FH - Audit Report / Information 2019

FENG HSIN STEEL CO., LTD.

STANDALONE FINANCIAL STATEMENTS WITH REPORT OF INDEPENDENT ACCOUNTANTS

FOR THE YEARS ENDED 31 DECEMBER 2019 AND 2018

Address: No.998, Sec. 1, Jiahou Rd., Houli Dist., Taichung City 421, Taiwan ,R.O.C. Telephone: 886-4-2556-5101

The reader is advised that these standalone financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

Independent Auditors’ Report

To FENG HSIN STEEL Co., Ltd.

Opinion

We have audited the accompanying standalone balance sheets of FENG HSIN STEEL Co., Ltd. (the “Company”) as of 31 December 2019 and 2018, and the related standalone statements of comprehensive income, changes in equity and cash flows for the years ended 31 December 2019 and 2018, and notes to the standalone financial statements, including the summary of significant accounting policies (together “the standalone financial statements”).

In our opinion, based on our audits and the reports of other auditors (please refer to the Other Matter – Making Reference to the Audits of Component Auditors section of our report), the standalone financial statements referred to above present fairly, in all material respects, the standalone financial position of the Company as of 31 December 2019 and 2018, and their standalone financial performance and cash flows for the years ended 31 December 2019 and 2018, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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 Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China (the “Norm”), and we have fulfilled our other ethical responsibilities in accordance with the Norm. Based on our audits and the reports of other auditor(s), 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 2019 standalone financial statements. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Valuation for inventories

As of 31 December 2019, the Company’s net inventories amounted to NT$4,307,181 thousand which represented 20% of the total standalone assets. The amount of inventories was significant to the Company’s financial statements. The Company manufacture and sell various types of steel products. The main ingredient is iron scrap. The material and finished goods are affected by the fluctuation of international prices that may cause significant changes in inventory prices. As a result, the calculation of net realizable value was complicated, we therefore determined this a key audit mater. Our audit procedures included, but not limited to, understanding and testing the effectiveness of internal control; evaluating the adequacy of accounting policies around obsolete inventories; evaluating stocktaking plan and selecting important storage locations to observe inventory counts to ensure inventory quantities and status; obtaining inventory aging schedule to test whether inbound and outbound records are accurate; re-calculating the unit cost of inventories; evaluating and testing net realizable value adopted by management; testing selling prices; and implementing analytical procedures with respect to the gross profit ratios by products. We also assessed the adequacy of disclosures of inventories. Please refer to Note 6 to the Company’s standalone financial statements.

Other Matter – Making Reference to the Audits of Component Auditors

Those financial statements were audited by other auditors, whose reports thereon have been furnished to us, and our opinions expressed herein are based solely on the audit reports of the other auditors. We did not audit the financial statements of certain associates and joint ventures accounted for under the equity method whose statements are based solely on the reports of other auditors. Investment in these associates and joint ventures under equity method amounted to NT$696,101 thousand and NT$711,740 thousand, both representing 3% of the standalone total assets as of 31 December 2019 and 2018, respectively. The related shares of profits from the associates and joint ventures under the equity method amounted to NT$79,764 thousand and NT$155,367 thousand, representing 3% and 4% of the standalone net income before tax for the years ended 31 December 2019 and 2018, respectively; and the related shares of other comprehensive income from the associates and joint ventures under the equity method amounted to NT$173 thousand and NT$(855) thousand, both representing 0% of the standalone other comprehensive income for the years ended 31 December 2019 and 2018, respectively.

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

Management is responsible for the preparation and fair presentation of the standalone financial statements in accordance with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by Financial Supervisory Commission of the Republic of China and for such internal control as management determines is necessary to enable the preparation of standalone financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including the audit committee, are responsible for overseeing the financial reporting process of the Company.

Auditor’s Responsibilities for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 standalone financial statements.

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

Identify and assess the risks of material misstatement of the standalone 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 internal control of the Company.
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 ability to continue as a going concern of the Company. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the standalone financial statements, including the accompanying notes, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the standalone financial statements. We are responsible for the direction, supervision and performance of the Company 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 2019 standalone financial statements and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

/s/Chen, Ming Hung

/s/Yen, Wen Pi

Ernst & Young, Taiwan

25 February 2020

Notice to Readers

The accompanying standalone financial statements are intended only to present the standalone financial position, results of operations 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 standalone financial statements are those generally accepted and applied in the Republic of China.

English Translation of Standalone Financial Statements Originally Issued in Chinese FENG HSIN STEEL CO., LTD.

STANDALONE BALANCE SHEETS

31 December 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Assets	Notes	2019.12.31	2018.12.31
Current Assets Cash and cash equivalents Contract assets, current Notes receivable, net Accounts receivable, net Other receivables Inventories, net Prepayments Other current assets Total current assets Non-current assets Financial assets at fair value through other comprehensive income-noncurrent Investments accounted for under the equity method Property, plant and equipment Right-of-use asset Investment property,net Deferred tax assets Other non-current assets Total non-current assets	4, 6.(1) 4, 6.(14),(15) 4, 6.(15) 4, 6.(2),(15) 4, 6.(3) 6.(4) 4, 6.(6) 4, 6.(7) 4, 6.(16) 4, 6.(8) 4, 6.(20) 6.(9) 4, 6.(5)	$1,565,811 239,141 25,287 1,532,271 20,516 4,307,181 671,224 2,620	$649,152 250,924 2,796 1,455,699 28,315 6,719,474 569,360 2,116
		8,364,051	9,677,836
		1,883,864 9,846,122 212,184 380,417 111,510 101,641 566,987	2,015,428 9,953,300 - 381,635 140,715 101,589 532,253
		13,102,725	13,124,920

Total assets

$21,466,776 $22,802,756

(Continued)

English Translation of Standalone Financial Statements Originally Issued in Chinese

FENG HSIN STEEL CO., LTD.

STANDALONE BALANCE SHEETS (Continued)

31 December 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

	Notes 4, 6.(10) 4, 6.(14) 7 6.(11) 4 4, 6.(16) 4, 6.(20) 4, 6.(16) 4, 6.(12) 6.(13) 6.(13) 6.(13) 4	2019.12.31 $381,151 131,372 241 1,176,403 998,743 120,585 6,238 1,376 2,816,109 - 204,165 159,488 363,653 3,179,762 5,815,994 588,123 4,158,088 316,503 7,686,547 12,161,138 (278,241) (278,241) 18,287,014 $21,466,776	2018.12.31
Current liabilities Short-term loans Contract liabilities, current Notes payable Accounts payable Other payables Current tax liabilities Lease liabilities, current Other current liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Lease liabilities, noncurrent Net defined benefit obligation, noncurrent Total non-current liabilities Total liabilities Equity attributable to the parent company Capital Common stock Additional paid-in capital Retained earnings Legal reserve Special reserve Unappropriated earnings Total Retained earnings Other components of equity Unrealized gains (losses) measured at fair value through other comprehensive income financial asset Total Other components of equity Total equity Total liabilities and equity			$1,018,533 170,900 2,472 1,556,131 907,008 326,455 - 1,220 3,982,719 159 - 181,711 181,870 4,164,589 5,815,994 615,583 3,863,847 46,888 8,612,358 12,523,093 (316,503) (316,503) 18,638,167 $22,802,756

(The accompanying notes are an integral part of the standalone financial statements)

English Translation of Standalone Financial Statements Originally Issued in Chinese FENG HSIN STEEL CO., LTD.

STANDALONE STATEMENTS OF COMPREHENSIVE INCOME

For the years ended 31 December 2019 and 2018

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

Notes Operating revenues 4,6.(14) Operating costs 6.(17),7 Gross Profit-net Operating expenses 6.(17) Sales and marketing expenses General and administrative expenses Research and development expenses Subtotal Operating Income Non-operating income and expenses Other income 4,6.(18) Other gains and losses 6.(18) Finance costs 6.(18) Share of profit or loss of associates and joint ventures 6.(6) Subtotal Income from continuing operations before income tax Income tax expense 4,6.(20) Net income Other comprehensive income 6.(19) Items that will not to be reclassified subsequently to profit or loss Remeasurements of defined benefit pension plans Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income Share of other comprehensive of associates and joint ventures Income tax related to items that will not to be reclassified subsequently to profit or loss Items that will be reclassified subsequently to profit or loss Effective portion of gains on hedging instruments in a cash flow hedge Income tax related to items that will be reclassified subsequently to profit or loss Total other comprehensive loss, net of tax Total comprehensive income Earnings per share (NTD) 4,6.(21) Earnings per share-basic Earnings per share-diluted	Notes	2019	2018
		$27,735,611 (24,870,034)	$30,865,647 (26,694,587) 4,171,060 (498,231) (291,059) (46,061) (835,351) 3,335,709 52,420 82,879 (8,217) 174,585 301,667 3,637,376 (694,961) 2,942,415 (27,863) (855) 1,300 5,141 $2,947,556 $5.06 $5.06 7,284 (221) 25,496
		2,865,577
		(441,118) (290,545) (44,890)
		(776,553)
		2,089,024
		58,850 47,209 (13,533) 209,180
		301,706
		2,390,730 (428,375)
		1,962,355
		2,437 173 - (522) - 38,262
		40,350
		$2,002,705
		$3.37
		$3.37

(The accompanying notes are an integral part of the standalone financial statements)

English Translation of Standalone Financial Statements Originally Issued in Chinese

FENG HSIN STEEL CO., LTD.

STANDALONE STATEMENTS OF CHANGES IN EQUITY For the years ended 31 December 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

				EquityAttributable t	o theparent company				Total Equity
	Common Stock	Additional Paid-in Capital		Retained earnings		Oth	er components of equity
			Legal Reserve	Special reserve	Unappropriated Earnings	Unrealized Gains (losses) measured at fair value through other comprehensive income	Unrealized gain(losses) available-for-sale financial assets	Effective portion of gains and losses on hedging instruments in a cash flow hedge
Balance as of 1 January 2018 Impact of retroactive applications Adjusted balance as of 1 Janurary 2018 Appropriation and distribution of 2017 retained earnings Legal reserve Cash dividends Reversal of special reserve Change in other paid-in capital Change in other paid-in capital of associates and joint ventures accounted for using the equity method Change in other paid-in capital Net income for the year ended 31 December 2018 Other comprehensive income (loss), net of tax for the year ended 31 December 2018 Total comprehensive income (loss) Disposal of financial assets at fair value through other comprehensive income Balance as of 31 December 2018 Balance as of 1 January 2019 Appropriation and distribution of 2018 retained earnings Legal reserve Special reserve Cash dividends Change in other paid-in capital Change in other paid-in capital of associates and joint ventures accounted for using the equity method Change in other paid-in capital Net income for the year ended 31 December 2019 Other comprehensive income (loss), net of tax for the year ended 31 December 2019 Total comprehensive income (loss) Balance as of 31 December 2019	$5,815,994 -	$448,351 -	$3,591,351 - 3,591,351 272,496 - $3,863,847 $3,863,847 294,241 - $4,158,088	$98,711 -	$7,698,777 277,000	$ - (370,128)	$(45,809) 45,809	$(1,079) -	$17,606,296 (47,319)
	5,815,994	448,351 165,644 1,588		98,711 (51,823)	7,975,777 (272,496) (2,035,598) 51,823 2,942,415 (21,434)	(370,128) 25,496	- -	(1,079) 1,079	17,558,977 - (2,035,598) - 165,644 1,588 2,942,415 5,141
	-	-		-	2,920,981 (28,129)	25,496 28,129	-	1,079	2,947,556
	$5,815,994	$615,583		$46,888	$8,612,358	$(316,503)	$-	$-	$18,638,167
	$5,815,994	$615,583 (28,385) 925		$46,888 269,615	$8,612,358 (294,241) (269,615) (2,326,398) 1,962,355 2,088	$(316,503) 38,262	$ -	$ -	$18,638,167 - - (2,326,398) (28,385) 925 1,962,355 40,350
	-	-		-	1,964,443	38,262	-	-	2,002,705

	$5,815,994	$588,123		$316,503	$7,686,547	$(278,241)	$-	$-	$18,287,014

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

English Translation of Standalone Financial Statements Originally Issued in Chinese

FENG HSIN STEEL CO., LTD.

STANDALONE STATEMENTS OF CASH FLOWS

For the years ended 31 December 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

	For theyears ended 31 December	For theyears ended 31 December
	2019	2018
Cash flows from operating activities:
Net income before tax	$2,390,730	$3,637,376
Adjustments to reconcile net income before tax to net cash provided by operating activities:
Income and expense adjustments:
Depreciation	1,114,364	1,018,307
Amortization	3,000	3,000
Interest expense	13,533	8,217
Interest income	(2,529)	(2,857)
Dividend income	(30,583)	(28,443)
Share of profit of associates and joint ventures	(209,180)	(174,585)
Gain on disposal of property, plant and equipment	(34,329)	(66,328)
Changes in operating assets and liabilities:
Decrease (Increase) in current contract assets	11,783	(250,924)
(Increase) Decrease in notes receivable	(21,566)	7,830
(Increase) Decrease in accounts receivable	(76,572)	123,875
Decrease (Increase) in other receivables	11,656	(24,923)
Decrease (Increase) in inventories, net	2,435,929	(3,106,893)
Increase in prepayments	(174,274)	(181,256)
(Increase) Decrease in other current assets	(504)	845
(Decrease) Increase in current contract liabilities	(39,528)	170,900
(Decrease) Increase in notes payable	(2,231)	1,836
(Decrease) Increase in accounts payable	(379,728)	146,981
Increase in other payables	86,131	52,530
Increase (Decrease) in other current liabilities	156	(81,730)
Decrease in net defined benefit obligation	(13,698)	(43,967)
Cash generated from operations	5,082,560	1,209,791
Interest received	2,472	3,164
Dividends received	26,783	28,443
Interest paid	(10,917)	(7,640)
Income tax paid	(605,721)	(638,008)
Net cash provided by operating activities	4,495,177	595,750

(Continued)

English Translation of Standalone Financial Statements Originally Issued in Chinese

FENG HSIN STEEL CO., LTD.

STANDALONE STATEMENTS OF CASH FLOWS

For the years ended 31 December 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from investing activities: Disposal of financial assets at fair value through other comprehensive income Return of paid-in capital for capital reduction in financial assets at fair value through other comprehensive income Acquisition of investments accounted for under the equity method Decrease in investments accounted for under the equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in other financial assets (Increase) Decrease in non-current-assets Dividends received Net cash used in investing activities Cash flows from financing activities: (Decrease) Increase in short-term loans Cash paymentsfor the principal of lease liability Cash dividends Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	For theyears ended 31 December	For theyears ended 31 December
	2019 $ - 3,528 (188,129) 4,268 (874,744) 14,553 - (59,851) 496,393 (603,982) (637,382) (10,756) (2,326,398) (2,974,536) 916,659 649,152 $1,565,811	2018
		$10,876 1,960 (4,202) 38,412 (2,104,612) 79,167 134,160 975,436 117,687
		(751,116)
		859,537 - (2,035,598)
		(1,176,061)
		(1,331,427) 1,980,579
		$649,152

(The accompanying notes are an integral part of the standalone financial statements)

FENG HSIN STEEL CO., LTD.

