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MERRY Audit Report / Information 2019

Oct 25, 2019

52085_rns_2019-10-25_1d2f0ca5-1f65-4962-ba48-f0ef59c1d674.pdf

Audit Report / Information

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MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT

ACCOUNTANTS DECEMBER 31, 2019 AND 2018

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

~1~

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of Merry Electronics Co., Ltd.

Opinion

We have audited the accompanying parent company only balance sheets of Merry Electronics Co., Ltd. (the “Company”) as at December 31, 2019 and 2018, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

Basis for opinion

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

Key audit matters

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

The key audit matters in relation to the parent company only financial statements for the year ended

~2~

December 31, 2019 are outlined as follows:

Cut-off on sales revenue from distribution warehouses

Description

Refer to Note 4(30) for accounting policy on revenue recognition.

The Company recognises revenue upon delivery or pick-up of goods (the transfer of control of ownership) by customers at the warehouses. Warehouse sales revenue constitutes 39% of total operating revenue for the year ended December 31, 2019. The Company’s revenue recognition is based on inventory movement records of warehouses based on the reports provided by warehouse custodians or bill of lading reports recorded on network platform. As the hubs are located in various locations and there are numerous custodians, the frequency and contents of statements provided by custodians vary, and customers are from different places, the process of revenue recognition contains numerous manual procedures, which would potentially result in inaccurate timing of revenue recognition and the discrepancy between physical inventory quantities in the hubs and quantities per accounting records. Thus, we consider the cut-off on sales revenue from distribution warehouses a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in relation to the above key audit matter:

  • A. Understood, evaluated and verified the Company’s procedures for warehouse sales revenue and internal control, including:

  • (a) Interviewing the staff from different departments of the sales revenue process from distribution warehouse, and confirming the consistency by comparing interview results with the process of warehouse sales revenue recognition obtained.

  • (b) Verifying the internal control of warehouse distribution (checked the terms of transaction / timing of ownership transfer and dates of supporting documents and verifying transactions recognised in the appropriate period by reconciling the quantities of supporting documents with invoices) to confirm the accuracy of the timing of revenue recognition.

  • B. Performed cut-off procedures on sales revenue from distribution warehouse recognised during a specific period before and after the period-end, including verifying delivery schedule of distribution warehouses and ensuring the movements of inventories contained in the statements and cost of goods sold had been recognised in the appropriate period.

  • C. Performed physical inventory count observation or confirmed the inventory quantities with hub custodian and agreed the results to accounting records.

~3~

Investments accounted for using equity method - valuation of inventories

Description

The Company receives orders from customers and the subsidiaries are tasked to manufacture the products. The subsidiaries (shown as investments accounted for using equity method) have a high risk of incurring inventory valuation loss and obsolescence due to fluctuations in market demand and rapidly evolving technology. Further, the measurement of net realisable value of inventories involves subjective judgement resulting in a high degree of estimation uncertainty. Thus, we consider the allowance for inventory valuation loss of the subsidiaries (shown as investments accounted for using equity method) a key audit matter .

How our audit addressed the matter

We performed the following audit procedures in relation to the above key audit matter:

  • A. Understood and assessed the reasonableness of the subsequent inventory valuation and the provision for loss on obsolete and slow-moving inventory.

  • B. Inspected the annual plan of the physical inventory count and observed the inventory count; evaluated the effectiveness of the procedures used to identify and control obsolete inventories.

  • C. Obtained inventory aging report and verified dates of movements with supporting documents, and ensured the accuracy of inventory aging classification and its consistency with the policies.

  • D. Obtained the net realisable value of each kind of inventory and checked whether the applied calculation logic was in agreement with all inventory, tested the supporting documents related to the estimation basis for net realisable value of inventories including verifying the supporting documents of sales and purchase prices, as well as recalculating and assessing the reasonableness of allowance for inventory valuation losses.

Responsibilities of management and those charged with governance for the parent company only financial statements

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

~4~

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

Those charged with governance, including independent directors and supervisors, are responsible for overseeing the Company’s financial reporting process.

Independent accountant’s responsibilities for the audit of the parent company only financial statements

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

As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

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

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

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

  • D. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events

~5~

or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

E.

F.

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

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

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

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

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

~6~

Wang, Yu-Juan

Xu, Jian-Ye

For and on behalf of PricewaterhouseCoopers, Taiwan February 27, 2020

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

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

~7~

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Assets Notes
6(1)
6(2)
6(3)
6(21)
6(4)
7
7
6(6)
6(2)
6(3)
6(7)
6(8)
6(9)
6(10)
6(26)		 December 31, 2019
AMOUNT
%
$
4,038,861
18
16,913
-
171,906
1
31,585
-
4,466,711
19
134,974
1
17,657
-
43,626
-
815,756
4
16,216
-
32,710
-
9,786,915
43
21,301
-
2,435,247
11
9,618,330
42
770,937
3
7,849
-
287,174
1
88,793
-
8,755
-
13,238,386
57
$
23,025,301
100		 December 31, 2018 December 31, 2018
AMOUNT
$
4,038,861
16,913
171,906
31,585
4,466,711
134,974
17,657
43,626
815,756
16,216
32,710
9,786,915
21,301
2,435,247
9,618,330
770,937
7,849
287,174
88,793
8,755
13,238,386
$
23,025,301		 AMOUNT
$
6,610,358
166,048
228,413
-
7,168,341
10,595
32,397
33,315
625,058
8,890
25,474
14,908,889
18,174
1,381,450
8,300,401
761,523
-
277,570
40,785
39,924
10,819,827
$
25,728,716		 %
Current assets
1100
Cash and cash equivalents
1110
Financial assets at fair value through
profit or loss - current
1120
Financial assets at fair value through
other comprehensive income - current
1140
Current contract assets
1170
Accounts receivable, net
1180
Accounts receivable - related parties
1200
Other receivables
1210
Other receivables - related parties
130X
Inventories, net
1410
Prepayments
1479
Other current assets
11XX
Total current assets
Non-current assets
1510
Financial assets at fair value through
profit or loss - non-current
1517
Financial assets at fair value through
other comprehensive income - non-
current
1550
Investments accounted for under
equity method
1600
Property, plant and equipment, net
1755
Right-of-use assets
1780
Intangible assets
1840
Deferred income tax assets
1990
Other non-current assets
15XX
Total non-current assets
1XXX
Total assets		 26
1
1
-
28
-
-
-
2
-
-
58
-
6
32
3
-
1
-
-
42
100

(Continued)

~8~

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity Notes
6(12)
6(2)
7
6(13)
7
6(14)
6(26)
6(15)
6(17)
6(18)
6(19)
6(20)
9
11		 December 31, 2019
AMOUNT
%
$
89,940
1
11,799
-
103,882
1
5,384,900
23
498,778
2
7,124
-
215,609
1
287,887
1
6,599,919
29
2,229,959
9
874,025
4
83,476
-
1,017
-
402,928
2
3,591,405
15
10,191,324
44
2,086,684
9
3,870,105
17
1,745,768
8
269,144
1
3,834,442
17
1,027,834
4
12,833,977
56
$
23,025,301
100		 December 31, 2018 December 31, 2018
AMOUNT
$
89,940
11,799
103,882
5,384,900
498,778
7,124
215,609
287,887
6,599,919
2,229,959
874,025
83,476
1,017
402,928
3,591,405
10,191,324
2,086,684
3,870,105
1,745,768
269,144
3,834,442
1,027,834
12,833,977
$
23,025,301		 AMOUNT
$
4,399,144
6,976
4,420
6,642,168
423,685
40,296
119,172
187,325
11,823,186
2,882,721
604,859
84,044
1,018
402,072
3,974,714
15,797,900
1,996,625
2,789,111
1,539,341
269,144
3,189,563
147,032
9,930,816
$
25,728,716		 %
Current liabilities
2100
Short-term borrowings
2120
Financial liabilities at fair value
through profit or loss - current
2170
Accounts payable
2180
Accounts payable - related parties
2200
Other payables
2220
Other payables - related parties
2230
Current income tax liabilities
2300
Other current liabilities
21XX
Total current liabilities
Non-current liabilities
2530
Corporate bonds payable
2570
Deferred income tax liabilities
2640
Accrued pension liabilities
2645
Guarantee deposits received
2670
Other non-current liabilities
25XX
Total non-current liabilities
2XXX
Total liabilities
Equity
Share capital
3110
Share capital - common stock
Capital surplus
3200
Capital surplus
Retained earnings
3310
Legal reserve
3320
Special reserve
3350
Unappropriated retained earnings
Other equity interest
3400
Other equity interest
3XXX
Total equity
Significant contingent liabilities and
unrecognised contract commitments
Significant events after the balance
sheet date
3X2X
Total liabilities and equity		 17
-
-
26
2
-
-
1
46
11
2
-
-
2
15
61
8
11
6
1
12
1
39
100

The accompanying notes are an integral part of these parent company only financial statements.

~9~

MERRY ELECTRONICS CO., LTD. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

Items Year ended December 31
2019
2018
Notes
AMOUNT
%
AMOUNT
%
6(21) and 7
$
30,648,815
100
$
30,438,179
100
6(6)(24) and 7
(
27,637,789) (
90) (
27,825,720) (
92)
3,011,026
10
2,612,459
8
6(24)(25)
(
192,099) (
1) (
210,681)
-
(
584,741) (
2) (
553,006) (
2)
(
606,161) (
2) (
569,581) (
2)
(
1,383,001) (
5) (
1,333,268) (
4)
1,628,025
5
1,279,191
4
6(22)
145,596
-
131,041
-
6(2)(3)(23)
(
5,693)
-
52,726
-
(
63,385)
-
(
31,217)
-
6(7)
1,441,489
5
1,063,494
4
1,518,007
5
1,216,044
4
3,146,032
10
2,495,235
8
6(26)
(
597,420) (
2) (
430,970) (
1)
$
2,548,612
8
$
2,064,265
7
6(15)
($
15,027)
-
($
7,051)
-
6(20)
1,146,956
4
(
2,530,480) (
9)
-
-
(
5,513)
-
3,005
-
1,410
-
1,134,934
4
(
2,541,634) (
9)
6(20)
(
113,955)
-
19,095
-
(
2,377)
-
18,639
-
(
153,522) (
1) (
87,285)
-
52,830
-
12,720
-
(
217,024) (
1) (
36,831)
-
$
917,910
3
($
2,578,465) (
9)
$
3,466,522
11
($
514,200) (
2)
6(27)
$
12.51
$
10.47
$
11.54
$
10.35
4000
Sales revenue
5000
Operating costs
5900
Net operating margin
Operating expenses
6100
Selling expenses
6200
General and administrative expenses
6300
Research and development expenses
6000
Total operating expenses
6900
Operating profit
Non-operating income and expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7070
Share of profit of associates and joint
ventures accounted for using equity
method
7000
Total non-operating income and
expenses
7900
Profit before income tax
7950
Income tax expense
8200
Profit for the year
Other comprehensive income
Components of other comprehensive
income that will not be reclassified to
profit or loss
8311
Actuarial losses on defined benefit plans
8316
Unrealised losses from investments in
equity instruments measured at fair value
through other comprehensive income
8330
Share of other comprehensive loss of
associates and joint ventures accounted
for using equity method
8349
Income tax related to components of
other comprehensive income that will not
be reclassified to profit or loss
8310
Other comprehensive income (loss)
that will not be reclassified to profit
or loss
Components of other comprehensive
income that will be reclassified to profit
or loss
8361
Exchange differences on translation
8367
Unrealised gains from investments in
debt instruments measured at fair value
through other comprehensive income
8380
Share of other comprehensive loss of
associates and joint ventures accounted
for using equity method
8399
Income tax relating to the components of
other comprehensive income
8360
Other comprehensive loss that will
be reclassified to profit or loss
8300
Other comprehensive (loss) income for
the year
8500
Total comprehensive (loss) income for the
year
Earnings per share
9750
Basic earnings per share
9850
Diluted earnings per share

The accompanying notes are an integral part of these parent company only financial statements.

~10~

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

2018
Balance at January 1, 2018
Effects of modified retrospective restatement
Balance at January 1, 2018 after adjustments
Profit
Other comprehensive loss
Total comprehensive income
Appropriations and distribution of 2017 earnings (Note 2):
Legal reserve
Cash dividends
Issuance of convertible bonds
Convertible bonds converted to equity shares
Share-based payment
Retirement of treasury shares
Disposal of investments in equity instruments at fair value through other
comprehensive income
Acquisition agreement of additional equity in subsidiaries
Recognition of change in equity of associates in proportion to the Group's
ownership
Balance at December 31, 2018
2019
Balance at January 1, 2019
Profit (loss)
Other comprehensive income (loss)
Total comprehensive income
Appropriations and distribution of 2018 earnings
Legal reserve
Cash dividends
Issuance of common stock for cash
Convertible bonds converted to equity shares
Share-based payment
Disposal of investments in equity instruments at fair value through other
comprehensive income
Recognition of change in equity of associates in proportion to the Group's
ownership
Recognition of change in equity of non-associates in proportion to the Group's
ownership
Balance at December 31, 2019		 Notes Share capital - common
stock		 Capital surplus, additional
paid-in capital		 Capital surplus, additional
paid-in capital		 Retained earnings Financial statements
translation differences of
foreign operations		 Treasurystocks Total equity
Legal reserve Special reserve Unappropriated retained
earnings
6(20)
6(14)
6(14)
6(16)
6(17)
6(3)
6(20)
6(14)
6(16)
6(3)		 $
2,004,721
-
2,004,721
-
-
-
-
-
-
1,409
9,165
(
18,670 )
-
-
-
$
1,996,625
$
1,996,625
-
-
-
-
-
40,000
48,851
1,208
-
-
-
$
2,086,684		 $
2,985,304
-
2,985,304
-
-
-
-
-
133,326
13,565
120,515
(
66,129 )
-
(
402,072 )
4,602
$
2,789,111
$
2,789,111
-
-
-
-
-
408,000
636,587
25,256
-
11,151
-
$
3,870,105		 $
1,177,121
-
1,177,121
-
-
-
362,220
-
-
-
-
-
-
-
-
$
1,539,341
$
1,539,341
-
-
-
206,427
-
-
-
-
-
-
-
$
1,745,768		 $
269,144
-
269,144
-
-
-
-
-
-
-
-
-
-
-
-
$
269,144
$
269,144
-
-
-
-
-
-
-
-
-
-
-
$
269,144		 $
4,292,018
3,766
4,295,784
2,064,265
(
11,154 )
2,053,111
(
362,220 )
(
3,143,838 )
-
-
-
-
346,726
-
-
$
3,189,563
$
3,189,563
2,548,612
(
12,022 )
2,536,590
(
206,427 )
(
1,751,419 )
-
-
-
68,104
-
(
1,969 )
$
3,834,442








$
3,074,587
(
3,766 )
3,070,821
-
(
2,567,311 )
(
2,567,311 )
-
-
-
-
(
9,752 )
-
(
346,726 )
-
-
$
147,032
$
147,032
-
929,932
929,932
-
-
-
-
18,974
(
68,104 )
-
-
$
1,027,834
($
98,743 )
-
(
98,743 )
-
-
-
-
-
-
-
13,944
84,799
-
-
-
$
-
$
-
-
-
-
-
-
-
-
-
-
-
-
$
-		 $
13,704,152
-
13,704,152
2,064,265
(
2,578,465 )
(
514,200 )
-
(
3,143,838 )
133,326
14,974
133,872
-
-
(
402,072 )
4,602
$
9,930,816
$
9,930,816
2,548,612
917,910
3,466,522
-
(
1,751,419 )
448,000
685,438
45,438
-
11,151
(
1,969 )
$
12,833,977

Note 1: DirectorsNote 2: Directors ’’ and supervisors and supervisors ’’ remuneration amounting to $43,733 thousand and employees remuneration amounting to $90,750 thousand and employees ’’ compensation amounting to $128,626 thousand were recognised as expenses in the statement of comprehensive income for the year ended December 31, 2016. compensation amounting to $272,251 thousand were recognised as expenses in the statement of comprehensive income for the year ended December 31, 2017.

The accompanying notes are an integral part of these parent company only financial statements.

~11~

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation

Depreciation - right-of-use assets

Gain on modification of lease
Amortization

Expected credit loss
Finance costs
Interest expense - lease liability
Net loss on financial assets or liabilities at fair value through
profit or loss
Proceeds from disposal of available-for-sale financial assets-
non-current

Share of profit of associates and joint ventures accounted for
using equity method

Dividend income

Interest income

Gain on disposal of property, plant and equipment

Share-based payments

Treasury share-based payments

Compensation cost of cash capital increase reserved for
employee preemption

Effect of exchange rate changes
Changes in operating assets and liabilities
Changes in operating assets
Financial assets at fair value through profit or loss

Accounts receivable
Accounts receivable - related parties
Contract assets-current
Other receivables
Other receivables - related parties
Inventories
Prepayments
Other current assets
Acquisition of financial assets at fair value through profit or
loss - non-current
Changes in operating liabilities
Accounts payable
Accounts payable - related parties
Other payables
Other payables - related parties
Other current liabilities
Other non-current liabilities
Cash inflow generated from operations
Interest paid
Income taxes paid
Interest received
Dividend income
Recognition of dividends received from investments
accounted for using equity method

Net cash flows from operating activities		 Notes
2019
2018
$
3,146,032 $
2,495,235
6(8)
17,318
18,288
6(9)
10,441
-
(
5 )
-
6(10)
55,625
56,241
1,207
1,024
63,385
31,217
610
-
(
2,634 )
16,904
6(3)
(
833 )
-
6(7)
(
1,441,489 ) (
1,063,494 )
6(22)
(
69,850 ) (
60,437 )
6(22)
(
48,522 ) (
40,417 )
6(23)
(
471 ) (
97 )
6(16)
52,158
90,298
6(16)
-
26,734
6(16)
-
3,993
(
34,526 ) (
58,875 )
6(2)
154,703
231,061
2,782,214 (
1,234,799 )
(
124,380 )
2,923
(
31,585 )
-
19,076
152,625
(
10,311 )
495
(
190,698 )
205,914
(
7,326 )
7,548
(
7,669 ) (
7,398 )
(
3,127 ) (
18,174 )
99,462
3,934
(
1,240,671 ) (
594,367 )
74,309 (
162,479 )
(
49,769 ) (
30,977 )
11,654
7,622
(
15,596 ) (
22,325 )
3,208,732
58,217
(
15,061 ) (
30,050 )
(
223,990 ) (
552,376 )
48,955
43,223
69,850
60,437
6(28)
-
574,124
3,088,486
153,575

(Continued)

~12~

MERRY ELECTRONICS CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at fair value through other
comprehensive income
Proceeds from disposal of financial assets at fair value through
other comprehensive income

Acquisition of investments accounted for using equity method

Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets

Decrease in other financial assets
Decrease in guarantee deposits
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings
Proceeds from issuance of bonds

Cash dividends paid

Repayment of principal portion of lease liabilities

Employee purchase of treasury shares
Cancellation of restricted employee shares
Issuance of common stock for cash

Net cash flows (used in) from financing activities
Effect of exchange rate changes
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year		 Notes
2019
2018
$
- ( $
324,392 )
6(3)(28)
143,315
603,040
6(7)
(
134,264 ) (
1,807,223 )
6(8)(28)
(
42,763 ) (
335,241 )
12,141
3,185
6(8)(28)
(
42,812 ) (
44,197 )
-
100,000
138
284
(
64,245 ) (
1,804,544 )
(
4,309,204 )
3,049,624
6(14)
-
3,015,000
6(19)
(
1,751,419 ) (
3,143,838 )
6(9)
(
10,921 )
-
-
13,944
(
6,720 ) (
1,095 )
6(17)
448,000
-
(
5,630,264 )
2,933,635
34,526
58,875
(
2,571,497 )
1,341,541
6,610,358
5,268,817
$
4,038,861 $
6,610,358

The accompanying notes are an integral part of these parent company only financial statements.

