Except bonds payable measured at amortized cost, the management considered that the carrying amounts of financial assets and financial liabilities not measured at fair value approximate their fair values. The carrying amounts and fair value of bonds payable as of December 31, 2022 and 2023 were as follows:

The aforementioned fair value hierarchy of bonds payable was Level 3 which was determined based on discounted cash flow analysis with the applicable yield curve for the duration. The significant unobservable inputs is discount rates that reflected the credit risk.


	Level 1		Level 2		Level 3		Total
	NT$		NT$		NT$		NT$

December 31, 2022

Financial assets at FVTPL
Derivative financial assets
Swap contracts	$	—	$	3,205,828	$	—	$	3,205,828
Forward exchange contracts		—		246,710		—		246,710
Non-derivative financial assets
Quoted ordinary shares		2,521,964		—		—		2,521,964
Private-placement funds		—		—		1,599,932		1,599,932
Unquoted preferred shares		—		—		628,156		628,156
Contingent considerations		—		—		438,176		438,176
Open-end mutual funds		293,385		—		—		293,385


	$	2,815,349	$	3,452,538	$	2,666,264	$	8,934,151

Financial assets at FVTOCI
Investments in equity instruments
Unquoted ordinary shares	$	—	$	—	$	419,491	$	419,491
Quoted ordinary shares		45,683		—		—		45,683
Unquoted preferred shares		—		—		13,883		13,883
Limited partnership		—		—		3,502		3,502
Investments in debt instruments
Unsecured subordinate corporate bonds		—		—		1,059,712		1,059,712
Trade receivables, net		—		—		5,402,714		5,402,714


	$	45,683	$	—	$	6,899,302	$	6,944,985

Financial liabilities at FVTPL
Derivative financial liabilities
Swap contracts	$	—	$	543,547	$	—	$	543,547
Forward exchange contracts		—		83,213		—		83,213


	$	—	$	626,760	$	—	$	626,760


	Level 1		Level 2		Level 3		Total
	NT$		NT$		NT$		NT$

December 31, 2023

Financial assets at FVTPL
Derivative financial assets
Swap contracts	$	—	$	1,453,868	$	—	$	1,453,868
Forward exchange contracts		—		161,924		—		161,924
Non-derivative financial assets
Quoted ordinary shares		2,099,844		—		—		2,099,844
Private-placement funds		—		—		1,796,015		1,796,015
Unquoted preferred shares		—		—		747,960		747,960
Open-end mutual funds		307,669		—		—		307,669
Hybrid financial assets Convertible notes		—		—		61,410		61,410


	$	2,407,513	$	1,615,792	$	2,605,385	$	6,628,690

Financial assets at FVTOCI
Investments in equity instruments
Unquoted ordinary shares	$	—	$	—	$	607,528	$	607,528
Unquoted preferred shares		—		—		13,303		13,303
Investments in debt instruments
Unsecured subordinate corporate bonds		—		—		1,042,906		1,042,906
Trade receivables, net		—		—		5,637,485		5,637,485


	$	—	$	—	$	7,301,222	$	7,301,222

Financial liabilities at FVTPL
Derivative financial liabilities
Swap contracts	$	—	$	1,183,469	$	—	$	1,183,469
Forward exchange contracts		—		118,873		—		118,873


	$	—	$	1,302,342	$	—	$	1,302,342


	Level 1		Level 2		Level 3		Total
	US$ (Note 4)		US$ (Note 4)		US$ (Note 4)		US$ (Note 4)

December 31, 2023

Financial assets at FVTPL
Derivative financial assets
Swap contracts	$	—	$	47,481	$	—	$	47,481
Forward exchange contracts		—		5,288		—		5,288
Non-derivative financial assets
Quoted ordinary shares		68,577		—		—		68,577
Private-placement funds		—		—		58,655		58,655
Unquoted preferred shares		—		—		24,427		24,427
Open-end mutual funds		10,048		—		—		10,048
Hybrid financial assets Convertible notes		—		—		2,006		2,006


	$	78,625	$	52,769	$	85,088	$	216,482

Financial assets at FVTOCI
Investments in equity instruments
Unquoted ordinary shares	$	—	$	—	$	19,841	$	19,841
Unquoted preferred shares		—		—		434		434
Investments in debt instruments
Unsecured subordinate corporate bonds		—		—		34,060		34,060
Trade receivables, net		—		—		184,111		184,111


	$	—	$	—	$	238,446	$	238,446

Financial liabilities at FVTPL
Derivative financial liabilities
Swap contracts	$	—	$	38,650	$	—	$	38,650
Forward exchange contracts		—		3,882		—		3,882


