JDS — Audit Report / Information 2018

Nov 13, 2018

Jourdeness Group Limited and Subsidiaries

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

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Jourdeness Group Limited

Opinion

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

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

Basis for Opinion

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

Key Audit Matters

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

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

- Impairment Assessment of Other Intangible Assets Customer Relationship and Goodwill

The accompanying consolidated financial statements for the year ended December 31, 2018 included customer relationship (classified as other intangible assets) of NT$858,110 thousand and goodwill of NT$520,514 thousand, the total amount was NT$1,378,624 thousand, which represented 23% of total assets in the consolidated financial statements. The other intangible assets of customer relationship and goodwill both resulting from the acquisition of assets and operations of beauty stores in China, Taiwan and Malaysia for expanding the cosmetology services and the Group’s operations. In accordance with IAS 36 “Impairment of Assets”, management assesses whether there is any indication that those assets have suffered any impairment loss at the balance sheet date. Determining whether those assets are impaired requires an estimation of the recoverable amount of the cash-generating unit to which those assets have been allocated, and the assumptions suffer from high uncertainty since they are subject to management’s judgments and affected by economic trends. Therefore, it was identified as one of the key audit matters.

Refer to Notes 4, 5, 14, 15 and 29 to the consolidated financial statements for the accounting policies, critical accounting judgments and key sources of estimation uncertainty and details of the information about the impairment of intangible assets of customer relationship and goodwill.

The audit procedures performed in response to the above key audit matter included the following:

1. We understood and assessed the reasonableness of the identification for impairment of those assets by management.

2. We evaluated the independent expert’s professional capacity, competence and independence engaged by the management.

3. We understood the process and basis for the estimated growth rate and profit margin associated with the future operating prospects of the asset’s cash-generating units.

4. We consulted our experts to assess the reasonableness and appropriateness of assumptions and methods used in the impairment test report provided by the independent experts.

Revenue Recognition of Beauty and Body Spa Course Services

As of December 31, 2018, the carrying amount of the contract liabilities - current was NT$2,247,520 thousand, which represented 54% of total liabilities in the consolidated financial statements. For the year ended December 31, 2018, the beauty and body spa course services revenue amounted to NT$1,820,165 thousand, which represented 59% of net revenue in the consolidated financial statements. The Group’s management recognized beauty and body spa course services revenue based on independent actuarial reports. The assumptions of actuarial analyses were made according to the Group’s historical service experience, and the percentage of expected redemption rate of deferred courses was calculated as the number of courses actually rendered to customers to the number of courses expected to be rendered to customers, excluding the courses that had refund liability in effective period. Such underlying assumptions are subject to management’s objective judgments and estimates which are highly uncertain. Therefore, the recognition of the beauty and body spa course services revenue was identified as one of the key audit matters.

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Refer to Notes 4, 5, 20 and 24 to the consolidated financial statements for the accounting policies, critical accounting judgments and key sources of estimation uncertainty, and details of the information about the recognition of beauty and body spa course services revenue.

The audit procedures performed in response to the above key audit matter included the following:

1. We evaluated the professional qualifications, competency and independence of the independent actuaries engaged by the management.

2. We understood and tested the accuracy and completeness of the data used by management in actuarial analyses of the expected redemption rate of deferred courses.

3. We compared the methodologies and significant assumptions, including expected redemption rate and expected aggregate redemption rate of deferred courses, along with specific historical data in order to assess the reasonableness of management’s judgments.

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

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

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

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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3. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

4. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

5. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

6. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

7. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation preludes 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.

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The engagement partners on the audit resulting in this independent auditors’ report are Cheng-Chun Chiu and Tzu-Jung Kuo.

Deloitte & Touche Taipei, Taiwan Republic of China

March 19, 2019

Notice to Readers

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

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

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JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at amortized cost - current (Notes 4, 8 and 34) Notes receivable (Notes 4 and 9) Trade receivables (Notes 4 and 9) Trade receivables from related parties (Notes 4, 9 and 33) Other receivables from related parties (Notes 4 and 33) Inventories (Notes 4, 10, 29 and 33) Current tax assets (Notes 4 and 26) Other current assets (Notes 29 and 33) Total current assets NON-CURRENT ASSETS Financial assets at amortized cost - non-current (Notes 4, 8 and 34) Property, plant and equipment (Notes 4, 5, 12, 29, 33 and 34) Investment properties (Notes 4, 5 and 13) Other intangible assets (Notes 4, 5 ,15, 29 and 33) Goodwill (Notes 4, 5, 14, 29 and 33) Deferred tax assets (Notes 4, 26, 29 and 33) Other financial assets - non-current (Notes 4, 16 and 34) Other non-current assets (Notes 4, 17 and 29) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 4, 18, 33 and 34) Financial liabilities at fair value through profit or loss - current (Notes 4, 7 and 19) Contract liabilities - current (Notes 4, 20, 29 and 33) Notes payable Trade payables Other payables (Note 21) Other payables to related parties (Note 33) Current tax liabilities (Notes 4 and 26) Advance receipts (Notes 20, 29 and 33) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Bonds payable (Notes 4 and 19) Long-term borrowings (Notes 4, 18, 33 and 34) Deferred tax liabilities (Notes 4 and 26) Guarantee deposits Net defined benefit liabilities - non-current (Notes 4 and 22) Total non-current liabilities Total liabilities EQUITY (Notes 4, 19 and 23) Share capital Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translating foreign operations Unearned employee benefits Total other equity Total equity TOTAL		2018 Amount % $ 1,367,873 23 290,680 5 106 - 175,297 3 - - 2,714 - 265,749 5 9,140 - 84,404 1 2,195,963 37 252,241 4 1,869,399 31 116,942 2 866,108 14 520,514 9 35,707 1 - - 141,907 2 3,802,818 63 $ 5,998,781 100 $ 78,323 1 1,275 - 2,323,381 39 284 - 28,718 1 331,445 6 1,957 - 26,910 - - - 8,743 - 2,801,036 47 719,327 12 400,000 7 182,198 3 33,132 - 8 - 1,334,665 22 4,135,701 69 609,997 10 660,696 11 112,651 2 19,415 - 653,862 11 785,928 13 (48,568) (1) (144,973 ) (2 ) (193,541 ) (3 ) 1,863,080 31 $ 5,998,781 100		2017
				Amount % $ 930,446 18 - - 268 - 177,259 4 464 - 9,280 - 290,417 6 9,140 - 72,300 1 1,489,574 29 - - 1,750,652 34 116,942 2 863,166 17 445,661 9 52,165 1 231,562 5 131,482 3 3,591,630 71 $ 5,081,204 100 $ - - - - - - 294 - 29,975 1 325,518 6 - - 28,726 1 2,751,087 54 6,982 - 3,142,582 62 - - 400,000 8 44,897 1 28,980 - 596 - 474,473 9 3,617,055 71 611,547 12 646,702 13 94,411 2 11,317 - 305,814 6 411,542 8 (19,415) - (186,227 ) (4 ) (205,642 ) (4 ) 1,464,149 29 $ 5,081,204 100

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

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JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

OPERATING REVENUE (Notes 4, 5, 20, 24, 29 and 33) OPERATING COSTS (Notes 4, 10, 25 and 33) GROSS PROFIT OPERATING EXPENSES (Notes 4, 22, 25 and 28) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Notes 4, 25 and 33) Other income Other gains and losses Finance costs Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 26) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) (Notes 4, 22 and 26) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Income tax relating to items that will not be reclassified subsequently to profit or loss		2018 Amount % $ 3,108,496 100 721,270 23 2,387,226 77 1,304,351 42 352,828 12 29,356 1 1,686,535 55 700,691 22 35,029 1 (7,960) - (6,999 ) - 20,070 1 720,761 23 193,236 6 527,525 17 (411) - (4 ) - (415 ) -		2017
				Amount % $ 2,313,520 100 668,517 29 1,645,003 71 1,075,118 46 315,135 14 36,284 2 1,426,537 62 218,466 9 38,168 2 (18,688) (1) (3,002 ) - 16,478 1 234,944 10 52,542 2 182,402 8 (2,823) - 480 - (2,343 ) - (Continued)

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JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Other comprehensive loss for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (Note 27) Basic Diluted		2018 Amount % $ (29,153 ) (1 ) (29,568 ) (1 ) $ 497,957 16 $ 9.02 $ 8.85		2017
				Amount % $ (8,098 ) (1 ) (10,441 ) (1 ) $ 171,961 7 $ 3.12 $ 3.11
		$		$

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

(Concluded)

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JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

Capital Surplus Share Capital (Note 23) (Notes 4, 19 and 23) BALANCE AT JANUARY 1, 2017 $ 611,547 $ 640,878 Appropriation of 2016 earnings Legal reserve - - Special reserve - - Cash dividends distributed by the Company - - Donations from shareholders - 5,824 Net profit for the year ended December 31, 2017 - - Other comprehensive loss for the year ended December 31, 2017, net of income tax - - Total comprehensive income (loss) for the year ended December 31, 2017 - - Issuance of restricted employee shares - - BALANCE AT DECEMBER 31, 2017 611,547 646,702 Appropriation of 2017 earnings Legal reserve - - Special reserve - - Cash dividends distributed by the Company - - Donations from shareholders - 55 Equity component of convertible bonds issued by the Company - 25,363 Net profit for the year ended December 31, 2018 - - Other comprehensive loss for the year ended December 31, 2018, net of income tax - - Total comprehensive income (loss) for the year ended December 31, 2018 - - Issuance of restricted employee shares - - Cancelation of restricted employee shares (1,550 ) (11,424 ) BALANCE AT DECEMBER 31, 2018 $ 609,997 $ 660,696	Retained Earnings (Note 23) Legal Reserve Special Reserve Unappropriated Earnings $ 67,188 $ 1,320 $ 377,016 27,223 - (27,223) - 9,997 (9,997) - - (214,041) - - - - - 182,402 - - (2,343 ) - - 180,059 - - - 94,411 11,317 305,814 18,240 - (18,240) - 8,098 (8,098) - - (152,724) - - - - - - - - 527,525 - - (415 ) - - 527,110 - - - - - - $ 112,651 $ 19,415 $ 653,862	Other Equity (Notes	4, 23 and 28) Unearned Employee Benefits $ (215,450) - - - - - - - 29,223 (186,227) - - - - - - - - 28,280 12,974 $ (144,973 )	Total Equity $ 1,471,182 - - (214,041) 5,824 182,402 (10,441 ) 171,961 29,223 1,464,149 - - (152,724) 55 25,363 527,525 (29,568 ) 497,957 28,280 - $ 1,863,080
		Exchange Differences on Translating Foreign Operations $ (11,317) - - - - - (8,098 ) (8,098 ) - (19,415) - - - - - - (29,153 ) (29,153 ) - - $ (48,568 )

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

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JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Expected credit loss recognized on trade receivables/impairment loss recognized on trade receivables Finance costs Interest income Compensation costs of employee share options (Gain) loss on disposal of property, plant and equipment Property, plant and equipment transferred to expenses Reversal of write-down of inventories Amortization of prepayments for leases Changes in operating assets and liabilities Notes receivable Trade receivables Other receivables Inventories Other current assets Notes payable Trade payables Other payables Contract liabilities/advance receipts Other current liabilities Net defined benefit liabilities Cash generated from operations Interest received Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets measured at cost Net cash outflows on business combinations Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Payments for intangible assets Decrease in other financial assets Increase in other non-current assets Decrease in prepayments for equipment Net cash used in investing activities	2018 $ 720,761 166,992 102,787 83 6,999 (8,891) 28,280 (41) 1,560 (3,341) 6,262 162 2,343 6,549 37,167 (11,760) (10) (1,257) 25,384 (615,697) 1,761 (999 ) 465,094 8,908 (6,992) (37,597 ) 429,413 (311,359) (51,683) (277,196) 314 (11,292) (3,579) - (1,597) (2,524 ) (658,916 )	2017 $ 234,944 147,301 77,012 587 3,002 (6,692) 29,223 1,905 200 (17,654) 7,067 (244) 84,221 (9,280) 48,890 (11,883) (243) 2,595 39,369 (137,182) (1,946) (1,013 ) 490,179 6,692 (2,783) (73,798 ) 420,290 - (81,820) (162,284) 490 (16,672) (406) 2,058 - 408 (258,226 ) (Continued)

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JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Proceeds from issuance of convertible bonds Proceeds from long-term borrowings Proceeds from guarantee deposits received Donation from shareholders Dividends paid to owners of the Company Net cash generated from financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH AND CASH EQUIVALENTS HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2018 $ 78,323 749,565 - 4,152 55 (152,724 ) 679,371 (12,441 ) 437,427 930,446 $ 1,367,873	2017 $ - - 290,000 3,415 5,824 (214,041 ) 85,198 (5,419 ) 241,843 688,603 $ 930,446

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

(Concluded)

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

JOURDENESS GROUP LIMITED AND SUBSIDIARIES

1. GENERAL INFORMATION

Jourdeness Group Limited (the “Company”) was incorporated in Cayman Islands in June 2010. The Company and its subsidiaries (collectively referred to as the “Group”) are mainly engaged in the beauty and body spa business (except medical cosmetology), manufacturing and sale of cosmetics, business management and consulting services.

