LTC - Annual Report 2013 | FinancialReports.eu

Lite-On Technology Corporation

Financial Statements for the Years Ended December 31, 2013 and 2012 and Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders Lite-On Technology Corporation

We have audited the accompanying balance sheets of Lite-On Technology Corporation as of December 31, 2013, December 31, 2012 and January 1, 2012, and the related statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2013 and 2012. These financial statements are the responsibility of Lite-On Technology Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lite-On Technology Corporation as of December 31, 2013, December 31, 2012 and January 1, 2012, and its financial performance and its cash flows for the years ended December 31, 2013 and 2012, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

We have also audited the consolidated financial statements of Lite-On Technology Corporation and subsidiaries as of and for the years ended December 31, 2013 and 2012 and have issued an unqualified opinion thereon in our report dated March 27, 2014.

March 27, 2014

Notice to Readers

The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally applied in the Republic of China. For the convenience of readers, the independent 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. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and financial statements shall prevail.

LITE-ON TECHNOLOGY CORPORATION

BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Notes receivable, net (Note 7) Trade receivables, net (Note 7) Trade receivables from related parties (Note 26) Other receivables Other receivables from related parties (Note 26) Inventories, net (Notes 5 and 8) Prepayments Total current assets NONCURRENT ASSETS Available-for-sale financial assets - noncurrent (Notes 5 and 9) Investments accounted for using equity method (Note 11) Property, plant and equipment, net (Notes 5 and 12) Intangible assets (Notes 5 and 13) Deferred tax assets (Notes 5 and 20) Refundable deposits Prepayments for pension fund (Notes 5 and 17) Other noncurrent assets Total noncurrent assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 14) Notes payable Trade payables Trade payables to related parties (Note 26) Other payables Other payables to related parties (Note 26) Current tax liabilities (Notes 5 and 20) Provisions - current (Notes 5 and 16) Advance receipts Current portion of long-term borrowings (Note 14) Finance lease payables - current (Note 15) Total current liabilities NONCURRENT LIABILITIES Derivative financial liabilities for hedging - noncurrent (Notes 5 and 10) Long-term borrowings, net of current portion (Note 14) Deferred tax liabilities (Notes 5 and 20) Finance lease payables, net of current portion (Note 15) Accrued pension liabilities (Notes 5 and 17) Guarantee deposits Credit balance of investments accounted for using equity method (Note 11) Total noncurrent liabilities Total liabilities EQUITY Share capital Ordinary share Advance receipts for share capital Total share capital Capital surplus Additional paid-in capital from share issuance in excess of par value Bond conversion Treasury stock transactions Difference between consideration and carry amounts adjusted arising from changes in percentage of ownership in subsidiaries Arising from share of changes in capital surplus of associates Merger Employee stock options Total capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translating foreign operations Unrealized gain (loss) on available-for-sale financial assets Unrealized loss on cash flow hedging Total other equity Treasury shares Total equity TOTAL		December 31, 2013 Amount % $ 6,924,714 6 7,518 - 18,074,101 14 5,307,083 4 223,612 - 372,160 - 2,575,272 2 453,873 - 33,938,333 26 717,171 1 87,132,748 68 4,758,177 4 646,137 - 921,841 1 87,784 - - - 5,512 - 94,269,370 74 $ 128,207,703 100 $ 5,484,120 4 7,134 - 2,408,170 2 20,668,164 16 4,352,868 3 465,963 - 720,462 1 133,230 - 713,778 1 6,350,000 5 - - 41,303,889 32 46,969 - 12,125,000 10 1,523,571 1 - - 11,173 - 16,165 - 144,632 - 13,867,510 11 55,171,399 43 23,246,552 18 29,705 - 23,276,257 18 9,096,489 7 7,540,388 6 430,851 - - - 15,487 - 10,120,217 8 8,587 - 27,212,019 21 8,601,391 7 689,913 1 12,172,082 9 21,463,386 17 2,383,040 2 83,231 - (46,969) - 2,419,302 2 (1,334,660) (1) 73,036,304 57 $ 128,207,703 100		December 31, 2012 Amount % $ 10,324,378 9 - - 14,980,406 14 3,241,115 3 160,143 - 309,504 - 2,214,716 2 270,930 - 31,501,192 28 660,080 1 72,538,973 65 5,262,397 5 640,801 - 790,151 1 84,129 - - - 4,000 - 79,980,531 72 $ 111,481,723 100 $ 2,787,840 3 500 - 1,457,394 1 15,591,993 14 3,732,425 3 449,867 1 409,454 - 175,712 - 562,187 1 3,125,000 3 453 - 28,292,825 26 101,563 - 12,575,000 11 998,046 1 - - 37,458 - 16,531 - - - 13,728,598 12 42,021,423 38 22,953,154 20 6,840 - 22,959,994 20 8,551,730 8 7,540,388 7 370,703 - 146,193 - 16,645 - 10,120,217 9 6,112 - 26,751,988 24 7,847,905 7 - - 13,654,612 12 21,502,517 19 128,872 - (446,848) - (101,563) - (419,539) - (1,334,660) (1) 69,460,300 62 $ 111,481,723 100		January 1, 2012
						Amount % $ 9,750,349 9 - - 13,894,932 12 5,121,231 4 180,982 - 853,564 1 4,474,796 4 202,556 - 34,478,410 30 2,255,870 2 69,729,781 61 5,481,271 5 687,177 1 789,049 1 86,371 - 79,234 - - - 79,108,753 70 $ 113,587,163 100 $ 1,050,000 1 1,962 - 6,656,629 6 14,560,064 13 3,815,817 3 663,986 1 441,682 - 181,346 - 560,101 1 - - 504 - 27,932,091 25 165,225 - 15,700,000 14 1,071,098 1 322 - - - 18,101 - - - 16,954,746 15 44,886,837 40 23,099,801 20 - - 23,099,801 20 8,533,185 8 7,641,499 7 416,974 - - - - - 10,255,921 9 4,602 - 26,852,181 24 7,125,313 6 - - 12,392,930 11 19,518,243 17 1,625,560 1 (142,004) - (165,225) - 1,318,331 1 (2,088,230) (2) 68,700,326 60 $ 113,587,163 100

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

LITE-ON TECHNOLOGY CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE Sales (Notes 5, 19 and 26) Less: Sales returns Sales allowance Total operating revenue OPERATING COSTS Cost of goods sold (Notes 8, 17 and 26) GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATES REALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATES GROSS PROFIT, NET OPERATING EXPENSES (Notes 17 and 26) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME NONOPERATING INCOME AND EXPENSES Share of profit of subsidiaries and associates (Note 11) Interest income Dividend income Other income Gain on disposal of property, plant and equipment Gain on disposal of investments Interest expense Other expenses Loss on disposal of property, plant and equipment Loss on disposal of investments		For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
		2013 Amount % $ 81,058,390 102 323,820 1 1,100,791 1 79,633,779 100 71,585,095 90 8,048,684 10 4,938 - - - 8,043,746 10 1,380,316 2 2,703,984 3 1,758,838 2 5,843,138 7 2,200,608 3 7,002,137 9 61,927 - 14,435 - 815,170 1 342,674 - - - (488,234) (1) (369,106) - (235,277) - (33,419) -		2012
				Amount % $ 78,151,418 102 313,787 - 1,093,294 2 76,744,337 100 69,655,055 91 7,089,282 9 - - 89,525 - 7,178,807 9 1,421,078 2 2,493,950 3 1,529,054 2 5,444,082 7 1,734,725 2 5,568,989 7 83,130 - 21,459 - 948,584 1 16,848 - 310,085 1 (337,129) - (225,930) - (242) - - - (Continued)

LITE-ON TECHNOLOGY CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Net loss on foreign currency exchange Impairment loss (Notes 9 and 12) Total nonoperating income and expenses OPERATING PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 5 and 20) NET PROFIT FOR THE PERIOD OTHER COMPREHENSIVE INCOME (Notes 11, 17, 18 and 20) Exchange differences on translating foreign operations Unrealized gain (loss) on available-for-sale financial assets Cash flow hedges Share of other comprehensive income of subsidiaries and associates Actuarial gains (losses) on defined benefit plans Income tax relating to the components of other comprehensive income (expense) Other comprehensive income (loss) for the period, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 22) Basic Diluted		For the Years Ended December 31	For the Years Ended December 31	For the Years Ended December 31
		2013 Amount % $ (12,039) - - - 7,098,268 9 9,298,876 12 544,028 1 8,754,848 11 1,962,895 3 84,664 - 54,594 - 1,111,461 1 18,043 - (377,841) - 2,853,816 4 $ 11,608,664 15 $3.83 $3.79		2012
				Amount % $ (11,068) - (652,857) (1) 5,721,869 8 7,456,594 10 54,171 - 7,402,423 10 (1,068,528) (2) (28,704) - 63,662 - (888,040) (1) (127,212) - 206,008 - (1,842,814) (3) $ 5,559,609 7 $3.25 $3.20

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

(Concluded)

LITE-ON TECHNOLOGY CORPORATION

STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars)

Issue of	Share Capital (Note 1				Capital Surplus	(Note 18)				Retained Earning	s(Note 18)		Other Equity (	Note 18)
		Additional Paid-in Capital from Share Issuance in Excess of Par Value $ 8,533,185 - - - - - 111,865 19,589 - - - - (112,909) 8,551,730 - - - - - - 134,320 410,439 - - - - $ 9,096,489	Bond Conversion $ 7,641,499 - - - - - - - - - - - (101,111) 7,540,388 - - - - - - - - - - - - $ 7,540,388	Treasury Stock Transactions $ 416,974 - - - - (3,928 ) - - 55,853 - - - (98,196) 370,703 - - - - - - - - 60,148 - - - $ 430,851	Difference Between Consideration and Carry Amounts Adjusted Arising from Change in Percentage of Ownership in Subsidiaries $ - - - - 146,193 - - - - - - - - 146,193 - - - - (146,193 ) - - - - - - - $ -	Arising from Share of Changes in Capital Surplus of Associates $ - - - - - 16,645 - - - - - - - 16,645 - - - - - (1,158 ) - - - - - - $ 15,487	Merger $ 10,255,921 - - - - - - - - - - - (135,704) 10,120,217 - - - - - - - - - - - - $ 10,120,217	Employee Stock Options $ 4,602 - - - - 1,510 - - - - - - - 6,112 - - - - - 2,475 - - - - - - $ 8,587
												Exchange Differences on Translating Foreign Operations $ 1,625,560 - - - (2,430 ) - - - - - (1,494,258) (1,494,258) - 128,872 - - - - - - - - - - 2,254,168 2,254,168 $ 2,383,040	Unrealized Gain (Loss) on Available- for-sale Financial Assets $ (142,004 ) - - - - - - - - - (304,844) (304,844) - (446,848 ) - - - - - - - - - - 530,079 530,079 $ 83,231	Cash Flow Hedges $ (165,225 ) - - - - - - - - - 63,662 63,662 - (101,563 ) - - - - - - - - - - 54,594 54,594 $ (46,969)
Shares (In Thousands) 2,309,980 - - 11,397 - - 4,421 82 - - - - (30,565) 2,295,315 - - - 11,490 - - 3,669 14,181 - - - - 2,324,655	Amount $ 23,099,801 - - 113,972 - - 44,215 816 - - - - (305,650) 22,953,154 - - - 114,899 - - 36,689 141,810 - - - - $ 23,246,552
									Legal Reserve $ 7,125,313 722,592 - - - - - - - - - - - 7,847,905 753,486 - - - - - - - - - - - $ 8,601,391	Special Reserve $ - - - - - - - - - - - - - - - 689,913 - - - - - - - - - - $ 689,913	Unappropriated Earnings $ 12,392,930 (722,592 ) (5,174,335 ) (113,972 ) - (22,468 ) - - - 7,402,423 (107,374) 7,295,049 - 13,654,612 (753,486 ) (689,913 ) (5,400,265 ) (114,899 ) (3,293,007 ) (783 ) - - - 8,754,848 14,975 8,769,823 $ 12,172,082

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

LITE-ON TECHNOLOGY CORPORATION

STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Reversal of impairment loss on trade receivable Finance costs Interest income Dividend income Share of profit of subsidiaries and associates Gain on disposal of property, plant and equipment (Gain) loss on disposal of available-for-sale financial assets (Gain) loss on disposal of associates Impairment loss recognized on financial assets Impairment loss recognized on non-financial assets Reversal of impairment loss recognized on non-financial assets Unrealized loss on transactions with subsidiaries and associates Realized gain on transactions with subsidiaries and associates Unrealized net gain on foreign currency exchange Recognition (reversal) of provisions Changes in operating assets and liabilities Notes receivable Trade receivables Trade receivables from related parties Other receivables Other receivables from related parties Inventories Prepayments Notes payable Trade payables Trade payables from related parties Other payable Other payable from related parties Provisions Advance receipts Accrued pension liabilities Cash generated from operations Interest received Dividend received Interest paid Income tax paid Net cash generated from operating activities		For the Years Ended December 31	For the Years Ended December 31
		2013 $ 9,298,876 259,545 71,591 (9,781) 488,234 (61,927) (14,435) (7,002,137) (107,397) 27,394 6,025 - 55,334 - 4,938 - (267,175) (14,550) (7,518) (3,083,914) (2,065,968) (66,440) (62,656) (415,890) (182,943) 6,634 1,217,951 5,076,171 869,714 16,096 (27,932) 151,591 (8,242) 4,151,189 64,898 14,435 (525,382) (131,276) 3,573,864	2012 $ 7,456,594 339,360 89,071 (16,640) 337,129 (83,130) (21,459) (5,568,989) (16,606) (295,694) (14,391) 651,697 1,160 (130,127) - (89,525) (226,465) 22,794 - (1,068,834) 1,880,116 22,583 544,060 2,390,207 (68,374) (1,462) (4,980,358) 1,031,929 143,208 (214,119) (28,428) 2,086 (10,520) 2,076,873 81,386 21,459 (335,080) (143,539) 1,701,099

(Continued)

LITE-ON TECHNOLOGY CORPORATION

STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on sales of available-for-sale financial assets Proceeds from capital reduction of investments accounted for using equity method Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment (Increase) decrease in refundable deposits Payments for intangible assets Increase in other noncurrent assets Dividend received from subsidiaries and associates Net cash generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Proceeds of long-term borrowings Refund of guarantee deposits received Decrease in finance lease payables Payment cash interests Proceeds of the exercise of employee stock options Partial acquisition of subsidiaries Partial disposal of interests in subsidiaries without losing control loss Net cash used in financing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR		For the Years Ended December 31	For the Years Ended December 31
		2013 $ 179 4,554,526 (265,087) 593,439 (3,655) (66,344) (1,512) 4,742,294 9,553,840 2,696,280 2,775,000 (366) (453) (5,400,265) 575,114 (17,172,678) - (16,527,368) (3,399,664) 10,324,378 $ 6,924,714	2012 $ 1,215,604 - (195,173) 28,538 2,242 (42,729) (4,000) 1,349,833 2,354,315 1,737,840 - (1,570) (373) (5,174,335) 27,245 (358,390) 288,198 (3,481,385) 574,029 9,750,349 $ 10,324,378

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

(Concluded)

NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

LITE-ON TECHNOLOGY CORPORATION

1. GENERAL INFORMATION

Lite-On Technology Corporation (the “Company”) was established in March 1989. Its shares are traded on the Taiwan Stock Exchange. The Company manufactures and markets (1) computer software, hardware, peripherals and components and (2) multifunction and all-in-one printers, cameras and Internet systems and image-processing equipment.

