Lida - Audit Report / Information 2018

LIDA HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2018 AND 2017

For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Lida Holdings Limited

PWCR18000478

Opinion

We have audited the accompanying consolidated balance sheets of Lida Holdings Limited and its subsidiaries (the “Group”) as of December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and 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 the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

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

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Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Group’s consolidated financial statements of the current period are stated as follows:

`Cash and financial assets at amortized cost`

Description

Please refer to Notes 6(1) and 6(2) to the consolidated financial statements for the accounting policies on cash and financial assets at amortized cost. As of December 31, 2018, the balances of cash and financial assets at amortized cost amounted to NT$4,408,043 thousand.

The Group designs, manufactures and sells mechanical and electrical products such as air compressors, electric welding machines and electric tools. Because of stable collection, cash and financial assets at amortized cost is material, representing 69% of the consolidated total assets. Thus, we consider cash and financial assets at amortized cost as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

Evaluated and tested the effectiveness of the internal control over cash management, including segregation of duties for cash receipts and recording, authorization of receipts and payments in cash and book general entry.
Verified the existence, accuracy as well as rights and obligations of cash and financial assets at amortized cost by sending out confirmation letters for all bank accounts.
Selected samples of the Group’s transactions which has critical cash collection and disbursement and confirmed whether the nature of transaction meets operating requirement.
Tested the bank reconciliation report by confirming the account balance to the general ledger, checking the balance of the bank account to bank statements or bank confirmations and verifying the reconciling items to the bank statements after the balance sheet date or other supporting documents to ensure the completeness, accuracy as well as rights and obligations of bank deposit.

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Checked the existence of cash on hand, revolving funds and time deposit receipts as of the balance sheet date by performing physical count.

`Sales revenue from distribution selling`

Description

Please refer to Note 4(23) to the consolidated financial statements for the accounting policies on revenue recognition. For details of revenue recognition, please refer to Note 6(15). For the year ended December 31, 2018, the Group’s sales revenue was NT$7,542,981 thousand.

The Group adopts distribution selling as the main sales model and signs agreements with distributors every year in which stating the rights and obligations of distributors such as the terms, sales quotas, delivery method, maintenance and warranty as well as refund method.

Given the above mentioned distribution selling constituted 87% of the total Group sales revenue and the distribution selling model and terms of transaction would have impacts on the sales revenue recognition. Thus, we consider sales revenue from distribution selling as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

Assess on the main or new distributors by checking the owner, major shareholders, registered address, business address, capital, main business items and other relevant information of the distribution company.
Conducted interviews with major distributors to verify the existence of purchase from distributors and check the occurrence of sales pertaining to distributors. Also, confirmed whether the financial information of transactions between the distributors and the Group was consistent with the information in the report.
Verified the accuracy of the ending balance of accounts receivable and total sales revenue during the year by sending out the confirmation letters to Group major distributors.
Assessed and tested the effectiveness of internal controls over sales including the procedures for customer order, shipping as well as sales and collection.
Conducted substantive test on sales revenue and subsequent collection test.

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`Valuation of property, plant and equipment impairment`

Description

Please refer to Note 4(14) to the consolidated financial statements for the accounting policies on property, plant and equipment impairment, Note 5 for the uncertainty of accounting estimates and assumptions applied to property, plant and equipment, and Notes 6(6) and 6(7) for details of property, plant and equipment.

The Group’s subsidiaries, manufacturing low-end products, continued to generate losses year by year as the energy-efficient and environment-friendly products become the mainstream in the market in recent years. The management assessed the impairment of property, plant and equipment on the subsidiary. The impairment valuation mainly relied on an external appraiser who was commissioned by the Group. As the valuation involved multiple assumptions, involved subjective judgment and high degree of uncertainty, and may have significant effects on the valuation results. We consider the valuation of property, plant and equipment as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

Obtained the assessment table the cash generating unit with assets that had any indication that it may be impaired, and reviewed relevant policies and processes on impairment valuation, including collection of internal and external data, long-term and short-term forecasts and industry changes.
Obtained the external appraisal report and performed the following procedures:
(1) Examined the appraiser’s qualification and assessed the independence, objectiveness and competence.
(2) Assessed whether the valuation method in the appraisal report was common industry practice and appropriate.
(3) Assessed the reasonableness of significant assumptions applied in the appraisal report.

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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 International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal controls as management determines are 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.

Auditor’s 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 auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that an audit conducted in accordance with ROC GAAS 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 ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

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

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internal controls.

Obtain an understanding of internal controls 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 controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 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 auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient 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 controls that we identify during our audit.

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

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

Chen, Hsien-Cheng Hsiao, Chin-Mu

For and on behalf of PricewaterhouseCoopers, Taiwan March 22, 2019

The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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LIDA HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Assets	Notes	December 31,
Current assets 1100 Cash and cash equivalents 1136 Financial assets at amortized cost - current 1170 Accounts receivable, net 1200 Other receivables 130X Inventories, net 1410 Prepayments 1470 Other current assets 11XX Total current assets Non-current assets 1600 Property, plant and equipment 1840 Deferred income tax assets 1900 Other non - current assets 15XX Total non-current assets 1XXX Total assets Liabilities and equity	6(1) 6(2) and 12(4) 6(3) and 12(4) 6(4) 6(5) and 12(4) 6(6)(7) and 8 6(21) 6(8) and 8 6(9) and 8 6(15) and 12(5) 6(10) 6(21) 12(5) 6(21) 6(11) 6(12) 6(13) 9 11
Current liabilities 2100 Short-term borrowings 2130 Current contract liabilities 2170 Accounts payable 2200 Other payables 2230 Current income tax liabilities 2250 Provisions for liabilities - current 2300 Other current liabilities 21XX Total current liabilities Non-current liabilities 2570 Deferred income tax liabilities 2XXX Total liabilities Equity Equity attributable to owners of parent Share capital 3110 Share capital Capital surplus 3200 Capital surplus Retained earnings 3320 Special reserve 3350 Unappropriated retained earnings Other equity interest 3400 Other equity interest 31XX Total equity attributable to owners of parent 3XXX Total equity Significant contingent liabilities and unrecognised contract commitments Significant events after the reporting period 3X2X Total liabilities and equity

LIDA HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)

Items	Years ended December 31	Years ended December 31	Years ended December 31
	2018	% Amount 100 8,123,832 $ 76) ( 6,213,563) ( 24 1,910,269 3) ( 232,593) ( 2) ( 127,322) ( 2) ( 164,431) ( - - 7) ( 524,346) ( 17 1,385,923 - 38,533 1) ( 31,377) ( - 2,668) ( 1) ( 4,488 16 1,390,411 6) ( 466,528) ( 10 923,883 $ 1) ( 58,829) ($ 1) ( 58,829) ($ 9 865,054 $ 10 923,883 $ 9 865,054 $ 2017 7.70 7.69 $ $	2017
				%
4000 Operating revenue 5000 Operating costs 5900 Gross profit Operating expenses 6100 Sales and marketing expenses 6200 General and administrative expenses 6300 Research and development expenses 6450 Expected credit impairment gain 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense 8200 Profit for the year Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss 8361 Exchange differences on translation of foreign operations 8300 Other comprehensive loss, net of income tax 8500 Total comprehensive income for the year Profit attributable to: 8610 Owners of parent Comprehensive income attributable to: 8710 Owners of parent 9750 Basic earnings per share (in dollars) 9850 Diluted earnings per share (in dollars)				100 77) (
				23
				3) ( 1) ( 2) ( -
				6) (
				17
				- - -
				-
				17 5) (
				12
				1) (
				1) (
				11
				12
				11
				9.24
	$		$	9.23

