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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2017
Disclosure Of Summary Of Significant Accounting Policies [Abstract] |
Summary of Significant Accounting Policies |
3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance The accompanying consolidated financial statements have been prepared in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board (collectively, “IFRSs”). Basis of Preparation The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values and net defined benefit liabilities (assets) which are measured at the present value of the defined benefit obligation less the fair value of plan assets. Current and Noncurrent Assets and Liabilities Current assets include:
| a. | Assets held primarily for the purpose of trading;
| b. | Assets expected to be realized within twelve months after the reporting period; and
| c. | Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
Current liabilities include:
| a. | Liabilities held primarily for the purpose of trading;
| b. | Liabilities due to be settled within twelve months after the reporting period; and
| c. | Liabilities for which the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period.
Assets and liabilities that are not classified as current are classified as noncurrent. Light Era Development Co., Ltd. (LED) engages mainly in development of property for rent and sale. The assets and liabilities of LED related to property development within its operating cycle, which is over one year, are classified as current items. Basis of Consolidation
| a. | Principles for preparing consolidated financial statements
The consolidated financial statements incorporate the financial statements of Chunghwa and entities controlled by Chunghwa (its subsidiaries). Income and expenses of subsidiaries acquired during the period are included in the consolidated statements of comprehensive income from the acquisition date. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the Company. All inter-company transactions, balances, income and expenses are eliminated in full upon consolidation. Attribution of total comprehensive income to the noncontrolling interests Profit or loss and each component of other comprehensive income are attributed to the stockholders of the parent and to the noncontrolling interests. Total comprehensive income of subsidiaries is attributed to the stockholders of the parent and to the noncontrolling interests even if it results in the noncontrolling interests having a deficit balance. Changes in the Company’s ownership interests in subsidiaries Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company’s interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to stockholders of the parent.
| b. | The subsidiaries in the consolidated financial statements
The detail information of the subsidiaries at the end of reporting period was as follows:
|  |  |  |  |  | Percentage of Ownership |  |  |
|  |  |  |  |  | December 31 |  |  |
Name of Investor |  | Name of Investee |  | Main Businesses and Products |  | 2016 |  |  | 2017 |  |  | Note
Chunghwa Telecom Co., Ltd. |  | Senao International Co., Ltd. (“SENAO”) |  | Handset and peripherals retailer; sales of CHT mobile phone plans as an agent |  |  | 29 |  |  |  | 29 |  |  | 1)
|  | Light Era Development Co., Ltd. (“LED”) |  | Planning and development of real estate and intelligent buildings, and property management |  |  | 100 |  |  |  | 100 |  |  |
|  | Donghwa Telecom Co., Ltd. (“DHT”) |  | International private leased circuit, IP VPN service, and IP transit services |  |  | 100 |  |  |  | 100 |  |  |
|  | Chunghwa Telecom Singapore Pte., Ltd. (“CHTS”) |  | International private leased circuit, IP VPN service, and IP transit services |  |  | 100 |  |  |  | 100 |  |  |
|  | Chunghwa System Integration Co., Ltd. (“CHSI”) |  | Providing system integration services and telecommunications equipment |  |  | 100 |  |  |  | 100 |  |  |
|  | Chunghwa Investment Co., Ltd. (“CHI”) |  | Investment |  |  | 89 |  |  |  | 89 |  |  |
