621) 43,045 $ 8,690,640

The investment properties located in the Hualien area were affected by the earthquake which occurred on February 6, 2018, which caused significant damage to the investment properties. The Group demolished the building in March 2018 and recognized loss on disposal of investment properties of $90,621 thousand in 2018.

SOGO has leased out its investment properties to Far Eastern Big City Shopping Mall Co., Ltd. since 2017. As the property was used in operating activities from the perspective of the Group, it was reclassified as property, plant and equipment at its fair value on December 31, 2016.

Some of the Group’s investment properties had been leased out under operating leases having lease terms between 1-7.5 years. Except for the minimum lease payments, some of the Group’s lease contracts included contingent lease clauses, and the Group should adjust rentals on the basis of the Consumer Price Index per annum. The rental incomes generated for the years ended December 31, 2018 and 2017 were $172,054 thousand and $138,880 thousand, respectively.

46 -

The commitments on future minimum lease payments under non-cancellable operating leases are as follows:

Not later than 1 year 1 year to 5 years Later than 5 years		December 31	December 31
		2018 $ 183,065 244,950 4,310 $ 432,325	2017 $ 125,930 245,061 - $ 370,991

The fair values of the investment properties as of December 31, 2018 and 2017 were based on the valuations carried out at those dates, on a recurring basis by independent qualified professional valuers, Hong-Kai Chang, Yi-Chih Chang, Yu-Fen Yeh and Kuang-Ping Tai from Savills Real Estate Appraiser Office, a member of certified ROC real estate appraisers.

Except for undeveloped lands, the fair values of investment properties were measured using the income approach and the significant assumptions used are the increase in the estimated future net cash inflows, or the decrease in discount rates that would result in increases in the fair values.

Expected future cash inflows Expected future cash outflows Expected future cash inflows, net Discount rate		December 31
		2018 2017 $ 21,577,513 $ 22,218,353 2,895,472 3,088,061 $ 18,682,041 $ 19,130,292 December 31
	2018 2017 3.845%-4.345% 4.345%

The market rentals in the area where the investment properties are located were between $1 thousand and $2 thousand per ping (i.e. per 3.3 square meters). The market rentals for comparable properties were between $1 thousand and $4 thousand per ping (i.e. per 3.3 square meters).

The expected future cash inflows generated by investment properties referred to rental income, interest income on rental deposits and disposal value. The rental income was extrapolated using the existing lease contracts of the Group and comparative market rentals covering 5-14 years, taking into account the annual rental growth rate. The interest income on rental deposits was extrapolated by the one-year average deposit interest rate, and the disposal value was determined by the direct capitalization method under the income approach. The expected future cash outflows on investment properties included expenditures such as property taxes, insurance premiums, management fees, maintenance costs and replacement allowances. These expenditures were extrapolated on the basis of the current level of expenditures, taking into account the future adjustments to the government-announced land value, the tax rate promulgated under the Construction Cost Index and the House Tax Act and construction costs.

The discount rate was determined with reference to the interest rate for two-year time deposits of Chunghwa Post Co., Ltd. plus 0.75% and the risk premium of investment properties of 2%-2.5%.

47 -

Part of the land owned by the Group, where is located in the east of Taiwan, was not developed yet. The fair value of the undeveloped land area was measured by the land development analysis approach. The increase in the estimated total sales price, the increase in the rate of return, or the decrease in the overall capital interest rate would result in increase in the fair value. The significant assumptions used are as follows:

Estimated total sales price Rate of return Overall capital interest rate		December 31	December 31
		2018 $ 1,965,503 16%-20% 1.49%-3.90%	2017 $ 801,791 16%-18% 2.20%-3.29%

The total sales price is estimated on the basis of the most effective use of land or property available for sale after development is completed, taking into account the related regulations, optimism of domestic macroeconomic prospects, local land use, and comparable market prices.

Refer to Note 36 for the information on the carrying amounts of invested properties pledged as security.

19. INTANGIBLE ASSETS

Cost Balance at January 1, 2017 Additions Disposals Reclassification Effect of exchange differences Balance at December 31, 2017 Accumulated amortization and impairment Balance at January 1, 2017 Impairment losses recognized Amortization expense Disposals Effect of exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017	Goodwill $ 7,631,973 - - - - $ 7,631,973 $ (1,493,351) (1,205,840) - - - $ (2,699,191) $ 4,932,782	Computer Software $ 314,002 53,748 (8,349) 15,159 (1,231) $ 373,329 $ (207,770) - (44,687) 5,088 774 $ (246,595) $ 126,734	Franchise $ - - - - - $ - $ - - - - - $ - $ -	Total $ 7,945,975 53,748 (8,349) 15,159 (1,231) $ 8,005,302 $ (1,701,121) (1,205,840) (44,687) 5,088 774 $ (2,945,786) $ 5,059,516 (Continued)

48 -

Cost Balance at January 1, 2018 Additions Disposals Reclassification Effect of exchange differences Balance at December 31, 2018 Accumulated amortization and impairment Balance at January 1, 2018 Impairment losses recognized Amortization expense Disposals Effect of exchange differences Balance at December 31, 2018 Carrying amounts at December 31, 2018	Goodwill $ 7,631,973 - - - - $ 7,631,973 $ (2,699,191) (1,630,000) - - - $ (4,329,191) $ 3,302,782	Computer Software $ 373,329 34,784 (210) 8,105 (1,130) $ 414,878 $ (246,595) - (51,903) 210 944 $ (297,344) $ 117,534	Franchise $ - 28,942 - - - $ 28,942 $ - - - - - $ - $ 28,942	Total $ 8,005,302 63,726 (210) 8,105 (1,130) $ 8,075,793 $ (2,945,786) (1,630,000 ) (51,903) 210 944 $ (4,626,535) $ 3,449,258 (Concluded)

Goodwill arising on mergers or the acquisition of majority interests in companies is the acquisition cost in excess of the fair value of the identifiable net assets acquired. Goodwill is mainly derived from the mainland China operating segment.

At the end of each reporting period, the Group reviews the carrying amounts of goodwill by comparing its recoverable amount with its carrying amount to determine whether there is any indication that those assets have suffered an impairment loss, amounting to $1,630,000 thousand in 2018 and $1,205,840 thousand in 2017. That is because, the actual profits from mainland China in 2017 did not achieve their target profits from mainland China.

The recoverable amount of this cash-generating unit was determined based on a value in use calculation which uses cash flow projections based on financial budgets approved by management, and a discount rate of 9.3% and 11.00% per annum for the years ended December 31, 2018 and 2017, respectively.

Cash flows of the financial forecast is prepared and based on estimates of annual revenues, gross profit, capital expenditures and other operating costs. Management believed that any reasonably possible change in the key assumptions on which the recoverable amount was based would not cause the aggregate carrying amount of the cash-generating unit to exceed its aggregate recoverable amount.

The following intangible assets are amortized on a straight-line basis over their estimated useful lives as follows:

Computer software 1-10 years Franchise 45 years

49 -

20. PREPAYMENTS FOR LEASES

SOGO - BR4 (a) FEDS - Xinyi Division A13 - land use right (b) FEDS Asia Pacific Development - Kaohsiung (c) Dalian Pacific Department Store Co., Ltd. (d) Far Eastern Ai Mai Co., Ltd. - Hsinchu (e) Shanghai Pacific Department Stores - land use right (f) Chubei New Century Shopping Mall Co., Ltd. - land use right (g) Current (recognized in prepayments) Non-current		December 31	December 31
		2018 $ 4,922,241 2,173,763 622,971 157,076 92,934 76,842 14,335 $ 8,060,162 $ 355,698 7,704,464 $ 8,060,612	2017 $ 5,305,965 2,236,168 644,452 171,333 116,167 93,874 14,643 $ 8,582,602 $ 405,928 8,176,674 $ 8,582,602

a. In January 2007, SOGO constructed a building within the Zhongxiao-Fuxing Station (BR4) of the Muzha line of the Taipei Rapid Transit System under a lease agreement with the Department of Rapid Transit Systems (DRTS), the Department of Finance under the Taipei City Government (TCG) and Hong-Tong Comprehensive Commercial Developing Co., Ltd. (HTCCD) SOGO renewed and signed a new lease agreement before the due date in June 2016. The new lease term is 9 years and 6 months, and the monthly rental for the first year is $20,263 thousand. From the second year onward, the rental will be adjusted in accordance to the conditions formulated in the new lease agreement.

SOGO paid deposits of $23,637 thousand to the DRTS under the TCG and $38,278 thousand to the Department of Finance under the TCG. SOGO also paid operating deposits of $182,324 thousand to the DRTS under the TCG. SOGO’s total refundable deposits were $244,239 thousand as of December 31, 2018.

In addition, SOGO made other prepayments under development leasehold rights - HTCCD to obtain the right to lease the building housing SOGO’s Branch BR4. In December 2006, SOGO entered into a lease agreement with HTCCD. Under this agreement, when the amount paid by SOGO exceeds the rental payable, the premium will be deemed as prepaid rental to be deducted from future rental expenses.

b. In September 2003, FEDS acquired the land use rights for No. A13 in Xinyi District of Taipei City, which is owned by the TCG. The total amount of the land use rights was $3,196,888 thousand, and FEDS completed the registration of its acquisition of the land use rights in October 2003. Under the contract, FEDS has the right to use the land for 50 years starting from the completion of the land use rights’ registration. The initial monthly rental is $3,771 thousand, to be adjusted annually in accordance with the assessed and publicly announced land value on the contract date.
c. On January 1, 1998, FEDS Asia Pacific Development signed a contract with Asia Cement Corporation (ACC) for the construction of the Kaohsiung Asian Business and Finance Building on the land provided by ACC. Under this contract, FEDS Asia Pacific Development will own the leasehold rights for 50 years starting from the date of the contract and should pay ACC $1,073,000 thousand as the premium for the land use rights. The land use rights are amortized during the land use period. Annual land rental is payable in November of each year for 50 years at 5% of the assessed and publicly announced land value.

The construction was completed in October 2001, and the building was rented out to FEDS and Vieshow Cinemas Co. The construction cost is amortized over the building occupancy period from October 2001 to December 2047.

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d. Owing to the change of business operations of Dalian Pacific Department Store Co., Ltd. (DPDS), DPDS entered into a lease agreement with Dalian Parkland Co., Ltd. and prepaid RMB60,000 thousand to Dalian Parkland Co., Ltd. as rental. The amount of the rental is amortized over the lease term period.
e. In November 2001, under an agreement, AIMAI will lease a hypermarket from Hsinchu Chemical Industrial Co., Ltd. (HCCI). HCCI will provide the land and build the hypermarket. The related construction expenses will be paid by HCCI and AIMAI at the respective ratio of 1:2. The payment (including the previous development expenses) by AIMAI will be regarded as prepaid rental and amortized over the rental period upon the remaining lease term beginning from the opening day (19 years and 3 months). The Hsinchu branch of AIMAI opened in October 2003.
f. Shanghai Pacific Department Store obtained land use rights which are amortized over 30 years on the basis of the straight-line method.
g. On July 8, 2015, Chubei New Century Shopping Mall Co., Ltd. (CBNC) signed a build-operate-transfer (BOT) investment contract with the Hsinchu County Government. The total royalty of this investment contract was $10,000 thousand, and the registration of the acquisition of the land use rights was completed in September 2015. Under the contract, CBNC has the right to use the land for 50 years (including the construction and operation period) from the date that this agreement was signed by both parties. The respective period’s rental amount for the land is based on 1% of the land owners’ reported value in the construction period and 3% of the land owners’ reported value in the operation period. The rental amount will be adjusted in accordance with the assessed and publicly announced land value.

21. OTHER ASSETS

Refundable deposits (Note 32) Lease incentives Others Current Non-current		December 31	December 31
		2018 $ 1,422,924 186,409 154,486 $ 1,763,819 $ 85,798 1,678,021 $ 1,763,819	2017 $ 1,655,510 38,616 154,509 $ 1,848,635 $ 69,068 1,779,567 $ 1,848,635

22. BORROWINGS

a. Short-term borrowings

Credit loans Secured loans (Note 36) Interest rate intervals are as follows: Credit loans Secured loans		December 31
	2018 2017 $ 12,047,612 $ 12,260,667 910,000 824,289 $ 12,957,612 $ 13,084,956 0.890%-6.491% 0.900%-5.550% 0.920%-1.230% 0.920%-4.850%

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b. Short-term bills payable

Commercial papers Less: Unamortized discount on bills payable		December 31	December 31
		2018 $ 3,482,000 1,635 $ 3,480,365	2017 $ 2,516,000 1,300 $ 2,514,700

Outstanding short-term bills payable are as follows:

December 31, 2018

Promissory Institutions Commercial papers Mega Bills Finance China Bills Finance Shanghai Bank International Bills Finance Grand Finance Taiwan Cooperative Bills Finance Taiwan Bills Finance Ta Ching Bill Finance	Nominal Amount $ 1,083,000 925,000 500,000 274,000 200,000 200,000 150,000 150,000 $ 3,482,000	Discount Amount $ 374 522 391 64 17 94 68 105 $ 1,635	Carrying Amount Interest Rate Collateral $ 1,082,626 0.770%-1.078% Shares 924,478 0.490%-1.288% Shares 499,609 0.600% - 273,936 0.680%-1.078% Shares 199,983 0.880% - 199,906 0.860% - 149,932 0.750% - 149,895 0.910% - $ 3,480,365	Carrying Amount of Collateral $ 662,952 84,875 - 91,665 - - - -
				$ 839,492

December 31, 2017

Promissory Institutions Commercial papers Mega Bills Finance China Bills Finance International Bills Finance Taiwan Bills Finance Grand Finance Taiwan Cooperative Bills Finance Ta Ching Bill Finance	Nominal Amount $ 825,000 701,000 340,000 200,000 200,000 200,000 50,000 $ 2,516,000	Discount Amount $ 494 349 100 50 78 207 22 $ 1,300	Carrying Amount Interest Rate Collateral $ 824,506 0.742%-0.760% Shares 700,651 0.430%-0.450% Shares 339,900 0.570%-0.650% Shares 199,950 0.750% - 199,922 0.750%-0.832% - 199,793 0.690% - 49,978 0.600% - $ 2,514,700	Carrying Amount of Collateral $ 659,025 70,500 76,140 - - - -
				$ 805,665

c. Long-term borrowings

Secured loans Credit loans Revolving commercial papers Less: Current portion		December 31	December 31
		2018 $ 10,200,000 4,890,000 - 15,090,000 - $ 15,090,000	2017 $ 10,500,000 5,610,000 648,102 16,758,102 3,500,000 $ 13,258,102

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Interest rate intervals are as follows:

Secured loans Credit loans Revolving commercial papers	December 31
	2018 2017 0.900%-1.720% 0.090%-1.801% 0.900%-1.660% 0.080%-1.600% - 1.210%-1.260%

23. BONDS PAYABLE

	December 31,	December 31,
		2017
Secured domestic bonds payable	$	1,000,000
Less: Unamortized discount on bonds payable		1,851
		998,149
Less: Current portions		998,149
	$	-

The he face value of the secured domestic bonds issued by SOGO on December 30, 2013 was $1,000,000 thousand. These bonds, which were guaranteed for issuance by Taiwan Cooperative Bank, will mature on December 30, 2018 and are repayable in one lump sum upon maturity. Interest on these bonds is 1.75%, payable annually. The bonds was repaid in December 2018.

