Neo Solar Power Corp. and Subsidiaries

Transcription

1 Neo Solar Power Corp. and Subsidiaries Consolidated Financial Statements for the Three Months Ended and and Independent Auditors Review Report

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4 NEO SOLAR POWER CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars) Reviewed Audited Reviewed Reviewed Audited Reviewed ASSETS Amount % Amount % Amount % LIABILITIES AND SHAREHOLDERS EQUITY Amount % Amount % Amount % CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents (Notes 6 and 38) $ 4,004, $ 4,430, $ 7,149, Short-term bank loans (Notes 24, 38 and 40) $ 7,572, $ 8,229, $ 8,800, Financial assets at fair value through profit or loss - current Short-term bills payable (Notes 24 and 38) 717, , ,528 1 (Notes 4, 7 and 38) 1, Financial liabilities at fair value through profit or loss - Contract assets - current (Notes 30 and 39) 164, current (Notes 7 and 38) 2,557-5,742-24,250 - Debt investments with no active market - current (Notes 12 and 38) ,512 1 Contract liabilities - current (Notes 30 and 39) 999, Notes and accounts receivable, net (Notes 13, 30 and 38) 1,190, ,300, ,883,205 5 Notes and accounts payable (Note 38) 992, ,104, ,017 2 Accounts receivable from related parties (Notes 13, 30, 38 and 39) 229, , ,753 - Accounts payable to related parties (Notes 38 and 39) , ,041 1 Financial lease receivables (Notes 14, 38 and 40) 248, , ,246 - Bonuses payable to employees and directors (Note 31) 8,242-8,242-2,649 - Amounts due from customers for construction contracts (Notes 15 Payables to contractors and equipment suppliers (Notes 38 and 39) 156, , ,323 1 and 39) ,295-4,542 - Accrued expenses (Notes 26, 38 and 39) 2,411, ,536, ,431,982 4 Other receivables (Notes 13 and 38) 55,982-99, ,013 - Amounts due to customers for construction contracts (Notes 15 and Other receivables from related parties (Notes 13, 38 and 39) 1,760, ,765, , ) ,963-2,536 - Current tax assets (Note 4) 5,678-8,557-5,615 - Current tax liabilities (Notes 4 and 32) 21,015-19,462-3,587 - Inventories (Notes 16 and 40) 2,873, ,972, ,792, Other current liabilities (Note 26) 100,349-98,835-92,824 - Prepayments (Notes 22, 23, 39 and 41) 239, , ,031 1 Provisions - current (Note 27) - - 1,609-6,338 - Non-current assets held for sale (Notes 17, 20 and 40) 143, , ,020 - Receipts in advance (Note 39) , ,305 - Other current assets (Notes 22, 23, 38 and 40) 1,278, ,079, ,542 1 Current portion of long-term bank loans and bonds payables (Notes 24, 38 and 40) 3,420, ,101, ,486,388 4 Total current assets 12,194, ,573, ,960, Total current liabilities 16,403, ,679, ,372, NON-CURRENT ASSETS Financial assets at fair value through profit or loss - NON-CURRENT LIABILITIES non-current (Notes 4, 7 and 38) 114, , Financial liabilities at fair value through profit or loss - Financial assets at fair value through other comprehensive income non-current (Note 7) 89,219-94, non-current (Notes 4, 8 and 38) 256, Bonds payable (Notes 25, 38 and 40) 3,361, ,425, ,418, Available-for-sale financial assets - non-current (Notes 10 and Long-term bank loans (Notes 24, 38 and 40) 2,183, ,158, ,122, ) , ,707 - Provisions - non-current (Note 27) 258, , ,066 1 Derivative financial assets for holding - non-current (Notes 4, 9 Deferred tax liabilities (Note 4) 58,191-53,125-37,729 - and 38) 145, Preference share liabilities (Notes 24, 38 and 40) 23,694-26, Financial assets carried at cost - non-current (Notes 11 and 38) ,546-54,556 - Guarantee deposits 35,682-36,595-37,105 - Debt investment with no active market - non-current (Notes 12 and Other non-current liabilities (Note 26) 179, , ,708-38) , ,680 1 Investment accounted for using the equity method (Note 19) 1,891, ,887, ,936,191 6 Total non-current liabilities 6,190, ,228, ,030, Property, plant and equipment (Notes 17, 20, 39 and 40) 9,864, ,162, ,127, Intangible assets (Note 21) 258, , ,530 1 Total liabilities 22,593, ,908, ,403, Deferred tax assets (Note 4) 85,625-90,529-40,873 - Financial lease receivables - non-current (Notes 14, 38 and 40) 4,594, ,798, ,713,058 5 EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT Prepayments - non-current (Notes 23 and 41) 1,050, ,010, ,365,164 4 (Notes 29, 31, 34 and 35) Refundable deposits (Notes 39 and 40) 849, , ,013 1 Common shares 10,192, ,192, ,175, Other receivables from related parties - non-current (Notes 13, Capital surplus 6,070, ,028, ,344, and 39) 190, , ,624 - Accumulated deficit (5,153,619) (15) (4,611,501) (14) (7,595,153) (22) Prepayments for lease (Note 22) 19,025-19,700-20,628 - Other equity (514,625) (2) (529,826) (2) (439,620) (1) Other non-current assets (Notes 23 and 40) 2,181, ,940, ,115,146 3 Total equity attributable to shareholders of the parent 10,594, ,079, ,485, Total non-current assets 21,501, ,672, ,477, NON-CONTROLLING INTERESTS (Note 35) 506, , ,626 1 Total equity 11,101, ,337, ,035, TOTAL $ 33,695, $ 34,245, $ 35,438, TOTAL $ 33,695, $ 34,245, $ 35,438, The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 8, ) - 3 -

