Chunghwa Telecom Co Ltd 6-K, filed May 7, 2021
Chunghwa Telecom Co Ltd (CHT)
About this 6-K
Chunghwa Telecom Co Ltd filed this 6-K on May 7, 2021.
1934 Act Registration No. 1-31731
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Dated May 7, 2021
Chunghwa Telecom Co., Ltd.
(Translation of Registrant’s Name into English)
21-3 Hsinyi Road Sec. 1,
Taipei, Taiwan, 100 R.O.C.
(Address of Principal Executive Office)
(Indicate by check mark whether the registrant files or will file annual reports under cover of form 20-F or Form 40-F.)
Form 20-F ☒ Form 40-F ☐
(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
Yes ☐ No ☒
(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable)
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant Chunghwa Telecom Co., Ltd. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 7, 2021
| Chunghwa Telecom Co., Ltd. | ||
| By: | /s/ Yu-Shen Chen | |
| Name: | Yu-Shen Chen | |
| Title: Chief Financial Officer | ||
3
Exhibit 99.1
To announce the differences between financial statements for the three months ended March 31, 2021 under Taiwan-IFRSs and that under IFRSs
Date of events: 2021/5/7
Contents:
| 1. | Date of occurrence of the event: 2021/5/7 |
| 2. | Of which year/ quarter financial report required to be adjusted: The first quarter of 2021 |
| 3. | Accounting principles applied (domestic listing securities): |
Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China (“Taiwan-IFRSs”)
| 4. | Inconsistent items/ amounts (domestic listing securities): |
Under Taiwan-IFRSs, Chunghwa Telecom Co., Ltd. and its subsidiaries (or the “Company”) reported consolidated net income of NT$9,121,630 thousand, consolidated net income attributable to stockholders of the parent of NT$8,804,944 thousand, and basic earnings per share of NT$1.14 for the three months ended March 31, 2021, respectively. The Company also reported total assets of NT$506,501,196 thousand, total liabilities of NT$109,050,456 thousand, and total equity of NT$397,450,740 thousand as of March 31, 2021.
| 5. | Accounting principles applied (securities issued overseas): |
IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standard Board (“IFRSs”)
| 6. | Inconsistent items/ amounts (securities issued overseas): |
Under IFRSs, the Company reported consolidated net income of NT$8,638 million, consolidated net income attributable to stockholders of the parent of NT$8,338 million, and basic earnings per share of NT$1.07 for the three months ended March 31, 2021, respectively. The Company also reported total assets of NT$506,300 million, total liabilities of NT$111,318 million, and total equity of NT$394,982 million as of March 31, 2021.
| 7. | Cause of the inconsistency: |
The differences between consolidated net income under Taiwan-IFRSs and that under IFRSs followed by the Company mainly come from the timing of the recognition of income tax on unappropriated earnings. In addition, prior to incorporation, the Company was subject to the laws and regulations applicable to state-owned enterprises in Taiwan which differed from the generally accepted accounting principles as applicable to commercial companies. As such, revenue from providing fixed line connection service and selling prepaid phone cards was recognized at the time the service was performed or the card was sold by the Company. Upon incorporation, net assets greater than the capital stock was credited as additional paid-in-capital and part of the additional paid-in-capital was from the unearned revenues generated from connection fees and prepaid cards as of the date of incorporation. Under IFRSs, revenue from connection fees and prepaid phone cards was deferred at the time of the service performed or sale and recognized as revenue over time as the service is continuously performed or as consumed. This reclassification from additional paid-in capital to retained earnings did not affect total equity.
| 8. | Any other matters that need to be specified: |
Chunghwa Telecom’s earnings distribution and stockholders’ equity matters are in accordance with Taiwan-IFRSs.
1
Exhibit 99.2
Chunghwa Telecom Co., Ltd. and Subsidiaries
Consolidated Financial Statements for the
Three Months Ended March 31, 2021 and 2020 and
Independent Auditors’ Review Report
INDEPENDENT AUDITORS’ REVIEW REPORT
The Board of Directors and Stockholders
Chunghwa Telecom Co., Ltd.
Introduction
We have reviewed the accompanying consolidated balance sheets of Chunghwa Telecom Co., Ltd. and its subsidiaries (the “Company”) as of March 31, 2021 and 2020, the related consolidated statements of comprehensive income, the consolidated statements of changes in equity and cash flows for the three months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.
Scope of Review
We conducted our reviews in accordance with Statement of Auditing Standards No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2021 and 2020, and of its consolidated financial performance and its consolidated cash flows for the three months then ended March 31, 2021 and 2020 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.
- 1 -
The engagement partners on the reviews resulting in this independent auditors’ review report are Dien Sheng Chang and Cheng Hung Kuo.
| /s/ Dien Sheng Chang |
/s/ Cheng Hung Kuo | |||
| Deloitte & Touche | ||||
| Taipei, Taiwan | ||||
| Republic of China | ||||
May 6, 2021
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ review report and consolidated financial statements shall prevail.
- 2 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of New Taiwan Dollars)
| March 31, 2021 (Reviewed) |
December 31, 2020 (Audited) |
March 31, 2020 (Reviewed) |
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| ASSETS | Amount | % | Amount | % | Amount | % | ||||||||||||||||||
| CURRENT ASSETS |
||||||||||||||||||||||||
| Cash and cash equivalents (Note 6) |
$ | 30,043,910 | 6 | $ | 30,419,655 | 6 | $ | 16,569,950 | 3 | |||||||||||||||
| Financial assets at fair value through profit or loss (Note 7) |
8,061 | — | 9,897 | — | 6,631 | — | ||||||||||||||||||
| Hedging financial assets (Note 20) |
— | — | 1,752 | — | — | — | ||||||||||||||||||
| Contract assets (Note 30) |
5,246,566 | 1 | 5,331,246 | 1 | 4,466,540 | 1 | ||||||||||||||||||
| Trade notes and accounts receivable, net (Notes 9 and 30) |
21,391,359 | 4 | 22,621,902 | 5 | 23,401,540 | 5 | ||||||||||||||||||
| Receivables from related parties (Note 38) |
34,203 | — | 230,696 | — | 9,712 | — | ||||||||||||||||||
| Inventories (Notes 10 and 39) |
12,348,605 | 3 | 12,408,903 | 3 | 17,774,693 | 4 | ||||||||||||||||||
| Prepayments (Note 11) |
5,486,706 | 1 | 2,306,246 | — | 5,103,222 | 1 | ||||||||||||||||||
| Other current monetary assets (Notes 12 and 35) |
11,620,376 | 2 | 6,123,665 | 1 | 6,159,141 | 1 | ||||||||||||||||||
| Other current assets (Notes 19 and 39) |
2,233,007 | — | 2,349,097 | — | 1,876,171 | — | ||||||||||||||||||
|
|
|
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|
|
|
|
|
|
|
|
|
|||||||||||||
| Total current assets |
88,412,793 | 17 | 81,803,059 | 16 | 75,367,600 | 15 | ||||||||||||||||||
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|
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| NONCURRENT ASSETS |
||||||||||||||||||||||||
| Financial assets at fair value through profit or loss (Note 7) |
816,602 | — | 677,202 | — | 767,362 | — | ||||||||||||||||||
| Financial assets at fair value through other comprehensive income (Notes 8 and 35) |
3,650,340 | 1 | 7,193,174 | 2 | 5,903,181 | 1 | ||||||||||||||||||
| Investments accounted for using equity method (Note 14) |
7,195,375 | 2 | 6,893,001 | 1 | 7,358,379 | 1 | ||||||||||||||||||
| Contract assets (Note 30) |
2,486,990 | — | 2,495,302 | — | 2,567,439 | 1 | ||||||||||||||||||
| Property, plant and equipment (Notes 15, 35, 38 and 39) |
280,150,750 | 55 | 281,415,943 | 56 | 279,867,247 | 56 | ||||||||||||||||||
| Right-of-use assets (Note 16) |
10,765,100 | 2 | 11,009,206 | 2 | 11,494,300 | 2 | ||||||||||||||||||
| Investment properties (Note 17) |
9,610,754 | 2 | 9,621,322 | 2 | 8,164,263 | 1 | ||||||||||||||||||
| Intangible assets (Notes 18 and 35) |
88,664,522 | 18 | 90,284,560 | 18 | 94,407,682 | 19 | ||||||||||||||||||
| Deferred income tax assets (Note 3) |
3,073,603 | 1 | 3,132,713 | 1 | 3,262,026 | 1 | ||||||||||||||||||
| Incremental costs of obtaining contracts (Note 30) |
961,667 | — | 999,593 | — | 929,827 | — | ||||||||||||||||||
| Net defined benefit assets (Note 3) |
3,577,381 | 1 | 3,372,555 | 1 | 2,204,182 | 1 | ||||||||||||||||||
| Prepayments (Note 11) |
2,144,737 | — | 2,213,521 | — | 2,611,936 | 1 | ||||||||||||||||||
| Other noncurrent assets (Notes 19, 35, 39 and 40) |
4,990,582 | 1 | 5,266,841 | 1 | 4,991,506 | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total noncurrent assets |
418,088,403 | 83 | 424,574,933 | 84 | 424,529,330 | 85 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
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|
|||||||||||||
| TOTAL |
$ | 506,501,196 | 100 | $ | 506,377,992 | 100 | $ | 499,896,930 | 100 | |||||||||||||||
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|
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| LIABILITIES AND EQUITY |
||||||||||||||||||||||||
| CURRENT LIABILITIES |
||||||||||||||||||||||||
| Short-term loans (Note 21) |
$ | 60,000 | — | $ | 67,000 | — | $ | 70,000 | — | |||||||||||||||
| Short-term bills payable (Note 22) |
4,999,489 | 1 | 6,999,198 | 1 | 19,965,629 | 4 | ||||||||||||||||||
| Financial liabilities at fair value through profit or loss (Note 7) |
3,867 | — | 143 | — | 570 | — | ||||||||||||||||||
| Hedging financial liabilities (Note 20) |
1,864 | — | — | — | — | — | ||||||||||||||||||
| Contract liabilities (Notes 30 and 38) |
13,264,677 | 3 | 13,436,706 | 3 | 17,163,178 | 4 | ||||||||||||||||||
| Trade notes and accounts payable (Note 25) |
9,689,794 | 2 | 15,590,814 | 3 | 11,890,475 | 2 | ||||||||||||||||||
| Payables to related parties (Note 38) |
324,619 | — | 645,944 | — | 338,449 | — | ||||||||||||||||||
| Current tax liabilities (Note 3) |
6,449,723 | 1 | 4,369,241 | 1 | 6,103,903 | 1 | ||||||||||||||||||
| Lease liabilities (Notes 16, 35 and 38) |
3,296,580 | 1 | 3,381,571 | 1 | 3,395,000 | 1 | ||||||||||||||||||
| Other payables (Notes 26 and 35) |
22,596,518 | 5 | 23,987,962 | 5 | 19,653,578 | 4 | ||||||||||||||||||
| Provisions (Note 27) |
325,747 | — | 313,555 | — | 199,804 | — | ||||||||||||||||||
| Current portion of long-term loans (Notes 23 and 39) |
1,600,000 | — | 1,600,000 | — | — | — | ||||||||||||||||||
| Other current liabilities |
957,627 | — | 1,042,977 | — | 972,553 | — | ||||||||||||||||||
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|||||||||||||
| Total current liabilities |
63,570,505 | 13 | 71,435,111 | 14 | 79,753,139 | 16 | ||||||||||||||||||
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| NONCURRENT LIABILITIES |
||||||||||||||||||||||||
| Long-term loans (Notes 23 and 39) |
— | — | — | — | 1,600,000 | — | ||||||||||||||||||
| Bonds payable (Note 24) |
19,981,108 | 4 | 19,980,272 | 4 | — | — | ||||||||||||||||||
| Contract liabilities (Note 30) |
7,216,060 | 2 | 7,289,087 | 2 | 6,667,831 | 1 | ||||||||||||||||||
| Deferred income tax liabilities (Note 3) |
2,017,828 | — | 1,966,538 | — | 1,928,010 | 1 | ||||||||||||||||||
| Provisions (Note 27) |
104,417 | — | 100,616 | — | 99,681 | — | ||||||||||||||||||
| Lease liabilities (Notes 16, 35 and 38) |
6,022,381 | 1 | 6,215,096 | 1 | 6,424,707 | 1 | ||||||||||||||||||
| Customers’ deposits (Note 38) |
4,731,909 | 1 | 4,826,679 | 1 | 4,601,704 | 1 | ||||||||||||||||||
| Net defined benefit liabilities (Note 3) |
3,420,564 | 1 | 3,415,331 | 1 | 3,539,441 | 1 | ||||||||||||||||||
| Other noncurrent liabilities |
1,985,684 | — | 1,890,805 | — | 1,686,030 | — | ||||||||||||||||||
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|||||||||||||
| Total noncurrent liabilities |
45,479,951 | 9 | 45,684,424 | 9 | 26,547,404 | 5 | ||||||||||||||||||
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| Total liabilities |
109,050,456 | 22 | 117,119,535 | 23 | 106,300,543 | 21 | ||||||||||||||||||
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| EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT (Notes 13 and 29) |
||||||||||||||||||||||||
| Common stocks |
77,574,465 | 15 | 77,574,465 | 15 | 77,574,465 | 16 | ||||||||||||||||||
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| Additional paid-in capital |
171,276,947 | 34 | 171,261,379 | 34 | 171,274,394 | 34 | ||||||||||||||||||
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| Retained earnings |
||||||||||||||||||||||||
| Legal reserve |
77,574,465 | 15 | 77,574,465 | 15 | 77,574,465 | 16 | ||||||||||||||||||
| Special reserve |
2,675,419 | 1 | 2,675,419 | 1 | 2,675,419 | 1 | ||||||||||||||||||
| Unappropriated earnings |
56,818,260 | 11 | 47,918,166 | 10 | 54,625,420 | 10 | ||||||||||||||||||
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| Total retained earnings |
137,068,144 | 27 | 128,168,050 | 26 | 134,875,304 | 27 | ||||||||||||||||||
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| Others |
(152,567 | ) | — | 927,122 | — | (708,698 | ) | — | ||||||||||||||||
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| Total equity attributable to stockholders of the parent |
385,766,989 | 76 | 377,931,016 | 75 | 383,015,465 | 77 | ||||||||||||||||||
| NONCONTROLLING INTERESTS (Notes 13 and 29) |
11,683,751 | 2 | 11,327,441 | 2 | 10,580,922 | 2 | ||||||||||||||||||
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| Total equity |
397,450,740 | 78 | 389,258,457 | 77 | 393,596,387 | 79 | ||||||||||||||||||
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| TOTAL |
$ | 506,501,196 | 100 | $ | 506,377,992 | 100 | $ | 499,896,930 | 100 | |||||||||||||||
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The accompanying notes are an integral part of the consolidated financial statements.
- 3 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
(Reviewed, Not Audited)
| Three Months Ended March 31 | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Amount | % | Amount | % | |||||||||||||
| REVENUES (Notes 30, 38 and 44) |
$ | 50,100,995 | 100 | $ | 48,149,999 | 100 | ||||||||||
| OPERATING COSTS (Notes 10, 28, 30, 31, 38 and 44) |
31,892,915 | 64 | 30,390,800 | 63 | ||||||||||||
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| GROSS PROFIT |
18,208,080 | 36 | 17,759,199 | 37 | ||||||||||||
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| OPERATING EXPENSES (Notes 9, 28, 31, 38 and 44) |
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| Marketing |
4,885,176 | 10 | 5,072,556 | 11 | ||||||||||||
| General and administrative |
1,302,592 | 2 | 1,213,500 | 3 | ||||||||||||
| Research and development |
875,401 | 2 | 936,176 | 2 | ||||||||||||
| Expected credit loss |
43,569 | — | 6,137 | — | ||||||||||||
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| Total operating expenses |
7,106,738 | 14 | 7,228,369 | 16 | ||||||||||||
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| OTHER INCOME AND EXPENSES (Note 31) |
2,569 | — | (680 | ) | — | |||||||||||
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| INCOME FROM OPERATIONS |
11,103,911 | 22 | 10,530,150 | 21 | ||||||||||||
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| NON-OPERATING INCOME AND EXPENSES |
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| Interest income |
17,880 | — | 39,386 | — | ||||||||||||
| Other income (Notes 31 and 38) |
41,971 | — | 43,192 | — | ||||||||||||
| Other gains and losses (Notes 31, 37 and 38) |
164,121 | — | 43,989 | — | ||||||||||||
| Interest expenses (Notes 16, 31 and 38) |
(50,726 | ) | — | (42,387 | ) | — | ||||||||||
| Share of profits of associates and joint ventures accounted for using equity method (Note 14) |
43,191 | — | 37,074 | — | ||||||||||||
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| Total non-operating income and expenses |
216,437 | — | 121,254 | — | ||||||||||||
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| INCOME BEFORE INCOME TAX |
11,320,348 | 22 | 10,651,404 | 21 | ||||||||||||
| INCOME TAX EXPENSE (Notes 3 and 32) |
2,198,718 | 4 | 2,104,040 | 4 | ||||||||||||
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| NET INCOME |
9,121,630 | 18 | 8,547,364 | 17 | ||||||||||||
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| TOTAL OTHER COMPREHENSIVE INCOME (LOSS) |
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| Items that will not be reclassified to profit or loss: |
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| Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income (Notes 29 and 37) |
(945,349 | ) | (2 | ) | (1,400,916 | ) | (3 | ) | ||||||||
(Continued)
- 4 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
(Reviewed, Not Audited)
| Three Months Ended March 31 | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Amount | % | Amount | % | |||||||||||||
| Gain or loss on hedging instruments subject to basis adjustment (Note 20) |
$ | (3,616 | ) | — | $ | (327 | ) | — | ||||||||
| Share of remeasurements of defined benefit pension plans of associates and joint ventures (Note 14) |
758 | — | 725 | — | ||||||||||||
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| (948,207 | ) | (2 | ) | (1,400,518 | ) | (3 | ) | |||||||||
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| Items that may be reclassified subsequently to profit or loss: |
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| Exchange differences arising from the translation of the foreign operations |
(38,328 | ) | — | (11,776 | ) | — | ||||||||||
| Share of exchange differences arising from the translation of the foreign operations of associates and joint ventures (Note 14) |
459 | — | (188 | ) | — | |||||||||||
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| (37,869 | ) | — | (11,964 | ) | — | |||||||||||
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| Total other comprehensive loss, net of income tax |
(986,076 | ) | (2 | ) | (1,412,482 | ) | (3 | ) | ||||||||
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| TOTAL COMPREHENSIVE INCOME |
$ | 8,135,554 | 16 | $ | 7,134,882 | 14 | ||||||||||
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| NET INCOME ATTRIBUTABLE TO |
||||||||||||||||
| Stockholders of the parent |
$ | 8,804,944 | 18 | $ | 8,283,334 | 17 | ||||||||||
| Noncontrolling interests |
316,686 | — | 264,030 | — | ||||||||||||
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| $ | 9,121,630 | 18 | $ | 8,547,364 | 17 | |||||||||||
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| COMPREHENSIVE INCOME ATTRIBUTABLE TO |
||||||||||||||||
| Stockholders of the parent |
$ | 7,820,405 | 16 | $ | 6,886,813 | 14 | ||||||||||
| Noncontrolling interests |
315,149 | — | 248,069 | — | ||||||||||||
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| $ | 8,135,554 | 16 | $ | 7,134,882 | 14 | |||||||||||
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| EARNINGS PER SHARE (Note 33) |
||||||||||||||||
| Basic |
$ | 1.14 | $ | 1.07 | ||||||||||||
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| Diluted |
$ | 1.13 | $ | 1.07 | ||||||||||||
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The accompanying notes are an integral part of the consolidated financial statements.
(Concluded)
- 5 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
| Equity Attributable to Stockholders of the Parent (Notes 13, 20 and 29) | ||||||||||||||||||||||||||||||||||||||||||||
| Others | ||||||||||||||||||||||||||||||||||||||||||||
| Unrealized Gain | ||||||||||||||||||||||||||||||||||||||||||||
| Exchange | or Loss on | |||||||||||||||||||||||||||||||||||||||||||
| Differences | Financial Assets | |||||||||||||||||||||||||||||||||||||||||||
| Arising from the | at Fair Value | |||||||||||||||||||||||||||||||||||||||||||
| Retained Earnings | Translation of | Through Other | Gain or Loss | Noncontrolling | ||||||||||||||||||||||||||||||||||||||||
| Additional | Unappropriated | the Foreign | Comprehensive | on Hedging | Interests | |||||||||||||||||||||||||||||||||||||||
| Common Stocks | Paid-in Capital | Legal Reserve | Special Reserve | Earnings | Operations | Income | Instruments | Total | (Notes 13 and 29) | Total Equity | ||||||||||||||||||||||||||||||||||
| BALANCE, JANUARY 1, 2020 |
$ | 77,574,465 | $ | 171,255,985 | $ | 77,574,465 | $ | 2,675,419 | $ | 46,341,361 | $ | (148,377 | ) | $ | 836,598 | $ | 327 | $ | 376,110,243 | $ | 10,283,522 | $ | 386,393,765 | |||||||||||||||||||||
| Change in additional paid-in capital from investments in associates and joint ventures accounted for using equity method |
— | (5,580 | ) | — | — | — | — | — | — | (5,580 | ) | 47 | (5,533 | ) | ||||||||||||||||||||||||||||||
| Net income for the three months ended March 31, 2020 |
— | — | — | — | 8,283,334 | — | — | — | 8,283,334 | 264,030 | 8,547,364 | |||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) for the three months ended March 31, 2020 |
— | — | — | — | 725 | (12,593 | ) | (1,384,326 | ) | (327 | ) | (1,396,521 | ) | (15,961 | ) | (1,412,482 | ) | |||||||||||||||||||||||||||
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| Total comprehensive income (loss) for the three months ended March 31, 2020 |
— | — | — | — | 8,284,059 | (12,593 | ) | (1,384,326 | ) | (327 | ) | 6,886,813 | 248,069 | 7,134,882 | ||||||||||||||||||||||||||||||
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| Share-based payment transactions of subsidiaries |
— | 23,989 | — | — | — | — | — | — | 23,989 | 49,284 | 73,273 | |||||||||||||||||||||||||||||||||
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| BALANCE, MARCH 31, 2020 |
$ | 77,574,465 | $ | 171,274,394 | $ | 77,574,465 | $ | 2,675,419 | $ | 54,625,420 | $ | (160,970 | ) | $ | (547,728 | ) | $ | — | $ | 383,015,465 | $ | 10,580,922 | $ | 393,596,387 | ||||||||||||||||||||
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| BALANCE, JANUARY 1, 2021 |
$ | 77,574,465 | $ | 171,261,379 | $ | 77,574,465 | $ | 2,675,419 | $ | 47,918,166 | $ | (314,531 | ) | $ | 1,239,901 | $ | 1,752 | $ | 377,931,016 | $ | 11,327,441 | $ | 389,258,457 | |||||||||||||||||||||
| Net income for the three months ended March 31, 2021 |
— | — | — | — | 8,804,944 | — | — | — | 8,804,944 | 316,686 | 9,121,630 | |||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) for the three months ended March 31, 2021 |
— | — | — | — | 758 | (35,695 | ) | (945,986 | ) | (3,616 | ) | (984,539 | ) | (1,537 | ) | (986,076 | ) | |||||||||||||||||||||||||||
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| Total comprehensive income (loss) for the three months ended March 31, 2021 |
— | — | — | — | 8,805,702 | (35,695 | ) | (945,986 | ) | (3,616 | ) | 7,820,405 | 315,149 | 8,135,554 | ||||||||||||||||||||||||||||||
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| Disposal of investments in equity instruments at fair value through other comprehensive income |
— | — | — | — | 94,392 | — | (94,392 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||
| Share-based payment transactions of subsidiaries |
— | 15,568 | — | — | — | — | — | — | 15,568 | 41,161 | 56,729 | |||||||||||||||||||||||||||||||||
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| BALANCE, MARCH 31, 2021 |
$ | 77,574,465 | $ | 171,276,947 | $ | 77,574,465 | $ | 2,675,419 | $ | 56,818,260 | $ | (350,226 | ) | $ | 199,523 | $ | (1,864 | ) | $ | 385,766,989 | $ | 11,683,751 | $ | 397,450,740 | ||||||||||||||||||||
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The accompanying notes are an integral part of the consolidated financial statements.
- 6 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Income before income tax |
$ | 11,320,348 | $ | 10,651,404 | ||||
| Adjustments for: |
||||||||
| Depreciation |
7,848,148 | 7,759,282 | ||||||
| Amortization |
1,641,037 | 1,059,023 | ||||||
| Amortization of incremental costs of obtaining contracts |
194,880 | 196,659 | ||||||
| Expected credit loss |
43,569 | 6,137 | ||||||
| Interest expenses |
50,726 | 42,387 | ||||||
| Interest income |
(17,880 | ) | (39,386 | ) | ||||
| Compensation cost of share-based payment transactions |
4,061 | 1,646 | ||||||
| Share of profits of associates and joint ventures accounted for using equity method |
(43,191 | ) | (37,074 | ) | ||||
| Loss (gain) on disposal of property, plant and equipment |
(2,569 | ) | 680 | |||||
| Loss (gain) on disposal of financial instruments |
(186 | ) | 1,788 | |||||
| Provision for impairment loss and obsolescence of inventory |
32,919 | 23,601 | ||||||
| Valuation loss (gain) on financial assets and liabilities at fair value through profit or loss, net |
(133,841 | ) | 12,374 | |||||
| Others |
(50,602 | ) | (50,887 | ) | ||||
| Changes in operating assets and liabilities: |
||||||||
| Decrease (increase) in: |
||||||||
| Contract assets |
92,885 | 8,189 | ||||||
| Trade notes and accounts receivable |
1,220,042 | 3,042,468 | ||||||
| Receivables from related parties |
196,493 | 7,122 | ||||||
| Inventories |
27,379 | (454,018 | ) | |||||
| Prepayments |
(3,111,676 | ) | (3,152,564 | ) | ||||
| Other current monetary assets |
(146,861 | ) | 122,464 | |||||
| Other current assets |
116,090 | 553,493 | ||||||
| Incremental cost of obtaining contracts |
(156,954 | ) | (183,834 | ) | ||||
| Increase (decrease) in: |
||||||||
| Contract liabilities |
(245,056 | ) | 149,694 | |||||
| Trade notes and accounts payable |
(5,901,532 | ) | (3,422,773 | ) | ||||
| Payables to related parties |
(321,325 | ) | (315,534 | ) | ||||
| Other payables |
(2,490,458 | ) | (2,523,167 | ) | ||||
| Provisions |
15,993 | (4,839 | ) | |||||
| Other current liabilities |
(76,689 | ) | (6,481 | ) | ||||
| Net defined benefit plans |
(199,593 | ) | (42,023 | ) | ||||
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| Cash generated from operations |
9,906,157 | 13,405,831 | ||||||
| Interest paid |
(23,016 | ) | (76,758 | ) | ||||
| Income tax paid |
(7,836 | ) | (8,521 | ) | ||||
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| Net cash provided by operating activities |
9,875,305 | 13,320,552 | ||||||
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(Continued)
- 7 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Acquisition of financial assets at fair value through other comprehensive income |
$ | (38,083 | ) | $ | (35,433 | ) | ||
| Proceeds from disposal of financial assets at fair value through other comprehensive income |
2,905,889 | — | ||||||
| Acquisition of financial assets at fair value through profit or loss |
(9,423 | ) | (38,944 | ) | ||||
| Proceeds from disposal of financial assets at fair value through profit or loss |
9,610 | 29,741 | ||||||
| Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months |
(7,726,466 | ) | (1,391,556 | ) | ||||
| Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months |
1,999,094 | 2,616,599 | ||||||
| Acquisition of investments accounted for using equity method |
(273,800 | ) | — | |||||
| Acquisition of property, plant and equipment |
(4,443,242 | ) | (3,729,411 | ) | ||||
| Proceeds from disposal of property, plant and equipment |
5,752 | 14,465 | ||||||
| Acquisition of intangible assets |
(20,453 | ) | (47,420,261 | ) | ||||
| Decrease in other noncurrent assets |
214,548 | 70,533 | ||||||
| Interest received |
17,444 | 45,620 | ||||||
| Dividends received |
102,757 | — | ||||||
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|||||
| Net cash used in investing activities |
(7,256,373 | ) | (49,838,647 | ) | ||||
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| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Proceeds from short-term loans |
63,000 | 70,000 | ||||||
| Repayments of short-term loans |
(70,000 | ) | (90,000 | ) | ||||
| Proceeds from short-term bills payable |
5,000,000 | 29,000,000 | ||||||
| Repayments of short-term bills payable |
(7,000,000 | ) | (9,000,000 | ) | ||||
| Decrease in customers’ deposits |
(103,431 | ) | (150,695 | ) | ||||
| Payments for the principal of lease liabilities |
(1,018,514 | ) | (992,494 | ) | ||||
| Increase in other noncurrent liabilities |
94,879 | 143,343 | ||||||
| Change in other noncontrolling interests |
52,668 | 71,627 | ||||||
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| Net cash provided by (used in) financing activities |
(2,981,398 | ) | 19,051,781 | |||||
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| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(13,279 | ) | (13,379 | ) | ||||
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|||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
(375,745 | ) | (17,479,693 | ) | ||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
30,419,655 | 34,049,643 | ||||||
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| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 30,043,910 | $ | 16,569,950 | ||||
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The accompanying notes are an integral part of the consolidated financial statements.
(Concluded)
- 8 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
(Reviewed, Not Audited)
| 1. | GENERAL |
Chunghwa Telecom Co., Ltd. (“Chunghwa”) was incorporated on July 1, 1996 in the Republic of China (“ROC”). Chunghwa is a company limited by shares and, prior to August 2000, was wholly owned by the Ministry of Transportation and Communications (“MOTC”). Prior to July 1, 1996, the current operations of Chunghwa were carried out under the Directorate General of Telecommunications (“DGT”). The DGT was established by the MOTC in June 1943 to take primary responsibility in the development of telecommunications infrastructure and to formulate policies related to telecommunications. On July 1, 1996, the telecom operations of the DGT were spun-off as Chunghwa which continues to carry out the business and the DGT continues to be the industry regulator.
Effective August 12, 2005, the MOTC completed the process of privatizing Chunghwa by reducing the government ownership to below 50% in various stages. In July 2000, Chunghwa received approval from the Securities and Futures Commission (the “SFC”) for a domestic initial public offering and its common stocks were listed and traded on the Taiwan Stock Exchange (the “TWSE”) on October 27, 2000. Certain of Chunghwa’s common stocks were sold, in connection with the foregoing privatization plan, in domestic public offerings at various dates from August 2000 to July 2003. Certain of Chunghwa’s common stocks were also sold in an international offering of securities in the form of American Depository Shares (“ADS”) on July 17, 2003 and were listed and traded on the New York Stock Exchange (the “NYSE”). The MOTC sold common stocks of Chunghwa by auction in the ROC on August 9, 2005 and completed the second international offering on August 10, 2005. Upon completion of the share transfers associated with these offerings on August 12, 2005, the MOTC owned less than 50% of the outstanding shares of Chunghwa and completed the privatization plan.
Chunghwa together with its subsidiaries are hereinafter referred to collectively as the “Company”.
The consolidated financial statements are presented in Chunghwa’s functional currency, New Taiwan dollars.
| 2. | APPROVAL OF FINANCIAL STATEMENTS |
The consolidated financial statements were approved by the Board of Directors on May 6, 2021.
| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Except for the following items, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2020. Please refer to the consolidated financial statements for the year ended December 31, 2020 for the details.
- 9 -
Statement of Compliance
The accompanying consolidated financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission (the “FSC”). The consolidated financial statements do not present all the disclosures required for a complete set of annual consolidated financial statements as required by International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), International Financial Reporting Interpretations Committee (IFRIC) and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the FSC.