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

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								Total equity		4,863,993 $	923,883	58,829) (	865,054		-	800,000) (	4,929,047 $		4,929,047 $	769,605	92,269) (	677,336		-	500,000) (	5,106,383 $
						Financial statements	translation differences	of foreign operations		266,848) ($	-	58,829) (	58,829) (		-	-	325,677) ($		325,677) ($	-	92,269) (	92,269) (		-	-	417,946) ($
LIDA HOLDINGS LIMITED AND SUBSIDIARIES	CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY	FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017	(Expressed in thousands of New Taiwan dollars)	Equity attributable to owners of the parent	Retained Earnings		Share capital Capital Unappropriated	Notes - common stock surplus Special reserve retained earnings		1,000,000 $ 1,548,200 $ - $ 2,582,641 $	- - - 923,883	- - - -	- - - 923,883		- - 266,848 266,848) (	- - - 800,000) (	1,000,000 $ 1,548,200 $ 266,848 $ 2,439,676 $		1,000,000 $ 1,548,200 $ 266,848 $ 2,439,676 $	- - - 769,605	- - - -	- - - 769,605		- - 58,829 58,829) (	- - - 500,000) (	1,000,000 $ 1,548,200 $ 325,677 $ 2,650,452 $	The accompanying notes are an integral part of these consolidated financial statements.
														6(14)									6(14)
									For the year ended December 31,2017	Balance at January 1, 2017	Profit for the year	Other comprehensive income (loss) for the year	Total comprehensive income (loss) for the year	Distribution of 2016 earnings:	Special reserve	Cash dividends	Balance at December 31, 2017	For the year ended December 31,2018	Balance at January 1, 2018	Profit for the year	Other comprehensive income (loss) for the year	Total comprehensive income (loss) for the year	Distribution of 2017 earnings:	Special reserve	Cash dividends	Balance at December 31, 2018

LIDA HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CACH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Notes	Years endedDecember31	Years endedDecember31
	2018 1,189,230 $ 58,773 3,018 188) ( - 282 61,273 43,604) ( 3,747 280,624 150 32,804) ( 104 8,897 7,940 187,584) ( 6,558) ( 8,191) ( - 1,335,109 43,604 3,747) ( 383,700) ( 991,266 148,478 - 235,834) ( 139 107) ( 142,364) ( 229,688) ( 45,601 500,000) ( 454,399) ( 19,509) ( 287,670 2,331,573 2,619,243 $	2017
6(6)(19) 6(8) 12(2) 6(2) 6(17) 6(17) 6(16) 6(18) 6(24) 6(17)		1,390,411 $ 32,596 820 - 480) ( 158 - 37,250) ( 2,668 35,173) ( 3,043 33,334) ( 43) ( 11,772) ( - 56,478 11,249) ( 640 2,345
		1,359,858 35,837 2,668) ( 365,988) (
		1,027,039
		- 372,080) ( 240,104) ( 2,232 21,808) ( -
		631,760) (
		45,650) ( 800,000) (
		845,650) (
		71,341) (
		521,712) ( 2,853,285
		2,331,573 $

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LIDA HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,

EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANISATION

Lida Holdings Limited (the “Company”) was incorporated in the British Cayman Islands on May 11, 2012, for the purpose of the restructuring undertaken prior to listing on the Taiwan Stock Exchange. On August 12, 2013, the Company provided its own shares to exchange 100% equity of Wellsoon International Limited (Wellsoon International) at the share exchange ratio of 1,551:1. The Company’s stock has been listed on the Taiwan Stock Exchange since July 20, 2016. The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in the design, manufacture and sales of mechanical and electrical products such as air compressors, electric welding machines and electrical tools.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorized for issuance by the Board of Directors on March 22, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments endorsed by the FSC effective from 2018 are as follows:

follows:
New Standards, Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 2, ‘Classification and measurement of share-based payment transactions’ Amendments to IFRS 4, ‘Applying IFRS 9, Financial instruments with IFRS 4, Insurance contracts’ IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018

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New Standards, Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts with customers’ Amendments to IAS 7, ‘Disclosure initiative’ Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealized losses’ Amendments to IAS 40, ‘Transfers of investment property’ IFRIC 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IAS 28, ‘Investments in associates and joint ventures’	January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2018

New Standards, Interpretations and Amendments

Effective date by
International Accounting
Standards Board

Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from
contracts with customers’
Amendments to IAS 7, ‘Disclosure initiative’
Amendments to IAS 12, ‘Recognition of deferred tax assets for
unrealized losses’
Amendments to IAS 40, ‘Transfers of investment property’
IFRIC 22, ‘Foreign currency transactions and advance consideration’
Annual improvements to IFRSs 2014-2016 cycle - Amendments to
IFRS 1, ‘First-time adoption of International Financial Reporting
Standards’
Annual improvements to IFRSs 2014-2016 cycle - Amendments to
IFRS 12, ‘Disclosure of interests in other entities’
Annual improvements to IFRSs 2014-2016 cycle - Amendments to
IAS 28, ‘Investments in associates and joint ventures’

January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

A. IFRS 9, ‘Financial instruments’
(a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset at amortized cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present subsequent changes in the fair value of an investment in an equity instrument that is not held for trading in other comprehensive income.

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(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognize 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Group shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.
(c) The Group has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Notes 12(4) B and C.
B. IFRS 15, ‘Revenue from contracts with customers’ and amendments
(a) IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11, ‘Construction contracts’, IAS 18, ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognized when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.
- The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:
- Step 1: Identify contracts with customer.
- Step 2: Identify separate performance obligations in the contract(s).
- Step 3: Determine the transaction price.

Step 4: Allocate the transaction price.

Step 5: Recognize revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

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(b) The Group applied retrospectively IFRS 15 only to incomplete contracts as of January 1, 2018, by adopting an optional transition expedient. The significant effects of adopting the modified transition as of January 1, 2018 are summarized below:
Consolidated balance sheet

modified transition as of January Consolidated balance sheet	1, 2018 are summarized below:
Affected items January1,2018 Contract liabilities Other current liabilities	Book value Adjustment for under previous initial application revenue standard of IFRS 15 - $ 9,174 $ 9,174 9,174) ( 9,174 $ - $	Adjusted amount after IFRS 15 adoption
		9,174 $ -
		9,174 $

Under IFRS 15, liabilities in relation to contracts are recognized as contract liabilities, but were previously presented as receipts in advance (shown as ‘other current liabilities’) in the balance sheet. The balances amounted to $9,174 on January 1, 2018.

C. Amendments to IAS 7, ‘Disclosure initiative’

This amendment requires that an entity shall provide more disclosures related to changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

The Group expects to provide additional disclosure to explain the changes in liabilities arising from financing activities.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

follows:
New Standards, Interpretations and Amendments Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	Effective date by International Accounting Standards Board
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

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Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognize a ‘right-of-use asset’ and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

The Group expects to recognize the lease contract of lessees in line with IFRS 16. However, the Group does not intend to restate the financial statements of prior period (collectively referred herein as the “modified retrospective approach”). On January 1, 2019, it is expected that ‘right-of-use asset’ and lease liability will be increased by $189,000 and $16,000, respectively, and long-term prepaid rents (shown as other non-current assets) will be decreased by $173,000.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRS as endorsed by the FSC are as follows:

endorsed by the FSC are as follows:
New Standards, Interpretations and Amendments Amendments to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ 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’	Effective date by International Accounting Standards Board
	January 1, 2020 January 1, 2020 To be determined by International Accounting Standards Board January 1, 2021

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

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(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation

A. The consolidated financial statements have been prepared under the historical cost convention.
B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.
C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Group has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognized as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 11 (‘IAS 11’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. Please refer to Notes 12(4) and (5) for details of significant accounting policies and details of significant accounts.

(3) Basis of consolidation

A. Basis for preparation of consolidated financial statements
(a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.
(b) Inter-company transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
B. Subsidiaries included in the consolidated financial statements:

Name of investor The Company	Name of subsidiary	Main business activities	Ownership (%) December 31, 2018 December 31, 2017 Description 100% 100%
	Wellsoon International Limited (Wellsoon International)	Investment holding

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Name of investor Wellsoon International Limited Lida(HK) Holdings Lida (China) Machine Equipment Co. Limited	Name of subsidiary	Main business activities	Ownership (%)	Ownership (%)	Description
			December 31, 2018 100% 100% 100%	December 31, 2017 100% 100% 100%
	Lida(HK) Holdings (Lida(HK)) Lida (China) Machine Equipment Co. Limited (Lida (China)) Lida (Jiangxi) Machine Equipment Co. Limited (Lida (Jiangxi))	Investment holding Design, manufacture and sales of air compressors Design, manufacture and sales of air compressors

C. Subsidiaries not included in the consolidated financial statements: None.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. Significant restrictions: None.
F. Subsidiaries that have non-controlling interests that are material to the Group: None.

