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Stock Code:3708
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese.)
Swancor Holding Company Limited And Its Subsidiaries
Consolidated Financial Statements December 31, 2016
(With Independent Auditors’ Report Thereon)
Address:No. 9, Industry South 6 Road., Nantou City 54066, Taiwan Telephone:886-49-225-5420 The auditors’ report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language auditors’ report and consolidated financial statements, the Chinese version shall prevail.
2
Table of contents Contents Page
1.Cover Page 1
2.Table of Contents 2
3.Representation Letter 3
4.Independent Auditors’ Report 4~9
5.Consolidated Balance Sheets 10
6.Consolidated Statements of Comprehensive Income 11
7.Consolidated Statements of Changes in Equity 12
8.Consolidated Statements of Cash Flows 13
9.Notes to the Consolidated Financial Statements
(1) Company history 14
(2) Approval date and procedures of the consolidated financial statements 14
(3) New standards, amendments and interpretations adopted 14~18
(4) Summary of significant accounting policies 18~33
(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty
33
(6) Explanation of significant accounts 34~59
(7) Related-party transactions 59
(8) Pledged assets 59
(9) Commitments and contingencies 59~60
(10)Losses Due to Major Disasters 60
(11)Subsequent Events 60
(12)Other 60
(13)Other disclosures
(a) Information on significant transactions 61~66
(b) Information on investees 67~68
(c) Information on investment in mainland China 68~69
(14)Segment information 69~71
3
Representation Letter
The entities that are required to be included in the combined financial statements of Swancor Holding
Company Limited. as of and for the year ended December 31, 2016(from August 31, 2016(Date of
Incorporation) to December 31, 2016) under the Criteria Governing the Preparation of Affiliation
Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated
Enterprises are the same as those included in the consolidated financial statements prepared in
conformity with International Financial Reporting Standards No. 10 by the Financial Supervisory
Commission, "Consolidated and Separate Financial Statements." In addition, the information required
to be disclosed in the combined financial statements is included in the consolidated financial
statements. Consequently, Swancor Holding Company Limited and its Subsidiaries do not prepare a
separate set of combined financial statements.
Hereby declare
Company name:
Chairman:
Date: February 24, 2017
4
Independent Auditors’ Report
To the Board of Directors of
Swancor Holding Company Limited:
Opinion
We have audited the consolidated financial statements of Swancor Holding Company Limited and its
subsidiaries (“the Group”), which comprise the consolidated balance sheets of December 31, 2016,
and the consolidated statement of comprehensive income, changes in equity and cash flows for the
period from August 31, 2016(Date of Incorporation) to December 31, 2016, and notes to the
consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at December 31, 2016, and its
consolidated financial performance and its consolidated cash flows for the period from August 31,
2016(Date of Incorporation) to December 31, 2016 in accordance with the Regulations Governing the
Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting
Standards (“IFRSs”), International Accounting Standards (“IASs”), interpretation as well as related
guidance endorsed by the Financial Supervisory Commission of the Republic of China.
Basis for Opinion
We conducted our audit in accordance with the Regulations Governing Auditing and Certification of
Financial Statements by Certified Public Accountants and the auditing standards generally accepted
in the Republic of China. Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report.
We are independent of the Group in accordance with the Certified Public Accountants Code of
Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical
responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis of our opinion.
5
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements for the year ended December 31. 2016. These
matters were addressed in the context of our audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The
key audit matters of the Company’s consolidated financial statements for the year ended December
31, 2016 are stated as the follows:
1. Revenue Recognition
Refer to Note 4(14) “Revenue Recognition” and Note 6(17) “Revenue” to the consolidated
financial statements.
Description of key audit matter:
Revenue is recognized when the risks and rewards specified in each individual contract with
customers are transferred. The Company recognizes revenue depending on the various sales terms
in each individual contract with customers to ensure the significant risks and rewards of ownership
have been transferred. In addition, since the Company is a listed company, it takes responsibility
to maintain stable revenue in order to meet investors’ expectation; therefore, Sales revenue has
been identified as a key audit matter.
How the matter was addressed in our audit:
In relation to the key audit matter above, our principal audit procedures included testing the
Company’s internal controls surrounding revenue recognition; assessing whether appropriate
revenue recognition policies are applied through comparison with accounting standards and
understanding the Company’s main revenue types, its related sales agreements, and sales terms;
on a sample basis, inspecting contracts with customers or customers’ orders and assessing whether
the accounting treatment of the related contracts (including sales terms) is applied appropriately;
performing a test of details of sales revenue and understanding the rationale for any identified
significant sales fluctuations and any significant reversals of revenue through sales discounts and
sales returns which incurred within a certain period before or after the balance sheet date; and
evaluating the adequacy of the Company’s disclosures of its revenue recognition policy and other
related disclosures.
6
2. Evaluation of Accounts receivable
Refer to Note 4(7) “Financial instruments”, Note 5(a)”Impairment of trade receivables” and Note
6(3) “Notes and accounts receivable and other receivables” to the consolidated financial
statements.
Description of key audit matter:
The Company has accounts receivable from its most significant clients. Since allowance
evaluation of accounts receivable is considered as a subject to the Company’s management’s
judgment, it has been identified as one of a key audit matter.
How the matter was addressed in our audit
In relation to the key audit matter above, to the allowance of accounts receivable, we analyze the
overdue aging report, historical collection records and concentration of credit risk from clients in
order to evaluate whether the Company recognizes its allowance of accounts receivable and the
amount appropriately.
3. Impairment of assets(excluding goodwill)
Refer to Note 4(12)”Impairment of non-financial assets”, Note 5(b)” impairment of property, plant
and equipment, and intangible assets”, and Note 6(5)”Property, plant and equipment” to the
consolidated financial statements.
Description of key audit matter:
The Company separates its business sectors to composite materials and offshore wind energy
business. Each business group is considered as an individual profit production unit. Since the
Company has a loss in its offshore wind energy segment for two years, there are risks on
impairment of assets existence. The impairment includes estimate and discount the future cash
flows to assess recoverable amounts, which contains significant judgments and uncertainties
Therefore, is one of the key matters our audit focused on.
7
How the matter was addressed in our audit
In relation to the key audit matter above, our principal audit procedures included evaluating the
cash generating unit, and external and internal impairment indications identified by the
management; understanding and testing the appropriateness of the valuation model used by the
management in the impairment assessment and the significant assumptions used to determine
related assets’ future cash flows projection, useful lives, and weighted-average cost of capital;
evaluating the results of past forecast and actual operating performance to assess the
appropriateness of the method of predicting future cash flows, and performing sensitivity analysis;
performing and inquiry of the management and identifying any event after the balance sheet date
if able to affect the results of the impairment assessment; and assessing the adequacy of the
Company’s disclosures of its policy on impairment of noncurrent non-financial assets and other
related disclosures.
Other Matter
Swancor Holding Company Limited has prepared its parent-company-only financial statements as of
and for the years ended December 31, 2016, on which we have issued an unmodified opinion.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with Regulations Governing the Preparation of Financial Reports by
Securities Issuers and International Financial Reporting Standards, International Accounting
Standards, interpretation as well as related guidance endorsed by the Financial Supervisory
Commission of the Republic of China, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error. In preparing the consolidated financial statements,
management is responsible for assessing the 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 (inclusive of the Audit Committee)
are responsible for overseeing the Company’s financial reporting process.
8
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with the auditing standards generally accepted in the
Republic of China will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements. As part of an audit in accordance with auditing standards generally
accepted in the Republic of China, we exercised professional judgment and maintained professional
skepticism throughout the audit. We also:
1. Identified and assessed the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
2. Obtained 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.
3. Evaluated the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
4. Concluded on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Company’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause
the Company to cease to continue as a going concern.
5. Evaluated the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
9
6. Obtained sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Company to express an opinion on the consolidated financial
statements.
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 consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditors’ report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partners on the audit resulting in this independent auditors’ report are Tzu-Hsin,
Chang and Shyh-Huar, Kuo.
KPMG
Taipei, Taiwan (Republic of China) February 24, 2017 Notes to Readers
The accompanying consolidate financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with the International Financial Reporting Standards approved by the Financial Supervisory Commissions in the Republic of China and not those of any other jurisdictions. The standards, procedures, and practices to audit such financial statements are those generally accepted and applied in the Republic of China.
The auditors’ report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language auditors’ report and consolidated financial statements, the Chinese version shall prevail.
10
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese.) Swancor Holding Company Limited and Subsidiaries
Consolidated Balance Sheets
December 31, 2016
(amounts are expressed in thousands of New Taiwan dollars)
See accompanying notes to financial statements.
2016.12.31 Assets Amount %
Current assets: Cash and cash equivalents (note 6 (1)) $ 1,716,033 15 Financial assets at fair value through profit or loss-current
(note 6 (2) and (11)) 3,620
-
Notes receivable, net (note 6 (3)) 1,687,224 15 Accounts receivable, net (note 6 (3)) 1,717,549 15 Other receivables (note 6 (3)) 116,146 1 Inventories (note 6 (4)) 349,455 3 Prepayments 50,835 - Other current assets (note 6 (7)) 173,882 2 Other financial assets-current (note 6 (7) and 8) 806,009 7
6,620,753 58 Non-current assets: Financial assets carried at cost-non-current (note 6 (2)) 12,464 - Property, plant and equipment (note 6 (5) and 8) 4,358,103 38 Intangible assets (note 6 (6)) 7,566 - Deferred tax assets (note 6 (13)) 89,762 1 Prepaid pension cost-non-current (note 6 (12)) 44 - Prepaid for long-term rents (note 8) 261,979 3 Other non-current assets (note 6 (7)) 39,591 -
4,769,509 42
Total Assets $ 11,390,262 100
2016.12.31 Liabilities and Stockholders’ Equity Amount %
Current liabilities: Short-term borrowings (note 6 (9) and 8) $ 2,180,515 19 Short-term notes and bills payable (note 6 (8)) 49,909 - Financial liabilities at fair value through profit or loss-current
(note 6 (2) and 11) 55,328
-
Notes payable 84,204 1 Accounts payable 1,060,625 9 Other payables (note 6 (12)) 1,073,143 9 Current tax liabilities 149,030 1 Other current liabilities 81,912 1 Bonds payable, current portion (note 6 (11)) 753,128 7 Long-term borrowings, current portion (note 6 (10) and 8) 58,865 1
5,546,659 48 Non-current liabilities: Long-term borrowings (note 6 (10) and 8) 945,598 8 Deferred tax liabilities (note 6 (13)) 72,552 1 Other non-current Liabilities 318,000 3
1,336,150 12 Total Liabilities 6,882,809 60 Equity Attributable to Owners of the Parent Company (note 6 (14)): Share capital 908,471 8 Capital surplus (note 6 (11)) 3,232,410 29 Retained earnings 50,312 - Other equity interest (143,560) (1) Treasury Stock (94,317) (1) Equity attributable to owners of the parent company 3,953,316 35 Non-controlling interests 554,137 5 Total Equity 4,507,453 40 Total Liabilities and Equity $ 11,390,262 100
11
See accompanying notes to financial statements.
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese.)
Swancor Holding Company and Subsidiaries
Statements of Consolidated Comprehensive Income August 31, 2016(Date of Incorporation) to December 31, 2016
(amounts are expressed in thousands of New Taiwan dollars, except earnings per share)
Aug.31, 2016 to Dec.31, 2016
Amount % Net revenue (note 6 (17)) $ 1,684,808 100 Cost of revenue (note 6 (4) and 6) 1,274,708 76 Gross profit 410,100 24 Operating expenses (note 6 (6), (12) and (18)) Selling expenses 71,689 4 General and administrative expenses 81,338 5 Research and development expenses 55,124 3 208,151 12 Net operating income 201,949 12 Non-operating income and expenses: Other income (note 6 (19)) 19,727 1 Other gains and losses (note 6 (11) and (19)) (34,402) (2) Finance costs (note 6 (11) and (19)) (17,500) (1) (32,175) (2) Income before income tax 169,774 10 Income tax expense (note 6 (13)) 104,377 6 Net Income 65,397 4 Other comprehensive income: Items that will never be reclassified subsequently to profit or loss: Remeasurement of defined benefit obligation (note 6 (13)) (1,379) - Related Tax - - Total items that will never be reclassified subsequently to profit or
loss (1,379) -
Items that are or may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations (101,033) (6) Related Tax (note 6 (13)) - - (101,033) (6) Other comprehensive income for the year, net of income tax (102,412) (6) Total comprehensive income for the year $ (37,015) (2) Net income attributable to: Shareholders of the parent $ 51,691 3 Non-controlling interests 13,706 1 $ 65,397 4 Total comprehensive loss attributable to: Shareholders of the parent $ (33,020) (2) Non-controlling interests (3,995) - $ (37,015) (2)
Earnings per share (NT dollars) (note 6 (16)) Basic earnings per share $ 0.57 Diluted earnings per share $ 0.57
12
See accompanying notes to financial statements.
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese.)
Swancor Holding Company Limited and Subsidiaries
Consolidated Statements of Changes in Equity
August 31, 2016(Date of Incorporation) to December 31, 2016
(amounts are expressed in thousands of New Taiwan dollars)
Equity attributable to owners of parent
Retained earnings
Other components of
equity
Ordinary share
Capital surplus
Unappropriated retained
earnings
Exchange differences on translation of
foreign Operations
Treasury Stock
Total
Owners of the parent company
Total equity
Balance as of August 31, 2016 (Date of Incorporation) $ 908,337 3,229,717 - (60,228) - 4,077,826 545,170 4,622,996From share of charges in equities of subsidiaries - 2,915 - - - 2,915 - 2,915 Adjustment to capital surplus due to non-proportional investment - (568) - - - (568) 568 - Conversion of convertible bonds 134 346 - - - 480 - 480Purchase of treasury share - - - - (94,317) (94,317) (94,317)Changes in non-controlling interests - - - - - - 12,394 12,394 908,471 3,232,410 - (60,228) (94,317) 3,986,336 558,132 4,544,468Net income for 2016 - - 51,691 - 51,691 13,706 65,397Comprehensive income for 2016 - - (1,379) (83,332) - (84,711) (17,701) (102,412)Total comprehensive income for 2016 - - 50,312 (83,332) - (33,020) (3,995) (37,015)Balance as of December 31, 2016 $ 908,471 3,232,410 50,312 (143,560) (94,317) 3,953,316 554,137 4,507,453
13
See accompanying notes to financial statements.