24. OTHER LIABILITIES

Other payables Lease incentives Payables for salaries and bonuses Payables for purchases of equipment Others Deferred revenue Arising from customer loyalty program Other liabilities Deposits received Others Current Other payables Deferred revenue Other liabilities Non-current Other liabilities		December 31	December 31
		2018 $ 970,529 780,040 363,938 2,466,932 $ 4,581,439 $ - $ 466,168 348,348 $ 814,516 $ 3,687,578 $ - $ 320,947 $ 1,387,430	2017 $ 1,134,423 769,592 314,015 3,103,941 $ 5,321,971 $ 83,761 $ 490,811 291,273 $ 782,084 $ 4,250,840 $ 83,761 $ 264,545 $ 1,588,670

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25. PROVISIONS

Dismantling obligation Current Non-current Balance at January 1, 2017 Usage Unwinding of discount Balance at December 31, 2017 Usage Unwinding of discount Balance at December 31, 2018		December	31
		2018 2017 $ 31,501 $ 33,293 $ 6,592 $ 6,828 24,909 26,465 $ 31,501 $ 33,293 Dismantling Obligation $ 46,591 (13,548) 250 33,293 (2,045) 253 $ 31,501

26. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

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

The employees of the Group’s subsidiaries in mainland China are members of a state-managed retirement benefit plan operated by the local government of mainland China. The Group in mainland China are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

b. Defined benefit plans

The defined benefit plan adopted by Yu Ming Advertising Agency Co., Ltd. (YMAC), Far Eastern Hon Li Do Co., Ltd. (FEHLD), FEDS, AIMAI, Ya Tung Department Stores, Ltd. (YTDS) and SOGO of the Group 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 6 months before retirement. The Company and aforementioned subsidiaries contribute amounts equal to 2%-6% 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 Group 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 Group 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 Group has no right to influence the investment policy and strategy.

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The pension costs of YMAC both amounted to $13 thousand in 2018 and 2017, and the accrued pension liabilities on December 31, 2018 and 2017 were $486 thousand and $611 thousand, respectively.

FEHLD terminated sales on July 1, 2000. Thus, the employees of FEHLD became the employees of AIMAI. The length of services of the employees at FEHLD is carried forward to accumulate and calculate the defined benefit plans at AIMAI. If the employees retire, the calculation of pension costs would be based on the length of service at FEHLD. The accrued pension liabilities on December 31, 2018 and 2017 both amounted to $778 thousand. These accrued pension liabilities were provisions for the aforementioned pension.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans are as follows:

December 31, 2018 Present value of defined benefit obligation Fair value of the plan assets Net defined benefit liabilities December 31, 2017 Present value of defined benefit obligation Fair value of the plan assets Net defined benefit liabilities	FEDS $ 667,816 (578,815) $ 89,001 $ 742,897 (505,389) $ 237,508	AIMAI $ 267,663 (29,627) $ 238,036 $ 258,508 (22,105) $ 236,403	YTDS $ 11,337 (9,517) $ 1,820 $ 11,176 (9,005) $ 2,171	SOGO $ 636,263 (157,904) $ 478,359 $ 641,256 (172,819) $ 468,437

Movements in net defined benefit liabilities are as follows:

Balance at January 1, 2017 Service cost Current service cost Net interest expense (income) Recognized in profit or loss Remeasurement Return on plan assets (excluding amounts included in net interest) Actuarial loss - changes in demographic assumptions Actuarial loss - changes in financial assumptions Actuarial loss - experience adjustments Recognized in other comprehensive income Contributions from the employer Benefits paid Balance at December 31, 2017 Service cost Current service cost Net interest expense (income) Recognized in profit or loss			FEDS	Net Defined Benefit Liabilities $ 314,561 8,329 3,932 12,261 15,485 6,394 - 866 22,745 (112,059 ) - 237,508 7,088 2,930 10,018			AIMAI
	P o	resent Value f the Defined Benefit Obligation F th $ 805,974 8,329 9,963 18,292 - 6,394 - 866 7,260 - (88,629) 742,897 7,088 9,286 16,374	air Value of e Plan Assets $ (491,413) - (6,031) (6,031) 15,485 - - - 15,485 (112,059 ) 88,629 (505,389) - (6,356) (6,356)		P o	resent Value f the Defined Benefit Obligation F th $ 240,346 1,803 3,004 4,807 - 14,285 3,179 8,188 25,652 - (12,297) 258,508 1,740 2,908 4,648	air Value of e Plan Assets Net Defined Benefit Liabilities $ (23,329) $ 217,017 - 1,803 (326) 2,678 (326) 4,481 56 56 - 14,285 - 3,179 - 8,188 56 25,708 (10,803 ) (10,803 ) 12,297 - (22,105) 236,403 - 1,740 (276) 2,632 (276) 4,372 (Continued)

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Remeasurement Return on plan assets (excluding amounts included in net interest) Actuarial loss - changes in demographic assumptions Actuarial loss - changes in financial assumptions Actuarial loss - experience adjustments Recognized in other comprehensive income Contributions from the employer Benefits paid Balance at December 31, 2018			FEDS	Net Defined Benefit Liabilities $ (43,357 ) 6,684 8,750 33,482 5,559 (164,084 ) - $ 89,001			AIMAI
	P o	resent Value f the Defined Benefit Obligation F th $ - 6,684 8,750 33,482 48,916 - (140,371) $ 667,816	air Value of e Plan Assets $ (43,357 ) - - - (43,357) (164,084 ) 140,371 $ (578,815)		P o	resent Value f the Defined Benefit Obligation F th $ - 16,205 - 9,176 25,381 - (20,875) $ 267,662	air Value of e Plan Assets Net Defined Benefit Liabilities $ (768 ) $ (768 ) - 16,205 - - - 9,176 (768) 24,613 (27,352 ) (27,352 ) 20,875 - $ (29,626) $ 238,036 (Concluded)

Balance at January 1, 2017 Service cost Current service cost Prior service cost Net interest expense (income) Recognized in profit or loss Remeasurement Return on plan assets (excluding amounts included in net interest) Actuarial loss - changes in demographic assumptions Actuarial loss - changes in financial assumptions Actuarial gain - experience adjustments Recognized in other comprehensive income Contributions from the employer Benefits paid Balance at December 31, 2017 Service cost Current service cost Net interest expense (income) Recognized in profit or loss Remeasurement Return on plan assets (excluding amounts included in net interest) Actuarial loss - changes in demographic assumptions Actuarial loss - changes in financial assumptions Actuarial gain - experience adjustments Recognized in other comprehensive income Contributions from the employer Benefits paid Balance at December 31, 2018			YTDS	Net Defined Benefit Liabilities $ 2,180 91 - 26 117 27 15 145 (165) 22 (148 ) - 2,171 90 24 114 (264 ) - 135 (107) (236) (146 ) (83) $ 1,820			SOGO
	P o	resent Value f the Defined Benefit Obligation F th $ 11,353 91 - 142 233 - 15 145 (165) (5) - (405) 11,176 90 126 216 - - 135 (107) 28 - (83) $ 11,337	air Value of e Plan Assets $ (9,173) - - (116) (116) 27 - - - 27 (148 ) 405 (9,005) - (102) (102) (264 ) - - - (264) (146 ) - $ (9,517)		P o	resent Value f the Defined Benefit Obligation F th $ 735,353 8,255 699 9,192 18,146 - 22,702 - 6,010 28,712 - (140,955) 641,256 4,498 8,015 12,513 - 16,185 9,084 1,969 27,238 - (44,744) $ 636,263	air Value of e Plan Assets $ (288,002) - - (3,756) (3,756) 1,221 - - - 1,221 (23,237 ) 140,955 (172,819) - (2,298) (2,298) (6,846 ) - - - (6,846) (20,685 ) 44,744 $ (157,904)	Net Defined Benefit Liabilities $ 447,351 8,255 699 5,436 14,390 1,221 22,702 - 6,010 29,933 (23,237 ) - 468,437 4,498 5,717 10,215 (6,846 ) 16,185 9,084 1,969 20,392 (20,685 ) - $ 478,359

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

1) Investment risk: The plan assets are invested in 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 of the plan assets.
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3) Salary risk: The present value of the defined benefit obligation is calculated with 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.

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 are as follows:

	FEDS	AIMAI	YTDS	SOGO
December 31, 2018
Discount rates	1.125%	1.125%	1.000%	1.125%
Expected rates of salary increase	2.000%	1.000%	2.000%	2.250%
December 31, 2017
Discount rates	1.250%	1.125%	1.125%	1.250%
Expected rates of salary increase	2.000%	1.000%	2.000%	2.250%

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

December 31, 2018 Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease December 31, 2017 Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease	FEDS $ (17,528) $ 18,207 $ 17,728 $ (17,156) $ (19,490) $ 20,244 $ 19,729 $ (19,093)	AIMAI $ (7,501) $ 7,812 $ 7,675 $ (7,406) $ (7,013) $ 7,299 $ 7,160 $ (6,914)	YTDS $ (267) $ 277 $ 270 $ (261) $ (288) $ 299 $ 292 $ (282)	SOGO $ (18,730) $ 19,512 $ 18,956 $ (18,294) $ (18,918) $ 19,713 $ 19,154 $ (18,479)

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

December 31, 2018 The expected contributions to the plan for the next year The average duration of the defined benefit obligation December 31, 2017 The expected contributions to the plan for the next year The average duration of the defined benefit obligation	FEDS $ 5,680 10.7 years $ 6,200 10.8 years	AIMAI $ 4,648 11.3 years $ 4,922 10.9 years	YTDS $ 144 9.4 years $ 144 10.3 years	SOGO $ 20,746 12 years $ 22,092 12.0 years

27. EQUITY

a. Share capital

Ordinary shares

December 31 2018 2017 Number of shares authorized (in thousands) 1,750,000 1,750,000 Shares authorized $ 17,500,000 $ 17,500,000 Number of shares issued and fully paid (in thousands) 1,416,941 1,416,941 Shares issued $ 14,169,406 $ 14,169,406 Fully paid ordinary shares, which have a par value of $10, are entitled to one vote and a right to receive dividends per share.		December 31

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (Note) Issuance in excess of ordinary shares Treasury share transactions May only be used to offset a deficit Changes in percentage of ownership interest in associates		December 31	December 31
		2018 $ 2,142,074 1,173,346 - $ 3,315,420	2017 $ 2,142,074 1,173,346 511 $ 3,315,931

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Note: 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 or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year).

Balance at January 1, 2017 Changes in percentage of ownership interest in associates Balance at December 31, 2017 Changes in percentage of ownership interest in associates Balance at December 31, 2018	Issuance in Excess of Ordinary Shares Treasury Share Transactions Changes in Percentage of Ownership Interest in Associates $ 2,142,074 $ 1,173,346 $ 4,448 - - (3,937) 2,142,074 1,173,346 511 - - (511) $ 2,142,074 $ 1,173,346 $ -	Total $ 3,319,868 (3,937) 3,315,931 (511) $ 3,315,420

c. Retained earnings and dividend policy

According to the Company’s Articles of Incorporation, net income should be used to pay its business income tax and offset deficits. From any remaining net income, 10% will be appropriated as a legal reserve, and a special reserve as required by government regulations. After adding prior years’ unappropriated earnings, the Company could retain a certain amount for expansion plans and then make the appropriation equally to each shareholder. However, if there is an increase in capital during the year, bonuses appropriated to new shareholders should be allocated based on the resolution passed in the shareholders’ meeting. For information about the policies of employees’ compensation and remuneration of directors prior to and after the amendments to the Company’s Articles of Incorporation, refer to Note 29.

The Company’s distribution of dividends would be in consideration of on economic conditions, tax obligations, and operating requirements for cash. For an orderly system of dividend distribution, the dividends are distributed in accordance with the Articles of Incorporation. In addition, improvements of the financial structure and support for investment, capacity expansion or other major capital expenditures are needed. The cash dividends to be distributed should not be below 50% than the current year's post-tax net profit deduction, offsetting losses of previous years, the statutory surplus reserve and the special surplus reserve, except for the improvement of financial structure and the transfer of funds, capacity expansion or other major capital expenditures. The cash dividends to be distributed should not be below 10% of the total cash and share dividends for the current accounting year.

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. 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.

Under Order No. 1010012865, Order No. 1010047490 and Order No. 1030006415 issued by the FSC and the directive titled Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs, the Company should appropriate or reverse to a special reserve.