NOTES TO STANDALONE FINANCIAL STATEMENTS

For the Years Ended 31 December 2019 and 2018

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

1. History and organization

FENG HSIN STEEL Co., Ltd. (the Company) was incorporated in 1969. The Company operates in the blast furnaces and steel mills sector. Its products include angle irons, steel channel, flat structural frames and shafts. In June 1989, the second steel-rolling plants began operations, thus, the Company is capable of producing of other types of steel products such as: carbon steel and particular steel. Also, the second steel plant completed trail run in 1997. The second steel plant works primarily produces particular types of steelnet, which supplies the first steel-rolling plant work and second steel-rolling plant work to ensure the control over quality and reduce manufacturing costs. The Company was approved for listing on the Taiwan Stock Exchange (“TWSE”) in 1991. The Company’s common shares were publicly traded on the TWSE on 25 May 1992. The Company’s registered office and the main business location is at No.998, Sec.1, Jiahou Rd., Houli Dist., Taichung, Taiwan (R.O.C.).

2. Date and procedures of authorization of financial statements for issue

The standalone financial statements of the Company for the years ended 31 December 2019 and 2018 were authorized for issue by the Company’s board of directors (the Board) on 25 February 2020.

3. Newly issued or revised standards and interpretations

(1) Changes in accounting policies resulting from applying for the first time certain standards and amendments

The Company applied for the first time International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are endorsed by Financial Supervisory Commission (“FSC”) and become effective for annual periods beginning on or after 1 January 2019. The nature and the impact of each new standard and amendment that has a material effect on the Company is described below:

(1) IFRS 16“Leases”

IFRS 16 “Leases” replaces IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, SIC-15 “Operating Leases - Incentives” and SIC-27 “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”.

The Company followed the transition provision in IFRS 16 and the date of initial application was 1 January 2019. The impacts arising from the adoption of IFRS 16 are summarized as follows:

A. Please refer to Note 4 for the accounting policies before or after 1 January 2019.
B. For the definition of a lease, the Company elected not to reassess whether a contract was, or contained, a lease on 1 January 2019. The Company was permitted to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 but not to apply IFRS 16 to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4. That is, for contracts entered into (or changed) on or after 1 January 2019, the Company need to assess whether contacts are, or contain, leases applying IFRS 16. In comparing to IAS 17, IFRS 16 provides that a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assessed most of the contracts are, or contain, leases and has no significant impact arised.
C. The Company is a lessee and elects not to restate comparative information in accordance with the transition provision in IFRS 16. Instead, the Company recognized the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the date of initial application.
(a) Leases previously classified as operating leases

For leases that were previously classified as operating leases applying IAS 17, the Company measured and recognized those leases as lease liability on 1 January 2019 at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on 1 January 2019, and; the Company chose, on a lease-by-lease basis, to measure the right-of-use asset at either:

i. its carrying amount as if IFRS 16 had been applied since the commencement date, but discounted using the lessee’s incremental borrowing rate on 1 January 2019; or
ii. an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before 1 January 2019.

On 1 January 2019, the Company’s right-of-use asset and lease liability increased by NT$221,370 thousand and NT$218,059 thousand, respectively. The Company’s prepaid rent decreased by NT$3,311 thousand.

In accordance with the transition provision in IFRS 16, the Company used the following practical expedients on a lease-by-lease basis to leases previously classified as operating leases:

i. Apply a single discount rate to a portfolio of leases with reasonably similar characteristics.
ii. Rely on its assessment of whether leases are onerous immediately before 1 January 2019 as an alternative to performing an impairment review.
iii. Elect to account in the same way as short-term leases to leases for which the lease term ends within 12 months of 1 January 2019.
iv. Exclude initial direct costs from the measurement of the right-of-use asset on 1 January 2019.
v. Use hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.
(b) Leases previously classified as finance leases

None

(c) Please refer to Note 4, Note 5 and Note 6 for additional disclosure of lessee and lessor which required by IFRS 16.
(d) As at 1 January 2019, the impacts arising from the adoption of IFRS 16 are summarized as follows:
i. The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized in the balance sheet on 1 January 2019 was 1.49%.
ii. The explanation for the difference of 930 thousand between: 1) operating lease commitments disclosed applying IAS 17 as at 31 December 2018, discounted using the incremental borrowing rate on 1 January 2019; and 2) lease liabilities recognized in the balance sheet as at 1 January 2019 is summarized as follows:

Operating lease commitments disclosed applying IAS 17 as at 31 December 2018 Discounted using the incremental borrowing rate on 1 January 2019 Less: adjustment to leases that meet and elect to account in the same way as short-term leases The carrying value of lease liabilities recognized as at 1 January 2019	$296,569
	$218,989 930
	$218,059

D. The Company is a lessor and has not made any adjustments. Please refer to Note 4, Note 5 and Note 6 for the information relating to the lessor.

(2) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are endorsed by FSC, but not yet adopted by the Company as at the end of the reporting period are listed below.

Items	New, Revised or Amended Standards and Interpretations	Effective Date issued byIASB
a	Definition of a Business - Amendments to IFRS 3	1 January2020
b	Definition of Material - Amendments to IAS 1 and 8	1 January2020
c	Interest Rate Benchmark Reform - Amendments to IFRS9,IAS 39and IFRS 7	1 January2020

(a) Definition of a Business - Amendments to IFRS 3

The amendments clarify the definition of a business in IFRS 3 Business Combinations. The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition.IFRS 3 continues to adopt a market participant’s perspective to determine whether an acquired set of activities and assets is a business. The amendments clarify the minimum requirements for a business; add guidance to help entities assess whether an acquired process is substantive; and narrow the definitions of a business and of outputs; etc.

(b) Definition of a Material - Amendments to IAS 1 and 8

The main amendment is to clarify new definition of material. It states that “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments clarify that materiality will depend on the nature or magnitude of information. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users.

(c) Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7

The amendments include a number of exceptions, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is directly affected if the interest rate benchmark reform gives rise to uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument. Hence, the entity shall apply the exceptions to all hedging relationships directly affected by the interest rate benchmark reform.

The amendments include:

(1) highly probable requirement

When determining whether a forecast transaction is highly probable, an entity shall assume that the interest rate benchmark on which the hedged cash flows are based is not altered as a result of the interest rate benchmark reform.

(2) prospective assessments

When performing prospective assessments, an entity shall assume that the interest rate benchmark on which the hedged item, hedged risk and/or hedging instrument are based is not altered as a result of the interest rate benchmark reform.

(3) IAS 39 retrospective assessment

An entity is not required to undertake the IAS 39 retrospective assessment (i.e. the actual results of the hedge are within a range of 80–125%) for hedging relationships directly affected by the interest rate benchmark reform.

(4) separately identifiable risk components

For hedges of a non-contractually specified benchmark component of interest rate risk, an entity shall apply the separately identifiable requirement only at the inception of such hedging relationships.

The amendments also include the end of application of the exceptions requirements and the related disclosures requirements of the amendments.

The abovementioned standards and interpretations were issued by IASB and endorsed by FSC so that they are applicable for annual periods beginning on or after 1 January 2020. The remaining standards and interpretations have no material impact on the Company

(3) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are not endorsed by FSC, but not yet adopted by the Company as at the end of the reporting period are listed below.

Items	New,Revised or Amended Standards and Interpretations	Effective Date issued byIASB
a	IFRS 10 “Standalone Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures	To be determined by IASB
b	IFRS 17 “Insurance Contracts”	1 January2021
c	Classification of Liabilities as Current or Non-current – Amendments to IAS 1	1 January 2022

(a) IFRS 10“Standalone Financial Statements” and IAS 28“Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10 “Standalone Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures”, in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and losses arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint ventures. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized in full.

IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture.

(b) IFRS 17 “Insurance Contracts”

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a Company of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The fulfilment cash flows comprise of the following:

(1) estimates of future cash flows

(2) discount rate: an adjustment to reflect the time value of money and the financial risks related to the future cash flows, to the extent that the financial risks are not included in the estimates of the future cash flows
(3) a risk adjustment for non-financial risk.

The carrying amount of a Company of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims. Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

These are the amendments to paragraphs 69-76 of IAS 1 Presentation of Financial statements and the amended paragraphs related to the classification of liabilities as current or non-current.

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Company’s financial statements were authorized for issue, the local effective dates are to be determined by FSC. As the Company is evaluating the impact of the standards and interpretations have no material impact in the Company.

4. Summary of significant accounting policies

(1) Statement of compliance

The Standalone financial statements of the Company for the years ended 31 December 2019 and 2018 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”), IFRSs, IASs, IFRIC and SIC, which are endorsed by the FSC (collectively referred to as “TIFRSs”).

(2) Basis of preparation

The standalone financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”).According to the Regulations Article 21 “The profit or loss during the period and other comprehensive income presented in parent company only financial reports shall be the same as the allocations of profit or loss during the period and of other comprehensive income attributable to owners of the parent presented in the financial reports prepared on a consolidated basis, and the owners' equity presented in the parent company only financial reports shall be the same as the equity attributable to owners of the parent presented in the financial reports prepared on a consolidated basis.” Therefore the subsidiaries is incorporated in the standalone financial statements under the equity method. The standalone financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The standalone financial statements are expressed in thousands of New Taiwan Dollars (“NT$”) unless otherwise stated.

(3)Foreign currency transactions

The Company’s standalone financial statements are presented in NT$, which is also the Company’s functional currency.

Transactions in foreign currencies are initially recorded by the Company’s at its respective functional currency rates prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

(a) Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.

(b) Foreign currency items within the scope of IFRS 9 Financial Instruments (Before 1 January 2018: IAS 39 Financial Instruments: Recognition and Measurement) are accounted for based on the accounting policy for financial instruments.

(c) Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

(4)Translation of Foreign Currency Financial Statements

The assets and liabilities of foreign operations are translated into NTD at the closing rate of exchange prevailing at the reporting date and their income and expenses are translated at an average exchange rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized.

On partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to the non-controlling interests in that foreign operation. On partial disposal of an associate or a joint venture that includes a foreign operation that does not result in a loss of significant

influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

(5) Current and non-current distinction

An asset is classified as current when:

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

All other assets are classified as non-current.

A liability is classified as current when:

(a) The Company expects to settle the liability in its normal operating cycle.
(b) The Company holds the liability primarily for the purpose of trading.
(c) The liability is due to be settled within twelve months after the reporting period.
(d) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as non-current.

(6) Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highly liquid time deposits (including ones that have maturity within 6 months) or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(7) Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party

to the contractual provisions of the instrument.

Financial assets and financial liabilities within the scope of IFRS 9 Financial Instruments are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

(1) Financial instruments: Recognition and Measurement

The Company accounts for regular way purchase or sales of financial assets on the trade date.

The Company classified financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

A. the Company’s business model for managing the financial assets.
B. the contractual cash flow characteristics of the financial asset.

Financial assets measured at amortized cost

A financial asset is measured at amortized cost if both of the following conditions are met and presented as note receivables, trade receivables, financial assets measured at amortized cost and other receivables etc., on balance sheet as at the reporting date:

(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.

Such financial assets are subsequently measured at amortized cost (the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount and adjusted for any loss allowance). A gain or loss is recognized in profit or loss when the financial asset is derecognized, through the amortization process or in order to recognize the impairment gains or losses.

Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

(a) purchased or originated credit-impaired financial assets. For those financial assets, the

Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.

(b) financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Financial asset measured at fair value through other comprehensive income

A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met:

(a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets 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.

Recognition of gain or loss on a financial asset measured at fair value through other comprehensive income are described as below:

(a) A gain or loss on a financial asset measured at fair value through other comprehensive income recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses, until the financial asset is derecognized or reclassified.
(b) When the financial asset is derecognized the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.
(c) Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:
(i) Purchased or originated credit-impaired financial assets. For those financial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
(ii) Financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Besides, for certain equity investments within the scope of IFRS 9 that is neither held for

trading nor contingent consideration recognized by an acquirer in a business combination to which IFRS 3 applies, the Company made an irrevocable election to present the changes of the fair value in other comprehensive income at initial recognition. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss (when disposal of such equity instrument, its cumulated amount included in other components of equity is transferred directly to the retained earnings) and these investments should be presented as financial assets measured at fair value through other comprehensive income on the balance sheet. Dividends on such investment are recognized in profit or loss unless the dividends clearly represents a recovery of part of the cost of investment.

(2) Impairment of financial assets

The Company recognizes a loss allowance for expected credit losses on debt instrument investments measured at fair value through other comprehensive income and financial asset measured at amortized cost.

The Company measures expected credit losses of a financial instrument in a way that reflects:

A. an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes；
B. the time value of money；and
C. reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

The loss allowance is measures as follows:

A. At an amount equal to 12-month expected credit losses: the credit risk on a financial asset has not increased significantly since initial recognition or the financial asset is determined to have low credit risk at the reporting date. In addition, the Company measures the loss allowance at an amount equal to lifetime expected credit losses in the previous reporting period, but determines at the current reporting date that the credit risk on a financial asset has increased significantly since initial recognition is no longer met.
B. At an amount equal to the lifetime expected credit losses: the credit risk on a financial asset has increased significantly since initial recognition or financial asset that is purchased or originated credit-impaired financial asset.

C. For trade receivables or contract assets arising from transactions within the scope of IFRS 15, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.

At each reporting date, the Company needs to assess whether the credit risk on a financial asset has increased significantly since initial recognition by comparing the risk of a default occurring at the reporting date and the risk of default occurring at initial recognition. Please refer to Note 12 for further details on credit risk.

(3) Derecognition of financial assets

A financial asset is derecognized when:

A. The rights to receive cash flows from the asset have expired
B. The Company has transferred the asset and substantially all the risks and rewards of the asset have been transferred
C. The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

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

(4) Financial liabilities and equity

Classification between liabilities or equity

The Company classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

Financial liabilities

Financial liabilities within the scope of IFRS 9 Financial Instruments are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

(5) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(8) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value

measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

(a) In the principal market for the asset or liability, or
(b) In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

(9) Inventories

Inventories are valued at lower of cost and net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accounted for as follows:

─ Materials Weighted average of actual procurements

─ Finished goods and Cost of direct materials and labor and a proportion of work in process manufacturing overheads based on normal operating capacity. Finished goods and work in process are accounted under the weighted average method.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

(10) Investments accounted for using the equity method

The subsidiary is incorporated in the standalone financial statements under the equity method. The standalone financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”).According to the Regulations Article 21 “The profit or loss during the period and other comprehensive income presented in parent company only financial reports shall be the same as the allocations of profit or loss during the period and of other comprehensive income attributable to owners of the parent presented in the financial reports prepared on a consolidated basis, and the owners' equity presented in the parent company only financial reports shall be the same as the equity attributable to owners of the parent presented in the financial reports prepared on a consolidated basis.”

The Company’s investment in its associate is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Company has significant influence.

Under the equity method, the investment in the associate or an investment in a joint venture is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Company’s share of net assets of the associate or joint venture. After the interest in the associate or joint venture is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. Unrealized gains and losses resulting from transactions between the Company and the associate or joint venture are eliminated to the extent of the Company’s related interest in the associate or joint venture.

When changes in the net assets of an associate or a joint venture occur and not those that are recognized in profit or loss or other comprehensive income and do not affects the Company’s percentage of ownership interests in the associate or joint venture, the Company recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate or joint venture on a pro-rata basis.

