|
15. |
SUBSIDIARIES |
|
|
a. |
Information on significant noncontrolling interest subsidiary |
The table below shows details of less than wholly owned subsidiaries of the Company that have material noncontrolling interests:
|
|
|
Place of Incorporation |
|
Proportion of Ownership Interests and Voting Rights Held by Noncontrolling Interests |
|
|||
|
|
|
and Principal |
|
December 31 |
|
|||
|
Subsidiaries |
|
Place of Business |
|
2016 |
|
|
2017 |
|
|
SENAO |
|
Taiwan |
|
71% |
|
|
71% |
|
|
CHPT |
|
Taiwan |
|
59% |
|
|
62% |
|
|
|
|
Profit Allocated to Noncontrolling Interests |
|
|
Accumulated Noncontrolling Interests |
|
||||||||||||||
|
|
|
Year Ended December 31 |
|
|
December 31 |
|
||||||||||||||
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|||||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|||||
|
|
|
|
|
|
|
(In Millions) |
|
|
|
|
|
|
|
|
|
|||||
|
SENAO |
|
$ |
551 |
|
|
$ |
690 |
|
|
$ |
592 |
|
|
$ |
4,069 |
|
|
$ |
4,092 |
|
|
CHPT |
|
$ |
212 |
|
|
$ |
341 |
|
|
$ |
431 |
|
|
|
1,575 |
|
|
|
3,513 |
|
|
Individually immaterial subsidiaries with noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
628 |
|
|
|
869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,272 |
|
|
$ |
8,474 |
|
Summarized financial information in respect of SENAO and its subsidiaries that has material noncontrolling interests is set out below. The summarized financial information below represents amounts before intercompany eliminations.
|
|
|
December 31 |
|
|||||
|
|
|
2016 |
|
|
2017 |
|
||
|
|
|
NT$ |
|
|
NT$ |
|
||
|
|
|
(In Millions) |
|
|||||
|
Current assets |
|
$ |
7,762 |
|
|
$ |
7,584 |
|
|
Noncurrent assets |
|
$ |
2,535 |
|
|
$ |
2,531 |
|
|
Current liabilities |
|
$ |
4,466 |
|
|
$ |
4,278 |
|
|
Noncurrent liabilities |
|
$ |
155 |
|
|
$ |
160 |
|
|
Equity attributable to the parent |
|
$ |
1,607 |
|
|
$ |
1,585 |
|
|
Equity attributable to noncontrolling interests |
|
$ |
4,069 |
|
|
$ |
4,092 |
|
|
|
|
Year Ended December 31 |
|
|||||||||
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|||
|
|
|
|
|
|
|
(In Millions) |
|
|
|
|
|
|
|
Revenue and income |
|
$ |
35,944 |
|
|
$ |
34,453 |
|
|
$ |
36,038 |
|
|
Costs and expenses |
|
|
35,171 |
|
|
|
33,476 |
|
|
|
35,200 |
|
|
Profit for the year |
|
$ |
773 |
|
|
$ |
977 |
|
|
$ |
838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to the parent |
|
$ |
222 |
|
|
$ |
287 |
|
|
$ |
246 |
|
|
Profit attributable to noncontrolling interests |
|
|
551 |
|
|
|
690 |
|
|
|
592 |
|
|
Profit for the year |
|
$ |
773 |
|
|
$ |
977 |
|
|
$ |
838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) attributable to the parent |
|
$ |
(1 |
) |
|
$ |
(21 |
) |
|
$ |
3 |
|
|
Other comprehensive loss attributable to noncontrolling interests |
|
|
(2 |
) |
|
|
(53 |
) |
|
|
(17 |
) |
|
Other comprehensive loss for the year |
|
$ |
(3 |
) |
|
$ |
(74 |
) |
|
$ |
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to the parent |
|
$ |
222 |
|
|
$ |
266 |
|
|
$ |
249 |
|
|
Total comprehensive income attributable to noncontrolling interests |
|
|
548 |
|
|
|
637 |
|
|
|
575 |
|
|
Total comprehensive income for the year |
|
$ |
770 |
|
|
$ |
903 |
|
|
$ |
824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to noncontrolling interests |
|
$ |
274 |
|
|
$ |
526 |
|
|
$ |
703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities |
|
$ |
1,739 |
|
|
$ |
531 |
|
|
$ |
1,081 |
|
|
Net cash flow from investing activities |
|
|
54 |
|
|
|
130 |
|
|
|
(57 |
) |
|
Net cash flow from financing activities |
|
|
(1,530 |
) |
|
|
(677 |
) |
|
|
(897 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
11 |
|
|
|
(7 |
) |
|
|
(2 |
) |
|
Net cash inflow (outflow) |
|
$ |
274 |
|
|
$ |
(23 |
) |
|
$ |
125 |
|
Summarized financial information in respect of CHPT and its subsidiaries that has material noncontrolling interests is set out below. The summarized financial information below represents amounts before intercompany eliminations.
