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 | — | ||||||||||||||||||
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Total current assets | 98,231 | 20 | 91,689 | 20 | 92,071 | 19 | ||||||||||||||||||
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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 | ||||||||||||||||||
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Total noncurrent assets | 381,586 | 80 | 375,367 | 80 | 375,800 | 81 | ||||||||||||||||||
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TOTAL | $ | 479,817 | 100 | $ | 467,056 | 100 | $ | 467,871 | 100 | |||||||||||||||
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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 | — | ||||||||||||||||||
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Total current liabilities | 61,424 | 13 | 63,218 | 13 | 60,035 | 13 | ||||||||||||||||||
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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 | ||||||||||||||||||
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Total noncurrent liabilities | 25,968 | 5 | 19,309 | 4 | 17,227 | 3 | ||||||||||||||||||
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Total liabilities | 87,392 | 18 | 82,527 | 17 | 77,262 | 16 | ||||||||||||||||||
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EQUITY ATTRIBUTABLE TO STOCKHOLDERS OF THE PARENT | ||||||||||||||||||||||||
Common stocks | 77,574 | 16 | 77,574 | 17 | 77,574 | 17 | ||||||||||||||||||
Additionalpaid-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 | ||||||||||||||||||
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Total retained earnings | 154,754 | 33 | 146,876 | 32 | 155,754 | 33 | ||||||||||||||||||
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Other adjustments | 309 | — | 460 | — | 417 | — | ||||||||||||||||||
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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 | ||||||||||||||||||
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Total equity | 392,425 | 82 | 384,529 | 83 | 390,609 | 84 | ||||||||||||||||||
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TOTAL | $ | 479,817 | 100 | $ | 467,056 | 100 | $ | 467,871 | 100 | |||||||||||||||
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- 1 -
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 | ||||||||||||
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GROSS PROFIT | 17,850 | 35 | 19,182 | 36 | ||||||||||||
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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 | |||||||||||
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Total operating expenses | 7,444 | 15 | 8,167 | 15 | ||||||||||||
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OTHER INCOME AND EXPENSES | (4 | ) | — | (72 | ) | — | ||||||||||
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INCOME FROM OPERATIONS | 10,402 | 20 | 10,943 | 21 | ||||||||||||
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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 | — | ||||||||||||
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Totalnon-operating income and expenses | 141 | — | 138 | — | ||||||||||||
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INCOME BEFORE INCOME TAX | 10,543 | 20 | 11,081 | 21 | ||||||||||||
INCOME TAX EXPENSE | 2,452 | 5 | 2,558 | 5 | ||||||||||||
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NET INCOME | 8,091 | 15 | 8,523 | 16 | ||||||||||||
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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)
- 2 -
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 | — | ||||||||||
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(163 | ) | — | (26 | ) | — | |||||||||||
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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 | — | ||||||||||||
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24 | — | (51 | ) | — | ||||||||||||
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Total other comprehensive income (loss), net of income tax | (139 | ) | — | (77 | ) | — | ||||||||||
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TOTAL COMPREHENSIVE INCOME | $ | 7,952 | 15 | $ | 8,446 | 16 | ||||||||||
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NET INCOME ATTRIBUTABLE TO | ||||||||||||||||
Stockholders of the parent | $ | 7,929 | 15 | $ | 8,267 | 15 | ||||||||||
Noncontrolling interests | 162 | — | 256 | 1 | ||||||||||||
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$ | 8,091 | 15 | $ | 8,523 | 16 | |||||||||||
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COMPREHENSIVE INCOME ATTRIBUTABLE TO | ||||||||||||||||
Stockholders of the parent | $ | 7,778 | 15 | $ | 8,182 | 15 | ||||||||||
Noncontrolling interests | 174 | — | 264 | 1 | ||||||||||||
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$ | 7,952 | 15 | $ | 8,446 | 16 | |||||||||||
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EARNINGS PER SHARE | ||||||||||||||||
Basic | $ | 1.02 | $ | 1.07 | ||||||||||||
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Diluted | $ | 1.02 | $ | 1.07 | ||||||||||||
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(Concluded)
- 3 -
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 | Total Equity Stockholders | ||||||||||||||||||||||||||||||||||||||||||||||||
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 | Total Other Adjustments | 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 | |||||||||||||||||||||||||||||||||||||
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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 | ) | ||||||||||||||||||||||||||||||||||
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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 | ||||||||||||||||||||||||||||||||||||
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Share-based payment transactions of subsidiaries | — | 12 | — | — | — | — | — | — | — | — | 12 | 22 | 34 | |||||||||||||||||||||||||||||||||||||||
Net increase in noncontrolling interests | — | — | — | — | — | — | — | — | — | — | — | 5 | 5 | |||||||||||||||||||||||||||||||||||||||
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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 | |||||||||||||||||||||||||
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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 | ) | ||||||||||||||||||||||||||||||||||
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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 | ) | ||||||||||||||||||||||||||||||||||
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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 | ||||||||||||||||||||||||||||||||||||
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Share-based payment transactions of subsidiaries | — | (1 | ) | — | — | — | — | — | — | — | — | (1 | ) | 16 | 15 | |||||||||||||||||||||||||||||||||||||
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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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- 4 -
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)
- 5 -
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 | ) | ||||
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|
|
| |||||
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 | ) | ||||
|
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|
| |||||
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 | ) | ||||
|
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| |||||
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 | ||||||
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|
| |||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 37,228 | $ | 31,529 | ||||
|
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|
|
(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 recognizeright-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments forlow-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 theright-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 ofright-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 ofnon-cancellable operating lease disclosed under IAS 17 on December 31, 2018 is explained as follows:
The future aggregate minimum lease payments ofnon-cancellable operating lease on December 31, 2018 | $ | 10,558 | ||
Less: Recognition exemption for leases oflow-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 | ||||||
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|
|
| |||||||||
Right-of-use assets | $ | — | 12,163 | $ | 12,163 | |||||||
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|
|
| |||||||||
Deferred income tax assets | $ | 3,554 | 26 | $ | 3,580 | |||||||
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|
|
| |||||||||
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 -