Basis of Consolidation
The detail information of the subsidiaries at the end of reporting period was as follows:
| Percentage of Ownership Interests | ||||||||||||
| Name of Investor | Name of Investee | Main Businesses and Products |
March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
Note | ||||||
| Chunghwa Telecom Co., Ltd. |
Senao International Co., Ltd. (“SENAO”) |
Handset and peripherals retailer, sales of CHT mobile phone plans as an agent |
28 | 28 | 28 | a. | ||||||
| Light Era Development Co., Ltd. (“LED”) |
Planning and development of real estate and intelligent buildings, and property management |
100 | 100 | 100 | ||||||||
| Donghwa Telecom Co., Ltd. (“DHT”) |
International private leased circuit, IP VPN service, and IP transit services |
100 | 100 | 100 | b. | |||||||
| Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”) |
International private leased circuit, IP VPN service, and IP transit services |
100 | 100 | 100 | ||||||||
| Chunghwa System Integration Co., Ltd. (“CHSI”) |
Providing system integration services and telecommunications equipment |
100 | 100 | 100 | ||||||||
| Chunghwa Investment Co., Ltd. (“CHI”) |
Investment |
89 | 89 | 89 | ||||||||
| CHIEF Telecom Inc. (“CHIEF”) |
Network integration, internet data center (“IDC”), communications integration and cloud application services |
56 | 56 | 56 | c. | |||||||
| CHYP Multimedia Marketing & Communications Co., Ltd. (“CHYP”) |
Digital information supply services and advertisement services |
100 | 100 | 100 | ||||||||
| Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”) |
Investment |
100 | 100 | 100 | ||||||||
| Spring House Entertainment Tech. Inc. (“SHE”) |
Software design services, internet contents production and play, and motion picture production and distribution |
56 | 56 | 56 | ||||||||
| Chunghwa Telecom Global, Inc. (“CHTG”) |
International private leased circuit, internet services, and transit services |
100 | 100 | 100 | ||||||||
| Chunghwa Telecom Vietnam Co., Ltd. (“CHTV”) |
Intelligent energy saving solutions, international circuit, and information and communication technology (“ICT”) services. |
100 | 100 | 100 | ||||||||
| Smartfun Digital Co., Ltd. (“SFD”) |
Providing diversified family education digital services |
65 | 65 | 65 | ||||||||
| Chunghwa Telecom Japan Co., Ltd. (“CHTJ”) |
International private leased circuit, IP VPN service, and IP transit services |
100 | 100 | 100 | ||||||||
| Chunghwa Sochamp Technology Inc. (“CHST”) |
Design, development and production of Automatic License Plate Recognition software and hardware |
51 | 51 | 51 | ||||||||
(Continued)
- 10 -
| Percentage of Ownership Interests | ||||||||||||
| Name of Investor | Name of Investee | Main Businesses and Products |
March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
Note | ||||||
| Honghwa International Co., Ltd. (“HHI”) |
Telecommunications engineering, sales agent of mobile phone plan application and other business services, etc |
100 | 100 | 100 | ||||||||
| Chunghwa Leading Photonics Tech Co., Ltd. (“CLPT”) |
Production and sale of electronic components and finished products |
75 | 75 | 75 | ||||||||
| Chunghwa Telecom (Thailand) Co., Ltd. (“CHTT”) |
International private leased circuit, IP VPN service, ICT and cloud VAS services |
100 | 100 | 100 | ||||||||
| CHT Security Co., Ltd. (“CHTSC”) |
Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services |
77 | 80 | 80 | d. | |||||||
| International Integrated Systems, Inc. (“IISI”) |
IT solution provider, IT application consultation, system integration and package solution |
51 | 51 | — | e. | |||||||
| Senao International Co., Ltd. |
Senao International (Samoa) Holding Ltd. (“SIS”) |
International investment |
100 | 100 | 100 | f. | ||||||
| Youth Co., Ltd. (“Youth”) |
Sale of information and communication technologies products |
96 | 96 | 93 | g. | |||||||
| Aval Technologies Co., Ltd. (“Aval”) |
Sale of information and communication technologies products |
100 | 100 | 100 | ||||||||
| Senyoung Insurance Agent Co., Ltd. (“SENYOUNG”) |
Property and liability insurance agency |
100 | 100 | 100 | ||||||||
| Youth Co., Ltd. |
ISPOT Co., Ltd. (“ISPOT”) |
Sale of information and communication technologies products |
100 | 100 | 100 | |||||||
| Youyi Co., Ltd. (“Youyi”) |
Maintenance of information and communication technologies products |
100 | 100 | 100 | ||||||||
| Aval Technologies Co., Ltd. |
Wiin Technology Co., Ltd. (“Wiin”) |
Sale of information and communication technologies products |
100 | 100 | 100 | |||||||
| Senyoung Insurance Agent Co., Ltd. |
Senaolife Insurance Agent Co., Ltd. (“Senaolife”) |
Life insurance services |
100 | 100 | 100 | |||||||
| CHIEF Telecom Inc. |
Unigate Telecom Inc. (“Unigate”) |
Telecommunications and internet service |
100 | 100 | 100 | |||||||
| Chief International Corp. (“CIC”) |
Telecommunications and internet service |
100 | 100 | 100 | ||||||||
| Shanghai Chief Telecom Co., Ltd. (“SCT”) |
Telecommunications and internet service |
49 | 49 | 49 | h. | |||||||
| Chunghwa Investment Co., Ltd. |
Chunghwa Precision Test Tech. Co., Ltd. (“CHPT”) |
Production and sale of semiconductor testing components and printed circuit board |
34 | 34 | 34 | i. | ||||||
(Continued)
- 11 -
| Percentage of Ownership Interests | ||||||||||||
| Name of Investor | Name of Investee | Main Businesses and Products |
March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
Note | ||||||
| Chunghwa Precision Test Tech. Co., Ltd. |
Chunghwa Precision Test Tech. USA Corporation (“CHPT (US)”) |
Design and after-sale services of semiconductor testing components and printed circuit board |
100 | 100 | 100 | |||||||
| CHPT Japan Co., Ltd. (“CHPT (JP)”) |
Related services of electronic parts, machinery processed products and printed circuit board |
100 | 100 | 100 | ||||||||
| Chunghwa Precision Test Tech. International, Ltd. (“CHPT (International)”) |
Wholesale and retail of electronic materials, and investment |
100 | 100 | 100 | ||||||||
| Senao International (Samoa) Holding Ltd. |
Senao International HK Limited (“SIHK”) |
International investment |
100 | 100 | 100 | j. | ||||||
| Senao International HK Limited |
Senao International Trading (Shanghai) Co., Ltd. (“SITS”) |
Sale of information and communication technologies products |
100 | 100 | 100 | k. | ||||||
| Prime Asia Investments Group Ltd. (B.V.I.) |
Chunghwa Hsingta Co., Ltd. (“CHC”) |
Investment |
100 | 100 | 100 | |||||||
| Chunghwa Hsingta Co., Ltd. |
Chunghwa Telecom (China) Co., Ltd. (“CTC”) |
Integrated information and communication solution services for enterprise clients, and intelligent energy network service |
100 | 100 | 100 | l. | ||||||
| Chunghwa Precision Test Tech. International, Ltd. |
Shanghai Taihua Electronic Technology Limited (“STET”) |
Design of printed circuit board and related consultation service |
100 | 100 | 100 | |||||||
| Su Zhou Precision Test Tech. Ltd. (“SZPT”) |
Assembly processed of circuit board, design of printed circuit board and related consultation service |
100 | 100 | 100 | ||||||||
| International Integrated Systems, Inc. |
Infoexplorer International Co., Ltd.(“IESA”) |
Investment |
100 | 100 | — | m. | ||||||
| IISI Investment Co., Ltd. (“IICL”) |
Investment |
100 | 100 | — | m. | |||||||
| Unitronics Technology Corp. (“UTC”) |
Development and maintenance of information system |
99.96 | 99.96 | — | m. | |||||||
| Infoexplorer International Co., Ltd. |
International Integrated Systems (Hong Kong) Limited (“IEHK”) |
Investment and technical consulting service |
100 | 100 | — | m. | ||||||
| IISI Investment Co., Ltd. |
Leading Tech Co., Ltd. (“LTCL”) |
Investment |
100 | 100 | — | m. | ||||||
| Leading Tech Co., Ltd. |
Leading Systems Co., Ltd. (“LSCL”) |
Investment |
100 | 100 | — | m. | ||||||
| Leading Systems Co., Ltd. |
International Integrated Systems Inc. (Shanghai) (“IISS”) |
Development and maintenance of information system |
100 | 100 | — | m. | ||||||
| International Integrated Systems Inc. (Shanghai) |
Huiyu Shanghai Management Consultancy Co., Ltd. (“HSMC”) |
Development and maintenance of information system |
— | — | — | m. n. | ||||||
(Concluded)
- 12 -
| a. | Chunghwa continues to control six out of eleven seats of the Board of Directors of SENAO through the support of large beneficial stockholders. As a result, the Company treated SENAO as a subsidiary. |
| b. | DHT reduced and returned its capital to its stakeholders in March 2021. The Company’s ownership interest in DHT remained the same. |
| c. | CHIEF issued new shares in March, December 2020, and March 2021 as its employees exercised options. Therefore, the Company’s ownership interest in CHIEF decreased to 59.08% and 58.90% as of December 31, 2020 and March 31, 2021, respectively. |
| d. | CHTSC issued new shares in February 2021 as its employees exercised options. Therefore, the Company’s ownership interest in CHTSC decreased to 77.46% as of March 31, 2021. |
| e. | Chunghwa obtained 20.38% ownership interest in IISI in July 2020 and Chunghwa’s ownership interest in IISI increased to 51.54% by considering the previously held ownership interest in IISI. Chunghwa obtained over half of the seats of the Board of Directors of IISI; therefore, Chunghwa gained control over IISI and treated it as a subsidiary. IISI issued new shares in September 2020 and January 2021 as its employees exercised options; therefore, the Company’s ownership interest in IISI decreased to 51.20% and 51.02% as of December 31, 2020 and March 31, 2021, respectively. |
| f. | SIS reduced and returned its capital to its stakeholders in November 2020. SIS reduced 8.14% of its capital to offset accumulated deficits in February 2021. The Company’s ownership interest in SIS remained the same. |
| g. | SENAO subscribed for all the shares in the capital increase of Youth in April 2020. Therefore, the Company’s ownership interest in Youth increased from 92.89% to 95.79%. |
| h. | CHIEF has two out of three seats of the Board of Directors of SCT according to the mutual agreements among stockholders and gained control over SCT; hence, SCT is deemed as a subsidiary of the Company. |
| i. | Though the Company’s ownership interest in CHPT is less than 50%, the management considered the absolute and relative size of ownership interest, and the dispersion of shares owned by the other stockholders and concluded that the Company has a sufficiently dominant voting interest to direct the relevant activities; hence, CHPT is deemed as a subsidiary of the Company. |
| j. | SIHK reduced and returned its capital to its stakeholders in November 2020. SIHK reduced 8.15% of its capital to offset accumulated deficits in January 2021. Furthermore, the Board of Directors of SIHK resolved another capital reduction proposal in April 2021. The Company’s ownership interest in SIHK remained the same. |
| k. | SITS was approved to end and dissolve its business in December 2020. The liquidation of SITS is still in process. |
| l. | CTC was approved to end and dissolve its business in August 2020. The liquidation of CTC is still in process. |
| m. | It is a subsidiary of IISI. |
| n. | HSMC completed its liquidation in December 2020. |
- 13 -
The following diagram presented information regarding the relationship and percentages of ownership interests between Chunghwa and its subsidiaries as of March 31, 2021.
Other Significant Accounting Policies
| a. | Defined benefit retirement benefits |
Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for other significant one-off events.
| b. | Taxation |
Income tax expense represents the sum of the tax currently payable and deferred tax. Income taxes for interim period are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income the tax rate that would be applicable to expected total annual earnings.
The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects to recover or settle the carrying amount of its assets and liabilities at balance sheet date.
| 4. | CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION, UNCERTAINTY AND ASSUMPTION |
In the application of the Company’s accounting policies, the management is required to make judgments, estimates and assumptions which are based on historical experience and other factors that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed by the management on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
- 14 -
For the critical accounting judgments and key sources of estimation, uncertainty and assumption applied in these consolidated financial statements, please refer to the consolidated financial statements for the year ended December 31, 2020.
| 5. | APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS |
| a. | Initial application of the amendments to the IFRSs endorsed and issued into effect by the FSC |
The initial application of the amendments to the IFRSs issued by the International Accounting Standards Board and endorsed and issued into effect by the FSC does not have material impacts on the Company’s consolidated financial statements.
| b. | IFRSs issued by the IASB but not yet endorsed and issued into effect by the FSC |
| New, Revised or Amended Standards and Interpretations |
Effective Date Announced by IASB (Note 1) | |||
| Amendments to IFRSs |
Annual Improvements to IFRS Standards 2018-2020 |
January 1, 2022 (Note 2) | ||
| Amendments to IFRS 3 |
Reference to the Conceptual Framework |
January 1, 2022 (Note 3) | ||
| Amendments to IFRS 10 and IAS 28 |
Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture |
To be determined by IASB | ||
| Amendments to IAS 1 |
Classification of liabilities as current or noncurrent |
January 1, 2023 | ||
| Amendments to IAS 1 |
Disclosure of Accounting Policies |
January 1, 2023 (Note 4) | ||
| Amendments to IAS 8 |
Definition of Accounting Estimates |
January 1, 2023 (Note 5) | ||
| Amendments to IAS 16 |
Property, Plant and Equipment - Proceeds before Intended Use |
January 1, 2022 (Note 6) | ||
| Amendments to IAS 37 |
Onerous Contracts - Cost of Fulfilling a Contract |
January 1, 2022 (Note 7) | ||
| Note 1: | Unless stated otherwise, the above new IFRSs are effective for annual periods beginning on or after their respective effective dates. | |
| Note 2: | The amendments to IFRS 9 are applied prospectively to financial liabilities that are exchanged or modified on or after the annual reporting periods beginning on or after January 1, 2022. | |
| Note 3: | The amendments are applicable to business combinations for which the acquisition date is on or after the annual reporting period beginning on or after January 1, 2022. | |
| Note 4: | The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023. | |
| Note 5: | The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023. | |
| Note 6: | The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021. | |
- 15 -
| Note 7: | The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022. | |
| As of the date the consolidated financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of above standards and interpretations will have on the Company’s financial position and operating result and will disclose the relevant impact when the assessment is completed. | ||
| 6. | CASH AND CASH EQUIVALENTS |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Cash |
||||||||||||
| Cash on hand |
$ | 281,714 | $ | 486,989 | $ | 311,405 | ||||||
| Bank deposits |
10,936,182 | 10,961,220 | 8,437,027 | |||||||||
|
|
|
|
|
|
|
|||||||
| 11,217,896 | 11,448,209 | 8,748,432 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Cash equivalents (investments with maturities of less than three months) |
||||||||||||
| Commercial paper |
15,778,753 | 14,060,568 | 4,955,878 | |||||||||
| Negotiable certificates of deposit |
500,000 | 2,600,000 | 550,000 | |||||||||
| Time deposits |
2,547,261 | 2,307,892 | 2,312,602 | |||||||||
| Repurchase agreements collateralized by bonds |
— | — | 3,038 | |||||||||
| Triple stimulus vouchers |
— | 2,986 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| 18,826,014 | 18,971,446 | 7,821,518 | ||||||||||
|
|
|
|
|
|
|
|||||||
| $ | 30,043,910 | $ | 30,419,655 | $ | 16,569,950 | |||||||
|
|
|
|
|
|
|
|||||||
The annual yield rates of bank deposits, commercial paper, negotiable certificates of deposit, time deposits and repurchase agreements collateralized by bonds as of balance sheet dates were as follows:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Bank deposits |
0.00%-0.40 | % | 0.00%-0.40 | % | 0.00%-0.50 | % | ||||||
| Commercial paper |
0.17%-0.23 | % | 0.14%-0.26 | % | 0.34%-0.52 | % | ||||||
| Negotiable certificates of deposit |
0.24 | % | 0.24%-0.30 | % | 0.60 | % | ||||||
| Time deposits |
0.06%-3.60 | % | 0.10%-3.60 | % | 0.09%-4.40 | % | ||||||
| Repurchase agreements collateralized by bonds |
— | — | 1.45 | % | ||||||||
- 16 -
| 7. | FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Financial assets-current |
||||||||||||
| Mandatorily measured at FVTPL |
||||||||||||
| Derivatives (not designated for hedge) |
||||||||||||
| Forward exchange contracts |
$ | — | $ | 2,271 | $ | — | ||||||
| Non-derivatives |
||||||||||||
| Listed stocks - domestic |
8,061 | 7,626 | 6,631 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 8,061 | $ | 9,897 | $ | 6,631 | |||||||
|
|
|
|
|
|
|
|||||||
| Financial assets-noncurrent |
||||||||||||
| Mandatorily measured at FVTPL |
||||||||||||
| Non-derivatives |
||||||||||||
| Non-listed stocks - domestic |
$ | 584,838 | $ | 441,095 | $ | 502,249 | ||||||
| Non-listed stocks - foreign |
231,764 | 236,107 | 265,113 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 816,602 | $ | 677,202 | $ | 767,362 | |||||||
|
|
|
|
|
|
|
|||||||
| Financial liabilities-current |
||||||||||||
| Held for trading |
||||||||||||
| Derivatives (not designated for hedge) |
||||||||||||
| Forward exchange contracts |
$ | 3,867 | $ | 143 | $ | 570 | ||||||
|
|
|
|
|
|
|
|||||||
Outstanding forward exchange contracts not designated for hedge as of balance sheet dates were as follows:
| Contract Amount | ||||||||
| Currency | Maturity Period | (In Thousands) | ||||||
| March 31, 2021 |
||||||||
| Forward exchange contracts - buy |
NT$/EUR | 2021.06 | NT$176,940 / EUR5,160 | |||||
| December 31, 2020 |
||||||||
| Forward exchange contracts - buy |
NT$/EUR | 2021.03 | NT$50,435 / EUR1,500 | |||||
| Forward exchange contracts - sell |
US$/NT$ | 2021.02-03 | US$13,500 / NT$379,472 | |||||
| March 31, 2020 |
||||||||
| Forward exchange contracts - buy |
NT$/EUR | 2020.06 | NT$35,905 / EUR1,063 | |||||
The Company entered into the above forward exchange contracts to manage its exposure to foreign currency risk due to fluctuations in exchange rates. However, the aforementioned derivatives did not meet the criteria for hedge accounting.
- 17 -
| 8. | FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - NONCURRENT |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Domestic investments |
||||||||||||
| Listed stocks |
$ | 150,803 | $ | 2,754,175 | $ | 1,823,534 | ||||||
| Non-listed stocks |
3,394,657 | 4,324,592 | 3,983,097 | |||||||||
| Foreign investments |
||||||||||||
| Non-listed stocks |
104,880 | 114,407 | 96,550 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 3,650,340 | $ | 7,193,174 | $ | 5,903,181 | |||||||
|
|
|
|
|
|
|
|||||||
The Company holds the above foreign and domestic stocks for medium to long-term strategic purposes and expects to profit from long-term investment. Accordingly, the management elected to designate these investments in equity instruments at FVOCI as they believe that recognizing short-term fair value fluctuations of these investments in profit or loss is not consistent with the Company’s strategy of holding these investments for long-term purposes.
The Company holds Powtec Electro Chemical Corporation (“Powtec”) as financial assets at FVOCI. The Board of Directors of Powtec resolved in February 2020 to file a petition with court for the declaration of its bankruptcy which was adjudged by the court in April 2020. The Company evaluated and determined the fair value of such investment was nil after its declaration of bankruptcy.
The Company started to dispose of its investment in China Airlines, Ltd. from December 2020 and sold all its shares by February 2021. The fair value of the disposed investment was $2,635,568 thousand and the related unrealized gain on investments in equity instruments at fair value through other comprehensive income of $94,392 thousand was transferred from other equity to retained earnings upon the aforementioned disposal for the three months ended March 31, 2021.
| 9. | TRADE NOTES AND ACCOUNTS RECEIVABLE, NET |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Trade notes and accounts receivable |
$ | 23,429,713 | $ | 24,776,266 | $ | 25,763,047 | ||||||
| Less: Loss allowance |
(2,038,354 | ) | (2,154,364 | ) | (2,361,507 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| $ | 21,391,359 | $ | 22,621,902 | $ | 23,401,540 | |||||||
|
|
|
|
|
|
|
|||||||
The main credit terms range from 30 to 90 days.
The Company serves a large consumer base for telecommunications business; therefore, the concentration of credit risk is limited. When having transactions with customers, the Company considers the record of arrears in the past. In addition, the Company may also collect some telecommunication charges in advance to reduce the payment arrears in subsequent periods.
The Company adopted a policy of dealing with counterparties with certain credit ratings for project business and to obtain collateral where necessary to mitigate the risk of loss arising from defaults. Credit rating information is provided by independent rating agencies where available and, if such credit rating information is not available, the Company uses other publicly available financial information and its own historical transaction experience to rate its major customers. The Company continues to monitor the credit exposure and credit ratings of its counterparties and spread the credit risk amongst qualified counterparties.
- 18 -
In order to mitigate credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure the recoverability of receivables. In addition, the Company reviews the recoverable amount of receivables at balance sheet dates to ensure that adequate allowance is provided for possible irrecoverable amounts. In this regard, the management believes the Company’s credit risk could be reasonably reduced.
The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for receivables. The expected credit losses on receivables are estimated using a provision matrix by reference to past default experience of the customers and an analysis of the customers’ current financial positions, as well as the forward-looking indicators such as macroeconomic business indicator.
When there is evidence indicating that the counterparty is in evasion, bankruptcy, deregistration of its company or the accounts receivable are over two years past due and the recoverable amount cannot be reasonable estimated, the Company writes off the trade notes and accounts receivable. For accounts receivable that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.
Except for receivables arising from telecommunications business and project business, the Company’s remaining accounts receivable are limited. Therefore, only Chunghwa’s provision matrix arising from telecommunications business and project business is disclosed below:
March 31, 2021
| Not Past Due |
Past Due Less than 30 Days |
Pass Due 31 to 60 Days |
Pass Due 61 to 90 Days |
Pass Due 91 to 120 Days |
Pass Due 121 to 180 Days |
Pass Due over 180 Days |
Total | |||||||||||||||||||||||||
| Telecommunications business |
||||||||||||||||||||||||||||||||
| Expected credit loss rate (Note a) |
0%-1% | 2%-24% | 3%-77% | 9%-90% | 26%-94% | 53%-99% | 100% | |||||||||||||||||||||||||
| Gross carrying amount |
$ | 16,377,984 | $ | 261,602 | $ | 88,785 | $ | 40,500 | $ | 26,316 | $ | 21,586 | $ | 627,560 | $ | 17,444,333 | ||||||||||||||||
| Loss allowance (lifetime ECL) |
(56,948 | ) | (40,949 | ) | (23,952 | ) | (21,305 | ) | (19,803 | ) | (20,529 | ) | (627,560 | ) | (811,046 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Amortized cost |
$ | 16,321,036 | $ | 220,653 | $ | 64,833 | $ | 19,195 | $ | 6,513 | $ | 1,057 | $ | — | $ | 16,633,287 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Project business |
||||||||||||||||||||||||||||||||
| Expected credit loss rate (Note b) |
0%-5% | 5% | 10% | 30% | 50% | 80% | 100% | |||||||||||||||||||||||||
| Gross carrying amount |
$ | 1,737,112 | $ | 129,145 | $ | 7,206 | $ | 64,226 | $ | 10,807 | $ | 2,058 | $ | 1,146,102 | $ | 3,096,656 | ||||||||||||||||
| Loss allowance (lifetime ECL) |
(2,813 | ) | (11,285 | ) | (2,641 | ) | (20,084 | ) | (5,403 | ) | (1,852 | ) | (1,146,102 | ) | (1,190,180 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Amortized cost |
$ | 1,734,299 | $ | 117,860 | $ | 4,565 | $ | 44,142 | $ | 5,404 | $ | 206 | $ | — | $ | 1,906,476 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
December 31, 2020
| Not Past Due |
Past Due Less than 30 Days |
Pass Due 31 to 60 Days |
Pass Due 61 to 90 Days |
Pass Due 91 to 120 Days |
Pass Due 121 to 180 Days |
Pass Due over 180 Days |
Total | |||||||||||||||||||||||||
| Telecommunications business |
||||||||||||||||||||||||||||||||
| Expected credit loss rate (Note a) |
0%-2% | 2%-24% | 3%-68% | 11%-83% | 28%-90% | 52%-96% | 100% | |||||||||||||||||||||||||
| Gross carrying amount |
$ | 15,839,132 | $ | 203,949 | $ | 50,897 | $ | 31,263 | $ | 29,872 | $ | 25,351 | $ | 625,591 | $ | 16,806,055 | ||||||||||||||||
| Loss allowance (lifetime ECL) |
(56,249 | ) | (20,880 | ) | (23,483 | ) | (24,859 | ) | (24,319 | ) | (21,665 | ) | (625,591 | ) | (797,046 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Amortized cost |
$ | 15,782,883 | $ | 183,069 | $ | 27,414 | $ | 6,404 | $ | 5,553 | $ | 3,686 | $ | — | $ | 16,009,009 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Project business |
||||||||||||||||||||||||||||||||
| Expected credit loss rate (Note b) |
0%-5% | 5% | 10% | 30% | 50% | 80% | 100% | |||||||||||||||||||||||||
| Gross carrying amount |
$ | 3,472,738 | $ | 64,372 | $ | 26,810 | $ | 8,963 | $ | 2,163 | $ | 2,691 | $ | 1,287,567 | $ | 4,865,304 | ||||||||||||||||
| Loss allowance (lifetime ECL) |
(20,060 | ) | (3,219 | ) | (2,772 | ) | (2,760 | ) | (1,132 | ) | (2,160 | ) | (1,287,567 | ) | (1,319,670 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Amortized cost |
$ | 3,452,678 | $ | 61,153 | $ | 24,038 | $ | 6,203 | $ | 1,031 | $ | 531 | $ | — | $ | 3,545,634 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
- 19 -
March 31, 2020
| Not Past Due |
Past Due Less than 30 Days |
Pass Due 31 to 60 Days |
Pass Due 61 to 90 Days |
Pass Due 91 to 120 Days |
Pass Due 121 to 180 Days |
Pass Due over 180 Days |
Total | |||||||||||||||||||||||||
| Telecommunications business |
||||||||||||||||||||||||||||||||
| Expected credit loss rate (Note a) |
0%-2% | 0%-24% | 0%-68% | 0%-83% | 17%-90% | 25%-96% | 100% | |||||||||||||||||||||||||
| Gross carrying amount |
$ | 17,985,058 | $ | 247,357 | $ | 76,261 | $ | 44,069 | $ | 28,652 | $ | 26,575 | $ | 662,490 | $ | 19,070,462 | ||||||||||||||||
| Loss allowance (lifetime ECL) |
(55,180 | ) | (29,938 | ) | (25,869 | ) | (26,350 | ) | (25,732 | ) | (24,799 | ) | (662,490 | ) | (850,358 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Amortized cost |
$ | 17,929,878 | $ | 217,419 | $ | 50,392 | $ | 17,719 | $ | 2,920 | $ | 1,776 | $ | — | $ | 18,220,104 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Project business |
||||||||||||||||||||||||||||||||
| Expected credit loss rate (Note b) |
0%-5% | 5% | 10% | 30% | 50% | 80% | 100% | |||||||||||||||||||||||||
| Gross carrying amount |
$ | 2,008,876 | $ | 128,593 | $ | 7,150 | $ | 35,195 | $ | 24,960 | $ | 17,489 | $ | 1,404,358 | $ | 3,626,621 | ||||||||||||||||
| Loss allowance (lifetime ECL) |
(2,445 | ) | (7,044 | ) | (715 | ) | (11,109 | ) | (12,554 | ) | (14,061 | ) | (1,404,358 | ) | (1,452,286 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Amortized cost |
$ | 2,006,431 | $ | 121,549 | $ | 6,435 | $ | 24,086 | $ | 12,406 | $ | 3,428 | $ | — | $ | 2,174,335 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Note a: | Please refer to Notes 30 and 44 for the information of disaggregation of telecommunications service revenue. The expected credit loss rate applicable to different business revenue varies so as to reflect the risk level indicating by factors like historical experience. |
| Note b: | The project business has different loss types according to the customer types. The expected credit loss rate listed above is for general customers. When the customer is a government-affiliated entity, it is anticipated that there will not be an instance of credit loss. Customers with past history of bounced checks or accounts receivable exceeding six months overdue are classified as high-risk customers, with an expected credit loss rate of 50%, increasing by period as the days overdue increase. |
Movements of loss allowance for trade notes and accounts receivable were as follows:
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Beginning balance |
$ | 2,154,364 | $ | 2,359,756 | ||||
| Add: Provision for credit loss |
42,751 | 5,930 | ||||||
| Less: Amounts written off |
(158,761 | ) | (4,179 | ) | ||||
|
|
|
|
|
|||||
| Ending balance |
$ | 2,038,354 | $ | 2,361,507 | ||||
|
|
|
|
|
|||||
| 10. | INVENTORIES |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Merchandise |
$ | 3,587,627 | $ | 3,902,854 | $ | 3,443,108 | ||||||
| Project in process |
6,383,176 | 6,166,583 | 11,864,846 | |||||||||
| Work in process |
133,548 | 126,163 | 161,540 | |||||||||
| Raw materials |
168,393 | 137,495 | 228,875 | |||||||||
|
|
|
|
|
|
|
|||||||
| 10,272,744 | 10,333,095 | 15,698,369 | ||||||||||
| Land held under development |
1,998,733 | 1,998,733 | 1,998,733 | |||||||||
| Construction in progress |
77,128 | 77,075 | 77,591 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 12,348,605 | $ | 12,408,903 | $ | 17,774,693 | |||||||
|
|
|
|
|
|
|
|||||||
- 20 -
The operating costs related to inventories were $11,876,607 thousand (including the valuation loss on inventories of $32,919 thousand) and $10,154,244 thousand (including the valuation loss on inventories of $23,601 thousand) for the three months ended March 31, 2021 and 2020, respectively.
As of March 31, 2021, December 31, 2020 and March 31, 2020, inventories of $2,075,861 thousand, $2,075,808 thousand and $2,076,324 thousand, respectively, were expected to be recovered after more than twelve months. The aforementioned amount of inventories is related to property development owned by LED.
Land held under development and construction in progress was developed by LED for Qingshan Sec., Dayuan Dist., Taoyuan City project.
| 11. | PREPAYMENTS |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Prepaid salary and bonus |
$ | 2,971,619 | $ | 4,655 | $ | 3,085,701 | ||||||
| Prepaid rents |
2,786,987 | 2,863,510 | 3,317,182 | |||||||||
| Others |
1,872,837 | 1,651,602 | 1,312,275 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 7,631,443 | $ | 4,519,767 | $ | 7,715,158 | |||||||
|
|
|
|
|
|
|
|||||||
| Current |
||||||||||||
| Prepaid salary and bonus |
$ | 2,971,619 | $ | 4,655 | $ | 3,085,701 | ||||||
| Prepaid rents |
642,420 | 651,510 | 705,322 | |||||||||
| Others |
1,872,667 | 1,650,081 | 1,312,199 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 5,486,706 | $ | 2,306,246 | $ | 5,103,222 | |||||||
|
|
|
|
|
|
|
|||||||
| Noncurrent |
||||||||||||
| Prepaid rents |
$ | 2,144,567 | $ | 2,212,000 | $ | 2,611,860 | ||||||
| Others |
170 | 1,521 | 76 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 2,144,737 | $ | 2,213,521 | $ | 2,611,936 | |||||||
|
|
|
|
|
|
|
|||||||
Prepaid rents comprised the prepayments from the lease agreements applying the recognition exemption and the prepayments for leases that do not meet the definition of leases under IFRS 16.
| 12. | OTHER CURRENT MONETARY ASSETS |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Time deposits and negotiable certificates of deposit with maturities of more than three months |
$ | 10,318,964 | $ | 4,595,951 | $ | 4,747,464 | ||||||
| Repurchase agreements collateralized by bonds with maturities of more than three months |
— | — | 15,113 | |||||||||
| Others |
1,301,412 | 1,527,714 | 1,396,564 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 11,620,376 | $ | 6,123,665 | $ | 6,159,141 | |||||||
|
|
|
|
|
|
|
|||||||
- 21 -
The annual yield rates of time deposits, negotiable certificates of deposit and repurchase agreements collateralized by bonds with maturities of more than three months at balance sheet dates were as follows:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Time deposits and negotiable certificates of deposit with maturities of more than three months |
0.06%-2.20 | % | 0.07%-2.25 | % | 0.03%-2.73 | % | ||||||
| Repurchase agreements collateralized by bonds with maturities of more than three months |
— | — | 2.50 | % | ||||||||
| 13. | SUBSIDIARIES |
| a. | Information on subsidiaries with material noncontrolling interests |
| Principal Place of |
Proportion of Ownership Interests and Voting Rights Held by Noncontrolling Interests |
|||||||||||||
| Subsidiaries | March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
|||||||||||
| SENAO |
Taiwan | 72 | % | 72 | % | 72 | % | |||||||
| CHPT |
Taiwan | 66 | % | 66 | % | 66 | % | |||||||
| Profit Allocated to Noncontrolling Interests |
Accumulated Noncontrolling Interests | |||||||||||||||||||
| Three Months Ended March 31 | March 31, | December 31, | March 31, | |||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2020 | ||||||||||||||||
| SENAO |
$ | 110,391 | $ | 63,212 | $ | 4,421,248 | $ | 4,311,048 | $ | 4,331,638 | ||||||||||
|
|
|
|
|
|||||||||||||||||
| CHPT |
$ | 110,246 | $ | 117,684 | 4,745,076 | 4,635,240 | 4,354,343 | |||||||||||||
|
|
|
|
|
|||||||||||||||||
| Individually immaterial subsidiaries with noncontrolling interests |
2,517,427 | 2,381,153 | 1,894,941 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| $ | 11,683,751 | $ | 11,327,441 | $ | 10,580,922 | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
Summarized financial information in respect of SENAO and its subsidiaries that has material noncontrolling interests is set out below. The summarized financial information below represented amounts before intercompany eliminations.