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The appropriations of earnings for 2017 and 2016, which were approved in the shareholders’ meetings on June 21, 2018 and June 20, 2017, respectively, are as follows:

Legal reserve Special reserve Cash dividends	Appropriation of Earnings 2017 2016 $ 153,599 $ 113,425 12,543 114,149 1,416,940 991,858	Dividends Per Share (NT$)
		2017 2016 $ 1.0 $ 0.7

The appropriation of the earnings for 2018 was proposed by the board of directors on March 20, 2019. The appropriations and dividends per share are as follows:

	Appropriation	Appropriation	Dividends Per	Dividends Per
	of	Earnings	Share	(NT$)
Legal reserve	$	131,815
Special reserve		73,330
Cash dividends		1,204,400	$	0.85

The appropriation of earnings for 2018 was resolved in the shareholders’ meeting held on June 25, 2019.

d. Special reserve

Balance, beginning of year Appropriation in respect of net increases in the fair value of investment properties Balance, end of year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,643,743 12,543 $ 2,656,286	2017 $ 2,529,594 114,149 $ 2,643,743

On the initial application of the fair value model to investment properties, the Company appropriated for a special reserve at an amount equal to the net increase arising from fair value measurement and which was subsequently transferred to retained earnings. The additional special reserve should be appropriated for subsequent net increases in fair value. The amount appropriated may be reversed to the extent that the cumulative net increases in fair value decrease or on the disposal of investment properties. If investment properties were reclassified to property, plant and equipment, the associated special reserve would be reversed in accordance to the subsequent depreciation expense of property, plant and equipment.

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e. Other equity items
1) Exchange differences on translating the financial statements of foreign operations

Balance, beginning of year Exchange differences on translating the financial statements of foreign operations Share of exchange difference of associates accounted for using the equity method Balance, end of year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 86,048 3,779 827 $ 90,654	2017 $ 58,273 29,974 (2,199) $ 86,048

Translation adjustments arising from net assets of foreign operations that translated from the functional currency to New Taiwan dollars were recognized as other comprehensive incomes of exchange differences on translating foreign operations.

2) Unrealized (loss) gain on available-for-sale financial assets

	For the Year	For the Year
		Ended
	December 31,
		2017
Balance, beginning of year	$	1,566,157
Unrealized gain (loss) arising on revaluation of available-for-sale financial assets		284,894
Cumulative gain reclassified to profit or loss on sale of available-for-sale
financial assets		(429,542)
Share of unrealized loss on available-for-sale financial assets of associates
accounted for using the equity method		(6)
Balance, end of year	$	1,421,503
Balance at January 1, 2018 per IAS 39	$	1,421,503
Adjustment on initial application of IFRS 9		(1,421,503)
Balance at January 1, 2018 per IFRS 9	$	-

On unrealized (losses) gains on available-for-sale financial assets, the cumulative gains or losses under generated from the fair value measurement of available-for-sale financial assets that are recognized under other comprehensive income and deducted from the disposal proceeds or the amount of impairment are reclassified to profit or loss.

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3) Unrealized gain (loss) on financial assets at FVTOCI

	For the Year	For the Year
		Ended
	December 31,
		2018
Balance at January 1 per IAS 39	$	-
Adjustment on initial application of IFRS 9		1,242,300
Balance at January 1 per IFRS 9		1,242,300
Recognized for the year
Unrealized gain/(loss) - equity instruments		536,660
Share from associates accounted for using the equity method		194,860
Reclassification adjustment
Cumulative unrealized gain (loss) of equity instruments transferred to retained
earnings due to disposal from associates accounted for using the equity
method		(4,192)
Balance at December 31	$	1,969,628

f. Non-controlling interests

Balance, beginning of year Attributable to non-controlling interests: Share of profit for the year Cash dividends distributed by subsidiaries Exchange differences on translating the financial statements of foreign operations Unrealized gain on available-for-sale financial assets Unrealized loss on financial assets at FVTOCI Remeasurement of defined benefit plans Related income tax Adjustments relating to changes of associates accounted for using the equity method Share of other comprehensive income of associates accounted for using the equity method Balance, end of year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 7,859,460 332,345 (220,697) (18,341) - (2,461) (11,161) 5,566 (625) 222,398 $ 8,166,484	2017 $ 7,812,231 309,036 (273,138) 23,316 4,427 - (16,384) 2,785 (1,490) (1,323) $ 7,859,460

g. Treasury shares

(In Thousands of Shares)

Purpose of Buy-Back

Shares Held by the Company’s Subsidiaries

Number of shares at December 31, 2018 and 2017

8,207

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The shares that the subsidiaries held were acquired before the Company Act was amended. The Company’s shares held by its subsidiaries at the end of the reporting period are as follows:

(In Thousands of Shares)

December 31, 2018 Name of Subsidiary Number of Shares Held Bai Ding Investment 8,207 December 31, 2017 Name of Subsidiary Number of Shares Held Bai Ding Investment 8,207	Carrying Amount Market Price $ 97,110 $ 128,837 Carrying Amount Market Price $ 97,110 $ 123,093

Under the Securities and Exchange Act, the Company shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as the rights to dividends and to vote. The subsidiaries holding treasury shares, however, retain shareholders’ rights, except the rights to participate in any share issuances for cash and to vote.

28. REVENUE

Sales of goods (Note) Commissions from concessionaires’ sales (Note) Maintenance and promotion fee income Rental income from property Others Note: Gross revenues is presented as follows: Concessionaires’ sales Sale of goods	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 $ 23,704,953 $ 24,257,581 12,250,426 12,794,159 890,598 1,845,277 1,584,523 1,420,631 812,051 849,334 $ 39,242,551 $ 41,166,982 For the Year Ended December 31
		2018 $ 88,049,625 24,198,695 $ 112,248,320	2017 $ 89,128,993 24,696,213 $ 113,825,206

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Contact Balances

	For the Year
	Ended
	December 31,
	2018
Contract liabilities - non current
Sale of goods	$ 7,435,814
Customer loyalty programs	84,802
Others	4,852
	$ 7,525,468

Refer to Note 13 for the information of notes receivables and trade receivables.

The changes in the balance of contract liabilities primarily result from the timing difference between the Group’s performance and the respective customer’s payment.

Revenue of the reporting period recognized from the beginning contract liabilities which were satisfied in the previous periods is as follows:

	For the Year
	Ended
	December 31,
	2018
From the beginning contract liabilities
Sale of goods	$ 5,612,648
Customer loyalty programs	59,426
	$ 5,672,074

29. NET PROFIT FOR THE YEAR

Net profit for the year includes the following items:

a. Operating costs

Operating costs Cost of sales Rental costs Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 18,697,764 355,092 38,728 $ 19,091,584	2017 $ 20,333,921 299,497 40,189 $ 20,673,607

64 -

b. Other income

Interest income Bank deposits Others Dividend income Insurance claim income	For the Year Ended	For the Year Ended	December 31
		2018 $ 120,525 7,599 128,124 152,720 250,005 $ 530,849	2017 $ 66,993 7,862 74,855 138,393 - $ 213,248

c. Other gains and losses

Loss arising on financial assets classified as held for trading, net (Note) Financial assets mandatorily classified as at FVTPL (Note) Gain (loss) arising on changes in fair value of investment properties, net Foreign exchange (loss) gain, net Loss on disposal of property, plant and equipment, net Loss on disposal of investment properties Gain on disposal of property, plant and equipment Gain on disposal of investment Impairment loss on intangible assets Impairment loss on property, plant and equipment Other gains Other losses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ - 10,443 43,045 (169,753) (26,487) (90,621) - - (1,630,000) (38,047) 207,019 (48,778) $ (1,743,179)	2017 $ (2,851) - (9,061) 74,681 (223,336) - 6,628 428,971 (1,205,840) (2,040) 1,251,964 (435,690) $ (116,574)

Note: Loss arising on financial assets classified as held for trading, net includes:

a) Gain/loss arising on changes in fair value in 2018 and 2017 were $4,647 thousand and $2,996 thousand, respectively and;
b) Gains on disposal of financial assets classified as held for trading in 2018 and 2017 were $5,796 thousand and $145 thousand, respectively.
65 -

d. Finance costs

For the Year Ended	For the Year Ended	December 31
2018 $ 442,384 19,351 33,994 495,729 253 (58,702) $ 437,280 For the Year Ended		2017 $ 454,249 19,367 29,107 502,723 250 (57,597) $ 445,376 December 31
2018 2017 $ 58,702 $ 57,597 0.9800%-1.0500 % 1.0500%-1.8417 % For the Year Ended December 31
2018 2017 $ 2,497,206 $ 2,856,202 (141,887) (205,391) 2,355,319 2,650,811 51,903 44,687 $ 2,407,222 $ 2,695,498 $ 94,443 $ 75,951 2,260,876 2,574,860 $ 2,355,319 $ 2,650,811 $ 51,903 $ 44,687 For the Year Ended December 31
	2018 $ 82,239 56,286 $ 138,525	2017 $ 71,407 70,585 $ 141,992

66 -

g. Employee benefits expenses

Post-employment benefits Defined contribution plan Defined benefit plan (Note 26) Other employee benefits Total employee benefits expenses An analysis of employee benefits expenses by function Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 187,241 24,732 211,973 4,187,287 $ 4,399,260 $ 4,399,260	2017 $ 206,574 31,262 237,836 4,564,671 $ 4,802,507 $ 4,802,507

h. Employees’ compensation and remuneration of directors

The Company accrued employees’ compensation and remuneration of directors at a rate of 2% to 3.5% of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2018 and 2017, which have been approved by the Company’s board of directors on March 20, 2019 and March 21, 2018, respectively, are as follows:

Employees’ compensation Remuneration of directors Amount Employees’ compensation Remuneration of directors	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 3.2% 3.2% 2.4% 2.4% For the Year Ended December 31
	2018 Cash $ 55,384 41,538	2017
		Cash $ 60,395 45,296

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

There was no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the year ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors 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.

67 -

30. INCOME TAX

a. Major components of income tax expense recognized in profit or loss are as follows:

Current income tax In respect of the current year Income tax on unappropriated earnings Adjustments for the prior years Deferred tax In respect of the current year Effect of tax rate changes Adjustments to deferred tax attributable to changes in tax rates and laws Adjustments for the prior years Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2018 $ 728,346 - (241) 728,105 35,200 85,957 48,101 1,257 170,515 $ 898,620	2017 $ 547,106 55 422 547,583 211,032 - 91,717 3,488 306,237 $ 853,820

A reconciliation of accounting profit and income tax expenses are as follows:

Profit before income tax from continuing operations Income tax expense calculated at the statutory rate Nondeductible expenses in determining taxable income Deferred tax effect of earnings of subsidiaries Tax-exempt income Unrecognized investment credits Income tax on unappropriated earnings Land value increment tax Unrecognized loss carryforwards Unrecognized deductible temporary differences Effect of tax rate changes Adjustments for prior years’ income tax Others Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,549,115 $ 690,816 21,312 (230,173) (53,307) - - (23,303) 383,187 7,595 85,957 1,016 15,520 $ 898,620	2017 $ 2,698,842 $ 622,672 14,538 (667,039) (91,479) 1,155 55 (35,107) 926,052 53,631 - 3,910 25,432 $ 853,820

In 2017, the applicable corporate income tax rate used by the Group 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%. The applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other groups operating in other jurisdictions are based on the tax laws in those jurisdictions.

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

68 -

b. Income tax recognized in other comprehensive income

In respect of the current year Effect of tax rate changes Remeasurement on defined benefit plans	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 13,253 10,113 $ 23,366	2017 $ - 13,325 $ 13,325

c. Current tax assets and liabilities

Current tax assets Benefits of tax losses to be carried back to recover taxes paid in prior periods Tax refund receivable Current tax liabilities Income tax payable		December 31	December 31
		2018 $ 2,630 3,025 $ 5,655 $ 609,796	2017 $ 2,656 423 $ 3,079 $ 539,394

d. Deferred tax assets and liabilities

The movements of deferred tax assets and liabilities are as follows:

For the year ended December 31, 2018

Deferred tax assets Temporary differences Lease incentives Differences of pension in determining taxable income Investments in subsidiaries Other payables Others Loss carryforwards	Balance, Beginning of Year Recognized in Profit or Loss Recognized in Other Comprehensive Income $ 209,714 $ (11,539) $ - 153,976 (23,484) 23,366 16,952 87,209 - 41,465 (41,465) - 142,263 6,333 - 564,370 17,054 23,366 155,208 13,386 - $ 719.578 $ 30,440 $ 23,366	Exchange Differences Balance, End of Year $ (700) $ 197,475 - 153,858 - 104,161 - - (149) 148,447 (849) 603,941 (435) 168,159 $ (1,284) $ 772,100

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Deferred tax liabilities Temporary differences Depreciation Reserve for land revaluation increment tax Investment properties Investments in subsidiaries Others	Balance, Beginning of Year Recognized in Profit or Loss Recognized in Other Comprehen- sive Income $ 823,288 $ 91,148 $ - 508,719 - - 384,773 (23,303 ) - 172,975 59,423 - 25,725 73,687 - $ 1,915,480 $ 200,955 $ -	Exchange Differences $ - - - (2,072 ) (1) $ (2,073)	Others Balance, End of Year $ - $ 914,436 - 508,719 - 361,470 - 230,326 - 99,411 $ - $ 2,114,362

For the year ended December 31, 2017

Deferred tax assets
Temporary differences
Lease incentives

Differences of pension in
determining taxable
income
Investment properties
Other payables
Others

Loss carryforwards

Deferred tax liabilities
Temporary differences
Depreciation

Reserve for land revaluation
increment tax
Investment properties
Investments in subsidiaries
Others

Balance,
Beginning of
Year
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
Exchange
Differences
Balance, End of
Year
$ 233,476
$ (22,373) $ -
$ (1,389) $ 209,714
160,195
(19,544)
13,325
-
153,976
37,290
-
-
-
37,290
41,691
(226)
-
-
41,465

302,701

(180,540)

-

(236)

121,925
775,353
(222,683)
13,325
(1,625)
564,370

248,154

(91,315)

-

(1,631)

155,208
$ 1,023,507
$ (313,998)
$ 13,325
$ (3,256)
$ 719,578
Balance,
Beginning of
Year
Recognized in
Profit or Loss
Recognized in
Other
Comprehen-
sive Income
Exchange
Differences
Others
Balance, End
of Year
$ 820,283
$ 3,005 $ -
$ -
$ -
$ 823,288
508,719
-
-
-
-
508,719
419,880
(35,107 )
-
-
-
384,773
270,519
33,143
-
(4,072 )
(126,615 )
172,975

34,502

(8,802)

-

25

-

25,725
$ 2,053,903
$ (7,761)
$ -
$ (4,047)
$ (126,615)
$ 1,915,480

70 -
e. Deductible temporary differences for which no deferred tax assets were recognized in the consolidated balance sheets

Loss carryforwards Expiry in 2028 Expiry in 2027 Expiry in 2026 Expiry in 2025 Expiry in 2024 Expiry in 2023 Expiry in 2022 Expiry in 2021 Expiry in 2020 Expiry in 2019 Expiry in 2018 Deductible temporary differences		December 31	December 31
		2018 $ 1,451,589 3,184,627 957,341 812,468 675,800 123,329 189,304 171,239 183,485 373,159 - $ 8,122,341 $ 806,834	2017 $ - 3,458,509 1,172,477 974,952 827,861 592,523 113,858 84,200 84,736 212,874 430,513 $ 7,952,503 $ 1,202,591

f. Information about unused loss carryforwards

As of December 31, 2018, information about loss carryforwards are as follows:

	Remaining Creditable Amount Expiry Year $ 1,676,954 2028 3,195,012 2027 1,493,269 2026 821,443 2025 696,075 2024 129,329 2023 195,449 2022 171,355 2021 183,485 2020 374,259 2019 $ 8,936,630

h. Income tax assessments

Income tax returns for the Group’s entities in ROC have been assessed by the tax authorities through 2016, except for YTDS has been assessed by the tax authorities through 2016.

