FPC - Audit Report / Information 2018

Stock Code:1301

(English Translation of Parent Company Only Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Parent Company Only Financial Statements

With Independent Auditors’ Report For the Years Ended December 31, 2018 and 2017

Address: No.100, Shuiguan Rd., Renwu Dist., Kaohsiung City 814, Taiwan (R.O.C.) Telephone: (07)371-1411 Telephone: (02)2712-2211

The independent auditors’ report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and parent company only financial statements, the Chinese version shall prevail.

		Contents	Page
1.	Cover Page		1
2.	Table of Contents		2
3.	Independent Auditors’ Report		3
4.	Balance Sheets		4
5.	Statements of Comprehensive Income		5
6.	Statements of Changes in Equity		6
7.	Statements of Cash Flows		7
8.	Notes to the Financial Statements
	(1)	Company history	8
	(2)	Approval date and procedures of the financial statements	8
	(3)	Application of new standards, amendments and interpretations	8`～`15
	(4)	Summary of significant accounting policies	16`～`33
	(5)	Critical accounting judgments and key sources of estimation uncertainly	33`～`34
	(6)	Significant account disclosures	34`～`70
	(7)	Related-party transactions	70`～`75
	(8)	Pledged properties	75
	(9)	Significant commitments and contingencies	76
	(10)	Losses due to major disasters	76
	(11)	Subsequent events	76
	(12)	Other	76
	(13)	Other disclosures
		(a) Information on significant transactions	77`～`82
		(b) Information on investees	83
		(c) Information on investment in mainland China	83
	(14)	Segment information	83
9.	List	of major account titles	84~104

Independent Auditors’ Report

To the Board of Directors of Formosa Plastics Corporation:

Opinion

We have audited the financial statements of Formosa Plastics Corporation (the “Company”) which comprise the statements of financial position as of December 31, 2018 and 2017, and the statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2018 and 2017, and notes to the financial statements, including a summary of significant accounting policies.

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

Basis for Opinion

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

Key Audit Matters

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

1. Revenue recognition

As the control of products transfers at different points in time, it exposes the risk wherein revenue may not be recognized within the proper period. For this reason, revenue recognition is considered to be one of our key audit matters. The accounting policies and the related information for revenue recognition were discussed in Notes 4(q) and 6(o) to the consolidated financial statements.

The principal audit procedures we have performed to address the aforementioned key audit matter included assessing the rationality of accounting treatment for revenue recognition; vouching the original sales documents according to the transactions with the customers during a selected period of time before and after the balance sheet date to evaluate whether the revenue is recorded appropriately.

3-1

Valuation of Inventories

The Group measured the cost and net realizable value of inventory and recognized a loss on the balance sheet date according to IAS 2 (including loss on obsolescence of inventories); however, to determine whether or not the loss of inventories should be recognized depends on the subjective judgment of the management. For this reason, the valuation of inventories is considered to be one of the key audit matters. The accounting policies and the related information for the valuation of inventories were discussed in Notes 4(g), 5 and 6(f) to the consolidated financial statements.

The principal audit procedures we have performed to address the aforementioned key audit matter included assessing the appropriateness of the policy on inventory valuation and slack loss recognition; ensuring whether the process of inventory valuation is in conformity with the accounting policies, confirming the sales price adopted by the management and the changes in the market price of inventory in the period after the balance sheet date; and sampling procedures to assess the reasonableness of the net realizable value of inventory.

Other Matter

We did not audit the financial statements of certain investee companies under equity method. The Company's investments in the aforementioned investee companies constituted 33.42% and 33.77% of the total assets as of December 31, 2018 and 2017, respectively; and the recognized shares of profit of associates accounted for using equity method of these investee companies constituted 40.01% and 53.19% of the income before tax for the years ended December 31, 2018 and 2017, respectively. The financial statements of the aforementioned investee companies were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these investee companies, is based solely on the reports of other auditors.

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

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

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

Those charged with governance (including the audit committee) are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

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

3-2

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

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

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

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

3-3

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

The engagement partners on the audit resulting in this independent auditors’ report are Hui-chih Kou and Chi-Lung Yu.

KPMG

Taipei, Taiwan (Republic of China) March 25, 2019

Notes to Readers

The accompanying parent company only financial statementsfinancial statements are intended only to present the parent company only financial statementsfinancial position, results of operations and cash flows in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuer and not those of any other jurisdictions. The standards, procedures and practices to audit such parent company only financial statementsfinancial statements are those generally accepted and applied in the Republic of China.

The independent auditors’ report and the accompanying parent company only financial statementsfinancial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language independent auditors’ report and parent company only financial statementsfinancial statements, the Chinese version shall prevail.

(English Translation of Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Balance Sheets

December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

Assets 1100 Cash and cash equivalents (Note 6(a)) 1110 Current financial assets at fair value through profit or loss (note 6(b)) 1120 Current financial assets at fair value through other comprehensive income (Note 6(b)) 1125 Available-for-sale financial assets`－`current (Note 6(c)) 1150 Notes receivable (Note 6(d)) 1170 Accounts receivable, net (Notes 6(d)) 1180 Accounts receivable`－`related parties (Note 6(d) and 7) 1200 Other receivables (Notes 6(e)) 1210 Other receivables`－`related parties (Note 6(e) and 7) 130X Inventories (note 6(f)) 1470 Other current assets Total current assets 1510 Non-current financial assets at fair value through other comprehensive income (not 6(b)) 1543 Financial assets carried at cost`－`non-current 1550 Investments accounted for using equity method (Notes 6(g) and 8) 1600 Property, plant and equipment (Notes 6(h), 7 and 8) 1780 Intangible assets 1840 Deferred tax assets (Note 6(n)) 1900 Other non-current assets (Notes 6(h) and 8) Total non-current assets Total assets	December 31, 2018 Amount % $ 18,941,635 4 4,017,249 1 98,426,404 21 - - 79,150 - 6,898,829 2 5,809,131 1 1,376,297 - 18,227,744 4 14,196,795 3 1,943,604 - 169,916,838 36 10,038,913 2 - - 252,285,317 53 38,227,497 8 124,762 - 1,928,942 - 4,862,307 1 307,467,738 64 $ 477,384,576 100	December 31, 2017 Amount % 14,499,334 3 - - - - 111,581,327 25 95,454 - 5,794,785 1 6,295,229 1 1,301,658 - 16,733,665 4 11,970,674 3 1,617,147 - 169,889,273 37 - - 2,462,768 1 242,200,819 53 33,679,540 7 124,762 - 2,016,425 1 5,097,993 1 285,582,307 63 455,471,580 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (Notes 6(i)) 2110 Short-term notes and bills payable (Note 6(j)) 2170 Accounts payable 2180 Accounts payable`－`related parties (Note 7) 2200 Other payables 2220 Other payables`－`related parties (Note 7) 2321 Current portion of bonds payable (Note 6(l)) 2322 Current portion of long-term debts (Notes 6(k) and 8) 2399 Other current liabilities Total current liabilities Non-Current liabilities: 2530 Bonds payable (Note 6(l) and 8) 2540 Long-term debts (Notes 6(k) and 8) 2570 Deferred tax liabilities (Note 6(n)) 2640 Net defined benefit liabilities (Note 6(m)) 2670 Other non-current liabilities (Note 6(g)) Total non-current liabilities Total liabilities Equity (Notes 6(o)): 3110 Common stock 3200 Capital surplus Retained earnings: 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings Total retained earnings 3400 Other components of equity Total equity Total liabilities and equity	December 31, 2018	December 31, 2018		December 31, 2017
			Amount	%		Amount % 8,347,337 2 9,495,509 2 2,873,396 1 8,522,863 2 3,387,704 1 1,107,851 - 5,696,600 1 4,084,327 1 11,266,843 2 54,782,430 12 27,861,638 6 5,813,038 1 14,464,611 3 7,262,543 2 277,154 - 55,678,984 12 110,461,414 24 63,657,408 14 11,649,929 3 52,165,530 12 51,285,206 11 78,699,082 17 182,149,818 40 87,553,011 19 345,010,166 76 455,471,580 100
			$ 14,343,680 11,995,636 2,871,571 7,947,619 4,570,797 1,167,103 4,598,557 2,284,327 10,899,670 60,678,960 32,556,004 4,628,711 16,670,784 7,123,118 158,998 61,137,615 121,816,575 63,657,408 11,713,842 57,103,815 58,778,533 82,499,843 198,382,191 81,814,560 355,568,001 $ 477,384,576	3 3 1 2 1 - 1 - 2 13 7 1 3 2 - 13 26 13 3 12 12 17 41 17 74 100

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017

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

4000 Net sales revenue (Notes 6(q)(r) and 7) 5000 Operating costs (Notes 6(f)(h)(m)(s) and 7) Gross profit 5920 Add: Realized profit (loss) on from sales Gross profit from operations Operating expenses (Notes 6(d)(h)(m)(s) and 7): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Total operating expenses Operating income Non-operating income and expenses (Notes 6(d)(g)(h)(t) and 7): 7010 Other income 7020 Other gains and losses 7050 Finance costs 7070 Share of profit (loss) of associates and joint ventures accounted for using equity method, net Total non-operating income and expenses Income before income tax 7950 Less: income tax expense (Note 6(n)) Profit (loss) 8300 Other comprehensive income: (Note 6(m)(n)(o)) 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Gains (losses) on remeasurements of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8330 Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8360 Other components of other comprehensive income that will not be reclassified to profit or loss 8361 Exchange differences on translation 8362 Unrealized gains (losses) on valuation of available-for-sale financial assets 8368 Gains (losses) on hedging instrument 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income, net Total comprehensive income 9710 Basic earnings per share -before income tax (Note 6(p))	2018	% 100 82 18 - 18 3 2 1 6 12 4 1 - 13 18 30 4 26 - (6) (3) - (9) 1 - - - 1 (8) 18 7.78	2017 Amount % 170,273,933 100 140,753,716 83 29,520,217 17 13,195 - 29,533,412 17 4,750,260 3 4,524,232 3 968,395 - 10,242,887 6 19,290,525 11 6,182,632 4 (2,270,887) (1) (964,044) (1) 32,631,087 19 35,578,788 21 54,869,313 32 5,486,460 3 49,382,853 29 (577,649) - - - (121,817) - 98,200 - (601,266) - (6,363,713) (4) 14,838,705 9 2,508,328 1 1,236,221 1 12,219,541 7 11,618,275 7 61,001,128 36 8.62 7.76
	Amount $ 189,246,407 155,626,259 33,620,148 (16,848) 33,603,300 5,028,586 4,437,166 1,138,174 10,603,926 22,999,374 8,282,421 2,412,543 (968,554) 24,320,374 34,046,784 57,046,158 7,496,618 49,549,540 (285,593) (10,491,380) (6,128,215) 169,178 (16,736,010) 1,770,369 - 392,426 (522,685) 1,640,110 (15,095,900) $ 34,453,640 $ 8.96

See accompanying notes to financial statements.

(English Translation of Parent Company Only Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Statements of Changes in Equity

For the years ended December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

Share capital	Capital surplus	Retained earnings	Retained earnings	Retained earnings	Retained earnings	Retained earnings		Total other equity interest	Total other equity interest	Total other equity interest	Total other equity interest	Total other equity interest	Total other equity interest	Gains (losses) on hedging instruments Total equity
							Exchange differences on translation of foreign financial statements	Unrealized gains on financial assets measured at fair value through other comprehensive income		Unrealized gains (losses) on available- for-sale financial assets		Gains (losses) on effective portion of cash flow hedges
Ordinary shares		Legal reserve	Special reserve		Unappropriated retained earnings
$ 63,657,408 - - - - - - - - 63,657,408 - 63,657,408 - - - - - - - - - $ 63,657,408	11,428,970	48,226,276		46,721,324		67,703,039	2,794,229		-		72,488,184		51,057	- 313,070,487 - 49,382,853 - 11,618,275 - 61,001,128 - - - - - (29,282,408) - 917 - 220,042 - 345,010,166 9,551 12,337,702 9,551 357,347,868 - 49,549,540 (28,314) (15,095,900) (28,314) 34,453,640 - - - - - (36,284,722) - (12,698) - (27,612) - 91,525 (18,763) 355,568,001
	- -	- -		- -					- -		- 18,280,305
	-	-		-					-		18,280,305
	- - - 917 220,042	3,939,254 - - - -		- 4,563,882 - - -					- - - - -		- - - - -
	11,649,929 -	52,165,530 -		51,285,206 -					- 99,924,374
	11,649,929	52,165,530		51,285,206					99,924,374
	- -	- -		- -
	-	-		-
		4,938,285 - - - - -		- 7,493,327 - - - -
		57,103,815		58,778,533

See accompanying notes to financial statements.

(English Translation of and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Statements of Cash Flows

For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities:
Income before income tax
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense
Amortization expense
Expected credit loss / Provision for bad debt expense
Interest expense
Net (loss) gain arising from financial assets at fair value through other comprehensive income
Interest income
Dividend income
Share of profit of associates and joint ventures accounted for using equity method
Gain on disposal of property, plant and equipment
Gain on disposal of investments
Impairment loss on non-financial assets
Realized loss (profit) on from sales
Unrealized foreign exchange loss
Total adjustments to reconcile profit
Changes in operating assets and liabilities:
Changes in operating assets:
Decrease in notes receivable
(Increase) decrease in accounts receivable
Decrease (increase) in accounts receivable due from related parties
(Increase) in other receivable
(Increase) decrease in other receivable due from related parties
(Increase) in inventories
(Increase) in other current assets
Total changes in operating assets
Changes in operating liabilities:
Decrease in accounts payable
Increase (decrease) in accounts payable to related parties
Increase (decrease) in other payable
Increase in other payable to related parties
Increase in other current liabilities
Decrease in net defined benefit liability
Total changes in operating liabilities
Total changes in operating assets and liabilities
Total adjustments
Cash inflow generated from operations
Interest received
Dividends received
Interest paid
Income taxes paid
Net cash flows from operating activities
Cash flows (used in) from investing activities:
Proceeds from disposal of financial assets designated at fair value through profit or loss
Proceeds from disposal of available-for-sale financial assets
Acquisition of investments accounted for using equity method
Proceeds from capital reduction of investments accounted for using equity method
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase (decrease) in other receivables due from related parties
(Increase) decrease in other non-current assets
Net cash flows (used in) from investing activities
Cash flows from (used in) financing activities:
Increase in short-term borrowings
Decrease in short-term borrowings
Increase (decrease) in short-term notes and bills payable
Proceeds from issuing bonds
Repayments of bonds
Proceeds from long-term debt
Repayments of long-term debt
Increase (decrease) in other non-current liabilities
Cash dividends paid
Net cash flows from (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

2018
2017
$ 57,046,158
54,869,313
4,195,963
5,238,826
157,087
197,548
945
(1,678)
968,554
964,044
(215,889)
-
(599,064)
(424,718)
(7,511,680)
(5,606,734)
(24,320,374)
(32,631,087)
(66,465)
(10,925)
-
(1,762,716)
-
2,347,867
16,848
(13,195)
(80,495)
115,764
(27,454,570)
(31,587,004)
16,304
230,880
(1,120,728)
304,747
486,098
(1,013,030)
(59,193)
(260,310)
(877,575)
364,463
(2,291,351)
(638,783)
(326,457)
(1,054)
(4,172,902)
(1,013,087)
(1,825)
(767,294)
(551,543)
729,231
(1,228,996)
(842,978)
59,252
82,955
(390,875)
128,379
(139,425)
(382,226)
(2,253,412)
(1,051,933)
(6,426,314)
(2,065,020)
(33,880,884)
(33,652,024)
23,165,274
21,217,289
583,027
411,427
25,574,092
22,771,652
(976,971)
(1,000,893)
(5,007,157)
(1,512,821)
43,338,265
41,886,654
772,908
-
-
2,560,664
(6,137,514)
(3,421,878)
1,127,075
-
(8,674,120)
(2,239,369)
70,439
18,773
(616,504)
4,466,799
93,963
(264,716)
(13,363,753)
1,120,273
375,117,873
317,537,132
(367,434,810)
(325,322,516)
2,500,000
(504,057)
9,300,000
7,000,000
(5,700,000)
(10,750,000)
-
700,000
(2,988,889)
(3,403,175)
(97,609)
62,667
(36,293,430)
(29,224,705)
(25,596,865)
(43,904,654)
64,654
(68,455)
4,442,301
(966,182)
14,499,334
15,465,516
$
18,941,635
14,499,334

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2018 and 2017

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

(1) Company history

Formosa Plastics Corporation (the “Company”) was incorporated on November 5, 1954, and established its factories in Kaohsiung City. The Company engages in the manufacture and sale of plastic raw materials, chemical fibers, and petrochemical products. The Company has gone through several capital increases and established many divisions, and become a well-diversified enterprise.

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

The accompanying financial statements of the Company for the years ended December 31, 2018 and 2017 were approved and authorized for issue by the Board of Directors on March 25, 2019.

(3) Application of new standards, amendments and interpretations:

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018.

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendment to IFRS 2 “Clarifications of Classification and Measurement of	January 1, 2018
Share-based Payment Transactions”
Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with IFRS 4	January 1, 2018
Insurance Contracts”
IFRS 9 “Financial Instruments”	January 1, 2018
IFRS 15 “Revenue from Contracts with Customers”	January 1, 2018
Amendment to IAS 7 “Statement of Cash Flows -Disclosure Initiative”	January 1, 2017
Amendment to IAS 12 “Income Taxes- Recognition of Deferred Tax Assets for	January 1, 2017
Unrealized Losses”
Amendments to IAS 40 “Transfers of Investment Property”	January 1, 2018
Annual Improvements to IFRS Standards 2014–2016 Cycle:
Amendments to IFRS 12	January 1, 2017
Amendments to IFRS 1 and Amendments to IAS 28	January 1, 2018
IFRIC 22 “Foreign Currency Transactions and Advance Consideration”	January 1, 2018

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

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

(i) IFRS 15 “Revenue from Contracts with Customers”

IFRS 15 establishes a comprehensive framework with five steps for determining whether, how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 “Revenue” and IAS 11 “Construction Contracts”.

The Company continues using IAS 18, IAS 11 and their relating explanations without restating its financial statements when applying IAS 15, and adjusts its retained earnings on January 1, 2017 to show the cumulative impact when it first adopted IAS 15.

The following are the nature and impacts on changing of accounting policies:

1) Sales of goods

For the sale of all products, revenue is currently recognized when the goods are delivered to the customers’ premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods. The company assumes the transfer of material risks and rewards and the transfer of controls occur at approximately the same time, so there will be no significant impact on the Company's financial statements.

2) Construction contracts

Contract revenue currently includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. When a claim or variation is recognized, the measure of contract progress or contract price is revised and the cumulative contract position is reassessed at each reporting date. Under IFRS 15, claims and variations will be included in the contract accounting when they are approved. Based on the Company's assessment, there will be no significant impact on its financial statements.

(ii) IFRS 9 “Financial Instruments”

IFRS 9 replaces IAS 39 “ Financial Instruments: Recognition and Measurement” which contains classification and measurement of financial instruments, impairment and hedge accounting.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

As a result of the adoption of IFRS 9, the Company adopted the consequential amendments to IAS 1 “Presentation of Financial Statements” which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Company’ s approach was to include the impairment of trade receivables in administrative expenses. Additionally, the Company adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosures that are applied to disclosures about 2018 but generally have not been applied to comparative information.

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

1) Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Company classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note 4(f).

The adoption of IFRS 9 did not have any significant impact on its accounting policies on financial liabilities.

2) Impairment of financial assets

IFRS 9 replaces the ‘ incurred loss’ model in IAS 39 with the ‘ expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than they are under IAS 39 – please see note 4(f).

3) Transition

The adoption of IFRS 9 have been applied retrospectively, except as described below,

‧Comparative periods have been restated only for retrospective application of the cost of hedging approach for forward points. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as on January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.
‧The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

－ The determination of the business model within which a financial asset is held.
－ The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.
－ The designation of certain investments in equity instruments not held for trading as at FVOCI.
4) Classification of financial assets on the date of initial application of IFRS 9

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

Financial Assets Cash and equivalents Debt securities Equity instruments Net receivables Other financial assets (Guarantee deposits paid)	IAS39		IFRS9
	Measurement categories Loans and receivables Available-for-sale (note 1) Available-for-sale (note 2) Loans and receivables (note 3) Loans and receivables	Carrying Amount	Measurement categories Carrying Amount Amortized cost 14,499,334 Designated as at FVTPL 4,574,268 FVOCI 118,956,697 Amortized cost 30,220,791 Amortized cost 142,369
		14,499,334 4,574,268 109,469,827 30,220,791 142,369

Note1: Under IAS 39, these fund instruments were measured as at FVOCI because they were managed on a fair value basis and their performance was monitored on this basis. These assets have been classified as mandatorily measured at FVTPL under IFRS 9; therefore, there was no change in the book value of those assets recognized, resulting in the increase of $343,982 thousand in other equity interests and decrease of $343,982 thousand in retained earnings, respectively, on January 1, 2018.
Note2: These equity securities (including financial assets measured at cost) represent investments that the Company intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Company has designated these investments at the date of initial application as measured at FVOCI, resulting in the increase of $9,486,870 thousand in those assets recognized, as well as $7,436,143 thousand and $2,050,727 thousand in other equity interests and retained earnings, respectively, on January 1, 2018.
Note3: Notes receivables, accounts receivables and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortized cost. The adoption of IFRS 9 did not have any significant impact on its accounting policies of the above assets.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on 1 January, 2018.