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Current assets |
$ | 6,509,675 | $ | 6,834,221 | $ | 7,108,725 | ||||||
| Noncurrent assets |
3,162,089 | 3,340,983 | 3,362,736 | |||||||||
| Current liabilities |
(3,182,190 | ) | (3,832,372 | ) | (3,928,940 | ) | ||||||
| Noncurrent liabilities |
(408,458 | ) | (415,712 | ) | (587,578 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Equity |
$ | 6,081,116 | $ | 5,927,120 | $ | 5,954,943 | ||||||
|
|
|
|
|
|
|
|||||||
| Equity attributable to the parent |
$ | 1,659,868 | $ | 1,616,072 | $ | 1,623,305 | ||||||
| Equity attributable to noncontrolling interests |
4,421,248 | 4,311,048 | 4,331,638 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 6,081,116 | $ | 5,927,120 | $ | 5,954,943 | |||||||
|
|
|
|
|
|
|
|||||||
- 22 -
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Revenues and income |
$ | 7,607,390 | $ | 6,776,807 | ||||
| Costs and expenses |
7,453,618 | 6,688,643 | ||||||
|
|
|
|
|
|||||
| Profit for the period |
$ | 153,772 | $ | 88,164 | ||||
|
|
|
|
|
|||||
| Profit attributable to the parent |
$ | 43,381 | $ | 24,952 | ||||
| Profit attributable to noncontrolling interests |
110,391 | 63,212 | ||||||
|
|
|
|
|
|||||
| Profit for the period |
$ | 153,772 | $ | 88,164 | ||||
|
|
|
|
|
|||||
| Other comprehensive income attributable to the parent |
$ | 415 | $ | 261 | ||||
| Other comprehensive income (loss) attributable to noncontrolling interests |
(191 | ) | 665 | |||||
|
|
|
|
|
|||||
| Other comprehensive income for the period |
$ | 224 | $ | 926 | ||||
|
|
|
|
|
|||||
| Total comprehensive income attributable to the parent |
$ | 43,796 | $ | 25,213 | ||||
| Total comprehensive income attributable to noncontrolling interests |
110,200 | 63,877 | ||||||
|
|
|
|
|
|||||
| Total comprehensive income for the period |
$ | 153,996 | $ | 89,090 | ||||
|
|
|
|
|
|||||
| Net cash flow from operating activities |
$ | (674,639 | ) | $ | 181,557 | |||
| Net cash flow from investing activities |
175,596 | (5,776 | ) | |||||
| Net cash flow from financing activities |
(75,577 | ) | (81,563 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
(1 | ) | 92 | |||||
|
|
|
|
|
|||||
| Net cash inflow (outflow) |
$ | (574,621 | ) | $ | 94,310 | |||
|
|
|
|
|
|||||
Summarized financial information in respect of CHPT and its subsidiaries that has material noncontrolling interests is set out below. The summarized financial information below represented amounts before intercompany eliminations.
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Current assets |
$ | 4,234,587 | $ | 4,122,134 | $ | 3,890,284 | ||||||
| Noncurrent assets |
4,066,561 | 4,012,654 | 4,025,176 | |||||||||
| Current liabilities |
(1,074,242 | ) | (1,072,538 | ) | (1,274,059 | ) | ||||||
| Noncurrent liabilities |
(10,060 | ) | (12,456 | ) | (18,827 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Equity |
$ | 7,216,846 | $ | 7,049,794 | $ | 6,622,574 | ||||||
|
|
|
|
|
|
|
|||||||
| Equity attributable to CHI |
$ | 2,471,770 | $ | 2,414,554 | $ | 2,268,231 | ||||||
| Equity attributable to noncontrolling interests |
4,745,076 | 4,635,240 | 4,354,343 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 7,216,846 | $ | 7,049,794 | $ | 6,622,574 | |||||||
|
|
|
|
|
|
|
|||||||
- 23 -
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Revenues and income |
$ | 813,967 | $ | 909,295 | ||||
| Costs and expenses |
646,293 | 730,309 | ||||||
|
|
|
|
|
|||||
| Profit for the period |
$ | 167,674 | $ | 178,986 | ||||
|
|
|
|
|
|||||
| Profit attributable to CHI |
$ | 57,428 | $ | 61,302 | ||||
| Profit attributable to noncontrolling interests |
110,246 | 117,684 | ||||||
|
|
|
|
|
|||||
| Profit for the period |
$ | 167,674 | $ | 178,986 | ||||
|
|
|
|
|
|||||
| Other comprehensive loss attributable to CHI |
$ | (213 | ) | $ | (110 | ) | ||
| Other comprehensive loss attributable to noncontrolling interests |
(409 | ) | (213 | ) | ||||
|
|
|
|
|
|||||
| Other comprehensive loss for the period |
$ | (622 | ) | $ | (323 | ) | ||
|
|
|
|
|
|||||
| Total comprehensive income attributable to the CHI |
$ | 57,215 | $ | 61,192 | ||||
| Total comprehensive income attributable to noncontrolling interests |
109,837 | 117,471 | ||||||
|
|
|
|
|
|||||
| Total comprehensive income for the period |
$ | 167,052 | $ | 178,663 | ||||
|
|
|
|
|
|||||
| Net cash flow from operating activities |
$ | 302,185 | $ | 175,028 | ||||
| Net cash flow from investing activities |
(163,985 | ) | (103,378 | ) | ||||
| Net cash flow from financing activities |
(5,043 | ) | (5,482 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
1,887 | 4,403 | ||||||
|
|
|
|
|
|||||
| Net cash inflow |
$ | 135,044 | $ | 70,571 | ||||
|
|
|
|
|
|||||
| b. | Equity transactions with noncontrolling interests |
CHIEF issued new shares in March, December 2020 and March 2021, as its employees exercised options. Therefore, the Company’s ownership interest in CHIEF decreased. See Note 34(a) for details.
CHTSC issued new shares in February 2021 as its employees exercised options. Therefore, the Company’s ownership interest in CHTSC decreased. See Note 34(b) for details.
IISI issued new shares in September 2020 and January 2021 as its employees exercised options. Therefore, the Company’s ownership interest in IISI decreased. See Note 34(c) for details.
The above transactions were accounted for as equity transactions since the Company did not cease to have control over these subsidiaries.
- 24 -
Information of the Company’s equity transactions with noncontrolling interests for the three months ended March 31, 2021 and 2020 was as follows:
| Three Months Ended March 31, 2021 | ||||||||||||
| CHIEF Share-Based Payment |
CHTSC Share-Based |
IISI Share-Based |
||||||||||
| Cash consideration received from noncontrolling interests |
$ | 28,364 | $ | 20,650 | $ | 3,654 | ||||||
| The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests |
(17,242 | ) | (19,066 | ) | (792 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Differences arising from equity transactions |
$ | 11,122 | $ | 1,584 | $ | 2,862 | ||||||
|
|
|
|
|
|
|
|||||||
| Line items for equity transaction adjustments |
||||||||||||
| Additional paid-in capital - arising from changes in equities of subsidiaries |
$ | 11,122 | $ | 1,584 | $ | 2,862 | ||||||
|
|
|
|
|
|
|
|||||||
| Three Months Ended March 31, 2020 |
||||
| CHIEF Share-Based Payment |
||||
| Cash consideration received from noncontrolling interests |
$ | 71,627 | ||
| The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests |
(47,638 | ) | ||
|
|
|
|||
| Differences arising from equity transactions |
$ | 23,989 | ||
|
|
|
|||
| Line items for equity transaction adjustments |
||||
| Additional paid-in capital - arising from changes in equities of subsidiaries |
$ | 23,989 | ||
|
|
|
|||
| 14. | INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Investments in associates |
$ | 7,185,195 | $ | 6,882,801 | $ | 7,358,379 | ||||||
| Investment in joint venture |
10,180 | 10,200 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 7,195,375 | $ | 6,893,001 | $ | 7,358,379 | |||||||
|
|
|
|
|
|
|
|||||||
- 25 -
| a. | Investments in associates |
Investments in associates were as follows:
| Carrying Amount | ||||||||||||
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Material associate |
||||||||||||
| Next Commercial Bank Co., Ltd. (“NCB”) |
$ | 3,695,467 | $ | 3,776,876 | $ | 4,040,695 | ||||||
|
|
|
|
|
|
|
|||||||
| Associates that are not individually material |
||||||||||||
| Listed |
||||||||||||
| Senao Networks, Inc. (“SNI”) |
1,022,121 | 991,610 | 982,484 | |||||||||
| KingwayTek Technology Co., Ltd. (“KWT”) |
251,359 | 249,044 | 245,294 | |||||||||
| Non-listed |
||||||||||||
| ST-2 Satellite Ventures Pte., Ltd. (“STS”) |
500,350 | 488,257 | 504,119 | |||||||||
| Viettel-CHT Co., Ltd. (“Viettel-CHT”) |
385,247 | 363,522 | 329,843 | |||||||||
| Taiwan International Standard Electronics Co., Ltd. (“TISE”) |
358,027 | 330,031 | 270,338 | |||||||||
| WiAdvance Technology Corporation (“WATC”) |
272,615 | — | — | |||||||||
| So-net Entertainment Taiwan Limited (“So-net”) |
225,129 | 226,647 | 191,140 | |||||||||
| Chunghwa PChome Fund I Co., Ltd. (“CPFI”) |
214,986 | 192,856 | 199,145 | |||||||||
| KKBOX Taiwan Co., Ltd. (“KKBOXTW”) |
156,501 | 163,809 | 160,061 | |||||||||
| Taiwan International Ports Logistics Corporation (“TIPL”) |
58,158 | 55,925 | 51,765 | |||||||||
| Click Force Co., Ltd. (“CF”) |
33,962 | 33,086 | 36,823 | |||||||||
| Cornerstone Ventures Co., Ltd. (“CVC”) |
6,193 | 6,058 | 5,646 | |||||||||
| Alliance Digital Tech Co., Ltd. (“ADT”) |
5,080 | 5,080 | 5,080 | |||||||||
| International Integrated Systems, Inc. (“IISI”) |
— | — | 330,805 | |||||||||
| UUPON Inc. (“UUPON”) |
— | — | 5,141 | |||||||||
| MeWorks LIMITED (HK) (“MeWorks”) |
— | — | — | |||||||||
|
|
|
|
|
|
|
|||||||
| 3,489,728 | 3,105,925 | 3,317,684 | ||||||||||
|
|
|
|
|
|
|
|||||||
| $ | 7,185,195 | $ | 6,882,801 | $ | 7,358,379 | |||||||
|
|
|
|
|
|
|
|||||||
- 26 -
The percentages of ownership interests and voting rights in associates held by the Company as of balance sheet dates were as follows:
| % of Ownership Interests and Voting Rights | ||||||||||||
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Material associate |
||||||||||||
| Next Commercial Bank Co., Ltd. (“NCB”) |
42 | 42 | 42 | |||||||||
| Associates that are not individually material |
||||||||||||
| Senao Networks, Inc. (“SNI”) |
34 | 34 | 34 | |||||||||
| KingwayTek Technology Co., Ltd. (“KWT”) |
23 | 23 | 23 | |||||||||
| ST-2 Satellite Ventures Pte., Ltd. (“STS”) |
38 | 38 | 38 | |||||||||
| Viettel-CHT Co., Ltd. (“Viettel-CHT”) |
30 | 30 | 30 | |||||||||
| Taiwan International Standard Electronics Co., Ltd. (“TISE”) |
40 | 40 | 40 | |||||||||
| WiAdvance Technology Corporation (“WATC”) |
20 | — | — | |||||||||
| So-net Entertainment Taiwan Limited (“So-net”) |
30 | 30 | 30 | |||||||||
| Chunghwa PChome Fund I Co., Ltd. (“CPFI”) |
50 | 50 | 50 | |||||||||
| KKBOX Taiwan Co., Ltd. (“KKBOXTW”) |
30 | 30 | 30 | |||||||||
| Taiwan International Ports Logistics Corporation (“TIPL”) |
27 | 27 | 27 | |||||||||
| Click Force Co., Ltd. (“CF”) |
49 | 49 | 49 | |||||||||
| Cornerstone Ventures Co., Ltd. (“CVC”) |
49 | 49 | 49 | |||||||||
| Alliance Digital Tech Co., Ltd. (“ADT”) |
14 | 14 | 14 | |||||||||
| International Integrated Systems, Inc. (“IISI”) |
— | — | 31 | |||||||||
| UUPON Inc. (“UUPON”) |
— | — | 22 | |||||||||
| MeWorks LIMITED (HK) (“MeWorks”) |
— | — | 20 | |||||||||
Summarized financial information of NCB was set out below:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Assets |
$ | 9,468,537 | $ | 9,906,945 | $ | 10,244,234 | ||||||
| Liabilities |
(548,056 | ) | (788,813 | ) | (600,571 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Equity |
$ | 8,920,481 | $ | 9,118,132 | $ | 9,643,663 | ||||||
|
|
|
|
|
|
|
|||||||
| The percentage of ownership interests held by the Company |
41.90 | % | 41.90 | % | 41.90 | % | ||||||
| Equity attributable to the Company |
$ | 3,737,682 | $ | 3,820,497 | $ | 4,040,695 | ||||||
| Unrealized gain or loss from downstream transactions |
(42,215 | ) | (43,621 | ) | — | |||||||
|
|
|
|
|
|
|
|||||||
| The carrying amount of investment |
$ | 3,695,467 | $ | 3,776,876 | $ | 4,040,695 | ||||||
|
|
|
|
|
|
|
|||||||
- 27 -
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Revenues |
$ | — | $ | — | ||||
|
|
|
|
|
|||||
| Net loss for the period |
$ | (197,651 | ) | $ | (79,888 | ) | ||
| Other comprehensive income |
— | — | ||||||
|
|
|
|
|
|||||
| Total comprehensive loss for the period |
$ | (197,651 | ) | $ | (79,888 | ) | ||
|
|
|
|
|
|||||
Except for NCB, no associate is considered individually material to the Company. Summarized financial information of associates that are not individually material to the Company was as follows:
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| The Company’s share of profits |
$ | 124,620 | $ | 70,547 | ||||
| The Company’s share of other comprehensive income |
1,217 | 537 | ||||||
|
|
|
|
|
|||||
| The Company’s share of total comprehensive income |
$ | 125,837 | $ | 71,084 | ||||
|
|
|
|
|
|||||
The Level 1 fair values of associates based on the closing market prices as of the balance sheet dates were as follows:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| SNI |
$ | 1,840,273 | $ | 1,707,640 | $ | 1,424,139 | ||||||
|
|
|
|
|
|
|
|||||||
| KWT |
$ | 1,372,673 | $ | 675,911 | $ | 591,561 | ||||||
|
|
|
|
|
|
|
|||||||
The Company invested $273,800 thousand and obtained 20.33% ownership interest by participating in the capital increase of WATC in March 2021. WATC mainly engages in software solution integration.
KWT repurchased its stock from January to February 2020. Therefore, the Company’s ownership interest in KWT increased to 22.72%.
Chunghwa’s Board of Directors approved the investment of 20.58% ownership interest in IISI in January 2020 and the equity transaction was completed on July 1, 2020 (“acquisition date”). The Company treated IISI as a subsidiary starting from the acquisition date and included IISI and its subsidiaries in the consolidated financial statements. Please refer to Note 3(b).
UUPON reduced 95.44% of its capital to offset accumulated deficits in September 2020 and the Company did not participate in the capital increase of UUPON in October 2020. Therefore, the Company’s ownership interest in UUPON decreased to 5.36% and lost its significant influence over UUPON. Hence the Company discontinued to treat UUPON as an associate. Instead, the Company treated it as a financial asset at fair value through other comprehensive income.
The Company disposed of all shares of MeWorks in September 2020.
- 28 -
The Company’s ownership interest in NCB is 41.90%. Although Chunghwa is the single largest stockholder of NCB, it only obtained six out of fifteen seats of the Board of Directors of NCB. In addition, the management considered the size of ownership interest and the dispersion of shares owned by the other stockholders, other holdings are not extremely dispersed. Chunghwa is not able to direct its relevant activities. Therefore, Chunghwa does not have control over NCB and merely has significant influence over NCB and treats it as an associate.
The Company invested and obtained 50% equity shares of CPFI. However, as the Company has only two out of five seats of the Board of Directors of CPFI and has no control but significant influence over CPFI. Therefore, the Company recognized CPFI as an investment in associate.
The Company invested and obtained 49% equity shares of CVC. However, as the Company has only two out of five seats of the Board of Directors of CVC and has no control but significant influence over CVC. Therefore, the Company recognized CVC as an investment in associate.
The Company owns 14% equity shares of ADT. As the Company remains its seat in the Board of Directors of ADT and considers the relative size of ownership interest and the dispersion of shares owned by the other stockholders, the Company has significant influence over ADT. In June 2018, the stockholders of ADT approved to dissolve. The liquidation of ADT is still in process.
The Company’s share of profits and other comprehensive income (loss) of associates was recognized based on the reviewed financial statements.
| b. | Investment in joint venture |
Investment in joint venture was as follows:
| Carrying Amount | % of Ownership Interests and Voting Rights | |||||||||||||||||||||||
| Name of Joint Venture | March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||||||||||
| Non-listed |
||||||||||||||||||||||||
| Chunghwa SEA Holdings (“CHT SEA”) |
$ | 10,180 | $ | 10,200 | $ | — | 51 | % | 51 | % | — | |||||||||||||
|
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|
|
|
|||||||||||||||||||
The Company invested $10,200 thousand to establish a joint venture, CHT SEA, with Delta Electronics, Inc. and Kwang Hsing Industrial Co., Ltd. in December 2020 and obtained 51% equity shares of CHT SEA. However, according to the mutual agreements among stockholders, the Company does not individually direct CHT SEA’s relevant activities and has joint control with the other party; therefore, the Company treated CHT SEA as a joint venture.
The joint venture is not considered individually material to the Company. Summarized financial information of CHT SEA was set out below:
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| The Company’s share of loss |
$ | (20 | ) | $ | — | |||
| The Company’s share of other comprehensive income |
— | — | ||||||
|
|
|
|
|
|||||
| The Company’s share of total comprehensive loss |
$ | (20 | ) | $ | — | |||
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|
|||||
The Company’s share of loss and other comprehensive income of the joint venture was recognized based on the reviewed financial statements.
- 29 -
| 15. | PROPERTY, PLANT AND EQUIPMENT |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Assets used by the Company |
$ | 272,591,103 | $ | 273,822,588 | $ | 272,137,995 | ||||||
| Assets subject to operating leases |
7,559,647 | 7,593,355 | 7,729,252 | |||||||||
|
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|
|
|
|
|
|||||||
| $ | 280,150,750 | $ | 281,415,943 | $ | 279,867,247 | |||||||
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|
|||||||
| a. | Assets used by the Company |
| Land | Land Improvements |
Buildings | Computer Equipment |
Telecommuni- cations |
Transportation Equipment |
Miscellaneous Equipment |
Construction in Progress and Equipment
to |
Total | ||||||||||||||||||||||||||||
| Cost |
||||||||||||||||||||||||||||||||||||
| Balance on January 1, 2020 |
$ | 99,102,251 | $ | 1,618,481 | $ | 71,000,783 | $ | 13,004,827 | $ | 706,032,448 | $ | 3,912,298 | $ | 10,090,170 | $ | 13,752,197 | $ | 918,513,455 | ||||||||||||||||||
| Additions |
— | — | 7,565 | 4,524 | 9,371 | — | 23,336 | 2,906,083 | 2,950,879 | |||||||||||||||||||||||||||
| Disposal |
(9,310 | ) | — | — | (292,573 | ) | (3,081,614 | ) | (8,494 | ) | (74,093 | ) | — | (3,466,084 | ) | |||||||||||||||||||||
| Effect of foreign exchange differences |
— | — | — | (28 | ) | 24,568 | (78 | ) | (923 | ) | 1,554 | 25,093 | ||||||||||||||||||||||||
| Others |
86,927 | 1,909 | (677,900 | ) | 33,151 | 6,051,748 | — | 32,341 | (6,126,932 | ) | (598,756 | ) | ||||||||||||||||||||||||
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|
|||||||||||||||||||
| Balance on March 31, 2020 |
$ | 99,179,868 | $ | 1,620,390 | $ | 70,330,448 | $ | 12,749,901 | $ | 709,036,521 | $ | 3,903,726 | $ | 10,070,831 | $ | 10,532,902 | $ | 917,424,587 | ||||||||||||||||||
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|
|
|
|
|||||||||||||||||||
| Accumulated depreciation and impairment |
||||||||||||||||||||||||||||||||||||
| Balance on January 1, 2020 |
$ | — | $ | (1,374,602 | ) | $ | (27,976,732 | ) | $ | (11,068,245 | ) | $ | (590,337,891 | ) | $ | (3,694,325 | ) | $ | (7,662,299 | ) | $ | (29,358 | ) | $ | (642,143,452 | ) | ||||||||||
| Depreciation expenses |
— | (11,115 | ) | (338,931 | ) | (194,766 | ) | (6,024,528 | ) | (17,907 | ) | (163,865 | ) | — | (6,751,112 | ) | ||||||||||||||||||||
| Disposal |
— | — | — | 292,300 | 3,076,100 | 8,494 | 74,045 | — | 3,450,939 | |||||||||||||||||||||||||||
| Effect of foreign exchange differences |
— | — | — | 26 | (10,022 | ) | (4 | ) | 296 | — | (9,704 | ) | ||||||||||||||||||||||||
| Others |
— | — | 176,864 | (3,718 | ) | (2,249 | ) | (373 | ) | (3,787 | ) | — | 166,737 | |||||||||||||||||||||||
|
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|
|
|
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|
|
|
|
|
|
|
|||||||||||||||||||
| Balance on March 31, 2020 |
$ | — | $ | (1,385,717 | ) | $ | (28,138,799 | ) | $ | (10,974,403 | ) | $ | (593,298,590 | ) | $ | (3,704,115 | ) | $ | (7,755,610 | ) | $ | (29,358 | ) | $ | (645,286,592 | ) | ||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance on January 1, 2020, net |
$ | 99,102,251 | $ | 243,879 | $ | 43,024,051 | $ | 1,936,582 | $ | 115,694,557 | $ | 217,973 | $ | 2,427,871 | $ | 13,722,839 | $ | 276,370,003 | ||||||||||||||||||
|
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|
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|
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|
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|
|
|
|
|
|
|
|||||||||||||||||||
| Balance on March 31, 2020, net |
$ | 99,179,868 | $ | 234,673 | $ | 42,191,649 | $ | 1,775,498 | $ | 115,737,931 | $ | 199,611 | $ | 2,315,221 | $ | 10,503,544 | $ | 272,137,995 | ||||||||||||||||||
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|||||||||||||||||||
| Cost |
||||||||||||||||||||||||||||||||||||
| Balance on January 1, 2021 |
$ | 101,990,645 | $ | 1,630,362 | $ | 70,889,578 | $ | 12,405,580 | $ | 710,775,709 | $ | 3,894,243 | $ | 10,299,819 | $ | 8,529,416 | $ | 920,415,352 | ||||||||||||||||||
| Additions |
— | — | 4,720 | 9,823 | 9,606 | — | 35,013 | 5,494,890 | 5,554,052 | |||||||||||||||||||||||||||
| Disposal |
— | — | (491 | ) | (246,431 | ) | (4,417,893 | ) | (27,162 | ) | (91,113 | ) | — | (4,783,090 | ) | |||||||||||||||||||||
| Effect of foreign exchange differences |
— | — | — | 13 | (1,438 | ) | (155 | ) | (777 | ) | (115 | ) | (2,472 | ) | ||||||||||||||||||||||
| Others |
2,155 | — | 24,336 | 59,915 | 6,923,250 | 615 | 65,181 | (7,034,870 | ) | 40,582 | ||||||||||||||||||||||||||
|
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|
|
|
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|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance on March 31, 2021 |
$ | 101,992,800 | $ | 1,630,362 | $ | 70,918,143 | $ | 12,228,900 | $ | 713,289,234 | $ | 3,867,541 | $ | 10,308,123 | $ | 6,989,321 | $ | 921,224,424 | ||||||||||||||||||
|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Accumulated depreciation and impairment |
||||||||||||||||||||||||||||||||||||
| Balance on January 1, 2021 |
$ | — | $ | (1,399,204 | ) | $ | (29,247,331 | ) | $ | (10,638,967 | ) | $ | (593,662,932 | ) | $ | (3,718,392 | ) | $ | (7,925,938 | ) | $ | — | $ | (646,592,764 | ) | |||||||||||
| Depreciation expenses |
— | (11,225 | ) | (346,396 | ) | (182,104 | ) | (6,088,917 | ) | (15,716 | ) | (178,297 | ) | — | (6,822,655 | ) | ||||||||||||||||||||
| Disposal |
— | — | 491 | 246,328 | 4,414,844 | 27,162 | 91,082 | — | 4,779,907 | |||||||||||||||||||||||||||
| Effect of foreign exchange differences |
— | — | — | (13 | ) | 502 | 60 | 395 | — | 944 | ||||||||||||||||||||||||||
| Others |
— | — | 6,725 | (1,063 | ) | 3,206 | (55 | ) | (7,566 | ) | — | 1,247 | ||||||||||||||||||||||||
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|
|
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|
|
|
|
|||||||||||||||||||
| Balance on March 31, 2021 |
$ | — | $ | (1,410,429 | ) | $ | (29,586,511 | ) | $ | (10,575,819 | ) | $ | (595,333,297 | ) | $ | (3,706,941 | ) | $ | (8,020,324 | ) | $ | — | $ | (648,633,321 | ) | |||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance on January 1, 2021, net |
$ | 101,990,645 | $ | 231,158 | $ | 41,642,247 | $ | 1,766,613 | $ | 117,112,777 | $ | 175,851 | $ | 2,373,881 | $ | 8,529,416 | $ | 273,822,588 | ||||||||||||||||||
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|
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|
|
|
|
|
|||||||||||||||||||
| Balance on March 31, 2021, net |
$ | 101,992,800 | $ | 219,933 | $ | 41,331,632 | $ | 1,653,081 | $ | 117,955,937 | $ | 160,600 | $ | 2,287,799 | $ | 6,989,321 | $ | 272,591,103 | ||||||||||||||||||
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|||||||||||||||||||
There was no indication that property, plant and equipment was impaired; therefore, the Company did not recognize any impairment loss for the three months ended March 31, 2021 and 2020.
Chunghwa signed a joint development agreement with the MOTC previously which stated that the MOTC would provide the national land and Chunghwa would be in charge of the planning and construction for the MOTC’s office building, Chunghwa’s Renai office building, etc. According to the agreement, the MOTC and Chunghwa would each own a certain percentage of the buildings, and Chunghwa is to pay or get the reimbursement for the difference between the assessed value of the land and the construction cost paid by Chunghwa on behalf of the MOTC. The difference amounting to $1,056,680 thousand due to the MOTC was reported to Chunghwa’s Board of Directors in May 2020 and Chunghwa will complete the property registration of the respective asset once the payment is made.
- 30 -
Depreciation expense for assets used by the Company is computed using the straight-line method over the following estimated service lives:
| Land improvements |
10-30 years | |||
| Buildings |
||||
| Main buildings |
20-60 years | |||
| Other building facilities |
3-15 years | |||
| Computer equipment |
2-8 years | |||
| Telecommunications equipment |
||||
| Telecommunication circuits |
2-30 years | |||
| Telecommunication machinery and antennas equipment |
2-30 years | |||
| Transportation equipment |
3-10 years | |||
| Miscellaneous equipment |
||||
| Leasehold improvements |
1-9 years | |||
| Mechanical and air conditioner equipment |
3-16 years | |||
| Others |
1-15 years |
| b. | Assets subject to operating leases |
| Land | Buildings | Total | ||||||||||
| Cost |
||||||||||||
| Balance on January 1, 2020 |
$ | 4,979,650 | $ | 3,841,560 | $ | 8,821,210 | ||||||
| Others |
(86,927 | ) | 689,992 | 603,065 | ||||||||
|
|
|
|
|
|
|
|||||||
| Balance on March 31, 2020 |
$ | 4,892,723 | $ | 4,531,552 | $ | 9,424,275 | ||||||
|
|
|
|
|
|
|
|||||||
| Accumulated depreciation and impairment |
||||||||||||
| Balance on January 1, 2020 |
$ | — | $ | (1,496,998 | ) | $ | (1,496,998 | ) | ||||
| Depreciation expenses |
— | (23,105 | ) | (23,105 | ) | |||||||
| Others |
— | (174,920 | ) | (174,920 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Balance on March 31, 2020 |
$ | — | $ | (1,695,023 | ) | $ | (1,695,023 | ) | ||||
|
|
|
|
|
|
|
|||||||
| Balance on January 1, 2020, net |
$ | 4,979,650 | $ | 2,344,562 | $ | 7,324,212 | ||||||
|
|
|
|
|
|
|
|||||||
| Balance on March 31, 2020, net |
$ | 4,892,723 | $ | 2,836,529 | $ | 7,729,252 | ||||||
|
|
|
|
|
|
|
|||||||
| Cost |
||||||||||||
| Balance on January 1, 2021 |
$ | 4,972,920 | $ | 4,236,156 | $ | 9,209,076 | ||||||
| Others |
(2,155 | ) | (12,149 | ) | (14,304 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Balance on March 31, 2021 |
$ | 4,970,765 | $ | 4,224,007 | $ | 9,194,772 | ||||||
|
|
|
|
|
|
|
|||||||
| Accumulated depreciation and impairment |
||||||||||||
| Balance on January 1, 2021 |
$ | — | $ | (1,615,721 | ) | $ | (1,615,721 | ) | ||||
| Depreciation expenses |
— | (19,615 | ) | (19,615 | ) | |||||||
| Others |
— | 211 | 211 | |||||||||
|
|
|
|
|
|
|
|||||||
| Balance on March 31, 2021 |
$ | — | $ | (1,635,125 | ) | $ | (1,635,125 | ) | ||||
|
|
|
|
|
|
|
|||||||
| Balance on January 1, 2021, net |
$ | 4,972,920 | $ | 2,620,435 | $ | 7,593,355 | ||||||
|
|
|
|
|
|
|
|||||||
| Balance on March 31, 2021, net |
$ | 4,970,765 | $ | 2,588,882 | $ | 7,559,647 | ||||||
|
|
|
|
|
|
|
|||||||
- 31 -
The Company leases out land and buildings with lease terms between 1 to 20 years. The lessees do not have bargain purchase options to acquire the assets at the expiry of the lease periods.
The future aggregate lease collection under operating lease for the freehold plant, property and equipment was as follows:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Year 1 |
$ | 368,058 | $ | 347,229 | $ | 329,167 | ||||||
| Year 2 |
291,898 | 288,184 | 289,963 | |||||||||
| Year 3 |
240,251 | 230,984 | 234,707 | |||||||||
| Year 4 |
159,376 | 164,141 | 191,157 | |||||||||
| Year 5 |
132,988 | 124,845 | 116,675 | |||||||||
| Onwards |
1,240,687 | 1,179,493 | 1,203,039 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 2,433,258 | $ | 2,334,876 | $ | 2,364,708 | |||||||
|
|
|
|
|
|
|
|||||||
The above items of property, plant and equipment subject to operating leases are depreciated on a straight-line basis over their estimated useful lives as follows:
| Buildings |
||||
| Main buildings |
35-60 years | |||
| Other building facilities |
3-15 years |
| 16. | LEASE ARRANGEMENTS |
| a. | Right-of-use assets |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Land and buildings |
||||||||||||
| Handsets base stations |
$ | 6,988,843 | $ | 7,095,883 | $ | 7,008,413 | ||||||
| Others |
1,644,335 | 1,708,593 | 1,972,852 | |||||||||
| Equipment |
2,131,922 | 2,204,730 | 2,513,035 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 10,765,100 | $ | 11,009,206 | $ | 11,494,300 | |||||||
|
|
|
|
|
|
|
|||||||
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Additions to right-of-use assets |
$ | 814,854 | $ | 1,162,359 | ||||
|
|
|
|
|
|||||
| Depreciation charge for right-of-use assets |
||||||||
| Land and buildings |
||||||||
| Handsets base stations |
$ | 688,544 | $ | 677,376 | ||||
| Others |
201,761 | 195,623 | ||||||
| Equipment |
105,005 | 106,936 | ||||||
|
|
|
|
|
|||||
| $ | 995,310 | $ | 979,935 | |||||
|
|
|
|
|
|||||
The Company did not have significant sublease or impairment of right-of-use assets for the three months ended March 31, 2021 and 2020.
- 32 -
| b. | Lease liabilities |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Lease liabilities |
||||||||||||
| Current |
$ | 3,296,580 | $ | 3,381,571 | $ | 3,395,000 | ||||||
| Noncurrent |
6,022,381 | 6,215,096 | 6,424,707 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 9,318,961 | $ | 9,596,667 | $ | 9,819,707 | |||||||
|
|
|
|
|
|
|
|||||||
Ranges of discount rates for lease liabilities were as follows:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Land and buildings |
||||||||||||
| Handsets base stations |
0.37%-1.18 | % | 0.46%-1.18 | % | 0.58%-1.18 | % | ||||||
| Others |
0.37%-9.00 | % | 0.46%-9.00 | % | 0.58%-9.00 | % | ||||||
| Equipment |
0.37%-2.99 | % | 0.46%-2.99 | % | 0.58%-3.07 | % | ||||||
| c. | Important lease-in activities and terms |
The Company mainly enters into lease-in agreements of land and buildings for handsets base stations located throughout Taiwan with lease terms ranging from 1 to 20 years. The lease agreements do not contain bargain purchase options to acquire the assets at the expiration of the respective leases. For majority of the lease-in agreements on handsets base station, the Company has the right to terminate the agreement prior to the expiration date if the Company is unable to build the required telecommunication equipment, either due to legal restrictions, controversial events, or other events.
The Company also leases land and buildings for the use of offices, server rooms, and stores with lease terms from 1 to 30 years. Most of the lease agreements for national land adjust the lease payment according to the changes of the announced land values by the authority. At the expiry of the lease term, the Company does not have bargain purchase options to acquire the assets.
The lease agreements for equipment include a contract between Chunghwa and ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. For the information of lease agreements with related parties, please refer to Note 38 to the consolidated financial statements for details.
| d. | Other lease information |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Expenses relating to low-value asset leases |
$ | 2,019 | $ | 1,841 | ||||
|
|
|
|
|
|||||
| Expenses relating to variable lease payments not included in the measurement of lease liabilities |
$ | 1,431 | $ | 1,147 | ||||
|
|
|
|
|
|||||
| Total cash outflow for leases |
$ | 1,039,924 | $ | 1,016,954 | ||||
|
|
|
|
|
|||||
The Company leases certain equipment which qualify as low-value asset leases. The Company has elected to apply the recognition exemption and, thus, not to recognize right-of-use assets and lease liabilities for these leases.