The Company merged with Lite-On Electronics, Inc., Silitek Corp. and GVC Corp., with the Company as the survivor entity. The merger took effect on November 4, 2002, and the Company thus assumed all rights and obligations of the three merged companies on that date. The Company merged with its subsidiary, Lite-On Enclosure Inc., with the Company as the survivor entity. The merger took effect on April 1, 2004, and the Company thus assumed all rights and obligations of the three merged companies on that date.

The financial statements are presented in the Company’s functional currency, New Taiwan dollars. For greater comparability and consistency of financial reporting, the financial statements are presented in New Taiwan dollars since the Company’s stocks are listed on the Taiwan Stock Exchange.

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the board of directors and authorized for issue on March 27, 2014.

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

a. New, amended and revised standards and interpretations (the “New IFRSs”) in issue but not yet effective

The Company have not applied the following International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) issued by the IASB. On January 28, 2014, the Financial Supervisory Commission (FSC) announced the framework for the adoption of updated IFRSs version in the ROC. Under this framework, starting January 1, 2015, the previous version of IFRSs endorsed by the FSC (the 2010 IFRSs version) currently applied by companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market will be replaced by the updated IFRSs without IFRS 9 (the 2013 IFRSs version). However, as of the date that the financial statements were authorized for issue, the FSC has not endorsed the following new, amended and revised standards and interpretations issued by the IASB (the “New IFRSs”) included in the 2013 IFRSs version. Furthermore, the FSC has not announced the effective date for the following New IFRSs that are not included in the 2013 IFRSs version.

The New IFRSs Included in the 2013 IFRSs Version Not Yet Endorsed by the FSC

Effective Date Announced by IASB (Note 1)

Improvements to IFRSs (2009) - amendment to IAS 39 January 1, 2009 and January 1, 2010, as appropriate Amendment to IAS 39 “Embedded Derivatives” Effective for annual periods ending on or after June 30, 2009 Improvements to IFRSs (2010) July 1, 2010 and January 1, 2011, as appropriate Annual Improvements to IFRSs 2009-2011 Cycle January 1, 2013 Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7 July 1, 2010 Disclosures for First-time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed July 1, 2011 Dates for First-time Adopters” Amendment to IFRS 1 “Government Loans” January 1, 2013 Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and January 1, 2013 Financial Liabilities” Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” July 1, 2011 IFRS 10 “Consolidated Financial Statements” January 1, 2013 IFRS 11 “Joint Arrangements” January 1, 2013 IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2013 Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated January 1, 2013 Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance” Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment January 1, 2014 Entities” IFRS 13 “Fair Value Measurement” January 1, 2013 Amendment to IAS 1 “Presentation of Other Comprehensive Income” July 1, 2012 Amendment to IAS 12 “Deferred Tax: Recovery of Underlying January 1, 2012 Assets” IAS 19 (Revised 2011) “Employee Benefits” January 1, 2013 IAS 27 (Revised 2011) “Separate Financial Statements” January 1, 2013 IAS 28 (Revised 2011) “Investments in Associates and Joint January 1, 2013 Ventures” Amendment to IAS 32 “Offsetting Financial Assets and Financial January 1, 2014 Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine” January 1, 2013 Effective Date The New IFRSs Not Included in the 2013 IFRSs Version Announced by IASB (Note 1) Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 IFRS 9 “Financial Instruments” Note 3 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of Note 3 IFRS 9 and Transition Disclosures” IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of January 1, 2014 Hedge Accounting” IFRIC 21 “Levies” January 1, 2014

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Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations for which the acquisition date is on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: IASB tentatively decided that an entity should apply IFRS 9 for annual periods beginning on or after January 1, 2018.
b. Significant changes in accounting policy that would result from adoption of New IFRSs in issue but not yet effective

Except for the following, the impending initial application of the above New IFRSs, whenever applied, would not have any material impact on the Company’s accounting policies:

1) IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Specifically, financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other financial assets are measured at their fair values at the end of reporting period. However, the Company may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss.

Hedge accounting

The main changes in hedge accounting amended the application requirements for hedge accounting to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing retrospective effectiveness assessment with the principle of economic relationship between the hedging instrument and the hedged item.

Effective date

The mandatory effective date of IFRS 9, which was previously set at January 1, 2015, was removed and will be reconsidered once the standard is complete with a new impairment model and finalization of any limited amendments to classification and measurement.

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2) New issued and revised standards related to Associates and Disclosure
a) Revised to IAS 28 “Investments in Associates and Joint Ventures”

Revised IAS 28 requires when a portion of an investment in associates meets the criteria to be classified as held for sale, that portion is classified as held for sale. Any retained portion that has not been classified as held for sale is accounted for using the equity method. Previously, when a portion of an investment in associates meets the criteria to be classified as held for sale, the entire investment is classified as held for sale and ceases to apply the equity method.

b) IFRS 12 “Disclosure of Interests in Other Entities”

IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than in the current standards.

3) IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope.

4) Amendment to IAS 1 “Presentation of Items of Other Comprehensive Income”

The amendment to IAS 1 requires items of other comprehensive income to be grouped into those that (1) will not be reclassified subsequently to profit or loss; and (2) will be reclassified subsequently to profit or loss when specific conditions are met. Income taxes on related items of other comprehensive income are grouped on the same basis. Previously, there were no such requirements.

5) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

In issuing IFRS 13 “Fair Value Measurement”, the IASB made some consequential amendments to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that the disclosure of such recoverable amount is required when an impairment loss has been recognized or reversed during the period. Furthermore, the Company is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique.

6) Revision to IAS 19 “Employee Benefits”

Revised IAS 19 changes the definition of short-term employee benefits. The revised definition is “employee benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service”. The Company’s unused annual leave, which can be carried forward within 18 months after the end of the annual period in which the employee renders service and which is currently classified as short-term employee benefits, will be classified as other long-term employee benefits under revised IAS 19. Related defined benefit obligation of such other long-term benefit is calculated using the Projected Unit Credit Method. However, this change does not affect unused annual leave to be presented as a current liability in the consolidated balance sheet.

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7) Annual Improvements to IFRSs: 2010-2012 Cycle

Several standards including IFRS 2 “Share-Based Payment”, IFRS 3 “Business Combinations” and IFRS 8 “Operating Segments” were amended in this annual improvement.

The amended IFRS 2 changes the definitions of ‘vesting condition’ and ‘market condition’ and adds definitions for 'performance condition' and 'service condition'. The amendment clarifies that a performance target can be based on the operations (i.e. a non-market condition) of the Company or another entity in the same group or the market price of the equity instruments of the Company or another entity in the same group (i.e. a market condition); that a performance target can relate either to the performance of the Company as a whole or to some part of it (e.g. a division); and that the period for achieving a performance condition must not extend beyond the end of the related service period. In addition, a share market index target is not a performance condition because it not only reflects the performance of the Company, but also of other entities outside the Group.

IFRS 3 was amended to clarify that contingent consideration should be measured at fair value, irrespective of whether the contingent consideration is a financial instrument within the scope of IFRS 9 or IAS 39. Changes in fair value should be recognized in profit or loss.

The amended IFRS 8 requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have ‘similar economic characteristics’. The amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segments’ assets are regularly provided to the chief operating decision-maker.

IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of not discounting is immaterial.

IAS 24 was amended to clarify that a management entity providing key management personnel services to the Company is a related party of the Company. Consequently, the Company is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.

8) Annual Improvements to IFRSs: 2011-2013 Cycle

Several standards including IFRS 3 “Business Combination”, IFRS 13 “Fair Value Measurement” and IAS 40 “Investment Property” were amended in this annual improvement.

IFRS 3 was amended to clarify that IFRS 3 does not apply to the accounting for the formation of all types of joint arrangements in the financial statements of the joint arrangement itself.

The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32.

IAS 40 was amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive and application of both standards may be required to determine whether the investment property acquired is acquisition of an asset or a business combination.

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c. The impact of the application of New IFRSs and the Regulations Governing the Preparation of Financial Reports by Securities Issuers (the “Regulations”) in issue but not yet effective on the Company’s financial statements is as follows:

As of the date the financial statements were authorized for issue, the Company is continuingly assessing the possible impact that the application of the above New IFRSs will have on the Company's financial position and operating result, and will disclose the relevant impact when the assessment is complete.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s financial statements for the year ended December 31, 2013 is the first financial statements prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

a. Statement of compliance

The financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (the “Accounting Standards Used in the Preparation of Parent Company Only Financial Statements”).

b. Basis of preparation

The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

When preparing the Company’s financial statements, the Company account for subsidiaries and associates by using the equity method. For the consistency with net income, other comprehensive income and equity attributable to Company in the consolidated financial statements, the differences of the accounting treatment between Company basis and the consolidated basis are adjusted under “investments accounted for using equity method”, “share of profit or loss of subsidiaries and associates” and “share of other comprehensive income of subsidiaries and associates.”

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

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

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
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2) Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and
3) Liabilities for which the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

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

d. Foreign currencies

In preparing the Company’s financial statements, transactions in currencies other than the Company’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purposes of presenting financial statements, the assets and liabilities of the Company’s foreign operations (including of the subsidiaries and associates, in other countries or currencies used different with the Company) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income.

On the disposal of a foreign operation, and the disposal involving loss of control, loss of joint control and loss of significant influence, all of the exchange differences accumulated in equity are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences is merged to the calculation of equity transaction and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

e. Inventories

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

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f. Investments accounted for using equity method

Investments in subsidiaries and associates are accounted for using equity method.

1) Investments in subsidiaries

Subsidiaries are the entities controlled by the Company.

Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Company's share of the profit or loss and other comprehensive income of the subsidiary after the date of acquisition. Besides, the Company also recognizes the Company’s share of the change in other equity of the subsidiary.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company’s loss of control over the subsidiaries are accounted for as equity transactions. Any difference between the carrying amounts of the investment and the fair value of the consideration paid or received is recognized directly in equity.

When the Company’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary, the Company continues recognizing its share of further losses.

The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired is recognized as goodwill. Goodwill is not amortized. The acquisition-date fair value of the net identifiable assets acquired in excess of the acquisition cost is recognized immediately in profit or loss.

Profits and losses from downstream transactions are eliminated in full. Profits and losses from upstream and sidestream transactions are recognized in the Company’s financial statements only to the extent of interests in the subsidiary that are not related to the Company.

2) Investments in associates

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. Besides, the Company also recognizes the Company’s share of the change in equity of the associate.

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

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Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

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

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

g. Property, plant and equipment

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

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

Depreciation is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

h. Goodwill

For the purpose of impairment testing, goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating units that are expected to benefit.

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

When testing for impairment loss for investments in equity, the cash-generating unit is determined based on the financial statements. If the recoverable amount of the asset subsequently increases, the reversal of the impairment loss is recognized as a gain, but the increased carrying amount of an asset after a reversal of an impairment loss shall not exceed the carrying amount that would have been determined net of amortization had no impairment loss been recognized on the asset in prior years.

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i. Intangible assets

1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset before the end of its economic life. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

2) Derecognition of intangible assets

Intangible asset is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the assets. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.

j. Impairment of tangible and intangible assets other than goodwill

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

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

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

k. Financial instruments

Financial assets and financial liabilities are recognized in Balance Sheet when a company becomes a party to the contractual provisions of the instruments.

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

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1) Financial assets

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

a) Measurement category

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

i. Available-for-sale financial assets

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

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

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

ii. Loans and receivables

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

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

b) Impairment of financial assets

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

For financial assets carried at amortized cost, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. The Company assesses the collectability of receivables by performing the account aging analysis and examining current trends in the credit quality of its customers.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is 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.

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

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

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income.

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

c) Derecognition of financial assets

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

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

2) Financial liabilities and equity instruments

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

a) Financial liabilities subsequent measurement

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

b) Derecognition of financial liabilities

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

c) Equity instruments

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

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

l. Hedge accounting

The Company designates derivative hedging instruments to conduct cash flow hedges. The effective portion of changes in the fair value of derivatives is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss. The associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in the same period when the hedged item affects profit or loss.

Hedge accounting is discontinued prospectively when the Company revokes the designated hedging relationship, or when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been previously recognized in other comprehensive income from the period when the hedge was effective remains separately in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.

m. Provisions

Provisions are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products, at the best estimate of the expenditure required to settle the Company’s obligation by the management of the Company

n. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns and recognizes a liability for returns based on previous experience and other relevant factors.

1) Sale of goods

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

a) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
b) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
c) The amount of revenue can be measured reliably;
d) It is probable that the economic benefits associated with the transaction will flow to the Company; and
e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.
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The Company does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

Income from properties developed for sale is recognized when construction is complete, rewards of ownership of the properties are transferred to buyers, and collectability of the related receivables is reasonably assured. Deposits received from sales of properties and installment payments are carried in balance sheets under current liabilities.

2) Rendering of services

Service income is recognized when services are provided.

3) Royalties

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. Royalties determined on a time basis are recognized on a straight-line basis over the period of the agreement. Royalty arrangements that are based on production, sales and other measures are recognized by reference to the underlying arrangement.

4) Rental revenue

The operation of leasing business was in accordance with IAS 17- Leases, that is, the possible situation related to leasing (ex. the condition of leasing, and the burden of future cost) would treat as operating lease.

5) Dividend and interest income

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

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

o. Leasing

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

1) The Company as lessor

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

2) The Company as lessee

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

p. Retirement benefit costs

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

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For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method. All actuarial gains and losses on the defined benefit obligation are recognized immediately in other comprehensive income.

The retirement benefit obligation recognized in the balance sheets represents the present value of the defined benefit obligation and reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the plan.

Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or settlement occurs.

q. Taxation

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

1) Current tax

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

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

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, research and development expenditures, and personnel training expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

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

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

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3) Current and deferred tax for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company's accounting policies (Note 4), management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

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

a. Impairment of goodwill

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

b. Estimated impairment of trade receivables

When there is objective evidence of impairment loss, the Company takes into consideration the estimation of future cash flows. 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. Where the actual future cash flows are less than expected, a material impairment loss may arise.

c. Income taxes

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which those deferred tax assets can be utilized. Assessment of the realization of the deferred tax assets requires the Company’s subjective judgment and estimation, including the future revenue growth and profitability, tax holidays, the amount of tax credits that can be utilized and feasible tax planning strategies. Any changes in the global economic environment, industry trends and relevant laws and regulations could result in significant adjustments to the deferred tax assets.

d. Derivative instruments and other fair value of financial instruments

As described in Note 25, the Company’s management uses its judgment in selecting an appropriate valuation technique for financial instruments that do not have quoted market price in an active market. Valuation techniques commonly used by market practitioners are applied. For derivative financial instruments, assumptions were based on quoted market rates adjusted for specific features of the instruments. Other financial instruments were valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or rates. The estimation of fair value of unlisted equity instruments including assumptions based on unobservable market prices or rates. The Company’s management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments.