Fair value through profit or loss Additions – equity instruments: From available for sale Total Fair value through other comprehensive income Beginning balance of available for sale (including measured at cost) (IAS 39) Available for sale to FVOCI Subtraction – equity instruments: To FVTPL – required reclassification based on classification criteria Total	2017.12.31 IAS 39 Carrying Amount $ - $ - $ 114,044,095 - - $ 114,044,095	Reclassifications 4,574,268 4,574,268 - - (4,574,268) (4,574,268)	Remeasurements - - - 9,486,870 - 9,486,870	2018.1.1 IFRS 9 Carrying Amount 4,574,268 118,956,697	2018.1.1 2018.1.1 Retained earnings Other equity (343,982) 343,982 (343,982) 343,982 - - 2,050,727 7,436,143 - - 2,050,727 7,436,143

The changes due to the adoption of the above IFRSs would not have any material impact on the Company's basic earnings per share.

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019 in accordance with Ruling No. 1070324857 issued by the FSC on July 17, 2018:

1070324857 issued by the FSC on July 17, 2018:
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
IFRS 16 “Leases”	January 1, 2019
IFRIC 23 “Uncertainty over Income Tax Treatments”	January 1, 2019
Amendments to IFRS 9 “Prepayment features with negative compensation”	January 1, 2019
Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”	January 1, 2019
Amendments to IAS 28 “Long-term interests in associates and joint ventures”	January 1, 2019
Annual Improvements to IFRS Standards 2015–2017 Cycle	January 1, 2019

(i) IFRS 16“Leases”

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

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of lowvalue items. The lessor accounting remains similar to the current standard – i.e. the lessors will continue to classify leases as finance or operating leases.

So far, the most significant impact identified is that the Company will have to recognize the new assets and liabilities for its operating leases of offices, warehouse and factory facilities. No significant impact is expected for the Company’s finance leases. Besides, The Company does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant.

1) Determining whether an arrangement contains a lease

The Company has an arrangement that was not in the legal form of a lease, for which it concluded that the arrangement contains a lease of equipment under IFRIC 4. On transition to IFRS 16, the Company can choose whether to:

‧apply the IFRS 16 definition of a lease to all its contracts; or

‧apply a practical expedient and not reassess whether a contract is, or contains, a lease.

The Company plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

2) Transition

As a lessee, the Company can either apply the standard using the following:

‧retrospective approach; or

‧modified retrospective approach with optional practical expedients.

The lessee applies the election consistently to all of its leases.

On January 1, 2019, the Company plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Company is assessing the potential impact of using the following practical expedients:

－ apply a single discount rate to a portfolio of leases with similar characteristics.
－ adjust the right-of-use assets, based on the amount reflected in IAS 37 onerous
contract provision, immediately before the date of initial application, as an alternative to an impairment review.
－ exempt the adoption of right-of-use assets and lease liabilities if the term of a lease
ends in 12 months after the first adoption.
－ exclude the initial direct costs from measuring the right-of-use assets at the date of
initial application.
－ use hindsight when determining the lease term if the contract contains options to
extend or terminate the lease.

So far, the most significant impact identified is that the Company will have to recognize the new assets and liabilities for the operating leases of its offices, warehouses, and factory facilities. The Company estimated that its right-of-use assets and lease liabilities to increase by $81,596 thousand and $81,596 thousand respectively, on January 1, 2019. No significant impact is expected on the Company’ s finance leases. Besides, The Company does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant. Also, the Company is not required to make any adjustments for leases where the Company is the intermediate lessor in a sub-lease.

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

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between	Effective date to
an Investor and Its Associate or Joint Venture”	be determined
	by IASB
IFRS 17 “Insurance Contracts”	January 1, 2021
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Those which may be relevant to the Company are set out below:

Issuance / Release
Dates
September 11, 2014
October 22, 2018
October 31, 2018

Standards or
Interpretations
Content of amendment
Amendments to IFRS 10 and
IAS 28 “Sale or Contribution
of Assets Between an Investor
and Its Associate or Joint
Venture”
The amendments address an acknowledged
inconsistency between the requirements in
IFRS 10 and those in IAS 28 (2011) in
dealing with the sale or contribution of assets
between an investor and its associate or joint
venture.
The main consequence of the amendments is
that a full gain or loss is recognized when a
transaction involves a business (whether it is
housed in a subsidiary or not). A partial gain
or loss is recognized when a transaction
involves assets that do not constitute a
business, even if these assets are housed in a
subsidiary.
Amendments to IFRS 3
“Definition of a Business”
The
IASB
has
issued
narrow-scope
amendments to IFRS 3 to improve the
definition of a business. The amendments
will help companies determine whether an
acquisition made is of a business or a group
of assets.
The amended definition emphasizes that the
output of a business is to provide goods and
services to customers, whereas the previous
definition focused on returns in the form of
dividends, lower costs or other economic
benefits to investors and others. In addition
to amending the wording of the definition,
the IASB has provided supplementary
guidance.
Amendments to IAS 1 and IAS
8 “Definition of Material”
The amendments clarify the definition of
material and how it should be applied by
including in the definition guidance that until
now has featured elsewhere in IFRS
Standards. In addition, the explanations
accompanying the definition have been
improved. Finally, the amendments ensure
that the definition of material is consistent
across all IFRS Standards.

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

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(4) Summary of significant accounting policies:

The following significant accounting policies are adopted in the accompanying financial statements. The significant accounting policies have been applied consistently to all the reporting periods presented in these financial statements.

(a) Statement of compliance

These annual financial statements have been prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the Guidelines).

(b) Basis of preparation

Basis of measurement

The financial statements have been prepared on historical cost basis, except for the following material items in the statement of financial position.

(i) Available-for-sale financial assets measured at fair value.
(ii) The net defined benefit liabilities are measured as the fair value of the plan assets, less the present value of the defined benefit obligation.

Functional and presentation currency

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

(c) Foreign currency
(i) Foreign currency transaction

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

Foreign currency denominated non-monetary assets and liabilities measured at fair value are retranslated to the functional currency at the exchange rate on the date when fair value was determined. Foreign currency denominated non-monetary items measured at historical cost is translated using the exchange rate at the date of the transaction. Foreign currency differences arising on translation are recognized in profit or loss.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(ii) Foreign operations

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

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

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

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

An asset is classified as current under any one of the following conditions. All other assets are classified as non-current.

(i) The asset is expected to be realized, or sold or consumed, during the Company’ s normal operating cycle;
(ii) The asset is held primarily for the purpose of trading;
(iii) The asset is expected to be realized within twelve months after the reporting period; or
(iv) The asset is cash and cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the balance sheet date.

A liability is classified as current under any one of the following conditions. All other liabilities are classified as non-current.

(i) The liability is expected to be settled during the Company’s normal operating cycle;
(ii) The liability is held primarily for the purpose of trading;
(iii) The liability is due to be settled within twelve months after the reporting period; or
(iv) It 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 issuing equity instruments do not affect its classification.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(e) Cash and cash equivalents

Cash comprises cash on hand and cash in bank. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes are classified under cash equivalents.

(f) Financial instruments
(i) Financial assets (applicable from January 1, 2018)

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

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

1) Financial assets measured at amortized cost

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

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

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on de-recognition is recognized in profit or loss.

2) Fair value through other comprehensive income (FVOCI )

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

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

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

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

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

Dividend income derived from equity investments is recognized on the date that the Company’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.

3) Fair value through profit or loss (FVTPL)

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

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

4) Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘ principal’ is defined as the fair value of the financial assets on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:

‧ contingent events that would change the amount or timing of cash flows;
‧ terms that may adjust the contractual coupon rate, including variable rate features;
‧ prepayment and extension features; and
‧ terms that limit the Company’s claim to cash flows from specified assets (e.g. nonrecourse features)
5) Impairment of financial assets

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

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

‧ bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

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

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

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

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

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

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

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

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

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

6) De-recognition of financial assets

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

(ii) Financial assets (applicable before January 1, 2018)

Financial assets are categorized into available-for-sale financial assets, loans, and receivables.

1) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated available-for-sale or are not classified in any of the other categories of financial assets. Available-for-sale financial assets are recognized initially at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and dividend income, are recognized in other comprehensive income and presented in other equity interest in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, and is included in other income and expenses in statement of comprehensive income. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade-date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at cost less impairment loss, and are included in financial assets measured at cost.

Dividend income from equity investments is recognized when the Company obtains the right to receive the dividend (usually the ex-dividend date) and is recognized in other income.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

2) Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market, which comprise accounts receivable and other receivables. Such assets are recognized initially at fair value, plus, any directly attributable transaction costs. Subsequent to initial recognition, receivables are measured at amortized cost using the effective interest method, less any impairment losses, except for short-term receivables in which the effect of discounting is immaterial. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Interest income from receivables is recognized in other income.

3) Impairment of financial asset

Except for financial assets at fair value through profit or loss, a financial asset is assessed for impairment at reporting date. A financial asset is impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a ‘loss event’) that occurred subsequent to the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial assets that can be estimated reliably.

Objective evidence that financial assets are impaired includes delinquency or default (such as unpaid or delayed payment of interest or principal) by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an available-for-sale investment in an equity security, a significant or prolonged decline in its fair value below its cost is accounted for as objective evidence of impairment.

All individually significant receivables are assessed for specific impairment. Objective evidence that receivables are impaired includes historical trends of collection and increasing level of overdue receivables which are collected beyond the credit term.

An impairment loss in respect of a financial asset measured at amortized cost is determined based on the excess of its carrying amount over the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

An impairment loss in respect of a financial asset measured at cost is determined based on the excess of its carrying amount over the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss is not reversible in subsequent periods.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

An impairment loss in respect of a financial asset is written off directly against its carrying amount, except for accounts receivable, in which an impairment loss is credited to an allowance account against the receivables. When a receivable is determined to be uncollectible, it is written off from the allowance account. Any subsequent recovery of receivable written off is charged to the allowance account. Changes in the amount of the allowance accounts are recognized into profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the other equity interest in equity to profit or loss.

If, in a subsequent period, the amount of the impairment loss of a financial assets measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost before impairment was recognized at the reversal date.

Impairment losses recognized on available-for-sale equity security are not reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income, and accumulated in other equity interest in equity.

Impairment losses and recoveries on receivables are recognized in profit or loss.

4) Derecognition of financial assets

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

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

If the transferred asset is part of a larger financial asset and the part transferred qualifies for derecognition in its entirety, the previous carrying amount of the larger financial asset is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income are recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair values of those parts.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(iii) Financial liabilities and equity instruments
1) Classification of debt or equity

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

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized based on the proceeds received, net of direct issue costs.

Interest related to the financial liability is recognized in profit or loss under nonoperating income and expenses.

2) Other financial liabilities

Except for those held-for-trading or is designated at fair value through profit or loss, financial liabilities which comprise of short-term and long-term loans, and accounts and other payables, are measured at fair value, plus, any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in finance costs.

3) Derecognition of financial liabilities

A financial liability is derecognized when the contractual obligation thereon has been discharged or cancelled or expires. The difference between the carrying amount of a financial liability derecognized and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

4) Offsetting of financial assets and liabilities

Financial assets and liabilities are presented on a net basis when the Group has legally enforceable rights to offset, and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

(g) Inventories

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

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

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(h) Investment in associates

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

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

The financial statements include the or Company’ s share of the profit or loss and other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Company, from the date when significant influence commences until the date that significant influence ceases.

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

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

(i) Subsidiaries

The Company accounts the investee companies that it possesses control using the equity. Net income, other comprehensive income, and shareholder’ s equity in the financial reports of the Company and the net income, other comprehensive income, and shareholder’s equity that belongs to the Consolidated Company in the consolidated financial reports should be the same.

The Company accounts the changes in equity, under the condition that control is still present, as equity transactions between the proprietors.

(j) Joint venture

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Those parties are called joint ventures. Joint ventures should account the rights from the joint arrangement as an investment, and account it for using equity method according to IAS 28, unless, the entity is exempted from applying the equity method as specified in the standard.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(k) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost eligible for capitalization. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

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, unless the useful life and the depreciation method of a significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item.

Gain or loss arising from the disposal of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and is charged to profit or loss.

(ii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with the expenditure can be assessed reasonably, and will flow to the Company. The carrying amount of those parts that are replaced is derecognized. On-going repairs and maintenance is expensed as incurred.

(iii) Depreciation

Depreciation of property, plant and equipment is provided over their estimated useful lives by using the straight-line method. Each significant item of property, plant and equipment is evaluated individually and depreciated separately if it possesses different useful life. The depreciation charge for each period is recognized in profit or loss.

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

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

1) Buildings and constructions: 3 to 55 years.
2) Machinery and equipment: 3 to 25 years.
3) Other facilities: 3 to 15 years.

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

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(l) Lease

(i) Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and recognized as an expense over the lease term on the same basis as the lease income.

(ii) Lessee

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

Payments made under operating leases (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease.

(m) Intangible assets
(i) Goodwill
- 1) Initial Recognition

When Yung Chia Chemical Industries Corp. was acquired, the excess of original investment cost over the fair value of net assets acquired was recognized as goodwill.

2) Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses.

(n) Impairment of non-derivative financial assets

At each balance sheet date, an assessment is made whether there is any indication that an asset (including inventories, deferred tax assets, and other non-financial assets) may have been impaired. If any such indication exists, the recoverable amount of the asset is estimated. If it is not possible to determine the recoverable amount for the individual asset, then the Company will have to determine the recoverable amount for the asset's cash-generating unit (CGU).

For goodwill, an assessment is made whether there is any such indication exists. The recoverable amount for an individual asset or a cash generating unit is the higher of its fair value, less costs to sell, and its value in use. When assessing the value in use, estimated future cash flows are discounted using the pre-tax discount rate. The discount rate shall reflect the estimated specific risks of the time value of money for such asset or cash generating unit under the current market. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is deemed as an impairment loss. An impairment loss is recognized immediately in profit or loss.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amount of that asset is estimated. An impairment loss recognized in prior periods for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The increase in the carrying amount shall not exceed the carrying amount (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the acquirer’s CGUs, or group of CGUs, that is expected to benefit from the synergies of the combination. If the carrying value of the CGUs exceeds the recoverable amount thereof impairment loss is recognized and allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.

(o) Revenue recognition

(i) Revenue from contracts with customers (applicable from January 1, 2018)

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

1) Sale of goods–plastic raw materials, chemical fibers, and petrochemical products.

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

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

2) Construction contracts

Since the Company entered into separate agreements with different customers on the development of electronic components and software products, wherein the customers have control over the development process of the said items, the Company recognizes its revenue over time on the basis of the construction costs incurred to date as a proportion of the total estimated costs of the contract. The Company recognizes revenue only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. If the Company has recognized a revenue without issuing any bill, then the entitlement to consideration is recognized as a contract asset.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

The contract asset is transferred to receivables when the entitlement to payment becomes unconditional.

If the Company cannot reasonably measure its progress towards complete satisfaction of the performance obligation of a construction contract, the Company shall recognize revenue only to the extent of the costs expected to be recovered.

A provision for onerous contracts is recognized when the Company expects the unavoidable costs of performing the obligations under a construction contract exceed the economic benefits expected to be received under the contract.

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

3) Financing components

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

(ii) Revenue recognition (applicable before January 1, 2018)

1) Sales of goods

Revenue from the sale of goods in the course of ordinary business activities is measured at fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

2) Construction contracts

Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. When the outcome of a construction contract can be estimated reliably, revenue and costs are recognized by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred to date relative to the estimated total contract costs. Variations in contract work, claims and incentive payments are included to the extent the amount can be measured reliably and its receipt is considered probable.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

When the outcome of a construction contract can be estimated reliably, contract revenue is recognized in profit or loss in proportion to the stage of completion of the contract. The stage of completion is assessed with reference to surveys of work performed. Otherwise, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable.

When the outcome of a construction contract cannot be estimated reliably, contract expenses are recognized as incurred unless they create an asset related to future contract activity. An expected loss on a contract is recognized immediately in profit or loss.

3) Rental

Revenue from sub-lease of property, plant and equipment is recognized as rental income on accrual basis.

(p) Contract costs (applicable from January 1, 2018)
(i) Incremental costs of obtaining a contract

The Company recognizes as an asset the incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The incremental costs of obtaining a contract are those costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained shall be recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.

The Company applies the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

(ii) Costs to fulfil a contract

If the costs incurred in fulfilling a contract with a customer are not within the scope of another Standard (for example, IAS 2 Inventories, IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets), the Company recognizes an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria:

‧ the costs relate directly to a contract or to an anticipated contract that the Company can specifically identify;
‧ the costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and
‧ the costs are expected to be recovered.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

General and administrative costs, costs of wasted materials, labor or other resources to fulfil the contract that were not reflected in the price of the contract, costs that relate to satisfied performance obligations (or partially satisfied performance obligations), and costs for which the Company cannot distinguish whether the costs relate to unsatisfied performance obligations or to satisfied performance obligations(or partially satisfied performance obligations), the Group recognizes these costs as expenses when incurred.

(q) Employee benefits

(i) Defined contribution plans

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

(ii) Defined benefit plans

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

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

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

Remeasurement of the net defined benefit liabilities (assets), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Company can reclassify the amounts recognized in other comprehensive income to retained earnings or other equity. If the amounts recognized in other comprehensive income are transferred to other equity, they shall not be reclassified to profit or loss or recognized in retained earnings in a subsequent period.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Gains or losses on the curtailment or settlement of a defined benefit plan are also recognized as pension expenses when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains or losses and past service cost that was not previously recognized.

(iii) Short-term employee benefits

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

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

(r) Income taxes

Tax expense comprises current tax expense and deferred tax expense. Current and deferred tax shall be included in profit or loss for the period, except to the extent that the tax arises from a business combination or a transaction or event which is recognized directly in equity or other comprehensive income.

Current tax comprises the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax lows) that have been enacted or substantively enacted by the balance sheet date, and any adjustments for current tax of prior periods.

Deferred tax is recognized for the temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax is recognized for all temporary differences, except to the extent that the deferred tax arises from:

(i) the initial recognition of an asset or liability in a transaction which is not a business combination, and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss); or
(ii) the investments in subsidiaries, branches and associates, and interests in joint ventures, and it is probable that the temporary difference will not reverse in the foreseeable future; or
(iii) the initial recognition of goodwill.

Deferred tax is measured, at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, and tax laws that have been enacted or substantively enacted by the balance sheet date.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

The Company offset deferred tax assets and deferred tax liabilities only if:

(i) the Company has a legal enforceable right to set off current tax assets against current tax liabilities; and
(ii) the deferred tax assets and the deferred liabilities relate to income taxes levied by the same taxation authority on either:
1) the same taxable entity; or
2) different taxable entities which intent either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously; in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

A deferred tax asset is recognized for the carryforward of unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that the benefit of part or all of that deferred tax asset will be utilized.

(s) Earnings per share

The basic earnings per share is calculated based on the profit attributable to the ordinary shareholders of the Company divided by weighted average number of ordinary shares outstanding.

(t) Operating segments

The Company discloses its information on operating segments in its consolidated financial statements, so it need not disclose such information in the parent company only financial statements.

(5) Critical accounting judgments and key sources of estimation uncertainly:

The preparation of the financial statements in conformity with the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

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

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

The information about assumptions and estimation uncertainties of valuation of inventories that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

As inventories are stated at the lower of cost or net realizable value, the Company estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Refer to note 6(f) for further description of the valuation of inventories.

(6) Significant account disclosures:

(a) Cash and cash equivalents

Cash on hand Bank deposit Cash equivalents Time deposits Repurchase bonds	December 31, 2018 December 31, 2017 $ 358 382 4,221,765 852,994 12,697,721 11,705,838 2,021,791 1,940,120 $ 18,941,635 14,499,334

Please refer to Note 6(v) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company.