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese.)Swancor Holding Company Limited and Subsidiaries
Consolidated Statements of Cash Flows August 31, 2016(Date of Incorporation) to December 31, 2016 (amounts are expressed in thousands of New Taiwan dollars)
Aug 31, 2016 to Dec 31, 2016
Cash flows from operating activities: Income before income tax $ 169,774 Adjustments: Adjustments to reconcile net income to net cash provided Depreciation expense 43,861 Amortization expense 788 Impairment loss recognized (reversal of impairment loss) on trade receivables (59,119) Net loss (gain) on financial assets at fair value through profit or loss 30,561 Interest expense 17,500 Interest income (11,656) Dividend income (30) Gain on disposal of property, plant and equipment (396) Gain on disposal of investment accounted for using equity method (295) Total adjustments to reconcile profit 21,169 Changes in operating assets and liabilities: Changes in operating assets Decrease in financial assets held for trading 756 Increase in notes receivable (72,881) Decrease in accounts receivable (include related parties) 333,062 Increase in other receivables (99,181) Increase in inventories (69,694) Decrease in prepayments 9,240 Increase in prepayment of pension-non current (1,423) Decrease in other operating assets 69,695 Total changes in operating assets 169,574 Changes in operating liabilities Increase in notes payable 21,049 Increase in accounts payable 442,195 Increase in other payables 589,099 Increase in other operating liabilities 338,269 Total changes in operating liabilities 1,390,612 Total adjustments 1,581,355 Cash inflow generated from operations 1,751,129 Interest received 11,656 Interest paid (11,737) Income taxes paid (44,850) Net cash provided by operating activities 1,706,198 Cash flows from investing activities: Acquisition of property, plant and equipment (1,310,496) Proceeds from disposal of property, plant and equipment 9,693 Increase in refundable deposits (14,605) Acquisition of intangible assets (478) Increase in prepayments for equipment (4,261) Dividends received 30 Net cash used in investing activities (1,320,117) Cash flows from financing activities: Increase in short-term borrowings 642,706 Decrease in short-term borrowings (906,979) Repayments of long-term borrowings (12,833) Increase in other financial assets (470,624) Payments to acquire treasury shares (94,317) Changes in non-controlling interests 12,394 From share of charges in equities of subsidiaries 2,915 Net cash used in financing activities
(826,738)
Effect of exchange rate changes on cash and cash equivalents
(73,264)
Net decrease in cash and cash equivalents
(513,921)
Cash and cash equivalents, beginning of period
2,229,954
Cash and cash equivalents, end of period $ 1,716,033
14
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese.)
Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
August 31, 2016(Date of Incorporation) to December 31, 2016
(expressed in thousands of New Taiwan dollars unless otherwise specified)
See accompanying notes to financial statements.
1. Company history
Swancor Holding Company Limited (the “Company”) was incorporated on August 31, 2016 as a Company limited by transferred preference shares from Swancor Industrial Company Limtied (Swancor) and registered under the Company Act of the Republic of China (ROC)., the company’s shares were listed on the Taiwan stock Exchange (TNSE) on the same day, after that, Swancor has entirely become of the Company’s subsidiaries with 100% shares hold. The Company and its subsidiaries (together referred to as the “Group”). The Group primarily is involved in precision chemical materials, Vinyl Ester Resins & Upresin, light composite material resins, energy conservation LED resins, energy conservation wind power laminar resins and painting’s manufacturing and trading business.
2. Approval date and procedures of the consolidated financial statements
These consolidated financial statements were authorized for issuance by the board of directors on February
24, 2017.
3. Impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory
Commission, R.O.C. ("FSC") but not yet in effect
(a) According to Ruling No. 1050026834 issued on July 18, 2016, by the FSC, public entities are required
to conform to the IFRSs which were issued by the International Accounting Standards Board (IASB)
before January 1, 2016, and were endorsed by the FSC on January 1, 2017 in preparing their financial
statements. The related new standards, interpretations and amendments are as follows:
New, Revised or Amended Standards and Interpretations
Effective date
per IASB
Amendments to IFRS 10, IFRS 12 and IAS 28 "Investment Entities: Applying
the Consolidation Exception"
January 1, 2016
Amendments to IFRS 11, Joint Arrangements : "Accounting for Acquisitions of
Interests in Joint Operations"
January 1, 2016
IFRS 14, "Regulatory Deferral Accounts" January 1, 2016
Amendment to IAS 1, presentation of Financial Statement "Disclosure Initiative" January 1, 2016
Amendments to IAS 16 and IAS 38, "Clarification of Acceptable Methods of
Depreciation and Amortization"
January 1, 2016
Amendments to IAS 16 and IAS 41, "Agriculture: Bearer Plants" January 1, 2016
Amendments to IAS 19, "Defined Benefit Plans: Employee Contributions" July 1, 2014
Amendment to IAS 27, "Equity Method in Separate Financial Statements" January 1, 2016
15 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
New, Revised or Amended Standards and Interpretations
Effective date
per IASB
Amendments to IAS 36, "Recoverable Amount Disclosures for Non-Financial
Assets"
January 1, 2014
Amendments to IAS 39, "Novation of Derivatives and Continuation of Hedge
Accounting"
January 1, 2014
Annual improvements to IFRSs 2010-2012 Cycle and 2011-2013 Cycle July 1, 2014
Annual improvements to IFRSs 2012-2014 Cycle January 1, 2016
IFRIC 21, "Levies" January 1, 2014
The Group assessed that the initial application of the above IFRSs would not have any material impact on
the consolidated financial statements.
(b) Newly released or amended standards and interpretations not yet endorsed by the FSC
A summary of the new standards and amendments issued by the IASB but not yet endorsed by the FSC.
The FSC announced that the Group should apply IFRS 9 and IFRS 15 starting January 1, 2018. As of the
date the Group’s financial statements were issued, the FSC has yet to announce the effective dates of the
other IFRSs. As of the end of reporting date is as follows:
New, Revised or Amended Standards and Interpretations
Effective date per
IASB
IFRS 9, "Financial Instruments" January 1, 2018
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets
Between an Investor and Its Associate or Joint Venture"
Effective date to be
determined by IASB
IFRS 15, "Revenue from Contracts with Customers" January 1, 2018
IFRS 16, "Leases" January 1, 2019
Amendment to IFRS 2, "Clarifications of Classification and Measurement
of Share-based Payment Transactions"
January 1, 2018
Amendment to IFRS 15, "Clarifications of IFRS 15" January 1, 2018
Amendment to IAS 7, "Disclosure Initiative" January 1, 2017
Amendment to IAS 12, "Recognition of Deferred Tax Assets for Unrealized
Losses"
January 1, 2017
Amendments to IFRS 4, " Insurance Contracts"(“Applying IFRS 9
Financial Instruments with IFRS 4 Insurance Contracts”)
January 1, 2018
16 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
New, Revised or Amended Standards and Interpretations
Effective date per
IASB
Annual Improvements to IFRS Standards 2014–2016 Cycle:
IFRS 12, "Disclosure of Interests in Other Entities"
IFRS 1, "First-time Adoption of International Financial Reporting
Standards" and IAS 28 "Investments in Associates and Joint Ventures"
January 1, 2017
January 1, 2018
IFRIC 22, "Foreign Currency Transactions and Advance Consideration" January 1, 2018
Amendments to IAS 40 Investment Property January 1, 2018
The Group is still currently determining the potential impact of the standards listed below:
Issuance / Release
Dates Standards or Interpretations Content of amendment
May 28, 2014
April 12, 2016
IFRS 15 "Revenue from
Contracts with Customers"
IFRS 15 establishes a five-step model for recognizing revenue that applies to all contracts with customers, and will supersede IAS 18 "Revenue," IAS 11 "Construction Contracts," and a number of revenue-related interpretations.
Final amendments issued on April 12, 2016, clarify how to (i) identify performance obligations in a contract; (ii) determine whether a company is a principal or an agent; (iii) account for a license for intellectual property (IP); and (iv) apply transition requirements.
17 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Issuance / Release
Dates Standards or Interpretations Content of amendment
November 19, 2013
July 24, 2014
IFRS 9 "Financial Instruments" The standard will replace IAS 39 "Financial Instruments: Recognition and Measurement", and the main amendments are as follows:
Classification and measurement:
Financial assets are measured at
amortized cost, fair value through
profit or loss, or fair value through
other comprehensive income, based
on both the entity's business model
for managing the financial assets
and the financial assets' contractual
cash flow characteristics. Financial
liabilities are measured at amortized
cost or fair value through profit or
loss. Furthermore, there is a
requirement that "own credit risk"
adjustments be measured at fair
value through other comprehensive
income.
Impairment: The expected credit
loss model is used to evaluate
impairment.
Hedge accounting: Hedge
accounting is more closely aligned
with risk management activities,
and hedge effectiveness is measured
based on the hedge ratio.
18 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
The Group is evaluating the impact on its financial position and financial performance of the initial adoption
of the abovementioned standards or interpretations. The results thereof will be disclosed when the Group
completes its evaluation.
4. Summary of Significant Accounting Policies
The significant accounting policies presented in the consolidated financial statements are summarized as follows: Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements.
(1) Statement of compliance
The consolidated financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (the Guidelines) and with the IFRSs, IASs, IFRIC Interpretations and SIC Interpretations endorsed by the FSC (collectively, “Taiwan-IFRSs”).
Issuance / Release
Dates Standards or Interpretations Content of amendment
January 13, 2016 IFRS 16 "Leases" The new standard of accounting for lease is amended as follows:
For a contract that is, or contains, a
lease, the lessee shall recognize a
right-of-use asset and a lease
liability in the balance sheet. In the
statement of profit or loss and other
comprehensive income, a lessee
shall present interest expense on the
lease liability separately from the
depreciation charge for the right-of-
use asset during the lease term.
A lessor classifies a lease as either a
finance lease or an operating lease,
and therefore, the accounting
remains similar to IAS 17.
19 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(2) Basis of preparation (a) Basis of measurement
The consolidated annual financial statements have been prepared on a historical cost basis except for the following material items in the statement of financial position:
(i) Financial instruments measured at fair value through profit or loss are measured at fair value;
(ii) The net defined benefit liabilities (or assets) are recognized as the fair value of plan assets, net. of aggregation of the present value of the defined benefit obligation, with a limit based on defined benefit assets.
(b) Functional and presentation currency
The functional currency of each Group entities is determined based on the primary economic environment in which the entities operate. The Group’s consolidated financial statements are presented in New Taiwan Dollar, which is the Company’s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.
(3) Basis of consolidation
(a) Principle of preparation of the consolidated financial statements
The consolidated financial statements comprised of the Company and its subsidiaries. The Group accounted an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its control over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that the control ceases. Intra-group balances and transactions, and any unrealized income and expenses arising from intra- group transactions, are eliminated in preparing the consolidated financial statements. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. Accounting policies of subsidiaries have been adjusted to ensure consistency with the policies adopted by the Group. Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any differences between the Group’s share of net assets before and after the change, and any considerations received or paid, are adjusted to or against the Group reserves.
20 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(b) List of subsidiaries in the consolidated financial statements Percentage of Ownership
Name of Investor Name of Investee Main Business and products 2016.12.31 Swancor Holding Swancor Industrial Co., Ltd. (Swancor) Producing and selling of Viny1 Ester
Resins and light composite material resins
100%
〞 Swancor Renewable Energy Co., Ltd.(Swancor Renewable Energy)
Energy technical services 100%
Swancor Industrial
Strategic Capital Holding Ltd. (Strategic) Investing and holding 100%
〞 Formosa I Wind Power Co., Ltd.( Formosa I Wind Power)
Electric power supply 95.81%
〞 Swancor (Jiangsu) Carbon Composites Co., Ltd. (Swancor (Jiangsu) Carbon Composites)
Producing and selling carbon 82%
〞 Formosa I International Investment Co., Ltd (Formosa I International Investment)
Investing and holding 100%
Strategic Swancor Ind. Co., Ltd. (Samoa) (Swancor) Investing and holding 100% 〞 Shang-Wei Investment Co., Ltd
(Seychelles)(Shang-Wei(Seychelles)) Investing and holding 100%
〞 Swancor (Shanghai) Fine Chemical Co., Ltd. (Swancor (Shanghai))
Producing and selling of Viny1 Ester Resins and light composite material resins
17.02%
Swancor Swancor (Shanghai) Production and selling of Vinyl Ester Resins and light composite material resins
71.73%
Swancor (Shanghai)
Swancor (Tianjin) Win Blade Materials Co., Ltd.
Energy conservation wind power laminar resins’ manufacturing and selling
100%
Swancor (Shanghai)
Swancor(Jiangsu) New Materials Co., Ltd. (Swancor(Jiangsu))
Energy conservation wind power laminar resins’ producing and selling
100%
〞 Swancor (HK) Investment Co., Ltd. Investing and holding 100% Swancor (HK) Swancor Ind(M) SDN.BHD.
(Swancor Ind(M)) Production and selling of Vinyl Ester Resins and light composite material resins
100%
〞 Swancor Highpolymer Co., Ltd. (Swancor Highpolymer)
Production and selling of Vinyl Ester Resins and light composite material resins
100%
Subsidiaries excluded from consolidation: None.
(c) Change in ownership of subsidiaries in December, 2016 was as follow:
In September 2016, pursuant to the resolutions of the board of directors, Swancor(HK) invested thousand dollars (USD7,000 thousand dollars) in subsidiary- Swancor Highpolymer Co., Ltd. As of October 6, 2016, the procedure for the registration had been completed. In September 26, 2016, Formosa I Wind Power issued new stock for capital increase by cash. The Compnay purchased new shares by $175,000 thousand dollars. Consequently, the company’s comprehensive shareholding increase from 95% to 95.81%, cause to the original net shares had a deduction of 568 thousand dollars, and the Company had adjusted its capital surplus.