5 NEO SOLAR POWER CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Loss Per Share) (Reviewed, Not Audited) For the Three Months Ended March 31 Amount % Amount % NET SALES (Notes 15, 30, 39 and 41) $ 2,514, $ 2,161, COST OF SALES (Notes 16, 31, 39 and 41) 2,694, ,840, GROSS LOSS (180,251) (7) (679,388) (31) (UNREALIZED) REALIZED GAIN FROM SALES (3,018) REALIZED GROSS LOSS (183,269) (7) (679,130) (31) OPERATING EXPENSES (Notes 31 and 39) Selling 118, ,655 9 General and administrative 167, ,880 9 Research and development 60, ,410 3 Expected credit gain reversed on trade receivables (1,383) Total operating expenses 345, , OTHER INCOME AND EXPENSES (Notes 17 and 31) (2,403) - (12,225) (1) LOSS FROM OPERATIONS (530,797) (21) (1,135,300) (53) NON-OPERATING INCOME AND EXPENSES Gain on disposal of investments 42, Foreign exchange gain (loss), net (Note 31) 38,538 1 (31,163) (1) Interest income (Notes 31 and 39) 13,140-10,137 - Other income (Notes 31 and 39) 10,529-24,624 1 Other gains and losses (299) - (21) - Share of the loss of associates and joint ventures (677) - (10,159) - Loss on financial instruments at fair value through profit or loss (Notes 7 and 25) (58,689) (2) (69,604) (3) Finance costs (Notes 24 and 31) (152,074) (6) (104,719) (5) Total non-operating income and expenses (107,245) (5) (180,905) (8) LOSS BEFORE INCOME TAX (638,042) (26) (1,316,205) (61) INCOME TAX EXPENSE (Notes 4 and 32) (5,132) - (1,242) - NET LOSS FOR THE PERIOD (643,174) (26) (1,317,447) (61) (Continued) - 4 -