- 33 -
Lease-out arrangements under operating leases for freehold property, plant, and equipment and investment properties were set out in Notes 15 and 17 to the consolidated financial statements.
| 17. | INVESTMENT PROPERTIES |
| Cost |
||||
| Balance on January 1 and March 31, 2020 |
$ | 9,213,979 | ||
|
|
|
|||
| Accumulated depreciation and impairment |
||||
| Balance on January 1, 2020 |
$ | (1,044,586 | ) | |
| Depreciation expense |
(5,130 | ) | ||
|
|
|
|||
| Balance on March 31, 2020 |
$ | (1,049,716 | ) | |
|
|
|
|||
| Balance on January 1, 2020, net |
$ | 8,169,393 | ||
|
|
|
|||
| Balance on March 31, 2020, net |
$ | 8,164,263 | ||
|
|
|
|||
| Cost |
||||
| Balance on January 1 and March 31, 2021 |
$ | 10,662,450 | ||
|
|
|
|||
| Accumulated depreciation and impairment |
||||
| Balance on January 1, 2021 |
$ | (1,041,128 | ) | |
| Depreciation expense |
(10,568 | ) | ||
|
|
|
|||
| Balance on March 31, 2021 |
$ | (1,051,696 | ) | |
|
|
|
|||
| Balance on January 1, 2021, net |
$ | 9,621,322 | ||
|
|
|
|||
| Balance on March 31, 2021, net |
$ | 9,610,754 | ||
|
|
|
|||
Depreciation expense is computed using the straight-line method over the following estimated service lives:
| Land improvements |
10-30 years | |
| Buildings |
||
| Main buildings |
35-60 years | |
| Other building facilities |
4-10 years |
The fair values of the Company’s investment properties as of December 31, 2020 and 2019 were determined by Level 3 fair value measurements inputs based on the appraisal reports conducted by independent appraisers. The Company used the aforementioned appraisal reports as the basis to determine the fair values as of March 31, 2021 and 2020 because there was no material change in the economic environment or the market transaction price. Those appraisal reports are based on the comparison approach, income approach or cost approach. Key assumptions and the fair values were as follows:
- 34 -
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Fair value |
$ | 22,644,318 | $ | 22,644,318 | $ | 18,701,398 | ||||||
|
|
|
|
|
|
|
|||||||
| Overall capital interest rate |
0.93%-3.03 | % | 0.93%-3.03 | % | 1.03%-4.04 | % | ||||||
| Profit margin ratio |
12%-20 | % | 12%-20 | % | 12%-20 | % | ||||||
| Discount rate |
— | — | — | |||||||||
| Capitalization rate |
0.73%-2.20 | % | 0.73%-2.20 | % | 0.79%-1.74 | % | ||||||
All of the Company’s investment properties are held under freehold interest.
The future aggregate lease collection under operating lease for investment properties is as follows:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Year 1 |
$ | 120,645 | $ | 115,305 | $ | 118,705 | ||||||
| Year 2 |
93,409 | 95,223 | 94,996 | |||||||||
| Year 3 |
74,241 | 75,285 | 73,199 | |||||||||
| Year 4 |
49,793 | 52,544 | 58,476 | |||||||||
| Year 5 |
34,937 | 37,588 | 37,338 | |||||||||
| Onwards |
51,836 | 57,773 | 89,825 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 424,861 | $ | 433,718 | $ | 472,539 | |||||||
|
|
|
|
|
|
|
|||||||
| 18. | INTANGIBLE ASSETS |
| Mobile Broadband Concession |
Computer Software |
Goodwill | Others | Total | ||||||||||||||||
| Cost |
||||||||||||||||||||
| Balance on January 1, 2020 |
$ | 59,965,000 | $ | 3,428,609 | $ | 236,200 | $ | 378,063 | $ | 64,007,872 | ||||||||||
| Additions-acquired separately |
48,373,000 | 45,456 | — | 1,805 | 48,420,261 | |||||||||||||||
| Disposal |
— | (128,598 | ) | — | (9 | ) | (128,607 | ) | ||||||||||||
| Effect of foreign exchange differences |
— | 27 | — | (51 | ) | (24 | ) | |||||||||||||
| Others |
— | — | — | (45 | ) | (45 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on March 31, 2020 |
$ | 108,338,000 | $ | 3,345,494 | $ | 236,200 | $ | 379,763 | $ | 112,299,457 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Accumulated amortization and impairment |
||||||||||||||||||||
| Balance on January 1, 2020 |
$ | (14,293,046 | ) | $ | (2,498,825 | ) | $ | (35,623 | ) | $ | (133,853 | ) | $ | (16,961,347 | ) | |||||
| Amortization expenses |
(959,893 | ) | (92,851 | ) | — | (6,279 | ) | (1,059,023 | ) | |||||||||||
| Disposal |
— | 128,598 | — | 9 | 128,607 | |||||||||||||||
| Effect of foreign exchange differences |
— | (28 | ) | — | 16 | (12 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on March 31, 2020 |
$ | (15,252,939 | ) | $ | (2,463,106 | ) | $ | (35,623 | ) | $ | (140,107 | ) | $ | (17,891,775 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on January 1, 2020, net |
$ | 45,671,954 | $ | 929,784 | $ | 200,577 | $ | 244,210 | $ | 47,046,525 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on March 31, 2020, net |
$ | 93,085,061 | $ | 882,388 | $ | 200,577 | $ | 239,656 | $ | 94,407,682 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
(Continued)
- 35 -
| Mobile Broadband Concession |
Computer Software |
Goodwill | Others | Total | ||||||||||||||||
| Cost |
||||||||||||||||||||
| Balance on January 1, 2021 |
$ | 108,338,000 | $ | 3,319,223 | $ | 291,206 | $ | 392,326 | $ | 112,340,755 | ||||||||||
| Additions-acquired separately |
— | 19,247 | — | 1,206 | 20,453 | |||||||||||||||
| Disposal |
— | (40,659 | ) | — | — | (40,659 | ) | |||||||||||||
| Effect of foreign exchange differences |
— | (156 | ) | — | (8 | ) | (164 | ) | ||||||||||||
| Others |
— | 553 | — | — | 553 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on March 31, 2021 |
$ | 108,338,000 | $ | 3,298,208 | $ | 291,206 | $ | 393,524 | $ | 112,320,938 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Accumulated amortization and impairment |
||||||||||||||||||||
| Balance on January 1, 2021 |
$ | (19,318,842 | ) | $ | (2,532,910 | ) | $ | (44,926 | ) | $ | (159,517 | ) | $ | (22,056,195 | ) | |||||
| Amortization expenses |
(1,549,728 | ) | (84,067 | ) | — | (7,242 | ) | (1,641,037 | ) | |||||||||||
| Disposal |
— | 40,659 | — | — | 40,659 | |||||||||||||||
| Effect of foreign exchange differences |
— | 155 | — | 2 | 157 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on March 31, 2021 |
$ | (20,868,570 | ) | $ | (2,576,163 | ) | $ | (44,926 | ) | $ | (166,757 | ) | $ | (23,656,416 | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on January 1, 2021, net |
$ | 89,019,158 | $ | 786,313 | $ | 246,280 | $ | 232,809 | $ | 90,284,560 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on March 31, 2021, net |
$ | 87,469,430 | $ | 722,045 | $ | 246,280 | $ | 226,767 | $ | 88,664,522 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
(Concluded)
For long-term business development, Chunghwa participated in the 5G mobile broadband license bidding hosted by the NCC and paid the deposit for 5G spectrum bidding amounting to $1,000,000 thousand in October 2019. Chunghwa paid $48,373,000 thousand, including the aforementioned deposit, in February 2020 for the aforementioned license to obtain 90MHz in the 3.5GHz spectrum and 600MHz in the 28GHz spectrum.
The concessions are granted and issued by the NCC. The concession fees are amortized using the straight-line method over the period from the date operations commence through the date the license expires or the useful life, whichever is shorter. The 4G concession fees will be fully amortized by December 2030 and December 2033 and 5G concession fees will be fully amortized by December 2040.
The computer software is amortized using the straight-line method over the estimated useful lives of 1 to 10 years. Other intangible assets are amortized using the straight-line method over the estimated useful lives of 1 to 20 years. Goodwill is not amortized.
| 19. | OTHER ASSETS |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Spare parts |
$ | 2,074,582 | $ | 2,156,136 | $ | 1,762,816 | ||||||
| Refundable deposits |
1,938,725 | 2,009,796 | 1,793,997 | |||||||||
| Other financial assets |
1,000,000 | 1,000,000 | 1,000,000 | |||||||||
| Others |
2,210,282 | 2,450,006 | 2,310,864 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 7,223,589 | $ | 7,615,938 | $ | 6,867,677 | |||||||
|
|
|
|
|
|
|
|||||||
(Continued)
- 36 -
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Current |
||||||||||||
| Spare parts |
$ | 2,074,582 | $ | 2,156,136 | $ | 1,762,816 | ||||||
| Others |
158,425 | 192,961 | 113,355 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 2,233,007 | $ | 2,349,097 | $ | 1,876,171 | |||||||
|
|
|
|
|
|
|
|||||||
| Noncurrent |
||||||||||||
| Refundable deposits |
$ | 1,938,725 | $ | 2,009,796 | $ | 1,793,997 | ||||||
| Other financial assets |
1,000,000 | 1,000,000 | 1,000,000 | |||||||||
| Others |
2,051,857 | 2,257,045 | 2,197,509 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 4,990,582 | $ | 5,266,841 | $ | 4,991,506 | |||||||
|
|
|
|
|
|
|
|||||||
(Concluded)
Other financial assets - noncurrent was Piping Fund. As part of the government’s effort to upgrade the existing telecommunications infrastructure, Chunghwa and other public utility companies were required by the ROC government to contribute to a Piping Fund administered by the Taipei City Government. This fund was used to finance various telecommunications infrastructure projects. Net assets of this fund will be returned proportionately after the project is completed.
| 20. | HEDGING FINANCIAL INSTRUMENTS |
Chunghwa’s hedge strategy is to enter into forward exchange contracts - buy to avoid its foreign currency exposure to certain foreign currency denominated equipment payments in the following six months. In addition, Chunghwa’s management considers the market condition to determine the hedge ratio and enters into forward exchange contracts with the banks to avoid the foreign currency risk.
Chunghwa signed equipment purchase contracts with suppliers and entered into forward exchange contracts to avoid foreign currency risk exposure to Euro-denominated purchase commitments. Those forward exchange contracts were designated as cash flow hedges. When forecast purchases actually take place, basis adjustments are made to the initial carrying amounts of hedged items.
For the hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life and underlying) of the forward foreign exchange contracts and their corresponding hedged items are the same, the Company performs a qualitative assessment of effectiveness and it is expected that the value of the forward contracts and the value of the corresponding hedged items will systematically change in opposite direction in response to movements in the underlying exchange rates.
The main source of hedge ineffectiveness in these hedging relationships is the effect of credit risks of the Company and the counterparty on the fair value of the forward exchange contracts. Such credit risks do not impact the fair value of the hedged item attributable to changes in foreign exchange rates. No other sources of ineffectiveness emerged from these hedging relationships.
- 37 -
The following tables summarized the information relating to the hedges for foreign currency risk.
March 31, 2021
| Notional Amount |
Forward | Line Item in | Carrying Amount | Change in Fair Values of Hedging Instruments Used for Calculating Hedge |
||||||||||||||||||||||||||||
| Hedging Instruments | Currency | (In Thousands) | Maturity | Rate | Balance Sheet | Asset | Liability | Ineffectiveness | ||||||||||||||||||||||||
| Cash flow hedge |
||||||||||||||||||||||||||||||||
| Forecast purchases - forward exchange contracts |
NT$/EUR | NT$
|
495,142 /EUR 14,700 |
|
2021.06 | $ | 33.68 | |
Hedging financial assets (liabilities |
) |
$ | — | $ | 1,864 | $ | (3,616 | ) | |||||||||||||||
| Change in Value of Hedged Item Used for |
Accumulated Gain or Loss on Hedging Instruments in Other Equity |
|||||||||||
| Hedged Items | Calculating Hedge Ineffectiveness |
Continuing Hedges |
Hedge Accounting no Longer Applied |
|||||||||
| Cash flow hedge |
||||||||||||
| Forecast equipment purchases |
$ | 3,616 | $ | (1,864 | ) | $ | — | |||||
December 31, 2020
| Notional Amount |
Forward | Line Item in | Carrying Amount | Change in Fair Values of Hedging Instruments Used for Calculating Hedge |
||||||||||||||||||||||||||||
| Hedging Instruments | Currency | (In Thousands) | Maturity | Rate | Balance Sheet | Asset | Liability | Ineffectiveness | ||||||||||||||||||||||||
| Cash flow hedge |
||||||||||||||||||||||||||||||||
| Forecast purchases - forward exchange contracts |
NT$/EUR | NT$
|
200,867/ EUR 5,831 |
|
2021.03 | $ | 34.45 | |
Hedging financial assets (liabilities |
) |
$ | 1,752 | $ | — | $ | 1,425 | ||||||||||||||||
| Change in Value of Hedged
Item |
Accumulated Gain or Loss on Hedging Instruments in Other Equity |
|||||||||||
| Hedged Items | Calculating Hedge Ineffectiveness |
Continuing Hedges |
Hedge Accounting No Longer Applied |
|||||||||
| Cash flow hedge |
||||||||||||
| Forecast equipment purchases |
$ | (1,425 | ) | $ | 1,752 | $ | — | |||||
March 31, 2020
| Notional Amount |
Forward | Line Item in | Carrying Amount | Change in Fair Values of Hedging Instruments Used for Calculating Hedge |
||||||||||||||||||||||||||||
| Hedging Instruments | Currency | (In Thousands) | Maturity | Rate | Balance Sheet | Asset | Liability | Ineffectiveness | ||||||||||||||||||||||||
| Cash flow hedge |
||||||||||||||||||||||||||||||||
| Forecast purchases - forward exchange contracts |
NT$/EUR | — | — | $ | — | |
Hedging financial assets (liabilities |
) |
$ | — | $ | — | $ | (327 | ) | |||||||||||||||||
- 38 -
| Change in Value of Hedged Item Used for |
Accumulated Gain or Loss on Hedging Instruments in Other Equity |
|||||||||||
| Hedged Items | Calculating Hedge Ineffectiveness |
Continuing Hedges |
Hedge Accounting no Longer Applied |
|||||||||
| Cash flow hedge |
||||||||||||
| Forecast equipment purchases |
$ | 327 | $ | — | $ | — | ||||||
Three months ended March 31, 2021
| Comprehensive Income | ||||||||||||||||||||
| Reclassification from Equity to Profit or Loss and the Adjusted Line Item |
||||||||||||||||||||
| Hedge Transaction | Hedging Gain or Loss Recognized in OCI |
Amount of Hedge Ineffectiveness Recognized in Profit or Loss |
Line Item in Which Hedge Ineffectiveness is Included |
Amount Reclassified to P/L and the Adjusted Line Item |
Due to Hedged Future Cash Flows No Longer Expected to Occur |
|||||||||||||||
| Cash flow hedge |
||||||||||||||||||||
| Forecast equipment purchases |
$ | (3,616 | ) | $ | — | — | $ |
154 Construction in |
|
$ |
— Other gains |
| ||||||||
Three months ended March 31, 2020
| Comprehensive Income | ||||||||||||||||||||
| Reclassification from Equity to Profit or Loss and the Adjusted Line Item |
||||||||||||||||||||
| Hedge Transaction | Hedging Gain or Loss Recognized in OCI |
Amount of Hedge Ineffectiveness Recognized in Profit or Loss |
Line Item in Which Hedge Ineffectiveness is Included |
Amount Reclassified to P/L and the Adjusted Line Item |
Due to Hedged Future Cash Flows No Longer Expected
to |
|||||||||||||||
| Cash flow hedge |
||||||||||||||||||||
| Forecast equipment purchases |
$ | (327 | ) | $ | — | — | $ |
(706 Construction in |
) |
$ |
— Other gains |
| ||||||||
| 21. | SHORT-TERM LOANS |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Unsecured bank loans |
$ | 60,000 | $ | 67,000 | $ | 70,000 | ||||||
|
|
|
|
|
|
|
|||||||
- 39 -
The annual interest rates of bank loans were as follows:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Unsecured bank loans |
1.97%-2.43 | % | 1.12%-2.33 | % | 1.20%-2.50 | % | ||||||
| 22. | SHORT-TERM BILLS PAYABLE |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Commercial paper payable |
$ | 5,000,000 | $ | 7,000,000 | $ | 20,000,000 | ||||||
| Less: Discounts on commercial paper payable |
(511 | ) | (802 | ) | (34,371 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| $ | 4,999,489 | $ | 6,999,198 | $ | 19,965,629 | |||||||
|
|
|
|
|
|
|
|||||||
The annual interest rates of commercial paper payable were as follows:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Commercial paper payable |
0.13%-0.21 | % | 0.34%-0.36 | % | 0.57%-0.69 | % | ||||||
| 23. | LONG-TERM LOANS |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Secured bank loans (Note 39) |
$ | 1,600,000 | $ | 1,600,000 | $ | 1,600,000 | ||||||
| Less: Current portion |
(1,600,000 | ) | (1,600,000 | ) | — | |||||||
|
|
|
|
|
|
|
|||||||
| $ | — | $ | — | $ | 1,600,000 | |||||||
|
|
|
|
|
|
|
|||||||
The annual interest rates of loans were as follows:
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Secured bank loans |
0.72 | % | 0.72 | % | 0.91 | % | ||||||
LED obtained a secured loan from Chang Hwa Bank in September 2010. Interest is paid monthly. $300,000 thousand and $1,350,000 thousand were originally due in December 2014 and September 2015, respectively. In October 2014, the bank borrowing mentioned above was extended to September 2018 for one-time repayment. LED made an early repayment of $50,000 thousand in April 2015. LED entered into a contract with Chang Hwa Bank to renew the contract upon the maturity of the aforementioned contract in December 2017 and the due date of the renew contract is September 2021.
- 40 -
| 24. | BONDS PAYABLE |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Unsecured domestic bonds |
$ | 20,000,000 | $ | 20,000,000 | $ | — | ||||||
| Less: Discounts on bonds payable |
(18,892 | ) | (19,728 | ) | — | |||||||
|
|
|
|
|
|
|
|||||||
| $ | 19,981,108 | $ | 19,980,272 | $ | — | |||||||
|
|
|
|
|
|
|
|||||||
The major terms of unsecured domestic bonds issued by Chunghwa were as follows:
| Issuance | Tranche | Issuance Period | Total Amount |
Coupon Rate |
Repayment and Interest Payment | |||||||||
| 2020-1 |
A | July 2020 to July 2025 | $8,800,000 | 0.50% | One-time repayment upon maturity; interest payable annually | |||||||||
| B | July 2020 to July 2027 | 7,500,000 | 0.54% | The same as above | ||||||||||
| C | July 2020 to July 2030 | 3,700,000 | 0.59% | The same as above | ||||||||||
| 25. | TRADE NOTES AND ACCOUNTS PAYABLE |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Trade notes and accounts payable |
$ | 9,689,794 | $ | 15,590,814 | $ | 11,890,475 | ||||||
|
|
|
|
|
|
|
|||||||
Trade notes and accounts payable were attributable to operating activities and the trading conditions were agreed separately.
| 26. | OTHER PAYABLES |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Accrued salary and compensation |
$ | 6,413,928 | $ | 9,449,659 | $ | 6,478,657 | ||||||
| Payables to contractors |
3,068,961 | 1,778,735 | 1,182,512 | |||||||||
| Accrued compensation to employees and remuneration to directors and supervisors |
2,174,260 | 1,690,796 | 1,807,337 | |||||||||
| Amounts collected for others |
1,347,333 | 1,307,728 | 1,336,273 | |||||||||
| Payable on land (Note 15) |
1,056,680 | 1,056,680 | — | |||||||||
| Accrued maintenance costs |
923,021 | 1,039,689 | 847,504 | |||||||||
| Payables to equipment suppliers |
859,084 | 1,049,008 | 227,977 | |||||||||
| Accrued franchise fees |
786,069 | 785,352 | 1,352,266 | |||||||||
| Others |
5,967,182 | 5,830,315 | 6,421,052 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 22,596,518 | $ | 23,987,962 | $ | 19,653,578 | |||||||
|
|
|
|
|
|
|
|||||||
- 41 -
| 27. | PROVISIONS |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Warranties |
$ | 186,249 | $ | 182,431 | $ | 167,155 | ||||||
| Onerous contracts |
181,539 | 170,433 | 66,578 | |||||||||
| Employee benefits |
58,279 | 57,210 | 61,355 | |||||||||
| Others |
4,097 | 4,097 | 4,397 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 430,164 | $ | 414,171 | $ | 299,485 | |||||||
|
|
|
|
|
|
|
|||||||
| Current |
$ | 325,747 | $ | 313,555 | $ | 199,804 | ||||||
| Noncurrent |
104,417 | 100,616 | 99,681 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 430,164 | $ | 414,171 | $ | 299,485 | |||||||
|
|
|
|
|
|
|
|||||||
| Warranties | Onerous Contracts |
Employee Benefits |
Others | Total | ||||||||||||||||
| Balance on January 1, 2020 |
$ | 173,275 | $ | 66,907 | $ | 59,745 | $ | 4,397 | $ | 304,324 | ||||||||||
| Additional / (reversal of) provisions recognized |
18,870 | (329 | ) | 1,610 | — | 20,151 | ||||||||||||||
| Used / forfeited during the period |
(24,990 | ) | — | — | — | (24,990 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on March 31, 2020 |
$ | 167,155 | $ | 66,578 | $ | 61,355 | $ | 4,397 | $ | 299,485 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on January 1, 2021 |
$ | 182,431 | $ | 170,433 | $ | 57,210 | $ | 4,097 | $ | 414,171 | ||||||||||
| Additional provisions recognized |
16,594 | 11,106 | 1,457 | — | 29,157 | |||||||||||||||
| Used / forfeited during the period |
(12,776 | ) | — | (388 | ) | — | (13,164 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance on March 31, 2021 |
$ | 186,249 | $ | 181,539 | $ | 58,279 | $ | 4,097 | $ | 430,164 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| a. | The provision for warranty claims represents the present value of the management’s best estimate of the future outflow of economic benefits that will be required under the Company’s obligation for warranties in sales agreements. The estimate has been made based on the historical warranty experience. |
| b. | The provision for employee benefits represents vested long-term service compensation accrued. |
| c. | The provision for onerous contracts represents the present obligation resulting from the measurement for the unavoidable costs of meeting the Company’s contractual obligations exceed the economic benefits expected to be received from the contracts. |
| 28. | RETIREMENT BENEFIT PLANS |
Relevant pension costs for defined benefit plans which were determined by the pension cost rates of actuarial valuation as of December 31, 2020 and 2019 were as follows:
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Operating costs |
$ | 181,663 | $ | 300,673 | ||||
| Marketing expenses |
91,888 | 150,910 | ||||||
| General and administrative expenses |
19,659 | 29,977 | ||||||
| Research and development expenses |
10,905 | 18,036 | ||||||
|
|
|
|
|
|||||
| $ | 304,115 | $ | 499,596 | |||||
|
|
|
|
|
|||||
- 42 -
| 29. | EQUITY |
| a. | Share capital |
| 1) | Common stocks |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Number of authorized shares (thousand) |
12,000,000 | 12,000,000 | 12,000,000 | |||||||||
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|
|
|
|
|
|
|||||||
| Authorized shares |
$ | 120,000,000 | $ | 120,000,000 | $ | 120,000,000 | ||||||
|
|
|
|
|
|
|
|||||||
| Number of issued and paid shares (thousand) |
7,757,447 | 7,757,447 | 7,757,447 | |||||||||
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|
|
|
|
|
|
|||||||
| Issued shares |
$ | 77,574,465 | $ | 77,574,465 | $ | 77,574,465 | ||||||
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|
|||||||
Each issued common stock with par value of $10 is entitled the right to vote and receive dividends.
| 2) | Global depositary receipts |
The MOTC and some stockholders sold some common stocks of Chunghwa in an international offering of securities in the form of American Depositary Shares (“ADS”) (one ADS represents 10 common stocks) in July 2003, August 2005, and September 2006. The ADSs were traded on the New York Stock Exchange since July 17, 2003. As of March 31, 2021, the outstanding ADSs were 221,590 thousand common stocks, which equaled 22,159 thousand units and represented 2.86% of Chunghwa’s total outstanding common stocks.
The ADS holders generally have the same rights and obligations as other common stockholders, subject to the provision of relevant laws. The exercise of such rights and obligations shall comply with the related regulations and deposit agreement, which stipulate, among other things, that ADS holders are entitled to, through deposit agents:
| a) | Exercise their voting rights, |
| b) | Sell their ADSs, and |
| c) | Receive dividends declared and subscribe to the issuance of new shares. |
| b. | Additional paid-in capital |
The adjustments of additional paid-in capital for the three months ended March 31, 2021 and 2020 were as follows:
| Share Premium | Movements of Additional Paid-in Capital for Associates Accounted for Using Equity Method |
Movements of Additional Paid-in Capital Arising from Changes in Equities of Subsidiaries |
Difference between Consideration Received and Carrying Amount of the Subsidiaries’ Net Assets upon Disposal |
Donated Capital | Stockholders’ Contribution due to Privatization |
Total | ||||||||||||||||||||||
| Balance on January 1, 2020 |
$ | 147,329,386 | $ | 208,746 | $ | 2,062,250 | $ | 987,611 | $ | 19,914 | $ | 20,648,078 | $ | 171,255,985 | ||||||||||||||
| Change in additional paid-in capital from investments in associates accounted for using equity method |
— | (5,580 | ) | — | — | — | — | (5,580 | ) | |||||||||||||||||||
| Share-based payment transactions of subsidiaries |
— | — | 23,989 | — | — | — | 23,989 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance on March 31, 2020 |
$ | 147,329,386 | $ | 203,166 | $ | 2,086,239 | $ | 987,611 | $ | 19,914 | $ | 20,648,078 | $ | 171,274,394 | ||||||||||||||
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|
|||||||||||||||
(Continued)
- 43 -
| Share Premium | Movements of Additional Paid-in Capital for Associates Accounted for Using Equity Method |
Movements of Additional Paid-in Capital Arising from Changes in Equities of Subsidiaries |
Difference between Consideration Received and Carrying Amount of the Subsidiaries’ Net Assets upon Disposal |
Donated Capital | Stockholders’ Contribution due to Privatization |
Total | ||||||||||||||||||||||
| Balance on January 1, 2021 |
$ | 147,329,386 | $ | 186,828 | $ | 2,087,957 | $ | 987,611 | $ | 21,519 | $ | 20,648,078 | $ | 171,261,379 | ||||||||||||||
| Share-based payment transactions of subsidiaries |
— | — | 15,568 | — | — | — | 15,568 | |||||||||||||||||||||
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance on March 31, 2021 |
$ | 147,329,386 | $ | 186,828 | $ | 2,103,525 | $ | 987,611 | $ | 21,519 | $ | 20,648,078 | $ | 171,276,947 | ||||||||||||||
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|||||||||||||||
(Concluded)
Additional paid-in capital from share premium, donated capital and the difference between consideration received and the carrying amount of the subsidiaries’ net assets upon disposal may be utilized to offset deficits. Furthermore, when Chunghwa has no deficit, it may be distributed in cash or capitalized, which however is limited to a certain percentage of Chunghwa’s paid-in capital except the additional paid-in capital arising from unclaimed dividend can only be utilized to offset deficits.
The additional paid-in capital from movements of paid-in capital arising from changes in equities of subsidiaries may only be utilized to offset deficits.
Among additional paid-in capital from movements of investments in associates and joint ventures accounted for using equity method, the portion arising from the difference between consideration received and the carrying amount of the subsidiaries net assets upon disposal may be utilized to offset deficits; furthermore, when the Company has no deficit, it may be distributed in cash or capitalized. However, other additional paid-in capital recognized in proportion of share ownership may only be utilized to offset deficits.
| c. | Retained earnings and dividends policy |
In accordance with the Chunghwa’s Articles of Incorporation, Chunghwa must pay all outstanding taxes, offset deficits in prior years and set aside a legal reserve equal to 10% of its net income before distributing a dividend or making any other distribution to stockholders, except when the accumulated amount of such legal reserve equals to Chunghwa’s total issued capital, and depending on its business needs or requirements, may also set aside or reverse special reserves. No less than 50% of the remaining earnings comprising remaining balance of net income, if any, plus cumulative undistributed earnings shall be distributed as stockholders’ dividends, of which cash dividends to be distributed shall not be less than 50% of the total amount of dividends to be distributed. If cash dividend to be distributed is less than $0.10 per share, such cash dividend shall be distributed in the form of common stocks.
Chunghwa should appropriate or reverse a special reserve in accordance with Rule No. 1010012865 issued by the FSC and the directive entitled “Questions and Answers on Special Reserves Appropriated Following the Adoption of Taiwan-IFRSs”. Distributions can be made out of any subsequent reversal of the debit to other equity items.
The appropriation for legal reserve shall be made until the accumulated reserve equals the aggregate par value of the outstanding capital stock of Chunghwa. This reserve can only be used to offset a deficit, or, when the legal reserve has exceeded 25% of Chunghwa’s paid-in capital, the excess may be transferred to capital or distributed in cash.
- 44 -
The appropriations of the 2020 earnings of Chunghwa proposed by the Chunghwa’s Board of Directors on February 23, 2021 and the appropriations of the 2019 earnings of Chunghwa approved by the stockholders in their meetings on May 29, 2020 were as follows:
| Appropriation of Earnings | Dividends Per Share (NT$) |
|||||||||||||||
| For Fiscal Year 2020 |
For Fiscal Year 2019 |
For Fiscal Year 2020 |
For Fiscal Year 2019 |
|||||||||||||
| Cash dividends |
$ | 33,403,565 | $ | 32,782,969 | $ | 4.306 | $ | 4.226 | ||||||||
The appropriations of earnings for 2020 are subject to the resolution of the stockholders’ meeting planned to be held on May 28, 2021. Information of the appropriation of Chunghwa’s earnings proposed by the Board of Directors and approved by the stockholders is available on the Market Observation Post System website.
| d. | Others |
| 1) | Exchange differences arising from the translation of the foreign operations |
The exchange differences arising from the translation of the foreign operations from their functional currency to New Taiwan dollars were recognized as exchange differences arising from the translation of the foreign operations in other comprehensive income.
| 2) | Unrealized gain or loss on financial assets at FVOCI |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Beginning balance |
$ | 1,239,901 | $ | 836,598 | ||||
| Unrealized gain or loss for the period |
||||||||
| Equity instruments |
(945,986 | ) | (1,384,326 | ) | ||||
| Transferred accumulated gain or loss to unappropriated earnings resulting from the disposal of equity instruments (Note 8) |
(94,392 | ) | — | |||||
|
|
|
|
|
|||||
| Ending balance |
$ | 199,523 | $ | (547,728 | ) | |||
|
|
|
|
|
|||||
| e. | Noncontrolling interests |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Beginning balance |
$ | 11,327,441 | $ | 10,283,522 | ||||
| Shares attributed to noncontrolling interests |
||||||||
| Net income for the period |
316,686 | 264,030 | ||||||
| Exchange differences arising from the translation of the foreign operations |
(2,261 | ) | 456 | |||||
| Unrealized gain or loss on financial assets at FVOCI |
637 | (16,590 | ) | |||||
| Share of other comprehensive income of associates and joint ventures accounted for using equity method |
87 | 173 | ||||||
(Continued)
- 45 -
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Changes in additional paid-in capital from investments in associates and joint ventures accounted for using equity method |
$ | — | $ | 47 | ||||
| Share-based payment transactions of subsidiaries |
41,161 | 49,284 | ||||||
|
|
|
|
|
|||||
| Ending balance |
$ | 11,683,751 | $ | 10,580,922 | ||||
|
|
|
|
|
|||||
(Concluded)
| 30. | REVENUES |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Revenue from contracts with customers |
$ | 49,814,836 | $ | 47,871,762 | ||||
|
|
|
|
|
|||||
| Other revenues |
||||||||
| Rental income |
227,079 | 203,926 | ||||||
| Others |
59,080 | 74,311 | ||||||
|
|
|
|
|
|||||
| 286,159 | 278,237 | |||||||
|
|
|
|
|
|||||
| $ | 50,100,995 | $ | 48,149,999 | |||||
|
|
|
|
|
|||||
For the information of performance obligations related to customer contracts, please refer to Note 3 Summary of Significant Accounting Policies to the consolidated financial statements for the year ended December 31, 2020 for details.
| a. | Disaggregation of revenue |
Three months ended March 31, 2021
| Domestic Fixed Communi- cations Business |
Mobile Communi- cations Business |
Internet Business |
International Communi- cations Business |
Others | Total | |||||||||||||||||||
| Main Products and Service Revenues |
||||||||||||||||||||||||
| Mobile services revenue |
$ | — | $ | 14,152,046 | $ | — | $ | — | $ | — | $ | 14,152,046 | ||||||||||||
| Sales of products |
574,309 | 8,976,365 | 14,739 | 2,377 | 990,158 | 10,557,948 | ||||||||||||||||||
| Local telephone and domestic long distance telephone services revenue |
6,341,552 | — | — | — | — | 6,341,552 | ||||||||||||||||||
| Broadband access and domestic leased line services revenue |
5,637,348 | — | — | — | — | 5,637,348 | ||||||||||||||||||
| Data communications internet services revenue |
— | — | 5,455,821 | — | — | 5,455,821 | ||||||||||||||||||
| International network and leased line services revenue |
— | — | — | 1,086,822 | — | 1,086,822 | ||||||||||||||||||
| Others |
2,667,382 | 287,884 | 2,111,756 | 1,078,134 | 438,143 | 6,583,299 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| $ | 15,220,591 | $ | 23,416,295 | $ | 7,582,316 | $ | 2,167,333 | $ | 1,428,301 | $ | 49,814,836 | |||||||||||||
|
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|||||||||||||
- 46 -
Three months ended March 31, 2020
| Domestic Fixed cations Business |
Mobile Communi- cations Business |
Internet Business |
International Fixed cations Business |
Others | Total | |||||||||||||||||||
| Main Products and Service Revenues |
||||||||||||||||||||||||
| Mobile services revenue |
$ | — | $ | 14,284,650 | $ | — | $ | — | $ | — | $ | 14,284,650 | ||||||||||||
| Sales of products |
481,821 | 8,004,138 | 18,788 | 77,732 | 931,044 | 9,513,523 | ||||||||||||||||||
| Local telephone and domestic long distance telephone services revenue |
6,611,740 | — | — | — | — | 6,611,740 | ||||||||||||||||||
| Broadband access and domestic leased line services revenue |
5,541,156 | — | — | — | — | 5,541,156 | ||||||||||||||||||
| Data communications internet services revenue |
— | — | 5,305,258 | — | — | 5,305,258 | ||||||||||||||||||
| International network and leased line services revenue |
— | — | — | 1,079,323 | — | 1,079,323 | ||||||||||||||||||
| Others |
1,900,147 | 228,436 | 2,126,029 | 1,076,424 | 205,076 | 5,536,112 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| $ | 14,534,864 | $ | 22,517,224 | $ | 7,450,075 | $ | 2,233,479 | $ | 1,136,120 | $ | 47,871,762 | |||||||||||||
|
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|
|||||||||||||
| b. | Contract balances |
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
January 1, 2019 |
|||||||||||||
| Trade notes and accounts receivable (Note 9) |
$ | 21,391,359 | $ | 22,621,902 | $ | 23,401,540 | $ | 26,407,783 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Contract assets |
||||||||||||||||
| Products and service bundling |
$ | 7,205,888 | $ | 7,232,134 | $ | 6,922,587 | $ | 6,942,974 | ||||||||
| Others |
545,567 | 612,206 | 128,191 | 115,993 | ||||||||||||
| Less: Loss allowance |
(17,899 | ) | (17,792 | ) | (16,799 | ) | (16,858 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 7,733,556 | $ | 7,826,548 | $ | 7,033,979 | $ | 7,042,109 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Current |
$ | 5,246,566 | $ | 5,331,246 | $ | 4,466,540 | $ | 4,441,196 | ||||||||
| Noncurrent |
2,486,990 | 2,495,302 | 2,567,439 | 2,600,913 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 7,733,556 | $ | 7,826,548 | $ | 7,033,979 | $ | 7,042,109 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Contract liabilities |
||||||||||||||||
| Telecommunications business |
$ | 13,303,693 | $ | 13,601,662 | $ | 12,457,891 | $ | 12,771,621 | ||||||||
| Project business |
6,615,715 | 6,686,561 | 10,872,402 | 10,360,428 | ||||||||||||
| Products and service bundling |
12,794 | 16,404 | 33,129 | 38,570 | ||||||||||||
| Others |
548,535 | 421,166 | 467,587 | 510,696 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 20,480,737 | $ | 20,725,793 | $ | 23,831,009 | $ | 23,681,315 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Current |
$ | 13,264,677 | $ | 13,436,706 | $ | 17,163,178 | $ | 16,839,830 | ||||||||
| Noncurrent |
7,216,060 | 7,289,087 | 6,667,831 | 6,841,485 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 20,480,737 | $ | 20,725,793 | $ | 23,831,009 | $ | 23,681,315 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The changes in the contract asset and the contract liability balances primarily result from the timing difference between the satisfaction of performance obligations and the payments collected from customers.