|  | CHIEF Telecom Inc. (“CHIEF”) |  | Network integration, internet data center (“IDC”), communications integration and cloud application services |  |  | 69 |  |  |  | 67 |  |  | 2)
|  | CHYP Multimedia Marketing & Communications Co., Ltd. (“CHYP”) |  | Digital information supply services and advertisement services |  |  | 100 |  |  |  | 100 |  |  | 3)
|  | Prime Asia Investments Group Ltd. (B.V.I.) (“Prime Asia”) |  | Investment |  |  | 100 |  |  |  | 100 |  |  |
|  | Spring House Entertainment Tech. Inc. (“SHE”) |  | Digital entertainment contents production, animated character licensing and endorsement, and mobile digital platform construction |  |  | 56 |  |  |  | 56 |  |  |
|  | Chunghwa Telecom Global, Inc. (“CHTG”) |  | International private leased circuit, internet services, and transit services |  |  | 100 |  |  |  | 100 |  |  |
|  | Chunghwa Telecom Vietnam Co., Ltd. (“CHTV”) |  | Intelligent energy saving solutions, international circuit, and information and communication technology (“ICT”) services |  |  | 100 |  |  |  | 100 |  |  |
|  | Smartfun Digital Co., Ltd. (“SFD”) |  | Providing diversified family education digital services |  |  | 65 |  |  |  | 65 |  |  |
|  | Chunghwa Telecom Japan Co., Ltd. (“CHTJ”) |  | International private leased circuit, IP VPN service, and IP transit services |  |  | 100 |  |  |  | 100 |  |  |
|  | Chunghwa Sochamp Technology Inc. (“CHST”) |  | Design, development and production of Automatic License Plate Recognition software and hardware |  |  | 51 |  |  |  | 51 |  |  |
|  | Honghwa International Co., Ltd. (“HHI”) |  | Telecommunication engineering, sales agent of mobile phone plan application and other business services |  |  | 100 |  |  |  | 100 |  |  |
|  | Chunghwa Leading Photonics Tech Co., Ltd. (“CLPT”) |  | Production and sale of electronic components and finished products |  |  | 75 |  |  |  | 75 |  |  | 4)
|  | Chunghwa Telecom (Thailand) Co., Ltd. (“CHTT”) |  | International private leased circuit, IP VPN service, ICT and cloud VAS services |  |  | — |  |  |  | 100 |  |  | 5)
(Continued)
|  |  |  |  |  | Percentage of Ownership |  |  |
|  |  |  |  |  | December 31 |  |  |
Name of Investor |  | Name of Investee |  | Main Businesses and Products |  | 2016 |  |  | 2017 |  |  | Note
|  | 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 |  |  | — |  |  |  | 80 |  |  | 6)
|  | New Prospect Investments Holdings Ltd. (B.V.I.) (“New Prospect”) |  | Investment |  |  | 100 |  |  |  | — |  |  | 7)
Senao International Co., Ltd. |  | Senao International (Samoa) Holding Ltd. (“SIS”) |  | International investment |  |  | 100 |  |  |  | 100 |  |  |
|  | Youth Co., Ltd. (“Youth”) |  | Sale of information and communication technologies products |  |  | 89 |  |  |  | 89 |  |  |
|  | Aval Technologies Co., Ltd. (“Aval”) |  | Sale of information and communication technologies products |  |  | 100 |  |  |  | 100 |  |  |
|  | SENYOUNG Insurance Agent Co., Ltd. (“SENYOUNG”) |  | Property and liability insurance agency |  |  | — |  |  |  | 100 |  |  | 8)
Youth Co., Ltd. |  | ISPOT Co., Ltd. (“ISPOT”) |  | Sale of information and communication technologies products |  |  | 100 |  |  |  | 100 |  |  |
|  | Youyi Co., Ltd. (“Youyi”) |  | Maintenance of information and communication technologies products |  |  | 100 |  |  |  | 100 |  |  |
CHIEF Telecom Inc. |  | Unigate Telecom Inc. (“Unigate”) |  | Telecommunications and internet service |  |  | 100 |  |  |  | 100 |  |  |
|  | Chief International Corp. (“CIC”) |  | Telecommunications and internet service |  |  | 100 |  |  |  | 100 |  |  |
|  | Shanghai Chief Telecom Co., Ltd. (“SCT”) |  | Telecommunications and internet service |  |  | 49 |  |  |  | 49 |  |  |
Chunghwa System Integration Co., Ltd. |  | Concord Technology Co., Ltd. (“Concord”) |  | Investment |  |  | 100 |  |  |  | 100 |  |  | 9)
Spring House Entertainment Tech. Inc. |  | Ceylon Innovation Co., Ltd. (“CEI”) |  | E-book publishing and copyright negotiation of digital music |  |  | — |  |  |  | — |  |  | 10)