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31. EARNINGS PER SHARE

Unit: NT$ Per Share

Basic earnings per share Diluted earnings per share	For	the Year Ended December 31	the Year Ended December 31
		2018 $ 0.94 $ 0.93	2017 $ 1.09 $ 1.09

Earnings and weighted average number of ordinary shares outstanding used for the computation of earnings per share are as follows:

Net profit for the year

Net profit for the year Effect of potentially dilutive ordinary shares: Employees’ compensation Earnings 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 $ 1,318,150 - $ 1,318,150	2017 $ 1,535,986 - $ 1,535,986

(In Thousands of Shares)

Weighted average number of ordinary shares outstanding used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employees’ compensation Weighted average number of ordinary shares outstanding used in the computation of dilutive earnings per share	For the Year Ended	For the Year Ended	December 31
		2018 1,408,734 4,931 1,413,665	2017 1,408,734 5,237 1,413,971

If the Group offered to settle the compensation or bonuses paid to employees in cash or shares, the Group assumed the entire amount of the compensation or bonus will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in their meeting in the following year.

32. OPERATING LEASE ARRANGEMENTS

a. The Group as lessee

In addition to the transaction described in Note 20 to the consolidated financial statements, the Group signed operating lease arrangements with related parties and unrelated parties in line with its business operations.

72 -

As of December 31, 2018 and 2017, the deposit paid for operating lease arrangements were $1,020,277 thousand and $1,063,690 thousand, respectively.

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

Not later than 1 year Later than 1 year but not later than 5 years Later than 5 years		December 31	December 31
		2018 $ 3,975,449 13,515,692 20,264,110 $ 37,755,251	2017 $ 3,752,994 10,185,176 16,633,122 $ 30,571,292

Under non-cancelable sublease commitments, the Group expected to receive minimum sublease payments of $113,287 thousand and $165,918 thousand as of December 31, 2018 and 2017, respectively.

The lease payments recognized in profit or loss and the rental payments on sub-lease are as follows:

Minimum lease payments Contingent rentals Sub-lease payments received	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 3,934,059 170,442 (61,751) $ 4,042,750	2017 $ 3,742,002 233,269 (54,111) $ 3,921,160

b. The Group as lessor

For investment properties that are leased out under operating lease agreements, refer to Note 18.

As of December 31, 2018 and 2017, the deposits received by the Group through operating lease contract were $183,724 thousand and $162,255 thousand, respectively.

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

Not later than 1 year Later than 1 year but not later than 5 years Later than 5 years		December 31	December 31
		2018 $ 825,529 2,269,991 3,468,739 $ 6,564,259	2017 $ 633,272 1,498,733 617,923 $ 2,749,928

Except for receivables for minimum lease payments, the lease commitments of the Group also included contingent rental agreements which require the lessee to make contingent rental payments based on a specific percentage of its annual sales profit.

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33. CAPITAL MANAGEMENT

Under its operating development schemes and related government rules, the Group manages its capital to ensure it can continue to operate as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity of the Group (comprising share capital, capital surplus, retained earnings and other equity). The Group’s capital management concerns the capital expenditures for capital structure and relative risks to ensure the optimal capital structure; the Group may adjust the amount of dividends paid to shareholders, the number of new shares issued and the proceeds from borrowings and repayments of borrowings, in order to balance the overall capital structure.

34. FINANCIAL INSTRUMENTS

a. Fair value information - financial instruments not measured at fair value

The financial instruments not measured at fair value are either those with due dates in the near future or those with a future collection value which approximately equals its carrying amount. Thus, the fair value of these financial instruments are estimated at their carrying amounts on the financial reporting date.

b. Fair value information - financial instruments measured at fair value on a recurring basis
1) Fair value hierarchy

Fair value hierarchy as at December 31, 2018

Financial assets at FVTPL Beneficiary certificates Domestic listed ordinary shares Financial assets at FVTOCI Domestic listed ordinary shares Unlisted shares	Level 1 $ 344,481 93,266 $ 437,747 $ 3,631,653 - $ 3,631,653	Level 2 $ - - $ - $ - - $ -	Level 3 $ - - $ $ - 573,146 $ 573,146	Total $ 344,481 93,266 $ 437,747 $ 3,631,653 573,146 $ 4,204,799

74 -

Fair value hierarchy as at December 31, 2017 Level 1 Financial assets at FVTPL Non-derivative financial assets held for trading $ 496,455 Available-for-sale financial assets Listed ordinary shares Equity investments $ 3,178,410	Level 2 $ - $ -	Level 3 $ - $ -	Total $ 496,455 $ 3,178,410
Financial assets at FVTPL Non-derivative financial assets held for trading Available-for-sale financial assets Listed ordinary shares Equity investments

There were no transfers between Level 1 and 2 in both 2018 and 2017.

2) Valuation techniques and inputs applied for Level 3 fair value measurement
- Financial Instruments Valuation Techniques and Inputs
- Unlisted shares a) Asset-based approach. Valuation based on the fair value of an investee, calculated through each investment of the investee using the income approach, market approach or a combination of the two approaches, while also taking the liquidity premium into consideration.
  - b) Transaction method of market approach. The approach is a valuation strategy that looks at market ratios of companies with similar profitability at the end of the reporting period, while taking the liquidity premium into consideration.
c. Categories of financial instruments

Financial assets FVTPL Held for trading Mandatorily classified as at FVTPL Loans and receivables (1) Available-for-sale financial assets (2) Financial assets at amortized cost (3) FVTOCI Equity instruments Financial liabilities Measured at amortized cost (4)	December 31
	2018 2017 $ - $ 496,455 437,747 - - 22,929,381 - 3,786,447 22,215,229 - 4,204,799 - 53,293,190 56,313,688

1) The balances included the carrying amount of cash and cash equivalents, debt investments with no active market, notes receivable and trade receivables (including related parties), other receivables and refundable deposits, which are measured at amortized cost.
75 -
2) The balances included the carrying amount of available-for-sale financial assets measured at cost.
3) The balances included the carrying amount of cash and cash equivalents, notes receivable and trade receivables (including related parties), other receivables and refundable deposits, which are measured at amortized cost.
4) The balances included the carrying amount of short-term borrowings, short-term bills payable, notes payable and trade payables (including related parties), other payables, long-term borrowings including the current portion and deposits received, which are measured at amortized cost.
d. Financial risk management objectives and policies

The Group’s major financial instruments include equity and debt investments, trade receivables, trade payables, bonds payable, and borrowings. The Group’s financial risk management pertains to the management of operations-related market risks (including exchange rate risk, interest rate and other price risks), credit risks and liquidity risks. To reduce financial risk, the Group is committed to identifying, assessing and avoiding the market uncertainties and reducing negative effects of these market changes on the Group’s financial performance.

The main financial activities of the Group are governed by the Group’s internal management and approved by the board of directors. The financial schemes, which include fund raising plans should be carried out in compliance with the Group’s policies.

1) Market risk

a) Exchange rate risk

The Group was exposed to exchange rate risk for holding assets and liabilities denominated in foreign currencies.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period are as follows:

Assets USD Liabilities USD Sensitivity analysis		In Thousands of US Dollars December 31	In Thousands of US Dollars December 31
		2018 $ 29,879 $ 3,968	2017 $ 91,315 $ 139,874

The Group was mainly affected by the floating exchange rates of USD denominated assets and liabilities. The sensitivity analyses below were determined based on the Group’s exposure to exchange rates for non-derivative instruments at the end of the reporting period. The change of exchange rates reported to the senior management of the Group was based on a 1% increase or decrease in exchange rate which also denotes the management’s assessment for the reasonableness of the fluctuation of exchange rates.

76 -

If exchange rates had been 1% higher or lower and all other variables were held constant, the profit before income tax or equity of the Group for 2018 and 2017 would increase/decrease by $7,958 thousand and $14,451 thousand, respectively,

b) Interest rate risk

The Group was exposed to interest rate risk because the entities in the Group borrowed funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings.

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

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis	December 31
	2018 2017 $ 10,740,306 $ 6,679,030 9,476,066 13,352,308 2,026,821 7,303,752 22,051,911 20,003,599

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for financial assets and financial liabilities at the end of the reporting period. For sensitivity analysis purposes, the sensitivity rate was adjusted as a result of the volatile financial markets. The measurement of the increase or decrease in the interest rates is based on 100 basis points, which is reported to the senior management denoting the management’s assessment for the reasonableness of the fluctuation of the interest rates.

If interest rates had been 100 basis points higher or lower and all other variables had been held constant, the income before income taxes for the years ended December 31, 2018 and 2017 would have decreased/increased by $200,251 thousand and $126,998 thousand, respectively.

c) Other price risks

The Group was exposed to equity price risks involving equity investments in listed companies and beneficial certificates. The Group’s investments in listed companies and beneficial certificates should be in compliance with the rule made by the board of directors in order to achieve the goal of risk management and maximize the returns on investments.

Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period. For sensitivity analysis purposes, the sensitivity rate was adjusted as a result of the volatile financial market.

If equity prices had been 5% higher or lower, the income before income tax for the years ended December 31, 2018 and 2017 would increase/decrease by $21,887 thousand and $24,823 thousand, respectively, as a result of the changes in fair value of held-for-trading investments. The pre-tax other comprehensive income for the years ended December 31, 2018 and 2017 would have increased/decreased by $210,240 thousand and $158,921 thousand, respectively, as a result of the changes in fair value of available-for-sale financial assets.

77 -

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. At the end of the reporting period, the Group’s credit risk was mainly from trade receivables in operating activities, bank deposits and financial instruments in financial activities.

To maintain the quality of trade receivables, the Group manages credit risk by assessing customers’ credit elements, such as financial status, historical transactions, etc., and obtains an adequate amount of collaterals as guarantees from the customers with high credit risk. In addition, the Group reviews the recoverable amount of each trade debt at the end of the reporting period to ensure that adequate allowances are made for irrecoverable amounts. On the credit risk management of bank deposits and other financial instruments, the Group trades with the counterparties comprising banks with high credit ratings.

3) Liquidity risk

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

On the demand for capital payments for a particular purpose, the Group maintains adequate cash by the way of the long-term finance/borrowings. For the management of cash shortage, the Group monitors cash management and allocates cash appropriately to maintain financial flexibility and ensure the mitigation of liquidity risk.

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

December 31, 2018

	On Demand or
	Not Later than										Later than
	1 Year		1-2 Years		2-3 Years		3-4 Years		4-5 Years		5 Years	Total
Non-derivative financial liabilities
Short-term borrowings	$ 12,957,612	$	-	$	-	$	-	$	-	$	-	$ 12,957,612
Short-term bills payable	3,480,365		-		-		-		-		-	3,480,365
Notes payable	3,683		-		-		-		-		-	3,683
Trade payables	17,579,453		-		-		-		-		-	17,579,453
Trade payables to related parties	104,999		-		-		-		-		-	104,999
Other payables	3,610,910		-		-		-		-		-	3,610,910
Long-term borrowings (including
current portion)	-		12,460,000		2,630,000		-		-		-	15,090,000
Deposits received	50,344		227,618		125,821		3,584		7,596		51,205	466,168
December 31, 2017
	On Demand or
	Not Later than										Later than
	1 Year		1-2 Years		2-3 Years		3-4 Years		4-5 Years		5 Years	Total
Non-derivative financial liabilities
Short-term borrowings	$ 13,084,956	$	-	$	-	$	-	$	-	$	-	$ 13,084,956
Short-term bills payable	2,514,700		-		-		-		-		-	2,514,700
Notes payable	3,071		-		-		-		-		-	3,071
Trade payables	18,285,105		-		-		-		-		-	18,285,105
Trade payables to related parties	127,880		-		-		-		-		-	127,880
Other payables	4,050,914		-		-		-		-		-	4,050,914
Bond payables (including current
portion)	998,149		-		-		-		-		-	998,149
Long-term borrowings (including
current portion)	3,500,000		10,238,102		3,020,000		-		-		-	16,758,102
Deposits received	87,541		249,261		45,142		82,094		6,872		19,901	490,811

78 -

35. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Group and its subsidiaries (which are related parties of the Company) have been eliminated on consolidation and are not disclosed in this note. The transactions between the Group and its related parties, other than those disclosed in other notes, are summarized as follows:

a. The Group’s related parties and their relationships

Related Party Relationship with the Group Ding Ding Integrated Marketing Service Associate Co., Ltd. (DDIM) Chengdu Baiyang Industry Co., Ltd. (CDBI) Associate Yuan Hsin Digital Payment Co., Ltd. Associate (YHDP) Oriental Securities Corporation (OSC) Associate Pacific Department Store Associate Sogo Industrial Co., Ltd. Associate Far Eastern International Leasing Corp. Associate (FEIL) Far Eastern Electronic Commerce Co., Ltd. Associate (FEEC) (Note) Yuan Shi Digital Technology Co., Ltd. The associate of the investor that has significant (YSDT) (Note) influence over the Company (the subsidiary of FENC) Far EasTone Telecommunications Co., Ltd. The associate of the investor that has significant influence over the Company (the subsidiary of FENC) Asia Cement Corporation The associate of the investor that has significant

influence over the Company (the subsidiary of FENC) The associate of the investor that has significant

influence over the Company (the associate of FENC) The associate of the investor that has significant