When the associate or joint venture issues new stock, and the Company’s interest in an associate or a joint venture is reduced or increased as the Company fails to acquire shares newly issued in the associate or joint venture proportionately to its original ownership interest, the increase or decrease in the interest in the associate or joint venture is recognized in Additional Paid in Capital and Investment accounted for using the equity method. When the interest in the associate or joint venture is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other

appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Company disposes the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.

The Company determines at each reporting date whether there is any objective evidence that the investment in the associate or an investment in a joint venture is impaired in accordance with IAS 28 Investments in Associates and Joint Ventures (before 1 January 2018: IAS 39 Financial Instruments: Recognition and Measurement ). If this is the case the Company calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of comprehensive income in accordance with IAS 36 Impairment of Assets. In determining the value in use of the investment, the Company estimates:

(1) Its share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the investment; or
(2) The present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.

Because goodwill that forms part of the carrying amount of an investment in an associate or an investment in a joint venture is not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets .

Upon loss of significant influence over the associate or joint venture, the Company measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss. Furthermore, 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 entity continues to apply the equity method and does not remeasure the retained interest.

(11) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and

removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Company recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 Property, plant and equipment . When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Items Buildings Machinery and equipment Transportation equipment Furniture, fixtures and equipment Leasehold improvements	Useful Lives
	6～56 years 3～41 years 4～16 years 3～17 years 2～25 years

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate, and are treated as changes in accounting estimates.

(12) Investment property

The accounting policy from 1 January 2019 as follow:

The Company’s owned investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, other than those that meet the criteria to be classified as held for sale (or are included in a disposal Company that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations , investment properties are

measured using the cost model in accordance with the requirements of IAS 16 Property, plant and equipment for that model. If investment properties are held by a lessee as right-of-use assets and is not held for sale in accordance with IFRS 5, investment properties are measured in accordance with the requirements of IFRS 16.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Items	Useful Lives
Buildings	30～50 years

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of derecognition.

Assets are trasferred to or from investment properties when there is a change in use.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

The accounting policy before 1 January 2019 as follow:

The Company’s investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are measured using the cost model in accordance with the requirements of IAS 16 Property, plant and equipment for that model, other than those that meet the criteria to be classified as held for sale (or are included in a disposal Company that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations .

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Items	Useful Lives
Buildings	30～50 years

Assets are trasferred to or from investment properties when there is a change in use.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

(13) Leases

The accounting policy from 1 January 2019 as follow:

For contracts entered on or after 1 January 2019, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset for a period of time, the Company assesses whether, throughout the period of use, has both of the following:

(a)the right to obtain substantially all of the economic benefits from use of the identified asset; and
(b)the right to direct the use of the identified asset.

The Company elected not to reassess whether a contract is, or contains, a lease on 1 January 2019. The Company is permitted to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 but not to apply IFRS 16 to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4.

For a contract that is, or contains, a lease, the Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract. For a contract that contains a lease component and one or more additional lease or non-lease components, the Company allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. The relative stand-alone price of lease and non-lease components shall be determined on the basis of the price the lessor, or a similar supplier, would charge the Company for that component, or a similar component, separately. If an observable stand-alone price is not readily available, the Company estimates the stand-alone price, maximising the use of observable information.

Company as a lessee

Except for leases that meet and elect short-term leases or leases of low-value assets, the Company recognizes right-of-use asset and lease liability for all leases which the Company is the lessee of those lease contracts.

At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be

readily determined, the Company uses its incremental borrowing rate. At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:

(a)fixed payments (including in-substance fixed payments), less any lease incentives receivable;
(b)variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
(c)amounts expected to be payable by the lessee under residual value guarantees;
(d)the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
(e)payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After the commencement date, the Company measures the lease liability on an amortised cost basis, which increases the carrying amount to reflect interest on the lease liability by using an effective interest method; and reduces the carrying amount to reflect the lease payments made.

At the commencement date, the Company measures the right-of-use asset at cost. The cost of the right-of-use asset comprises:

(a)the amount of the initial measurement of the lease liability;
(b)any lease payments made at or before the commencement date, less any lease incentives received;
(c)any initial direct costs incurred by the lessee; and
(d)an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

For subsequent measurement of the right-of-use asset, the Company measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses. That is, the Company measures the right-of-use applying a cost model.

If the lease transfers ownership of the underlying asset to the Company by the end of the lease term or if the cost of the right-of-use asset reflects that the Company will exercise a purchase option, the Company depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Company depreciates the right-of-use asset from the commencement date to the earlier of the end of

the useful life of the right-of-use asset or the end of the lease term.

The Company applies IAS 36 “Impairment of Assets” to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.

Except for those leases that the Company accounted for as short-term leases or leases of low-value assets, the Company presents right-of-use assets and lease liabilities in the balance sheet and separately presents lease-related interest expense and depreciation charge in the statements comprehensive income.

For short-term leases or leases of low-value assets, the Company elects to recognize the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis.

Company as a lessor

At inception of a contract, the Company classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. At the commencement date, the Company recognizes assets held under a finance lease in its balance sheet and present them as a receivable at an amount equal to the net investment in the lease.

For a contract that contains lease components and non-lease components, the Company allocates the consideration in the contract applying IFRS 15.

The Company recognizes lease payments from operating leases as rental income on either a straight-line basis or another systematic basis. Variable lease payments for operating leases that do not depend on an index or a rate are recognized as rental income when incurred.

The accounting policy before 1 January 2019 as follow:

Company as a lessee

Finance leases which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the

liability. Finance charges are recognized in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

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

Company as a lessor

Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.

(14) Impairment of non-financial assets

The Company assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Companys of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.

A cash generating unit, or Companys of cash-generating units, to which goodwill has been allocated is tested for impairment annually at the same time, irrespective of whether there is any indication of impairment. If an impairment loss is to be recognized, it is first allocated to reduce the carrying amount of any goodwill allocated to the cash generating unit (Company of units), then to the other assets of the unit (Company of units) pro rata on the basis of the carrying amount of each asset in the unit (Company of units). Impairment losses relating to goodwill cannot be reversed in future periods for any reason.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

(15) Revenue recognition

The Company’s revenue arising from contracts with customers are primarily related to sale of goods and rendering of services. The accounting policies are explained as follows:

Sale of goods

The Company manufactures and sells goods. Sales are recognized when control of the goods is transferred to the customer and the goods are delivered to the customers. The main product of the Company is iron and steel, and revenue is recognized based on the consideration stated in the contract. For certain sales of goods transactions, they are usually accompanied by volume discounts (based on the accumulated total sales amount for a specified period). Therefore, revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts. The Company estimates the discounts using the expected value method based on historical experiences. Revenue is only recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. During the period specified in the contract, refund liability is recognized for the expected volume discounts.

The credit period of the Company’s sale of goods is within 10 to 75 days. For most of the contracts, when the Company transfers the goods to customers and has a right to an amount of consideration that is unconditional, these contracts are recognized as trade receivables. The Company usually collects the payments shortly after transfer of goods to customers; therefore, there is no significant financing component to the contract. For some of the contracts, the Company has transferred the goods to customers but does not has a right to an amount of consideration that is unconditional, these contacts should be presented as contract assets. Besides, in accordance with IFRS 9, the Company measures the loss allowance for a contract asset at an amount equal to the lifetime expected credit losses.

Rendering of services

The Company provides maintenance services for the sale of iron and steel. Such services are separately priced or negotiated, and provided based on contract periods. As the Company provides the maintenance services over the contract period, the customers simultaneously receive and consume the benefits provided by the Company. Accordingly, the performance obligations are satisfied over time, and the related revenue is recognized by straight -line method over the contract period.

Most of the contractual considerations of the Company are collected evenly throughout the contract periods. When the Company has performed the services to customers but does not have a right to an amount of consideration that is unconditional, these contacts should be presented as contract assets. However, for some rendering of services contracts, part of the consideration was received from customers upon signing the contract, and the Company has the obligation to provide the services subsequently; accordingly, these amounts are recognized as contract liabilities.

The period between the transfers of contract liabilities to revenue is usually within one year, thus, no significant financial component is arised.

(16) Borrowing cost

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(17) Post-employment benefits

All regular employees of the Company are entitled to a pension plan that is managed by an independently administered pension fund committee. Fund assets are deposited under the committee’s name in the specific bank account and hence, not associated with the Company and its domestic subsidiaries. Therefore fund assets are not included in the Company’s Standalone financial statements.

For the defined contribution plan, the Company and its domestic subsidiaries will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defined contribution plan in the period in which the contribution becomes due.

Post-employment benefit plan that is classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions. Re-measurements, comprising of the effect of the actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. Past service costs are recognized in profit or loss on the earlier of:

(a) the date of the plan amendment or curtailment, and
(b) the date that the Company recognizes restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment.

(18) Income taxes

Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss.

The income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders’ meeting.

Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

i. Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the

transaction, affects neither the accounting profit nor taxable profit or loss

ii. In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:

i. Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
ii. In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

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

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed at each reporting date and are recognized accordingly.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

5. Significant accounting judgements, estimates and assumptions

The preparation of the Company’s Standalone financial statements require management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumption and estimate could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

(1) Judgement

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the Standalone financial statements:

(a) Investment Properties

Certain properties of the Company comprise a portion that is held to earn rentals or for capital appreciation and another portion that is owner-occupied. If these portions could be sold separately, the Company accounts for the portions separately as investment properties and property, plant and equipment. If the portions could not be sold separately, the property is classified as investment property in its entirety only if the portion that is owner-occupied is insignificant.

－ (b) Operating lease commitment Company as the lessor

The Company has entered into commercial property leases on its investment property portfolio. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.

(2) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Pension benefits

The cost of post-employment benefit and the present value of the pension obligation under defined benefit pension plans are determined using actuarial valuations. An

actuarial valuation involves making various assumptions. These include the determination of the discount rate and future salary increases, mortality rates and future pension increases. Please refer to Note 6 for more details.

(b) Revenue recognition – sales returns and allowance

The Company estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue. In assessing the aforementioned sales returns and allowance, revenue is recognized to the extent it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Please refer to Note 6 for more details.

(c) Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Company company's domicile.

Deferred tax assets are recognized for all carryforward of unused tax losses and unused tax credits and deductible temporary differences to the extent that it is probable that taxable profit will be available or there are sufficient taxable temporary differences against which the unused tax losses, unused tax credits or deductible temporary differences can be utilized. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies.

(d) Accounts receivables–estimation of impairment loss

The Company estimates the impairment loss of accounts receivables at an amount equal to lifetime expected credit losses. The credit loss is the present value of the difference between the contractual cash flows that are due under the contract (carrying amount) and the cash flows that expects to receive (evaluate forward looking information). However, as the impact from the discounting of short-term receivables is not material, the credit loss is measured by the undiscounted cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details.

(e) Inventories

Estimates of net realizable value of inventories take into consideration that inventories may be damaged, become wholly or partially obsolete, or their selling prices have declined. The estimates are based on the most reliable evidence available at the time the estimates are made. Please refer to Note 6 for more details.

6. Contents of significant accounts

(1) Cash and cash equivalents

Cash and cash equivalents
Cash on hand Demand deposits Cash equivalents Total Accounts receivables Accounts receivables Less: loss allowance Total	As of 31 December
	2019 2018 $963 $915 1,164,888 648,237 399,960 - $1,565,811 $649,152 As of 31 December 2019 2018 $1,534,389 $1,457,817 (2,118) (2,118) $1,532,271 $1,455,699
	2019 $1,534,389 (2,118)
	$1,532,271

(2) Accounts receivables

Accounts receivables were not pledged.

Accounts receivables are generally on 10-75 day terms. The total carrying amount are NT$1,534,389 thousand and NT$1,457,817 thousand as of 31 December 2019 and 2018, respectively. Please refer to Note 6 (15) for more details on loss allowance of accounts receivables for the year periods ended 31 December 2019 and 2018. Please refer to Note 12 for more details on credit risk management.

(3) Inventories

Inventories
Raw materials Supplies & parts Work in progress Finished goods Total	As of 31 December 2019 2018 $1,230,794 $2,828,502 744,366 811,633 1,236,781 1,538,598 1,095,240 1,540,741 $4,307,181 $6,719,474
	2019 $1,230,794 744,366 1,236,781 1,095,240 $4,307,181

		$6,719,474

The cost of inventories recognized in expenses amounted to NT$24,870,034 thousand and NT$26,694,587 thousand, respectively, for the years ended 31 December 2019 and 2018.

No inventories were pledged.

(4) Prepayments

Prepayments
Factory supplies Prepayments of purchases Overpaid sales tax Other prepayments Total	As of 31 December 2019 2018 $598,305 $465,585 69,359 27,915 - 65,945 3,560 9,915 $671,224 $569,360
	2019 $598,305 69,359 - 3,560 $671,224
		$569,360

Prepayments were not pledged.

(5) Financial assets at fair value through other comprehensive income

Equity instrument investments measured at fair value through other comprehensive income – Non-current: Listed companies stocks Unlisted companies stocks Total	As of 31 December	As of 31 December
	2019 $302,826 264,161 $566,987	2018
		$248,111 284,142 $532,253

Financial assets at fair value through other comprehensive income were not pledged.

In the first quarter of 2018, the Company represented on the board of directors’ of the non-listed company, Wen-Shan Enterprise Co., Ltd, which was recorded as equity instrument measured at fair value through other comprehensive income. Upon the existence of significant influence by the Company, the abovementioned investment was accounted for using the equity method and reclassified into investments accounted for using the equity method in the amount of NT$33,861 thousand, which was transferred from other equity to retained earnings.

The Company disposed of equity instrument measured at fair value through other comprehensive income for the year ended 2018. Upon derecognition, the fair value of the

investments was NT$10,896 thousand, and the cumulative disposal loss in the amount of NT$5,732 thousand was transferred from other equity to retained earnings.

The return of paid-in capital for capital reduction from Ascentek Venture Capital Corporation amounted to NT$3,528 thousand and NT$1,960 thousand as of 1 August 2019 and 2018.

(6) Investments accounted for using the equity method

The following table lists the investments accounted for using the equity method of the Company:

As of 31 December	As of 31 December	As of 31 December
2019 Carrying amount Percentage of ownership(%) $516,552 100.00 $696,101 20.24 514,794 29.71 156,417 18.00 - - $1,883,864	2018
Carrying amount $516,552 $696,101 514,794 156,417 - $1,883,864	Carrying amount $516,592 $711,740 371,028 175,269 240,799 $2,015,428	Percentage of ownership(%)
		100.00 19.81 29.71 18.00 35.57

Note: Taiwan Steel Union Co., Ltd. began trading on TWSE on 30 January 2018.

A. The share of profit or loss of associates and joint ventures for the years ended 31 December 2019 and 2018:

December 2019 and 2018:
Investment in subsidiaries: GREAT FORTUNE HOLDING LIMITED Investment in associates: Taiwan Steel Union Co., Ltd.	For theyears ended 31 December
	2019 $(40) 79,764	2018
		$2 155,367

Fong Yu Resources Co., Ltd Feng Ying Development Enterprise Co., Ltd. Wen-Shan Enterprise Co., Ltd. Total	(746) 149,054 (18,852) $209,180	(359) 20,222 (647)
		$174,585

B. Investment in subsidiaries:

Investment in subsidiaries is represent as “Investments accounted for under the equity method” in standalone statements and.