6 NEO SOLAR POWER CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Loss Per Share) (Reviewed, Not Audited) For the Three Months Ended March 31 Amount % Amount % OTHER COMPREHENSIVE INCOME (LOSS) (Note 31) Items that will not be reclassified subsequently to profit or loss Unrealized gain on investments in equity instruments designated as at fair value through other comprehensive income $ 52,592 2 $ - - Items that may be reclassified subsequently to profit or loss Exchange differences on translating foreign operations 9,675 1 (324,992) (15) Unrealized loss on available-for-sale financial assets - - (1,981) - Total other comprehensive income (loss) 62,267 3 (326,973) (15) TOTAL COMPREHENSIVE LOSS FOR THE PERIOD $ (580,907) (23) $ (1,644,420) (76) NET LOSS ATTRIBUTABLE TO Shareholders of the parent $ (640,944) (26) $ (1,285,367) (59) Non-controlling interests (2,230) - (32,080) (2) $ (643,174) (26) $ (1,317,447) (61) TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO Shareholders of the parent $ (571,284) (23) $ (1,578,415) (73) Non-controlling interests (9,623) - (66,005) (3) $ (580,907) (23) $ (1,644,420) (76) LOSS PER SHARE (Note 33) Basic loss per share $ (0.63) $ (1.26) Diluted loss per share $ (0.63) $ (1.26) The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 8, ) (Concluded) - 5 -

7 NEO SOLAR POWER CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) Shares (In Thousand) Equity Attributable to Shareholders of the Parent Capital Surplus Difference between Consideration Other Equity Share of and Carrying Unrealized Unrealized Changes in Amounts (Loss) (Loss) Capital Changes in Unappropriated Foreign Gain on Gain on Common Shares Surplus of Percentage of Restricted Earnings Currency Available-for Financial Unearned Common Shares Share Premium Associates of Joint Ventures Ownership in Subsidiaries Employee Share Options Shares for Employees (Accumulated Deficits) Translation Reserve -sale Financial Assets Assets at FVTOCI Employees Benefits Total Non-controlling Interests Total Equity BALANCE AT JANUARY 1, 1,017,615 $ 10,176,152 $ 12,209,652 $ - $ 14,023 $ 3,022 $ 118,649 $ (6,309,786 ) $ (90,836 ) $ (53,259 ) $ - $ (4,666 ) $ 16,062,951 $ 616,631 $ 16,679,582 Cancellation of restricted shares for employees (84 ) (837 ) (846 ) , Compensation cost of restricted shares for employees Net loss for the three months ended (1,285,367 ) (1,285,367 ) (32,080 ) (1,317,447 ) Other comprehensive loss for the three months ended, net of income tax (291,067) (1,981) - - (293,048) (33,925) (326,973) Total comprehensive loss for the three months ended (1,285,367) (291,067) (1,981) - - (1,578,415) (66,005) (1,644,420) BALANCE AT MARCH 31, 1,017,531 $ 10,175,315 $ 12,209,652 $ - $ 14,023 $ 3,022 $ 117,803 $ (7,595,153 ) $ (381,903 ) $ (55,240 ) $ - $ (2,477 ) $ 14,485,042 $ 550,626 $ 15,035,668 BALANCE AT JANUARY 1, 1,019,256 $ 10,192,564 $ 6,020,328 $ - $ - $ - $ 7,837 $ (4,611,501 ) $ (437,906 ) $ (71,882 ) $ - $ (20,038 ) $ 11,079,402 $ 258,408 $ 11,337,810 Effect of retrospective application ,826-71,882 (130,891 ) - 39,817-39,817 BALANCE AT JANUARY 1, - AFTER RETROSPECTIVE APPLICATION 1,019,256 10,192,564 6,020, ,837 (4,512,675) (437,906) - (130,891) (20,038) 11,119, ,408 11,377,627 Change in capital surplus from investments in associates and joint ventures accounted for using the equity method , ,000-42,000 Compensation cost of restricted shares for employees ,550 4,550-4,550 Non-controlling interests , ,094 Net loss for the three months ended (640,944 ) (640,944 ) (2,230 ) (643,174 ) Other comprehensive income or loss for the three months ended, net of income tax ,068-52,592-69,660 (7,393) 62,267 Total comprehensive income or loss for the three months ended (640,944) 17,068-52,592 - (571,284) (9,623) (580,907) BALANCE AT MARCH 31, 1,019,256 $ 10,192,564 $ 6,020,328 $ 42,000 $ - $ - $ 7,837 $ (5,153,619 ) $ (420,838 ) $ - $ (78,299 ) $ (15,488 ) $ 10,594,485 $ 506,879 $ 11,101,364 The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche review report dated May 8, ) - 6 -