~13~

MERRY ELECTRONICS CO., LTD. NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANISATION

Merry Electronics Co., Ltd. (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Act of the Republic of China (R.O.C.) on December 24, 1975. The Company is primarily engaged in manufacturing, processing, repair, sales of electric appliances and audiovisual electric products, telecommunication equipment and apparatus, computers and computing peripheral equipments, restrained telecom radio frequency equipments, medical appliances, as well as electronic parts and components; planning, design as well as output of service items’ equipments; production as well as marketing management consultant of service items’ relevant business. The Company’s shares were listed on the Taipei Exchange since August 1998 and transferred to the Taiwan Stock Exchange since September 2000 with approval. The Company merged with its subsidiary, HUGES HI-TECH INC., on September 1, 2005. The Company was the surviving company while HUGES HITECH INC. was the dissolved company.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These parent company only financial statements were authorised for issuance by the Board of Directors on February 27, 2020.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

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

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

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

~14~

IFRS 16, ‘Leases’

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

  • (b) The Group has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Group increased ‘right-of-use asset’ by $15,699 thousand, increased ‘lease liability’ by $15,699 thousand on January 1, 2019.

  • (c) The Group has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:

  • i. Reassessment as to whether a contract is, or contains, a lease is not required, instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4.

  • ii. The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.

  • iii. The accounting for operating leases whose period will end before December 31, 2019 as short-term leases and accordingly, rent expense of $956 thousand was recognised in 2019.

  • (d) The Group calculated the present value of lease liabilities by using the weighted average incremental borrowing interest rate of 3.25%.

  • (e) The Group recognised lease liabilities which had previously been classified as ‘operating leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate and lease liabilities recognised as of January 1, 2019 is as follows:

Operating lease commitments disclosed by applying IAS 17 as at $ 18,340
December 31, 2018
Less: Short-term leases ( 956)
Less: Low-value assets ( 1,056)
Total lease contracts amount recognised as lease liabilities by applying
IFRS 16 on January 1, 2019 $ 16,418
Incremental borrowing interest rate at the date of
initial application 3.25%
Lease liabilities recognised as at January 1, 2019 by applying IFRS 16 $ 15,699

~15~

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

New standards, interpretations and amendments endorsed by the FSC effective from 2020 are as follows:

ollows:
New Standards,Interpretations andAmendments
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-
Definition of Material’
Amendments to IFRS 3, ‘Definition of a business’
Amendments to IFRS 9, IAS 39 and IFRS7 ,‘Interest rate
benchmark reform’		 Effective date by International
Accounting StandardsBoard
January 1, 2020
January 1, 2020
January 1, 2020

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

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

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

==> picture [470 x 31] intentionally omitted <==

----- Start of picture text -----

Effective date by International
New Standards, Interpretations and Amendments Accounting Standards Board
----- End of picture text -----

endorsed by the FSC are as follows:
New Standards, Interpretations and Amendments
 Effective date by International
Accounting Standards Board
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of To be determined by
assets between an investor and its associate or joint venture’ International Accounting
Standards Board
IFRS 17, ‘Insurance contracts’ January 1, 2021
Amendments to IAS 1, ‘Classification of liabilities as current or January 1, 2022
non-current’

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

The parent company only financial statements of the Company have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

(2) Basis of preparation

  • A. Except for the following items, the parent company only financial statements have been prepared under the historical cost convention:

  • (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

  • (b) Financial assets at fair value through other comprehensive income.

~16~ 

  - (c) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.

  • B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

  • (3) Foreign currency translation

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in New Taiwan dollars, which is the Company’s functional and presentation currency.

  • A. Foreign currency transactions and balances

  • (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

  • (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

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

  • (d) All foreign exchange gains and losses are presented in the statement of comprehensive income within ‘Other gains and losses’.

  • B. Translation of foreign operations

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

    • i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

~17~

  • ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

  • iii. All resulting exchange differences are recognised in other comprehensive income.

  • (b) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even when the Company retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

  • (c) Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rates at the balance sheet date.

(4) Classification of current and non-current items

  • A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

  • (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

  • (b) Assets held mainly for trading purposes;

  • (c) Assets that are expected to be realised within twelve months from the balance sheet date;

  • (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities more than twelve months after the balance sheet date.

  • B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

  • (a) Liabilities that are expected to be settled within the normal operating cycle;

  • (b) Liabilities held mainly for trading purposes;

  • (c) Liabilities that are to be settled within twelve months from the balance sheet date;

  • (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(5) Cash equivalents

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

(6) Financial assets at fair value through profit or loss

  • A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.

~18~

  • B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.

  • C. At initial recognition, the Company measures the financial liabilities at fair value. All related transaction costs are recognised in profit or loss. The Company subsequently measures these financial liabilities at fair value with any gain or loss recognised in profit or loss.

  • D. The Company recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.

  • (7) Financial assets at fair value through other comprehensive income

  • A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Company has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:

    • (a) The objective of the Company’s business model is achieved both by collecting contractual cash flows and selling financial assets; and

    • (b) The assets’ contractual cash flows represent solely payments of principal and interest.

  • B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using trade date accounting.

  • C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. The Company subsequently measures the financial assets at fair value:

    • (a) The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.

    • (b) Except for the recognition of impairment loss, interest income and gain or loss on foreign exchange which are recognised in profit or loss, the changes in fair value of debt instruments are taken through other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss.

(8) Accounts and notes receivable

  • A. Accounts and notes receivable entitle the Company a legal right to receive consideration in exchange for transferred goods or rendered services.

  • B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(9) Impairment of financial assets

For debt instruments measured at fair value through other comprehensive income including accounts receivable, at each reporting date, the Company recognises the impairment provision for 12 months

~19~

expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that do not contain a significant financing component, the Company recognises the impairment provision for lifetime ECLs.

(10) Derecognition of financial assets

The Group derecognises a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

The Group derecognises a financial asset when one of the following conditions is met:

  • A. The contractual rights to receive the cash flows from the financial asset expire.

  • B. The contractual rights to receive cash flows of the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.

  • C. The contractual rights to receive cash flows of the financial asset have been transferred; however, the Group has not retained control of the financial asset.

(11) Inventories

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

(12) Investments accounted for using equity method / subsidiaries and associates

  • A. Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity

  • B. Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Company are eliminated. The accounting policies of the subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

  • C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise losses proportionate to its ownership, unless it has incurred statutory/constructive obligations or made payments on behalf of the associate.

  • D. When changes in a subsidiary’s equity do not arise from profit or loss or other comprehensive

~20~

income of the associate and such changes do not affect the Company’s ownership percentage of the subsidiary, the Company recognises the Company’s share of change in equity of the subsidiary in ‘Capital surplus’ in proportion to its ownership.

  • E. Associates are all entities over which the Company has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.

  • F. The Company’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income.

  • G. When changes in an associate’s equity do not arise from profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognises the Company’s share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.

  • H. Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

  • I. Pursuant to the “Regulations Governing the Preparation of Financial Reports by Securities Issuers,” profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the financial statements prepared with basis for consolidation. Owners’ equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the financial statements prepared with basis for consolidation.

  • (13) Property, plant and equipment

  • A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

  • B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

  • C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

  • D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if

~21~

appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

are as follows:
Buildings and structures 5 ~ 60 years
Machinery and equipment 2 ~ 10 years
Transportation equipment 7 ~ 12 years
Office equipment 5 ~ 10 years
Others 4 ~ 10 years

(14) Leasing arrangements (lessee) － right-of-use assets/ lease liabilities

Effective 2019

  • A. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of lowvalue assets, lease payments are recognised as an expense on a straight-line basis over the lease term.

  • B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate.

  • Lease payments are comprised of the fixed payments, less any lease incentives receivable.

    • The Group subsequently measures the lease liability at amortised cost using the interest method and recognises interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognised as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.

  • C. At the commencement date, the right-of-use asset is stated at cost comprising the following:

  • (a) The amount of the initial measurement of lease liability;

  • (b) Any lease payments made at or before the commencement date; and

  • (c) Any initial direct costs incurred by the lessee.

The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognised as an adjustment to the right-of-use asset.

(15) Leased assets / leases (lessee)

Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

(16) Leased assets/ operating leases (lessee)

Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

~22~

(17) Intangible assets

  • A. Computer software

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 3 to 5 years.

  • B. Goodwill

Goodwill arises in a business combination accounted for by applying the acquisition method.

  • C. Other intangible assets are patents and are amortised using the straight-line method over 3 years.

  • (18) Impairment of non-financial assets

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

  • B. The recoverable amounts of goodwill should be evaluated periodically. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognised in profit or loss shall not be reversed in the following years.

  • C. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination.

(19) Borrowings

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

  • (20) Notes and accounts payable

  • A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

  • B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(21) Financial liabilities at fair value through profit or loss

  • A. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term and financial liabilities at fair value through profit or loss. Financial liabilities that meet one of the following criteria are designated as at fair value

~23~

through profit or loss at initial recognition:

  • (a) Hybrid (combined) contracts; or

  • (b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

  • (c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management policy.

  • B. At initial recognition, the Company measures the financial liabilities at fair value. All related transaction costs are recognised in profit or loss. The Company subsequently measures these financial liabilities at fair value with any gain or loss recognised in profit or loss.

(22) Convertible bonds payable

Convertible bonds issued by the Company contain conversion options (that is, the bondholders have the right to convert the bonds into the Company’s common shares by exchanging a fixed amount of cash for a fixed number of common shares), call options and put options. The Company classifies the bonds payable upon issuance as a financial asset, a financial liability or an equity instrument in accordance with the contract terms. They are accounted for as follows:

  • A. The embedded call options and put options are recognised initially at net fair value as ‘financial assets or financial liabilities at fair value through profit or loss’. They are subsequently remeasured and stated at fair value on each balance sheet date; the gain or loss is recognised as ‘Gain or loss on valuation of financial assets or financial liabilities at fair value through profit or loss’.

  • B. The host contracts of bonds are initially recognised at fair value. Any difference between the initial recognition and the redemption value is accounted for as the premium or discount on bonds payable and subsequently is amortised in profit or loss as an adjustment to ‘finance costs’ over the period of circulation using the effective interest method.

  • C. The embedded conversion options which meet the definition of an equity instrument are initially recognised in ‘capital surplus—share options’ at the residual amount of total issue price less the amount of financial assets or financial liabilities at fair value through profit or loss and bonds payable as stated above. Conversion options are not subsequently remeasured.

  • D. Any transaction costs directly attributable to the issuance are allocated to each liability or equity component in proportion to the initial carrying amount of each abovementioned item.

  • E. When bondholders exercise conversion options, the liability component of the bonds (including bonds payable and ‘Financial assets or financial liabilities at fair value through profit or loss’) shall be remeasured on the conversion date. The issuance cost of converted common shares is the total book value of the abovementioned liability component and ‘Capital surplus - share options’.

(23) Derecognition of financial liabilities

A financial liability is derecognised when the obligation specified in the contract is either

discharged or cancelled or expires.

~24~

(24) Non-hedging and embedded derivatives

Non-hedging derivatives are initially recognised at fair value on the date a derivative contract is entered into and recorded as financial assets or financial liabilities at fair value through profit or loss. They are subsequently remeasured at fair value and the gains or losses are recognised in profit or loss.

(25) Employee benefits

  • A. Short-term employee benefits

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

  • B. Pensions

  • (a) Defined contribution plans

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

  • (b) Defined benefit plans

    • i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.

    • ii. Remeasurements arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

  • C. Employees’ compensation and directors’ and supervisors’ remuneration

  • Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is paid by shares, the Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

- (26) Employee share based payment

  • A. For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair

~25~

value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

  • B. Restricted stocks:

  • (a) Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period.

  • (b) For restricted stocks where those stocks do not restrict distribution of dividends to employees and employees are not required to return the dividends received if they resign during the vesting period, the Company recognises the fair value of the dividends received by the employees who are expected to resign during the vesting period as compensation cost at the date of dividends declared.

  • (c) For restricted stocks where employees have to pay to acquire those stocks, if employees resign during the vesting period, they must return the stocks to the Company and the Company must refund their payments on the stocks, the Company recognises the payments from the employees who are expected to resign during the vesting period as liabilities at the grant date, and recognises the payments from the employees who are expected to be eventually vested with the stocks in ’Capital Surplus - restricted stock’.

(27) Income tax

  • A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

  • B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

  • C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent company only balance sheet. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates

~26~

(and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

  • D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.

  • E. A deferred tax asset shall be recognised for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilized.

(28) Share capital

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

  • B. Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

  • (29) Dividends

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

  • (30) Revenue recognition

Sales of goods

  • A. The Company manufactures and sells radio apparatus, communication devices, consumer electronics as well as electronic parts and components. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Company has objective evidence that all criteria for acceptance have been satisfied.

  • B The products are often sold with volume discounts based on aggregate sales over a 12-month period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated sales discounts. Accumulated experience is used to estimate and provide for the

~27~

sales discounts and allowances, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an assessment at each reporting date. A refund liability is recognised for expected sales discounts and allowances payable to customers in relation to sales made until the end of the reporting period. The sales usually are made with a credit term of 100 days which is consistent with market practice. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Company does not adjust the transaction price to reflect the time value of money.

  • C. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

(31) Business combinations

  - A. The Company uses the acquisition method to account for business combinations. The consideration transferred for an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued at the acquisition date, plus the fair value of any assets and liabilities resulting from a contingent consideration arrangement. All acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. For each business combination, the Company measures at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to the proportionate share of the entity’s net assets in the event of liquidation at either fair value or the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other non-controlling interests should be measured at the acquisition-date fair value.

  - B. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets acquired and the liabilities assumed is recorded as goodwill at the acquisition date. If the total of consideration transferred, non-controlling interest in the acquiree recognised and the fair value of previously held equity interest in the acquiree is less than the fair value of the identifiable assets acquired and the liabilities assumed, the difference is recognised directly in profit or loss on the acquisition date.

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

  2. The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying

~28~

amounts of assets and liabilities within the next financial year. The related information is addressed below:

(1) Critical accounting estimates and assumptions

  • A. Impairment assessment of goodwill

  • The impairment assessment of goodwill relies on the Company’s subjective judgement, including identifying cash-generating units, allocating assets and liabilities as well as goodwill to related cash-generating units, and determining the recoverable amounts of related cash-generating units. Please refer to Note 6(11) for the information of goodwill impairment.

As of December 31, 2019, the Company recognised goodwill, net of impairment loss, amounting to $139,735 thousand.

  • B. Impairment assessment of investments accounted for using equity method

    • The Company assesses the impairment of an investment accounted for using equity method as soon as there is any indication that it might have been impaired and its carrying amount cannot be recovered. The Company assesses the recoverable amount of an investment accounted for under the equity method based on the present value of the Company’s share of expected future cash flows of the investee, and analyses the reasonableness of related assumptions.

    • As of December 31, 2019, the Company’s investments accounted for under the equity method, net of impairment loss, amounted to $9,618,330 thousand.

  • DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS
ash and cash equivalents
Cash on hand and revolving funds
Checking accounts and demand deposits
Time deposits
Short-term notes and bills		 December31,2019
196
$ 2,669,637
-
1,369,028
4,038,861
$		 December31,2018
175
$ 2,768,317
3,224,098
617,768
6,610,358
$

  • A. The Company transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

  • B. The Company has no cash and cash equivalents pledged to others.

~29~

(2) Financial assets and liabilities at fair value through profit or loss

Items
Current items:
Financial assets mandatorily measured
at fair value through profit or loss
- Funds
- Non-hedging derivatives
- Stocks
- Call options of convertible bonds
Valuation adjustment
Non-current items:
- Funds
Items
Current items:
Financial liabilities held for trading
- Non-hedging derivatives		 December31,2019
December31,2018
-
$ 51,262
$ 14,138
6,176
169
108,949
2,290
4,200
316
4,539)
(
16,913
$ 166,048
$ 21,301
$ 18,174
$ December31,2019
December31,2018
11,799
$ 6,976
$		 December31,2018
166,048
$
18,174
$
December31,2018
6,976
$
  • A. Amounts recognised in profit or loss in relation to financial assets at fair value through profit or loss are listed below:
loss are listed below:
Years ended December 31,
2019 2018
Net gains on financial assets at fair
value through profit or loss 68,721
$		 $ 62,842
  • B. The Company entered into contracts relating to derivative financial assets which were not accounted for under hedge accounting. The information is listed below:

December 31, 2019

December31,2019 December31,2019
Derivativeinstruments
Forward foreign exchange
contract to sell
Forward foreign exchange
contract to buy
Derivativeinstruments
Forward foreign exchange
contract to sell
Forward foreign exchange
contract to buy		 Contract amount
(Notionalprincipal)
Contract period
USD63,000 thousand
2019/12/12~
2020/2/27

USD63,000 thousand
2019/12/12~
2020/2/27

December31,2018		 Contract price
NTD 30.017~30.310
NTD 29.835~30.220
Contract amount
(Notionalprincipal)
USD54,300 thousand
USD54,300 thousand		 Contract period
2018/12/12~
2019/1/29

2018/12/12~
2019/1/29
 Contract price
NTD 30.649~30.756
NTD 30.709~30.811

~30~

The Company entered into forward foreign exchange contracts to hedge exchange rate risk of import and export proceeds. However, these forward foreign exchange contracts are not accounted for under hedge accounting.

  • C. Information relating to credit risk of financial assets at fair value through profit or loss is provided in Note 12(2).

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

Items December31,2019 December31,2018
Current items:
Debt instruments
Closed-end fund $ -
 $ 50,000
Bonds 89,550
 89,550
Valuation adjustment 1,000 3,913
90,550 143,463
Equity instruments
Stocks 76,080 83,834
Valuation adjustment 5,276 1,116
81,356 84,950
$ 171,906 $ 228,413
Non-current items:
Equity instruments
Listed stocks $ 775,130
 $ 748,154
Emerging stocks - 40,106
Unlisted stocks 48,107 61,157
823,237 849,417
Valuation adjustment 1,614,986 535,009
Accumulated impairment ( 2,976)
 ( 2,976)
$ 2,435,247 $ 1,381,450

  • A. The Company has elected to classify equity and debt investments that are considered to be strategic investments or steady dividend income as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $2,607,153 thousand and $1,609,863 thousand as at December 31, 2019 and 2018, respectively.

  • B. During the year ended December 31, 2019, the Company redeemed the debt investment at fair value of $50,833 thousand due to maturity of bond which resulted in cumulated gain on disposals amounting to $833 thousand (shown as other gains and losses). Aiming to satisfy the capital needs, the Company sold $88,988 thousand of equity investment at fair value which resulted in cumulative gains on disposal amounting to $68,104 thousand during the year ended December 31, 2019 (transferred from other equity interest to unappropriated retained earnings). During the year ended December 31, 2018, the Company repurchased bond investments at fair value of $156,192 due to maturity of bond which resulted in cumulative losses on disposal amounting to $13,602

~31~

(shown as other gains and losses). Aiming to satisfy the capital needs, the Company sold $443,288 of equity investments at fair value which resulted in cumulative gains on disposal amounting to $346,726 (transferred from other equity interest to unappropriated retained earnings) during the year ended December 31, 2018.