C. Investment in associates:

Taiwan Steel Union Co., Ltd. raised capital by cash as of 30 January 2018. However, the Company did not participate in the capital raising. Therefore, its ownership dropped from 22.01% to 19.77%. The Company recognized an increase in capital surplus in the amount of NT$168,489 thousand.

In the fourth quarter of 2018, the Company increased its investment in Taiwan Steel Union Co., Ltd. in the amount of NT$4,202 thousand, which increased its shareholding ratio from 19.77% to 19.81%. Thus, the Company recognized a decrease in capital surplus in the amount of NT$2,845 thousand.

For the years ended 31 December 2019, the Company increased its investment in Taiwan Steel Union Co., Ltd. in the amount of NT$43,579 thousand, which increased its shareholding ratio from 19.81% to 20.24%. Thus, the Company recognized a decrease in capital surplus in the amount of NT$28,347 thousand.

The return of paid-in capital for capital reduction from Feng Ying Development Enterprise Co., Ltd. amounted to NT$4,268 thousand and NT$38,412 thousand as of 21 November 2019 and 30 April 2018. Feng Ying Development Enterprise Co., Ltd. was closed down on 22 November 2019.

In the third quarter of 2019, the Company participated in issuance of common stock for cash of Fong Yu Resources Co., Ltd., increasing its investment in Fong Yu Resources Co., Ltd in the amount of NT$144,550 thousand. Thus, the Company recognized a decrease in capital surplus in the amount of NT$38 thousand.

Although the holding of Wen-Shan Enterprise Co., Ltd. is less than 20%, the Company presumed to have significant influence on these invested companies. Hence, it evaluates the investment by using the equity method.

Fair value of the investment in the associate when there is a quoted market price for the

investment: Taiwan Steel United Co., Ltd. is a listed entity on the Taiwan Stock Exchange (TWSE). The fair vaiue of the investment in Taiwan Steel United Co., Ltd. was NT$1,874,212 thousand and NT$1,873,875 thousand as of 31 December 2019 and 2018, respectively.

The Company’s investments in Taiwan Steel Union Co., Ltd., Fong Yu Resources Co., Ltd., Feng Ying Development Enterprise Co., Ltd. and Wen-Shan Enterprise Co., Ltd are not individually material. The summarized financial information based on the Company’s investment in associates is as follows:

Profit from continuing operations Other comprehensive income (post-tax) Total comprehensive income	For theyears ended 31 December	For theyears ended 31 December
	2019 $209,220 139 $209,359	2018
		$174,583 (697)
		$173,886

The abovementioned associates had no contingent liabilities or capital commitments as of 31 December 2019 and 2018. No investment in the associates was pledged.

Our audit, insofar as it related to the investments accounted for under the equity method amounting to NT$696,101 thousand and NT$711,740 thousand as of 31 December 2019 and 2018; the related shares of investment income from the associates and joint ventures amounted to NT$79,764 thousand and NT$155,367 thousand for the years ended 31 December 2019 and 2018, respectively; and the related shares of other comprehensive income from the associates and joint ventures amounted to NT$173 thousand and NT$(855) thousand for the years ended 31 December 2019 and 2018, respectively; are based solely on the reports of other independent accountants.

(7) Property, plant and equipment

(1) Owner occupied property, plant and equipment (applicable under IFRS 16 requirements)

Land	Buildings	Machinery and equipment	Office equipment	Transportation equipment	Leasehold improvements	Construction in progress and equipment pending inspection	Total
$1,196,407 - (2,440) -	$2,983,623 15,517 (68,689) 508,955	$16,550,018 302,608 (527,673) 342,125	$26,902 1,814 (8,587) 26,309	$376,908 25,466 (7,808) -	$261,931 - (10,814) 79,031	$417,671 529,339 - (821,535)	$21,813,460 874,744 (626,011) 134,885
$1,193,967	$3,439,406	$16,667,078	$46,438	$394,566	$330,148	$125,475	$22,197,078

Land	Buildings	Machinery and equipment	Office equipment	Transportation equipment	Leasehold improvements	Construction in progress and equipment pending inspection	Total
$ - - - -	$1,255,985 92,002 (68,482) -	$10,271,273 973,193 (527,540) -	$22,373 1,373 (8,587) -	$268,659 24,460 (6,728) -	$41,870 12,932 (10,814) 8,987	$ - - - -	$11,860,160 1,103,960 (622,151) 8,987
$ -	$1,279,505	$10,716,926	$15,159	$286,391	$52,975	$ -	$12,350,956
$1,193,967	$2,159,901	$5,950,152	$31,279	$108,175	$277,173	$125,475	$9,846,122

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.
(2) Property, plant and equipment (prior to the application of IFRS 16)

Land	Buildings	Machinery and equipment	Office equipment	Transportation equipment	Leasehold improvements	Construction in progress and equipment pending inspection	Total
$1,196,407 - - -	$2,545,868 4,153 (135) 433,737	$15,451,274 259,829 (1,660,771) 2,499,686	$22,775 4,157 (30) -	$371,086 17,916 (12,094) -	$261,931 - - -	$1,498,141 1,818,557 - (2,899,027)	$21,347,482 2,104,612 (1,673,030) 34,396
$1,196,407	$2,983,623	$16,550,018	$26,902	$376,908	$261,931	$417,671	$21,813,460
	$1,170,111 86,001 (127) -	$11,026,554 894,139 (1,649,420) -	$21,929 474 (30) -	$252,890 24,948 (9,179) -	$30,342 11,528 - -	$ - - - -	$12,501,826 1,017,090 (1,658,756) -
$ -	$1,255,985	$10,271,273	$22,373	$268,659	$41,870	$ -	$11,860,160
$1,196,407	$1,727,638	$6,278,745	$4,529	$108,249	$220,061	$417,671	$9,953,300

There is no capitalization of interest due to purchase of property, plant and equipment.

As of 31 December 2019 and 2018 deeds of certain agriculture land both amounted to NT$55,425 thousand. The ownership of the land was not transferred to the Company. The Company had entered into a trust deed with the entrusted registrant for such agriculture land.

Property, plant and equipment were not pledged.

(8) Investment property

The Company has entered into commercial property leases on its owned investment properties with terms of between 1and 10 years. These leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

Cost: As of 1 January 2019 Additions As of 31 December 2019 Depreciation and impairment： As of 1 January 2019 Depreciation As of 31 December 2019 Cost: As of 1 January 2018 Additions As of 31 December 2018 Depreciation and impairment： As of 1 January 2018 Depreciation As of 31 December 2018 Net carrying amount： As of 31 December 2019 As of 31 December 2018	Land $376,867 - $376,867 $ - - $ - $376,867 - $376,867 $ - - $ - $376,867 $376,867	Buildings $6,086 - $6,086 $1,318 1,218 $2,536 $6,086 - $6,086 $101 1,217 $1,318 $3,550 $4,768	Total
			$382,953 -
			$382,953
			$1,318 1,218
			$2,536
			$382,953 -
			$382,953
			$101 1,217
			$1,318
			$380,417
			$381,635

Rental income from investment property Less: Direct operating expenses from investment property generating rental income Direct operating expenses from investment property not generating rental income Total	For theyears ended 31 December	For theyears ended 31 December
	2019 $2,657 - - $2,657	2018
		$2,556 - -
		$2,556

No investment property was pledged.

Investment properties held by the Company are not measured at fair value but for which the fair value is disclosed. The fair value measurements of the investment properties are categorized within Level 3. The fair value of investment properties was both NT$627,522 thousand as at 31 December 2019 and 31 December 2018. The fair value has been determined based on valuations performed by an independent appraiser and on transactions observable in the market. The valuation method used is direct capitalized method, and the inputs used are as follows:

Discount Rate	As of 31 December	As of 31 December
	2019 5.58%	2018
		5.58%

(9) Other non-current assets

Other non-current assets
Long-term prepaid rent Advance payments in equipment Refundable deposits Other non-current assets - other Total	As of 31 December
	2019 (Note) $74,343 5,112 22,186 $101,641	2018
		$56,799 11,460 8,144 25,186
		$101,589

Long-term prepaid rent include land use rights in the amount of NT$56,799 as at 31 December 2018.

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

(10) Short-term borrowings

hort-term borrowings
Unsecured bank loans	Interest Rates(%) 0.42%-3.10%	As of 31 December
		2019 $381,151	2018
			$1,018,533

The Company’s unused short-term lines of credits amounted to NT$9,045,230 thousand and NT$9,213,843 thousand as of 31 December 2019 and 2018, respectively.

(11) Other payables

) Other payables
Accrued Salary and bonus Accrued Discount Accrued Utilities Pollution control payable Others Total	As of 31 December
	2019 $280,280 174,272 177,502 214,010 152,679 $998,743	2018
		$359,636 180,401 170,582 104,588 91,801
		$907,008

(12) Post-employment benefits

Defined contribution plan

The Company adopt a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. Under the Labor Pension Act, the Company will make monthly contributions of no less than 6% of the employees’ monthly wages to the employees’ individual pension accounts. The Company has made monthly contributions of 6% of each individual employee’s salaries or wages to employees’ pension accounts.

Pension expenses under the defined contribution plan for the years ended 31 December 2019 and 2018 were NT$19,691 thousand and NT$18,087 thousand, respectively.

Defined benefits plan

The Company adopts a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, the Company and its domestic subsidiaries contribute an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee. Before the end of each year, the Company and its domestic subsidiaries assess the balance in the designated labor pension fund. If the amount is inadequate to pay pensions calculated for workers retiring in the same year, the Company and its domestic subsidiaries will make up the difference in one appropriation before the end of March the following year.

The Ministry of Labor is in charge of establishing and implementing the fund utilization plan in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund. The pension fund is managed by the in-house managers or under discretionary accounts, based on a passive-aggressive investment strategy

for long-term profitability. The Ministry of Labor establishes checks and risk management mechanism based on the assessment of risk factors including market risk, credit risk and liquidity risk, in order to maintain adequate manager flexibility to achieve targeted return without over-exposure of risk. With regard to utilization of the pension fund, the minimum earnings in the annual distributions on the final financial statement shall not be less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. Treasury Funds can be used to cover the deficits after the approval of the competent authority. As the Company does not participate in the operation and management of the pension fund, no disclosure on the fair value of the plan assets categorized in different classes could be made in accordance with paragraph 142 of IAS 19. The Company expects to contribute NT$25,333 thousand to its defined benefit plan during the 12 months beginning after 31 December 2019.

The weighted average duration of the defined benefits obligation was 9 years of 31 December 2019.

Pension costs recognized in profit or loss are as follows:

Current period service costs Net interest on the net defined benefit liabilities(assets) Past service cost Total	For the years ended 31 December	For the years ended 31 December
	2019	2018
	$10,656 1,868 -	$12,631 2,102 1,041
	$12,524	$15,774

Reconciliations of the defined benefit obligation and fair value of plan assets are as follows:

	As of
31 December 2019	31 December 2018	1 January 2018
$696,770 (516,396)	$709,018 (512,509)	$726,213 (513,600)
180,374 (20,886)	196,509 (14,798)	212,613 (27,655)
$159,488	$181,711	$184,958

Reconciliation of liabilities (assets) of the defined benefit plan are as follows:

As at 1 January 2018 Current period service costs Interest expense (income)	Defined benefit obligation	Fair value of plan assets	Benefit liability (asset)
	$726,213 12,631 7,118	$(513,600) - (5,016)	$212,613 12,631 2,102

Defined benefit obligation	Fair value of plan assets	Benefit liability (asset)
1,041	-	1,041
20,790	(5,016)	15,774
	- - - (15,862)	211 (3,350) 46,864 (15,862)
43,725	(15,862)	27,863

(76,925) - (4,785)	55,491 (33,522) -	(21,434) (33,522) (4,785)
$709,018 10,656 6,956	$(512,509) - (5,088)	$196,509 10,656 1,868
17,612	(5,088)	12,524
	- - - (18,826)	1 15,391 997 (18,826)
16,389	(18,826)	(2,437)
(46,249) -	40,249 (20,222)	(6,000) (20,222)
$696,770	$(516,396)	$180,374

The principal assumptions used in determining the Company’s defined benefit plan are shown below:

Discount rate Expected rate of salary increases	As of 31 December	As of 31 December
	2019	2018
	0.75% 0.50%	1.00% 0.50%

Sensitivity analysis for significant assumption are shown below:

For theyears ended 31 December	For theyears ended 31 December	For theyears ended 31 December	For theyears ended 31 December
2019		2018
Defined benefit obligation increase	Defined benefit obligation decrease	Defined benefit obligation increase	Defined benefit obligation decrease
$ - 15,906 15,906 -	$15,391 - - 15,466	$ - 16,823 16,866 -	$16,260 - - 16,380

The sensitivity analyses above are based on a change in a significant assumption (for example: change in discount rate or future salary), keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another.

There was no change in the methods and assumptions used in preparing the sensitivity analyses compared to the previous period.

(13) Equities

(a) Common stock

The Company’s authorized capital was both NT$7,000,000 thousand as at 31 December 2019 and 2018, each at a par value of NT$10. The Company has issued 581,599,424 common shares both as at 31 December 2019 and 31 December 2018. The paid-up capital was NT$5,815,994 thousand. Each share has one voting right and a right to receive dividends.

(b) Capital surplus

Capital surplus
Additional paid-in capital Treasury share transactions Share of changes in net assets of associates and joint ventures accounted for using the equity method	As of 31 December
	2019 $271,134 175,263 137,259	2018
		$271,134 175,263 165,644

Gain on sale of assets Donated assets Other Total	665 218 3,584 $588,123	665 218 2,659
		$615,583

According to the Company Act, the capital reserve shall not be used except for making good the deficit of the company. When a company incurs no loss, it may distribute the capital reserves related to the income derived from the issuance of new shares at a premium or income from endowments received by the company. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them.

(c) Legal reserve

The Company Act provides that companies must retain at least 10% of their annual earnings, as defined in the Act, until such retention equals the amount of paid-in capital. This retention is accounted for as a legal reserve account. When the Company incurs no loss, it may distribute the portion of legal serve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

(d) Special reserve

When the Company distributed the earnings, it shall set aside supplemental special reserve based on the difference between the amount already set aside and other net deductions from shareholders’ equity. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed.

(e) Retained earnings and dividend policies

According to the Company’s Articles of Incorporation, current year’s earnings, if any, shall be distributed in the following order:

a. Payment of all taxes and dues
b. Offset prior years’ operation losses
c. Set aside 10% of the remaining amount after deducting items (a) and (b) as legal reserve
d. Set aside or reverse special reserve in accordance with law and regulations
e. The distribution of the remaining portion, if any, will be recommended by the Board of Directors and resolved in the shareholders’ meeting

As the Company’s industry is mature and the Company makes stable profits, most of the dividends will be distributed to shareholders as cash dividends. However, when there is significant capital expenditure, no more than 70% of total dividends can be distributed as stock dividends to shareholders.