Yuan Tong Investment Co., Ltd. (YTIC) The associate of the investor that has significant influence over the Company (the associate of FENC) Far Eastern Electronic Toll Collection Co., The associate of the investor that has significant Ltd. influence over the Company (the subsidiary of FENC) New Century Info Comm Tech Co., Ltd. The associate of the investor that has significant influence over the Company (the subsidiary of FENC) Yuan Ding Co., Ltd. The associate of the investor that has significant influence over the Company (the subsidiary of FENC) Ding Ding Hotel Co., Ltd. The associate of the investor that has significant influence over the Company (the subsidiary of FENC) Far East Resources Development Co., Ltd. The associate of the investor that has significant influence over the Company (the subsidiary of FENC) Far Eastern Technical Consultants Co., Ltd. The associate of the investor that has significant influence over the Company (the associate of FENC) Yuan Ding Integrated Information Service The associate of the investor that has significant (Shanghai) Inc. influence over the Company (the subsidiary of FENC) Far Eastern General Contractor Inc. The associate of the investor that has significant influence over the Company (the subsidiary of FENC) Far Eastern Apparel Co., Ltd. The associate of the investor that has significant influence over the Company (the subsidiary of FENC) YDT Technology International Co., Ltd. The associate of the investor that has significant

influence over the Company (the subsidiary of FENC) (Continued)

79 -

Relationship with the Group

Related Party

Far Eastern New Century (China) The associate of the investor that has significant Investment Co., Ltd. (FENCI (China)) influence over the Company (the subsidiary of FENC) Far Eastern General Contractor Inc. The associate of the investor that has significant influence over the Company (the subsidiary of FENC) Yuan Ding Enterprise (Shanghai) Co., Ltd. The associate of the investor that has significant (YDEC (Shanghai)) influence over the Company (the subsidiary of FENC) Yadong Ready Mixed Concrete Co., Ltd. The associate of the investor that has significant influence over the Company (the associate of FENC) Everest Textile Co., Ltd. The associate of the investor that has significant influence over the Company (the associate of FENC) Far Eastern New Century Corporation The investor that has significant influence over the (FENC) Company (investor of FEDS accounted for using the equity method) Yuan-Ze University Other related party (the same chairman) Mr. Xuyuan Zhi Memorial Foundation Other related party (the same chairman) Far Eastern Medical Foundation (FEMF) Other related party (the same chairman) Oriental Union Chemical Corp. Other related party (the same chairman) U-Ming Marine Transport Corp. Other related party (the same chairman) Tranquil Enterprise Ltd. (TEL) Other related party (the same chairman) Hong-Tong Developing Co., Ltd. Other related party Sogo New Life Foundation Other related party Pacific Sogo Social Welfare Foundation Other related party Far Eastern International Bank (FEIB) Other related party (the president of the Company is its vice president) Ding&Ding Management Consultants Co., Other related party Ltd. CitySuper (Hong Kong) Other related party (other related party of Subsidiary Far Eastern CitySuper) CitySuper (Labuan) Ltd. Other related party (investor of Far Eastern CitySuper accounted for using the equity method) CitySuper Ltd. Other related party (the parent company of CitySuper (Labuan) Ltd.) Oriental Securities Investment Advisory Other related party (the subsidiary of OSC) Co., Ltd. Yuanbo Asset Management Company Other related party (subsidiary of FEIL) Chengdu Zhongtie Ruicheng Building Co., Other related party (mainland cooperative enterprise) Ltd. Chengdu Tai Bai Consultant and Other related party (mainland cooperative enterprise) Management Co., Ltd. Shanghai Xujiahui Commercial Co., Ltd. Other related party (mainland cooperative enterprise) (Concluded)

Note: The board of directors of both FEEC and Hiiir approved the merger on June 27, 2017, with Hiiir as the surviving company and FEEC dissolved. Upon the completion of the aforesaid merger, the surviving company was renamed YSDT.

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b. Operating revenue

Sales of goods (Note) The associates of investor that has significant influence over the Group Other related parties Investor that has significant influence over the Group Associates	For the Year Ended	For the Year Ended	December 31
		2018 $ 63,322 4,958 1,719 1,155 $ 71,154	2017 $ 61,433 3,710 1,428 4,627 $ 71,198

Note: Sales to related parties and unrelated parties were made under normal terms.

Other operating revenue Other related parties The associates of investor that has significant influence over the Group Associates	For the Year Ended	For the Year Ended	December 31
		2018 $ 83,160 45,788 3,265 $ 132,213	2017 $ 31,466 40,690 12,790 $ 84,946

c. Operating costs and expenses

Operating costs (Note) The associates of investor that has significant influence over the Group Other related parties Investor that has significant influence over the Group	For the Year Ended	For the Year Ended	December 31
		2018 $ 128,884 15,819 137 $ 144,840	2017 $ 132,792 20,687 143 $ 153,622

Note: Purchases from related parties and unrelated parties were made under normal terms.

Operating expenses (Note) The associates of investor that has significant influence over the Group Other related parties Associates Investor that has significant influence over the Group	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 762,604 497,811 144,407 115,260 $ 1,520,082	2017 $ 770,262 479,796 557,939 119,543 $ 1,927,540

Note: The rental pertaining to related parties is based on agreement and is received or paid monthly or yearly.

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d. Other gains and losses

Other gains Other related parties The associates of investor that has significant influence over the Group Associates Investor that has significant influence over the Group Other losses Associates Investor that has significant influence over the Group	For the Year Ended	For the Year Ended	December 31
		2018 $ 18,300 16,683 1,272 263 $ 36,518 $ 7,176 1 $ 7,177	2017 $ 17,544 18,149 1,140 3,220 $ 40,053 $ 7,217 1 $ 7,218

e. Receivables from related parties

Trade receivables, net The associates of investor that has significant influence over the Group Other related parties Associates (Note) Investor that has significant influence over the Group		December 31	December 31
		2018 $ 61,195 53,923 40,066 758 $ 155,942	2017 $ 51,658 22,403 48,637 3,666 $ 126,364

Note: As of December 31, 2018 and 2017, the amounts of allowance for impairment loss on receivables were $125,035 thousand and $128,450 thousand, respectively.

Other receivables The associates of investor that has significant influence over the Group (1) FENCI (China) YDEC (Shanghai) Others Associates Other related parties (2) Investor that has significant influence over the Group		December 31	December 31
		2018 $ 969,171 256,777 11,968 1,237,916 136,978 58,496 289 $ 1,433,679	2017 $ 986,323 261,322 10,453 1,258,098 15,388 4,947 296 $ 1,278,729

1) As of December 31, 2018 and 2017, the amounts of finance to related parties were $1,225,948 thousand and $1,247,645 thousand, respectively.
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2) As of December 31, 2018 and 2017, the amounts of allowances for impairment loss were $16,181 thousand for both of these dates.
f. Other assets

Prepayments Other related parties The associates of investor that has significant influence over the Group Associates Prepayments for lease Other related parties Other current assets Associates Other non-current asset Leasing incentives The associates of investor that has significant influence over the Group Other related parties Refundable deposits Associates The associates of investor that has significant influence over the Group Long-term prepayments for lease Other related parties Hong-Tong Comprehensive Commercial Developing Co., Ltd.		December 31	December 31
		2018 $ 2,889 86 - $ 2,975 $ 259,065 $ 570 $ 9,141 1,314 $ 10,455 $ 130,848 44,816 $ 175,664 $ 4,663,176	2017 $ 2,889 96 166 $ 3,151 $ 265,298 $ 570 $ 7,924 1,494 $ 9,418 $ 136,363 44,818 $ 181,181 $ 5,040,667

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g. Payables to related parties

December 31 2018 2017 Trade payables The associates of investor that has significant influence over the Group $ 102,277 $ 125,810 Other related parties 2,711 2,059 Investor that has significant influence over the Group 11 11 $ 104,999 $ 127,880 Other payables Associates $ 294,205 $ 282,478 The associates of investor that has significant influence over the Group 273,720 272,117 Investor that has significant influence over the Group 43,320 44,902 Other related parties 25,332 104,123 $ 636,577 $ 703,620 h. Contract liabilities December 31, 2018 The associates of investor that has significant influence over the Group $ 5,277 Other related parties 2,959 Associates 308 $ 8,544 i. Other liabilities December 31 2018 2017 Advance receipts The associates of investor that has significant influence over the Group $ - $ 3,018 Other related parties - 3,012 Associates - 1,425 $ - $ 7,455 Other current liabilities Associates $ 6,146 $ 5,907 Other related parties 238 15 The associates of investor that has significant influence over the Group 27 196 $ 6,411 $ 6,118		December 31	December 31
		2018 $ - - - $ - $ 6,146 238 27 $ 6,411	2017 $ 3,018 3,012 1,425 $ 7,455 $ 5,907 15 196 $ 6,118

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Other non-current liabilities Leasing incentive The associates of investor that has significant influence over the Group Deposits received The associates of investor that has significant influence over the Group Other related parties Others Other related parties		December 31	December 31
		2018 $ 91,142 $ 36,846 1,032 $ 37,878 $ 29,505	2017 $ 92,791 $ 28,860 1,032 $ 29,892 $ 29,759

j. Construction projects

The associates of investor that has significant influence over the Group Other related parties Associates		December 31	December 31
		2018 $ 805,482 764 540 $ 806,786	2017 $ 417,500 1,939 - $ 419,439

k. Disposals of financial assets

For the year ended December 31, 2017

Related Party Item Number of Shares Underlying Assets YTIC Available-for-sale financial assets - current 25,771 Ordinary shares TEL Available-for-sale financial assets - non-current 18,000 Ordinary shares FEMF Available-for-sale financial assets - non-current 9,217 Ordinary shares	Proceeds $ 254,111 $ 479,574 $ 234,540	Gain on Disposal $ 74,341
		$ 198,471
		$ 107,918

l. Loans to related parties

The associates of investors which the Group provided financing to and that have significant influence over the Group are as follows:

Related Party FENCI (China) YDEC (Shanghai)			December 31, 2018
		Maximum Balance $ 1,926,169 $ 520,820	Ending Balance Interest Rate (%) $ 969,171 - $ 256,777 -	Interest Income $ - $ -

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Related Party FENCI (China) YDEC (Shanghai)			December 31, 2017
		Maximum Balance $ 2,972,097 $ 524,843	Ending Balance Interest Rate (%) $ 986,323 - $ 261,322 -	Interest Income $ - $ -

m. Loans from related parties

The Group’s financing from other related parties are as follows:

Related Party FEIB Related Party FEIB			December 31, 2018
		Maximum Balance $ 400,000	Ending Balance Interest Rate (%) $ - 1.15 December 31, 2017	Finance Cost $ 192
		Maximum Balance $ 1,200,000	Ending Balance Interest Rate (%) $ - 0.90-1.25	Finance Cost $ 3,583

n. Compensation of key management personnel

Short-term employee benefits Post-employment benefits	For the Year Ended	For the Year Ended	December 31
		2018 $ 129,097 494 $ 129,591	2017 $ 112,697 5,143 $ 117,840

The compensation to directors and other key management personnel were determined by the Compensation Committee of the Group in accordance with the individual performance and the market trends.

36. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for goods purchases, long/short-term borrowings, short-term bills payable and administrative proceedings:

Debt investments with no active market Financial assets at amortized cost Investments accounted for using the equity method Available-for-sale financial assets Financial assets at FVTOCI Property, plant and equipment Investment properties		December 31	December 31
		2018 $ - 280,400 3,504,587 - 1,783,290 17,400,626 682,999 $ 23,651,902	2017 $ 283,690 - 3,492,833 1,535,640 - 17,587,339 755,294 $ 23,654,796

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37. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of December 31, 2018 and 2017 are as follows:

a. Significant commitments

The amount of unrecognized commitments are as follows:

Acquisition of property, plant and equipment Unused letters of credit for purchases		December 31	December 31
		2018 $ 3,592,586 500,000 $ 4,092,586	2017 $ 2,180,109 - $ 2,180,109

b. A letter from the Ministry of Economic Affairs (MOEA) on July 28, 2011 stated that the term of the board of directors and supervisors (the “Board”) of SOGO was terminated, and the election of the Board should be held by October 28, 2011. On August 26, 2011, in the shareholders’ meeting, Douglas Hsu, Ching-Wen Huang, Mao-De Huang, Hsiao-Yi Wang and Satoshi Inoue were elected to be the representatives of the Board and Jing-Yi Wang was elected as a supervisor. On September 2, 2011, the registration of the Board was submitted to the MOEA, and on August 30, 2013, the registration of the Board was approved and completed by the MOEA.

For the resolution passed in the shareholders’ meeting, SOGO’s shareholders filed an appeal for an invalid resolution and for the withdrawal of the resolution of the shareholders’ meeting. As of March 17, 2017, many verdicts, including the Year 100 Letter Su No. 3965 verdict made by the TTDC, the Year 104 Letter Tsai Shang No. 90 verdict made by the Supreme Administrative Court (SAC), the Year 101 Letter Kun No. 1589 and No. 1681 verdicts made by the THC, and the Year 106 Letter Tsai Shang No. 86 verdict made by the SAC, confirmed that the shareholders’ meeting was legal and rejected the appeal of the SOGO shareholders.

Also, Heng-Long Li filed an appeal against SOGO and PLTI, alleging that the decisions made in the SOGO shareholders’ meeting on August 26, 2011 were invalid. After the TTDC rejected the appeal in the Year 103 Letter Shang No. 1014 verdict, the THC rejected the appeal once more.