  • C. As of December 31, 2019 and 2018, the uncollected payments arising from disposal of shares of public offering companies amounted to $4,336 thousand and $0, respectively.

  • D. Amounts recognised in profit or loss and other comprehensive income in relation to the financial assets at fair value through other comprehensive income are listed below:

Years ended December 31,
2019 2018
Equity instruments at fair value
through other comprehensive
income
Fair value change recognised in other
comprehensive income $ 1,152,242 ($ 3,530,480)
Cumulative gains (losses) reclassified
to retained earnings due to
derecognition ($ 68,104) ($ 346,726)
Debt instruments at fair value through
other comprehensive income
Fair value change recognised in other
comprehensive income ($ 2,080) $ 5,037
Cumulative other comprehensive
income reclassified to profit or loss
Reclassified due to derecognition ($ 833) $ 13,602
Interest income recognised in profit
or loss $ 3,554 $ 5,048

  • E. For the years ended December 31, 2019 and 2018, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at fair value through other comprehensive income held by the Company was $2,607,153 thousand and $1,609,863 thousand, respectively.

  • F. Information relating to credit risk of financial assets at fair value through other comprehensive income is provided in Note 12(2).

  • G. The counterparties of the Company’s investments in debt instruments have good credit quality; those debt securities are all rated as investment grade.

  • H. The Company recognised interest income of $3,554 thousand and $5,048 thousand on debt

~32~

instruments held for the years ended December 31, 2019 and 2018, respectively. (4) Accounts receivable

ccounts receivable
December31,2019 December31,2018
Accounts receivable $ 4,469,877
 $ 7,170,300
Less: Loss allowance ( 3,166)
 ( 1,959)
$ 4,466,711 $ 7,168,341
A. The ageing analysis of accounts receivable that were past due but not impaired is as follows:
December 31, 2019 December 31, 2018
Not past due $ 4,455,759
 $ 6,992,854
Up to 30 days 6,431 177,049
31 to 90 days 7,471 236
91 to 180 days 216 161
Over 180 days -
 -
$ 4,469,877
 $ 7,170,300

The above ageing analysis was based on past due date.

  • B. As of December 31 2019 and 2018, and January 1, 2018, the balances of receivables (including notes receivable) from contracts with customers amounted to $4,649,877 thousand, $7,170,300 thousand, and $5,938,359 thousand, respectively.

  • C. The Company does not hold any collateral as security.

  • D. Information relating to credit risk of accounts receivable is provided in Note 12(2).

  • (5) Transfer of financial assets

Transferred financial assets that are derecognised in their entirety

On October 2, 2019, the Group entered into a factoring agreement with Bank of America to sell its accounts receivable. Under the agreement, the Group is not obligated to bear the default risk of the transferred accounts receivable, but is liable for the losses incurred on any business dispute. The Group does not have any continuing involvement in the transferred accounts receivable. Thus, the Group derecognised the transferred accounts receivable. As of December 31, 2019, there was no amount that had past due.

~33~

(6) Inventories

December 31, 2019

Finished goods
Raw materials
Finished goods
Raw materials		 Cost
Allowance for slow-moving
and valuation losses
Bookvalue
874,580
$ 59,960)
($ 814,620
$ 1,136
-

1,136
875,716
$ 59,960)
($ 815,756
$ Cost
Allowance for slow-moving
and valuation losses
Book value
671,831
$ 46,810)
($ 625,021
$ 957
920)
(
37
672,788
$ 47,730)
($ 625,058
$ December 31, 2018

The cost of inventories recognised as expense for the year:

Cost of goods sold
Loss on market value decline and
obsolete and slow-moving inventories		 Years ended December 31, Years ended December 31,
2019
27,625,559
$ 12,230
27,637,789
$		 2018
27,800,355
$ 25,365
27,825,720
$

(Remainder of page intentionally left blank)

~34~

(7) Investments accounted for using equity method

MERRY ELECTRONICS
(HK) CO., LTD.
DANNY DYNAMICS LIMITED

LEOHAB ENTERPRISE CO., LTD.

MERRY ELECTRONICS
(U.S.A.) CO., LTD.
MERRY ELECTRONICS
(SINGAPORE) PTE., LTD.
MERRY ELECTRONICS
(THAILAND) CO., LTD.
MERRY HEALTHCARE CO., LTD.

GUANGDONG LUXSHARE & MERRY
ELECTRONICS CO., LTD.

ASIAN ELITE INTERNATIONAL LTD.
INDIGO ENTERPRISE INC.

BIOTEST MEOLCAL
CORPORATION(“BTTT”)




 December31,2019
2,838,996
66,395
541,594
376,606
93,666
794,473
27,792
9,618,330
$ 554,432
$ 3,627,334
36,408
660,634








December31,2018
2,419,742
64,030
442,404
416,309
96,909
836,583
-
533,283
$ 3,086,828
33,598
370,715
8,300,401
$

A. Subsidiaries:

  • (a) Details of the subsidiaries of the Company are provided in Note 4(3) in the Company’s consolidated financial statements as of and for the year ended December 31, 2019.

  • (b) The Board of Directors during its meeting in February 2018 adopted a resolution to increase cash capital in Fulicare Co., Ltd. in the amount of US$10,500.

  • (c) In February 2018, the Company acquired 14% and 68.5% of shares in Austar Hearing Science and Technology (Xiamen) Co., Ltd. for a consideration of RMB 10,453 thousand and RMB 51,147 thousand through second-tier subsidiary, Fulicare Co., Ltd., and third-tier subsidiary, Fulicare Medical Technology (Suzhou) Co., Ltd., respectively as resolved at the meeting of the Board of Directors. The Company acquired 82.5% of shares for total amount of RMB 61,600 thousand. In June 2018, the Company acquired an additional 17% of shares in Austar Hearing Science and Technology (Xiamen) Co., Ltd. for a consideration of RMB 13,600 thousand through Fulicare Co., Ltd. as resolved at the meeting of the Board of Directors. Accordingly, the Company acquired 99.5% of shares for a total amount of RMB 75,200 thousand.

  • (d) In April 2018, the Company invested in the investee of Indigo Enterprises Inc., Sonavox Canada Inc., and the subsidiary of Indigo Enterprises Inc., SEAS FABRIKKER, and entered into a share transfer agreement with the shareholder (Newood Consultancy Limited) as resolved at the meeting of the Board of Directors. The investments were carried out in two stages: the Company acquired 70% of shares in the amount of US$28,203 thousand at the first

~35~

stage and acquired another 30% of shares in the amount of US$12,087 thousand at the second stage, the second stage payment will be made on maturity date three years after the initial settlement date and the acquisition is completed unless the transferor refuses to transfer by written notice. In accordance with relevant contract liabilities standard, the payment obligation of subsequent 30% of shares was recognised (shown as ‘Other non-current liabilities, others’). In July 2018, the Company acquired 70% of shares in Indigo Enterprise Inc. and ASIAN ELITE INTERNATIONAL LTD. and accordingly, the Company obtained control over it. Only the statements of comprehensive income of said investees for the six months ended December 31, 2018 were consolidated in the Company’s financial statements.

  • (e) The information on investment income from the subsidiaries, MERRY ELECTRONICS (SINGAPORE) PTE., LTD. and MERRY ELECTRONICS (HK) CO., LTD., is provided in Note 6(28).

  • (f) In December 2018, the Company acquired 100% of shares in Fulicare Medical Technology (Xiamen) Co., Ltd. (to be confirmed) for a consideration of US$10 million as resolved at the meeting of Board of Directors.

  • (g) To meet customers’ demand and expand market of health care personal sound amplification product business, the Company made a cooperation investment with Biotest Medical Corp. for a consideration no more than NT$10 million as resolved at the meeting of the Board of Directors on December 27, 2018. In February 2019, the Board of Directors resolved to invest in Biotest Medical Corp. in the amount of NTD 9,420 thousand and acquire 94.20% equity interests. The effective date for the conversion was set on July 31, 2019.

  • (h) In October 2019, the Board of Directors of the Company resolved to increase its investment in Fulicare Co., Ltd amounting to USD 1,900 thousand. As of December 31, 2019, the Company has remitted USD 987 thousand (NTD 30,000 thousand).

  • (i) In October 2019, the Board of Directors of the Company resolved to establish Fulicare Co., Ltd. TAIWAN BRANCH (SAMOA), Taiwan branch and set 30,000 thousand as working capital. The registration was completed on November 20, 2019.

  • (j) The liquidation of the Company’s second-tier subsidiary, Fulicare Medical Instruments Technical Services (Suzhou)Co.,Ltd was completed in May 2019.

  • (k) The liquidation of the Company’s second-tier subsidiary, Fulicare Medical Instruments (Suzhou)Co.,Ltd was completed in April 2019.

B. Associates

The carrying amount of the Company’s interests in all individually immaterial associates and the Company’s share of the operating results are summarised below:

As of December 31, 2019 and 2018, the carrying amount of the Company’s individually immaterial associates amounted to $443001 thousand and $480,339 thousand, respectively.

~36~

Years ended December 31,
2019 2018
Share of profit (loss) of associates
accounted for using equity method		 ($ 25,645)
 ($ 12,722)
Other comprehensive loss, net of tax ( 15,978)
 ( 23,003)
Total comprehensive loss ($ 41,623)
 ($ 35,725)
  • C. The recognised share of (loss) profit of subsidiaries and associates accounted for using equity method is as follows:
method is as follows:
Years ended December 31,
2019 2018
MERRY ELECTRONICS
(HK) CO., LTD. $ 675,996
 $ 718,960
DANNY DYNAMICS LIMITED 525,582 36,010
LEOHAB ENTERPRISE CO., LTD. 5,693 10,030
MERRY ELECTRONICS
(U.S.A.) CO., LTD. 3,720 435
MERRY ELECTRONICS
(SINGAPORE) PTE. LTD. 307,560 311,892
MERRY ELECTRONICS
(THAILAND) CO., LTD. ( 10,756)
 19,064
MERRY HEALTHCARE CO., LTD. ( 7,757)
 ( 2,063)
GUANGDONG LUXSHARE & MERRY ( 31,338)
 ( 22,752)
ASIAN ELITE INTERNATIONAL LTD. 2,415 20,935
INDIGO ENTERPRISE INC. ( 42,769)
 ( 29,017)
BIOTEST MEOLCAL
CORPORATION(“BTTT”) 13,152 -
$ 1,441,489 $ 1,063,494

(Remainder of page intentionally left blank)

~37~

(8) Property, plant and equipment

roperty, plant and equipment
YearendedDecember31,2019
Cost
Opening balance
Additions
Reductions
Ending balance
Land
558,900
$ -
$ -
$ 558,900
$ Buildings and structures
176,947
163
-
177,110
Machinery
89,565
16,566
12,846)
(
93,285
Transportation equipment
2,582
1,500
-
4,082
Office equipment
65,697
816
181)
(
66,332
Others
9,072
289
-
9,361
Unfinished construction
2,485
19,068
-
21,553
905,248
$ 38,402
$ 13,027)
($ 930,623
Accumulated depreciation
Buildings and structures
31,205)
(
4,334)
($ -
$ 35,539)
(
Machinery
65,921)
(
4,669)
(
1,176
69,414)
(
Transportation equipment
737)
(
529)
(
-
1,266)
(
Office equipment
38,531)
(
7,104)
(
181
45,454)
(
Others
7,331)
(
682)
(
-
8,013)
(
143,725)
(
17,318)
($ 1,357
$ 159,686)
(
761,523
$ 770,937
$ YearendedDecember31,2018
Cost
Opening balance
Additions
Reductions
Ending balance
Land
254,124
$ 304,776
$ -
$ 558,900
$ Buildings and structures
182,812
5,082
10,947)
(
176,947
Machinery
85,221
10,036
5,692)
(
89,565
Transportation equipment
2,767
-
185)
(
2,582
Office equipment
55,215
11,364
882)
(
65,697
Others
8,985
914
827)
(
9,072
Unfinished construction
-
2,485
-
2,485
589,124
$ 334,657
$ 18,533)
($ 905,248
Accumulated depreciation
Buildings and structures
36,843)
(
5,309)
($ 10,947
$ 31,205)
(
Machinery
65,093)
(
4,259)
(
3,431
65,921)
(
Transportation equipment
553)
(
369)
(
185
737)
(
Office equipment
32,208)
(
7,205)
(
882
38,531)
(
Others
6,185)
(
1,146)
(
-
7,331)
(
140,882)
(
18,288)
($ 15,445
$ 143,725)
(
448,242
$ 761,523
$

~38~

－ (9) Leasing arrangements lessee

Effective 2019

  • A. The Company leases various assets including land, buildings, machinery and equipment, business vehicles, multifunction printers. Rental contracts are typically made for periods of 1 to 5 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.

  • B. The carrying amount of right-of-use assets and the depreciation charge are as follows:

Land
Buildings
Machinery and equipment
Transportation equipment (Business vehicles)
Office equipment (Photocopiers)
Other equipment		 December31,2019 Year ended December
31,2019
Depreciationcharge
Carrying amount
$ 6,044
-
1,789
16
-
7,849
$		 $ 9,117
-
605

108

611
10,441
$

  • C. For the year ended December 31, 2019, the additions to right-of-use assets was $4,269 thousand.

  • D. The information on profit and loss accounts relating to lease contracts is as follows:

Items affecting profit or loss
Interest expense on lease liabilities		 Year ended December
31,2019
$ 610
  • E. For the year ended December 31, 2019, the Company’s total cash outflow for leases was $10,921 thousand.

~39~

(10) Intangible assets

ntangible assets
YearendedDecember31,2019
Cost
Goodwill
Patents
Computer software
Accumulated amortisation
Patents
Computer software		 Ending balance
139,735
$ 25,157
432,998
597,890
20,450)
(
290,266)
(
310,716)
(
287,174
$
Year ended December 31, 2018 Year ended December 31, 2018 Year ended December 31, 2018 Year ended December 31, 2018
Cost
Goodwill
Patents
Computer software
Accumulated amortisation
Patents
Computer software		 Opening balance Additions Reductions Ending balance
139,735
$ 19,263
360,238
519,236
14,317)
(
189,059)
(
203,376)
(
315,860
$		 -
$ 1,883
16,068
17,951
$ 2,884)
($ 53,357)
(
56,241)
($		 -
$ -
1,071)
(
1,071)
($ -
$ 1,071
1,071
$		 139,735
$ 21,146
375,235
536,116
17,201)
(
241,345)
(
258,546)
(
277,570
$

Details of amortisation on intangible assets are as follows:

Operating costs
Selling expenses
Administrative expenses
Research and development expenses		 Years endedDecember31, Years endedDecember31,
2019
14,407
$ 2,606
20,796
17,816
55,625
$		 2018
13,552
$ 2,353
20,152
20,184
56,241
$

(11) Impairment of non-financial assets

The recoverable amount of all cash-generating units calculated using the value-in-use exceeded their carrying amount, so goodwill was not impaired. The key assumptions used for value-in-use calculations are as follows:

~40~

The cash flow projections are based on financial budgets approved by the management covering a five-year period, the Company estimates a 10% year-on-year growth in sales as the Company will launch new products and improve its technology from 2020 to 2024.The estimation is based on that the Company is committed to developing and taking Bluetooth orders and the experience of sale growths of 5%, 94%, 84%, 34% and (3)% from 2015 to 2019, respectively.

Management determined budgeted gross margin based on past performance and their expectations of market development. The weighted average growth rates used are consistent with the projection included in industry reports. The discount rate of 16.03% used was pre-tax and reflected specific risks relating to the relevant operating segments.

(12) Short-term borrowings

==> picture [469 x 112] intentionally omitted <==

----- Start of picture text -----

Type of Borrowings December 31, 2019 Interest rate range Collateral
Bank borrowings
Unsecured borrowings $ 89,940 2.14% None
Type of Borrowings December 31, 2018 Interest rate range Collateral
Bank borrowings
Unsecured borrowings $ 4,399,144 0.69% ～ 2.99% None
----- End of picture text -----

ther payables
December31,2019 December31,2018
Salary and bonus payable $ 132,358
 $ 117,550
Employees’ compensation payable 219,531 162,028
Remuneration due to directors
and supervisors		 68,392 54,009
Machinery and equipment payable 675 13,650
Others 77,822 76,448
$ 498,778 $ 423,685
onds payable
December31,2019 December31,2018
Bonds payable $ 2,289,500
 $ 3,000,000
Less: Discount on bonds payable ( 59,541)
 ( 117,279)
2,229,959 2,882,721
Less: Current portion - -
$ 2,229,959 $ 2,882,721

(13) Other payables

(14) Bonds payable

  • A. The details of the second domestic unsecured convertible bonds issued by the Company on December 11, 2018 are as follows:

  • (a) The terms of the second domestic unsecured convertible bonds issued by the Company are as follows:

    • i. The competent authority has approved the Company’s second issuance of domestic

~41~

unsecured corporate bonds for a total issuance amount of US$3,015 million at a coupon rate of 0%, covering a 3-year period of issuance and a circulation period from December 11, 2018 to December 11, 2021. The bonds will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on December 11, 2018.

  • ii. The bondholders have the right to ask for conversion of the bonds into common shares of the Company by Taiwan Depository & Clearing Corporation through Securities Firms during the period from the date after three months of the bonds issue to the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations and the Company’s book closure date of stock dividends, book closure date of cash dividends, the period between the date that is 15 business days before the book closure date of a capital increase to the ex-right date, the period between the record date of a capital reduction and the prior day before the commencement of share trading after shares are repurchased. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

  • iii. The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price will be reset based on the pricing model in the terms of the bonds on each effective date regulated by the terms.

  • As of December 31, 2019, the conversion price of convertible bonds was $139.3 per share.

  • iv. The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of the Company’s common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after one month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after three months of the bonds issue to 40 days before the maturity date.

  • v. Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

  • (b) As of December 31, 2019, the bonds totalling $710,500 thousand (face value) had been converted into 4,884 thousand shares of common stock. After the issuance, the Company should adjust the conversion price of convertible bonds of $139.3 per share in accordance with the terms set out in the indenture when there is an increase in issued common shares.

  • B. Regarding the issuance of convertible bonds, the equity conversion options amounting to $101,750 thousand were separated from the liability component and were recognised in ‘capital surplus - share options’ in accordance with IAS 32. The call options embedded in bonds payable were separated from their host contracts and were recognised in ‘Financial assets at fair value through profit or loss’ in net amount in accordance with IFRS 9 because the economic

~42~

characteristics and risks of the embedded derivatives were not closely related to those of the host contracts.

  • C. The details of the first domestic unsecured convertible bonds issued by the Company on January 29, 2015 are as follows:

  • (a) The terms of the first domestic unsecured convertible bonds issued by the Company are as follows:

    • i. The competent authority has approved the Company’s first time issuance of domestic unsecured corporate bonds for a total issuance amount of US$1,507,500 thousand at a coupon rate of 0%, covering a 3-year period of issuance and a circulation period from January 29, 2015 to January 29, 2018. The bonds will be redeemed in cash at 100.5% of face value at the maturity date. The bonds were listed on the Taipei Exchange on January 29, 2015.

    • ii. The bondholders have the right to ask for conversion of the bonds into common shares of the Company by Taiwan Depository & Clearing Corporation through Securities Firms during the period from the date after one month of the bonds issue to the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations and the Company’s book closure date of stock dividends, book closure date of cash dividends, the period between the date that is 15 business days before the book closure date of a capital increase to the ex-right date, the period between the record date of a capital reduction and the prior day before the commencement of share trading after shares are repurchased. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

    • iii. The conversion price of the bonds is set up based on the pricing model in the terms of the bonds,and is subject to adjustments if the condition of the anti-dilution provisions occur subsequently. The conversion price will be reset based on the pricing model in the terms of the bonds on each effective date regulated by the terms. As of December 31, 2017, the conversion price of convertible bonds was $105.7 per share.