	$	—	$	42,532	$	—	$	42,532


	Financial Assets at FVTPL						Financial Assets at FVTOCI
Financial Assets	Equity Instruments			Debt Instruments			Equity Instruments			Debt Instruments			Total
	NT$			NT$			NT$			NT$			NT$

Balance at January 1	$	1,897,984		$	—		$	728,398		$	1,639,149		$	4,265,531
Recognized in profit or loss		131,276			—			—			—			131,276
Recognized in other comprehensive income
Included in unrealized gains on financial assets at FVTOCI		—			—			129,726			63,722			193,448
Effects of foreign currency exchange		(79,614	)		—			(4,508	)		—			(84,122	)
Net increase in trade receivables		—			3,269,782			—			14,940,539			18,210,321
Trade receivables factoring		—			(3,269,782	)		—			(9,474,490	)		(12,744,272	)
Purchases		459,046			—			32,246			—			491,292
Disposals		(107,793	)		—			(14,873	)		—			(122,666	)
Reclassify		—			—			(29,758	)		—			(29,758	)


Balance at December 31	$	2,300,899		$	—		$	841,231		$	7,168,920		$	10,311,050


	Financial Assets at FVTPL						Financial Assets at FVTOCI
Financial Assets	Equity Instruments			Debt Instruments			Equity Instruments			Debt Instruments			Total
	NT$			NT$			NT$			NT$			NT$

Balance at January 1	$	2,300,899		$	—		$	841,231		$	7,168,920		$	10,311,050
Recognized in profit or loss		100,134			605			—			—			100,739
Recognized in other comprehensive income
Included in unrealized losses on financial assets at FVTOCI		—			—			(366,862	)		(16,746	)		(383,608	)
Effects of foreign currency exchange		195,415			—			5,558			—			200,973
Net increase (decrease) in trade receivables		—			4,330,075			—			(674,112	)		3,655,963
Trade receivables factoring		—			(4,330,075	)		—			(15,636	)		(4,345,711	)
Purchases		338,016			14,325			20,000			—			372,341
Disposals		(268,200	)		(14,930	)		(63,051	)		—			(346,181	)


Balance at December 31	$	2,666,264		$	—		$	436,876		$	6,462,426		$	9,565,566


Financial Instruments		Valuation Techniques and Inputs

Derivatives - swap contracts and forward exchange contracts		Discounted cash flows - Future cash flows are estimated based on observable forward exchange rates at balance sheet dates and contract forward exchange rates, discounted at rates that reflected the credit risk of various counterparties.

The fair value of unquoted ordinary shares, unquoted preferred shares, limited partnership and private-placement funds were determined by using market approach and asset-based approach. The significant unobservable inputs were the discount rates for lack of marketability of 20% to 30%. If the discount rates for lack of marketability to the valuation model increased by 1% to reflect reasonably possible alternative assumptions while all other variables held constant, the fair value of the abovementioned investments would have decreased approximately by NT$6,600 thousand and NT$7,200 thousand (US$235 thousand) as of December 31, 2022 and 2023, respectively.

The fair values of the unsecured subordinate corporate bonds, convertible notes and unquoted preferred shares were determined using income approach based on a discounted cash flow analysis. The significant unobservable input was the discount rate that reflects the credit risk of the

counterparties

. If the discount rate increased by 0.1% while all other variables held constant, the fair value of the bonds would have decreased approximately by NT$3,000 thousand and NT$2,000 thousand (US$65 thousand) as of December 31, 2022 and 2023, respectively.

The fair value of accounts receivables measured at FVTOCI are determined based on the present value of future cash flows that reflect the credit risk of counterparties. Since the discount effect was not significant, the Group measured its fair value by using the nominal values.

The fair value of the contingent considerations were determined by using the Monte Carlo Simulation method. If the estimated net profit margin fails to reach the performance specified in the agreement, the Group could receive the contingent considerations according to the agreement.


	December 31
	2022		2023
	NT$		NT$		US$ (Note 4)

Financial assets

FVTPL
Mandatorily at FVTPL	$	8,934,151	$	6,628,690	$	216,482
Measured at amortized cost (Note 1)		188,733,772		182,950,517		5,974,870
FVTOCI
Equity instruments		482,559		620,831		20,275
Debt instruments		1,059,712		1,042,906		34,060
Trade receivables, net		5,402,714		5,637,485		184,111

Financial liabilities

FVTPL
Held for trading		626,760		1,302,342		42,532
Financial liabilities for hedging		12,204,620		12,516,971		408,784
Measured at amortized cost (Note 2)		337,771,707		295,102,540		9,637,574

The derivative instruments used by the Group were to mitigate risks arising from ordinary business operations. All derivative transactions entered into by the Group were designated as either hedging or trading. Derivative transactions entered into for hedging purposes must hedge risk against fluctuations in foreign exchange rates and interest rates arising from operating activities. The currencies and the amount of derivative instruments held by the Group must match its hedged assets and liabilities denominated in foreign currencies.