Chunghwa Investment Co., Ltd. |  | Chunghwa Precision Test Tech. Co., Ltd. (“CHPT”) |  | Production and sale of semiconductor testing components and printed circuit board |  |  | 41 |  |  |  | 38 |  |  | 11)
|  | Chunghwa Investment Holding Co., Ltd. (“CIHC”) |  | Investment |  |  | — |  |  |  | — |  |  | 12)
Concord Technology Co., Ltd. |  | Glory Network System Service (Shanghai) Co., Ltd. (“GNSS (Shanghai)”) |  | Design, development and production of computer and internet software, installment, maintenance and consulting services of information system integration, and sales of self-production products |  |  | 100 |  |  |  | — |  |  | 13)
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 |  |  |
|  | CHPT Japan Co., Ltd. (“CHPT (JP)”) |  | Related services of electronic parts, machinery processed products and printed circuit board |  |  | 100 |  |  |  | 100 |  |  |
|  | Chunghwa Precision Test Tech. International, Ltd. (“CHPT (International)”) |  | Wholesale and retail of electronic materials, and investment |  |  | 100 |  |  |  | 100 |  |  |
Senao International (Samoa) Holding Ltd. |  | Senao International HK Limited (“SIHK”) |  | International investment |  |  | 100 |  |  |  | 100 |  |  |
(Continued)
|  |  |  |  |  | Percentage of Ownership |  |  |
|  |  |  |  |  | December 31 |  |  |
Name of Investor |  | Name of Investee |  | Main Businesses and Products |  | 2016 |  |  | 2017 |  |  | Note
Chunghwa Investment Holding Co., Ltd. |  | CHI One Investment Co., Limited (“COI”) |  | Investment |  |  | — |  |  |  | — |  |  | 14)
Senao International HK Limited |  | Senao Trading (Fujian) Co., Ltd. (“STF”) |  | Sale of information and communication technologies products |  |  | 100 |  |  |  | 100 |  |  |
|  | Senao International Trading (Shanghai) Co., Ltd. (“SITS”) |  | Sale of information and communication technologies products |  |  | 100 |  |  |  | 100 |  |  |
|  | Senao International Trading (Shanghai) Co., Ltd. (“SEITS”) |  | Maintenance of information and communication technologies products |  |  | 100 |  |  |  | 100 |  |  | 15)
|  | Senao International Trading (Jiangsu) Co., Ltd. (“SITJ”) |  | Sale of information and communication technologies products |  |  | 100 |  |  |  | 100 |  |  | 17)
Prime Asia Investments Group Ltd. (B.V.I.) |  | Chunghwa Hsingta Co., Ltd. (“CHC”) |  | Investment |  |  | 100 |  |  |  | 100 |  |  |
Chunghwa Hsingta Co., Ltd. (“CHC”) |  | Chunghwa Telecom (China) Co., Ltd. (“CTC”) |  | Integrated information and communication solution services for enterprise clients, and intelligent energy network service |  |  | 100 |  |  |  | 100 |  |  |
|  | Jiangsu Zhenhua Information Technology Company, LLC. (“JZIT”) |  | Providing intelligent energy saving solution and intelligent buildings services |  |  | 75 |  |  |  | 75 |  |  | 16)
Chunghwa Precision Test Tech. International, Ltd. |  | Shanghai Taihua Electronic Technology Limited (“STET”) |  | Design of printed circuit board and related consultation service |  |  | 100 |  |  |  | 100 |  |  |
(Concluded)
| 1) | The Company owns 28.93% equity shares of SENAO. Chunghwa had originally four out of seven seats of the Board of Directors of SENAO through the support of large beneficial stockholders. In order to comply with the local regulations, SENAO increased two seats of independent directors in June 2016; therefore, total seats of its Board of Directors increased to nine and Chunghwa continues to hold four out of nine seats of the Board of Directors. As Chunghwa remains the control over SENAO’s relevant activities, the accounts of SENAO are included in the consolidated financial statements.
| 2) | 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% as of December 31, 2017. CHIEF issued new shares in March 2018 as its employees exercised their options. The Company’s equity ownership decreased to 69.31% on March 31, 2018.
| 3) | Chunghwa International Yellow Pages Co., Ltd changed its name to CHYP Multimedia Marketing & Communications Co., Ltd starting from September 4, 2017.