The Company’s shares have been listed on the Taiwan Stock Exchange since October 21, 2015.

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

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on March 19, 2019.

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

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

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

• 1) IFRS 9 “Financial Instruments” and related amendments

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

The requirements for classification, measurement and impairment of financial assets have been applied retrospectively starting from January 1, 2018. IFRS 9 is not applicable to items that have already been derecognized as of December 31, 2017.

Classification, measurement and impairment of financial assets

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

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

Financial Assets Cash and cash equivalents Notes receivable, trade receivables and other receivables Other financial assets - current Financial Liabilities Notes payable, trade payables, other payables, guarantee deposits and long-term borrowings	Measurement Category IAS 39 IFRS 9 Loans and receivables Amortized cost Loans and receivables Amortized cost Loans and receivables Amortized cost Measurement Category IAS 39 IFRS 9 Amortized cost Amortized cost	Carrying Amount IAS 39 IFRS 9 Remark $ 930,446 $ 930,446 a 187,271 187,271 a 231,562 231,562 b Carrying Amount IAS 39 IFRS 9 Remark 584,863 584,863

Financial Assets Amortized cost Add: Reclassification from loans and receivables (IAS 39)	IAS 39 Carrying Amount as of January 1, 2018 $ - - $ -	Reclassifi- cations $ - 1,349,279 $ 1,349,279	Remea- surements $ - - $ -	IFRS 9 Carrying Amount as of January 1, 2018 $ - 1,349,279 $ 1,349,279	Retained Earnings Effect on January 1, 2018 $ - - $ -	Other Equity Effect on January 1, 2018 Remark $ - - a and b $ -

• a) Cash and cash equivalents, notes receivable, trade receivables (including related parties) and other receivables that were previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

• b) Bank deposits that were previously classified as other financial assets - non-current under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective was to collect contractual cash flows.

• 2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for related accounting policies.

In identifying performance obligations, IFRS 15 and the related amendments require that a good or service is distinct if it is capable of being distinct (for example, the Group regularly sells it separately) and the promise to transfer it is distinct within the context of the contract (i.e. the nature of the promise in the contract is to transfer each good or service individually rather than to transfer a combined output). The Group assesses that the application of IFRS 15 will not have material impact on the Group’s revenue recognition currently.

The Group elected only to retrospectively apply IFRS 15 to contracts that were not complete as of January 1, 2018, and reclassified advance receipts of $2,751,087 thousand to contract liabilities - current.

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• b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations Effective Date (the “New IFRSs”) Announced by IASB (Note 1) Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019 Amendments to IFRS 9 “Prepayment Features with Negative January 1, 2019 (Note 2) Compensation” IFRS 16 “Leases” January 1, 2019 Amendments to IAS 19 “Plan Amendment, Curtailment or January 1, 2019 (Note 3) Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint January 1, 2019 Ventures” IFRIC 23 “Uncertainty over Income Tax Treatments” January 1, 2019

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.

• Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

IFRS 16 “Leases”

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

Definition of a lease

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

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value assets and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Prepaid lease payments for land use rights of land located in China are recognized as prepayments for leases. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

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

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining

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lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets will be measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments. The Group will apply IAS 36 to all right-of-use assets.

The Group expects to apply the following practical expedients:

• a) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.

• b) The Group will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.

• c) The Group will use hindsight, such as in determining lease terms, to measure lease liabilities.

The Group as lessor

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

Anticipated impact on assets, liabilities and equity

		Carrying	Adjustments	Adjustments		Adjusted
	Amount as of		Arising from			Carrying
	December 31,			Initial	Amount as of
		2018	Application		January 1, 2019
Prepayments for leases - current	$	1,950	$	(1,950)	$	-
Prepayments for leases - non-current		72,322		(72,322)		-
Right-of-use assets		-		1,160,241		1,160,241
Total effect on assets	$	74,272	$	1,085,969	$	1,160,241
Lease liabilities - current	$	-	$	341,573	$	341,573
Lease liabilities - non-current		-		744,396		744,396
Total effect on liabilities	$	-	$	1,085,969	$	1,085,969

Except for the above impacts, as of the date the consolidated financial statements were authorized for issue, the Group assessed that the application of other standards and interpretations would not have material impact on the Group’s financial position and financial performance.

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

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

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• 15 -

• Note 2: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

• Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

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

• b. Basis of preparation

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

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

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• 3) Level 3 inputs are unobservable inputs for an asset or liability.

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

Current assets include:

• 1) Assets held primarily for the purpose of trading;

• 2) Assets expected to be realized within 12 months after the reporting period; and

• 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

• 1) Liabilities held primarily for the purpose of trading;

• 2) Liabilities due to be settled within 12 months after the reporting period, and

• 16 -

• 3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

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

• d. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries). When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

Refer to Note 11, Table 4 and Table 5 for detailed information on subsidiaries (including percentages of ownership and main businesses).

• e. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as they are incurred.

Goodwill is measured as the excess of the sum of the consideration transferred and the fair value of the acquirer’s previously held equity interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

• f. Foreign currencies

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

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

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

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

For the purpose of presenting consolidated financial statements, the functional currencies of the Company and the group entities (including subsidiaries in other countries that use currencies which are different from the currency of the Company) are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

• 17 -

g. Inventories

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

h. Property, plant and equipment

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

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

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

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

• i. Investment properties

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

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

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

• j. Goodwill

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

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as “cash-generating units”) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit

• 18 -

based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. Any impairment loss recognized for goodwill is not reversed in subsequent periods.

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

• k. Intangible assets

• 1) Intangible assets acquired separately

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

• 2) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date. Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

• 3) Derecognition of intangible assets

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

• l. Impairment of tangible and intangible assets other than goodwill

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

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

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

• m. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

• 19 -

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

1) Financial assets

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

• a) Measurement categories

2018

Financial assets are classified as financial assets at amortized cost.

Financial assets at amortized cost

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

• i. The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• ii. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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

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

• i. Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and

• ii. Financial assets that have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets.

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

2017

Financial assets are classified as loans and receivables.

• 20 -

Loans and receivables

Loans and receivables (including cash and cash equivalents, notes receivable, trade receivables, other receivables, and other financial assets) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

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

• b) Impairment of financial assets

2018

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

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

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

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of such a financial asset.

2017

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

Financial assets at amortized cost, such as notes receivable and trade receivables, are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience with collecting payments, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

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

• 21 -

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

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

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

• c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

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

2) Equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue costs.

The repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of the Company’s own equity instruments.

• 3) Financial liabilities

• a) Subsequent measurement

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

• 22 -

b) Derecognition of financial liabilities

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

4) Convertible bonds

The component parts of compound instruments (i.e. convertible bonds) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

On initial recognition, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or upon the instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised; in which case, the balance recognized in equity will be transferred to capital surplus - share premiums. When the conversion option remains unexercised at maturity, the balance recognized in equity will be transferred to capital surplus - share premiums.

Transaction costs that relate to the issuance of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component.

• n. Revenue recognition

2018

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

• 1) Revenue from the sale of goods

Revenue from the sale of goods comes from sales of beauty cosmetics. The main channels of distribution are franchise, directly-managed stores and internet. Sales of beauty cosmetics are recognized as revenue when the goods are delivered to the customer’s specific location. Before the goods are delivered to the customer, the transaction price received is recognized as a contract liability. When the goods have been delivered to the customer, the advance receipts is recognized as revenue.

• 2) Revenue from the rendering of services

The services revenue comes from beauty and body spa course services, and the Group provides beauty and body spa course services and charges for various courses. At the time of sale, the total amount of income from the beauty and body spa courses will be based on the ratio of number of courses in which customers actually attended to the overall number of courses, advanced receipts are recognized as a contract liability, then reclassified as revenue when services have been provided. At the end of each reporting period, the Group’s management recognized and adjusted beauty and body spa course services revenue based on the actuarial analyses of the Group’s historical service experience and the percentage of expected redemption rate of deferred courses was calculated as the

• 23 -

number of courses actually rendered to customers to the number of courses expected to be rendered to customers, excluding the courses that had refund liability in effective period.

2017

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

• 1) Revenue from the sale of goods

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

• a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• c) The amount of revenue can be measured reliably;

• d) It is probable that the economic benefits associated with the transaction will flow to the Group; and

• e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

• 2) Beauty and body spa course services revenue recognition

The services revenue comes from the beauty and body spa course services, and the Group provides beauty and body spa course services and charges for various courses. At the time of sale, the total amount of income from the beauty and body spa courses will be based on the ratio of number of courses in which customers actually attended to the overall number of courses, advanced receipts are recognized as a contract liability, then reclassified as revenue when services have been provided. At the end of each reporting period, the Group’s management recognized and adjusted beauty and body spa course services revenue based on the actuarial analyses of the Group’s historical service experience and the percentage of expected redemption rate of deferred courses was calculated as the number of courses actually rendered to customers to the number of courses expected to be rendered to customers, excluding the courses that had refund liability in effective period.

• 3) Revenue from the rendering of services

Service income is recognized when services are provided.

• 4) Interest income

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis with reference to the principal outstanding and at the applicable effective interest rate.

• 24 -

o. Leasing

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

1) The Group as lessor

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

2) The Group as lessee

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

p. Borrowing costs

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

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

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

q. Employee benefits

1) Short-term employee benefits

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

2) Retirement benefits

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

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

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

• 25 -

• r. Share-based payment arrangements

Restricted shares for employees granted to employees

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

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

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

• s. Taxation

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

• 1) Current tax

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

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

• 2) Deferred tax

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

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

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

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

• 26 -

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

• 3) Current and deferred taxes for the year

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

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

• a. Beauty and body course services revenue recognition

In principle, the total amount of the total number of the beauty and body spa course advanced receipt from customer is recognized as a contract liability, then reclassified as revenue when service is provided. At the end of each reporting period, the Group needs judgment to assess the assumptions of the actuarial analyses, including the percentage of expected redemption rate of deferred courses calculated as the number of courses actually rendered to customers to the number of courses expected to be rendered to customers, excluding the courses that have refund liability in effective period, in order to adjust the revenue recognized.

• b. Impairment of goodwill

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

• c. Impairment of tangible assets and intangible assets other than goodwill

In assessing the impairment of tangible assets and intangible assets, management evaluates the cash flows and profit or loss of specific group of assets based on management’s objective judgment and industry characteristic. When there are changes in the economic trends or corporate strategies, a material impairment loss may arise.

