AU OPTRONICS CORP | CIK:0001172494 |

33.	Income Taxes

 

The Company cannot file a consolidated tax return under local regulations. Therefore, AUO and its subsidiaries calculate their income taxes liabilities individually on a stand-alone basis using the enacted tax rates in their respective tax jurisdictions.

 

 

		For the years ended December 31,
		2017			2016			2015
		(in thousands)
Current income tax expense (benefit):
Current year		$	3,719,483			1,601,384			1,561,194
Adjustment to prior years and others			246,264			879,337			(208,609)
			3,965,747			2,480,721			1,352,585
Deferred tax expense (benefit):
Temporary differences			(1,271,415)			(98,137)			(163,513)
Investment tax credit and tax losses carryforwards			(3,819,489)			49,961			(804,231)
			(5,090,904)			(48,176)			(967,744)
Total income tax expense (benefit)		$	(1,125,157)			2,432,545			384,841

 

 

		For the years ended December 31,
		2017			2016			2015
		(in thousands)
Items that will never be reclassified to profit or loss:
Remeasurement of defined benefit obligations		$	(155,930)			-			(681)
Items that are or may be reclassified subsequently to profit or loss:
Foreign operations – foreign currency translation differences		$	(316,372)			(230,202)			(16,050)

 

 

		For the years ended December 31,
		2017							2016						2015
		Rate				Amount			Rate			Amount			Rate			Amount
						(in thousands)						(in thousands)						(in thousands)
Profit before income taxes						$	39,363,606					$	11,185,902					$	7,598,850
Income tax expense at AUO’s statutory tax rate			17.00	%			6,691,813			17.00	%		1,901,603			17.00	%		1,291,804
Effect of different subsidiaries income tax rate			0.89	%			348,192			2.55	%		285,661			(21.08)	%		(1,601,591)
Share of profit of equity-accounted subsidiaries			(1.80)	%			(708,417)			(3.86)	%		(432,163)			(28.84)	%		(2,191,605)
Effect of changes in statutory income tax rate			-				-			-			-			4.02	%		305,312
Effect of change of unrecognized deductible temporary differences, tax losses carryforwards, and investment tax credits			(27.04)	%			(10,645,339)			(9.76)	%		(1,091,327)			24.15	%		1,835,311
Net of non-taxable income and non-deductible expense			0.61	%			241,265			2.47	%		275,706			0.78	%		58,821
Loss (gain) from domestic long-term investment			1.16	%			457,275			(1.51)	%		(168,484)			5.41	%		411,293
Tax on undistributed earnings, net			7.59	%			2,987,763			6.84	%		765,419			6.82	%		518,356
Adjustments to prior year			(1.34)	%			(528,662)			8.01	%		895,861			(3.14)	%		(238,555)
Others			0.08	%			30,953			-			269			(0.06)	%		(4,305)
Income tax expense (benefit)						$	(1,125,157)					$	2,432,545					$	384,841
Effective tax rate			(2.85)	%						21.74	%					5.06	%

 

The above reconciliation is prepared based on each individual entity of the Company and presented on an aggregate basis.

 

 

 

		Deferred tax assets						Deferred tax liabilities						Total
		December 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016			December 31, 2017			December 31, 2016
		(in thousands)
Investment tax credits		$	656,480			840,112			-			-			656,480			840,112
Tax losses carryforwards			3,942,012			-			-			-			3,942,012			-
Unrealized loss and expenses			284,084			182,443			(61,345)			(3,495)			222,739			178,948
Inventories write-down			644,887			69,938			-			-			644,887			69,938
Foreign investment gains under the equity method			-			-			(890,153)			(1,091,023)			(890,153)			(1,091,023)
Remeasurement of defined benefit plans			155,930			-			-			-			155,930			-
Foreign operations – foreign currency translation differences			279,517			-			(44,992)			(81,847)			234,525			(81,847)
Others			1,106,104			644,361			(641,737)			(653,899)			464,367			(9,538)
Deferred tax assets (liabilities)		$	7,069,014			1,736,854			(1,638,227)			(1,830,264)			5,430,787			(93,410)