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. Gains or losses arising from fluctuations in foreign currency exchange rates of a variety of derivative financial instruments were approximately offset by those of hedged items. Interest rate risk was not significant due to the cost of capital was expected to be fixed.

The Group had sales and purchases as well as

investing and

financing activities denominated in foreign currency which exposed the Group to foreign currency exchange rate risk. The Group entered into a variety of derivative financial instruments to hedge foreign currency exchange rate risk to minimize the fluctuations of assets and liabilities denominated in foreign currencies.

The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities (including those eliminated upon consolidation) as well as derivative instruments which exposed the Group to foreign currency exchange rate risk at each balance sheet date are presented in Note 40.

The Group was mainly subject to the impact from the exchange rate fluctuation in US$ and JPY against NT$, RMB or EUR. 1% fluctuation is used when reporting foreign currency exchange rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign currency exchange rates. The sensitivity analysis included financial assets and liabilities and inter-company receivables and payables within the Group. The changes in profit before income tax due to a 1% change in US$ and JPY against NT$, RMB and EUR would be NT$38,000 thousand, NT$60,000 thousand and NT$148,000 thousand (US$4,833 thousand) for the years ended December 31, 2021, 2022 and 2023, respectively. Hedging contracts and hedged items have been taken into account while measuring the changes in profit before income tax. The abovementioned sensitivity analysis mainly focused on the foreign currency monetary items at each balance sheet date. As the

year

-end

exposure did not reflect the exposure for the years ended December 31, 2021, 2022 and 2023, the abovementioned sensitivity analysis was unrepresentative of those respective years.

The Group’s hedging strategy was to lift borrowings denominated in foreign currencies to avoid exchange rate exposure from its investments in equity instruments denominated in foreign currencies (recognized under the line item of financial assets at FVTPL) and net investment in foreign subsidiary, Universal Scientific Industrial (France), which has EUR as its functional currency. Those transactions were designated as fair value hedges and a hedge of net investment in foreign operation, respectively. Hedge adjustments were made to totally offset the foreign exchange gains or losses from those equity instruments denominated in foreign currencies and foreign operations when they were evaluated based on the exchange rates on each balance sheet date.

The source of hedge ineffectiveness in these hedging relationships arose from the material difference between the notional amounts of borrowings denominated in foreign currencies and the fair value of investments in equity instruments denominated in foreign currencies and net investment in foreign operations. No other sources of ineffectiveness is expected to emerge from these hedging relationships.


	Line item in	Carrying Amount
Hedging Instrument/Hedged Items	Balance sheet	Asset		Liability
		NT$		NT$

Fair value hedge
Borrowings denominated in foreign currencies/ Financial assets at FVTPL	Financial liabilities for hedging - current	$	—	$	3,278,805
Hedge of net investment in foreign operation	Financial liabilities for hedging - current		—		8,925,815


	Change in Value Used for Calculating Hedge Ineffectiveness					Accumulated Gains or Losses in Other Equity				Carrying Amount of Hedged Item in Fair Value Hedge		Accumulated Amount of Fair Value Hedge Adjustments on Hedged Item
Hedging Instrument/ Hedged Item	Hedging Instrument			Hedged Item		Continuing Hedges		Hedge Accounting No Longer Applied		Asset		Asset
	NT$			NT$		NT$		NT$		NT$		NT$

Fair value hedge
Borrowings denominated in foreign currencies/ Financial assets at FVTPL	$	(323,884	)	$	323,884	$	—	$	—	$	2,282,243	$	87,522
Hedge of net investment in foreign operation		(509,229	)		509,229		673,005		—		—		—


	Line item in	Carrying Amount
Hedging Instrument/Hedged Items	Balance sheet	Asset				Liability
		NT$		US$ (Note 4)		NT$		US$ (Note 4)

Fair value hedge
Borrowings denominated in foreign currencies/ Financial assets at FVTPL	Financial liabilities for hedging - current	$	—	$	—	$	3,271,312	$	106,836
Hedge of net investment in foreign operation	Financial liabilities for hedging - current		—		—		9,245,659		301,948