(b) Financial assets at fair value through profit or loss and other comprehensive income

(i) Mandatorily at FVTPL Private fund Please refer to Notes 6(t) for amount of remeasurement at FVTPL. (ii) Equity investments at fair value through other comprehensive income Listed stocks Non-listed stocks Non-domestic stocks Total	December 31, 2018	December 31, 2018
	$ 4,017,249 December 31, 2018
		December 31, 2018
	$ 98,426,404 5,056,694 4,982,219 $ 108,465,317

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Equity investments at fair value through other comprehensive income

The Company designated the investments shown above as equity instruments as at fair value through other comprehensive income because these equity instruments represent those investments that the Group intends to hold for long-term for strategic purposes. These investments were classified as available-for-sale financial assets as of December 31, 2017 .

No strategic investments were disposed as of December 31, 2018, and there were no transfers of any cumulative gain or loss within equity relating to these investments.

(c) Available-for-sale financial assets

Available-for-sale financial assets
		December 31,
		2017
Listed securities:
Listed stocks	$	107,007,059
Unpublicly traded investment:
Private fund		4,574,268
Total	$	111,581,327

(d) Notes receivable and accounts receivable:

Notes receivable from operating activities Accounts receivable (including related parties)`－`at amortized cost Less : allowance for doubtful receivables	December 31, 2018 December 31, 2017 $ 79,150 95,454 12,712,715 12,093,824 (4,755) (3,810) $ 12,787,110 12,185,468

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables on December 31, 2018. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as the incorporated forward looking information. The loss allowance provision on receivables as of December 31, 2018 amounted to $4,755 thousand, and the expected credit risk was no more than 0.1%.

As of 2017 the Company applies the incurred loss model to consider the loss allowance provision of notes and trade receivable, as well as the aging analysis of notes and trade receivable as of December 31, 2018 and 2017, which were past due but not impaired, as follows:

Within 30 days 30~60 days Total	December 31, 2018 December 31, 2017 $ 27,753 24,919 5 586 $ 27,758 25,505

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

The movement of the allowance for doubtful receivable were as follows:

Beginning balance (IAS39) Adjustment of the first adoption of IFRS 9 Beginning balance (IFRS 9) Impairment loss recognized Reversal of impairment Ending balance	2018 $ 3,810 - 3,810 945 - $ 4,755	For the year ended December 31, 2017
		Impairment loss of group evaluation
		5,488 - (1,678)
		3,810

The terms of sales made by the Group were net 30~90 days. Based on historical default rates, the Group recognizes 0.1% allowance for impairment of uncollectible accounts receivables.

(e) Other receivable

Other receivable—loans to related parties Other receivable—related parties Other receivable	December 31, 2018 December 31, 2017 $ 15,026,044 14,409,540 3,201,700 2,324,125 1,376,297 1,301,658 $ 19,604,041 18,035,323

As of December 31, 2018 and 2017, the aging analysis of other receivables were not recognized which estimated by the Company.

(f) Inventories

Finished goods Work in process Raw materials Supplies Machinery and accessories in process Others	December 31, 2018 December 31, 2017 $ 9,309,434 7,969,399 1,318,819 1,386,672 1,297,227 907,270 491,515 409,842 1,502,299 1,277,956 277,501 19,535 $ 14,196,795 11,970,674

Cost of goods sold and expense recognized for the year 2018 and 2017 are $155,906,492 thousand and $140,365,078 thousand, respectively.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Change of net realizable value of inventories

Change of net realizable value of inventories
Loss from devaluation (gain from recovery) of inventories	For the years ended December 31,
	2018 2017 $ (280,233) 388,638

The changes in net realizable value of the above inventories have been recognized as cost of goods sold.

(g) Investments accounted for using equity method

The components of the investments accounted for using equity method were as follows:

Subsidiaries
Formosa Plastics Corp. (Cayman Ltd.)
Formosa Industries Corporation
Formosa Plastics International (Cayman) Limited
Associates
Formosa Petrochemical Corporation
Formosa Plastics Corp., U.S.A.
Formosa Heavy Industries Corp.
Sky Dragon Investment Limited
Mai Liao Power Corp.
Formosa Sumco Technology Corporation
Formosa Transportation Corp.
Formosa Fairway Corp.
Yi-Jih Development Corp.
Ya Tai Development Corp.
Formosa Automobile Corporation
Wha Ya Park Management Consulting Corporation Ltd.
Su-Hua Transportation Corporation
Formosa Environmental Technology Corporation
Formosa Resources Corporation
Formosa Plastics Development Corporation Ltd.
Formosa Group (Cayman) Limited
Joint ventures
Formosa Asahi Spandex Co., Ltd.
Formosa Daikin Advanced Chemical Co., Ltd.

December 31,
2018
December 31,
2017
$ 29,273,905
29,410,382
5,345,785
5,754,520
16,418,229
15,984,457
96,197,632
97,144,019
63,350,563
56,660,362
7,717,150
7,616,375
6,547,397
2,973,156
11,163,467
10,845,857
6,327,209
6,297,821
1,014,210
694,761
98,624
100,952
63,305
63,027
18,887
23,408
105,760
-
1,503
1,382
-
275,864
225,838
226,435
5,370,047
5,361,771
82,299
87,773
631,060
348,135
1,323,203
1,337,432
1,009,244
992,930
$
252,285,317
242,200,819

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

For the years ended December 31, 2018 and 2017, the share of net income (loss) of subsidiaries, associates and joint ventures were as follows:

For the years ended December 31,
2018
2017
$ 472,346
2,934,815
(569,094)
(361,873)
-
147
17,228,355
22,866,965
5,598,261
6,316,205
152,403
118,039
(768,574)
(128,536)
133,645
213,360
1,621,643
651,743
13,745
4,992
(679)
(5,130)
278
266
(4,520)
(3,153)
136,045
38,434
401
108
4,881
26,150
308
(29,134)
(231,542)
(135,857)
(5,474)
(4,151)
267,773
(163,146)
106,642
131,428
163,531
159,415
$
24,320,374
32,631,087

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(i) Subsidiaries

On April 16, 2018, the Company participated in the capital increase by cash of Formosa Plastics International (Cayman) Limited by acquiring additional shares of stock amounting to US$57,161 thousand (equivalent to $1,676,070 thousand).

On July 3 and 19, 2017, the Company participated in the capital increase by cash of Formosa Plastics Corp. (Cayman Ltd.) by acquiring additional shares of stock amounting to US$57,161 thousand (equivalent to $1,738,438 thousand).

(ii) Associates

1) The information of the major associate of the investments accounted for using the equity method was as follows:

Associates	Relationship	Registration Country	Percentage of ownership
			December 31, 2018 December 31, 2017 % 28.56 % 28.56 % 22.61 % 22.61
Formosa Petrochemical Corporation Formosa Plastic Corp. U.S.A.	Formosa Petrochemical Corporation, the main supplier of raw materials for the Company, has principal activities that consists of petroleum refining and integrated manufacture of hydrocarbon Formosa Plastic Corp., U.S.A., engages in the manufacturing and sales of oil, plastic raw materials, and petrochemical raw materials, with the Company as its main sale target.	Taiwan U.S.A

The fair value of investments in publicly traded stocks of the major associate was as follows:

Formosa Petrochemical Corporation	December 31, 2018 December 31, 2017 $ 296,539,842 314,223,411

The following is the aggregated financial information of the major associate, and necessary changes have already been made to the information therein concerning the associates' consolidated financial statements based on the IFRS as endorsed by FSC to reflect the fair value adjustments made at the time of acquisition and adjustment for accounting policy variations.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

The financial information of Formosa Petrochemical Corporation was as follows:

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net asset
Net asset contributed to non-controlling interest of
Formosa Petrochemical Corporation
Net asset contributed to Formosa Petrochemical
Corporation
Revenue
Net income
Other comprehensive income
Total comprehensive income
Income allocated to non-controlling interest of
Formosa Petrochemical Corporation
Income allocated to Formosa Petrochemical
Corporation
Beginning balance of share of net assets of associates at
January 1
Retrospective adjustment
Share of net assets of associates as of January 1 after
adjustment
Total comprehensive income allocated to the Company
Dividend Received
Share of net assets of affiliates as of December 31
Add : share premium acquired not according to holding
percentage
Total carrying amount of equity of the major associate as of
December 31

December 31,
2018
December 31,
2017
$ 232,198,754
266,200,257
173,570,701
165,340,469
(50,431,424)
(65,117,512)
(14,681,851)
(22,276,730)
$
340,656,180
344,146,484
$
2,917,972
2,859,884
$
337,738,208
341,286,600
For the years ended December 31,
2018
2017
$
767,550,218
624,107,892
$ 60,070,831
80,175,421
(9,983,466)
9,186,884
$
50,087,365
89,362,305
$
63,198
(12,068)
$
50,024,167
89,374,373
For the years ended December 31,
2018
2017
$ 97,144,019
87,970,770
1,850,448
-
98,994,467
87,970,770
14,352,949
25,495,629
(17,139,459)
(16,323,294)
96,207,957
97,143,105
(10,325)
914
$
96,197,632
97,144,019

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

The financial information of Formosa Plastics Corp., U.S.A. was as follows:

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net asset
Net asset contributed to non-controlling interest of
Formosa Plastics Corp., U.S.A.
Net asset contributed to Formosa Plastics Corp.,
U.S.A.
Revenue
Net income
Other comprehensive income
Total comprehensive income
Income allocated to non-controlling interest of
Formosa Plastics Corp., U.S.A.
Income allocated to Formosa Plastics Corp., U.S.A.
Beginning balance of share of net assets of associatesat
January 1
Total comprehensive income allocated to the Company
Ending balance of share of net assets of associates at
December 31

December 31,
2018
December 31,
2017
$ 113,319,996
123,602,500
212,593,457
172,307,285
(15,063,386)
(14,514,493)
(23,830,982)
(24,570,230)
$
287,019,085
256,825,062
$
7,189,678
6,743,441
$
279,829,427
250,081,621
For the years ended December 31,
2018
2017
$
151,631,407
134,789,930
$ 24,392,035
27,772,678
(2,824,218)
123,638
$
21,567,817
27,896,316
$
(369,389)
(164,252)
$
21,937,206
28,060,568
For the years ended December 31,
2018
2017
$ 56,660,362
54,436,736
6,690,201
2,223,626
$
63,350,563
56,660,362

2) The information of the minor associate of the investments accounted for using the equity method was as follows:

Total carrying amount of equity of the minor associates	December 31, 2018 December 31, 2017 $ 39,366,755 34,916,717

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Attributable to the Company: Net income Other comprehensive income Total comprehensive income	For the years ended December 31, 2018 2017 $ 1,320,334 583,985 (485,406) (361,516) $ 834,928 222,469

3) The Company, which invested in “ Formosa Automobile Corporation” (an investee accounted for using the equity method) recognized the gains of $136,045 thousand and $38,434 thousand from this investment for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2017 the Company’ s cumulative losses from this investment had already exceeded the book value of the investment by $29,472 thousand, respectively. The investee company were reclassified to other liabilities for the Company intended to support it. The situation abovementioned no longer exists as of December 31, 2018.
4) On July 1, 2018, Su-Hua Transportation Corporation, an associate previously owned by the Company, merged with Formosa Transportation Corp, another associate owned by the Company, at the stock exchange rate ratio of 5.843543 ： 1 . The Company’ s shareholding ratio in Formosa Transportation Corp remains unchanged
5) On July 5 and 26, 2018, The Company participated in the capital increase by cash of Sky Dragon Investment Limited. at 50% ownership interest, with the total investment amounting to US$145,800 thousand (equivalent to $4,461,424 thousand).
6) On July 13, 2018, Formosa Sumco Technology Corporation, an associate owned by the Group, reduced its capital by 50%. The Company received the amount of $1,127,075 thousand on September 25, 2018 due to the said capital reduction, wherein its shareholding ratio remains unchanged.
7) On April 7, 2017, The Group participated in the capital increase by cash of Formosa Resources Corporation at 25% ownership interest, with the total investment amounting to US$55,000 thousand (equivalent to $1,683,440 thousand).

8)

(iii) Joint ventures

The Company’s investments in joint ventures are not significant. The financial information of the minor joint ventures of the investments accounted for using equity method was as follows:

Total carrying amount of investments in the minor joint ventures	December 31, 2018 December 31, 2017 $ 2,332,448 2,330,362

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Attributable to the Company: Net income Other comprehensive loss Total comprehensive income	For the years ended December 31, 2018 2017 $ 270,173 290,843 (11,256) (6,767) $ 258,917 284,076

(iv) Collaterals

Please refer to Note 8 for investments accounted for using equity method which were pledged to banks as collateral to secure the Company’s bank loans as of December 31, 2018 and 2017.

(h) Property, plant and equipment

The movements of cost and accumulated depreciation and impairments of property, plant and equipment of the Company for the years ended December 31, 2018 and 2017 were as follows:

Land Cast: Balance as of January 1, 2018 $ 6,775,418 Additions 3,623,411 Disposals - Reclassification (297) Balance as of December 31, 2018 $ 10,398,532 Balance as of January 1, 2017 $ 6,775,780 Additions - Disposals (362) Reclassification - Balance as of December 31, 2017 $ 6,775,418 Accumulated depreciation/impairment: Balance as of January 1, 2018 $ - Depreciation for the year - Disposals - Reclassification - Balance as of December 31, 2018 $ -	Land		Buildings and constructions		Machinery and equipment		Other facilities		Construction in progress Total 2,609,073 166,763,217 2,917,152 8,682,664 - (2,159,820) (2,031,458) 139,270 3,494,767 173,425,331 2,891,452 165,380,701 1,890,777 2,250,897 - (969,785) (2,173,156) 101,404 2,609,073 166,763,217 - 133,083,677 - 4,195,963 - (2,155,846) - 74,040 - 135,197,834

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Balance as of January 1, 2017 Depreciation for the year Impairment loss Disposals Reclassification Balance as of December 31 , 2017 Carrying amounts:`：` Balance as of December 31 , 2018 Balance as of December 31 , 2017	Land		Buildings and constructions		Machinery and equipment		Other facilities		Construction in progress Total - 126,450,692 - 5,238,826 - 2,347,867 - (961,937 - 8,229 - 133,083,677 3,494,767 38,227,497 2,609,073 33,679,540
	$ - - - - - $ - $ 10,398,532 $ 6,775,418

(i) Impairment loss

The impairment loss amounting to $2,347,867 thousand was recognized for the year ended December 31, 2017 due to the equipment that had been identified to be no longer useful for future operation.

(ii) Collaterals

The property, plant and equipment pledged to secure bank loans as of December 31, 2018 and 2017, are described in Note 8.

(iii) As of December 31, 2018 and 2017, the Company’ s parcels of land with title temporarily registered under the names of third parties for trust purpose had carrying value of $33,529 thousand for both years. which were recorded under property, plant and equipment. The Company has implemented a deed of trust with the authorities to secure the Company’s rights related to the abovementioned properties.
(iv) Please refer to Note 6(t) for further information about the capitalized interest on borrowings for the purchase of the property, plant and equipment and gain on disposal of property, plant and equipment.

(i)

Short-term borrowings
(i) Short-term borrowings consisted of the following:

Unsecured short-term borrowings Employees’ savings Total Interest rate	December 31, 2018 December 31, 2017 $ 14,058,910 8,110,987 284,770 236,350 $ 14,343,680 8,347,337 0.75%~1.115% 0.75%~2.266%

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(j) Short-term notes and bills payable

Short-term notes and bills payable Short-term notes and bills payable

Short-term notes and bills payable Short-term notes and bills payable Short-term notes and bills payable Short-term notes and bills payable Short-term notes and bills payable

Less: Discount on short-term notes and bills payable Total

December 31, 2018	December 31, 2018
Institutions	Interest rate		Amount
Taishin International Bank	0.47%	$	1,400,000
International Bills Finance	0.867%		500,000
Corporation
Ta Ching Securities Co., Ltd.	0.75%		600,000
Cathay United Bank Company	0.665%~0.745%		3,000,000
Limited
Mega Bills Finance Co., Ltd.	0.66%~0.857%		2,300,000
Grand Bills Finance Corporation	0.61%~0.73%		2,200,000
Taipei Fubon Commercial Bank	0.745%
Co., Ltd.			1,000,000
E Sun Commercial Bank, LTD.	0.73%		500,000
Yuanta Commercial Bank. LTD.	0.66%		500,000
			12,000,000
			(4,364)
		$	11,995,636

Short-term notes and bills payable Short-term notes and bills payable Short-term notes and bills payable Short-term notes and bills payable Short-term notes and bills payable Short-term notes and bills payable Less: Discount on short-term notes and bills payable Total	December 31, 2017 Institutions Interest rate Amount China Bills Finance Corporation 0.60% $ 1,000,000 Grand Bills Finance Corporation 0.40% 2,300,000 International Bills Finance Corporation 0.590%~0.867% 1,000,000 Cathay United Bank Company Limited 0.419% 2,200,000 Mega Bills Finance Co., Ltd. 0.410%~0.857% 1,500,000 CTBC Bank Co., Ltd 0.40% 1,500,000 9,500,000 (4,491) $ 9,495,509
	Institutions
	China Bills Finance Corporation Grand Bills Finance Corporation International Bills Finance Corporation Cathay United Bank Company Limited Mega Bills Finance Co., Ltd. CTBC Bank Co., Ltd

Short-term notes and bills payable
Short-term notes and bills payable
Short-term notes and bills payable
Short-term notes and bills payable
Short-term notes and bills payable
Short-term notes and bills payable
Less: Discount on short-term notes and
bills payable
Total

December 31, 2017
Institutions
Interest rate
Amount
China Bills Finance Corporation
0.60%
$ 1,000,000
Grand Bills Finance Corporation
0.40%
2,300,000
International Bills Finance
Corporation
0.590%~0.867%
1,000,000
Cathay United Bank Company
Limited
0.419%
2,200,000
Mega Bills Finance Co., Ltd.
0.410%~0.857%
1,500,000
CTBC Bank Co., Ltd
0.40%
1,500,000
9,500,000
(4,491)
$
9,495,509

Institutions

China Bills Finance Corporation
Grand Bills Finance Corporation
International Bills Finance
Corporation
Cathay United Bank Company
Limited
Mega Bills Finance Co., Ltd.
CTBC Bank Co., Ltd

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(k) Long-term debts
(i) Long-term debts consisted of the following:

Unsecured long-term debts Secured long-term debts Less: Current portion Total Repayment period Interest rate	December 31, 2018 December 31, 2017 $ 1,200,000 1,900,000 5,713,038 7,997,365 (2,284,327) (4,084,327) $ 4,628,711 5,813,038 2020~2021 2018~2021 0.800%~1.632% 0.800%~1.632%

(ii) Secured bank loans

In order to raise funds to build the plant and accessory equipment, the Company signed a syndicated loan agreement with Bank of Taiwan, the lead bank of the syndicated loan, and 19 other banks on November 14, 2013. As of December 31, 2018, the details of the loan agreement are as follows:

1) Credit line: $10,300,000 thousand.
2) Interest rate: as settled with each participating bank.
3) Period: 7 years (including a 3 years extension).
4) Collateral: the land at Sixth Naphtha Cracker pledged for 120 percent of the credit line financed by the loan.
5) The financial covenants under the loan agreement include the requirement to maintain certain financial ratios based on the audited consolidated financial reports. If the Company breaches these financial covenants, the syndicated banks may determine to declare the unpaid principal, interest, fees and other sums payable by the Company under the loan agreement to be immediately due and payable. These financial ratios are as follows:
a) Current Ratio (total current assets divided by total current liabilities): not lower than 100%.
b) Leverage Ratio (total liabilities plus contingent liabilities to tangible net worth): not higher than 150%.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

6) The Company did not breach the above mentioned financial covenants in respect of its financial statements as of December 31, 2018 and 2017.
7) As of December 31, 2018, the credit line of $10,300,000 thousand had been used, and the loan of $4,577,778 thousand had been repaid.

(iii) The assets pledged to secure long-term loans are described in Note 8.