• 27 -

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalents Time deposits		December 31	December 31
		2018 $ 5,178 817,975 544,720 $ 1,367,873	2017 $ 4,738 706,588 219,120 $ 930,446

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

		December 31	December 31
		2018		2017
	Bank balance	0.01%-2.10%	0.01%-2.10%
	FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS		(December 31,
	2017: NONE)
			December 31,
				2018
	Financial liabilities at FVTPL-current
	Financial liabilities held for trading
	Derivative financial liabilities (not under hedge accounting)
	Put option and redemption option of convertible bonds (Note 19)		$	1,275
	FINANCIAL ASSETS AT AMORTIZED COST - 2018
			December 31,
				2018
	Current
	Financial products (a)		$	290,680
	Non-current
	Restricted time deposits (b)		$	250,001
	Restricted demand deposits (b)			2,240
			$	252,241

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (December 31, 2017: NONE)

8. FINANCIAL ASSETS AT AMORTIZED COST - 2018

• 28 -

• a. Financial products arose when subsidiary Jourdeness (Guangzhou) Cosmetics Co., Ltd. entered into principal protected interest rate linked investment product with the bank. At the end of the reporting period, outstanding financial products were as follows:

	December 31,
	2018
Annual rate of return	3.80%-4.10%
Maturity date	2019.1.28-
	2019.12.25

The Group’s investment policy was to invest in both short-term financial products and structured deposits with low credit risk. The Group assessed the impact of credit risk on principal and benefits through understanding of the final destination of the funds and the value of collaterals. For the year ended December 31, 2018, no impairment loss was recognized for financial products.

• b. The market interest rates for restricted time deposits and restricted demand deposits were ranging from 0.10% to 0.63% per annum as of December 31, 2018. Restricted time deposits and restricted demand deposits were classified as other financial assets under IAS 39. Refer to Notes 3 and 16 for information relating to their reclassification and comparative information for 2017.

• c. Refer to Note 34 for information relating to investments financial assets at amortized cost pledged as security.

9. NOTES RECEIVABLE AND TRADE RECEIVABLES

Notes receivable At amortized cost Gross carrying amount Less: Allowance for impairment loss Notes receivable - operating Trade receivables At amortized cost Gross carrying amount Less: Allowance for impairment loss Trade receivables from related parties (Note 33)		December 31	December 31
		2018 $ 106 - $ 106 $ 106 $ 175,891 (594 ) $ 175,297 $ -	2017 $ 268 - $ 268 $ 268 $ 177,770 (511 ) $ 177,259 $ 464

• 29 -

In 2018

At amortized cost

The retail sales of the Group to individual consumers were usually settled through cash and credit card. Trade receivables mainly consist of payments due from banks for credit cards. The average credit period of sales of goods for other trade receivables was 90-180 days, and no interest was charged on trade receivables.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

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

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

December 31, 2018

Not Past Due Less than 90 Days Gross carrying amount $ 174,999 $ 275 Loss allowance (Lifetime ECL) - (8 ) Amortized cost $ 174,999 $ 267	91 to 180 Days $ 32 (3 ) $ 29	181 to 240 Days $ 2 - $ 2	Over 241 Days $ 583 (583 ) $ -	Total $ 175,891 (594 ) $ 175,297

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

Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Add: Net remeasurement of loss allowance Balance at December 31, 2018	2018 $ 511 - 511 83 $ 594

In 2017

The Group applied the same credit policy in 2018 and 2017. In determining the recoverability of a trade receivable, the Group considered any change in the credit quality of trade receivable since the date the credit was initially granted to the end of the reporting period. The impairment assessment of trade receivables was to initially confirm whether objective evidence which revealed an impairment on a significant individual receivable actually existed. Those trade receivables with existing impairment evidences should be individually assessed, and then the remaining individually non-significant trade receivables without objective evidence of impairment and trade receivables were collectively assessed by group categorization with similar credit risk characteristics.

• 30 -

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

The aging of trade receivables was as follows:

	December 31,
	2017
Not past due	$ 174,416
Less than 30 days	1,931
31-90 days	919
91-180 days	194
Over 181 days	774
	$ 178,234

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

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

	December 31,	December 31,
		2017
Less than 30 days	$	1,931
31-90 days		919
91-180 days		194
Over 181 days		502
	$	3,546

The above aging schedule was based on the number of past due days from the end of the credit term. The movements of the allowance for doubtful trade receivables were as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ - $ - Add: Impairment losses recognized or receivables 272 315 Less: Amounts written off during the period as uncollectable - (76 ) Balance at December 31, 2017 $ 272 $ 239	Total $ - 587 (76 ) $ 511

As of December 31, 2017, the amount of individually impaired trade receivables was $272 thousand. This amount mainly related to customers that were in severe financial difficulties. The Group did not hold any collateral over these balances.

• 31 -

10. INVENTORIES

Raw materials Work in progress Finished goods Merchandise		December 31	December 31
		2018 $ 99,345 10,254 139,308 16,842 $ 265,749	2017 $ 97,426 13,287 174,377 5,327 $ 290,417

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 were as follows:

Cost of inventories sold Loss on disposal of inventories Inventory write-downs (reversed) Gain on physical inventory	For the Year Ended	For the Year Ended	December 31
		2018 $ 228,650 9,588 (3,341) (221 ) $ 234,676	2017 $ 228,098 11,889 (17,654) (239 ) $ 222,094

11. SUBSIDIARIES

Subsidiaries Included in the Consolidated Financial Statements

Investor Investee Nature of Activities The Company Bio-Jourdeness International Group Co., Ltd. (“ Jourdeness International ”) Beauty and body spa business and manufacture of cosmetics The Company Success United Limited (“Success”) Investment The Company Jourdeness Development Limited (“J Development”) Investment The Company Bio-Jourdeness Cosmetic Co. (MY) Sdn. Bhd. (“MY”) Beauty and body spa business Success Jourdeness (Guangzhou) Cosmetics Co., Ltd. (“Jourdeness (Guangzhou) Cosmetics”) Manufacture of cosmetics and beauty and body spa business J Development Jourdeness (Guangzhou) Cosmetology Enterprise Management Co., Ltd. (“Jourdeness (Guangzhou) Enterprise Management”) Consulting services of beauty and body spa business Jourdeness (Guangzhou) Enterprise Management Changsha Jourdeness Enterprise Management Consulting Co., Ltd. (“Changsha Enterprise Management”) Consulting services of beauty and body spa business Jourdeness (Guangzhou) Enterprise Management Chengdu Jourdeness Enterprise Management Consulting Co., Ltd. (“Chengdu Enterprise Management”) Consulting services of beauty and body spa business Jourdeness (Guangzhou) Enterprise Management Wuhan Jourdeness Enterprise Management Consulting Co., Ltd. (“Wuhan Enterprise Management”) Consulting services of beauty and body spa business

Proportion of Ownership (%) December 31 2018 2017 Remark 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 a 100.00 100.00 a - 100.00 a

• 32 -

Remarks:

• a. Considering the layout of mainland China market, the board of directors of Jourdeness (Guangzhou) Enterprise Management approved the liquidation of Changsha Enterprise Management, Chengdu Management and Wuhan Enterprise Management on July 5, 2017. At the end of the reporting period, Wuhan Enterprise Management has completed the deregistration process. As of March 19, 2019, Changsha Enterprise Management and Chengdu Enterprise Management had not completed the deregistration process.

12. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Acquisitions through business combinations (Note 29) Disposals Reclassification Effect of foreign currency exchange differences Balance at December 31, 2017 Accumulated depreciation Balance at January 1, 2017 Depreciation expenses Acquisitions through business combinations (Note 29) Disposals Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Acquisitions through business combinations (Note 29) Disposals Reclassification Effect of foreign currency exchange differences Balance at December 31, 2018 Accumulated depreciation Balance at January 1, 2018 Depreciation expenses Acquisitions through business combinations (Note 29) Disposals Effect of foreign currency exchange differences Balance at December 31, 2018 Carrying amounts at December 31, 2018	Freehold Land $ 817,118 - - - - - $ 817,118 $ - - - - - $ - $ 817,118 $ 817,118 - - - - - $ 817,118 $ - - - - - $ - $ 817,118	Buildings $ 768,643 3,131 - (1,998 ) 29,695 (2,431 ) $ 797,040 $ 245,549 54,028 - (1,108 ) (872 ) $ 297,597 $ 499,443 $ 797,040 21,066 - (2,658 ) 170,962 (7,545 ) $ 978,865 $ 297,597 53,974 - (2,658 ) (2,667 ) $ 346,246 $ 632,619	Machinery and Equipment $ 94,811 7,921 - (4,942 ) 7 (944 ) $ 96,853 $ 61,258 5,484 - (4,521 ) (612 ) $ 61,609 $ 35,244 $ 96,853 3,744 - (289 ) - (1,585 ) $ 98,723 $ 61,609 5,925 - (260 ) (1,144 ) $ 66,130 $ 32,593	Transportation Equipment $ 23,699 1,215 - (578 ) 10 (227 ) $ 24,119 $ 18,567 1,178 - (106 ) (184 ) $ 19,455 $ 4,664 $ 24,119 3,615 - (942 ) - (432 ) $ 26,360 $ 19,455 1,545 - (728 ) (354 ) $ 19,918 $ 6,442	Office Equipment $ 145,917 7,572 23,348 (13,807 ) 3,860 (137 ) $ 166,753 $ 95,953 34,781 7,309 (13,260 ) 76 $ 124,859 $ 41,894 $ 166,753 33,569 4,898 (1,563 ) 7,851 (1,530 ) $ 209,978 $ 124,859 30,305 1,977 (1,549 ) (1,131 ) $ 154,461 $ 55,517	Other Equipment $ 36,143 1,062 11 (448 ) (43 ) (397 ) $ 36,328 $ 21,690 3,884 - (383 ) (199 ) $ 24,992 $ 11,336 $ 36,328 222 - (159 ) - (734 ) $ 35,657 $ 24,992 3,296 - (143 ) (565 ) $ 27,580 $ 8,077	Leasehold Improvements C $ 141,500 6,573 70,932 - 73,743 271 $ 293,019 $ 10,815 47,946 - - 340 $ 59,101 $ 233,918 $ 293,019 5,811 10,563 - 109,141 (5,242 ) $ 413,292 $ 59,101 71,947 - - (1,538 ) $ 129,510 $ 283,782	onstruction in Progress and Machinery in Transit $ 74,900 142,514 - - (109,735 ) (644 ) $ 107,035 $ - - - - - $ - $ 107,035 $ 107,035 216,171 - - (289,899 ) (56 ) $ 33,251 $ - - - - - $ - $ 33,251	Total $ 2,102,731 169,988 94,291 (21,773 ) (2,463 ) (4,509 )
									$ 2,338,265
									$ 453,832 147,301 7,309 (19,378 ) (1,451 )
									$ 587,613
									$ 1,750,652
									$ 2,338,265 284,198 15,461 (5,611 ) (1,945 ) (17,124 )
									$ 2,613,244
									$ 587,613 166,992 1,977 (5,338 ) (7,399 )
									$ 743,845
									$ 1,869,399

In response to the demand of operation, the purchase of building located in Panyu District, Guangzhou, China, from key management was resolved by the board of directors of Jourdeness (Guangzhou) Cosmetics on January 22, 2018. The purchase price of the building was RMB16,000 thousand.

No impairment assessment was performed for the years ended December 31, 2018 and 2017, as there were no indications of impairment.

• 33 -

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

Buildings
Plant buildings and office	10 to 50 years
Others	5 to 10 years
Machinery and equipment	5 to 10 years
Transportation equipment	5 years
Office equipment	3 to 10 years
Other equipment	5 to 10 years
Leasehold improvements	1 to 10 years

Property, plant and equipment pledged as collateral for bank borrowings and performance guarantees were set out in Note 34.

13. INVESTMENT PROPERTIES

Land	For the Year Ended	For the Year Ended	December 31
		2018 $ 116,942	2017 $ 116,942

• a. The Group’s freehold land in Taichung, including the land serial numbers of 0716-0000, 0716-0001, 0717-0000 and 0742-0000, were not for operation and lease in 2018 and 2017. There were no direct operating expenses of investment properties for the years ended in December 31, 2018 and 2017.

