China Airlines, Ltd.
Financial Statements for theYears Ended December 31, 2014 and 2013 andIndependent Auditors’ ReportINDEPENDENT AUDITORS’ REPORTThe Board of Directors and the Stockholders
China Airlines, Ltd.
We have audited the accompanying balance sheets of China Airlines, Ltd. (the “Company”) as of December 31,
2014 and 2013 and the related statements of comprehensive income, changes in equity and cash flows for theyears ended. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the Rules Governing the Auditing and Attestation of Financial
Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China.
Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, based on our audits, the financial statements referred to above present fairly, in all material
respects, the financial position of China Airlines, Ltd. as of December 31, 2014 and 2013 and its financial
performance and its cash flows for the years then ended, in conformity with the Regulations Governing the
Preparation of Financial Reports by Securities Issuers, or other regulations.

March 27, 2015

Notice to Readers
The accompanying financial statements are intended only to present the financial position, financial
performance and cash flows in accordance with accounting principles and practices generally accepted in the
Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit
such financial statements are those generally applied in the Republic of China.
For the convenience of readers, the independent auditors’ report and the accompanying financial statements
have been translated into English from the original Chinese version prepared and used in the Republic of China.
If there is any conflict between the English version and the original Chinese version or any difference in theinterpretation of the two versions, the Chinese-language independent auditors’ report and financial statements
shall prevail.

-1-

CHINA AIRLINES, LTD.
BALANCE SHEETSDECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars)

2014
Amount%2013
Amount%$ 15,828,488
46,81242,8507-$ 14,970,817
23,25472,440135,0037-8,900,395
496,872
551,185
4,171
7,096,376
1,510,384

41
3
1

7,364,392
456,218
506,379
7,794
6,677,081
1,120,056

4
3
1

34,477,533

16

31,333,434

15

727
371,367
11,075,172
131,178,428
2,047,448
649,614
8,055,966
30,049,215

5
60
1
4
14

5,617
371,367
9,828,118
139,946,013
2,047,448
473,064
8,641,671
18,410,242

5
66
1
4
9

183,427,937

84

179,723,54085$ 217,905,470100$ 211,056,974

100

$

2,799
22,853
678,649
1,309,054
13,047,948
39,111
8,437,388
4,780,000
25,001,950
4,368,184
2,252,321

1
6
4
2
12
2
1

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6, 17 and 31)
Financial assets at fair value through profit or loss - current (Notes 4, 5, 7 and 31)
Available-for-sale financial assets - current (Notes 4, 8 and 31)
Derivative financial assets for hedging - current (Notes 4, 5, 9 and 31)
Receivables:
Notes and accounts, net (Notes 4, 5, 11 and 31)
Notes and accounts - related parties (Notes 31 and 32)
Other receivables
Current tax assets (Notes 4, 27 and 31)
Inventories, net (Notes 4 and 12)
Other current assets (Notes 6 and 17)
Total current assets
NONCURRENT ASSETS
Derivative financial assets for hedging - noncurrent (Notes 4, 5, 9 and 31)
Financial assets carried at cost - noncurrent (Notes 10 and 31)
Investments accounted for by the equity method (Notes 4 and 13)
Property, plant and equipment (Notes 4, 5, 14 and 33)
Investment properties (Notes 4 and 15)
Other intangible assets (Notes 4 and 16)
Deferred tax assets (Notes 4, 5 and 27)
Other noncurrent assets (Notes 17, 29, 31, 33 and 34)
Total noncurrent assets
TOTAL

LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans (Note 18)
Short-term bills payable (Note 18)
Financial liabilities at fair value through profit or loss - current (Notes 4, 5, 7 and 31)
Derivative financial liabilities for hedging - current (Notes 4, 5, 9 and 31)
Notes and accounts payable (Note 31)
Notes and accounts payable - related parties (Notes 31 and 32)
Other payables (Notes 21 and 26)
Current tax liabilities (Notes 4 and 27)
Deferred revenue - current (Notes 4, 5 and 22)
Bonds payable - current portion (Notes 4, 19, 25, 31 and 32)
Loans and debts - current portion (Notes 18, 31 and 33)
Capital lease obligations - current portion (Notes 4, 20, 31 and 33)
Other current liabilities (Notes 26 and 31)

4,160,000
1,998,138
2,460,000
120,773
1,441,966
9,608,518
10,487,504
9,025,000
13,858,278
2,727,933
3,191,736

2
1
1
1
4
5
4
6
1
2

59,079,846

27

59,940,257

28

5,150
18,323,836
69,517,097
3,416,601
239,590
6,945,200
1,805,315
8,670,569
1,232,131

8
32
2
3
1
4
1

2,026
27,808,023
49,676,138
2,591,678
460,134
8,449,000
1,909,749
8,879,355
534,150

13
24
1
4
1
4
1

Total noncurrent liabilities

110,155,489

51

100,310,253

48

Total liabilities

169,235,335

78

160,250,510

76

52,491,666
1,992,415

24
1

52,000,000
1,924,015

25
1(3,864,876)(3,864,876)(1,905,698)(43,372)

(2)
(2)
(1)
-

321,891
3,926,293(7,409,299)(3,161,115)
86,936(43,372)

2
(4)
(2)
-

48,670,135

2250,806,464

24$ 217,905,470100$ 211,056,974

100

Total current liabilities
NONCURRENT LIABILITIES
Derivative financial liabilities for hedging - noncurrent (Notes 4, 5, 9 and 31)
Bonds payable - noncurrent (Notes 4, 19, 25, 31 and 32)
Loans and debts - noncurrent (Notes 18, 31 and 33)
Provisions - noncurrent (Notes 4, 5 and 23)
Deferred tax liabilities (Notes 4 and 27)
Capital lease obligations - noncurrent (Notes 4, 20, 31 and 33)
Deferred revenue - noncurrent (Notes 4, 5 and 22)
Accrued pension costs (Notes 4, 5 and 24)
Other noncurrent liabilities (Note 26)

EQUITY (Notes 19 and 25)
Capital stock
Capital surplus
Accumulated deficit
Legal reserve
Special reserve
Accumulated deficit
Total accumulated deficit
Other equity
Treasury shares
Total equity
TOTAL

The accompanying notes are an integral part of the financial statements.

-2-$

CHINA AIRLINES, LTD.
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars, Except Loss Per Share)%

2013
Amount%$ 139,726,168

100$ 131,752,677

100

COSTS (Notes 4, 9, 12, 24, 26 and 32)

128,808,748

92

123,444,875

94

GROSS PROFIT

10,917,420

8

8,307,802

6

OPERATING EXPENSES (Notes 4, 24 and 26)

9,046,866

7

8,591,584

6

OPERATING PROFIT (LOSS)

1,870,554

1(283,782)-

918,621(1,713,999)(1,965,294)

1
(1)
(2)

1,343,415(1,650,404)(2,047,047)

1
(1)
(2)

937,4461

1,693,481

1(1,823,226)(1)(660,555)(1)

PRETAX PROFIT (LOSS)

47,328-(944,337)(1)

INCOME TAX BENEFIT (Notes 4, 5 and 27)

798,560

1

329,709-

NET LOSS(751,232)(1)(1,274,046)(1)

109,512-67,654-

16,523(2,537,523)

(2)

9,701
96,500-(24,571)-(6,154)-99,277-(41,911)-391,619

1(23,673)-(1,945,163)(1)

102,117-(2,696,395)(2)

REVENUES (Notes 4, 26 and 32)

NONOPERATING LOSS
Other income (Notes 4, 15 and 26)
Other gains and losses (Notes 9 and 26)
Finance cost (Notes 9, 26 and 32)
Share of the profit of associates and joint ventures(Note 13)
Total nonoperating loss

OTHER COMPREHENSIVE INCOME (LOSS)
Exchange differences on translating foreign
operations (Notes 4 and 25)
Unrealized gain on available-for-sale financial assets(Notes 4 and 25)
Cash flow hedges (Notes 4 and 25)
Share of other comprehensive loss of associates andjoint ventures (Notes 4 and 25)
Actuarial gain (loss) on defined benefit plans(Notes 4 and 24)
Income tax relating to components of othercomprehensive income (Note 27)
Other comprehensive income (loss) for the year,
net of income tax
TOTAL COMPREHENSIVE LOSS FOR THE YEAR

-3-

$

2014
Amount$(1,171,929)(1)(Continued)

CHINA AIRLINES, LTD.
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars, Except Loss Per Share)

2014
AmountLOSS PER SHARE (NEW TAIWAN DOLLARS;
Note 28)
Basic and diluted$(0.14)

The accompanying notes are an integral part of the financial statements.

-4-

%

2013
Amount$%(0.25)(Concluded)

CHINA AIRLINES, LTD.
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars)

Retained Earnings
Share Capital

Capital Surplus

Legal Reserve

UnappropriatedSpecial Reserve
Earnings

BALANCE AT JANUARY 1, 2013

$ 52,000,000

$

$

$

Appropriation of 2012 the earnings
Legal reserve
Special reserve--

Other changes in capital surplus
Issue of convertible bonds arising on equity
component-

Net loss for the year ended December 31, 2013$$

$ 51,459,772

-

-

-

-

-

518,621

-

-

-

-

-

-

-

518,621

-

-

-

-

(1,274,046)

-

-

-

-

(1,274,046)

Other comprehensive income (loss) for the year ended
December 31, 2013, net of income tax

-

-

-

-

(45,381)

62,224

5,180

80,094-102,117

Total comprehensive loss for the year ended
December 31, 2013

-

-

-

-

(1,319,427)

62,224

5,180

80,094-(1,171,929)

52,000,000

1,924,015

321,891

3,926,293(7,409,299)

1,843(11,486)

96,579(43,372)

50,806,464--(321,891)-(3,926,293)

321,891
3,926,293

-

-

-

-

-

Convertible bonds converted to ordinary shares

491,666

68,400

-

-

-

-

-

-

-

560,066

Net loss for the year ended December 31, 2014

-

-

-

-

(751,232)

-

-

-

-

(751,232)

Other comprehensive loss for the year ended
December 31, 2014, net of income tax

-

-

-

-

47,471

98,00915,501(2,106,144)-(1,945,163)

Total comprehensive loss for the year ended
December 31, 2014

-

-

-

-

(703,761)

98,00915,501(2,106,144)-(2,696,395)-$ (3,864,876)

4,015$ (2,009,565)(43,372)$ 48,670,135

1,992,415$-$

The accompanying notes are an integral part of the financial statements.

-5-$99,852$

16,485(43,372)(5,881)(52,924)$$$

52,924$ 52,491,666(16,666)

Total Equity

5,881
-

BALANCE AT DECEMBER 31, 2014

(60,381)

Treasury
Shares Held by
Subsidiaries$ (6,031,067)

Compensation of 2013 deficit
Legal reserve
Special reserve

316,010

Cash Flow
Hedges3,873,369

BALANCE AT DECEMBER 31, 2013

1,405,394

Exchange
Differences on
Translating
Foreign
Operations

Other Equity
Unrealized
Gain (Loss) on
Available-forsale Financial
Assets$CHINA AIRLINES, LTD.
STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars)

2014
CASH FLOWS FROM OPERATING ACTIVITIESPretax profit (loss)
Adjustments to reconcile pretax profit (loss) to net cash generated fromoperating activities:
Debt expenses
Depreciation expenses
Amortization expenses
Net gain on fair value change of financial assets and liabilities held
for trading
Interest income
Dividend income
Share of profit of associates and joint ventures
Loss on disposal of investments accounted for by the equity method
Gain on disposal of property, plant and equipment
Loss on inventories and property, plant and equipment
Gain on disposal of available-for-sales financial assets
Net loss on foreign currency exchange
Finance costs
Recognition of provisions
Amortization of unrealized gain on sale-leaseback
Amortization of deferred credits
Reversal of impairment on investment properties
Changes in operating assets and liabilities
Decrease in financial assets held for trading
Increase in notes and accounts receivable
Increase in accounts receivable - related parties
Increase in other receivables
Increase in inventories(Increase) decrease in other current assets(Decrease) increase in notes and accounts payable
Increase in accounts payable - related parties
Increase (decrease) in other payables
Increase in deferred revenue
Decrease in provisions(Decrease) increase in other current liabilities
Decrease in accrued pension liabilities
Cash generated from operations
Interest received
Dividend received
Interest paid
Income tax paid
Net cash generated from operating activities-6-$

47,3282013$(944,337)

30,00016,588,695
47,013

16,485,432
43,077(77,668)(353,002)(24,847)(937,446)30(52,277)
519,566(4,007)396,270
1,965,294
1,217,163(14,512)(2,862)-(130,884)(275,404)(65,403)(1,693,481)(3,725)
318,081
194,074
2,047,047
882,876(14,512)(48,986)(579,015)

51,311(1,458,009)(40,654)(54,773)(410,481)(395,654)(521,369)
132,912(1,954,792)
1,993,718(392,240)(73,057)(109,509)
16,112,141
362,969
636,545(2,007,095)(77,267)

1,364,044(269,793)(71,160)(104,075)(10,898)
135,381272,633
123,7112,932,982
541,786(116,580)
188,648(131,277)
21,070,242
259,686
640,066(1,900,216)(33,977)

15,027,293

20,035,801(Continued)

CHINA AIRLINES, LTD.
STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars)

2014
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds of the sale of available-for-sale financial assets
Payments for property, plant and equipment
Acquisition of investments accounted for by the equity method
Proceeds of the disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayments for equipment
Increase in computer software cost
Decrease in restricted assets
Proceeds of share redemption of subsidiaries
Net cash used in investing activities$

92,969(7,882,013)(1,600,000)
75,665(312,254)
318,803(12,191,393)(216,948)
232,457
763,6062013$(4,999,109)(14,535)
30,306(103,945)
364,516(7,327,815)(107,919)
77,732-(20,719,108)(12,080,769)

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) short-term loans
Increase in short-term bills payable
Issuance of bonds payable
Repayments of bonds payable
Proceeds of long-term debts
Repayments of long-term debts and capital lease obligations
Proceeds of guarantee deposits received
Refund of guarantee deposits received

4,160,000
1,998,138(4,780,000)
38,950,000(33,904,669)
101,888(102,502)(1,600,000)
16,900,000(6,130,000)
14,520,000(25,826,529)
149,584(169,075)

Net cash generated from (used in) financing activities

6,422,855(2,156,020)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES

126,631

160,441NET INCREASE IN CASH AND CASH EQUIVALENTS

857,6715,959,453

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

14,970,817

9,011,364

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 15,828,488$ 14,970,817

The accompanying notes are an integral part of the financial statements.

-7-(Concluded)

CHINA AIRLINES, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION
China Airlines, Ltd. (the “Company”) was founded in 1959 and its stocks have been listed on the Taiwan
Stock Exchange since February 26, 1993. The Company primarily provides air transport services forpassengers and cargo. Its other operations include (a) mail services; (b) ground services and routine
aircraft maintenance; (c) major maintenance of flight equipment; (d) communications and data processing
services to other airlines; (e) sale of aircraft parts, equipment and entire aircraft; and (f) lease of aircraft.
The major stockholders of the Company are the China Aviation Development Foundation (CADF) and the
National Development Fund (NDF), Executive Yuan. As of December 31, 2014 and 2013, CADF and
NDF held 45.5% and 45.9% of the Company’s shares, respectively. The employee number on December
31, 2014 and 2013 are 11,319 and 11,141, respectively.

2. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the board of directors and authorized for issue on March 27,
2015.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
a. The amendments to the Regulations Governing the Preparation of Financial Reports by Securities
Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International
Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC)
endorsed by the FSC not yet effective
Rule No. 1030029342 and Rule No. 1030010325 issued by the FSC on April 3, 2014 stipulated that theCompany should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”)
endorsed by the Financial Supervisory Commission (FSC) and the related amendments to theRegulations Governing the Preparation of Financial Reports by Securities Issuers starting January 1,
2015.
The New IFRSs Included in the2013 IFRSs Version Not Yet Endorsed by the FSC
Improvements to IFRSs (2009) - amendment to IAS 39

Effective Date
Announced by IASB (Note 1)

January 1, 2009 and January 1,
2010, as appropriate
Amendment to IAS 39 “Embedded Derivatives”
Effective for annual periods
ending on or after June 30,
2009
Improvements to IFRSs (2010)
July 1, 2010 and January 1,
2011, as appropriate
Annual Improvements to IFRSs 2009-2011 Cycle
January 1, 2013
Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7 July 1, 2010
Disclosures for First-time Adopters”(Continued)-8-

The New IFRSs Included in the2013 IFRSs Version Not Yet Endorsed by the FSC
Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed
Dates for First-time Adopters”
Amendment to IFRS 1 “Government Loans”
Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets andFinancial Liabilities”
Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets”
IFRS 10 “Consolidated Financial Statements”
IFRS 11 “Joint Arrangements”
IFRS 12 “Disclosure of Interests in Other Entities”
Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated
Financial Statements, Joint Arrangements and Disclosure ofInterests in Other Entities: Transition Guidance”
Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment
Entities”
IFRS 13 “Fair Value Measurement”
Amendment to IAS 1 “Presentation of Other Comprehensive Income”
Amendment to IAS 12 “Deferred Tax: Recovery of Underlying
Assets”
IAS 19 (Revised 2011) “Employee Benefits”
IAS 27 (Revised 2011) “Separate Financial Statements”
IAS 28 (Revised 2011) “Investments in Associates and Joint
Ventures”
Amendment to IAS 32 “Offsetting Financial Assets and Financial
Liabilities”
IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine”

Effective Date
Announced by IASB (Note 1)
July 1, 2011
January 1, 2013
January 1, 2013
July 1, 2011
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013

January 1, 2014
January 1, 2013
July 1, 2012
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
(Concluded)

Note:

Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on orafter their respective effective dates.