| 4) | Chunghwa invested 75% equity shares of Chunghwa Leading Photonics Tech Co., Ltd. (“CLPT”) in July 2016.
| 5) | Chunghwa invested 100% equity shares of Chunghwa Telecom (Thailand) Co., Ltd. (“CHTT”) in March 2017.
| 6) | Chunghwa invested 80% equity shares of CHT Security Co., Ltd. (“CHTSC”) in December 2017.
| 7) | New Prospect was approved to dissolve its business in April 2017. The liquidation of New Prospect was completed in May 2017.
| 8) | SENAO invested 100% equity shares of SENYOUNG Insurance Agent Co., Ltd. (“SENYOUNG”) in November 2017.
| 9) | Concord was approved to end and dissolve its business in August 2017. The liquidation of Concord was completed in January 2018.
| 10) | CEI’s liquidation was completed in August 2016 and SHE received the proceeds from the liquidation.
| 11) | CHI disposed of some shares of CHPT in March 2016. Furthermore, CHI did not participate in the capital increase of CHPT in March 2016 and September 2017. Therefore, its ownership interest in CHPT decreased to 38.30%. However, considering absolute and relative size of ownership interest, and the dispersion of shares owned by the other stockholders, the management 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.
| 1 2) | CIHC’s dissolution was approved in August 2016 and the liquidation was completed in September 2016. CHI received the proceeds from the liquidation.
| 1 3) | GNSS (Shanghai) completed its liquidation in August 2017 and Concord received the proceeds from the liquidation.
| 1 4) | COI completed its liquidation in July 2016 and CIHC received the proceeds from the liquidation.
| 1 5) | SEITS was approved to end and dissolve its business in March 2017. The liquidation of SEITS was completed in March 2018.
| 1 6) | JZIT was approved to end and dissolve its business in May 2016. The liquidation of JZIT is still in process.
| 1 7) | SITJ was approved to end and dissolve its business in April 2018. The liquidation of SITJ is still in process.
| 1 8) | LED invested 60% equity shares of Taoyuan Asia Silicon Valley Innovation Co., Ltd. (“TASVI”) in March 2018.
The following diagram presents information regarding the relationship and ownership percentages between Chunghwa and its subsidiaries as of December 31, 2017: Business Combination Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are recognized in profit or loss as incurred. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Noncontrolling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of noncontrolling interests are measured at fair value. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the Company retrospectively adjusts the provisional amounts recognized at the acquisition date or recognizes additional assets or liabilities to reflect new information obtained about facts and circumstances that existed as of the acquisition date and if known, would have affected the measurement of the amounts recognized as of that date. Foreign Currencies In preparing the financial statements of each individual entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation denominated in foreign currencies are recognized in profit or loss in the period in which they arise. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined and related exchange differences are recognized in profit or loss. Conversely, when the fair value changes were recognized in other comprehensive income, related exchange difference shall be recognized in other comprehensive income. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated. Chunghwa uses New Taiwan dollars (NT$) as the functional currency. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign operations (including of the subsidiaries and associates in other countries or currencies used different with Chunghwa) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income and attributed to stockholders of the parent and noncontrolling interests as appropriate. Cash Equivalents Cash equivalents include commercial paper, time deposits and negotiable certificate of deposit with original maturities within three months from the date of acquisition, 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. Inventories Inventories are stated at the lower of cost or net realizable value item by item, except for those that may be appropriate to group items of similar or related inventories. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. The calculation of the cost of inventory is derived using the weighted-average method. Buildings and Land Consigned to Construction Contractors Inventories of LED are stated at the lower of cost or net realizable value item by item, except for those that may be appropriate to group as similar items or related inventories. Land acquired before construction is classified as land held for development, and then reclassified as land held under development after LED begins its construction project. When using the completed-contract method for its construction projects, LED recognizes the proceeds from customers as advances from customers for land and building before the construction project is completed. After completion of the construction project and ownership is transferred to the customers, LED recognizes the relevant revenues. Investments in Associates and Joint Ventures An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby the Company and other parties that have joint control of the arrangement have rights to the net assets of the arrangement. Investments accounted for using the equity method include investments in associates and interests in joint ventures. Under the equity method, an investment in an associate or a joint venture is initially recognized at cost and adjusted thereafter to recognize the Company’s share of profit or loss and other comprehensive income of the associate and joint venture as well as the distribution received. When the Company reduces its ownership interest in an associate or a joint venture but the Company continues to use the equity method, the Company reclassifies to profit or loss the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. Any excess of the cost of acquisition over the Company’s share of the fair value of the identifiable net assets and liabilities of an associate or a joint venture at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and shall not be amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases. When the Company transacts with its associate and joint venture, profits and losses resulting from the transactions with the associate and joint venture are recognized in the Company’s consolidated financial statements only to the extent of interests in the associate and joint venture that are not related to the Company. Property, Plant and Equipment Property, plant and equipment are initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation on property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis. On derecognition of an item of property, plant and equipment, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period in which the property is derecognized. Investment Properties Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties also include land held for a currently undetermined future use. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method. On derecognition of the investment properties, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period in which the property is derecognized. Goodwill Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss. For the purpose of impairment testing, goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating units (referred to as “cash-generating unit”) that are expected to benefit from the synergies of the business combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributable goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods. Intangible Assets Other Than Goodwill Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset before the end of its economic life. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss. Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss in the period in which the asset is derecognized. Impairment of Tangible and Intangible Assets Other Than Goodwill At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss. When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss. Financial Instruments Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
| a. | Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. The regular way of transaction means the purchase or sale of financial assets delivered within the time frame established by regulation or convention in the marketplace.
| 1) | Measurement category
| a) | Financial assets at fair value through profit and loss (FVTPL)
Financial assets are classified as at FVTPL when the financial asset is held for trading. Financial assets at FVTPL are stated 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 dividend or interest earned on the financial asset.
| b) | Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity date that the Company has positive intention and ability to hold to maturity other than those that are designated as at fair value through profit or loss or as available-for-sale and those that meet the definition of loans and receivables on initial recognition. The Company invests in bank debentures and corporate bonds with specific credit ratings and the Company has positive intent and ability to hold to maturity, are classified as held-to-maturity investments. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method less any impairment loss.
| c) | Available-for-sale financial assets (AFS financial assets)
AFS financial assets are non-derivatives that are either designated as AFS or are not classified as loans and receivables, held-to-maturity financial assets or financial assets at fair value through profit or loss. The Company invests in listed stocks, emerging market stocks, and unlisted stocks. Among these investments, those that have a quoted market price in an active market are classified as AFS and measured at fair value at the end of each reporting period; the others that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period. 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. Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on AFS equity investments are recognized in profit or loss. Other changes in the carrying amount of AFS financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired. Dividends on AFS equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established.
| d) | Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including cash and cash equivalents, trade notes and accounts receivable, receivables from related parties, other financial assets and refundable deposits) are measured at amortized cost using the effective interest method, less any impairment loss, except for short-term receivables as the effect of discounting is immaterial.
| 2) | Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed to determine whether there is objective evidence that an impairment loss has occurred at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For financial assets carried at amortized cost, such as held-to-maturity financial assets, and trade notes and accounts receivable, assets that are individually assessed and not impaired are, in addition, assessed for impairment on a collective basis. For financial assets carried at amortized cost, the amount of the impairment loss recognized is mainly based on 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. However, since the discounted effect of short-term receivables is immaterial, the impairment loss is recognized on the difference between carrying amount and estimated future cash flow. For financial assets measured at amortized cost, if, in a subsequent period, the amount of 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 AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. 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. In respect of 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. For financial assets that are carried at cost, the amount of the impairment loss is mainly measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss is not 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 notes and accounts receivable and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade note and accounts receivable and other receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade notes and accounts receivable and other receivables that are written off against the allowance account.
| 3) | Derecognition of financial assets
The Company 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 entity. 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.
| b. | Financial liabilities
| 1) | Subsequent measurement
Except for financial liabilities at FVTPL, all the financial liabilities are subsequently measured at amortized cost using the effective interest method.
| 2) | Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.