- 47 -
The Company applies the simplified approach to recognize expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for receivables. Contract assets will be reclassified to trade receivables when the corresponding invoice is billed to the client. Contract assets have substantially the same risk characteristics as the trade receivables of the same types of contracts. Therefore, the Company concluded that the expected loss rates for trade receivables can be applied to the contract assets.
| c. | Incremental costs of obtaining contracts |
| March 31, 2021 | December 31, 2020 |
March 31, 2020 | ||||||||||
| Noncurrent |
||||||||||||
| Incremental costs of obtaining contracts |
$ | 961,667 | $ | 999,593 | $ | 929,827 | ||||||
|
|
|
|
|
|
|
|||||||
The Company considered the past experience and the default clauses in the telecommunications service contracts and believes the commissions and equipment subsidies paid for obtaining such contracts are expected to be recoverable; therefore, such costs were capitalized. Amortization expenses for the three months ended March 31, 2021 and 2020 are $194,880 thousand and $196,659 thousand, respectively.
| 31. | NET INCOME |
| a. | Other income and expenses |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Gain (loss) on disposal of property, plant and equipment, net |
$ | 2,569 | $ | (680 | ) | |||
|
|
|
|
|
|||||
| b. | Other income |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Rental income |
$ | 16,072 | $ | 17,973 | ||||
| Others |
25,899 | 25,219 | ||||||
|
|
|
|
|
|||||
| $ | 41,971 | $ | 43,192 | |||||
|
|
|
|
|
|||||
| c. | Other gains and losses |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Valuation gain (loss) on financial assets and liabilities at fair value through profit or loss, net |
$ | 133,841 | $ | (12,374 | ) | |||
| Foreign currency exchange gain or loss, net |
38,204 | 71,070 | ||||||
| Gain (loss) on disposal of financial instruments, net |
186 | (1,788 | ) | |||||
| Others |
(8,110 | ) | (12,919 | ) | ||||
|
|
|
|
|
|||||
| $ | 164,121 | $ | 43,989 | |||||
|
|
|
|
|
|||||
- 48 -
| d. | Interest expenses |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Interest on bonds payable |
$ | 27,419 | $ | — | ||||
| Interest on lease liabilities |
17,960 | 21,472 | ||||||
| Interest paid to financial institutions |
5,322 | 20,429 | ||||||
| Others |
25 | 486 | ||||||
|
|
|
|
|
|||||
| $ | 50,726 | $ | 42,387 | |||||
|
|
|
|
|
|||||
| e. | Impairment loss (reversal of impairment loss) |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Contract assets |
$ | 107 | $ | (59 | ) | |||
|
|
|
|
|
|||||
| Trade notes and accounts receivable |
$ | 42,751 | $ | 5,930 | ||||
|
|
|
|
|
|||||
| Other receivables |
$ | 711 | $ | 266 | ||||
|
|
|
|
|
|||||
| Inventories |
$ | 32,919 | $ | 23,601 | ||||
|
|
|
|
|
|||||
| f. | Depreciation and amortization expenses |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Property, plant and equipment |
$ | 6,842,270 | $ | 6,774,217 | ||||
| Right-of-use assets |
995,310 | 979,935 | ||||||
| Investment properties |
10,568 | 5,130 | ||||||
| Intangible assets |
1,641,037 | 1,059,023 | ||||||
| Incremental costs of obtaining contracts |
194,880 | 196,659 | ||||||
|
|
|
|
|
|||||
| Total depreciation and amortization expenses |
$ | 9,684,065 | $ | 9,014,964 | ||||
|
|
|
|
|
|||||
| Depreciation expenses summarized by functions |
||||||||
| Operating costs |
$ | 7,384,251 | $ | 7,277,894 | ||||
| Operating expenses |
463,897 | 481,388 | ||||||
|
|
|
|
|
|||||
| $ | 7,848,148 | $ | 7,759,282 | |||||
|
|
|
|
|
|||||
| Amortization expenses summarized by functions |
||||||||
| Operating costs |
$ | 1,784,636 | $ | 1,199,273 | ||||
| Marketing expenses |
23,656 | 23,034 | ||||||
| General and administrative expenses |
17,792 | 22,552 | ||||||
| Research and development expenses |
9,833 | 10,823 | ||||||
|
|
|
|
|
|||||
| $ | 1,835,917 | $ | 1,255,682 | |||||
|
|
|
|
|
|||||
- 49 -
| g. | Employee benefit expenses |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Post-employment benefit |
||||||||
| Defined contribution plans |
$ | 192,547 | $ | 167,292 | ||||
| Defined benefit plans |
304,115 | 499,596 | ||||||
|
|
|
|
|
|||||
| 496,662 | 666,888 | |||||||
|
|
|
|
|
|||||
| Share-based payment |
||||||||
| Equity-settled share-based payment |
4,061 | 1,646 | ||||||
|
|
|
|
|
|||||
| Other employee benefit |
10,549,101 | 10,544,068 | ||||||
|
|
|
|
|
|||||
| Total employee benefit expenses |
$ | 11,049,824 | $ | 11,212,602 | ||||
|
|
|
|
|
|||||
| Summary by functions |
||||||||
| Operating costs |
$ | 5,692,531 | $ | 5,727,372 | ||||
| Operating expenses |
5,357,293 | 5,485,230 | ||||||
|
|
|
|
|
|||||
| $ | 11,049,824 | $ | 11,212,602 | |||||
|
|
|
|
|
|||||
Chunghwa distributes employees’ compensation at the rates from 1.7% to 4.3% and remuneration to directors not higher than 0.17%, respectively, of pre-tax income.
If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the difference is recorded as a change in accounting estimate.
The compensation to the employees and remuneration to the directors of 2020 and 2019 approved by the Board of Directors on February 23, 2021 and February 26, 2020, respectively, were as follows. The compensation to the employees and remuneration to the directors of 2020 will be reported to the stockholders in their meeting planned to be held on May 28, 2021.
| Cash | ||||||||
| 2020 | 2019 | |||||||
| Compensation distributed to the employees |
$ | 1,202,448 | $ | 1,126,194 | ||||
| Remuneration paid to the directors |
35,803 | 35,210 | ||||||
There was no difference between the initial accrued amounts recognized in 2020 and 2019 and the amounts approved by the Board of Directors in 2021 and 2020 of the aforementioned compensation to employees and the remuneration to directors.
Information of the appropriation of Chunghwa’s employees compensation and remuneration to directors and those approved by the Board of Directors is available on the Market Observation Post System website.
- 50 -
| 32. | INCOME TAX |
| a. | Income tax recognized in profit or loss |
The major components of income tax expense were as follows:
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Current tax |
||||||||
| Current tax expenses recognized for the period |
$ | 2,117,788 | $ | 2,087,951 | ||||
| Income tax adjustments on prior years |
(29,722 | ) | — | |||||
| Others |
154 | 143 | ||||||
|
|
|
|
|
|||||
| 2,088,220 | 2,088,094 | |||||||
|
|
|
|
|
|||||
| Deferred tax |
||||||||
| Deferred tax expenses recognized for the period |
112,983 | 15,946 | ||||||
| Income tax adjustments on prior years |
(2,485 | ) | — | |||||
|
|
|
|
|
|||||
| 110,498 | 15,946 | |||||||
|
|
|
|
|
|||||
| Income tax recognized in profit or loss |
$ | 2,198,718 | $ | 2,104,040 | ||||
|
|
|
|
|
|||||
The applicable tax rate used by the entities subject to the Income Tax Act of the Republic of China is 20%, while the applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other entities of the Company operating in other jurisdictions are based on the tax laws in those jurisdictions.
In July 2019, the President of the ROC announced the amendments to the Statute of Industrial Innovation, which stipulate that the unappropriated earnings in 2018 and thereafter that are used to build or acquire certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings. The Company has deducted the reinvested capital expenditure while calculating income tax on unappropriated earnings.
| b. | Income tax examinations |
Income tax returns of Chunghwa, SENAO, SENYOUNG and HHI have been examined by the tax authorities through 2018. Income tax returns of ISPOT, Youth, Youyi, Aval, Wiin, CHYP, CHSI, LED, CHI, CHPT, SFD, CLPT, CHTSC, CHIEF, Unigate, SHE, CHST, IISI and UTC have been examined by the tax authorities through 2019.
| 33. | EARNINGS PER SHARE (“EPS”) |
Net income and weighted average number of common stocks used in the calculation of earnings per share were as follows:
Net Income
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Net income used to compute the basic earnings per share |
||||||||
| Net income attributable to the parent |
$ | 8,804,944 | $ | 8,283,334 | ||||
| Assumed conversion of all dilutive potential common stocks |
||||||||
| Employee stock options and employee compensation of subsidiaries |
(922 | ) | (1,386 | ) | ||||
|
|
|
|
|
|||||
| Net income used to compute the diluted earnings per share |
$ | 8,804,022 | $ | 8,281,948 | ||||
|
|
|
|
|
|||||
- 51 -
Weighted Average Number of Common Stocks
| (Thousand Shares) | ||||||||
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Weighted average number of common stocks used to compute the basic earnings per share |
7,757,447 | 7,757,447 | ||||||
| Assumed conversion of all dilutive potential common stocks |
||||||||
| Employee compensation |
8,124 | 7,731 | ||||||
|
|
|
|
|
|||||
| Weighted average number of common stocks used to compute the diluted earnings per share |
7,765,571 | 7,765,178 | ||||||
|
|
|
|
|
|||||
As Chunghwa may settle the employee compensation in shares or cash, Chunghwa shall presume that it will be settled in shares and take those shares into consideration when calculating the weighted average number of outstanding shares used in the calculation of diluted EPS if the shares have a dilutive effect. The dilutive effect of the shares needs to be considered until the approval of the number of shares to be distributed to employees as compensation in the following year.
| 34. | SHARE-BASED PAYMENT ARRANGEMENT |
| a. | CHIEF share-based compensation plan (“CHIEF Plan”) described as follows: |
| Effective Date for Plan Registration |
Resolution Date by CHIEF’s Board of Directors |
Stock Options Units | Exercise Price (NT$) | |||
| 2020.09.16 |
2020.10.26 | 200.00 | $206.00 | |||
| 2017.12.18 |
2018.10.31 | 50.00 | $138.70 (Original price$147.00) | |||
| 2017.12.19 | 950.00 | $132.70 (Original price$147.00) | ||||
| 2015.11.17 |
2015.10.22 | 2,000.00 | $34.40 (Original price$43.00) |
Each option is eligible to subscribe for one thousand common stocks when exercisable. The options are granted to specific employees that meet the vesting conditions. The CHIEF Plan has an exercise price adjustment formula upon the changes in common stocks or distribution of cash dividends. The options of the CHIEF Plan are valid for five years and the graded vesting schedule will vest two years after the grant date.
The Board of Directors of CHIEF resolved to issue stock options on October 26, 2020 and authorized the chairman to decide the grant date. Afterwards, the grant date was decided as November 13, 2020. The compensation costs was $2,432 thousand for the three months ended March 31, 2021.
The compensation costs for stock options granted on October 31, 2018 were $42 thousand and $138 thousand for the three months ended March 31, 2021 and 2020, respectively.
The compensation costs for stock options granted on December 19, 2017 were $52 thousand and $72 thousand for the three months ended March 31, 2021 and 2020, respectively.
- 52 -
No compensation cost for stock options granted on October 22, 2015 was recognized for the three months ended March 31, 2021 and 2020.
CHIEF modified the plan terms of stock options granted on October 31, 2018 in July 2020; therefore, the exercise price changed from $ $141.70 and $138.70 per share. The modification did not cause any incremental fair value granted.
CHIEF modified the plan terms of stock options granted on December 19, 2017 in July 2020; therefore, the exercise price changed from $135.60 and $132.70 per share. The modification did not cause any incremental fair value granted.
Information about CHIEF’s outstanding stock options for the three months ended March 31, 2021 and 2020 was as follows:
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||
| Granted on November 13, 2020 |
Granted on October 31, 2018 |
Granted on December 19, 2017 |
||||||||||||||||||||||
| Number of Options |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||||
| Employee stock options |
||||||||||||||||||||||||
| Options outstanding at beginning of the period |
200.00 | $ | 206.00 | 21.00 | $ | 138.70 | 427.50 | $ | 132.70 | |||||||||||||||
| Options exercised |
— | — | — | — | (213.75 | ) | 132.70 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Options outstanding at end of the period |
200.00 | 206.00 | 21.00 | 138.70 | 213.75 | 132.70 | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Options exercisable at end of the period |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Three Months Ended March 31, 2020 | ||||||||||||||||||||||||
| Granted on October 31, 2018 |
Granted on December 19, 2017 |
Granted on October 22, 2015 |
||||||||||||||||||||||
| Number of Options |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||||
| Employee stock options |
||||||||||||||||||||||||
| Options outstanding at beginning of the period |
46.00 | $ | 141.70 | 897.00 | $ | 135.60 | 314.25 | $ | 34.40 | |||||||||||||||
| Options exercised |
— | — | (448.50 | ) | 135.60 | (314.25 | ) | 34.40 | ||||||||||||||||
| Options forfeited |
— | — | (15.00 | ) | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Options outstanding at end of the period |
46.00 | 141.70 | 433.50 | 135.60 | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Options exercisable at end of the period |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
- 53 -
As of March 31, 2021, information about employee stock options outstanding was as follows:
| Granted on November 13, 2020 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 206.00 | 200.00 | 4.62 | $ | 206.00 | — | $ | — | ||||||||||||||
| Granted on October 31, 2018 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 138.70 | 21.00 | 2.58 | $ | 138.70 | — | $ | — | ||||||||||||||
| Granted on December 19, 2017 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 132.70 | 213.75 | 1.72 | $ | 132.70 | — | $ | — | ||||||||||||||
As of March 31, 2021, all the stock options granted on October 22, 2015 were exercised or forfeited.
As of December 31, 2020, information about employee stock options outstanding was as follows:
| Granted on November 13, 2020 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 206.00 | 200.00 | 4.87 | $ | 206.00 | — | $ | — | ||||||||||||||
| Granted on October 31, 2018 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 138.70 | 21.00 | 2.83 | $ | 138.70 | — | $ | — | ||||||||||||||
- 54 -
| Granted on December 19, 2017 |
||||||||||||||||||||
| Options Outstanding |
Options Exercisable | |||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||
| $ 132.70 | 427.50 | 1.96 | $ | 132.70 | 213.75 | $ | 132.70 | |||||||||||||
As of December 31, 2020, all the stock options granted on October 22, 2015 were exercised or forfeited.
As of March 31, 2020, information about employee stock options outstanding was as follows:
| Granted on October 31, 2018 |
||||||||||||||||||||
| Options Outstanding |
Options Exercisable | |||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||
| $ 141.70 | 46.00 | 3.58 | $ | 141.70 | — | $ | — | |||||||||||||
| Granted on December 19, 2017 |
||||||||||||||||||||
| Options Outstanding |
Options Exercisable | |||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||
| $ 135.60 | 433.50 | 2.72 | $ | 135.60 | — | $ | — | |||||||||||||
As of March 31, 2020, all the stock options granted on October 22, 2015 were exercised or forefeited.
CHIEF used the fair value method to evaluate the options using the Black-Scholes model and binomial option pricing model and the related assumptions and the fair value of the options were as follows:
| Stock Options Granted on November 13, 2020 |
Stock Options Granted on October 31, 2018 |
Stock Options Granted on December 19, 2017 |
Stock Options Granted on October 22, 2015 |
|||||||||||||
| Grant-date share price (NT$) |
$ | 356.00 | $ | 166.00 | $ | 95.92 | $ | 39.55 | ||||||||
| Exercise price (NT$) |
$ | 206.00 | $ | 147.00 | $ | 147.00 | $ | 43.00 | ||||||||
| Dividend yield |
— | — | — | — | ||||||||||||
| Risk-free interest rate |
0.18 | % | 0.72 | % | 0.62 | % | 0.86 | % | ||||||||
| Expected life |
5 years | 5 years | 5 years | 5 years | ||||||||||||
| Expected volatility |
34.61 | % | 16.60 | % | 17.35 | % | 21.02 | % | ||||||||
| Weighted average fair value of grants (NT$) |
$ | 173,893 | $ | 33,540 | $ | 2,318 | $ | 4,863 | ||||||||
- 55 -
The expected volatility for the options granted in 2020 was based on CHIEF’s average annualized historical share price volatility from June 5, 2018, CHIEF’s listing date on Taipei Exchange, to the grant date. The expected volatilities for the options granted from 2015 to 2018 were based on the average annualized historical share price volatility of CHIEF’s comparable companies before the grant date.
| b. | CHTSC share-based compensation plan (“CHTSC Plan”) described as follows: |
The Board of Directors of CHTSC resolved to issue 4,500 and 3,500 stock options on December 20, 2019 and February 20, 2021, respectively. Each option is eligible to subscribe for one thousand common stocks when exercisable and the exercise price are both $19.085 per share. The options are granted to specific employees that meet the vesting conditions. The CHTSC Plan has an exercise price adjustment formula upon the changes in common stocks. The options of the CHTSC Plan are valid for five years and the graded vesting schedule will vest one year after the grant date.
The compensation cost for stock options granted on February 20, 2021 was $691 thousand for the three months ended March 31, 2021.
The compensation costs for stock options granted on December 20, 2019 were $731 thousand and $1,436 thousand for the three months ended March 31, 2021 and 2020, respectively.
Information about CHTSC’s outstanding stock options for the three months ended March 31, 2021 and 2020 were as follows:
| Three Months Ended March 31, 2021 | ||||||||||||||||
| Granted on February 20, 2021 |
Granted on December 20, 2019 |
|||||||||||||||
| Number of Options |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||
| Employee stock options |
||||||||||||||||
| Options outstanding at beginning of the period |
— | $ | — | 4,328 | $ | 19.085 | ||||||||||
| Options granted |
3,500 | 19.085 | — | — | ||||||||||||
| Options exercised |
— | — | (1,082 | ) | 19.085 | |||||||||||
|
|
|
|
|
|||||||||||||
| Options outstanding at end of the period |
3,500 | 19.085 | 3,246 | 19.085 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Options exercisable at end of the period |
— | — | — | — | ||||||||||||
|
|
|
|
|
|||||||||||||
- 56 -
| Three Months Ended March 31, 2020 |
||||||||
| Granted on December 20, 2019 | ||||||||
| Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||
| Employee stock options |
||||||||
| Options outstanding at beginning and end of the period |
4,500 | $ | 19.085 | |||||
|
|
|
|||||||
| Options exercisable at end of the period |
— | — | ||||||
|
|
|
|||||||
As of March 31, 2021, information about employee stock options outstanding was as follows:
| Granted on February 20, 2021 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 19.085 | 3,500 | 4.89 | $ | 19.085 | — | $ | — | ||||||||||||||
| Granted on December 20, 2019 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 19.085 | 3,246 | 3.72 | $ | 19.085 | — | $ | — | ||||||||||||||
As of December 31, 2020, information about employee stock options outstanding was as follows:
| Granted on December 20, 2019 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 19.085 | 4,328 | 3.97 | $ | 19.085 | 1,082 | $ | 19.085 | ||||||||||||||
- 57 -
As of March 31, 2020, information about employee stock options outstanding was as follows:
| Granted on December 20, 2019 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 19.085 | 4,500 | 4.72 | $ | 19.085 | — | $ | — | ||||||||||||||
CHTSC used the fair value method to evaluate the options using the Black-Scholes model and the related assumptions and the fair value of the options were as follows:
| Stock Options Granted on Ferbuary
20, |
Stock Options Granted on December 20, 2019 |
|||||||
| Grant-date share price (NT$) |
$ | 23.73 | $ | 20.17 | ||||
| Exercise price (NT$) |
$ | 19.085 | $ | 19.085 | ||||
| Dividend yield |
15.20 | % | 12.49 | % | ||||
| Risk-free interest rate |
0.25 | % | 0.54 | % | ||||
| Expected life |
5 years | 5 years | ||||||
| Expected volatility |
47.35 | % | 42.41 | % | ||||
| Weighted average fair value of grants (NT$) |
$ | 3,332 | $ | 2,470 | ||||
Expected volatility was based on the average annualized historical share price volatility of CHTSC’s comparable companies before the grant date.
| c. | IISI share-based compensation plan (“IISI Plan”) described as follows: |
IISI issued 1,665 and 1,335 stock options in January 2014 and August 2013, respectively. Each option is eligible to subscribe for one thousand common stocks when exercisable. The options are granted to specific employees of IISI and its subsidiaires that meet the vesting conditions. The options of the IISI Plan are valid for seven years and the graded vesting schedule will vest at certain percentages starting from two years after the grant date. The exercise price of the original options is $14 per share. After the options are issued, if the common stocks of IISI change, the exercise price of the options should be adjusted according to the prescibed formula.
No compensation cost of stock options granted was recognized for the three months ended March 31, 2021.
- 58 -
Information about IISI’s outstanding stock options for the three months ended March 31, 2021 was as follows:
| Three Months Ended March 31, 2021 |
||||||||
| Granted in January 2014 | ||||||||
| Number of Options |
Weighted Average Exercise Price |
|||||||
| Employee stock options |
||||||||
| Options outstanding at beginning of the period |
530.00 | $ | 14.00 | |||||
| Options exercised |
(261.00 | ) | 14.00 | |||||
| Options forfeited |
(269.00 | ) | — | |||||
|
|
|
|||||||
| Options outstanding at end of the period |
— | — | ||||||
|
|
|
|||||||
| Options exercisable at end of the period |
— | — | ||||||
|
|
|
|||||||
As of March 31, 2021, all the stock options granted in 2014 and 2013 were exercised or forfeited.
As of December 31, 2020, information about employee stock options outstanding was as follows:
| Granted in January 2014 | ||||||||||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Price (NT$) |
Number of Options |
Weighted Average Remaining Contractual Life (Years) |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 14.00 | 530.00 | 0.04 | $ | 14.00 | 530.00 | $ | 14.00 | ||||||||||||||
As of December 31, 2020, all the stock options granted in 2013 were exercised or forfeited.
IISI used the fair value method to evaluate the options using the Black-Scholes model and the related assumptions and the fair value of the options were as follows:
| Stock Options Granted in January 2014 |
Stock Options Granted in August 2013 |
|||||||
| Grant-date share price (NT$) |
$ | 14.51 | $ | 12.51 | ||||
| Exercise price (NT$) |
$ | 14.00 | $ | 14.00 | ||||
| Dividend yield |
6 | % | 6 | % | ||||
| Risk-free interest rate |
1.16%-1.32 | % | 1.20%-1.39 | % | ||||
| Expected life |
4.5-5.5 years | 4.5-5.5 years | ||||||
| Expected volatility |
35.28%-35.97 | % | 36.01%-36.62 | % | ||||
| Weighted average fair value of grants (NT$) |
$ | 14.51 | $ | 12.51 | ||||
Expected volatility was based on the average annualized historical share price volatility of IISI’s comparable companies before the grant date.
- 59 -
| d. | CLPT share-based compensation plan (“CLPT Plan”) described as follows: |
The Board of Directors of CLPT resolved to issue 690 stock options on February 26, 2021. Each option is eligible to subscribe for one thousand common stocks when exercisable and the exercise price is $16.87 per share. The options are granted to specific employees that meet the vesting conditions. The CLPT Plan has an exercise price adjustment formula upon the changes in common stocks or distribution of cash dividends. The options of the CLPT Plan are valid for four years and the graded vesting schedule will vest two years after the grant date.
The compensation cost was $113 thousand for the three months ended March 31, 2021.
Information about CLPT’s outstanding stock options for the three months ended March 31, 2021 was as follows:
| Three Months Ended March 31, 2021 |
||||||||
| Granted on February 26, 2021 | ||||||||
| Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||
| Employee stock options |
||||||||
| Options outstanding at beginning of the period |
— | $ | — | |||||
| Options granted |
690 | 16.87 | ||||||
|
|
|
|||||||
| Options outstanding at end of the period |
690 | 16.87 | ||||||
|
|
|
|||||||
| Options exercisable at end of the period |
— | — | ||||||
|
|
|
|||||||
As of March 31, 2021, information about employee stock options outstanding was as follows:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise |
Number of Options |
Weighted Average Remaining |
Weighted Average Exercise Price (NT$) |
Number of Options |
Weighted Average Exercise Price (NT$) |
|||||||||||||||||
| $ | 16.87 | 690 | 3.91 | $ | 16.87 | — | $ | — | ||||||||||||||
CLPT used the fair value method to evaluate the options using the Black-Scholes model and the related assumptions and the fair value of the options were as follows:
| Stock Options Granted on February 26, 2021 |
||||
| Grant-date share price (NT$) |
$ | 17.63 | ||
| Exercise price (NT$) |
$ | 16.87 | ||
| Dividend yield |
— | |||
| Risk-free interest rate |
0.31 | % | ||
(Continued)
- 60 -
| Stock Options Granted on February 26, 2021 |
||||
| Expected life |
|
4 years |
| |
| Expected volatility |
35.22 | % | ||
| Weighted average fair value of grants (NT$) |
$ | 4,750 | ||
(Concluded)
Expected volatility was based on the average annualized historical share price volatility of CLPT’s comparable companies before the grant date.
| 35. | CASH FLOW INFORMATION |
Except for those disclosed in other notes, the Company entered into the following non-cash investing and financing activities:
| Investing activities | Three Months Ended March 31 | |||||||
| 2021 | 2020 | |||||||
| Increase in property, plant and equipment |
$ | 5,554,052 | $ | 2,950,879 | ||||
| Changes in other payables |
(1,110,810 | ) | 778,532 | |||||
|
|
|
|
|
|||||
| Acquisition of property, plant and equipment |
$ | 4,443,242 | $ | 3,729,411 | ||||
|
|
|
|
|
|||||
| Increase in intangible assets |
$ | 20,453 | $ | 48,420,261 | ||||
| Changes in other assets |
— | (1,000,000 | ) | |||||
|
|
|
|
|
|||||
| Acquisition of intangible assets |
$ | 20,453 | $ | 47,420,261 | ||||
|
|
|
|
|
|||||
| Disposal of financial assets at fair value through other comprehensive income |
$ | 2,635,568 | $ | — | ||||
| Changes in other current monetary assets |
270,321 | — | ||||||
|
|
|
|
|
|||||
| Proceeds from disposal of financial assets at fair value through other comprehensive income |
$ | 2,905,889 | $ | — | ||||
|
|
|
|
|
|||||
Financing Activities
| Balance on January 1, |
Cash Flows From |
Changes In Non-Cash Transactions |
Cash Flows From Operation |
Balance on March 31, |
||||||||||||||||||||
| 2021 | Activities | New Leases | Others | Interest Paid | 2021 | |||||||||||||||||||
| Lease liabilities |
$ | 9,596,667 | $ | (1,018,514 | ) | $ | 814,854 | $ | (56,086 | ) | $ | (17,960 | ) | $ | 9,318,961 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance on January 1, |
Cash Flows From |
Changes In Non-Cash Transactions |
Cash Flows From Operation |
Balance on March 31, |
||||||||||||||||||||
| 2020 | Activities | New Leases | Others | Interest Paid | 2020 | |||||||||||||||||||
| Lease liabilities |
$ | 9,758,138 | $ | (992,494 | ) | $ | 1,162,359 | $ | (86,824 | ) | $ | (21,472 | ) | $ | 9,819,707 | |||||||||
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- 61 -
| 36. | CAPITAL MANAGEMENT |
The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.
The capital structure of the Company consists of debt of the Company and the equity attributable to the parent.
Some consolidated entities are required to maintain minimum paid-in capital amount as prescribed by the applicable laws.
The management reviews the capital structure of the Company as needed. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. According to the management’s suggestions, the Company maintains a balanced capital structure through paying cash dividends, increasing its share capital, purchasing outstanding shares, and issuing new debt or repaying debt.
| 37. | FINANCIAL INSTRUMENTS |
Fair Value Information
The fair value measurement guidance establishes a framework for measuring fair value and expands disclosure about fair value measurements. The standard describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value. These levels are:
Level 1 fair value measurements: These measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 fair value measurements: These measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements: These measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
| a. | Financial instruments that are not measured at fair value but for which fair value is disclosed |
Except those listed in the table below, the Company considers that the carrying amounts of financial assets and liabilities not measured at fair value approximate their fair values or the fair values cannot be reliable estimated.
| March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||
| Financial liabilities |
||||||||||||||||||||||||
| Financial liabilities measured at amortized cost |
||||||||||||||||||||||||
| Bonds payable |
$ | 19,981,108 | $ | 20,083,133 | $ | 19,980,272 | $ | 20,078,098 | $ | — | $ | — | ||||||||||||
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The fair value of bonds payable is measured using Level 2 inputs. The valuation of fair value is based on the quoted market prices provided by third party pricing services.
- 62 -
| b. | Financial instruments that are measured at fair value on a recurring basis |
March 31, 2021
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial assets at FVTPL |
||||||||||||||||
| Listed stocks |
$ | 8,061 | $ | — | $ | — | $ | 8,061 | ||||||||
| Non-listed stocks |
— | — | 816,602 | 816,602 | ||||||||||||
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| $ | 8,061 | $ | — | $ | 816,602 | $ | 824,663 | |||||||||
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| Financial assets at FVOCI |
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| Listed stocks |
$ | 150,803 | $ | — | $ | — | $ | 150,803 | ||||||||
| Non-listed stocks |
— | — | 3,499,537 | 3,499,537 | ||||||||||||
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| $ | 150,803 | $ | — | $ | 3,499,537 | $ | 3,650,340 | |||||||||
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| Financial liabilities at FVTPL |
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| Derivatives |
$ | — | $ | 3,867 | $ | — | $ | 3,867 | ||||||||
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| Hedging financial liabilities |
$ | — | $ | 1,864 | $ | — | $ | 1,864 | ||||||||
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December 31, 2020
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial assets at FVTPL |
||||||||||||||||
| Derivatives |
$ | — | $ | 2,271 | $ | — | $ | 2,271 | ||||||||
| Listed stocks |
7,626 | — | — | 7,626 | ||||||||||||
| Non-listed stocks |
— | — | 677,202 | 677,202 | ||||||||||||
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| $ | 7,626 | $ | 2,271 | $ | 677,202 | $ | 687,099 | |||||||||
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| Hedging financial assets |
$ | — | $ | 1,752 | $ | — | $ | 1,752 | ||||||||
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| Financial assets at FVOCI |
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| Listed stocks |
$ | 2,754,175 | $ | — | $ | — | $ | 2,754,175 | ||||||||
| Non-listed stocks |
— | — | 4,438,999 | 4,438,999 | ||||||||||||
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| $ | 2,754,175 | $ | — | $ | 4,438,999 | $ | 7,193,174 | |||||||||
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| Financial liabilities at FVTPL |
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| Derivatives |
$ | — | $ | 143 | $ | — | $ | 143 | ||||||||
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- 63 -
March 31, 2020
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial assets at FVTPL |
||||||||||||||||
| Listed stocks |
$ | 6,631 | $ | — | $ | — | $ | 6,631 | ||||||||
| Non-listed stocks |
— | — | 767,362 | 767,362 | ||||||||||||
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| $ | 6,631 | $ | — | $ | 767,362 | $ | 773,993 | |||||||||
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| Financial assets at FVOCI |
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| Listed stocks |
$ | 1,823,534 | $ | — | $ | — | $ | 1,823,534 | ||||||||
| Non-listed stocks |
— | — | 4,079,647 | 4,079,647 | ||||||||||||
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| $ | 1,823,534 | $ | — | $ | 4,079,647 | $ | 5,903,181 | |||||||||
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| Financial liabilities at FVTPL |
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| Derivatives |
$ | — | $ | 570 | $ | — | $ | 570 | ||||||||
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There were no transfers between Levels 1 and 2 for the three months ended March 31, 2021 and 2020.