8 NEO SOLAR POWER CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) For the Three Months Ended March 31 CASH FLOWS FROM OPERATING ACTIVITIES Loss before income tax $ (638,042) $ (1,316,205) Adjustments for: Depreciation 422, ,387 Amortization 3,560 5,369 Net gain on financial assets and liabilities at fair value through profit or loss 17,546 34,184 Gain on disposal of investments (42,287) - Reversal of provisions - (1,584) Expected credit gain reversed on trade receivables (1,383) - Write down of inventories 73,037 5,026 Share of loss of associates and joint ventures ,159 Loss on disposal of property, plant and equipment Impairment loss on property, plant and equipment - 12,076 Reclassified from property, plant and equipment to expenses 1,195 2,645 Loss on disposal of non-current assets held for sale 2,403 - Realized gain from associates 3,018 (258) Compensation cost of restricted shares for employees 4, Interest income (74,254) (17,351) Finance costs 152, ,719 Net loss (gain) on foreign exchange 7,223 (182,708) 569, ,319 Changes in operating assets and liabilities: Contract assets - current (99,978) - Notes and accounts receivable 99, ,998 Accounts receivable from related parties (61,400) (26,431) Other receivables 40,138 3,388 Other receivables from related parties (26,277) (37,294) Amounts due from customers for construction contracts - (4,542) Inventories 25,506 94,930 Prepayments (including non-current prepayments) (35,768) 157,553 Other current assets (2,153) (56,336) Contract liabilities - current 690,808 - Notes and accounts payable (92,232) (557,106) Accounts payable to related parties (12,551) (24,281) Accrued expenses 7,191 (204,835) Amounts due to customers for construction contracts - 2,536 Deferred revenue (8,705) (17,677) Receipts in advance (137,684) 47,517 Other current liabilities (95) (924) Provisions 12,637 6,303 Income taxes refunded 9, Net cash generated from (used in) operating activities 340,230 (915,812) (Continued) - 7 -

9 NEO SOLAR POWER CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited) For the Three Months Ended March 31 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of associates and joint ventures $ (381) $ (2,598) Net cash inflow on disposal of subsidiaries 61,553 - Proceeds from sale of non-current assets held for sale 135,189 - Acquisition of property, plant and equipment (850,280) (902,193) Increase in restricted assets (333,270) (267,916) Increase in other receivables from related parties 4,498 2,214 Decrease in pledged bank acceptances (134,085) - Decrease in finance lease receivables 34,679 10,083 Interest received 103,639 17,418 Increase in refundable deposits (29,830) (29) Decrease in refundable deposits 24,225 3,669 Increase in other non-current assets (7,315) - Decrease in other non-current assets 9,405 2,210 Net cash used in investing activities (981,973) (1,137,142) CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term bank loans 5,046,159 8,152,052 Decrease in short-term bank loans (5,612,112) (6,806,777) Increase in short-term bills payable 553,000 - Decrease in short-term bills payable (442,300) - Proceeds from long-term bank loans 664,385 1,172,507 Repayments of long-term bank loans (125,244) (1,156,648) Decrease in guarantee deposits (128) - Interest paid (98,810) (66,398) Increase in non-controlling interests 258,094 - Net cash generated from financing activities 243,044 1,294,736 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (27,653) (99,749) NET DECREASE IN CASH AND CASH EQUIVALENTS (426,352) (857,967) CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 4,430,627 8,007,136 CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 4,004,275 $ 7,149,169 The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche review report dated May 8, ) (Concluded) - 8 -

10 NEO SOLAR POWER CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, AND (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited) 1. ORGANIZATION AND OPERATION Neo Solar Power Corp. (NSP) was incorporated in the Republic of China on August 26, NSP specializes in manufacturing high-quality solar cells, solar cell modules and wafers. NSP s main business activities include researching, developing, designing, manufacturing and selling solar cells as well as participating in other solar-related businesses. Its common shares have been listed on the Taiwan Stock Exchange (TSE) since January For the main business activities of NSP and its subsidiaries (collectively referred to as the Corporation ), refer to Notes 18 and 43. The consolidated financial statements are presented in NSP s functional currency, the New Taiwan dollar. 2. APPROVAL OF FINANCIAL STATEMENTS The consolidated financial statements were approved by NSP s board of directors on May 8,. 3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the IFRSs ) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China (FSC) Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Corporation s accounting policies: 1) IFRS 9 Financial Instruments and related amendments IFRS 9 supersedes IAS 39 Financial Instruments: Recognition and Measurement, with consequential amendments to IFRS 7 Financial Instruments: Disclosures and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies. Classification, measurement and impairment of financial assets On the basis of the facts and circumstances that existed as at January 1,, the Corporation has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods

11 The following table shows the original measurement categories and carrying amounts under IAS 39 and the new measurement categories and carrying amounts under IFRS 9 for each class of the Corporation s financial assets and financial liabilities as at January 1,. Financial asset classification Measurement Category Carrying Amount IAS 39 IFRS 9 IAS 39 IFRS 9 Note Cash and cash equivalents, net Loans and receivables Amortized cost $ 11,549,608 $ 11,549,608 (1) accounts receivable (accounts receivable - related parties), pledged time deposits, restricted assets, refundable deposits and other receivables Equity securities Available for sale FVTOCI 163, ,428 (2) Derivatives Held for trading Mandatorily at FVTPL 141, ,620 Debt investments Amortized cost Amortized cost 149, ,240 Financial liabilities classification Short-term loans, short-term Amortized cost Amortized cost 20,581,872 20,581,872 bills payable, notes and accounts payable, accounts payable to related parties, payables to contractors and equipment suppliers, accrued expenses, long-term loans and bonds payable Derivatives Held for trading Held for trading 99,756 99,756 Financial Assets Carrying Amount as of (IAS 39) Reclassifications Remeasurements Carrying Amount as of January 1, (IFRS 9) Retained Earnings Effect on January 1, Other Equity Effect on January 1, Note FVTOCI $ - $ - $ - $ - $ - $ - - Equity instruments - 163,611 39, ,428 98,826 (59,009) (2) Add: Reclassification from available-for-sale - 163,611 39, ,428 98,826 (59,009) Amortized cost Add: Reclassification - 11,549,608-11,549, (1) from loans and receivables - 11,549,608-11,549, Total $ - $ 11,713,219 $ $ 11,753,036 $ 98,826 $ (59,009) (1) Cash and cash equivalents, net accounts receivable (accounts receivable - related parties), pledged time deposits, restricted assets, refundable deposits and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortized cost with assessment of future 12-month or lifetime expected credit losses under IFRS 9. (2) As equity investments that were previously classified as available-for-sale financial assets under IAS 39 are not held for trading, the Corporation elected to designate all of these investments as at FVTOCI under IFRS 9. As a result, the related other equity-unrealized gain/loss on available-for-sale financial assets in the amount of $71,882 thousand would result in an increase in other equity - unrealized gain/loss on financial assets at FVTOCI. As equity investments previously measured at cost under IAS 39 are remeasured at fair value under IFRS 9, the adjustments would result in an increase in financial assets at FVTOCI of $39,817 thousand, an increase in other equity - unrealized gain/loss on financial assets at FVTOCI of $18,567 thousand and an increase in retained earnings of $21,250 thousand on January 1,