21 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Pursuant to the resolutions of the board of directors in Sep, 2016, the Company invested $1,000 thousand dollars in subsidiary- Formosa I Wind Power. As of September, 2016, the procedure for the registration had been completed.
Jiangsu Tiande New Materials Technology Co., Ltd. completed the liquidation procedures in Sep, 2016. Due to business requirement, the Company decided to switch the ownership of Swancor Renewable Energy from Swancor Industrial to the Company at 100% shareholding on board of directors’ meeting on August, 2016. As of November, 2016, the procedure for the registration had been completed. Transfer of ownership described above leads no effect into combined shareholdings of Swancor Renewable Energy.
(4) Foreign currency
(a) Foreign currency transaction
Transactions in foreign currencies are translated to the respective functional currencies of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation. Foreign currency differences arising on retranslation are recognized in profit or loss, except for the following differences which are recognized in other comprehensive income arising on the retranslation: ‧ available-for-sale equity investment; ‧ a financial liability designated as a hedge of the net investment in a foreign operation to the extent
that the hedge is effective; or ‧ qualifying cash flow hedges to the extent the hedge is effective.
(b) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Group’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Group’s functional currency at average rate. Foreign currency differences are recognized in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity.
22 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Group disposes only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.
(5) Assets and liabilities classified as current and non-current
An entity shall classify an asset as current when:
(a) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; (b) It holds the asset primarily for the purpose of trading; (c) It expects to realize the asset within twelve months after the reporting period; or (d) The asset is cash and cash equivalent unless the asset is restricted from being exchanged or used to
settle a liability for at least twelve months after the reporting period.
An entity shall classify all other assets as non-current.
An entity shall classify a liability as current when:
(a) It expects to settle the liability in its normal operating cycle; (b) It holds the liability primarily for the purpose of trading; (c) The liability is due to be settled within twelve months after the reporting period; or (d) It does not have an unconditional right to defer settlement of the liability for at least twelve months
after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
An entity shall classify all other liabilities as non-current.
(6) Cash and cash equivalents Cash and cash equivalents comprise cash balances, demand deposits and investments which can be convertible to fixed cash anytime and with an insignificant risk of fair value changes and high liquidity. Time deposits with maturities of one year or less from the acquisition date that are subject to an insignificant risk of changes in their fair value are convertible to fixed cash anytime, and are used by the Group for the management of its short-term commitments, not for investment or other purposes. It is, hence, recognized as cash and cash equivalents.
(7) Financial instruments
Financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instruments.
23 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(a) Financial assets
Financial assets are categorized into financial assets at fair value through profit or loss, loans and receivables.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss consist of financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as financial assets at fair value through profit or loss unless they are designated as hedges. The Group designates financial assets, other than ones classified as held-for-trading, as at fair value through profit or loss at initial recognition under one of the following situations: A. Such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on a different basis.
B. Performance of the financial asset is evaluated on a fair value basis. C. A hybrid instrument contains one or more embedded derivatives. At initial recognition, financial assets carried at fair value through profit or loss are recognized at fair value. Any attributable transaction costs are recognized in profit or loss as incurred. Subsequent to the initial recognition, changes in fair value (including dividend income and interest income) are recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade-date accounting.
(ii) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise trade receivables and other receivables. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses other than insignificant interest on short-term receivables. A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade-date accounting. Interest income is recognized in profit or loss under non-operating income and expenses.
(iii) Impairment of financial assets
A financial asset is impaired if, and only if, there is objective evidence of impairment as a result of one or more events that occurred subsequent to the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the future cash flows of the financial asset that can be estimated reliably.
24 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is accounted for as objective evidence of impairment. All individually significant receivables are assessed for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries, and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than those suggested by historical trends. For financial assets carried at amortized cost, the amount of the impairment loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the allowance accounts are recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss of a financial asset measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss to the extent that the carrying value of the asset does not exceed its amortized cost before impairment was recognized at the reversal date. Impairment losses and recoveries of accounts receivable are recognized in for financial assets other than accounts receivable, impairment losses and recoveries are recognized in non-operating income and expenses.
(iv) Derecognition of financial assets
The Group derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets. The Group separates the part that continues to be recognized and the part that is derecognized, based on the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income shall be recognized in profit or loss, and is included in non-operating income and expenses.
25 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair values of those parts.
(b) Financial liabilities and equity instruments
(i) Classification of debt or equity
Debt or equity instruments issued by the Group are classified as financial liabilities or equity in accordance with the substance of the contractual agreement. Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized as the amount of consideration received less the direct cost of issuing. Compound financial instruments issued by the Group comprise convertible that can be converted to share capital at the option of the holder, when the number of shares to be issued is fixed. The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition. Interest related to the financial liability is recognized in profit or loss, and it is included in non-operating income and expenses. On conversion, the financial liability is reclassified to equity, and no gain or loss is recognized.
(ii) Financial liabilities at fair value through profit or loss
A financial liability is classified in this category if it is classified as held-for-trading or is designated as such on initial recognition. A financial liability is classified as held-for-trading if it is acquired principally for the purpose of selling in the short term. The Group designates financial liabilities, other than the ones classified as held-for-trading, as at fair value through profit or loss at initial recognition under one of the following situations:
A. Such designation eliminates or significantly reduces a measurement or recognition inconsistency
that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on a different basis.
B. Performance of the financial liabilities is evaluated on a fair value basis.
C. A hybrid instrument contains one or more embedded derivatives.
26 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value and changes therein, which take into account any interest expense, are recognized in profit or loss, and are included in non-operating income and expenses.
(iii) Other financial liabilities
Financial liabilities not classified as held-for-trading or designated as at fair value through profit or loss, which comprise loans and borrowings, and accounts and other payables, are measured at fair value plus any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, and is included in non-operating income and expenses.
(iv) Derecognition of financial liabilities
The Group derecognizes a financial liability when its contractual obligation has been discharged or cancelled, or expired. The difference between the carrying amount of a financial liability removed and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss, and is included in non – operating income and expenses.
(v) Offsetting of financial assets and liabilities
The Group presents financial assets and liabilities on a net basis when the Group has the legally enforceable right to offset and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.
(c) Derivative financial instruments, including hedge accounting
The Group holds derivative financial instruments to hedge its foreign currency and interest rate
fluctuation exposures. At initial recognition, derivatives are recognized at fair value; and attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein, are recognized in profit of loss under non-operating income and expenses. When a derivative is designated as hedging instrument, the timing for recognizing gain or loss is determined based on the nature of the hedging relationship. When the result of the valuation at fair value of a derivative instrument is positive, it is classified as a financial asset; otherwise, it is classified as a financial liability.
(8) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expense.
27 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(9) Property, plant and equipment
(a) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. The cost of a self-constructed asset comprises material, labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that is eligible for capitalization.
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 shall be depreciated separately, unless the useful life and the depreciation method of a significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item. The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized as other gains and losses.
(b) Subsequent cost
Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.
(c) Depreciation
The depreciable amount of an asset is determined after deducting its residual amount, and it shall be allocated on a systematic basis over its useful life. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period shall be recognized in profit or loss. Land has an unlimited useful life and therefore is not depreciated. The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:
(i) Buildings and structures: 5~25 years (ii) Machinery and equipment: 4~15 years (iii) Transportation equipment: 5~9 years (iv) Other equipment: 2~13 years
Buildings and structures constitutes mainly building, electrical power equipment, improvement construction and fire protection engineering, etc. Each such part depreciates based on its useful life of 25 years, 20 years, 20 years, and 20 years respectively.
28 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Machinery and equipment constitutes mainly equipment, power distribution project and piping construction, etc. Each such part depreciates based on its useful life of 15 year, 15 year and 5~10 years respectively. Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change is accounted for as a change in an accounting estimate.
(d) Reclassification to investment property The property is reclassified to investment property at its carrying amount when the use of the property changes from internal use to investment use.
(10) Prepaid for long-term rents
Prepaid for long-term rents are land use rights on a straight – line basis over its useful life.
(11) Intangible assets
(a) Research and development
During the research phase, activities are carried out to obtain and understand new scientific or technical knowledge. Expenditures during this phase are recognized in profit or loss as incurred. Expenditures arising from the development phase shall be recognized as an intangible asset if all the conditions described below can be demonstrated; otherwise, they will be recognized in profit or loss as incurred.
(i) The technical feasibility of completing the intangible asset so that it will be available for use or
sale. (ii) Its intention to complete the intangible asset and use or sell it. (iii) Its ability to use or sell the intangible asset. (iv) How the intangible asset will generate probable future economic benefits. (v) The availability of adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset. (vi) Its ability to measure reliably the expenditure attributable to the intangible asset during its
development.
(b) Other intangible assets Other intangible assets that are acquired by the Group are measured at cost less accumulated amortization and any accumulated impairment losses.
(c) Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.
29 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(d) Amortization
The depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with all indefinite useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows: (i) Trademarks: 5 years (ii) Computer software: 2~10 years
The residual value, amortization period, and amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each financial year-end. Any change shall be accounted for as a change in accounting estimate.
(12) Impairment of non-financial assets The Group assesses non-derivative financial assets for impairment (except for inventories, assets arising from construction contracts, deferred income tax assets and employee benefits) at every reporting date, and estimates its recoverable amount. If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use) for the individual asset, then the Group will have to determine the recoverable amount for the asset's cash-generating unit (CGU).
The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value less costs to sell or its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.
The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount, as a reversal of a previously recognized impairment loss. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(13) Treasury stock Common stock repurchased by the Group treated as treasury stock (a contra-equity account) is reported at acquisition cost (including all directly accountable costs), net of taxes. When treasury stock is sold, the excess of sales proceeds over cost is accounted for as capital surplus-treasury stock. If the sales proceeds are less than cost, the deficiency is accounted for as a reduction of the remaining balance of capital surplus-treasury stock. If the remaining balance of capital surplus-treasury stock is insufficient to cover the deficiency, the remainder is recorded as a reduction of retained earnings. The cost of treasury stock is computed using the weighted-average method.
30 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
If treasury stock is retired, the weighted-average cost of the retired treasury stock is written off against the par value and the capital surplus premium, if any, of the stock retired on a pro rata basis. If the weighted-average cost written off exceeds the sum of the par value and the capital surplus, the difference is accounted for as a reduction of capital surplus-treasury stock, or reduction of retained earnings for any deficiency where capital surplus-treasury stock is insufficient to cover the difference. If the weighted-average cost written off is less than the sum of the par value and capital surplus, if any, of the stock retired, the difference is accounted for as an increase in capital surplus-treasury stock.
(14) Revenue
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.
The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. For international trade where FOB shipping point is mainly adopted, transfers occur upon loading the goods onto the relevant carrier at the port. For domestic trade, transfers usually occur when the product is received at the customer’s warehouse.
(15) Government subsidy
The government takes subsidy to which the Group can be reasonable assurance and would compliance the extra term of the government subsidy. And it can be the government takes the subsidy to the Group which can be reasonable of the government subsidy. If the subsidy is belong to compensate the expense which come from the consolidated company, then it shall be recognized immediately in profit or loss.
(16) Employee benefits
(a) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.
(b) Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted from the aforesaid discounted present value. The discount rate is the yield at the reporting date on bonds (market yields of government bonds) that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid.
31 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities. When the benefits of a plan are improved, the expense of the increased benefit relating to past service by employees is recognized immediately in profit or loss . Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. Net interest expense and other expenses related to the defined benefit plans are recognized in retained earnings. The Group recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains or losses.
(c) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
(17) Share-based payment
The grant-date fair value of share-based payment awards granted to employees is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards whose related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions, and there is no true-up for differences between expected and actual outcomes.
(18) Income taxes
Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss.
32 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to prior years. Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes shall not be recognized for the below exceptions:
(a) Assets and liabilities that are initially recognized but are not related to the business combination and
have no effect on net income or taxable gains (losses) during the transaction. (b) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is
a high probability that such temporary differences will not reverse. (c) Initial recognition of goodwill. Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities may be offset against each other if the following criteria are met: (i) The entity has the legal right to settle tax assets and liabilities on a net basis; and (ii) the taxing of deferred tax assets and liabilities fulfill one of the below scenarios:
(A) levied by the same taxing authority; or (B) Levied by different taxing authorities, but where each such authority intends to settle tax assets and
liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.
A deferred tax asset should be recognized for the carry-forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences shall also be re-evaluated every year on the financial reporting date, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.
(19) Earnings per share
The Group discloses the Group’s basic and diluted earnings per share attributable to ordinary equity holders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the Company, divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares, such as convertible notes, employee stock options, and employee bonus.
33 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(20) Operating segments
An operating segment is a component of the Group that engages in business activities from which it may incur revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Each operating segment consists of standalone financial information.
5. Significant Accounting Assumption and Judgments, and Major Sources of Estimation Uncertainly
The preparation of the consolidated financial statements in conformity with the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates. The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period. Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is as follows:
(a) Impairment of trade receivable
When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding possible future credit losses) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise. Refer to note 6(3) for further description of the impairment of trade receivable.
(b) Impairment of property, plant and equipment, and intangible assets
In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill, the Group is required to make subjective judgments in determining the independent cash flows, useful lives, expected future income and expenses related to the specific asset groups considering of the nature of the industry. Any changes in these estimates based on changed economic conditions or business strategies and could result in significant impairment charges or reversal in future years.
Consolidated companies’ valuation on assets and liabilities maximizes the use of relevant observable inputs. The fair value hierarchy categorizes the inputs used in valuation techniques into three levels:
(a) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.
(b) Level 2: prices other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
(c) Level 3: prices for the assets or liability that are not based on observable market data (unobservable inputs).