| c. | Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including forward exchange contracts. Derivatives are initially measured at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability. Hedge Accounting The Company designates some derivatives instruments as cash flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss. The associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in the same period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses that were recognized in other comprehensive income are removed from equity and are included in the initial cost of the non-financial asset or non-financial liability. Hedge accounting is discontinued prospectively when the Company revokes the designated hedging relationship, or when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been previously recognized in other comprehensive income from the period when the hedge was effective remains separately in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss. Provisions Provisions are measured at the best estimate of the expenditure required to settle the Company’s obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. The provisions for warranties claims and trade-in right are made by management according to the sales agreements which represent the management’s best estimate of the future outflow of economic benefits. The provisions of warranties claims and trade-in right are recognized as operating cost and the reduction of revenue, respectively, in the period in which the goods are sold. Revenue Recognition Revenue from the sale of goods is recognized when all the following conditions are satisfied:
| a. | The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
| b. | The Company 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 Company; and
| e. | The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts for goods sold in the normal course of business, net of sales discounts and volume rebates. For trade notes and accounts receivable due within one year from the balance sheet date, as the nominal value of the consideration to be received approximates its fair value and transactions are frequent, fair value of the consideration is not determined by discounting all future receipts using an imputed rate of interest. Usage revenues from fixed-line services (including local, domestic long distance and international long distance telephone services), cellular services, Internet and data services, and interconnection and call transfer fees from other telecommunications companies and carriers are billed in arrears and are recognized based upon seconds or minutes of traffic processed when the services are provided in accordance with contract terms. Other revenues are recognized as follows: (a) one-time subscriber connection fees (on fixed-line services) are deferred and recognized over the average expected customer service periods, (b) monthly fees (on fixed-line services, mobile, Internet and data services) are accrued every month, and (c) prepaid services (fixed-line, mobile, Internet and data services) are recognized as income based upon actual usage by customers. Where the Company enters into transactions which involve both the provision of telecommunications service bundled with products such as handsets, total consideration received from products and telecommunications service in these arrangements are allocated and measured using units of accounting within the arrangement based on their relative fair values limited to the amount paid by the customer for the products. Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. Dividend income from investments is recognized when the stockholder’s right to receive payment has been established under the premises when it is probable that the economic benefit related to the transactions will flow to the Company and that the revenue can be reasonably measured. Interest income from a financial asset is recognized when it is probable that the economic benefits related to the transactions will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. When another party is involved in providing goods or services to a customer, the Company is acting as a principal when it has exposure to the significant risks and rewards associated with the sale of goods or the rendering of services; otherwise, the Company is acting as an agent. When the Company is acting as a principal, gross inflows of economic benefits arising from transactions is recognized as revenue. When the Company is acting as an agent, revenue is recognized in the amount of commission. Leasing
| a. | The Company as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.
| b. | The Company as lessee
Operating lease payments are recognized as an expense on a straight-line basis over the lease term. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred. Employee Benefits
| a. | Short-term employee benefits
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
| b. | Retirement benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and gains or losses on settlements) and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising (a) actuarial gains and losses; and (b) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Net defined benefit liability (asset) represents the actual deficit (surplus) in the Company’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.
| c. | Other long-term employee benefits
Other long-term employee benefits are accounted for in the same way as the accounting required for defined benefit plan except that remeasurement is recognized in profit or loss. Share-based Payment Arrangements - Employee Stock Options The fair value determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of employee stock options that are expected to ultimately vest, with a corresponding increase in additional paid-in capital - employee stock options. If the equity instruments granted vest immediately at the grant date, expenses are recognized in full in profit or loss. At the end of each reporting period, the Company revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to additional paid-in capital - employee stock options. Income Tax Income tax expense represents the sum of the tax currently payable and deferred tax.
| a. | Current tax
The current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Income tax (10%) on undistributed earnings is accrued during the period the earnings arise and adjusted to the extent that distributions are approved by the stockholders in the following year. Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
| b. | Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. If the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit, the resulting deferred tax asset or liability is not recognized. In addition, a deferred tax liability is not recognized on taxable temporary difference arising from initial recognition of goodwill. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forward and unused tax credits from purchases of machinery, equipment and technology, and research and development expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
| c. | Current and deferred tax
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred tax are also recognized in other comprehensive income. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

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