12 For those equity investments previously classified as available-for-sale financial assets (including measured at cost financial assets) under IAS 39, the impairment losses that the Corporation had recognized have been accumulated in retained earnings. Since these investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, the adjustments would result in a decrease in other equity - unrealized gain/loss on financial assets at FVTOCI of $149,458 thousand and an increase in retained earnings of $77,576 thousand on January 1,. 2) IFRS 15 Revenue from Contracts with Customers and related amendments IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and supersedes IAS 18 Revenue, IAS 11 Construction Contracts and a number of revenue-related interpretations. Refer to Note 4 for the related accounting policies. The Corporation elects to retrospectively apply IFRS 15 to contracts that are not complete on January 1, and elects not to restate prior reporting periods with the cumulative effect of the initial application recognized at the date of initial application. The anticipated impact on assets, liabilities and equity when retrospectively applying IFRS 15 on January 1, is detailed below: Carrying Amount as of (IAS 18 and Revenue-related Interpretations) Adjustments Arising from Initial Application Carrying Amount as of January 1, (IFRS 15) Note Amount due from customers for $ 64,295 $ (64,295) $ - (2) construction contracts Contract assets - current - 64,295 64,295 (2) Total effect on assets $ 64,295 $ - $ 64,295 Provisions - current $ 1,609 $ (1,609) $ - (1) Amount due to customers for 71,963 (71,963) - (2) construction contracts Receipts in advance 374,623 (236,552) 138,071 (2) Contract liabilities - current - 308, ,515 (2) Other current liabilities 98,835 1, ,444 (1) Total effect on liabilities $ 547,030 $ - $ 547,030 (1) Prior to the application of IFRS 15, the Corporation recognized the estimation of sales returns and allowances as provisions. Under IFRS 15, the Corporation recognizes such estimation as a refund liability (classified under accrued expenses and other current liabilities). (2) Currently, the net effect of the progress billings, cost incurred and recognized profit (loss) of a construction contract is recognized as amounts due from (to) customers for construction contracts under IAS 11. Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability

13 Decrease in amounts due from customers for construction contracts $ 164,273 Increase in contract assets - current (164,273) Increase (decrease) in assets $ - Increase in contract liability - current $ 999,323 Decrease in amounts due to customers for construction contracts (45,823) Decrease in receipts in advance (953,500) Increase (decrease) in liabilities $ - b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC New IFRSs Effective Date Announced by IASB (Note 1) Annual Improvements to IFRSs Cycle January 1, 2019 Amendments to IFRS 9 Prepayment Features with Negative January 1, 2019 (Note 2) Compensation Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets To be determined by IASB between an Investor and its Associate or Joint Venture IFRS 16 Leases January 1, 2019 (Note 3) IFRS 17 Insurance Contracts January 1, 2021 Amendments to IAS 19 Plan Amendment, Curtailment or January 1, 2019 (Note 4) Settlement Amendments to IAS 28 Long-term Interests in Associates and Joint January 1, 2019 Ventures IFRIC 23 Uncertainty over Income Tax Treatments January 1, 2019 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 FSC permits the election for early adoption of the amendments starting from. Note 3: On December 19,, the FSC announced that IFRS 16 will take effect starting from January 1, Note 4: The Corporation shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, ) Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments stipulate that, when an entity sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when an entity loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full

14 Conversely, when an entity sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors interest in the associate or joint venture, i.e. the entity s share of the gain or loss is eliminated. Also, when an entity loses control of a subsidiary that does not contain a business but retains significant influence or joint control over an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors interest in the associate or joint venture, i.e. the entity s share of the gain or loss is eliminated. 2) IFRS 16 Leases IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations. Under IFRS 16, if the Corporation is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Corporation may elect to apply the accounting method similar to the accounting for operating leases under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Corporation should present the depreciation expense charged on the right-of-use assets separately from the interest expense accrued on the lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liabilities are classified within financing activities; cash payments for the interest portion are classified within financing activities. The Corporation should assess on the date of the contract whether the contract belongs to (or includes) the lease on the accounting of the Corporation as lessor. If the contract transfers the identified asset in exchange for a consideration, it belongs to (or includes) the lease. When IFRS 16 becomes effective, the Corporation may elect to apply this standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this standard recognized at the date of initial application. 3) IFRIC 23 Uncertainty over Income Tax Treatments IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Corporation should assume that the taxation authority will have full knowledge of all related information when making related examinations. If the Corporation concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Corporation should determine the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Corporation should make estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the entity expects to better predict the resolution of the uncertainty. The Corporation has to reassess its judgments and estimates if facts and circumstances change. On initial application, the Corporation shall apply IFRIC 23 either retrospectively to each prior reporting period presented, if this is possible without the use of hindsight, or retrospectively with the cumulative effect of the initial application of IFRIC 23 recognized at the date of initial application. 4) Amendments to IAS 28 Long-term Interests in Associates and Joint Ventures The amendments clarified that IFRS 9 shall be applied to account for other financial instruments in an associate or joint venture to which the equity method is not applied. These included long-term interests that, in substance, form part of the entity s net investment in an associate or joint venture