|
|
|
December 31 |
|
|||||
|
|
|
2016 |
|
|
2017 |
|
||
|
|
|
NT$ |
|
|
NT$ |
|
||
|
|
|
(In Millions) |
|
|||||
|
Current assets |
|
$ |
2,116 |
|
|
$ |
4,496 |
|
|
Noncurrent assets |
|
$ |
1,872 |
|
|
$ |
2,167 |
|
|
Current liabilities |
|
$ |
1,323 |
|
|
$ |
965 |
|
|
Noncurrent liabilities |
|
$ |
1 |
|
|
$ |
1 |
|
|
Equity attributable to CHI |
|
$ |
1,089 |
|
|
$ |
2,184 |
|
|
Equity attributable to noncontrolling interests |
|
$ |
1,575 |
|
|
$ |
3,513 |
|
|
|
|
Year Ended December 31 |
|
|||||||||
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|||
|
|
|
|
|
|
|
(In Millions) |
|
|
|
|
|
|
|
Revenue and income |
|
$ |
1,735 |
|
|
$ |
2,607 |
|
|
$ |
3,127 |
|
|
Costs and expenses |
|
|
1,341 |
|
|
|
2,020 |
|
|
|
2,402 |
|
|
Profit for the year |
|
$ |
394 |
|
|
$ |
587 |
|
|
$ |
725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to CHI |
|
$ |
182 |
|
|
$ |
246 |
|
|
$ |
294 |
|
|
Profit attributable to noncontrolling interests |
|
|
212 |
|
|
|
341 |
|
|
|
431 |
|
|
Profit for the year |
|
$ |
394 |
|
|
$ |
587 |
|
|
$ |
725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss attributable to CHI |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
Other comprehensive loss attributable to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
Other comprehensive loss for the year |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to CHI |
|
$ |
182 |
|
|
$ |
246 |
|
|
$ |
293 |
|
|
Total comprehensive income attributable to noncontrolling interests |
|
|
212 |
|
|
|
341 |
|
|
|
429 |
|
|
Total comprehensive income for the year |
|
$ |
394 |
|
|
$ |
587 |
|
|
$ |
722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to noncontrolling interests |
|
$ |
35 |
|
|
$ |
109 |
|
|
$ |
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities |
|
$ |
532 |
|
|
$ |
671 |
|
|
$ |
1,052 |
|
|
Net cash flow from investing activities |
|
|
(200 |
) |
|
|
(904 |
) |
|
|
(639 |
) |
|
Net cash flow from financing activities |
|
|
(112 |
) |
|
|
841 |
|
|
|
2,306 |
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
3 |
|
|
|
(2 |
) |
|
|
(4 |
) |
|
Net cash inflow |
|
$ |
223 |
|
|
$ |
606 |
|
|
$ |
2,715 |
|
|
|
b. |
Equity transactions with noncontrolling interests |
CHI disposed of some shares of CHPT in January 2015 and March 2016, and did not participate in the capital increase of CHPT in March 2016 and September 2017. Therefore, the Company’s ownership interest in CHPT decreased to 38.30%. See Note 34(d) for details.
SENAO purchased its treasury stock in June and July 2015, and the Company’s ownership interest of SENAO increased from 28.18% to 29.31%.