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e. Impairment of property, plant and equipment

The impairment of equipment in relation to the production of handsets was based on the recoverable amount of those assets, which is the higher of fair value less costs to sell or value-in-use of those assets. Any changes in the market price or future cash flows will affect the recoverable amount of those assets and may lead to recognition of additional or reversal of impairment losses.

f. Write-down of inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

g. Recognition and measurement of defined benefit plans

Accrued pension liabilities and the resulting pension expense under defined benefit pension plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and long-term average future salary increase. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

6. CASH AND CASH EQUIVALENTS

Cash on hand Demand deposits Cash equivalent Time deposits with original maturities less than 3 months	December 31, 2013 $ 881 3,493,573 3,430,260 $ 6,924,714	December 31, 2012 January 1, 2012 $ 887 $ 850 2,222,756 2,740,724 8,100,735 7,008,775 $ 10,324,378 $ 9,750,349

7. TRADE RECEIVABLES, NET

Notes receivable Notes receivable - operating Allowance for impairment loss Trade receivables Trade receivables Allowance for impairment loss	December 31, 2013 $ 7,518 - $ 7,518 $ 18,095,210 (21,109) $ 18,074,101	December 31, 2012 January 1, 2012 $ - $ - - - $ - $ - $ 15,011,296 $ 13,924,347 (30,890) (29,415) $ 14,980,406 $ 13,894,932

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As of December 31, 2013, December 31, 2012 and January 1, 2012, the Company did not have the age of the trade receivables that were past due but not impaired.

Movements in the allowance for impairment loss recognized on trade receivables were as follows:

Balance at January 1 Impairment losses reversed Reclassification Balance at December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 30,890 (9,781) - $ 21,109	2012 $ 29,415 (16,640) 18,115 $ 30,890

8. INVENTORIES, NET

	December	31,	December	31,
	2013		2012		January 1, 2012
Merchandise	$ 2,575,272		$ 2,214,716		$ 2,451,313
Finished goods		-		-	1,563,429
Raw materials		-		-	284,584
Work in progress		-		-	175,470
	$ 2,575,272		$ 2,214,716		$ 4,474,796

The cost of allowance for inventory write-downs for the years ended December 31, 2013 and 2012 was NT$218,025 thousand and NT$162,691 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2013 and 2012 was NT$71,585,095 thousand and NT$69,655,055 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the year ended December 31, 2013 included inventory write-downs of NT$55,334 thousand, which resulted from write-downs of inventory to net realizable value. The cost of inventories recognized as cost of goods sold for the year ended December 31, 2012 included reversal of inventory write-downs of NT$130,127 thousand. Inventory write-down made through allowance account was reversed after the inventory had been disposed of by direct write off.

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS

	December	December	31,	December	December	31,
		2013			2012		January 1, 2012
Non-current
Domestic investments
Quoted shares	$	698,162		$	583,654		$ 1,708,728
Unquoted shares			-			-	460,187
Emerging market shares			-		56,434		56,434
		698,162			640,088		2,225,349
							(Continued)

25 -

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Foreign investments
Unquoted shares	$	19,009	$	19,009	$	19,009
Quoted shares		-		983		11,512
		19,009		19,992		30,521
	$	717,171	$	660,080	$	2,255,870
						(Concluded)

Refer to Note 25 for information relating to the fair values of on available-for-sale financial assets determined.

There was objective evidence that the fair values of some financial assets were below their carrying costs and will permanently decline. As a result, the Company recognized impairment losses of NT$651,697 thousand in the statements of comprehensive income for the year ended December 31, 2012.

10. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING

	December 31,	December 31,	December 31,
		2013	2012	January 1, 2012
Derivative financial assets under hedge
accounting-non-current
Cash flow hedges - interest rate swaps	$	46,969	$ 101,563	$ 165,225

The Company’s liabilities with floating interest rate might be affected by changes in the market rate. Thus, future cash flows on those liabilities might fluctuate, exposing the Company to cash flow risk. To hedge against this risk, the Company entered into an interest rate swap contract with a bank to change the floating rate of its liabilities to fixed rate. The cash flow hedge transactions are deemed sufficient.

The outstanding interest rate swap contracts of the Company at the end of the reporting period were as follows:

December 31, 2013

Notional Amounts		Range of	Range of Interest
(In Thousands)	Maturity Date	Interest Rates Paid	Rates Received
NT$4,800,000	2008.9.23-2015.9.23	1.895%	0.863%
December 31, 2012
Notional Amounts		Range of	Range of Interest
(In Thousands)	Maturity Date	Interest Rates Paid	Rates Received
NT$6,000,000	2008.9.23-2015.9.23	1.895%	0.900%

26 -

January 1, 2012

	Notional Amounts		Range	of	Range of Interest
	(In Thousands) Maturity Date	Interest Rates Paid			Rates Received
	NT$6,000,000 2008.9.23-2015.9.23		1.895%		0.861%
11.	INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
		December 31,	December 31,
		2013		2012	January 1, 2012
	Investments in subsidiaries	$ 84,685,063	$	70,253,370	$ 67,445,842
	Investments in associates	2,447,685		2,285,603	2,283,939
		$ 87,132,748	$	72,538,973	$ 69,729,781
	a. Investments in subsidiaries
		December 31,	December 31,
		2013		2012	January 1, 2012
	Lite-On International Holding Co., Ltd.	$ 20,412,910	$	16,150,949	$ 14,754,273
	Lite-On IT Corporation	19,032,107		9,896,862	9,817,780
	Lite-On Singapore Pte. Ltd.	9,440,364		5,759,750	3,355,348
	Lite-On Electronics H.K. Ltd.	9,257,407		11,509,512	11,351,593
	Lite-On Capital Corp.	8,743,042		8,964,426	9,540,289
	Lite-On Technology (Europe) B.V.	6,048,666		6,280,740	6,643,131
	Li Shin International Enterprise Corp.	4,268,292		4,198,270	4,280,019
	Silitech Technology Corp.	1,989,559		2,030,771	2,249,156
	Lite-On Technology USA, Inc.	1,727,197		1,670,954	1,877,497
	Lite-On Automotive Corp.	1,440,627		1,243,283	1,204,843
	Lite-On Electronics (Thailand) Co., Ltd.	1,065,618		979,833	954,613
	LTC Group Ltd. (BVI)	350,789		578,424	374,338
	Lite-On Japan Ltd.	324,371		327,308	370,703
	Lite-On Overseas Tradings Co., Ltd.	250,541		225,470	191,515
	Logah Technology Corp.	246,170		328,405	377,815
	Lite-On Integrated Service Inc.	45,219		44,084	43,073
	Lite-On Electronics (Europe) Ltd.	42,184		64,329	59,856
	Lite-On Clean Energy Technology Corp.	(144,632)		-	-
		84,540,431		70,253,370	67,445,842
	Add: Credit balance of investments
	accounted for using equity method	144,632		-	-
		$ 84,685,063	$	70,253,370	$ 67,445,842

27 -

At the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by the Company were as follows:

	December 31,	December 31,
Name of Associate	2013	2012	January 1, 2012
Lite-On International Holding Co., Ltd.	100.00%	100.00%	100.00%
Lite-On Electronics H.K. Ltd.	100.00%	100.00%	100.00%
Lite-On Capital Corp.	100.00%	100.00%	100.00%
Lite-On Singapore Pte. Ltd.	100.00%	100.00%	100.00%
Li Shin International Enterprise Corp.	100.00%	100.00%	100.00%
Lite-On Technology USA, Inc.	100.00%	100.00%	100.00%
Lite-On Electronics (Thailand) Co., Ltd.	100.00%	100.00%	100.00%
LTC Group Ltd. (BVI)	100.00%	100.00%	100.00%
Lite-On Overseas Tradings Co., Ltd.	100.00%	100.00%	100.00%
Lite-On Electronics (Europe) Ltd.	100.00%	100.00%	100.00%
Lite-On Integrated Service Inc.	100.00%	100.00%	100.00%
Lite-On Clean Energy Technology Corp.	100.00%	100.00%	100.00%
Lite-On IT Corporation	99.13%	42.33%	42.70%
Lite-On Automotive Corp.	82.26%	84.89%	84.89%
Lite-On Technology (Europe) B.V.	54.00%	54.00%	54.00%
Lite-On Japan Ltd.	49.49%	49.49%	49.49%
Silitech Technology Corp.	32.14%	32.37%	34.90%
Logah Technology Corp.	18.97%	18.97%	18.97%

The combined equities of the Company and its subsidiaries were more than 20% of the outstanding common stocks of Logah Technology Corp. as of December 31, 2013 and 2012. Thus, the investee was accounted for by the equity method.

The Company holds less than 50% interest in Lite-On Japan Ltd., Silitech Technology Corp. and Logah Technology Corp. In the context of the written agreements between the shareholders of Lite-On Japan Ltd., Silitech Technology Corp. and Logah Technology Corp., the Company can control the composition of the board of directors; hence, Lite-On Japan Ltd., Silitech Technology Corp. and Logah Technology Corp. is deemed as a subsidiary of the Company.

Refer to Note 28 to the consolidated financial statements for the year ended December 31, 2013 for the disclosures of the Company’s acquisition of Lite-On IT Corporation and disposal of Silitech Technology Corp.

The investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2013 and 2012 were based on the subsidiaries’ financial statements audited by auditors for the same years.

b. Investments in associates

	December 31,	December 31,
Name of Associate	2013	2012	January 1, 2012
Lite-On Semiconductor Corp.	$ 1,416,172	$ 1,286,158	$ 1,318,494
Dragonjet Corporation	1,031,513	999,445	965,445
	$ 2,447,685	$ 2,285,603	$ 2,283,939

28 -

As the end of the reporting period, the proportion of ownership and voting rights in associates held by the Company were as follows:

	December 31,	December 31,
Name of Associate	2013	2012	January 1, 2012
Lite-On Semiconductor Corp.	18.37%	18.37%	18.37%
Dragonjet Corporation	29.66%	29.74%	29.74%

The combined equities of the Company and its subsidiaries were more than 20% of the outstanding common stocks of Lite-On Semiconductor Corp. as of December 31, 2013 and 2012. Thus, the investee was accounted for by the equity method.

Publicly traded investments accounted for using the equity method were priced based on the closing price of those investments at the balance sheet date and were summarized as follows:

	December 31,	December 31,	December 31,	December 31,
Name of Associate		2013		2012	January 1, 2012
Silitech Technology Corp.	$	2,141,891	$	2,986,880	$	4,331,825
Lite-On Semiconductor Corp.	$	1,579,493	$	1,257,064	$	983,612
Lite-On Japan Ltd.	$	332,719	$	294,337	$	295,804
Logah Technology Corp.	$	252,364	$	221,353	$	220,284
Lite-On IT Corporation	$	-	$	9,686,175	$	9,618,737

The summarized financial information in respect of the Company’s interests in the jointly controlled entities which are accounted for using equity method is set out below:

Total assets Total liabilities Operating revenue Net profit Other comprehensive income (loss) Share of profit of subsidiaries and associates	December 31, 2013 $ 17,911,944 $8,421,692	December 31, 2012 January 1, 2012 $ 16,496,757 $ 15,736,339 $7,850,928 $6,880,460 For the Year Ended December 31	December 31, 2012 January 1, 2012 $ 16,496,757 $ 15,736,339 $7,850,928 $6,880,460 For the Year Ended December 31	December 31, 2012 January 1, 2012 $ 16,496,757 $ 15,736,339 $7,850,928 $6,880,460 For the Year Ended December 31
			2013 $ 7,274,832 $ 247,208 $ 427,680 $ 678,732	2012 $ 7,033,186 $ 337,101 $ (341,821) $ 666,865

The investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2013 and 2012 were based on the associates’ financial statements audited by auditors for the same years.

29 -

12. PROPERTY, PLANT AND EQUIPMENT, NET

Carrying amounts of each class Freehold land Buildings Machinery equipment Tooling equipment Transportation equipment Office equipment Equipment held under finance lease Other equipment January 1, 2013 Cost Freehold land $ 2,280,117 Buildings 3,674,272 Machinery equipment 2,454,974 Tooling equipment 386,930 Transportation equipment 1,137 Office equipment 497,190 Equipment held under finance lease 5,515 Other equipment 348,749 9,648,884 Accumulated depreciation Buildings 1,058,046 Machinery equipment 2,287,732 Tooling equipment 372,372 Transportation equipment 942 Office equipment 382,391 Equipment held under finance lease 4,851 Other equipment 265,124 4,371,458 Accumulated impairment Freehold land - Buildings 8,082 Machinery equipment 6,947 Tooling equipment - Transportation equipment - Office equipment - Equipment held under finance lease - Other equipment - 15,029 $ 5,262,397	Carrying amounts of each class Freehold land Buildings Machinery equipment Tooling equipment Transportation equipment Office equipment Equipment held under finance lease Other equipment January 1, 2013 Cost Freehold land $ 2,280,117 Buildings 3,674,272 Machinery equipment 2,454,974 Tooling equipment 386,930 Transportation equipment 1,137 Office equipment 497,190 Equipment held under finance lease 5,515 Other equipment 348,749 9,648,884 Accumulated depreciation Buildings 1,058,046 Machinery equipment 2,287,732 Tooling equipment 372,372 Transportation equipment 942 Office equipment 382,391 Equipment held under finance lease 4,851 Other equipment 265,124 4,371,458 Accumulated impairment Freehold land - Buildings 8,082 Machinery equipment 6,947 Tooling equipment - Transportation equipment - Office equipment - Equipment held under finance lease - Other equipment - 15,029 $ 5,262,397	Carrying amounts of each class Freehold land Buildings Machinery equipment Tooling equipment Transportation equipment Office equipment Equipment held under finance lease Other equipment January 1, 2013 Cost Freehold land $ 2,280,117 Buildings 3,674,272 Machinery equipment 2,454,974 Tooling equipment 386,930 Transportation equipment 1,137 Office equipment 497,190 Equipment held under finance lease 5,515 Other equipment 348,749 9,648,884 Accumulated depreciation Buildings 1,058,046 Machinery equipment 2,287,732 Tooling equipment 372,372 Transportation equipment 942 Office equipment 382,391 Equipment held under finance lease 4,851 Other equipment 265,124 4,371,458 Accumulated impairment Freehold land - Buildings 8,082 Machinery equipment 6,947 Tooling equipment - Transportation equipment - Office equipment - Equipment held under finance lease - Other equipment - 15,029 $ 5,262,397	December 31, 2013 December 31, 2012 January 1, 2012 $ 2,033,482 $ 2,280,117 $ 2,280,117 2,224,075 2,608,144 2,693,420 209,698 160,295 250,427 5,607 14,558 18,800 57 195 333 115,175 114,799 128,415 265 664 1,845 169,818 83,625 107,914 $ 4,758,177 $ 5,262,397 $ 5,481,271 For the Year Ended December 31, 2013	December 31, 2013 December 31, 2012 January 1, 2012 $ 2,033,482 $ 2,280,117 $ 2,280,117 2,224,075 2,608,144 2,693,420 209,698 160,295 250,427 5,607 14,558 18,800 57 195 333 115,175 114,799 128,415 265 664 1,845 169,818 83,625 107,914 $ 4,758,177 $ 5,262,397 $ 5,481,271 For the Year Ended December 31, 2013	December 31, 2013 December 31, 2012 January 1, 2012 $ 2,033,482 $ 2,280,117 $ 2,280,117 2,224,075 2,608,144 2,693,420 209,698 160,295 250,427 5,607 14,558 18,800 57 195 333 115,175 114,799 128,415 265 664 1,845 169,818 83,625 107,914 $ 4,758,177 $ 5,262,397 $ 5,481,271 For the Year Ended December 31, 2013
		January 1, 2013 $ 2,280,117 3,674,272 2,454,974 386,930 1,137 497,190 5,515 348,749 9,648,884 1,058,046 2,287,732 372,372 942 382,391 4,851 265,124 4,371,458 - 8,082 6,947 - - - - - 15,029 $ 5,262,397	Additions $ - - 139,670 4,627 - 47,216 - 128,177 $ 319,690 $ 80,305 87,627 13,578 138 46,749 399 30,749 $ 259,545 $ - - - - - - - - $ -	Disposals Reclassification $ 246,635 $ - 434,059 - 267,337 (56,690) 99,311 (25,960) 310 - 19,232 (7,157) - - 6,045 (10,583) $ 1,072,929 $ (100,390) $ 122,213 $ - 264,705 (56,682) 99,311 (25,960) 310 - 19,141 (7,157) - - 5,393 - $ 511,073 $ (89,799) $ - $ - 8,082 - - - - - - - - - - - - - $ 8,082 $ -	December 31, 2013 $ 2,033,482 3,240,213 2,270,617 266,286 827 518,017 5,515 460,298 8,795,255 1,016,138 2,053,972 260,679 770 402,842 5,250 290,480 4,030,131 - - 6,947 - - - - - 6,947 $ 4,758,177