(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Company’s functional currency is China Yuan (CNY); however, the consolidated financial statements are presented in New Taiwan dollars (NTD) under the regulations of the country where the consolidated financial statements are reported to the regulatory authorities.

A. Translation of foreign operations

The operating results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(a) Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
(b) Except for the beginning retained earnings balance are brought forward from last year, other items within equity are translated at the historical rate.
(c) Except for dividends are translated at exchange rate on the declaration date, income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
(d) All resulting exchange differences are recognized in other comprehensive income.
B. Foreign currency transactions and balances
(a) Foreign currency transactions are translated into the functional currency using the exchange rates on the trade dates or measurement date. Therefore, foreign exchange differences resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are

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re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.

  - (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

  - (d) All foreign exchange differences are presented in the statement of comprehensive income under “Other gains and losses” by the nature of transactions.

(5) Classification of current and non-current items
A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
- (a) Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
- (b) Assets held mainly for trading purposes;
- (c) Assets that are expected to be realized within twelve months from the balance sheet date;
- (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
- (a) Liabilities that are expected to be paid off within the normal operating cycle;
- (b) Liabilities arising mainly from trading activities;
- (c) Liabilities that are to be paid off within twelve months from the balance sheet date;
- (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

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(6) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

(7) Financial assets at amortized cost

A. Financial assets at amortized cost are those that meet all of the following criteria:
(a) The objective of the Group’s business model is achieved by collecting contractual cash flows.
(b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at amortized cost are recognized and derecognized using trade date accounting.
C. The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

(8) Accounts receivable

A. Accounts receivable entitle the Group a legal right to receive consideration in exchange for transferred goods.
B. The short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(9) Impairment of financial assets

For financial assets at amortized cost including accounts receivable that have a significant financing component, at each reporting date, the Group recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that do not contain a significant financing component, the Group recognizes the impairment provision for lifetime ECLs.

(10) Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to receive the cash flows from the financial asset have expired.

(11) Operating leases

Lease income and payments made under an operating leases (net of any incentives given to the lessee and received from the lessor) are recognized in profit or loss on a straight-line basis over the lease term.

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(12) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads. It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(13) Property, plant and equipment

A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalized.
B. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.
D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

and equipment are as follows:
Buildings and structures	10	`～`50 years
Machinery and equipment		10 years
Transportation equipment		5 years
Office equipment		5 years
Other assets		5 years

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(14) Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortized historical cost would have been if the impairment had not been recognized.

(15) Borrowings

Borrowings comprise short-term bank borrowings. Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.

(16) Accounts payable

Accounts payable are liabilities for purchases of raw materials, goods or services. The short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(17) Derecognition of financial liabilities

A financial liability is derecognized when the obligation specified in the contract is either discharged or cancelled or expires.

(18) Provisions

Provisions (including warranties) are recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognized as interest expense. Provisions are not recognized for future operating losses.

(19) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognized as expenses in that period when the employees render service.

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B. Pensions

For defined contribution plans, the contributions are recognized as pension expenses when they are due on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in the future payments.

C. Employees’ compensation and directors’ and supervisors’ remuneration
Employees’ compensation and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal obligation or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates.

(20) Income tax

A. The income tax expense for the period comprises current and deferred tax. Income tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the income tax is recognized in other comprehensive income or equity.
B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities.
C. Deferred tax is recognized, using the balance sheet method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.
D. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized deferred tax assets are reassessed.

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E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realize the asset and settle the liability simultaneously.

(21) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

(22) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(23) Revenue recognition

A. The Group designs, manufactures and sells air compressor products. Sales are recognized when control of the products has transferred, when the products are delivered to the customer, the customer has channel and price discretion over the products, and there is no unfulfilled obligation which could affect to the customer receiving the products. When the products have been shipped to the assigned destination, the risks of obsolescence and loss would transfer to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria have been satisfied. Since the period of transferring committed goods to customer payment is within one year, the Group does not adjust the transaction price to reflect the time value of money.
B. The Group’s obligation to provide the standard warranty terms is recognized as a provision.
C. A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

(24) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker. The Group’s Chief Operating Decision-Maker is responsible for allocating resources and assessing performance of the operating segments, and has been identified as the Board of Directors that makes strategic decisions.

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5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of the consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

Critical accounting estimates and assumptions

Impairment assessment of tangible assets

The Group assesses impairment based on its subjective judgement and determines the recoverable amounts of a specific group of assets arising from the assets depending on how assets are utilized and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Group strategy might cause material impairment on assets in the future.

As of December 31, 2018, the Group recognized property, plant and equipment, net of impairment loss, amounting to $774,378.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and revolving funds Checking accounts and demand deposits Time deposits	December31,2018 292 $ 2,618,951 - 2,619,243 $	December31,2017
		154 $ 2,301,692 29,727
		2,331,573 $

A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.
B. No cash and cash equivalents of the Group were pledged to others.

(2) Financial assets at amortized cost - current

Financial assets at amortized cost-current
Items Time deposit over 3 months Less: Accumulated impairment	December31,2018
	1,788,800 $ -
	1,788,800 $

A. Amounts recognized in profit or loss in relation to financial assets at amortized cost are listed below:

Interest income	Year ended December31,2018 34,840 $

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B. As of December 31, 2018, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at amortized cost held by the Group was $1,788,800.
C. No financial assets at amortized cost of the Group were pledged to others.
D. Information relating to credit risk of financial assets at amortized cost is provided in Note 12(2).

(3) Accounts receivable

Accounts receivable Less: Loss allowance A. The ageing analysis of accounts receivable that were Not past due Up to 30 days 31 to 60 days 61 to 120 days	December 31,2018 December 31,2017 656,628 $ 951,207 $ 191) ( 383) ( 656,437 $ 950,824 $ past due but not impaired is as follows: December31,2018 December31,2017 514,603 $ 788,256 $ 141,240 156,505 - 5,236 785 1,210 656,628 $ 951,207 $

The above ageing analysis was based on past due date.

B. No accounts receivable of the Group were pledged to others.
C. As of December 31, 2018 and 2017, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the accounts receivable held by the Group were $656,437 and $950,824, respectively.
D. Information relating to credit risk of accounts receivable is provided in Note 12(2).

(4) Inventories

Inventories
Raw materials Work in progress Finished goods	December31,2018
	Allowance for Cost valuation loss 123,174 $ 676) ($ 63,077 - 124,881 - 311,132 $ 676) ($	Bookvalue
		122,498 $ 63,077 124,881
		310,456 $

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Raw materials Work in progress Finished goods	December31,2017
	Allowance for Cost valuation loss 114,122 $ 297) ($ 72,655 - 97,986 - 284,763 $ 297) ($	Bookvalue
		113,825 $ 72,655 97,986
		284,466 $

The cost of inventories recognized as expense for the year:

		Years ended	December 31,	December 31,
		2018		2017
Cost of goods sold	$	5,763,208	$	6,214,949
Loss on decline in market value		396		198
Revenue from sale of scraps	(	2,165)	(	1,584)
	$	5,761,439	$	6,213,563

(5) Other current assets

Other current assets
Time deposits-over 3 months Excess business tax paid	December31,2018 - $ 6,226 6,226 $	December31,2017
		1,974,636 $ 15,123
		1,989,759 $

Time deposits-over 3 months were reclassified as ‘Financial assets at amortized cost - current’ on initial application of IFRS 9. Please refer to Notes 6(2) and 12(4) for details.