• b. The fair values of investment properties were $128,549 thousand and $144,780 thousand as of December 31, 2018 and 2017, respectively. The valuation was arrived at by reference to market evidence of transaction price for similar properties.

14. GOODWILL

Cost Balance at January 1 Additional amounts recognized from business combinations occurring during the year (Note 29) Effect of foreign currency exchange differences Balance at December 31 Accumulated impairment losses Balance at January 1 and December 31 Carrying amounts at December 31	For the Year Ended	For the Year Ended	December 31
		2018 $ 445,661 83,048 (8,195 ) $ 520,514 $ - $ 520,514	2017 $ 247,453 198,543 (335 ) $ 445,661 $ - $ 445,661

At the end of the reporting period, the Group assessed the impairment of recoverable amount of goodwill based on a value in use, which was calculated using the cash flow projections in the financial budgets and annual discount rate to reflect the relevant specific risk. No impairment loss for goodwill for the years ended December 31, 2018 and 2017.

• 34 -

The Group obtained an independent expert evaluation reports in 2018 and 2017. According to the report, the Group had adjusted the amount calculated at the initial accounting for the date of business acquisition. Refer to Note 29 for detailed information.

15. OTHER INTANGIBLE ASSETS

Cost Balance at January 1, 2017 Additions Acquisitions through business combinations (Note 29) Disposals Effect of foreign currency exchange differences Balance at December 31, 2017 Accumulated amortization Balance at January 1, 2017 Amortization expenses Disposals Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Acquisitions through business combinations (Note 29) Disposals Effect of foreign currency exchange differences Balance at December 31, 2018 Accumulated amortization Balance at January 1, 2018 Amortization expenses Disposals Effect of foreign currency exchange differences Balance at December 31, 2018 Carrying amounts at December 31, 2018	Computer Software $ 36,863 406 - (8,641) (170 ) $ 28,458 $ 23,678 4,632 (8,641) (108 ) $ 19,561 $ 8,897 $ 28,458 3,579 - (641) (137 ) $ 31,259 $ 19,561 4,430 (641) (89 ) $ 23,261 $ 7,998	Customer Relationship $ 343,966 - 588,595 - 3,819 $ 936,380 $ 8,905 72,380 - 826 $ 82,111 $ 854,269 $ 936,380 - 116,977 - (17,987 ) $ 1,035,370 $ 82,111 98,357 - (3,208 ) $ 177,260 $ 858,110	Total $ 380,829 406 588,595 (8,641) 3,649 $ 964,838 $ 32,583 77,012 (8,641) 718 $ 101,672 $ 863,166 $ 964,838 3,579 116,977 (641) (18,124 ) $ 1,066,629 $ 101,672 102,787 (641) (3,297 ) $ 200,521 $ 866,108

• 35 -

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

Computer software	3	to	10	years
Customer relationship			10	years

16. OTHER FINANCIAL ASSETS - NON-CURRENT - 2017

	December 31,
	2017
Restricted time deposits	$ 228,818
Restricted demand deposits	2,744
	$ 231,562

Refer to Note 34 for information relating to other financial assets pledged as collateral or for security.

17. OTHER NON-CURRENT ASSETS

Prepayments for leases Refundable deposits Prepayments for equipment Other		December 31	December 31
		2018 $ 72,322 66,382 3,052 151 $ 141,907	2017 $ 75,817 55,090 528 47 $ 131,482

Prepayments for leases are payments for land use right located in mainland China. The lease term were 50 years, and it was paid in full at the time of signing the lease contracts. Rent expenses were recognized in the amounts of $1,988 thousand and $1,965 thousand for the years ended December 31, 2018 and 2017, respectively.

18. BORROWINGS

• a. Short-term borrowings

Secured borrowings Bank loans		December	31
		2018 $ 78,323	2017 $ -

The Group provided its land and buildings as collateral (refer to Note 34), and key management personnel of the Group and Jourdeness International were the joint guarantor (refer to Note 33 and Table 2). The interest rate was 3.99% per annum as of December 31, 2018.

• 36 -

b. Long-term borrowings

Secured borrowings Bank loans		December 31	December 31
		2018 $ 400,000	2017 $ 400,000

The Group provided its land as collateral (refer to Note 34), and key management personnel of the Group was the joint guarantor (refer to Note 33). The interest rates were both 1.45% per annum as of December 31, 2018 and 2017. The borrowing period was from November 14, 2016 to November 14, 2021. The interest expenses are paid monthly from the grant date, and the principal is paid at maturity.

19. BONDS PAYABLE

	December 31,
	2018
Secured domestic convertible bonds	$ 750,000
Less: Discounts on bonds payable	(30,673 )
	$ 719,327

First Unsecured Domestic Convertible Bonds

As of December 28, 2018, the Company issued 7,500 thousand, 0% NTD denominated unsecured convertible bonds in Taiwan, with an aggregate principal amount of $750,000 thousand.

Each bond entitles the holder to convert it into ordinary shares of the Company at a conversion price of $111. Conversion may occur at any time between March 29, 2019 and December 28, 2021. After the issuance of the convertible bonds, whenever the number of the Company’s ordinary shares increases, including but not limited to capital increase fund by cash (through public offering or private placement), by retained earnings or by capital reserves stock dividends, shares issued for consideration of merger and acquisition, stock split, and capital increase for participation in overseas ADRs other than the new shares issue upon exercise of the conversion or of the securities convertible into or entitled to subscribe ordinary shares or the new shares issue upon employee bonus, the conversion price shall be adjusted in accordance with “Rules Governing Issue and Conversion of First Unsecured Domestic Convertible Bonds” (hereinafter referred to as the “Rules”) article 11.

In even that the Company issues any kind of securities (including privately placed securities), convertible into ordinary shares or with warrants to subscribe for ordinary shares at a conversion price or exercise price lower than the current market price per share, or issuance of the ordinary shares option which is not resulted from capital increase fund by cash, and the number of the Company’s ordinary shares is reduced due to capital reduction which is not resulted from the treasury stocks cancellation, the conversion price shall be adjusted in accordance with “Rules Governing Issue and Conversion of First Unsecured Domestic Convertible Bonds” (hereinafter referred to as the “Rules”) article 11.

If the convertible bonds are not converted at maturity, the Company will redeem the convertible bonds at par value in cash as of December 28, 2021.

• 37 -

For the conversion of bonds from the day following three months after the date of issuance up till 40 days before the maturity date, if the closing price of the Company’s ordinary shares at the securities counter trading center exceeded the then convertible bond’s conversion price by more than or equal to 30% for 30 consecutive business days, or if the amount of Company’s outstanding circulating bonds falls below 10% of the total amount of original issuance, the Company may redeem all of the outstanding convertible bonds at par value in cash.

The convertible bonds shall be sold back to the base date of convertible bonds in advance on the maturity date of 2 years after the issuance. Bondholders may notify the Company in writing in accordance with the provisions of the Issue and Conversion Measures to sell back to the Company with the par value of convertible bonds plus interest compensation.

The convertible bonds contain liability and equity components. The equity component was presented in equity under the heading of capital surplus - options. The effective interest rate of the liability component was 1.39% per annum on initial recognition.

Proceeds from issuance (less transaction costs of $4,035 thousand) Derivative financial liabilities component Equity component (less transaction costs allocated to the equity component of $137 thousand) Liability component at the date of issue (less transaction costs allocated to the liability component of $3,898 thousand) and at December 31, 2018	$ 745,965 (1,275) (25,363 ) $ 719,327

As of December 31, 2018, the face value of first unsecured domestic convertible bonds outstanding was $750,000 thousand.

20. CONTRACT LIABILITIES/ADVANCE RECEIPTS

Advance receipts of services Advance receipts of products		December 31	December 31
		2018 $ 2,247,520 75,861 $ 2,323,381	2017 $ 2,670,263 80,824 $ 2,751,087

The movements of contract liabilities/advance receipts were as follows:

Advance receipts of services Balance at January 1 Acquisitions through business combinations (Note 29) Additions Transferred to revenue Effect of foreign currency exchange differences Balance at December 31 Advance receipts of products Balance at December 31, 2018 and 2017	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,670,263 201,801 1,207,240 (1,817,974) (13,810 ) 2,247,520 75,861 $ 2,323,381	2017 $ 1,971,978 844,702 988,566 (1,137,049) 2,066 2,670,263 80,824 $ 2,751,087

The advance receipts were the performance obligation of delivering the goods or services to the customer, and it was reclassified as a contract liabilities upon initial application IFRS 15.

• 38 -

On the balance sheet date, subsidiary Jourdeness International’s revenue recognition was based on historical service experience and the percentage of expected redemption rate of deferred courses, the percentage was calculated as the number of courses actually rendered to customers to the number of courses expected to be rendered to customers, excluding the courses that had refund liability in effective period within one year.

The key assumptions of expected aggregate redemption rate of deferred courses used in actuarial analyses were as follows:

The aging of courses 0-1 years 1-2 years 2-3 years 3-4 years 4-5 years 5-6 years 6-7 years 7-8 years 8-9 years 9-10 years Over 10 years	For the Year Ended December 31
	2018 2017 100.00% 100.00% 63.18% 62.25% 54.93% 53.79% 46.15% 44.83% 37.15% 35.70% 28.30% 26.81% 20.01% 18.58% 12.70% 11.45% 6.73% 5.79% 2.43% 1.91% 0.00% 0.00%

On the balance sheet date, subsidiary Jourdeness (Guangzhou) Enterprise Management’s revenue recognition was based on historical service experience and the percentage of expected redemption rate of deferred courses, the percentage was calculated as the number of courses actually rendered to customers to the number of courses expected to be rendered to customers.

The key assumptions of expected aggregate redemption rate of deferred courses used in actuarial analyses were as follows:

The aging of courses 0-1 years 1-2 years 2-3 years 3-4 years 4-5 years 5-6 years 6-7 years 7-8 years	For the Year Ended December 31
	2018 2017 65.44% 64.26% 50.31% 53.26% 37.10% 42.90% 26.46% 33.61% 18.31% 25.58% 12.28% 18.83% 7.91% 13.27% 4.80% -

On the balance sheet date, subsidiary Jourdeness (Guangzhou) Cosmetics and MY’s revenue recognitions were based on historical service experience and the percentage of expected redemption rate of deferred courses, the percentage was calculated as the number of courses actually rendered to customers to the number of courses expected to be rendered to customers, excluding the courses that had refund liability in effective period within half a year.

• 39 -

The key assumptions of expected aggregate redemption rate of deferred courses used in actuarial analyses were as follows:

The aging of courses 0-0.5 years 0.5-2 years Over 2 years	For the Year Ended December 31
	2018 2017 100.00% 100.00% 49.18% 64.26% 0.00% -

21. OTHER PAYABLES

Payables for salaries Payables for acquisition of beauty salons Payables for social security fund and housing provident fund Payables for employees’ benefits Payables for levies Payables for employees’ compensation Payables for purchase of equipment Others		December 31	December 31
		2018 $ 138,909 27,995 26,754 22,339 21,998 17,132 20,015 56,303 $ 331,445	2017 $ 119,760 56,104 19,349 23,829 22,112 14,854 13,013 56,497 $ 325,518

The Group’s subsidiaries in mainland China were required to pay the social security expenses and housing provident fund with a fixed percentage of total monthly salaries and wages in accordance with the “Social Insurance Law of the People’s Republic of China”. In addition, those subsidiaries had accrued the social security expenses and the housing provident fund based on actual monthly salaries and wages on the balance sheets date.

22. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

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

The employees of the Group’s subsidiaries in mainland China are members of a state-managed retirement benefit plan operated by the government of mainland China. The subsidiaries were required to contribute 20%-29% of monthly salaries per person to the retirement benefit scheme for the years ended December 31, 2018 and 2017, of which the subsidiaries were responsible for 8%-21% contributions.

b. Defined benefit plans

The defined benefit plans adopted by the subsidiary, Jourdeness International, in accordance with the Labor Standards Law is operated by the government of the Republic of China (“ROC”). Pension benefits are calculated on the basis of the length of service and average monthly salaries of six months before retirement. The subsidiary contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are

• 40 -

deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the subsidiary assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the subsidiary is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the subsidiary has no right to influence the investment policy and strategy.

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

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December	31
		2018 $ 56,572 (56,564 ) $ 8	2017 $ 53,854 (53,258 ) $ 596

Movements in net defined benefit liabilities (assets) were as follows:

	Present Value		Net	Defined
	of the Defined		Benefit
	Benefit	Fair Value of	Liabilities
	Obligation	the Plan Assets	(Assets)
Balance at January 1, 2017	$ 50,388	$ (51,602 )	$	(1,214 )
Service cost
Current service cost	163	-		163
Net interest expense (income)	752	(781 )		(29 )
Recognized in profit or loss	915	(781 )		134
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	272		272
Actuarial loss - changes in demographic
assumptions	1,235	-		1,235
Actuarial loss - changes in financial
assumptions	1,970	-		1,970
Actuarial gain - experience adjustments	(654 )	-		(654 )
Recognized in other comprehensive income	2,551	272		2,823
Contributions from the employer	-	(1,147 )		(1,147 )
Balance at December 31, 2017	$ 53,854	$ (53,258)	$	596
Balance at January 1, 2018	$ 53,854	$ (53,258)	$	596
Service cost
Current service cost	168	-		168
Net interest expense (income)	671	(672 )		(1 )
Recognized in profit or loss	839	(672 )		167

(Continued)

• 41 -

	Present Value	Present Value			Net	Defined
	of the Defined				Benefit
	Benefit		Fair Value	of	Liabilities
	Obligation		the Plan Assets		(Assets)
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	$	-	$ (1,468)		$	(1,468)
Actuarial loss - changes in demographic
assumptions		314	-			314
Actuarial loss - changes in financial
assumptions		2,056	-			2,056
Actuarial gain - experience adjustments		(491 )	-			(491 )
Recognized in other comprehensive income		1,879	(1,468 )			411
Contributions from the employer
Benefits paid		-	(1,166 )			(1,166 )
Balance at December 31, 2018	$	56,572	$ (56,564)		$	8
					(Concluded)

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

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

• 2) Interest risk: A decrease in government and corporate bond interest rates will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.

• 3) Salary risk: The present value of the defined benefit obligation is calculated with reference to the future salaries of plan participants. As such, an increase in the salaries of the plan participants will increase the present value of the defined benefit obligation.

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

Discount rates Expected rates of salary increase	December 31
	2018 2017 1.00% 1.25% 2.00% 2.00%

• 42 -

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

Discount rates 0.25% increase 0.25% decrease Expected rates of salary increase 0.25% increase 0.25% decrease		December	31
		2018 $ (2,070 ) $ 2,174 $ 2,146 $ (2,056 )	2017 $ (2,024 ) $ 2,127 $ 2,106 $ (2,015 )

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

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		December	31
		2018 $ 1,394 14 years	2017 $ 1,402 15 years

23. EQUITY

• a. Ordinary shares

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2018 100,000 $ 1,000,000 61,000 $ 609,997	2017 100,000 $ 1,000,000 61,155 $ 611,547

The holders of issued ordinary shares with a par value of $10 are entitled the right to vote and receive dividends.

The Company canceled 155 thousands of the employee’s restricted shares for the reason of employees’ resignation.

• 43 -

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital* Issuance of ordinary shares Donations May be used to offset a deficit only Issuance of ordinary shares for cash which is reserved for employees May not be used for any purpose Employee restricted shares Employee share options		December 31	December 31
		2018 $ 441,993 5,879 945 186,516 25,363 $ 660,696	2017 $ 441,993 5,824 945 197,940 - $ 646,702

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

c. Retained earnings and dividends policy

Under the dividends policy as set forth in the amended Articles, unless otherwise provided in the Applicable Listing Rules, the net profits of the Company for each annual financial year shall be allocated in the following order and proposed by the board of directors to the shareholders in the general meeting for approval:

• 1) To make provision of the applicable amount of income tax pursuant to applicable tax laws and regulations;

• 2) To set off accumulated losses of previous years (if any);

• 3) To set aside ten percent (10%) as legal reserve pursuant to the Applicable listing rules unless the accumulated amount of such legal reserve equals to the total paid-up capital of the Company;

• 4) To set aside an amount as special reserve pursuant to the Applicable Listing Rules and requirements of the commission; and;

• 5) With respect to the earnings available for distribution (i.e. the net profit after the deduction of the items (1) to (5) above plus any previously undistributed cumulative retained earnings), the board of directors may present a proposal to distribute to the shareholders by way of dividends at the annual general meeting for approval pursuant to the Applicable Listing Rules. Dividends may be distributed in the form of cash dividends and/or bonus shares, and, subject to Cayman Islands law, the amount of dividends shall be at least ten percent (10%) of the net profit after the deduction of the items (a) to (d) above. Cash dividends shall comprise a minimum of ten percent (10%) and a maximum of one hundred percent (100%) of the total dividends allocated to shareholders.

For the policies on the distribution of employees’ compensation and remuneration of directors after the amendment, refer to employees’ compensation and remuneration of directors in Note 25-f.

• 44 -

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

Items referred to under Rule No. 1010012865 issued by the FSC should be appropriated to or reversed from a special reserve by the Company.

The appropriations of earnings for 2017 and 2016 were approved in the shareholders’ meetings on June 28, 2018 and June 22, 2017, respectively, were as follows:

Legal reserve Special reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2017 2016 $ 18,240 $ 27,223 8,098 9,997 152,724 214,041	Dividends Per Share (NT$)
		For the Year Ended December 31
		2017 2016 $ - $ - - - 2.5 3.5

The appropriation of earnings for 2018 had been proposed by the Company’s board of directors on March 19, 2019. The appropriation and dividends per share were as follows:

	Appropriation	Appropriation	Dividends Per	Dividends Per
	of	Earnings	Share	(NT$)
Legal reserve	$	52,752	$	-
Special reserve		29,153		-
Cash dividends		274,499		4.5

The appropriations of earnings for 2018 are subject to resolution of the shareholders in their meeting to be held on June 25, 2019.

• d. Other equity items

Unearned employee benefit

In the meeting of shareholders on June 23, 2016, the shareholders approved a restricted share plan for employees (refer to Note 28).

Balance at January 1 Cancelation of shares Share-based payment expenses recognized Balance at December 31	For the Year Ended	For the Year Ended	December 31
		2018 $ (186,227) 12,974 28,280 $ (144,973 )	2017 $ (215,450) - 29,223 $ (186,227 )

• 45 -

24. NET REVENUE

a. Disaggregation of revenue

Type of goods or services Sale of goods Rendering of beauty and body spa course services Rendering of supporting services Royalty revenue Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,255,720 1,820,165 12,599 4,321 15,691 $ 3,108,496	2017 $ 1,136,265 1,137,071 15,956 6,319 17,909 $ 2,313,520

Refer to Note 4 for information about contract from customer.

• b. Contract balances

The changes in the contract liabilities balances primarily result from the timing difference between the satisfaction of performance obligation and the customer’s payment (refer to Note 20).

25. NET PROFIT FROM CONTINUING OPERATIONS

a. Other income

Rental income Interest income Government grants Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 7,084 8,891 4,560 14,494 $ 35,029	2017 $ 5,302 6,692 12,880 13,294 $ 38,168

• b. Other gains and losses

Net foreign exchange gains (losses) Gain (loss) on disposal of property, plant and equipment Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 949 41 (8,950 ) $ (7,960 )	2017 $ (10,198) (1,905) (6,585 ) $ (18,688 )

• 46 -

c. Finance costs

Interest on bank loans Other interest expenses Less: Amounts included in the cost of qualifying assets Information about capitalized interest was as follows: Capitalized interest Capitalization rate d. Depreciation and amortization Property, plant and equipment Intangible assets An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Selling and marketing expenses General and administrative expenses	For the Year Ended	For the Year Ended	December 31
	2018 $ 6,999 - - $ 6,999 For the Year Ended		2017 $ 3,889 1 (888 ) $ 3,002 December 31
	2018 $ - - For the Year Ended		2017 $ 888 1.45% December 31
		2018 $ 166,992 102,787 $ 269,779 $ 9,122 157,870 $ 166,992 $ 444 98,357 3,986 $ 102,787	2017 $ 147,301 77,012 $ 224,313 $ 9,142 138,159 $ 147,301 $ 187 72,394 4,431 $ 77,012

• 47 -

e. Employee benefits expense

Post-employment benefits (Note 22) Defined contribution plans Defined benefit plans Share-based payments (Note 28) Equity-settled Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 54,931 167 55,098 28,280 1,122,906 $ 1,206,284 $ 480,613 725,671 $ 1,206,284	2017 $ 45,275 134 45,409 29,223 963,617 $ 1,038,249 $ 424,276 613,973 $ 1,038,249

• f. Employees’ compensation and remuneration of directors

According to the Articles of Incorporation of the Company, the Company accrued employees’ compensation at rates of no less than 1% and no higher than 5% of net profit before income tax, and accrued remuneration of directors at rates of no higher than 3% of net profit before income tax. The employees’ compensation and the remuneration of directors for the years ended December 31, 2018 and 2017, which were approved by the Company’s board of directors on March 19, 2019 and March 29, 2018, respectively, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors Amount Employees’ compensation Remuneration of directors	For the Year Ended December 31
	2018 2017 1% 1% - - For the Year Ended December 31
	2018 2017 $ 5,324 $ 1,816 - -

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

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

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

• 48 -

26. INCOME TAXES RELATING TO CONTINUING OPERATIONS

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

For the Year Ended 2018 Current tax In respect of the current year $ 28,190 Income tax on unappropriated earnings 9,831 Adjustments for prior years (2,133 ) 35,888 Deferred tax In respect of the current year 161,029 Adjustments to deferred tax attributable to changes in tax rates and laws (1,008) Adjustments for prior years (2,673 ) 157,348 Income tax expense recognized in profit or loss $ 193,236 A reconciliation of accounting profit and income tax expense was as follows: For the Year Ended 2018 Profit before tax from continuing operations $ 720,761 Income tax expense calculated at the statutory rate $ 189,424 Nondeductible expense in determining taxable income 1,681 Income tax on unappropriated earnings 9,831 Effect of tax rate changes (1,008) Adjustments for prior years’ tax (4,806) Others (1,886 ) Income tax expense recognized in profit or loss $ 193,236	For the Year Ended	For the Year Ended	December 31
			2017 $ 31,226 12,619 (4,226 ) 39,619 31,060 - (18,137 ) 12,923 $ 52,542 December 31
		2018 $ 720,761 $ 189,424 1,681 9,831 (1,008) (4,806) (1,886 ) $ 193,236	2017 $ 234,944 $ 61,520 766 12,619 - (22,363) - $ 52,542

In 2017, the applicable corporate income tax rate used by the group entities in the ROC was 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings has been reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