30 -

Cost Freehold land Buildings Machinery equipment Tooling equipment Transportation equipment Office equipment Equipment held under finance lease Other equipment Accumulated depreciation Buildings Machinery equipment Tooling equipment Transportation equipment Office equipment Equipment held under finance lease Other equipment Accumulated impairment Freehold land Buildings Machinery equipment Tooling equipment Transportation equipment Office equipment Equipment held under finance lease Other equipment			For the Year	Ended December 31, 2012
		January 1, 2012 $ 2,280,117 3,674,272 3,013,943 388,170 1,137 480,810 5,515 332,159 10,176,123 972,770 2,756,569 369,370 804 352,395 3,670 224,245 4,679,823 - 8,082 6,947 - - - - - 15,029 $ 5.481.271	Additions $ - - 52,489 21,557 - 34,792 - 16,590 $ 125,428 $ 85,276 131,252 31,577 138 49,057 1,181 40,879 $ 339,360 $ - - 1,160 - - - - - $ 1,160	Disposals Reclassification December 31, 2012 $ - $ - $ 2,280,117 - - 3,674,272 601,849 (9,609) 2,454,974 29,172 6,375 386,930 - - 1,137 16,592 (1,820) 497,190 - - 5,515 - - 348,749 $ 647,613 $ 5,054 9,648,884 $ - $ - 1,058,046 590,963 (9,126) 2,287,732 28,575 - 372,372 - - 942 16,143 (2,918) 382,391 - - 4,851 - - 265,124 $ 635,681 $ (12,044) 4,371,458 $ - $ - - - - 8,082 - (1,160) 6,947 - - - - - - - - - - - - - - - $ - $ (1,160) 15,029 $ 5,262,397

For the year ended December 31, 2012, as the result of the declining sale of one of the products in the market, the estimated future cash flows expected to arise from the related equipment was decreased. The Company carried out a review of the recoverable amount of that related equipment and determined that the carrying amount exceeded the recoverable amount. The review led to the recognition of an impairment loss of NT$1,160 thousand. The Company determined the recoverable amount of the relevant assets on the basis of their value in use. No impairment assessment was performed for the year ended 2013 as there was no indication of impairment.

The above items of property, plant and equipment were depreciated on a straight-line basis over the estimated useful life of the asset:

Buildings 2-61 years Machinery equipment 1-11 years Tooling equipment 1-3 years Transportation equipment 6 years Office equipment 1-9 years Equipment held under finance lease 3-5 years Other equipment 1-10 years

31 -

13. INTANGIBLE ASSETS, NET

Carrying amounts of each class		December 31, 2013 December 31, 2012 January 1, 2012 $ 544,918 $ 544,918 $ 544,918 5,653 10,175 14,698 - 10,239 51,193 95,566 75,469 76,368 $ 646,137 $ 640,801 $ 687,177 For the Year Ended December 31, 2013	December 31, 2013 December 31, 2012 January 1, 2012 $ 544,918 $ 544,918 $ 544,918 5,653 10,175 14,698 - 10,239 51,193 95,566 75,469 76,368 $ 646,137 $ 640,801 $ 687,177 For the Year Ended December 31, 2013	December 31, 2013 December 31, 2012 January 1, 2012 $ 544,918 $ 544,918 $ 544,918 5,653 10,175 14,698 - 10,239 51,193 95,566 75,469 76,368 $ 646,137 $ 640,801 $ 687,177 For the Year Ended December 31, 2013
Goodwill Patents Client relationships Software Cost Goodwill Patents Client relationships Software Accumulated amortization Goodwill Patents Client relationships Software Accumulated impairment Goodwill Patents Client relationships Software Cost Goodwill Patents Client relationships Software Accumulated amortization Goodwill Patents Client relationships Software
	January 1, 2013 $ 622,152 27,134 163,819 563,090 1,376,195 77,234 16,959 153,580 487,621 735,394 - - - - - $ 640,801	Additions $ - - - 66,344 $ 66,344 $ - 4,522 10,239 56,830 $ 71,591 $ - - - - $ - For the Year	Disposals Reclassification $ - $ - - - - - 1,286 10,583 $ 1,286 $ 10,583 $ - $ - - - - - 1,286 - $ 1,286 $ - $ - $ - - - - - - - $ - $ - Ended December 31, 2012	December 31, 2013 $ 622,152 27,134 163,819 638,731 1,451,836 77,234 21,481 163,819 543,165 805,699 - - - - - $ 646,137
	January 1, 2012 $ 622,152 27,134 163,819 520,361 1,333,466 77,234 12,436 112,626 443,993 646,289	Additions $ - - - 42,729 $ 42,729 $ - 4,523 40,954 43,594 $ 89,071	Disposals Reclassification $ - $ - - - - - - - $ - $ - $ - $ - - - - - - 34 $ - $ 34	December 31, 2012 $ 622,152 27,134 163,819 563,090 1,376,195 77,234 16,959 153,580 487,621 735,394 (Continued)

32 -

Accumulated impairment Goodwill Patents Client relationships Software			For the Year	Ended December 31, 2012
		January 1, 2012 $ - - - - - $ 687,177	Additions $ - - - - $ -	Disposals Reclassification December 31, 2012 $ - $ - $ - - - - - - - - - - $ - $ - - $ 640,801

(Concluded)

The above items of other intangible assets were amortized on a straight-line basis over the estimated useful life of the asset:

Patents 6 years Client relationships 4 years Software 1-14 years

14. BORROWINGS

a. Short-term borrowings

	December 31,	December 31,
	2013	2012	January 1, 2012
Unsecured borrowings
Line of credit borrowings	$ 5,484,120	$ 2,787,840	$ 1,050,000

The range of weighted average effective interest rate on bank loans was 0.72%-0.76%, 0.76%-0.79% and 1.54%-1.71% per annum as of December 31, 2013, December 31, 2012 and January 1, 2012, respectively.

b. Long-term borrowings

	December 31,	December 31,
	2013	2012	January 1, 2012
Unsecured borrowings
Syndicated loan with Citi Bank	$ 16,000,000	$ 12,500,000	$ 12,500,000
Taiwan Cooperative Bank	1,275,000	1,700,000	1,700,000
Taipei Fubon Commercial Bank	700,000	1,000,000	1,000,000
Chang Hwa Bank	500,000	500,000	500,000
	18,475,000	15,700,000	15,700,000
Less: Current portion	6,350,000	3,125,000	-
Long-term borrowings: Non-current	$ 12,125,000	$ 12,575,000	$ 15,700,000

33 -

As of December 31, 2013, December 31, 2012 and January 1, 2012, the Company had 6, 4 and 4 long-term bank loans with contract terms between September 23, 2008 and September 23, 2018. The floating interest rates are (1.448% to 1.663% and 1.518% to 1.694% and as of December 31, 2013 and 2012, respectively) payable monthly or quarterly. These loans should be repaid in 3, 5 or 8 installments or at lump sum on loan maturity.

On September 23, 2008, the Company signed the contract for a five-year syndicated loan with Citibank and 14 other financial institutions, and on May 16, 2011 changed the contract period to seven years from 2008. The repayment period is between September 23, 2008 and September 22, 2015. The credit line is NT$15 billion, consisting of:

1) NT$12 billion, which is a refinancing of existing credit lines to improve financial structure, which should be used as a medium-term loan and may not be used on a revolving basis; and
2) NT$3 billion, which is for supporting operations and may be used on a revolving basis.

The principal of this syndication loan should be repaid in five semiannual installments from September 23, 2013, and the interest rate is the 90-day Taiwan subprime commercial paper interest rate plus 61 points.

Under the syndicated loan agreement, the Company should maintain certain financial ratios based on the most recent semiannual or annual consolidated financial statements.

As of December 31, 2013, December 31, 2012 and January 1, 2012, the Company used a) NT$12 billion, NT$12 billion and NT$12 billion, respectively and b) NT$0, NT$0.5 billion, and NT$0.5 billion of the credit line of the above syndicated loan.

On March 19, 2013, the Company signed a contract for a five-year syndicated loan with Citibank and 10 other financial institutions. The credit line is NT$15 billion, consisting of (a) NT$6 billion and (b) NT$9 billion. This loan was obtained for the purposes of supporting operations and completing an acquisition and should be used as a medium-term loan but may not be used on a revolving basis.

At December 31, 2013, the Company used a) NT$1.23 billion and b) NT$2.77 billion of the credit line of the above syndicated loan.

The minimum payment of principal should be repaid at NT$4 billion by March 19, 2014. The remaining principal of this syndication loan should be repaid in five semiannual installments from March 19, 2016, and the interest rate is the 90-day Taiwan subprime commercial paper interest rate plus 65 points.

Under the syndicated loan agreement, the Company should maintain certain financial ratios based on the most recent semiannual or annual consolidated financial statements.

As of December 31, 2013, December 31, 2012 and January 1, 2012, the Company did not violate the financial ratios stated above.

34 -

15. FINANCE LEASE PAYABLES

	December	31,	December	December	31,
	2013			2012		January 1, 2012
Minimum lease payments
Not later than one year	$	-	$	453		$	504
Later than one year and not later than five years		-			-		504
Later than five years		-			-		-
		-		453			1,008
Less: Future finance charges		-			-		182
Present value of minimum lease payments	$	-	$	453		$	826
Present value of minimum lease payments
Not later than one year	$	-	$	453		$	504
Later than one year and not later than five years		-			-		322
Later than five years		-			-		-
	$	-	$	453		$	826

The Company leased machinery and equipment under capital leases valid from September 1, 2009 to June 1, 2013. The terms of these leases were between 3 and 5 years, with 15.6% interest rate. The payments of these leases were between NT$42 thousand and NT$120 thousand. The ownership of the leased assets will be transferred to the Company at the end of the lease term.

16. PROVISIONS

December 31, 2013 Warranties $ 133,230 Movements in the provisions were as follow: Balance at January 1 Additional provisions recognized Usage Reversing un-usage balances Balance at December 31	December 31, 2012 January 1, 2012 $ 175,712 $ 181,346 For the Year Ended December 31	December 31, 2012 January 1, 2012 $ 175,712 $ 181,346 For the Year Ended December 31	December 31, 2012 January 1, 2012 $ 175,712 $ 181,346 For the Year Ended December 31
		2013 $ 175,712 59,396 (27,932) (73,946) $ 133,230	2012 $ 181,346 49,569 (28,428) (26,775) $ 175,712

The provision for warranty claims represents the present value of management’s best estimate of the future outflow of economic benefits that will be required under the Company’s obligations for warranties under local sale of goods legislation. The estimate had been made on the basis of historical warranty trends and may vary as a result of new materials, altered manufacturing processes or other events affecting product quality.

35 -

17. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. As of December 31, 2013 and December 31, 2012, the Company recognized expenses in statements of comprehensive income were NT$105,144 thousand and NT$95,195 thousand, respectively.

An analysis by function Operating cost Operating expenses	For the Year Ended	For the Year Ended	December 31
		2013 $ 7,714 97,430 $ 105,144	2012 $ 6,860 88,335 $ 95,195

b. Defined benefit plans

The Company adopted the defined benefit plan under the Labor Standards Law, under which pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Company contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name.

The plan assets are invested in domestic (foreign) equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of Bureau of Labor Funds, Ministry of Labor or under the mandated management. However, in accordance with Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund the return generated by employees' pension contribution should not be below the interest rate for a 2-year time deposit with local banks.

The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out by qualifying actuaries. The principal assumptions used for the purposes of the actuarial valuations were as follows:

	December 31,	December 31,
	2013	2012	January 1, 2012
Discount rate(s)	1.75%	1.30%	1.60%
Expected return on plan assets	1.75%	1.30%	1.60%
Expected rate(s) of salary increase	3.00%	3.00%	3.00%

Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:

Current service cost Interest cost Expected return on plan assets	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 6,720 11,559 (11,170) $ 7,109	2012 $ 6,221 12,261 (13,653) $ 4,829

(Continued)

36 -

An analysis by function Operating cost Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 1,957 5,152 $ 7,109	2012 $ 2,056 2,773 $ 4,829 (Concluded)

Pre-tax actuarial gains and losses recognized in other comprehensive income for the years ended December 31, 2013 and 2012 were NT$18,043 thousand and NT$127,212 thousand, respectively. The cumulative amount of pre-tax actuarial losses recognized in other comprehensive income as of December 31, 2013 and 2012 was NT$109,169 thousand and NT$127,212 thousand, respectively.

The amount included in the balance sheet arising from the Company’s obligation in respect of its defined benefit plans was as follows:

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Present value of funded defined benefit
obligation	$	870,102	$	889,166	$ 766,333
Fair value of plan assets		(858,929)		(851,708)	(845,567)
Accrued pension liabilities (prepayments for
pension fund)	$	11,773	$	37,458	$ (79,234)

Movements in the present value of the defined benefit obligations were as follows:

Balance at January 1 Current service cost Interest cost Actuarial losses/(gains) Benefits paid Balance at December 31	For the Year Ended	For the Year Ended	December 31
		2013 $ 889,166 6,720 11,559 (18,324) (19,019) $ 870,102	2012 $ 766,333 6,221 12,261 121,945 (17,594) $ 889,166

Movements in the fair value of the plan assets were as follows:

Balance at January 1 Expected return on plan assets Actuarial losses Contributions from the employer Benefits paid Balance at December 31	For the Year Ended	For the Year Ended	December 31
		2013 $ 851,708 11,170 (281) 15,351 (19,019) $ 858,929	2012 $ 845,567 13,653 (5,267) 15,349 (17,594) $ 851,708

37 -

The major categories of plan assets at the end of the reporting period for each category were disclosed based on the information announced by Bureau of Labor Funds, Ministry of Labor:

	December 31,	December 31,
	2013	2012	January 1, 2012
Equity instruments	-	-	-
Debt instruments	-	-	-
Others	100%	100%	100%
	100%	100%	100%

The Company chose to disclose the history of experience adjustments as the amounts determined for each accounting period prospectively from the date of transition to IFRSs:

			December 31,	December 31,	December 31,	December 31,
				2013		2012	January 1, 2012
Experience	adjustments	on plan liabilities	$	10,775	$	61,224	$	-
Experience	adjustments	on plan assets	$	281	$	5,267	$	-

The Company expects to make contributions of NT$15,300 thousand to the defined benefit plans in the next year starting from December 31, 2013.