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(6) Property, plant and equipment

At January 1, 2018 Cost Accumulated depreciation 2018 Opening net book amount as at January 1 Additions Disposals Reclassifications (Note) Depreciation charge Impairment loss Net exchange differences Closing net book amount as at December 31 December 31, 2018 Cost Accumulated depreciation and impairment	Buildings and structures 382,060 $ 38,385) ( 343,675 $ 343,675 $ - - - 9,905) ( 37,262) ( 6,090) ( 290,418 $ 374,277 $ 83,859) ( 290,418 $	Machinery and equipment 472,618 $ 171,886) ( 300,732 $ 300,732 $ 110,921 421) ( 23,129 42,442) ( 24,011) ( 7,426) ( 360,482 $ 594,035 $ 233,553) ( 360,482 $	Transportation equipment 34,306 $ 14,159) ( 20,147 $ 20,147 $ 1,693 - - 5,014) ( - 346) ( 16,480 $ 35,269 $ 18,789) ( 16,480 $	Office equipment 6,220 $ 3,504) ( 2,716 $ 2,716 $ 43 - - 867) ( - 39) ( 1,853 $ 6,136 $ 4,283) ( 1,853 $	Other facilities 6,145 $ 4,079) ( 2,066 $ 2,066 $ 562 - - 545) ( - 42) ( 2,041 $ 6,572 $ 4,531) ( 2,041 $	Unfinished construction and equipment under acceptance - $ - - $ - $ 105,136 - - - - 2,032) ( 103,104 $ 103,104 $ - 103,104 $	Total 901,349 $ 232,013) ( 669,336 $ 669,336 $ 218,355 421) ( 23,129 58,773) ( 61,273) ( 15,975) ( 774,378 $ 1,119,393 $ 345,015) ( 774,378 $

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At January 1, 2017 Cost Accumulated depreciation 2017 Opening net book amount as at January 1 Additions Disposals Reclassifications (Note) Depreciation charge Net exchange differences Closing net book amount as at December 31 December 31, 2017 Cost Accumulated depreciation	Buildings and structures 346,838 $ 29,685) ( 317,153 $ 317,153 $ 38,630 - - 8,920) ( 3,188) ( 343,675 $ 382,060 $ 38,385) ( 343,675 $	Machinery and equipment 272,121 $ 155,079) ( 117,042 $ 117,042 $ 199,810 2,205) ( 3,360 18,317) ( 1,042 300,732 $ 472,618 $ 171,886) ( 300,732 $	Transportation Office equipment equipment Other facilities Total 17,848 $ 4,618 $ 5,256 $ 646,681 $ 10,003) ( 2,830) ( 3,667) ( 201,264) ( 7,845 $ 1,788 $ 1,589 $ 445,417 $ 7,845 $ 1,788 $ 1,589 $ 445,417 $ 16,447 1,788 968 257,643 - 154) ( 31) ( 2,390) ( - - - 3,360 4,215) ( 696) ( 448) ( 32,596) ( 70 10) ( 12) ( 2,098) ( 20,147 $ 2,716 $ 2,066 $ 669,336 $ 34,306 $ 6,220 $ 6,145 $ 901,349 $ 14,159) ( 3,504) ( 4,079) ( 232,013) ( 20,147 $ 2,716 $ 2,066 $ 669,336 $

Note: Transfers from prepayments for business facilities.

A. No capitalization of interests for the years ended December 31, 2018 and 2017.

B. Information about the property, plant and equipment that were pledged to others as collaterals is provided in Note 8.

C. Impairment information about the property, plant and equipment is provided in Note 6(7).

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(7) Impairment of non-financial assets (For the year ended December 31, 2017: None)

A. The Group recognized impairment loss (shown as ‘other gains and losses’) for the year ended December 31, 2018. Details of such loss are as follows:

December 31, 2018. Details of such loss are as follows:
Impairment loss - buildings and structures Impairment loss - machinery	Year ended December31,2018
	Recognised in profit or loss
	37,262 $ 24,011
	61,273 $

B. In 2018, due to the impact of the US-China trade war, slowing demand from the ultimate customers and the energy-efficient and environment-friendly products becoming the mainstream in the market, the Group’s subsidiaries, manufacturing low-end products incurred losses year by year that resulted in an impairment in the Group’s property, plant and equipment. The Group wrote down the carrying amount of the asset based on the recoverable amount and recognized an impairment loss of $61,273 accordingly. The recoverable amount is the property’s fair value less costs of disposal estimated by multiplying the replacement cost method and depreciation rate.

(8) Other non-current assets

Other non-current assets
Long-term prepaid rent - land access right Prepayments for business facilities Guarantee deposits paid	December 31,2018 172,941 $ 107 174 173,222 $	December 31,2017
		33,490 $ 26,325 169
		59,984 $

A. Lida (China) entered into land access right agreements with Fujian Quanzhou People’s Government for the land located on Gu se Wei, Jinfeng Village, Dongyuan Town, Quanzhou, Fujian and Hui Nan Industrial Zone, Dongyuan town on April 2, 2004, May 17, 2004 and March 20, 2004, respectively. Lida (Jiangxi) entered into land access right agreements with Jiujiang people’s Government of Jiangxi Province for the land located southern Gang Cheng Avenue, northern Gang Xing Road, eastern of public rental housing project and western Tong Kong West Road, Chengxi port area, Jiujiang economic and Technological Development Zone on July 9, 2012. The lease terms were 44 ~ 50 years and made all payments upon signing of the agreements.
B. Lida (China) entered into a land access right agreement with Quanzhou Municipal Bureau of land and resources for the land located on Jincuo Village and Dongtou Village, Luoyang Town, Dongyuan Town, Quanzhou, Fujian on March 30, 2018. The lease term was 50 years and made all payments before June 5, 2018 in accordance with the agreement.

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C. The Group recognized rental expenses of $3,018 and $820 for the years ended December 31, 2018 and 2017, respectively.
D. Information about the abovementioned land access right that were pledged to others as collaterals is provided in Note 8.

(9) Short-term borrowings

Type of borrowings December 31, 2018 Interest rate Collateral Short-term borrowings Land access right, buildings Secured borrowings $ 93,912 4.7% and structures Type of borrowings December 31, 2017 Interest rate Collateral Short-term borrowings Land access right, buildings Secured borrowings $ 50,215 4.4% and structures

(10) Other payables

Other payables
Salaries payable Social insurance payable Professional fees payable Employees' compensation payable Value increment tax payable Payable to equipment suppliers Others	December 31,2018 59,795 $ 59,599 7,125 5,976 647 60 1,752 134,954 $	December 31,2017
		65,923 $ 66,053 6,762 6,987 611 17,539 4,090
		167,965 $

(11) Pensions

A. The Company’s mainland China subsidiaries have a defined contribution plan. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentage of employees’ monthly salaries and wages. The contribution percentage for the years ended December 31, 2018 and 2017, was 18% to 19%, respectively. Other than the monthly contributions, the Group has no further obligations.
B. The Company and subsidiary-Wellsoon International as well as indirect subsidiary-Lida (HK) have no related pension plan.
C. The pension costs under defined contribution pension plans of the Group for the years ended

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December 31, 2018 and 2017, were $70,862 and $70,458, respectively.

(12) Share capital

As of December 31, 2018 and 2017, Company’s authorized capital was $1,500,000, consisting of 150 million shares and the paid-in capital was $1 million with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

(13) Capital surplus

Under the Company’s Articles of Incorporation:

A. During the listing period, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. However, capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.
B. Except as required by law, the Board of Directors shall capitalize all or partial share premium account, the balance of other reserves account, earnings account or other distributable earnings and issue new stocks or cash to shareholders in proportion to their share ownership out of the listing period.

(14) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings (including prior years’ unappropriated retained earnings), if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as special reserve (if needed, retained earnings to support). The remainder (“distributable earnings”), if any, to be appropriated shall be resolved by the stockholders at the stockholders’ meeting.
B. Except as required by law or regulations, the Group’s dividend policy is summarized below:
(a) Before distributing dividends and bonuses, the Board of Directors shall at its discretion retain a certain amount of reserve fund for business operation, investment or others out of the listing period. When distributing dividends and bonuses, the Board of Directors shall issue new stocks and/or cash dividends or others in proportion to their share ownership and authorize the Company to pay out of available fund in accordance with the regulations.

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(b) At least 10% of the distributable earnings, if any, (including reversal of special reserve) plus previous years undistributed earnings in full or in part shall be appropriated as dividends or bonus to the shareholders in proportion to its ownership during the listing period. Cash dividends shall account for at least 10% of the total dividends distributed. Dividends, bonus or other interest to shareholders are calculated in NTD unless otherwise resolved at the shareholders’ meeting.
C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.
D. The appropriations of earnings for 2017 and 2016 had been resolved at the shareholders’ meeting on June 13, 2018 and June 13, 2017. Details are summarized below:

Years endedDecember31,	Years endedDecember31,	Years endedDecember31,
Dividends per share Amount (indollars) 58,829 $ 500,000 5.00 $ 2017	2016
Amount 58,829 $ 500,000	Amount 266,848 $ 800,000	Dividends per share (indollars)
		8.00 $

E. The details about the appropriation of 2018 earnings which was proposed at the Board of Directors’ meeting on March 22, 2019 are as follows:

Legal reserve Cash dividends Stock dividends	Years endedDecember31,	Years endedDecember31,
	2016
	Amount 92,269 $ 230,000 160,000	Dividends per share (indollars)
		2.30 $ 1.60

As of March 22, 2019, the appropriation proposal of 2018 earnings has not yet approved at the meeting of shareholders.

F. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, is provided in Note 6(20).

(15) Operating revenue

Revenue from contracts with customers

Year ended December 31, 2018 $ 7,542,981

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A. Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods at a point in time in the following major product lines and geographical regions:

Air compressors Others 6,391,431 $ 156,497 $ 6,391,431 $ 156,497 $ Within MainlandChina	Air compressors Others 951,620 $ 43,433 $ 951,620 $ 43,433 $ Outside MainlandChina	Total
Air compressors 6,391,431 $ 6,391,431 $	Air compressors 951,620 $ 951,620 $
		7,542,981 $
		7,542,981 $

B. Contract liabilities

The Group has recognized the following revenue-related contract liabilities:

Receipts in advance	December31,2018
	17,114 $

Revenue recognized that was included in the contract liability balance at the beginning of the period

Revenue recognized that was included in the contract liability balance at period	the beginning of the
Receipts in advance	Year ended December 31,2018
	8,773 $

C. Related disclosures for 2017 operating revenue are provided in Note 12(5) B.

(16) Other income

Other income
Interest income: Bank deposits Financial assets at amortised cost Total interest income Rental income Others	Years ended December 31,
	2018 8,764 $ 34,840 43,604 393 12 44,009 $	2017
		37,250 $ -
		37,250
		- 1,283
		38,533 $

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(17) Other gains and losses

Other gains and losses
		Years ended	December 31,
		2018		2017
Impairment loss	($	61,273)	$	-
Foreign exchange losses	(	24,735)	(	11,609)
Donation expense	(	5,233)	(	18,862)
Losses on disposals of property, plant and equipment	(	282)	(	158)
Others	(	866)	(	748)
	($	92,389)	($	31,377)

(18) Finance costs

Finance costs
Interest expense from bank borrowings	Years ended December31,
	2018 3,747 $	2017
		2,668 $

(19) Expenses by nature

Expenses by nature
		Years ended	December 31,
		2018		2017
Change in inventory of finished goods and work in progress	($	16,001)	($	33,757)
Raw materials and supplies used		5,156,788		5,599,213
Employee benefit expense		549,541		566,297
Contracted research expense		187,711		159,438
Transportation expenses		153,877		180,834
Depreciation expenses		58,773		32,596
Electricity expense		50,347		52,585
Traveling expense		20,208		18,239
Entertainment expense		18,740		11,006
Low-value consumption goods		14,912		12,708
Rental expenses		12,282		9,988
Maintenance expense		11,856		17,351
Expected credit impairment gain	(	188)		-
Other costs and expenses		82,778		111,411
Operating costs and expenses	$	6,301,624	$	6,737,909

~35~

(20) Employee benefit expense

Employee benefit expense
Salaries Labor and health insurance Pension Directors’ remuneration Other personnel expenses	Years ended December31,
	2018 433,763 $ 19,263 70,862 2,196 23,457 549,541 $	2017
		446,310 $ 23,364 70,458 1,808 24,357
		566,297 $

A. In accordance with the Articles of Incorporation of the Company, during the listing period, a ratio of distributable profit of the current year, after covering accumulated losses, shall be distributed as employees’ compensation and directors’ remuneration. The ratio shall not be 0.5% ～ 3% for employees’ compensation and shall not be higher than 2% for directors’ remuneration. The employees’ compensation will be distributed in the form of cash and/or shares and the directors’ remuneration shall not be distributed in the form of shares. The employees’ compensation and directors’ remuneration are calculated based on NTD unless otherwise resolved by the shareholders at their shareholders’ meeting. The above ‘profit’ refers to pre-tax profit before deduction of employees’ compensation and directors’ remuneration.
B. For the years ended December 31, 2018 and 2017, employees’ compensation were accrued at $5,976 and $6,987, respectively; directors’ remuneration were both accrued $0. The aforementioned amounts were recognized in salary expenses.
The employees’ compensation and directors’ remuneration were estimated and accrued based on 0.5% and 0%, respectively, of distributable profit of current year for the year ended December 31, 2018. The employees’ compensation and directors’ and supervisors’ remuneration resolved by the Board of Directors were $5,976 and $0, respectively, and the employees’ compensation will be distributed in the form of cash.
Employees’ compensation and directors’ remuneration of 2017 as resolved by the Board of Directors were in agreement with those amounts recognized in the 2017 financial statements. Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

~36~

(21) Income tax

A. Income tax expense

(a) Components of income tax expense:

Components of income tax expense:
Current tax: Current tax on profits for the year Prior year income tax underestimation Total current tax Deferred tax: Origination and reversal of temporary differences Income tax expense	Years ended December31,
	2018 326,704 $ 1,728 328,432 91,193 419,625 $	2017
		359,158 $ 1,834
		360,992
		105,536
		466,528 $

(b) Reconciliation between income tax expense and accounting profit

Tax calculated based on profit before tax and statutory tax rate Effects from foreign earnings income tax Effects from items disallowed by tax regulation Prior year income tax underestimation Income tax expense	Years ended December31,	Years ended December31,
	2018 325,154 $ 89,246 3,497 1,728 419,625 $	2017
		354,509 $ 105,723 4,462 1,834
		466,528 $

B. Amounts of deferred tax assets and liabilities as a result of temporary differences are as follows:

					2018	2018
				Recognised in			Exchange
		January1			profit or loss		difference	December 31
Deferred tax assets
-Temporary differences:
Warranty expenses	$	4,303	($		1,999)	($	49)	$	2,255
Bad debts expense		157	(		48)	(	2)		107
Loss on inventory		63			99	(	3)		159
	$	4,523	($		1,948)	($	54)	$	2,521
`-`Deferred tax liabilities:
Effects from foreign earnings income tax	($	407,913)	($		89,246)	$	26,610	($	470,549)
	($	403,390)	($		91,194)	$	26,556	($	468,028)

~37~

					2017	2017
				Recognised in			Exchange
		January1			profit or loss		difference	December 31
Deferred tax assets
-Temporary differences:
Warranty expenses	$	4,143	$		204	($	44)	$	4,303
Bad debts expense		219	(		59)	(	3)		157
Loss on inventory		21			42		-		63
		4,383			187	($	47)		4,523
-Deferred tax liabilities:
Effects from foreign earnings income tax	($	336,599)	($		105,723)		34,409	($	407,913)
	($	332,216)	($		105,536)		34,362	($	403,390)

C. The Company is a registered company in the British Cayman Islands and is exempt from business income tax under local laws and regulations.
D. Wellsoon International is a registered company in the British Virgin Islands and is exempt from business income tax under local laws and regulations.
E. Lida (HK) is a registered company in the Hong Kong Special Administrative Region of the People’s Republic of China. Under the rules of Hong Kong’s Inland Revenue Ordinance, only income sourced in Hong Kong is taxable. Lida (HK) did not generate taxable income for the years ended December 31, 2018 and 2017.
F. Lida (China) and Lida (Jiangxi) are registered companies in the People’s Republic of China and are subject to an income tax rate of 25%.