(iv) The loan the Company has with sumitomo Mitsui Banking Corporation has been extended to August 9, 2020.
(l) Bonds payable
(i)Bonds payable consisted of the following:

Domestic unsecured nonconvertible corporate bonds Less: current portion Total Expiry	December 31, 2018 December 31, 2017 $ 37,154,561 33,558,238 (4,598,557) (5,696,600) $ 32,556,004 27,861,638 2019~2028 2018~2026

(ii) Issuance and repayment of bonds payable for the twelve-month periods ended December 31, 2018 and 2017:
1) Issuance

1) Issuance
Face value Coupon rate Expiry 2) Repayment Repayment	For the years ended December 31,
	2018 2017 $ 9,300,000 7,000,000 0.82%`、`0.93%`、`1.09% 1.09%`、`1.32% 2023`、`2025`、`2028 2022`、`2024 For the years ended December 31,

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

3) The term of domestic corporate bonds as December 31, 2018 and 2017 were as follows:

Issue amount 2018.12.31 Ending balance 2018.12.31 Current portion 2017.12.31 Ending balance 2017.12.31 Current portion Issuance date Coupon rate Interest payment date Repayment method	The first domestic unsecured nonconvertible corporate bond in 2011	The second domestic unsecured nonconvertible The third domestic unsecured nonconvertible corporate bond corporate bond in 2011 in 2012 5,000,000 9,000,000 1,449,442 4,646,952 1,449,442 2,149,501 2,898,698 6,795,553 1,449,256 2,149,349 September 12, 2012 November 5, 2012 1.28%`、`1.40% 1.25%`、`1.39%`、` 1.53% September 12 November 5 Payable in 2 equal installments for each different coupon rate in 2016~2017 and 2018~2019, respectively. Payable in 3 equal installments for each different coupon rate in 2016~2017, 2018~2019 and 2021~2022, respectively.
	7,000,000 999,614 999,614 1,998,686 999,073 May 22, 2012 1.26%`、`1.42% May 22 Payable in 2 equal installments for each different coupon rate in 2016~2017 and 2018~2019, respectively.

Issue amount 2018.12.31 Ending balance 2018.12.31 Current portion 2017.12.31 Ending balance 2017.12.31 Current portion Issuance date Coupon rate Interest payment date Repayment method	The first domestic unsecured nonconvertible corporate bond in 2013	The second domestic unsecured nonconvertible corporate bond in 2013	The first domestic unsecured nonconvertible corporate bond in 2014	The first domestic unsecured nonconvertible The first domestic unsecured nonconvertible corporate bond corporate bond in 2017 in 2018 7,000,000 9,300,000 6,991,679 9,286,494 - - 6,989,783 - - - May 19, 2017 June 26, 2018 1.09%`、`1.32% 0.82%`、`0.93%`、` 1.09% May 19 June 26 Payable in 2 equal installments for each different coupon rate in 2021~2022 and 2023~2024, respectively. Payable in 2 equal installments for each different coupon rate in 2022~2023, 2024~2025 and 2027~2028, respectively.
	$ 11,500,000 1,493,183 - 1,491,668 - June 10, 2013 1.23%`、`1.52% June 10 Payable in 2 equal installments for each different coupon rate in 2016~2017 and 2022~2023, respectively.	8,500,000 6,294,220 - 7,391,967 1,098,922 November 8, 2013 1.42%`、`1.94% November 8 Payable in 2 equal installments for each different coupon rate in 2017~2018 and 2022~2023, respectively.	6,000,000 5,992,977 - 5,991,883 - May 21, 2014 1.83%`、`1.92% May 21 Payable in 2 equal installments for each different coupon rate in 2023~2024 and 2025~2026, respectively.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(m) Employee benefits

(i) Defined benefit plan

The movements in the present value of the defined benefit obligations and fair value of plan assets were as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	December 31, 2018 December 31, 2017 $ 9,710,141 9,788,989 (2,587,023) (2,526,446) $ 7,123,118 7,262,543

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

1) Composition of the plan asset

The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Company's Bank of Taiwan labor pension reserve account balance amounted to $2,552,506 thousand as of December 31, 2018. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

Defined benefit obligations on January 1 Benefits paid Current service and interest costs Remeasurement of net defined benefit liabilities `－`actuarial losses arising from change in financial assumptions Decrease due to transfer of related party employees Defined benefit obligations on December 31	For the years ended December 31, 2018 2017 $ 9,788,989 9,607,708 (475,699) (519,349) 218,402 219,593 364,835 580,977 (186,386) (99,940) $ 9,710,141 9,788,989

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

3) Movements in fair value of defined benefit plan assets

Fair value of plan assets on January 1 Interest income Remeasurement of net defined obligation assets `－`return on plan assets (excluding interest income) Benefits already paid by the plan Contributions from employer Fair value of plan assets on December 31	For the years ended December 31,
	2018 2017 $ 2,526,446 2,540,589 29,881 30,317 79,242 3,328 (165,646) (166,189) 117,100 118,401 $ 2,587,023 2,526,446

4) Expense recognized in profit or loss

The pension costs recognized in profit or loss for the years ended December 31, 2018 and 2017 were as follows:

Current service costs Interest costs Operating costs Selling expenses Administrative expenses	For the years ended December 31,
	2018 2017 $ 98,540 101,712 89,981 87,564 $ 188,521 189,276 $ 110,835 112,486 6,748 6,797 70,938 69,993 $ 188,521 189,276

5) Remeasurement of net defined benefit assets recognized in other comprehensive income

Balance of January 1, Recognized in current period Balance of December 31,	For the years ended December 31,
	2018 2017 $ 1,738,211 1,258,762 228,474 479,449 $ 1,966,685 1,738,211

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

6) Actuarial assumptions

The following are the principal actuarial assumptions as of December 31, 2018 and 2017:

The following are the principal actuarial assumptions	as of December 31, 2018 and 2017
Discount rate Rate of future salary increases	For the years ended December 31,
	2018 2017 % 1.25 % 1.25 % 2.85 % 2.85

Based on the actuarial report, the Company is expected to make contributions of $124,379 thousand to the defined benefit plans for the one year period after the reporting date.

The weighted average duration of the defined benefit plan is 10.5 years.

7) Sensitivity analysis

When calculating the present value of the defined benefit obligation, the Company should use judgments and estimates in determining the related actuarial assumptions at balance sheet date, including discount rate, expected return on plan assets and future salary increases. Any changes in actuarial assumptions may significantly impact the present value of the defined benefit obligation.

As of December 31, 2018 and 2017, the effects of the present value of the defined benefit obligation arising from changes in principal actuarial assumptions were as follows:

December 31, 2018 Discount rate (change 0.25%) Future salary increases (change 1.00%) December 31, 2017 Discount rate (change0.25`％`) Future salary increases (change1.00`％`)	Effect of defined benefit obligations Increase Amount Decrease Amount $ (202,850) 211,483 898,019 (777,285) (217,664) 227,501 968,975 (830,255)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. The sensitivity analysis adopts the same methods for determining the defined benefit assets at balance sheet date.

The same methods and assumptions are adopted in the two-year sensitivity analysis.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(ii) Defined contribution plan

The Company contributes an amount equal to 6% of the employee’s monthly wages to the Labor Pension personal account with the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act, under which, the Company is not required to bear the regulated or putative obligation subsequent to the payment of fixed-rate contribution.

The Company’ s pension costs under the defined contribution pension plan amounted to $233,156 thousand and $224,454 thousand for the years ended December 31, 2018 and 2017, respectively.

(n) Income tax

(i) Corporate tax rate rises from 17% to 20% due to the income tax amendment promulgated by Office of the President on February 7, 2018.

The details of income tax expense for the years ended December 31, 2018 and 2017 were as follows:

Current income tax expense Deferred tax expense The origination of temporary differences Exchange differences on tax rates Income tax expense	For the years ended December 31,
	2018 2017 $ 5,556,469 3,511,829 2,001,608 1,974,631 (61,459) - $ 7,496,618 5,486,460

The income tax expense related to components of other comprehensive income for the years ended December 31, 2018 and 2017 was as follows:

ended December 31, 2018 and 2017 was as follows:
Items that could not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plan Items that will subsequently be reclassified to profit or loss: Exchange differences on translation of foreign financial statements	For the years ended December 31,
	2018 2017 $ 169,178 98,200 $ (522,685) 1,236,221

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

The income tax calculated at a statutory income tax rate on accounting income before income tax was reconciled with income tax expense recognized in profit or loss as follows:

Income tax calculated based on pretax financial income Effect of difference in income tax rate between foreign investee and the Company Tax- exempt income Tax effect on investment income recognized under equity method and Non-deductible expenses Under (over) provision in prior periods 10% income surtax on undistributed earnings 10% income surtax on undistributed earnings Income tax expense	For the years ended December 31, 2018 2017 $ 11,409,232 9,327,783 550,379 798,950 (1,502,336) (1,315,759) (3,712,672) (3,954,319) 57,616 49,842 755,858 579,963 (61,459) - $ 7,496,618 5,486,460

(ii) Recognized deferred tax assets and liabilities

Movements in deferred tax assets and liabilities were as follows:

For the year ended December 31, 2018 Deferred tax assets Unrealized gross loss Unamortized fixed manufacturing expense Accrued pension liability Cumulative translation adjustment Unrealized impairment loss on non-financial assets Unrealized foreign currency exchange loss Total Deferred tax liabilities Foreign investment income under equity method Unrealized foreign currency exchange gain Cumulative translation adjustment Depreciation Unrealized gross profit Total	Beginning balance	Recognized in income or loss		Recognized in other comprehensive income Ending balance - 1,867 - 24,845 169,178 1,503,124 (272,099) - - 383,007 - 16,099 (102,921) 1,928,942 - 16,284,936 - 52,766 250,586 250,586 - 82,496 - - 250,586 16,670,784
	$ - 24,221 1,301,357 272,099 399,068 19,680 $ 2,016,425 $ 14,397,905 - - 65,429 1,277 $ 14,464,611

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

For the year ended December 31, 2017 Deferred tax assets Unrealized gross profit Unamortized fixed manufacturing expense Accrued pension liability Unrealized foreign currency exchange gain Unrealized impairment loss Unrealized foreign currency exchange loss Total Deferred tax liabilities Foreign investment income under equity method Unrealized foreign currency exchange gain Cumulative translation adjustment Depreciation Unrealized gross profit Total	Beginning balance	Recognized in income or loss		Recognized in other comprehensive income Ending balance - - - 24,221 98,200 1,301,357 272,099 272,099 - 399,068 - 19,680 370,299 2,016,425 - 14,397,905 - - (964,122) - - 65,429 - 1,277 (964,017) 14,464,611
	$ 966 32,024 1,268,135 - - - $ 1,301,125 $ 12,054,017 50,018 964,122 40,944 - $ 13,109,101

(iii) The Company’s income tax returns have been examined and approved through 2015 by the ROC tax authorities.

(o) Capital and other equity

As of December 31, 2018 and 2017, the Company’s government registered total authorized capital and issued capital stock both amounted to $63,657,408 thousand, divided into 6,365,741 thousand shares of stock with $10 par value per share. All issued shares were paid up upon issuance.

(i) Capital surplus

The components of capital surplus were as follows:

Paid-in capital in excess of par value Treasury stock transactions Equity in capital surplus of investee companies Overdue unpaid directors’ remuneration and dividends Paid in capital in excess of the par value derived from Overseas corporate bond conversion	December 31, 2018 December 31, 2017 $ 8,130,081 8,130,081 16,263 16,263 192,701 203,000 377,294 303,082 2,997,503 2,997,503 $ 11,713,842 11,649,929

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(ii) Retained earnings

According to the rules of the Company’s articles and Company Act, the Company’s annual net profit, after providing for income tax and covering the losses of previous years, is first set aside for legal reserve at the rate of 10% thereof. In addition, a special reserve in accordance with applicable laws and regulations shall also be set aside. The remainder plus the undistributed earnings of the previous years are distributed or left undistributed for business purposes according to the resolution of the stockholders’ dividend distribution plan, which are initially proposed by the Board of Directors and adopted by the shareholders in the Annual Stockholders’ Meeting.

The Company also adopts a dividend distribution policy, under which, net earnings after deducting the legal reserve and special reserve may first be distributed by way of cash dividends which shall be equal to at least fifty percent (50%) of the Company’s total dividend distribution every year. The capitalization of earnings and capital surplus shall not exceed fifty percent of the total dividends.

1) Special reserve

As the Company opted to avail of the exemptions allowed under IFRS 1 “ First-time Adoption of International Financial Reporting Standards” during the Company’s firsttime adoption of the IFRS as endorsed by the FSC, unrealized revaluation increments and cumulative translation adjustments (gains) of $2,790,507, which were previously recognized in shareholders’ equity were reclassified to retained earnings. In accordance with Regulatory Permit No. 1010012865 as issued by the FSC on April 6, 2012, a special reserve is appropriated from retained earnings for aforementioned reclassification. In addition, during the use, disposal or reclassifications of relevant assets, this special reserve is reverted to distributable earnings proportionately. The carrying amount of special reserve amounted to $2,790,507 thousand both as of December 31, 2018 and 2017.

Pursuant to the Regulatory Permit mentioned above, the Company is also required to set aside an additional special reserve, as part of the distribution of its annual earnings, equal to the difference between the amount of above-mentioned special reserve and net debit balance of the other components of stockholders’ equity.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

2) Earnings distribution

The appropriations of earnings in 2017 and 2016 had been approved in the stockholders' meetings on June 20, 2018, and June 13, 2017, respectively. The amounts of appropriation of dividend per share were as follows:

Dividends attributable to ordinary shareholders: Cash dividends	2017	2017	2017	2016 Dividends per share Amount 4.60 29,282,408
	Dividends per share		Amount
	$ 5.70		36,284,722

3) Other equity (net of tax)

Balance at January 1, 2018 Adjustments due to new standard Balance adjusted as of January 1, 2018 Exchange differences arising on translation of foreign operations Share of exchange differences on associates and joint ventures accounted for using equity method Unrealized gains on financial assets at fair value through other comprehensive income Share of cash flow hedge of associates and joint ventures Balance at September 30, 2018	Exchange differences on translation of foreign operations $ (3,225,029 -	) ) )	Unrealized gain (loss) on financial assets at fair value through profit or loss - 99,924,374		Available-for- sale investments 90,768,489 (90,768,489)		Cash flow hedge 9,551 (9,551)		Gain (loss) on hedging instruments Total - 87,553,011 9,551 9,155,885 9,551 96,708,896 - 1,247,684 - (5,622,326 - (10,491,380 (28,314) (28,314 (18,763) 81,814,560
	(3,225,029 1,247,684 420,740 - -		99,924,374 - (6,043,066) (10,491,380) -		- - - - -		- - - - -
	$ (1,556,605		83,389,928		-		-

Balance at January 1, 2017 Exchange differences on translation of foreign operations, net of tax -the Company -associates Unrealized gains on available-for- sale financial assets`：` -the Company -associates Balance at December 31, 2017	Exchange differences on translation of foreign operations $ 2,794,229 (5,127,492) (891,766) - - $ (3,225,029)	Unrealized gains on available-for- sale financial assets 72,488,184 - - 14,838,705 3,441,600 90,768,489	Cash flow hedge Total 51,057 75,333,470 - (5,127,492) - (891,766) - 14,838,705 (41,506) 3,400,094 9,551 87,553,011

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(p) Earnings per share

The basic earnings per share were calculated as follows:

The basic earnings per share were calculated as follows:
Profit attributable to ordinary shareholders Weighted average number of outstanding ordinary shares	For the years ended December 31,
	2018 2017 $ 49,549,540 49,382,853 6,365,741 6,365,741 $ 7.78 7.76

(q) Revenue from Contracts with Customers

(i) Revenue Segmentation

		For the year	s ended Decemb	er 31, 2018
Plastic division $ 25,631,278 13,937,962 33,605,210 $ 73,174,450 $ 34,449,210 22,292,211 - - - - - - - - - - - - 16,433,029 $ 73,174,450	Polyolefin division 12,739,441 13,775,705 10,133,381 36,648,527 - - 20,361,107 6,171,882 9,721,259 - - - - - - - - - 394,279 36,648,527	Polypropylene division 8,048,632 6,688,243 7,060,888 21,797,763 - - - - - 19,393,763 2,404,000 - - - - - - - - 21,797,763	Tairylan division 7,758,250 5,711,759 7,387,247	Chemistry division 22,270,403 8,202,518 3,309,202 33,782,123 - - - - - - - - - - - 15,477,149 5,395,577 5,019,558 7,889,839 33,782,123	Others divisions Total 2,639,349 79,087,353 30,033 48,346,220 316,906 61,812,834 2,986,288 189,246,407 - 34,449,210 - 22,292,211 - 20,361,107 - 6,171,882 - 9,721,259 - 19,393,763 - 2,404,000 - 8,662,849 - 3,915,642 - 2,339,796 - 5,078,384 - 15,477,149 - 5,395,577 - 5,019,558 2,986,288 28,564,020 2,986,288 189,246,407
			20,857,256
			- - - - - - - 8,662,849 3,915,642 2,339,796 5,078,384 - - - 860,585
			20,857,256

For details on revenue for the year ended December 31, 2017, please refer to note 6(r).

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(ii) Balance of contracts

Notes receivable Accounts receivable (including related parties) Less: allowance for doubtful receivables Total	December 31, 2018 January 1, 2018 $ 79,150 95,454 12,712,715 12,093,824 (4,755) (3,810) $ 12,787,110 12,185,468

Please refer to Note 6(d) for the disclosure of accounts receivable and impairment.

(r) Revenue

For the years ended December 31, 2018 and 2017, the components of revenue were as follows:

Sale of goods Constructive revenue Others	For the year ended December 31, 2017
	$ 168,289,026 611,954 1,372,953 $ 170,273,933

(s) Employee bonus

According to the Company’s articles, 0.05%~0.5% of the Company’s profit, excluding employee compensations, and after being appropriated to offset accumulated deficits, if any, should be distributed as employee compensations.

For the years ended December 31, 2018 and 2017, the appropriated employee compensations amounted to $74,167 thousand and $69,454 thousand, respectively. These amounts were calculated based on the Company’ s articles of incorporation and the net profit before tax after deducting employee compensations, and was recognized under operating costs and operating expenses. The employee compensations were consistent with the actual distributions. Related information can be accessed from the Market Observation Post System website.

(t) Non-operating income and expenses

(i) Other income

For the years ended December 31, 2018 and 2017, the components of other income were as follows:

Interest income Rental income Dividends income	For the years ended December 31,
	2018 2017 $ 599,064 424,718 171,677 151,180 7,511,680 5,606,734 $ 8,282,421 6,182,632

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(ii) Other gains and losses

For the years ended December 31, 2018 and 2017, the components of other gains and losses were as follows:

Gain on disposal of property, plant and equipment Gain on disposal of investments Foreign exchange gains/(losses), net Valuation gains on financial assets, net Impairment loss on non-financial assets Other gains Other losses	For the years ended December 31, 2018 2017 $ 66,465 10,925 - 1,762,716 1,329,007 (1,889,724) 215,889 - - (2,347,867) 1,013,575 462,612 (212,393) (269,549) $ 2,412,543 (2,270,887)

(iii) Finance costs

For the years ended December 31, 2018 and 2017, the components of finance costs were as follows:

Interest expense Less: capitalized interest Capitalized interest rate	For the years ended December 31, 2018 2017 $ 977,098 975,231 (8,544) (11,187) $ 968,554 964,044 1.47%~1.56% 1.49%~1.52%

(u) Reclassification adjustments of components of other comprehensive income

Available-for-sale financial assets Net change in fair value Net change in fair value reclassified to loss Net change in fair value recognized in other comprehensive income	For the year ended December 31, 2017 $ 16,601,421 (1,762,716) $ 14,838,705

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(v) Financial instruments

(i) Credit risk
1) Maximum credit risk exposure

The carrying amount of financial assets and contract assets represents the maximum amount exposed to credit risk exposure.

2) Concentration of credit risk

The company’s revenue was not attributable to sales transactions with a single customer or to sales in a specific region. Therefore, accounts receivable have no obvious concentrated credit risk. To reduce credit risk, the Company regularly monitors and reviews the recoverable amount of the trade receivables to its clients, but the company usually doesn’t ask its clients to provide collateral.

3) Credit risk of receivables

For credit risk exposure of receivables, please refer to note 6(d).