	Change in Value Used for Calculating Hedge Ineffectiveness					Accumulated Gains or Losses in Other Equity				Carrying Amount of Hedged Item in Fair Value Hedge		Accumulated Amount of Fair Value Hedge Adjustments on Hedged Item
Hedging Instrument/ Hedged Item	Hedging Instrument		Hedged Item			Continuing Hedges		Hedge Accounting No Longer Applied		Asset		Asset
	NT$		NT$			NT$		NT$		NT$		NT$

Fair value hedge
Borrowings denominated in foreign currencies/ Financial assets at FVTPL	$	7,493	$	(7,493	)	$	—	$	—	$	2,011,050	$	80,029
Hedge of net investment in foreign operation		312,029		(312,029	)		360,976		—		—		—


	Change in Value Used for Calculating Hedge Ineffectiveness					Accumulated Gains or Losses in Other Equity				Carrying Amount of Hedged Item in Fair Value Hedge		Accumulated Amount of Fair Value Hedge Adjustments on Hedged Item
Hedging Instrument/ Hedged Item	Hedging Instrument		Hedged Item			Continuing Hedges		Hedge Accounting No Longer Applied		Asset		Asset
	US$ (Note 4)		US$ (Note 4)			US$ (Note 4)		US$ (Note 4)		US$ (Note 4)		US$ (Note 4)

Fair value hedge
Borrowings denominated in foreign currencies/ Financial assets at FVTPL	$	245	$	(245	)	$	—	$	—	$	65,678	$	2,614
Hedge of net investment in foreign operation		10,190		(10,190	)		11,789		—		—		—

Except a portion of long-term borrowings and bonds payable at fixed interest rates, the Group was exposed to interest rate risk because group entities borrowed funds at floating interest rates. Changes in market interest rates led to variances in effective interest rates of borrowings from which the future cash flow fluctuations arise. The Group utilized financing instruments with low interest rates and favorable terms to maintain low financing cost, adequate banking facilities, as well as to hedge interest rate risk.


	December 31
	2022		2023
	NT$		NT$		US$ (Note 4)

Fair value interest rate risk
Financial assets	$	16,434,562	$	17,007,765	$	555,446
Financial liabilities		91,152,265		84,315,866		2,753,621
Cash flow interest rate risk
Financial assets		41,964,775		51,158,406		1,670,751
Financial liabilities		121,370,564		117,160,631		3,826,278

For assets and liabilities with floating interest rates, a 100 basis point increase or decrease was used when reporting interest rate risk internally to key management personnel. If interest rates had been 100 basis points (1%) higher or lower and all other variables held constant, the Group’s profit before income tax for the years ended December 31, 2021, 2022 and 2023 would have decreased or increased approximately by NT$959,000 thousand, NT$794,000 thousand and NT$660,000 thousand (US$21,555 thousand), respectively.

The Group was exposed to equity price risk through its investments in financial assets at FVTPL and financial assets at FVTOCI. If equity price was 1% higher or lower, profit before income tax for the years ended December 31, 2021, 2022 and 2023 would have increased or decreased approximately by NT$49,000 thousand, NT$50,000 thousand and NT$46,500 thousand (US$1,519 thousand), respectively, and other comprehensive income before income tax for the years ended December 31, 2021, 2022 and 2023 would have increased or decreased approximately by NT$9,000 thousand, NT$5,000 thousand and NT$6,000 thousand (US$196 thousand), respectively.

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group’s credit risk arises from cash and cash equivalents, contract assets, trade and other receivables and other financial assets. The Group’s maximum exposure to credit risk was the carrying amounts of financial assets in the consolidated balance sheets.

As of December 31, 2022 and 2023, the Group’s five largest customers accounted for 30% and 31% of trade receivables, respectively. The Group transacts with a large number of unrelated customers and, thus, no concentration of credit risk was observed.

The Group manages liquidity risk by maintaining adequate working capital and banking facilities to fulfill the demand for cash flow used in the Group’s operation and capital expenditure. The Group also monitors its compliance with all the loan covenants. Liquidity risk is not considered to be significant.

In the table below, financial liabilities with a repayment on demand clause were included in the earliest time band regardless of the probability of counter-parties choosing to exercise their rights. The maturity dates for other

non-derivative

financial liabilities were based on the agreed repayment dates.