    • vi. The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of the Company’s common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after one month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after one month of the bonds issue to 40 days before the maturity date.

    • v. Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

  • (b) On December 31, 2017, the bonds payable of $1,492,526 had been converted into 13,487

~43~

thousand shares of common shares. As of January 31, 2018, the bonds were all converted. After the issuance, the Company should adjust the conversion price of convertible bonds of $105.7 per share in accordance with the terms set out in the indenture when there is an increase in issued common shares.

  • D. Regarding the issuance of convertible bonds, the equity conversion options amounting to $683 were separated from the liability component and were recognised in ‘capital surplus—share options’ in accordance with IAS 32. The call options embedded in bonds payable were separated from their host contracts and were recognised in ‘financial assets or liabilities at fair value through profit or loss’ in net amount in accordance with IAS 39 because the economic characteristics and risks of the embedded derivatives were not closely related to those of the host contracts.

(15) Pensions

  • A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Act, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Act. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 5.1% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee, and contributes 8% of the manager’s salaries and wages to the retirement fund deposited. Also, the Company would assess the balance in the aforementioned labor pension reserve account by the end of December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contributions for the deficit by next March.

  • (b) The amounts recognised in the balance sheet are as follows:

December31,2019 December31,2018
Present value of defined
benefit obligations $ 140,594
 $ 125,392
Fair value of plan assets ( 57,118)
 ( 41,348)
Net defined benefit liability $ 83,476 $ 84,044

~44~

(c) Movements in net defined benefit liabilities are as follows:

Year ended
December31,2019		 Present value of defined
benefit obligations		 Fair value of plan
assets		 Net defined benefit
liability
125,392
$ 284
1,230
-
126,906
4
3,653
12,682
16,339
-
2,651)
(
140,594
$ Present value of defined
benefit obligations
-		 41,348)
($ -
404)
(
-
41,752)
(
-
-
-
1,312)
(
16,705)
(
2,651
57,118)
($ Fair value of plan
assets
1,312)
(		 84,044
$ 284
826
-
85,154
4
3,653
12,682
15,027
16,705)
(
-
83,476
$ Net defined benefit
liability
1,312)
(
Balance at January 1
Current service cost
Interest expense (income)
Past service cost
Remeasurements:
Return on plan assets
(excluding amounts
included in interest income or
expense)
Change in demographic
assumption
Change in financial assumption
Experience adjustments
Pension fund contribution
Paid pension
Balance at December 31
Year ended
December31,2018
154,607
$ 1,246
1,512
2,706)
(
154,659
8,121
8,121
-
37,388)
(
125,392
$ -		 42,475)
($ -
408)
(
779
42,104)
(
-
1,070)
(
1,336)
(
3,162
41,348)
($ 1,070)
(		 112,132
$ 1,246
1,104
1,927)
(
112,555
8,121
7,051
1,336)
(
34,226)
(
84,044
$ 1,070)
(
Balance at January 1
Current service cost
Interest expense (income)
Past service cost
Remeasurements:
Return on plan assets
(excluding amounts
included in interest
income or expense)
Experience adjustments
Pension fund contribution
Paid pension
Balance at December 31

~45~

  • (d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2019 and 2018 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

  • (e) The principal actuarial assumptions used were as follows:

Discount rate
Future salary increases		 Years endedDecember31,
2019
2018
0.75%
1.00%
3.00%
3.00%

Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Morality Table.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

December 31, 2019
Effect on present value of defined
benefit obligation
December 31, 2018
Effect on present value of defined
benefit obligation		 Discount rate Discount rate Discount rate Future salaryincreases Future salaryincreases
Increase
0.25%		 Decrease
0.25%		 Increase
0.25%		 Decrease
0.25%
3,653)
($ 3,331)
($		 3,800
$ 3,468
$		 3,706
$ 3,391
$		 3,584)
($ 3,275)
($

The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

~46~

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

  • (f) The Company expects to pay contribution for pension plan amounting to $3,176 thousand in 2020.

  • (g) As of December 31, 2019, the weighted average duration of the retirement plan is 10 years. The analysis of timing of the future pension payment was as follows:

Within 1 year
1-2 year(s)
2-5 years
Over 5 years		 2,921
$ 5,049

21,923

122,460
152,353
$

  • B. (a) Effective July 1, 2005, the Company has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

  • (b) The pension costs under the defined contribution pension plan of the Company for the years ended December 31, 2019 and 2018 were $29,017 thousand and $26,435 thousand, respectively.

(16) Share-based payments

The Company issued restricted stocks to employees as resolved at the meeting of the Board of Directors on April 27, 2017 and May 9, 2016 with grant dates on October 26, 2018, December 29, 2017, June 16, 2017 and December 21, 2016. The relevant information is as follows:

  • A. For the years ended December 31, 2019 and 2018, the Company’s share-based payment arrangements were as follows:

~47~

Type of
arrangement		 Grant date
Quantity
granted
2016.12.21
1,542 units
2017.06.16
458 units
2017.10.30
95 units
2017.12.29
196 units
2018.07.02
307 units
2018.10.26
878 units
2018.12.28
363 units
2019.11.02
813 units		 Contract
period		 Vesting
conditions
Restricted stocks
to employees
Restricted stocks
to employees
Treasury stock
transferred to
employees
Restricted stocks
to employees
Treasury stock
transferred to
employees
Restricted stocks
to employees
Cash capital
increase reserved
for employee
preemption
Restricted stocks
to employees		 3 years
3 years
-
3 years
-
3 years
-
3 years		 Note
Note
-
Note
-
Note
-
Note

Note: Depending on the employees’ tenure in the Company (1 to 3 years), the employees can vest stocks at the ratio of 30%, 30% and 40% in three years based on the number of stocks written on the notification. The conditions for vesting restricted stocks are as follows:

  • (a) For the employees who are currently working in the Company, whose services have reached 1 year and achieved the performance of the most recent year’s consolidated financial statements and the target personal performance, the ceiling of vested share ratio is 30%.

  • (b) For the employees who are currently working in the Company, whose services have reached 2 years and achieved the performance of the most recent year’s consolidated financial statements and the target personal performance, the ceiling of accumulated vested share ratio is 60%.

  • (c) For the employees who are currently working in the Company, whose services have reached 3 years and achieved the performance of the most recent year’s consolidated financial statements and the target personal performance, the ceiling of accumulated vested share ratio is 100%.

  • (d) The Company will repurchase and retire the stocks that did not meet the conditions of vesting for the employees who resign during the vesting period or not meet the condition of vesting by the issuance price.

The aforementioned restricted stocks issued by the Company cannot be transferred during the vesting period and the commissioned trust custodians execute the shareholders’ rights on

~48~

behalf of the employees.

  • B. Details of the share-based payment arrangements are as follows:

  • (a) The first restricted stocks to employees in 2016

2019 2019 2019 2018 2018 2018
Weighted- Weighted-
average average
No. of exercise price No. of exercise price
options (in dollars) options (indollars)
Options outstanding at
January 1 542
 $ 10
 1,037 $ 10
Restricted stocks vested ( 4)
 10 ( 408)
 10
Employee restricted
shares retired ( 538)
 10
 ( 87)
 10
Options outstanding at
December 31 - 10 542 10
  • (b) The second restricted stocks to employees in 2016
Options outstanding at
January 1
Restricted stocks vested
Employee restricted
shares retired
Options outstanding at
December 31		 2019 2019 Weighted-
average
exercise price
(in dollars)
445

10
$ 129)
(
10
22)
(
10
294
10
2018
No. of
options
No. of
options		 Weighted-
average
exercise price
(indollars)
294
-
134)
(
160		 10
$ -
10
10
  • (c) The first restricted stocks to employees in 2017
2019 2019 2018 2018
Weighted- Weighted-
average average
No. of exercise price No. of exercise price
options (indollars) options (indollars)
Options outstanding
at January 1 164 $ -
 196 $ -
Restricted stocks vested ( 49)
 - - -
Employee restricted
shares retired ( 7)
 - ( 32)
 -
Options outstanding
at December 31 108 - 164 -

~49~

(d) The second restricted stocks to employees in 2017

2019 2019 2019 2018 2018 2018
Weighted- Weighted-
average average
No. of exercise price No. of exercise price
options (indollars) options (indollars)
Options outstanding at
January 1 862 $ -
 - $ -
Restricted stocks granted
to employees -
 - 878 -
Restricted stocks vested ( 251)
 - - -
Employee restricted
shares retired ( 13)
 - 16)
(		 -
Options outstanding at
December 31 598 - 862
 -
  • (e) The first restricted stocks to employees in 2019
Options outstanding at
January 1
Restricted stocks granted
to employees
Employee restricted
shares retired
Options outstanding at
December 31		 Weighted-
average
exercise price
(indollars)
-
-
$ 813
-
-
-
813
-
2019
No. of options		 2018 2018
No. of options No. of options Weighted-
average
exercise price
(indollars)
-
813
-
813		 -
-
-
-		 -
$ -
-
-

~50~

B. The fair value of stock options granted on grant date is measured using the closing price on the grant date. Relevant information is as follows:

follows:
Type of arrangement
Grant date
Stockprice
The first restricted
stocks to employees
in 2016
2016.12.21
125
The second restricted
stocks to employees
in 2016
2016.06.16
187
Treasury stock
transferred to
employees
2017.10.30
220
The first restricted
stocks to employees
in 2017
2017.12.29
194.5
Treasury stock
transferred to
employees
2018.07.02
132.5
The second restricted
stocks to employees
in 2017
2018.10.26
139.5
Cash capital increase
reserved for
employee preemption
2018.12.28
123
The first restricted
stocks to employees
in 2019
2019.11.02
150		 Exercise
price		 Expected price
volatility		 Expected
option life		 Expected
dividends		 Risk-free interest rate Fair value per
unit
Price risk -
-
-
-
-
-
-
0		 -
-
-
-
-
-
-
0		 -
-
-
-
-
-
-
0		 -
-
-
-
-
-
-
0		 115
177
174.58
194.5
87.08
139.5
11
150
10
10
45.42
0
45.42
0
112
0

~51~

C. Expenses incurred on share-based payment transactions are shown below:

Years ended December 31,

Years ended D ecember31,
2019
Equity-settled
52,158
$		 2018
121,025
$

(17) Share capital

  • A. As of December 31, 2019, the Company’s authorised capital was $4 billion, consisting of 400 million shares of ordinary stock (including 5 million shares reserved for employee stock options), and the paid-in capital was $2,086,681 thousand with a par value of $10 (in dollars) per share. Movements in the number of the Company’s ordinary shares outstanding are as follows (in thousands):
2019 2018
At January 1 $ 199,663
 $ 200,472
Employee restricted shares retired ( 692)
 ( 157)
Issuance of restricted shares
to employees		 813 1,074
Conversion of convertible bonds 4,884 141
Retirement of treasury share -
 ( 1,867)
Proceeds from issuing shares 4,000
 -
At December 31 $ 208,668 $ 199,663

  • (a) On April 27, 2017, the Board of Directors has resolved for the Company to issue employee restricted stocks (please refer to Note 6(16)). The issuance was approved by the regulatory authority on November 29, 2017 and effective on January 22, 2018 and with a subscription price of $0 (in dollars) per share. The registrations were completed on February 26, 2018 and November 15, 2018 for ordinary shares issued of 196 thousand shares and 878 thousand shares, respectively. The employee restricted ordinary shares issued are subject to certain transfer restrictions before their vesting conditions are met. Other than these restrictions, the rights and obligations of these shares issued are the same as other issued ordinary shares.

  • (b) On April 26, 2018 and October 25, 2018, the Board of Directors of the Company resolved to retire employee restricted share in the amount of 157,500 shares. The effective dates for the capital reduction were March 14, 2019 and October 25, 2018. The capital reduction through retirement of employee restricted shares was completed.

  • (c) On April 25, 2019 and July 26, 2019, the Board of Directors of the Company resolved to retire employee restricted share in the amount of 692,200 shares. The effective dates for the capital reduction were April 30, 2019 and July 31, 2019. The capital reduction through retirement of employee restricted shares was completed.

  • (d) On December 11, 2018, the Company issued the 2nd unsecured convertible bonds. As of December 31, 2019, the face value of those convertible bonds amounted to $710,500, which had been converted into 4,884 thousand common shares. Please refer to Note 6(14) for further

~52~

information

  • (e) In 2018, the Company increased its capital by issuing 4 million shares with a par value of $112 (in dollars per share). The total amount of capital increase was $40 million. The capital increase was set effective on January 1, 2019 and the registration has been completed in February 13, 2019.

  • (f) On October 24, 2019, the Board of Directors of the Company resolved to issue employee restricted shares (please refer to Note 6(16)). The issuance was approved by the Competent Authority on September 16, 2019. The Company issued 813 thousand common shares with the effective date set on November 2, 2019. The subscription price is $0 per share and the registration for the issuance of new shares was completed. The employee restricted shares issued are subject to certain transfer restrictions before their vesting conditions are qualified. Other than these restrictions, the rights and obligations of these shares issued are the same as other issued common shares.

  • B. Treasury shares

  • (a) Movements in the Company’s treasury shares are as follows (in thousands): Year 2019 ： No such situation.

Year ended December 31, 2018 Number of shares Number of shares Reason for reacquisition at beginning Additions Reductions at end Transferred to employees 2,174 - ( 2,174) -

  • (b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realised capital surplus.

  • (c) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.

  • (d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.

  • (e) The Company retired 1,867 thousand treasury shares which were repurchased from June 16, 2015 to August 14, 2015 for the purpose of transferring to employees as resolved at the meeting of the Board of Directors on July 26, 2018 with the capital reduction effective date set on September 28, 2018.

(18) Capital surplus

Capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders

~53~

in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paid-in capital each year. However, capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

At January 1
Issuance of
restricted shares
to employees
Restricted
stocks vested
Employee
restricted stocks
retired
Proceeds from
issuance of
convertible bonds
Ordinary shares
converted from
convertible bonds
Proceeds from
issuing shares
Treasury stock
transferred to
employees
Retirement of
treasury share
Acquisition of
additional share
agreements in
a subsidiary
Recognition of
change in equity
of associates
in proportion to the
Company’s
ownership
At December 31		 2019 Total
Share
premium		 Treasury
share option		 Employee
restricted
stocks		 Others
2,376,147
$ -
45,123
-
-
668,163
411,993
-
-
-
-
3,501,426
$		 137,319
$ -
-
-
-
31,576)
(
3,993)
(
-
-
-
-
101,750
$		 256,324
$ 113,820
45,123)
(
88,564)
(
-
-
-
-
-
-
-
236,457
$		 19,321
$ -
-
-
-
-
-
-
-
-
11,151
30,472
$		 2,789,111
$ 113,820
-
88,564)
(
-
636,587
408,000
-
-
-
11,151
3,870,105
$

~54~

At January 1
Issuance of
restricted shares
to employees
Restricted
stocks vested
Employee
restricted stocks
retired
Proceeds from
issuance of
convertible bonds
Ordinary shares
converted from
convertible bonds
Proceeds from
issuing shares
Treasury stock
transferred to
employees
Retirement of
treasury share
Acquisition of
additional share
agreements in
a subsidiary
Recognition of
change in equity
of associates
in proportion to the
Company’s
ownership
At December 31		 2018
Share
premium		 Treasury
share option		 Employee
restricted
stocks		 Others Total
2,719,952
$ -
69,665
-
-
14,248
-
-
25,646)
(
402,072)
(
-
2,376,147
$		 683
$ -
-
-
133,326
683)
(
3,993
-
-
-
-
137,319
$		 236,200
$ 111,741
69,665)
(
21,952)
(
-
-
-
-

-

-
-
256,324
$		 28,469
$ -
-
-
-
-
-
26,733
40,483)
(
-
4,602
19,321
$		 2,985,304
$ 111,741
-
21,952)
(
133,326
13,565
3,993
26,733
66,129)
(
402,072)
(
4,602
2,789,111
$

~55~

(19) Retained earnings

  • A. Under the Company’s Articles of Incorporation, the current year’s earnings, after deduction of mandatory income tax, shall first be used to offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve. After the provision or reversal of special reserve, the appropriation of the remaining earnings along with the unappropriated earnings of prior years shall be proposed by the Board of Directors and approved by the shareholders. According to the dividend policy adopted by the Board of Directors, 30% to 80% of the Company’s accumulated distributable earnings shall be appropriated as dividends, and cash dividends shall account for at least 5% of the total dividends distributed.

  • B. The Company’s dividend policy is summarized below: as the Company operates in a volatile business environment and is in the stable growth stage, the residual dividend policy is adopted taking into consideration the Company’s financial structure, operating results and future expansion plans. In order to encourage employees and operations team, if the Company has any profit for the current year, the Company shall set aside 5% to 10% as employees’ compensation and no more than 2% as directors’ and supervisors’ remuneration. The employees’ compensation shall be distributed in the form of stock and cash by a resolution adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors and report it in the shareholders’ meeting. Employees entitled to receive stock or cash as compensation include employees of subsidiaries of the company meeting certain specific requirements.

  • C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

  • D. (a) In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

  • (b) The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land. As of December 31, 2019, the balance of capital surplus was $269,144 thousand.

  • E. The Company distributed cash dividends amounting to $8.6 and $16.44 per share, respectively as resolved at the meeting of Board of Directors on June 19, 2019 and June 13, 2018, respectively.

~56~

The abovementioned distribution of earnings for the years ended December 31, 2018 and 2017 was in agreement with those amounts proposed by the Board of Directors on February 26, 2019 and February 26, 2018, respectively.

  • F. The appropriation of cash dividends for 2019 as resolved by the Board of Directors on February 27, 2020 amounted to $7.7.

  • G. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(25).

(Remainder of page intentionally left blank)

~57~

(20) Other equity items

ther equity items
2019 Exchange
differences on
translation of
foreign
financial
statements		 Unrealised gains (losses)
from investments in debt
instruments measured at
fair value through other
comprehensiveincome		 Unrealised gains (losses)
from investments in
equity instruments
measured at fair value
through other
comprehensiveincome		 Cost of
unearned
employee
compensation
Total
($ 223,900) $ 147,032
( 121,950) ( 121,950)
52,158 52,158
88,766 88,766
- 1,145,412
- ( 833)
- ( 68,104)
- ( 113,955)
- 22,791
- ( 153,522)
-
30,039
($204,926)
$ 1,027,834		 Total
At January 1
Effects of simple
retrospection
Issuance of restricted
shares to employees
Employee restricted
shares retired
Revaluation - gross
Revaluation transferred to
profit or loss - gross
Revaluation transferred to
retained earnings – gross
Currency translation
differences:
- Group
- Tax on Group
- Associates
- Tax on associates
At December 31		 ($ 242,186)
-
-
-
-
-
-
( 113,955)
22,791
( 153,522)
30,039
($456,833)		 $ 3,244
-
-
-
( 1,544)
( 833)
-
-
-
-
-
$ 867		 $ 609,874
-
-
-
1,146,956
-
( 68,104)
-
-
-
-
$1,688,726
$ 1,027,834

.