Except for the following, the future initial application of the above 2013 version of IFRSs is notexpected to have any material impact on the Company’s accounting policies:
1) IFRS 12 “Disclosure of Interests in Other Entities”
IFRS 12 is a new disclosure standard that applies to entities with interests in subsidiaries, joint
arrangements, associates and/or unconsolidated structured entities. The disclosure requirements in
IFRS 12 are more extensive than those required in the current standards.
2) IFRS 13 “Fair Value Measurement”
IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value,establishes a framework for measuring fair value, and requires disclosures about fair value
measurements. The disclosure requirements in IFRS 13 are more extensive than those required in
the current standards. For example, quantitative and qualitative disclosures based on thethree-level fair value hierarchy currently required for financial instruments only will be extended by
IFRS 13 to cover all assets and liabilities within its scope.
The fair value measurements under IFRS 13 will be applied from January 1, 2015.

-9-3) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”
The amendments to IAS 1 requires the grouping of items of other comprehensive income (OCI) into
those that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified
subsequently to profit or loss. Income taxes on OCI items are grouped on the same basis. Under
the current IAS 1, there are no such requirements.
The Company will apply the above amendments starting in 2015. Items not expected to bereclassified to profit or loss are remeasurements of the defined benefit plans and share of thedefined benefit plans of associates and joint ventures accounted for using the equity method.
Items expected to be reclassified to profit or loss are the exchange differences on translating foreign
operations, unrealized gains (losses) on available-for-sale financial assets, cash flow hedges, andshare of the other comprehensive income (except the share of the remeasurements of the defined
benefit plans) of associates and joint ventures accounted for using the equity method.
4) Revision to IAS 19 “Employee Benefits”
Revised IAS 19 requires the immediate recognition of all changes in defined benefit obligations andin the fair value of plan assets in the period these changes occur, thus eliminating the “corridor
approach” permitted under the current IAS 19. In addition, all past service costs are recognized
immediately in the period of plan amendment. The revision requires all remeasurements of thedefined benefit plans to be recognized immediately in other comprehensive income so that the net
pension asset or liability will reflect the full value of the plan deficit or surplus.
Furthermore, the interest cost and expected return on plan assets used in the current IAS 19 are
replaced with net interest on the net defined liability or asset, which is calculated by applying thediscount rate to the net defined benefit liability or asset.
The anticipated impact of the initial application of the revised IAS 19 is detailed as follows::

Carrying
AmountAdjustments
Arising from
InitialApplication

Adjusted
Carrying
AmountImpact on assets, liabilities and equity
January 1, 2014
Investments accounted for using theequity method$

9,828,118$(8,444)$9,819,674

Total effect on assets$

9,828,118$(8,444)$9,819,674

Retained earnings$(3,161,115)$(8,444)$(3,169,559)

Total effect on equity$(3,161,115)$(8,444)$(3,169,559)

Investment accounted for using equity
method$ 11,075,172$(5,860)$ 11,069,312

Total effect on assets$ 11,075,172$(5,860)$ 11,069,312(Continued)

December 31, 2014

- 10 -

CarryingAmountAdjustments
Arising from
InitialApplication

Adjusted
Carrying
AmountRetained earnings$(3,864,876)$(5,860)$(3,870,736)

Total effect on equity$(3,864,876)$(5,860)$(3,870,736)$ 128,808,748
9,046,866

$

246
117

$ 128,808,994
9,046,983(2,460)(62)(939,906)
798,498

Impact on total comprehensive income forthe year ended December 31, 2014
Operating cost
Operating expense
Share of the loss of associates and joint
ventures
Income tax expense(937,446)
798,560

Total increase amount on net profit for theyear
Items that will not be reclassified to profit
or loss:
Remeasurements of defined benefit
plan
Share of the other comprehensive lossof associates and joint ventures
accounted by equity method
Income tax relating to items that will
not be reclassified$(2,159)99,277363

99,640(24,571)(124)(24,695)

391,619(62)

391,557

Total after tax increase amount on total
comprehensive income for the year$

177
(Concluded)b. New IFRSs in issue but not yet endorsed by the FSC

The New IFRSs Not Included in the 2013 IFRSs Version
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
Annual Improvements to IFRSs 2012-2014 Cycle
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”
Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities:
Applying the Consolidation Exception”
Amendment to IFRS 11 “Accounting for Acquisitions of Interests in
Joint Operations”
IFRS 14 “Regulatory Deferral Accounts”

Effective Date
Announced by IASB (Note 1)
July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 4)
January 1, 2018
January 1, 2018
January 1, 2016 (Note 3)
January 1, 2016
January 1, 2016
January 1, 2016
(Continued)- 11 -

The New IFRSs Not Included in the 2013 IFRSs Version
IFRS 15 “Revenue from Contracts with Customers”
Amendment to IAS 1 “Disclosure Initiative”
Amendments to IAS 16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”
Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants”
Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”
Amendment to IAS 27 “Equity Method in Separate Financial
Statements”
Amendment to IAS 36 “Impairment of Assets: Recoverable Amount
Disclosures for Non-financial Assets”
Amendment to IAS 39 “Novation of Derivatives and Continuation of
Hedge Accounting”
IFRIC 21 “Levies”

Effective Date
Announced by IASB (Note 1)
January 1, 2017
January 1, 2016
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014
January 1, 2014
(Concluded)Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on
or after the respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant
date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations forwhich the acquisition date is on or after July 1, 2014; the amendment to IFRS 13 is effective
immediately; the remaining amendments are effective for annual periods beginning on or after
July 1, 2014.
Note 3: Prospectively applicable to transactions occurring in annual periods beginning on or afterJanuary 1, 2016.
Note 4: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal; theremaining amendments are effective for annual periods beginning on or after January 1, 2016.
The initial application of the above New IFRSs, whenever applied, would not have any material impact
on the Company’s accounting policies, except for the following:1) IFRS 9 “Financial Instruments”
Recognition and measurement of financial assets
With regards to financial assets, all recognized financial assets that are within the scope of IAS 39“Financial Instruments: Recognition and Measurement” are subsequently measured at amortizedcost or fair value. Under IFRS 9, the requirement for the classification of financial assets is statedbelow.
For the Group’s debt instruments that have contractual cash flows that are solely payments ofprincipal and interest on the principal amount outstanding, their classification and measurement are
as follows:a) For debt instruments, if they are held within a business model whose objective is to collect thecontractual cash flows, the financial assets are measured at amortized cost and are assessed for
impairment continuously with impairment loss recognized in profit or loss, if any. Interest
revenue is recognized in profit or loss by using the effective interest method;- 12 -

b) For debt instruments, if they are held within a business model whose objective is achieved byboth the collecting of contractual cash flows and the selling of financial assets, the financial
assets are measured at fair value through other comprehensive income (FVTOCI) and areassessed for impairment. Interest revenue is recognized in profit or loss by using the effective
interest method, and other gain or loss shall be recognized in other comprehensive income,
except for impairment gains or losses and foreign exchange gains and losses. When the debt
instruments are derecognized or reclassified, the cumulative gain or loss previously recognizedin other comprehensive income is reclassified from equity to profit or loss.
Except for above, all other financial assets are measured at fair value through profit or loss.
However, the Group may make an irrevocable election to present subsequent changes in the fairvalue of an equity investment (that is not held for trading) in other comprehensive income, with
only dividend income generally recognized in profit or loss. No subsequent impairment
assessment is required, and the cumulative gain or loss previously recognized in othercomprehensive income cannot be reclassified from equity to profit or loss.
The impairment of financial assets
IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected
Credit Losses Model”. The credit loss allowance is required for financial assets measured atamortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets
arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments
and financial guarantee contracts. A loss allowance for the 12-month expected credit losses isrequired for a financial asset if its credit risk has not increased significantly since initial recognition.
A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit
risk has increased significantly since initial recognition and is not low. However, a loss allowancefor full lifetime expected credit losses is required for trade receivables that do not constitute a
financing transaction.
For purchased or originated credit-impaired financial assets, the Group takes into account the
expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate.
Subsequently, any changes in expected losses are recognized as a loss allowance with acorresponding gain or loss recognized in profit or loss.
Hedge accounting
The main changes in hedge accounting amended the application requirements for hedge accounting
to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes
include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening
the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging
derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing
retrospective effectiveness assessment with the principle of economic relationship between thehedging instrument and the hedged item.
2) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”
In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to thedisclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose inevery reporting period the recoverable amount of an asset or each cash-generating unit. The
amendment clarifies that such disclosure of recoverable amounts is required only when an
impairment loss has been recognized or reversed during the period. Furthermore, the Company isrequired to disclose the discount rate used in measurements of the recoverable amount based on fairvalue less costs of disposal measured using a present value technique.

- 13 -

As of the date the accompanying financial statements were authorized for issue, the Company wascontinuing to assess the possible impact that the application of other standards and except for IAS 19
interpretations will have on the Company’s financial position and operating result, and will disclose thepossible impact when the assessment is completed.

4. SIGNIFICANT ACCOUNTING POLICIESStatement of Compliance
The financial statements have been prepared in accordance with the Regulations Governing the Preparationof Financial Reports by Securities Issuers, or other regulations.
Basis of Preparation
The financial statements have been prepared on the historical cost basis except for financial instrumentsthat are measured at fair values. Historical cost is generally based on the fair value of the consideration
given in exchange for assets.
When preparing its financial statements, the Company used the equity method to account for its investment
in subsidiaries, associates and jointly controlled entities. In order for the amounts of the net profit for theyear, other comprehensive income for the year and total equity in the parent company only financial
statements to be the same with the amounts attributable to the owner of the Company in its consolidated
financial statements, adjustments arising from the differences in accounting treatment between parent
company only basis and consolidated basis were made to investments accounted for by equity method,share of profit or loss of subsidiaries, associates and joint ventures, share of other comprehensive income ofsubsidiaries, associates and joint ventures and related equity items, as appropriate, in the parent company
only financial statements.
Current and Noncurrent Assets and Liabilities
Current assets include assets held primarily for the purpose of trading, assets expected to be realized withintwelve months after the reporting period, and cash and cash equivalents unless the asset is restricted frombeing exchanged or used to settle a liability for at least twelve months after the reporting period. All otherassets such as property, plant and equipment, investment properties, intangible assets and other assets thatare not classified as current are classified as noncurrent.
Current liabilities include liabilities held primarily for the purpose of trading, liabilities due to be settled
within twelve months after the reporting period. Terms of a liability that could, at the option of thecounterparty, result in its settlement by the issue of equity instruments do not affect its classification.
Foreign Currencies
In preparing the financial statements of the Company entity, transactions in currencies other than theentity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at thedates 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. Non-monetary items that are measured at historical cost in a foreign
currency are not retranslated. Non-monetary items measured at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing at the date when the fair value was determined.

- 14 -

Exchange differences on monetary items arising from settlement or translation are recognized in profit orloss in the period in which they arise except for:a. Exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment
to interest costs on those foreign currency borrowings;
b. Exchange differences on transactions entered into in order to hedge certain foreign currency risks.
Exchange differences arising on the retranslation of non-monetary items are included in profit or loss forthe period except for exchange differences arising from the retranslation of non-monetary items in respectof which gains and losses are recognized directly in other comprehensive income, in which case, theexchange differences are also recognized directly in other comprehensive income.
For the purposes of presenting financial statements, the assets and liabilities of the Company’s foreign
operations are translated into New Taiwan dollars using exchange rates prevailing at the end of eachreporting period. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising are recognized in other comprehensive income.
On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect ofthat operation attributable to the owners of the Company are reclassified to profit or loss.
Cash Equivalents
Cash equivalents, consisting of commercial paper, are highly liquid financial instruments with maturities ofthree months or less when acquired and with carrying amounts that approximate their fair values.
Inventories
Inventories are primarily expendable and nonexpendable parts and materials, supplies used in operations
and items for in-flight sale and are stated at the lower of cost or net realizable value. The costs ofinventories sold or consumed are determined using the weighted-average method.
Investments Accounted for by the Equity Method
Investments in subsidiaries, associates and jointly controlled entities are accounted for by the equity method
a. Investment in subsidiaries
Subsidiaries (including special purpose entities) are the entities controlled by the Company.
Under the equity method, the investment is initially recognized at cost and the carrying amount isincreased or decreased to recognize the Company’s share of the profit or loss and other comprehensive
income of the subsidiary after the date of acquisition. Besides, the Company also recognizes theCompany’s share of the change in other equity of the subsidiary.
Changes in the Company’s ownership interests in subsidiaries that do not result in the Company’s lossof control over the subsidiaries are accounted for as equity transactions. Any difference between the
carrying amounts of the investment and the fair value of the consideration paid or received isrecognized directly in equity.
When the Company’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary(which includes any carrying amount of the investment in subsidiary accounted for by the equity
method and long-term interests that, in substance, form part of the Company’s net investment in thesubsidiary), the Company continues recognizing its share of further losses.

- 15 -

The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired isrecognized as goodwill. Goodwill is not amortized. The acquisition-date fair value of the net
identifiable assets acquired in excess of the acquisition cost is recognized immediately in profit or loss.
When the Company ceases to have control over a subsidiary, any retained investment is measured atfair value at that date and the difference between the previous carrying amount of the subsidiary
attributable to the retained interest and its fair value is included in the determination of the gain or loss.
Furthermore, the Company accounts for all amounts previously recognized in other comprehensive
income in relation to that subsidiary on the same basis as would be required if the Company had
directly disposed of the related assets or liabilities.
Profits and losses from downstream transactions with a subsidiary are eliminated in full. Profits andlosses from upstream with a subsidiary and sidestream transactions between subsidiaries are recognizedin the Company’s financial statements only to the extent of interests in the subsidiary that are notrelated to the Company.
b. Investment in associates and jointly controlled entities
An associate is an entity over which the Company has significant influence and that is neither asubsidiary nor an interest in a joint venture. Joint venture arrangements that involve the establishmentof a separate entity in which venturers have joint control over the economic activity of the entity arereferred to as jointly controlled entities.
The results and assets and liabilities of associates and jointly controlled entities are incorporated inthese financial statements using the equity method of accounting. Under the equity method, an
investment in an associate and jointly controlled entity is initially recognized at cost and adjusted
thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of theassociate and jointly controlled entity. The Company also recognizes the changes in the Company’s
share of equity of associates and jointly controlled entity attributable to the Company.
When the Company subscribes for additional new shares of the associate and jointly controlled entity ata percentage different from its existing ownership percentage, the resulting carrying amount of theinvestment differs from the amount of the Company’s proportionate interest in the associate and jointly
controlled entity. The Company records such a difference as an adjustment to investments with thecorresponding amount charged or credited to capital surplus. If the Company’s ownership interest is
reduced due to the additional subscription of the new shares of associate and jointly controlled entity,
the proportionate amount of the gains or losses previously recognized in other comprehensive income inrelation to that associate and jointly controlled entity is reclassified to profit or loss on the same basis as
would be required if the investee had directly disposed of the related assets or liabilities. When theadjustment should be debited to capital surplus, but the capital surplus recognized from investments
accounted for by the equity method is insufficient, the shortage is debited to retained earnings.
When the Company’s share of losses of an associate and jointly controlled entity equals or exceeds its
interest in that associate and jointly controlled entity which includes any carrying amount of theinvestment accounted for by the equity method and long-term interests that, in substance, form part of
the Company’s net investment in the associate and jointly controlled entity, the Company discontinues
recognizing its share of further losses. Additional losses and liabilities are recognized only to theextent that the Company has incurred legal obligations, or constructive obligations, or made paymentson behalf of that associate and jointly controlled entity.
Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable
assets and liabilities of an associate and jointly controlled entity recognized at the date of acquisition isrecognized as goodwill, which is included within the carrying amount of the investment and is notamortized. Any excess of the Company’s share of the net fair value of the identifiable assets andliabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

- 16 -

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 isrecognized to the extent that the recoverable amount of the investment subsequently increases.
The Company discontinues the use of the equity method from the date on which it ceases to havesignificant influence and joint control. Any retained investment is measured at fair value at that date
and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference
between the previous carrying amount of the associate and the jointly controlled entity attributable to
the retained interest and its fair value is included in the determination of the gain or loss on disposal of
the associate and the jointly controlled entity. The Company accounts for all amounts previously
recognized in other comprehensive income in relation to that associate and the jointly controlled entity
on the same basis as would be required if that associate had directly disposed of the related assets or
liabilities.
When the Company transacts with its associate and jointly controlled entity, profits and losses resulting
from the transactions with the associate are recognized in the Company’ financial statements only to theextent of interests in the associate and the jointly controlled entity that are not related to the Company.
Property, Plant and Equipment
Property, plant and equipment are tangible items that are held for use in the production or supply of goods
or services, for rental to others, or for administrative purposes; and are expected to be used more than one
period. The cost of an item of property, plant and equipment shall be recognized as assets if, and only if itis probable that future economic benefits associated with the item will flow to the entity; and the cost of theitem can be measured reliably. Property, plant and equipment are stated at cost, less subsequentaccumulated depreciation and subsequent accumulated impairment loss.
Freehold land is not depreciated.
Depreciation 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 eachreporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets. Assets are depreciated over the shorter of the lease term and their useful lives using thestraight-line method.
Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amount of the asset and isrecognized in profit or loss.
Investment Properties
Investment properties are properties held to earn rentals 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 initialrecognition, investment properties are measured at cost less accumulated depreciation and accumulated
impairment loss.
Any gain or loss arising on derecognition of the property is calculated as the difference between the net
disposal proceeds and the carrying amount of the asset and is included in profit or loss in the period inwhich the property is derecognized.