(22) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	Weighted average number of ordinary shares outstanding Amount after tax (shares in thousands) 769,605 $ 100,000 769,605 100,000 - 120 769,605 $ 100,120	Earnings per share(in dollars)
		7.70 $
		7.69 $

~38~

Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	Year ended December31,2017	Year ended December31,2017
	Weighted average number of ordinary shares outstanding Amount after tax (shares in thousands) 923,883 $ 100,000 923,883 100,000 - 70 923,883 $ 100,070	Earnings per share(in dollars)
		9.24 $
		9.23 $

(23) Operating leases

A. The Group leases plant assets to others under non-cancellable agreements. These leases have terms between January 2018 and December 2022, and all these lease agreements are not renewable at the end of the lease period. For the year ended December 31, 2018, the Group recognized rental income in the amount of $393. The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

Not later than one year Later than one year but not later than five years	December31,2018
	337 $ 1,091
	1,428 $

B. The Group leases office located in Taipei City Xinyi District under non-cancellable operating lease agreements. The lease terms are between 2016 and 2019 years. For the years ended December 31, 2018 and 2017, the Group recognized rental income both in the amount of $1,056. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

are as follows:
Up to 12 months	December31,2018 645 $	December31,2017
		616 $

C. Information regarding operating leases with related parties is provided in Note 7(3).

~39~

(24) Supplemental cash flow information

Investing activities with partial cash payments

Supplemental cash flow information Investing activities with partial cash payments
			Years ended	December31,
			2018		2017
Purchase of property, plant and equipment		$	218,355	$	257,643
Add: Opening balance of payable on equipment			17,539		-
Less: Ending balance of payable on equipment	(		60)	(	17,539)
Cash paid during the year		$	235,834	$	240,104

(25) Changes in liabilities from financing activities

Changes in liabilities from financing activities
			Short-term
			borrowings
At January 1, 2018		$	50,215
Changes in cash flow from financing activities			45,601
Impact of changes in foreign exchange rate	(		1,904)
At December 31, 2018		$	93,912

7. RELATED PARTY TRANSACTIONS

(1) Parent and ultimate controlling party

The Company was incorporated in the British Cayman Islands and acquired 100% equity of Wellsoon International (incorporated in the British Virgin Islands) in a share exchange transaction. The Company becomes the ultimate controlling party of the Group.

(2) Names of related parties and relationship

Names of related parties Relationship with the Group Lida Machinery Industry Co., Ltd Chairman of the related party is the Company’s

Chairman of the related party is the Company’s Vice Chairman

(Lida Machinery)

(3) Significant related party transactions

Rental expense

Lida (China) leases plants from Lida Machinery. The rent was set and calculated at the discretion of both parties by reference to the transaction price of a property in similar location. Payments are made in installments in accordance with the lease agreement. The Group recognized rental expenses of $8,208 and $8,112 for the years ended December 31, 2018 and 2017, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

~40~

Not later than one year Later than one year	December31,2018 8,050 $ 8,050 16,100 $	December31,2017
		8,217 $ 16,434
		24,651 $

(4) Key management personnel compensation

Key management personnel compensation
Salaries and other short-term employee benefits Post-employment compensation	Years ended December31,
	2018 3,029 $ 237 3,266 $	2017
		3,140 $ 159
		3,299 $

8. PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

PLEDGED ASSETS The Group’s assets pledged as	collateral are as follows:
Pledged asset Land access right (shown as other non-current assets) Buildings and structures	December 31,2018 December 31,2017 11,517 $ 12,106 $ 83,449 89,999 94,966 $ 102,105 $ Book value	Purpose
	December 31,2018 11,517 $ 83,449 94,966 $
		Short-term borrowings `〃`

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT

COMMITMENTS

(1) Contingencies

None.

(2) Commitments

A. Information of the Group’s operating lease agreements is provided in Notes 6(23) and 7(3).
B. Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:

December 31, 2018 December 31, 2017 Property, plant and equipment $ 250 $ 103,306

10. SIGNIFICANT DISASTER LOSS

None.

~41~

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

The appropriations of earnings for 2018 had been resolved by the Board of Directors at its meeting on March 22, 2019. Details are provided in Note 6(14).

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

A. Financial instruments by category

Financial instruments by category
Financial assets Financial assets at amortised cost Cash and cash equivalents Financial assets at amortised cost - current Accounts receivable Other receivables Other current assets Guarantee deposits paid Financial liabilities Financial liabilities at amortised cost Short-term borrowings Accounts payable Other payables	December31,2018 2,619,243 $ 1,788,800 656,437 6,391 - 174 5,071,045 $ 93,912 $ 438,654 134,954 667,520 $	December31,2017
		2,331,573 $ - 950,824 6,541 1,974,636 169
		5,263,743 $
		50,215 $ 626,238 167,965
		844,418 $

B. Financial risk management policies
(a) The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk, foreign exchange risk and price risk), credit risk and liquidity risk.
(b) Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as interest rate risk, foreign exchange risk, credit risk and non-derivative financial instruments, and investment of excess liquidity.

~42~

C. Significant financial risks and degrees of financial risks
(a) Market risk

i. Cash flow and fair value interest rate risk

The Group’s main interest rate risk arises from short-term borrowings with fixed rates, which expose the Group to fair value interest rate risk. During 2018 and 2017, the Group’s borrowings at fix rate were mainly denominated in CNY Dollars.

ii. Foreign exchange risk

(i) The Group operates internationally and is exposed to exchange rate risk arising from the transactions of the Company and its subsidiaries used in various functional currency, primarily with respect to the USD. Exchange rate risk arises from future commercial transactions and recognized assets and liabilities.
(ii) Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The companies are required to hedge their entire foreign exchange risk exposure with the Group treasury.
(iii) The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
(iv) The Group’s businesses involve some non-functional currency operations (the Company’s functional currency: CNY). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Foreign currency: functional currency) Financial assets Monetary items USD:CNY Financial liabilities Monetary items USD:CNY	December 31, 2018 Foreign currency amount Book value (In thousands) Exchange rate (NTD) $ 1,105 6.866 $ 33,928 $ 558 6.866 $ 11,148	December 31, 2018 Foreign currency amount Book value (In thousands) Exchange rate (NTD) $ 1,105 6.866 $ 33,928 $ 558 6.866 $ 11,148
	Foreign currency amount (In thousands)	Exchange rate
	$ 1,105 $ 558	6.866 6.866

~43~

December 31, 2017

(Foreign currency: functional currency) Financial assets Monetary items USD:CNY Financial liabilities Monetary items USD:CNY	Foreign currency amount (In thousands)	Exchange rate 6.512 6.512	Book value (NTD) $ 250,542 $ 9,037
	$ 8,428 $ 304

(v) Total net exchange loss arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2018 and 2017, amounted to $24,735 and $11,609, respectively.
(vi) Analysis of foreign currency market risk arising from significant foreign exchange variation:

(Foreign currency: functional currency) Financial assets Monetary items USD:CNY Financial liabilities Monetary items USD:CNY	Year ended December 31, 2018 Sensitivity analysis Degree of Effect on other comprehensive variation income (loss) 1% $ 339 1% $ 111
	Degree of variation 1% 1%

~44~

(Foreign currency: functional currency) Financial assets Monetary items USD:CNY Financial liabilities Monetary items USD:CNY	Year ended December 31, 2017 Sensitivity analysis Degree of Effect on other comprehensive variation income (loss) 1% $ 2,505 1% $ 90
	Degree of variation 1% 1%

iii. Price risk

The Group is not exposed to significant price risk as the Group does not hold equity securities financial assets at the consolidated balance sheet.

(b) Credit risk

i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows of financial assets at amortized cost.
ii. The Group manages their credit risk taking into consideration the entire group’s concern. For banks, only independently rated parties with a good rating are accepted. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilization of credit limits is regularly monitored.
iii. The Group adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 90 days.