	On Demand or Less than 1 Month		1 to 3 Months		3 Months to 1 Year		1 to 5 Years		More than 5 Years
	NT$		NT$		NT$		NT$		NT$

Non-derivative financial liabilities

Non-interest bearing	$	65,356,106	$	33,887,460	$	11,145,612	$	20,498	$	74,643
Obligation under leases		120,733		201,686		790,427		2,685,977		5,147,266
Floating interest rate liabilities		9,251,237		10,982,036		9,652,804		93,837,521		5,648,699
Fixed interest rate liabilities		12,530,681		9,209,134		9,055,918		44,756,570		29,280


	$	87,258,757	$	54,280,316	$	30,644,761	$	141,300,566	$	10,899,888


	On Demand or Less than 1 Month		1 to 3 Months		3 Months to 1 Year		1 to 5 Years		More than 5 Years
	NT$		NT$		NT$		NT$		NT$

Non-derivative financial liabilities

Non-interest bearing	$	52,472,703	$	33,530,541	$	13,358,363	$	4,478,467	$	83,594
Obligation under leases		123,436		219,960		884,309		2,867,502		5,505,095
Floating interest rate liabilities		19,534,908		9,967,914		9,505,587		78,388,027		8,785,084
Fixed interest rate liabilities		12,370,288		22,921,637		11,235,729		21,095,740		—


	$	84,501,335	$	66,640,052	$	34,983,988	$	106,829,736	$	14,373,773


	On Demand or Less than 1 Month		1 to 3 Months		3 Months to 1 Year		1 to 5 Years		More than 5 Years
	US$ (Note 4)		US$ (Note 4)		US$ (Note 4)		US$ (Note 4)		US$ (Note 4)

Non-derivative financial liabilities

Non-interest bearing	$	1,713,674	$	1,095,053	$	436,263	$	146,260	$	2,730
Obligation under leases		4,031		7,184		28,880		93,648		179,787
Floating interest rate liabilities		637,979		325,536		310,437		2,560,027		286,907
Fixed interest rate liabilities		403,994		748,584		366,941		688,953		—


	$	2,759,678	$	2,176,357	$	1,142,521	$	3,488,888	$	469,424


	Less than 1 Year		1 to 5 Years		5 to 10 Years		10 to 15 Years		15 to 20 Years		More than 20 Years
	NT$		NT$		NT$		NT$		NT$		NT$

Obligation under leases	$	1,227,705	$	2,867,502	$	2,157,503	$	891,614	$	864,881	$	1,591,097


	Less than 1 Year		1 to 5 Years		5 to 10 Years		10 to 15 Years		15 to 20 Years		More than 20 Years
	US$ (Note 4)		US$ (Note 4)		US$ (Note 4)		US$ (Note 4)		US$ (Note 4)		US$ (Note 4)

Obligation under leases	$	40,095	$	93,648	$	70,460	$	29,119	$	28,245	$	51,963

The amounts included above for floating interest rate instruments for

non-derivative

financial liabilities were subject to change if changes in floating interest rates differ from those estimates of interest rates determined at each balance sheet date.

The following table detailed the Group’s liquidity analysis for its derivative financial instruments. The table was based on the undiscounted contractual net cash inflows and outflows on derivative instruments settled on a net basis, and the undiscounted gross cash inflows and outflows on those derivatives that require gross settlement. When the amounts payable or receivable are not fixed, the amounts disclosed have been determined by reference to the projected interest rates as illustrated by the yield curves at each balance sheet date.


	On Demand or Less than 1 Month			1 to 3 Months			3 Months to 1 Year
	NT$			NT$			NT$

December 31, 2022

Net settled
Forward exchange contracts	$	(11,136	)	$	11,994		$	—

Gross settled
Forward exchange contracts
Inflows	$	13,398,921		$	4,688,786		$	599,796
Outflows		(13,310,433	)		(4,687,958	)		(534,354	)

		88,488			828			65,442

Swap contracts
Inflows		32,274,691			16,429,850			62,187,750
Outflows		(31,891,439	)		(15,016,775	)		(59,838,031	)

		383,252			1,413,075			2,349,719


	$	471,740		$	1,413,903		$	2,415,161


	On Demand or Less than 1 Month			1 to 3 Months			3 Months to 1 Year
	NT$			NT$			NT$

December 31, 2023

Net settled
Forward exchange contracts	$	(44,550	)	$	5,585		$	—

Gross settled
Forward exchange contracts
Inflows	$	13,971,393		$	347,468		$	143,726
Outflows		(13,854,585	)		(338,670	)		(133,330	)

		116,808			8,798			10,396

Swap contracts
Inflows		22,388,255			19,166,073			66,015,750
Outflows		(22,021,077	)		(18,547,076	)		(64,821,453	)

		367,178			618,997			1,194,297


	$	483,986		$	627,795		$	1,204,693