According to the Company Act, the Company needs to set aside amount to legal reserve unless where such legal reserve amounts to the total paid-in capital. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal reserve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

Details of the 2019 and 2018 earnings distribution and dividends per share as approved and resolved by the board of directors’ meeting and shareholders’ meeting on 25 February 2020 and 14 June 2019 respectively, are as follows:

Appropriation of earnings	Appropriation of earnings	Dividendper share(NT$)	Dividendper share(NT$)
2019	2018	2019	2018
$196,444 (38,262) 1,744,798	$294,241 269,615 2,326,398	$3	$4
$1,902,980	$2,890,254

Please refer to Note 6(17) for further details on employees’ compensation and remuneration to directors and supervisors.

(14) Operating revenue

Operating revenue
Revenue from contracts with customers Sale revenue Revenue arising from rendering of services Total	For theyears ended 31 December
	2019	2018
	$27,622,481 113,130	$30,762,524 103,123
	$27,735,611	$30,865,647

Analysis of revenue from contracts with customers during the year periods ended 31 December 2019 and 2018 are as follows:

(1) Disaggregation of revenue
A. The Company is a single operating department and should report the income information disclosed by the department. Please refer to the preceding paragraph

for details.

  - B. The income types of contracts with customers from 1 January to 31 December 2019 and 2018 are all recognized at a certain point in time.

(2) Contract balances
A. Contract assets - current

Contract assets - current
Sales of goods	31 Dec. 2019	31 Dec. 2018	1 Jan. 2018
	$239,141	$250,924	$210,573

Contract assets have decreased for the year ended 31 December 2019 as the Company obtained an unconditional right to receive the consideration at the financial statement reporting date. Please refer to Note 6 (15) for more details on the impairment impact.

Contract assets have increased for the year ended 31 December 2018 as the Company did not obtain an unconditional right to receive the consideration at the financial statement reporting date. Please refer to Note 6 (15) for more details on the impairment impact.

B. Contract liabilities - current

31 Dec. 2019 31 Dec. 2018 1 Jan. 2018 Sales of goods $131,372 $170,900 $82,076

During the year ended 31 December 2019, contract liabilities significantly decreased as performance obligations are satisfied and recognized as revenue in the current year.

During the year ended 31 December 2018, contract liabilities significantly increased as performance obligations are not satisfied.

(3) Transaction price allocated to unsatisfied performance obligations

As of 31 December 2019 and 2018, the Company expected that all of the transaction price allocated to unsatisfied performance obligations will be recognized as revenue within one year, therefore, it is not required to provide information about the unsatisfied performance obligations.

(4) Assets recognized from costs to fulfil a contract

None

(15) Expected credit losses

The Company expected credit losses for the year ended 31 December 2019 and 2018: None.

Please refer to Note 12 for more details on credit risk.

The Company measures the loss allowance of its contract assets and trade receivables (including note receivables and trade receivables) at an amount equal to lifetime expected credit losses. The assessment of the Company’s loss allowance as at 31 December 2019 and 2018 are as follows

(1)the loss allowance of contract assets is measured at an amount equal to lifetime expected credit losses, details are as follow:

credit losses, details are as follow:
Total carrying amount Expected credit loss rates Loss allowance Total	As of 31 December
	2019	2018 $250,924 0% - $250,924
	$239,141 0% -
	$239,141

(2)the Company considers the Companying of trade receivables by counterparties’ credit rating, by geographical region and by industry sector and its loss allowance is measured by using a provision matrix, details are as follows:

2019.12.31

2019.12.31
Gross carrying amount Loss ratio Lifetime expected credit losses Carrying amount of trade receivables	Not yet due (Note)			Overdue			Total
		<=30 days	31-60 days	61-90 days	91-120 days	>=121 days
	$1,535,913 0-1%	$24,950 -%	$ - -%	$ - -%	$ - -%	$ - -%	$1,560,863 3,305
	3,305	-	-	-	-	-
	$1,532,608	$24,950	$-	$-	$-	$-	$1,557,558

2018.12.31

2018.12.31
Gross carrying amount Loss ratio Lifetime expected credit losses Carrying amount of trade receivables	Not yet due (Note)			Overdue			Total
		<=30 days	31-60 days	61-90 days	91-120 days	>=121 days
	$1,446,020 0-1%	$15,240 -%	$540 -%	$ - -%	$ - -%	$ - -%	$1,461,800 3,305
	3,305	-	-	-	-	-
	$1,442,715	$15,240	$540	$-	$-	$-	$1,458,495

Note: The Company’s trade receivables are not overdue, and the credit loss of its duration period is all recorded in the previous year.

The movement in the provision for impairment of contract assets, note receivables and trade receivables for the year ended 31 December 2019 and 2018 are as follows:

Contract assets	Note receivables	Trade receivables
$ - - -	$1,187 - -	$2,118 - -
$-	$1,187	$2,118
$ - -	$1,187 -	$2,118 -
- - -	1,187 - -	2,118 - -
$-	$1,187	$2,118

(16) Leases

(1) Company as a lessee (applicable to the disclosure requirement under IFRS 16)

The Company leases various properties, including real estate such as land, machinery and equipment. The lease terms range from 1 to 50 years.

The Company’s leases effect on the financial position, financial performance and cash

flows are as follow:

A. Amounts recognized in the balance sheet
a. Right-of-use assets

The carrying amount of right-of-use assets

Land Machinery and equipment Total	As of 31	December
	2019	2018(Note)
	$207,654 4,530
	$212,184

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

During the year period ended 31 December 2019, the Company did not add new right-of-use assets.

b. Lease liabilities

Lease liabilities Current Non-current Total	As of 31 December	As of 31 December
	2019	2018(Note)
	$6,238 204,165
	$210,403

Please refer to Note 6 (18)(c) for the interest on lease liabilities recognized during the year period ended 31 December 2019 and refer to Note 12 (5) Liquidity Risk Management for the maturity analysis for lease liabilities as at 31 December 2019.

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

B. Amounts recognized in the statement of profit or loss

Depreciation charge for right-of-use assets

Land Machinery and equipment Total	For the years ended 31 December	For the years ended 31 December
	2019 $7,311 1,875 $9,186	2018(Note)

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.
C. Income and costs relating to leasing activities

ncome and costs relating to leasing activities
The expenses relating to short-term leases	For the years ended 31 December 2019 2018(Note) $4,750
		2018(Note)

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.
D. Cash outflow relating to leasing activities

During the year period ended 31 December 2019, the Company’s total cash outflows for leases amounting to NT$14,776 thousand.

E. Other information relating to leasing activities
(i) Variable lease payments

Some of the Company’s property rental agreement contain variable payment terms that are linked to certain percentages of sales generated from the leased stores, which is very common in the industry of the Company. As such variable lease payments do not meet the definition of lease payments, those payments are not included in the measurement of the assets and liabilities.

(ii) Extension and termination options

Some of the Company’s property rental agreement contain extension

and termination options. In determining the lease terms, the non-cancellable period for which the Company has the right to use an underlying asset, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. These options are used to maximize operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Company. After the commencement date, the Company reassesses the lease term upon the occurrence of a significant event or a significant change in circumstances that is within the control of the lessee and affects whether the Company is reasonably certain to exercise an option not previously included in its determination of the lease term, or not to exercise an option previously included in its determination of the lease term.

(iii) Residual value guarantees

None.

(2) Operating lease commitments - Company as a lessee (applicable to the disclosure requirement in IAS 17)

The Company has entered into commercial leases on certain land, machinery and equipment. These leases have an average life of one to twenty-five years with some renewal option included in the contracts. There are no restrictions placed upon the Company by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases as at 31 December 2019 and 2018 are as follows:

December 2019 and 2018 are as follows:
Not later than one year Later than one year and not later than five years Later than five years Total	As of 31 December
	2019 (Note)	2018
		$11,953 31,282 253,334
		$296,569

Operating lease expenses recognized are as follows:

Minimum lease payments	For theyears ended 31 December	For theyears ended 31 December
	2019(Note)	2018
		$17,812

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not

to restate prior periods in accordance with the transition provision in IFRS 16.

(3) Company as a lessor (applicable to the disclosure requirement in IFRS 16)

Please refer to Note 6 (8) for details on the Company’s owned investment properties and investment properties held by the Company as right-of-use assets. Leases of owned investment properties are classified as operating leases as they do not transfer substantially all the risks and rewards incidental to ownership of underlying assets.

Lease income for operating leases Income relating to fixed lease payments and variable lease payments that depend on an index or a rate	For the years ended 31 December	For the years ended 31 December
	2019	2018(Note)
	$3,562

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

Please refer to Note 6 (8) for relevant disclosure of property, plant and equipment for operating leases under IFRS 16. For operating leases entered by the Company, the undiscounted lease payments to be received and a total of the amounts for the remaining years as at 31 December 2019 are as follow:

years as at 31 December 2019 are as follow:
Not later than one year Later than one year but not later than two years Later than two years but not later than three years Later than three years but not later than four years Later than four years but not later than five years Later than five years Total	As of 31 December
	2019	2018(Note)
	$1,849 1,849 1,552 1,323 785 10,990
	$18,348

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

(4) Operating lease commitments - Company as a lessor (applicable to the disclosure requirement in IAS 17)

The Company has entered into commercial property leases with lease period between one to ten years and with remaining terms of between one to six years. All leases include a clause to enable upward revision of the rental charge on an annual basis

according to prevailing market conditions.

Future minimum rentals receivable under non-cancellable operating leases as of 31 December 2019 and 2018 are as follows:

December 2019 and 2018 are as follows:
Not later than one year Later than one year and not later than five years Later than five years Total	As of 31 December
	2019 (Note)	2018 $2,357 3,433 - $5,790

The contingent rent recognized as income amount to NT$3,562 thousand and NT$3,265 thousand for the year ended 31 December 2019 and 2018, respectively.

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not

to restate prior periods in accordance with the transition provision in IFRS 16.

(17) Summary statement of employee benefits, depreciation and amortization expenses by function for the year ended 31 December 2019 and 2018:

Function Nature		2019			2018
	Operating costs	Operating expenses	Total amount	Operating costs	Operating expenses	Total amount
Employee benefits expense
Salaries	$657,977	$221,331	$879,308	$708,489	$250,531	$959,020
Labor and health insurance	51,198	17,366	68,564	48,241	16,860	65,101
Pension	26,571	5,594	32,165	28,086	5,712	33,798
Other employee benefits expense	32,791	7,902	40,693	33,743	8,703	42,446
Depreciation	1,079,808	34,556	1,114,364	998,599	19,708	1,018,307
Amortization	3,000	-	3,000	3,000	-	3,000

The number of employees of the Company for the years ended 31 December 2019 and 2018 were 870 and 872, including 6 non-employee directors, respectively.

Average labor cost for the year ended December 31, 2019 and 2018 were NT$1,132 thousand and 1,211 thousand, respectively.

Average salary and bonus for the year ended December 31, 2019 and 2018 were NT$968 thousand and 1,048 thousand, respectively.

The average salary and bonus decreased by 8% year over year

According to the Articles of Incorporation, no less than 2% of profit of the current year is distributable as employees’ compensation and no higher than 2% of profit of the current year is distributable as remuneration to directors and supervisors. However, the company's accumulated losses shall have been covered. The Company may, by a resolution adopted by a majority vote at a meeting of board of directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the form of cash; and in addition thereto a report of such distribution is submitted to the shareholders’ meeting. Information on the board meeting resolution regarding the employees’ compensation and remuneration to directors and supervisors can be obtained from the “Market Observation Post System” on the website of the TWSE.

Based on profit of 31 December 2019, the Company estimated the amounts of the employees’ compensation and remuneration to directors and supervisors for the period ended of 31 December 2019 to be 9.36% and 1.38% of profit, respectively. The employees’ compensation and remuneration to directors and supervisors for the period ended of 31 December 2019 amounted to NT$250,623 thousand and NT$37,000 thousand respectively, recognized as employee benefits expense.

A resolution was passed at a board meeting to distribute NT$250,623 thousand and NT$37,000 thousand in cash as employees’ compensation and remuneration to directors and supervisors of 2019, respectively. Differences between the estimated amount and the actual distribution of the employee compensation and remuneration to directors and supervisors for the year ended 31 December 2019 were recognized in profit or loss of the subsequent year.

The employees’ compensation and remuneration to directors and supervisors for the period ended of 31 December 2018 amount to NT$321,252 thousand and NT$46,000 thousand respectively. No material differences exist between the estimated amount and the actual distribution of the employee bonuses and remuneration to directors and supervisors for the year ended 31 December 2018.

(18) Non-operating income and expenses

(a) Other income

Other income
Dividend income Rental income Interest income Financial assets measured at amortized cost Others	For theyears ended 31 December
	2019 $30,583 3,562 2,529 22,176	2018
		$28,443 3,265 2,857 17,855

Total

$58,850 $52,420

(b) Other gains and losses

Other gains and losses
Gains on disposal of property, plant and equipment, net Foreign exchange (losses) gains, net Others Total	For theyears ended 31 December
	2019	2018
	$34,329 13,107 (227)	$66,328 18,760 (2,209)
	$47,209	$82,879

Finance costs
Interest on loans from bank Interest on lease liabilities Total	For theyears ended 31 December
	2019	2018
	$10,433 3,100	$8,217 (Note)
	$13,533	$8,217

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

(19) Components of other comprehensive income

For the year ended 31 December 2019:

Not to be reclassified to profit or loss in subsequent periods: Remeasurements of defined benefit plans(note) Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income Share of other comprehensive income of associates and joint ventures accounted for using the equity method(note) Total of other comprehensive income	Arising during theperiod	Reclassificatio n adjustments during the period	Other comprehensive income, before tax	Income tax effect	Other comprehensive income, net of tax
	$2,437 38,262 173	$ - - -	$2,437 38,262 173	$(487) - (35)	$1,950 38,262 138
	$40,872	$ -	$40,872	$(522)	$40,350

For the year ended 31 December 2018:

Not to be reclassified to profit or loss in subsequent periods: Remeasurements of defined benefit plans(note) Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income Share of other comprehensive income of associates and joint ventures accounted for using the equity method(note) To be reclassified to profit or loss in subsequent periods: Effective portion of gains and losses on hedging instruments in a cash flow hedge (note) Total of other comprehensive income	Arising during theperiod	Reclassificatio n adjustments during the period	Other comprehensive income, before tax	Income tax effect	Other comprehensive income, net of tax
	$(27,863) 25,496 (855) 1,300	$ - - - -	$(27,863) 25,496 (855) 1,300	$7,127 - 157 (221)	$(20,736) 25,496 (698) 1,079
	$(1,922)	$ -	$(1,922)	$7,063	$5,141

Note: including the effects of change in income tax rate applicable in 2018.

(20) Income tax

Based on the amendments to the Income Tax Act announced on 7 February 2018, the Company’s applicable corporate income tax rate for the year ended 31 December 2019 has changed from 17% to 20%. The corporate income surtax on undistributed retained earnings has changed from 10% to 5%.