18. EQUITY

a. Share capital
1) Ordinary shares

Numbers of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued	December 31, 2013 3,500,000 $ 35,000,000 2,324,655 $ 23,246,552	December 31, 2012 January 1, 2012 3,500,000 3,500,000 $ 35,000,000 $ 35,000,000 2,295,315 2,309,980 $ 22,953,154 $ 23,099,801

Fully paid ordinary shares, which have a par value of NT$10, carry one vote per share and carry a right to dividends.

Of the Company’s authorized shares, 120,000 thousand shares and 100,000 thousand shares had been reserved for the issuance of convertible bonds and employee share options, respectively.

In their meeting on August 27, 2008, the Company’s Board of Directors approved a plan to repurchase up to 30,000 thousand shares listed on the Taiwan Stock Exchange (TSE) between September 28, 2008 and October 27, 2008, with the buyback price ranging from NT$20.48 to NT$43.60. On October 28, 2008, the Company’s Board of Directors approved the repurchase of up to 40,000 thousand shares listed on the TSE between October 29, 2008 and December 28, 2008, with the buyback price ranging from NT$13.00 to NT$37.10. The Company bought back a total of 30,565 thousand shares during the repurchase periods and retired all these shares in January 2012.

38 -

2) Issued global depositary receipts

On September 25, 1996, the Company issued 4,900 thousand units of global depositary receipts (GDRs) on the London Stock Exchange. These GDRs represented 49,000 thousand common shares of the Company.

On April 3, 1995, GVC Corp. issued 5,000 units of GDRs on the London Stock Exchange. These GDRs represented 25,000 thousand common shares of GVC Corp., which were assumed by the Corporation as a result of a merger, with the Company as the survivor entity. As of November 4, 2002, the outstanding GDRs were 7,627 thousand units, or 38,136 thousand common shares of GVC Corp. For merger purposes, these GDRs were exchanged for the Company’s 1,478 thousand marketable equity securities, which represented the Company’s 14,781 thousand common shares.

As of December 31, 2013, December 31, 2012 and January 1, 2012, the outstanding marketable equity securities were 5,206 thousand units, 5,201 thousand units, and 5,196 thousand units, representing 52,064 thousand common share, 52,006 thousand common share, and 51,957 thousand common shares of the Company, respectively. The rights and obligation of security holders are the same as those of common shareholders, except for voting rights. As of December 31, 2013, December 31, 2012 and January 1, 2012, the unredeemed GDRs amounted to 1,194 thousand units, 984 thousand units, and 1,141 thousand units.

b. Capital surplus

The premium from shares issued in excess of par (including share premium from issuance of common shares, conversion of bonds, treasury share transactions, and excess of the consideration received over the carrying amount of the subsidiaries’ net assets during disposal or acquisition) and donations may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Company’s capital surplus and once a year).

The capital surplus from long-term investments, employee share options and share warrants may not be used for any purpose.

c. Retained earnings and dividend policy

To ensure the availability of cash for the Company’s present and future expansion plans and to meet shareholders’ cash flow requirements, the Company prefers to distribute more stock dividends. In principle, cash dividends are limited to 10% of total dividends distributed.

The Company’s Articles of Incorporation provide that the annual net income, less any deficit, and 10% legal reserve as well as special reserve equal to the debit balances of the shareholders’ equity accounts, together with the distributable unappropriated earnings of prior years, can be retained partially on the basis of operating requirements. The remainder should be distributed as follows:

1) Bonus to employees: At least 1%.
2) Bonus to directors: 1.5% or less.
3) Others, as dividends.

If the bonus to employees is in the form of shares, it may be distributed to the employees’ subsidiaries. The requirements and the method of distribution of these share bonuses are based on resolutions passed by the board of directors.

39 -

For the year ended December 31, 2013, the bonus to employees were estimated on the basis of net income after considering the effect of partial profit on share of subsidiaries and associates at 15%; the remuneration to directors were estimated on the basis of net income at 0.85%. For the year ended December 31, 2012, the bonus to employees and remuneration to directors and supervisors represented 14.18% and 0.82%, respectively of net income. Material differences between these estimates and the amounts proposed by the Board of Directors in the following year are adjusted in the year of the proposal. If the actual amounts subsequently resolved by shareholders differ from the proposed amounts, the differences are recorded in the year of the shareholders’ resolution as a change in accounting estimate. If stock bonuses are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonuses by the closing price (after considering the effect of cash and stock dividends) of the shares on the day preceding the shareholders’ meeting.

Under Rule No. 100116 and Rule No. 0950000507 issued by the FSC, an amount equal to the net debit balance of shareholders’ other equity items (including exchange differences on translating foreign operations, unrealized gain (loss) on available-for-sale financial assets, and the gain or loss on the hedging instrument relating to the effective portion of cash flow hedge) shall be transferred from unappropriated earnings to a special reserve before any appropriation of earnings generated before January 1, 2012 shall be made. Any special reserve appropriated may be reversed to the extent of the decrease in the net debit balance.

Under Rule No. 1010012865 issued by the FSC on April 6, 2012 and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, on the first-time adoption of IFRSs, a company should appropriate to a special reserve of an amount that was the same as these of unrealized revaluation increment and cumulative translation differences (gains) transferred to retained earnings as a result of the company’s use of exemptions under IFRS 1. However, at the date of transitions to IFRSs, if the increase in retained earnings that resulted from all IFRSs adjustments is not sufficient for this appropriation, only the increase in retained earnings that resulted from all IFRSs adjustments will be appropriated to special reserve. The special reserve appropriated as above may be reversed in proportion to the usage, disposal or reclassification of the related assets and thereafter distributed. The special reserve appropriated on the first-time adoption of IFRSs may be used to offset deficits in subsequent years. No appropriation of earnings shall be made until any shortage of the aforementioned special reserve is appropriated in subsequent years if the company has earnings and the original need to appropriate a special reserve is not eliminated.

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

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company.

The appropriations of earnings for 2012 and 2011 had been approved in the shareholders’ meetings on June 19, 2013 and 2012, respectively. The appropriations and dividends per share were as follows:

Legal reserve Special reserve Share dividends Cash dividends	Appropriation of Earnings 2012 2011 $ 753,486 $ 722,592 689,913 - 114,899 113,972 5,400,265 5,174,335	Dividends Per Share (NT$)
		2012 2011 $ 0.05 $ 0.05 2.35 2.27

40 -

The bonus to employees and the remuneration to directors for 2012 and 2011 approved in the shareholders’ meetings on June 19, 2013 and 2012, respectively, were as follows:

Bonus to employees Remuneration of directors	For the Year Ended December 31	For the Year Ended December 31
	2012 Cash Dividends Stock Dividends $ 897,799 $ 171,009 61,420 -	2011
		Cash Dividends Stock Dividends $ 819,420 $ 156,080 61,420 -

The 4,421 thousand shares for 2011 was determined by dividing the amount of share bonus resolved in 2012 by the closing price of NT$35.3 (after considering the effect of cash and stock dividends) on the day immediately preceding the shareholders’ meeting.

The 3,669 thousand shares for 2012 was determined by dividing the amount of share bonus resolved in 2013 by the closing price of NT$46.61 (after considering the effect of cash and stock dividends) on the day immediately preceding the shareholders’ meeting.

The appropriation of the earnings for 2012 was approved by the Financial Supervisory Commission, Executive Yuan, ROC. The Company’s board of directors approved August 13, 2013 as the date of distributing stock dividends and cash dividends.

The appropriations of earnings for 2012 were proposed according to the Company’s financial statements for the years ended December 31, 2012, which were prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and the Generally Accepted Accounting Standard in the Republic of China (“ROC GAAP”),, and by reference to the balance sheet for the year ended December 31, 2012, which was prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (revised) and International Financial Reporting Standards.

There was no difference between the amounts of the bonus to employees and the remuneration to directors and supervisors approved in the shareholders’ meetings in 2013 and 2012 and the amounts recognized in the financial statements for the years ended December 31, 2012 and 2011.

The appropriations of earnings for 2013 had been proposed by the Company’s board of directors on March 27, 2014. The appropriations and dividends per share were as follows:

	Appropriation	Appropriation	Dividends Per	Dividends Per
	of	Earnings	Share	(NT$)
Legal reserve	$	875,485
Reversal of special reserve		640,244
Cash dividends		6,307,866	$	2.71
Share dividends		116,381		0.05

The Board of Directors of the Company also approved in year 2013 the cash dividends to employees, stock dividends to employees and the remuneration to directors in the amounts of NT$997,212 thousand, NT$189,945 thousand and NT$70,039 thousand, respectively. There is no significant difference between the approved amounts and the amounts charged against earnings of 2013.

The appropriations of earnings, the bonus to employees, and the remuneration to directors for 2013 are subject to the resolution of the shareholders’ meeting to be held on June 19, 2014.

Information on the bonus to employees, directors and supervisors proposed by the Company’s board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

41 -

d. Others equity items

Movements in others equity items were as follows:

Balance at January 1 Exchange differences arising on translating the foreign operations Gain arising on changes in the fair value of available-for-sale financial assets Gain arising on changes in the fair value of hedging instruments Share of other comprehensive income of subsidiaries and associates Income tax effect Balance at December 31 Balance at January 1 Exchange differences arising on translating the foreign operations Loss arising on changes in the fair value of available-for-sale financial assets Gain arising on changes in the fair value of hedging instruments Share of other comprehensive income of subsidiaries and associates Exchange differences on partial disposal of subsidiaries reclassified to equity Income tax effect Balance at December 31	2013	2013
	Exchange Differences on Translating Foreign Operations Unrealized Gain (Loss) on Available- for-sale Financial Assets Cash Flow Hedge $ 128,872 $ (446,848) $ (101,563) 1,962,895 - - - 84,664 - - - 54,594 666,046 445,415 - (374,773) - - $ 2,383,040 $ 83,231 $ (46,969) 2012		Total $ (419,539) 1,962,895 84,664 54,594 1,111,461 (374,773) $ 2,419,302
	Exchange Differences on Translating Foreign Operations Unrealized Gain (Loss) on Available- for-sale Financial Assets $ 1,625,560 $ (142,004) (1,068,528) - - (28,704) - - (607,380) (280,660) (2,430) - 181,650 4,520 $ 128,872 $ (446,848)	Cash Flow Hedge $ (165,225) - - 63,662 - - - $ (101,563)	Total $ 1,318,331 (1,068,528) (28,704) 63,662 (888,040) (2,430) 186,170 $ (419,539)

42 -

The exchange differences arising on translation of foreign operation’s net assets from its functional currency to the Company’s presentation currency are recognized directly in other comprehensive income and also accumulated in the foreign currency translation reserve.

Unrealized gain/loss on available-for-sale financial assets represents the cumulative gains or losses arising from the fair value measurement on available-for-sale financial assets that are recognized in other comprehensive income. When those available-for-sale financial assets have been disposed of or are determined to be impaired subsequently, the related cumulative gains or losses in other comprehensive income are reclassified to profit or loss.

The cash flow hedges reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of the hedging instruments entered into as cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments that are recognized and accumulated in cash flow hedges reserve will be reclassified to profit or loss only when the hedge transaction affects profit or loss.

e. Treasury shares

			Unit: In Thousands of Shares	Unit: In Thousands of Shares
	Number of	Increase	Decrease	Number of
Purpose of Buy-Back	Shares at	During the	During the	Shares at
(Please Specify Reasons)	January 1	Period	Period	December 31
For the year ended
December 31, 2013
Shares held by its subsidiaries	27,979	139	-	28,118
For the year ended
December 31, 2012
Shares held by its subsidiaries	27,840	139	-	27,979
Shares transferred to employees	30,565	-	30,565	-
	58,405	139	30,565	29,979

The Company’s shares held by its subsidiaries at the end of the reporting periods were as follows:

Name of Subsidiary Number of Shares Held (In Thousands) December 31, 2013 Lite-On Capital Corporation 14,892 LTC International Ltd. 6,900 Yet Foundate Ltd. 2,237 Lite-On Electronics Co., Ltd. 2,414 Lite-On IT Corp. 1,675	Carrying Amount Market Price $ 718,857 $ 711,812 297,469 305,906 126,881 90,023 105,515 97,132 85,938 80,066 $ 1,334,660 $ 1,284,939 (Continued)

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Name of Subsidiary
Number of
Shares Held
(In Thousands)
December 31, 2012
Lite-On Capital Corporation
14,818

LTC International Ltd.
6,866
Yet Foundate Ltd.
2,226
Lite-On Electronics Co., Ltd.
2,402
Lite-On IT Corp.
1,667

January 1, 2012
Lite-On Capital Corporation
14,744

LTC International Ltd.
6,832
Yet Foundate Ltd.
2,215
Lite-On Electronics Co., Ltd.
2,390
Lite-On IT Corp.
1,659

Carrying
Amount
Market Price
$ 718,857
$ 571,221
297,469
271,316
126,881
90,511
105,515
97,658
85,938

64,252
$ 1,334,660
$ 1,094,958
$ 718,857
$ 502,769
297,469
258,888
126,881
93,869
105,515
101,281
85,938

56,552
$ 1,334,660
$ 1,013,359
(Concluded)

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

19. REVENUE

Revenue from the sale of goods Royalty income Revenue from management services Rental income from property	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 78,029,729 968,907 491,859 143,284 $ 79,633,779	2012 $ 74,755,102 1,349,743 484,269 155,223 $ 76,744,337

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20. INCOME TAX

a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

Current income tax expense (benefit) Current tax expense recognized in the current year Income tax adjustments on prior years Deferred tax The origination and reversal of temporary differences Investment tax credits Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2013 $ 535,033 (7,000) 528,033 (137,272) 153,267 15,995 $ 544,028	2012 $ 140,567 (218,250) (77,683) (59,874) 191,728 131,854 $ 54,171

A reconciliation of income before income tax and income tax expense recognized in profit or loss was as follows:

Income before tax Income tax expense at the statutory rate (17%) Tax effect of adjusting items: Nondeductible (deductible) items in determining taxable income Tax-exempt income Additional income tax on unappropriated earnings The origination and reversal of temporary differences Income tax adjustments on prior years Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 9,298,876 $ 1,580,809 (950,139) - 57,630 (137,272) (7,000) $ 544,028	2012 $ 7,456,594 $ 1,267,621 (981,642) (75,187) 121,503 (59,874) (218,250) $ 54,171

b. Income tax expense recognized in other comprehensive income

Deferred income tax expense (benefit) Translation of foreign operations Related to unrealized gain/loss on available-for-sale financial assets Related to actuarial gain/loss from defined benefit plans	For the Year Ended	For the Year Ended	December 31
		2013 $ 374,773 - 3,068 $ 377,841	2012 $ (181,650) (4,520) (19,838) $ (206,008)

