EX-99.3

EX-99.3 4 d742332dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

Chunghwa Telecom Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the

Three Months Ended March 31, 2019 and 2018

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Millions of New Taiwan Dollars)


	March 31, 2019				December 31, 2018				March 31, 2018
	(Unaudited)				(Audited)				(Unaudited)
ASSETS	Amount		%		Amount		%		Amount		%
CURRENT ASSETS
Cash and cash equivalents	$	37,228		8	$	27,645		6	$	31,529		7
Financial assets at fair value through profit or loss		—		—		—		—		—		—
Hedging financial assets		—		—		1		—		—		—
Contract assets		4,606		1		4,869		1		6,259		1
Trade notes and accounts receivable, net		27,524		5		30,076		7		29,999		7
Receivables from related parties		18		—		24		—		29		—
Inventories		13,904		3		15,121		3		11,080		2
Prepayments		4,855		1		1,873		—		5,535		1
Other current monetary assets		7,170		1		9,504		2		5,394		1
Other current assets		2,926		1		2,576		1		2,246		—

Total current assets		98,231		20		91,689		20		92,071		19

NONCURRENT ASSETS
Financial assets at fair value through profit or loss		511		—		517		—		—		—
Financial assets at fair value through other comprehensive income		6,774		1		6,933		1		7,305		2
Investments accounted for using equity method		2,811		1		2,732		1		2,381		—
Contract assets		2,395		1		2,344		—		3,588		1
Property, plant and equipment		284,681		59		288,914		62		284,977		61
Right-of-use assets		11,710		2		—		—		—		—
Investment properties		8,278		2		8,287		2		8,048		2
Intangible assets		49,934		11		50,944		11		53,833		12
Deferred income tax assets		3,558		1		3,554		1		3,250		1
Incremental costs of obtaining contracts		1,117		—		1,335		—		2,283		—
Net defined benefit assets		1,088		—		1,164		—		1,289		—
Prepayments		2,931		1		3,463		1		3,412		1
Other noncurrent assets		5,798		1		5,180		1		5,434		1

Total noncurrent assets		381,586		80		375,367		80		375,800		81

TOTAL	$	479,817		100	$	467,056		100	$	467,871		100

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Short-term loans	$	175		—	$	100		—	$	170		—
Financial liabilities at fair value through profit or loss		2		—		1		—		1		—
Hedging derivative financial liabilities		3		—		—		—		—		—
Contract liabilities		12,417		3		10,688		2		8,654		2
Trade notes and accounts payable		14,948		3		20,465		5		14,695		3
Payables to related parties		361		—		918		—		415		—
Current tax liabilities		8,541		2		6,221		1		13,124		3
Lease liabilities		3,500		1		—		—		—		—
Other payables		20,294		4		23,315		5		21,576		5
Provisions		131		—		128		—		100		—
Other current liabilities		1,052		—		1,382		—		1,300		—

Total current liabilities		61,424		13		63,218		13		60,035		13

NONCURRENT LIABILITIES
Contract liabilities		6,325		1		2,595		1		2,384		1
Long-term loans		1,600		—		1,600		—		1,600		—
Deferred income taxes liabilities		1,985		1		1,992		—		2,065		—
Provisions		79		—		79		—		79		—
Lease liabilities		6,353		1		—		—		—		—
Customers’ deposits		4,646		1		4,716		1		4,560		1
Net defined benefit liabilities		3,580		1		3,534		1		2,002		—
Other noncurrent liabilities		1,400		—		4,793		1		4,537		1

Total noncurrent liabilities		25,968		5		19,309		4		17,227		3

Total liabilities		87,392		18		82,527		17		77,262		16

EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT
Common stocks		77,574		16		77,574		17		77,574		17
Additional paid-in capital		149,761		31		149,762		32		148,103		32
Retained earnings
Legal reserve		77,574		16		77,574		17		77,574		17
Special reserve		2,676		1		2,676		1		2,681		—
Unappropriated earnings		74,504		16		66,626		14		75,499		16

Total retained earnings		154,754		33		146,876		32		155,754		33

Other adjustments		309		—		460		—		417		—

Total equity attributable to stockholders of the parent		382,398		80		374,672		81		381,848		82
NONCONTROLLING INTERESTS		10,027		2		9,857		2		8,761		2

Total equity		392,425		82		384,529		83		390,609		84

TOTAL	$	479,817		100	$	467,056		100	$	467,871		100

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Millions of New Taiwan Dollars, Except Earnings Per Share)

(Unaudited)