Moreover, the former chairman of PLTI, Heng-Long Li, stated that he appointed Chun-Chih Weng, Chao-Chuan Chu, Shen-Yi Li, Jui-Tsun Liu and Yu-Ying Chin as members of the Board of SOGO to replace Ching-Wen Huang, Satoshi Inoue, Douglas Hsu, Hsiao-Yi Wang and Mao-De Huang. Furthermore, those individuals (Chun-Chih Weng, Chao-Chuan Chu, Shen-Yi Li, Jui-Tsun Liu and Yu-Ying Chin) elected Chun-Chih Weng as the chairman of PLTI and applied to the MOEA for the registration of a change of the Board and supervisor of SOGO on August 8, 2011. However, the application of the registration was rejected by the MOEA, due to the election being held by the former chairman of PLTI, Heng-Long Li. Chun-Chih Weng, Chao-Chuan Chu, Shen-Yi Li, Jui-Tsun Liu and Yu-Ying Chin not only announced publicly that they are the five members of the Board of SOGO but also that they held the SOGO shareholders’ meetings on September 5, 2011 and September 6, 2011. However, the decisions made in these two shareholders’ meetings on September 5, 2011 and September 6, 2011 were not approved and not consented to by all of SOGO’s shareholders. According to the Year 100 Letter Su No. 4224 verdict from the TTDC on January 22, 2014, the TTDC declared that the decisions made in the shareholders’ meeting on September 5, 2011 were not approved legally; according to the Year 100 Letter Su No. 4164 verdict on November 28, 2013, the TTDC confirmed that the decisions made in the shareholders’ meeting on September 6, 2011 were not approved legally. The THC passed the Year 103 Letter Shang No. 330 verdict on May 31, 2016 rejecting the appeal and confirmed that the resolutions of the shareholders’ meeting on September 5, 2011 were not approved

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legally. Chun-Chih Weng filed an appeal against the judgments. Under Court Reference Year 107 Letter Tai Shang No. 965 verdict, issued by the Taiwan Supreme Court on December 6, 2018, the Court rejected Chun-Chih Weng’s appeals and confirmed that the resolutions of the shareholders’ meeting on September 5, 2011 were not approved legally. In the Year 103 Letter Shang No. 87 verdict from the THC on August 17, 2016, the THC rejected the appeal and confirmed that the decisions made in the shareholders’ meeting on September 6, 2011 were not approved legally. Chun-Chih Weng filed an appeal against the judgments. Under Court Reference Year 107 Letter Tai Shang No. 1591 verdict, issued by the Taiwan Supreme Court on December 13, 2018, the Court rejected Chun-Chih Weng’s appeals and confirmed that the resolutions of the shareholders’ meeting on September 5, 2011 were not approved legally.

c. Pacific Department Store asserted that SOGO injured the trademark, and raised an appeal to the president Qing-Wen Huang and the general manager Ding-Song WanGuo of SOGO for violation of the trademark law. After being sued by the TTDC (Year 106 Annual detective No. 2264) on November 27, 2017. Under Court Reference Year 106 Zhi Yi Zi Note 70 verdict, issued by the TTDC on December 28, 2018, the Court made the judgment that Qing-Wen Huang and Ding-Song WanGuo were innocent of the filed criminal charges. Taiwan Taipei District Prosecutor's Office appealed to Intellectual Property Court on January 23, 2019. SOGO received a complaint proposed by the Pacific Department Store in January. In the complaint, the president Qing-Wen Huang and the general manager Ding-Song WanGuo were asked to compensate an amount of $72,226,923 thousand, and also to post the judgment on the front pages of several newspapers for 30 days. Pacific Department Store withdrew the criminal case and the criminal case supplementary civil action in April 2019.

38. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the Group and the exchange rates between foreign currencies and respective functional currencies are disclosed. The significant assets and liabilities denominated in foreign currencies are as follows:

December 31, 2018

Foreign Currency (In Thousands) Exchange Rate Financial assets Monetary items USD $ 3,759 30.7150 (USD:NTD) USD 26,210 6.8632 (USD:RMB) RMB 525,092 4.4753 (RMB:NTD) Non-monetary items Associates accounted for using the equity method RMB 399,450 4.4753 (RMB:NTD) Financial assets measured at cost USD 294 30.2750 (USD:NTD)	Carrying Amount $ 115,452 802,283 2,349,944 $ 3,267,679 $ 1,787,660 8,903 $ 1,796,563 (Continued)

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Foreign
Currency
(In Thousands)
Exchange Rate
Financial liabilities
Monetary items
USD
$ 150
30.7150 (USD:NTD)
USD
3,818
6.8632 (USD:RMB)
RMB
247,992
4.4753 (RMB:NTD)

December 31, 2017
Foreign
Currency
(In Thousands)
Exchange Rate
Financial assets
Monetary items

USD
$ 10,438
29.7600 (USD:NTD)
USD
80,877
6.5342 (USD:RMB)
RMB
527,652
4.5545 (RMB:NTD)

Non-monetary items
Associates accounted for using the equity
method
RMB
423,405
4.5545 (RMB:NTD)
Financial assets measured at cost
USD
294
30.2750 (USD:NTD)

Financial liabilities
Monetary items
USD
29,944
29.7600 (USD:NTD)
USD
109,930
6.5342 (USD:RMB)
RMB
36,113
4.5545 (RMB:NTD)

Carrying
Amount
$ 4,618

117,272

1,109,837
$ 1,231,727
(Concluded)
Carrying
Amount
$ 310,622

2,406,900

2,403,190
$ 5,120,712
$ 1,928,400

8,903
$ 1,937,303
$ 891,136

3,271,523

164,479
$ 4,327,138

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The Group is mainly exposed to RMB. The following information was aggregated by the functional currencies of the Group, and the exchange rates between respective functional currencies and the presentation currency are disclosed. The significant realized and unrealized foreign exchange gains (losses) are as follows:

Functional Currency NTD RMB	For the Year Ended December 31	For the Year Ended December 31
	2018 Exchange Rate Net Foreign Exchange Gain (Loss) 1.0000 (NTD:NTD) $ (47,489) 4.5599 (RMB:NTD)(122,264) $ (169,753)	2017
		Exchange Rate Net Foreign Exchange Gain (Loss) 1.0000 (NTD:NTD) $ 11,389 4.5053 (RMB:NTD) 63,292 $ 74,681

39. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and b. investees are as follow:
1) Financing provided to others: Table 2.
2) Endorsements/guarantees provided: Table 3.
3) Marketable securities held (excluding investment in subsidiaries, associates and joint controlled entities): Table 4.
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Table 5.
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: None.
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 6.
9) Trading in derivative instruments: None.
10) Others: Intercompany relationships and significant intercompany transactions: Table 7.
11) Information on investees: Table 8.
c. Information on investments in mainland China:
1) Name of the investees in mainland China, main businesses and products, paid-in capital, method of investment, information on the inflow or outflow of capital, percentage of ownership, investment income or loss, ending balance of investment, repatriations of investment income, and the limit of investments in mainland China: Table 9.
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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:
a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period: None.
b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period: None.
c) The amount of property transactions and the amount of the resultant gains or losses: None.
d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes: Table 3.
e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds: Table 2.
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 receiving of services: None.

40. OPERATING SEGMENT FINANCIAL INFORMATION

The Group belongs to a single industry of department stores and supermarkets. Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on geographical information as management structure. The Group’s reportable segments under IFRS 8 “Operating Segments” includes ROC and China.

a. Segment revenues and results

ROC China Total for continuing operations Interest income Dividend income Insurance claim income Loss arising on financial assets classified as held for trading, net Foreign exchange gain (loss), net Gain arising on financial assets mandatorily classified as at FVTPL Loss on disposal of property, plant and equipment, net Gain on disposal of property, plant and equipment		Segment Revenue For the Year Ended December 31 2018 2017 $ 36,129,276 $ 37,621,304 3,113,275 3,545,678 $ 39,242,551 $ 41,166,982		Segment Profit	Segment Profit
				For the Year Ended December 31
		2018 $ 36,129,276 3,113,275 $ 39,242,551		2018 $ 4,438,794 (251,465) 4,187,329 128,124 152,720 250,005 - (169,753) 10,443 (26,487) -	2017 $ 4,020,142 (933,418) 3,086,724 74,855 138,393 - (2,851) 74,681 - (223,336) 6,628 (Continued)

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Gain on disposal of investment Loss on disposal of investment properties (Loss) gain arising on changes in fair value of investment properties, net Finance costs Share of profits of associates accounted for using the equity method Impairment loss on intangible assets Impairment loss on property, plant and equipment Other gains Other losses Profit before income tax	Segment Revenue For the Year Ended December 31 2018 2017		Segment Profit	Segment Profit
			For the Year Ended December 31
			2018 $ - (90,621) 43,045 (437,280) 11,396 (1,630,000) (38,047) 207,019 (48,778) $ 2,549,115	2017 $ 428,971 - (9,061) (445,376) (39,180) (1,205,840) (2,040) 1,251,964 (435,690) $ 2,698,842 (Concluded)

Segment revenue reported above represents revenue generated from external customers. There were no intersegment sales in 2018 and 2017.

b. Segment assets and liabilities

Segment assets ROC China Adjustments and eliminations Consolidated total assets Segment liabilities ROC China Consolidated total liabilities		December 31	December 31
		2018 $ 93,643,355 10,102,800 186 $ 103,746,341 $ 56,374,554 9,681,397 $ 66,055,951	2017 $ 92,043,486 13,665,994 (1,029) $ 105,708,451 $ 55,551,721 13,298,552 $ 68,850,273

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c. Revenue from major products

The Group’s revenue from its major products and services are as follows:

Retail sales revenue Other operating revenues	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 35,955,379 3,287,172 $ 39,242,551	2017 $ 37,051,740 4,115,242 $ 41,166,982

d. Geographical information

The Group operates in two principal geographical areas - ROC and China. The Group’s revenue from external customers by geographical location and information about its non-current assets by geographical location are detailed below.

Revenue from External Customers	Revenue from External Customers	Non-current Assets	Non-current Assets
For the Year Ended December 31
		December 31
2018 $ 36,129,276 3,113,275 $ 39,242,551	2017 $ 37,621,304 3,545,678 $ 41,166,982	2018 $ 61,476,837 2,182,977 $ 63,659,814	2017 $ 61,875,989 3,922,858 $ 65,798,847

Non-current assets exclude those classified as non-current assets held for sale, financial instruments, and deferred tax assets.

e. Information about major customers

There is no revenue from any individual customer comprising over 10% or more of the Group’s gross revenue for 2018 and 2017.

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TABLE 1

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

DIAGRAM OF INTERCOMPANY RELATIONSHIPS DECEMBER 31, 2018

==> picture [1001 x 562] intentionally omitted <==

----- Start of picture text -----

35.13%
Far Eastern Department
Stores, Ltd. (the “Company”)
0.57%
100% 67% 100% 100% 56% 100% 100% 96%
54%
Far Eastern Ai Mai Co., Bai Ding Investment Bai Yang Investment Ya Tung Department Far Eastern Hon Li Do Co., Asians Merchandise Yu Ming Advertising FEDS Development Ltd. Far Eastern CitySuper
Ltd. (Ai Mai) Co., Ltd. (Bai Ding) Co., Ltd. (Bai Yang) Stores, Ltd. (YTDS) Ltd. (FEHLD) Company (AMC) Agency Co., Ltd. (BVI) Co., Ltd.
(Yu Ming)
44% 46%
33%
12.50%
100% 70%
FEDS New Century FEDS Asia Pacific Development
Development Co., Ltd. Co., Ltd. (FEAPD) 100% 100%
(FENCD)
2.47% 2.47% 2.47% Shanghai Bai Ding Chongqing FEDS Co.,
0.02% Consultant & Ltd.
1.37% 0.17% Management Co., Ltd.
Pacific Liu Tong Investment Co.,
Ltd. (“PLT”)
100%
0.1% 78.60%
Chubei New Century Pacific Sogo Department Stores 1.36%
Shopping Mall Co., Ltd.
Co., Ltd. (SOGO)
(CBNC)
40%
40%
60%
50% 60%
Lian Ching Investment Pacific China Holdings Far Eastern Big City Shopping
Co., Ltd. (Note) (HK) Limited Malls Co., Ltd.
100%
Pacific China Holdings
Ltd.
100% 100% 73% 100% 100% 100%
Pacific (China) Bai Fa China Holdings Shanghai Pacific Chengdu Quanxing Chongqing Metropolitan Chongqing Pacific
Investment Co., Ltd. (HK), Limited Department Store Co., Pacific Department Plaza Pacific Department Consultant &
Ltd. Store Co., Ltd. Store Co., Ltd. Management Co., Ltd.
100% 100%
Chengdu FEDS Co., Ltd. Dalian Pacific Department
Store Co., Ltd.
----- End of picture text -----

Note: The amount of Lian Ching Investment Co., Ltd. had been written off to zero, no liabilities were be undertaken by the Group and the accounts are not disclosed in the consolidated financial statement.