~45~

iv. The Group adopts the assumptions under IFRS 9, if the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
v. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:
(i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;
(ii) The disappearance of an active market for that financial asset because of financial difficulties;
(iii) Default or delinquency in interest or principal repayments;
(iv) Adverse changes in national or regional economic conditions that are expected to cause a default.
vi. The Group classifies customers’ accounts receivable in accordance with customer types. The Group applies the simplified approach using provision matrix to estimate expected credit loss under the provision matrix basis.
vii. The Group wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Group will continue executing the recourse procedures to secure their rights.
viii. The Group used the forecastability of China Manufacturing Purchasing Managers Index to adjust historical and timely information to assess the default possibility of accounts receivable. On December 31, 2018, the provision matrix is as follows:

Expected loss rate Total book value Loss allowance	Not past due	Past due 1 to 30 days	Past due 31 to 60 days	Past due 61 to 120 days	Past due 120 to 360 days 0.30% $ 97	Past due Over 360 days	Total
	0.03% $ 514,602	0.03% $ 141,241	0.05% $ -	0.10% $ 688		100.00% $ -	$ 656,628
	$ 155	$ 35	$ -	$ 1	$ -	$ -	$ 191

ix. Movements in relation to the Group applying the simplified approach to provide loss allowance for accounts receivable are as follows:

2018

			2018
			Accounts
			receivable
At January 1_IAS 39		$	383
Adjustments under new standards			-
At January 1_IFRS 9			383
Reversal of impairment loss	(		188)
Effect of exchange rate changes	(		4)
At December 31		$	191

~46~

x. Credit risk information of 2017 is provided in Note 12(4).
(c) Liquidity risk
i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, if applicable external regulatory or legal requirements, for example, currency restrictions.
ii. Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts and time deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts. As at December 31, 2018 and 2017 the Group held money market position of $2,619,243 and $2,331,573, respectively, financial assets at amortized cost of $1,788,800 and $0, respectively, and other liquid assets of $0 and $1,974,636, respectively, that are expected to readily generate cash inflows for managing liquidity risk.
iii. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial

Non-derivative financial
December 31, 2018 Short-term borrowings Accounts payable Other payables	Less than 3 months 45,582 $ 438,654 128,978 613,214 $	3 months and 1year 49,268 $ - 5,976 55,244 $	Over 1year
			- $ - -
			- $

~47~

Non-derivative financial

Non-derivative financial
December 31, 2017 Short-term borrowings Accounts payable Other payables	Less than 3 months 552 $ 626,238 160,978 787,768 $	3 months and 1year 50,583 $ - 6,987 57,570 $	Over 1year
			- $ - -
			- $

(3) Fair value information

None.

(4) Effects on initial application of IFRS 9 and information on application of IAS 39 in 2017

A. Summary of significant accounting policies adopted in 2017:
(a) Loans and receivables
- i. Accounts receivable

They are created by the entity by selling goods or providing services to customers in the ordinary course of business. They are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

ii. Investments in debt instruments without active market
- Investments in debt instrument without active market held by the Group are those time deposits with a short maturity period but do not qualify as cash equivalents, and they are measured at initial investment amount as the effect of discounting is immaterial.
(b) Impairment of financial assets
i. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
ii. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:
- (i) Significant financial difficulty of the issuer or debtor;
- (ii) A breach of contract, such as a default or delinquency in interest or principal payments;

~48~

(iii) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession that a lender would not otherwise consider;
(iv) It becomes probable that the borrower will enter bankruptcy or other financial reorganization;
(vi) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;
iii. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

Financial assets at amortized cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognized in profit or loss. 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 loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortized cost that would have been at the date of reversal had the impairment loss not been recognized previously. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

B. The reconciliations of carrying amount of financial assets transferred from December 31, 2017, IAS 39, to January 1, IFRS 9, were as follows:

IAS 39 Transferred into and measured at amortised cost IFRS 9	Measured at Other current amortised cost assets - $ 1,974,636 $ 1,974,636 1,974,636) ( 1,974,636 $ - $	Effects	Effects
		Retained earnings - $ - - $	Other equity interest
			- $ -
			- $

Under IAS 39, because the cash flows of debt instruments, which were classified as: other current assets, amounting to $1,974,636 met the condition that it is intended to settle the principal and interest on the outstanding principal balance, they were reclassified as “financial assets at amortized cost” on initial application of IFRS 9.

~49~

C. Credit risk information for the year ended December 2017 are as follows:
(a) Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilization of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to distributors, including outstanding receivables. For banks and financial institutions, only independently rated parties with good rating are accepted.
(b) For the year ended December 31, 2017, no credit limits were exceeded during the reporting periods, and management does not expect any significant losses from non-performance by these counterparties.
(c) In accordance with the Group’s credit standards, the credit quality information of the Group’s accounts receivable that are neither past due nor impaired is as follows:

December 31, 2017 Group A $ 773,447 Group B 14,809 $ 788,256

Note: Group A: Customers within Mainland China.

Group B: Customers outside Mainland China.

(d) The ageing analysis of financial assets that were past due but not impaired is as follows:

2017 Up to 30 days $ 156,505 31 to 60 days 4,974 61 to 120 days 1,089 $ 162,568

The above ageing analysis was based on past due date.

(e) Movements in impaired financial assets are as follows:
i. As of December 31, 2017, the total amount of impaired accounts receivable was $383.

~50~

ii. Movements in the provision for impairment of accounts receivable for the year ended December 2017 are as follows:

Movements in the provision for impairment of accounts receivable December 2017 are as follows:	for the year ende
At January 1 Reversal of impairment loss Effect of exchange rate changes At December 31	2017
	Group provision
	879) ($ 480 16
	383) ($

(5) Effects on initial application of IFRS 15

A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below.

Sales of goods

The Group designs, manufactures and sells air compressor products. Revenue is measured at the fair value of the consideration received or receivable taking into account of business tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. Revenue arising from the sales of goods is recognized when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

B. The revenue recognized by using above accounting policies for the year ended December 31, 2017 are as follows:

2017 are as follows:
Sales revenue within Mainland China Sales revenue outside Mainland China	Year ended December31,2017
	7,250,205 $ 873,627
	8,123,832 $

~51~

C. The effects and description of current balance sheet items if the Group continues adopting above accounting policies for the year ended 2018 are as follows:

			December31,2018	December31,2018
				Balance by		Effects from
			using previous			changes in
		Balance by		accounting		accounting
Balance sheet items	usingIFRS15			policies		policy
Contract liabilities	($	17,114)	$	-	($	17,114)
Other current liabilities		-	(	17,114)		17,114

The contract with customers were previously presented as advance sales receipts (shown as other current liabilities). Under IFRS 15, the advance sales receipts are recognized as contract liabilities. It has no impact to comprehensive income for the year.

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: None.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): None.
D. Acquisition or sale of the same security with the accumulated cost exceeding NT$300 million or 20% of the Company’s paid-in capital: None.
E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more: None.
H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 2.
I. Trading in derivative instruments undertaken during the reporting periods: None.
J. Significant inter-company transactions during the reporting periods: Please refer to table 3.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 4.

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 5.

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B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 5.

14. SEGMENT INFORMATION

(1) General information

The Group operates business only in a single industry. The Board of Directors, who allocates resources and assesses performance of the Group as a whole, has identified that the Company has only one reportable operating segment.

(2) Measurement of segment information

The Board of Directors evaluates the performance of the operating segments based on a measure of pretax income or loss.

(3) Information about segment

The segment information provided to the chief operating decision-maker for the reportable segments is as follows:

egments is as follows:
Total segment revenue Net revenue from external customers Inter-segment revenue Segment income before tax Depreciation expense Interest revenue Interest expense Income tax expense	Years ended December31,
	2018 7,542,981 $ - 7,542,981 $ 1,189,230 $ 58,773 $ 43,604 $ 3,747 $ 419,625 $	2017
		8,123,832 $ -
		8,123,832 $
		1,390,411 $
		32,596 $
		37,250 $
		2,668 $
		466,528 $

Segment assets and liabilities Total segment assets Total segment liabilities	December31,2018 6,337,775 $ 1,231,392 $	December31,2017
		6,297,211 $
		1,368,164 $

(4) Reconciliation for segment income (loss)

A. Sales between segments are carried out at arm’s length. The revenue from external customers reported to the chief operating decision-maker is measured in a manner consistent with that in the statement of comprehensive income.
B. The amounts provided to the chief operating decision-maker with respect to total assets and liabilities are measured in a manner consistent with that of the financial statements.

~53~

C. The Group operates business only in a single industry. The Group allocates resources and assesses performance of the Group as a whole, has identified that the Group has only one reportable operating segment. Thus, reconciliation is not required.