34 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
6. Explanation of significant accounts
(1) Cash and Cash Equivalents 2016.12.31
Cash on hand $ 718Demand deposits 1,556,590Time deposits 158,725Cash and cash equivalents $ 1,716,033
Refer to note 6 (20) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company
(2) Financial Assets and Liabilities (a) Financial assets and liabilities
2016.12.31
Financial assets designated as at fair value through profit or loss:
Unsecured convertible corporate bonds-Call and put provision
$ 462
Financial assets held for trading purpose: Non-derivative financial assets-Stock shares 3,158
$ 3,620 Financial liabilities designated as at fair value through profit or loss:
Unsecured convertible corporate bonds-Call and put provision
$ 33,600
Non-hedging derivative financial instruments- Forward exchange contract
21,728
Total $ 55,328 The amount of profit or loss which are recognized at fair value please refer to note 6 (11) and (19).
(b) Financial assets carried at cost-non-current
2016.12.31
Available-for-sale financial assets Stocks unlisted on domestic markets $ 12,464
The aforementioned investments held by the Group are measured at amortized cost at year end given the range of reasonable fair value estimates is large and the probability for each estimate cannot be reasonably determined. Therefore, the Group management has determined that the fair value cannot be measured reliably.
35 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(c) Non-hedging derivative financial instruments
The Group use derivative financial instruments to hedge certain foreign exchange and interest risk the Group is exposed to arising from its operating, financing and investing activities. The Group held the following derivative financial instruments not designated as hedging instruments presented as held-for-trading financial assets as of December 31, 2016:
Forward exchange contract
2016.12.31 Contract Amount
(in thousands)
Currency
Maturity date
Forward exchange purchased EUR 3,384 NTD to EUR Jan 20, 2017
Forward exchange purchased EUR 3,692 NTD to EUR Jan 03, 2017
Forward exchange purchased EUR 4,000 NTD to EUR Jan 20, 2017
As of December 31, 2016, the financial assets at fair value through profit or loss of the Group had been pledged as collateral for long-term borrowings
(3) Notes and Account Receivable, and Other Receivables 2016.12.31
Notes receivable from operating activities $ 1,687,224 Accounts receivable 1,886,948 Less:allowance for impairment loss (169,399) $ 1,717,549 Other receivables $ 116,146
The following table sets forth the aging analysis of receivables past due but not impaired:
2016.12.31
Passed due within 60 days $ 251,889 Passed due 61~360 days 324,064 Passed due Over 360 days - $ 575,953
Notes and accounts receivable include amounts that are past due but for which the Group has not recognized a specific allowance for impairment loss after the assessment since there has not been a significant change in the credit quality of its customers and the amounts are still considered recoverable. The movement of the allowance for impairment loss with respect to notes and accounts receivable, and other receivables for the period from August 31, 2016(Date of Incorporation) to December 31, 2016 were as follows:
36 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Individually assessed for
impairment Balance at August 31, 2016 $ 230,269
Impairment loss (59,119) Foreign exchange loss (1,751) Balance at December 31, 2016 $ 169,399
For the balances of the accounts receivable and notes receivable that are past due, the Group should estimate if the balance can be recovered or not. An allowance for impairment loss was assessed based on the customers ‘historical payment behavior, credit risk and current financial situation. Impairment loss recognized for individually assessed impairment is the difference between the carrying amount and the amount expected to be collected. The Group does not hold any collateral for the collectible amounts. Based on historic default rates, the Group believes that, apart from the above, impairment allowance of notes and accounts receivable not past due is considerate; 10 percent of the balance, which includes the amount owed by the Group’s most significant customers, relates to customers that have good payment records with the Group. None of the receivables was discounted or pledged as collateral as of August 31, 2016(Date of Incorporation) to December 31, 2016. The Group transferred $1,917,741 thousand dollars of trade receivables to an unrelated third party. At the time of transfer, the Group provided a guarantee on the trade receivables to the transferee. Therefore, the Group continues to recognize the full carrying value of the trade receivables transferred, and recognized the cash received from the transfer as a guaranteed loan.
(4) Inventories
2016.12.31
Raw materials $ 174,931 Finished goods 148,347 Merchandise 26,177 $ 349,455
The detail of inventory write-downs as follows:
August 31, 2016 to December 31, 2016
Provision (reversal of provision) for inventory valuation and obsolescence
$ 3,359
Loss on physical inventory (233) Gain on disposal of leftover bits and pieces (85) Loss on disposal of scrap 838 Operating costs recognized $ 3,879
As of December 31, 2016, inventories were not pledged as collateral.
37 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(5) Property, plant and equipment
The cost, depreciation, and impairment of the property, plant and equipment of the Company in 2016 were as follows:
Land Buildings and
Structures Machinery and
Equipment Other
Equipment
Unfinished Construction
and equipment Total Cost: Balance at August 31, 2016 $ 254,072 561,558 308,669 466,269 1,844,485 3,435,053 Additions - 12,810 9,647 30,783 1,434,861 1,488,101 Disposals - (263) (7,238) (2,079) (5,098) (14,678)Reclassification - 6,329 - - 31,471 37,800 Effect of movements in exchange rates - (8,017) (4,328) (4,690) (17,614) (34,649)Balance at December 31, 2016 $ 254,072 572,417 306,750 490,283 3,288,105 4,911,627 Depreciation and impairment loss: Balance at August 31, 2016 $ - 164,304 180,396 177,244 - 521,944 Depreciation for the year - 9,229 8,090 26,542 - 43,861 Disposals - (75) (2,219) (3,087) - (5,381)Effect of movements in exchange rates - (2,268) (2,335) (2,297) - (6,900)Balance at December, 31 2016 $ - 171,190 183,932 198,402 - 553,524 Carrying amounts: Balance at August 31, 2016 $ 254,072 397,254 128,273 289,025 1,844,485 2,913,109 Balance at December 31, 2016 $ 254,072 401,227 122,818 291,881 3,288,105 4,358,103
As of December 31, 2016, Offshore wind power is processing the test of the impairment assets, which have no damage on assets of book value. As of December 31, 2016, property, plant and equipment pledged as collateral for bank loans are described in note 8.
(6) Intangible Assets The costs of intangible assets, amortization, and impairment loss of the Group for the years ended August 31, 2016(Date of Incorporation) to December 31, 2016, were as follows:
Technique Computer software
Total
Costs: Balance at August 31, 2016 $ 36,266 53,656 89,922 Additions - 478 478 Disposals - (9,273) (9,273) Effect of movement in exchange rates - (29) (29) Balance at December 31, 2016 $ 36,266 44,832 81,098Amortization and Impairment Loss: Balance at August 31, 2016 $ 36,266 45,760 82,026 Amortization for the year - 788 788 Disposals - (9,273) (9,273) Effect of movement in exchange rates - (9) (9) Balance at December 31, 2016 $ 36,266 37,266 73,532Carrying value: Balance at August 31, 2016 $ - 7,896 7,896 Balance at December 31, 2016 $ - 7,566 7,566
38 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
a. Amortization For the years ended August 31, 2016(Date of Incorporation) to December 31, 2016, the amortizations of intangible assets were included in the statement of comprehensive income:
August 31, 2016 to
December 31, 2016 Operating costs $ 26 Operating expenses $ 762
b. Disclosures on pledges
As of December 31, 2016, the intangible assets were not pledged as collateral.
(7) Other current assets and other assets
The details of other current assets and others were as follows:
2016.12.31 Restricted cash in banks $ 445,870 Capital guarantee financial product 360,139 Temporary payments and payment on behalf of others 62,749 Prepayments for equipment 15,283 Guarantee deposits paid 24,063
Other-current 111,133 Other-non-current 245 $ 1,019,482
(8) Short-term Notes and Bills Payable 2016.12.31 Guarantee or
acceptance agency
Interest rates
Amount Short-term bills payable Mega Bills 1.278% $ 50,000 Less: Discount on short-term notes and
bills payable 91
$ 49,909
As of December 31, 2016, the Short-term bills payable were not pledged as collateral.
(9) Short-term borrowings Short-term borrowings consisted of the following:
2016.12.31 Unsecured bank loans $ 1,884,184Secured bank loans 296,331 $ 2,180,515Unused credit lines $ 731,881Interest rate 1.00%~7.16%
39 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
For details of the related assets pledged as collateral, please refer to note 8.
(10) Long-term borrowings Long-term borrowing consisted of the following:
2016.12.31 Currency Interest rates Expiration Amount
Cathy bank and others NTD 3.032%~3.066% 2018~2021
$ 768,200
Unsecured bank loans NTD 1.58%~1.66% 2019~2020
159,167
Secured bank loans NTD 1.62%~3.013% 2029
110,000
1,037,367
Less: Long-term borrowings current portion
58,865
Less: Transaction Costs 32,904Total $ 945,598Unused credit lines $ 841,800
The Company had a secured bank loan with Cathy bank and two other bank institutions with a carrying amount of $2,500,000 thousand dollars at March 2016. According to the terms of the agreement, this loan is repayable in tranches over the next 5 years, can apply once for 2 years extension with floating interest rate. However, the loan contains a debt covenant stating that at the end of each year, the Company has to comply with some specific financial ratios, such as current ratio, debt ratio, tangible net worth ratio, and net debt ratio. If the Company violate the financial ratios above, it has to pay extra interest expense basic on the contract; in addition, the banks have authority to request the Company to redeem all borrowings if the Company violate specific agreements on the contract.
For details of the related assets pledged as collateral, please rater to note 8.
(11) Bonds payable
Dec 31, 2016 The first domestic unsecured convertible bonds $ 710,000 The second domestic unsecured convertible bonds 700,000 Unamortized bonds payable discount (43,072) Exercise of conversion options (613,800) 753,128 Less:Bonds payable, current portion 753,128 Bonds payable, net balance at year end $ - Embedded derivative-put options, included in financial assets at
fair value through profit or loss-current $ 462
Embedded derivative-put options, induced in financial liabilities at fair value through profit or loss-non-current $ 33,600
Equity component-conversion options, included in paid-in capital $ 48,232
40 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Aug 31, 2016 to Dec 31, 2016
Embedded derivative instruments – put options, included in financial liabilities at fair value through profit or loss $ 13,131
Interest expense $$ 4,382
a The significant terms of the first domestic unsecured convertible bonds were as follows:
(i) Offering amount : $710,000 thousand dollars
(ii) Duration: five years (August 23, 2013 to August 23, 2018)
(iii) Interest rate: 0%
(iv) Conversion period: Within the period between one month after the issuance date and 10 days before
the maturity date. (v) Conversion price: As of the issuance date, the conversion price was NT$43 per share. However,
after issuance date, except the conversion of common stock or employee bonus issue new stock, which is subject to adjustment by the formula provided in the issue terms if the Company’s outstanding common shares are increased, or the ratio of distributed either in cash or in stock dividends is higher than current price per share of 1.5%, or is lower than reissue or privately places which is provided with conversion of common stock, or decreasing of common stock which does cause by cancellation of treasury shares.
(vi) Redemption at the option of bondholders: Each Holder has the right to request the Group to
repurchase the bonds on August 23, 2015, August 23, 2016 and August 23, 2017 at a redemption price equal to the principal amount of the Bonds with a yield-to-maturity of 102.01% (real yield=1%), 103.03% (real yield=1%) and 104.06% (real yield=1%) per annum, respectively. The Group shall redeem the convertible bonds in cash within five business days from the day on which it accepts an application for processing.
(vii) Redemption at the option of the Group: The Group may redeem the bonds under the following
circumstances: Within the period between one month years after the issuance date (September 24, 2013) and 40 days before the maturity date (July 14, 2018), the Group may redeem the bonds at their principal amount if the closing price of the Group’s common stock on TWSE for a period of 30 consecutive trading days has been 30% more than the conversion price in effect on each such trading day.
Within the period between one month after the issuance date and 40 days before the maturity date, if at least 90% of the principal amount of the bonds has been converted, redeemed, or purchased and cancelled, the Group may redeem the bonds at their principal amount after five business days from the base day. The base day should not be within the lock-out period.
(viii) Settlement: Unless the Bonds have been converted to common stocks, previously redeemed or
repurchased, each Holder of the Bonds will have the right to redeem the bonds at their principal amount in cash.
41 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
The Company separated the equity and liability components as follows:
Items Amounts Total issue price (deducted transaction cost ) $ 705,000Convertible bonds’ fair value at issuance (642,334)Embedded derivative debt at issuance (9,727)Equity components at issuance $ 52,939
(ix) According to the resolution of the Shares Conversion, the Company will have to take the obligation to
perform the approval of the Warrants issued by the Competent Authority by the Competent Authority and adjust the price and the number of the shares in accordance with the conversion ratio.
b The significant terms of the second domestic unsecured convertible bonds were as follows:
(i) Offering amount : $700,000 thousand dollars
(ii) Duration: five years (July 23, 2015 to July 2, 2020)
(iii) Interest rate: 0%
(iv) Conversion period: Within the period between one month after the issuance date and 10 days before
the maturity date. (v) Conversion price: As of the issuance date, the conversion price was NT$287 per share. However,
after issuance date, except the conversion of common stock or employee bonus issue new stock, which is subject to adjustment by the formula provided in the issue terms if the Company’s outstanding common shares are increased, or the ratio of distributed either in cash or in stock dividends is higher than current price per share of 1.5%, or is lower than reissue or privately places which is provided with conversion of common stock, or decreasing of common stock which does cause by cancellation of treasury shares.
(vi) Redemption at the option of bondholders: Each Holder has the right to request the Group to
repurchase the bonds on July 2, 2017, July 2, 2018 and July 2, 2019 at a redemption price equal to the principal amount of the Bonds with a yield-to-maturity of 102.01% (real yield=1%), 103.03% (real yield=1%) and 104.06% (real yield=1%) per annum, respectively. The Group shall redeem the convertible bonds in cash within five business days from the day on which it accepts an application for processing.
(vii) Redemption at the option of the Group: The Group may redeem the bonds under the following
circumstances: Within the period between one month years after the issuance date (August 3, 2015) and 40 days before the maturity date (May 23, 2020), the Group may redeem the bonds at their principal amount if the closing price of the Group’s common stock on TWSE for a period of 30 consecutive trading days has been 30% more than the conversion price in effect on each such trading day.