The major components of income tax expense (income) for the year ended 31 December 2019 and 2018 are as follows:

(A)Income tax expense (income) recognized in profit or loss

Current income tax expense: Current income tax charge Deferred tax income: Deferred tax income relating to origination and	For theyears ended 31 December	For theyears ended 31 December
	2019	2018
	$399,851 28,524	$603,924 129,080

reversal of temporary differences Deferred tax expense (income) relating to - (38,043) changes in tax rate or the imposition of new taxes Total income tax expense $428,375 $694,961

(B)Income tax relating to components of other comprehensive income

For the years ended 31 December

Deferred tax expense (income): Remeasurements of defined benefit plans Share of other comprehensive income of associates and joint ventures accounted for using the equity method Unrealized gains and losses on hedging instruments in a cash flow hedge Income tax relating to components of other comprehensive income	2019 $487 35 - $522	2018
		$(7,127) (157) 221
		$(7,063)

(C)A reconciliation between tax expense and the product of accounting profit multiplied by applicable tax rate is as follows:

applicable tax rate is as follows:
Accounting profit before tax from continuing operations Tax at the domestic rates applicable to profits in the country concerned Tax effect of revenues exempt from taxation Tax effect of expenses not deductible for tax purposes Tax expense (income) relating to changes in tax rate Corporate income surtax on undistributed retained earnings Total income tax expenses recognized in profit or loss	For the years ended 31 December
	2019	2018
	$2,390,730	$3,637,376
	$478,146 (50,039) 268 - -	$727,475 (40,609) 307 (38,043) 45,831
	$428,375	$694,961

(D)Deferred tax assets (liabilities) relate to the following:

For the year ended 31 December 2019:

Items	Balance as of 1 January	Recognized in profit or loss	Recognized in other comprehensive income	Balance as of 31 December
	$4,913 4,328 1,308 (159) 55,435 81 22,939 15,932 35,779	$(212) - - 270 8 - (2,740) - (25,850)	$ - - - - - (35) - (487) -	$4,701 4,328 1,308 111 55,443 46 20,199 15,445 9,929
	$140,556	$(28,524)	$(522)	$111,510
		Recognized in profit or loss	Recognized in other comprehensive income
	$140,715			$111,510
	$(159)			$ -
				Balance as of 31 December
Temporary difference Bonus payable Impairment losses on available-for-sale financial assets Loss from price recovery (reduction) of inventories Unrealized foreign exchange gains or losses Investments accounted for using the equity method Share of other comprehensive of associates and joint ventures	$4,338 3,679 1,112 421 47,120 (76)	$575 649 196 (580) 8,315 -	$ - - - - - 157	$4,913 4,328 1,308 (159) 55,435 81

Recognized in

			Recognized in
Items	Balance as of 1 January	Recognized in profit or loss	other comprehensive income	Balance as of 31 December
Non-current liability – Defined benefit Liability Remeasurements of defined benefit plans Difference between book depreciation expense and tax depreciation expense Effective portion of gains on hedging instruments in a cash flow hedge Deferred tax income Net deferred tax assets Reflected in balance sheet as follows: Deferred tax assets Deferred tax liabilities	26,973 8,805 131,937 221	(4,034) - (96,158) -	- 7,127 - (221)	22,939 15,932 35,779 -
	$224,530	$(91,037)	$7,063	$140,556

	$224,606			$140,715
	$(76)			$(159)

The assessment of income tax returns

As of 31 December 2019, the Company’s income tax returns through 2017 have been assessed and approved by the tax authority.

(21) Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

Basic earnings per share Profit attributable to ordinary equity holders of the Company	For the years ended 31 December	For the years ended 31 December
	2019	2018
	$1,962,355	$2,942,415

Weighted-average number of ordinary shares for basic earnings per share (in thousands) Basic earnings per share (NT$)	581,599	581,599
	$3.37	$5.06

The Company’s diluted earnings per share amounts equal to its basic earnings per share amounts.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date the financial statements were authorized for issue.

7. Related party transactions

Information of the related parties that had transactions with the Company during the financial reporting period is as follows:

Name and nature of relationship of the related parties

Name of the relatedparties Gei Tai International Ltd (note) Taiwan Steel Union Co., Ltd. Feng Ying Development Enterprise Co., Ltd. Wen-Shan Enterprise Co., Ltd. Taiwan Steel Resources Co., Ltd.	Nature of relationshipof the relatedparties
	Substantive related party Associate Associate Associate Subsidiary of associate

。 Note: The company became a non- related party on 30 June 2018

Significant transactions with the related parties

(a)Purchases

) Purchases
Substantive related party	For theyears ended 31 December
	2019 $ -	2018
		$126,477

The purchase price from the above related parties was determined through mutual agreement based on the market rates. The payment terms from the related party suppliers are comparable with third party suppliers.

(b)Account Payable

Associates

As of 31 December	As of 31 December
2019	2018
$6,443	$3,275

(c)Other

Taiwan Steel Union Co., Ltd was commissioned to process the electric arc furnace dust. Other expenditures paid to Taiwan Steel Union Co., Ltd for the years ended 31 December 2019 and 2018 were NT$31,716 thousand and NT$26,030 thousand, respectively, and were recorded as manufacturing expenses. The unpaid amounts as of 31 December 2019 and 2018 were NT$ 3,669 thousand and NT$3,275 thousand.

Taiwan Steel Resources Co., Ltd. was commissioned to process the reduction slag.Other expenditures paid to Taiwan Steel Resources Co., Ltd. for the years ended 31 December 2019 was NT$2,774 thousand and were recorded as manufacturing expenses. The unpaid amounts as of 31 December 2019 was NT$ 2,774 thousand.There was no such transation during the year ended 31 December 2018.

(d)Key management personnel compensation

Short-term employee benefits Post-Employment Benefits Total	For theyears ended 31 December	For theyears ended 31 December
	2019	2018
	$82,241 365	$117,961 538
	$82,606	$118,499

8. Assets pledged as security

None.

9. Commitments and contingencies

(1) As of 31 December 2019 and 2018, the Company issued guaranty notes as security for borrowings in the amount of NT$12,755,250 thousand and NT$12,955,250 thousand, respectively.
(2) As of 31 December 2019 and 2018, the Company was issued letters of guarantee by banks in the amount of NT$50,000 thousand and NT$35,500 thousand for importing goods, respectively.

(3) Amounts available under unused letters of credit are as follows:

Currency USD JPY EUR	Carrying	amount
	2019.12.31 $33,097 258,785 421	2018.12.31
		$14,783 111,274 1,893

The amounts that are available under unused letters of credit above are unguaranteed.

(4) The following table lists major purchase contracts of the Company:

Contract counterparty Company A Company B Company C Company D Company E	Contract content New building Crane update project Crane update project Oxygen field update project Roof dust collection renovation project	Contract amount $300,000 JPY 263,100 $75,700 JPY 550,000 JPY 198,000	Contract amountpaid $266,742 JPY 30,073 $15,140 - JPY 59,400	Unpaid amount as of 31 December 2019
				$33,258 JPY 233,027 $60,560 JPY 550,000 JPY 138,600

10. Losses due to major disasters

None.

11. Significant subsequent events

None.

12. Others

(1) Categories of financial instruments

Categories of financial instruments
Financial assets Financial assets at fair value through other comprehensive income Financial assets measured at amortized cost: Cash and cash equivalents (exclude cash on hand)	As of 31 December
	2019	2018
	$566,987 1,564,848	$532,253 648,237

Contract assets Notes and accounts receivable Other receivables Other financial assets -Non Current Subtotal Total Financial liabilities Financial liabilities at amortized cost: Short-term borrowings Notes and accounts payable Other payables Lease liabilities Total	239,141 1,557,558 20,516 13,686	250,924 1,458,495 28,315 13,686
	3,395,749	2,399,657
	$3,962,736	$2,931,910
	$381,151 1,176,644 998,743 210,403	$1,018,533 1,558,603 907,008 (Note) $3,484,144
	$2,766,941

Note: The Company adopted IFRS 16 since 1 January 2019. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 16.

(2) Financial risk management objectives and policies

The Company’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activities. The Company identifies measures and manages the aforementioned risks based on the Company’s policy and risk appetite.

The Company has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant financial activities, due approval process by the board of directors and audit committee must be carried out based on related protocols and internal control procedures. The Company complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in market prices. Market prices comprise currency risk, interest rate risk and other price risk.

In practice, it is rarely the case that a single risk variable will change independently from

other risk variables, there is usually interdependencies between risk variables. However the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

Foreign currency risk

The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a different currency from the Company’s functional currency).

The Company has certain foreign currency receivables to be denominated in the same foreign currency with certain foreign currency payables, therefore natural hedge is received.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Company’s profit is performed on significant monetary items denominated in foreign currencies as of the end of the reporting period. The Company’s foreign currency risk is mainly related to the volatility in the exchange rates for USD, JPY and EUR.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s debt instrument investments at variable interest rates, bank borrowings with fixed interest rates and variable interest rates.

The interest rate sensitivity analysis is performed on the borrowings and investments with variable interest rates as of the end of the reporting period, under the assumption that, a change of 10 basis points of interest rates in a reporting period.

Pre-tax sensitivity analysis of changes in related risk factors for the years ended 31 December 2019 and 2018 are as follows:

For the year ended 31 December 2019

Main Risk Foreign currency risk Interest rate risk	Fluctuation NTD/USD rate +/− 1% NTD/EUR rate +/− 1% Market rate +/− 10 basis points	Sensitivity of profit/loss +/-$(1,844) +/-$(434) +/-$381	Sensitivity of equity
			$ - $ - $ -

For the year ended 31 December 2018

Main Risk Foreign currency risk Interest rate risk	Fluctuation NTD/USD rate +/− 1% Market rate +/− 10 basis points	Sensitivity of profit/loss +/−$(4,250) +/−$1,019	Sensitivity of equity
			$ - $ -

Equity price risk

The fair value of the Company’s listed and unlisted equity securities and conversion rights of the Euro-convertible bonds issued are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company’s listed and unlisted equity securities are classified under held for trading financial assets measured at fair value through profit or loss and financial assets measured at fair value through other comprehensive income, while conversion rights of the Euro-convertible bonds issued are classified as financial liabilities at fair value through profit or loss as it does not satisfy the definition of an equity component. The Company manages the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company’s senior management on a regular basis. The Company’s board of directors reviews and approves all equity investment decisions.

At the reporting date, a change of 1% in the price of the listed equity securities measured at fair value through other comprehensive income could could have an impact of NT$3,028 thousand and NT$2,481 thousand on the equity attributable to the Company for the year periods ended 31 December 2019 and 2018, respectively.

(4) Credit risk management

Credit risk is the risk that counterparty will not meet its obligations under a contract, leading to a financial loss. The Company is exposed to credit risk from operating activities (primarily for contract assets, accounts and notes receivables and lease receivables) and from its financing activities, including bank deposits and other financial instruments.

Credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to credit risk management. Credit limits are established for all counter parties based on their financial position, ratings from credit rating agencies, historical experiences, prevailing economic condition and the Company’s internal rating criteria, etc. Certain counter parties’ credit risk will also be managed by taking credit enhancing procedures, such as requesting for prepayment.

As of 31 December 2019 and 2018, account receivables from top ten customers represented 23.22% and 19.46% of the total trade receivables of the Company, respectively. The credit concentration risk of other accounts receivables is insignificant.

Credit risk from balances with banks, fixed income securities and other financial instruments is managed by the Company’s treasury in accordance with the Company’s policy. The Company only transacts with counterparties approved by the internal control procedures, which are banks and financial institutions, companies and government entities with good credit rating and with no significant default risk. Consequently, there is no significant credit risk for these counter parties.

(5) Liquidity risk management

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash and cash equivalents, highly liquid equity investments and bank loans. The table below summarizes the maturity profile of the Company’s financial liabilities based on the contractual undiscounted payments and contractual maturity. The payment amount includes the contractual interest. The undiscounted payment relating to borrowings with variable interest rates is extrapolated based on the estimated interest rate yield curve as of the end of the reporting period.

Non-derivative financial liabilities

Non-derivative financial liabilities
As of 31 December 2019 Short-term borrowings Notes and accounts payable Other payable Lease liabilities As of 31 December 2018 Short-term borrowings Notes and accounts payable Other payable	Less than 1 year	2 to 3 years	4 to 5 years	> 5years	Total
	$391,145 1,176,644 998,743 9,240 $1,046,803 1,558,603 907,008	$ - - - 15,863 $ - - -	$ - - - 12,358 $ - - -	$ - - - 247,155 $ - - -	$391,145 1,176,644 998,743 284,616 $1,046,803 1,558,603 907,008

Derivative financial liabilities

None.

(6) Reconciliation of liabilities arising from financing activities

Reconciliation of liabilities for the year ended 31 December 2019:

As at 1 Jan. 2019 Cash flows Non-cash changes Acquisition As at 31 Dec. 2019	Short-term borrowings	Leases liabilities	Total liabilities from financingactivitie
	$1,018,533 (637,382) -	$218,059 (10,756) 3,100	$1,236,592 (648,138) 3,100
	$381,151	$210,403	$591,554

Reconciliation of liabilities for the year ended 31 December 2018:

As at 1 Jan.2018 Cash flows As at 31 Dec.2018	Short-term borrowings
	$158,996 859,537
	$1,018,533

(7) Fair value of financial instruments
(1) The methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used by the Company to measure or disclose the fair values of financial assets and financial liabilities:

A. The carrying amount of cash and cash equivalents, accounts receivables, accounts payable and other current liabilities approximate their fair value due to their short maturities.
B. For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (including listed equity securities and bonds) at the reporting date.

C. Fair value of equity instruments without market quotations (including unquoted public company and private company equity securities) are estimated using the market method valuation techniques based on parameters such as recent fund raising activities, valuation of similar companies, individual company’s development, market conditions and other economic indicators.
D. Fair value of debt instruments without market quotations, bank loans, bonds payable and other non-current liabilities are determined based on the counterparty prices or valuation method. The valuation method uses DCF method as a basis, and the assumptions such as the interest rate and discount rate are primarily based on relevant information of similar instrument (such as yield curves published by the GreTai Securities Market, average prices for Fixed Rate Commercial Paper published by Reuters and credit risk, etc.)
(2) Fair value of financial instruments measured at amortized cost

The book value of the Company’s financial assets and financial liabilities measured at amortized cost is very close to the fair value.

(3) Fair value measurement hierarchy for financial instruments

Please refer to Note 12. (9) for fair value measurement hierarchy for financial instruments of the Company.

(8) Derivative financial instruments

None.

(9) Fair value measurement hierarchy
(1) Fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly or indirectly

Level 3 – Unobservable inputs for the asset or liability

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization at the end of each reporting period.

(2) Fair value measurement hierarchy of the Company’s assets and liabilities

The Company does not have assets that are measured at fair value on a non-recurring basis. Fair value measurement hierarchy of the Company’s assets and liabilities measured at fair value on a recurring basis is as follows:

As of 31 December 2019 Financial assets: Financial assets measured at fair value through other comprehensive income Equity instrument measured at fair value through other comprehensive income As of 31 December 2018 Financial assets: Financial assets measured at fair value through other comprehensive income Equity instrument measured at fair value through other comprehensive income	Level 1	Level 2	Level 3	Total
	$302,826 Level 1	$ - Level 2	$264,161 Level 3	$566,987 Total
	$248,111	$ -	$284,142	$532,253

Transfers between Level 1 and Level 2 during the period

During the year period ended 31 December 2019 and 2018, there were no transfers between Level 1 and Level 2 fair value measurements.