45 -

c. Deferred income tax balance

The analysis of deferred income tax assets was as follows:

			December 31,	December 31,		December 31,	December 31,	December 31,
				2013		2012			January 1, 2012
Investment tax credits			$	-		$ 153,267			$	344,995
Temporary differences
Accumulated equity in the net loss of
foreign investees				374,803		131,734				-
Impairment loss on assets				298,231		298,231				219,802
Unrealized loss and expense				107,152			54,461			71,628
Unrealized sales profit				51,236			62,339			39,678
Unrealized loss on inventories				37,064			27,657			49,779
Accrued pension cost				24,590			26,157			28,715
Accrued warranty expense				22,649			29,871			30,829
Available-for-sale financial assets				4,520			4,520			-
Accumulated compensated absences				1,596			1,914			-
Others				-			-			3,623
			$	921,841		$ 790,151			$	789,049
						Recognized in
							Other
	Opening		Recognized in			Comprehensive				Closing
	Balance			Profit (Loss)		Income (Loss)			Balance
2013
Investment tax credits	$	153,267		$ (153,267)		$		-	$	-
Temporary differences
Accumulated equity in the
net loss of foreign
investees		131,734		243,069				-		374,803
Impairment loss on assets		298,231			-			-		298,231
Unrealized loss and expense		54,461		52,691				-		107,152
Unrealized sales profit		62,339		(11,103)				-		51,236
Unrealized loss on
inventories		27,657		9,407				-		37,064
Accrued pension cost		26,157		1,501			(3,068)			24,590
Accrued warranty expense		29,871		(7,222)				-		22,649
Available-for-sale assets		4,520			-			-		4,520
Accumulated compensated
absences		1,914		(319)				-		1,596
	$	790,151		$ 134,757		$	(3,068)		$	921,841
										(Continued)

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2012 Investment tax credits Temporary differences Accumulated equity in the net loss of foreign investees Impairment loss on assets Unrealized loss and expense Unrealized sales profit Unrealized loss on inventories Accrued pension cost Accrued warranty expense Available-for-sale assets Accumulated compensated absences Others	Opening Balance Recognized in Profit (Loss) Recognized in Other Comprehensive Income (Loss) $ 344,995 $ (191,728) $ - - 33,391 98,343 219,802 78,429 - 71,628 (17,167) - 39,678 22,661 - 49,779 (22,122) - 28,715 (22,396) 19,838 30,829 (958) - - - 4,520 - 1,914 - 3,623 (3,623) - $ 789,049 $ (121,599) $ 122,701	Closing Balance $ 153,267 131,734 298,231 54,461 62,339 27,657 26,157 29,871 4,520 1,914 - $ 790,151 (Concluded)

The analysis of deferred income tax liabilities was as follows:

			December 31,	December 31,	December 31,	December 31,
			2013			2012	January 1, 2012
Temporary differences
Accumulated equity in the net	gain	of
investees			$ 1,212,198		$	693,593	$	776,900
Land value increment tax				230,216		230,216		230,216
Unrealized exchange gains net				45,420		38,500		28,245
Unrealized amortization of goodwill				35,737		35,737		35,737
			$ 1,523,571		$	998,046	$	1,071,098
					Recognized in
						Other
					Comprehensive
		Opening	Recognized in			Loss		Closing
		Balance	(Profit) Loss			(Income)		Balance
2013
Temporary differences
Accumulated equity in the
net gain of investees	$	693,593	$	143,832	$	374,773	$	1,212,198
Land value increment tax		230,216		-		-		230,216
								(Continued)

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Unrealized exchange gains net Unrealized amortization of goodwill 2012 Temporary differences Accumulated equity in the net gain of investees Land value increment tax Unrealized exchange gains net Unrealized amortization of goodwill	Opening Balance Recognized in (Profit) Loss Recognized in Other Comprehensive Loss (Income) $ 38,500 $ 6,920 $ - 35,737 - - $ 998,046 $ 150,752 $ 374,773 $ 776,900 $ - $ (83,307) 230,216 - - 28,245 10,255 - 35,737 - - $ 1,071,098 $ 10,255 $ (83,307)	Closing Balance $ 45,420 35,737 $ 1,523,571 $ 693,593 230,216 38,500 35,737 $ 998,046 (Concluded)

d. As of December 31, 2013, December 31, 2012 and January 1, 2012, the aggregate deductible temporary differences for which no deferred income tax assets have been recognized amounted to NT$294,292 thousand, NT$301,920 thousand and NT$377,871 thousand, respectively.
e. Integrated income tax

Unappropriated earnings Unappropriated earnings generated before January 1, 1998 Unappropriated earnings generated on and after January 1, 1998 Imputation credits accounts	December 31, 2013 $ 2,215 12,169,867 $ 12,172,082 $ 568,173	December 31, 2012 January 1, 2012 $ 2,215 $ 2,215 13,652,397 12,390,715 $ 13,654,612 $ 12,392,930 $ 485,212 $ 514,845

The estimated and actual creditable ratio for distribution of earnings of 2013 and 2012 were 3.71% and 3.46%, respectively.

Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation credits allocated to ROC resident shareholders of the Company was calculated based on the creditable ratio as of the date of dividend distribution. The actual imputation credits allocated to shareholders of the Company was based on the balance of the Imputation Credit Accounts (ICA) as of the date of dividend distribution. Therefore, the expected creditable ratio for the 2013 earnings may differ from the actual creditable ratio to be used in allocating imputation credits to the shareholders.

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According to legal interpretation No. 10204562810 announced by the Taxation Administration of the Ministry of Finance, when calculating imputation credits in the year of first-time adoption of IFRSs, the cumulative retained earnings include the net increase or net decrease in retained earnings arising from first-time adoption of IFRSs.

f. Income tax assessments

Income tax returns through 2011 have been examined by the tax authorities. The Company disagreed with the tax authorities’ assessment of its 2009 to 2011 tax returns and had applied for a reexamination. Nevertheless, the Company made a provision for the income tax assessed.

21. SHARE-BASED PAYMENT ARRANGEMENTS

The Company elected to take the optional exemption from applying related guidance retrospectively for share-based payment transactions granted and vested before January 1, 2012. The plans are described as follows:

Qualified employees of the Company and its subsidiaries were granted 30,000 options in December 2007. Each option entitles the holder to subscribe for one thousand common shares of the Company. The options granted are valid for 6 years and exercisable at certain percentages after the second, third and fourth anniversary from the grant date. The options were granted at an exercise price equal to the closing price of the Company’s common shares listed on the grant date. For any subsequent changes in the Company’s capital surplus, the exercise price is adjusted accordingly.

Information on employee share options was as follows:

Employee Share Option Plan Balance at January 1 Options exercised Options expired Balance at December 31 Weighted-average fair value of options granted (NT$)	For the Year Ended December 31	For the Year Ended December 31
	2013 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) $ 17,724 $35.5 (16,468) 33.7-35.5 (1,256) 33.7-35.5 $ - $ 16.964	2012
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 19,819 $38.0 (766) 35.5-38.0 (1,329) 35.5-38.0 $ 17,724 35.5 $ 16.964

Information about outstanding options at the end of the reporting period was as follows:

December 31, 2013 Range of Exercise Price (NT$) Weighted-aver age Remaining Contractual Life (Years) $33.7 0	December 31, 2012 Range of Exercise Price (NT$) Weighted-aver age Remaining Contractual Life (Years) $35.5 1	January 1, 2012
		Range of Exercise Price (NT$) Weighted-aver age Remaining Contractual Life (Years) $38.0 2

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Options granted in December 2007 were priced using the (Binomial option pricing model) and the inputs to the model were as follows:

	December 31,
	2007
Expected volatility	40.07%
Expected life (years)	6 years
Expected dividend yield	7.07%
Risk-free interest rate	2.5101%

22. EARNINGS PER SHARE

Basic earnings per share Diluted earnings per share	Unit: NT$ Per Share For the Year Ended December 31	Unit: NT$ Per Share For the Year Ended December 31	Unit: NT$ Per Share For the Year Ended December 31
		2013 $ 3.83 $ 3.79	2012 $ 3.25 $ 3.20

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

2013
Basic EPS
The net income of common shareholders

Effect of dilutive potential common stock
Bonus to employees
Common stock-based compensation

Diluted EPS
The net income of common shareholders plus
the effect of potential dilutive common stock
2012
Basic EPS
The net income of common shareholders

Effect of dilutive potential common stock
Bonus to employees
Common stock-based compensation

Diluted EPS
The net income of common shareholders plus
the effect of potential dilutive common stock

Amounts
(Numerator)
Shares
(Denominator)
(Thousands)
Earnings
Per Share
(NT$)
$ 8,754,848
2,286,684
$ 3.83
-
24,733

-

-
$ 8,754,848
2,311,417
$ 3.79
$ 7,402,423
2,276,009
$ 3.25
-
34,342

-

-
$ 7,402,423
2,310,351
$ 3.20

The average number of shares outstanding for EPS calculation was adjusted retroactively for the issuance of stock dividends. Thus, in 2012, basic and diluted EPS decreased from NT$3.27 to NT$3.25 and from NT$3.22 to NT$3.20, respectively.

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If the Company was able to settle the bonuses paid to employees by cash or shares, the Company presumed that the entire amount of the bonus would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

At the end of 2012, the stock-based compensation exercise price was greater than the average price of the shares, the number of common shares outstanding decreased and earnings per share increased, and these developments had an anti-dilutive effect; thus, these shares were not included in the calculation of diluted EPS.

23. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

In March 2012, the Company disposed of 2.21% of its interest in Silitech Technology Corp., reducing its continuing interest from 34.90% to 32.69%.

Between March and December 2013, the Company acquired an additional 56.8% of its interest in Lite-On IT Corp., increasing its continuing interest from 42.33% to 99.13%.

The above transactions were accounted for as equity transactions; for the explanation of partial disposal of Silitech Technology Corp. and acquisition of Lite-On IT Corp., please refer to Note 28 in the consolidated financial statements for the year ended December 31, 2013.

24. CAPITAL MANAGEMENT

The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximizing the return to shareholders through the optimization of the debt and equity balance.

The Company’s capital management system aims to ensure that the necessary financial resources and operating plan are enough to meet the next 12 months’ requirements for working capital, capital expenditures, research and development expenses, debt repayment, dividend expenses and other need.

25. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments
1) Fair value of financial instruments not carried at fair value

The fair value of financial instruments not carried at fair value was finance lease payables. The Company’s management considers the carrying amounts of finance lease payables recognized in the financial statements approximate their fair values.

2) Fair value measurements recognized in the balance sheets

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

a) Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities;
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b) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

December 31, 2013

Available-for-sale financial assets Securities listed in ROC - equity securities Unlisted securities - other countries - equity securities Derivative financial liabilities for hedging Cash flow hedges - interest swap contracts December 31, 2012 Available-for-sale financial assets Securities listed in ROC - equity securities Securities listed in other countries - equity securities Unlisted securities - other countries - equity securities Emerging market stocks Derivative financial liabilities for hedging Cash flow hedges - interest swap contracts	Level 1 $ 698,162 - $ 698,162 $ - Level 1 $ 583,654 983 - - $ 584,637 $ -	Level 2 $ - - $ - $ 46,969 Level 2 $ - - - 56,434 $ 56,434 $ 101,563	Level 3 $ - 19,009 $ 19,009 $ - Level 3 $ - - 19,009 - $ 19,009 $ -	Total $ 698,162 19,009 $ 717,171 $ 46,969 Total $ 583,654 983 19,009 56,434 $ 660,080 $ 101,563

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January 1, 2012

Available-for-sale financial assets Securities listed in ROC - equity securities Securities listed in other countries - equity securities Unlisted securities - ROC - equity securities Unlisted securities - other countries - equity securities Emerging market stocks Derivative financial liabilities for hedging Cash flow hedges - interest swap contracts	Level 1 $ 1,708,728 11,512 - - - $ 1,720,240 $ -	Level 2 $ - - - - 56,434 $ 56,434 $ 165,225	Level 3 $ - - 460,187 19,009 - $ 479,196 $ -	Total $ 1,708,728 11,512 460,187 19,009 56,434 $ 2,255,870 $ 165,225

There were no transfers between Levels 1 and 2 in the current and prior periods.

3) Reconciliation of Level 3 fair value measurements of financial assets

For the year ended December 31, 2013: None. For the year ended December 31, 2012

Balance at January 1, 2012 Impairment loss In profit or loss Balance at December 31, 2013	Available-for- sale Financial Assets
	Unlisted Shares $ 479,196 (460,187) $ 19,009

The total gains or losses for the period included a loss of NT$0 thousand and NT$460,187 thousand relating to assets held years ended December 31, 2013 and 2012. Such fair value gains or losses were included in impairment losses.

All gains and losses included in other comprehensive income relate to unlisted shares held at the end of the reporting period and were reported as changes in unrealized gain or loss on available-for-sale financial assets.

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4) Valuation techniques and assumptions applied for the purpose of measuring fair value

The fair values of financial assets and financial liabilities were determined as follows:

a) The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market prices;
b) The fair values of derivative instruments were calculated using quoted prices.
c) The fair values of other financial assets and financial liabilities (excluding those described above) were determined in accordance with generally accepted pricing models based on discounted cash flow analysis.
b. Categories of financial instruments

	December 31,	December 31,
	2013	2012	January 1, 2012
Financial assets
Loans and receivables (1)	$ 30,909,188	$ 29,015,546	$ 29,801,058
Available-for-sale financial assets	717,171	660,080	2,255,870
Financial liabilities
Derivative financial liabilities	46,969	101,563	165,225
Measured at amortized cost
Short-term borrowings	5,484,120	2,787,840	1,050,000
Long-term loans (included current portion
of long-term debts)	18,475,000	15,700,000	15,700,000
Payables (2)	27,902,299	21,232,179	25,698,458

1) The balances included cash and cash equivalents, notes receivable, trade receivables, trade receivables - inter, other receivables and other receivables - inter.
2) The balances included notes payable, trade payables, trade payables - inter, other payables and other payables - inter.
c. Financial risk management objectives and policies

The Company’s major financial instruments included equity investments, trade receivable, trade payables and borrowings. The Company’s Corporate Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Company sought to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives was governed by the Company’s policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits was reviewed by the internal auditors on a continuous basis. The Company did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

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1) Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see a) below) and interest rates (see b) below).

a) Foreign currency risk

The Company had foreign currency sales and purchases, which exposed the Company to foreign currency risk. The Company is an international electronics manufacturing entity with stable foreign currency income that covers foreign currency expense; exchange rate exposures were managed through foreign currency loans.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period (see Note 28).

Sensitivity analysis

The Company was mainly exposed to the currency USD.