The reconciliations for financial assets measured at Level 3 were listed below:
Three months ended March 31, 2021
| Financial Assets | Measured at Fair Value through Profit or Loss |
Measured at Fair Value through Other Comprehensive Income |
Total | |||||||||
| Balance on January 1, 2021 |
$ | 677,202 | $ | 4,438,999 | $ | 5,116,201 | ||||||
| Acquisition |
— | 33,000 | 33,000 | |||||||||
| Recognized in profit or loss under “Other gains and losses” |
139,400 | — | 139,400 | |||||||||
| Recognized in other comprehensive income under “Unrealized gain or loss on financial assets at fair value through other comprehensive income” |
— | (972,462 | ) | (972,462 | ) | |||||||
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| Balance on March 31, 2021 |
$ | 816,602 | $ | 3,499,537 | $ | 4,316,139 | ||||||
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| Unrealized gain for the three months ended March 31, 2021 |
$ | 139,400 | ||||||||||
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- 64 -
Three months ended March 31, 2020
| Financial Assets | Measured at Fair Value through Profit or Loss |
Measured at Fair Value through Other Comprehensive Income |
Total | |||||||||
| Balance on January 1, 2020 |
$ | 778,105 | $ | 4,815,301 | $ | 5,593,406 | ||||||
| Recognized in profit or loss under “Other gains and losses” |
(10,743 | ) | — | (10,743 | ) | |||||||
| Recognized in other comprehensive income under “Unrealized gain or loss on financial assets at fair value through other comprehensive income” |
— | (735,654 | ) | (735,654 | ) | |||||||
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| Balance on March 31, 2020 |
$ | 767,362 | $ | 4,079,647 | $ | 4,847,009 | ||||||
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| Unrealized loss for the three months ended March 31, 2020 |
$ | (10,743 | ) | |||||||||
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The fair values of financial assets and financial liabilities of Level 2 are determined as follows:
| 1) | The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market prices. |
| 2) | For derivatives, fair values are estimated using discounted cash flow model. Future cash flows are estimated based on observable inputs including forward exchange rates at the end of the reporting periods and the forward and spot exchange rates stated in the contracts, discounted at a rate that reflects the credit risk of various counterparties. |
The fair values of non-listed domestic and foreign equity investments were Level 3 financial assets and determined using the market approach by reference the Price-to-Book ratios (P/B ratios) of peer companies that traded in active market or using assets approach. The significant unobservable inputs used were listed in the table below. A decrease in discount for the lack of marketability or noncontrolling interests discount would result in increases in the fair values.
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Discount for lack of marketability |
14.73%-20.00 | % | 14.73%-20.00 | % | 13.73%-20.00 | % | ||||||
| Noncontrolling interests discount |
17.29%-25.00 | % | 17.29%-25.00 | % | 21.45%-25.00 | % | ||||||
If the inputs to the valuation model were changed to reflect reasonably possible alternative assumptions while all the other variables were held constant, the fair values of equity investments would increase as below table. When related discounts increase, the fair value of equity investments would be the negative amount of the same amount.
| March 31 | ||||||||
| 2021 | 2020 | |||||||
| Discount for lack of marketability 5% decrease |
$ | 233,202 | $ | 302,934 | ||||
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|||||
| Noncontrolling interests discount 5% decrease |
$ | 17,205 | $ | 52,925 | ||||
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- 65 -
Categories of Financial Instruments
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Financial assets |
||||||||||||
| Measured at FVTPL |
||||||||||||
| Mandatorily measured at FVTPL |
$ | 824,663 | $ | 687,099 | $ | 773,993 | ||||||
| Hedging financial assets |
— | 1,752 | — | |||||||||
| Financial assets at amortized cost (Note a) |
66,028,573 | 62,405,714 | 48,934,340 | |||||||||
| Financial assets at FVOCI |
3,650,340 | 7,193,174 | 5,903,181 | |||||||||
| Financial liabilities |
||||||||||||
| Measured at FVTPL |
||||||||||||
| Held for trading |
3,867 | 143 | 570 | |||||||||
| Hedging financial liabilities |
1,864 | — | — | |||||||||
| Measured at amortized cost (Note b) |
55,395,249 | 62,557,414 | 49,833,841 | |||||||||
| Note a: | The balances included cash and cash equivalents, trade notes and accounts receivable, receivables from related parties, other current monetary assets and refundable deposits (classified as other noncurrent assets), which were financial assets measured at amortized cost. | |
| Note b: | The balances included short-term loans, short-term bills payable, trade notes and accounts payable, payables to related parties, partial other payables, customers’ deposits, bonds payable and long-term loans (included current portion) which were financial liabilities carried at amortized cost. | |
Financial Risk Management Objectives
The main financial instruments of the Company include equity investments, trade notes and accounts receivable, trade notes and accounts payable, lease liabilities, loans, short-term bills payable and bonds payable. The Company’s Finance Department provides services to its business units, co-ordinates access to domestic and international capital markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk, and liquidity risk.
The Company seeks to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Company’s policies approved by the Board of Directors. Those derivatives are used to hedge the risks of exchange rate fluctuation arising from operating or investment activities. Compliance with policies and risk exposure limits is reviewed by the Company’s Finance Department on a continuous basis. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
Chunghwa reports the significant risk exposures and related action plans timely and actively to the audit committee and if needed to the Board of Directors.
| a. | Market risk |
The Company is exposed to market risks of changes in foreign currency exchange rates and interest rates. The Company uses forward exchange contracts to hedge the exchange rate risk arising from assets and liabilities denominated in foreign currencies.
- 66 -
There were no changes to the Company’s exposure to market risks or the manner in which these risks are managed and measured.
| 1) | Foreign currency risk |
The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the balance sheet dates were as follows:
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Assets |
||||||||||||
| USD |
$ | 2,473,347 | $ | 2,710,705 | $ | 5,699,931 | ||||||
| EUR |
33,152 | 14,957 | 16,599 | |||||||||
| SGD |
266,901 | 169,747 | 229,967 | |||||||||
| JPY |
18,616 | 22,289 | 21,229 | |||||||||
| RMB |
40,062 | 29,742 | 15,819 | |||||||||
| HKD |
69,033 | 69,321 | 340 | |||||||||
| Liabilities |
||||||||||||
| USD |
705,777 | 767,553 | 4,097,882 | |||||||||
| EUR |
721,827 | 957,257 | 179,523 | |||||||||
| SGD |
989,769 | 1,049,225 | 1,115,049 | |||||||||
| JPY |
7,706 | 9,683 | 8,705 | |||||||||
| RMB |
102 | 201 | — | |||||||||
| HKD |
7,695 | 7,665 | 10,530 | |||||||||
The carrying amounts of the Company’s derivatives with exchange rate risk exposures at the balance sheet dates were as follows:
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Assets |
||||||||||||
| USD |
$ | — | $ | 121 | $ | — | ||||||
| EUR |
— | 3,902 | — | |||||||||
| Liabilities |
||||||||||||
| USD |
— | 143 | — | |||||||||
| EUR |
5,731 | — | 570 | |||||||||
Foreign currency sensitivity analysis
The Company is mainly exposed to the fluctuations of the currencies USD, EUR, SGD, JPY, RMB and HKD as listed above.
The following table details the Company’s sensitivity to a 5% increase and decrease in the functional currency against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and forward exchange contracts. A positive number below indicates an increase in pre-tax profit or equity where the functional currency weakens 5% against the relevant currency.
- 67 -
| Three Months Ended March 31 |
||||||||
| 2021 | 2020 | |||||||
| Profit or loss |
||||||||
| Monetary assets and liabilities (a) |
||||||||
| USD |
$ | 88,379 | $ | 80,102 | ||||
| EUR |
(34,434 | ) | (8,146 | ) | ||||
| SGD |
(36,143 | ) | (44,254 | ) | ||||
| JPY |
546 | 626 | ||||||
| RMB |
1,998 | 791 | ||||||
| HKD |
3,067 | (510 | ) | |||||
| Derivatives (b) |
||||||||
| EUR |
8,638 | 1,767 | ||||||
| Equity |
||||||||
| Derivatives (c) |
||||||||
| EUR |
24,608 | — | ||||||
| a) | This is mainly attributable to the exposure to foreign currency denominated receivables and payables of the Company outstanding at the balance sheet dates. |
| b) | This is mainly attributable to forward exchange contracts. |
| c) | This is mainly attributable to the changes in the fair value of derivatives that are designated as cash flow hedges. |
For a 5% strengthening of the functional currency against the relevant currencies, there would be an equal and opposite effect on the pre-tax profit or equity for the amounts shown above.
| 2) | Interest rate risk |
The carrying amounts of the Company’s exposures to interest rates on financial assets and financial liabilities at the balance sheet dates were as follows:
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Fair value interest rate risk |
||||||||||||
| Financial assets |
$ | 29,746,090 | $ | 24,217,959 | $ | 13,211,537 | ||||||
| Financial liabilities |
34,299,558 | 36,576,137 | 29,785,336 | |||||||||
| Cash flow interest rate risk |
||||||||||||
| Financial assets |
10,204,551 | 9,306,397 | 7,326,188 | |||||||||
| Financial liabilities |
1,660,000 | 1,667,000 | 1,670,000 | |||||||||
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. A 25 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.
If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Company’s pre-tax income would increase/decrease by $21,361 thousand and $14,140 thousand for the three months ended March 31, 2021 and 2020, respectively. This is mainly attributable to the Company’s exposure to floating interest rates on its financial assets and short-term and long-term loans.
- 68 -
| 3) | Other price risk |
The Company is exposed to equity price risks arising from holding other company’s equity. Equity investments are held for strategic rather than trading purposes. The management managed the risk through holding various risk portfolios. Further, the Company assigned finance and investment departments to monitor the price risk.
Equity price sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to equity price risks at the end of the reporting period.
If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income would have increased/decreased by $41,233 thousand and $182,517 thousand as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI for the three months ended March 31, 2021. If equity prices had been 5% higher/lower, pre-tax profit and pre-tax other comprehensive income would have increased/decreased by $38,700 thousand and $295,159 thousand as a result of the changes in fair value of financial assets at FVTPL and financial assets at FVOCI for the three months ended March 31, 2020.
| b. | Credit risk |
Credit risk refers to the risk that a counterparty would default on its contractual obligations resulting in financial loss to the Company. The maximum credit exposure of the aforementioned financial instruments is equal to their carrying amounts recognized in the consolidated balance sheet as of the balance sheet date.
The Company has large trade receivables outstanding with its customers. A substantial majority of the Company’s outstanding trade receivables are not covered by collateral or credit insurance. The Company has implemented ongoing measures including enhancing credit assessments and strengthening overall risk management to reduce its credit risk. While the Company has procedures to monitor and limit exposure to credit risk on trade receivables, there can be no assurance such procedures will effectively limit its credit risk and avoid losses. This risk is heightened during periods when economic conditions worsen.
As the Company serves a large number of unrelated consumers, the concentration of credit risk was limited.
| c. | Liquidity risk |
The Company manages and maintains sufficient cash and cash equivalent position to support the operations and reduce the impact on fluctuation of cash flow.
| 1) | Liquidity and interest risk tables |
The following tables detailed the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company is required to pay.
- 69 -
March 31, 2021
| Weighted Average Effective Interest Rate (%) |
Less than 1 Month |
1-3 Months | 3 Months to 1 Year |
1-5 Years | More than 5 Years |
Total | ||||||||||||||||||||||
| Non-derivative financial liabilities |
||||||||||||||||||||||||||||
| Non-interest bearing |
— | $ | 29,650,602 | $ | 786,069 | $ | 2,174,260 | $ | 4,731,909 | $ | — | $ | 37,342,840 | |||||||||||||||
| Floating interest rate instruments |
0.77 | — | 50,000 | 1,610,000 | — | — | 1,660,000 | |||||||||||||||||||||
| Fixed interest rate instruments |
0.48 | 5,000,000 | — | — | 8,800,000 | 11,200,000 | 25,000,000 | |||||||||||||||||||||
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|
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| $ | 34,650,602 | $ | 836,069 | $ | 3,784,260 | $ | 13,531,909 | $ | 11,200,000 | $ | 64,002,840 | |||||||||||||||||
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Information about the maturity analysis for lease liabilities was as follows:
| Less than 1 Year |
1-3 Years | 3-5 Years | More than 5 Years |
Total | ||||||||||||||||
| Lease liabilities |
$ | 3,316,670 | $ | 4,146,909 | $ | 1,658,759 | $ | 354,212 | $ | 9,476,550 | ||||||||||
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|||||||||||
December 31, 2020
| Weighted Average Effective Interest Rate (%) |
Less than 1 Month |
1-3 Months | 3 Months to 1 Year |
1-5 Years | More than 5 Years |
Total | ||||||||||||||||||||||
| Non-derivative financial liabilities |
||||||||||||||||||||||||||||
| Non-interest bearing |
— | $ | 37,748,572 | $ | — | $ | 2,476,148 | $ | 4,826,679 | $ | — | $ | 45,051,399 | |||||||||||||||
| Floating interest rate instruments |
0.78 | — | 7,000 | 1,660,000 | — | — | 1,667,000 | |||||||||||||||||||||
| Fixed interest rate instruments |
0.50 | 7,000,000 | — | — | 8,800,000 | 11,200,000 | 27,000,000 | |||||||||||||||||||||
|
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|
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|
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|
|
|
|
|
|
|||||||||||||||||
| $ | 44,748,572 | $ | 7,000 | $ | 4,136,148 | $ | 13,626,679 | $ | 11,200,000 | $ | 73,718,399 | |||||||||||||||||
|
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|
|
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Information about the maturity analysis for lease liabilities was as follows:
| Less than 1 Year |
1-3 Years | 3-5 Years | More than 5 Years |
Total | ||||||||||||||||
| Lease liabilities |
$ | 3,396,908 | $ | 4,239,587 | $ | 1,691,426 | $ | 409,067 | $ | 9,736,988 | ||||||||||
|
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|
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|
|
|
|
|||||||||||
March 31, 2020
| Weighted Average Effective Interest Rate (%) |
Less than 1 Month |
1-3 Months | 3 Months to 1 Year |
1-5 Years | More than 5 Years |
Total | ||||||||||||||||||||||
| Non-derivative financial liabilities |
||||||||||||||||||||||||||||
| Non-interest bearing |
— | $ | 28,722,899 | $ | 1,352,266 | $ | 1,807,337 | $ | 4,601,704 | $ | — | $ | 36,484,206 | |||||||||||||||
| Floating interest rate instruments |
0.97 | 60,000 | — | 10,000 | 1,600,000 | — | 1,670,000 | |||||||||||||||||||||
| Fixed interest rate instruments |
0.62 | — | 4,000,000 | 16,000,000 | — | — | 20,000,000 | |||||||||||||||||||||
|
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|
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|
|
|
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|
|
|
|
|
|||||||||||||||||
| $ | 28,782,899 | $ | 5,352,266 | $ | 17,817,337 | $ | 6,201,704 | $ | — | $ | 58,154,206 | |||||||||||||||||
|
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|
|
|||||||||||||||||
Information about the maturity analysis for lease liabilities was as follows:
| Less than 1 Year |
1-3 Years | 3-5 Years | More than 5 Years |
Total | ||||||||||||||||
| Lease liabilities |
$ | 3,409,621 | $ | 4,306,574 | $ | 1,629,653 | $ | 645,022 | $ | 9,990,870 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
- 70 -
The following table detailed the Company’s liquidity analysis for its derivative financial instruments. The table had been drawn up based on the undiscounted gross inflows and outflows on those derivatives that require gross settlement.
| Less than 1 Month |
1-3 Months | 3 Months to 1 Year |
1-5 Years | Total | ||||||||||||||||
| March 31, 2021 |
||||||||||||||||||||
| Gross settled |
||||||||||||||||||||
| Forward exchange contracts |
||||||||||||||||||||
| Inflow |
$ | — | $ | 666,351 | $ | — | $ | — | $ | 666,351 | ||||||||||
| Outflow |
— | 672,082 | — | — | 672,082 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | — | $ | (5,731 | ) | $ | — | $ | — | $ | (5,731 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| December 31, 2020 |
||||||||||||||||||||
| Gross settled |
||||||||||||||||||||
| Forward exchange contracts |
||||||||||||||||||||
| Inflow |
$ | — | $ | 634,676 | $ | — | $ | — | $ | 634,676 | ||||||||||
| Outflow |
— | 630,796 | — | — | 630,796 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | — | $ | 3,880 | $ | — | $ | — | $ | 3,880 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| March 31, 2020 |
||||||||||||||||||||
| Gross settled |
||||||||||||||||||||
| Forward exchange contracts |
||||||||||||||||||||
| Inflow |
$ | — | $ | 35,335 | $ | — | $ | — | $ | 35,335 | ||||||||||
| Outflow |
— | 35,905 | — | — | 35,905 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | — | $ | (570 | ) | $ | — | $ | — | $ | (570 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 2) | Financing facilities |
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Facilities of unsecured bank loan and commercial paper payable |
||||||||||||
| Amount used |
$ | 5,060,800 | $ | 7,067,800 | $ | 20,105,826 | ||||||
| Amount unused |
51,862,487 | 59,277,690 | 46,045,299 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 56,923,287 | $ | 66,345,490 | $ | 66,151,125 | |||||||
|
|
|
|
|
|
|
|||||||
| Secured bank loan facility |
||||||||||||
| Amount used |
$ | 1,600,000 | $ | 1,600,000 | $ | 1,600,000 | ||||||
| Amount unused |
20,000 | 20,000 | 1,340,000 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 1,620,000 | $ | 1,620,000 | $ | 2,940,000 | |||||||
|
|
|
|
|
|
|
|||||||
- 71 -
| 38. | RELATED PARTIES TRANSACTIONS |
The ROC Government, one of Chunghwa’s customers, has significant equity interest in Chunghwa. Chunghwa provides fixed-line services, wireless services, internet and data and other services to the various departments and institutions of the ROC Government in the normal course of business and at arm’s-length prices. Except for those disclosed in other notes or this note, the transactions with the ROC government bodies have not been disclosed because the transactions are not individually or collectively significant. However, the related revenues and operating costs have been appropriately recorded.
| a. | The Company engages in business transactions with the following related parties: |
| Company |
Relationship | |
| Taiwan International Standard Electronics Co., Ltd. |
Associate | |
| So-net Entertainment Taiwan Limited |
Associate | |
| KKBOX Taiwan Co., Ltd. |
Associate | |
| KingwayTek Technology Co., Ltd. |
Associate | |
| UUPON Inc. |
Associate (Note 2) | |
| Taiwan International Ports Logistics Corporation |
Associate | |
| International Integrated Systems, Inc. |
Subsidiary (Note 1) | |
| Senao Networks, Inc. |
Associate | |
| EnRack Tech. Co., Ltd. |
Subsidiary of the Company’s associate, Senao Networks, Inc. | |
| Emplus Technologies, Inc. |
Subsidiary of the Company’s associate, Senao Networks, Inc. | |
| ST-2 Satellite Ventures Pte., Ltd. |
Associate | |
| Viettel-CHT Co., Ltd. |
Associate | |
| Click Force Co., Ltd. |
Associate | |
| Alliance Digital Tech Co., Ltd. |
Associate | |
| Chunghwa PChome Fund I Co., Ltd. |
Associate | |
| Cornerstone Ventures Co., Ltd. |
Associate | |
| Next Commercial Bank Co., Ltd. |
Associate | |
| WiAdvance Technology Corporation |
Associate | |
| Chunghwa SEA Holdings |
Joint venture | |
| Other related parties |
||
| Chunghwa Telecom Foundation |
A nonprofit organization of which the funds donated by Chunghwa exceeds one third of its total funds | |
| Senao Technical and Cultural Foundation |
A nonprofit organization of which the funds donated by SENAO exceeds one third of its total funds | |
| Sochamp Technology Co., Ltd. |
Investor of significant influence over CHST | |
| E-Life Mall Co., Ltd. |
One of the directors of E-Life Mall and a director of SENAO are members of an immediate family | |
| Engenius Technologies Co., Ltd. |
Chairman of Engenius Technologies Co., Ltd. is a member of SENAO’s management | |
| Cheng Keng Investment Co., Ltd. |
Chairman of Cheng Keng Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family | |
| Cheng Feng Investment Co., Ltd. |
Chairman of Cheng Feng Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family |
(Continued)
- 72 -
| Company |
Relationship | |
| All Oriented Investment Co., Ltd. |
Chairman of All Oriented Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family | |
| Hwa Shun Investment Co., Ltd. |
Chairman of Hwa Shun Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family | |
| Yu Yu Investment Co., Ltd. |
Chairman of Yu Yu Investment Co., Ltd. and SENAO’s chief executive officer are members of an immediate family | |
| United Daily News Co., Ltd. |
Investor of significant influence over SFD | |
| Shenzhen Century Communication Co., Ltd. |
Investor of significant influence over SCT | |
| Chunghwa Post Co., Ltd. |
Government-related entity as Chunghwa Telecom |
(Concluded)
| Note 1: | IISI was an associate and has become a subsidiary starting from July 1, 2020. Please refer to Note 3 (b). All transactions between the Company were eliminated upon consolidation since the acquisition date. | |
| Note 2: | UUPON was previously an associate. As the Company did not participate in the capital increase of UUPON in October 2020; therefore, the Company lost its significant influence over UUPON. Since then, UUPON was no longer a related party of the Company. Please refer to Note 14. | |
| b. | Balances and transactions between Chunghwa and its subsidiaries, which are related parties of Chunghwa, have been eliminated on consolidation and are not disclosed in this note. Terms of the foregoing transactions with related parties were not significantly different from transactions with non-related parties. When no similar transactions with non-related parties can be referenced, terms were determined in accordance with mutual agreements. Details of transactions between the Company and other related parties are disclosed below: |
| 1) | Operating transactions |
| Revenues | ||||||||
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Associates |
$ | 70,391 | $ | 61,699 | ||||
| Others |
12,778 | 16,992 | ||||||
|
|
|
|
|
|||||
| $ | 83,169 | $ | 78,691 | |||||
|
|
|
|
|
|||||
| Operating Costs and Expenses | ||||||||
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Associates |
$ | 138,287 | $ | 173,950 | ||||
| Others |
55,929 | 55,693 | ||||||
|
|
|
|
|
|||||
| $ | 194,216 | $ | 229,643 | |||||
|
|
|
|
|
|||||
- 73 -
| 2) | Non-operating transactions |
| Non-operating Income and Expenses |
||||||||
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Associates |
$ | 9,418 | $ | 63,560 | ||||
| Others |
351 | 11 | ||||||
|
|
|
|
|
|||||
| $ | 9,769 | $ | 63,571 | |||||
|
|
|
|
|
|||||
| 3) | Receivables |
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Associates |
$ | 31,200 | $ | 228,879 | $ | 6,444 | ||||||
| Others |
3,003 | 1,817 | 3,268 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 34,203 | $ | 230,696 | $ | 9,712 | |||||||
|
|
|
|
|
|
|
|||||||
| 4) | Contract liabilities-current |
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Associates |
$ | 182,857 | $ | 182,857 | $ | — | ||||||
|
|
|
|
|
|
|
|||||||
| 5) | Payables |
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Associates |
$ | 321,139 | $ | 642,489 | $ | 335,248 | ||||||
| Others |
3,480 | 3,455 | 3,201 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 324,619 | $ | 645,944 | $ | 338,449 | |||||||
|
|
|
|
|
|
|
|||||||
| 6) | Customers’ deposits |
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Associates |
$ | 8,420 | $ | 4,626 | $ | 6,734 | ||||||
|
|
|
|
|
|
|
|||||||
| 7) | Acquisition of property, plant and equipment |
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Associates |
$ | 40,428 | $ | 12,995 | ||||
|
|
|
|
|
|||||
- 74 -
| 8) | Lease-in agreements |
Chunghwa entered into a contract with ST-2 Satellite Ventures Pte., Ltd. on March 12, 2010 to lease capacity on the ST-2 satellite. This lease term is for 15 years which should start from the official operation of ST-2 satellite and the total contract value is approximately $6,000,000 thousand (SGD 260,723 thousand), including a prepayment of $3,067,711 thousand at the inception of the lease, and the rest of amount should be paid annually when ST-2 satellite starts its official operation. ST-2 satellite was launched in May 2011 and began its official operation in August 2011.
The lease liabilities of ST-2 Satellite Ventures Pte., Ltd. as of balance sheet dates were as follows:
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Lease liabilities - current |
$ | 179,229 | $ | 182,187 | $ | 179,398 | ||||||
| Lease liabilities - noncurrent |
760,297 | 816,610 | 932,884 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 939,526 | $ | 998,797 | $ | 1,112,282 | |||||||
|
|
|
|
|
|
|
|||||||
The interest expense recognized for the aforementioned lease liabilities for the three months ended March 31, 2021 and 2020 were $1,994 thousand and $2,412 thousand, respectively.
| c. | Compensation of key management personnel |
The compensation of directors and key management personnel was as follows:
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Short-term employee benefits |
$ | 90,780 | $ | 72,366 | ||||
| Post-employment benefits |
1,941 | 2,010 | ||||||
| Share-based payment |
404 | 20 | ||||||
|
|
|
|
|
|||||
| $ | 93,125 | $ | 74,396 | |||||
|
|
|
|
|
|||||
The compensation of directors and key management personnel was mainly determined by the compensation committee having regard to the performances and market trends.
| 39. | PLEDGED ASSETS |
The following assets are pledged as collaterals for bank loans, custom duties of the imported materials and warranties of contract performance.
| March 31, 2021 |
December 31, 2020 |
March 31, 2020 |
||||||||||
| Property, plant and equipment |
$ | 2,454,431 | $ | 2,461,810 | $ | 2,483,946 | ||||||
| Land held under development (included in inventories) |
1,998,733 | 1,998,733 | 1,998,733 | |||||||||
| Restricted assets (included in other assets - others) |
196,914 | 209,638 | 2,850 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 4,650,078 | $ | 4,670,181 | $ | 4,485,529 | |||||||
|
|
|
|
|
|
|
|||||||
- 75 -
| 40. | SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS |
Except for those disclosed in other notes, the Company’s significant commitments and contingent liabilities as of March 31, 2021 were as follows:
| a. | Acquisitions of land and buildings of $580,777 thousand. |
| b. | Acquisitions of telecommunications-related inventory and equipment of $28,281,918 thousand. |
| c. | Unused letters of credit amounting to $10,000 thousand. |
| d. | A commitment to contribute $2,000,000 thousand to a Piping Fund administered by the Taipei City Government, of which $1,000,000 thousand was contributed by Chunghwa on August 15, 1996 (classified as other monetary assets - noncurrent). If the fund is not sufficient, Chunghwa will contribute the remaining $1,000,000 thousand upon notification from the Taipei City Government. |
| e. | Chunghwa committed that when its ownership interest in NCB is greater than 25% and NCB encounters financial difficulty or the capital adequacy ratio of NCB cannot meet the related regulation requirements, Chunghwa will provide financial support to assist NCB in maintaining a healthy financial condition. |
| 41. | OTHER MATTERS |
The Company has assessed the economic impact of COVID-19 and determined that there were no significant impacts on the Company’s financial statements as of the date the consolidated financial statements were authorized for issue. The Company will continue to monitor developments of the pandemic and assess the related impacts.
| 42. | SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES |
The following information summarizes the disclosure of foreign currencies other than the functional currency of Chunghwa and its subsidiaries. The following exchange rates are the exchange rates used to translate to the presentation currency of the consolidated financial statements, which is the NTD:
| March 31, 2021 | ||||||||||||
| Foreign Currencies (Thousands) |
Exchange Rate |
New Taiwan Dollars (Thousands) |
||||||||||
| Assets denominated in foreign currencies |
||||||||||||
| Monetary items |
||||||||||||
| USD |
$ | 86,678 | 28.54 | $ | 2,473,347 | |||||||
| EUR |
990 | 33.48 | 33,152 | |||||||||
| SGD |
12,584 | 21.21 | 266,901 | |||||||||
| JPY |
72,238 | 0.258 | 18,616 | |||||||||
| RMB |
9,222 | 4.344 | 40,062 | |||||||||
| HKD |
18,810 | 3.670 | 69,033 | |||||||||
| Non-monetary items |
||||||||||||
| Investments accounted for using equity method |
||||||||||||
| SGD |
23,590 | 21.21 | 500,350 | |||||||||
| VND |
347,069,369 | 0.0011 | 385,247 | |||||||||
(Continued)
- 76 -
| March 31, 2021 | ||||||||||||
| Foreign Currencies (Thousands) |
Exchange Rate |
New Taiwan Dollars (Thousands) |
||||||||||
| Liabilities denominated in foreign currencies |
||||||||||||
| Monetary items |
||||||||||||
| USD |
$ | 24,734 | 28.54 | $ | 705,777 | |||||||
| EUR |
21,560 | 33.48 | 721,827 | |||||||||
| SGD |
46,665 | 21.21 | 989,769 | |||||||||
| JPY |
29,902 | 0.258 | 7,706 | |||||||||
| RMB |
23 | 4.344 | 102 | |||||||||
| HKD |
2,097 | 3.670 | 7,695 | |||||||||
(Concluded)
| December 31, 2020 | ||||||||||||
| Foreign Currencies (Thousands) |
Exchange Rate |
New Taiwan Dollars (Thousands) |
||||||||||
| Assets denominated in foreign currencies |
||||||||||||
| Monetary items |
||||||||||||
| USD |
$ | 95,179 | 28.48 | $ | 2,710,705 | |||||||
| EUR |
427 | 35.02 | 14,957 | |||||||||
| SGD |
7,873 | 21.56 | 169,747 | |||||||||
| JPY |
80,671 | 0.276 | 22,289 | |||||||||
| RMB |
6,795 | 4.377 | 29,742 | |||||||||
| HKD |
18,873 | 3.673 | 69,321 | |||||||||
| Non-monetary items |
||||||||||||
| Investments accounted for using equity method |
||||||||||||
| SGD |
22,646 | 21.56 | 488,257 | |||||||||
| VND |
327,497,036 | 0.0011 | 363,522 | |||||||||
| Liabilities denominated in foreign currencies |
||||||||||||
| Monetary items |
||||||||||||
| USD |
26,951 | 28.48 | 767,553 | |||||||||
| EUR |
27,335 | 35.02 | 957,257 | |||||||||
| SGD |
48,665 | 21.56 | 1,049,225 | |||||||||
| JPY |
35,044 | 0.276 | 9,683 | |||||||||
| RMB |
46 | 4.377 | 201 | |||||||||
| HKD |
2,087 | 3.673 | 7,665 | |||||||||
| Assets denominated in foreign currencies |
||||||||||||
| Monetary items |
||||||||||||
| USD |
188,583 | 30.23 | 5,699,931 | |||||||||
| EUR |
499 | 33.24 | 16,599 | |||||||||
| SGD |
10,832 | 21.23 | 229,967 | |||||||||
| JPY |
76,144 | 0.279 | 21,229 | |||||||||
(Continued)
- 77 -
| March 31, 2020 | ||||||||||||
| Foreign Currencies (Thousands) |
Exchange Rate |
New Taiwan Dollars (Thousands) |
||||||||||
| RMB |
$ | 3,718 | 4.255 | $ | 15,819 | |||||||
| HKD |
87 | 3.898 | 340 | |||||||||
| Non-monetary items |
||||||||||||
| Investments accounted for using equity method |
||||||||||||
| SGD |
23,746 | 21.23 | 504,119 | |||||||||
| VND |
284,347,414 | 0.0012 | 329,843 | |||||||||
| Liabilities denominated in foreign currencies |
||||||||||||
| Monetary items |
||||||||||||
| USD |
135,579 | 30.23 | 4,097,882 | |||||||||
| EUR |
5,401 | 33.24 | 179,523 | |||||||||
| SGD |
52,522 | 21.23 | 1,115,049 | |||||||||
| JPY |
31,224 | 0.279 | 8,705 | |||||||||
| HKD |
2,701 | 3.898 | 10,530 | |||||||||
(Concluded)
The unrealized foreign exchange gains were $61,025 thousand and $59,759 thousand for the three months ended March 31, 2021 and 2020, respectively. Due to the various foreign currency transactions and the functional currency of each individual entity of the Company, foreign exchange gains and losses cannot be disclosed by the respective significant foreign currency.
| 43. | ADDITIONAL DISCLOSURES |
Following are the additional disclosures required by the FSC for the Company:
| a. | Financing provided: None. |
| b. | Endorsement/guarantee provided: Please see Table 1. |
| c. | Marketable securities held (excluding investments in subsidiaries, associates and joint ventures): Please see Table 2. |
| d. | Marketable securities acquired or disposed of at costs or prices at least $300 million or 20% of the paid-in capital: Please see Table 3. |
| e. | Acquisition of individual real estate at costs of at least $300 million or 20% of the paid-in capital: Please see Table 4. |
| f. | Disposal of individual real estate at prices of at least $300 million or 20% of the paid-in capital: None. |
| g. | Total purchases from or sales to related parties amounting to at least $100 million or 20% of the paid-in capital: Please see Table 5. |
- 78 -
| h. | Receivables from related parties amounting to $100 million or 20% of the paid-in capital: Please see Table 6. |
| i. | Names, locations, and other information of investees on which the Company exercises significant influence (excluding investment in Mainland China): Please see Table 7. |
| j. | Derivative instruments transactions: Please see Notes 7, 20 and 37. |
| k. | Investments in Mainland China: Please see Table 8. |
| l. | Intercompany relationships and significant intercompany transactions: Please see Table 9. |
| m. | Information of main stakeholders: Please see Table 10. |
| 44. | SEGMENT INFORMATION |
The Company has the following reportable segments that provide different products or services. The reportable segments are managed separately because each segment represents a strategic business unit that serves different markets. Segment information is provided to the CEO who allocates resources and assesses segment performance. The Company’s measure of segment performance is mainly based on revenues and income before income tax. The Company’s reportable segments are as follows:
| a. | Domestic fixed communications business - the provision of local telephone services, domestic long distance telephone services, broadband access, and related services; |
| b. | Mobile communications business - the provision of mobile services, sales of mobile handsets and data cards, and related services; |
| c. | Internet business - the provision of HiNet services and related services; |
| d. | International fixed communications business - the provision of international long distance telephone services and related services; |
| e. | Others - the provision of non-telecom services and the corporate related items not allocated to reportable segments. |
Some operating segments have been aggregated into a single operating segment taking into account the following factors: (a) similar economic characteristics such as long-term gross profit margins; (b) the nature of the telecommunications products and services are similar; (c) the nature of production processes of the telecommunications products and services are similar; (d) the type or class of customer for the telecommunications products and services are similar; and (e) the methods used to provide the services to the customers are similar.