SENAO participated in share subscription of Youth in December 2015 at a percentage different from its original ownership interest. Therefore, the ownership interest of Youth increased from 70% to 89.48%.
SENAO transferred its treasury stock to employees in May and November 2017 and the Company’s ownership interest in SENAO decreased to 28.93%. See Note 34(b) for details.
Chunghwa and CHI disposed some shares of CHIEF in June 2017 before CHIEF traded its shares on the emerging stock market according to the local requirements. The Company’s equity ownership of CHIEF decreased to 70.43%.
The above transactions were accounted for as equity transactions since the Company did not cease to have control over these subsidiaries.
The detailed information of the equity transactions for the years ended December 31, 2015, 2016 and 2017 was as follows:
|
|
|
Year Ended December 31 |
|
|||||||||||||||||||||||||||||
|
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|||||||||||||||||||||||
|
|
|
CHI Disposed Some Shares of CHPT |
|
|
SENAO Purchased Its Treasury Stock |
|
|
SENAO Participated in Youth's Share Subscription |
|
|
CHI Disposed Some Shares of CHPT |
|
|
CHI Did Not Participate in the Capital Increase of CHPT |
|
|
CHI Did Not Participate in the Capital Increase of CHPT |
|
|
SENAO Transferred its Treasury Stock |
|
|
Chunghwa and CHI Disposed Some Shares of CHIEF |
|
||||||||
|
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
|
NT$ |
|
||||||||
|
|
|
(In Millions) |
|
|||||||||||||||||||||||||||||
|
Cash consideration received from (paid to) Noncontrolling interests |
|
$ |
45 |
|
|
$ |
(492 |
) |
|
$ |
— |
|
|
$ |
83 |
|
|
$ |
1,175 |
|
|
$ |
2,552 |
|
|
$ |
164 |
|
|
$ |
106 |
|
|
The proportionate share of the carrying amount of the net assets of the subsidiary transferred (to) from noncontrolling interests |
|
|
(18 |
) |
|
|
416 |
|
|
|
(0.4 |
) |
|
|
(25 |
) |
|
|
(786 |
) |
|
|
(1,750 |
) |
|
|
(137 |
) |
|
|
(29 |
) |
|
Differences arising from equity transactions |
|
$ |
27 |
|
|
$ |
(76 |
) |
|
$ |
(0.4 |
) |
|
$ |
58 |
|
|
$ |
389 |
|
|
$ |
802 |
|
|
$ |
27 |
|
|
$ |
77 |
|
|
Line items for equity transaction adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital - difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets upon actual disposal or acquisition |
|
$ |
27 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
58 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
77 |
|
|
Additional paid-in capital - arising from changes in equities of subsidiaries |
|
$ |
— |
|
|
$ |
(15 |
) |
|
$ |
(0.4 |
) |
|
$ |
— |
|
|
$ |
389 |
|
|
$ |
802 |
|
|
$ |
27 |
|
|
$ |
— |
|
|
Unappropriated earnings |
|
$ |
— |
|
|
$ |
(61 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
c. |
Business combinations |
|
|
1) |
Subsidiaries acquired |
|
|
|
Principal Activity |
|
Date of Acquisition |
|
Proportion of Voting Equity Interests Acquired (％) |
|
|
Consideration Transferred |
|
||
|
|
|
|
|
|
|
|
|
|
|
NT$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions) |
|
|
|
Youth Co., Ltd. and its subsidiaries |
|
Sale and maintenance of information and communication technologies products |
|
September 2, 2015 |
|
|
70 |
|
|
$ |
135 |
|
Youth and its subsidiaries were acquired in cash in order to continue the expansion of SENAO’s activities in selling telecommunications products.