Within the period between one month after the issuance date and 40 days before the maturity date, if at least 90% of the principal amount of the bonds has been converted, redeemed, or purchased and cancelled, the Group may redeem the bonds at their principal amount after five business days from the base day. The base day should not be within the lock-out period.
42 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(viii) Settlement: Unless the Bonds have been converted to common stocks, previously redeemed or
repurchased, each Holder of the Bonds will have the right to redeem the bonds at their principal amount in cash.
The Company separated the equity and liability components as follows:
Items Amounts Total issue price (deducted transaction cost ) $ 696,510Convertible bonds’ fair value at issuance (643,341)Embedded derivative debt at issuance (12,110)Equity components at issuance $ 41,059
(12) Employee benefits
(a) Defined benefit plans
The movement in the present value of the defined benefit obligations and fair value of plan assets were as follows:
2016.12.31 The present value of the defined benefit obligations $ 46 Fair value of plan assets (90)The net defined benefit liability $ (44)
The Group makes defined benefit plan contributions to the pension fund account at Bank of Taiwan that provides pensions for employees upon retirement. The plans (covered by the Labor Standards Law) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement. (i) Composition of plan assets
The Group set aside pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Labor Pension Fund Supervisory Committee. With regard to the utilization of the funds, 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 interest rates offered by local banks.
The Group’s Bank of Taiwan labor pension reserve account balance amounted to $38 thousand dollars at the end of the reporting period. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Labor Pension Fund Supervisory Committee.
43 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(ii) Movements in present value of the defined benefit obligations
The movements in present value of defined benefit obligations from August 31, 2016(Date of Incorporation) to December 31, 2016 were as follows:
2016 Defined benefit obligation at January 1 $ 13,323
Current service costs and interest 217
Remeasurements of the net defined benefit liability (asset)
-Due to experience adjustments of actuarial gains (losses)
(285)
-Due to changes in demographic assumptions of actuarial gains
1,479
Settlement effects (13,272)
Plan assets payment (1,416)
Defined benefit obligation at December 31 $ 46
(iii) Movements of defined benefit plan assets
The movements in the present value of the defined benefit plan assets for the period of August 31, 2016(Date of Incorporation) to December 31, 2016 were as follows:
2016 Fair value of plan assets at January 1 $ 13,583 Interest income 236 Remeasurement of the net defined benefit liability
(asset)
-Return on plan assets (excluding amounts included in net interest expense)
(185)
Benefits paid from the plan 3,909 Settlement payments (16,037) Plan assets payments (1,416) Fair value of plan assets at December 31 $ 90
(iv) Expenses recognized in profit or loss
The expenses recognized in profit or loss for the Group were as follows: 2016
Net interest of the net defined benefit liability (asset)
$ (19)
Current service costs and net settlements 2,765
Current manager payments 944
$ 3,690
Administration expenses $ 3,690
44 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(v) Remeasurement in net defined benefit liability (asset) recognized in other comprehensive income
The Group’s remeasurement in net defined benefit liability (assets) recognized in other comprehensive income for the years ended December 31, 2016 were as follows :
2016 Cumulative amount at January 1 $ (2,409) Recognized during the period (1,379) Cumulative amount at December 31 $ (3,788)
(vi) Actuarial assumptions
The following were the key actuarial assumptions at the reporting date:
2016
Discount rate 1.625% Future salary increases 2.25%
The appropriation amount to be made by the Group to the defined benefit plans in one year period after the reporting date is expected to be $0. The weighted average duration of the defined benefit obligation is 32.9 years.
(vii) Sensitivity analysis
As of December 31, 2016, the present value of defined benefit obligation impact was as follow:
The impact on defined benefit obligation Increase 0.25% Decrease 0.25% Discount rate $ (4) 4 Future salary increases 4 (4)
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions remain constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.
There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2016.
(b) Defined contribution plans
The Company set aside 6% of the employees’ monthly wages to the labor pension personal account at the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Company set aside a fixed amount to the Bureau of the Labor Insurance without the payment of additional legal or constructive obligations. Under the defined benefit retirement plans, the cost of the pension contributions to Labor Insurance Burean were as follows:
45 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Except for the Company, Swancor, Formosa I Wind Power, Formosa I International Investment, Swancor Highpolymer, and Swancor Renewable Energy, other subsidiaries adopted the defined contribution method under their local law, and accordingly, the pension costs were 5,806 thousand dollars for the period of August 31, 2016(Date of Incorporation) to December 31, 2016, respectively.
(c) Short term compensated absence Debt
The Company has the accrual compensated absence debt $ 3,308 thousand dollars for the period of August 31, 2016(Date of Incorporation) to December 31, 2016.
(13) Income taxes
a. Income tax expense
The details of income tax expense for the period of August 31, 2016 to December 31, 2016 were as follows:
Aug 31, 2016 to Dec 31, 2016
Current income tax expense Current period $ 31,128 Adjustment for prior periods (10,246) $ 20,882 Deferred tax expense Origination and reversal of temporary differences 50,531 Unrecognized deductible temporary difference of
change
32,964
Income tax expense $ 104,377
There is no income tax expense (benefit) recognized in other comprehensive income for the period of August 31, 2016(Date of Incorporation) to December 31, 2016.
The reconciliation of income tax expense and profit before tax for the the period of August 31, 2016(Date of Incorporation) to December 31, 2016 were as follows:
2016 Income before income tax $ 169,774 Income tax using the Company’s domestic tax rate 28,862 Effect of tax rates in foreign jurisdiction 42,005 Loss (profit) generated from securities transactions 20,846
Tax-exempt income (179) Tax credit of investment (5,241) Over accrual of prior years’ income tax (10,246) Under (over) accrual of prior year’s deferred tax assets (3,091)
Change of unrecognized deffered tax liabilities 31,421 $ 104,377
46 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
b. Deferred tax assets and liabilities
(i) Unrecognized deferred tax assets
The amount of unrecognized deferred assets were as follows:
2016.12.31 Deductible temporary differences $ 1,632
(ii) Unrecognized deferred tax liabilities
The consolidated entity is able to control the timing of the reversal of the temporary differences associated with investments in subsidiaries as of December 31, 2016. Also, management considers it probable that the temporary differences will not reverse in the foreseeable future. Hence, such temporary differences are not recognized under deferred tax liabilities. Details are as follows:
2016.12.31 Aggregate amount of temporary differences related to
investments in subsidiaries $ 1,870,100
Unrecognized deferred tax liabilities $ 314,917
(iii) Recognized deferred tax assets and liabilities
Changes in the amount of deferred tax assets and liabilities for the period of August 31, 2016 to December 31, 2016 were as follows: Deferred Tax Assets:
Allowance for
inventory valuation and obsolescence loss
Unrealized inter-affiliate accounts
Unrealized amortizations
Unrealized exchange
loss
Loss on doubtful debts
Loss Deduction
Others
Total Balance at August 31, 2016 $ 845 346 8,224 3,865 53,674 30,869 2,882 100,705
Recognized in profit (loss) 2,569 192 (6,175) 4,651 (13,256) 941 135 (10,943)
Balance at December 31, 2016 $ 3,414 538 2,049 8,516 40,418 31,810 3,017 89,762
Deferred Tax Liabilities:
Unrealized exchange
profits
By Equity method recognition of foreign
investment profits
Total Balance at August 31, 2016 $ - - - Recognized in loss (profit) 2,443 70,109 72,552Balance at December 31, 2016 $ 2,443 70,109 72,552
c. The ROC income tax authorities have examined the Company’s income tax returns for all years through
2014.
d. Integrated income tax information
As of August 31, 2016(Date of Incorporation) to December 31, 2016, the Company’s integrated income tax information was as follows:
47 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
2016.12.31 Unappropriated earnings, from January 1, 1998 $ 50,312 Balance of deductible tax account $ 0
2016(estimated) Tax deduction ratio for earnings distribution to R. O. C. residents 0%
The aforementioned amounts of integrated income tax information have been prepared in accordance with the permit No. 10204562810 issued by the Ministry of Finance on October 17, 2013. Since January 1, 2015, the Company’s integrated income tax should be covering the disclosed information of imputation tax credit as above. For net dividends or earnings received by each individual shareholder residing in the territory of the Republic of China, the amount of imputation tax credit has been revised to half of the original amount. In addition, for the amount that actual paid from assessed 10% surtax of imputation tax credit came from net dividends or earnings received by each individual shareholder, half of the actual payment of 10% surtax on undistributed earnings can be offset against the income tax withheld.
(14) Capital and other equity
Swancor Holding Company Limited (the “Company”) was incorporated on August 31, 2016 as a Company limited by transferred preference shares from Swancor Industrial Company Limited. As of December 31, 2016, the company’s authorized shares of common stock consisted of 200,000 thousand shares with per value of $10 per share, and its outstanding capital consisted of 90,847 thousand common shares, respectively.
The movements in ordinary shares of stock outstanding for the period of August 31, 2016(Date of Incorporation) to December 31, 2016 were as follows:
Ordinary shares (in thousands of shares)
Ordinary Shares(in thousands of shares) Aug 31, 2016 to Dec 31, 2016 Beginning balance, August 31 $ 90,834 Conversion of convertible bonds 13 Ending balance, December 31 $ 90,847
a. Ordinary shares The Company’s bonds holders have conversed the bonds into new common stock of 13 thousand shares (134 thousand dollars) and bring in capital surplus-additional paid-in capital-conversion right of convertible bonds of 383 thousand dollars and write-off capital surplus-employee share options of 37 thousand shares, which has completed the change registration.
48 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
b. Capital surplus
The components of the capital surplus were as follows:
2016.12.31 Additional paid-in Capital $ 405,127 From conversion of convertible bonds 464,790 Other donated assets received 253 Employee share options 8,151 Treasury stock transaction 44,668 Conversion right of convertible bonds 48,232 Changes in ownership interest in subsidiaries 1,213,525 Stock transfer (from undistributed earnings of
Swancor Industrial Co., Ltd) 1,047,664
$ 3,232,410 According to Enterprises Mergers and Acquisitions Act, when a company transfer its shares to another company, its undistributed earnings will be recognized as capital surplus of the holding company. In accordance with the ROC Company Act amended in January, 2012, realized capital surplus can only be reclassified as share capital or distributed as cash dividends after offsetting losses. The aforementioned capital surplus includes share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital surplus to be reclassified under share capital shall not exceed 10 percent of the actual share capital amount. However, the restriction doesn’t apply to this case since the company has been to a significant organization restructuring.
c. Retained earnings
Before the distribution of dividends, the Company shall first take into consideration its operating
environment, industry developments, and the long-term interests of stockholders, as well as its programs
to maintain operating efficiency and meet its capital expenditure budget and financial goals in
determining the stock or cash dividends to be paid. After the above appropriations, current and prior-
period earnings that remain undistributed will be proposed for distribution by the board of directors, and
a meeting of shareholders will be held to decide on this matter. The cash dividends shall not be more
than 10% of total dividends.
(A) Legal reserve
In accordance with the Company Act as amended in January 2012, 10 percent of net income after tax should be set aside as legal reserve, until it is equal to authorized capital. If the Company experienced profit for the year, the distribution of the statutory earnings reserve, either by new shares or by cash, shall be decided at the shareholders meeting, and the distribution amount is limited to the portion of legal reserve which exceeds 25 percent of the paid-in capital.
49 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(B) Special reserve In accordance with permit NO.1010012865 as issued by the financial supervisory commission on April 6, 2012, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should be equal to the difference between the total net current-period reduction of other shareholders’ equity resulting from the first-time adoption of IFRSs and the carrying amount of special earnings reserve as stated above. Similarly, a portion of undistributed prior period earnings shall be reclassified as a special earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods due to the first-time adoption of IFRSs. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.
(C) Earnings distribution
The Company was incorporated at August 31, 2016, there was no retained earnings recently.
d. Treasury stock
(i) According to Article 28-2 of the securities and Exchange Act and Regulations Governing share
repurchase by Exchange – Listed and OTC-Listed Companies, the company purchased its own common stock of 1,500 thousand shares at price of $55 to $145 in order to motivate employees. As of December 31, 2016, change in the amount of treasury stock were as follow:
(In thousands of shares)
Items
Number of shares on
August 31, 2016 Increase Decrease
Number of shares on
December 31, 2016Transferring to employees - 1,362 - 1,362
(ii) According to the Securities and Exchange Act, the number of treasury shares shall not exceed 10% of
the number of common shares issued. The total amount of treasury stock shall not exceed the sum of retained earnings, paid-in capital in excess of par value and other realized capital surplus. In addition to application the transferred treasury stocks, the quota has been calculated by the laws and regulations, and hasn’t been overrun.
(iii) According to the securities and Exchange Act, treasury stock cannot be collateralized, In addition, treasury shares do not bear share holder rights prior to being sold to third parties.
e. Other equity Exchange differences
on translation of foreign financial
statements At August 31, 2016 $ (60,228) Foreign exchange differences, net of taxes: The Group (83,332)At December 31, 2016 $ (143,560)
50 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(15) Share-based Payments a. As of December 31, 2016 the share-based payments of Swancor (Shanghai) were disclosed as
follows:
Issuance of Date Issuance of restricted stock
(Shares in thousands) Contract
period
Vested condition Restricted stocks to
employees-paid subscription (note)
March 31, 2016 3,047 4 years Employees’ performance has reached the Company’s performance standard
Note: Restricted stocks to employees issued by Swancor (Shanghai), which can not be transferred when the conditions are not reached, but the right to limit the right to participate in the distribution of dividends and participation.
b. The issuance of Restricted stocks to employees have been approved by Swancor (Shanghai)’s shareholders in its meetings held on March 29, 2016, which issued 3,047 thousand shares ( RMB 9.82 per share),the fair value was RMB 2.44 per share on issuance of date. The issue object of Restricted stocks to employees include the employees of the Company’s affiliated companies who meet certain conditions. The movements in not yet acquires Restricted stocks to employees outstanding for August 31, 2016, to December 31, 2016 were as follows.
Aug. 31, 2016 to Dec. 31, 2016
( in thousands of shares)
Opening balance(is Ending balance) 3,047c. The expenses incurred on share-based payments were as follows.