- 17 -

Intangible Assets
Intangible assets with finite useful lives that are acquired separately are initially measured at cost andsubsequently measured at cost less accumulated amortization and accumulated impairment loss.
Amortization is recognized on a straight-line basis. The estimated useful life, residual value, andamortization 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.
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 andintangible assets, excluding goodwill, to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimatedin 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 towhich the asset belongs. Corporate assets are allocated to the individual cash-generating units on areasonable and consistent basis; otherwise Corporate assets are allocated to the smallest group of
cash-generating units on a reasonable and consistent allocation basis.
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. In assessing value in
use, the Company use the estimated cash flows to be discounted by future pre-tax discount rate, thediscount rate reflects current market time value of money and the specific risks to the asset that theestimated future cash flows have not yet adjusted to the market.
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.
When an impairment loss subsequently is 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 amountthat 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 thecontractual 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 thanfinancial assets and financial liabilities at fair value through profit or loss) are added to or deducted fromthe 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 fairvalue 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 datebasis. All regular way purchases or sales of financial assets means buy or sell financial assets in the
period made by regulation or market convention.

- 18 -

1) Measurement category
Financial assets are classified into the following specified categories: Financial assets at fair value
through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans andreceivables. The classification of financial assets is depending on their nature and purpose of theoriginal recognition. Financial assets are classified into the following categories: Financial
assets at fair value through profit or loss and available-for-sale financial assets.
a) Financial assets at fair value through profit or loss
Financial assets are classified as at fair value through profit or loss when the financial asset iseither held for trading or it is designated as at fair value through profit or loss.
Financial assets at fair value through profit or loss are stated at fair value, with any gains orlosses arising on remeasurement recognized in profit or loss. The net gain or loss recognizedin profit or loss incorporates any dividend or interest earned on the financial asset. Fair value
is determined in the manner described in Note 31.
b) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated asavailable-for-sale or are not classified as loans and receivables, held-to-maturity investments orfinancial assets at fair value through profit or loss.
Changes in the carrying amount of available-for-sale financial assets are recognized in othercomprehensive income and will be reclassified to profit or loss when the investment is disposedof or is determined to be impaired.
Dividends on available-for-sale equity instruments are recognized in profit or loss when the
Company’s right to receive the dividends is established.
Available-for-sale equity investments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured and derivatives that are linked to and must be
settled by delivery of such unquoted equity investments are measured at cost less any identified
impairment loss at the end of each reporting period and are presented in a separate line item asfinancial assets carried at cost. 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 carrying amount and fair value is recognized in profit or loss or other comprehensive
income on financial assets.
c) Loans and receivables
Loans and receivables (including trade receivables, cash and cash equivalent, debt investmentswith no active market, and other receivables are measured at amortized cost using the effective
interest method, less any impairment, except for short-term receivables when the effect of
discounting is immaterial.
2) Impairment of financial assets
Financial assets, other than those at fair value through profit or loss and available-for-sale financial
assets, are assessed for indicators of impairment 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.

- 19 -

For financial assets carried at amortized cost, such as trade receivables and other receivables, assets
are assessed for impairment on a collective basis even if they were assessed not to be impaired
individually. Objective evidence of impairment for a portfolio of receivables could include theCompany’s past experience of collecting payments, an increase in the number of delayed paymentsin the portfolio past the average credit period of 60 days, as well as observable changes in nationalor local economic conditions that correlate with default on receivables.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is thedifference 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.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of theimpairment 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 orloss 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 available-for-sale 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.
For all other financial assets, objective evidence of impairment could include the followings:a) Significant financial difficulty of the issuer or counterparty;b) Breach of contract, such as a default or delinquency in interest or principal payments;c) It becoming probable that the borrower will enter bankruptcy or financial re-organization; ord) The disappearance of an active market for that financial asset because of financial difficulties.
When an available-for-sale 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 available-for-sale equity securities, impairment loss previously recognized in profit orloss are not reversed through profit or loss. Any increase in fair value subsequent to an
impairment loss is recognized in other comprehensive income. In respect of available-for-saledebt securities, impairment loss are subsequently reversed through profit or loss if an increase in thefair value of the investment can be objectively related to an event occurring after the recognition of
the impairment loss.
For financial assets that are carried at cost, the amount of the impairment loss is measured as thedifference 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 will not be 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 receivables and other receivables, where the carrying
amount is reduced through the use of an allowance account. When a trade receivable and otherreceivables 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 foruncollectible trade receivables and other receivables that are written off against the allowanceaccount.

- 20 -

3) Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows fromthe asset expire, or when it transfers the financial asset and substantially all the risks and rewards ofownership of the asset to another party.
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. Equity instruments
Debt and equity instruments issued by the Company are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of afinancial liability and an equity instrument.
An equity instrument is residual interest in any contract after the Company’s assets minus all liabilities.
Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue
costs.
Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity.
No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of theCompany’s own equity instruments.
c. Financial liabilities
1) Subsequent measurement
Except for derivative financial instruments, all the financial liabilities are measured at amortizedcost using the effective interest method.
2) Derecognition of financial liabilities
The Company derecognizes financial liabilities only when the obligation is discharged, canceled or
expired. The difference between the carrying amount of the financial liability derecognized andthe consideration paid, including any non-cash assets transferred or liabilities assumed, isrecognized in profit or loss.
d. Convertible bonds
The component parts of compound instruments (convertible bonds) issued by the Company areclassified separately as financial liabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financial liability and an equity instrument.
On initial recognition, the fair value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible instruments. This amount is recorded as a liability on anamortized cost basis using the effective interest method until extinguished upon conversion or the
instrument’s maturity date. Any embedded derivative liability is measured at fair value.
The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized andincluded in equity, net of income tax effects, and is not subsequently remeasured. In addition, theconversion option classified as equity will remain in equity until the conversion option is exercised, inwhich case, the balance recognized in equity will be transferred to capital surplus - share premium.
When the conversion option remains unexercised at maturity, the balance recognized in equity will betransferred to capital surplus - share premium.
- 21 -

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity
components in proportion to the allocation of the gross proceeds. Transaction costs relating to theequity component are recognized directly in equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability component.
e. Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to interest
rate foreign exchange rate and fuel price risks, including foreign exchange forward contracts, interest
rate swaps, currency options and fuel swaps.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into andare subsequently remeasured to their fair value at the end of each reporting period. The resulting gainor loss is recognized in profit or loss immediately unless the derivative is designated and effective as ahedging instrument, in which event the timing of the recognition in profit or loss depends on the natureof the hedge relationship. When the fair value of derivative financial instruments is positive, thederivative is recognized as a financial asset; when the fair value of derivative financial instruments isnegative, the derivative is recognized as a financial liability.
Hedge Accounting
The Company enters into some derivative transactions that aim to manage interest rates, exchange rates,
fuel prices, and other factors affecting gains or losses on assets and liabilities. The hedging transactions
are defined as cash flow hedge. When entering into hedging transactions, the Company has prepared
official documents that describe the hedging relationship between hedging instruments and items been
hedged, objective of risk management, hedging strategy, and the way to evaluate the effectiveness of thehedging instrument.
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 isrecognized immediately in profit or loss.
The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in thesame 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 initialcost 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 nolonger meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument thathas 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 orloss.
Provisions
The Company recognizes provisions when the Company has a present obligation (legal or constructive)
arising from past events (legal or constructive obligation), payment for the obligation is probable, and theexpenditure for settling the obligation can be estimated reliably.

- 22 -

The amount recognized as a provision is the best estimate of the expenditure required to settle the present
obligation, taking into account the risks and uncertainties surrounding the obligation as of the balance sheet
date. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows.
Aircraft lease contracts
When the aircraft lease contracts expire and will be returned to lessor, should assess if existing obligations
exist and required to recognize as provision when signing of the lease contract.
Revenue Recognition
a. Rendering of services
Passenger fares and cargo revenue are recognized when transport service is provided. The value of
unused passenger tickets is recognized as “advance ticket - sales”.
b. Dividend and interest income
Dividend income from investments is recognized when the shareholder’s right to receive payment has
been established provided that it is probable that the economic benefits will flow to the Company andthe amount of income can be measured reliably.
Interest income from a financial asset is recognized when it is probable that the economic benefits willflow 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.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.
a. Financial lease
The Company as lessee
Assets held under finance leases are initially recognized as assets of the Company at the lower of theirfair value at the inception of the lease or the present value of the minimum lease payments. The
corresponding liability to the lessee is included in the balance sheets as a finance lease obligation.
Minimum lease payments are apportioned between finance expenses and reduction of the leaseobligation so as to achieve a constant rate of interest on the remaining balance of the liability. Financeexpenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying
assets, in which case they are capitalized in accordance with the Company’s general policy on
borrowing costs. Contingent rents are recognized as expenses in the periods in which they are
incurred.
b. Operating lease1) The Company as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of therelevant lease unless another systematic basis is representative of the time pattern of the lessee’s
benefit from the use of the leased asset.

- 23 -

2) The Company as lessee
Operating lease payments are recognized as an expense on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rents arising under operating leases arerecognized as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives arerecognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental
expense on a straight-line basis, except where another systematic basis is more representative of thetime pattern in which economic benefits from the leased asset are consumed.
c. Sale and leaseback
Sale and leaseback transaction if met the condition that all the risks and rewards of ownership of theleased asset is essentially transfer to the lessee, the sale and leaseback type is finance lease; If part ofthe significant risks and rewards of the leased asset ownership remain with the lessor (the buyer), thesale and leaseback type is operating lease.
1) Financial lease
This transaction does not actually dispose of the assets, the accounting treatment deemedtransaction did not occur, and use the book value of the asset before sale continuing recognition of
the asset.
2) Operating lease
If the selling price is equal to the fair value, the transaction gain or loss should be recognized
immediately. If selling price is above fair value, the difference between the fair value and thebook value of the gain or loss should be recognized immediately; only the part of selling price
above fair value shall be deferred and amortized over the period of the lease.
Retirement Benefit Costs
Payments to defined contribution retirement benefit plans are recognized as an expense when employees
have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected
unit credit method. All actuarial gains and losses on the defined benefit obligation are recognized
immediately in other comprehensive income. Past service cost is recognized immediately to the extent
that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average
period until the benefits become vested.
The retirement benefit obligation recognized in the balance sheets represents the present value of thedefined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value ofplan assets. Any asset resulting from this calculation is limited to the unrecognized past service cost, plus
the present value of available refunds and reductions in future contributions to the plan.
Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or
settlement occurs.
Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determinedpension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since thattime and for significant curtailments, settlements, or other significant one-time events.

- 24 -

Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets(assets are substantially ready for their intended use or sale through a fairly long period) are added to thecost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditureon qualifying assets is deducted from the borrowing costs eligible for capitalization.
Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which
they are incurred.
Frequent Flyer Program
The Company has a “Dynasty Flyer Program” through which program members can convert accumulated
mileage to a cabin upgrade, free tickets and other member reward.
A portion of passenger revenue attributable to the rewards for the frequent flyer program is deferred. The
entity should recognize this deferred revenue as revenue only when the entity has fulfilled its obligations on
the granting of rewards or when the period for converting the mileage to rewards has expired.
Share-based Payment Arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on astraight-line basis over the vesting period, based on the Company’s estimate of equity instrument that will
eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value
determined at the grant date of the equity-settled share-based payments is recognized as an expense in fullat the grant date when the share options granted vest immediately.
Taxation
Income tax expense represents the sum of the current tax and deferred tax.
a. Current tax
The current tax liabilities are based on current taxable profit. Since part of the income and expenses
are taxable or deductible in other periods, or in accordance with the relevant tax laws are taxable ordeductible, current taxable profit differs from net profit reported in the income statement.
The Company’s current tax liabilities are calculated by the tax rate has been legislative or substantial
legislative at the balance sheet date.
According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided foras income tax in the year the stockholders approve the retention of these earnings.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax
provision.

- 25 -

b. Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets andliabilities in the financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are generally recognized for all taxable temporary differences.
Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carryforward and unused tax credits for purchases of machinery, equipment and technology, research anddevelopment expenditures, and personnel training expenditures to the extent that it is probable thattaxable 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 reversein the foreseeable future. Deferred tax assets arising from deductible temporary differences associatedwith 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 orpart of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at theend of each reporting period and recognized to the to the extent that it has become probable that futuretaxable profit will allow the deferred tax asset to be recovered.
Deferred tax liabilities and assets 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 beenenacted or substantively enacted by the end of the reporting period. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would follow from the manner in which theCompany 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 for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that arerecognized in other comprehensive income or directly in equity, in which case, the current and deferred
tax are also recognized in other comprehensive income or directly in equity respectively.
Maintenance and Overhaul Costs
Routine maintenance costs are recognized in profit or loss in the period in which they are incurred.
The overhaul costs of the owned or leased aircraft that meet the criteria for fixed asset capitalization andengines as replacement parts for aircraft and engines are capitalized, and amortized over the expectedannual overhaul cycle using straight-line depreciation method.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY
In the application of the Company’s accounting policies, management is required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience andother factors that are considered relevant. Actual results may differ from these estimates.

- 26 -

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that period
or in the period of the revision and future periods if the revision affects both current and future periods.
Key Sources of Estimation Uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of thereporting period that have a significant risk of causing a material adjustment to the carrying amounts ofassets and liabilities within the next financial year are discussed below.
Income Taxes
The Company is subject to income taxes in numerous jurisdictions. Where the final tax payable differsfrom the amounts that were initially recognized, these differences will affect the income tax and deferred
tax provisions in the period in which the differences are determined. Deferred tax assets are recognizedfor deductible temporary differences to the extent that it is probable that taxable profits will be available
against which the deductible temporary differences can be used. When evaluating the realizability of thedeferred tax asset, management uses significant accounting judgments and estimates, including expected
future revenue growth and profit margins, income tax exemption periods, the use of tax credits, tax
planning and certain assumptions. Changes in the industry environment and regulations will result in amaterial adjustment of the deferred tax asset.
Estimated Impairment of Trade Receivables
The Company assesses the receivables portfolios monthly for impairment. Impairment evidences may
include observable changes in debtors’ solvency and national or local economic conditions that correlatewith default on receivable settlement. Management’s analysis of expected cash flows is based on pastexperience of loss on assets with similar credit risk characteristics. The Company periodically reviews themethods of determining, and assumptions on, the expected amount and timing of cash flows to reduce thedifference between the estimated and the actual losses.
Fair Value of Derivatives and Other Financial Instruments
The Company’s management uses its judgment in selecting an appropriate valuation technique for financial
instruments with no quoted market prices in an active market. Valuation techniques commonly used bymarket practitioners are applied. For derivative financial instruments, assumptions are based on quoted
market rates adjusted for specific features of the instruments. Other financial instruments are valued using
a discounted cash flow analysis based on assumptions supported, where possible, by observable market
prices or rates. The chosen valuation techniques and assumptions used are possible effecting in
determining the fair value of financial instruments.
Depreciation of Property, Plant and Equipment - Flight Equipment
Flight equipment are depreciated on a straight-line basis at rates that can be used to write down their cost to
their estimated residual values at the end of their useful lives. The estimates of the useful lives andresidual values of the flight equipment are made by the Company on the basis of past experience and fleet
operation performance in the industry.
Accrued Pension Costs
The present value of defined benefit obligations at the end of the reporting period are calculated using
actuarial assumptions. Those assumptions, which are based on management’s judgment and estimates,
comprise the discount rate and expected return on plan assets. Changes in actuarial assumptions may havea material impact on the amount of defined benefit obligations.

- 27 -

Maintenance Reserve for Operating Lease Aircraft
Maintenance reserve is based on the requirement under lease contracts to reflect maintenance costs that
may arise on lease expiry. Estimation of this reserve is based on the past maintenance experience on thesame or similar type of aircraft; incurred overhaul costs; and historical operating performance data.
Changes in judgment or estimations may have a material impact on the amount of maintenance reserve.
Frequent Flyer Program
As stated in Note 4 (22), a portion of passenger revenue attributable to the awarding of frequent flyer
benefits is deferred until the awards are given out. The deferment of the revenue is estimated on the basisof historical trends of breakage and redemption, which is then used to project the expected claiming ofthese benefits. Changes in fair value per mileage or redemption rate may have a material impact ondeferred revenue.