15 When the amendments become effective, the Corporation shall apply the amendments retrospectively. However, the Corporation may elect to recognize the cumulative effect of the initial application of the amendments in the opening carrying amount at the date of initial application, or to restate prior periods if, and only if, it is possible without the use of hindsight. 5) Annual Improvements to IFRSs Cycle Several standards, including IFRS 3, IFRS 11, IAS 12 and IAS 23 Borrowing Costs, were amended in this annual improvement. IAS 23 was amended to clarify that, if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings. The amendment shall be applied prospectively. Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Corporation is continuously assessing the possible impact that the application of other standards and interpretations will have on the Corporation s financial position and financial performance, and will disclose the relevant impact when the assessment is completed. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended. For the summary of other significant accounting policies, please refer to the consolidated financial statements for the year ended. a. Statement of compliance The interim consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 Interim Financial Reporting as endorsed and issued into effect by the FSC. Disclosure information included in the interim consolidated financial statements is less than the disclosure information required in a complete set of annual financial statements. b. Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair value. The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, are described as follows: 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and 3) Level 3 inputs are unobservable inputs for the asset or liability. c. Basis of consolidation See Note 18 and Table 6 for the detailed information of subsidiaries (including the percentage of ownership and main businesses)

16 d. Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a settlement date basis. 1) Measurement category Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost, and investments in equity instruments at FVTOCI. a) Financial assets at FVTPL A financial asset is classified as at FVTPL when the financial asset is mandatorily classified or it is designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria. Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividends or interest earned on the financial asset. Fair value is determined in the manner described in Note 38. b) Financial assets at amortized cost Financial assets that meet the following conditions are subsequently measured at amortized cost: i. The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and ii. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, trade receivables at amortized cost and debt investments with no active market, are measured at amortized cost, which equals the gross carrying amount determined by the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss. Cash equivalents are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. c) Investments in equity instruments at FVTOCI On initial recognition, the Corporation may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is in contingent consideration recognized by an acquirer in a business combination. Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit

17 or loss on disposal of the equity investments, instead, they will be transferred to retained earnings. Dividends on these investments in equity instruments are recognized in profit or loss when the Corporation s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment. a) Financial assets at fair value through profit or loss Financial assets are classified as at fair value through profit or loss when the financial assets are held for trading. Financial assets at fair value through profit or loss are stated at their fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividends or interest earned on the financial asset. Fair value is determined in the manner described in Note 38. b) Available-for-sale financial assets Available-for-sale (AFS) financial assets are non-derivatives that either are designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. AFS financial assets are measured at fair value. Dividends on AFS equity investments are recognized in profit or loss. Other changes in the carrying amounts of AFS financial assets are recognized in other comprehensive income and accumulated under other equity - unrealized gains (losses) on available-for-sale financial assets. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the other equity - unrealized gains (losses) on available-for-sale financial assets is reclassified to profit or loss. Dividends on AFS equity instruments are recognized in profit or loss when the Corporation s right to receive the dividends is established. AFS equity investments with no quoted market prices in an active market and with fair values that cannot be reliably measured are measured at cost less any identified impairment loss at the end of each reporting period and are recognized in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in other comprehensive income. Any impairment losses are recognized in profit or loss. c) Loans and receivables Loans and receivables (including notes and accounts receivable, cash and cash equivalents and debt investments with no active market) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial. Cash equivalents include time deposits that are highly liquid, readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments

18 2) Impairment of financial assets The Corporation recognizes a loss allowance for expected credit losses on financial assets at amortized cost which includes trade receivables, investments in debt instruments that are measured at FVTOCI, lease receivables, as well as contract assets. The Corporation always recognizes lifetime Expected Credit Loss (i.e. ECL) for trade receivables, and lease receivables. For all other financial instruments, the Corporation recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Corporation measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. The Corporation recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the financial asset. Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the investment have been affected. For financial assets carried at amortized cost, such as trade receivables, assets are collectively assessed for impairment even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Corporation s past experience of collecting payments and an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. For financial assets carried at amortized cost, the impairment loss recognized is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate. For financial assets measured at amortized cost, if the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered objective evidence of impairment