~58~

2018 Exchange
differences on
translation of
foreign financial
statements		 (losses) from
investments in debt
instruments measured at
fair value through other
comprehensive income		 from investments in
equity instruments
measured at fair value
through other
comprehensive income		 Unrealised
gains (losses)
on available-
for-sale
financial assets		 Cost of
unearned
employee
compensation
Total
($ 214,148) $ 3,074,587
- ( 3,766)
( 122,481) ( 122,481)
90,298 90,298
22,431 22,431
- ( 2,511,564)
- 13,602
- ( 346,726)
- ( 13,879)
- -
- 19,095
- ( 3,834)
- ( 87,285)
-
16,554
($223,900)
$147,032
At January 1
Effects of simple
retrospection
Issuance of restricted
shares to employees
Amortisation of employee
restricted stocks
Employee restricted
shares retired
Revaluation - gross
Revaluation transferred to
profit or loss - gross
Revaluation transferred to
retained earnings – gross
Revaluation – associates
Revaluation – tax
Currency translation
differences:
- Group
- Tax on Group
- Associates
- Tax on associates
At December 31		 ($ 186,716)
-
-
-
-
-
-
-
-
-
19,095
( 3,834)
( 87,285)
16,554
($242,186)		 $ -
( 15,395)
-
-
-
5,037
13,602
-
-
-
-
-
-
-
$ 3,244		 $ -
3,487,080
-
-
-
( 2,516,601)
-
( 346,726)
( 13,879)
-
-
-
-
-
$ 609,874		 $ 3,475,451
( 3,475,451)
-
-
-
-
-
-
-
-
-
-
-
-
$-

~59~

(21) Operating revenue

Years ended December 31, 2019 2018 Revenue from contracts with customers $ 30,648,815 $ 30,438,179

A. Disaggregation of revenue from contracts with customers

The Company derives revenue from the transfer of goods and services at a point in time in the following geographical regions:

Year ended December 31, 2019

Electronic devices

Total segment revenue
Revenue from
external customer
contracts
Timing of revenue
recognition
At a point in time
Total		 Taiwan
411,816
$ 411,816
411,816
411,816
$		 Europe
US
10,833,812
$ 16,775,583
$ 10,833,812
$ 16,775,583
$ 10,833,812
16,775,583
10,833,812
$ 16,775,583
$ Year ended December31,		 Europe
US
10,833,812
$ 16,775,583
$ 10,833,812
$ 16,775,583
$ 10,833,812
16,775,583
10,833,812
$ 16,775,583
$ Year ended December31,		 Others
1,092,385
$ 1,092,385
$ 1,092,385
30,648,815
$		 Total
30,648,815
$ 30,648,815
$ 30,648,815
30,648,815
$
B. Contract assets and liabilities:
Taiwan
Total segment revenue
399,809
$ Revenue from
external customer
contracts
399,809
Timing of revenue
recognition
At a point in time
399,809
Total
399,809
$ December
Contract assets
$ Cintract liabilities
$		 Europe
11,997,550
$ 11,997,550
11,997,550
11,997,550
$
31,2019
31,585
87,580		 US
Mainland
China
14,811,909
$ 2,300,222
$ 14,811,909
2,300,222
14,811,909
2,300,222
14,811,909
$ 2,300,222
$ Electronic devices
December31,2018
-
$ $ -
$ $		 Others
Total
928,689
$ 30,438,179
$ 928,689
30,438,179
928,689
30,438,179
928,689
$ 30,438,179
$ January1,2018
-
-
$ $
$ $

~60~

(22) Other income

(22) Other income
(23)
(24)		 Other gains and losses
Expenses by nature
Dividend income
Interest income from bank deposits
Interest income from financial assets
not at fair value through profit or loss
Sample income
Rent income
Other income
Net currency exchange (losses) gains
($ Net gains on financial assets at fair
value through profit or loss
Gains on disposal of
property, plant and equipment
Gains (losses) on disposals of
investment
Other losses
(
($ Employee benefit expense
$ Depreciation charge-
property, plant and equipment
Depreciation - right of use asset
Amortisation charge
$		 2019
2018
69,850
$ 60,437
$ 44,968
35,369

3,554
5,048

14,364

11,683

6,604
6,620

6,256

11,884

145,596
$ 131,041
$ Years endedDecember31,
2019
2018
73,253)

3,564
$ 68,721
62,842
471
97
833
13,602)
(
2,465)

175)
(
5,693)
52,726
$ Years endedDecember31,
2019
2018
1,027,528

984,785
$ 17,318
18,288
10,441
-

55,625
56,241
1,110,912
1,059,314
$ Years endedDecember31,
2019
1,027,528

17,318
10,441
55,625
1,110,912
$
$

As of December 31, 2019 and 2018, the Company had 654 and 703 employees, including 5 and 3 nonemployee directors, respectively.

~61~

(25) Employee benefit expense

mployee benefit expense
Years ended December 31,
2019 2018
Wages and salaries $ 773,321
 $ 708,228
Share-based payments 56,411 118,770
Labour and health insurance fees 57,100
 52,067
Pension costs 30,127
 26,882
Directors' remuneration 69,276
 46,372
Other employee benefit expense 41,293
 32,466
$ 1,027,528 $ 984,785

  • A. In accordance with the Articles of Incorporation of the Company, a ratio of distributable profit of the current year, after covering accumulated losses, shall be distributed as employees ‘compensation and directors’ and supervisors’ remuneration. The ratio shall be from 5% to 10% for employees’ compensation and shall not be higher than 2% for directors’ and supervisors’ remuneration.

  • B. The details of employees’ compensation and directors’ and supervisors’ remuneration of the Company are as follows:

Company are as follows:
Years ended December 31,
2019 2018
Employees’ compensation $ 205,176
 $ 162,028
Directors’ and supervisors’
remuneration		 68,392
 54,009
$ 273,568
 $ 216,037

The abovementioned amounts were recognised in salaries and wages.

Employees’ compensation and directors’ and supervisors’ remuneration for 2018 as resolved at the Board of Directors’ meeting were in agreement with those amounts recognised in the profit or loss of 2018.

Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(Remainder of page intentionally left blank)

~62~

(26) Income tax

A. Income tax expense

(a) Components of income tax expense:

me tax
Income tax expense
(a) Components of income tax expense:
Years ended December 31,
2019 2018
Current tax:
Current tax on profits for the year $ 315,664
 $ 254,791
Tax on undistributed surplus earnings 4,763
 11,008
Prior year income tax (over) under
estimation -
 15,101
Total current tax 320,427
 280,900
Deferred tax:
Origination and reversal of
temporary differences 276,993 150,070
Income tax expense $ 597,420 $ 430,970
(b) The income tax (charge)/credit relating to components of other comprehensive income is as
follows:
Years ended December 31,
2019 2018
Exchange differences changes
on translation of foreign
financial statements ($ 25,493)
 $ 3,834
Exchange differences changes
on translation of foreign financial
statements - associates ( 27,337)
 ( 16,554)
Remeasurement of defined
benefit obligations ( 3,005)
 ( 1,410)
($ 55,835)
 ($ 14,130)

(Remainder of page intentionally left blank)

~63~

B. Reconciliation between income tax expense and accounting profit:

Years ended December December 31,
2019 2018
Current tax:
Tax calculated based on profit
before tax and statutory tax rate $ 629,206
 $ 446,618
Expenses disallowed by tax regulation - 35
Tax exempt income by tax regulation ( 5,673)
 ( 9,571)
Effect from investment tax credits ( 31,485)
 ( 29,534)
Impact of change in the tax rate
on temporary differences between
current year and the year realised - -
Effect from Alternative Minimum Tax -
 -
Tax on undistributed surplus earnings 4,763
 11,008
Prior year income tax (over) under
estimation - 15,101
Others 609 ( 2,687)
Income tax expense $ 597,420
 $ 430,970

(Remainder of page intentionally left blank)

~64~

  • C. Amounts of deferred tax assets or liabilities as a result of temporary differences, tax losses and investment tax credits are as follows:
Deferred tax assets:
Temporary differences:
Remeasurement of defined
benefit obligations
Allowance for bad debts
Unallocated appropriation
of pension
Unrealised impairment loss
Accumulated unused
compensated absences
Allowance for inventory
valuation losses and loss
on obsolete and
slow-moving inventories
Amortisation of discounts
on corporate bonds
Unrealised exchange loss
Unrealised loss on valuation
of financial instruments
Investment tax credits
Deferred tax liabilities
Temporary differences:
Gain on overseas long-term
investment
Cumulative translation
adjustment of long-term
equity investments
Unrealised exchange gain
Others		 2019 December31
January1 Recognised in
profit or loss		 Recognised in other
comprehensive income
15,236
$ 6,118
192
-
4,083
9,546
427
3,597
1,586
-
40,785
$ 588,227)
($ 15,832)
(
-
800)
(
604,859)
($		 -
$ -
192)
(
-
497
2,446
6,917
77)
(
1,586)
(
-
8,005
$ 284,530)
($ -
468)
(
-
284,998)
($		 3,005
$ -
-
-
-
-
-
-
-
36,998
40,003
$ -
$ 15,832
-
-
15,832
$		 18,241
$ 6,118
-
-
4,580
11,992
7,344
3,520
-
36,998
88,793
$ 872,757)
($ -
468)
(
800)
(
874,025)
($

~65~

2018 2018
Recognised in Recognised in other
January1 profit or loss comprehensive income December31
Deferred tax assets:
Temporary differences:
Remeasurement of defined
benefit obligations		 $ 13,826
 $ -
 $ 1,410
 $ 15,236
Allowance for bad debts 5,913 205
 - 6,118
Unallocated appropriation
of pension 6,435 ( 6,243)
 - 192
Unrealised impairment loss 595 ( 595)
 - -
Accumulated unused
compensated absences 3,694 389
 - 4,083
Allowance for inventory
valuation losses and loss
on obsolete and
slow-moving inventories 425 9,121 - 9,546
Amortisation of discounts
on corporate bonds - 427 - 427
Unrealised exchange loss 2,200 1,397 - 3,597
Unrealised loss on valuation
of financial instruments - 1,586 - 1,586
Investment tax credits 17,624 ( 17,624)
 - -
$ 50,712 ($ 11,337) $ 1,410
 $ 40,785
Deferred tax liabilities
Temporary differences:
Gain on overseas long-term
investment ($ 447,280)
 ($ 140,947)
 $ -
 ($ 588,227)
Cumulative translation
adjustment of long-term
equity investments ( 28,552)
 - 12,720 ( 15,832)
Unrealised exchange gain - - - -
Others ( 3,014)
 2,214 - ( 800)
($ 478,846) ($ 138,733) $ 12,720
 ($ 604,859)

D. The Company invested in MERRY ELECTRONICS (HK) CO., LTD. and MERRY LECTRONICS (U.S.A.) CO., LTD. Before 2000, the unappropriated retained earnings of MERRY ELECTRONICS (HK) CO., LTD. and MERRY LECTRONICS (U.S.A.) CO., LTD. were not distributed because of permanent investment and their accumulated deficit were not covered either, therefore, the difference between the carrying amount and taxable amount of long-term equity investments was not recognised as deferred tax. However, the retained earnings after 2001 would be distributed and remitted back for the consideration of the whole operation plan. Therefore, from 2001, the deferred tax liabilities and assets would be recognised for the retained earnings and accumulated deficit.

~66~

  • E. The Company’s income tax returns through 2017 have been assessed and approved by the Tax Authority.

  • F. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China on February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of the change in income tax rate.

(27) Earnings per share

in income tax rate.
rnings per share		 in income tax rate.
rnings per share		 in income tax rate.
rnings per share
Amount aftertax
Weighted average
number of ordinary
shares outstanding
(sharesinthousands)
Basic earningsper share
Profit attributable to
ordinary shareholders
of the parent
2,548,612
$ 203,745
Diluted earnings per share
Profit attributable to
ordinary shareholders
of the parent
2,548,612
$ 203,745
Assumed conversion of
all dilutive potential
ordinary shares
Employees’ compensation
-
1,375
Convertible bonds
27,669
17,874

Employee restricted shares
-
308

Profit attributable to ordinary
shareholders of the parent
plus assumed conversion
of all dilutive potential
ordinary shares
2,576,281
$ 223,302
YearendedDecember31,		 Earnings per
share (indollars)
2019
203,745
203,745
1,375
17,874

308

223,302		 12.51
$ 11.54
$

~67~

Amount aftertax
Weighted average
number of ordinary
shares outstanding
(sharesinthousands)
Basic earnings pershare
Profit attributable to
ordinary shareholders
of the parent
2,064,265
$ 197,147
Diluted earnings pershare
Profit attributable to
ordinary shareholders
of the parent
2,064,265
$ 197,147
Assumed conversion of
all dilutive potential
ordinary shares
Employees’ compensation
-
1,610
Convertible bonds
-
-
Employee restricted shares
-
669
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion
of all dilutive potential
ordinary shares
2,064,265
$ 199,426
YearendedDecember31,		 YearendedDecember31, YearendedDecember31, YearendedDecember31, Earnings per
share (indollars)
2018
Weighted average
number of ordinary
shares outstanding
(sharesinthousands)
197,147
197,147
1,610
-
669
199,426		 10.47
$ 10.35
$

  • A. The number of weighted-average outstanding shares is included for assumed conversion of all dilutive potential ordinary shares at the calculation of diluted earnings per share, based on the assumption that employees’ compensation will all be distributed in the form of shares.

  • B. The number of weighted-average shares outstanding is calculated by considering the weightedaverage number of treasury shares for the years ended December 31, 2019 and 2018.

~68~

(28) Supplemental cash flow information

A. Investing activities with partial cash payments

Years endedDecember31, Years endedDecember31, Years endedDecember31, Years endedDecember31,
2019 2018
Purchase of property,
plant and equipment $ 38,402
 $ 334,657
Add: Opening balance of payable on
equipment 10,998
 5,831
Ending balance of prepayments
for equipment - 5,962
Less: Ending balance of payable on
equipment ( 5,962)
 ( 10,998)
Opening balance of prepayments
for equipment ( 5,962)
 ( 211)
Cash paid during the year $ 42,763 $ 335,241
Years ended December 31,
2019 2018
Purchase of intangible assets $ 65,229
 $ 17,951
Add: Opening balance of payable 2,652 2,103
Ending balance of prepayments 5,901
 30,970
Less: Opening balance of prepayments ( 30,970)
 ( 4,175)
Ending balance of payable -
 ( 2,652)
Cash paid during the year $ 42,812 $ 44,197
B. Financial assets at fair value through profit or loss
Years ended December 31,
2019 2018
Disposal of financial assets at
fair value through profit or loss ($ 154,703)
 ($ 235,728)
Payment for prior period
purchases during the year -
 4,667
Cash received during the year ($ 154,703) ($ 231,061)
C. Financial assets at fair value through other comprehensive income
Years ended December31,
2019 2018
Disposal of financial assets at fair value
through other comprehensive income ($ 147,651)
 ($ 473,701)
Add: Uncollected proceeds from
disposal during the year 4,336 -
Less: Collected proceeds from prior
period disposal - ( 129,339)
Cash received during the year ($ 143,315) ($ 603,040)

~69~

D. Investments accounted for using equity method

Years ended December 31,
2019 2018
Backward remittance of
earnings in subsidiaries $ -
 ($ 347,634)
Less: Opening balance of dividends
receivable (shown as other
receivables due from related
parties) -
 ( 226,490)
$ -
 ($ 574,124)

E. Financing activities with no cash flow effects

Years ended December31,
2019 2018
Convertible bonds being converted to
capital stocks 48,851
$		 1,409
$

(29) Changes in liabilities from financing activities

At January 1, 2019
Changes in cash flow from financing activities
Impact of changes in foreign exchange rate
Changes in other non-cash items
At December 31, 2019
At January 1, 2018
Changes in cash flow from financing activities
Impact of changes in foreign exchange rate
Changes in other non-cash items
At December 31, 2018		 Short-term
borrowings
4,399,144
$ 4,306,796)
(
2,408)
(
-
89,940
$ Short-term
borrowings		 Short-term
borrowings
4,399,144
$ 4,306,796)
(
2,408)
(
-
89,940
$ Short-term
borrowings		 Convertible
bonds		 Total liabilities from
financing activities		 Total liabilities from
financing activities
2,882,721
$ -
-
652,762)
(
2,229,959
$ Convertible
bonds		 4,399,144)
($ 4,306,796)
(
2,408)
(
-
89,940
$ Total liabilities from
financing activities
1,349,520
$ 3,049,066
558
-
4,399,144
$		 -
$ 3,015,000
-
132,279)
(
2,882,721
$		 1,349,520
$ 3,049,066
558
-
4,399,144
$

~70~

7. RELATED PARTY TRANSACTIONS

(1) Relationship of related parties

Names of related partiesames of related partiespartiesarties

Names of related partiesames of related partiespartiesarties Relationship with the Company MERRY ELECTRONICS (SHENZHEN) CO., Subsidiary of the Company LTD. (“MECL”) MERRY ELECTRONICS (HK) Subsidiary of the Company CO., LTD. (“MEST”) Merry Electronics （ Suzhou ） Co., Ltd. Stockholder which accounts for the (“MECE”) Company using the equity method (Note 3) MERRY ELECTRONICS (Thailand) Subsidiary of the Company CO., LTD. (“METC”) MERRY ELECTRONICS (U.S.A) Subsidiary of the Company CO., LTD. (“MECA”) LEOHAB ENTERPRISE CO.,LTD. Stockholder which accounts for the (“LEOHAB”) Company using the equity method UNIVERSAL CAPITAL INVESTMENT Subsidiary of the Company (Note 2) LIMITED (“UCMU”) MERRYTECH (HK) CO., LTD. ("MTCH") Subsidiary of the Company (Note 1) MERRY ELECTRONICS (HUIZHOU) CO., Stockholder which accounts for the LTD. (“MECH”) Company using the equity method (Note 4) MERRY ELECTRONICS Subsidiary of the Company (SINGAPORE) PTE. LTD. (“MESG”) MERRY HEALTHCARE CO., LTD. Branch of the Company's Subsidiary GUANGDONG LUXSHARE & MERRY Stockholder which accounts for the ELECTRONICS CO., LTD. (“MEDG”) Company using the equity method (Note 5) BIOTEST MEOLCAL Subsidiary of the Company (Note 6) CORPORATION(“BTTT”)

Stockholder which accounts for the Company using the equity method (Note 3) Subsidiary of the Company

Subsidiary of the Company (Note 1) Stockholder which accounts for the Company using the equity method (Note 4) Subsidiary of the Company

Branch of the Company's Subsidiary Stockholder which accounts for the Company using the equity method (Note 5) Subsidiary of the Company (Note 6)

  • Note 1: The Group amended abbreviation of ‘Universal Capital Investment Limited’ for the year 2018, the former abbreviation was ‘UCIL’.

  • Note 2: The Group amended abbreviation of ‘MERRYTECH (HK) CO.LIMITED’during the year, the former abbreviation was ‘MTCH’ .

  • Note 3: The Company sold 44.95% of shares in MECH in April 2017 and did not participate in the increase raised by MECH in April 2017. As a result, the Company lost control over the subsidiary.

  • Note 4: The Group amended abbreviation of ‘ MERRY HEALTHCARE CO., LTD.,TAIWAN ’ ‘ ’

  • BRANCH(CAYMAN) during the year, the former abbreviation was MHCHTW .

  • Note 5: The Company became the related party with MEDG after acquisition of 49% of its shares in 2018.

  • Note 6: The Company was merged and acquired BIOTEST MEDICAL CORPORATION in July, 2019.

~71~

(2) Significant related party transactions

A. Operating revenue

(a) Sales of goods

erating revenue
Sales of goods
Years ended December 31,
2019 2018
MECE $ 489
 $ 16,254
MECL - 7,018
MHTT -
 1,765
Others 134
 99
$ 623 $ 25,136

The credit terms of aforementioned transactions were approximately the same with third parties, which were 60 days after the end of the month, and to third parties were 45 to 120 days after the end of the month.