6. CASH AND CASH EQUIVALENTS
December 31
2014
Cash on hand and revolving fund
Checking accounts and demand deposits
Cash equivalents
Time deposits with original maturities less than three months
Repurchase agreements collateralized by bonds

$

2013

76,126
7,686,416$

125,312
4,611,834

7,716,060
349,886

9,334,516
899,155$ 15,828,488$ 14,970,817

The market rate intervals of cash in bank and cash equivalent at the end of the reporting period were as
follows:
December 31

Bank balanceTime deposits with original maturities less than three months
Repurchase agreements collateralized by bonds

2014

2013

0%-1.75%
0.39%-4%
0.59%-0.8%

0%-2%
0.8%-6.5%
0.58%-0.6%

As of December 31, 2014, time deposits of $507,357 thousand with original maturities of more than 3months and market interest rates of 4% were classified as other current assets (Note 17).

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
December 31
2014

2013

$ 46,812$ 23,254$$

Financial assets held for trading - current
Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts
Financial liabilities held for trading - current
Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts- 28 --

2,799

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

Currency

Maturity Date

Notional Amount(In Thousands)

NTD/USD

2015.01.02-2015.06.16

NTD1,247,678/USD40,300

NTD/USD

2014.01.03-2014.07.08

NTD2,085,799/USD70,500

December 31, 2014
Buy
December 31, 2013
Buy

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
December 31
2014
2013
Carrying% ofCarrying% ofAmountOwnership
AmountOwnership
Current
Foreign marketable equity securities
France Telecom

$

-

-

$ 72,440-

Net gain on disposal of available-for-sale financial assets in 2014 is $4,007 thousand.

9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING
December 31
2014

2013

Derivative financial assets under hedge accounting
Interest rate swaps
Currency options
Fuel options

Current
Noncurrent$

727
32,285
10,565$

5,617
27,033
107,970$

43,577$

140,620$42,850727$

135,003
5,617$

43,577$

140,620

$

5,150
3,028
2,456,972

$

2,026
1,255
21,598$ 2,465,150$

24,879(Continued)

Derivative financial liabilities under hedge accounting
Interest rate swaps
Currency options
Fuel swaps- 29 -

December 31
2014
Current
Noncurrent

2013$ 2,460,000
5,150

$

22,853
2,026$ 2,465,150$

24,879(Concluded)

The fair value of each derivative contract is determined using quotes from financial institutions.
a. Interest rate swaps
The Company entered into interest rate swap contracts to mitigate the risk of changes in interest rates
on the cash flow exposure related to the outstanding floating rate debt. All swapped fixed interest rate
swap out the floating rate interest rate swap contracts are designated as cash flow hedges.
The outstanding interest rate swap contracts at the end of the reporting period were as follows:

Notional Amount(In Thousands)

Maturity Date

Range ofInterest Rates
Paid

Range of Interest Rates
Received2015.05.24-2017.06.22

0.9%-1.14%

TAIBOR rate

2014.08.24-2017.06.22

0.9%-1.14%

6165 page 3M CP rate

December 31, 2014
NTD4,500,000
December 31, 2013
NTD5,240,000

The interest rate swaps settle on a quarterly basis.
fixed and floating interest rates on a net basis.

The Company will settle the difference between theb. Currency options
The Company entered into currency option to minimize the risk of changes in foreign currency rate on
the cash flow exposure related to fuel payments, which will be paid in U.S. dollars.
The outstanding currency options at the end of the reporting period were as follows:

Currency

Maturity Date

Notional Amount(In Thousands)

JPY/USD
JPY/USD

2015.01.08-2015.05.15
2015.01.08-2015.05.15

JPY2,044,410/USD17,900
JPY1,973,570/USD17,900

JPY/USD
JPY/USD

2014.01.10-2014.04.30
2014.01.10-2014.04.30

JPY2,440,000/USD24,000
JPY2,340,450/USD24,000

December 31, 2014
Buy USD call option
Sell USD put option
December 31, 2013
Buy USD call option
Sell USD put option- 30 -

c. Fuel swaps
The Company used fuel swaps to minimize the risk of changes in fuel price related to operating cost.
The outstanding fuel swaps at the end of the reporting period were as follows:

Currency

Notional Amount(In Thousands)

Maturity Date

December 31, 2014
Buy fuel call option
Sell fuel put option

USD
USD

2015.3.31-2015.11.30
2015.3.31-2015.11.30

NTD10,565
NTD2,456,972

USD
USD

2014.01.31-2014.11.30
2014.01.31-2014.11.30

NTD107,970
NTD21,598

December 31, 2013
Buy fuel call option
Sell fuel put option

Based on the Taiwan Stock Exchanges regulation for the public companies monthly declaration on the
trading of derivative financial instruments the contractual amounts are shown at the absolute values offair value because fuel swap contracts only have notional amounts.
Gains and losses of hedging instruments reclassified from equity to profit or loss were included in thefollowing line items in the statements of comprehensive income:For the Year Ended December 31
2014
2013
Decrease (increase) in operating cost
Increase in finance cost
Other foreign exchange gain

$ (418,329)(7,428)28,333$ 136,089(9,954)
93,206$ (397,424)$ 219,341

10. FINANCIAL ASSETS CARRIED AT COST
December 31
2014
2013
Carrying% ofCarrying% ofAmountOwnership
AmountOwnership
Unlisted common stocks
Abacus International Holdings Ltd.
Jardine Air Terminal Services
Chung Hwa Express Co.
Regal International Advertising
Unlisted preferred stocks
Abacus International Holdings Ltd.

Classified according to financial asset
measurement categories
Available-for-sale financial assets$ 297,946
56,023
11,0005,925
370,894

14
15
11
6

$ 297,946
56,023
11,0005,925
370,894

14
15
11
6

473

-

473

-

$ 371,367$ 371,367$ 371,367$ 371,367- 31 -

The unlisted common stock held by the Company, are measured at cost less impairment losses at reporting
date. Because a reasonable estimate of the fair value range is significant and cannot be reasonably
assessed various estimates of probability, the Company’s management believes its fair value cannot be
reliably measured.

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE
December 31
2014
Notes receivable

$

2013

290,535$

291,248

Accounts receivable
Accounts receivable
Less: Allowance for impairment loss

8,664,953(55,093)8,609,860

7,118,748(45,604)
7,073,144$ 8,900,395$ 7,364,392

The average credit period was 7 to 45 days. In determining the recoverability of a accounts receivable, theCompany considered any change in the credit quality of the accounts receivable since the date credit was
initially granted to the end of the reporting period, allowance for impairment loss were based on estimatedirrecoverable amounts determined by reference to past default experience of the counterparties and ananalysis of their current financial position.
Movements in the allowance for impairment loss recognized on notes receivable and accounts receivables
were as follow:
For the Year Ended December 31
2014
2013
Balance at January 1
Impairment loss of accounts receivable
Less: Amounts written off as uncollectible$ 45,604
30,000(20,511)$ 52,034(6,430)

Balance at December 31$ 55,093$ 45,604

12. INVENTORIES
December 31

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services

2014

2013

$ 6,393,427
454,601
248,348$ 6,246,657
403,380
27,044$ 7,096,376$ 6,677,081

The cost of inventories recognized as operating costs due to write-downs of inventories was $159,682
thousand and $149,430 thousand in 2014 and 2013, respectively.

- 32 -

13. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
December 31
2014
Investments in subsidiaries
Investments in associates
Investments in jointly controlled entities

$

2013

9,034,323
1,130,840
910,009$7,909,086
1,069,607
849,425$ 11,075,172$

9,828,118

a. Investment in subsidiaries
December 31
2014

2013

Unlisted companies
Tigerair Taiwan Co., Ltd.
Taiwan Air Cargo Terminal
Cal Park
Mandarin Airlines
Cal-Dynasty International
Taoyuan International Airport Services
Cal-Asia Investment
Abacus Distribution Systems (Taiwan)
Taiwan Airport Services
Cal Hotel
Hwa Hsia
Dynasty Holidays
Yestrip
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Freighter Queen Ltd.

$ 1,440,708
1,316,457
1,496,712
1,278,362
1,160,402
665,127
577,230
435,744
269,401
248,177
81,261
25,527
31,826
7,325
32
32
-

$

1,355,357
1,479,619
1,102,073
1,056,433
604,5101,275,313
420,209
252,587
210,275
78,81030,98636,353
6,471
30
30
30

$ 9,034,323$ 7,909,086

At the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by
the Company were as follows:
December 31

Tigerair Taiwan Co., Ltd.
Taiwan Air Cargo Terminal
Cal Park
Mandarin Airlines
Cal-Dynasty International
Taoyuan International Airport Services
Cal-Asia Investment
Abacus Distribution Systems (Taiwan)
Taiwan Airport Services- 33 -

2014

2013

80%
54%
100%
94%
100%
49%
100%
94%
47%

54%
100%
94%
100%
49%
100%
94%
47%
(Continued)

December 31

Cal Hotel
Hwa Hsia
Dynasty Holidays
Yestrip
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Freighter Queen Ltd.

2014

2013

100%
100%
51%
100%
25%
100%
100%
-

100%
100%
51%
100%
25%
100%
100%
100%
(Concluded)

The Company’s holdings of the issued share capital of Taoyuan International Airport Service, Taiwan
Airport Service and Global Sky Express did not each exceed 50%, but since the Company had control
over these investees, they were listed as subsidiaries.
The subsidiaries, Freighter Princess Ltd., Freighter Prince Ltd. and Freighter Queen Ltd., were
established in March 2001, September 2001 and January 2002, respectively, for leasing of theCompany’s aircraft. In its balance sheets, the Company recognized the fixed assets and liabilities
related to the leased aircraft as a leasing transaction.
Freighter Queen Ltd. was liquidated on April 17, 2014.
In order to provide the customers with more diverse options, the board of directors has reached anagreement to established a Low Cost Carrier, named Tigerair Taiwan Co., Ltd., with Tiger Airways
Singapore Pte. Ltd. in the form of joint venture. The capital stock of Tigerair Taiwan Co., Ltd. is
2,000,000 thousand, which contains 1,600,000 thousand (80%) from the company and 200,000
thousand (10%) from Mandarin Airlines Co., Ltd., respectively. Tigerair Taiwan Co., Ltd wasestablished on April 21, 2014 and started operating on September 26, 2014.
To meet the operation demand, CAL-Asia investment issued common stock for cash $14,535 thousandin January 2013. The Company acquired all the additional shares. Afterwards, the disposal proceedsof Yangtze River Express of $763,606 thousand was remitted back to the company as deducted capitalby CAL-Asia Investment.
The investment in subsidiaries accounted for by the equity method and the share of profit or loss andother comprehensive income of those investments for the years ended December 31, 2014 and 2013
was based on the subsidiaries’ financial statements audited by the auditors for the same years.
The share of profit or loss of subsidiaries recognized under equity method was as follows:2014
The share of profit or loss$

- 34 -

486,5642013$ 1,307,429

b. Investments in associates
December 31
2014

2013

Unlisted companies
China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics$

450,111232,105
259,605
189,019$ 1,130,840$

407,725
225,221244,486
192,175$ 1,069,607

As the end of the reporting period, the proportion of ownership and voting rights in associates held by
the Company were as follows:
December 31

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics

2014

2013

20%
36%
25%
28%

20%
36%
25%
28%

The investments in associates accounted for by the equity method and the share of profit or loss andother comprehensive income of those investments for the years ended December 31, 2014 and 2013
was based on the associates’ financial statements audited by the auditors for the same years.
The amounts of investment in associated include goodwill arising from the acquisition of associated inprevious years in December 31, 2014 and 2013, the balance of goodwill were all $53,844 thousand.
Shown below are the movements in 2014 and 2013 of goodwill.

Goodwill

Transaction
betweenCompany andSubsidiary

Balance, beginning of year
Reduction$ 53,844-$ 52,042(32,868)

Balance, end of year

$ 53,844$ 19,174

Balance, beginning of year
Reduction$ 53,844-$ 84,910(32,868)

Balance, end of year

$ 53,844$ 52,042

December 31, 2014

December 31, 2013- 35 -

The share of profit or loss of associates recognized under equity method were as follows:
2014
China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics

$

2013

35,664
100,716
49,08623,426$ 208,892$

28,183
95,71147,306
27,562$ 198,762

c. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:
December 31

China Pacific Catering Services
China Pacific Laundry Services

2014

2013

$ 743,817
166,192$ 685,797
163,628$ 910,009$ 849,425

At the end of the reporting period, the percentage of ownership and voting rights in jointly controlled
entities held by the Company were as follows:
December 31

China Pacific Catering Services
China Pacific Laundry Services

2014

2013

51%
55%

51%
55%

The Company signed a joint venture agreement with the Taikoo Group to invest in China Pacific
Catering Services and China Pacific Laundry Services. According to the agreement, both sides on theboard have major motion veto, therefore the Company does not have its control power.
The summarized financial information on the Company’s interests in the jointly controlled entities
accounted for using the equity method is as follows:
December 31

Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities

2014

2013

$ 644,880$ 678,995$ 261,049$ 152,817$ 594,412$ 612,753$ 216,257$ 141,483

For the Year Ended December 31
2014
2013
Income recognized in profit or loss
Expenses recognized in profit or loss
Other comprehensive income$ 1,334,715$ 1,092,725$
16,045- 36 -$ 1,188,922$ 1,001,632$
4,714

The investments in jointly controlled entities accounted for by the equity method and the share of profit
or loss and other comprehensive income of those investments for the years ended December 31, 2014
and 2013 was based on the jointly controlled entities’ financial statements audited by the auditor for thesame years.

14. PROPERTY, PLANT AND EQUIPMENT
December 31
2014

2013

Cost
Freehold land
Buildings
Flight equipment
Equipment under finance lease
Machinery equipment
Office equipment
Leasehold improvements
Construction in progress$

193,013
7,314,028
230,661,285
33,379,391
4,173,873
680,573
1,006,556
68,870$210,350
7,368,106
222,507,866
38,078,519
4,104,144
668,892
1,104,439
3,834$ 277,477,589$ 274,046,150$$

Accumulated depreciation
Buildings
Flight equipment
Equipment under finance lease
Machinery equipment
Office equipment
Leasehold improvements

Net value

Freehold Land

Buildings

FlightEquipment

3,289,776
121,708,296
16,542,230
3,289,402
516,328
953,129

3,181,061
108,498,875
17,767,630
3,211,113
476,155
965,303$ 146,299,161$ 134,100,137$ 131,178,428$ 139,946,013

Equipment
under Finance
Lease

OthersTotal

Cost
Balance at January 1,
2013
Additions
Disposals
Reclassification
Balance at December 31,
2013$

210,350-$

7,286,415
45,281(10,833)
47,243$ 207,456,231
3,970,726(2,279,769)
13,360,678$

51,327,865
771,874(759,288)(13,261,932)$

5,891,438
211,228(133,012)(88,345)$ 272,172,299
4,999,109(3,182,902)
57,644$

210,350$

7,368,106$ 222,507,866$

38,078,519$

5,881,309$ 274,046,150

$

-

$

(2,911,004)(186,927)
10,321(93,451)$ (90,799,422)(12,942,243)
1,981,753(6,738,963)$ (22,293,677)(2,968,472)
755,335
6,739,184$(4,490,201)(387,790)
131,809
93,611$ (120,494,304)(16,485,432)
2,879,218
381

$

-

$

(3,181,061)$ (108,498,875)$ (17,767,630)$(4,652,571)

Accumulated depreciationand impairment
Balance at January 1,
2013
Depreciation expense
Disposals
Reclassification
Balance at December 31,
2013$ (134,100,137)(Continued)- 37 -

Freehold Land

FlightEquipment

Buildings

Equipment
under Finance
Lease

OthersTotal

Cost
Balance at January 1,
2014
Additions
Disposals
Reclassification
Balance at December 31,
2014$

210,350(17,337)-$

7,368,106
23,308(68)(77,318)$ 222,507,866
6,331,741(3,521,679)
5,343,357$

38,078,519
1,232,885(1,002,179)(4,929,834)$

5,881,309
294,079(322,718)
77,202$ 274,046,150
7,882,013(4,863,981)
413,407$

193,013$

7,314,028$ 230,661,285$

33,379,391$

5,929,872$ 277,477,589

$

-

$

(3,181,061)(186,370)
67
77,588$ (108,498,875)(13,614,141)
2,989,664(2,584,944)$ (17,767,630)(2,431,002)
1,000,201
2,656,201$(4,652,571)(357,182)
322,282(71,388)$ (134,100,137)(16,588,695)
4,312,214
77,457$-$(3,289,776)$ (121,708,296)$ (16,542,230)$(4,758,859)

Accumulated depreciationand impairment
Balance at January 1,
2014
Depreciation expense
Disposals
Reclassification
Balance at December 31,
2014$ (146,299,161)(Concluded)
The above items of property, plant and equipment were depreciated on a straight-line basis over theestimated useful life of the asset:
Building
Main buildings
Others
Machinery and equipment
Electro-mechanical equipment
OthersFlight equipment and equipment under finance lease
Airframe
Aircraft cabin
EngineHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Office equipment
Leasehold improvements
Building improvements
Others45-55 years
10-25 years
25 years
3-13 years
20-25 years
7-13 years
12-20 years
6-8 years
3-10 years
7-10 years
7-15 years
3-15 years
5 years
3-5 years

Refer to Note 33 for the carrying amounts of property, plant and equipment pledged by the Company.