The following table details the Company’s sensitivity to a 5% increase and decrease in New Taiwan dollars (the functional currency) against the U.S. dollars. The sensitivity analysis included only outstanding foreign currency denominated monetary items. A positive number below indicates an increase in pre-tax profit and other equity associated with New Taiwan dollars strengthen 5% against the U.S. dollars. For a 5% weakening of New Taiwan dollars against the U.S. dollars, there would be an equal and opposite impact on pre-tax profit and other equity and the balances below would be negative.

Profit or loss	Currency USD Impact	Currency USD Impact	Currency USD Impact
	For the Year Ended December 31
		2013 $ (4,982)	2012 $ (34,443)

b) Interest rate risk

The Company was exposed to interest rate risk because entities in the Company borrowed funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix of fixed and floating rate borrowings, and using interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied.

The carrying amount of the Company’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows.

	December 31,	December 31,	December 31,	December 31,
		2013		2012	January 1, 2012
Fair value interest rate risk
Financial assets (i)	$	3,430,260	$	8,100,735	$	7,008,775
Financial liabilities (ii)		5,484,120		2,788,293		826
Cash flow interest rate risk
Financial assets (iii)		3,493,573		2,222,756		2,740,724
Financial liabilities (iv)		18,475,000		15,700,000		16,750,000

i. The balances included time deposit.

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ii. The balances included financial liabilities exposed to fair value risk from interest rate fluctuation.
iii. The balances included demand deposits.
iv. The balances included financial liabilities exposed to cash flow risk from interest rate fluctuation.

The Company aims to keep borrowings at variable rates. In order to achieve this result, the Company entered into interest rate swaps to hedge its exposures to changes in fair values of the borrowings. The critical terms of these interest rate swaps are similar to those of hedged borrowings. These interest rate swaps were designated as effective hedging instruments and hedge accounting is used.

The Company was also exposed to cash flow interest rate risk in relation to variable-rate bank borrowings and pay-fixed/receive-floating interest rate swaps. It is the Company’s policy to keep its borrowings at floating rate of interests so as to minimize the fair value interest rate risk. The Company’s cash flow interest rate risk was mainly concentrated in the fluctuation of the average rate for 90-day notes in Taiwan’s secondary market arising from the Company’s New Taiwan dollars denominated borrowings.

Sensitivity analysis

The sensitivity analyses below were determined based on the Company’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year.

If interest rates had been 25 basis points higher and all other variables were held constant, the Company’s pre-tax profit years ended December 31, 2013 and 2012 would decrease by NT$37,454 thousand and NT$33,693 thousand.

c) Other price risk

The Company was exposed to equity price risk through its investments in listed equity securities. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments.

Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 7% higher, the pre-tax other comprehensive income years ended December 31, 2013 and 2012 would increase by NT$48,871 thousand and NT$40,925 thousand as a result of the changes in fair value of available-for-sale shares.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company.

The Company is exposed to credit risk from trade receivables, deposits and other financial instruments. Credit risks on business-related exposures are managed separately from that on financial-related exposures.

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a) Business related credit risk

To maintain the quality of receivables, the Company has established operating procedures to manage credit risk.

For individual customers, risk factors considered include the customer’s financial position, credit rating agency rating, the Company’s internal credit rating, and transaction history as well as current economic conditions that may affect the customer’s ability to pay. The Company also has the right to use some credit protection enhancement tools, such as requiring advance payments, to reduce the credit risks involving certain customers.

b) Financial credit risk

Bank deposits and other financial instruments are credit risk sources required by the Parent Company’s Department of Finance Department to be measured and monitored. However, since the Company’s counter-parties are all reputable financial institutions and government agencies, there is no significant financial credit risk.

3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’s operations.

The objective of liquidity risk management, the Department is required to maintain operating cash and cash equivalents, in order to ensure that the combined company has sufficient financial flexibility.

a) Liquidity and interest risk rate tables

The table below summarizes the maturity profile of the Company’s non-derivative financial liabilities based on contractual undiscounted payments.

December 31, 2013

Weighted Average Effective Interest Rate (%) On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing - $ 27,902,299 Finance lease liabilities - - Fixed interest rate liabilities 0.72-0.76 5,484,120 Variable interest rate liabilities 1.448-1.663 6,350,000 $ 39,736,419	1-3 Years $ 16,165 - - 8,285,000 $ 8,301,165	3 Years to 5 Years $ - - - 3,840,000 $ 3,840,000	5+ Years $ - - - -
			$ -

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December 31, 2012

Weighted Average Effective Interest Rate (%) On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing - $ 21,232,179 Finance lease liabilities 15.60 453 Fixed interest rate liabilities 0.76-0.79 2,787,840 Variable interest rate liabilities 1.518-1.694 3,125,000 $ 27,145,472 January 1, 2012 Weighted Average Effective Interest Rate (%) On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing - $ 25,698,457 Finance lease liabilities 15.60 504 Fixed interest rate liabilities - - Variable interest rate liabilities 1.480-1.71 1,050,000 $ 26,748,961	1-3 Years $ 16,531 - - 12,075,000 $ 12,091,531 1-3 Years $ 18,101 322 - 2,075,000 $ 2,093,423	3 Years to 5 Years $ - - - 500,000 $ 500,000 3 Years to 5 Years $ - - - 1,125,000 $ 1,125,000	5+ Years $ - - - -
			$ -
			5+ Years $ - - - 12,500,000
			$ 12,500,000

26. TRANSACTIONS WITH RELATED PARTIES

Significant transactions with related parties are summarized below.

a. Sales of goods

Related Parties Categories Subsidiaries Associates Other related parties	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 6,357,298 24 468 $ 6,357,790	2012 $ 8,375,915 24 465 $ 8,376,404

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b. Purchases of goods

For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2013 2012 $ 72,364,906 $ 66,271,267 - 11,457 $ 72,364,906 $ 66,282,724 December 31, 2012 January 1, 2012 $ 3,241,115 $ 5,121,231 $ 243,248 $ 784,690 66,020 68,874 236 - $ 309,504 $ 853,564 December 31, 2012 January 1, 2012 $ 15,591,414 $ 14,477,695 579 82,369 - - $ 15,591,993 $ 14,560,064 $ 445,046 $ 663,986 32 - 4,789 - $ 449,867 $ 663,986 Purchase Price
For the Year Ended December 31
	2013 $ -	2012 $ 1,594

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f. Disposal of property, plant and equipment

For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
2013		2012
		Proceeds Gains (Losses) $ 315,253 $ 303,553 the Year Ended December 31
	$	2013 220,022 84,652 304,674	2012 $ 398,356 86,007 $ 484,363
	$

g. Operating expense

The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, price and terms were determined in accordance with mutual agreements.

The Company deferred the disposal gain/loss derived from sales of property, plant and equipment to related parties using equity method, and then recognized such gain/loss over the depreciable lives of the disposed assets.

h. Compensation of management personnel

Related Parties Categories Short-term employee benefits Termination benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2013 $ 400,799 54,429 $ 455,228	2012 $ 391,508 15,889 $ 407,397

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

27. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In May 2010, INPRO II Licensing Sarl (INPRO) filed a lawsuit with the U.S. District Court for the Northern District of California and charged the Company with breach of contract. INPRO alleged that the Company incurred a debt on patent rights obtained from Hitachi Limited. INPRO also claimed it had assumed Hitachi’s rights to payments for patent use. But because of the court’s lack of jurisdiction, INPRO dismissed the case later. On September 3, 2010, the Company filed a lawsuit with the Intellectual Property Court (“IP Court”) in Taiwan against INPRO, alleging that the Company had no patent obligations. On September 8, 2010, INPRO filed a lawsuit with the Superior Court of California (SCC) in the County of San Francisco. In December 2010, the SCC ruled that the U.S. proceedings in the U.S. should be stopped because the same facts had been filed with the IP Court in Taiwan. In July 2012, INPRO file a counterclaim with the IP Court in Taiwan and demanded a royalty payment of US$5.4 million. In June 2013, on the basis of its presentence investigation, the IP Court made a final judgment in favor of INPRO and ruled that the Company should pay royalties of US$5.4 million plus interest. In July 2013, the Company filed an appeal, claiming that the Company had no patent obligations under the former patent licensing contract. The Company accrued a reasonable amount in case of a loss on this lawsuit.

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The Company will continue to recognize the losses based upon reasonable estimation of the lawsuit quarterly until the settlement of this lawsuit.

28. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The significant financial assets and liabilities denominated in foreign currencies were as follows:

Financial assets Monetary items USD HKD JPY CZK EUR Non-monetary items EUR Investments accounted for by the equity method HKD JPY USD EUR Financial liabilities Monetary items USD JPY HKD CZK EUR Nonmonetary items USD	December 31, 2013 Foreign Currencies Exchange Rate $ 1,018,504 29.8050 14,961 3.8436 9,921 0.2842 6,631 1.5022 1,042 41.0623 - - 2,408,525 3.8436 1,141,347 0.2842 1,079,745 29.8050 147,305 41.0623 1,021,847 29.8050 9,769 0.2842 5,061 3.8436 4,647 1.5022 988 41.0623 - -	December 31, 2012 Foreign Currencies Exchange Rate $ 717,972 29.0400 1,422 3.7464 5,990 0.3364 35,557 1.5349 352 38.478 717 38.478 2,850,596 3.7464 994,115 0.3364 841,835 29.0400 142,470 38.478 741,693 29.0400 1,650 0.3364 4,219 3.7464 39,749 1.5349 497 38.478 3,497 29.0400	January 1, 2012
			Foreign Currencies Exchange Rate $ 764,240 30.2680 43,104 3.8956 43,929 0.3903 54,254 1.5218 370 39.1668 294 39.1668 2,802,429 3.8956 950,745 0.3903 710,981 30.2680 150,487 39.1668 772,733 30.2680 23,380 0.3903 50,715 3.8956 51,313 1.5218 265 39.1668 5,459 30.2680

29. SEPARATELY DISCLOSED ITEMS

a. Information on significant transactions and information on investees:
1) Lending funds to others: Note 4 to the financial statements
2) Providing endorsements or guarantees for others: Note 4 to the financial statements
3) Holding of securities at the end of the period: Note 4 to the financial statements
4) Aggregate purchases or sales of the same securities reaching NT$300 million or 20 percent of paid-in capital or more: Note 4 to the financial statements
5) Acquisition of real estate reaching NT$300 million or 20 percent of paid-in capital or more: None
6) Disposal of real estate reaching NT$300 million or 20 percent of paid-in capital or more: Note 4 to the financial statements
7) Purchases or sales of goods from or to related parties reaching NT$100 million or 20 percent of paid-in capital or more: Note 4 to the financial statements
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8) Trade receivables from related parties reaching NT$100 million or 20 percent of paid-in capital or more: Note 4 to the financial statements
9) Trading in derivative instruments: Note 10 to the financial statements
10) Information on investees: Note 4 to the financial statements
b. Information on investments in mainland China:
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area. Note 4 to the financial statements
2) Significant direct or indirect transactions with the investee, prices, payment terms and unrealized gain or loss: Note 4 to the financial statements

30. FIRST-TIME ADOPTION OF IFRSS

The Company’s date of transition to the Regulations was January 1, 2012. The impact of the transition to the Regulations on the Company’s balance sheets and statements of comprehensive income is stated as follows:

a. Exemptions

Except for optional exemptions and mandatory exceptions, the Accounting Standards for Use in the Preparation of Parent Company Only Financial Statements have been applied in the Company’s opening balance sheet at the date of transition, January 1, 2012. The major optional exemptions the Company elected are summarized as follows:

Investments in subsidiaries, associates and joint ventures

The Company elected to measure the investments in subsidiaries, associates and joint ventures acquired before the date of transition, at the same carrying amount as recognized under ROC GAAP as of December 31, 2011.

Share-based payment

The Company elected to take the optional exemption from applying related guidance retrospectively for the share-based payment transactions granted and vested before the transition date.

Deemed cost

All other property, plant and equipment, investment properties and intangible assets applied IFRSs retrospectively at the date of the transition.

Employee benefits

The Company elected to recognize all cumulative actuarial gains and losses in retained earnings as of the date of transition. In addition, the Company elected to apply the exemption disclosure requirement provided by IFRS 1, in which the experience adjustments are determined for each accounting period prospectively from the transition date.

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b. Reconciliation of balance sheet as of January 1, 2012

Item Deferred tax assets - current Available-for-sale financial assets Financial assets carried at cost Investments accounted for using equity method Net property, plant and equipment Intangible assets, net Deferred expenses, net Deferred income tax assets Prepayment for pension - noncurrent Others Total Other payables Reserve for land value increment tax Deferred tax liabilities Deferred credits - profits of associates Others Total liabilities Capital surplus Unappropriated earnings Net loss not recognized as pension cost Unrealized loss on available-for-sale financial assets Treasury stock Others Total shareholders’ equity Total	ROC GAAP Effect of Transition to Accounting Standards Used in Preparation of the Financial Statements $ 306,618 $ (306,618) 1,720,240 535,630 535,630 (535,630) 70,169,806 (440,025) 5,382,464 98,807 610,809 76,368 175,175 (175,175) - 789,049 19,834 59,400 34,564,781 - $ 113,485,357 $ 101,806 $ 3,736,148 $ 79,669 230,216 (230,216) 358,451 712,647 233,398 (233,398) 39,999,922 - 44,558,135 328,702 27,759,251 (907,070) 11,729,938 662,992 (17,182) 17,182 (372,591) 230,587 (1,857,643) (230,587) 31,685,449 - 68,927,222 (226,896) $ 113,485,357 $ 101,806	IFRSs Note $ - 1) 2,255,870 2) - 2) 69,729,781 8) 5,481,271 3) 687,177 3) - 3) 789,049 1) and 7) 79,234 5) 34,564,781 $ 113,587,163 $ 3,815,817 10) - 4) 1,071,098 4) and 7) - 8) 39,999,922 44,886,837 26,852,181 8) and 9) 12,392,930 5), 8), 9), 10) and 12) - 12) (142,004) 6) (2,088,230) 6) 31,685,449 68,700,326 $ 113,587,163

c. Reconciliation of balance sheet as of December 31, 2012

Item Deferred tax assets - current Available-for-sale financial assets Financial assets carried at cost Investments accounted for using equity method Net property, plant and equipment Intangible assets Deferred expenses, net Deferred income tax assets Prepayment for pension - noncurrent Other noncurrent assets Others Total	ROC GAAP $ 295,529 584,637 75,443 73,059,529 5,192,407 565,332 149,459 - 29,057 - 31,585,321 $ 111,536,714	Effect of Transition to Accounting Standards Used in Preparation of the Financial Statements $ (295,529) 75,443 (75,443) (520,556) 69,990 75,469 (149,459) 790,151 (29,057) 4,000 - $ (54,991)	IFRSs Note $ - 1) 660,080 2) - 2) 72,538,973 8) 5,262,397 3) 640,801 3) - 3) 790,151 1) and 7) - 5) 4,000 3) 31,585,321 $ 111,481,723 (Continued)