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

• 49 -

b. Income tax recognized in other comprehensive income

Deferred tax Effect of tax rate changes Remeasurement of defined benefit plans In respect of the current year Remeasurement on defined benefit plans	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ (86) 82 $ (4 )	2017 $ - 480 $ 480

c. Current tax assets and liabilities

Current tax assets Tax refund receivable Current tax liabilities Income tax payable		December	31
		2018 $ 9,140 $ 26,910	2017 $ 9,140 $ 28,726

d. Deferred tax assets and liabilities

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

For the year ended December 31, 2018

Deferred tax assets Temporary differences Write-down of inventory Deferred revenue Defined benefit obligations Payables for annual leave Payables for employees’ benefits Tax losses Unrealized exchange losses Property, plant and equipment Deferred tax liabilities Temporary differences Deferred revenue Amortization of prepayments for leases Property, plant and equipment	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehensive Income Exchange Differences $ 2,490 $ (301 ) $ - $ (21 ) 31,553 (9,288 ) - 104 101 (96 ) (4 ) - 3,426 1,941 - - 5,957 (256 ) - (115 ) 7,949 (7,940 ) - (9 ) 623 (407 ) - - 66 (67 ) - 1 $ 52,165 $ (16,414 ) $ (4 ) $ (40 ) $ (41,073 ) $ (140,217 ) $ - $ 3,543 (3,824 ) (530 ) - 88 - (187 ) - 2 $ (44,897 ) $ (140,934 ) $ - $ 3,633	Closing Balance $ 2,168 22,369 1 5,367 5,586 - 216 - $ 35,707 $ (177,747 ) (4,266 ) (185 ) $ (182,198 )

• 50 -

For the year ended December 31, 2017

Deferred tax assets Temporary differences Write-down of inventory Deferred revenue Defined benefit obligations Payables for annual leave Payables for employees’ benefits Tax losses Unrealized exchange losses Property, plant and equipment Deferred tax liabilities Temporary differences Deferred revenue Defined benefit obligations Unappropriated earnings of subsidiaries Amortization of prepayments for leases Unrealized exchange gains	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehensive Income Co $ 6,387 $ (3,825 ) $ - 8,513 (2,913 ) - - (379 ) 480 2,033 1,389 - 6,025 - - - 7,848 - - 623 - - 63 - $ 22,958 $ 2,806 $ 480 $ (6,397 ) $ (34,306 ) $ - (206 ) 206 - (18,137 ) 18,137 - (3,331 ) (524 ) - (758 ) 758 - $ (28,829 ) $ (15,729 ) $ -	Business mbinations $ - 25,086 - - - - - - $ 25,086 $ - - - - - $ -	Exchange Differences Closing Balance $ (72 ) $ 2,490 867 31,553 - 101 4 3,426 (68 ) 5,957 101 7,949 - 623 3 66 $ 835 $ 52,165 $ (370 ) $ (41,073 ) - - - - 31 (3,824 ) - - $ (339 ) $ (44,897 )

• e. Income tax assessments

The income tax returns of subsidiary Jourdeness International through 2016 have been assessed by the tax authorities. However, according to the Accounting Research and Development Foundation (104) Foundation Letter No. 089, subsidiary Jourdeness International had restated the financial statements for the years ended December 31, 2011 to 2014 and period for the nine months ended September 30, 2014, and submitted a correction request on the income tax return for the year of 2014.

27. EARNINGS PER SHARE

EARNINGS PER SHARE
Basic earnings per share Diluted earnings per share	For	Unit: NT$ Per Share the Year Ended December 31
		2018 $ 9.02 $ 8.85	2017 $ 3.12 $ 3.11

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

Net Profit for the Year

Profit for the period	For the Year Ended	For the Year Ended	December 31
		2018 $ 527,525	2017 $ 182,402

• 51 -

The weighted average number of ordinary shares outstanding (in thousands of shares) is as follows:

Weighted average number of ordinary shares used in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employees’ compensation Employees’ restricted shares Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 58,470 54 1,116 59,640	2017 58,470 40 185 58,695

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

28. SHARE-BASED PAYMENT ARRANGEMENTS

Employee Restricted Shares

In the shareholder’s meeting on June 23, 2016, the shareholders approved a restricted share plan for employees with 2,900 thousand shares. On August 2, 2016, the above transaction was approved by the FSC. The Company issued 2,645 thousands and 110 thousands of the restricted shares on August 30, 2016 and December 28, 2016, respectively. The restrictions on the rights of employees who acquire the restricted shares but have not met the vesting conditions are as follows:

• a. The employees cannot sell, pledge, transfer, donate or, in any other way, dispose of these shares.

• b. The rights of attendance, proposal, speech and voting in shareholders meetings shall all be executed based on trust contracts signed by employees.

• c. During the vesting period, the Company agrees that the restricted employee shares can still receive shares and dividends regardless of whether the employees have achieved the vested conditions.

If an employee fails to meet the vesting conditions, the Company will recall and cancel the restricted shares without compensation.

The related information was as follows:

Employee Restricted Shares Balance at January 1 Options forfeited Balance at December 31	For the Year Ended December 31	For the Year Ended December 31
	2018 Number of Shares (In Thousands of Shares) 2,685 (155 ) 2,530	2017
		Number of Shares (In Thousands of Shares) 2,685 - 2,685

• 52 -

Information about outstanding employee restricted shares as of December 31, 2018 was as follows:

		Number of
		Shares
	Grant-date Fair	(In Thousands	Vesting Period
Grant-date	Value (NT$)	of Shares)	(Years)
August 18, 2016	$83.70	2,420	1-10
December 26, 2016	84.20	110	1-10

The calculation of employee restricted shares’ fair value was based on the closing price of the ordinary shares at the grant date.

Compensation costs of share-based payments arrangement recognized were $28,280 thousand and $29,223 thousand for the years ended December 31, 2018 and 2017, respectively.

29. BUSINESS COMBINATIONS

• a. Acquisition of assets and operations

For the year ended December 31, 2018

			Proportion of
			Voting Equity
			Interests	Consideration
	Principal Activity	Date of Acquisition	Acquired (%)	Transferred
19 beauty salons	Consulting services of	January 2018 to	100	$	23,574
in China	beauty and body spa	December 2018
	business
4 beauty salons in	Consulting services of	September 2018 to	100	$	-
Taiwan	beauty and body spa	October 2018
	business
For the year ended	December 31, 2017
			Proportion of
			Voting Equity
			Interests	Consideration
	Principal Activity	Date of Acquisition	Acquired (%)	Transferred
85 beauty salons	Consulting services of	January 2017 to	100	$	101,145
in China	beauty and body spa	December 2017
	business
15 beauty salons	Consulting services of	January 2017 to	100	$	10,000
in Taiwan	beauty and body spa	March 2017
	business
16 beauty salons	Consulting services of	April 2017 and July	100	$	-
in Malaysia	beauty and body spa	2017
	business

• 53 -

In order to expand the Group’s operation and increase various aspects of beauty and body spa services, Jourdeness (Guangzhou) Cosmetics and Jourdeness International acquired 19 and 4 beauty salons in 2018, respectively, and Jourdeness (Guangzhou) Cosmetics, Jourdeness International and MY acquired 85, 15 and 16 beauty salons in 2017, respectively.

• b. Assets acquired and liabilities assumed at the date of acquisition

For the year ended December 31, 2018

Current assets Inventories Non-current assets Property, plant and equipment (Note 12) Other intangible assets (Note 15) Other non-current assets Current liabilities Contract liabilities/advance receipts (Note 20)		Beauty Salons	Beauty Salons
		China $ 9,081 13,484 72,362 2,785 (121,173 ) $ (23,461 )	Taiwan $ - - 44,615 - (80,628 ) $ (36,013 )	Total $ 9,081 13,484 116,977 2,785 (201,801 ) $ (59,474 )

For the year ended December 31, 2017

Current assets Inventories Other current assets Non-current assets Property, plant and equipment (Note 12) Other intangible assets (Note 15) Deferred tax assets (Note 26) Other non-current assets Current liabilities Contract liabilities/advance receipts (Note 20)			Beauty Salons	Beauty Salons
		China $ 50,313 - 77,778 480,386 - 4,694 (628,628 ) $ (15,457 )	Taiwan $ - - 9,204 58,975 - - (111,550 ) $ (43,371 )	Malaysia $ 1,552 82 - 49,234 25,086 - (104,524 ) $ (28,570 )	Total $ 51,865 82 86,982 588,595 25,086 4,694 (844,702 ) $ (87,398 )

• c. Goodwill recognized on acquisition

Consideration transferred Plus: Fair value of identifiable net liabilities acquired Goodwill recognized on acquisition	Beauty Salons	Beauty Salons	Beauty Salons
	For the Year Ended		December 31
		2018 $ 23,574 59,474 $ 83,048	2017 $ 111,145 87,398 $ 198,543

• 54 -

The goodwill recognized in the acquisitions of beauty salons in 2018 and 2017 mainly represents the acquisition premium, consisting of customer relationship and net liabilities due from advance receipts included in the cost of the combinations. Acquisition premium included amounts attributed to the benefits of expected synergies, revenue growth, future market development and the assembled workforces. Except for the recognition of customer relationship as other intangible assets, these benefits are not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

d. Impact of acquisitions on the results of the Group

The results of the acquirees since the acquisition date included in the consolidated statements of comprehensive income were as follows:

Revenue Profit	Beauty Salons	Beauty Salons	Beauty Salons
	For the Year Ended		December 31
		2018 $ 128,417 $ 49,348	2017 $ 452,941 $ 57,988

Had these business combinations been in effect at the beginning of the annual reporting period, the Group’s revenue from continuing operations would have been $67,157 thousand and $184,364 thousand for the years ended December 31, 2018 and 2017, respectively; the profit from continuing operations would have been $8,651 thousand and $11,456 thousand for the years ended December 31, 2018 and 2017, respectively. This pro-forma information is for illustrative purposes only and is not necessarily an indication of the revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on January 1, 2018 and 2017, nor is it intended to be a projection of future results.

In determining the pro-forma revenue and profit of the Group had beauty salons been acquired at the beginning of the current reporting period, the management calculated net assets acquired on the basis of the fair values at the initial accounting for the business combination rather than the carrying amounts recognized in the respective pre-acquisition financial statements.

30. OPERATING LEASE AGREEMENTS

Operating leases with lease terms between 1 and 12 years. All contractual contents may be re-negotiated at the expiration of the lease periods. There are no contingent rentals for all leasehold properties.

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

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December 31	December 31
		2018 $ 333,070 617,265 61,607 $ 1,011,942	2017 $ 299,894 598,833 36,673 $ 935,400

• 55 -

31. CAPITAL MANAGEMENT

In order to set out the appropriate capital structure, the Group manages its capital based on the industry scale, the growth of market and the development of products for determining an appropriate market share, and considers the working capital, business benefits and cash flow generated from the competitive products.

32. FINANCIAL INSTRUMENTS

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

December 31, 2018

Financial liabilities Financial liabilities at amortized cost Convertible bonds	Carrying Amount $ 719,327			Fair Value	Fair Value
			Level 1 $ -	Level 2 $ -	Level 3 $ 719,327	Total $ 719,327

When the Group estimated the fair value of the liabilities component of convertible bonds, it assumed that the convertible bonds would be redeemed on December 28, 2021, and the risk discount rate of 1.2200% was assessed by the borrowing interest rate of similar corporation.

Except as stated above, the management of the Group believes the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values or their fair values cannot be reliably measured.

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

• 1) Fair value hierarchy (December 31, 2017: None)

December 31, 2018

Financial liabilities at FVTPL Derivatives	Level 1 $ -	Level 2 $ -	Level 3 $ 1,275	Total $ 1,275

• 2) Reconciliation of Level 3 fair value measurements of financial instruments (2017: None)

December 28, 2018 to December 31, 2018

Financial Liabilities Balance at January 1 and December 31, 2018	Financial Liabilities at FVTPL
	Derivatives $ 1,275

• 56 -

• 3) Valuation techniques and inputs applied for Level 3 fair value measurement

The fair values of the host liability instrument and the conversion option derivative instrument, consisting of put option and redemption option of convertible bonds, were estimated using the Binomial Convertible Bonds Pricing Model. The significant parameters used in the evaluation model were as follows:

	December 31,
	2018
Volatility	56.26%
Risk-free rate of interest	0.5961%
Risk discount rate	1.2200%
Liquidity risk	15.72 %

• c. Categories of financial instruments

Financial assets Loans and receivables (1) Financial assets at amortized cost (2) Financial liabilities Financial liabilities at FVTPL Held for trading Financial liabilities at amortized cost (3)	December 31
	2018 2017 $ - $ 1,349,279 2,088,091 - 1,275 - 1,366,054 584,863

• 1) The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables, other receivables and other financial assets.