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TABLE 2

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

FINANCING PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018

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

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate	Nature of Financing	Business Transaction Amounts	Reason for Short-term Financing	Allowance for Impairment Loss	Colla	teral	Financing Limit for Each Borrower	Aggregate Financing Limits
													Item	Value
1	Pacific Sogo Department Stores Co., Ltd.	Pacific China Holdings Ltd.	Other receivables	Y	$ 2,000,000	$ 2,000,000	$ -	-	(Note A)	$ -	Transaction	$ -	-	$ -	$ 4,433,405 (Note B)	$ 4,433,405 (Note B)
2	Chongqing FEDS Co., Ltd.	Chongqing Pacific Consultant & Management Co., Ltd. Dalian Pacific Department Store Co., Ltd. Chengdu FEDS Co., Ltd. Chengdu Quanxing Building Pacific Department Store Co., Ltd.	Other receivables Other receivables Other receivables Other receivables	Y Y Y Y	760,801 (RMB 170,000 ) 447,530 (RMB 100,000 ) 1,342,590 (RMB 300,000 ) 223,765 (RMB 50,000 )	760,801 (RMB 170,000 ) 447,530 (RMB 100,000 ) - 223,765 (RMB 50,000 )	554,937 (RMB 124,000 ) 185,725 (RMB 41,500 ) - 67,130 (RMB 15,000 )	4.35%- 4.353514% 4.353514% 4.353514% 4.353514%	(Note A) (Note A) (Note A) (Note A)	- - - -	Transaction Transaction Transaction Transaction	- - - -	- - - -	- - - -	11,809,562 (Note D) 11,809,562 (Note D) 11,809,562 (Note D) 11,809,562 (Note D)	11,809,562 (Note D) 11,809,562 (Note D) 11,809,562 (Note D) 11,809,562 (Note D)
3	Chongqing Metropolitan Plaza Pacific Department Store Co., Ltd.	Chongqing FEDS Co., Ltd. Chongqing Pacific Consultant & Management Co., Ltd.	Other receivables Other receivables	Y Y	313,271 (RMB 70,000 ) 313,271 (RMB 70,000 )	313,271 (RMB 70,000 ) -	255,092 (RMB 57,000 ) -	4.08% 4.35%	(Note A) (Note A)	- -	Transaction Transaction	- -	- -	- -	11,809,562 (Note D) 11,809,562 (Note D)	11,809,562 (Note D) 11,809,562 (Note D)
4	Pacific China Holding Ltd.	Chengdu FEDS Co., Ltd. Pacific China Holdings (HK) Limited	Other receivables Other receivables	Y Y	1,566,465 (US$ 51,000 ) 307,150 (US$ 10,000 )	737,160 (US$ 24,000 ) 307,150 (US$ 10,000 )	645,015 (US$ 21,000 ) -	3.81425%- 4.59694% -	(Note A) (Note A)	- -	Transaction Transaction	- -	- -	- -	11,809,562 (Note D) 11,809,562 (Note D)	11,809,562 (Note D) 11,809,562 (Note D)
5	Pacific China Holdings (HK) Limited	Pacific China Holding Ltd.	Other receivables	Y	307,150 (US$ 10,000 )	307,150 (US$ 10,000 )	106,888 (US$ 3,480 )	2.52%-3.66%	(Note A)	-	Transaction	-	-	-	11,809,562 (Note D)	11,809,562 (Note D)
6	Pacific (China) Investment Co., Ltd.	Chongqing FEDS Co., Ltd.	Other receivables	Y	44,753 (RMB 10,000 )	44,753 (RMB 10,000 )	-	4.08%	(Note A)	-	Transaction	-	-	-	11,809,562 (Note D)	11,809,562 (Note D)
7	FEDS Development Ltd.	Yuan Ding Enterprise (Shanghai) Co., Ltd. Far Eastern New Century (China) Investment Co., Ltd.	Other receivables Other receivables	Y Y	520,820 (RMB 116,337 ) 1,926,169 (RMB 430,400 )	364,185 (RMB 81,377 ) 969,798 (RMB 216,700 )	256,777 (RMB 57,377 ) 969,171 (RMB 216,560 )	- -	(Note A) (Note A)	- -	Transaction Transaction	- -	- -	- -	5,904,781 (Note C) 5,904,781 (Note C)	11,809,562 (Note D) 11,809,562 (Note D)

Note A: Short-term financing.

Note B: 40% of the financing company’s net assets.

Note C: 20% of the financing company’s net assets of ultimate parent company, Far Eastern Department Stores, Ltd.

Note D: 40% of the financing company’s net assets of ultimate parent company, Far Eastern Department Stores, Ltd.

Note E: The amount of Lian Ching Investment Co., Ltd. had been written off to zero, no liabilities were undertaken by the Group and the accounts are not disclosed in the financial statement.

95 -

TABLE 3

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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 (%)	Maximum Endorsement/ Guarantee Amounts Allowable	Endorsement/ Guarantee Provided by Parent Company	Endorsement/ Guarantee Provided by A Subsidiary	Endorsement/ Guarantee Provided to Mainland China
		Name	Nature of Relationship (Note F)
0	Far Eastern Department Stores, Ltd.	FEDS New Century Development Co., Ltd. Bai Yang Investment Co., Ltd. Bai Ding Investment Co., Ltd. FEDS Development Ltd. Chubei New Century Shopping Mall Co., Ltd. Far Eastern CitySuper Co., Ltd. Pacific Sogo Department Stores Co., Ltd.	2 2 2 2 2 2 2	$ 17,714,344 (Note A) 17,714,344 (Note A) 17,714,344 (Note A) 17,714,344 (Note A) 17,714,344 (Note A) 17,714,344 (Note A) 17,714,344 (Note A)	$ 30,000 400,000 700,000 2,874,924 (US$ 93,600) 3,700,000 160,000 4,798,653	$ 30,000 400,000 700,000 2,874,924 (US$ 93,600) 3,700,000 160,000 4,544,806	$ - - 350,000 1,106,478 (US$ 247,241) - - 4,544,806	$ - - - - - - -	- 1 2 10 13 1 15	$ 29,523,906 (Note B) 29,523,906 (Note B) 29,523,906 (Note B) 29,523,906 (Note B) 29,523,906 (Note B) 29,523,906 (Note B) 29,523,906 (Note B)	Y Y Y Y Y Y Y	- - - - - - -	- - - - - - -
1	Pacific Sogo Department Stores Co., Ltd.	Pacific China Holdings Ltd. Dalian Pacific Department Store Co., Ltd. Chongqing Metropolitan Plaza Pacific Department Store Co., Ltd. Far Eastern Department Stores, Ltd.	2 2 2 3	17,714,344 (Note C) 17,714,344 (Note C) 17,714,344 (Note C) 17,714,344 (Note C)	8,345,266 (US$ 271,700) 410,503 (RMB 78,000) (US$ 2,000) 307,150 (US$ 10,000) 3,005,901	8,345,266 (US$ 271,700) 410,503 (RMB 78,000) (US$ 2,000) 307,150 (US$ 10,000) 2,848,393	3,848,774 (US$ 125,306) - - 2,848,393	- - - -	28 1 1 10	29,523,906 (Note D) 29,523,906 (Note D) 29,523,906 (Note D) 29,523,906 (Note D)	- - - -	- - - Y	- Y Y -
2	Pacific China Holdings Ltd.	Chongqing Pacific Consultant & Management Co., Ltd.	2	17,714,344 (Note C)	279,706 (RMB 62,500)	134,259 (RMB 30,000)	134,259 (RMB 30,000)	-	-	29,523,906 (Note D)	-	-	Y
3	Far Eastern Big City Shopping Malls Co., Ltd.	Pacific Sogo Department Stores Co., Ltd.	3	362,860 (Note A)	164,396	154,325	154,325	-	1	604,766 (Note B)	-	-	-

Note A: The amount is 60% of net assets based on the latest financial statements of the endorser/guarantor.

Note B: The amount is 100% of net assets based on the latest financial statements of the endorser/guarantor.

Note C: The amount is 60% of the net assets based on the latest financial statements of the final parent company - Far Eastern Department Stores, Ltd.

Note D: The amount is 100% of the net assets based on the latest financial statements of the final parent company - Far Eastern Department Stores, Ltd.

Note E: The amount of Lian Ching Investment Co., Ltd. had been written off to zero, no liabilities were undertaken by the Company and the accounts are not disclosed in the financial statement.

(Continued)

96 -

(Concluded)

Note F: Relationships between the endorsement/guarantee provider and the guaranteed party:

Trading partner.
The Company that directly and indirectly hold more than 50% of the voting shares.
The companies that directly and indirectly hold more than 50% of the Company’s voting rights.
The Company that directly and indirectly holds more than 90% of the voting shares.
Guaranteed by the Company according to the construction contract.
An investee company. The guarantees were provided based on the Company’s proportionate share in the investee company.
Companies in the same industry provide among themselves joint and several securities for as performance guarantees of sales contracts for pre-construction homes pursuant to the Consumer Protection Act.
97 -

TABLE 4

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2018

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

Holding Company	Type and Name of Marketable Securities	Relationship with the Holding Company (Note A)	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Shares (In Thousands)	Carrying Amount	Percentage of Ownership (%)	Fair Value
Far Eastern Department Stores, Ltd. Bai Ding Investment Co., Ltd. Bai Yang Investment Co., Ltd. Far Eastern Hon Li Do Co., Ltd.	Shares Asia Cement Corporation Far Eastern New Century Corporation Kaohsiung Rapid Transit Corporation Yuan Ding Leasing Corp. Yuan Ding Co., Ltd. Yuan Shi Digital Technology Co., Ltd. Shares Far Eastern Department Stores, Ltd. Asia Cement Corporation Far Eastern New Century Corporation Chung-Nan Textile Co., Ltd. Ding Ding Management Consultants Co., Ltd. Yue Ding Industry Co., Ltd. Oriental Securities Investment Advisory Co., Ltd. Ding Sheng Investment Co., Ltd. Shares Far Eastern International Bank Asia Cement Corporation U-Ming Marine Transport Corp. Oriental Securities Investment Advisory Co., Ltd. Beneficiary certificate DWS Taiwan Money Market Fund	4 3 - - 4 4 2 7 6 - 8 7 8 - 8 7 8 8 -	Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current	50,000 19,964 6,286 7,309 3 1,041 8,207 14,814 15,812 2,984 216 2,476 1 39,600 22,102 3,849 200 1 986	$ 1,697,517 557,006 29,355 69,892 10 571 128,850 502,949 441,141 81,531 5,168 43,301 10 345,312 221,023 130,690 6,450 10 11,522	1 - 2 9 - 1 1 - - 5 5 2 - 18 1 - - - -	$ 1,697,517 557,006 29,355 69,892 10 571 128,850 502,949 441,141 81,531 5,168 43,301 10 345,312 221,023 130,690 6,450 10 11,522	35,000 thousand shares of Asia Cement Corporation pledged for loans and commercial papers issued of the investor company 5,200 thousand shares of Asia Cement Corporation pledged for commercial papers issued of the investor company 15,000 thousand shares of Far Eastern New Century Corporation pledged for loans of the investor company

(Continued)

98 -

Holding Company	Type and Name of Marketable Securities	Relationship with the Holding Company (Note A)	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Shares (In Thousands)	Carrying Amount	Percentage of Ownership (%)	Fair Value
Yu Ming Advertising Agency Co., Ltd. FEDS New Century Development Co., Ltd. FEDS Development Ltd. Pacific Sogo Department Stores Co., Ltd. Pacific Liu Tong Investment Co., Ltd. Pacific China Holdings Ltd.	Beneficiary certificate DWS Taiwan Money Market Fund Shares Asia Cement Corporation Beneficiary certificate DWS Taiwan Money Market Fund Shares Kowloon Cement Corp., Ltd. Shares CMC Magnetics Corp. Quanta computer Inc. Pacific Construction Co., Ltd. DBTEL Inc. Oriental Union Chemical Corp. U-Ming Marine Transport Corp. Pacific Liu Tong Investment Co., Ltd. E-Shou Hi-tech Co., Ltd. Tain Yuan Investment Co., Ltd. PURETEK Corp. Pacific 88 Co., Ltd. Yuan Shi Digital Technology Co., Ltd. Beneficiary certificate DWS Taiwan Money Market Fund Shares Overseas Development Corp. Taiwan Ocean Farming Corp.	- 7 - 7 - - - - 8 8 1 - - - - 7 - - -	Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Financial assets at fair value through profit or loss - non-current	2,730 1,506 8,503 46 297 1 7,931 10 546 300 800 18,300 98,000 119 16 1,041 17,273 2,250 2,250	$ 31,892 51,115 99,312 8,903 1,993 38 91,206 29 14,087 9,675 4,019 - - - - - 201,755 - -	- - - 2 - - 2 - - - - 15 20 - 1 1 - 15 15	$ 31,892 51,115 99,312 8,903 1,993 38 91,206 29 14,087 9,675 4,019 - - - - - 201,755 - -

Note A: 1. Subsidiary of FEDS.
Parent company.
Investor that has significant influence over the Company.
The associate of investor that has significant influence over the Company. 5. Other related party.
Investor that has significant influence over FEDS.
The associate of investor that has significant influence over FEDS.
Other related party of FEDS.

(Concluded)

99 -

TABLE 5

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counter party	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition			Disposal			Ending	Balance
					Shares (In Thousands)	Amount	Shares (In Thousands)	Amount	Shares (In Thousands)	Amount	Carrying Amount	Gain (Loss) on Disposal	Adjusted Item (Note C)	Shares (In Thousands)	Amount
Bai Yang Investment Co., Ltd. FEDS New Century Development Co., Ltd. Pacific (China) Investment Co., Ltd.	Shares FEDS New Century Development Co., Ltd. Shares Chubei New Century Shopping Mall Co., Ltd. Shares Chengdu FEDS Co., Ltd.	Investments accounted for using the equity method Investments accounted for using the equity method Investments accounted for using the equity method	- - -	Subsidiary Subsidiary Subsidiary	72,000 40,000 -	$ 782,939 393,353 (652,536)	78,000 78,000 -	$ 780,000 (Note A) 780,000 (Note A) 637,742 (Note B)	- - -	$ - - -	$ - - -	$ - - -	$ 6,217 (1,435) (63,760)	150,000 118,000 -	$ 1,569,156 1,171,918 (78,554)

Note A: There was an increase in cash capital.

Note B: There was an increase of NT$21,500 thousand in cash capital.

Note C: The share of comprehensive profit or loss using the equity method.

100 -

TABLE 6

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Pacific Sogo Department Stores Co., Ltd. FEDS Development Ltd. (BVI) Chongqing Metropolitan Plaza Pacific Department Store Co., Ltd. Pacific China Holdings Ltd. Pacific China Holdings (HK) Limited. Chongqing FEDS Co., Ltd. Chengdu FEDS Co., Ltd. Chongqing Pacific Consultant & Management Co., Ltd	Sogo Department Store Co., Ltd. Far Eastern Big City Shopping Malls Co., Ltd. Far Eastern New Century (China) Investment Co., Ltd. Yuan Ding Enterprise (Shanghai) Co., Ltd. Chongqing FEDS Co., Ltd. Chongqing FEDS Co., Ltd. Chengdu FEDS Co., Ltd. Pacific China Holdings Ltd. Chongqing Pacific Consultant & Management Co., Ltd. Dalian Pacific Department Store Co., Ltd. Chengdu Quanxing Pacific Department Store Co., Ltd. Chengdu Baiyang Industry Co., Ltd.	Associate Subsidiary The associate of investor that has significant influence over the Group. The associate of investor that has significant influence over the Group. Subsidiary Same ultimate parent company Subsidiary Subsidiary Same ultimate parent company Same ultimate parent company Same ultimate parent company Associate	$ 125,035 101,231 969,171 (Note B) 256,777 (Note B) 1,119,720 (Note A) 258,827 (Note B) 652,520 (Note B) 107,868 (Note B) 557,018 (Note B) 186,186 (Note B) 427,905 108,414 (Note A)	- - - - - - - - - - - -	$ 125,035 - - - - - - - - - - -	Collection expedited - - - - - - - - - - -	$ 532 - - - - - - - - - - -	$ 125,035 - - - - - - - - - - -

Note A: The cash dividend receivable.