|
|
2) |
Assets acquired and liabilities assumed at the date of acquisition |
|
|
|
Youth and Its Subsidiaries |
|
|
|
|
|
NT$ |
|
|
|
|
|
(In Millions) |
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
21 |
|
|
Accounts and other receivables |
|
|
10 |
|
|
Inventories |
|
|
30 |
|
|
Prepayments |
|
|
6 |
|
|
Other current assets |
|
|
6 |
|
|
Noncurrent assets |
|
|
|
|
|
Property, plant and equipment |
|
|
36 |
|
|
Intangible assets |
|
|
259 |
|
|
Refundable deposits |
|
|
22 |
|
|
Deferred income tax assets |
|
|
4 |
|
|
Other noncurrent assets |
|
|
32 |
|
|
Current liabilities |
|
|
|
|
|
Short-term loans |
|
|
(54 |
) |
|
Trade notes payable |
|
|
(9 |
) |
|
Accounts and other payables |
|
|
(75 |
) |
|
Other current liabilities |
|
|
(80 |
) |
|
Noncurrent liabilities |
|
|
|
|
|
Long-term loans |
|
|
(40 |
) |
|
Deferred income tax liabilities |
|
|
(44 |
) |
|
Other noncurrent liabilities |
|
|
(10 |
) |
|
|
|
$ |
114 |
|
|
|
3) |
Goodwill arising on acquisition |
|
|
|
Youth and Its Subsidiaries |
|
|
|
|
|
NT$ |
|
|
|
|
|
(In Millions) |
|
|
|
Consideration transferred |
|
$ |
135 |
|
|
Add: Noncontrolling interest (30% of the recognized amounts of Youth and its subsidiaries’ identifiable net assets) |
|
|
34 |
|
|
Less: Fair value of identifiable net assets acquired |
|
|
(114 |
) |
|
Goodwill arising on acquisition |
|
$ |
55 |
|
Goodwill that arose in the acquisition of Youth and its subsidiaries mainly included the amount in relation to the benefit of expected synergies from integrating the businesses of Youth and its subsidiaries into the Company that operate sales and maintenance of Apple’s products for many years. These benefits were not recognized separately from goodwill because they did not meet the recognition criteria for identifiable intangible assets.
Goodwill arising from business combinations is not deductible for tax purposes.
SENAO evaluated the goodwill that arose in the acquisition of Youth and its subsidiaries at the end of each year. SENAO determined the smallest identifiable group of assets that generates cash inflows as single cash generating units by business type, and evaluated the recoverable amount of those cash generating units by their value in use. The management of SENAO estimated the cash flow projections based on the financial budgets for the following five years. Discount rates were 16.3%, 14.6% and 14.8% as of December 31 2015, 2016 and 2017, respectively and were used to calculate the recoverable amount of related cash generating units by discounting aforementioned cash flows.SENAO concluded that there was no impairment loss recognized for the years ended December 31, 2015 and 2016. Furthermore, SENAO concluded the recoverable amount of the goodwill was lower than the carrying value and recognized impairment loss of $9 million for the year ended December 31, 2017. The impairment loss was included in other income and expenses in the statements of comprehensive income.
|
|
4) |
Net cash outflow on acquisition of subsidiaries |
|
|
|
Youth and Its Subsidiaries |
|
|
|
|
|
NT$ |
|
|
|
|
|
(In Millions) |
|
|
|
Consideration paid in cash |
|
$ |
135 |
|
|
Less: Cash and cash equivalents acquired |
|
|
(21 |
) |
|
|
|
$ |
114 |
|
|
|
5) |
Impact of acquisitions on the results of the Company’s financial performance |
The results of the acquired subsidiaries’ financial performance from the acquisition date to December 31, 2015, were as follows:
|
|
|
Youth and ItsSubsidiaries |
|
|
|
|
|
NT$ |
|
|
|
|
|
(In Millions) |
|
|
|
Revenue |
|
$ |
188 |
|
|
Net loss |
|
$ |
18 |
|
Had these business combinations been in effect at the beginning of the annual reporting period, the Company’s pro-forma revenue and net income would have been $232,187 million and $42,774 million, respectively, for the year ended December 31, 2015. This pro-forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Company that actually would have been achieved had the acquisition been completed on January 1, 2015, nor is it intended to be a projection of future results.
In determining the pro-forma revenue and net income of the Company had Youth and its subsidiaries been acquired at the beginning of 2015, management calculated depreciation of property, plant and equipment and amortization of intangible assets acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognized in the pre-acquisition financial statements.