(b) Technical service revenue

MESG
Others		 2019
2018
3,537
$ 10,223
$ 2,478
3,058

6,015
$ 13,281
$ Years ended December 31,
  • i. The Company granted licences of manufacturing, technology and intellectual property of electroacoustic products and charged 0.84% to 3.06% of the companies’ net sale amount excluding the sales amount from related parties.

ii. The credit term of aforementioned transactions was 60 days after the end of the month.

B. Purchases

(a) Purchases of goods

chases
Purchases of goods
MECL
MECE
MECH
MEDG
Others		 2019
2018
13,404,793
$ 15,935,083
$ 11,875,381
8,410,554
1,847,478
2,883,969
884,721
310,638
1,539
-

28,013,912
$ 27,540,244
$ Years endedDecember31,
15,935,083
$ 8,410,554
2,883,969
310,638
-
27,540,244
$

The prices of goods for the aforementioned purchase transactions charged by the companies are based on the different product’s profitability and adjusted annually. The credit terms to the Company was 60 days after the end of the month and 30 to 90 days after the end of the month to third parties.

~72~

(b) Administrative service fee

Years ended December 31,
2019 2018
MECA $ 55,305
 $ 45,543
MESG 14,186 14,859
$ 69,491
 $ 60,402

The above administrative service fees were charged for marketing management services provided by the subisidiaries in current period with an additional 3% of service fees. The credit term was 60 days after the end of the month.

C. Receivables from related parties

(a) Accounts receivable

METC
MECE
Others		 December31,2019
December 31, 2018
124,899
$ -
$ 9,690
9,772
385

823
134,974
$ 10,595
$

The receivables arise mainly from sale transactions and services provided for granting licences of manufacturing, technology and intellectual property of electroacoustic products. (b) Other receivables

Other receivables
December 31, 2019 December 31, 2018
MECE $ 36,618
 $ 29,152
MTHK 3,019 2,675
METC 2,279 -
Others 1,710 1,488
$ 43,626 $ 33,315

Other receivables mainly consisted of the receivables of sale of property, plant and equipment and miscellaneous payments on behalf of the related parties. D. Payables to related parties

(a) Accounts payable

ables to related parties
Accounts payable
MECE
MECK
MECH
Others		 December31,2019
2,987,747
$ 1,761,651
451,901

183,601
5,384,900
$		 December 31, 2018
2,993,515
$ 2,330,766
1,034,887
283,000
6,642,168
$

~73~

(b) Other payables

Other payables
December31,2019 December31,2018
MEST $ 5,286
 $ 13,193
MECE 1,834 27,103
Others 4
 -
$ 7,124
 $ 40,296

The other payables arise mainly from accounts receivable collected and miscellaneous payment made on behalf of the related parties.

E. Property transactions

(a) Acquisition of property, plant and equipment

Year ended December 31, 2019 MECL $ 2,585

(b) Disposal of property, plant and equipment

MECL
METC
MECE
Total		 Disposal
proceeds
Gain(Loss) on
disposal
10,008
$ 477
$ 2,316
271
64
64
12,388
$ 812
$ 2019		 Disposal
proceeds
Gain(Loss) on
disposal
-
$ -
$ -
-

-
-
-
$ -
$ 2018		 Disposal
proceeds
Gain(Loss) on
disposal
-
$ -
$ -
-

-
-
-
$ -
$ 2018		 Disposal
proceeds
Gain(Loss) on
disposal
-
$ -
$ -
-

-
-
-
$ -
$ 2018
Disposal
proceeds
10,008
$ 2,316
64
12,388
$		 Disposal
proceeds
-
$ -
-
-
$		 -
$ -

-
-
$

F. Loans to/from related parties

Loans to related parties

  • (a)Ending balance

Please refers to table 13(1).

(b)Interest income

s to/from related parties
s to related parties
nding balance
Please refers to table 13(1).
nterest income
YearendedDecember31,2019
BTTT
385
$		 YearendedDecember31,2018
-
$

The loans to BTTT are repayable monthly within 1 year after loans are granted, and carried an interest at 0.98% per annum for the year ended December 31, 2019.

H. Key management compensation

interest at 0.98% per annum for the
Key management compensation		 year ended December 31, 2019. year ended December 31, 2019.
Salaries and other short-term
employee benefits
Post-employment benefits
Share-based payments		 Years endedDecember31,
2019
117,777
$ 247
18,635
136,659
$		 2018
108,436
$ 939
13,706
123,081
$

8. PLEDGED ASSETS

None.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:

~74~

December31,2019 December31,2018
Property, plant and equipment $ 191,828
 $ 1,801
Intangible assets 2,442
 26,344
$ 194,270
 $ 28,145

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

To increase its international market competitiveness and increase its product plants abroad, the Company planned an investment in Vietnam. On February 27, 2020, the Board of Directors of the Company approved to establish a joint venture, Merry Li-Hsun (Vietnam) Co., Ltd. (temporary name), with Lanto Electronic Ltd. The Company will invest USD 12,240 and acquired 51% share equity.

12. OTHERS

(1) Capital management

A. In view of the industrial characteristics and future development status and considering the external environment changes, the Company’s capital management objective is to ensure it has sufficient financial resource and operating plans to meet operational capital for future needs, capital expenditure, research and development expense, obligation repayment and dividend distribution within the following year.

The Company monitored capital by reassessing debt ratios periodically. The debt ratios at December 31, 2019 and 2018 were as follows:

31, 2019 and 2018 were as follows:
December 31, 2019
Total debt
$ 10,191,324
Total assets
23,025,301
Debt ratio
44%		 December31,2018
$ 15,797,900
25,728,716
61%

(Remainder of page intentionally left blank)

~75~

(2) Financial instruments
A. Financial instruments by category
Financial assets
Financial assets at fair
value through profit or loss
Financial assets mandatorily
measured at fair value
through profit or loss
Financial assets at fair value
through other
comprehensive income
Designation of equity instrument
Qualifying equity instrument
Financial assets at amortised
cost/Loans and receivables
Cash and cash equivalents
Accounts receivable
(including accounts receivable
due from related parties)
Other receivables (including
other receivables due from
related parties)
Guarantee deposits paid
Financial liabilities
Financial liabilities at fair value
through profit or loss
Financial liabilities held for trading
Short-term borrowings
Accounts payable (including
accounts payable to related parties)
Other payables (including other
payables to related parties)
Corporate bonds payable
(including current portion)
Guarantee deposits received		 December31,2019
38,214
$ 2,516,603
$ 90,550
2,607,153
$ 4,038,861
$ 4,601,685
61,283
2,854
8,704,683
$
December31,2019
11,799
$ 89,940
5,488,782
505,902
2,229,959
1,017
8,327,399
$		 December31,2018
A.
184,222
$
1,466,400
$ 143,463
1,609,863
$
6,610,358
$ 7,178,936
65,712
2,992
13,857,998
$
December31,2018
6,976
$ 4,399,144
6,646,588
463,981
2,882,721
1,018
14,400,428
$

B. Financial risk management policies

(a) The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.

(b) The Company’s treasury identifies, evaluates and hedges financial risks in close co-operation

~76~

with the Company’s operating units, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

  • C. Significant financial risks and degrees of financial risks

  • (a) Market risk

Foreign exchange risk

  • i. The Company operates internationally and is exposed to exchange rate risk arising from the transactions of the Company used in various functional currency, primarily with respect to the USD, RMB and HKD. Exchange rate risk arises from future commercial transactions and recognised assets and liabilities.

  • ii. The Company’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

~77~

Foreign currency
amount
(Inthousands)
(Foreign currency: functional currency)
Financial assets
Monetary items
Cash in banks
USD : NTD
43,661
$ RMB : NTD
42,433
HKD : NTD
1,060
SGD : NTD
398
Receivables
USD : NTD
157,143
$ HKD : NTD
69
Non-monetary items
Current financial investments at
fair value through other
comprehensive income
USD : NTD
$ 3,000
Non-current financial investments
at fair value through other
comprehensive incom
e
THB : NTD
$ 6,425
USD : NTD
300		 Foreign currency
amount
(Inthousands)
(Foreign currency: functional currency)
Financial assets
Monetary items
Cash in banks
USD : NTD
43,661
$ RMB : NTD
42,433
HKD : NTD
1,060
SGD : NTD
398
Receivables
USD : NTD
157,143
$ HKD : NTD
69
Non-monetary items
Current financial investments at
fair value through other
comprehensive income
USD : NTD
$ 3,000
Non-current financial investments
at fair value through other
comprehensive incom
e
THB : NTD
$ 6,425
USD : NTD
300		 December December 31,2019 31,2019 31,2019
Foreign currency
amount
(Inthousands)		 Exchange
rate		 Book value
(NTD)		 Sensitivityanalysis
Degree ofvariation
3%
3%
3%
3%
3%
3%
3%
3%
3%		 Effects on
profit or
loss		 Effect on other
comprehensive
income
29.9800
4.3050
3.8490
22.2800
29.9800
3.8490
29.9800
1.0098
29.9800		 1,308,957
$ 182,674
4,080
8,867
4,711,147
$ 266
$ 89,940
6,488
$ 8,994		 $ 39,269
5,480
122
266
141,334
$ 8
$ -
$ -
-		 $ -
-
-
-
$ -
-
$ 2,728
$ 195
270


























~78~

Non-current financial assets
mandatorily measured at fair value
USD:NTD
Financial liabilities
Monetary items
Bank borrowings
USD:NTD
Accounts payable
USD:NTD
RMB:NTD
through profit or loss		 Foreign currency
amount
(inthousands)
700
$ 3,000
$ 155,776
$ 197,913		 Degree
Effect on
Effect on other
Book value
of
profit or
comprehensive
(NTD)
variation
loss
income
29.9800
20,986
$ 3%
630
$ -
$ 29.9800
89,940
$ 3%
2,698
$ -
$ 29.9800
4,670,164
$ 3%
140,105
$ -
$ 4.3050
852,015
3%
25,560
-
December31,2019
Sensitivity analysis
Exchange rate		 Degree
Effect on
Effect on other
Book value
of
profit or
comprehensive
(NTD)
variation
loss
income
29.9800
20,986
$ 3%
630
$ -
$ 29.9800
89,940
$ 3%
2,698
$ -
$ 29.9800
4,670,164
$ 3%
140,105
$ -
$ 4.3050
852,015
3%
25,560
-
December31,2019
Sensitivity analysis
Exchange rate
-
$ -
$ -
$ -





~79~

(Foreign currency: functional currency)
Financial assets
Monetary items
Cash in banks
USD : NTD
RMB : NTD
HKD : NTD
SGD : NTD
Accounts receivable
USD : NTD
HKD : NTD
Non-monetary items
Current financial investments at
fair value through other
comprehensive income
USD : NTD
Non-current financial investments
at fair value through other
comprehensive incom
e
THB:NTD
HKD:NTD		 December31,2018 December31,2018
Foreign currency
amount
(in thousands)
81,187
$ 16,047
2,382
405
236,335
$ 69
3,305
$ 6,425
$ 2,126		 Book value
(NTD)
30.72
2,493,659
$ 4.47
71,762

3.92
9,340

22.48
9,104
30.72
7,259,030
$ 3.92
271

30.72
101,513
$ 0.95
6,124
$ 3.92
8,336
Exchange rate		 Sensitivityanalysis
Degree
of
variation
3%
3%
3%
3%
3%
3%
3%
3%
3%		 Effect on
profit or
loss
$ 74,810
2,153
280
273
217,771
$
8

-
$ -
$ -		 Effect on other
comprehensive
income
$ -
-
-
-
$ -
-
$ 3,045
184
$ 250








~80~

Current financial assets
mandatorily measured
at fair value through profit or loss
USD:NTD
HKD:NTD
Non-current financial assets
mandatorily measured at fair value
USD:NTD
Financial liabilities
Monetary items
Bank borrowings
USD:NTD
Accounts payable
USD:NTD
RMB:NTD
through profit or loss		 December31,2018 December31,2018
Foreign currency
amount
Book value
(in thousands)
(NTD)
2,006
$ 30.72
61,614
$ 14,019
3.92
54,968

600
$ 30.72
18,429
$ 1,600
$ 30.72
49,144
$ 180,372
$ 30.72
5,540,126
$ 254,279
4.47
1,137,136
Exchange rate		 Sensitivityanalysis
Degree
of
variation
3%
3%
3%
3%
3%
3%		 Effect on
profit or
loss
1,848
$ 1,649
553
$ 1,474
$ 166,204
$ 34,114		 Effect on other
comprehensive
income
-
$ -
-
$ -
$ -
$ -





~81~

Total exchange (loss) gain, including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2019 and 2018 amounted to $73,253 thousand and $3,564 thousand, respectively.

Price risk

  • i. The Company’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.

  • ii. The Company’s investments in equity securities comprise shares and open-end funds issued by the domestic companies. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 3% with all other variables held constant, post-tax profit for the years ended December 31, 2019 and 2018 would have increased by $654 thousand and $5,215 thousand, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $75,498 thousand and $45,512 thousand, respectively, as a result of other comprehensive income classified as equity investment at fair value through other comprehensive income.

Cash flow and fair value interest rate risk

  • i. The Company’s borrowings are measured at amortised cost. The borrowings are periodically contractually repriced and to that extent are also exposed to the risk of future changes in market interest rates.

  • ii. If the borrowing interest rate had increased/decreased by 0.25% or with all other variables held constant, profit, net of tax for the years ended December 31, 2019 and 2018 would have decreased/increased by $180 thousand and $8,798 thousand, respectively. The main factor is that changes in interest expense result from floating rate borrowings.

  • (b) Credit risk

  • i. Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows of debt instruments stated at amortised cost, at fair value through profit or loss and at fair value through other comprehensive income.

  • ii. For banks and financial institutions, the Company transacts with a variety of banks and financial institutions, mainly domestic and overseas well-known financial institutions, to avoid concentration in any single counterparty and to minimise credit risk. The Company can only enter into the financial services and loan agreement provided by banks and financial institutions after being approved by the Board of Directors or authorised management according to the Company’s delegation of authorisation policy. To prevent legal risks, all the Company signs with banks and financial institutions after all documents are examined by counsel or legal advisor profession. The Company periodically checks the credit rating, conditions and quality of service as well as transactions. According to the Company’s operating condition, the credit limits and utilisation of credit limits are monitored on a regular basis and maintained within a reasonable range to ensure it meets the needs of the operation.

  • iii. The Company adopts the assumption under IFRS 9, that is, the default occurs when the contract payments are past due over 90 days.

  • iv. The Company adopts the following assumption under IFRS 9 to assess whether there has

~82~

been a significant increase in credit risk on that instrument since initial recognition:

  • (i) If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

  • (ii) For investments in bonds that are traded over the counter, if any external credit rating agency rates these bonds as investment grade, the credit risk of these financial assets is low.

  • v. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:

  • (i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;

  • (ii) The disappearance of an active market for that financial asset because of financial difficulties;

  • (iii) Default or delinquency in interest or principal repayments;

  • (iv)Adverse changes in national or regional economic conditions that are expected to cause a default.

  • vi. The Company classifies customers’ accounts receivable and contract assets in accordance with geographic area. The Company applies the simplified approach using provision matrix to estimate expected credit loss under the provision matrix basis.

  • vii. The Company wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Company will continue executing the recourse procedures to secure their rights.

  • viii. The Company used the forecastability to adjust historical and timely information to assess the default possibility of accounts receivable, contract assets and lease payments receivable. As of December 31, 2019 and 2018, the provision matrix is as follows:

December31,2019 Not
past due		 Up to
30days		 31 to
60days		 61 to
90days
0.01%
4,455,759
$ 394)
($ Not
past due		 1.28%
6,431
$ 82)
($ Up to
30 days		 16.52%
2,064
$ 341)
($ 31 to
60 days		 39.45%
5,407
$ 2,133)
($ 61 to
90 days
Expected loss rate
Total book value
Loss allowance
December31,2018
0.01%
6,992,854
$ 668)
($		 0.59%
177,049
$ 1,042)
($		 19.18%
73
$ 14)
($		 45.40%
163
$ 74)
($
Expected loss rate
Total book value
Loss allowance
  • ix. Movements in relation to the Company applying the simplified approach to provide loss allowance for accounts receivable are as follows:

~83~

At January 1_IAS 39
Provision for impairment
At December 31
At January 1_IAS 39
Adjustments under new standards
At January 1_IFRS 9
Provision for impairment
At December 31		 2019
Accountsreceivable
1,959
$ 1,207
3,166
$ 2018
Accounts receivable
935
$ -
935
1,024
1,959
$

For provisioned loss in 2019 and 2018, the impairment losses arising from customers’ contracts are $1,207 thousand and $1,024 thousand, respectively.

  • x. There was no impairment on investments in debt instruments measured at fair value through other comprehensive income after the Company’s evaluation.

  • xi. For investments in debt instruments at fair value through other comprehensive income, the credit rating levels are presented below:

Financial assets at fair value
through other comprehensive
income
Group 1
Financial assets at fair value
through other comprehensive
income
Group 1		 December 31,2019
90,550
$		 -
$ December		 -
$ 90,550
$ 31,2018
139,550
$		 -
$		 -
$ 139,550
$

Group 1: Debt instruments designated as investment grade.

  • (c) Liquidity risk

  • i. Cash flow forecasting is performed in the operating entities of the Company and aggregated by Company treasury. Company treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs.

  • ii. Company treasury invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.

  • iii. The table below analyses the Company’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for nonderivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

~84~

iv. As of December 31,2019 and 2018, the Company has $8,316,340 thousand and $3,604,751 thousand undrawn borrowing facilities, respectively. Non-derivative financial liabilities:

Non-derivative financial liabilities:
Less than
3months
Short-term
borrowings
90,198
$ Accounts payable
76,812
Accounts payable
to related parties
5,387,900
Other payables
498,116
Other payables to
related parties
7,124
Other current
liabilities
9,074
Bonds payable
-
Forward exchange
contracts
11,799
Less than
3months
Short-term
borrowings
4,401,222
$ Accounts payable
4,363
Accounts payable
to related parties
6,642,168
Other payables
183,693
Other payables to
related parties
40,296
Other current
liabilities
10,852
Bonds payable
-
Forward exchange
contracts
6,976
Derivative financial
liabilities
December 31,2019
Derivative financial
liabilities
Non-derivative financial liabilities:
December 31,2018		 3 months
and 1
year
-
$ 27,070
-
662
-
-
-
-
3 months
and 1
year
-
$ 57
-
20,493
-
635
-
-		 Between
1 and 2
years
-
$ -
-
-
-
-
-
-
Between
1 and 2
years
-
$ -

-
219,499
-
-
-
-		 Between
2 and 5
Over 5
years
years
-
$ -
$ -
-
-
-
-
-
-
-
-
-
2,289,500
-
-
-
Between
2 and 5
Over 5
years
years
-
$ -
$ -
-
-
-
-
-
-
-
-
-
3,000,000
-
-
-		 Total
90,198
$ 103,882
5,387,900
498,778
7,124
9,074
2,289,500
11,799
Total
Short-term
borrowings
Accounts payable
Accounts payable
to related parties
Other payables
Other payables to
related parties
Other current
liabilities
Bonds payable
Forward exchange
contracts
Derivative financial
liabilities
December 31,2018
4,401,222
$ 4,420
6,642,168
423,685
40,296
11,487
3,000,000
6,976

(3) Fair value

  • A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which

~85~

transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company’s investment in listed stocks and derivative instruments with quoted market prices is included in Level 1

  • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Company’s investment in certain derivative instruments and equity investment is included in Level 2.