Aug. 31, 2016 to Dec. 31, 2016
Equity-settled $ 1,745
(16) Earnings per Share
Basic earnings per share
The calculation of basic earnings per share and diluted earnings per shares for the period of August 31, 2016 (Date of Incorporation) to December 31, 2016 were as follow:
August 31, 2016 to December 31, 2016
Profit attributable to ordinary shareholders of the Company $ 51,691Weighted average number of ordinary shares outstanding 90,273(Unit: dollar) $ 0.57
51 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
Diluted earnings per share
August 31, 2016 to December 31, 2016
Profit attributable to ordinary shares of the company (basic) $ 51,691Weighted-average number of ordinary shares (basic) 90,273Dilutive potential ordinary shares of employee bonus effect 7Weighted-average number of ordinary shares (diluted
Dilutive potential ordinary shares) at December 31 $ 90.280
(Unit: dollar) $ 0.57 Weighted-average number of ordinary shares was considered retro spectively adjusted earnings per share for the ended December 31, 2016. The calculation of antidilutive excluded weighted-average number of ordinary shares are as follows:
August 31, 2016 to December 31, 2016
Effect of convertible bonds 5,207
(17) Revenue
The details of revenue for the period of August 31, 2016(Date of Incorporation) to December 31, 2016 were as follows:
August 31, 2016 to
December 31, 2016 Sales Revenue $ 1,670,522
Service Revenue 14,286
$ 1,684,808
(18) Employees’ and directors’ emoluments
In accordance with the Company article, which has not yet been approved by the shareholders, the
Company should contribute not less than 1% of the profit as employee compensation and not higher than
3% as directors’ and supervisors’ remuneration when there is profit for the year. However, if the Group
has accumulated deficits, the profit should be reserved to offset the deficit. Employees entitled to receive
the above mentioned employee compensation, in shares or cash, include the employees of the Company's
affiliated companies who meet certain conditions.
52 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
The Company estimated employee bonus and directors’ emoluments amounting to 510 and 1,020 thousand dollars for the period of August 31, 2016 to (Date of Incorporation) to December 31, 2016, respectively. The estimated amounts mentioned above are based on the net profit-pre-tax of each respective ending period multiplied by the amount of the employee bonus and the remuneration of the board of directors and supervisors as specified in the Company’s policy, and estimations are reported under operating expenses. The differences between the estimated amounts and those recognized in financial statements approved by the Board of Directors and published to the public, if any, shall be accounted for as a change in accounting estimates and recognized in 2016.
(19) Non-operating income and expenses
a. Other income
The details of other income are as follows:
August 31, 2016 to
December 31, 2016 Interest income $ 11,656 Stock dividends 30 Others 8,041 $ 19,727
b. Other gains and losses
The details of other gains or losses are as follows:
August 31, 2016 to
December 31, 2016 Foreign exchange loss, net $ (4,577)Gain on disposal of property, plant and equipment 396 Net loss on financial assets (liabilities) at fair value
through profit or loss (30,516)
Gain on disposal investment accounted for using equity method
295
$ (34,402)
c. Finance costs Interest expenses: August 31, 2016 to
December 31, 2016 Bank borrowings $ 13,118
Convertible bonds payable 4,382
$ 17,500
53 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(20) Financial instrument a. Credit risk
The maximum exposure to credit risk is mainly from the carrying amount of financial assets. Major clients of the Group are concentrated in composite material market. To minimize credit risk, the Group periodically evaluated their financial positions and requested collateral if deemed necessary. The Group periodically assesses the recoverability of the accounts receivable and accordingly recognize an allowance for impairment. The impairment loss was always under management’s expectation. As of December 31, 2016, the major customers accounted for 175,775 thousand dollars, respectively, of accounts receivable resulting in concentration of credit risk.
b. Liquidity risk The following are the contractual maturities of financial liabilities, including the estimated interest payments but excluding the impact of netting agreements.
The Group is not expecting the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts. c. Currency risk
(i) The Group’s significant exposure to foreign currency risk was as follows:
2016.12.31
Foreign currency (In Thousands)
Exchange rates
TWD
Financial assets
Monetary items
USD 6,527 32.25 210,496
EUR 474 33.90 16,069
Financial liabilities
Monetary items
USD 3,844 32.25 123,969
Carrying amount
Contractualcash flows
Within 1 year
1-2
years
2-5
years
More than
5 yearsAs of December 31, 2016
Non-derivative financial liabilities
Secured bank loans $ 1,141,627 1,254,735 328,568 81,015 228,429
616,723
Unsecured bank loans 2,043,351 2,053,304 1,943,316 52,767 57,221
Short-term notes and bills payable 49,909 49,909 49,909 - -
-
Note and accounts payables 2,217,972 2,217,972 2,217,972 - -
-
Bonds payable, current portion 753,128 796,200 796,200 - - -
$ 6,205,987 6,372,120 5,335,965 133,782 285,650 616,723
54 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(ii) Sensitivity analysis
The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, financial assets (liabilities) at fair value through profit or loss, loans and borrowings, accounts payable and other payables that are denominated in foreign currency. A strengthening (weakening) 0.5 % of appreciation (depreciation) of the NTD against the USD and the EUR as of August 31, 2016(Date of Incorporation) to December 31, 2016, would have increased (decreased) the net profit after tax by 426 thousand dollars, respectively. The analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis for both years.
(iii) Sensitivity analysis Since the Group has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For the period of August 31, 2016 (Date of Incorporation) to December 31, 2016, foreign exchange gain (loss) (including realized and unrealized portions) amounted to 4,577 thousand dollars, respectively.
d. Interest rate risk
Please refer to the attached note for the liquidity risk management and the Group’s interest rate exposure to its financial assets and liabilities. The following sensitivity analysis is based on the risk exposure to interest rates on the derivative and non-derivative financial instruments on the reporting date. For variable rate liabilities, the sensitivity analysis assumes the variable rate liabilities are outstanding for the whole year on the reporting date. The Group’s internal department reported the increase/decrease in the interest rates and the exposure to changes in interest rates by 0.5% on behalf of the Group’s key management so as to allow key management to assess the reasonableness of the changes in the interest rates. If the interest rate increases/decreases by 0.5%, the Group’s net income will decrease by 15,925 thousand dollars for the period of August 31, 2016(Date of Incorporation) to December 31, 2016, respectively, assuming all other variable factors that remain constant. These are mainly due to the Group’s borrowing in variable rates.
e. Fair value
(i) Categories and fair value of financial instruments
Except for the followings, carrying amount of the Group’s financial assets and liabilities are valuated approximately to their fair value, and are not based on observable market date and the value measurements which are not reliable. No additional fair value disclosure is required in accordance to the Regulations.
55 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
December 31, 2016 Carrying Fair Value amount Level 1 Level 2 Level 3 Total
Financial assets Financial assets at fair value through profit
or loss
Held-for- trading financial assets $ 3,158 3,158 - - 3,158Appoint financial assets at fair value through
profit or loss 462
-
462
-
462
Subtotal 3,620 3,158 462 - 3,620Financial assets carried at cost $ 12,464 - - - -
Loans and receivables: Cash and cash equivalents 1,716,033 - - - - Notes receivable, accounts receivable and other
receivable 3,520,919 - - - -
Other current financial assets 806,009 - - - - Guarantee deposits 24,063 - - - - Subtotal 6,067,024 - - - - Total $ 6,083,108 3,158 462 - 3,620
Financial liabilities Financial liabilities at fair value through profit
or loss Held-for-trading financial liabilities $ 55,328 - 55,328 - 55,328Financial liabilities carried at amortized cost Short-term borrowings $ 2,180,515 - - - - Short-term notes and bills payable 49,909 - - - - Notes, accounts and other payables 2,217,972 - - - - Bonds payable, current portion 753,128 - 1,307,984 - 1,307,984Long-term borrowings, current portion 58,865 - - - - Long-term borrowings 945,598 - - - - Subtotal 6,205,987 - 1,307,984 - 1,307,984Total $ 6,261,315 - 1,363,312 - 1,363,312
(ii) Valuation techniques for financial instruments which is not measured at fair value:
The assumptions and methods used in valuing financial instruments that are not measured at fair value are as follows: Financial assets measured at amortized cost. Fair value measurement for financial assets and liabilities is based on the latest quoted price and agreed-upon price if these prices are available in active market. When market value is unavailable, fair value of financial assets and liabilities are evaluated based on the discounted cash flow of the financial assets and liabilities.
56 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(iii) Valuation techniques for financial instruments measured at fair value
A. Non-derivative financial instruments Financial instruments traded in active markets are based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and on-the-run bonds from Taipei Exchange can be used as basis to determine the fair value of the listed companies’ equity instrument and debt instrument of the quoted price in an active market. If quoted price of a financial instrument can be obtained in time and often from exchanges, brokers, underwriters, industrial union, pricing institute, or authorities and such price can reflect those actual trading and frequently happen in the market, then the financial instrument is considered to have quoted price in active market. If a financial instrument does not accord with the definition aforementioned, then it is considered to be without quoted price in active market. In general, market with low trading volume or high bid-ask spreads is an indication of non-active market. Measurements of fair value of financial instruments without active market are based on valuation technique or quoted price from competitor.
B. Derivative financial instruments Fair value of forward currency exchange is usually determined by using the forward currency rate.
(iv) Transfers between Level 1 and Level 2 There were no transfers from one level to another from August 31, 2016 to December 31, 2016.
(21) Financial risk management
a. Overview
The Group has exposures to the following risks from its financial instruments:
(i) Credit risk (ii) Liquidity risk (iii) Market risk
This note discloses the exposure risk information, and the Group’s objectives, policies and procedures of measuring and managing risks. For more quantitative disclosure information, please refer to notes of the financial statements.
57 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
b. Risk management framework
The Group’s finance department provides business services for the overall internal department. It coordinates the domestic and international financial market operations, and supervises and manages financial risks related to the Group’s operation based on internal risk report about exposure to risk with the analysis of the extent and width of risk. Operation of derivative financial instruments is subject to the policy approved by the Board of Directors, which is documentation regarding exchange rate risk, interest risk, credit risk , operation of derivative and non-derivative financial instruments and investment in the remaining current capital. The internal auditors of the Group continue with the review of the compliance with the policy and the extent of the exposure to risk. The Group has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation.
c. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to financial instruments fails to meet its contractual obligations that arise principally from the Group’s accounts receivable and investments in securities and financial guarantees.
(i) Accounts receivable and other receivables
The Group will transact with corporations of credit ratings equivalent to investment grade and such ratings are provided by independent rating agencies. Where it is not possible to obtain such information, the Group will assess the ratings based on other publicly available financial information and transactions records with its major customers.
The Group does not hold any collateral and of other credit enhancement to mitigate the credit risk of the financial assets.
(ii) Investment
The credit risk exposure in the bank deposits and other financial instruments are measured and monitored by the Group’s finance department. As the Group deals with the banks and other external parties with good credit standing and investment grade above financial institutions and corporate organization, there are no non-compliance and no significant credit risk.
(iii) Guarantee
The Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. As of December 31, 2016, no other guarantees were outstanding.
d. Liquidity risk
The Group manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Group’s management supervises the banking facilities and ensures in compliance with the terms of the loan agreements. The loans and borrowings from the bank form an important source of liquidity for the Group. The Group has unused short-term and long-term bank facilities of 1,573,681 thousand dollars as of August 31, 2016(Date of Incorporation) to December 31, 2016.
58 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
e. Market risk
Market risk is a risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
(i) Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities, primarily the New Taiwan Dollars (TWD), Dollars (RMB) and US Dollars (USD).
(ii) Interest rate risk
The Group manages the interest risk by maintaining the fixed and variable interest rates with a proper portfolio. The Group will assess the hedging activities for consistent interest rates within its risk preferences and use the most cost-effective hedging strategy on a regular basis.
(22) Capital management
The Group meets its objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return on shareholders, interest of other related parties and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the dividend payment to the shareholders, reduce the capital for redistribution to shareholders, and issue new shares or sell assets to settle any liabilities. The Group and other entities in the similar industry use the debt-to-equity ratio to manage capital. This ratio is using the total net debt divided by the total capital. The net debts from the balance sheet are derived from the total liabilities less cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings and other equity plus net debt. As of December 31, 2016, the Group’s capital management strategy and the debt to equity ratio is maintained within 25% to 55% so as to ensure financing at reasonable cost. The Group’s debt to equity ratio at the end of the reporting period was as follows:
2016.12.31
Total liabilities $ 6,882,809 Less: cash and cash equivalents 1,716,033 Net debt 5,166,776 Total equity 4,507,453 Total capital $ 9,674,229 Debt to equity ratio 53%
There were no changes in the Group’s approach to capital management during the year.
59 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(23) Non-cash transactions of investment and financing activity The Group’s non-cash-transaction of investment and financing activity for the period of August 31, 2016(Date of Incorporation) to December 31, 2016, please refer to note 6 (11) and (15) for details.
7. Related-party transactions (a) The Company is the ultimate controlling party of the Group. (b) Key management personnel compensation
Aug 31, 2016 to Dec 31, 2016
Short-term employee benefits $ 14,258Post-employment benefits 335Other long-term employee benefits - Termination benefits -
Share-based payments - $ 14,593
8. Pledged assets
The carrying values of pledged assets are as follow:
9. Significant Commitments and Contingencies
a. Contract commitments 2016.12.31
Purchase property, plant and equipment $ 1,260,487
b. Outstanding standby letter of credit 2015.12.31
Outstanding standby letter of credit $ 554,975
c. Contingent Liability (i) In 2015, the Company had revised its investment construction, from Swancor transferred 100% shares
of Swancor (Tianjin) to Swancor (Shanghai). The Company is negotiating with the local tax administration whether this situation is in accordance with the reorganization provision. Consequently, the result and contingent liability cannot be predicted.