Reconciliation for fair value measurements in Level 3 of the fair value hierarchy for movements during the period is as follows:

movements during the period is as follows:
Beginning balances as at 1 January 2019 Total gains and losses recognized for the year ended	Assets
	At fair value through other comprehensive income
	Stocks
	$284,142

31 December 2019: Amount recognized in OCI (presented in “Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income) Return of paid-in capital for capital reduction Ending balances as at 31 December 2019 Beginning balances as at 1 January 2018 Total gains and losses recognized for the year ended 31 December 2018: Amount recognized in OCI (presented in “Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income) Disposal/settlements for the year ended 31 December 2018 Return of paid-in capital for capital reduction Reclassification to investment using equity method Ending balances as at 31 December 2018	(16,453) (3,528)
	$264,161
	Assets
	At fair value through other comprehensive income
	Stocks
	$461,163 8,629 (7,774) (1,960) (175,916)
	$284,142

Information on significant unobservable inputs to valuation

Description of significant unobservable inputs to valuation of recurring fair value measurements categorized within Level 3 of the fair value hierarchy is as follows:

As at 31 December 2019

Relationship Valuation Significant Quantitative between inputs Sensitivity of the input techniques unobservable inputs information and fair value to fair value Financial assets at fair value through other comprehensive income Stocks and others Market approach discount for lack of 10%~30% The higher the 10% increase (decrease) marketability discount for lack in the discount for lack of marketability, of marketability would the lower the fair result in increase

value of the (decrease) in the stocks Company’s equity by NT$26,416 thousand

As at 31 December 2018

Valuation process used for fair value measurements categorized within Level 3 of the fair value hierarchy

The Company’s financial Department is responsible for validating the fair value measurements and ensuring that the results of the valuation are in line with market conditions, based on independent and reliable inputs which are consistent with other information, and represent exercisable prices. The department analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Company’s accounting policies at each reporting date.

(3) Fair value measurement hierarchy of the Company’s assets and liabilities not measured at fair value but for which the fair value is disclosed

As of 31 December 2019

Level 1 Level 2 Level 3 Total Financial assets not measured at fair value but for which the fair value is disclosed:

Investment properties (Notes 6, 8) Investments accounted for using the equity method (please refer to Notes 6, 6) As of 31 December 2018 Financial assets not measured at fair value but for which the fair value is disclosed: Investment properties (Notes 6, 8) Investments accounted for using the equity method (please refer to Notes 6, 6)	$ - 1,874,212 Level 1 $ - 1,873,875	$ - - Level 2 $ - -	$627,522 - Level 3 $627,522 -	$627,522 1,874,212 Total
				$627,522 1,873,875

(10) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below:

Unit: Thousands

Financial assets Monetary items: USD EUR JPY Financial liabilities Monetary item: USD EUR JPY	As of 31 December 2019 Foreign currencies Foreign exchange rate NTD $6,509 30.0500 $195,597 - 33.5470 - 2 0.2752 - $12,604 30.1500 $379,966 1,279 33.9070 43,377 - 0.2790 -	As of 31 December 2019 Foreign currencies Foreign exchange rate NTD $6,509 30.0500 $195,597 - 33.5470 - 2 0.2752 - $12,604 30.1500 $379,966 1,279 33.9070 43,377 - 0.2790 -	As of 31 December 2018	As of 31 December 2018	As of 31 December 2018
	Foreign currencies $6,509 - 2 $12,604 1,279 -	Foreign exchange rate 30.0500 33.5470 0.2752 30.1500 33.9070 0.2790	Foreign currencies $10,488 - 2 $24,261 - -	Foreign exchange rate 30.6800 35.0540 0.2765 30.7800 35.4140 0.2803	NTD
					$321,763 - - $746,697 - -

The Company has a number of different functional currencies; therefore, we are unable to

disclose the exchange loss and gain of monetary financial assets and financial liabilities under each foreign currency that has significant impact. The Company had NT$13,107 thousand and NT$18,760 thousand foreign exchange gains for the years ended 31

December 2019 and 2018, respectively.

The above information is disclosed based on the carrying amount of foreign currency (after conversion to functional currency).

(11) Capital management

The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize the shareholder value. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

13. Other disclosure

(1) Information at significant transactions
a. Financing provided to others for the year ended 31 December 2019: None.
b. Endorsement/Guarantee provided to others for the year ended December 31, 2019:

None.

c. Securities held as of 31 December 2019:

Name of company	Type of securities	Name of securities	Relationship	Financial statement account	December 31,2019	December 31,2019	December 31,2019	December 31,2019	December 31,2019
					Shares	Book value	Percentage of ownership (%)	Market value/Net assets value	Note
FENG HSIN STEEL CO.,LTD.	Stock	Chien Shing Harbour Service Co., Ltd. Fung-So Investment Co. Ltd Taiwan Fertilizer Co., LTD. Gwo Uei Metals Industrial Co., Ltd. Gwo Huei Iron & Steel Co., Ltd. Ascentek Venture Capital	- - - - - -	Financial assets at fair value through other comprehensive income, noncurrent Financial assets at fair value through other comprehensive income, noncurrent Financial assets at fair value through other comprehensive income, noncurrent Financial assets at fair value through other comprehensive income, noncurrent Financial assets at fair value through other comprehensive income, noncurrent Financial assets at fair value through	8,203,800 3,640,000 1,390,000 3,800,000 3,800,000 1,411,200	233,808 159,745 68,875 50,035 36,121 17,265	10.11% 18.20% - 19.00% 19.00% 5.35%	233,808 159,745 68,875 50,035 36,121 17,265

Name of securities	Relationship	Financial statement account		December 31,2019	December 31,2019
			Shares	Book value	Percentage of ownership (%)	Market value/Net assets value	Note
Corporation Taichung International Entertainment Corporation Pacgen Biopharmaceuticals China Trade And Development Corporation	- - -	other comprehensive income, noncurrent Financial assets at fair value through other comprehensive income, noncurrent Financial assets at fair value through other comprehensive income, noncurrent Financial assets at fair value through other comprehensive income, noncurrent Total	1 249,346 1,925	970 143 25	0.03% - -	970 143 25
				$566,987

d. Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the paid-in capital for the year ended 31 December 2019: None.
e. Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the paid-in capital for the year ended 31 December 2019: None.
f. Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock for the year ended 31 December 2019: None.
g. Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of the capital stock for the year ended 31 December 2019:
None.
h. Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of capital stock as of year ended 31 December 2019: None.
i. Financial instruments and derivative transactions: None.
j. Others: The business relationship, significant transactions and amounts between parent company and subsidiaries: None.

(2) Information on investees

Names, locations, main businesses and products, original investment amount, investment as of 31 December 2019, net income (loss) of investee company and investment income (loss) recognized as of 31 December 2019 (excluding investees in mainland China):

Investment company	Investee company	Address	Main businesses and products	Initial Investment	Initial Investment	Investment as of December 31,2019	Investment as of December 31,2019	Investment as of December 31,2019	Net income (loss) of investee company (Note)	Investment income (loss) recognized	Note
				Ending balance	Beginning balance	Number of Shares (thousand)	Percentage of ownership (%)	Book value
FENG HSIN STEEL CO.,LTD.	GREAT FORTUNE HOLDING LIMITED	Offshore Chamber, P.O. Box217, Apia, Samoa	General investment business	$971,367	$971,367	31,406,834	100.00%	$516,552	$(40)	$(40)	Subsidiary company of the Company
FENG HSIN STEEL CO.,LTD.	TAIWAN STEEL UNION CO., LTD.	No. 36, Xiangong N. 1st Rd., Shengang Township, Changhua County 509, Taiwan (R.O.C.)	General business and hazardous industrial waste treatment, the manufacture and sale of zinc oxide and non-metallic mineralproducts.	$147,761	$104,182	22,526,587	20.24%	$696,101	$398,825	$79,764	Associated company of the Company
FENG HSIN STEEL CO.,LTD.	FONG YU RESOURCES CO., LTD.	No.998, Jiahou Rd., Sec. 1, Houli Dist., Taichung City 421, Taiwan (R.O.C.)	General business and hazardous industrial waste treatment	$516,250	$371,700	51,625,000	29.71%	$514,794	$(2,513)	$(746)	Associated company of the Company
FENG HSIN STEEL CO.,LTD.	FENG YING DEVELOPMENT ENTERPRISE CO., LTD.	No.998, Jiahou Rd., Sec. 1, Houli Dist., Taichung City 421, Taiwan (R.O.C.)	Real Estate	$ -	$219,803	-	-%	$ -	$872,787	$149,054	Associated company of the Company
			Investment and
			general
			investment

FENG HSIN STEEL CO.,LTD.	Wen-Shan Enterprise Co., Ltd.	No.16, Wuncyuan Ln., Sec. 1,	General business	$175,916	$175,916	18,000,000	18.00%	$156,417	$(104,736)	$(18,852)	Associated company of the
			and the operation
			of hotel industry

Investment company	Investee company	Address	Main businesses and products	Initial Investment	Initial Investment	Investment	as of December 31,2019	as of December 31,2019	Net income (loss) of investee company (Note)	Investment income (loss) recognized	Note
				Ending balance	Beginning balance	Number of Shares (thousand)	Percentage of ownership (%)	Book value
		Dongguan Rd., Heping Dist., Taichung City 42444, Taiwan (R.O.C.)									Company

Note: The Company has recognized investment income from subsidiaries, and the investment income was eliminated in the Standalone report.

(3) Information on investments in mainland China

a. Information on investments in mainland China from the subsidiaries through GREAT FORTUNE HOLDING LIMITED as of 31 December 2019:

Investee company	Investee company	Main Businesses and Products	Total Amount of Paid-in Capital	Method of Investment	Accumulated Outflow of Investment from Taiwan as of 1 January2019	Accumulated Outflow of Investment from Taiwan as of 1 January2019	Investmen	t Flows	Accumulated Outflow of Investment from Taiwan as of 31 December 2019	Net income (loss) of investee company	Net income (loss) of investee company	Percentage of Ownership	Investment income (loss) recognized	Carrying Value as of 31 December 2019 (Note 1)	Accumulated Inward Remittance of Earnings as of 31 December 2019
							Outflow	Inflow
Shihlien Chemical Industrial Jiangsu Co.		Sodium carbonate, which is the ingredient of glass production	USD 800,000,000	Investment in Mainland China companies through a company invested and established in a third region	$821,952 (USD27,352,800)		-	-	$821,952 (USD27,352,800)	Note	1	3.15%	$ -	$488,816	$ -
Shihlien Brine Huaian Co.		Brine, which is the ingredient ofsodium carbonate	USD 32,000,000	Investment in Mainland China companies through a company invested and established in a third region	$44,678 (USD1,486,800)		-	-	$44,678 (USD1,486,800)	Note	1	3.94%	$ -	$26,595	$ -

	Accumulated Investment in Mainland China as of 31 December 2019					Investment Amounts Authorized by Investment Commission, MOEA						Upper	Limit on	Investment
											The lender’s net accounts value×60%
	$866,630 (USD 28,839,600)					$866,630 (USD 28,839,600)					$10,972,208 (Note 2)

Note 1: The Company's subsidiary's investment in Mainland China was made indirectly through financial assets at fair value through other comprehensive income investee established in the third region.

Note 2: Pursuant to the Investment Commission, Ministry of Economic Affairs, R.O.C., the Company's investment in Mainland China is limited to 60% of net worth or Standalone net worth.

Note 3: Initial investment amounts denominated in foreign currencies are translated into New Taiwan Dollars using the spot rates at the financial statement reporting date.

b. Directly or indirectly significant transactions through third regions with the investees in Mainland China, including price, payment terms, unrealized gain or loss, and other events with significant effects on the operating results and financial condition: None.

14. Segment information

Please refer to the consolidated financial statements of FENG HSIN STEEL CO., LTD. and subsidiaries for operating segment information.

FENG HSIN STEEL CO., LTD. THE CONTENTS OF STATEMENTS OF MAJOR ACCOUNTING ITEMS DECEMBER 31, 2019

ITEM	STATEMENT INDEX
STATEMENT OF CASH AND CASH EQUIVALENTS	1
STATEMENT OF ACCOUNTS RECEIVABLE	2
STATEMENT OF INVENTORIES	3
STATEMENT OF PREPAYMENTS	4
STATEMENT OF CHANGES IN FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - NONCURRENT	5
STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD	6
STATEMENT OF CHANGES IN PROPERTY, PLANT AND EQUIPMENT	Note6(7)
STATEMENT OF CHANGES IN ACCUMULATED DEPRECIATION OF PROPERTY,PLANT AND EQUIPMENT	Note6(7)
STATEMENT OF RIGHT OF USE AESST	7
STATEMENT OF ACCUMULATED DEPRECIATION OF RIGHT- OF- USE AESST	7
STATEMENT OF CHANGES IN INVESTMENT PROPERTIES	Note6(8)
STATEMENT OF OTHER NON-CURRENT ASSETS	Note6(9)
STATEMENT OF SHORT-TERM LOANS	8
STATEMENT OF ACCOUNTS PAYABLE	9
STATEMENT OF LEASE LIABILITIES	10
STATEMENT OF OPERATING REVENUES	11
STATEMENT OF OPERATING COSTS	12
STATEMENT OF MANUFACTURING EXPENSES	13
STATEMENT OF OPERATING EXPENSES	14
STATEMENT OF OTHER GAINS AND LOSSES	Note6(18)

FENG HSIN STEEL CO., LTD.

1. STATEMENT OF CASH AND CASH EQUIVALENTS

DECEMBER 31, 2019

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

Item	Amount	Note
Cash on hand Demand deposits NTD Foreign currency deposits Checking accounts Cash equivalents Total	$963 1,123,522 41,276 90 399,960 $1,565,811	USD1,374 thousand; exchange rate:30.0500 JPY2 thousand; exchange rate :0.2752 RP

FENG HSIN STEEL CO., LTD.

2. STATEMENT OF ACCOUNTS RECEIVABLE

DECEMBER 31, 2019

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

Customer Name	Amount	Note
Customer A Customer B Customer C Others Total Less: loss allowance Total(net)	$91,348 89,678 79,570 1,273,793	1. The amount of individual customer included in others does not exceed 5% of the account balance. 2. Accounts receivable are non-related parties.
	1,534,389 (2,118)
	$1,532,271

FENG HSIN STEEL CO., LTD.

3. STATEMENT OF INVENTORIES

DECEMBER 31, 2019

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

Item	Cost	Net Realizable Value	Note
Raw materials Supplies & parts Work in progress Finished goods Total Less: loss allowance Total(net)	$1,230,794 744,366 1,236,781 1,095,240 - $4,307,181	$1,230,794 744,366 1,236,781 1,325,494 $4,537,435	Allowance for loss on inventory value decline of supplies is recognized according to the extent of idleness and valuation at net realizable value. Refer to Note 4(9)for details.

FENG HSIN STEEL CO., LTD.

4. STATEMENT OF PREPAYMENTS

DECEMBER 31, 2019

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

Item	Description	Amount	Amount	Note
		Subtotal	Total
Factory supplies Less: loss allowance Prepayments of purchases Other prepayments Total	Supplies for repairmen Prepayment for oils, raw material and import expense Prepayment of insurance, rental expense and others	$604,848 (6,543)	$598,305 69,359 3,560 $671,224

FENG HSIN STEEL CO., LTD.