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Item Other payables Reserve for land value increment tax Deferred tax liabilities Deferred credits - profits of associates Accrued pension cost Others Total liabilities Capital surplus Unappropriated earnings Foreign currency translation reserve Unrealized loss on available-for-sale financial assets Net loss not recognized as pension cost Treasury stock Others Total shareholders’ equity Total	ROC GAAP $ 3,633,722 230,216 273,208 366,048 - 37,253,494 41,756,688 27,504,826 13,253,899 126,009 (677,435) (29,536) (1,104,073) 30,706,336 69,780,026 $ 111,536,714	Effect of Transition to Accounting Standards Used in Preparation of the Financial Statements $ 98,703 (230,216) 724,838 (366,048) 37,458 - 264,735 (752,838) 400,713 2,863 230,587 29,536 (230,587) - (319,726) $ (54,991)	IFRSs Note $ 3,732,425 10) - 4) 998,046 4) and 7) - 8) 37,458 5) 37,253,494 42,021,423 26,751,988 8), 9) and 11) 13,654,612 5), 8), 9), 10), 11) and 12) 128,872 8) (446,848) 6) - 12) (1,334,660) 6) 30,706,336 69,460,300 $ 111,481,723

d. Reconciliation of statement of comprehensive income for the year ended December 31, 2012

Item Operating revenue Operating cost Operating profits Unrealized gross profit on sales to associates Gross profit Operating expenses Income from operations Non-operating income and expenses Share of profits of subsidiaries and associates Profits on disposal of investments Others Total Income before income tax Income tax expense Profit after income tax expense Other comprehensive Foreign currency translation reserve Unrealized valuation loss on available-for-sale financial assets Cash flow hedges Share of other comprehensive income of subsidiaries and associates Actuarial loss from defined benefit plans Income tax relating to components of other comprehensive income Total comprehensive income for the year	ROC GAAP Effect of Transition to Accounting Standards Used in Preparation of the Financial Statements $ 76,744,337 $ - (69,655,336) 281 7,089,001 281 89,525 - 7,178,526 281 (5,426,063) (18,019) 1,752,463 (17,738) 5,551,497 17,492 442,276 (132,191) (157,205) - 5,836,568 (114,699) 7,589,031 (132,437) (54,171) - $ 7,534,860 $ (132,437)	IFRSs Note $ 76,744,337 (69,655,055) 10) 7,089,282 89,525 7,178,807 (5,444,082) 5) and 10) 1,734,725 5,568,989 8) 310,085 9) and 11) (157,205) 5,721,869 7,456,594 (54,171) 7,402,423 (1,068,528) (28,704) 63,662 (888,040) (127,212) 206,008 $ 5,559,609

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e. Explanations of significant reconciling items in the transition to IFRSs

Material differences between the accounting policies under ROC GAAP and Accounting Standards Used in the Preparation of Parent Company Only Financial Statements were as follows:

1) Classifications of deferred income tax asset/liability and valuation allowance

Under ROC GAAP, valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. In accordance with the Accounting Standards Used in Preparation of the Company Only Financial Statements, deferred tax assets are only recognized to the extent that it is probable that there will be sufficient taxable profits and the valuation allowance account is no longer used.

In addition, under ROC GAAP, a deferred tax asset and liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred income tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as either current or noncurrent based on the expected length of time before it is realized or settled. Under Accounting Standards Used in Preparation of the Financial Statements, a deferred tax asset and liability is classified as noncurrent asset or liability.

As of January 1, 2012 and December 31, 2012, the amounts reclassified from deferred income tax assets to noncurrent assets were NT$306,618 thousand and NT$295,529 thousand, respectively.

2) Financial assets carried at cost

Under Regulations Governing the Preparation of Financial Reports by Securities Issuers before its amendment, the non-publicly traded stocks or stocks that are not traded in the Emerging Stock Market and pertaining to an investment in which the investor has no significant influence on the investee should be measured as financial assets carried at cost.

Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, the financial instruments designated as at fair value through other comprehensive income and financial assets carried at cost should be classified as at fair value through profit or loss.

As of January 1, 2012 and December 31, 2012, the Company’s financial assets carried at cost reclassified to available for sale financial assets amounted to NT$535,630 thousand and NT$75,443 thousand.

3) Classification of deferred expenses

Under ROC GAAP, deferred expenses are recorded under other assets. Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, the Company reclassified deferred expenses to other current assets, properties, intangible assets, and other noncurrent assets in accordance with their nature.

As of January 1, 2012, the Company had reclassified deferred expenses of NT$98,807 thousand and NT$76,368 thousand to properties and intangible assets, respectively.

As of December 31, 2012, the Company had reclassified deferred expenses of NT$69,990 thousand, NT$75,469 thousand and NT$4,000 thousand to properties, intangible assets and other noncurrent assets, respectively.

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4) Reserve for land value increment tax

Based on the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, land revaluation surplus is classified as reserve for land value increment tax and recorded under other liabilities. Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, the Company reclassified land value increment tax to deferred income tax liabilities. As of both January 1, 2012 and December 31, 2012, the amount reclassified from land value increment tax to deferred income tax liabilities were NT$230,216 thousand.

5) Employee benefits

The Company had previously applied actuarial valuation to its defined benefit obligations and recognized the related pension cost and retirement benefit obligation in conformity with ROC GAAP. Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, the Company should carry out actuarial valuation on defined benefit obligations in accordance with IAS No. 19 - “Employee Benefits.” The Company has opted to recognize actuarial gains and losses as other comprehensive income immediately in full in the period in which they occur. The subsequent reclassification to earnings is not permitted.

At the transition date, the Company performed the actuarial valuation under IAS No. 19 - “Employee Benefits” and recognized the valuation difference directly as retained earnings under IFRS 1. As of January 1, 2012, the IFRS-based adjustments resulted in increases in both prepayment for pension - noncurrent and unappropriated earnings by NT$59,400 thousand.

At the transition date, the Company performed the actuarial valuation under IAS No. 19 - “Employee Benefits” and recognized the valuation difference directly as retained earnings under IFRS 1. As of December 31, 2012, the IFRS-based adjustments resulted in (a) increases in accrued pension liabilities by NT$37,458 thousand and (b) decreases in prepayment for pension - noncurrent and unappropriated earnings by NT$29,057 thousand and NT$66,515 thousand, respectively.

For the year ended 2012, IFRS adoption resulted in a decrease of NT$1,297 thousand (recorded as operating expenses) in salary expenses.

6) Treasury stock

Under ROC GAAP on the accounting for treasury stocks, effective January 1, 2002, the Company accounted for its shares held by its subsidiary as treasury stock when it recognized the investment income at the market price. The difference in carrying value and market value of this treasury stock was recorded as unrealized loss on available-for-sale financial assets. Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, treasury shares are recognized immediately at the time when treasury shares are acquired by subsidiaries.

As of both January 1, 2012 and December 31, 2012, the Company’s unrealized loss of NT$230,587 thousand on available-for-sale financial assets was reclassified to treasury stock.

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7) Offsetting between deferred tax assets/liabilities

Under ROC GAAP, deferred current tax assets - current should be offset against deferred tax liability - current under the same taxable entity. The same rule applies to deferred tax asset/liability - noncurrent. Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, an entity is eligible to offset tax assets against tax liabilities generated from the same taxable entity only (a) if the entity has a legally enforceable right to make this offset and (b) the deferred tax assets and liabilities relate to income taxes levied by the same tax authorities on either the same taxable entity or different taxable entities that intend either to settle current tax liabilities and assets on a net basis or to realize the assets and settle the liabilities simultaneously.

As of January 1, 2012 and December 31, 2012, the offset amounts of the Company’s deferred tax assets and reclassification of deferred tax liabilities were NT$482,431 thousand and NT$494,622 thousand, respectively.

8) Investments accounted for using the equity method

The Company has evaluated significant differences between current accounting policies and Accounting Standards Used in the Preparation of Parent Company Only Financial Statements for the Company’s subsidiaries and associates accounted for using the equity method. The significant difference is mainly due to the adjustment to employee benefits.

As of January 1, 2012, the differences mentioned above resulted in decreases in investments accounted for using the equity method, deferred credits, unappropriated earnings and capital surplus by NT$440,025 thousand, NT$233,398 thousand, NT$37,955 thousand and NT$168,672 thousand, respectively.

As of December 31, 2012, the differences mentioned above resulted in (a) increases in unappropriated earnings and foreign currency translation reserve by NT$90,523 thousand and NT$2,863 thousand and (b) decreases in investments accounted for using the equity method, deferred credits and capital surplus by NT$520,556 thousand, NT$366,048 thousand and NT$247,894 thousand, respectively.

The net profit share of subsidiaries and associates recognized by equity method was adjusted for an increase of NT$17,492 thousand for the year ended December 31, 2012.

9) Accounting treatment of the Company for increases in carrying values of equity-method investments due to not subscribing proportionally to the additional shares issued by the investees and relevant adjustment of capital surplus - long-term equity investment.

Under ROC GAAP, if an investee issues new shares and an investor does not buy new shares proportionately, the investor’s ownership percentage and its interest in net assets of the investment will change. The resulting difference should be used to adjust the capital surplus and long-term equity investment accounts.

Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, the changes in interest in net assets adjusted the capital surplus and investments for using the equity method. If the Company’s ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. In addition, in accordance with the “Q&A on the Adoption of IFRSs” issued by the Taiwan Stock Exchange, capital surplus not covered by the IFRSs, the ROC Company Law and the relevant legal interpretations of the Ministry of Economic Affairs, ROC should be adjusted accordingly at the date of transition to IFRSs.

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As of January 1, 2012, the foregoing adjustments resulted in a decrease of NT$738,398 thousand in the Company’s capital surplus - long term investments and an increase of NT$738,398 thousand in unappropriated earnings.

As of December 31, 2012, the foregoing adjustments resulted in a decrease of NT$651,137 thousand in the Company’s capital surplus - long term investments and an increase of NT$651,137 thousand in unappropriated earnings.

As of December 31, 2012, the gains on disposal of investments was adjusted due to not subscribing proportionally by NT$14,002 thousand.

10) Employee benefits - short-term accumulated compensated absences

Under ROC GAAP, there are no specific requirements for recognizing accumulated compensated absences at the end of reporting periods. Companies usually recognize the related costs when the employees actually go on leave. Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, the expected cost of short-term accumulated compensated absences should be recognized as the employees render services that increase their entitlement to these compensated absences.

As of January 1, 2012, the IFRS-based evaluation adjustment resulted in both increases of the other payables and decreases of unappropriated earnings by NT$79,669 thousand.

As of December 31, 2012, the IFRS-based evaluation adjustment resulted in both increases of the other payables and decreases of unappropriated earnings by NT$98,703 thousand.

For the year ended December 31, 2012, the salary expenses were adjusted for an increase of NT$19,035 thousand (resulting in a decrease of NT$281 thousand in cost of sales and an increase of NT$19,316 thousand in operating expenses).

11) Disposal of partial shares without losing significant influence on the investee

Under ROC GAAP, if the stock ownership percentage changes during the year, the investor company should recognize investment gains or losses in proportion to the actual stock ownership percentage on the disposition date.

Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, disposal of the shares of subsidiaries without losing significant control over the subsidiaries is deemed an equity transaction.

As of December 31, 2012, the IFRS-based adjustments resulted in an increase of NT$146,193 thousand in the Company’s capital surplus - difference between consideration and carry amounts adjusted arising from changes in percentage of ownership in subsidiaries, and a decrease of NT$146,193 thousand in the gain on disposal of investments.

12) Employee benefits - minimum pension liability to be recognized

Under ROC GAAP, the minimum pension liability should be should be recognized as such in the balance sheet; if the accrued pension liability is lower than this minimum, any shortfall should be recorded.

Under the Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, there is no requirement for recognizing minimum pension liability.

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As of January 1, 2012, net loss not recognized as pension cost was adjusted for an increase of NT$17,182 thousand and a decrease of NT$17,182 thousand in unappropriated earnings.

As of December 31, 2012, net loss not recognized as pension cost was adjusted for an increase of NT$29,536 thousand and a decrease of NT$29,536 thousand in unappropriated earnings.

f. Explanation of material adjustments to the statement of cash flows.

The Company partially disposed of its interest in subsidiary - Silitech Technology Corp. without loss of control in the year ended December 31, 2012. Under ROC GAAP, the resulting cash flows were classified as investing activities. Under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, the resulting cash flows of NT$288,198 were classified as financing activities.

According to ROC GAAP, interest paid and received and dividends received are classified as operating activities while dividends paid are classified as financing activities. Additional disclosure is required for interest expenses when reporting cash flow using indirect method. However, under Accounting Standards Used in the Preparation of Parent Company Only Financial Statements, cash flows from interest and dividends received and paid shall each be disclosed separately. Each shall be classified in a consistent manner from period to period as operating, investing or financing activities. Therefore, interests received, interests paid and dividends received by the Company of NT$81,386 thousand, NT$335,080 thousand and NT$21,459 thousand, respectively, for the year ended December 31, 2012 were presented separately at the date of transition to Accounting Standards Used in the Preparation of Parent Company Only Financial Statements.

Except for the above differences, there are no other significant differences between ROC GAAP and Accounting Standards Used in the Preparation of Parent Company Only Financial Statements in the statement of cash flows.

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AI assistant

LTC — Annual Report 2013

51997_rns_2013-12-06_80219d8a-3bdc-4d17-8eda-0ec86ae095cb.pdf

Lite-On Technology Corporation

INDEPENDENT AUDITORS’ REPORT

March 27, 2014

Notice to Readers

LITE-ON TECHNOLOGY CORPORATION

BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

LITE-ON TECHNOLOGY CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

LITE-ON TECHNOLOGY CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

LITE-ON TECHNOLOGY CORPORATION

LITE-ON TECHNOLOGY CORPORATION

STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

LITE-ON TECHNOLOGY CORPORATION

STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

LITE-ON TECHNOLOGY CORPORATION

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

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

The New IFRSs Included in the 2013 IFRSs Version Not Yet Endorsed by the FSC

Effective Date Announced by IASB (Note 1)

Recognition and measurement of financial assets

Hedge accounting

Effective date

6) Revision to IAS 19 “Employee Benefits”

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

e. Inventories

1) Investments in subsidiaries

g. Property, plant and equipment

h. Goodwill

i. Intangible assets

1) Intangible assets acquired separately

2) Derecognition of intangible assets

j. Impairment of tangible and intangible assets other than goodwill

k. Financial instruments

1) Financial assets

a) Measurement category

i. Available-for-sale financial assets

ii. Loans and receivables

c) Equity instruments

l. Hedge accounting

m. Provisions

n. Revenue recognition

1) Sale of goods

2) Rendering of services

o. Leasing

p. Retirement benefit costs

q. Taxation

1) Current tax

2) Deferred tax

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

d. Derivative instruments and other fair value of financial instruments

e. Impairment of property, plant and equipment

f. Write-down of inventory

6. CASH AND CASH EQUIVALENTS

7. TRADE RECEIVABLES, NET

8. INVENTORIES, NET

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS

10. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING

January 1, 2012

12. PROPERTY, PLANT AND EQUIPMENT, NET

13. INTANGIBLE ASSETS, NET

14. BORROWINGS

15. FINANCE LEASE PAYABLES

16. PROVISIONS

17. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

b. Defined benefit plans

18. EQUITY

2) Issued global depositary receipts

b. Capital surplus

d. Others equity items

19. REVENUE

20. INCOME TAX

LTC Annual Report 2013