	Three Months Ended March 31
	2019					2018
	Amount			%		Amount			%
REVENUES	$	51,331			100	$	53,632			100
OPERATING COSTS		33,481			65		34,450			64

GROSS PROFIT		17,850			35		19,182			36

OPERATING EXPENSES
Marketing		5,408			11		5,653			10
General and administrative		1,171			2		1,191			2
Research and development		921			2		925			2
Expected credit loss (reversal of credit loss)		(56	)		—		398			1

Total operating expenses		7,444			15		8,167			15

OTHER INCOME AND EXPENSES		(4	)		—		(72	)		—

INCOME FROM OPERATIONS		10,402			20		10,943			21

NON-OPERATING INCOME AND EXPENSES
Interest income		53			—		39			—
Other income		56			—		56			—
Other gains and losses		(19	)		—		(33	)		—
Interest expenses		(26	)		—		(4	)		—
Share of the profits of associates accounted for using equity method		77			—		80			—

Total non-operating income and expenses		141			—		138			—

INCOME BEFORE INCOME TAX		10,543			20		11,081			21
INCOME TAX EXPENSE		2,452			5		2,558			5

NET INCOME		8,091			15		8,523			16

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified to profit or loss:
Unrealized gain or loss on investments in equity instruments designated as at fair value through other comprehensive income		(159	)		—		(234	)		—
Gain or loss on hedging instruments subject to basis adjustment		(4	)		—		1			—

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Millions of New Taiwan Dollars, Except Earnings Per Share)

(Unaudited)


	Three Months Ended March 31
	2019					2018
	Amount			%		Amount			%
Income tax benefit relating to items that will not be reclassified to profit or loss	$	—			—	$	207			—

		(163	)		—		(26	)		—

Items that may be reclassified subsequently to profit or loss:
Exchange differences arising from the translation of the foreign operations		24			—		(52	)		—
Share of exchange differences arising from the translation of the foreign operations of associates		—			—		1			—

		24			—		(51	)		—

Total other comprehensive income (loss), net of income tax		(139	)		—		(77	)		—

TOTAL COMPREHENSIVE INCOME	$	7,952			15	$	8,446			16

NET INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	7,929			15	$	8,267			15
Noncontrolling interests		162			—		256			1

	$	8,091			15	$	8,523			16

COMPREHENSIVE INCOME ATTRIBUTABLE TO
Stockholders of the parent	$	7,778			15	$	8,182			15
Noncontrolling interests		174			—		264			1

	$	7,952			15	$	8,446			16

EARNINGS PER SHARE
Basic	$	1.02				$	1.07

Diluted	$	1.02				$	1.07

(Concluded)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Millions of New Taiwan Dollars)

(Unaudited)


	Equity Attributable to Stockholders of the Parent
																Other Adjustments
						Retained Earnings										Exchange Differences Arising from the			Unrealized Gain			Gain on Hedging Instruments						Total Equity Attributable to Stockholders of the Parent
	Common Stocks		Additional Paid-in Capital			Legal Reserve		Special Reserve		Unappropriated Earnings			Total Retained Earnings			Translation of the Foreign Operations			or Loss on Financial Assets at FVOCI			Gain on Hedging Instruments			Total Other Adjustments			Total Equity Attributable to Stockholders of the Parent			Noncontrolling Interests			Total Equity
BALANCE, JANUARY 1, 2018	$	77,574	$	148,091		$	77,574	$	2,681	$	54,633		$	134,888		$	(174	)	$	—		$	—		$	383		$	360,936		$	8,474		$	369,410
Effect of retrospective application		—		—			—		—		12,393			12,393			—			883			(1	)		325			12,718			(4	)		12,714

BALANCE, JANUARY 1, 2018 AS ADUJUSTED		77,574		148,091			77,574		2,681		67,026			147,281			(174	)		883			(1	)		708			373,654			8,470			382,124
Net income for the three months ended March 31, 2018		—		—			—		—		8,267			8,267			—			—			—			—			8,267			256			8,523
Other comprehensive income (loss) for the three months ended March 31, 2018		—		—			—		—		206			206			(54	)		(238	)		1			(291	)		(85	)		8			(77	)

Total comprehensive income (loss) for the three months ended March 31, 2018		—		—			—		—		8,473			8,473			(54	)		(238	)		1			(291	)		8,182			264			8,446

Share-based payment transactions of subsidiaries		—		12			—		—		—			—			—			—			—			—			12			22			34
Net increase in noncontrolling interests		—		—			—		—		—			—			—			—			—			—			—			5			5

BALANCE, MARCH 31, 2018	$	77,574	$	148,103		$	77,574	$	2,681	$	75,499		$	155,754		$	(228	)	$	645		$	—		$	417		$	381,848		$	8,761		$	390,609