5. STATEMENT OF CHANGES IN FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME –

NONCURRENT

FOR THE YEAR ENDED DECEMBER 31, 2019

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

Name	As of January 1, 2019	As of January 1, 2019	Additions	Additions	Decrease	Decrease	Adjustments	As of December 31, 2019	As of December 31, 2019	Accumulated Impairment	Collateral
	Shares	Fair Value	Shares	Amount	Shares	Amount		Shares	Fair Value
Chien Shing Harbour Service Co., Ltd. Fung-So Investment Co. Ltd Taiwan Fertilizer Co., LTD. Gwo Uei Metals Industrial Co., Ltd. Gwo Huei Iron & Steel Co., Ltd. Ascentek Venture Capital Corporation Taichung International Entertainment Corporation Pacgen Biopharmaceuticals China Trade And Development Corporation Total	8,203,800 3,640,000 1,390,000 3,800,000 3,800,000 1,764,000 1 249,346 1,925	$187,867 175,954 60,048 50,778 36,676 19,739 970 196 25 $532,253	- - - - - - - - -	$- - - - - - - - - $-	- - - - - (352,800) - - -	$- - - - - (3,528) - - -	$45,941 (16,209) 8,827 (743) (555) 1,054 - (53) - $38,262	8,203,800 3,640,000 1,390,000 3,800,000 3,800,000 1,411,200 1 249,346 1,925	233,808 159,745 68,875 50,035 36,121 17,265 970 143 25 $566,987	NA NA NA NA NA NA NA NA NA	None None None None None None None None None
						$(3,528)

FENG HSIN STEEL CO., LTD.

6. STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

FOR THE YEAR ENDED DECEMBER 31, 2019

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

Name	As of January 1, 2018	As of January 1, 2018	Additions	Additions	Decrease	Decrease	Gain/Loss	As of December 31, 2018	As of December 31, 2018	As of December 31, 2018	Market Value or Net Assets Value	Market Value or Net Assets Value	Cost	Collateral
	Shares	Amount	Shares	Amount	Shares	Amount		Shares	% of Ownership	Amount	Unit Price	Total Amount
Investment in subsidiaries: GREAT FORTUNE HOLDING LIMITED Investment in associates: Taiwan Steel Union Co., Ltd. Fong Yu Resources Co., Ltd Feng Ying Development Enterprise Co., Ltd. Wen-Shan Enterprise Co., Ltd.	31,406,834 22,045,587 37,170,000 426,801 18,000,000	$516,592 711,740 371,028 240,799 175,269	- 481,000 14,455,000 - -	$ - 15,232 Note 1 144,512 Note 4 -	- - - (426,801)	$- (110,808) Note 2 - (389,853) Note 5 -	$(40) 79,937 Note 3 (746) 149,054 (18,852)	31,406,834 22,526,587 51,625,000 - 18,000,000	100.00% 20.24% 29.71% - 18.00%	$516,552 696,101 514,794 - 156,417		$516,592 696,101 514,794 - 156,417	$971,367 147,761 516,250 - 175,916	None None None None None
Total		$2,015,428		$159,744		$(500,661)	$209,353			$1,883,864		$1,883,864	$1,811,294

Note 1：The Company increased its investment in Taiwan Steel Union Co., Ltd. in the amount of NT$43,579 thousand, which increased its shareholding ratio from 19.81% to 20.824%. Thus, the Company and recognized capital

surplus in the amount of NT$(28,347) thousand.

Note 2：The Company received cash dividend1 NT$110,808 thousand from Taiwan Steel Union Co., Ltd.

Note 3：Share of profit or loss of associates and joint ventures:79,764 thousand and Remeasurements of defined benefit pension plans gain:173 thousand..

Note4：The Company participated in issuance of common stock for cash of Fong Yu Resources Co., Ltd., increasing its investment in Fong Yu Resources Co., Ltd in the amount of NT$144,550 thousand. Thus, the Company

recognized a decrease in capital surplus in the amount of NT$38 thousand.

Note 5：The Company received cash dividend1 NT$385,585 thousand from Feng Ying Development Enterprise Co., Ltd. The return of paid-in capital for capital reduction amounted to NT$4,268 thousand as of 21 November 2019.

FENG HSIN STEEL CO., LTD.

7. STATEMENT OF RIGHT OF USE AESST AND ACCUMULATED DEPRECIATION OF RIGHT- OF- USE AESST FOR THE YEAR ENDED DECEMBER 31, 2019

Cost:： As of 1 January 2019 Additions As of 31 December 2019 Depreciation and impairment： As of 1 January 2019 Depreciation As of 31 December 2019 Net carrying amount： As of 31 December 2019	Land $214,965 - $214,965 $ - 7,311 $7,311 $207,654	Machineryand equipment		Total
		$6,405 -		$221,370 -
		$6,405		$221,370
		$ - 1,875		$ - 9,186
		$1,875		$9,186
		$4,530		$212,184

FENG HSIN STEEL CO., LTD.

8. STATEMENT OF SHORT-TERM LOANS

DECEMBER 31, 2019

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

Type	Description	SHORT-T ERM LOANS	SHORT-TERM LOANS (Raw materials in transit)	Balance, End of Year	Contract Period	Range of Interest Rates (%)	Loan Commitments(T housands)	Collateral	Note
Letters of credit Letters of credit Letters of credit Letters of credit Letters of credit Letters of credit Letters of credit Letters of credit Letters of credit Letters of credit Letters of credit Letters of credit Letters of credit	Bank of Taiwan Fengyuan Branch Land Bank Fengyuan Branch Taiwan Cooperative Bank Fengyuan Branch Taiwan Cooperative Bank Fongjhong Branch First Bank Fengyuan Branch Hua Nan Bank Fengyuan Branch Chang Hwa Bank Fengyuan Branch Shanghai Commercial & Savings Bank Taichung Branch Taipei Fubon Bank Fengyuan Branch Cathay Bank Mega Bank Fengyuan Branch Mizuho Bank Taichung Branch Bangkok Bank TaichungBranch	$24,858 29,574 38,183 4,454 92,008 883 25,280 1,255 12,316 12,400 122 5,115 13,254	$26,088 13,178 11,001 21,736 812 - - - - 6,025 - - -	$50,946 42,752 49,184 26,190 92,820 883 25,280 1,255 12,316 18,425 122 5,115 13,254	Within 180days Within 90days Within 30days Within 30days Within 180days Within 60days Within 60days Within 90days Within 30days Within 60days Within 60days Within 150days Within 180days	0.42%~2.57% 2.57%~2.60% 2.89% 2.90% 2.52%~2.56% 2.69%~2.73% 0.79% 2.79% 2.94%~3.09% 2.65%~2.76% 1.26% 0.86% 2.68%	NT$400,000 NT$800,000 NT$330,000 NT$500,000 NT$800,000 NT$850,000 NT$1,500,000 US$10,000 US$40,000 US$9,000 US$40,000 US$40,000 US$12,000	Cashier's Order Cashier's Order Cashier's Order Cashier's Order Cashier's Order Cashier's Order Cashier's Order Cashier's Order Cashier's Order Cashier's Order Cashier's Order Cashier's Order Cashier's Order

Type	Description	SHORT-T ERM LOANS	SHORT-TERM LOANS (Raw materials in transit)	Balance, End of Year	Contract Period	Range of Interest Rates (%)	Loan Commitments	Collateral	Note
Letters of credit Letters of credit Letters of credit	Taichung Bank Bank SinoPac Fongyuan Branch CTBC Bank Taichung Branch Subtotal Foreign exchange losses Total(net)	520 555 17,760	- 23,661 825	520 24,216 18,585 381,863 (712) $381,151	Within 180days Within 30days Within 180days	2.47% 2.48% 2.53%~3.10%	US$10,000 NT$200,000 NT$700,000	Cashier's Order Cashier's Order Cashier's Order

FENG HSIN STEEL CO., LTD.

9. STATEMENT OF ACCOUNTS PAYABLE

DECEMBER 31, 2019

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

Vendor Name	Description	Amount	Note
Non-related Parties: Vendor A Others Related Parties: Taiwan Steel Union Co., Ltd. Taiwan Steel Resources Co., Ltd. Total	Payment for Raw material electric arc furnace dust expense the reduction slag expense	$78,287 1,091,673	The amount of individual vendor in others does not exceed 5% of the account balance
		1,169,960
		3,669 2,774
		6,443
		$1,176,403

FENG HSIN STEEL CO., LTD.

10. STATEMENT OF LEASE LIABILITIES

DECEMBER 31, 2019

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

Item	Description	Period	Discount rate	Amount
Land Machinery and equipment	Inventory warehouse Supplies & parts equipment	2014.09.01~ 2065.10.20 2017.02.01~ 2022.05.31	1.49% 1.49% Current Non-current	$205,840 4,563
				6,238 204,165
				$210,403

FENG HSIN STEEL CO., LTD.

11. STATEMENT OF OPERATING REVENUES

FOR THE YEAR ENDED DECEMBER 31, 2019

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

Item	Units(Ton)	Amount	Note
Merchant(Domestic) Merchant(Export) SBQ(Domestic) SBQ(Export) Rebar(Domestic) Freight and Insurance Others Subtotal Less：Sales return Sales discounts Net Sales	230,282 135,951 302,749 29,906 798,595 906 1,498,389	$4,845,799 2,413,514 7,153,644 588,623 13,438,630 113,130 9,788 $28,563,128 (21,994) (805,523) $27,735,611

FENG HSIN STEEL CO., LTD.

12. STATEMENT OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2019

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

Item

Amount

A、Direct material：beginning of year
Add：raw material purchased
Transferred form finished goods
Transferred form work in process
Transferred from disposal PPE
Gain on physical count
Less：raw material, end of year
Revenue from selling material
Direct material uesd
B、Supplies & parts：beginning of year
Add：supplies & parts purchased
Less：supplies & parts, end of year
Supplies & parts uesd
C、Direct labor
D、Manufacturing expenses(Statement 11)
Manufacturing cost
Add：work in progress, beginning of year
Adjustment
Less：work in progress, end of year
Transferred to other account
Transferred to direct material
Revenue from sellingwork in progress
Cost of finished goods
Add：finished goods, beginning of year
Processing cost
Gain on physical count
Less：finished goods, end of year
Adjustment
Transferred to direct material
Transferred to other account
Costs of goods sold
Add：revenue from selling material
Revenue from sellingwork in progress
Non-allocated fix expense transferred to cost
Price gap of reduction slag expense
Less：gain on physical count
Revenue from scraps
Total

$2,828,502
14,113,211
310,842
3,937
23,637
187,743
(1,230,794)
(8,481)
16,228,597
811,633
3,658,719
(744,366)
3,725,986
534,159
3,951,168
24,439,910
1,538,598
(14,698)
(1,236,781)
(1,031)
(3,937)
(374)
24,721,687
1,540,741
28,667
(211)
(1,095,240)
(4,962)
(310,842)
(8,383)
24,871,457
8,481
374
111,807
79,869
(187,532)
(14,422)
$24,870,034

FENG HSIN STEEL CO., LTD.

13. STATEMENT OF MANUFACTURING EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan	(In Thousands of New Taiwan	(In Thousands of New Taiwan	Dollars,Unless Stated Otherwise)
Item		Amount	Note
Utilities expense Depreciation expense Repair and maintenance expense Pollution Prevention Others Total		$1,754,083 1,054,123 642,843 295,629 204,490 $3,951,168	The amount of individual account does not exceed 5% of the account balance.

Note：the list is not included the expense operated from oxygen factory.

100

FENG HSIN STEEL CO., LTD.

14. STATEMENT OF OPERATING EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2019

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

Item	Sales and marketing expenses	General and administrative expenses	Research and development expenses	Total
Payroll expense Flight expense Repair expense Depreciation expense Commission expense Export expense Others(note) Total	$53,969 287,513 298 706 33,397 29,444 35,791	$148,293 4 2,492 27,275 - - 112,481	$24,663 - 3,773 6,575 - - 9,879	$226,925 287,517 6,563 34,556 33,397 29,444 158,151
	$441,118	$290,545	$44,890	$776,553

Note: The amount of individual account does not exceed 5% of the account balance.

101

AI assistant

FH — Audit Report / Information 2019

51946_rns_2019-11-07_d734c0e1-d36a-415f-96bd-2e47307a5bf7.pdf

FENG HSIN STEEL CO., LTD.

STANDALONE FINANCIAL STATEMENTS WITH REPORT OF INDEPENDENT ACCOUNTANTS

Independent Auditors’ Report

Opinion

Basis for Opinion

Key Audit Matters

Valuation for inventories

Other Matter – Making Reference to the Audits of Component Auditors

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

Auditor’s Responsibilities for the Audit of the Standalone Financial Statements

Notice to Readers

English Translation of Standalone Financial Statements Originally Issued in Chinese FENG HSIN STEEL CO., LTD.

STANDALONE BALANCE SHEETS

English Translation of Standalone Financial Statements Originally Issued in Chinese

FENG HSIN STEEL CO., LTD.

STANDALONE BALANCE SHEETS (Continued)

31 December 2019 and 2018

English Translation of Standalone Financial Statements Originally Issued in Chinese FENG HSIN STEEL CO., LTD.

STANDALONE STATEMENTS OF COMPREHENSIVE INCOME

English Translation of Standalone Financial Statements Originally Issued in Chinese

FENG HSIN STEEL CO., LTD.

FENG HSIN STEEL CO., LTD.

STANDALONE STATEMENTS OF CASH FLOWS

English Translation of Standalone Financial Statements Originally Issued in Chinese

FENG HSIN STEEL CO., LTD.

STANDALONE STATEMENTS OF CASH FLOWS

FENG HSIN STEEL CO., LTD.

NOTES TO STANDALONE FINANCIAL STATEMENTS

1. History and organization

2. Date and procedures of authorization of financial statements for issue

3. Newly issued or revised standards and interpretations

(1) IFRS 16“Leases”

(a) Definition of a Business - Amendments to IFRS 3

(b) Definition of a Material - Amendments to IAS 1 and 8

(c) Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7

(1) highly probable requirement

(1) estimates of future cash flows

4. Summary of significant accounting policies

(1) Statement of compliance

(2) Basis of preparation

(4)Translation of Foreign Currency Financial Statements

(6) Cash and cash equivalents

(1) Financial instruments: Recognition and Measurement

Financial assets measured at amortized cost

Financial asset measured at fair value through other comprehensive income

(2) Impairment of financial assets

Classification between liabilities or equity

Equity instruments

Financial liabilities

Financial liabilities at amortized cost

Derecognition of financial liabilities

(5) Offsetting of financial instruments

(8) Fair value measurement

(10) Investments accounted for using the equity method

(11) Property, plant and equipment

(12) Investment property

The accounting policy from 1 January 2019 as follow:

The accounting policy before 1 January 2019 as follow:

The accounting policy from 1 January 2019 as follow:

Company as a lessee

Company as a lessor

The accounting policy before 1 January 2019 as follow:

Company as a lessee

liability. Finance charges are recognized in profit or loss.

Company as a lessor

(14) Impairment of non-financial assets

(15) Revenue recognition

Sale of goods

Rendering of services

(16) Borrowing cost

(17) Post-employment benefits

Current income tax

Deferred tax

5. Significant accounting judgements, estimates and assumptions

(1) Judgement

(a) Investment Properties

－ (b) Operating lease commitment Company as the lessor

FH Audit Report / Information 2019