15. INVESTMENT PROPERTIES
December 31

Carrying amount
Investment properties

2014

2013

$ 2,047,448$ 2,047,448

The investment properties (land) held by the Company was located in Nankan, which was leased to others.
- 38 -

Using appraisal the land located in Nankan, Taoyuan. In 2010, the Company recognized the difference
between the net fair value of $1,468,433 thousand and carrying value of $2,047,448 thousand, as
impairment loss of $579,015 thousand. In September 2013, the Company acquired the two updated
appraisal reports. Those reports indicated that the net fair value of the land was $2,316,300 thousand and$2,449,699 thousand, respectively. Both of them exceeded the original cost of $2,047,448 thousand,therefore the all impairment loss was reversed.
The fair value of the investment properties held by the Company were $2,316,300 thousand on December
31, 2014 and 2013, respectively.
The fair value valuation was performed by the independent qualified professional valuers.
All of the Company’s investment properties were held under freehold interest.

Cost

Accumulated
Impairment

Net Value

Balance at January 1, 2013
Gain on reversal of impairment$ 2,047,448-$(579,015)
579,015$ 1,468,433
579,015

Balance at December 31, 2013

$ 2,047,448$-$ 2,047,448

Balance at January 1, 2014
Additions$ 2,047,448-$-$ 2,047,448-

Balance at December 31, 2014

$ 2,047,448$-$ 2,047,448

Computer
Software Cost

Accumulated
Amortization

Net Value

Balance at January 1, 2013
Additions
Amortization expense$

787,836
107,919-$(379,614)(43,077)$

408,222
107,919(43,077)

Balance at December 31, 2013$

895,755$(422,691)$

473,064

Balance at January 1, 2014
Additions
Amortization expense
Reclassification$

895,755
216,948
6,615$(422,691)(47,013)-$473,064
216,948(47,013)6,615

Balance at December 31, 2014

$ 1,119,318$(469,704)$

649,614

16. OTHER INTANGIBLE ASSETS

The above items of other intangible assets were depreciated on a straight-line basis on 2-10 years.

- 39 -

17. OTHER ASSETS
December 31
2014

2013

Current
Temporary payments
Prepayments
Other financial assets
Others$197,348
608,980
507,357
196,699$281,673
462,141
376,242$

1,510,384$

1,120,056

Noncurrent
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets$ 27,585,802
1,388,920
780,731
279,497
14,265$ 15,397,766
1,767,537
743,250
487,649
14,040$ 30,049,215$ 18,410,242

The prepayments for aircraft was the prepaid deposit, capitalized interest, etc. that the Company enteredinto a contract to purchase A350-900 and 777-300ER aircraft. As for the instruction of the contracts,
please refer to Note 34.

18. BORROWINGSa. Short-term loans
December 31
2014
Bank loans - unsecured

2013$ 4,160,000$-

The range of interest rate on bank loans was 1.18%-1.30% on December 31, 2014.
b. Short-term bills payable
December 31
2014
Commercial paper
Less: Unamortized discount on bills payable

Annually discount rate2013

$ 2,000,000
1,862

$

-

$ 1,998,138$-

1.108%-1.238%-

The short-term bills payable remained in the balance of December 31, 2014 will expire on various datestarting from March 2015.

- 40 -

c. Long-term debts
December 31

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountLess: Current portion

2014

2013

$ 30,025,000
28,905,839$ 19,875,000
34,188,569

24,505,000
60,464
83,375,375
13,858,278

20,655,000
40,481
74,678,088
25,001,950$ 69,517,097$ 49,676,138

Secured bank loans were secured by buildings, machinery equipment and flight equipment, please refer
to Note 33.
Bank loans (New Taiwan dollars and U.S. dollars) are repayable quarterly, semiannually or in lumpsum upon maturity date. Related information is summarized as follows:
Currency
New Taiwan
Dollars
U.S. Dollars
Original currency
December 31, 2014
December 31, 2013

$ 50,475,804
41,844,455$

267,179
410,562

Translated in New Taiwan dollars
December 31, 2014
December 31, 2013

50,475,804
41,844,455

8,455,035
12,219,114

1.288%2.2074%
1.283%-2.647%

0.2326%4.39%
0.2376%-4.79%

2004/12/162020/2/26
2002/4/112020/2/26

2003/7/222017/9/21
2003/7/222017/9/21

Interest rates
December 31, 2014
December 31, 2013
Periods
December 31, 2014
December 31, 2013

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The
NIFs, with various maturities until November 2017, were used by the Company to guarantee
commercial paper it issued. The commercial paper was issued at discount rates of 1.3895%-2.086 %in 2014 and 1.302%-2.121% in 2013.

- 41 -

19. BONDS PAYABLE
December 31
2014
Privately placed corporate bonds - first issue in 2009
Privately placed corporate bonds - second issue in 2009
Secured corporate bonds - first issue in 2010
Secured corporate bonds - first issue in 2011
Unsecured corporate bonds - first issue in 2012
Unsecured corporate bond first-time issued in 2013
Convertible bonds - fifth issue
Less: Current portion$

1,440,000
4,200,000
5,785,000
10,900,000
5,023,836
27,348,836
9,025,000$ 18,323,836

2013$

1,100,000
800,000
2,520,000
6,000,000
5,785,000
10,900,000
5,483,023
32,588,023
4,780,000$ 27,808,023

Related issuance conditions were as follows:
Category

PeriodPrivately placed corporate bonds - first issue in 20092009.4.15-2014.4.15

Privately placed corporate bonds - second issue in 20092009.6.15-2014.6.15

Five-year secured domestic bonds - issued at par in
January 20102010.1.25-2015.1.25

Five-year secured domestic bonds - issued at par in
February 2010; repayable in February 2013, February
2014 and February 2015; indicator rate plus 1.5%
interest p.a., payable quarterly
Five-year secured domestic bonds - issued at par in
February 2010; repayable in February 2013, February
2014 and February 2015; indicator rate plus 1.5%
interest p.a., payable quarterly
Five-year secured domestic bonds - issued at par in May
2011; repayable in May 2014, May 2015 and May
2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in May
2011; repayable in May 2014, May 2015 and May
2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in May
2011; repayable in May 2014, May 2015 and May
2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in May
2011; repayable in May 2014, May 2015 and May
2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
January 2012; repayable in January 2015; 2% interestp.a., payable semiannually
Five-year private unsecured bonds - issued at par in
January 2013; repayable in January 2017 and 2018;
1.6% interest p.a., payable annually
Seven-year private unsecured bonds - issued at par in
January 2013; repayable in January 2019 and 2020;
1.85% interest p.a., payable annually
Five-year convertible bonds - issued at discount in
December 2013; repayable in lump sum upon maturity;
1.8245% discount rate p.a.

2010.2.1-2015.2.1

2010.2.8-2015.2.8

2011.5.20-2016.5.20

2011.5.20-2016.5.20

2011.5.20-2016.5.20

2011.5.20-2016.5.20

2012.1.10-2015.1.10

2013.1.17-2018.1.17

2013.1.17-109.1.17

2013.12.26-2018.12.26

Conditions

Rate (%)

Principal repayable semiannually andpay principal on due date
Repayable semi-annually and pay
principal on due datePrincipal repayable in January andFebruary 2013, 2014 and 2015;
indicator rate plus 1.5% interest p.a.,payable quarterly
Principal repayable in January andFebruary 2013, 2014 and 2015;
indicator rate plus 1.5% interest p.a.,payable quarterly
Principal repayable in January andFebruary 2013, 2014 and 2015;
indicator rate plus 1.5% interest p.a.,payable quarterly
Principal repayable in May of 2014,2015 and 2016; indicator rate; payableannually
Principal repayable in May of 2014,2015 and 2016; indicator rate; payableannually
Principal repayable in May of 2014,2015 and 2016; indicator rate; payableannually
Principal repayable in May of 2014,2015 and 2016; indicator rate; payableannually
Principal repayable in January 2015;
indicator rate; payable semi-annually

3.60

Principal repayable in January of 2017and 2018; indicator rate; payableannually
Principal repayable in January of 2019and 2020; indicator rate; payableannually
Unless bonds are converted to capitalstock or redeemed, principal repayable
one time in December 2018; 1.8245%
discount rate p.a

1.60

3.60
Indicator rateplus 1.50

Indicator rateplus 1.50

Indicator rateplus 1.50

1.35

1.35

1.35

1.35

2.00

1.85

-

The indicator rate mentioned above is the 90 days’ commercial paper rates in Taiwan’s secondary market.

- 42 -

In January 2012, the Company made a first issue of 2012 private unsecured bonds with aggregate facevalue of $5,785,000 thousand. The investors included these affiliates: Taoyuan International Airport
Services, Mandarin Airlines and Abacus Distribution Systems (Taiwan) held $440,000 thousand of its facevalue in aggregate and would write off in the consolidation financial report.
On December 26, 2013, the Company made the fifth issue of unsecured convertible bonds, and the issue
conditions are as follows:a. The holders may demand a lump-sum payment for the bonds upon maturity.
b. On 30 days before December 26, 2015 and December 26, 2016, the holders can require the Company toredeem their bonds at face value.
c. The Company may redeem the bonds piecemeal between January 26, 2014 and, November 16, 2018
under certain conditions.
d. Between January 26, 2014 and December 16, 2018 (except for the period between the ex-dividend date
and the date of dividend declaration on record), holders may convert the bonds to the Company’scommon shares. The initial conversion price was set at NT$12.24, subject to adjustment if there iscapital injection by cash, stock dividend distribution, the proportion of cash dividend per share inmarket price exceed 1.5%. As of December 31, 2014, there was no adjustment to the conversion pricebut face value of $601,800 thousand of corporate bond convert into 49,167 thousand of common stock.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - option. The effective interest rate of the liability
component was 1.8245% per annum on initial recognition.
Proceeds from issue
Equity component$ 6,000,000(518,621)

Liability component at the date of issue$ 5,481,379

20. CAPITAL LEASE OBLIGATIONS
December 31
2014

2013

Minimum lease payments
Not later than one year
Later than one year and not later than five years
Later than five years$

2,727,933
6,945,200-$

Present value of minimum lease payments$

9,673,133$ 12,817,184

Current
Noncurrent$

2,727,933
6,945,200$$

9,673,133$ 12,817,184

1.287%-1.667%

1.306%-2.244%

Interest rate

- 43 -

4,368,184
7,853,000
596,000

4,368,184
8,449,000

The Company leased aircraft and engines by sale-leaseback under finance leases. The lease terms arefrom June 2006 to April 2019. During the lease term, the Company retained all risks and rewards attached
to aircraft and engines, and enjoyed the same substantive right prior to the transaction. Interest rate
underlying all obligation under finance leases were floated. Therefore, the minimum lease payments
under sale-leaseback aircraft contract are not inclusive of interest expense.

21. OTHER PAYABLES
December 31
2014
Fuel cost
Ground service expense
Repair expense
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expense
Others2013$

3,529,688
1,021,534
836,870
347,145857,268
667,196607,366
1,741,451$

4,137,233
860,276
468,454376,335
1,241,130
606,499566,609
4,791,412$

9,608,518$ 13,047,948

22. DEFERRED REVENUE
December 31
2014Frequent flyer program
Advance ticket sales$

Current
Noncurrent

2013

2,501,231
9,791,588$

2,587,189
7,759,948$ 12,292,819$ 10,347,137$ 10,487,504
1,805,315$$ 12,292,819$ 10,347,137

8,437,388
1,909,749

23. PROVISIONS
December 31

Operating lease - aircraft

2014

2013

$ 3,416,601$ 2,591,678

The Company rented flight equipment under operating lease agreements. Under the contracts, when the
Company returns aircraft to the lessor, the flight equipment have to be repaired on the basis of operating
years and flight hours, flight cycle and the engine revolution times; for these contracts, the Company
recognizes a provision after entering into the lease contracts or during the lease term.

- 44 -

Aircraft Lease
Contract
Balance at January 1, 2013
Additional provisions recognizedUsage$ 1,825,382
882,876(116,580)

Balance at December 31, 2013

$ 2,591,678

Balance at January 1, 2014
Additional provisions recognizedUsage$ 2,591,678
1,217,163(392,240)

Balance at December 31, 2014

$ 3,416,601

24. RETIREMENT BENEFIT PLANS
a. Defined contribution plans
The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is astate-managed defined contribution plan. Under the LPA, an entity makes monthly contributions toemployees’ individual pension accounts at 6% of monthly salaries and wages.
b. Defined benefit plans
The Company adopted the defined benefit plan under the Labor Standards Law, under which pension
benefits are calculated on the basis of the length of service and average monthly salaries of the six
months before retirement. The Company contribute amounts equal to 6%-7.5% of total monthly
salaries and wages to a pension fund administered by the pension fund monitoring committee.
Pension contributions are deposited in the Bank of Taiwan in the committee’s name.
The plan assets are invested in domestic (foreign) equity and debt securities, bank deposits, etc. The
investment is conducted at the discretion of Bureau of Labor Funds, Ministry of Labor or under the
mandated management. However, in accordance with Enforcement Rules of the Labor Pension Act,the return generated by employees’ pension contribution should not be below the interest rate for a
2-year time deposit with local banks.
The actuarial valuations of plan assets and the present value of the defined benefit obligation werecarried out by qualifying actuaries. The principal assumptions used for the purposes of the actuarial
valuations were as follows:
December 31

Discount rates
Expected return on plan assets
Expected rates of salary increase- 45 -

2014

2013

1.68%
1.68%
1.50%

1.92%
1.92%
1.50%

The amount recognized as profit or loss related to defined benefit plans were as follows:
For the Year Ended December 31
2014
2013
Current service cost
Interest cost
Expected return on plan assets
Past service cost

An analysis by function
Operating cost
Operating expense$ 342,520
201,952(40,802)-$ 211,368
163,494(33,061)
59,136$ 503,670$ 400,937$ 340,362
163,308$ 292,966
107,971$ 503,670$ 400,937

Actuarial gains and losses recognized in other comprehensive income for the years ended December 31,
2014 and 2013 was $99,277 thousand and $41,911 thousand, respectively. The cumulative amount of
actuarial gains or losses recognized in other comprehensive income as of December 31, 2014 and 2013
was $389,931 thousand and $489,208 thousand, respectively.
The amounts included in the balance sheet on the Company’s obligation on its defined benefit plans
were as follows:
December 31
2014

2013

Present value of funded defined benefit obligation
Fair value of plan assets$ 10,523,038(1,852,469)$ 11,390,715(2,511,360)

Deficit$$

8,670,569

8,879,355

Movements in the present value of the defined benefit obligations were as follows:
For the Year Ended December 31
2014
2013
Defined benefit obligation at the beginning of the year
Current service cost
Interest cost
Actuarial (gains) and losses
Benefits paid

$ 11,390,715
342,520
201,952(83,327)(1,328,822)$ 11,727,654
211,368
163,494
41,942(753,743)

Defined benefit obligation at the end of the year

$ 10,523,038$ 11,390,715- 46 -

Movements in the fair value of the plan assets were as follows:
For the Year Ended December 31
2014
2013
Fair value of plan assets at the beginning of the year
Expected return on plan assets
Actuarial gains/(losses)
Contributions from the employer
Benefits paid

$ 2,511,360
40,802
15,950462,258(1,177,901)$ 2,699,797
33,061
31
451,862(673,391)

Fair value of plan assets at the end of the year

$ 1,852,469$ 2,511,360

The major categories of plan assets at the end of the reporting period for each category were disclosed
based on the information announced by Bureau of Labor Funds, Ministry of Labor:
December 31
2014

2013

51.43%
26.21%
22.36%

38.25%
40.69%
21.06%

100.00%100.00%Equity instruments
Debt instruments
OthersThe Company chose to disclose the history of experience adjustments as the amounts determined foreach accounting period prospectively from the date of transition to IFRSs:

Present value of defined benefit
obligation
Fair value of plan assets
Deficit
Experience adjustments on plan
liabilities
Experience adjustments on plan
assets

December 31,
2014

December 31,
2013

December 31,
2012

January 1,
2012$ 10,523,038$ (1,852,469)$ 8,670,569$ 11,390,715$ (2,511,360)$ 8,879,355$ 11,727,654$ (2,699,797)$ 9,027,857$ 11,549,012$ (2,710,959)$ 8,838,053$(305,877)$

467,674$

425,880$-$(15,950)

$

(31)

$

21,417$-The Company expects to make a contribution of $460,500 thousand to the defined benefit plans during
the annual period beginning after 2014.