Note B: This balance refers to fund lending.

101 -

TABLE 7

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Number	Transacting Company	Counter party	Flow of Transaction (Note A)			Status
				Account	Amount (Note C)	Condition	Ratio to Consolidated Operating Revenue or Assets (Note B)
0	Far Eastern Department Stores, Ltd.	FEDS Asia Pacific Development Co., Ltd.	1	Operating expenses	$ 228,000	Rent was based on market rates and paid monthly	1
1	FEDS Asia Pacific Development Co., Ltd.	Far Eastern Department Stores, Ltd.	2	Operating revenue	(228,000)	Rent was based on market rates and received monthly	1
2	Pacific Sogo Department Stores Co., Ltd.	Far Eastern Big City Shopping Malls Co., Ltd.	3	Operating revenue	(313,914)	Rent was based on market rates and received monthly	1
3	Far Eastern Big City Shopping Malls Co., Ltd.	Pacific Sogo Department Stores Co., Ltd.	3	Operating costs and expenses	313,914	Rent was based on market rates and paid monthly	1

Note A: Flow of transaction:

From the Company to the subsidiary.
From the subsidiary to the Company. 3. Between subsidiaries.
Note B: If the account of the intercompany transaction is shown in the balance sheet, the ratio is the percentage of the year-end account balance to the total consolidated assets; if the account of the intercompany transaction is shown in the statement of comprehensive income, the ratio is the percentage of the accumulated amount during the year to the total consolidated operating revenues.
Note C: Only an intercompany transaction amounting to more than 1% of total consolidated operating revenues or total consolidated assets is disclosed in this table.
102 -

TABLE 8

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance as of December 31, 2018	Balance as of December 31, 2018	Balance as of December 31, 2018	Net Income (Loss) of the Investee	Share of (Loss) Profit	Note A
				December 31, 2018	December 31, 2017	Shares (In Thousands)	Percentage of Ownership (%)	Carrying Amount
Far Eastern Department Stores, Ltd. Bai Ding Investment Co., Ltd. FEDS Asia Pacific Development Co., Ltd. FEDS New Century Development Co., Ltd. Bai Yang Investment Co., Ltd. Ya Tung Department Stores, Ltd. Yu Ming Advertising Agency Co., Ltd. Far Eastern Hon Li Do Co., Ltd. Pacific Liu Tong Investment Co., Ltd. Pacific Sogo Department Stores Co., Ltd.	Bai Yang Investment Co., Ltd. Oriental Securities Corporation Pacific Liu Tong Investment Co., Ltd. Bai Ding Investment Co., Ltd. Far Eastern Ai Mai Co., Ltd. FEDS Development Ltd. Yu Ming Advertising Agency Co., Ltd. Ya Tung Department Stores, Ltd. Ding Ding Integrated Marketing Service Co. Asians Merchandise Company Far Eastern Hon Li Do Co., Ltd. Far Eastern CitySuper Co., Ltd. Yuan Hsin Digital Payment Co., Ltd. Oriental Securities Corporation Pacific Liu Tong Investment Co., Ltd. Far Eastern International Leasing Corp. Pacific Sogo Department Stores Co., Ltd. Yu Ming Trading Co. Far Eastern Hon Li Do Co., Ltd. Far Eastern CitySuper Co., Ltd. Pacific Liu Tong Investment Co., Ltd. Pacific Liu Tong Investment Co., Ltd. Chubei New Century Shopping Mall Co., Ltd. FEDS Asia Pacific Development Co., Ltd. Far Eastern International Leasing Corp. Bai Ding Investment Co., Ltd. FEDS New Century Development Co., Ltd. Pacific Liu Tong Investment Co., Ltd. FEDS Development Ltd. Pacific China Holdings (HK) Limited Far Eastern Big City Shopping Malls Co., Ltd. Pacific Liu Tong Investment Co., Ltd. Pacific Liu Tong Investment Co., Ltd. Pacific Liu Tong Investment Co., Ltd. Pacific Sogo Department Stores Co., Ltd. Pacific Department Store Co., Ltd. Pacific China Holdings (HK) Limited Pacific Department Store Co., Ltd. Lian Ching Investment Co., Ltd. Pacific Venture Investment Ltd. Sogo Department Store Co., Ltd. Pacific Sogo Investment Co., Ltd. Ding Ding Integrated Marketing Service Co Far Eastern Big City Shopping Malls Co., Ltd. Yuan Hsin Digital Payment Co., Ltd.	Taiwan Taiwan Taiwan Taiwan Taiwan British Virgin Island Taiwan Taiwan Taiwan USA. Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan British Virgin Island Hong Kong Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Hong Kong Taiwan Taiwan Hong Kong Taiwan Taiwan Taiwan Taiwan Taiwan	Investment Securities brokerage Investment Investment Hypermarket Investment Advertising and importation of certain merchandise Department store Marketing Trading Building rental Hypermarket Other financing and supporting services Securities brokerage Investment Leasing Department store Importation of certain merchandise Building rental Hypermarket Investment Investment Department store Shopping mall Leasing Investment Shopping mall Investment Investment Investment Department store Investment Investment Investment Department store Department store Investment Department store Investment Investment Credit card business Investment Marketing Department store Other financing and supporting services	$ 8,922,181 143,652 1,764,210 33,357 1,535,538 125,058 33,000 519,292 64,500 5,316 40,278 478,269 238,292 163,563 658,129 301,125 33,490 21,291 28,672 - 99,000 99,000 1,180,000 1,522,761 1,555,590 577,457 1,425,272 99,000 723,946 3,597,868 200,000 55,000 1,200 8,400 4,469,904 62,480 5,733,286 599,000 270,641 357,050 32,984 - 64,500 300,000 238,292	$ 8,922,181 143,652 1,764,210 33,357 1,535,538 125,058 33,000 519,292 64,500 5,316 40,278 478,269 238,292 163,563 658,129 301,125 33,490 21,291 28,672 - 99,000 99,000 400,000 1,522,761 1,555,590 577,457 645,272 99,000 723,946 3,597,868 200,000 55,000 1,200 8,400 4,469,904 62,480 5,733,286 599,000 270,641 357,050 32,984 999,900 64,500 300,000 238,292	924,991 140,297 281,734 119,981 87,744 218 3,500 21,000 3,399 950 1,571 47,827 15,313 97,116 100,250 22,203 11,254 4,901 1,259 2 19,800 19,800 118,000 149,100 132,388 60,019 150,000 19,800 185 35,680 20,000 11,000 200 1,400 650,817 6,840 53,520 60,296 26,764 100,000 7,120 - 3,399 30,000 15,313	100 20 35 67 100 54 100 100 10 100 56 96 15 14 13 5 1 47 44 - 2 2 100 70 30 33 100 2 46 40 40 1 - - 79 3 60 29 50 48 34 - 10 60 15	$ 9,131,939 1,949,756 3,838,530 2,108,498 (Note B) 1,298,433 1,411,729 95,804 (5,018 ) 36,191 4,534 12,480 60,382 116,511 1,349,755 1,379,566 321,278 150,736 75,181 13,418 1 289,681 289,681 1,171,918 1,789,737 1,651,953 1,070,297 1,569,156 289,681 1,202,100 (652,143 ) 241,907 160,690 2,728 18,473 10,030,616 141,402 (120,287 ) 1,026,265 - - - - 36,191 362,860 116,511	$ (694,448 ) 46,790 321,223 90,435 1,421 38,764 7,085 (94,863 ) 23,617 52 489 (33,938 ) (244,148 ) 46,790 321,223 57,007 428,934 3,324 489 (33,938 ) 321,223 321,223 (1,435 ) 152,406 57,007 90,435 4,831 321,223 38,764 (2,340,062 ) 93,904 321,223 321,223 321,223 428,934 100,612 (2,340,062 ) 100,612 - - - - 23,617 93,904 (244,148 )	$ (694,417 ) 9,196 112,843 60,945 1,421 30,071 7,085 (94,863 ) 2,382 52 390 (32,465 ) (36,622 )	2 1 2 2 2 2 2 2 1 2 2 2 1 1 2 1 2 1 2 2 2 2 2 2 1 2 2 2 2 2 2 2 2 2 2 1 2 1 2 1 1 2 1 2 1
											(Continued)

103 -

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	Balance as of December 31, 2018	Balance as of December 31, 2018	Balance as of December 31, 2018	Net Income (Loss) of the Investee	Share of (Loss) Profit	Note A
				December 31, 2018	December 31, 2017	Shares (In Thousands)	Percentage of Ownership (%)	Carrying Amount
Pacific China Holdings (HK) Limited Pacific China Holdings Ltd.	Pacific China Holdings Ltd. Bai Fa China Holdings (HK), Limited	British Virgin Island Hong Kong	Investment Investment	$ 4,115,810 46	$ 4,115,810 46	109,200 2	100 100	$ (439,800 ) 46	$ (655,202 ) -		2 2

Note A: 1. Associate.

Subsidiary.

Note B: The foreign-currency investments were translated at the rate of US$1:NT$30.715 prevailing on December 31, 2018.

Note C: The amount is the investment accounted for using the equity method to $2,205,608 thousand deduct the parent company shares reclassification to treasury shares of $97,110 thousand.

Note D: The amount of Lian Ching Investment Co., Ltd. had been written off to zero, no liabilities were undertaken by the Group and the accounts are not disclosed in the financial statement.

(Concluded)

104 -

TABLE 9

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

INFORMATION ON INVESTMENT 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	Total Amount of Paid-in Capital (Note A)	Method of Investment (Note G)	Accumulated Outflow of Investment from Taiwan as of January 1, 2018 (Note A)	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2018 (Note A)	Net Income (Loss) of the Investee (Note E)	% Ownership of Direct or Indirect Investment	Share of (Loss) Profit (Note E)	Carrying Amount as of December 31, 2018	Accumulated Repatriation of Investment Income as of December 31, 2018
					Outflow	Inflow
Shanghai Pacific Department Stores Co., Ltd. Chengdu Quanxing Mansion Pacific Department Store Co., Ltd. Chongqing Metropolitan Plaza Pacific Department Store Co., Ltd. Chongqing Pacific Consultant & Management Co., Ltd. Shanghai Pacific Consultant & Management Co., Ltd. Shanghai Bai Ding Consultant & Management Co., Ltd. Chongqing FEDS Co., Ltd. Chengdu Baiyang Industry Co., Ltd. Dalian Pacific Department Store Co., Ltd. Pacific (China) Investment Co., Ltd. Chengdu FEDS Co., Ltd. Chengdu Beicheng FEDS Co., Ltd.	Department store Department store Department store Consulting service Consulting service Consulting service Department store Department store, logistics and storehouse Department store Investment Department store Department store	$ 543,456 30,408 92,145 2,242,195 10,750 3,072 86,002 1,006,946 71,605 6,634,440 4,115,810 -	2 2 2 2 2 2 2 2 2 2 2 2	$ 394,150 (Note B) 30,408 (Note B) 92,145 (Note B) 6,143 (Note B) 5,268 (Note B) - - - - - - -	$ - - - - - - - - - - - -	$ - - - - - - - - - - - -	$ 394,150 (Note B) 30,408 (Note B) 92,145 (Note B) 6,143 (Note B) 5,268 (Note B) - - - - - - -	$ 91,418 (115,079) (162,266) (23,393) 264 (25,635) 194,767 44,131 (26,773) (106,838) (57,787) (8,706)	49 67 67 67 33 100 100 22 67 67 67 67	$ 19,281 (77,292) (108,985) (15,711) 87 (25,635) 194,767 740 (17,982) (71,096) (38,812) (5,847)	$ 158,168 (389,764) 183,405 805,569 6,156 11,235 1,218,719 1,194,518 23,722 32,203 (52,761) -	$ - - - - - - - - - - - -

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2018	Investment Amounts Authorized by Investment Commission, MOEA		Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$ - (Note C)	$243,048 (US$7,913 thousand) (Notes A and C)		$ - (Note F)

Note A: Translated at the rate of US$1:NT$30.715 prevailing on December 31, 2018.

Note B: The payment was made by Pacific Construction Co., Ltd. (the former shareholder).

(Continued)

105 -

(Concluded)

Note C: The payment made by the Company and the investment amount approved by the Investment Commission, except for the payment made by subsidiary and the subsidiary’s investment amount approved by the Investment Commission.

Note D: The financial report was audited by an international accounting firm with a cooperative working relationship.

Note E: There is no upper limit, as stated in the Principles Governing the Review of Investment or Technical Corporation in Mainland China (No. 10720421530), which was issued by the Industrial Development Bureau, Ministry of Economic Affairs, ROC.

Note F: Three investment types are as follows:

The Company made the investment directly.
The Company made the investment through a company registered in a third region. The companies registered in a third region were FEDS Development Ltd. and Pacific China Holdings Ltd.
Others.
106 -

AI assistant

FEDS — Annual Report 2018

52225_rns_2018-11-14_01db5132-7734-4f63-b854-25d2d33d5e56.pdf

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Evaluation of Impairment Loss of Goodwill

Fair Value Evaluation of Investment Properties

Others Matter

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Notice to Readers

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

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

FAR EASTERN DEPARTMENT STORES, LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

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

Classification, measurement and impairment of financial assets

Impact on assets, liabilities and equity for current year

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

Definition of a lease

The Group as lessee

The Group as lessor

Anticipated impact on assets, liabilities and equity

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

Basis of Preparation

Classification of Current and Non-current Assets and Liabilities

Basis of Consolidation

Foreign Currencies

Inventories

Investment in Associates

Property, Plant and Equipment

Investment Properties

Goodwill

Intangible Assets

Impairment of Tangible and Intangible Assets Other than Goodwill

Financial Instruments

Financial assets

1) Financial assets at FVTPL

2017

2018

2017

2017

Financial liabilities

Provisions

Revenue Recognition

2018

2017

Leasing

Borrowing Costs

Retirement Benefit Costs

Taxation

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

6. CASH AND CASH EQUIVALENTS

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

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

December 31, 2018

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

11. FINANCIAL ASSETS MEASURED AT COST - 2017

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

13. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES (INCLUDING RELATED PARTIES)

b. Trade receivables

December 31, 2018

FEDS Annual Report 2018