Pledged assets Object 2016.12.31 Land Bank Loans $ 199,044 Buildings Bank Loans 182,592 Restricted bank deposit (other financial assets-current)
Bank’s acceptance bill, long-term borrowings, forward exchange contract and stand by L/C
445,870
Long-term prepaid rentals Short – term borrowing 261,978 $ 1,089,484
60 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
See accompanying notes to financial statements.
(ii) In 2016, the Company had revised its investment construction, from Swancor Industrial transferred 100% shares of Swancor (Jiangsu) to Swancor (Shanghai). However, the application has been required a higher transfer price by the local tax administration. The Company is still negotiating with the local tax administration. Consequently, the result and contingent liability cannot be predicted.
10. Losses Due to Major Disasters: None. 11. Subsequent Events
The Company has signed an investment agreement with Macquarie Capital and DONG Energy company
as of January 25, 2017. Shareholding for Macquarie Capital and DONG Energy will be 50% and 35%; the
Company will decrease its shareholding to 15%. This agreement will be complete once European and
Taiwan government approved. 12. Others
The followings are the summary statement of current period employee benefits, depreciation, depletion, and amortization expenses by function:
By function Aug 31, 2016 to Dec 31,2016
By item Operating
Costs OperatingExpenses
OperatingCosts
Employee benefits Salary 17,535 83,590 101,125
Labor and health insurance
2,901
6,743
9,644
Pension 3,687 9,966 13,653 Others 1,525 2,604 4,129Depreciation 15,482 28,379 43,861Amortization 26 762 788
61 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
13. Additional Disclosures. (1) Information on significant transactions
According to the Guidelines Governing the preparation of Financial Reports by Securities Issuers, the Group shall disclosure information on significant transactions as follows:
a. Financing provided:
No. Financing Company
Counter-party Financial Statement Account
RelatedParty
Maximum Balance for the Period
Ending BalanceAmount
Actually DrawnInterest
Rate
Nature for
Financing
Transaction Amounts
Reason For
Financing
Allowance for
Bad Debt
Collateral Financing Limits for
Each Borrowing Company
Financing Company’s
Total Financing Amount Limits
Item Value
1 Strategic Capital Holding Ltd.
Swancor (Shanghai)
Temporary payments
Yes USD980
32,781USD980
31,605USD980
31,6053.5% 2 -
Operating capital
- - 592,997 1,581,326
1 Strategic Capital Holding Ltd.
Swancor Ind Co.,Ltd.
Temporary payments
Yes USD1,000
33,450- - 2.5% 2 -
Operating capital
- - 1,581,326 1,581,326
1 Strategic Capital Holding Ltd.
Swancor (Jiangsu) Temporary payments
Yes USD2,200
73,590- - 4% 2 -
Operating capital
- - 592,997 1,581,326
2 Swancor Ind Co.,Ltd.
Swancor (Tianjin) Temporary payments
Yes USD3,000
100,3503.5%~4.83% 2 -
Operating capital
- - 592,997 1,581,326
3 Swancor (Shanghai)
Swancor (Tianjin) Temporary payments
Yes RMB42,000
204,418RMB42,000
195,258RMB42,000
195,2584.35%~4.5% 2 -
Operating capital
- - 566,976 1,511,935
3 Swancor (Shanghai)
Swancor (Jiangsu) Carbon Composites
Other receivables
Yes RMB1,651
7,925 2 -
Operating capital
- - 566,976 1,511,935
Note1 : The total amount for lending to subsidiaries shall not exceed forty percent (40%) of the net worth of the company. Note2 : The total amount available for lending purpose shall not exceed forty percent (40%) of the net worth of the company. Note3 : According to the “Procedure for Loaning of Funds and Endorsements and Guarantees” issued by Strategic and Swancor, the total amount for lending purpose and for lending
to counter-party shall not exceed fifteen percent (15%) and forty percent (40%) of the net equity of latest financial statements audited and certified or reviewed by certified
62 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
public accountant. When holding 100% shares directly or indirectly, the limitation amount shall not exceed forty percent (40%) of the net worth of the company. In addition, according to the “Procedure for Loaning of Funds and Endorsements and Guarantees” issued by Swancor (Shanghai), the foregoing amounts shall not respectively exceed fifteen percent (15%) and forty percent (40%) of the net worth of latest financial statements audited and certified or reviewed by certified public accountant.
Note4 : For the purpose of lending, the numbering are classified as follows: i. Business relationship.
ii. Short-term financing. Note5 : The transactions have been eliminated upon consolidation.
b. Endorsement/guarantee provided:
Note1 : The total amount and the limited amount of the guarantee provided by the company to any individual subsidiary shall not exceed fifty percent (50%) and a hundred percent (100%) of the Company’s net worth.
No. Endorsement/Guar
antee Provider
Guaranteed Party Limits on
Endorsement/Guarantee
Amount Provided to
Each Guaranteed
Party
Maximum Balance for the Period
Ending Balance
Amount Actually Drawn
Amount of Endorseme
nt/ Guarantee Collateraliz
ed by Properties
Ratio of Accumulated Endorsement/
Guarantee to Net Equity per Latest
Financial Statements
Maximum Endorsement/ Guarantee
Amount Allowable
Guarantee Provided by Parent Company
Guarantee Provided
by A Subsidiary
Guarantee Provided to
Subsidiaries in Mainland
China Name Nature of Relations
hip
0 Swancor Holding.Co.,Ltd
Formosa I Wind Power Co., Ltd.
3 1,976,658 1,600,000 1,600,000 1,268,808 - 40.47 % 3,953,316 Y N N
1 Swancor Ind Co.,Ltd Strategic Capital Holding Ltd.
2 2,007,411 33,450 32,250 - - 0.80 % 4,014,821 N N N
1 Swancor Ind Co.,Ltd Swancor Ind Co.,Ltd 3 2,007,411 66,900 - - - - % 4,014,821 N N N
1 Swancor Ind Co.,Ltd Formosa I Wind Power Co., Ltd.
3 2,007,411 1,600,000 200,000 200,000 - 4.98 % 4,014,821 N N N
1 Swancor Ind Co.,Ltd Swancor Highpolymer
3 2,007,411 80,000 80,000 - - 1.99% 4,014,821 N N N
1 Swancor Ind Co.,Ltd Swancor (Tianjin) 3 2,007,411 369,712 129,000 107,075 - 3.21% 4,014,821 N N Y
2 Swancor (Shanghai) Swancor(Jiangsu) 3 755,968 76,584 - - - - % 1,889,918 N N Y
2 Swancor (Shanghai) Swancor (Tianjin) 3 755,968 80,880 - - - - % 1,889,918 N N Y
63 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Note2 : According to the “Procedure for Loaning of Funds and Endorsements and Guarantees” issued by Swancor Industrial, the total amount and the limited amount of the guarantee provided by the Company to individuals shall not exceed ten percent (10%) and a hundred percent (100%) of the net worth of latest financial statement audited and certified or reviewed by certified public accounts. If the individual is the Company’s subsidiary, the total amount of guarantee shall not exceed fifty percent (50%) of the Company’s net worth.
Note3 : According to the “Procedure for Loaning of Funds and Endorsements and Guarantees” issued by Swancor(Shanghai), the total amount of the guarantee provided by Swancor(Shanghai) to any individual entity and the total amount of guarantee shall not respectively exceed twenty percent (20%) and fifty percent (50%) of the net worth of latest financial statement audited and certified or reviewed by certified public accounts.
Note4 : The relationship between guarantee provider and guarantee party were as follows : 1. Companies which were in business relationship. 2. Subsidiaries which the company directly or indirectly held more than fifty percent (50%). 3. Direct or indirect subsidiaries of the company.
c. Marketable securities held (excluding investments in subsidiaries, associates and jointly controlled entities):
Held Company
Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
Ending Balance Maximum Balance for
the Period Note
Shares Carrying
Value Percentage of
Ownership Fair
Value Shares
Percentage of
Ownership
Swancor Ind. Co., Ltd
Stock – China Communications Media Group Co., Ltd.
Financial assets at fair value through profit or loss-current
25,666 3,750 0.07 % 414 25,666 0.07 %
Swancor Ind. Co., Ltd
Stock- Tsang Yow Industrial Co., Ltd. Financial assets at fair value through profit or loss-current
60,000 1,356 0.06 % 1,983 120,000 0.12 %
Swancor Ind. Co., Ltd
Stock – Aero Win Technology Corporation
Financial assets at fair value through profit or loss-current
31,000 481 0.05 % 761 62,000 0.09 %
Swancor Ind. Co., Ltd
Stock – Gigantex Composite Tedhnologies Co., Ltd.
Investees carried at cost Financial assets carried at cost-non-current
16,115 - 14.92 % 12,464 16,115 14.92% Note
Swancor Ind. Co., Ltd
Stock – Promix Composites, Inc. Investees carried at cost Financial assets carried at cost-non-current
1,500 - 10 % - 1,500 10% Note
Swancor Ind. Co., Ltd
Stock – Ideal Star International Corp. Investees carried at cost Financial assets carried at cost-non-current
500,000 - 10 % - 500,000 10% Note
Note: The shares were not listed on public market and had no specific fair value. Therefore, the company disclosures the net equity at the percentage of ownership.
64 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
d. Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None; e. Acquisition of individual real estate properties at costs of at least NT$300 million or 20% of the paid-in capital: None. f. Disposal of individual real estate properties at prices of at least NT$300 million or 20% of the paid-in capital: None. g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital :
Company
Name Related Party Nature of Relationships
Transaction Details Abnormal Transaction Notes/ Accounts
Payable or Receivable Note Purchases/
(Sales) Amount
% to Total
Payment Terms
Unit Price Payment Terms
Ending Balance
% to Total
Swncor (Shanghai)
Swancor (Jiangsu)
Direct or indirect subsidiaries of the Company
(Sales) (212,417) (13)% 90 Days Note1 No
difference 86,881 3%
Swancor (Jiangsu)
Swncor (Shanghai)
Direct or indirect subsidiaries of the Company
Purchases 212,417 16% 90 Days Note1 No
difference (86,881) 8%
Swancor (Jiangsu)
Swncor (Shanghai)
Direct or indirect subsidiaries of the Company
(Sales) (266,232) (16)% 60 Days Note1 No
difference 220,212 6%
Swncor (Shanghai)
Swancor (Jiangsu)
Direct or indirect subsidiaries of the Company
Purchases 266,232 20% 60 Days Note1 No
difference (220,212) 19%
Swancor (Jiangsu)
Swancor (Tianjiu)
Direct or indirect subsidiaries of the Company
(Sales) (136,092) (8)% 60 Days Note1 No
difference 105,455 3%
Swancor (Tianjiu)
Swancor (Jiangsu)
Direct or indirect subsidiaries of the Company
Purchases 136,092 20% 60 Days Note1 No
difference (105,455) 9%
Note1:The sales prices and payment terms to related parties were not significantly differed from those of sales to third parties except for some special items. Note2:The transactions have been eliminated upon consolidation.
h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital:
Company Name
Related Party Nature of Relationships Ending Balance Turnover Days Overdue Amounts Received in
Subsequent Period Allowance for Bad Debts
Amount Action Taken The Company Swancor Ind.
Co., Ltd Subsidiaries of the company
571,698 -% - - - -
Swancor (Jiangsu)
Swncor (Shanghai)
Direct or indirect subsidiaries of the company
220,212 275.23% - - - -
Swancor (Jiangsu)
Swancor (Tianjin)
Direct or indirect subsidiaries of the company
105,455 101.99% - - - -
65 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
i. Information about the derivative financial instruments transaction: Please refer to Note7;
j. The business relationship and significant transactions between the parent and the subsidiaries:
i.
No. Company Name Counter Party Nature of
Relationship(Note2)
Intercompany Transactions
Financial Statements Item Amount Terms Percentage of
Consolidated Net Revenue or Total Assets
1 The Company Swancor Ind Co., Ltd
1 Service revenues 2,993The sales prices and payment terms were same as those of sales to third parties.
0.18 %
1 The Company Swancor Ind Co., Ltd
1 Other receivables 571,698The sales prices and payment terms were same as those of sales to third parties.
5.02 %
1 The Company Formosa I Wind Power Co., Ltd.
1 Other receivables 367The sales prices and payment terms were same as those of sales to third parties.
- %
1 Swancor Ind Co., Ltd
Swancor (Tianjin) 3 Service revenues 13,494The sales prices and payment terms were same as those of sales to third parties.
0.80 %
1 Swancor Ind Co., Ltd
Swancor (Tianjin) 3 Accounts receivable 24,916The sales prices and payment terms were same as those of sales to third parties.
0.22 %
1 Swancor Ind Co., Ltd
Swancor (Tianjin) 3 Other receivables 55,825The sales prices and payment terms were same as those of sales to third parties.
0.49 %
1 Swancor Ind Co., Ltd
Swancor (Shanghai)
3 Sales 61,436The sales prices and payment terms were same as those of sales to third parties.
3.65 %
1 Swancor Ind Co., Ltd
Swancor (Shanghai)
3 Service revenues 6,881The sales prices and payment terms were same as those of sales to third parties.
0.41 %
1 Swancor Ind Co., Ltd
Swancor (Shanghai)
3 Accounts receivable 59,096The sales prices and payment terms were same as those of sales to third parties.
0.52 %
1 Swancor Ind Co., Ltd
Swancor (Shanghai)
3 Other receivables 18,866The sales prices and payment terms were same as those of sales to third parties.
0.17 %
0 Swancor Ind Co., Ltd
Swancor Renewable Energy
3 Service revenues 7,355The sales prices and payment terms were same as those of sales to third parties.
0.44 %
1 Swancor Ind Co., Ltd
Swancor Renewable Energy
3 Other receivables 47,829The sales prices and payment terms were same as those of sales to third parties.
0.42 %
2 Swancor(Shanghai)
Swancor Ind Co., Ltd
3 Sales 1,101The sales prices and payment terms were same as those of sales to third parties.
0.07 %
2 Swancor(Shanghai)
Swancor (Tianjin) 3 Sales 745The sales prices and payment terms were same as those of sales to third parties.