(ii) Liquidity risk

The following are the remaining contractual maturities at the end of the reporting period of financial liabilities, including estimated interest payments but excluding the impact of netting agreements:

agreements:
Carrying amount December 31, 2018 Non-derivative financial liabilities Unsecured bank loans $ 15,258,910 Bonds payable 37,154,561 Secured bank loans 5,713,038 Short-term notes and bills payable 11,995,636 Accounts payable (including related parties) 10,819,190 Other payables (including related parties) 5,737,900 Other current liabilities 7,501,395 Employees’ savings 284,770 $ 94,465,400	Carrying amount	Contractual cash flow	Within 6 months	6~12months	1~2years	2~5years Over 5 years - - 22,958,690 12,056,520 1,200,477 - - - - - - - - - - - 24,159,167 12,056,520
		15,347,309 39,672,495 5,880,979 12,000,000 10,819,190 5,737,900 7,501,395 286,332	12,572,056 1,007,100 1,153,783 12,000,000 10,819,190 5,737,900 7,501,395 286,332	2,775,253 3,650,185 1,163,121 - - - - -	- - 2,363,598 - - - - -
		97,245,600	51,077,756	7,588,559	2,363,598

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Carrying amount December 31, 2017 Non-derivative financial liabilities Unsecured bank loans $ 10,010,987 Bonds payable 33,558,238 Secured bank loans 7,997,365 Short-term notes and bills payable 9,495,509 Accounts payable (including related parties) 11,396,259 Other payables (including related parties) 4,495,555 Other current liabilities 7,254,909 Employees’ savings 236,350 $ 84,445,172		Contractual cash flow		Within 6 months		6~12months		1~2years		2~5years Over 5 years 103,645 - 10,378,555 15,200,200 3,620,107 - - - - - - - - - - - 14,102,307 15,200,200
		10,098,138 36,080,430 8,300,609 9,500,000 11,396,259 4,495,555 7,254,909 237,768		3,685,593 1,007,100 1,153,783 9,500,000 11,396,259 4,495,555 7,254,909 237,768		6,308,900 4,765,805 1,163,121 - - - - -		- 4,728,770 2,363,598 - - - - -
		87,363,668		38,730,967		12,237,826		7,092,368

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

(iii) Currency risk

1) Exposure to currency risk

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

Financial assets: Monetary items USD EUR JPY CNY Financial liabilities Monetary items USD EUR JPY	December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2017 Foreign currency (in thousand) Exchange Rate New Taiwan Dollars 792,757 29.8480 23,668,181 1,093 35.6081 38,920 60,873 0.2641 16,077 1,512 4.5680 6,907 42,995 29.8480 1,283,315 471 35.6081 16,771 381,979 0.2641 100,881	December 31, 2017 Foreign currency (in thousand) Exchange Rate New Taiwan Dollars 792,757 29.8480 23,668,181 1,093 35.6081 38,920 60,873 0.2641 16,077 1,512 4.5680 6,907 42,995 29.8480 1,283,315 471 35.6081 16,771 381,979 0.2641 100,881
	Foreign currency (in thousand)	Exchange Rate	New Taiwan Dollars		Exchange Rate New Taiwan Dollars 29.8480 23,668,181 35.6081 38,920 0.2641 16,077 4.5680 6,907 29.8480 1,283,315 35.6081 16,771 0.2641 100,881
	$ 638,205 1,296 50,378 1,876 26,369 138 109,142	30.7330 35.1670 0.2772 4.4779 30.7330 35.1670 0.2772	19,613,954 45,576 13,965 8,401 810,398 4,853 30,254	792,757 1,093 60,873 1,512 42,995 471 381,979

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

2) Sensitivity analysis

The Company exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, trade and other receivables, loans and borrowings; and trade and other payables that are denominated in foreign currency.

A strengthening (weakening) of 1% of the NTD against the USD, EUR, JPY and CNY as of December 31, 2018 and 2017 would have increased (decreased) net profit before tax by $188,364 thousand and $ 223,291 thousand. The analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis for 2018 and 2017.

3) Foreign exchange gain and loss on monetary items

Since the Group has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For years 2018 and 2017, foreign exchange gain (loss) (including realized and unrealized portions) amounted to $1,329,007 thousand and ($1,889,724) thousand, respectively.

(iv) Interest rate analysis

Please refer to the notes on liquidity risk management and interest rate exposure of the company's financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of derivative and nonderivative financial instruments on the reporting date. Regarding liabilities with variable interest rates, the analysis is based on the assumption that the amount of liabilities outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases or decreases by 1% when reporting to management internally, which also represents the Group management's assessment of the reasonably possible interest rate change.

If the interest rate had increased / decreased by 1%, the company’s net income would have increased / decreased by $155,437 thousand and by $102,473 thousand for the year ended December 31, 2018 and 2017, with all other variable factors remaining constant. This is mainly due to the Group’s borrowing at variable rates.

(v) Other market price risk

Other market price risk
Prices of securities at the reporting date	2018		2017
	Other comprehensive income after tax $ 984,264 $ (984,264)	Net income - -	Other comprehensive income after tax Net income 1,070,071 - (1,070,071) -
Increasing 1% Decreasing1%

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(vi) Fair value

1) Types and fair value of financial instruments
The fair value of financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income (available for sale financial assets ) is measured on a recurring basis.

The Company’s financial assets and liabilities are listed as follows: (including (1) the information on the levels in fair value hierarchy, wherein, disclosures are not required for financial instruments not measured at fair value with a carrying value approximating its fair value; and (2) those equity investments in which the fair value cannot be reliably measured and without any quoted price in the open market)

	December 31, 2018	December 31, 2018	December 31, 2018
Carrying value		Fair value
	Level 1	Level 2	Level 3 Total - 4,017,249 - 4,017,249 - 98,426,404 10,038,913 10,038,913 10,038,913 108,465,317 - - - - - - - - 10,038,913 112,482,566 - - - - - - - - - - - - - - - -
	-	4,017,249
	-	4,017,249
	98,426,404 -	- -
	98,426,404	-
	- - -	- - -
	-	-
	98,426,404	4,017,249
	- - - - - - -	- - - - - - -
	-	-

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

	December 31, 2017	December 31, 2017	December 31, 2017
Carrying value		Fair value
	Level 1	Level 2	Level 3 Total - 107,007,059 - 4,574,268 - 111,581,327 - - - - - - - - - 111,581,327 - - - - - - - - - - - - - - - -
$ 107,007,059 4,574,268 111,581,327 14,499,334 12,185,468 18,035,323 44,720,125 $ 156,301,452 $ 33,558,238 9,495,509 8,347,337 9,897,365 11,396,259 4,495,555 7,254,909 $ 84,445,172	107,007,059 -	- 4,574,268
	107,007,059	4,574,268
	- - -	- - -
	-	-
	107,007,059	4,574,268
	- - - - - - -	- - - - - - -
	-	-

2) Valuation techniques for financial instruments not measured at fair value

The Company’s valuation techniques and assumptions used for financial instruments not measured at fair value are as follows:

Financial liabilities measured at amortized cost.

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

3) Valuation techniques for financial instruments measured at fair value

The fair value of the financial instruments traded in active markets is based on quoted market prices. The fair value of listed equity instruments is based on the market prices that were published at main stock exchanges.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

If the financial instruments possessed by the Company have quoted market prices in active markets, the fair value was as follows:

The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes publicly traded stocks).

Except for financial instruments traded in active market, Measurements of fair value of financial instruments without an active market are based on a valuation technique or quoted price from a competitor.

4) There were no transfer between the fair value hierarchy levels for the years ended December 31, 2018 and 2017.
5) Movement of financial instruments grouped into level 3

January 1, 2018 Total gains and losses recognized: In other comprehensive income December 30, 2018	Financial assets at fair value through other comprehensive income Unquoted equity instruments $ 11,949,637 (1,910,724) $ 10,038,913

6) The valuation procedures for fair value measurements being categorized within Level 3 is to ensure the valuation results are reasonable by applying independent information to make the results close to the current market conditions, to confirm whether the resource of information is independent, reliable and in line with other resources, and to represent the independent information as the exercisable price. According to the Company’ s accounting policy, the analysis on the value changes of remeasured or reevaluated assets and liabilities is performed to ensure the reasonability of the evaluation results at the reporting date.
7) The quantitative information of significant unobservable inputs (Level 3)

Most of the Company’ s financial instruments that use Level 3 inputs have only one significant unobservable input, except for equity investment without an active market which have multiple significant unobservable inputs.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Quantified information of significant unobservable inputs was as follows:

Item Financial assets at fair value through other comprehensive income – unquoted equity instruments	Valuation technique Market comparable companies Net Asset Value Method	Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement Price to earnings ratio multiple, price to book ratio multiple, enterprise value to operating income ratio multiple, enterprise value to EBITA multiple, discount for lack of marketability The higher the multiple, the higher the fair value Not applicable Not applicable

8) Valuation model used in Level 3 fair value measurement - sensitivity analysis of the fair value to the reasonable replaceable assumption

The valuation models and assumptions used to measure the fair value of the financial instruments is reasonable. However, the use of different valuation models or assumptions may result in different measurements. The following is the effect of other comprehensive income from financial assets and liabilities categorized within Level 3 when the inputs used to valuation models have changed:

December 31, 2018 Financial assets at fair value through other comprehensive income – unquoted equity instruments	Input Price to earnings ratio multiple price to book ratio multiple, enterprise value to operating income ratio multiple, enterprise value to EBITA multiple, discount for lack of marketability	Recognized in other comprehensive income Change Favorable change Unfavorable change ± 1% $ 58,409 (58,409)	Recognized in other comprehensive income

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(w) Financial risk management new

The Company seeks to ensure sufficient cost-efficient funding readily available when needed. The Company manages its exposure to credit risk, liquidity risk and market risk with the objective to reduce the potentially adverse effects the market uncertainties may have on its financial performance.

(i) Framework of risk management

Items

Risk Management Department
Risk Detection

1. Interest rate, exchange rate, and
inflation
2.Investments of high risk and
leverage, loans to others,
guarantees and endorsements,
and trade of derivatives
3.R&D plans
4.Changes on significant domestic
and international policies and
regulations
5.Changes on technologies
6.Changes on corporate images
7.Merge and reinvestments
8.Expansion of factories
9.Centralization of purchases and
sales

General manager department;
accounting department; finance
department; and general management
department
Computer audit & regular self audit;
monthly budget meeting; finance
supervisors meeting; internal audit
department; and board meeting
General manager department; finance
department; and general management
department
Computer audit & regular self audit;
monthly budget meeting; finance
supervisors meeting; internal audit
department; and board meeting
General manager department;
technology department of each
business division; and general
management department
Purchase & sales meeting; operation
performance meeting; R&D
meeting; board meeting; and internal
audit department
General manager department; manager
department and technology
department of each business division;
legal department; and general
management department
Purchases & sales meeting;
operation performance meeting;
board meeting; and internal audit
department
General manager department; and
manager department of each business
division; R&D center; and general
management department
Purchase & sales meeting; operation
performance meeting; internal audit
department; and board meeting
General manager department; and
manager department of each business
division; and general management
department
Purchase & sales meeting; operation
performance meeting; and board
meeting
General manager department; manager
department of each business division;
and general management department
Purchase & sales meeting; operation
performance meeting; internal audit
department; and board meeting
General manager department; factory
affair department of each business
division; manager department; and
general management department
Purchase & sales meeting; operation
performance meeting; internal audit
department; and board meeting
General manager department; manager
department of each business division;
purchase department; and general
management department
Weekly marker price meeting;
purchase & sales meeting; operation
performance meeting; internal audit
department; and board meeting

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Items

Risk Management Department
Risk Detection

10.Changes of directors,
controllers and major
shareholders
11.Changes of management rights
12.Litigation and other affairs

General manager department; and
shares management division of finance
department
Operation management meeting and
board meeting
General manager department; and
general management department
Operation management meeting and
board meeting
General manager department; general
management department; and legal
department
Purchase & sales meeting, operation
performance meeting, internal audit
department, and board meeting.

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from operating activities, primarily trade receivables, and from financing activities, primarily deposits, fixed-income investments and other financial instruments with banks.

1) Accounts receivable and other receivables

To maintain the credit quality of receivables, a credit risk management policy has been established. Under this policy, each customer is analyzed individually regarding customer’ s financial situation, external and internal credit rating, historical trading record, and current economic condition which may affect customer’s payment ability. In addition, some methods are adopted to reduce the credit risk for specific customers, such as prepayment and insurance of accounts receivable.

2) Investments

The Company mainly invests in Petrochemical Industry, which belongs to mature industry with lower risk. In addition, the Company’ s prudent management creates financial health without high-leveraged investment.

3) Guarantee

The Company’ s endorsement policy is limited to endorsement of subsidiaries or associates with business relationship. The endorsed items are usually related to financing and import duty guarantee. Due to associates’ financial health created by prudent management, management of the Company believes that they are expecting no significant losses from endorsement.

(ii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as much as possible, that it will always have sufficient current funds, such as cash and cash equivalent, securities with high liquidity and sufficient credit line from banks, to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Company’s reputation.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(iii) Market risk

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

1) Foreign currency risk

To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Company utilizes derivative financial instruments, including currency forward contracts and cross currency swaps, to hedge its currency exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency exchange rate movements.

2) Interest rate risk

The Company is exposed to interest rate risk arising from long-term borrowings at floating interest rates. To reduce the risk caused by floating interest rates, the Company utilized interest rate swap contracts to partially hedge its exposure.

(x) Capital management

Although business operated by the Company has reached the stage of maturity, a sufficient amount of capital is still required to support the operation of investee companies, construction and expand its production facilities and equipment.

The Company’s policy is to maintain adequate financial resources and operating plan to meet future operating capital, capital expenditure, research and development expenditure, loans reimbursement, and dividend distribution.

The Company uses debt to capital ratio to manage its capital. The debt to capital ratio is calculated by dividing the net liabilities by the total capital. Net liabilities derived from deducting cash and cash equivalents from total liabilities. Total capital includes common shares of stocks, capital surplus, retained earnings and net liabilities. The Company’s debt to capital ratio at the end of the reporting period was as follows:

Total liabilities Less: cash and cash equivalents Net liabilities Total equity Adjusted equity Debt to capital ratio	December 31, 2018 December 31, 2017 $ 121,816,575 110,461,414 (18,941,635) (14,499,334) 102,874,940 95,962,080 355,568,001 345,010,166 $ 458,442,941 440,972,246 % 22.44 % 21.76

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(y) Changes of liabilities arising from financing activities

Changes of liabilities arising from financing activities were as follows: ：

January 1,2018 Cash flows Non-cash changes Exchanges rate changes December 31,2018	Short-term borrowings $ 8,347,337 7,683,063 - (1,686,720) $ 14,343,680	Short-term notes payable 9,495,509 2,500,000 127 - 11,995,636	Long-term borrowings (include current portion) 9,897,365 (2,988,889) 4,562 - 6,913,038	Bonds payable (include current portion) Total liabilities arising from financing activities 33,558,238 61,298,449 3,600,000 10,794,174 (3,677) 1,012 - (1,686,720) 37,154,561 70,406,915

(7) Related-party transactions:

(a) Name of related parties

Name of related party	Relationship with Consolidated Company
Formosa Plastics Corp. (Cayman Ltd.)	Subsidiary
Formosa Industries Corporation	Subsidiary
Formosa Plastics International (Cayman) Limited	Subsidiary
Formosa Industries (Hong Kong) Limited	Subsidiary
Formosa Industries (Ningbo) Co., Ltd.	Subsidiary
Formosa Electronic (Ningbo) Co., Ltd.	Subsidiary
Formosa Petrochemical Corporation	Associates
Formosa Plastics Corp., U.S.A.	Associates
Formosa Heavy Industries Corp.	Associates
Mai Liao Power Corp.	Associates
Formosa Sumco Technology Corporation	Associates
Formosa Transportation Corp.	Associates
Ya Tai Development Corp.	Associates
Wha Ya Park Management Consulting Corporation	Associates
Ltd.
Formosa Environmental Technology Corporation	Associates
Formosa Resources Corporation	Associates
Formosa Group (Cayman) Limited	Associates
Hua Ya Power Corp.	Associates
Japan Formosa Sumco Technology Corp.	Associates
Formosa Automobile Corp.	Associates
Fujian Fuxin Special Steel Co., Ltd.	Associates

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

Relationship with Consolidated Company Joint venture

Name of related party

Formosa Asahi Spandex Co., Ltd. Joint venture Formosa Daikin Advanced Chemical Co., Ltd. Joint venture Formosa Mitsui Advanced Chemical Co., Ltd. Joint venture Nan Ya Plastics Corporation Other related parties Formosa Chemicals and Fiber Corporation Other related parties Chang Gung Medical Foundation Other related parties Nan Ya PCB Corporation Other related parties Nan Chung Petrochemical Corporation Other related parties PFG Fiber Glass Corporation Other related parties Nan Ya Plastics (Hong Kong) Co., Ltd. Other related parties Nan Ya Plastics (Guangzhou) Co., Ltd. Other related parties Nan Ya Plastics (Nantong) Co., Ltd. Other related parties Nan Ya Plastics Film (Nantong) Co., Ltd. Other related parties Nan Ya Electronic Materials (Kunshan) Co., Ltd. Other related parties Nan Ya Plastics Corporation America Other related parties Formosa Industries Corp., Vietnam Other related parties Formosa Taffeta Co., Ltd. Other related parties Formosa BP Chemicals Corp. Other related parties Formosa Biomedical Technology Corp. Other related parties Formosa Carpet Co., Ltd. Other related parties Formosa Idemitsu Petrochemical Corp. Other related parties Hong Jing Resources Corp. Other related parties Formosa ABS Plastics (Ningbo) Co., Ltd. Other related parties Formosa Chemicals Industries (Ningbo) Co., Ltd. Other related parties Formosa Plastics Marine Corp. Other related parties Formosa Group Ocean Marine Corp. Other related parties Asia Pacific Development Corp. Other related parties Nanya Technology Corporation Other related parties Inteplast Taiwan Corporation Other related parties Asian Pacific Investment Corp. Other related parties Formosa Ha Tinh (Cayman) Ltd. Other related parties Formosa Ha Tinh (Cayman) Limited Taiwan Branch Other related parties

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(b) Significant related-party transactions

(i) Sales to related parties

Significant sales to related parties and the balance of accounts receivable were as follows:

Subsidiaries Associates Joint ventures Other related parties	Sales for the years ended December 31, 2018 2017 $ 9,049,850 8,396,035 12,691,992 11,753,701 73,124 628,110 27,214,140 22,921,707 $ 49,029,106 43,699,553	Accounts receivable –related parties
	2018 $ 9,049,850 12,691,992 73,124 27,214,140 $ 49,029,106	December 31, 2018 December 31, 2017 1,680,478 1,580,907 1,197,854 1,798,174 9,425 18,298 2,921,374 2,897,850 5,809,131 6,295,229

The selling prices and collection terms for the sales to related parties are not significantly different from those third-party customers, and receivables are collected on the 27th of the month following the month of sales. The terms of receivables from subsidiaries are O/A 90 days and from other foreign related parties are O/A 60 days or L/C at sight.

(ii) Purchase from related parties

Purchases from related parties and the balance of accounts payables were as follows:

Subsidiaries Associates Formosa Petrochemical Corporation Others Joint ventures Other related parties	Purchases for the years ended December 31,	Purchases for the years ended December 31,	Accounts payable –related parties
	2018 $ 1,331,919 95,868,581 931,271 - 3,735,862 $ 101,867,633	2017 856,560 84,227,514 795,650 26,697 3,591,678 89,498,099	December 31, 2018 December 31, 2017 85,596 77,257 7,604,281 8,101,464 577 70,144 - 3,524 257,165 270,474 7,947,619 8,522,863

The purchase price and payment terms for the purchase from related parties are not significantly different from those with third-party vendors, and payables are paid on the 27th of the month following the month of purchase. The terms of receivables are O/A 90 days for subsidiaries.

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(iii) Property plant and equipment

Disposals of lands and equipment (recognized as property, plant and equipment) to related parties were as follow:

Associates Other related parties		For the year ended December 31, 2017
	Disposal price Gain from disposal $ 150 150 1,070 664 $ 1,220 814

3) Property plant and equipment

Purchase of lands and equipment (recognized as property, plant and equipment) from related parties and the balance of accounts payable were as follow:

For the years ended December 31, 2018 2017 Associates 95 663 Other related parties 261,481 72,008 $ 261,576 72,671 Financing transactions Financing transactions with related parties were as follows: Associates Formosa Heavy Industries Corp. Formosa Group (Cayman) Ltd. Others Other related parties Formosa Group Ocean Corp. Formosa Ha Tinh (Cayman) Ltd.		For the years ended December 31,	For the years ended December 31,	Other receivables –related parties
			2017 663 72,008 72,671 were as follows:	December 31, 2018 December 31, 2017 - - 117,601 1,045 117,601 1,045 Due from related parties (recognized as other receivables–related parties)
				December 31, 2018 December 31, 2017 $ 9,174,852 2,871,040 - 4,259,500 400,000 - 5,451,192 4,238,500 - 3,040,500 $ 15,026,044 14,409,540

(iv) Financing transactions

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

As of December 31, 2018 and 2017, the interest receivable from the abovementioned transactions amounted to $16,987 thousand and $17,107 thousand, respectively, which was recognized as other receivables–related parties.