  • Level 3: Unobservable inputs for the asset or liability. The fair value of the Company’s investment in certain derivative instruments and equity investment without active market and investment property is included in Level 3.

  • B. Financial instruments not measured at fair value

Financial instruments not measured at fair value include the carrying amounts of cash and cash equivalents, notes receivable, accounts receivable, other receivables, short-term borrowings, notes payable, accounts payable and other payables.

  • C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities are as follows:
December31,2019
Assets
Recurring fair value measurements
Financial assets at
fair value through
profit or loss
-Equity securities
-Debt securities
-Forward exchange
contracts
-Funds
-Call options of
convertible bonds
Financial assets at
fair value through
other comprehensive
income
-Equity securities
-Debt securities
Liabilities
Recurring fair value measurements
Financial liabilities at
fair value through
profit or loss
-Forward exchange
contracts		 Level 1
485
$ -
-
-
2,485,433
90,550
2,576,468
$ -
-
$		 Level 2
-
$ -
14,138
-
-
-
14,138
$ -
11,799
$		 Level3
21,301
$ -
-
-
31,170
-
54,761
$ 2,290
-
$		 Total
21,786
$ -
14,138
-
2,516,603
90,550
2,290
2,645,367
$
11,799
$

~86~

December31,2018
Assets
Recurring fair value measurements
Financial assets at
fair value through
profit or loss
-Equity securities
-Forward exchange
contracts
-Funds
-Call options of
convertible bonds
Financial assets at
fair value through
other comprehensive
income
-Equity securities
-Debt securities
Liabilities
Recurring fair value measurements
Financial liabilities at
fair value through
profit or loss
-Forward exchange
contracts		 Level 1
103,972
$ -
51,700
1,424,861
143,463
1,723,996
$ -
$ -		 Level 2
-
$ 6,176

-
-
-
6,176
$ 6,976
$ -		 Level3
18,174
$ -
-
41,539
-
63,913
$ -
$ 4,200		 Total
122,146
$ 6,176
51,700
1,466,400
143,463
4,200
1,794,085
$
6,976
$

  • D. The methods and assumptions the Company used to measure fair value are as follows:

  • (a) The instruments the Company used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Listed shares Open-end fund Closing price at Net asset value at Market quoted price evaluation date evaluation date

  • (b) Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods.

  • (c) Forward exchange contracts are usually valued based on the current forward exchange rate.

  • (d) The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Company’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs In accordance with the Company’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the consolidated balance sheet.

~87~

The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

  • E. For the years ended December 31, 2019 and 2018, there was no transfer between Level 1 and Level 2.

  • F. The following chart is the movement of Level 3 for the years ended December 31, 2019 and 2018:

2019 2018
At January 1 $ 63,913
 $ 45,503
Sold in the year - 26,946
Merged and transferred to subsidiary in the year ( 5,220)
 -
Recovery of capital reduction in the year ( 7,830)
 -
Gains recognised in profit
or loss		 ( 1,910)
 4,194
Gains/losses recognised in other
comprehensive income		 5,808 ( 12,730)
At December 31 $ 54,761 $ 63,913
  • G. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

~88~

Equity
securities
Venture Capital
shares private
equity fund
inverstment
Call options of
convertible
bonds
Equity
securities
Call options of
convertible
bonds		 Fair value at
December 31,
2019		 Valuation
technique		 Significant
unobservable
input		 Range
(weighted
average)		 Relationship of inputs
tofairvalue
13,850
$ 21,786
2,290
Fair value at
December 31,
2018		 Market
comparable
companies
Binary tree
convertible
bond valuation
model
Valuation
technique		 N/A
N/A
Risk-free
interest rate
Stock price
Volatility
Significant
unobservable
input		 313
$ 21,786
0.4816%
167.5
32.97%
Range
(weighted
average)		 N/A
The higher the risk-
free interest rate, the
lower the fair value
The higher the stock
price, the higher the
fair value
The higher the stock
price volatility, the
higher the fair value
Relationship of inputs
tofairvalue
11,169
$ 4,200		 Market
comparable
companies
Binary tree
convertible
bond valuation
model		 N/A
Risk-free
interest rate
Stock price
Volatility		 594
$ 0.5935%
123
52.14%		 N/A
The higher the risk-
free interest rate, the
lower the fair value
The higher the stock
price, the higher the
fair value
The higher the stock
price volatility, the
higher the fair value
  • H. The Company has carefully assessed the valuation models and assumptions used to measure fair value. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used to valuation models have changed:

~89~

December 31, 2019

Recognised in profit Recognised in other or loss comprehensive income

Favourable Unfavourable Favourable Unfavourable Input Change change change change change

Financial assets

==> picture [458 x 112] intentionally omitted <==

December 31, 2018

Recognised in profit Recognised in other or loss comprehensive income

Financial assets
Call options of
convertible bonds
Equity securities		 Input Change Favourable
change		 Favourable
change		 Unfavourable
change		 Favourable
change		 Favourable
change		 Unfavourable
change		 Unfavourable
change
Risk-free
interest rate
Stock price
Volatility
Stock price
Volatility		 ±20bp
±10%
±5%
±10%
±5%		 -
$ 900
1,200
-
-
2,100
$		 -
$ 1,200)
(
1,200)
(
-
-
2,400)
($		 -
$ -
-
1,117
-

1,117
$		 -
$ -
-
1,117
-
1,117
$

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

  • A. Loans to others: Please refer to table 1.

  • B. Provision of endorsements and guarantees to others: Please refer to table 2.

  • C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.

  • D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: None.

~90~

  • E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.

  • F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

  • G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.

  • H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.

  • I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Note 6(2).

  • J. Significant inter-company transactions during the reporting periods: Please refer to table 6.

  • (2) Information on investees

  • Names, locations and other information of investee companies (not including investees in Mainland China) ： Please refer to table 7.

  • (3) Information on investments in Mainland China

  • A. Basic information: Please refer to table 8.

  • B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 9.

14. SEGMENT INFORMATION

  • Not applicable.

  • INITIAL APPLICATION OF IFRSs

  • Not applicable.

~91~

MERRY ELECTRONICS CO., LTD.

Table 1

Loans to others

Year ended December 31, 2019

Expressed in thousands of NTD

(Except as otherwise indicated)

Maximum
outstanding
balance for the year
ended
December 31, 2019
Balance at
December 31,
2019
Actual
amount
drawn
down
No.
Creditor
Borrower
General
ledger
account
Is a
related
party
Interest
rate
Nature of
loan(Note 3)
Amount of
transactions with
the
borrower
Reason for
short-term
financing
Allowance
for doubtful
accounts		 Collateral Limit on loans
granted to a
single party
(Note 2)		 Ceiling on total
loans granted
(Note 1)		 Note
Item
Value
0
MEHO
MECE
Other receivables
Y
926,000
$ -
$ -
$ -
2
-
$ Business
operation
-
$ 0
MEHO
BTTT
Other receivables
Y
180,000
118,000
-
0.98%
2
-
Business
operation
-
0
MEHO
METC
Other receivables
Y
200,000
200,000
-
-
2
-
Business
operation
-
1
MECL
ASCX
Other receivables
Y
31,073
-
-
-
2
-
Business
operation
-		 -
-
$ Commercial
paper
80,000
-
-
-
-		 5,133,591
$ 5,133,591
5,133,591
1,020,588		 5,133,591
$ 5,133,591
5,133,591
5,133,591

Note 1: The ceiling on total loans to others is the Company net assets; for short-term financing, the limit to a single party is 40% of the Company net assets. Note 2: (1)For business transactions, limit on loans granted for a single party is the amount of the transactions.

(2)For short-term financing, limit on loans granted for a single party is 40% of the net assets of the Company. Note 3: (1) For business transactions.

(2) For short-term financing.

Table 1,page1

MERRY ELECTRONICS CO., LTD.

Provision of endorsements and guarantees to others

Year ended December 31, 2019

Table 2

Expressed in thousands of NTD

(Except as otherwise indicated)

Number
(Note 1)
Endorser/
guarantor		 Party being
endorsed/guaranteed		 Limit on
endorsements/
guarantees
provided for a
single party
(Note 3)		 Maximum
outstanding
endorsement/
guarantee
amount as of
December 31,
2019		 Outstanding
endorsement/
guarantee
amount at
December 31, 2019		 Actual amount
drawn down		 Amount of
endorsements/
guarantees
secured with
collateral		 Ratio of accumulated
endorsement/
guarantee amount to
net asset value of the
endorser/
guarantor company		 Ceiling on
total amount of
endorsements/
guarantees
provided
(Note 4)		 Provision of
endorsements /
guarantees by parent
company to
subsidiary		 Provision of
endorsements /
guarantees by
subsidiary to
parent company		 Provision of
endorsements /
guarantees to the
party in Mainland
China		 Footnote
Companyname
Relationship
with the
endorser/
guarantor
(Note 2)
0
MEHO
0
MEHO
0
MEHO		 SOCV
2
SENM
2
BTTT
2		 10,267,182
$ 10,267,182
10,267,182		 108,640
$ 30,440
1,700,000		 108,640
$ 30,440
1,700,000		 80,704
$ -
62,000		 -
$ -
-		 0.85
0.24
13.25		 12,833,977
$ 12,833,977
12,833,977		 Y
Y
Y		 N
N
N		 N
N
N

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:

  • (1)The Company is ‘0’.

  • (2)The subsidiaries are numbered in order starting from ‘1’.

Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following six categories; fill in the number of category each case belongs to: (1)Having business relationship.

  • (2)The Company holds over 50% of the voting rights directly or indirectly.

  • (3)This company holds over 50% of the voting rights of the Company directly or indirectly.

  • (4)The Company holds over 90% of the voting rights directly or indirectly.

Note 3: The guarantees and endorsements for a single party should not exceed 80% of the Company’s net assets.

Note 4: The ceiling on total amount of endorsements/guarantees provided to others by the Company is 100% of the Company's net assets.

Table 2, Page 1

MERRY ELECTRONICS CO., LTD.

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2019

Table 3

Expressed in thousands of NTD

(Except as otherwise indicated)

Securities held by
Marketable securities(Note 1)
Relationship with the
securities issuer
General
ledger account		 As of Decemb er 31, 2019 Note
Numberofshares Bookvalue (inthousands) Ownership (%) Fair value
(inthousands)
The Company
ARRIS International plc.
-
Financial assets mandatorily measured at fair value through profit or loss
Valuation adjustment
The Company
JAFCO
-
Non-current financial assets mandatorily measured at fair value through profit or loss
The Company
2881B.TW
-
Equity instruments measured at fair value through other comprehensive income
The Company
2882B.TW
-
Equity instruments measured at fair value through other comprehensive income
The Company
P18QNBF3F10306
-
Equity instruments measured at fair value through other comprehensive income
MEST
EBIUH
-
Equity instruments measured at fair value through other comprehensive income
Valuation adjustment
The Company
Stock - 6679.TW
-
Measured at fair value through other comprehensive income - non-current
The Company
Stock - 4943.TW
-
Measured at fair value through other comprehensive income - non-current
The Company
Stock - 3290.TW
-
Measured at fair value through other comprehensive income - non-current
The Company
Stock - FUJITER Semiconductor CO.,LTD.
-
Measured at fair value through other comprehensive income - non-current
The Company
Stock - NETVOX TECHNOLOGY CO., LTD
-
Measured at fair value through other comprehensive income - non-current
The Company
Stock - EVER THAI AGRI-PRODUCT CO.,LTD.
-
Measured at fair value through other comprehensive income - non-current
The Company
Stock - SUNSINO SME Development Co., Ltd.
-
Measured at fair value through other comprehensive income - non-current
The Company
Stock - LINSATION
-
Measured at fair value through other comprehensive income - non-current
MEST
Stock - Perfect Fortune Inc.
-
Measured at fair value through other comprehensive income - non-current
MEST
Stock - LOYAL WIRE& CABLE COMPANY LTD.
-
Measured at fair value through other comprehensive income - non-current
Valuation adjustment		 1
700
683
585
3,000
1,000
1,054
12,091
5,723
2,781
324
733
169
75
2,126
1,159		 169
$ 316		 -
0.71%
-
-
-
-
2.55%
8.85%
5.75%
9.79%
1.32%
5.55%
0.36%
7.50%
18.33%
18.33%		 485
$
21,301
$
485
$
21,301
$
40,980
$ 35,100
89,550
30,304		 43,916
$ 37,440
90,550
30,171
195,934
6,143		 202,077
$
187,085
$ 2,121,990
95,002
13,850
-
6,425
2,123
8,772
67,839
30,321
202,077
$
34,976
$ 648,164
99,990
27,812
2,976
6,425
2,123
8,772
8,184
7,890
847,312
2,976)
(
1,689,071		 2,533,407
$
2,533,407
$

Table 3,page1

Table 4

Expressed in thousands of NTD

(Except as otherwise indicated)

MERRY ELECTRONICS CO., LTD.

Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more

Year ended December 31, 2019

Purchaser/seller Counterparty Relationshipwith the counterparty Trans action Differences in tra nsaction terms compared to third party transactions
(Note 1)		 Notes/accounts re ceivable(payable) Note
Purchases
(sales)		 Amount Percentage of
total purchases
(sales)		 Credit term Unit price Credit term Balance (Note2) Percentage of total
notes/accounts
receivable (payable)
The Company
The Company
The Company
The Company
METC
MESG
MESG
MESG
MECL
MECL		 MEDG
MECH
MECE
MECL
MECE
METC
MECL
MECH
MEDG
MECE		 Investment accounted for using
the equity method
Investment accounted for using
the equity method
Investment accounted for using
the equity method
A subsidiary of the Company
Investment accounted for using
the equity method
A subsidiary of the Company
A subsidiary of the Company
Investment accounted for using
the equity method
Investment accounted for using
the equity method
Investment accounted for using
the equity method		 Purchases
Purchases
Purchases
Purchases
Purchases
Purchases
Purchases
Purchases
Purchases
Purchases		 $ 884,721
1,847,478
11,875,381
13,479,637
100,284
353,053
1,325,366
2,202,779
120,988
173,643		 2%
5%
33%
37%
0%
1%
4%
6%
0%
0%		 60 days end of month after offsetting with accounts
receivable
60 days end of month after offsetting with accounts
receivable
60 days end of month after offsetting with accounts
receivable
60 days end of month after offsetting with accounts
receivable
60 days end of month after offsetting with accounts
receivable
60 days end of month after offsetting with accounts
receivable
60 days end of month after offsetting with accounts
receivable
60 days end of month after offsetting with accounts
receivable
60 days end of month after offsetting with accounts
receivable
60 days end of month after offsetting with accounts
receivable		 (Note 1)
(Note 1)
(Note 1)
(Note 1)
(Note 1)
(Note 1)
(Note 1)
(Note 1)
(Note 1)
(Note 1)		 30~120 days end of month for the third parties
30~90 days end of month for the third parties
30~120 days end of month for the third parties
30~120 days end of month for the third parties
30~120 days end of month for the third parties
30~120 days end of month for the third parties
30~120 days end of month for the third parties
30~90 days end of month for the third parties
30~90 days end of month for the third parties
30~120 days end of month for the third parties		 ( 164,742)
( 451,901)
( 2,987,747)
( 1,761,651)
( 9,765)
( 121,626)
( 286,911)
( 298,459)
( 101,968)
( 75,197)		 2%
7%
44%
26%
0%
2%
4%
4%
1%
1%		 (Note 3)
(Note 3)
(Note 3)

Note 1: For purchase transactions with related parties, the price is based on the profitability of the product and will be adjusted annually. Note 2: The balance is the net amount after offsetting accounts receivable and payable due from/ to related parties. Note 3: Inter-company transactions between companies within the Group are eliminated.

Table 4,page1

MERRY ELECTRONICS CO., LTD.

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

December 31, 2019

Table 5

Expressed in thousands of NTD (Except as otherwise indicated)

Creditor Counterparty Relationship with the
counterparty		 Balance as at
December 31,2019(Note 1)		 Turnover
rate		 Overdue receivables Overdue receivables Amount collected
subsequent to the
balance sheet date(Note 2)		 Allowance for
doubtful accounts
Amount Action taken
MECL
MECL
METC		 The Company
MESG
MESG		 Parent Company
A subsidiary of the Company
A subsidiary of the Company		 $ 1,761,651
286,911
121,626		 5.67
4.38
4.20		 -
$ -
-		 -
-
-		 744,418
$ 148,440
86,051		 -
$ -
-

Note 1: Inter-company transactions between companies within the Group are eliminated. Note 2: The balance was as at February 27, 2020.

Table 5,page1

Table 6

MERRY ELECTRONICS CO., LTD.

Significant inter-company transactions during the reporting periods Year ended December 31, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Number
(Note 1)		 Companyname Counterparty Transaction
Relationship
(Note 2)		 General ledger account Amount Transaction
terms		 Percentage of consolidated
total operating
revenues or total assets (Note
3)
0
0
1
1
1
1		 MEHO
MEHO
MESG
MESG
MESG
MESG		 MECL
MECL
MECL
METC
MECL
METC		 1
1
3
3
3
3		 Purchases
Accounts payable
Purchases
Purchases
Accounts payable
Accounts payable		 $ 13,479,637
1,761,651
1,325,366
353,053
286,911
121,626		 The price is based on the profitability of the product
The balance shown was net of receivables as agreed by both parties
The price is based on the profitability of the product
The price is based on the profitability of the product
The balance shown was net of receivables as agreed by both parties
The balance shown was net of receivables as agreed by both parties		 37%
7%
4%
1%
1%
0%

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

  1. Parent company is ‘0’.

  2. The subsidiaries are numbered in order starting from ‘1’.

Note 2: Relationship between transaction company and counter party is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.):

  1. Parent company to subsidiary.

  2. Subsidiary to parent company.

  3. Subsidiary to subsidiary.

  4. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Table 6,page1

Information on investees Year ended December 31, 2019

Table 7

MERRY ELECTRONICS CO., LTD.

Expressed in thousands of NTD

(Except as otherwise indicated)

Investor Investee Location Main business
activities		 Initial invest ment amount Shares he ld as at December 31 ,2019 Net profit (loss)
of the investee for
the year ended
December 31,2019		 Investment income (loss)
recognised by the
Company for the year
ended December 31,2019		 Note
Balance as at
December 31,2019		 Balance as at December
31,2018		 Number of shares (in
thousand shares)		 Ownership (%) Book value
The Company
The Company
The Company
The Company
The Company
The Company
The Company
The Company
The Company
DDBV
DDBV
MHKY
INSA
SOCV
SOCA		 MEST
DDBV
LEOHAB ENTERPRISE
CO.,LTD.
MECA
MESG
METC
MHKY
INSA
BTTT
UCMU
MTHK
FUSA
SOCV
SOCA
SENM		 HONG KONG
British Virgin IS.
Taichung City
U.S.A
SINGAPORE
THAILAND
CAYMAN
SAMOA
Taichung City
MAURITIUS
HONG KONG
SAMOA
CANADA
CANADA
NORWAY		 General investment business
Plastic injection molding and metal stamping
Technique, marketing and after service
Sales of medical device
General investment business
Sales of medical device
General investment business
General investment business
General investment business
Sale and development of speaker and power
amplifier
General investment business
Manufacture and sales of speaker monomer
Microphone, components and product and
sale of other electric products
Sales of microphone, receiver and speaker
Sales of microphone, receiver and speaker		 981,113
$ 1,479,925
96,666
28,887
92,132
484,358
648,129
865,832
14,901
151
1,392,956
579,758
30
11,112
23		 981,113
$ 1,479,925
96,666
28,887
92,132
484,358
523,265
865,832
-
151
1,392,956
454,913
30
11,112
23		 25,658
48,005
13,395
999
800
5,060
20,902
-
9,000
5
48,000
-
-
-
-		 100.00
100.00
30.91
99.90
100.00
99.99
100.00
70.00
100.00
100.00
100.00
95.94
100.00
100.00
100.00		 3,627,334
$ 2,838,996
66,395
36,408
660,634
554,432
541,594
794,473
27,792
698)
(
2,842,636
780,260
52,215
63,049
49,016		 675,409
$ 506,553
18,418
3,724
307,560
11,855)
(
7,757)
(
61,098)
(
3,003
-
506,553
10,458)
(
23,508)
(
1,815)
(
1,815)
(		 675,996
$ 525,582
5,693
3,720
307,560
10,765)
(
7,757)
(
42,769)
(
13,152
-
-
-
-
-
-		 (Note 1)
(Note 1)
(Note 1)
(Note 2)
(Note 2)
(Note 2)
(Note 2)
(Note 2)
(Note 2)

Note 1: The investment income included unrealised gains or losses and realised gains arising from upstream transactions.