• 2) The balances include financial assets measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables and other receivables.

• 3) The balances include financial liabilities at amortized cost, which comprise short-term loans, notes payable, trade payables, other payables (including related parties), refundable deposits, bonds payable and long-term loans.

• d. Financial risk management objectives and policies

The operations of the Group are affected by several financial risks, the risks include market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management policy is focused on unpredictable events in the financial markets and seeks to reduce the potentially adverse effects on the Group’s financial position and financial performance.

The risk management work is carried out by the financial management function of the Group in accordance with the policies approved by the board of directors. The Group’s financial management function is responsible for identifying, assessing and evading financial risks by working closely with the Group’s operation management function.

• 57 -

1) Market risk

The Group’s activities exposed it primarily to the market risks of changes in foreign currency exchange rates.

a) Foreign currency risk

The Group is a multinational corporation, which exposed it to the financial risks of changes in foreign currency exchange rates (the main currencies are U.S. dollars and RMB). The relevant foreign currency risk arises from future commercial transactions, financial assets and liabilities denominated in foreign currencies, and net investments in the foreign operation institutions.

The Group holds investments from a number of foreign operating institutions resulting in foreign currency risk on net assets.

The Group’s operations are transacted in several non-functional currencies (the functional currencies of the Company and subsidiaries include the NTD, RMB and MYR), therefore, the Group is affected by the volatility of exchange rates. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 36.

Sensitivity analysis

The Group’s sensitivity analysis mainly focuses on the foreign currency risk of U.S. dollars at the end of the reporting period. Assuming a 3% strengthening/weakening of the functional currency against U.S. dollars, the net income before tax for the year ended December 31, 2018 would have increased/decreased by $896 thousand; the net income before tax for the year ended December 31, 2017 would have decreased/increased by $297 thousand.

In management’s opinion, sensitivity analysis was unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period did not reflect the exposure during the period.

b) Interest rate risk

The Group was exposed to fair value and cash flow interest rate risk because the Group held both fixed and floating interest rate financial assets and financial liabilities. The Group’s management monitors fluctuations in market interest rate regularly. If it is needed, the management will perform necessary procedures to control significant interest rate risks from fluctuations in market interest rates.

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

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2018 2017 $ 890,401 $ 252,938 719,327 - 989,106 891,075 478,323 400,000

• 58 -

Sensitivity analysis

The Group’s sensitivity analysis is based on the floating interest rates financial assets and financial liabilities at the end of the reporting period. If interest rates had been 0.5% higher/lower and all other variables were held constant, the net income before tax for the years ended December 31, 2018 and 2017 would increase/decrease by $2,554 thousand and $2,455 thousand, respectively.

2) Credit risk

• a) Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group is required to manage and analyze the credit risk for each of its new customers before granting the payment terms and the delivery conditions in accordance with the internal credit policy. For internal risk control, the Group assesses the credit quality of customers by considering their financial status, past experience and other factors. The limitations of individual risk are set by the board of directors based on internal or external credit ratings and regular monitoring of the use of credit lines.

• b) There were no excess credit lines for the years ended December 31, 2018 and 2017, and the management did not expect any significant losses due to the counterparty default on its contractual obligations.

• c) The Group transacts with a large number of unrelated customers and, thus, no concentration of credit risk was observed. Credit risk arises from cash and cash equivalents, deposit in banks and trade receivables from customers. In addition, the credit risk is not high because the counterparty of liquidity is the bank with a high credit rating granted by the rating agency.

• d) The Group only deals with creditworthy counterparties as a means of mitigating the risk of financial loss. The Group monitors the exposure at default and the credit ratings of its counterparties continuously.

3) Liquidity risk

• a) The Group’s financial control center aggregates the cash flow forecasting performed by each operating entity and monitors the forecast of the Group’s liquidity requirements to ensure that it has sufficient funds to meet operational needs.

• b) The remaining cash held by each operating entity is invested in demand deposits and marketable securities when it exceeds the management of working capital. The selected instruments have appropriate maturity dates or sufficient liquidity to meet the above forecast and provide sufficient water level.

• 59 -

• c) The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay.

December 31, 2018

d)	On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing $ 141,072 Floating interest rate liabilities 78,323 Fixed interest rate liabilities - $ 219,395 December 31, 2017 On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing liabilities $ 161,683 Floating interest rate liabilities - $ 161,683 Financing facilities Unsecured bank loan facilities Amount used Amount unused Secured bank loan facilities Amount used Amount unused		1-5 Years 5+ Years $ 43,985 $ - 400,000 - 719,327 - $ 1,163,312 $ - 1-5 Years 5+ Years $ 59,831 $ - 400,000 - $ 459,831 $ - December 31	1-5 Years 5+ Years $ 43,985 $ - 400,000 - 719,327 - $ 1,163,312 $ - 1-5 Years 5+ Years $ 59,831 $ - 400,000 - $ 459,831 $ - December 31	1-5 Years 5+ Years $ 43,985 $ - 400,000 - 719,327 - $ 1,163,312 $ - 1-5 Years 5+ Years $ 59,831 $ - 400,000 - $ 459,831 $ - December 31
				2018 $ - 50,000 $ 50,000 $ 478,323 219,177 $ 697,500	2017 $ - - $ - $ 400,000 - $ 400,000

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33. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

• a. Related party name and category

Related Party Name Jourdeness Cosmetic., Sdn Bhd. (“Cosmetic”) Jourdeness Canada Enterprises Inc. Jourdenwell Medical Beauty Clinic Co., Ltd. (“Jourdenwell”) Chen, Cheng-Hsiung Chen, Cheng-Tzu	Related Party Category
	Related party in substance Related party in substance Related party in substance Key management personnel (Chairman of the Company) Key management personnel (Director of the Company)

• b. Sales of goods - net revenue from sale of goods

Related Party Category Related party in substance	For the Year Ended	For the Year Ended	December 31
		2018 $ 24	2017 $ 8,171

The selling price of the Group to the related parties was negotiated among each other. The payment terms for the related parties were 60 days to 90 days after shipment of goods, and they were similar to those from the third party.

• c. Purchases of goods

Related Party Category Related party in substance	For the Year Ended	For the Year Ended	December 31
		2018 $ -	2017 $ 6,013

Purchases were made at market price discounted to reflect the quantity of goods purchased and the relationships between the parties.

• d. Trade receivables from related parties

Related Party Category Related party in substance		December 31	December 31
		2018 $ -	2017 $ 464

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

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• e. Other receivables from related parties

Related Party Category/Name Related party in substance Cosmetic Jourdenwell		December 31	December 31
		2018 $ 2,288 426 $ 2,714	2017 $ 9,280 - $ 9,280

• f. Other payables to related parties

Related Party Category/Name Related party in substance Jourdenwell Acquisitions of property, plant and equipment Related Party Category Key management personnel		December 31	December 31
		2018 2017 $ 1,957 $ - Purchase Price
	For the Year Ended		December 31
		2018 $ 72,960	2017 $ -

• g. Acquisitions of property, plant and equipment

• h. Acquisitions of assets (2018: None)

Related Party Category/Name Account Items Related party in substance Cosmetic Inventories Cosmetic Other current assets Cosmetic Customer relationship Cosmetic Goodwill Cosmetic Deferred tax assets Cosmetic Advance receipts	Purchase Price
	For the Year Ended December 31, 2017 $ 1,620 85 51,296 29,786 26,144 (108,931 ) $ -

i. Rental revenue

Related Party Category/Name Related party in substance Jourdenwell	For the Year Ended	For the Year Ended	December 31
		2018 $ 1,328	2017 $ -

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• j. Endorsements and guarantees

Endorsements and guarantees given by related parties

Related Party Category/Name Key management personnel Amount endorsed Amount utilized (reported as short-term and long-term borrowings)		December 31	December 31
		2018 $ 747,500 $ 478,323	2017 $ 400,000 $ 400,000

• k. Compensation of key management personnel

Short-term employee benefits Post-employment benefits Share-based payments	For the Year Ended	For the Year Ended	December 31
		2018 $ 22,988 325 7,928 $ 31,241	2017 $ 21,535 368 7,998 $ 29,901

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

34. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral applications as follows:

Buildings Buildings Land Land Financial assets at amortized cost - trust time deposits Financial assets at amortized cost - pledged time deposits Financial assets at amortized cost - reserve bank deposits Financial assets at amortized cost - demand deposits		December 31 2018 2017 Collateral Applications $ 252,317 $ 258,639 Performance bond (a) and (c) 91,804 - Guarantees of bank loans 216,067 216,067 Performance bond (a) and (c) 587,940 528,393 Guarantees of bank loans 175,000 175,000 Performance bond (b) and (c) 75,001 53,818 Performance bond (a) and (c) 1,347 1,837 Membership Installment Payment Plan 893 907 Property maintenance funds $ 1,400,369 $ 1,234,661
		2018 $ 252,317 91,804 216,067 587,940 175,000 75,001 1,347 893 $ 1,400,369

• a. Subsidiary Jourdeness International entrusts the credit bank to process the collection and payment from the credit card holder’s account. Since the service provided by Jourdeness International is of a pre-receipt nature, the failure of Jourdeness International to satisfy performance obligations will cause losses on the credit card bank. Therefore, Jourdeness International has agreed to provide time deposit as collateral to obtain credit line with credit bank, and the guaranteed amount is $74,000 thousand. In addition, Jourdeness International signed an agreement with National Credit Card Center of the ROC and agreed to obtain a comprehensive credit line by pledging buildings and land as collateral. The credit

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bank issues a performance statement with a guarantee amount of $350,000 thousand which is the guarantee for the credit card losses caused by Jourdeness International’s promise to pay for the bank’s default.

• b. For the purpose of strengthening the protection of consumer rights by Jourdeness International, in addition to the original performance bond, the “Guarantee Trust Deed Agreement” was approved by Jourdeness International’s board of directors on August 28, 2015. The agreement states that Jourdeness International needs to consider the liquidity and the enhancement of the guarantee reserve rate, and be responsible for trust management through the trust management bank, as well as 30% of the advance receipts which are based on the Jourdeness International’s recent audit report deducted by the performance bond as a guarantee reserve have to be remitted to the trust account. If Jourdeness International fails to perform its services or goods in accordance with the contract from customer, consumers can obtain relevant rulings through formal channels to ensure their remaining rights.

• c. The performance bonds provided by Jourdeness International were $599,000 thousand and $508,000 thousand as of December 31, 2018 and 2017, respectively, which had complied with the commitment guarantee amount as stated in (b) above.

35. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, the capital expenditures that the Group has committed but not incurred are as follows:

Property, plant and equipment		December 31	December 31
		2018 $ 9,380	2017 $ 22,913

36. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

December 31, 2018

		Foreign		Functional
	Currencies			Currencies	Carrying
		(In	Exchange Rate	(In	Amount (In
	Thousands)		(In Dollars)	Thousands)	Thousands)
Financial assets
Monetary items
USD	$	7,078	30.715 (USD:NTD)	$ 217,413	$ 217,413
Financial liabilities
Monetary items
USD		8,050	30.715 (USD:NTD)	247,256	247,256

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December 31, 2017

		Foreign		Functional	Functional
	Currencies			Currencies		Carrying
		(In	Exchange Rate		(In	Amount (In
	Thousands)		(In Dollars)	Thousands)		Thousands)
Financial assets
Monetary items
USD	$	2,832	29.76 (USD:NTD)	$	84,290	$	84,290
RMB		3,227	4.57 (RMB:NTD)		14,730		14,730
Financial liabilities
Monetary items
USD		2,500	29.76 (USD:NTD)		74,400		74,400

For the years ended December 31, 2018 and 2017, net foreign exchange gains (losses) were $949 thousand and $(10,198) thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions.

37. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees

• 1) Financing provided to others (Table 1);

• 2) Endorsements/guarantees provided (Table 2);

• 3) Marketable securities held (excluding investments in subsidiaries, associates and joint ventures) (None);

• 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital (None);

• 5) Acquisitions of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital (None);

• 6) Disposals of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital (None);

• 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital (None);

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital (None);

• 9) Trading in derivative instruments (None);

• 10) Intercompany relationships and significant intercompany transactions (Table 3);

• 11) Information on investees (Table 4).

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• b. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area (Table 5).

• 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses (Table 6):

  • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.

  • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.

  • c) The amount of property transactions and the amount of the resultant gains or losses.

  • d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

  • e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.

  • f) Other transactions that have a material effect on the profit or loss for the year or on the financial position, such as the rendering or receipt of services.

38. SEGMENT INFORMATION

Information reported to the chief operating decision maker was based on the types of business units. Business units include Jourdeness International, Jourdeness (Guangzhou) Cosmetics, Jourdeness Enterprise Management and MY.

The operating segments’ accounting policies were similar to the Group as detailed in Note 4. The operating segments’ profit or loss is measured in terms of profit or loss before tax and serves as the basis for assessing performance.

• a. Segment revenues and results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segments:

For the year ended December 31, 2018

Revenue from external customers Inter-segment revenue Consolidated revenue Segment income Other income Other gains and losses Finance costs Profit before tax	Jourdeness International $ 1,235,421 40,393 $ 1,275,814 $ 95,359	Jourdeness (Guangzhou) Cosmetics $ 1,725,450 11,740 $ 1,737,190 $ 608,162	Jourdeness Enterprise Management $ 34,529 3,597 $ 38,126 $ 4,100	MY $ 113,096 - $ 113,096 $ 46,646	Other $ - - $ - $ (53,576 )	Elimination $ - (55,730 ) $ (55,730 ) $ -	Total $ 3,108,496 - $ 3,108,496 $ 700,691 35,029 (7,960 ) (6,999 ) $ 720,761

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For the year ended December 31, 2017

Revenue from external customers Inter-segment revenue Consolidated revenue Segment income Other income Other gains and losses Finance costs Profit before tax	Jourdeness International $ 1,244,054 35,778 $ 1,279,832 $ 141,751	Jourdeness (Guangzhou) Cosmetics $ 985,666 9,429 $ 995,095 $ 96,864	Jourdeness Enterprise Management $ 29,412 7,880 $ 37,292 $ 6,694	MY $ 54,388 - $ 54,388 $ 20,923	Other $ - 5,841 $ 5,841 $ (47,766 )	Elimination $ - (58,928 ) $ (58,928 ) $ -	Total $ 2,313,520 - $ 2,313,520 $ 218,466 38,168 (18,688 ) (3,002 ) $ 234,944

The segment revenues were all generated from external customers. All intercompany transactions in 2018 and 2017 have been eliminated on consolidation.

Segment profit represented the profit before tax earned by each segment without interest income, rental revenue, gains or losses on disposal of property, plant and equipment and exchange gains or losses. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

• b. Revenue from major products and services: Refer to Note 24.

• c. Geographical information

The Group’s revenue from continuing operations from external customers by location of operations and information about its non-current assets by location of assets are detailed below.

China Taiwan Other	Revenue from External Customers For the Year Ended December 31 2018 2017 $ 1,759,979 $ 1,015,078 1,235,397 1,235,883 113,120 62,559 $ 3,108,496 $ 2,313,520	Revenue from External Customers For the Year Ended December 31 2018 2017 $ 1,759,979 $ 1,015,078 1,235,397 1,235,883 113,120 62,559 $ 3,108,496 $ 2,313,520		Non-current Assets	Non-current Assets
				December 31
		2018 $ 1,759,979 1,235,397 113,120 $ 3,108,496		2018 $ 1,669,784 1,694,312 84,392 $ 3,448,488	2017 $ 1,576,578 1,592,544 83,691 $ 3,252,813

Non-current assets exclude those which are classified as financial instruments and deferred tax assets.

• d. Information about major customers

No single customer contributed 10% or more to the Group’s revenue.

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TABLE 1

JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period (Note 3)	Ending Balance	Actual Borrowing Amount	Interest Rate	Nature of Financing	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower (Note 2)	Aggregate Financing Limits (Note 2)
													Item	Value
1	Bio-Jourdeness International Group Co., Ltd.	Jourdeness Group Limited	Other receivables from related parties	Yes	$ 168,933 (US$ 5,500 thousand)	$ 168,933 (US$ 5,500 thousand)	$ 168,933 (US$ 5,500 thousand)	-	Short-term financing	$ -	Operating capital	$ -	-	-	$ 248,458	$ 248,458
2	Jourdeness (Guangzhou) Cosmetics Co. Ltd.	Jourdeness (Guangzhou) Cosmetology Enterprise Management Co. Ltd.	Other receivables from related parties	Yes	$ 44,720 (RMB 10,000 thousand)	$ 44,720 (RMB 10,000 thousand)	$ 4,472 (RMB 1,000 thousand)	-	Short-term financing	-	Operating capital	-	-	-	547,431	547,431

Note 1: The information of note column is as follows:

• a. The Company: 0. b. The subsidiaries are marked in numerical order from 1.

Note 2: The total amount of the financing provided by the Company to others, collectively and to any individual entity shall not exceed 40% of its net worth. The Company’s net worth was calculated as of December 31, 2018.

Note 3: The calculation was based on the spot exchange rate of December 31, 2018.

Note 4: All intercompany transactions have been eliminated on consolidation.

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TABLE 2

JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

No.		Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Notes 2 and 3)	Maximum Amount Endorsed/ Guaranteed During the Period (Note 3)	Outstanding Endorsement/ Guarantee at the End of the Period (Note 3)	Actual Borrowing Amount (Note 3)	Amount Endorsed/ Guaranteed by Collateral (Note 3)	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries (Note 4)	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent (Note 4)	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China (Note 4)
	Endorser/Guarantor	Name	Relationship
1	Bio-Jourdeness International Group Co., Ltd.	Jourdeness Group Limited	Parent	$ 310,573	$ 92,145 (US$ 3,000 thousand)	$ 89,645 (US$ 2,919 thousand)	$ 78,323 (US$ 2,550 thousand)	$ 92,145 (US$ 3,000 thousand)	4.81	$ 621,145	N	Y	N

Note 1: The information of note column is as follows:

• a. The Company: 0.

• b. The subsidiaries are marked in numerical order from 1.

Note 2: The total amount of the guarantee provided by the Company to others, collectively and to any individual entity shall not exceed 100% and 50% of its net worth, respectively. The Company’s net worth was calculated as of December 31, 2018.

• Note 3: The calculation was based on the spot exchange rate of December 31, 2018.

• Note 4: Endorsement/guarantee given by parent on behalf of subsidiaries marked as “Y”; endorsement/guarantee given by subsidiaries on behalf of parent marked as “Y”; endorsement/guarantee given on behalf of companies in mainland China marked as “Y”.

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TABLE 3

JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

No. (Note 1)	Investee Company	Counterparty	Relationship (Note 2)		Transactions	Details
				Financial Statement Accounts	Amount	Transaction Terms	% of Total Sales or Assets (Note 3)
0	Jourdeness Group Limited	Bio-Jourdeness International Group Co., Ltd.	a	Other payables from related parties	$ 168,933	No significant difference to others	3
1	Bio-Jourdeness International Group Co., Ltd.	Jourdeness (Guangzhou) Cosmetic Co., Ltd.	c	Sales revenue	26,800	No significant difference to others	1

Note 1: The information about the transactions between the Company and its subsidiaries is marked in the note column as follows:

• a. The Company: 0.

• b. The subsidiaries are marked in numerical order from 1.

Note 2: Investment types are as follows:

• a. The Company to the subsidiaries.

• b. The subsidiaries to the Company.

• c. Between the subsidiaries.

• Note 3: The ratio of transaction amounts to total sales revenue or assets was calculated as follows: (1) Asset or liability: The ratio was calculated based on the ending balance over the total consolidated assets; (2) Income or loss: The ratio was calculated based on the midterm accumulated amounts over the total consolidated sales revenue.

Note 4: All intercompany transactions have been eliminated on consolidation.

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TABLE 4

JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

Investor Company	Investee Company	Location	Business Content	Original Investment Amount	Original Investment Amount	As of December 31, 2018	As of December 31, 2018	As of December 31, 2018	Net Income (Loss) of Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares	%	Carrying Amount
The Company	Bio-Jourdeness International Group Co., Ltd. Success United Limited Jourdeness Development Limited Bio-Jourdeness Cosmetic Co. (MY) Sdn. Bhd.	Taiwan Samoa Hong Kong Malaysia	Beauty and body spa business and manufacture of cosmetics Investment Investment Beauty and body spa business	$ 130,000 224,494 32,320 7,857	$ 130,000 224,494 32,320 7,857	13,000,000 6,529,401 1,000,000 1,100,750	100.00 100.00 100.00 100.00	$ 621,145 1,368,904 43,034 57,864	$ 74,667 470,157 7,026 34,467	$ 74,667 470,157 7,026 34,467	Note Note Note Note

Note: All intercompany transactions have been eliminated on consolidation.

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TABLE 5

JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

Investee Company	Investee Company	Business Content	Paid-in Capital (Note 1)	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2018	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2018	Net Income (Loss) of Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 4)	Carrying Amount as of December 31, 2018 (Note 4)	Accumulated Repatriation of Investment Income as of December 31, 2018
						Outflow	Inflow
Jourdeness (Guangzhou) Cosmetics Co. Ltd. Jourdeness (Guangzhou) Cosmetology Enterprise Management Co. Ltd. Changsha Jourdeness Enterprise Management Consulting Co. Ltd. Chengdu Jourdeness Enterprise Management Consulting Co. Ltd. Wuhan Jourdeness Enterprise Management Consulting Co. Ltd.		Manufacture of cosmetics and beauty and body spa business Consulting services of beauty and body spa business Consulting services of beauty and body spa business Consulting services of beauty and body spa business Consulting services of beauty and body spa business	$ 286,552 30,531 - - -	Note 2 Note 2 Note 2 Note 2 Note 2	$ - - - - -	$ - - - - -	$ - - - - -	$ - - - - -	$ 470,190 7,026 605 378 685	100.00 100.00 100.00 100.00 100.00	$ 470,190 7,026 605 378 685	$ 1,368,578 43,079 - - -	$ - - - - -
Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2018 Investment Amounts Authorized by Investment Commission, MOEA Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA (Note 3) $ - $ - $ -
Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2018	Investment Amounts Authorized by Investment Commission, MOEA		Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA (Note 3)
$ -	$ -		$ -

Note 1: The calculation was based on the spot exchange rate of December 31, 2018.

Note 2: The Company indirectly invested in subsidiaries in China by investing via third region.

Note 3: The Company was incorporated in Cayman Islands and not restricted to “Guideline Governing the Review of Investment or Technical Cooperation in the Mainland Area.”

Note 4: All intercompany transactions have been eliminated on consolidation. The basis for investment income (loss) recognition is the financial statements audited and attested by parent company’s CPA in the ROC.

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TABLE 6

JOURDENESS GROUP LIMITED AND SUBSIDIARIES

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

FOR THE YEAR ENDED DECEMBER 31, 2018

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

Investee Company	Transaction Type	Purchase/Sale	Purchase/Sale	Price	Transaction Details	Transaction Details	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Unrealized (Gain) Loss	Note
		Amount	%		Payment Terms	Comparison with Normal Transactions	Ending Balance	%
Jourdeness (Guangzhou) Cosmetics Co. Ltd.	Sale	$ 26,800	2.13	$ -	Collect within 90 days after shipment of goods	No significant difference to others	$ 7,586	4.32	$ -

Note: All intercompany transactions have been eliminated on consolidation.

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