BALANCE, JANUARY 1, 2019	$	77,574	$	149,762		$	77,574	$	2,676	$	66,626		$	146,876		$	(79	)	$	538		$	1		$	460		$	374,672		$	9,857		$	384,529
Effect of retrospective application (Note 2)		—		—			—		—		(51	)		(51	)		—			—			—			—			(51	)		(20	)		(71	)

BALANCE, JANUARY 1, 2019 AS ADUJUSTED		77,574		149,762		$	77,574	$	2,676	$	66,575		$	146,825		$	(79	)	$	538		$	1		$	460		$	374,621		$	9,837		$	384,458
Net income for the three months ended March 31, 2019		—		—			—		—		7,929			7,929			—			—			—			—			7,929			162			8,091
Other comprehensive income (loss) for the three months ended March 31, 2019		—		—			—		—		—			—			15			(162	)		(4	)		(151	)		(151	)		12			(139	)

Total comprehensive income (loss) for the three months ended March 31, 2019		—		—			—		—		7,929			7,929			15			(162	)		(4	)		(151	)		7,778			174			7,952

Share-based payment transactions of subsidiaries		—		(1	)		—		—		—			—			—			—			—			—			(1	)		16			15

BALANCE, MARCH 31, 2019	$	77,574	$	149,761		$	77,574	$	2,676	$	74,504		$	154,754		$	(64	)	$	376		$	(3	)	$	309		$	382,398		$	10,027		$	392,425

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions of New Taiwan Dollars)

(Unaudited)


	Three Months Ended March 31
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	10,543		$	11,081
Adjustments to reconcile income before income tax to net cash provided by operating activities:
Depreciation		7,693			6,895
Amortization		1,064			1,070
Amortization of incremental costs of obtaining contracts		377			452
Expected credit losses (reversal of credit loss)		(56	)		398
Interest expenses		26			4
Interest income		(53	)		(39	)
Compensation cost of share-based payment transactions		—			—
Share of the profits of associates accounted for using equity method		(77	)		(80	)
Loss on disposal of property, plant and equipment		4			21
Gain on disposal of financial instruments		—			(6	)
Provision for inventory and obsolescence		96			32
Impairment loss on intangible assets		—			51
Valuation loss on financial assets and liabilities at fair value through profit or loss, net		7			—
Others		(23	)		(22	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Financial assets mandatorily measured at fair value through profit or loss		—			60
Contract assets		213			135
Trade notes and accounts receivable		2,615			1,593
Receivables from related parties		6			21
Inventories		1,121			(2,405	)
Prepayments		(3,109	)		(3,193	)
Other current monetary assets		(42	)		79
Other current assets		(350	)		69
Incremental cost of obtaining contracts		(159	)		(261	)
Increase (decrease) in:
Contract liabilities		1,762			409
Trade notes and accounts payable		(5,517	)		(4,701	)
Payables to related parties		(557	)		(269	)
Other payables		(2,241	)		(2,257	)
Provisions		4			—
Other current liabilities		(107	)		182
Net defined benefit plans		122			(1,978	)

Cash generated from operations		13,362			7,341

(Continued)

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CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions of New Taiwan Dollars)

(Unaudited)


	Three Months Ended March 31
	2019			2018
Interest paid	$	(26	)	$	(5	)
Income tax paid		(117	)		(12	)

Net cash provided by operating activities		13,219			7,324

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of time deposits and negotiable certificate of deposit with maturities of more than three months		(1,564	)		(2,317	)
Proceeds from disposal of time deposits and negotiable certificate of deposit with maturities of more than three months		3,931			2,118
Proceeds from capital reduction of investments accounted for using equity method		—			19
Acquisition of property, plant and equipment		(4,492	)		(4,390	)
Proceeds from disposal of property, plant and equipment		10			10
Acquisition of intangible assets		(54	)		(70	)
Acquisition of investment properties		—			(6	)
Increase in other noncurrent assets		(619	)		(43	)
Interest received		58			42

Net cash used in investing activities		(2,730	)		(4,637	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans		300			200
Repayment of short-term loans		(225	)		(100	)
Decrease in customers’ deposits		(79	)		(101	)
Payments for the principal of lease liabilities		(1,019	)		—
Decrease in other noncurrent liabilities		90			(38	)
Change in other noncontrolling interests		14			38

Net cash used in financial activities		(919	)		(1	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		13			18

NET INCREASE IN CASH AND CASH EQUIVALENTS		9,583			2,704
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		27,645			28,825

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	37,228		$	31,529

(Concluded)

- 6 -

CHUNGHWA TELECOM CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2019 and 2018

(In Millions of New Taiwan Dollars, Except Earnings Per Share)

(Unaudited)

1.	STATEMENT OF COMPLIANCE

The Company has prepared its consolidated balance sheets as of March 31, 2019 and 2018, the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2019 and 2018 in accordance with IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standard Board (IASB). The consolidated financial statements are incomplete as they omit the related footnote disclosures as required under International Financial Reporting Standards as issued by IASB.