(5) Information on products

Revenue from external customers arising mainly from design, manufacture and sales of mechanical and electrical products such as air compressors and electric welding machines. Manufacture and sales of air compressors and electric welding machines are mainly for the Group’s owned brand such as “Luowei”, “Lida” and “Eagleland”. Details of revenue is as follows:

Type of products Air compressors Others	Years endedDecember31,	Years endedDecember31,
	2018 7,343,051 $ 199,930 7,542,981 $	2017
		7,955,574 $ 168,258
		8,123,832 $

(6) Geographical information

Geographical information for the years ended December 31, 2018 and 2017 is as follows:

Years ended December 31,

Non-current Revenue assets 6,547,928 $ 947,600 $ 209,608 - 179,343 - 115,223 - 76,154 - 70,181 - 62,927 - 38,533 - 37,599 - 205,485 - 7,542,981 $ 947,600 $ 2018	2017	2017
Revenue 6,547,928 $ 209,608 179,343 115,223 76,154 70,181 62,927 38,533 37,599 205,485 7,542,981 $	Revenue 7,250,205 $ 198,119 43,150 135,589 39,679 94,260 28,446 34,250 64,742 235,392 8,123,832 $	Non-current assets
		729,320 $ - - - - - - - - -
		729,320 $

(7) Major customer information

The Group did not have customers with which the revenues from a single customer accounts for more than 10% of the consolidated operating revenue in the statement of comprehensive income for the years ended December 31, 2018 and 2017.

~54~

Expressed in thousands of NTD (Except as otherwise indicated)

Lida Holdings Limited Loans to others Year ended December 31, 2018

Table 1

No.	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2018	Balance at December 31, 2018	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short- term financing	Allowance for doubtful accounts	Collateral	Collateral	Limit on loans granted to a singleparty	Ceiling on total loansgranted	Footnote
													Item	Value
1	Lida (HK) Holdings	Lida (China) Machine Equipment Co. Limited	Long-term accounts receivables due from related parties	Y	441,465	424,840	424,840	2.00%	Note 1	-	Business operation	-	-	-	5,106,383	5,106,383

Note 1: For long-term financing.

Note 2: Limit on the accumulated balance of loans to others provided by the foreign companies whose voting rights are 100% owned directly and indirectly by the Company is 100% of the Company's net assets.

Table 1, Page 1

Lida Holdings Limited

Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more

December 31, 2018

Table 2

Expressed in thousands of NTD (Except as otherwise indicated)

Creditor	Counterparty	Relationship with the counterparty	Balance as at December 31,2018	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
					Amount	Action taken
Lida (HK) Holdings	Lida (China) Machine Equipment Co. Limited	Indirect subsidiary of the Company	424,840 $	Note	- $	0	- $	- $

Note: It was other receivables arising from loans to others and hence not applicable.

Table 2,Page 2

Lida Holdings Limited

Table 3

Significant inter-company transactions during the reporting periods

Year ended December 31, 2018

Expressed in thousands of NTD

(Except as otherwise indicated)

Number (Note 1)	Companyname	Counterparty	Relationship (Note 2)			Transaction
				General ledger account	Amount	Transaction terms (Note3)	Percentage of consolidated total operating revenues or total assets(Note 4)
1 2 2	Lida (HK) Holdings Lida (China) Machine Equipment Co. Limited Lida (China) Machine Equipment Co. Limited	Lida (China) Machine Equipment Co. Limited Lida (JiangSi) Machine Equipment Co. Limited Lida (JiangSi) Machine Equipment Co. Limited	(3) (3) (3)	Long-term accounts receivables due from related parties Accounts receivable Sales revenue	424,840 2,192 14,956	(1) (2) (2)	6.70% 0.03% 0.20%

Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(1)Parent company is ‘0’.
(2)The subsidiaries are numbered in order starting from ‘1’.
Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between

parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.):

(1)Parent company to subsidiary.
(2)Subsidiary to parent company.
(3)Subsidiary to subsidiary.
Note 3: Transaction terms are classified into the following three categories; fill in the number of category each case belongs to:
(1) The term of borrowings is 2 years with interest at 2% per annum and interest is paid annually. Principal and remaining interests shall be paid in full within 30 days after the term expired.
(2) 30 days end of the month.
Note 4: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to
consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Table 3, Page 3

Lida Holdings Limited Information on investees

Year ended December 31, 2018

Table 4 Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at December31,2018	Shares held as at December31,2018	Shares held as at December31,2018	Net profit (loss) of the investee for the year ended December 31, 2018	Expressed in thousands of NTD (Except as otherwise indicated) Investment income(loss) recognised by the Company for the year ended December31,2018 Footnote	Expressed in thousands of NTD (Except as otherwise indicated) Investment income(loss) recognised by the Company for the year ended December31,2018 Footnote
				Balance as at December31,2018	Balance as at December31,2017	Number of shares	Ownership (%)	Bookvalue
The Company Wellsoon International Limited	Wellsoon International Limited Lida (HK) Holdings	British Virgin IS. HONG KONG	Investment holding Investment holding	1,038,589 $ 42	1,038,589 $ 42	10,000 201,669,137	100% 100%	5,107,917 $ 5,106,442	808,131 $ 808,130	808,131 $ 808,130	Subsidiary Indirect subsidiary

Table 4, Page 4

Lida Holdings Limited

Information on investments in Mainland China

Year ended December 31, 2018

Table 5

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital	Investment method	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2018	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year ended December 31,2018	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year ended December 31,2018	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2018	Net income of investee as of December 31, 2018	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2018 (Note 3)	Book value of investments in Mainland China as of December 31,2018	Accumulated amount of investment income remitted back to Taiwan as of December 31,2018	Footnote
					Remitted to MainlandChina	Remitted back to Taiwan
Lida (China) Machine Equipment Co. Limited Lida (JiangSi) Machine Equipment Co. Limited	Design, manufacture and sales of air compressors Design, manufacture and sales of air compressors	304,928 $ 535,924	Note 1 Note 2	- $ -	- $ -	- $ -	- $ -	908,962 $ 78,623) (	100% 100%	908,962 $ 78,623) (	5,143,097 $ 331,385	- $ -

Note 1: Through investing in Lida(HK) Holdings.

Note 1: Through investing in Lida (China) Machine Equipment Co. Limited.

Note 3: Abovementioned investment income (loss) was recognised based on the financial reports reviewed by the parent company’s CPA.

Accumulated amount of Investment Ceiling on remittance amount approved investments in from Taiwan to by the Investment Mainland China Mainland Commission of imposed by the China as of the Ministry of Investment December 31, Economic Affairs Commission of Company name 2018 (MOEA) MOEA - $ - $ - $ -

The Company does not have significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas.

Table 5, Page 5

AI assistant

Lida — Audit Report / Information 2018

52404_rns_2018-11-14_94239105-3735-4ea9-a67d-11f2e44f8f6d.pdf

LIDA HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2018 AND 2017

REPORT OF INDEPENDENT ACCOUNTANTS

Opinion

Basis for opinion

Key audit matters

Cash and financial assets at amortized cost

Description

How our audit addressed the matter

Sales revenue from distribution selling

Valuation of property, plant and equipment impairment

How our audit addressed the matter

Responsibilities of management and those charged with governance for the consolidated financial statements

Auditor’s responsibilities for the audit of the consolidated financial statements

LIDA HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2018 AND 2017

LIDA HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

LIDA HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CACH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

LIDA HOLDINGS LIMITED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANISATION

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORISATION

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

the Group

(3) IFRSs issued by IASB but not yet endorsed by the FSC

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) Compliance statement

(2) Basis of preparation

(3) Basis of consolidation

(4) Foreign currency translation

(6) Cash equivalents

(7) Financial assets at amortized cost

(8) Accounts receivable

(9) Impairment of financial assets

(10) Derecognition of financial assets

(11) Operating leases

(12) Inventories

(13) Property, plant and equipment

(14) Impairment of non-financial assets

(15) Borrowings

(16) Accounts payable

(17) Derecognition of financial liabilities

(18) Provisions

(19) Employee benefits

B. Pensions

(20) Income tax

(21) Share capital

(22) Dividends

(23) Revenue recognition

(24) Operating segments

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

Critical accounting estimates and assumptions

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

(2) Financial assets at amortized cost - current

(3) Accounts receivable

(4) Inventories

(6) Property, plant and equipment

(7) Impairment of non-financial assets (For the year ended December 31, 2017: None)

(8) Other non-current assets

(9) Short-term borrowings

(10) Other payables

(11) Pensions

(12) Share capital

(13) Capital surplus

(14) Retained earnings

(15) Operating revenue

A. Disaggregation of revenue from contracts with customers

B. Contract liabilities

C. Related disclosures for 2017 operating revenue are provided in Note 12(5) B.

Lida Audit Report / Information 2018

`Cash and financial assets at amortized cost`

`Sales revenue from distribution selling`

`Valuation of property, plant and equipment impairment`