(v) Endorsements and guarantees
1) The Company’ s endorsements guarantees to secure related parties’ loans were as follows:

Associates Formosa Group (Cayman) Limited Others Other Related Parties Formosa Ha Tinh (Cayman) Ltd.	December 31, 2018 December 31, 2017 $ 19,208,125 21,639,800 3,303,798 3,208,660 15,915,686 15,457,372 $ 38,427,609 40,305,832

(vi) Purchases of raw materials on behalf of related parties

The detailed information of buying raw materials on behalf of related parties were as follows:

Subsidiaries	Amount of purchases of raw materials on behalf for the years ended December 31, 2018 2017 $ 19,333,682 15,897,049	Other receivables –related parties
	2018 $ 19,333,682	December 31, 2018 December 31, 2017 1,802,303 1,302,593

(vii) Other transactions

The Company's utility and steam expenses paid to related parties were as follow:

Associates Formosa Petrochemical Corporation	Other payables–related parties
	December 31, 2018 December 31, 2017 $ 1,049,502 1,106,806

(viii) Receivables from payment on behalf of related parties1382410

1) The Company paid for construction design service fees on behalf of related parties as follows:

Associates	Other receivables `－`related parties
	December 31, 2018 December 31, 2017 $ 1,382,410 1,004,425

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(ii) Rental (recognized as other income)

The Company lease its office and building to related parties, and derived rental income thereon as follows:

Associates Formosa Petrochemical Corporation Formosa Heavy Industries Corp. Others Joint ventures Formosa Daikin Advanced Chemical Co., Ltd. Others Other related parties Nan Ya Plastics Corporation Others	For the years ended December 31,
	2018 2017 $ 16,568 16,568 61,457 61,457 6,966 6,900 32,779 7,571 596 596 24,740 25,251 17,674 17,723 $ 160,780 136,066

The rentals charged to related parties are determined based on the local market prices, and rents are collected depending on the contract periods (e.g. monthly, semi-annually or annually).

(c) Compensation of key management

The compensation to key management was as follows:

The compensation to key management was as follows:
Short-term employee benefits	For the years ended December 31,
	2018 2017 $ 72,245 76,053

(8) Pledged properties:

The Company’s assets pledged to secure loans were as follows:

Classification of assets Nature of Pledged Assets Fixed assets Property plant and equipment Refundable deposits (recognized as non-current assets) Certificate of deposit Investments accounted for using equity method Stocks of Formosa Petrochemical Corp.	December 31, 2018 December 31, 2017 $ 2,181,675 2,183,879 81,805 34,658 10,607,892 10,712,252 $ 12,871,372 12,930,789

(Continued)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(9) Significant commitments and contingencies:

(a) The amounts of endorsements and guarantees for related parties were as follows:

Endorsements and guarantees	December 31, 2018 December 31, 2017 $ 38,427,609 40,305,832

(b) The amounts of unused outstanding letters of credit for the importation of raw materials for related parties were as follows:

Unused outstanding letters	December 31, 2018 December 31, 2017 $ 688,542 535,719

Formosa Industries (Ningbo) Co., Ltd., a subsidiary of the Company, signed a syndicated loan contract amounting to US$218,000 thousand with a group of financial institutions, with Bank of Taiwan as the lead bank, for its construction which commenced in 2013. According to the requirement of the consortium, the Company has to offer a letter of undertaking and commit to monitor the operations of Formosa Industries (Ningbo) Co., Ltd., as well as to provide sufficient funds to the borrower in order to ensure its subsidiary completes its construction on schedule.

As of December 31, 2017, the Company’ s investee, Formosa Ha Tinh (Cayman) Ltd., signed several contracts of syndicated credit lines with different banks amounting to US$2,220,000 thousand for its operational needs. According to the requirement of the bank consortium, the Company together with the other related parties have to issue a letter of undertaking and to manage the necessary funds to fulfill the repayment of obligations when needed.

(10) Losses due to major disasters: None

(11) Subsequent events: None

(12) Other:

The nature of operating costs and expenses of the Company were as follows:

	For the year ended December 31, 2018	For the year ended December 31, 2018	For the year ended December 31, 2018	For the year ended December 31, 2018	For the year ended December 31, 2017	For the year ended December 31, 2017	For the year ended December 31, 2017	For the year ended December 31, 2017
	Operating costs	Operating expenses	Non- operating expenses	Total	Operating costs	Operating expenses	Non- operating expenses	Total
Employee benefits Salaries Labor and health insurance Pension Remuneration of directors Others Depreciation expenses Amortization expenses	5,076,412 324,679 248,738 - 170,018 3,950,004 141,722	2,948,136 228,479 172,939 7,570 122,370 245,959 1,766	- - - - - - 13,599	8,024,548 553,158 421,677 7,570 292,388 4,195,963 157,087	4,914,738 315,271 245,746 - 169,008 4,974,582 181,596	2,805,024 226,248 167,984 7,520 106,182 264,244 1,766	- - - - - - 14,186	7,719,762 541,519 413,730 7,520 275,190 5,238,826 197,548

As of December 31, 2018 and 2017, the Company had 6,337 and 6,143 employees, respectively, including 8 directors for both year who were adjunct employees.

(Continued)

FORMOSA PLASTICS CORPORATION

Notes to the Financial Statements

(13) Other disclosures:

(a) Information on significant transactions:

The significant transactions required by the “Guidelines” for the Company were as follows:

(i) Fund financing to other parties (the amounts expressed in CNY are in thousands):

(In Thousands of New Taiwan Dollars)

No.	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Colla	teral	Individual funding loan limits	Maximum limit of fund financing	Note
													Item	Value
0 0 0 0 0 0 0 0 0 0 1 2	The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company Formosa Electronic (Ningbo) Co., Ltd. Formosa Electronic (Ningbo) Co., Ltd.	Formosa Petrochemical Corp. Formosa Chemicals & Fiber Corp. Nan Ya plastic Corp. Formosa Heavy Industries Corp. Formosa Group (Cayman) Limited Formosa Automobile Corp. Formosa Transportation Corp. Formosa Ha Tinh (Cayman) Limited Formosa Group Ocean Marine Corp. Japan Formosa Sumco Technology Corp. Formosa Industries (Ningbo) Co., Ltd. Formosa Mitsui Advanced Chemical Co., Ltd.	Other receivables- related parties Other receivables- related parties Other receivables- related parties Other receivables- related parties Other receivables- related parties Other receivables- related parties Other receivables- related parties Other receivables- related parties Other receivables- related parties Other receivables- related parties Other receivables- related parties	Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes	20,500,000 8,000,000 9,500,000 19,874,852 4,259,500 400,000 200,000 3,040,500 10,136,357 1,220,000 304,504 (CNY68,000) 89,560 (CNY20,000)	6,000,000 6,000,000 6,000,000 17,674,852 - 400,000 - - 8,981,192 - 170,164 89,560 (CNY20,000)	- - - 9,174,852 - 400,000 - - 5,451,192 - 170,162 89,559 (CNY20,000)	1.411%~1. 414% 1.414% 1.414% 1.408% ~1.414% 1.408% ~1.411% 1.414% 1.412% 1.408% ~1.411% 1.408% ~1.414% 1% 3.480% 3.480%	2 2 2 2 2 2 2 2 2 2 2	- - - - - - - - - - - -	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	- - - - - - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -	71,113,600 71,113,600 71,113,600 71,113,600 71,113,600 71,113,600 71,113,600 71,113,600 71,113,381 71,113,600 11,528,666 129,298	142,227,200 142,227,200 142,227,200 142,227,200 142,227,200 142,227,200 142,227,200 142,227,200 142,227,200 142,227,200 28,821,666 323,245	Note 4 Note 4

Note 1: (1) Those with business contact please fill in 1

(2) Those necessary for short-term financing please fill in 2.

Note 2: (1) The maximum financing allowed should not exceed 50% of the Company’s net equity, and the maximum short-term financing to companies with no transaction with the Company could not exceed 40% of the Company’s net equity as of December 31, 2017.

(2) The Company grants financing to a related party even if the Company has no normal business transactions with the entity. However, such financing is limited to 25% of the related party’s equity based on the current independent auditor’s report.

(3) The Company grants financing to an entity even if the Company has no normal business transactions with the entity. However, such financing is limited to 20% of the Company’s equity based on the current independent auditor’s report.

(4) The ceiling on loans granted by a subsidiary to others shall not be more than 100% of the Company's net assets, and ceiling on loans granted a short-term financing borrower with no business transactions shall not be more than 40% of the Company's net assets.

Note 3: The ending balance was approved by the Board of Directors.

Note 4: The exchange rate of New Taiwan dollars to CNY dollars was 4.478 to 1 for the highest balance of financing to other parties during the period and for the ending balance; and the exchange rate of New Taiwan dollars to CNY dollars was 4.477940 to 1 for the actual usage during the period.

(Continued)

FORMOSA PLASTICS CORPORATION

Notes to the Financial Statements

(ii) Guarantees and endorsements for other parties:

(In Thousands of New Taiwan Dollars)

No.	Name of guarantor	Counter-party of guarantee and endorsement	Counter-party of guarantee and endorsement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements/ guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company (Note 2)
0 0 0	The Company The Company The Company	Formosa Group (Cayman) Limited Formosa Ha Tinh (Cayman) Limited Formosa Resources Corporatio n	6 6 6	231,119,201 231,119,201 231,119,201	21,133,750 21,185,781 3,329,060	19,208,125 21,185,781 3,303,798	19,208,125 15,915,686 3,303,798	- - -	% 5.40 % 5.96 % 0.93	462,238,401 462,238,401 462,238,401	N N N	N N N	N N N

Note 1: The guarantees and endorsements of the Company and its subsidiaries were listed in the form of numbers with the rules below:

(1) The Company is represented by 0.
(2) The subsidiaries are represented numerically starting from 1.

Note 2: There are seven conditions in which the Company may have guarantees or endorsements for other parties as follows:

(1) The Company has business relationship.

(2) The Company holds directly and indirectly more than 50% of the voting shares of the subsidiaries.

(3) In aggregate, the Company holds directly or its subsidiaries hold indirectly more than 50% of the investee.

(4) Subsidiaries in which the Company holds directly or indirectly more than 90% of the voting shares make endorsement and guarantees for each other.

(5) The Company is required to provide guarantees or endorsements for the construction project based on the construction contract.

(6) The stockholders of the Company provide guarantees or endorsements for the investee in proportion to their stockholding percentage.

(7) According to Consumer Protection Act, companies are required to provide guarantees and endorsements for joint and several liability if take part in business of preconstruction real estate.

Note 3: In accordance with Company's procedures of endorsements and guarantees, limit on the Company's total guarantee amount is 130% of the Company's net assets, the limit on endorsement/guarantee to a single party is 50% of the aforementioned total amount.

(iii) Securities held as of December 31, 2018 (excluding investment in subsidiaries, associates and joint ventures):

(In Thousands of New Taiwan Dollars)

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance		Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company	Asian Pacific Investment Corp. Mai-Liao Harbor Administration Corp. Taiwan Aerospace Corp. Chinese Television System Inc. China Investment & Development Co., Ltd. Formosa Plastics Development Corp. Xiangho Aircraft Leasing Corp. Formosa Petrochemical Transportation Corporation, Ltd. Formosa Network Technology Corp. Formosa Plastics Marine Corp. Formosa Group Ocean Investment Corp. Formosa Plastics Maritime Corp.	Other related parties Other related parties - - - Other related parties - Other related parties Other related parties Other related parties Other related parties Other related parties	Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost	68,743 39,574 1,103 1,769 1,287 15,246 2,071 2,642 2,925 2,429 3 354	2,773,780 922,129 22,945 31,032 3,110 266,354 - 80,877 82,709 596,127 4,982,219 193,531	% 16.17 % 17.99 % 0.81 % 1.05 % 0.80 % 18.00 % 9.55 % 12.00 % 12.50 % 15.00 % 19.00 % 18.11	2,773,780 922,129 22,945 31,032 3,110 266,354 - 80,877 82,709 596,127 4,982,219 193,531	Note 1 Note Note Note 1 Note 1 Note Note Note 1 Note Note 1 Note

(Continued)

FORMOSA PLASTICS CORPORATION

Notes to the Financial Statements

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance		Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
The Company The Company The Company The Company Formosa Plastics Corp. (Cayman Ltd.) Formosa Plastics International (Cayman) Limited The Company The Company The Company The Company	Am Trust Capital I Corp. Central Leasing International Corp. Inteplast Taiwan Corporation Mega Growth Venture Capital Co., Ltd. Swancor (Jiangsu) Carbon Fiber Composite Co., Ltd. Formosa Ha Tinh (Cayman) Limited Nan Ya Plastics Corporation Formosa Chemicals & Fibre Corporation Nan Ya Technology Corp. Mega Prosperity Private Placement Fund	- - Other related parties - - Other related parties Other related parties Other related parties Other related parties -	Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Financial assets carried at cost Available-for-sale financial asset`－`current Available-for-sale financial asset`－`current Available-for-sale financial asset`－`current Available-for-sale financial asset`－`current	5,000 2,373 2,160 2,500 - - 621,178 783,357 198,744 334,815 - 12,479	30,100 - 34,775 19,225 10,038,913 85,480 16,417,976 26,542,369 59,143,443 20,868,113 18,414,848 98,426,404 4,017,249	% 3.91 % 1.43 % 18.00 % 1.97 % 18.00 % 11.43 % 9.88 % 3.39 % 10.97 % - % 25.00	30,100 - 34,775 19,225 10,038,913 85,480 16,417,976 26,542,369 59,143,443 20,868,113 18,414,848 98,426,404 4,017,249	Note 1 Note 1 Note 1 Note Note

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of $300 thousand or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Category and name of security	Account name	Name of counter-party	Relationship with the company	Beginning Balance	Beginning Balance	Purchases	Purchases	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance
					Shares	Amount	Shares	Amount	Shares	Price	Cost	Gain (loss) on disposal	Shares	Amount
he Company he Company ormosa lastics nternational Cayman) imited he Company	Securities- Formosa Plastics International (Cayman) Limited Securities-Sky Dragon Investment Limited Securities- Formosa Ha Tinh (Cayman) Limited Mega Prosperity Private Placement Fund	Investments accounted for using equity method Investments accounted for using equity method Financial assets at fair value through other comprehensive income-non- current Current financial assets at fair value through profit or loss	Formosa Plastics International (Cayman) Limited Sky Dragon Investment Limited Formosa Ha Tinh (Cayman) Limited	Subsidiary Associates Other related parties	51 280,000 564,707 14,979	15,984,457 2,973,156 15,984,213 4,574,268	1 145,800 56,471 -	1,676,070 4,461,424 1,676,070 -	- - - 2,500	- - - 772,908	- - - 820,847	- - - -	52 425,800 621,178 12,479	16,418,229 (Note 1) 6,547,397 (Note 2) 16,417,976 (Note 3) 4,017,249 (Note 4)

Note 1: The ending balance includes the unrealized loss of financial assets at fair value through other comprehensive income-non-current of investment accounted for using equity method of ($1,796,896) thousand and accumulated translation adjustment of $554,598 thousand.

Note 2 : The ending balance includes the share of profit or loss of associates and joint ventures accounted for using equity method of ($768,574) thousand and accumulated translation adjustment of ($118,609) thousand.

Note 3: The ending balance includes the unrealized loss of financial assets at fair value through other comprehensive income-non-current of ($1,796896) thousand and adjustments of $554,589 thousand caused by exchange rate changes at the end of the period.

Note 4: The ending balance includes the net gain of financial assets at fair value through profit or loss of $263,828 thousand recognized at the end of the period.

(Continued)

FORMOSA PLASTICS CORPORATION

Notes to the Financial Statements

(v) Acquisition of individual real estate with amount exceeding the lower of $300 thousand or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Name of property	Transaction date	Transaction amount	Status of payment	Counter- party	Relationship with the Company	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	References for determining price	Purpose of acquisition and current condition	Others
							Owner	Relationshi p with the Company	Date of transfer	Amount
The company The company	Taipei`．`CBD Taipei`．`CBD	May 10, 2018 May 10, 2018	3,674,500 1,000,500	the first , second, and third installment were paid the first, second, and third installment werepaid	TransGlobe Lif Insurance Inc. Meifu development Corporation	e none none	- -	- -	- -	- -	refer to market value and appraisal report refer to market value and appraisal report	Office buildings Office buildings	none none

Note: The office buildings are co-paid an installment by the Company, Nan Ya Plastics Corporation, Formosa Chemicals and Fiber Corporation and Formosa Petrochemical Corporation. The value of office buildings are $18,044,586 thousand and $18,010,228 thousand, respectively, estimated by Euro-Asia Real Estate Appraiser firm and Taiwan Dawa Real Estate Appraiser & Associates.

(vi) Disposal of individual real estate with amount exceeding the lower of $300 thousand or 20% of the capital stock: None
(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of $100 thousand or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Related party	Nature of relationship		Transaction details	Transaction details	Transaction details	Transactions wit from	h terms different others	Notes/Accounts	receivable (payable)	Note
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company	Nan Ya Plastics Corporation Formosa Chemicals & Fiber Corporation Formosa Petrochemical Corporation Formosa Heavy Industries Corp. Mai Liao Power Corp. Formosa Taffeta Co. Ltd. Inteplast Taiwan Corporation Nan Ya Plastics (Guangzhou) Co., Ltd. Nan Ya Plastics (Nantong) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd.	Other related parties `〃` Associates `〃` Associates Other related parties `〃` `〃` `〃` `〃`	(Sales) `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃`	(13,353,279) (7,875,854) (8,370,247) (179,511) (246,080) (339,048) (226,959) (521,123) (222,289) (115,398)	% (7.06) % (4.16) % (4.42) % (0.09) % (0.13) % (0.18) % (0.12) % (0.28) % (0.12) % (0.06)	Before the 27th of the following month Before the 27th of the following month Before the 27th of the following month Before the 27th of the following month Before the 27th of the following month Before the 27th of the following month Before the 27th of the following month O/A 60 days O/A 60 days O/A 60 days	- - - - - - - - - -		1,012,364 638,997 525,999 3,884 212 19,816 19,737 109,721 45,514 69,793	7.92% 5.00% 4.11% 0.03% -% 0.15% 0.15% 0.86% 0.36% 0.55%

(Continued)

FORMOSA PLASTICS CORPORATION

Notes to the Financial Statements

Name of company	Related party	Nature of relationship		Transaction details	Transaction details	Transaction details	Transactions wit from	h terms different others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company The Company The Company The Company Formosa Industries (Ningbo) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. The Company The Company The Company The Company The Company Formosa Industries (Ningbo) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd.	Formosa ABS Plastics (Ningbo) Co., Ltd. Formosa Industries Corp., Vietnam Formosa Industries (Ningbo) Co., Ltd. Formosa Plastics Corp., U.S.A. The Company Nan Ya Plastics (Nantong) Co., Ltd. Nan Ya Plastics (Xiamen) Co., Ltd. Nan Ya Plastics (Guangzhou) Co., Ltd. Nan Ya Plastics Corporation Formosa Chemicals & Fiber Corporation Formosa Petrochemical Corporation Formosa Heavy Industries Corp. Formosa BP Chemicals Corp. The Company Nan Ya Plastics Corporation	Other related parties Other related parties Parent- subsidiary Associates Parent- subsidiary `〃` `〃` `〃` Other related parties `〃` Associates `〃` Other related parties Parent- subsidiary Other related parties	(Sales) `〃` `〃` `〃` `〃` `〃` `〃` `〃` Purchase `〃` `〃` `〃` `〃` `〃` `〃`	(3,970,937) (353,008) (9,049,850) (3,820,080) (1,331,919) (1,108,440) (250,815) (478,243) (114,726) 1,245,647 2,277,294 95,868,581 931,271 163,840 28,383,532 126,887	% (2.10) % (0.19) % (4.78) % (2.02) % (2.60) % (2.16) % (0.49) % (0.93) % (0.22) % 0.90 % 1.65 % 69.39 % 0.67 % 0.12 % 64.60 % 0.29	O/A 60 days O/A 60 days O/A 90 days O/A 90 days Before the 30th of the following month Before the 30th of the following month Before the 30th of the following month Before the 30th of the following month Before the 27th of the following month Before the 27th of the following month Before the 27th of the following month Before the 27th of the following month Before the 27th of the following month O/A 90 days O/A 90 days	- - - - - - - - - - - - - - - -		953,320 33,988 1,680,478 662,095 85,596 74,865 25,912 56,134 6,227 (94,170) (150,018) (7,604,281) (577) (9,183) (3,482,781) (4,263)	7.46% 0.27% 13.14% 5.18% 1.67% 1.46% 0.51% 1.10% 0.12% (0.87)% (1.39)% (70.29)% (0.01)% (0.08)% (73.76)% (0.09)%	Note

Note ： Including the purchases of raw materials on behalf of related parties.