Note 2: The investee is second subsidiary and investment income (loss) is not shown.

Table 7,page1

Table 8

MERRY ELECTRONICS CO., LTD.

Information on investees in Mainland China Year ended December 31, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in
Mainland China		 Main business
activities		 Paid-in
capital		 Investment
method		 Accumulated amount
of remittance
from Taiwan
to Mainland
China as of
January1, 2019		 Amount remitt
to Mainland C
remitted back t
year ended Dec		 ed from Taiwan
hina / Amount
o Taiwan for the
ember 31, 2019		 Accumulated amount
of remittance
from Taiwan
to Mainland
China as of
December 31, 2019		 Net income of
investee for the year ended
December 31, 2019		 Ownership
held by the
Company
(direct or
indirect)		 Investment income
(loss) recognised by
the Company for
the year ended
December 31, 2019		 Book value of
investments in
Mainland China
as of
December 31, 2019
(Note 5)		 Accumulated amount
of investment income
remitted back to
Taiwan as of
December 31, 2019		 Note
Remitted to
Mainland China		 Remitted back
to Taiwan
MECL
MECE
MECS
Perfect Fortune Inc.
LOYAL WIRE& CABLE
COMPANY LTD.
MECH
FUCS
MHTS
MEDG
MHMI
MSCS
ETCX		 Manufacture of medical device
Medical device technical service
Sales of medical device
Manufacture of speaker and amplifier
Retail sales of hearing products
Manufacture and sales of microphone, receiver and
speaker
Electric wire, electric cable and other wire processing
Electric wire, electric cable and other wire processing
Microphone, receiver, speaker, security system,
induction cooker and other electronic component
International trade, transit trade and trading
consulting; trading amongst companies in bonded
area and trading agency in the area
Research and development of sound equipment,
earphones, mobile power supply, charging box, cable,
connector, electronic components, plastic hardware,
mould and antenna
Manufacture and sales of microphone, receiver,
speaker and mobile phone		 410,456
$ 2,693,806
7,145
44,648
128,445
430,500
276,309
-
861,000
-
148,835
2,153		 (Note 2)
(Note 2)
(Note 2)
(Note 2、4)
(Note 2、4)
(Note 2)
(Note 2)
(Note 2)
(Note 1)
(Note 2)
(Note 1)
(Note 2)		 453,191
$ 1,369,285
6,055
107,624
-
420,687
310,763
12,154
452,564
2,526
79,728
2,237		 -
$ -
-
-
-
-
-
-
-
-
-
-		 -
$ -
-
-
-
-
-
-
-
-
-
-		 453,191
$ 1,369,285
6,055
107,624
-
420,687
310,763
12,154
452,564
2,526
79,728
2,237		 509,314
$ 1,036,414
11,618
20,443
12,913
338,952
6,764)
(
58
68,202)
(
3)
(
3,450
6,689)
(		 100.00%
49.00%
49.00%
18.33%
18.33%
49.00%
95.94%
-
49.00%
-
70.00%
95.94%		 509,314
526,872
5,693
-
-
165,334
6,620)
(
58
31,338)
(
3)
(
2,415
6,512)
(		 2,551,470
$ 2,842,636
863)
(
67,836
30,319
666,377
565,369
-
376,606
-
93,666
5,280)
(		 2,282,120
$ 295,185
40,321
4,125
-
-
-
-
-
-
-
-		 (Note 3)
(Note 3)
(Note 3)
(Note 6)
(Note 3)
(Note 7)
(Note 3)

Table 8,page1

MERRY ELECTRONICS CO., LTD.

Table 8

Information on investees in Mainland China Year ended December 31, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in
Mainland China		 Main business
activities		 Paid-in
capital		 Investment
method		 Accumulated amount
of remittance
from Taiwan
to Mainland
China as of
January1, 2019		 Amount remitt
to Mainland C
remitted back t
year ended Dec		 ed from Taiwan
hina / Amount
o Taiwan for the
ember 31, 2019		 Accumulated amount
of remittance
from Taiwan
to Mainland
China as of
December 31, 2019		 Net income of
investee for the year ended
December 31, 2019		 Ownership
held by the
Company
(direct or
indirect)		 Investment income
(loss) recognised by
the Company for
the year ended
December 31, 2019		 Book value of
investments in
Mainland China
as of
December 31, 2019
(Note 5)		 Accumulated amount
of investment income
remitted back to
Taiwan as of
December 31, 2019		 Note
Remitted to
Mainland China		 Remitted back
to Taiwan
ASCX
LACX
FUCX
ASCZ		 Manufacture and sales of hearing aid, hearing device
and acoustics equipment
Sales of medical device
Manufacture of hearing aid and acoustics for
rehabilitation device
Research and development and technical sales of
software for hearing aid use		 57,089
21,525
17,220
88,908		 (Note 2)
(Note 2)
(Note 2)
(Note 2)		 275,537
22,180
17,744
-		 -
-
-
94,845		 -
-
-
-		 275,537
22,180
17,744
94,845		 30,537
5,149
9,505
9,246)
(		 95.46%
95.46%
95.46%
95.94%		 29,150
5,067
9,311
8,870)
(		 54,348
30,364
29,881
76,756		 -
-
-
-
3,627,120
$

Note 1: Reinvesting in the investee in Mainland China through the parent company.

Note 2: Through investing in an existing company in the third area, which then invested in the investee in Mainland China. Note 3: The financial statements that are audited and attested by R.O.C. parent company’s CPA.

Note 4: The investee is the reinvestment company of MERRY ELECTRONICS (HK) CO.,LTD. shown as non-current financial assets at fair value through other comprehensive income. Note 5: The amount in the table is translated into New Taiwan dollars at the closing exchange rates prevailing at the balance sheet date. Note 6: MHTS has completed the liquidation process in May 2019. Note 7: MHMI has completed the liquidation process in April 2019.

Companyname Accumulated amount of remittance from Taiwan to
Mainland China
as of December 31,2019		 Investment amount
approved by the
Investment Commission of
the Ministry of Economic
Affairs(MOEA)
Ceiling on investments in
Mainland China imposed
by the Investment
Commission of MOEA
Merry Electronics Co., Ltd. $ 3,627,120 $ 3,727,090 $ 7,700,386

Note 1: (2001) Tai-Cai-Zheng (1) Letter No. 006130 of Securities and Futures Commission, Ministry of Finance, R.O.C

Table 8,page2

MERRY ELECTRONICS CO., LTD.

Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas Year ended December 31, 2019

Table 9

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China Counterparty Sale(purchase) Sale(purchase) Propertytr ansaction Accounts receivab le(payable) Provision of
endorsements/guarantees or
collaterals		 Provision of
endorsements/guarantees or
collaterals		 Financing Financing Others
Amount % Amount % Balance at December
31,2019		 % Balance at
December 31,2019		 Purpose Maximum balance
during the year ended
December 31,2019		 Balance at
December 31,2019		 Interest rate Interest during the year
ended December 31,2019
MECL
MECL
MECL
MECL		 MESG
MEHO
MECE
MEDG		 $ 1,325,366
13,479,637
( 173,643)
( 120,988)		 4%
37%
0%
0%		 -
$ -
-
-		 -
-
-
-		 $ 286,911
1,761,651
( 75,197)
( 101,968)		 4%
26%
1%
1%		 -
$ -
-
-		 -
-
-
-		 -
$ -
-
-		 -
$ -
-
-		 -
-
-
-		 -
$ -
-
-		 -
-
-
-

Table 9,page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 1

==> picture [506 x 15] intentionally omitted <==

----- Start of picture text -----

Item Description Amount
----- End of picture text -----

Cash on hand
Cash in banks
Checking accounts
Demand deposits
Foreign exchange deposits
USD
EUR
RMB
HKD
SGD
JPY
Short-term notes and bills
NTD
Period
2019.12..16~2020.01.13
Interest rate
0.55%
USD
Period
2019.12.11~2020.01.06
Interest rate
2.10%~2.25%		 196
$ 8,837

1,156,089

1,308,966

114

182,674
4,080
8,867
10
1,098,442
-
270,586
-
4,038,861
$

Statement 1,Page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF TRADE RECEIVABLES DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

==> picture [498 x 184] intentionally omitted <==

----- Start of picture text -----

Statement 2
Client Name Summary Amount Note
A $ 2,143,915
B 688,159
C 547,800
D 245,501
E 234,994
The balance of each
customer has not
exceeded 5% of the
Others 606,342 accounts receivable
$ 4,466,711
----- End of picture text -----

Statement 2,Page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF INVENTORIES DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 3

Amount

Finished goods
Raw materials
Less: Allowance for
slow-moving
inventories
and valuation loss
Item		 Cost
874,580
$ 1,136
875,716
59,960)
(
815,756
$ Summary		 Net Realizable
Value
819,910
$ Net realisable
value
1,129

Replacement
cost
821,039
$ Note

Statement 3,Page1

MERRY ELECTRONICS CO., LTD.

STATEMENT OF FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - NON-CURRENT FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 4

Statement 4
Name BeginningBalance Addition Decrease EndingBalance Pledged as
collateral		 Note
Number of shares
(in thousand
shares)		 FairValue Number of shares
(in thousand
shares)		 Amount Number of shares
(in thousand
shares)
513)
(
-

-
-
-

1,305)
(
-
-
-		 Amount Number of shares
(in thousand
shares)		 Amount
6679.TW
4943.TW
3290.TW
FUJITER Semiconductor CO.,
LTD.
NETVOX TECHNOLOGY
CO., LTD.
Biotest Medical Corp.
EVER THAI AGRI-PRODUCT
CO., LTD.
SUNSINO SME Development
Co., Ltd.
Linsation Intelligent Technology
Limited
Add: Valuation adjustment
Less: Accumulated impairment		 1,567
11,550
5,723
2,781
324
1,305
733
169
75		 40,106
$ 648,164
99,990
27,811
2,976
13,050
6,425
2,123

8,772
849,417
535,009
2,976)
(
1,381,450
$		 -
541
-
-
-
-
-
-
-		 -
$ -
-
-
-
-
-
-
-
-
1,079,977
-
1,079,977
$		 13,130)
($ -
-
-
-
13,050)
(
-
-
-
26,180)
(
-
-
26,180)
($		 1,054
12,091
5,723
2,781
324
-
733
169
75		 26,976
$ 648,164
99,990
27,811
2,976
-

6,425
2,123
8,772
823,237
1,614,986
2,976)
(
2,435,247
$		 None
None
None
None
None
None
None
None
None

Statement 4,Page1

MERRY ELECTRONICS CO., LTD.

STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 5

Statement 5
Name BeginningBalance Addition Decrease EndingBalance Market Value or Net
Assets Value		 Pledged as
Collateral		 Note
Number of
shares (in
thousand
shares)		 Amount Number of
shares (in
thousand
shares)		 Amount Number of
shares (in
thousand
shares)		 Amount Number of
shares (in
thousand
shares)
25,658

48,005
13,395
999

800
5,060
20,902
-
-
-
9,000		 Percentage of
Ownership		 Amount Unit Price
(in
dollars)		 Total Amount
MERRY ELECTRONICS (HK)
CO., LTD.
DANNY DYNAMICS LIMITED
LEOHAB ENTERPRISE CO.,
LTD.
MERRY ELECTRONICS
(U.S.A.) CO., LTD.
MERRY ELECTRONICS
(SINGAPORE) PTE., LTD.
MERRY ELECTRONICS
(THAILAND) CO., LTD.
MERRY HEALTHCARE CO.,
LTD.
GUANGDONG LUXSHARE &
MERRY ELECTRONICS CO.,
LTD.
Suzhou Meisheng Electronics
Co.,Ltd.
INDIGO ENTERPRISE INC.
BIOTEST MEDICAL
CORPORATION		 25,658
48,005
13,395
999
800
5,060
20,500
-
-
-
-		 3,086,828
$ 2,419,742
64,303
33,598
370,715
533,283
442,404
416,309
96,909
836,583
-
8,300,674
$		 -
-
-
-
-
-
402
-
-
-
9,000		 540,506
$ 419,254
2,365
2,810
289,919
21,149
99,190
-
-
-
27,792
1,402,985
$		 -
-
-
-
-
-
-
-
-
-
-		 -
$ -
-
-
-
-
-
39,703)
(
3,243)
(
42,110)
(
-
85,056)
($		 100%
100%
30.91%
99.9%
100%
99.99%
100%
49%
70%
70%
100%		 3,627,334
$ 2,838,996
66,395
36,408
660,634
554,432
541,594
376,606
93,666

794,473

27,792
9,618,330
$		 141.37
59.14
4.96
36.44
825.79
109.57
25.91
0
0
0
0		 3,627,334
$ 2,838,996
66,395
36,408
660,634
554,432
541,594
376,606
93,666
794,473
27,792
9,618,330
$		 None
None
None
None
None
None
None
None
None
None
None

Statement 5,Page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF CHANGES IN PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 6

Item Beginning Balance Addition Decrease Ending Balance Collateral

Note:“Property,Plant and Equipment”:Please refer to Note 6(8)

Statement 6,Page1

MERRY ELECTRONICS CO., LTD.

STATEMENT OF CHANGES IN ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 7

Item Beginning Balance Addition Decrease

==> picture [117 x 13] intentionally omitted <==

Note

Note : “Property,Plant and Equipment”: Please refer to Note 6(8).

Statement 7,Page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF BONDS PAYABLE DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 8

Amount

Interest Unamortized Issuance Payment Coupo Total Issuance Repayment Ending Premiums Carrying Bonds Name Trustee Date Date n Rate Amount Paid Balance (Discounts) Amount Repayment Term Collateral Note Fubon Amirtized with Merry Electromics Securities 2018.12.1 2021.12.1 cash by bond's face Co.,Ltd. Co.,Ltd. 1 1 1.35% $ 3,000,000 $ 71,050 $ 2,289,500 $ 59,541 $2,229,959 value at maturity None The Second Domestic unsecured convertible bond

Statement 8,Page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF DEFERRED TAX LIABILITIES DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 9

Item Description

Amount Note

Note : “Deferred Tax Liabilities”Please refer to Note 6(26).

Statement 9,Page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF OPERATING REVENUE FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 10

==> picture [495 x 166] intentionally omitted <==

----- Start of picture text -----

Items Quantity Amount Note
Wireless electronic products 165,700 $ 12,750,130
Telephone receivers/speakers 4,418 8,492,365
Headset speakers 6,944 8,058,727
Others 63,195 1,709,264
31,010,486
Less: Sales returns ( 79,438)
Sales discounts and allowances ( 288,248)
Net sales revenue 30,642,800
Technical service revenue 6,015
Operating revenue, net $ 30,648,815
----- End of picture text -----

Statement 10,Page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 11

Statement 11
Raw materials at beginning of year
Add: Raw materials purchased during the year
Less: Raw materials at end of year
Used raw materials transferred to expenses
Raw materials sold
Conaumption of Raw materials for the year
Materials at beginning of year
Add:Materials purchases during the year
Less:Materials sold
Consumption of materials for the year
Semi-finished goods at beginning of year
Less: Used semi-finished goods transferred to expenses
Semi-finished goods sold
Finished goods cost
Finished goods at beginning of year
Add: Finished goods cost purchased during the year
Less: Finished goods at end of year
Finished goods used and transferred to expenses
Cost of sales
Cost of raw materials sales
Cost of materials sales
Cost of semi-finished goods sold
Loss on slow-moving inventories and valuation loss
Operating costs
Item		 Amount
Total
957
$ 79,840
1,136)
(
2,618)
(
77,043)
(
-
-
$ 29

29)
(
-

-
2,981

2,981)
(
-

671,831
27,750,862
874,580)
(
2,607)
(
27,545,506
77,043
29
2,981

12,230
27,637,789
$

Statement 11,Page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF ADMINISTRATIVE EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 12

Statement 12
Item
Wages and salaries
Freight
Administrative service fee
Other expenses		 Selling expenses Administrative
expenses
407,235
$ 1,058
14,186
162,262
584,741
$		 Research and
development
expense
440,350
$ 422

-
165,389
606,161
$		 Total Note
$ 65,112
28,089
55,305
43,593
$ 192,099		 912,697
$ 29,569

69,491
371,244
1,383,001
$		 The balance of
each expense
account has not
exceeded 5% of
the total expense

Statement 12,Page1

MERRY ELECTRONICS CO., LTD. STATEMENT OF FINANCE COOST FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 13

Statement 13
Item Description Amount
Note
Amortisation of discounts on $ 34,565
bonds
Account Receviables Financing 15,168
Bank Borrowings 13,042
Lease Liability 610
$ 63,385

Statement 13,Page1

MERRY ELECTRONICS CO., LTD.

SUMMARY STATEMENT OF CURRENT PERIOD EMPLOYEE BENEFITS, DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSES BY FUNCTION FOR THE YEAR ENDED DECEMBER 31, 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Statement 14

==> picture [757 x 194] intentionally omitted <==

----- Start of picture text -----

Function Year ended December 31, 2019 Year ended December 31, 2018
Classified as Classified as
Classified as Classified as
Operating Total Operating Total
Nature Operating Costs Operating Costs
Expenses Expenses
Employee Benefit Expense
Wages and salaries 14,944 758,377 773,321 19,004 689,224 708,228
Labour and health insurance fees 877 56,223 57,100 1,091 50,795 51,886
Pension costs 453 29,674 30,127 634 26,248 26,882
Directors' remuneration - 69,276 69,276 - 46,372 46,372
Other personnel expenses 625 97,079 97,704 1,959 149,277 151,236
Depreciation Expense 923 26,836 27,759 127 18,161 18,288
- - - - - -
Depletion Expense
Amortisation Expense 14,407 41,218 55,625 13,553 42,688 56,241
----- End of picture text -----

Note:

  1. As at December 31, 2019 and 2018, the Company had 654 and 703 employees,including 54and 3 non-employee directors, respectively.

  2. 2.A company whose stock is listed for trading on the stock exchange or over-the-counter securities exchange shall additionally disclose the following

  3. 。

  4. (1) Average employee benefit expense in current year 1,477(in dollars)

。 Average employee benefit expense in previous year 1,340(in dollars)

  • 。

  • (2) Average employees salaries in current year 1,192(in dollars)

。 Average employees salaries in previous year 1,012(in dollars)

  • 。

  • (3) Adjustments of average employees salaries 17.79%

Statement 14,Page1

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