25. EQUITY
a. Share capital
1) Common shares
December 31

Numbers of shares authorized (in thousands)
Amount of shares authorized
Amount of shares issued- 47 -

20142013

6,000,000$ 60,000,000$ 52,491,666

6,000,000$ 60,000,000$ 52,000,000

The Company issued the 5th domestic unsecured convertible bonds and equal to the amount of$601,800 thousand convertible bonds holders apply for conversion, and the capital shares exchanged
more $49,167 thousand and entitled to change registration after issuing new shares.
b. Capital surplus
December 31

Issue of stock in excess of par value and conversion premium
Employee stock options expired
Long-term investment
Gain on sale of treasury shares held by subsidiaries
Bonds payable equity component

2014

2013

$ 1,511,953
11,747955
1,156
466,604$ 1,391,536
11,747955
1,156
518,621$ 1,992,415$ 1,924,015

The capital surplus from shares issued in excess of par (additional paid-in capital from issuance ofcommon shares and treasury stock transactions) and donations may be used to offset a deficit; inaddition, when the Company has no deficit, such capital surplus may be distributed as cash dividends ortransferred to capital (limited to a certain percentage of the Company’s paid-in capital and once a year).
The capital surplus from long-term investments and employee stock options may not be used for any
purpose.
c. Appropriation of earnings and dividend policy
The Company’s Articles of Incorporation provide that the following should be appropriated fromannual net income (less any deficit): (a) 10% as legal reserve, and (b) special reserve equivalent to a
debit balance of any stockholders’ equity account. From the remainder, the Company should also
appropriate at least 3% as bonus to employees. Of the final remainder, at least 50% should be
distributed to stockholders as cash or stock dividends (cash dividend should not be less than 30% of thetotal dividends). In determining the amount of cash dividends to be distributed, the board of directors
should take into account future cash requirements of the Company, primarily cash requirements for
future aircraft acquisitions. Distribution of earnings generated in prior years should also meet theforegoing guidelines.
All earnings appropriations should be made and approved by the stockholders in, and given effect to in
the financial statements of, the year following the year of earnings generation.
Appropriation of earnings in 2012
The Company appropriated net income in 2012 on the basis of ROC GAAP. The bonus to employees
was estimated on the basis of past experience. However, there were net losses in 2012; thus, no bonus
to employees was estimated. Material differences between estimates and the amounts proposed by the
Board of Directors in the following year are retroactively adjusted in the current year. If the actual
amounts subsequently resolved by the stockholders differ from the proposed amounts, the differences
are recorded in the year of stockholders’ resolution as a change in accounting estimate.
Based on a directive issued by the Securities and Futures Bureau (SFB), an amount equal to the net
debit balance of certain stockholders’ equity accounts (including unrealized valuation gain or loss onfinancial instruments, cumulative translation adjustments against the unrealized gain of equity, and net
loss not recognized as pension cost) should be transferred from unappropriated earnings to a special
reserve. Any special reserve appropriated may be reversed to the extent of the decrease in the net
debit balance.

- 48 -

Under the SFB’s regulations, a special reserve is appropriated from the balance of the retained earnings
at an amount equal to the carrying value of the treasury stock held by subsidiaries in excess of themarket value on the balance sheet date. The special reserve may be reversed when the market value
recovers.
The appropriation of the 2012 earnings was approved at the stockholders’ meeting on June 25, 2013, as
follows:
Appropriationof Earnings
Legal reserve
Special reserve

$

5,881
52,924$ 58,805
There was no other appropriation of the 2012 earnings after the recognition of the above legal reserveand special reserve.
Appropriation of earnings in 2013
The bonus to employees was estimated on the basis of past experience. However, there were net
losses in 2013; thus, no bonus to employees was estimated. Under Rule No. 1010012865 issued by
the FSC on April 6, 2012, on the first-time adoption of IFRSs, the Company should appropriate to a
special reserve an amount that is the same as the sum of unrealized revaluation increment andcumulative translation differences (gains) transferred to retained earnings as a result of the Company’s
use of exemptions under IFRS 1. However, if at the date of transition to IFRSs, the increase inretained earnings that resulted from all IFRSs adjustments is not sufficient for this appropriation, only
the increase in retained earnings that resulted from all IFRSs adjustments will be appropriated to special
reserve. The special reserve appropriated as above may be reversed in proportion to the usage,
disposal or reclassification of the related assets and thereafter distributed. At the date of transition to
IFRSs, the Company had a decrease in retained earnings, so there was no appropriation of a special
reserve.
Under the Company Law, legal reserve should be appropriated until it equals the Company’s paid-in
capital. This reserve may be used to offset a deficit. If the Company has no deficit and the legal
reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or
distributed in cash.
On June 18, 2014, the stockholders resolved to offset the accumulated deficit in 2013. The deficit,
included a net loss of $1,274,046 thousand, negative other retained earning of $45,381 thousand, theunappropriated deficits of $6,089,872 thousand, and reversed the special reserve of $3,926,293
thousand by Corporate charter the remaining amount of accumulated deficit was $3,483,006 thousand.
The Company offset the accumulated deficit against legal reserve of $321,891 thousand. No bonus toemployees was appropriated for 2013 because of a net loss in that year.
On March 27, 2015 the board proposed to offset the accumulated deficit against paid-in capital of$1,511,953 thousand. No bonus to employees was a appropriated for 2014 because of a net loss inthat year.
Information on bonus to employee is available on the Market Observation Post System website.
Except for non-ROC resident stockholders, all stockholders receiving the unappropriated earnings
generated on and after January 1, 1998 are allowed a tax credit equal to their proportionate share of theincome tax paid by the Company.

- 49 -

d. Other equity items
The movement of other equity items is as follows:
Exchange
Unrealized
Differences on Gain (Loss) on
Translating
Available-forForeign
sale Financial
Operations
AssetsCash Flow
Hedge

Balance at January 1, 2014
Exchange differences arising ontranslating the foreign
operations
Unrealized gain (loss) on
available-for-sale financial
assetsCash flow hedge
Cumulative (gain)/loss arisingon changes in fair value ofhedging instruments
reclassified to profit or loss
Share of exchange difference of
associates accounted forusing the equity method
Income tax$$

Balance at December 31, 2014$

99,852

Balance at January 1, 2013
Exchange differences arising ontranslating the foreign
operations
Unrealized gain (loss) on
available-for-sale financial
assetsCash flow hedge
Cumulative (gain)/loss arisingon changes in fair value ofhedging instruments
reclassified to profit or loss
Share of exchange difference of
associates accounted forusing the equity method
Income tax$(60,381)

Balance at December 31, 2013

$

1,843

$

(11,486)

96,579Total$

86,936

109,512--

109,512-

16,523-(2,934,947)

16,523(2,934,947)--

397,424

397,424

8,571(20,074)

1,787(2,809)431,379

10,358408,496$

4,015$ (2,009,565)$ (1,905,698)$(16,666)$$

16,485(60,562)

67,654--67,654-9,701-

315,841

9,701
315,841--(219,341)(219,341)

7,314(12,744)(2,873)(1,648)(16,406)

4,441(30,798)

1,843- 50 -$(11,486)$

96,579$86,936

e. Treasury stock(Shares in Thousands)
Number of
Shares,Beginningof Year

Purpose of Treasury Stock

Reduction
Duringthe Year(Note)

Number of
Shares,Endof YearFor the year ended December 31, 2014
Company’s shares held by its subsidiaries reclassified frominvestment in shares of stock to treasury stock

2,889

-

2,889

2,889

-

2,889

For the year ended December 31, 2013
Company’s shares held by its subsidiaries reclassified frominvestment in shares of stock to treasury stock

The Company’s shares held by its subsidiaries as the ended of the reporting periods were as follows:

Subsidiary

Shares(In Thousands)

Carrying
AmountMarket Value$ 30,082
11,805$ 30,082
11,805$ 41,887$ 41,887$ 22,717
8,915$ 22,717
8,915$ 31,632$ 31,632

December 31, 2014
Mandarin Airlines
Hwa Hsia

2,075
814

December 31, 2013
Mandarin Airlines
Hwa Hsia

2,075
814

Above subsidiaries acquired the Company’s stock in previous years was based on investment planning.
The shares of the Company held by its subsidiaries were treated as treasury stock. The subsidiaries
can exercise stockholders’ right on these treasury stocks, except the right to subscribe for theCompany’s new shares and the right to vote.

26. NET LOSS
a. Revenue
For the Year Ended December 31
2014
2013
Passenger
Cargo
Others- 51 -$ 90,984,009
43,176,442
5,565,717$ 87,573,928
38,983,676
5,195,073$ 139,726,168$ 131,752,677

b. Other income
For the Year Ended December 31
2014
2013
Interest income
Subsidy income
Dividend income
Others$353,002
194,671
24,847346,101$

275,404
182,025
65,403
820,583$

918,621$ 1,343,415

c. Other gains and losses
For the Year Ended December 31
2014
2013
Gain on disposal property, plant and equipment
Net gain arising on financial assets classified as held for trading
Litigation settlement
Gain or loss on foreign exchange, net
Others$52,277
77,668(1,212,121)(83,129)(548,694)$ (1,713,999)

$

3,725
130,884(1,488,095)
82,971(379,889)$ (1,650,404)

The Company along with worldwide leading carriers was named as defendants in the civil class action
by global airfreight forwarders alleging the 2000-2006 fuel surcharges levied on the shipments to andfrom the United States in violation of US Antitrust Laws. The board of directors reached theresolution for settlement of US$90,000 thousand in three installments starting from 2014 on annual
basis, and US$50,000 thousand of which was recognized as operating cost in the financial report for theyear of 2013. For consistency, the company reclassified the said operating cost to non-operating loss
and the remaining balances recognized as non-operating loss of 2014 as well.
d. Finance costs
For the Year Ended December 31
2014
2013
Interest on bonds payable
Interest on bank loans
Interest on obligations under finance leases
Loss arising on derivatives as designated hedging instruments incash flow hedge accounting relationship reclassified fromequity to profit or loss$

548,687
1,247,095
162,084$

562,686
1,289,608
184,799

7,428

9,954

$ 1,965,294$ 2,047,047

Information about capitalized interest is as follows:
For the Year Ended December 31
2014
2013
Capitalized interest
Capitalization rate

$ 211,409
1.77%-1.82%- 52 -$ 160,749
1.85%-1.91%

e. Depreciation and amortization
For the Year Ended December 31
2014
2013
Property, plant and equipment
Intangible assets

An analysis of deprecation by function
Operating costs
Operating expenses

An analysis of amortization by function
Operating expenses$ 16,588,695
47,013$ 16,485,432
43,077$ 16,635,708$ 16,528,509$ 16,249,887
338,808$ 16,133,489
351,943$ 16,588,695$ 16,485,432$$

47,01343,077f. Employee benefit expense
For the Year Ended December 31
2014
2013
Post-employment benefits
Defined contribution plans
Defined benefit plans

Other employee benefits
Salary expenses
Labor and health insurance
Personnel service expenses

An analysis of employee benefit expense by function
Operating costs
Operating expenses- 53 -$

245,836
503,670$

241,955
400,937$

749,506$

642,892$ 11,188,769
1,037,000
1,888,383$ 11,309,878
975,162
1,794,616$ 14,114,152$ 14,079,656$ 11,837,468
3,026,190$ 11,822,227
2,900,321$ 14,863,658$ 14,722,548

27. INCOME TAX
a. Income tax recognized in profit or loss
The major components of tax expense were as follows:
For the Year Ended December 31
2014
2013
Current tax
Current year
Prior year adjustment
Deferred tax
Current year$

Income tax expense recognized in profit or loss

50,615(8,835)$75,845372

756,780

253,492$ 798,560$ 329,709

A reconciliation of accounting profit and income tax expense (benefit) is as follows:
For the Year Ended December 31
2014
2013
Profit (loss) before tax
Income tax expense (benefit) calculated at the statutory rate(17%)
Add (deduct) tax effects of:Nondeductible expenses in determining taxable income
Temporary differences
Tax-exempt income
Additional income tax under the Alternative Minimum Tax Act
Loss carryforwards - current used
Overseas income tax expense
Deferred tax
Temporary differences
Investment tax credits - current
Unrecognized loss carryforwards and investment tax credits
Adjustments for prior years’ tax
Income tax expense recognized in profit or loss$

47,328$ (944,337)

$

8,046

$ (160,537)

18,60369,570(96,219)
50,6158,389
894,896(257,461)
41,720(485,287)
34,124

501,780
255,000(8,835)(438,580)
148,073544,000
372$ 798,560$ 329,709

b. Income tax recognized in other comprehensive income
For the Year Ended December 31
2014
2013
Deferred tax
Recognized in other comprehensive income
Translation of foreign operations
Fair value changes of available-for-sale financial assets
Fair value changes of hedging instruments for cash flow
hedgesActuarial gain or loss on defined benefit plan
Total income tax recognized in other comprehensive income- 54 -$ (20,074)(2,809)$ (12,744)(1,648)431,379(16,877)(16,406)
7,125$ 391,619$ (23,673)

c. Deferred tax assets and liabilities
For the year ended December 31, 2014

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive Income$ 1,509,490
448,617
1,058,025
440,585$$

EndingBalance

Deferred tax assets
Temporary differences
Defined benefit plan
Dynasty flyer program
Depreciation of significant
Maintenance reserve
Depreciation of major sparepart depreciation
Allowance for reduction of
inventory
OthersLoss carryforwards(17,275)(16,421)(1,058,025)
140,237(16,877)-$ 1,475,338
432,196
580,822

114,947(114,947)--

327,711500,134
4,242,162(179,275)
129,328
138,362

409,188-

148,436
1,038,650
4,380,524$ 8,055,966$ 8,641,671$(978,016)$

392,311$$(156,272)$-

Deferred tax liabilities
Temporary differences
Unrealized foreign exchange
gain
Depreciation difference fromfixed assets
Others234,397
127,862
97,875$

460,134(1,374)(63,590)$(221,236)

$

692
$

692

78,125
126,488
34,977$

239,590

For the year ended December 31, 2013

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive Income$ 1,524,377
731,148458,870
342,642
310,315$$

EndingBalance

Deferred tax assets
Temporary differences
Defined benefit plan
Finance lease assets
Dynasty flyer program
Depreciation of significant
Maintenance reserve
Depreciation of major sparepart depreciation

200,860- 55 -(22,012)(731,148)(10,253)
715,383
130,270(85,913)

7,125-$ 1,509,490
448,617
1,058,025
440,585-

114,947(Continued)

Allowance for reduction of
inventory
OthersLoss carryforwards
Investment credits

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive Income$

280,983
372,473
5,272,752
148,073$

46,728
138,678(1,030,590)(148,073)$(11,017)-$$ 9,642,493$(996,930)$(3,892)$ 8,641,671$$(790,369)$-

EndingBalance

327,711500,134
4,242,162-

Deferred tax liabilities
Temporary differences
Finance leases assets
Unrealized foreign exchange
gain
Depreciation difference fromfixed assets
Others790,369$-

237,048(2,651)-

234,397

144,529
11,844(16,667)
66,25019,781

127,862
97,875$ 1,183,790$

743,437$

19,781$

460,134(Concluded)

Deductible temporary differences, unused loss carryforwards and unused investment credits for which
no deferred tax assets have been recognized in the balance sheets
December 31
2014

2013

Loss carryforwards
Expiry in 2019

$ 4,700,000$ 3,200,000

Investment credits
Automated equipment$$

65,233

Total
Creditable
AmountRemaining
Creditable
AmountExpiryYear$ 24,691$ 24,691

2015

40,542d. Unused investment tax credits as of December 31, 2014 were as follows:

Laws and Statutes

Tax Credit Source

Article 6 of the Statutefor Upgrading
Industries

R&D expenses, personnel
training expenses andpurchases of eligible
equipment- 56 -

e. Unused tax loss carryforwards as of December 31, 2014 were as follows:
UnusedAmountExpiry Year
2018
2019
2021
2022

$

7,631,747
19,338,075
2,899,496
598,471$ 30,467,789
f. Integrated income tax
December 31

Imputation credit accounts

2014

2013

$ 385,425$ 225,815

The Company had accumulated deficit as of December 31, 2014 and 2013; thus, there were no expectedcreditable tax ratios.
Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputationcredits allocated to ROC resident stockholders of the Company was calculated based on the creditableratio as of the date of dividend distribution.
g. The income tax returns of the Company through 2012 have been examined by the tax authorities.

28. LOSS PER SHARE
The numerators and denominators used in calculating loss per share were as follows:
For the Year Ended December 31
2014
2013
Basic and diluted loss per share$ (0.14)$ (0.25)

The weighted average number of shares used to calculate loss per share was as follows:
Net Loss for the YearFor the Year Ended December 31
2014
2013
Net loss used to calculate loss per share$(751,232)$ (1,274,046)

Number of Shares (Share in Thousands)
For the Year Ended December 31
2014
2013
The weighted average number of shares used to calculate loss pershare- 57 -

5,199,401

5,197,111

These bonuses were previously recorded as appropriations from earnings. If the Company decides tosettle the bonus to employees by cash or shares, the Company should presume that the entire amount of thebonus will be settled in shares, and the resulting potential shares should be included in the weighted average
number of shares outstanding used in the calculation of diluted EPS, if the shares have a dilutive effect.
This dilutive effect of the potential shares should be included in the calculation of diluted EPS until thestockholders resolve the number of shares to be distributed to employees at their meeting in the following
year.