0.01 %
66 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
No. Company Name Counter Party Nature of
Relationship(Note2)
Intercompany Transactions
Financial Statements Item Amount Terms Percentage of
Consolidated Net Revenue or Total Assets
2 Swancor(Shanghai)
Swancor (Jiangsu) 3 Sales 212,417The sales prices and payment terms were same as those of sales to third parties.
12.61 %
2 Swancor(Shanghai)
Swancor (Jiangsu) 3 Accounts receivable 86,881The sales prices and payment terms were same as those of sales to third parties.
0.76 %
2 Swancor(Tianjin) Swancor (Shanghai)
3 Sales
1,165The sales prices and payment terms were same as those of sales to third parties.
0.07 %
3 Swancor(Tianjin) Swancor (Shanghai)
3 Accounts receivable 1,351 The sales prices and payment terms were same as those of sales to third parties.
0.01 %
4 Swancor(Tianjin) Swancor (Jiangsu) 3 Sales 9,849 The sales prices and payment terms were same as those of sales to third parties.
0.58 %
4 Swancor(Tianjin) Swancor (Jiangsu) 3 Accounts receivable 11,128 The sales prices and payment terms were same as those of sales to third parties.
0.10 %
4 Swancor(Jiangsu) Swancor (Tianjin) 3 Sales 136,092 The sales prices and payment terms were same as those of sales to third parties.
8.08 %
4 Swancor(Jiangsu) Swancor (Tianjin) 3 Accounts receivable 105,455 The sales prices and payment terms were same as those of sales to third parties.
0.93 %
4 Swancor(Jiangsu) Swancor (Shanghai)
3 Sales 266,232 The sales prices and payment terms were same as those of sales to third parties.
15.80 %
5 Swancor(Jiangsu) Swancor (Shanghai)
3 Accounts receivable 220,212 The sales prices and payment terms were same as those of sales to third parties.
1.93 %
5 Swancor Renewable Energy
Formosa I Wind Power Co., Ltd.
3 Service revenues
19,035 The sales prices and payment terms were same as those of sales to third parties.
1.13 %
5 Swancor Renewable Energy
Formosa I Wind Power Co., Ltd.
3 Other receivables
50,769 The sales prices and payment terms were same as those of sales to third parties.
0.45 %
Note1 : Representations of No. were as follows: 1. No.0 represents the parent company. 2. Subsidiaries were numbered in sequence from No.1.
Note2 : Type of intra-group transactions were as follows: 1. 1 represents the transactions form parent company to subsidiary. 2. 2 represents the transactions from subsidiary to parent company. 3. 3 represents the transactions between subsidiaries.
67 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
ii. Information on investment (excluding information on investment in Mainland China) Amount in Thousands of U.S. dollars/shares
Investor Company
Investee Company
Location Main Businesses and
Products
Original Investment Amount
Balance as of December 31, 2016 Maximum Balance for the Period
Net Income (Loses) of
the Investee
Share of Profits/
Losses of Investee
Note December 31,2016
December 31,2015
Shares
Percentage Of
Ownership
Carrying Value
Shares
Percentage of Ownership
Swancor Hol Co., Ltd
Swancor Ind Co., Ltd
R.O.C. Investing and holding 4,077,826 - 90,834 100% 4,014,821 90,834 100% 183,785 67,629 Investment Using Equity Method
Swancor Hol Co., Ltd
Swancor Renewable Energy Co., Ltd.
R.O.C. Energy technical services
132,805 - 20,000 100% 141,401 20,000 100% 2,594 8,596 Investment Using Equity Method
Swancor Ind Co., Ltd
Strategic Capital Holding Ltd.
Samoa Investing and holding USD 9,601
317,780USD 9,601
317,7809,601 100% 3,681,091 9,601 100%
USD 9,014290,594
297,533 Investment Using Equity Method
Swancor Ind Co., Ltd
Ta-Hsuan Applied Materials Co., Ltd.(Ta-Hsuan)
R.O.C. Chemical products manufacturing and processing
- 11,110 - - % - - - % - - Investment Using Equity Method
Swancor Ind Co., Ltd
Swancor Renewable Energy Co., Ltd.
R.O.C. Energy technical services
- 200,000 - 100% - 200,000 100% 2,594 (6,002) Investment Using Equity Method
Swancor Ind Co., Ltd
Formosa I Wind Power Co., Ltd.
R.O.C. Wind power industry 1,030,000 600,000 103,000 95.81% 956,067 103,000 95.81% (57,977) (55,278) Investment Using Equity Method
Swancor Ind Co., Ltd
Formosa I International Investment Co., Ltd
R.O.C. Investing and holding 1,000 - 100 100% 939 100 100% (61) (61)
Investment Using Equity Method
Strategic Capital Holding Ltd.
Swancor Ind Co., Ltd
Samoa Investing and holding USD 7,100
233,692USD 7,100
233,6927,100 100%
USD 89,0422,871,599
7,100 100%USD 7,440
239,847USD7,440
239,847
Investment Using Equity Method
Strategic Capital Holding Ltd.
Shang-Wei Investment Co., Ltd. (Seychelles)
Seychelles Investing and holding USD 780
23,294USD 780
23,294780 100%
USD 55417,875
780 100%USD (220)
(7,078)USD (220)
(7,078)
Investment Using Equity Method
Shang-Wei Investment Co., Ltd
Swancor Ind. (M)SDN.BHD.
Malaysia Chemical products manufacturing and processing
- USD 780
23,294- - % - 780 100%
USD 692,239
USD 41 1,338
Investment Using Equity Method
Swancor (Shanghai)
Swancor (HK) Investment Co., Ltd
Hong Kong
Investing and holding USD 8,455
(103)- 10 100%
USD 8,033259,076
10 100%USD (103)
(3,337)USD(103)
(3,337)
Investment Using Equity Method
68 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Investor Company
Investee Company
Location Main Businesses and
Products
Original Investment Amount
Balance as of December 31, 2016 Maximum Balance for the Period Net Income
(Loses) of the Investee
Share of Profits/ Losses
of Investee Note December 31,
2016 December 31,
2015 Shares
Percentage Of
Ownership
Carrying Value
Shares
Percentage of Ownership
Swancor (HK) Swancor Ind. (M)SDN.BHD
Malaysia Chemical products manufacturing and processing
USD 1,44547,306
- 1,670 100%USD 1,232
39,7231,670 100%
USD (69)(2,239)
USD (110) (3,577)
Investment Using Equity Method
Swancor (HK) Swancor Highpolymer Co., Ltd
ROC Chemical products manufacturing and processing
USD 7,000219,170
- 21,917 100%USD 6,797
219,20621,917 100%
USD 136
USD 1 36
Investment Using Equity Method
Note: The transactions have been eliminated upon consolidation.
iii. Information on investment in Mainland China (a) Investment in Mainland China
Investee Company Mani Businesses and
Products
Total Amount of
Paid-in Capital
Method of Investment
Accumulated Outflow of Investment
from Taiwan as of January
1, 2016
Outflow Inflow
Accumulated Outflow of Investment
from Taiwan as of December
31, 2016
Net Income
(Loss) of the
Investee Company
Percentage of
Ownership
Share of Profit/ Loss
Carrying Amount
as of December 31,
2016
Maximum Balance
for the Period
Accumulated Inward
Remittance of Earnings
as of December 31, 2016
Shares
Percentage
of Ownership
Swancor (Shanghai) Fine Chemical Co., Ltd.
Production and selling of Vinyl Ester Resins and light composite material resins
USD 5,280 RMB 203,034
1,188,675
Indirectly owned by the company
USD 2,50084,071
- - USD 2,500
84,071 USD 12,122
390,80688.75%
USD 11,05684,071
USD 63,38381,071
USD 2,500(Note 1)
88.75% -
Wuxi Rongmai Engineering Plastic Co., Ltd.
Producing Engineering plastic used in electronic, electrical engineering and automotive industry
USD 2,100 64,806
Indirectly owned by the company (Note1)
USD 2508,098
- - USD 250
8,098 - 10% - -
USD 250(Note 1)
10% -
Swancor (Tianjin) Win Blade Materials Co., Ltd.
Energy conservation wind power laminar resins’ manufacturing and selling
USD 7,000 230,401
Indirectly owned by the company
USD 7,000230,401
- - USD 7,000
230,401 USD 6,263
201,923 88.75%USD 5,559
230,401USD 32,922
1,038,653USD 7,000
(Note 1) 100% USD 2,557
82,285
Swancor (Jiangsu) New Materials Co., Ltd.
Energy conservation wind power laminar resins’ manufacturing and selling
RMB 122,500 613,850
Indirectly owned by the company
RMB 76,875380,892
- - RMB 76,875
380,892 RMB 11,601
56,303 88.75%RMB 10,296
380,892RMB 32,922
623,114RMB 76,875
(Note 1) 100% -
Swancor (Jiangsu) Carbon Composites Co., Ltd.
Producing and selling carbon composites
RMB 17,000 549,813
Directly owned by the company
USD 9,850317,526
USD 4,090133,211
- USD 13,940 450,737
RMB (5,839)
(28,337)82%
RMB (4,788)(23,236)
RMB 66,612396,156
RMB 13,940(Note 1) 82%
-
Tiande (Jiangsu) new materials co., Ltd
Production and selling of Vinyl Ester Resins and light composite material resins
RMB 50,000 247,870
Indirectly owned by the company
- - - - RMB (333)(1,643) 82%
RMB (333)(1,643)
- RMB 50,000
(Note 1) 100%
Note 1: The limited companies don’t issue shares, disclosing the capital investment.
69 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(b) Upper Limit on Investment
Company
Accumulated Investment in Mainland China as of
December 31, 2016 (US$ in Thousands)
Investment Amounts Authorized by
Investment Commission, MOEA
(US$ in Thousands)
Upper Limit on Investment (US$ in Thousands)
Swancor Industrial Co., Ltd USD 23,690 RMB 76,875
USD 23,690 778,513(Note3)
RMB 76,875 478,246(Note3)
(Note5)
Note1:Which is invested by Ideal Star. Note2:Amount was recognized based on the audited financial statements. Note3:Amount was translated at the rates of exchange at each authorization by Investment Commission. Note4:Swancor (Shanghai) Fine Chemical Co., Ltd increased its capital at 2,780 thousand US dollars by transferring
retained earnings to capital. Note5:On August 28, 2015, the company was identified by Industrial Development Bureau to be qualified for
Operation Headquarters of Enterprise. The investment amounts in Mainland China were not limited according to “Regulations Governing The approval of Investment or Technical Cooperation in Mainland China”.
(c) Significant transactions.
As of August 31, 2016(Date of Incorporation) to December 31, 2016, all direct or indirect transactions (which were eliminated in full on consolidation) please refer to “Information of Significant Transactions” and “Parent-subsidiary Relation of Significant Transactions”.
14. Segment Information
(1) General information
The Consolidated Companies have two reportable segments which are Composite Material segment and offshore wind power segment. The Composite Material segment main operating activities are manufacturing and selling Precision chemical materials, energy conservation LED resins and energy conservation wind power laminar resins also it same of the technology and sales. The offshore wind power segment main operating activities the energy technology services and offshore wind power related business. The reportable segments of the Group are strategic business units which provide different products and services. Due to each strategic business unit requires different technology and marketing strategy, it needs to be managed separately.
(2) Reportable information of segment’s profit, assets, liabilities, and the measurement basis:
The Group uses the internal management report that the chief operating decision maker reviews as the basis to determine resource allocation and make a performance evaluation. The internal management report includes profit before taxation, excluding any extraordinary activity and foreign exchange gain or losses, because taxation, extraordinary activity and foreign exchange gain or losses are managed on a group basis, and hence they are not able to be allocated to each reportable segment. In addition, not all reportable segments include depreciation and amortization of significant non-cash items. The reportable amount is similar to that in the report used by the chief operating decision maker.
70 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
There is no inconsistency between the accounting principles of the operating segment and the accounting principle described in Note 4.
The Group treated intersegment sales and transfers as third-party transactions. They are measured at market price.The Group’s operating segment information and reconciliation were as follows:
August 31 to December 31, 2016
Composite Material
Offshore Wind Power
Adjustment and
elimination
Total Revenue Revenue from external customers $ 1,670,522 14,286 - 1,684,808 Interest income 11,767 127 (238) 11,656Total revenue $ 1,682,289 14,413 (238) 1,696,464Interest expenses $ (15,253) (2,485) 238 (17,500)Depreciation and amortization (34,327) (10,322) - (44,649)Share of profits of subsidiaries and
associates (2,983)
-
2,983
-
Reportable segment profit or loss $ 174,035 (7,871) - 166,164Investments accounted for using
equity method $ 1,098,407
-
(1,098,407)
-
Capital expenditure 242,803 1,067,693 - 1,310,496Reportable segment assets $ 7,777,193 3,613,218 (149) 11,390,262Reportable segment liabilities $ 4,409,959 2,472,999 (149) 6,882,809
The Group’s significant operating segment information and reconciliation were as follows: The eliminations of segment revenue are 15,463 thousand dollars as of August 31 to December 31, 2016
(3) Production information
The Group’s mainly segment is Precision chemical materials segment main operating activities are manufacturing and selling Precision chemical materials, energy conservation LED resins and energy conservation wind power laminar resins also it sane of the technology and sales. The Group effectively operates in a single industry segment, because the operating revenue, profit and assets of the segment are constituting more than 90% of the consolidated revenue, profit and assets.
(4) Geographic information In presenting information on the basis of geography, segment revenue is based on the geographical location of customers and segment non-current assets are based on the geographical location of the assets.
Region Aug 31 to Dec 31, 2016 Revenue from external customers : Taiwan $ 259,193 China 1,255,739 United Arab Emirates 30,117 Other countries 139,759 $ 1,684,808
71 Swancor Holding Company Limited and Subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Dec 31, 2016 Non-current assets: Taiwan $ 3,479,622 China 1,151,941
Malaysia 14,613 $ 4,643,176
Non-current assets include property, plant and equipment, investment property, intangible assets, and other assets, not including financial instruments, refundable deposits, prepaid pension cost, and deferred tax assets.
(5) Major Customer
August 31 to
December 31, 2016Composite material’s revenues
From material’s by Customer A $ 684,917