(Continued)

FORMOSA PLASTICS CORPORATION

Notes to the Financial Statements

(viii) Receivables from related parties with amounts exceeding the lower of $100 thousand or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue	Overdue	Amounts received in subsequent period	Allowance for bad debts	Note
					Amount	Action taken
The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company Formosa Industries (Ningbo) Co., Ltd.	Nan Ya Plastics Corporation Formosa Chemicals & Fiber Corporation Formosa Petrochemical Corporation Nan Ya Plastics (Guangzhou) Co., Ltd. Formosa ABS Plastics (Ningbo) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Formosa Plastics Corp., U.S.A. Formosa Heavy Industries Corp. Formosa Automobile Corp. Formosa Group Ocean Marine Corp. Fujian Fuxin Special Steel Co., Ltd Formosa Mitsui Advanced Chemical Co., Ltd.	Other related parties `〃` Associates Other related parties Other related parties Parent subsidiary Associates Associates Associates Other related parties Associates Other related parties	1,012,364 638,997 525,999 109,721 953,320 1,680,478 662,095 9,174,852 400,000 5,451,192 1,382,410 170,162	% 12.37 % 11.48 % 14.89 % 4.82 % 4.95 % 5.55 % 4.21 - - - - -	- - - - - - - - - - - -		1,012,364 638,997 525,999 81,059 842,031 1,167,879 259,440 - - - - -	- - - - - - - - - - - -

(ix) Trading in derivative instruments: None.

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2018 (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars)

Name of investor	Name of investee	Location	Main businesses and products	Original invest	ment amount	Balance a	s of December 31, 2018	s of December 31, 2018	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Ownership	Carrying value
The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company	Formosa Petrochemical Corporation Formosa Plastics Corp., U.S.A. Formosa Heavy Industries Corp. Sky Dragon Investment Limited Formosa Plastics Corp. (Cayman Ltd.) Mai Liao Power Corp. Formosa Sumco Technology Corp. Formosa Transportation Corp. Formosa Fairway Corp. Yi-Jih Development Corp. Ya Tai Development Corp. Formosa Asahi Spandex Co., Ltd. Formosa Automobile Corporation Wha Ya Park Management Consulting Corporation Ltd. Formosa Daikin Advanced Chemical Co., Ltd. Su-Hua Transportation Corporation Formosa Resources Corporation Formosa Environmental Technology Corporation Formosa Plastics Development Corporation Ltd. Formosa Group (Cayman) Limited Formosa Industries Corporation	Taiwan U.S.A Taiwan Samoa Cayman Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Cayman U.S.A	Petrochemicals Chemicals Mechanical equipment Investment Investment Electricity Electronics manufacture Transportation Transportation Construction Development of land Artificial fiber Automobile Consulting service Chemical industry Transportation Mining industry Environmental industry Construction Investment Chemicals	30,144,951 5,614,024 2,498,463 13,221,416 19,104,301 5,985,531 1,709,987 110,664 33,330 57,000 54,034 501,752 270,442 341 100,000 - 5,845,940 417,145 100,000 377 6,864,287	30,144,951 5,614,024 2,498,463 8,759,992 19,104,301 5,985,531 2,837,042 60,664 33,330 57,000 54,034 501,752 270,442 341 100,000 50,000 5,845,940 417,145 100,000 377 6,864,287	2,720,549 70 651,828 425,800 76 547,030 112,708 6,566 4,698 5,700 1,306 50 27,044 33 24 - 584,594 41,714 10,000 13 2	% 28.56 % 22.61 % 32.92 % 50.00 % 100.00 % 24.94 % 29.06 % 33.33 % 33.33 % 28.72 % 45.04 % 50.00 % 45.00 % 33.00 % 50.00 % - % 25.00 % 24.34 % 33.33 % 25.00 % 100.00	96,197,632 63,350,563 7,717,150 6,547,397 29,273,905 11,163,467 6,327,209 1,014,210 98,624 63,305 18,887 1,323,203 105,760 1,503 1,009,244 - 5,370,047 225,838 82,299 631,060 5,345,785	60,090,225 24,392,035 454,628 (1,537,081) 472,346 532,067 5,580,459 40,949 (2,038) 1,003 (10,035) 213,284 302,327 1,216 327,062 19,523 (926,170) 1,363 (16,422) 1,071,094 (569,094)	17,228,355 5,598,261 152,403 (768,574) 472,346 133,645 1,621,643 13,745 (679) 278 (4,520) 106,642 136,045 401 163,531 4,881 (231,542) 308 (5,474) 267,773 (569,094)	Note, Note 1 Note, Note 1 Note, Note 1 Note, Note 1 Note, Note 1, Note 2 Note, Note 1 Note, Note 1 Note, Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note, Note 1 Note, Note 1 Note 1 Note, Note 1, Note 2 Note, Note 1, Note 2

(Continued)

FORMOSA PLASTICS CORPORATION

Notes to the Financial Statements

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as	of December 31, 2018	of December 31, 2018	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Ownership	Carrying value
The Company Formosa Plastics Corp. (Cayman Ltd.) Formosa Industries Corporation Formosa Industries Corporation	Formosa Plastics International (Cayman) Limited. Formosa Industries (Hong Kong) Limited Formosa Olefins, L.L.C. Lolita Packaging, L.L.C.	Cayman Hong Kong U.S.A U.S.A	Investment Reinvestment Olefins Transportation	18,784,620 7,687,504 (USD234,902) 3,164,416 (USD95,700) 306,478 (USD9,880)	17,108,550 7,687,504 (USD234,902) 3,164,416 (USD95,700) 306,478 (USD9,880)	52 - - -	% 100.00 % 100.00 % 33.00 % 38.00	16,418,229 28,812,332 (USD937,505) 2,409,179 (USD78,391) 261,377 (USD8,505)	- 499,270 (USD16,538) (831,552) (USD-27,545) (95,537) (USD-3,165)	- 499,270 (USD16,538) (274,411) (USD-9,090) (36,305) (USD-1,203)	Note, Note 1, Note 2 Note 1, Note 2 Note 1, Note 2 Note 1, Note 2

Note ： Including cumulative translation adjustments.

Note 1 ： Long-term equity investments under equity method.

Note 2 ： The exchange rate of New Taiwan dollars to US dollars on December 31, 2018, was 30.7330 to 1. The average exchange rate of New Taiwan dollars to US dollars for the year ended December 31, 2017, was 30.1886 to 1.

(c) Information on investment in mainland China:
(i) The names of investees in Mainland China, the main businesses and products, and other information:

(In Thousands of New Taiwan Dollars)

Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2018	Investment flows	Investment flows	Accumulated outflow of investment from Taiwan as of December 31, 2018	Net income (losses) of the investee	Percentage of ownership	Book value	Highest Percentage of ownership	Accumulated remittance of earnings in current period
					Outflow	Inflow
Formosa Industries (Ningbo) Co., Ltd. Formosa Electronic (Ningbo) Co., Ltd. Formosa Mitsui Advanced Chemical Co., Ltd. Fujian Fuxin Special Steel Co., Ltd Swancor (Jiangsu) Carbon Fiber Composite Co., Ltd.	Plastics Electronics Electrolyte Steel Carbon fiber	23,074,124 (USD22,023) 74,648 (USD2,260) 244,196 (USD8,200) 34,347,344 (USD1,460,000) 555,517 (USD17,000)	( 2 ) ( 2 ) ( 2 ) ( 2 ) ( 2 )	18,814,370 (USD578,270) 66,137 (USD2,000) 122,098 (USD4,100) 8,759,992 (USD280,000) 99,993 (USD3,060)	- - - 4,461,424 (USD145,800) -	- - - - -	18,814,370 (USD578,270 66,137 (USD2,000 122,098 (USD4,100 13,221,416 (USD425,800 99,993 (USD3,060	) 466,761 (USD15,461) ) 32,509 (USD1,077) ) (53,667) (USD-1,778) ) (2,635,203) (USD-87,291) ) (48,290) (USD-1,600)	100.00% 100.00% 50.00% 29.16% 18.00%	466,761 (USD15,461) 32,509 (USD1,077) (26,834) (USD-889) (768,574) (USD-25,459) -	28,821,666 (USD937,808) 323,245 (USD10,518) 49,644 (USD1,615) 6,546,877 (USD213,024) 85,481 (USD2,781)	- - - - -

Note1: Investment methods are classified into the following three categories.

(1) Directly invest in a company in Mainland China.
(2) Through investing in an existing company in the third area, which then invested in the investee in Mainland China.

(3) Others.

(ii) Limitation on investment in Mainland China:

itation on investment in Mainland China:
Accumulated Investment in Mainland China as of December 31, 2018	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment (Note 2)
32,324,014 (USD1,013,230)	35,565,549 (USD1,157,243)	-

Note: The exchange rate of New Taiwan dollars to US dollars on December 31, 2018, was 30.733 to 1.

Note 1: Including USD$144,013 thousand approved capital increase out of retained earnings.

Note 2: The Industrial Development Bureau of the MOEA issued a letter to the Company stating that it qualifies under Section 12 of the Statute for Upgrading Industries.

(iii) Significant transactions: None

(14) Segment information:

Please refer to the consolidated financial statements in 2018.

(Continued)

Formosa Plastics Corporation

List of Cash and Cash Equivalents

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items Cash on hand Petty cash Bank deposit Cash equivalents	Description Amount $ 158 200 Checking account 58,094 Demand acccount 6,674 USD 134,116 thousand 4,121,790 JPY 50,378 thousand 13,965 EUR 595 thousand 20,920 CNY 72 thousand 322 4,221,765 Time deposits-NTD(note1&2) 959 USD 413,131 thousand(note1) 12,696,762 Repurchase bonds USD 65,786 thousand(note3) 2,021,791 14,719,512 $ 18,941,635

note: Exchange rate on December 31, 2018 USD 1.00=NTD 30.733 JPY 1.00=NTD 0.2772 EUR 1.00=NTD 35.167 CNY1.00=NTD 4.4779

note 1:	Bank	Original currency (thousand) TWD 959 USD 30,256 USD 30,315 USD 30,188 USD 40,000 USD 50,000 USD 35,733 USD 30,000 USD 30,462 USD 40,578 USD 30,190 USD 25,000 USD 40,409	Rate Term % 1.065 106.12.29`～`107.12.29 note 2 % 2.900 106.12.15`～`107.01.17 % 3.280 106.10.24`～`107.01.24 % 2.910 106.10.24`～`107.01.24 % 3.350 106.11.28`～`107.01.04 % 3.400 106.12.01`～`107.01.08 % 3.150 106.12.18`～`107.01.25 % 3.020 106.12.20`～`107.01.22 % 3.220 106.12.29`～`107.01.02 % 3.220 106.12.26`～`107.01.26 % 3.100 106.12.04`～`107.01.04 % 3.300 106.12.15`～`107.01.15 % 3.250 106.12.20`～`107.03.01
	Hua Nan Commercial Bank Hua Nan Commercial Bank Bank of China Ltd Taipei Fubon Commercial Bank Mega Bills Finance Co., Ltd. Mega Bills Finance Co., Ltd. Bank of Kaohsiung Taiwan Business Bank Credit Agricole CIB Credit Agricole CIB E Sun Commercial Bank, Ltd. Bank SinoPac First Commercial Bank

note 2 ： Time deposits less than 1 year are used as short-term funds.

note 3:	Bank	Original currency (thousand) USD 30,000 USD 35,786	Contract Rate Term % 2.500 107.11.29~108.01.02 % 3.300 107.12.24~108.02.25
	Yuanta Securities Co. Ltd ( Hong Kong) Yuanta Securities Co. Ltd

Formosa Plastics Corporation

List of Inventory

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items Raw materials Supplies Work in process Finished goods Machinery and accessories in process Others Less : allowance to reduce inventory to NRV Total	Amount Cost NRV Annotations $ 1,567,615 1,564,006 NRV 491,515 504,066 `″` 1,462,839 1,318,819 `″` 9,945,676 9,849,152 `″` 1,502,299 8,480,655 `″` 10,722 10,722 `″` 14,980,666 21,727,420 (783,871) $ 14,196,795
	Cost $ 1,567,615 491,515 1,462,839 9,945,676 1,502,299 10,722 14,980,666 (783,871) $ 14,196,795

Formosa Plastics Corporation

List of Other Current Assets and Other Receivables

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items Prepaid expense Prepaid material expense Payment on behalf of others Other current assets Other receivables	Description Amount Catalytic $ 41,311 Insurance 15,049 Construction Materials 781,229 Others 465,010 1,302,599 Materials from third party 609,530 31,475 $ 1,943,604 Interest $ 36,580 Claims 54,621 Materials 145,568 Tax refund of sales tax 782,412 Allocation of common expense 155,123 Payment on behalf of related parties 64,432 Rent 3,474 Others 134,087 $ 1,376,297

Formosa Plastics Corporation

List of Assets Measured at Fair Value Through Other Comprehensive Income - Current

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Name of financial assets Nan Ya Plastics Corporation Formosa Chemicals and Fiber Corporation Nanya Technology Corporation	Description Stocks Stocks Stocks	Shares 783,357 198,744 334,815	Face value Total amount $ 10 7,833,570 10 1,987,440 10 3,348,150 $ 13,169,160	Cost 16,930,051 1,775,505 10,215,315 28,920,871	Fair	value Total amount Note 59,143,443 - 20,868,113 - 18,414,848 - 98,426,404
					Unit price 75.50 105.00 55.00

Formosa Plastics Corporation

List of Assets Designated at FVTPL-Current

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Fair value Total Unit Total Name of financial assets Description Shares Face value amount Cost price amount Note Private equity of Mega Funds 12,479 $ 328.34 4,097,403 4,097,403 321.92 4,017,249 - International Commercial Bank Co. Ltd

Formosa Plastics Corporation

Changes in Investmemts Using Equity Method

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

January, 1	January, 1	Acquisition Shares Amount - - - - - - 145,800 4,461,424 - - - - - 20 - - - - - - - - - - - - - - - - - - - - - - - - - - 1 1,676,070 - - 6,137,514 - - 6,137,514	Disposal Shares Amount - - - - - - - - - - - - 112,707 1,127,075 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,127,075 - - 1,127,075	Equity method Share profit Share loss 17,228,355 - 5,598,261 - 152,403 - - 768,574 472,346 - 133,645 - 1,621,643 - 13,745 - - 679 278 - - 4,520 106,642 - 136,045 - 401 - 163,531 - 4,881 - 308 - - 231,542 - 5,474 267,773 - - - - 569,094 25,900,257 1,579,883 - - - - 25,900,257 1,579,883	Dividends from investees Share dividends (shares) Cash dividends - 17,139,459 - - - - - - - - - 191,461 - 468,863 - 3,034 - - - - - - - 115,287 - - - - - 144,308 - - - - - - - - - - - - - - 18,062,412 - - 18,062,412	Others (note2) Shares Amount - (1,290,840) - (650,342) - (752) - - - (25,412) - 403,704 - (884) 1,796 308,739 - (1,649) - - - (1) - (5,584) - (813) - (280) - (2,909) (10,495) (280,745) - (875) - - - - - - - (1,796,896) - - (3,345,539) 2,191,108 (29,472) (1,183,903)		December, 31
Shares	Amount	Shares - - - 145,800 - - - - - - - - - - - - - - - - 1 -	Shares - - - - - - 112,707 - - - - - - - - - - - - - - -	Share profit 17,228,355 5,598,261 152,403 - 472,346 133,645 1,621,643 13,745 - 278 - 106,642 136,045 401 163,531 4,881 308 - - 267,773 - -	Share dividends (shares) - - - - - - - - - - - - - - - - - - - - - -	Shares - - - - - - - 1,796 - - - - - - - (10,495) - - - - - -	Shares 2,720,549 70 651,828 425,800 76 547,030 112,708 6,566 4,698 5,700 1,306 50 27,044 33 24 - 41,714 584,594 10,000 13 52 2	Holding % 28.56 22.61 32.92 50.00 100.00 24.94 29.06 33.33 33.33 28.72 45.04 50.00 45.00 33.00 50.00 - 24.34 25.00 33.33 25.00 100.00 100.00
2,720,549 70 651,828 280,000 76 547,030 225,415 4,770 4,698 5,700 1,306 50 27,044 33 24 10,495 41,714 584,594 10,000 13 51 2	$ 97,228,576 57,567,359 7,712,942 2,977,193 28,409,551 10,922,498 6,294,594 708,415 100,952 63,027 23,408 1,337,432 (29,472) 1,382 992,930 275,864 226,473 5,350,327 87,773 384,013 16,064,282 6,335,328 243,034,847 (863,500) 29,472 $ 242,200,819				- - - - - - - - - - - - - - - - - - - - - -
				25,900,257 - - 25,900,257

Note 1 : cumulative translation adjustments come from exchanging financial statements of Formosa Plastics Corp., U.S.A., Formosa Plastics Corp. (Cayman Ltd), Sky Dragon Investments Limited, Formosa Industries Corporation, Formosa Group (Cayman) Limited, Formosa Plastics International (Cayman) Ltd. into NTD, which are 835,285 thousand, 417,419 thousand, (122,646) thousand, (420,449) thousand, (20,726) thousand and 474,773 thousand, respectively, and from translation adjustments of investees Formosa Petrochemical Corporation, Formosa Heavy Industries Corp., Mai Liao Power Corp., Formosa co Technology Corporation, Formosa Transportation Corp., Formosa Environmental Technology Corporation, Formosa Resources Corporation, which are 171,002 thousand, (147,443) thousand, (104,919) thousand, 7,774 thousand, (13,655) thousand, (69) thousand and 251,262 thousand.

Note 2 : others come from recognition based on holding percentage of investees' pension actuarial report adjustment, share premium and unrealized gain or loss from financial assets. Su-Hua Transportation Corporation merged with Formosa Transportation Corporation at the stock exchange rate ratio of 5.843543 ： 1. The amount shown in Formosa Plastics Corp. (Cayman Ltd) includes realized gross profit of transactions between related parties.

Note 3 : The Company bought 252 shares of Formosa co Technology Corporation in 2018. It is not disclosed independently because shares acquired are below 1,000.