2.	APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

Except for the effect of application of IFRS 16 discussed below, the application of other new, revised or amended standards and interpretations effective from January 1, 2019 does not have material impact on the Company’s consolidated financial statements.

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for identifying leases and accounting treatments for lessors and lessees. It supersedes IAS 17 “Lease”, IFRIC 4 - Determining Whether an Arrangement Contains a Lease and a number of related interpretations.

The Company reassesses whether a contract is, or contains, a lease in accordance with the definition of a lease under IFRS 16. Some contracts previously identified as containing a lease under IAS 17 and IFRIC 4 do not meet the definition of a lease under IFRS 16 and are accounted for in accordance with other accounting standards because the Company does not have the right to direct the use of the identified assets. Contracts that are reassessed as leases or containing a lease are accounted for in accordance with the transitional provisions under IFRS 16.

If the Company is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments for low-value assets are recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Company presents the depreciation expense charged on the right-of-use asset separately from the interest expense accrued on lease liability using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities. Before the application of IFRS 16, payments under operating lease contracts were recognized as expenses on a straight-line basis. Prepaid lease payments for use rights of leased assets were recognized as prepaid rents. Cash flows for operating leases were classified within operating activities on the statements of cash flows.

The Company does not make any adjustments for leases in which the Company is a lessor and accounts for those leases with the application of IFRS 16 starting from January 1, 2019.

- 7 -

The Company applied IFRS 16 retrospectively with the cumulative effect of the initial application of IFRS 16 recognized in retained earnings on January 1, 2019. Comparative financial information is not restated.

Lease liabilities are recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17 and measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets are measured at the present value discounted using the aforementioned incremental borrowing rate as if IFRS 16 had been applied since the commencement date of leases. The Company applies IAS 36 for assessing impairment of right-of-use assets.

The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 is 0.85%. The difference between the (1) lease liabilities recognized and (2) future aggregate minimum lease payments of non-cancellable operating lease disclosed under IAS 17 on December 31, 2018 is explained as follows:


The future aggregate minimum lease payments of non-cancellable operating lease on December 31, 2018	$	10,558
Less: Recognition exemption for leases of low-value assets		(3	)

Undiscounted amount on January 1, 2019	$	10,555

Discounted amount using the incremental borrowing rate on January 1, 2019	$	10,340
Add: Adjustments as a result of a different treatment of extension options		—

Lease liabilities recognized on January 1, 2019	$	10,340

The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16 is set out as follows:


	Carrying Amount as of January 1, 2019		Adjustments Arising from Initial Application of IFRS 16			Adjusted Carrying Amount as of January 1, 2019
	NT$		NT$			NT$
			(In Millions)
Prepayments—current	$	1,873	$	(245	)	$	1,628

Property, plant and equipment	$	288,914		(1,309	)	$	287,605

Right-of-use assets	$	—		12,163		$	12,163

Deferred income tax assets	$	3,554		26		$	3,580

Prepayments—noncurrent	$	3,463		(414	)	$	3,049

Total effect on assets			$	10,221

(Continued)

- 8 -


	Carrying Amount as of January 1, 2019		Adjustments Arising from Initial Application of IFRS 16			Adjusted Carrying Amount as of January 1, 2019
	NT$		NT$			NT$
			(In Millions)
Contract liabilities—current	$	10,688	$	214		$	10,902

Lease liabilities—current	$	—		3,394		$	3,394

Other payables	$	23,315		(48	)	$	23,267

Other current liabilities	$	1,382		(214	)	$	1,168

Contract liabilities—noncurrent	$	2,595		3,483		$	6,078

Deferred income tax liabilities	$	1,992		—		$	1,992

Lease liabilities—noncurrent	$	—		6,946		$	6,946

Other noncurrent liabilities	$	4,793		(3,483	)	$	1,310

Total effect on liabilities			$	10,292

Unappropriated earnings	$	66,626	$	(51	)	$	66,575

Noncontrolling interests	$	9,857		(20	)	$	9,837

Total effect on equity			$	(71	)

(Concluded)

- 9 -