29. OPERATING LEASE ARRANGEMENTS
The Company rented planes and hangars under various operating lease contracts expiring on various dates
until November 2026. The Company does not have a bargain purchase option to acquire the leased planes
and hangar at the expiration of the lease periods.
The rental rates stated in the aircraft lease agreements are fixed or floated. If the agreed-upon rental rate is
floating and will be revised monthly or semiannually, subleasing is not allowed for all the leasearrangements. As of December 31, 2014, the Company has rented eleven A330-300 aircrafts, six
B737-800 aircrafts and three 777-300 ER aircrafts under operating contracts; the lease terms range from 8
to 12 years, with an extension option.
As of December 31, 2014 and 2013, the refundable deposits paid by the Company under operating lease
contracts were $544,694 thousand and $519,112 thousand, respectively. Part of the refundable deposits issecured by credit guarantees. The credit guarantees were $528,196 thousand and $102,381 thousand,respectively.
The future minimum lease payments for the noncancelable operating lease commitments were as follows:
December 31
2014
Up to 1 year
Over 1 year to 5 years
Over 5 years$

5,288,346
20,303,770
18,723,586$ 44,315,702

2013$

2,973,463
10,718,096
11,667,231$ 25,358,790

The lease payments recognized in profit or loss for the current period were as follows:
For the Year Ended December 31
2014
2013
Minimum lease payment$ 4,019,389$ 2,967,896

30. CAPITAL MANAGEMENTThe Company manages its capital to ensure that entities in the Company will be able to continue as going
concerns while maximizing the return to stakeholders through the optimization of the debt and equity
balance. The capital structure of the Company consists of net debt (borrowings offset by cash and cash
equivalents) and equity of the Company comprising issued capital, reserves, retained earnings, other equity
and non-controlling interests.

- 58 -

To support its operating activities and purchase of aircraft, the Company needs to maintain sufficient
capital. Therefore, the goal of capital management is to ensure financial resources and operating plan isable to support the future working capital, capital expenditures, debt repayment and dividend expenses andother needs.

31. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments
1) Fair value of financial instruments not carried at fair value
Except as detailed in the following table, the management considers the carrying amounts offinancial assets and financial liabilities recognized in the financial statements as approximating theirfair values.
December 31
2014
Carrying
Amount$ 27,348,836
83,375,375

2013
Fair Value

Carrying
AmountFair Value$ 28,381,058
83,505,438$ 32,588,023
74,678,088$ 33,210,597
74,718,685

Financial liabilities
Bonds payable
Loans and debt

Some long-term debts and capital lease obligations are floating-rate financial liabilities, so theircarrying values are their fair values. The fair values of long-term debts and private bonds with
fixed interest rates are estimated at the present value of expected cash flows discounted at rates of
0.436% in 2014 and 0.486% in 2013 prevailing in the market for long-term debts.
2) Fair value measurements recognized in the balance sheets
The following table provides an analysis of financial instruments that are measured subsequent toinitial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fairvalue is observable:a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;b) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); andc) Level 3 fair value measurements are those derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data (unobservable inputs).
December 31, 2014
Level 1
Financial assets at FVTPL
Derivative instrument
Derivative financial assets forhedging$

Level 2-$$-

- 59 -

46,812

Level 3$

43,577$

90,389

Total
-

$

$

-

46,812
43,577$

90,389(Continued)

Level 1
Derivative financial liabilities forhedging

Level 2$-

Level 3

$ 2,465,150

Total

$

-

$ 2,465,150(Concluded)

December 31, 2013
Level 1
Financial assets at FVTPL
Derivative instrument
Available-for-sale financial
assetsDerivative financial assets forhedging

Financial liabilities at FVTPL
Derivative instrument
Derivative financial liabilities forhedging$

Level 2-$

Level 323,254

$

Total

-

$

23,25472,440--72,440-140,620-

140,620$

72,440$ 163,874$-$ 236,314

$

-

$

$

-

$

$

-

2,799
24,879$27,678$-2,799
24,879$27,678There were no transfers between Level 1 and 2 in the current and prior periods.
3) Valuation techniques and assumptions applied for the purpose of measuring fair value
The fair values of financial assets and financial liabilities are determined as follows:a) Fair values of financial assets at fair value through profit or loss, available-for-sale financial
assets, and derivative financial assets for hedging are based on their quoted prices in an active
market. If quoted market prices are not available, fair values are estimated using valuation
techniques. For those derivative financial assets for hedging and with no quoted prices, thefair values are determined using valuation techniques incorporating estimates and assumptions
consistent with those generally used by other market participants to price financial instruments.
The valuation techniques are applied to the derivative financial assets by financial institutions,which calculate fair values at the expiry date of each contract.
b) Financial assets carried at cost are investments in unquoted shares, which have no quoted prices
in an active market and entail an unreasonably high cost to obtain verifiable fair values. Thus,
no fair value is presented.
c) Fair values of bonds payable are based on their quoted market prices.
The total amount of fair value listed above is not equal to the total value of the Company because it
is not necessary to disclose the fair value of semifinancial and nonfinancial instruments.

- 60 -

b. Categories of financial instruments
December 31
2014

2013

Financial assets
Financial assets at FVTPL
Available-for-sale financial assets (3)Derivative financial assets for hedging
Loans and receivables (1)$46,812
371,367
43,57727,358,789$

23,254
443,807
140,620
24,542,746$ 27,820,545$ 25,150,427$$

Financial liabilities
Financial liabilities at FVTPL
Derivative financial liabilities for hedging
Financial liabilities at amortized cost (2)2,465,150
127,207,000$ 129,672,150

2,799
24,879135,336,140$ 135,363,818

1) The balances included loans and receivables measured at amortized cost, which comprise cash andcash equivalents, notes and accounts receivables, accounts receivable - related parties, otherreceivables, refundable deposits, other financial asset and other restricted financial asset.
2) The balances included financial liabilities measured at amortized cost, which comprise short-termloans, short-term notes payable, notes and accounts payables, accounts payable - related parties,
other payable, bonds payable and long-term loans, capital lease obligation, part of other current
liabilities, part of other noncurrent liability and guarantee deposit.
3) Including the Financial assets measured at cost.
c. Financial risk management objectives and policies
The Company has risk management and hedging strategies to respond to changes in the economic andfinancial environment and in the fuel market. To reduce the financial risks from changes in interest,
exchange rates and in fuel prices, the Company has its operating costs stay within a specified range byusing appropriate financial hedging instruments and hedging percentages in accordance with the“Processing Program of Derivative Financial Instrument Transactions” approved by Company
stockholders to reduce the impact of market price changes on earnings. These risks include market
risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
In addition, the Company has a risk committee, which meets periodically to evaluate the performanceof derivative instruments and determine the appropriate hedging percentage. This committee informs
the Company of global economic and financial conditions, controls the entire financial risk resulting
from changes in the financial environment and fuel prices, and develops the strategy and response to
avoid financial risk with the assistance of financial risk experts to effect risk management.
1) Market risk
The Company is primarily exposed to the financial risks of changes in foreign currency exchange
rates and interest rates. The Company entered into derivative financial instruments to manage its
exposure to foreign currency risk and interest rate risk.

- 61 -

The Company enters into forward contracts, foreign currency option contracts, and interest swap
contracts with fair values that are highly negatively correlated to the fair values of hedged items andevaluates the hedging effectiveness of these instruments periodically.
a) Foreign currency risk
The Company enters into foreign currency option contracts to hedge against the risks on change
in related exchange rates, enters into forward contracts to hedge against the risks on changes inforeign-currency assets, liabilities and commitments in the related exchange rates.
The Company’s foreign assets and liabilities carrying value denominated in foreign currencies
at the end of reporting periods were as follows:
December 31
2014

2013

Assets
USD
EUR
HKD
JPY
RMB

$

192,053
17,824317,204
1,267,381
1,662,290$

137,638
17,007338,315
2,728,839
1,836,235

Liabilities
USD
EUR
HKD
JPY
RMB

106,077
4,958
70,103
4,495,581
122,666

583,492
7,416
75,9784,274,591
324,472

Sensitivity analysis
The Company was mainly exposed to the U.S. dollar.
The following details the Company’s sensitivity to increase and decrease in New Taiwan dollars(the functional currency) against the relevant foreign currencies. U.S. dollars increase/decrease one dollar against New Taiwan dollars used when reporting foreign currency riskinternally to key management personnel and represents management’s assessment of thereasonably possible change in foreign exchange rates. The sensitivity analysis included only
outstanding foreign currency denominated monetary items and foreign currency forward
contracts designated as cash flow hedges, and adjusts their translation at the end of the reporting
period for U.S. dollars increase/decrease one dollar against New Taiwan dollars change in
foreign currency rates.
When New Taiwan dollars increase one dollar against U.S. dollars and all other variables were
held constant, there would be an decrease in pre-tax profit in 2014 $123,024 thousand andincrease in pre-tax profit in 2013 $91,377 thousand, respectively.
b) Interest rate risk
The Company enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates.

- 62 -

The Company was exposed to interest rate risk because entities in the Company borrowed funds
at both fixed and floating interest rates. The risk is managed by the Company by maintaining
an appropriate mix of fixed and floating rate borrowings, and using interest rate swap contracts
and forward interest rate contracts.
The carrying amount of the Company’s financial assets and financial liabilities with exposure tointerest rates at the end of the reporting period were as follows.
December 31

Fair value interest rate risk
Cash flow interest rate risk

2014

2013

$ 33,174,970
93,380,512$ 31,618,152
88,465,143

Sensitivity analysis
The sensitivity analyses below were determined based on the Company’s exposure to interest
rates for both derivatives and non-derivative instruments at the end of the reporting period.
For floating rate liabilities, the analysis was prepared assuming the amount of the liability
outstanding at the end of the reporting period was outstanding for the whole year. A 100 basis
point increase or decrease was used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.
Had interest rates increase 100 basis points higher and had all other variables been held
constant, the Company’s pretax profit for the year ended December 31, 2014 would havedecreased by $645,000 thousand.
Had interest rates increased 100 basis point and had all other variables been held constant, theCompany’s pretax profit for the year ended December 31, 2013 would have decreased by$700,000 thousand.
c) Other price risk
The Company was exposed to fuel price risk on its purchase of aviation fuel. The Company
enters into fuel swaps contract to hedge against adverse risks on fuel price changes.
Sensitivity analysis
The sensitivity analyses below were determined based on the exposure to fuel price risks at theend of the reporting period.
For the Year Ended December 31
2014
2013
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
Fuel price increase 5%
Fuel price decrease 5%$

31,646(32,545)- 63 -$ 316,498(134,513)$

21,417(13,132)$

91,940(84,966)

2) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in financial loss to the Company. The Company’s credit risk, primarily comes from accounts
receivable generated from operating activities and bank deposits generated from investing activities,
fixed investment income and other financial instruments, operation related credit risk and financial
credit risk are managed separately.
Operation - related credit risk
The Company has established procedures to management operations related credit risk to maintainthe quality of accounts receivable.
To assess individual customers, the Company consider into the financial condition of the customers,
the credit rating agency rating, the Company’s internal credit rating, transaction history and current
economic conditions and many other factors that may affect the repayment. Sometimes, theCompany uses certain credit enhancement tools to reduce the credit risk of specific customers.
Since the customers of the industry is dispersed and non-related, the credit risk concentration is nothigh.
Financial credit risk
Credit risk on bank deposits, investments income and other financial instruments are measured andmonitor by the Company’s finance department. The Company’s trading partners and other parties
were well-performing banks and financial institutions, corporations, and government agencies, therisk of Counterparties fail to discharge an obligation is low, therefore there is no significant credit
risk.
Endorsement Given by Parent on Behalf of Subsidiaries please refer to Note 32 (c).
3) Liquidity risk
The objective of the Company’s management of liquidity is to maintain cash and cash equivalents
are sufficient for operating purpose, marketable securities with high liquidity and sufficient Loan
Commitments and ensure the Company has adequate financial flexibility.
Liquidity and interest risk rate tables
The following table shows the remaining contractual maturity analysis of the Company’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Company may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.
Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other nonderivative financial liabilities were based on theagreed-upon repayment dates. The Company’s liquidity analysis for its derivative financial
instruments is also shown in the following table. The table was based on the undiscounted
contractual net cash inflows and outflows on derivative instruments that settle on a net basis, andthe undiscounted gross cash inflows and outflows on those derivatives that require gross settlement.
When the amount payable or receivable is not fixed, the amount disclosed has been determined byreference to the projected interest rates as illustrated by yield curves at the end of the reporting
period.

- 64 -

December 31, 2014
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments

1.4315

1-3 Months

3 Months to
1 Year$$525,733

2,202,200

1-2 Years$

2-5 Years

1,602,933$

5+ Years

5,342,267$-

1.4627

3,292,800

10,116,038

27,428,713

41,318,518

83,333

4.374

109,489

328,467

437,956

232,084-

2,504

21,879

394

405

-

3,930,526$ 12,668,584$ 29,469,996$ 46,893,274

1-3 Months

3 Months to
1 Year

1-2 Years

2-5 Years

$

$

$

$

83,333

December 31, 2013
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments

1.4260823,934

3,544,250$

2,379,000$

5+ Years

5,474,000$

596,000

1.49972,863,853

21,717,407

13,856,184

33,679,859

1,106,852

4.3739102,972

308,916

411,888

630,157-

2,201

21,879

394

705

-

3,792,960$ 25,592,452$ 16,647,466$ 39,784,421$$

1,702,852

Loan commitments
December 31

Disposal unsecured bank loan limit

2014

2013

$ 18,202,000$ 17,354,000

32. RELATED-PARTY TRANSACTIONS
Details of transactions between the Company and its related parties are disclosed below:
a. Operating transactions
Sales of Goods
For the Year Ended
December 31
2014
2013
Associates
Jointly controlled entities
Major stockholder$ 2,300,506$
16,558$28,605- 65 -$ 2,313,453$
13,877$26,001

Purchases of Goods
For the Year Ended
December 31
2014
2013
$ 3,419,013$ 1,439,844$
60,913$ 3,001,332$ 1,278,542$
53,014

The amount of accounts receivable - related parties at reporting dates were as follows:
December 31
2014
Associates
Jointly controlled entities
Major stockholder

2013

$

490,497
1,749
4,626

$

447,148
594
8,476

$

496,872$

456,218

The amount of accounts payable - related parties at reporting dates were as follows:
December 31
2014
Associates
Jointly controlled entities
Major stockholder

2013$ 1,071,774
365,493
4,699$

985,408
317,284
6,362$ 1,441,966$ 1,309,054

The outstanding accounts payable from related parties are unsecured and will be paid in cash, the termsof making collections and payables is from 30 days to 60 days; accounts receivable from related parties
does not gather any deposit, and no expense was recognized for allowance for impairment loss.
b. Lease of properties
In December 2008, the Company rented out planes to Mandarin Airlines under an operating lease
contract. The monthly rent received is based on flight hours. The rental rate was adjusted in August
2010. In 2014 and 2013, the rentals received amounted $1,399,962 thousand and $1,297,098
thousand, respectively.
The Company rented planes from Mandarin Airlines under an operating lease agreement. The
Company paid the rental by flight hours. The Company paid flight rentals of about $246,377 thousandin 2014 and $228,635 thousand in 2013, respectively.
Under an operating lease agreement, the Company rented flight training machines and flight simulatorsfrom China Aviation Development Foundation to train pilots. The Company paid the rental based on
usage hours. In 2014 and 2013, the Company had paid rentals of about $60,913 thousand and $53,014
thousand, respectively.
In March 2010, the Company signed with CAL Park a one-year renewable operating lease agreement to
use the Operating and Aviation Headquarters building of the Taiwan Taoyuan International Airport at a
fixed rental of $17,752 thousand monthly. In 2014 and 2013, the Company paid rentals of $213,019
thousand each.

- 66 -

c. Endorsements and guarantees
December 31
2014

2013

Authorized
AmountActualAmountUsed

Authorized
AmountActualAmountUsed$ 3,400,000
1,080,000
279,497
180,000
902,278$ 2,905,000
582,671
279,497
12,686-$ 3,400,000
1,080,000
285,564
180,000-$ 3,071,000
361,800
285,564
19,029---16,22915,323

The Company
Cal Park
Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan
Cal Asia
Taikoo Spirit Aerospace
Systems (Jinjiang)
Composite
d. Bonds payable - related parties
Related parties that invested in the first issue of private unsecured bonds in 2012 (Note 19) aresummarized as follows:
December 31, 2014
Aggregate
Units
Par/Dollars

Related Party
The first issue of private unsecured bonds in 2012
Taoyuan International Airport Services
Mandarin Airlines
Abacus Distribution Systems (Taiwan)

100
280
60

$ 100,000
280,000
60,000December 31, 2013
Aggregate
Units
Par/Dollars

Related Party
The first issue of private unsecured bonds in 2012
Taoyuan International Airport Services
Mandarin Airlines
Abacus Distribution Systems (Taiwan)

100
280
60

$ 100,000
280,000
60,000In 2014 and 2013, interest expenses were both $8,776 thousand. As of December 31, 2014 and 2013
the interests payable were both $4,195 thousand.
China Pacific Catering Services purchased the first issue of private unsecured bonds in 2010 (refer toNote 19). All bonds were repayable in May 2013.

- 67 -

e. Compensation of key management personnel
For the Year Ended December 31
2014
2013
Short-term employee benefits
Post-employment benefits$

39,282
2,595$

35,415
4,353$

41,877$39,768The remuneration of directors and key executives was determined by the remuneration committee
having regard to the performance of individuals and market trends.

33. PLEDGED ASSETS
The following assets had been pledged or mortgaged as collaterals for long-term bank loans, leaseobligations and business transactions:
December 31

Property, plant and equipment
Restricted assets - noncurrent
US treasury bills

2014

2013

$ 102,792,761$ 104,982,313

279,497

487,649$ 103,072,258$ 105,469,962

The above US treasury bills had been pledged as collaterals for Freighter Prince Ltd. and Freighter Princess
Ltd., which classified as restricted assets - noncurrent.