19 For all other financial assets, objective evidence of impairment could include: a) Significant financial difficulty of the issuer or counterparty; or b) Breach of contract, such as a default or delinquency in interest or principal payments; or c) It becoming probable that the borrower will enter bankruptcy or financial reorganization; or d) The disappearance of an active market for that financial asset because of financial difficulties. When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. For AFS equity securities, impairment losses previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under unrealized gains or losses. For financial assets that are carried at cost, impairment loss is measured as the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. This impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are considered uncollectable, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss, except for uncollectable trade receivables and other receivables that are written off against the allowance account. 3) Derecognition of financial assets The Corporation derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. Before, on derecognition of a financial asset in its entirety, the difference between the asset s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. From, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss

20 e. Revenue recognition The Corporation identifies the contract with the customers, allocates the transaction price to the performance obligations, and recognizes revenue when performance obligations are satisfied. For contracts where the period between the date the Corporation transfers a promised good or service to a customer and the date the customer pays for that good or service is one year or less, the Corporation does not adjust the promised amount of consideration for the effects of a significant financing component. 1) Revenue from the sale of goods Revenue from the sale of goods comes from sales of solar cells, solar cell modules and power facilities construction. Sales of solar cells, solar cell modules and power facilities construction are recognized as revenue when the customer acquires control of the committed assets, which means goods are delivered to the customer s specific location and performance obligations are satisfied. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and similar allowances. Refund liability for sales returns and allowance are recognized at the time of the sale based on the seller s reliable estimate of future returns and based on past experience and contract conditions. The Corporation does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of the materials ownership. 2) Construction contract revenue In cases where the Corporation obtained the orders for power facility construction in which specification is assigned by the customer, revenue is recognized over time. The Corporation measures the progress on the basis of costs incurred relative to the total expected costs as there is a direct relationship between the costs incurred and the progress of satisfying the performance obligation. A contract asset is recognized during the construction and is reclassified to trade receivables at the point at which it is invoiced to the customer. If the milestone payment exceeds the revenue recognized to date, the Corporation recognizes a contract liability for the difference. Certain payments retained by the customer as specified in the contract is intended to ensure that the Corporation adequately completes all its contractual obligations. Such retention receivables are recognized as contract assets until the Corporation satisfies its performance. When the outcome of a performance obligation cannot be measured reliably, construction contract revenue is recognized only to the extent of contract costs incurred for which it will be recoverable. 3) Revenue from the sale of power facilities construction The revenue from the sale of power facilities is recognized when the customer acquires control of the committed assets, which means the contract of power facilities construction completed and performance obligations are satisfied. 4) Processing fees revenue The revenue from processing fees is recognized when the customer acquires control of the committed assets, which means processed goods are delivered to the customer s specific location and performance obligations are satisfied

21 5) Electricity charges are calculated based on the actual amount of consumption at applicable rates. 1) Revenue from the sale of goods Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied: a) The Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods; b) The Corporation retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; c) The amount of revenue can be measured reliably; d) It is probable that the economic benefits associated with the transaction will flow to the Corporation; and e) The costs incurred or to be incurred can be measured reliably. The Corporation does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of the materials ownership. 2) Revenue from the sale of power facilities construction The revenue from the sale of power facilities is recognized in accordance with IAS 18 Revenue. 3) Revenue from the rendering of services Service income is recognized when services are provided. 4) Construction contracts revenue When the outcome of a construction contract can be estimated reliably, revenue and costs are recognized by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred to date relative to the estimated total contract costs. Variations in contract work and claims and incentive payments are included to the extent the amount can be measured reliably and its receipt is considered probable. When it is probable that total contract costs will exceed the total contract revenue, the expected loss is recognized as an expense immediately. When contract costs incurred to date plus recognized profits less recognized deficits exceed progress billings, the surplus is shown as the gross amount due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognized profits less recognized deficits, the surplus is shown as the gross amount due to customers for contract work. Amounts received before the related work is performed are included in the consolidated balance sheet as a liability under other current liabilities. Amounts billed for work performed but not yet paid by the customer are included in the consolidated balance sheet under trade receivables. 5) Electricity charges are calculated based on the actual amount of consumption at applicable rates