		January 1, 2016			Recognized in profit or loss			Recognized in other comprehensive income			Effect of change in consolidated entities, exchange rate and others			December 31, 2016			Recognized in profit or loss			Recognized in other comprehensive income			Effect of change in consolidated entities, exchange rate and others			December 31, 2017
		(in thousands)
Investment tax credits		$	859,300			-			-			(19,188)			840,112			(121,696)			-			(61,936)			656,480
Tax losses carryforwards			49,961			(49,961)			-			-			-			3,941,185			-			827			3,942,012
Unrealized loss and expenses			187,641			4,256			-			(12,949)			178,948			47,383			-			(3,592)			222,739
Inventories write-down			22,848			49,658			-			(2,568)			69,938			575,199			-			(250)			644,887
Foreign investment losses (gains) under the equity method			(1,174,733)			83,710			-			-			(1,091,023)			200,870			-			-			(890,153)
Remeasurement of defined benefit plans			2,798			-			-			(2,798)			-			-			155,930			-			155,930
Foreign operations – foreign currency translation differences			(312,049)			-			230,202			-			(81,847)			-			316,372			-			234,525
Unrealized gains on available-for-sale financial assets			(903)			-			-			903			-			-			-			-			-
Others			84,734			(39,487)			-			(54,785)			(9,538)			447,963			-			25,942			464,367
Total		$	(280,403)			48,176			230,202			(91,385)			(93,410)			5,090,904			472,302			(39,009)			5,430,787

 

 

Deferred tax assets have not been recognized in respect of the following items.

 

		December 31,
		2017			2016
		(in thousands)
Unused tax losses carryforwards		$	25,868,554			33,392,529
Unused investment tax credits			706,648			47,268
Difference in depreciation expense for tax and financial purposes			2,104,639			2,471,376
Inventories write-down			10,328			536,102
Others			655,974			3,545,013
		$	29,346,143			39,992,288

 

The unused investment tax credits with no expiration for the year ended December 31, 2017 from AUST and ACMK were $677,257 thousand and $29,391 thousand, respectively.

 

Tax loss carryforwards is utilized in accordance with the relevant jurisdictional tax laws and regulations. Net losses from foreign subsidiaries are approved by tax authorities in respective jurisdiction to offset future taxable profits. Under the ROC tax laws, approved tax losses of AUO and its domestic subsidiaries can be carried forward for 10 years to offset future taxable profits.

As of December 31, 2017, the expiration period for abovementioned unrecognized deferred tax assets of unused tax losses carryforwards were as follows:

 

		Unrecognized deferred tax assets
Year of assessment		(in thousands)			Expiration in year
2009		$	427,346		2018 ~ 2019
2010			620,885		2019
2011			1,313,095		2020 ~ 2021
2012			9,583,402		2021 ~ 2022
2013			1,723,631		2018 ~ 2023
2014			2,058,670		2019 ~ 2024
2015			3,851,129		2020 ~ 2025
2016			4,100,117		2021 ~ 2026
2017 (estimated)			2,190,279		2022 ~ 2027
		$	25,868,554

 

As of December 31, 2016, the aggregate taxable temporary differences associated with investments in subsidiaries not recognized as deferred tax liabilities amounted to $448,513 thousand.

 

 

As of December 31, 2017, the tax authorities have completed the examination of income tax returns of AUO through 2015.

 

 

The balance of the imputation credit account of AUO as of December 31, 2017 and 2016 was $3,072,019 thousand and $3,878,285 thousand, respectively.

 

The estimated and actual creditable ratios for distribution of AUO’s earnings under Taiwan Financial Reporting Standards of 2017 and 2016, which is for ROC resident shareholders, were 6.44% and 19.27%, respectively.

 

The imputation credit allocated to shareholders is based on its balance as of the date of the dividend distribution. The estimated creditable ratio may change when the actual distribution of the imputation credit is made.

 

The abovementioned integrated income tax information is prepared in accordance with Decree No. 10204562810 announced on October 17, 2013 by the ROC Ministry of Finance.