Formosa Plastics Corporation

STATEMENTS OF AVAILABLE-FOR-SALE ASSETS-NONCURRENT

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Name	January, 1 Shares Amount 68,743 $ 777,804 39,574 539,486 1,103 11,026 1,769 28,609 1,287 8,250 15,246 90,010 2,071 - 2,642 24,013 2,925 13,331 2,429 15,000 3 856,948 2,160 21,600 354 1,691 - - 5,000 50,000 2,373 - 2,500 25,000 $ 2,462,768	January, 1 Shares Amount 68,743 $ 777,804 39,574 539,486 1,103 11,026 1,769 28,609 1,287 8,250 15,246 90,010 2,071 - 2,642 24,013 2,925 13,331 2,429 15,000 3 856,948 2,160 21,600 354 1,691 - - 5,000 50,000 2,373 - 2,500 25,000 $ 2,462,768	Acquisition Shares Amount - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Disposal Shares Amount - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Dividends from investees Share dividends (shares) Cash dividends - 687,430 - 150,617 - 772 - - - 270 - - - - - 4,812 - 7,898 - 60,987 - - - - - 35,790 - - - 2,000 - - - - 950,576	Measurement Gain or Loss IFRS 9 Adjustments 2018 2,633,911 (637,935) 178,893 203,750 19,682 (7,763) 39,525 (37,102) (5,686) 546 169,026 7,318 - - 45,187 11,677 82,392 (13,014) 1,008,740 (427,613) 5,143,100 (1,017,829) 7,659 5,516 184,218 7,622 - - (14,277) (5,623) - - (5,500) (275) 9,486,870 (1,910,725)	December, 31 Shares Amount 68,743 3,461,210 39,574 1,072,746 1,103 23,717 1,769 31,032 1,287 3,380 15,246 266,354 2,071 - 2,642 85,689 2,925 90,607 2,429 657,114 3 4,982,219 2,160 34,775 354 229,321 - - 5,000 32,100 2,373 - 2,500 19,225 10,989,489	Guarantee /Pledge Note N/A - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` - `〃` -
	Shares		Shares - - - - - - - - - - - - - - - - -		Share dividends (shares) - - - - - - - - - - - - - - - - -	IFRS 9 Adjustments 2,633,911 178,893 19,682 39,525 (5,686) 169,026 - 45,187 82,392 1,008,740 5,143,100 7,659 184,218 - (14,277) - (5,500) 9,486,870	Shares 68,743 39,574 1,103 1,769 1,287 15,246 2,071 2,642 2,925 2,429 3 2,160 354 - 5,000 2,373 2,500
Asian Pacific Investment Corp. Mai-Liao Harbor Administration Corp. Taiwan Aerospace Corp. Chinese Television System Inc. China Investment & Development Co., Ltd. Formosa Plastics Development Corp. Xiangho Aircraft Leasing Corp. Formosa Petrochemical Transportation Corporation, Ltd. Formosa Network Technology Corp. Formosa Plastics Marine Corp. Formosa Group Ocean Investment Corp. Inteplast Taiwan Corporation Formosa Plastics Maritime Corp. Taiwan Times Am Trust Capital I Corp. Central Leasing International Corp. Mega Growth Venture Capital Co., Ltd. Financial assets, net	68,743 39,574 1,103 1,769 1,287 15,246 2,071 2,642 2,925 2,429 3 2,160 354 - 5,000 2,373 2,500	$ 777,804 539,486 11,026 28,609 8,250 90,010 - 24,013 13,331 15,000 856,948 21,600 1,691 - 50,000 - 25,000 $ 2,462,768

Formosa Plastics Corporation

List of Other Assets-Non current December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items		Amount
Materials for repairment and maintenance	$	4,126,727
Prepaid equipment expense		373,386
Others		362,194
Total	$	4,862,307

Formosa Plastics Corporation

List of Short-term Borrowings

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Banks Taiwan Cooperative Bank Co., Ltd. Chang Hwa Commercial Bank First Commercial Bank (Nanking- East-Road Branch) SMBC Mega International Commercial Bank Co. Ltd CityBank Taiwan Bank of Taiwan (Zhong-Shan Branch) Taipei Fubon Commercial Bank Taiwan Business Bank Hua Nan Bank (Min-Sheng Branch) Bank of China Ltd(Taipei Branch) DBS banking Ltd(Taipei Branch) - Hua Nan Bank (Min-Sheng Branch) Chang Hwa Commercial Bank The Bank Of Mitsubishi UFJ, Ltd DBS banking Ltd	Description Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Advances to emplotyees	Rate 1.10% 1.10% 0.95% 0.75% 0.98% 0.75% 1.115% 0.98% 0.764% 1.10% 0.82% 0.82% 1.09% 1.10%	Amount Mortgages or Guarantees $ 750,000 NA 1,700,000 `〃` 1,100,000 `〃` 1,500,000 `〃` 800,000 `〃` 1,000,000 `〃` 1,000,000 `〃` 600,000 `〃` 500,000 `〃` 2,442,400 `〃` 1,100,000 `〃` 500,000 `〃` 284,770 `〃` 1,000,000 YES 50,629 NA 10,947 `〃` 4,934 `〃` $ 14,343,680

Formosa Plastics Corporation

List of Other Currrent Liabilities

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items Accrued expense Unearned revenue Withholding paymen	Description Amount Salary (includes bonus) $ 3,678,604 Tax 116,931 Utilities expense 2,227,704 Freignt fee 54,608 Interest expense 230,071 Insurance premiums 130,862 Pension 95,602 Others 967,013 7,501,395 Sales revenue 2,878,035 Rent 19 Transfer money of bid 6,656 Others 468,689 3,353,399 Health and labor insurance expense 36,992 Others 7,884 44,876 $ 10,899,670

Formosa Plastics Corporation

List of Long-term Borrowings

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Expressed in Thousands of New Taiwan Dollars Debtor Type Term Rate Due in one year Due after one year Total Pepayment Method Syndicated loan agreement with Bank of Taiwan and other banks Pledged 2014.04.29 ～ 2021.04.29 1.632% 2,284,327 3,428,711 5,713,038 The first payment will be made three years after receiving the fund for the first time. The amount will be paid in nine installemts every half year. Sumitomo Mitsui Banking Corporation Unsecured 2016.08.09 ～ 2020.08.09 0.800% - 1,200,000 1,200,000 〃 Total of long-term debts $ 2,284,327 4,628,711 6,913,038

Formosa Plastics Corporation

List of Bonds Payable

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Name	Amount Issued $ 5,000,000 2,000,000 2,100,000 2,900,000 2,200,000 4,300,000 2,500,000 10,000,000 1,500,000 2,200,000 6,300,000 1,000,000 5,000,000 3,300,000 3,700,000 5,200,000 2,700,000 1,400,000 $ 63,300,000	Amount Paid 5,000,000 1,000,000 2,100,000 1,450,000 2,200,000 2,150,000 - 10,000,000 - 2,200,000 - - - - - - - - 26,100,000		Premiums/ Discounts Ending Balance - - 386 999,614 - 558 1,449,442 - 499 2,149,501 2,549 2,497,451 - 6,817 1,493,183 - 5,780 6,294,220 2,964 997,036 4,059 4,995,941 3,213 3,296,787 5,108 3,694,892 2,964 5,197,036 4,283 2,695,717 6,259 1,393,741 45,439 37,154,561 (4,598,557) $ 32,556,004	Issue Date Coupon rate Interest payment made Repayment method Pledge/ Guarantee 2012.5.22 1.26%, annual , simple, once a year May Payable in 2 equal installments at the end of the fourth and fifth year after the issuance day N/A 2012.5.22 1.42%, annual , simple, once a year May Payable in 2 equal installments at the end of the sixth and seventh year after the issuance day N/A 2012.9.12 1.28%, annual , simple, once a year September Payable in 2 equal installments at the end of the fourth and fifth year after the issuance day N/A 2012.9.12 1.40%, annual , simple, once a year September Payable in 2 equal installments at the end of the sixth and seventh year after the issuance day N/A 2012.11.5 1.25%, annual , simple, once a year November Payable in 2 equal installments at the end of the fourth and fifth year after the issuance day N/A 2012.11.5 1.39%, annual , simple, once a year November Payable in 2 equal installments at the end of the sixth and seventh year after the issuance day N/A 2012.11.5 1.53%, annual , simple, once a year November Payable in 2 equal installments at the end of the nineth and tenth year after the issuance day N/A 2013.6.10 1.23%, annual , simple, once a year June Payable in 2 equal installments at the end of the third and fourth year after the issuance day N/A 2013..6.10 1.52%, annual , simple, once a year June Payable in 2 equal installments at the end of the nineth and tenth year after the issuance day N/A 2013..11.8 1.42%, annual , simple, once a year November Payable in 2 equal installments at the end of the fourth and fifth year after the issuance day N/A 2013..11.8 1.94%, annual , simple, once a year November Payable in 2 equal installments at the end of the nineth and tenth year after the issuance day N/A 2014.5.21 1.83%, annual , simple, once a year May Payable in 2 equal installments at the end of the nineth and tenth year after the issuance day N/A 2014.5.21 1.92%, annual , simple, once a year May Payable in 2 equal installments at the end of the eleventh and twelveth year after the issuance day N/A 2017.5.19 1.09%, annual , simple, once a year May Payable in 2 equal installments at the end of the fourth and fifth year after the issuance day N/A 2017.5.19 1.32%, annual , simple, once a year May Payable in 2 equal installments at the end of the sixth and seventh year after the issuance day N/A 2018.6.26 0.82%, annual , simple, once a year June Payable in 2 equal installments at the end of the fourth and fifth year after the issuance day N/A 2018.6.26 0.93%, annual , simple, once a year June Payable in 2 equal installments at the end of the sixth and seventh year after the issuance day N/A 2018.6.26 1.09%, annual , simple, once a year June Payable in 2 equal installments at the end of the nineth and tenth year after the issuance day N/A
The first issuance of domestic corporate bonds in 2012 (May) `－`type A `－`type B The second issuance of domestic corporate bonds in 2012 (September) `－`type A `－`type B The third issuance of domestic corporate bonds in 2012 (November) `－`type A `－`type B `－`type C The first issuance of domestic corporate bonds in 2013 (June) `－`type A `－`type B The second issuance of domestic corporate bonds in 2013 (November) `－`type A `－`type B The first issuance of domestic corporate bonds in 2014 (May) `－`type A `－`type B The first issuance of domestic corporate bonds in2017 (May) `－`type A `－`type B The first issuance of domestic corporate bonds 2018 (June) `－`type A `－`type B `－`type C Less : amount due in a year Total

Formosa Plastics Corporation

List of Operating Revenue(1)

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Products PVC PA Processing Aid Modifier Chloromothane Liquid Caustic Soda Flake Caustic Soda Hydrogen CI HCL VCM EPC Hydrofluoric Acid Micropearls Caustic Soda Chlorine Trifluoride Others Plastic Division HPAA MA Butyl Acrylate 2-Ethylhexyl Acrylate Ethyl Acrylate Syngas N-Butanol N-Butyraldehyde Isobutyraldehyde SAP Tairy Carbon Fiber Others Tairylan Division	Unit MT `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` KG `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃`	Quantity Amount 1,253,348.054 $ 34,449,210 9,194.625 806,631 19,702.630 1,528,927 27,909.894 557,443 1,298,378.390 22,292,211 41,135.700 893,040 12,921.108 626,049 58,694.052 293,470 86,991.201 171,511 430,601.690 8,035,770 246,239.691 1,855,807 35,530.577 82,403 70,456.535 1,474,286 84,637.000 25,794 - 81,898 73,174,450 33,396.815 1,297,232 22,353.370 1,028,991 104,137.496 4,347,426 34,879.878 1,601,754 8,194.660 387,446 13,812.233 278,064 166,155.710 5,078,384 10,796.469 305,864 7,298.300 213,222 97,376.950 3,915,642 5,472.022 2,339,796 - 63,435 20,857,256

Formosa Plastics Corporation

List of Operating Revenue(2)

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Products Calcium carbide PCC GCC TAICAL U-CAL Taiso Lime Others Carbide Division HDPE LDPE EVA LLDPE Paraffin D.F.P level GZ Process Fuel Polyolefin Division Acrylonitrile MTBE MTBE Residual Acetonitrile B-1 Epichlorohydrin 30% HCL Methyl Methacrylate Dichloropropane DCP Chemistry Division DCS WMS Automation Maintenance RTPMS Electronics Special Project Department Extrusion Molding General Purpose Injection Molding Multi-Filament Molding Film Molding Block Copolymer PP Products Out Of Standard POM Polypropylene Division Polypropylene Division Total og Other Revenue Net Operating Revenue	Unit MT MT `〃` `〃` `〃` `〃` `〃` MT `〃` `〃` `〃` `〃` `〃` MT `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` MT `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃`	Quantity Amount 2,308.600 $ 63,164 13,886.745 170,777 74,735.295 242,775 5,180.175 71,815 5,585.790 116,748 2,157.975 166,599 127,116.340 454,907 - 1,535 1,288,320 488,539.787 20,361,107 585.900 28,249 212,406.300 9,721,259 162,117.170 6,171,882 6,977.956 195,978 607.970 486 36,478,961 264,095.021 15,477,149 173,927.076 3,861,183 84,152.113 1,471,561 6,324.760 397,998 11,860.403 384,613 89,314.596 5,019,558 23,847.648 37,483 72,174.751 5,395,577 17,445.900 1,709,539 3,968.685 27,462 33,782,123 418,159 226,005 38,831 75,930 23,195 782,120 67,875.785 2,737,042 7,489.175 291,295 61,389.400 2,385,597 72,899.275 2,826,749 82,914.595 3,244,991 147,264.945 5,933,248 43,902.050 1,877,758 3,832.630 97,083 45,347.875 2,404,000 21,797,763 188,160,993 1,085,414 $ 189,246,407

Formosa Plastics Corporation

List of Operating Cost

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

	Items		Amount
Direct materials
Raw materials at the beginning of period (includes		$	917,491
Purchase			115,374,462
Add : others			59,508,160
Less : raw materials at the end of	period (includes inevtories in transit)		(1,567,615)
others			(457,181)
Subtotal of raw materials			173,775,317
Supplies
Supplies at the beginning of period			410,309
Purchase			22,781,622
Add : others			6,859
Less : supplies at the end of period			(491,515)
others			(22,707,275)
Subtotal of supplies			-
Direct labor			2,851,000
Manufacturing overhead			53,821,719
Manufacturing cost			230,448,036
Add : work in process at the beginning of period (includes Machinery and accessories in process)			2,868,870
others			877,706
Less : work in process at theend of period (includes Machinery and accessories in process)			(2,965,138)
others			(57,256,009)
Cost of finished goods			173,973,465
Add : Finished goods at the beginning of period			8,828,711
others			541,322
Less : Finished goods at the end	of period		(9,945,676)
Others			(19,574,333)
Differences of transfer pricing			(356,560)
Cost of goods sold			153,466,929
Idle Capacity			1,510,288
Loss on write-down of inventory			(280,233)
Loss on disposal of inventory			14,382
Gain from sale of scraps			(108,668)
Stock gain			(86,232)
Stock loss			9,761
Other operating costs			1,100,032
Total of operating costs		$	155,626,259

Formosa Plastics Corporation

List of Manufacturing Expense

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items		Amount
Salaries	$	2,472,602
Employees bonus expense		19,026
Meals expense		47,763
Pension		154,076
Main by-product		4,061,430
Depreciation expense		3,949,773
Fuel expense		7,618,038
Steam expense		3,725,599
Package expense		1,502,791
Utilities expense		15,895,938
Quarry expense		13,937
Repair and maintenance expense		7,697,994
Rental expense		92,877
Insurance expense		41,782
Tax expense		119,618
Miscellaneous expense		194,924
Consumables		1,120,827
Travel expense		36,656
Internal arrangement expense		169,779
Freight fee		233,637
Freight fee		1,224,808
Security expense		1,102,861
Project improving expense		251,078
Research expense - researchers salaries		252,344
Research expense - researchers bonus		1,865
Research expense - researchers meal expense		4,328
Research expense - researchers pension		289
Research expense - depreciation		231
Research expense - repair and maintenance		733,782
Research expense - development		15,468
Research expense - travel expense		2,509
Research expense - project improveing expense		17,718
Research expense - others		6,420
Other manufacturing expense		1,038,951
Total	$	53,821,719

100

Formosa Plastics Corporation

List of Administration Expense

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items		Amount
Salaries	$	2,229,105
Meals expense		46,101
Pension		155,178
Bonus expense		20,620
Benefit expense		41,715
Depreciation expense		150,111
Repair and maintenance expense		147,358
Rental expense		48,982
Insurance expense		1,919
Tax expense		112,064
Entertainment expense		52,114
Postage and phone expense		19,085
Transportation expense		34,958
Books and publications expense		5,369
Printing & supplies expense		6,695
Office eauipment expense		1,200
Travel expense		135,360
Utilities expense		105,644
Freight fee		2,345
Medical expense		5,413
Internal arrangement expense		8,963
Miscellaneous expense		285,137
Computer user fee		171,906
Remuneration		13,362
Security expense		162,829
Donations		226,682
Material test expense		16,196
Advertisement expense		6,428
Overseas promotion expense		5,113
Pollution prevention expense		70,981
Fines		2,097
Others		146,136
Total	$	4,437,166

101

Formosa Plastics Corporation

List of R&D Expense and Selling Expense

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

R&D Expense `：`

R&D Expense`：`
Items		Amount
Salary expense of researchers	$	592,046
Meal expense of researchers		10,450
Pension of researchers		1,472
Bonus for researchers		4,322
Depreciation		95,530
Materials test expense		13,619
R&D expense		152,894
Travel expense		29,071
Utilities expense		13,762
Repair and maintenance expense		91,522
Security expense		59,824
Others		73,662
Total	$	1,138,174
Selling Expense:
Items		Amount
Salary expense	$	355,464
Meal expense		6,840
Pension		16,288
Employees bonus		2,716
Export freight fees of sea & air		1,091,076
Export insurance expense		6,830
Export commission		192,032
Export freight fees of ground		489,353
Export miscellaneous expense		142,972
Customs clearance fee		829
Export package expense		204,828
Export port administration expense		146,856
User fee of port facilities regards to export		56,139
Export terminal handling charge		656,132
Port user fee due to export		105,199
Export storage expense		87,207
Freight fee of domestic sales		1,232,510
Employees benefit expense		52,909
Depreciation		318
Rental expense		33,540
Profesional service expense		42,690
Entertainement expense		4,876
Postage and phone expense		7,663
Travel expense		17,853
Miscellaneous expense		3,470
Samples expense		14,738
Overseas promotion expense		6,356
Others		50,902
Total	$	5,028,586

102

Formosa Plastics Corporation

List of Other Revenue

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items
Interest revenue
Dividend revenue
Rent revenue

Description
Amount
Demand acccount
$ 9,884
Time deposits
332,199
Related parties - loans & receivables from payment on
behalf of related parties
209,919
Others
47,062
$
599,064
Nan Ya Plastics Corporation
$ 3,995,120
Formosa Chemicals and Fiber Corporation
1,391,208
Asian Pacific Investment Corp.
687,430
Mai-Liao Harbor Administration Corp.
150,618
Taiwan Aerospace Corp
772
China Investment & Development Co., Ltd.
270
Formosa Plastics Maritime Corp.
35,790
Formosa Petrochemical Transportation Corporation, Ltd.
4,812
Formosa Network Technology Corp.
7,897
Formosa Plastics Marine Corp.
60,987
Nanya Technology Corporation
1,174,776
Am Trust Capital I Corp.
2,000
$
7,511,680
$
171,677

103

Formosa Plastics Corporation

List of Other Gains and Losses

For the year ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items
Gain on disposal of property, plant
and equipment
Net gain from foreign exchange
Impairment loss on non-financial
assets
Other gains
Other losses

Description
Amount
$
66,465
Realized net gain from foreign exchange
$ 1,248,512
Unrealized foreign exchange gain - accounts receivable
15,739
other receivables
3,997
bank deposit & cash equivalent
64,654
Unrealized foreign exchange loss - financing of import using
foreign currency
(3,895)
$
1,329,007
Impaiment on assets
$
215,889
Expense estimate surplus ( actual cost less than estimated cost)
$ 24,487
Gain from purchases of raw materials on behalf of others
146,151
Revenue from claims
1,472
Others
841,465
$
1,013,575
Expense estimate deficit ( actual cost greater than estimated cost)
$ (25,813)
Loss on materials
(181,827)
Others
(4,753)
$
(212,393)

104

Formosa Plastics Corporation

List of Financing Cost

December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Items
Interest expense

Description
Amount
Interest of short-term secured loans
$ 5,228
Interest of short-term unsecured loans
95,717
Interest of payable benefit to employees
407
Discount interest (banks financing interest paid by seller due to
L/C export & discount interest of bill of exchange of D/A export)
114,682
Interest of financing and reimbursement between related
39
Interest of short-term notes and bills payable
56,200
Interest of demestic bonds payable
547,887
Interest of long-term debts - syndicated loan agreement with Mega
Bills Finance Co., Ltd. & other long-term debts
125,252
Administration expense
29,349
Others
2,337
less : capitalized interest
(8,544)
$
968,554

AI assistant

FPC — Audit Report / Information 2018

51762_rns_2018-12-21_69b409f2-370c-4880-8e40-7de2bbe4e5a3.pdf

Table of Contents

Independent Auditors’ Report

Opinion

Basis for Opinion

Key Audit Matters

1. Revenue recognition

Other Matter

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

Auditors’ Responsibilities for the Audit of the Financial Statements

KPMG

Notes to Readers

(English Translation of Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Balance Sheets

December 31, 2018 and 2017

(Expressed in Thousands of New Taiwan Dollars)

(English Translation of Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017

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

(English Translation of Parent Company Only Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Statements of Changes in Equity

For the years ended December 31, 2018 and 2017

(English Translation of and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Statements of Cash Flows

For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

(English Translation of Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2018 and 2017

(1) Company history

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

(3) Application of new standards, amendments and interpretations:

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(i) IFRS 15 “Revenue from Contracts with Customers”

2) Construction contracts

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

3) Transition

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

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

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(4) Summary of significant accounting policies:

(a) Statement of compliance

Basis of measurement

Functional and presentation currency

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(ii) Foreign operations

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

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

3) Fair value through profit or loss (FVTPL)

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

2) Loans and receivables

3) Impairment of financial asset

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(h) Investment in associates

(i) Subsidiaries

(j) Joint venture

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(k) Property, plant and equipment

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(l) Lease

(n) Impairment of non-derivative financial assets

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

(o) Revenue recognition

2) Construction contracts

FORMOSA PLASTICS CORPORATION Notes to the Financial Statements

3) Financing components

(ii) Revenue recognition (applicable before January 1, 2018)

1) Sales of goods

2) Construction contracts

FPC Audit Report / Information 2018