The accounting policies of the operating segments are the same as those described in Note 3.
- 79 -
Segment Revenues and Operating Results
Analysis by reportable segment of revenues and operating results of continuing operations are as follows:
| Domestic Fixed Communications Business |
Mobile Communications Business |
Internet Business |
International Fixed Communications Business |
Others | Total | |||||||||||||||||||
| Three months ended March 31, 2021 |
||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||
| From external customers |
$ | 15,395,084 | $ | 23,435,208 | $ | 7,633,125 | $ | 2,170,291 | $ | 1,467,287 | $ | 50,100,995 | ||||||||||||
| Intersegment revenues |
4,302,697 | 461,342 | 932,923 | 503,720 | 1,590,470 | 7,791,152 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment revenues |
$ | 19,697,781 | $ | 23,896,550 | $ | 8,566,048 | $ | 2,674,011 | $ | 3,057,757 | 57,892,147 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Intersegment elimination |
(7,791,152 | ) | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Consolidated revenues |
$ | 50,100,995 | ||||||||||||||||||||||
| Segment operating costs and expenses |
$ | 11,673,646 | $ | 18,531,632 | $ | 3,061,019 | $ | 2,099,748 | $ | 3,633,608 | $ | 38,999,653 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment income (loss) before income tax |
$ | 6,527,579 | $ | 1,609,238 | $ | 3,490,972 | $ | 280,659 | $ | (588,100 | ) | $ | 11,320,348 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Three months ended March 31, 2020 |
||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||
| From external customers |
$ | 14,691,853 | $ | 22,540,777 | $ | 7,512,040 | $ | 2,236,110 | $ | 1,169,219 | $ | 48,149,999 | ||||||||||||
| Intersegment revenues |
3,952,209 | 380,195 | 923,404 | 487,817 | 1,262,553 | 7,006,178 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment revenues |
$ | 18,644,062 | $ | 22,920,972 | $ | 8,435,444 | $ | 2,723,927 | $ | 2,431,772 | 55,156,177 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Intersegment elimination |
(7,006,178 | ) | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Consolidated revenues |
$ | 48,149,999 | ||||||||||||||||||||||
| Segment operating costs and expenses |
$ | 12,233,189 | $ | 16,696,101 | $ | 3,480,134 | $ | 2,219,609 | $ | 2,990,136 | $ | 37,619,169 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Segment income (loss) before income tax |
$ | 5,169,284 | $ | 2,873,707 | $ | 3,034,483 | $ | 242,065 | $ | (668,135 | ) | $ | 10,651,404 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Main Products and Service Revenues
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| Mobile services revenue |
$ | 14,152,046 | $ | 14,284,650 | ||||
| Sales of products |
10,557,948 | 9,513,523 | ||||||
| Local telephone and domestic long distance telephone services revenue |
6,341,552 | 6,611,740 | ||||||
| Broadband access and domestic leased line services revenue |
5,637,348 | 5,541,156 | ||||||
| Data communications internet services revenue |
5,455,821 | 5,305,258 | ||||||
| International network and leased line services revenue |
1,086,822 | 1,079,323 | ||||||
| Others |
6,869,458 | 5,814,349 | ||||||
|
|
|
|
|
|||||
| $ | 50,100,995 | $ | 48,149,999 | |||||
|
|
|
|
|
|||||
- 80 -
TABLE 1
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
ENDORSEMENTS/GUARANTEES PROVIDED
THREE MONTHS ENDED MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Guaranteed Party |
Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party |
Maximum Balance for the Period |
Ending Balance |
Actual Borrowing Amount |
Amount of Endorsement/ Guarantee Collateralized by Properties |
Ratio of Accumulated Endorsement/ Guarantee to Net Equity Per Latest Financial Statements |
Maximum Endorsement/ Guarantee Amount Allowable |
Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries |
Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent |
Endorsement/ Guarantee Given on Behalf of Companies in Mainland |
Note | |||||||||||||||||||||||||||||||
| No. (Note 1) |
Endorsement/ Guarantee Provider |
Name |
Nature of (Note 2) | |||||||||||||||||||||||||||||||||||||||
| 1 |
Senao International Co., Ltd. |
Aval Technologies Co., Ltd. |
b | $ | 606,759 | $ | 300,000 | $ | 300,000 | $ | 300,000 | $ | — | 4.94 | $ | 3,033,797 | Yes | No | No | Notes 3 and 4 | ||||||||||||||||||||||
| Wiin Technology Co., Ltd. |
b | 606,759 | 100,000 | 100,000 | 100,000 | — | 1.65 | 3,033,797 | Yes | No | No | Notes 3 and 4 | ||||||||||||||||||||||||||||||
| Note 1: | Significant transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows: |
| a. | “0” for the Company. |
| b. | Subsidiaries are numbered from “1”. |
| Note 2: | Relationships between the endorsement/guarantee provider and the guaranteed party: |
| a. | A company with which it does business. |
| b. | A company in which the Company directly and indirectly holds more than 50 percent of the voting shares. |
| c. | A company that directly and indirectly holds more than 50 percent of the voting shares in the Company. |
| d. | Companies in which the Company holds, directly or indirectly, 90% or more of the voting shares. |
| e. | The Company fulfills its contractual obligations by providing mutual endorsements/guarantees for another company in the same industry or for joint builders for purposes of undertaking a construction project. |
| f. | All capital contributing shareholders make endorsements/guarantees for their jointly invested company in proportion to their shareholding percentages. |
| g. | Companies in the same industry provide among themselves jointly and severally guarantee for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other. |
| Note 3: | The limits on endorsement or guarantee amount provided to each guaranteed party is up to 10% of the net assets value of the latest financial statements of Senao International Co., Ltd. |
| Note 4: | The total amount of endorsement or guarantee that the Company is allowed to provide is up to 50% of the net assets value of the latest financial statements of Senao International Co., Ltd. |
- 81 -
TABLE 2
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
MARKETABLE SECURITIES HELD
MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Held Company Name |
Marketable Securities Type and Name |
Relationship with the Company |
Financial Statement Account |
March 31, 2021 | Note | |||||||||||||||||||||
| Shares (Thousands/ Thousand Units) |
Carrying Value (Note 1) |
Percentage of Ownership |
Fair Value |
|||||||||||||||||||||||
| Chunghwa Telecom Co., Ltd. |
Stocks | |||||||||||||||||||||||||
| Taipei Financial Center Corp. | — | Financial assets at FVOCI | 172,927 | $ | 3,199,068 | 12 | $ | 3,199,068 | — | |||||||||||||||||
| Innovation Works Development Fund, L.P. | — | Financial assets at FVTPL - noncurrent | — | 231,764 | 4 | 231,764 | — | |||||||||||||||||||
| Industrial Bank of Taiwan II Venture Capital Co., Ltd. (IBT II) | — | Financial assets at FVOCI | 5,252 | 15,475 | 17 | 15,475 | — | |||||||||||||||||||
| Global Mobile Corp. | — | Financial assets at FVOCI | 7,617 | — | 3 | — | — | |||||||||||||||||||
| Innovation Works Limited | — | Financial assets at FVOCI | 1,000 | 3,630 | 2 | 3,630 | — | |||||||||||||||||||
| RPTI Intergroup International Ltd. | — | Financial assets at FVOCI | 4,765 | — | 10 | — | — | |||||||||||||||||||
| Taiwan mobile payment Co., Ltd. | — | Financial assets at FVOCI | 1,200 | 4,273 | 2 | 4,273 | — | |||||||||||||||||||
| Taiwania Capital Buffalo Fund Co., Ltd. | — | Financial assets at FVTPL - noncurrent | 600,000 | 584,838 | 13 | 584,838 | — | |||||||||||||||||||
| 4 Gamers Entertainment Inc. | — | Financial assets at FVOCI | 136 | 96,988 | 19.9 | 96,988 | — | |||||||||||||||||||
| UUPON Inc. | — | Financial assets at FVOCI | 246 | 1,261 | 4 | 1,261 | — | |||||||||||||||||||
| Senao International Co., Ltd. |
Stocks | |||||||||||||||||||||||||
| N.T.U. Innovation Incubation Corporation | — | Financial assets at FVOCI | 1,200 | 9,427 | 9 | 9,427 | — | |||||||||||||||||||
| UUPON Inc. | — | Financial assets at FVOCI | 109 | 560 | 2 | 560 | — | |||||||||||||||||||
| CHIEF Telecom Inc. |
Stocks | |||||||||||||||||||||||||
| 3 Link Information Service Co., Ltd. | — | Financial assets at FVOCI | 374 | 1,220 | 10 | 1,220 | — | |||||||||||||||||||
| WPG Holdings Limited | — | Financial assets at FVTPL - current | 9 | 453 | — | 453 | Note 2 | |||||||||||||||||||
| WPG Holdings Limited | — | Financial assets at FVOCI | 1,838 | 93,003 | — | 93,003 | Note 2 | |||||||||||||||||||
| Taichung Commercial Bank Co., Ltd. | — | Financial assets at FVTPL - current | 662 | 7,608 | — | 7,608 | Note 2 | |||||||||||||||||||
| Chunghwa Investment Co., Ltd. |
Stocks | |||||||||||||||||||||||||
| Tatung Technology Inc. | — | Financial assets at FVOCI | 4,571 | 126,137 | 11 | 126,137 | — | |||||||||||||||||||
| iSing99 Inc. | — | Financial assets at FVOCI | 10,000 | — | 7 | — | — | |||||||||||||||||||
| Powtec ElectroChemical Corporation | — | Financial assets at FVOCI | 20,000 | — | 2 | — | — | |||||||||||||||||||
| Bossdom Digiinnovation Co., Ltd. | — | Financial assets at FVOCI | 2,000 | 57,800 | 7 | 57,800 | Note 2 | |||||||||||||||||||
| AgriTalk Technology Inc. | — | Financial assets at FVOCI | 1,650 | 37,236 | 17 | 37,236 | — | |||||||||||||||||||
| Chunghwa Hsingta Co., Ltd. |
Stocks | |||||||||||||||||||||||||
| Cotech Engineering Fuzhou Corp. | — | Financial assets at FVOCI | — | 4,262 | 5 | 4,262 | — | |||||||||||||||||||
| Note 1: | Showed at carrying amounts with fair value adjustments. |
| Note 2: | Fair value was based on the closing price on March 31, 2021. |
- 82 -
TABLE 3
CHUNGHWA TELECOM CO., LTD.
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL
THREE MONTHS ENDED MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Beginning Balance | Acquisition | Disposal | Ending Balance | |||||||||||||||||||||||||||||||||||||||||||||||||
| Company Name |
Marketable Securities Type and Name |
Financial Statement Account |
Counter-party | Nature of Relationship |
Shares (Thousands/ Thousand Units) |
Amount | Shares (Thousands/ Thousand Units) |
Amount | Shares (Thousands/ Thousand Units) |
Amount | Carrying Value |
Gain on Disposal |
Shares (Thousands/ Thousand Units) |
Amount | ||||||||||||||||||||||||||||||||||||||
| Chunghwa Telecom Co., Ltd. |
Stocks China Airlines, Ltd. |
Financial assets at FVOCI | — | — | 216,639 | $ | 2,541,176 | (Note) | — | $ | — | 216,639 | $ | 2,635,568 | |
$2,541,176 (Note) |
|
$ | 94,392 | — | $ | — | ||||||||||||||||||||||||||||||
| Note: | Showing at their original investment amounts without adjustments for fair values. |
- 83 -
TABLE 4
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL
THREE MONTHS ENDED MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Buyer |
Property | Event Date | Transaction Amount |
Payment Status |
Counterparty |
Relationship |
Information on Previous Title Transfer If Counterparty is a Related Party |
Pricing Reference |
Purpose of Acquisition |
Other Terms | ||||||||||||||||||||||||
| Property Owner |
Relationship |
Transaction Date |
Amount | |||||||||||||||||||||||||||||||
| Chunghwa Precision Test Tech. Co., Ltd. |
Land | 2021.01.18 | $ | 534,030 | The first installment $80,104 thousand was paid. |
Taiwan Powder Technologies Co., Ltd. |
— | Not applicable | Not applicable | Not applicable | Not applicable | According to appraisal report | Space requirements for future business expansion and operational considerations |
— | ||||||||||||||||||||
- 84 -
TABLE 5
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
THREE MONTHS ENDED MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Transaction Details | Abnormal Transaction | Notes / Accounts Payable or Receivable |
||||||||||||||||||||||||||||||||
| Company Name |
Related |
Nature of Relationship |
Purchases/Sales (Note 1) |
Amount (Notes 2 and 5) |
% to Total | Payment Terms |
Units Price | Payment Terms | Ending Balance (Notes 3 and 5) |
% to Total | ||||||||||||||||||||||||
| Chunghwa Telecom Co., Ltd. |
Senao International Co., Ltd. |
Subsidiary |
Sales | $ | 1,296,982 | 3 | 30 days | $ | — | — | $ | 147,143 | 1 | |||||||||||||||||||||
| Purchase | 121,075 | — | 30-90 days | — | — | (857,276 | ) | (10 | ) | |||||||||||||||||||||||||
| Aval Technologies Co., Ltd. |
Subsidiary |
Purchase | 178,590 | 1 | 30 days | — | — | (59,327 | ) | (1 | ) | |||||||||||||||||||||||
| CHIEF Telecom Inc. |
Subsidiary |
Sales | 118,056 | — | 30 days | — | — | 58,983 | — | |||||||||||||||||||||||||
| Chunghwa System Integration Co., Ltd. |
Subsidiary |
Purchase | 446,040 | 2 | 30 days | — | — | (226,510 | ) | (3 | ) | |||||||||||||||||||||||
| Honghwa International Co., Ltd. |
Subsidiary |
Purchase | 1,457,996 | 5 | 30-60 days | — | — | (543,196 | ) | (6 | ) | |||||||||||||||||||||||
| Donghwa Telecom Co., Ltd. |
Subsidiary |
Purchase | 121,996 | — | 90 days | — | — | (158,194 | ) | (2 | ) | |||||||||||||||||||||||
| CHT Security Co., Ltd. |
Subsidiary |
Purchase | 106,041 | — | 30 days | — | — | (32,597 | ) | — | ||||||||||||||||||||||||
| Senao International Co., Ltd. |
Chunghwa Telecom Co., Ltd. |
Parent company |
Sales | 1,332,385 | 18 | 30-90 days | — | — | 857,285 | 48 | ||||||||||||||||||||||||
| Purchase | 1,258,984 | 19 | 30 days | — | — | (139,760 | ) | (8 | ) | |||||||||||||||||||||||||
| Aval Technologies Co., Ltd. |
Subsidiary |
Sales | 107,375 | 1 | 60 days | — | — | 74,785 | 4 | |||||||||||||||||||||||||
| CHIEF Telecom Inc. |
Chunghwa Telecom Co., Ltd. |
Parent company |
Purchase | 117,890 | 32 | 30 days | — | — | (58,983 | ) | (50 | ) | ||||||||||||||||||||||
| Chunghwa System Integration Co., Ltd. |
Chunghwa Telecom Co., Ltd. |
Parent company |
Sales | 467,349 | 92 | 30 days | — | — | 223,921 | 40 | ||||||||||||||||||||||||
| Honghwa International Co., Ltd. |
Chunghwa Telecom Co., Ltd. |
Parent company |
Sales | 1,496,753 | 99 | 30-60 days | — | — | 541,916 | 99 | ||||||||||||||||||||||||
| Donghwa Telecom Co., Ltd. |
Chunghwa Telecom Co., Ltd. |
Parent company |
Sales | 121,996 | 43 | 90 days | — | — | 158,194 | 42 | ||||||||||||||||||||||||
| Aval Technologies Co., Ltd. |
Chunghwa Telecom Co., Ltd. |
Parent company |
Sales | 178,590 | 2 | 30 days | — | — | 59,327 | 3 | ||||||||||||||||||||||||
| Note 1: | Purchases include costs to acquire services. |
| Note 2: | The differences were because Chunghwa Telecom Co., Ltd. and subsidiaries classified the amount as incremental costs of obtaining contracts, property, plant and equipment, intangible assets, and operating expenses. |
| Note 3: | Notes and accounts receivable did not include the amounts collected for others and other receivables. |
| Note 4: | Transaction terms with related parties were determined in accordance with mutual agreements when there were no similar transactions with third parties. Other transactions with related parties were not significantly different from those with third parties. |
| Note 5: | All intercompany transactions, balances, income and expenses are eliminated upon consolidation. |
- 85 -
TABLE 6
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Company Name |
Related Party |
Nature of Relationship |
Ending Balance | Turnover Rate (Note 1) |
Overdue | Amounts Received in Subsequent Period |
Allowance for Bad Debts |
|||||||||||||||||||||
| Amounts | Action Taken | |||||||||||||||||||||||||||
| Chunghwa Telecom Co., Ltd. |
Senao International Co., Ltd. |
Subsidiary |
$
|
247,579 (Note 2) |
|
11.19 | $ | — | — | $ | 43,491 | $ | — | |||||||||||||||
| Senao International Co., Ltd. |
Chunghwa Telecom Co., Ltd. |
Parent company |
|
1,012,902 (Note 2) |
|
6.62 | — | — | 126,367 | — | ||||||||||||||||||
| Chunghwa System Integration Co., Ltd. |
Chunghwa Telecom Co., Ltd. |
Parent company |
|
223,921 (Note 2) |
|
6.60 | — | — | 47,349 | — | ||||||||||||||||||
| Honghwa International Co., Ltd. |
Chunghwa Telecom Co., Ltd. |
Parent company |
|
541,916 (Note 2) |
|
9.79 | — | — | 39,207 | — | ||||||||||||||||||
| Donghwa Telecom Co., Ltd. |
Chunghwa Telecom Co., Ltd. |
Parent company |
|
158,194 (Note 2) |
|
3.07 | — | — | 102,578 | — | ||||||||||||||||||
| Note 1: | Payments and receipts collected in trust for others are excluded from the accounts receivable in calculating the turnover rate. |
| Note 2: | The amount was eliminated upon consolidation. |
- 86 -
TABLE 7
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES IN WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INVESTMENT IN MAINLAND CHINA)
THREE MONTHS ENDED MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Original Investment Amount | Balance as of March 31, 2021 | Net Income | Recognized | |||||||||||||||||||||||||||||||||
| Investor Company |
Investee Company |
Location |
Main Businesses and Products |
March 31, 2021 | December 31, 2020 |
Shares (Thousands) |
Percentage of Ownership (%) |
Carrying Value (Note 3) |
(Loss) of the Investee |
Gain (Loss) (Notes 1, 2 and 3) |
Note | |||||||||||||||||||||||||
| Chunghwa Telecom Co., Ltd. |
Senao International Co., Ltd. |
Taiwan |
Handset and peripherals retailer; sales of CHT mobile phone plans as an agent |
$ | 1,065,813 | $ | 1,065,813 | 71,773 | 28 | $ | 1,671,299 | $ | 153,989 | $ | 41,007 | Subsidiary (Note 5) | ||||||||||||||||||||
| Light Era Development Co., Ltd. |
Taiwan |
Planning and development of real estate and intelligent buildings, and property management |
3,000,000 | 3,000,000 | 300,000 | 100 | 3,862,104 | 9,759 | 8,869 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Donghwa Telecom Co., Ltd. |
Hong Kong |
International private leased circuit, IP VPN service, and IP transit services |
691,163 | 1,567,453 | 178,590 | 100 | 662,766 | (190 | ) | (190 | ) | Subsidiary (Note 5) | ||||||||||||||||||||||||
| Chunghwa Telecom Singapore Pte., Ltd. |
Singapore |
International private leased circuit, IP VPN service, and IP transit services |
574,112 | 574,112 | 26,383 | 100 | 920,281 | 24,777 | 24,773 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Chunghwa System Integration Co., Ltd. |
Taiwan |
Providing system integration services and telecommunications equipment |
838,506 | 838,506 | 60,000 | 100 | 730,025 | 408 | 4,813 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| CHIEF Telecom Inc. |
Taiwan |
Network integration, internet data center (“IDC”), communications integration and cloud application services |
459,652 | 459,652 | 39,426 | 56 | 1,892,791 | 167,115 | 95,671 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Chunghwa Investment Co., Ltd. |
Taiwan |
Investment |
639,559 | 639,559 | 68,085 | 89 | 3,072,733 | 57,482 | 51,198 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Prime Asia Investments Group Ltd. (B.V.I.) |
British Virgin Islands |
Investment |
385,274 | 385,274 | 1 | 100 | 159,790 | 742 | 742 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Honghwa International Co., Ltd. |
Taiwan |
Telecommunication engineering, sales agent of mobile phone plan application and other business services, etc. |
180,000 | 180,000 | 18,000 | 100 | 598,798 | 108,085 | 106,813 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| CHYP Multimedia Marketing & Communications Co., Ltd. |
Taiwan |
Digital information supply services and advertisement services |
150,000 | 150,000 | 15,000 | 100 | 199,544 | 5,043 | 5,145 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Chunghwa Telecom Vietnam Co., Ltd. |
Vietnam |
Intelligent energy saving solutions, international circuit, and information and communication technology (“ICT”) services |
148,275 | 148,275 | — | 100 | 90,596 | (1,100 | ) | (1,100 | ) | Subsidiary (Note 5) | ||||||||||||||||||||||||
| Chunghwa Telecom Global, Inc. |
United States |
International private leased circuit, internet services, and transit services |
70,429 | 70,429 | 6,000 | 100 | 422,339 | 18,735 | 18,832 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| CHT Security Co., Ltd. |
Taiwan |
Computing equipment installation, wholesale of computing and business machinery equipment and software, management consulting services, data processing services, digital information supply services and internet identify services |
240,000 | 240,000 | 24,000 | 77 | 393,074 | 76,976 | 61,547 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Chunghwa Telecom (Thailand) Co., Ltd. |
Thailand |
International private leased circuit, IP VPN service, ICT and cloud VAS services |
119,624 | 119,624 | 1,300 | 100 | 106,557 | 1,118 | 1,118 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Spring House Entertainment Tech. Inc. |
Taiwan |
Software design services, internet contents production and play, and motion picture production and distribution |
62,209 | 62,209 | 8,251 | 56 | 134,351 | 13,215 | 7,405 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Chunghwa leading Photonics Tech Co., Ltd. |
Taiwan |
Production and sale of electronic components and finished products |
70,500 | 70,500 | 7,050 | 75 | 124,743 | (496 | ) | 776 | Subsidiary (Note 5) | |||||||||||||||||||||||||
| Smartfun Digital Co., Ltd. |
Taiwan |
Providing diversified family education digital services |
65,000 | 65,000 | 6,500 | 65 | 75,063 | 1,545 | 1,007 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Chunghwa Telecom Japan Co., Ltd. |
Japan |
International private leased circuit, IP VPN service, and IP transit services |
17,291 | 17,291 | 1 | 100 | 89,099 | 5,263 | 5,263 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Chunghwa Sochamp Technology Inc. |
Taiwan |
Design, development and production of Automatic License Plate Recognition software and hardware |
20,400 | 20,400 | 2,040 | 51 | (4,894 | ) | (2,306 | ) | 145 | Subsidiary (Note 5) | ||||||||||||||||||||||||
(Continued)
- 87 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES IN WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INVESTEES IN MAINLAND CHINA)
THREE MONTHS ENDED MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Original Investment Amount | Balance as of March 31, 2021 | Net Income | Recognized | |||||||||||||||||||||||||||||||||
| Investor Company |
Investee Company |
Location | Main Businesses and Products |
March 31, 2021 | December 31, 2020 |
Shares (Thousands) |
Percentage of Ownership (%) |
Carrying Value (Note 3) |
(Loss) of the Investee |
Gain (Loss) (Notes 1, 2 and 3) |
Note | |||||||||||||||||||||||||
| International Integrated Systems, Inc. |
Taiwan | IT solution provider, IT application consultation, system integration and package solution |
$ | 517,423 | $ | 517,423 | 37,211 | 51 | $ | 594,698 | $ | 5,851 | $ | (1,201 | ) | Subsidiary (Note 5) | ||||||||||||||||||||
| Viettel-CHT Co., Ltd. |
Vietnam | IDC services |
288,327 | 288,327 | — | 30 | 385,247 | 72,385 | 21,726 | Associate | ||||||||||||||||||||||||||
| Taiwan International Standard Electronics Co., Ltd. |
Taiwan | Manufacturing, selling, designing, and maintaining of telecommunications systems and equipment |
164,000 | 164,000 | 1,760 | 40 | 358,027 | 56,996 | 27,172 | Associate | ||||||||||||||||||||||||||
| KKBOX Taiwan Co., Ltd. |
Taiwan | Providing of music on-line, software, electronic information, and advertisement services |
67,025 | 67,025 | 4,438 | 30 | 156,501 | (24,323 | ) | (7,297 | ) | Associate | ||||||||||||||||||||||||
| So-net Entertainment Taiwan Limited |
Taiwan | Online service and sale of computer hardware |
120,008 | 120,008 | 9,429 | 30 | 225,129 | (5,999 | ) | (1,800 | ) | Associate | ||||||||||||||||||||||||
| KingwayTek Technology Co., Ltd. |
Taiwan | Publishing books, data processing and software services |
66,684 | 66,684 | 8,688 | 23 | 251,359 | 9,134 | 2,315 | Associate | ||||||||||||||||||||||||||
| Taiwan International Ports Logistics Corporation |
Taiwan | Import and export storage, logistic warehouse, and ocean shipping service |
80,000 | 80,000 | 8,000 | 27 | 58,158 | 8,374 | 2,233 | Associate | ||||||||||||||||||||||||||
| Alliance Digital Tech Co., Ltd. |
Taiwan | Development of mobile payments and information processing service |
60,000 | 60,000 | 6,000 | 14 | 5,080 | — | — | Associate | ||||||||||||||||||||||||||
| Chunghwa PChome Fund I Co., Ltd. |
Taiwan | Investment, venture capital, investment advisor, management consultant and other consultancy service |
200,000 | 200,000 | 20,000 | 50 | 214,986 | 44,258 | 22,129 | Associate | ||||||||||||||||||||||||||
| Cornerstone Ventures Co., Ltd. |
Taiwan | Investment, venture capital, investment advisor, management consultant and other consultancy service |
4,900 | 4,900 | 490 | 49 | 6,193 | 275 | 135 | Associate | ||||||||||||||||||||||||||
| Next Commercial Bank Co., Ltd. |
Taiwan | Online banking business |
4,190,000 | 4,190,000 | 419,000 | 42 | 3,695,467 | (197,651 | ) | (81,409 | ) | Associate | ||||||||||||||||||||||||
| Chunghwa SEA Holdings |
Taiwan | Investment business |
10,200 | 10,200 | 1,020 | 51 | 10,180 | (39 | ) | (20 | ) | Joint venture | ||||||||||||||||||||||||
| WiAdvance Technology Corporation |
Taiwan | Software solution integration |
273,800 | — | 3,700 | 20 | 272,615 | (5,827 | ) | (1,185 | ) | Associate | ||||||||||||||||||||||||
| Senao International Co., Ltd. |
Senao Networks, Inc. |
Taiwan | Telecommunication facilities manufactures and sales |
202,758 | 202,758 | 16,579 | 34 | 1,022,121 | 89,930 | 30,390 | Associate | |||||||||||||||||||||||||
| Senao International (Samoa) Holding Ltd. |
Samoa Islands |
International investment |
2,253,828 | 2,253,828 | 68,875 | 100 | 246,089 | 13,857 | 13,857 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Youth Co., Ltd. |
Taiwan | Sale of information and communication technologies products |
427,850 | 427,850 | 14,752 | 96 | 230,604 | 783 | (1,372 | ) | Subsidiary (Note 5) | |||||||||||||||||||||||||
| Aval Technologies Co., Ltd. |
Taiwan | Sale of information and communication technologies products |
89,550 | 89,550 | 10,060 | 100 | 113,604 | 3,097 | 3,096 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Senyoung Insurance Agent Co., Ltd. |
Taiwan | Property and liability insurance agency |
59,000 | 59,000 | 5,900 | 100 | 99,037 | 8,187 | 8,175 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| CHIEF Telecom Inc. |
Unigate Telecom Inc. |
Taiwan | Telecommunications and internet service |
2,000 | 2,000 | 200 | 100 | 1,005 | 25 | 25 | Subsidiary (Note 5) | |||||||||||||||||||||||||
| Chief International Corp. |
Samoa Islands |
Telecommunications and internet service |
6,068 | 6,068 | 200 | 100 | 80,755 | 1,893 | 1,893 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Chunghwa Telecom Singapore Pte., Ltd. |
ST-2 Satellite Ventures Pte., Ltd. |
Singapore | Operation of ST-2 telecommunications satellite |
409,061 | 409,061 | 18,102 | 38 | 500,350 | 73,490 | 27,926 | Associate | |||||||||||||||||||||||||
| Chunghwa Investment Co., Ltd. |
Chunghwa Precision Test Tech. Co., Ltd. |
Taiwan | Production and sale of semiconductor testing components and printed circuit board |
178,608 | 178,608 | 11,230 | 34 | 2,471,770 | 167,674 | 57,428 | Subsidiary (Note 5) | |||||||||||||||||||||||||
| CHIEF Telecom Inc. |
Taiwan | Network integration, internet data center (“IDC”), communications integration and cloud application services |
19,064 | 19,064 | 2,078 | 3 | 93,677 | 167,115 | 4,947 | Associate (Note 5) | ||||||||||||||||||||||||||
| Senao International Co., Ltd. |
Taiwan | Selling and maintaining mobile phones and its peripheral products |
49,731 | 49,731 | 1,001 | — | 44,262 | 153,989 | 597 | Associate (Note 5) | ||||||||||||||||||||||||||
(Continued)
- 88 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES IN WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INVESTEES IN MAINLAND CHINA)
THREE MONTHS ENDED MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Investor Company |
Investee Company |
Location |
Main Businesses and Products |
Original Investment Amount | Balance as of March 31, 2021 | Net Income (Loss) of the Investee |
Recognized Gain (Loss) (Notes 1, 2 and 3) |
Note | ||||||||||||||||||||||||||||
| March 31, 2021 | December 31, 2020 |
Shares (Thousands) |
Percentage of Ownership (%) |
Carrying Value (Note 3) |
||||||||||||||||||||||||||||||||
| Chunghwa Precision Test Tech. Co., Ltd. |
Chunghwa Precision Test Tech USA Corporation |
United States | Design and after-sale services of semiconductor testing components and printed circuit board |
$ | 12,636 | $ | 12,636 | 400 | 100 | $ | 23,175 | $ | (515 | ) | $ | (714 | ) | Subsidiary (Note 5) | ||||||||||||||||||
| CHPT Japan Co., Ltd. |
Japan | Related services of electronic parts, machinery processed products and printed circuit board |
2,008 | 2,008 | 1 | 100 | 2,333 | 28 | 28 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Chunghwa Precision Test Tech. International, Ltd. |
Samoa Islands | Wholesale and retail of electronic materials, and investment |
116,790 | 116,790 | 3,700 | 100 | 93,379 | 2,112 | 2,291 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Prime Asia Investments Group, |
Chunghwa Hsingta Co., Ltd. |
Hong Kong | Investment |
375,274 | 375,274 | 1 | 100 | 159,790 | 742 | 742 | Subsidiary (Note 5) | |||||||||||||||||||||||||
| Ltd. (B.V.I.) |
||||||||||||||||||||||||||||||||||||
| Senao International (Samoa) Holding Ltd. |
Senao International HK Limited |
Hong Kong | International investment |
2,248,963 | 2,248,963 | 80,440 | 100 | 226,776 | 13,845 | 13,845 | Subsidiary (Note 5) | |||||||||||||||||||||||||
| Youth Co., Ltd. |
ISPOT Co., Ltd. |
Taiwan | Sale of information and communication technologies products |
53,021 | 53,021 | — | 100 | 11,192 | 678 | 630 | Subsidiary (Note 5) | |||||||||||||||||||||||||
| Youyi Co., Ltd. |
Taiwan | Maintenance of information and communication technologies products |
21,354 | 21,354 | — | 100 | 17,940 | (128 | ) | (205 | ) | Subsidiary (Note 5) | ||||||||||||||||||||||||
| Aval Technologies Co., Ltd. |
Wiin Technology Co., Ltd. |
Taiwan | Sale of information and communication technologies products |
29,550 | 29,550 | 2,955 | 100 | 35,038 | 1,562 | 1,562 | Subsidiary (Note 5) | |||||||||||||||||||||||||
| Senyoung Insurance Agent Co., Ltd. |
Senaolife Insurance Agent Co., Ltd. |
Taiwan | Life insurance services |
29,500 | 29,500 | 2,950 | 100 | 25,467 | (719 | ) | (719 | ) | Subsidiary (Note 5) | |||||||||||||||||||||||
| CHYP Multimedia Marketing & Communications Co., Ltd |
Click Force Marketing Company |
Taiwan | Advertisement services |
44,607 | 44,607 | 1,078 | 49 | 33,962 | 2,055 | 876 | Associate | |||||||||||||||||||||||||
| International Integrated Systems, Inc. |
Infoexplorer International Co., Ltd. |
Samoa | Investment |
24,806 | 24,806 | 795 | 100 | 26,915 | (154 | ) | (154 | ) | Subsidiary (Note 5) | |||||||||||||||||||||||
| IISI Investment Co., Ltd. |
Mauritius | Investment |
81,302 | 81,302 | 244 | 100 | 28,536 | (381 | ) | (381 | ) | Subsidiary (Note 5) | ||||||||||||||||||||||||
| Unitronics Technology Corp. |
Taiwan | Development and maintenance of information system |
55,569 | 55,569 | 5,065 | 99.96 | 72,280 | 2,414 | 2,413 | Subsidiary (Note 5) | ||||||||||||||||||||||||||
| Infoexplorer International Co., Ltd. |
International Integrated Systems (Hong Kong) Limited |
Hong Kong | Investment and engaging in technical consulting service |
24,336 | 24,336 | 780 | 100 | 26,908 | (154 | ) | (154 | ) | Subsidiary (Note 5) | |||||||||||||||||||||||
| IISI Investment Co., Ltd. |
Leading Tech Co., Ltd. |
Mauritius | Investment |
65,374 | 65,374 | 316 | 100 | 18,035 | (338 | ) | (338 | ) | Subsidiary (Note 5) | |||||||||||||||||||||||
| Leading Tech Co., Ltd. |
Leading Systems Co., Ltd. |
Mauritius | Investment |
100,693 | 100,693 | 300 | 100 | 13,175 | (338 | ) | (338 | ) | Subsidiary (Note 5) | |||||||||||||||||||||||
| Note 1: | The amounts were based on reviewed financial statements. |
| Note 2: | Recognized gain (loss) of investees includes amortization of differences between the investment cost and net value and elimination of unrealized transactions. |
| Note 3: | Recognized gain (loss) and carrying value of the investees did not include the adjustment of the difference between the accounting treatment on standalone basis and consolidated basis as a result of the application of IFRS 15. |
| Note 4: | Investments in mainland China are included in Table 8. |
| Note 5: | The amount was eliminated upon consolidation. |
(Concluded)
- 89 -
TABLE 8
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
INVESTMENT IN MAINLAND CHINA
THREE MONTHS ENDED MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Investee |
Main Businesses and Products |
Total Amount of Paid-in Capital |
Investment Type (Note 1) |
Accumulated Outflow of Investment from Taiwan as of January 1, 2021 |
Investment Flows | Accumulated Outflow of Investment from Taiwan as of March 31, 2021 |
Net Income (Loss) of the Investee |
% Ownership of Direct or Indirect Investment |
Investment Gain (Loss) (Note 2) |
Carrying Value as of March 31, 2021 |
Accumulated Inward Remittance of Earnings as of March 31, 2021 |
Note | ||||||||||||||||||||||||||||||||||||
| Outflow | Inflow | |||||||||||||||||||||||||||||||||||||||||||||||
| Senao Trading (Fujian) Co., Ltd. |
Sale of information and communication technologies products |
$ | 1,073,170 | 2 | $ | 1,073,170 | $ | — | $ | — | $ | 1,073,170 | $ | — | 100 | $ | — | $ | — | $ | — | Notes 8 and 12 | ||||||||||||||||||||||||||
| Senao International Trading (Shanghai) Co., Ltd. |
Sale of information and communication technologies products |
955,838 | 2 | 955,838 | — | — | 955,838 | 1,336 | 100 | 1,336 | 30,634 | — | Notes 9 and 12 | |||||||||||||||||||||||||||||||||||
| Chunghwa Telecom (China) Co., Ltd. |
Integrated information and communication solution services for enterprise clients, and intelligent energy network service |
177,176 | 2 | 177,176 | — | — | 177,176 | (230 | ) | 100 | (230 | ) | 31,752 | — | Notes 11 and 12 | |||||||||||||||||||||||||||||||||
| Jiangsu Zhenghua Information Technology Company, LLC |
Providing intelligent energy saving solution and intelligent buildings services |
189,410 | 2 | 142,057 | — | — | 142,057 | — | 75 | — | — | — | Notes 10 and 12 | |||||||||||||||||||||||||||||||||||
| Shanghai Taihua Electronic Technology Limited |
Design of printed circuit board and related consultation service |
51,233 | 2 | 51,233 | — | — | 51,233 | (2,235 | ) | 100 | (2,235 | ) | 14,188 | — | Note 12 | |||||||||||||||||||||||||||||||||
| Su Zhou Precision Test Tech. Ltd. |
Assembly processed of circuit board, design of printed circuit board and related consultation service |
62,340 | 2 | 62,340 | — | — | 62,340 | 4,358 | 100 | 4,358 | 82,235 | — | Note 12 | |||||||||||||||||||||||||||||||||||
| Shanghai Chief Telecom Co., Ltd. |
Telecommunications and internet service |
10,150 | 1 | 4,973 | — | — | 4,973 | 306 | 49 | 150 | 13,608 | — | Note 12 | |||||||||||||||||||||||||||||||||||
| International Integrated Systems Inc. (Shanghai) |
Development and maintenance of information system |
48,753 | 2 | 39,923 | — | — | 39,923 | (338 | ) | 100 | (338 | ) | 18,119 | — | Note 12 | |||||||||||||||||||||||||||||||||
(Continued)
- 90 -
| Investee |
Accumulated Investment in Mainland China as of March 31, 2021 |
Investment Amounts Authorized by Investment Commission, MOEA |
Upper Limit on Investment Stipulated by Investment Commission, MOEA |
|||||||||
| SENAO and its subsidiaries (Note 3) |
$ | 2,029,008 | $ | 2,239,005 | $ | 3,648,669 | ||||||
| Chunghwa Telecom (China) Co., Ltd. (Note 4) |
177,176 | 177,176 | 238,470,444 | |||||||||
| Jiangsu Zhenghua Information Technology Company, LLC (Note 4) |
142,057 | 142,057 | 238,470,444 | |||||||||
| Chunghwa Precision Test Tech Co., Ltd and its subsidiaries (Note 5) |
113,573 | 159,725 | 4,330,108 | |||||||||
| Shanghai Chief Telecom Co., Ltd. (Note 6) |
4,973 | 4,973 | 1,913,796 | |||||||||
| IISI and its subsidiaries (Note 7) |
39,923 | 39,923 | 646,409 | |||||||||
| Note 1: | Investments are divided into three categories as follows: |
| a. | Direct investment. |
| b. | Investments through a holding company registered in a third region. |
| c. | Others. |
| Note 2: | The amounts were calculated based on the investee’s reviewed financial statements. |
| Note 3: | Senao International Co., Ltd. and its subsidiaries were calculated based on the consolidated net assets value of Senao International Co., Ltd. |
| Note 4: | Chunghwa Telecom (China) Co., Ltd. and Jiangsu Zhenghua Information Technology Company, LLC were calculated based on the consolidated net assets value of Chunghwa Telecom Co., Ltd. |
| Note 5: | Chunghwa Precision Test Tech. Co., Ltd. and its subsidiaries were calculated based on the consolidated net assets value of Chunghwa Precision Test Tech. Co., Ltd |
| Note 6: | Shanghai Chief Telecom Co., Ltd. was calculated based on the consolidated net assets value of CHIEF Telecom Inc. |
| Note 7: | IISI and its subsidiaries were calculated based on the consolidated net assets value of IISI. |
| Note 8: | The liquidation of Senao Trading (Fujian) Co., Ltd. was completed in May 2019. |
| Note 9: | Senao International Trading (Shanghai) Co., Ltd. was approved to end and dissolve its business in December 2020. The liquidation of Senao International Trading (Shanghai) Co., Ltd. is still in process. |
| Note 10: | The liquidation of Jiangsu Zhenhua Information Technology Company, LLC. was completed in December 2018. |
| Note 11: | Chunghwa Telecom (China) Co., Ltd. was approved to end and dissolve its business in August 2020. The liquidation of Chunghwa Telecom (China) Co., Ltd. is still in process. |
| Note 12: | The amount was eliminated upon consolidation. |
(Concluded)
- 91 -
TABLE 9
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS
THREE MONTHS ENDED MARCH 31, 2021
(Amounts in Thousands of New Taiwan Dollars)
| Year |
No. (Note 1) |
Company Name |
Related Party |
Nature of Relationship (Note 2) |
Transaction Details |
|||||||||||||||||
| Financial Statement Account |
Amount (Note 5) |
Payment Terms (Note 3) |
% to Total Sales or Assets (Note 4) |
|||||||||||||||||||
| 2021 | 0 | Chunghwa Telecom Co., Ltd. |
Senao International Co., Ltd. | a | Accounts receivable |
$ | 147,143 | — | — | |||||||||||||
| Accrued custodial receipts |
100,436 | — | — | |||||||||||||||||||
| Accounts payable |
857,276 | — | — | |||||||||||||||||||
| Amounts collected for others |
155,617 | — | — | |||||||||||||||||||
| Revenues |
1,296,982 | — | 3 | |||||||||||||||||||
| Operating costs and expenses |
117,203 | — | — | |||||||||||||||||||
| Inventories |
3,872 | — | — | |||||||||||||||||||
| CHIEF Telecom Inc. | a | Accounts receivable |
58,983 | — | — | |||||||||||||||||
| Revenues |
118,056 | — | — | |||||||||||||||||||
| Chunghwa System Integration Co., Ltd. | a | Accounts payable |
226,510 | — | — | |||||||||||||||||
| Operating costs and expenses |
382,007 | — | 1 | |||||||||||||||||||
| Inventories |
64,033 | — | — | |||||||||||||||||||
| Donghwa Telecom Co., Ltd. | a | Accounts payable |
158,194 | — | — | |||||||||||||||||
| Operating costs and expenses |
121,996 | — | — | |||||||||||||||||||
| Honghwa International Co., Ltd. | a | Accounts payable |
543,196 | — | — | |||||||||||||||||
| Operating costs and expenses |
1,457,996 | — | 3 | |||||||||||||||||||
| CHT Security Co., Ltd. | a | Accounts payable |
32,597 | — | — | |||||||||||||||||
| Operating costs and expenses |
66,974 | — | — | |||||||||||||||||||
| Inventories |
39,067 | — | — | |||||||||||||||||||
| Aval Technologies Co., Ltd. | a | Accounts payable |
59,327 | — | — | |||||||||||||||||
| Operating costs and expenses |
138,728 | — | — | |||||||||||||||||||
| Inventories |
39,862 | — | — | |||||||||||||||||||
| Note 1: | Significant transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows: |
| a. | “0” for the Company. |
| b. | Subsidiaries are numbered from “1”. |
| Note 2: | Related party transactions are divided into three categories as follows: |
| a. | The Company to subsidiaries. |
| b. | Subsidiaries to the Company. |
| c. | Subsidiaries to subsidiaries. |
| Note 3: | Transaction terms with the related parties were determined in accordance with mutual agreements when there were no similar transactions with third parties. Other transactions with related parties were not significantly different from those with third parties. |
| Note 4: | For assets and liabilities, amount is shown as a percentage to consolidated total assets as of March 31, 2021, while revenues, costs and expenses are shown as a percentage to consolidated revenues for the three months ended March 31, 2021. |
| Note 5: | The amount was eliminated upon consolidation. |
(Concluded)
- 92 -
TABLE 10
CHUNGHWA TELECOM CO., LTD.
INFORMATION OF MAJOR STOCKHOLDERS
MARCH 31, 2021
| Name of Major Stockholders |
Shares | |||||||
| Number of Shares | Percentage of Ownership (%) |
|||||||
| Ministry of Transportation and Communications |
2,737,718,976 | 35.29 | ||||||
| Shin Kong Life Insurance Co., Ltd. |
508,900,184 | 6.56 | ||||||
| Note: | This table presents information provided by the Taiwan Depository & Clearing Corporation on stockholders holding greater than 5% of Chunghwa’s dematerialized securities that have completed the process of registration and delivery by book-entry transfer as of the last business day for the current quarter. |
- 93 -
Exhibit 99.3
Chunghwa Telecom Co., Ltd. and Subsidiaries
Consolidated Financial Statements for the
Three Months Ended March 31, 2021 and 2020
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Millions of New Taiwan Dollars)
| March 31, 2021 (Unaudited) |
December 31, 2020 (Audited) |
March 31, 2020 (Unaudited) |
March 31, 2021 (Unaudited) |
December 31, 2020 (Audited) |
March 31, 2020 (Unaudited) |
|||||||||||||||||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||||||||||||||||||||||||||||||
| ASSETS | LIABILITIES AND EQUITY | |||||||||||||||||||||||||||||||||||||||||||||||||||
| CURRENT ASSETS |
|
CURRENT LIABILITIES |
||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents |
$ | 30,044 | 7 | $ | 30,420 | 6 | $ | 16,570 | 3 | Short-term loans |
$60 | — | $67 | — | $70 | — | ||||||||||||||||||||||||||||||||||||
| Financial assets at fair value through profit or loss |
8 | — | 10 | — | 7 | — | Short-term bills payable |
4,999 | 1 | 6,999 | 1 | 19,966 | 4 | |||||||||||||||||||||||||||||||||||||||
| Hedging financial assets |
— | — | 2 | — | — | — | Financial liabilities at fair value through profit or loss |
4 | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||||||||
| Contract assets |
5,247 | 1 | 5,331 | 1 | 4,467 | 1 | Hedging financial liabilities |
2 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Trade notes and accounts receivable, net |
21,391 | 4 | 22,622 | 5 | 23,401 | 5 | Contract liabilities |
13,265 | 4 | 13,437 | 3 | 17,163 | 4 | |||||||||||||||||||||||||||||||||||||||
| Receivables from related parties |
34 | — | 230 | — | 10 | — | Trade notes and accounts payable |
9,690 | 2 | 15,591 | 3 | 11,890 | 2 | |||||||||||||||||||||||||||||||||||||||
| Inventories |
12,349 | 2 | 12,409 | 3 | 17,775 | 4 | Payables to related parties |
325 | — | 646 | — | 338 | — | |||||||||||||||||||||||||||||||||||||||
| Prepayments |
5,487 | 1 | 2,306 | — | 5,103 | 1 | Current tax liabilities |
8,718 | 2 | 6,157 | 1 | 8,335 | 2 | |||||||||||||||||||||||||||||||||||||||
| Other current monetary assets |
11,620 | 2 | 6,124 | 1 | 6,159 | 1 | Lease liabilities |
3,297 | 1 | 3,382 | 1 | 3,395 | 1 | |||||||||||||||||||||||||||||||||||||||
| Other current assets |
2,233 | — | 2,349 | — | 1,876 | — | Other payables |
22,596 | 4 | 23,988 | 5 | 19,654 | 4 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Provisions | 326 | — | 314 | — | 200 | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total current assets |
88,413 | 17 | 81,803 | 16 | 75,368 | 15 | Current portion of long-term loans |
1,600 | — | 1,600 | — | — | — | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Other current liabilities |
957 | — | 1,042 | — | 973 | — | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
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|
|
|||||||||||||||||||||||||||||||||||||||||
| NONCURRENT ASSETS |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial assets at fair value through profit or loss |
817 | — | 677 | — | 767 | — | Total current liabilities |
65,839 | 14 | 73,223 | 14 | 81,985 | 17 | |||||||||||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Financial assets at fair value through other comprehensive income |
3,650 | 1 | 7,193 | 1 | 5,903 | 1 | NONCURRENT LIABILITIES |
|||||||||||||||||||||||||||||||||||||||||||||
| Investments accounted for using equity method |
6,994 | 2 | 6,695 | 1 | 7,141 | 1 | Long-term loans |
— | — | — | — | 1,600 | — | |||||||||||||||||||||||||||||||||||||||
| Contract assets |
2,487 | — | 2,495 | — | 2,567 | 1 | Bonds payable |
19,981 | 4 | 19,980 | 4 | — | — | |||||||||||||||||||||||||||||||||||||||
| Property, plant and equipment |
280,151 | 55 | 281,416 | 56 | 279,867 | 56 | Contract liabilities |
7,216 | 1 | 7,289 | 2 | 6,668 | 1 | |||||||||||||||||||||||||||||||||||||||
|
Right-of-use assets |
10,765 | 2 | 11,009 | 2 | 11,494 | 2 | Deferred income taxes liabilities |
2,018 | — | 1,967 | — | 1,928 | 1 | |||||||||||||||||||||||||||||||||||||||
| Investment properties |
9,611 | 2 | 9,621 | 2 | 8,164 | 2 | Provisions |
104 | — | 101 | — | 100 | — | |||||||||||||||||||||||||||||||||||||||
| Intangible assets |
88,664 | 18 | 90,285 | 19 | 94,408 | 19 | Lease liabilities |
6,022 | 1 | 6,215 | 1 | 6,425 | 1 | |||||||||||||||||||||||||||||||||||||||
| Deferred income tax assets |
3,074 | 1 | 3,133 | 1 | 3,262 | 1 | Customers’ deposits |
4,732 | 1 | 4,827 | 1 | 4,602 | 1 | |||||||||||||||||||||||||||||||||||||||
| Incremental costs of obtaining contracts |
962 | — | 1,000 | — | 930 | — | Net defined benefit liabilities |
3,420 | 1 | 3,415 | 1 | 3,539 | 1 | |||||||||||||||||||||||||||||||||||||||
| Net defined benefit assets |
3,577 | 1 | 3,373 | 1 | 2,204 | — | Other noncurrent liabilities |
1,986 | — | 1,890 | — | 1,685 | — | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Prepayments |
2,145 | — | 2,214 | — | 2,612 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other noncurrent assets |
4,990 | 1 | 5,266 | 1 | 4,992 | 1 | Total noncurrent liabilities |
45,479 | 8 | 45,684 | 9 | 26,547 | 5 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total noncurrent assets |
417,887 | 83 | 424,377 | 84 | 424,311 | 85 | Total liabilities |
111,318 | 22 | 118,907 | 23 | 108,532 | 22 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stocks |
77,574 | 15 | 77,574 | 15 | 77,574 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Additional paid-in capital |
149,806 | 30 | 149,790 | 30 | 149,786 | 29 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Retained earnings |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Legal reserve |
77,574 | 15 | 77,574 | 15 | 77,574 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||
| Special reserve |
2,676 | 1 | 2,676 | 1 | 2,676 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||
| Unappropriated earnings |
76,007 | 15 | 67,574 | 13 | 73,834 | 14 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Total retained earnings |
156,257 | 31 | 147,824 | 29 | 154,084 | 31 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Others |
(152 | ) | — | 927 | — | (709 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Total equity attributable to stockholders of the parent |
383,485 | 76 | 376,115 | 74 | 380,735 | 76 | ||||||||||||||||||||||||||||||||||||||||||||||
| NONCONTROLLING INTERESTS |
11,497 | 2 | 11,158 | 3 | 10,412 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Total equity |
394,982 | 78 | 387,273 | 77 | 391,147 | 78 | ||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| TOTAL |
$ | 506,300 | 100 | $ | 506,180 | 100 | $ | 499,679 | 100 | TOTAL |
$ | 506,300 | 100 | $ | 506,180 | 100 | $ | 499,679 | 100 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
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|
|
|
|||||||||||||||||||||||||||||
- 1 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Millions of New Taiwan Dollars, Except Earnings Per Share)
(Unaudited)
| Three Months Ended March 31 | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Amount | % | Amount | % | |||||||||||||
| REVENUES |
$ | 50,101 | 100 | $ | 48,150 | 100 | ||||||||||
| OPERATING COSTS |
31,893 | 64 | 30,391 | 63 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| GROSS PROFIT |
18,208 | 36 | 17,759 | 37 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| OPERATING EXPENSES |
||||||||||||||||
| Marketing |
4,885 | 9 | 5,073 | 10 | ||||||||||||
| General and administrative |
1,303 | 3 | 1,213 | 3 | ||||||||||||
| Research and development |
875 | 2 | 936 | 2 | ||||||||||||
| Expected credit loss |
44 | — | 6 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
7,107 | 14 | 7,228 | 15 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| OTHER INCOME AND EXPENSES |
3 | — | (1 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCOME FROM OPERATIONS |
11,104 | 22 | 10,530 | 22 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NON-OPERATING INCOME AND EXPENSES |
||||||||||||||||
| Interest income |
18 | — | 39 | — | ||||||||||||
| Other income |
42 | — | 43 | — | ||||||||||||
| Other gains and losses |
164 | — | 39 | — | ||||||||||||
| Interest expenses |
(51 | ) | — | (42 | ) | — | ||||||||||
| Share of profits of associates and joint ventures accounted for using equity method |
40 | — | 35 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total non-operating income and expenses |
213 | — | 114 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| INCOME BEFORE INCOME TAX |
11,317 | 22 | 10,644 | 22 | ||||||||||||
| INCOME TAX EXPENSE |
2,679 | 5 | 2,544 | 5 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NET INCOME |
8,638 | 17 | 8,100 | 17 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| TOTAL OTHER COMPREHENSIVE INCOME (LOSS) |
||||||||||||||||
| Items that will not be reclassified to profit or loss: |
||||||||||||||||
| Unrealized gain or loss on investments in equity instruments at fair value through other comprehensive income |
(945 | ) | (2 | ) | (1,286 | ) | (3 | ) | ||||||||
| Gain or loss on hedging instruments subject to basis adjustment |
(4 | ) | — | — | — | |||||||||||
(Continued)
- 2 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Millions of New Taiwan Dollars, Except Earnings Per Share)
(Unaudited)
| Three Months Ended March 31 | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| Amount | % | Amount | % | |||||||||||||
| Share of remeasurements of defined benefit pension plans of associates and joint ventures |
$ | 1 | — | $ | — | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (948 | ) | (2 | ) | (1,286 | ) | (3 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Items that may be reclassified subsequently to profit or loss: |
||||||||||||||||
| Exchange differences arising from the translation of the foreign operations |
(37 | ) | — | (12 | ) | — | ||||||||||
| Share of exchange differences arising from the translation of the foreign operations of associates and joint ventures |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (37 | ) | — | (12 | ) | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other comprehensive loss, net of income tax |
(985 | ) | (2 | ) | (1,298 | ) | (3 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| TOTAL COMPREHENSIVE INCOME |
$ | 7,653 | 15 | $ | 6,802 | 14 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NET INCOME ATTRIBUTABLE TO |
||||||||||||||||
| Stockholders of the parent |
$ | 8,338 | 17 | $ | 7,850 | 16 | ||||||||||
| Noncontrolling interests |
300 | — | 250 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 8,638 | 17 | $ | 8,100 | 17 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| COMPREHENSIVE INCOME ATTRIBUTABLE TO |
||||||||||||||||
| Stockholders of the parent |
$ | 7,354 | 15 | $ | 6,554 | 13 | ||||||||||
| Noncontrolling interests |
299 | — | 248 | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 7,653 | 15 | $ | 6,802 | 14 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| EARNINGS PER SHARE |
||||||||||||||||
| Basic |
$ | 1.07 | $ | 1.01 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
$ | 1.07 | $ | 1.01 | ||||||||||||
|
|
|
|
|
|||||||||||||
(Concluded)
- 3 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In Millions of New Taiwan Dollars)
(Unaudited)
| Equity Attributable to Stockholders of the Parent | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Others | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exchange | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Differences | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Arising | Unrealized | |||||||||||||||||||||||||||||||||||||||||||||||||||
| from the | Gain or Loss | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Retained Earnings | Translation of | on Financial | Gain or Loss | Attributable to | ||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Special | Unappropriated | Total Retained | the Foreign | Assets at | on Hedging | Stockholders | Noncontrolling | ||||||||||||||||||||||||||||||||||||||||||||
| Common Stocks | Paid-in Capital | Legal Reserve | Reserve | Earnings | Earnings | Operations | FVOCI | Instruments | Total Others | of the Parent | Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| BALANCE, JANUARY 1, 2020 |
$ | 77,574 | $ | 149,762 | $ | 77,574 | $ | 2,676 | $ | 65,984 | $ | 146,234 | $ | (148 | ) | $ | 735 | $ | — | $ | 587 | $ | 374,157 | $ | 10,115 | $ | 384,272 | |||||||||||||||||||||||||
| Net income for the three months ended March 31, 2020 |
— | — | — | — | 7,850 | 7,850 | — | — | — | — | 7,850 | 250 | 8,100 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss for the three months ended March 31, 2020 |
— | — | — | — | — | — | (13 | ) | (1,283 | ) | — | (1,296 | ) | (1,296 | ) | (2 | ) | (1,298 | ) | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total comprehensive income (loss) for the three months ended March 31, 2020 |
— | — | — | — | 7,850 | 7,850 | (13 | ) | (1,283 | ) | — | (1,296 | ) | 6,554 | 248 | 6,802 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Share-based payment transactions of subsidiaries |
— | 24 | — | — | — | — | — | — | — | — | 24 | 49 | 73 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| BALANCE, MARCH 31, 2020 |
$ | 77,574 | $ | 149,786 | $ | 77,574 | $ | 2,676 | $ | 73,834 | $ | 154,084 | $ | (161 | ) | $ | (548 | ) | $ | — | $ | (709 | ) | $ | 380,735 | $ | 10,412 | $ | 391,147 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| BALANCE, JANUARY 1, 2021 |
$ | 77,574 | $ | 149,790 | $ | 77,574 | $ | 2,676 | $ | 67,574 | $ | 147,824 | $ | (315 | ) | $ | 1,240 | $ | 2 | $ | 927 | $ | 376,115 | $ | 11,158 | $ | 387,273 | |||||||||||||||||||||||||
| Net income for the three months ended March 31, 2021 |
— | — | — | — | 8,338 | 8,338 | — | — | — | — | 8,338 | 300 | 8,638 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) for the three months ended March 31, 2021 |
— | — | — | — | 1 | 1 | (35 | ) | (946 | ) | (4 | ) | (985 | ) | (984 | ) | (1 | ) | (985 | ) | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total comprehensive income (loss) for the three months ended March 31, 2021 |
— | — | — | — | 8,339 | 8,339 | (35 | ) | (946 | ) | (4 | ) | (985 | ) | 7,354 | 299 | 7,653 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Disposal of investments in equity instruments at fair value through other comprehensive income |
— | — | — | — | 94 | 94 | — | (94 | ) | — | (94 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||
| Share-based payment transactions of subsidiaries |
— | 16 | — | — | — | — | — | — | — | — | 16 | 40 | 56 | |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| BALANCE, MARCH 31, 2021 |
$ | 77,574 | $ | 149,806 | $ | 77,574 | $ | 2,676 | $ | 76,007 | $ | 156,257 | $ | (350 | ) | $ | 200 | $ | (2 | ) | $ | (152 | ) | $ | 383,485 | $ | 11,497 | $ | 394,982 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
- 4 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions of New Taiwan Dollars)
(Unaudited)
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Income before income tax |
$ | 11,317 | $ | 10,644 | ||||
| Adjustments to reconcile income before income tax to net cash provided by operating activities: |
||||||||
| Depreciation |
7,848 | 7,759 | ||||||
| Amortization |
1,641 | 1,059 | ||||||
| Amortization of incremental costs of obtaining contracts |
195 | 197 | ||||||
| Expected credit loss |
44 | 6 | ||||||
| Interest expenses |
51 | 42 | ||||||
| Interest income |
(18 | ) | (39 | ) | ||||
| Compensation cost of share-based payment transactions |
4 | 2 | ||||||
| Share of profits of associates and joint ventures accounted for using equity method |
(40 | ) | (35 | ) | ||||
| Loss (gain) on disposal of property, plant and equipment |
(3 | ) | 1 | |||||
| Loss on disposal of financial instruments |
— | 2 | ||||||
| Loss on disposal of investments accounted for by using equity method |
— | 6 | ||||||
| Provision for impairment loss and obsolescence of inventory |
33 | 24 | ||||||
| Valuation loss (gain) on financial assets and liabilities at fair value through profit or loss, net |
(133 | ) | 12 | |||||
| Others |
(50 | ) | (51 | ) | ||||
| Changes in operating assets and liabilities: |
||||||||
| Decrease (increase) in: |
||||||||
| Contract assets |
92 | 8 | ||||||
| Trade notes and accounts receivable |
1,220 | 3,042 | ||||||
| Receivables from related parties |
196 | 7 | ||||||
| Inventories |
27 | (454 | ) | |||||
| Prepayments |
(3,112 | ) | (3,153 | ) | ||||
| Other current monetary assets |
(147 | ) | 122 | |||||
| Other current assets |
116 | 554 | ||||||
| Incremental cost of obtaining contracts |
(157 | ) | (184 | ) | ||||
| Increase (decrease) in: |
||||||||
| Contract liabilities |
(245 | ) | 150 | |||||
| Trade notes and accounts payable |
(5,901 | ) | (3,423 | ) | ||||
| Payables to related parties |
(321 | ) | (316 | ) | ||||
| Other payables |
(2,490 | ) | (2,523 | ) | ||||
| Provisions |
15 | (5 | ) | |||||
| Other current liabilities |
(77 | ) | (6 | ) | ||||
| Net defined benefit plans |
(199 | ) | (42 | ) | ||||
|
|
|
|
|
|||||
| Cash generated from operations |
9,906 | 13,406 | ||||||
| Interest paid |
(23 | ) | (77 | ) | ||||
| Income tax paid |
(8 | ) | (8 | ) | ||||
|
|
|
|
|
|||||
| Net cash provided by operating activities |
9,875 | 13,321 | ||||||
|
|
|
|
|
|||||
(Continued)
- 5 -
CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions of New Taiwan Dollars)
(Unaudited)
| Three Months Ended March 31 | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Acquisition of financial assets at fair value through other comprehensive income |
$ | (38 | ) | $ | (35 | ) | ||
| Proceeds from disposal of financial assets at fair value through other comprehensive income |
2,906 | — | ||||||
| Acquisition of financial assets at fair value through profit or loss |
(9 | ) | (39 | ) | ||||
| Proceeds from disposal of financial assets at fair value through profit or loss |
10 | 30 | ||||||
| Acquisition of time deposits and negotiable certificates of deposit with maturities of more than three months |
(7,726 | ) | (1,392 | ) | ||||
| Proceeds from disposal of time deposits and negotiable certificates of deposit with maturities of more than three months |
1,998 | 2,616 | ||||||
| Acquisition of investments accounted for using equity method |
(274 | ) | — | |||||
| Acquisition of property, plant and equipment |
(4,443 | ) | (3,729 | ) | ||||
| Proceeds from disposal of property, plant and equipment |
6 | 14 | ||||||
| Acquisition of intangible assets |
(20 | ) | (47,420 | ) | ||||
| Decrease in other noncurrent assets |
214 | 70 | ||||||
| Interest received |
17 | 46 | ||||||
| Dividends received |
103 | — | ||||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(7,256 | ) | (49,839 | ) | ||||
|
|
|
|
|
|||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Proceeds from short-term loans |
63 | 70 | ||||||
| Repayments of short-term loans |
(70 | ) | (90 | ) | ||||
| Proceeds from short-term bills payable |
5,000 | 29,000 | ||||||
| Repayments of short-term bills payable |
(7,000 | ) | (9,000 | ) | ||||
| Decrease in customers’ deposits |
(103 | ) | (150 | ) | ||||
| Payments for the principal of lease liabilities |
(1,019 | ) | (992 | ) | ||||
| Increase in other noncurrent liabilities |
95 | 142 | ||||||
| Change in other noncontrolling interests |
53 | 72 | ||||||
|
|
|
|
|
|||||
| Net cash provided by (used in) financing activities |
(2,981 | ) | 19,052 | |||||
|
|
|
|
|
|||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(14 | ) | (14 | ) | ||||
|
|
|
|
|
|||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
(376 | ) | (17,480 | ) | ||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
30,420 | 34,050 | ||||||
|
|
|
|
|
|||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 30,044 | $ | 16,570 | ||||
|
|
|
|
|
|||||
(Concluded)
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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2021 and 2020
(Unaudited)
STATEMENT OF COMPLIANCE
The Company has prepared its consolidated balance sheets as of March 31, 2021 and 2020, the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2021 and 2020 in accordance with IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standard Board (IASB). The consolidated financial statements are incomplete as they omit the related footnote disclosures as required under International Financial Reporting Standards as issued by IASB.
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