34. COMMITMENTS AND CONTINGENT LIABILITIESAs of December 31, 2014, the Company had commitments and contingent liabilities, as follows:a. In January 2008, the Company entered into a contract to buy fourteen A350-900 planes from Airbus,
with the option to buy six more A350-900 planes, with aggregate purchase prices of US$3,933,235
thousand and US$1,802,645 thousand, respectively. Excepted delivery slots of aircrafts are from 2016
to 2018.
Prepayments for aircraft purchases were as follows:
December 31
2014

2013

US$ 449,216
thousandUS$ 315,859
thousandb. In December 2012, the Company entered into a contract to buy six 777-300ER planes from the Boeing
Company, with the option to buy six more 777-300ER planes, at aggregate purchase prices of
US$2,067,261 thousand and US$2,213,015 thousand, respectively. Expected delivery slots ofaircrafts are from 2015 to 2016. The board of the Company has resolved to transfer the purchase rightof the confirm orders for six aircrafts to the aircraft leasing company then lease back.

- 68 -

Prepayments for aircraft purchase were as follows:
December 31
2014

2013

US$ 418,325
thousandUS$ 163,786
thousandc. To replace the old aircraft, the Company entered into the four 777-300ER aircrafts lease contract with
12 years term. The expected delivery slot would be from October 2014. As of December 31, 2014,
the Company had received three aircrafts. The Company entered into three 737-800 aircrafts lease
contract. The expected delivery slot will be September 2015.
d. To provide new generation aircrafts maintenance, develop market share in aircrafts maintenance andupgrade the Group’s maintenance qualify, on August 12, 2014 the board resolved to invest a wholly
owned new aircraft maintenance company. Total capital of this company will be $1.35 billion and thiscompany is founded in January 2015.
e. The Company has been named as a defendant, together with other airline members in Association ofAsia Pacific Airlines, in the civil class action by some passengers alleging the antitrust violation in US
Northern District Court of California. The Company has properly joined the defendants’ Joint
Defense Group. The litigation is in the pretrial procedure, and none of any evidence supporting
Plaintiffs’ allegation has been raised so far.

35. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided:

None.

2) Endorsement/guarantee provided: Table 1 (attached).
3) Marketable securities held: Table 2 (attached).
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20%of the paid-in capital: Table 3 (attached).
5) Acquisition of individual real estates at costs or price of at least NT$100 million or 20% of thepaid-in capital: None.
6) Disposal of individual real estates at cost or prices of at least NT$100 million or 20% of the paid-in
capital: None.
7) Total purchase from or sale to related parties amounting to at least NT$100 million or 20% of thepaid-in capital: Table 4 (attached).
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in
capital: Table 5 (attached).
9) Names, locations, and related information of investees on which the Company exercises significant
influence: Table 6 (attached).
10) Derivative financial transactions: Notes 7 and 9.

- 69 -

b. Investment in Mainland China: Table 7 (attached).

36. SEGMENT INFORMATIONThe Company mainly engages in air transportation services for passengers, cargo and others. The major
revenue-generating asset is the fleet, which is jointly used for passenger and cargo services. Thus, theCompany’s sole reportable segment is the flight segment. For operating segment reporting in the financial
statements, the Company’s reportable segment comprises the flight and the non-flight businessdepartments.

- 70 -TABLE 1

CHINA AIRLINES, LTD. AND INVESTEESENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Counter-party
Endorsement/
Guarantee
Provider

No.

Name

0

China Airlines
Cal Park(the “Company”) Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan Ltd.

1

Cal-Asia
Investment

Nature of Relationship100% subsidiary
54% subsidiary
100% subsidiary
100% subsidiary
80% subsidiary

Taikoo Spirit Aerospace
Investments accounted for
Systems (Jinjiang) Composite
by the cost method

Limits on EachCounter-party’s
Maximum
Endorsement/
Balance for the Ending Balance
Guarantee
PeriodAmounts(Note 1)

Ratio ofAccumulated
Value ofAmount ofCollaterals
Collateral toProperty, Plant Net Equity ofor Equipment
the Latest
Financial
Statement (%)

ActualBorrowingAmount$ 9,734,027
9,734,027
9,734,027
9,734,027
9,734,027$ 3,400,000
1,080,000
297,057
180,000
902,278$ 3,400,000
1,080,000
279,497
180,000
902,278$ 2,905,000
582,671
279,497
12,686-

115,446

16,524--$Note 1:

Based on the Company’s guidelines, the maximum amount of guarantee to an individual counter-party is up to 20% of the Company’s stockholders’ equity.

Note 2:

Based on the Company’s guidelines, the allowable aggregate amount of collateral guarantee is up to 50% of the Company’s stockholders’ equity.

- 71 -

279,497
-

6.99
2.22
0.57
0.37
1.85
-

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)Endorsement/ Endorsement/ Endorsement/
Guarantee
Guarantee
Guarantee
Given by Parent
Given byGiven on Behalf
on Behalf of
Subsidiaries on of Companies in
Subsidiaries Behalf of Parent Mainland China$ 24,335,068
24,335,068
24,335,068
24,335,068
24,335,068

Y
Y
Y
Y
Y

-

-

288,615--YTABLE 2

CHINA AIRLINES, LTD. AND INVESTEESMARKETABLE SECURITIES HELDDECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

December 31, 2014
Percentage ofCarrying Value
Ownership

Relationship with theHolding Company

Financial Statement Account-Financial assets carried at cost - noncurrent

1,359,368-

Financial assets carried at cost - noncurrent

135,937

473--

Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent

1,100,000
12,000,000
559,584

11,00056,023
5,925

Parent company

Available-for-sale financial asset - current

2,074,628

30,082

Bond
First Issue of Private Unsecured Bonds in 2012, Parent company
China Airlines

Bond investments with no active market current

280

280,000

Taoyuan International
Airport Services

Bond
First Issue of Private Unsecured Bonds in 2012 Parent company- China Airlines

Bond investments with no active market current

100

100,000

Cal-Asia Investment

Stock
Taikoo (Xiamen) Landing Gear Services
Taikoo Spirit Aerospace Systems (Jinjiang)
Composite-

Financial assets carried at cost - noncurrent
Financial assets carried at cost - noncurrent-

Beneficial certificates
Mirae Asset Solomon Money Market Fund-Eastspring Inv Well Pool Money Market Fund-

Taishin 1699 Money Market Fund-

Mega Diamond Money Market Fund-

Yuanta Wan Tai Money Market Fund-

Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current

Holding Company Name Marketable Securities Type and Issuer/Name

China Airlines(the “Company”)

Mandarin Airlines

Abacus Distribution
Systems (Taiwan)

Stock
Abacus International Holdings Ltd. - unlistedcommon stock
Abacus International Holdings Ltd. - unlisted
preferred stock
Chung Hua Express Co.
Jardine Air Terminal Services
Regal International Advertising
Stock
China Airlines

Shares/Units$

297,946

13.59

Market Value or
Net Asset Value

$

Note

263,526

Note 1-

Note 1

11.00
15.00
6.22

19,66967,311
679

Note 3--30,082-280,000--

100,000-

75,91922,031

5.83
5.45

18,692
7,240

Note 2
Note 2

265,726

3,294

-

3,294

-

3,375,063

45,102-45,102-4,221,232

56,081-

56,081-

5,142,809

63,289-63,289-974,293

14,506-

14,506-(Continued)- 72 -

Relationship with theHolding Company

Holding Company Name Marketable Securities Type and Issuer/Name

BondFirst Issue of Private Unsecured Bonds in 2012 Parent company- China Airlines
Taiwan Airport Services

Hwa Hsia

Stock
TransAsia Airways

Stock
China Airlines-

Parent company

Beneficial certificates
Taishin 1699 Money Market Fund-

Financial Statement AccountBond investments with no active market current

Shares/Units

60,000-2,265,182

28,881

Available-for-sale financial asset - current

814,152

Financial assets at fair value through profit
or loss - current

506,592

Available-for-sale financial asset noncurrent

60

December 31, 2014
Percentage ofCarrying Value
Ownership$

Market Value or
Net Asset Value

$

Note

60,000-0.40

28,881-

11,805-

11,805

-

6,730

-

6,730

-

Note 1: The subsidiary’s net asset value was $263,526 thousand, which included common stock and preferred stock as of and for the year ended December 31, 2014.
Note 2: The Company does not issue stocks because it is a limited company.
Note 3: The net asset value was calculated using the investee's unaudited financial statements as of September 30, 2014 because the audited financial statements were not prepared on time.
(Concluded)- 73 -TABLE 3

CHINA AIRLINES, LTD. AND INVESTEESMARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name

Type and Issuerof Marketable
Securities

China Airlines
Stock(the “Company”) Tigerair Taiwan
Ltd.

Financial
Statement
Account

Investments
accounted forusing equity
methodBeginning Balance
Counterparty

Relationship-

Subsidiaries

SharesAcquisition

Amount-$-- 74 -

SharesAmount-$-Shares-

DisposalCarrying
AmountAmountGain (Loss)on Disposal

$

$

-

$

-

Ending Balance-

SharesAmount-$-TABLE 4

CHINA AIRLINES, LTD. AND INVESTEESTOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

China Airlines, Ltd.
(“China Airlines”)

Related Party

Nature of RelationshipTaiwan Air Cargo Terminal
Hua Hsia
Mandarin Airlines

Subsidiary
Subsidiary
Subsidiary

China Pacific Catering Services
Cal Park
Taiwan Airport Services
Taoyuan International Airport Service
Global Sky Express
Kaohsiung Catering Services
China Aircraft Services
Eastern United International Logistics

Equity-method investee
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Equity-method investee
Equity-method investee
Equity-method investee

Purchase/
Sale
Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase
Sale
Purchase
Purchase
Purchase$Amount% to
Total

336,731
312,259(2,038,646)
313,983
1,341,017
217,210526,599
1,084,643(146,658)
174,607
235,661
108,070

0.26
0.24
1.46
0.24
1.04
0.17
0.41
0.84
0.10
0.14
0.18
0.08

- 75 -

Note/Account Payable or
Receivable% toPayment Terms Ending Balance
Total

Abnormal Transaction
Payment Terms
30 days
2 months
2 months
2 months
60 days
2 months
40 days
40 days
15 days
60 days
30 days
2 months

Unit Price
$

-

-

$

(47,918)(33,067)
446,339(310,573)(349,135)(217,210)(77,021)(229,731)
9,148(29,275)(20,770)(10,307)

5.64
3.89
4.44
36.58
41.12
25.58
9.07
35.30
0.09
3.45
2.45
1.21

Note

-

TABLE 5

CHINA AIRLINES, LTD. AND INVESTEESRECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITALDECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name

Related Party

Nature ofRelationship

OverdueEnding Balance

Turnover Rate

$ 446,339

4.69

China Airlines, Ltd. (“China Airlines”)

Mandarin Airlines

Subsidiary

Cal Park

China Airlines

Parent company

217,210

Mandarin Airlines

China Airlines

Parent company

China Pacific Catering Services

China Airlines

Taoyuan International Airport Service

China Airlines

Amount$Action Taken

Amounts Received
in Subsequent
PeriodAllowance for
Bad Debts--$ 260,768

1.15

-

-

114,035-

310,573

1.05

-

-

310,573-

Parent company

349,135

4.11

-

-

115,409-

Parent company

299,731

3.57

-

-

298,854-- 76 -$-TABLE 6

CHINA AIRLINES, LTD. AND INVESTEESNAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCEFOR THE YEAR ENDED DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company

Investment Amount
December 31,
December 31,
2014
2013

Investee Company

Location

Main Businesses and Products

Cal Park
Mandarin Airlines
Taiwan Air Cargo Terminal
Cal-Dynasty International
China Pacific Catering Services
Taoyuan International Airport Services
Cal-Asia Investment
Abacus Distribution System (Taiwan)
China Aircraft Service
Asian Compressor Technology Services
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd.
Science Park Logistics
China Pacific Laundry Services

Taoyuan, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan
Los Angeles, U.S.A.
Taoyuan, Taiwan
Taoyuan, Taiwan
Territory of the British Virgin Islands
Taipei, Taiwan
Hong Kong International Airport
Taoyuan, Taiwan
Taipei, Taiwan
Kaohsiung, Taiwan
Taoyuan, Taiwan
Tainan, Taiwan
Taoyuan, Taiwan

Hwa Hsia

Taoyuan, Taiwan

Yestrip
Dynasty Holidays
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Freighter Queen Ltd.
Tigerair Taiwan Co., Ltd.

Taipei, Taiwan
Tokyo, Japan
Taipei, Taiwan
Cayman Islands
Cayman Islands
Cayman Islands
Taipei, Taiwan

Real estate lease and international trade
Air transportation and maintenance of aircraft
Air cargo and storage
A holding company, real estate and hotel services
In-flight catering
Airport services
General investment
Sale and maintenance of hardware and software
Airport services
Research, manufacture and maintenance of engines
Airport services
In-flight catering
Hotel business
Storage and customs of services
Cleaning and leasing of the towel of airlines, hotels, restaurants
and health clubs
Cleaning of aircraft and maintenance of machine andequipment
Travel businessTravel business
Forwarding and storage of air cargo
Aircraft lease
Aircraft lease
Aircraft lease
Air transportation and maintenance of aircraft

Mandarin Airlines

Tigerair Taiwan Co., Ltd.

Taipei, Taiwan

Air transportation and maintenance of aircraft

Cal-Asia Investment

Eastern United International Logistics

Hong Kong

Forwarding and storage of air cargo

HK$

3,329

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

Hwa Hsia

Hwa Shin Building Safeguard

Taoyuan, Taiwan

Building security and maintenance services

China Airlines, Ltd.

$1,500,000
2,042,368
1,350,000US$
26,145439,110147,000
US$
47,01652,200HK$
58,00077,322
12,289140,240
465,000
150,654
137,500$

1,500,000
2,042,368
1,350,000US$
26,145439,110147,000
US$
47,01652,200HK$
58,00077,322
12,289140,240
465,000
150,654
137,500

150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000
47,016,200
13,021,042
28,400,000
7,732,200
20,626,644
14,329,759
46,500,000
13,293,000
13,750,000

100.0093.99
54.00
100.0051.00
49.00
100.00
93.93
20.00
24.50
47.35
35.78
100.0028.48
55.00

50,00050,000100.0081,261

26,265
20,400
2,500
1
1
1
-

1,600,000
408
250,000
1,000
1,000
160,000,000

100.0051.00
25.00
100.00100.0080.00-

20,000,000

HK$

3,329

US$

50,00026,265
20,400
2,500
US$
1
US$
1
1,600,000
JPY

JPY
US$
US$
US$

200,000

10,000Note 1:Adopted the treasury stock method in recognizing investment income or loss.

Note 2:

Represents the consolidated financial information of the foreign holding company disclosed in accordance with local regulations.

Note 3:

The Company does not issue stocks because it is a limited company.

Note 4:The investment income (loss) was calculated using the investee’s unaudited financial statements, because the audited financial statement were not prepared on time.

Note 5:

Freighter Queen Ltd. was put into liquidation this year.

- 77 -

Balance as of December 31, 2014
Net Income (Loss)
Percentage ofof the Investee
Carrying Value
Ownership

Shares$1,496,712
1,278,362
1,316,457
1,160,402
743,817665,127
577,230
435,744
450,111259,605
269,401
232,105
248,177
189,019
166,192$

17,093
155,584(67,224)
36,865416,807
213,597
44,044
177,339
178,322411,087
118,206
137,187
37,90382,25353,488Investment
Income (Loss)$

Note

17,093
179,102(36,301)
36,865
212,571
104,66244,044
166,574
35,664
100,716
55,97149,08637,90323,426
29,419Note 1
Note 2-

32,76532,765Note 1

31,82625,5277,325
32
32
1,440,708

7,696(4,163)
6,419(199,115)

7,696(2,123)
1,605(159,292)

Note 5-10.00

180,089(199,115)(19,911)-1,050,000

35.00

33,58911,417

4,361

Note 4

5,877-

100.00396,039

27,22527,225Note 3

10,0001,000,000

100.0020,015

5,989

5,989

-

TABLE 7

CHINA AIRLINES, LTD. AND INVESTEESINVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars/Renminibi/U.S. Dollars, Unless Stated Otherwise)

China Airlines

Investee Company Name

Main Businesses andProducts

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof
January 1, 2014

Arport Air Cargo Terminal(Xiamen) Co., Ltd.

Forwarding and storage $1,138,914
of air cargo(RMB 224,480)

Indirect(Note 1)

Arport Air Cargo Service(Xiamen) Co., Ltd.

Forwarding and storageof air cargo(RMB

71,03014,000)

Taikoo (Xiamen) Landing
Gear Services

Investment Flows

Outflow$(US$130,316 $
4,118) (US$Indirect(Note 1)

Landing gear
1,167,405
maintenance services (US$36,890)

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

Accumulated
Outflow ofInvestment
from Taiwan asofDecember 31,
2014

Inflow

2,152 $
68)

-

-

-

(US$

61,614
1,947)

Indirect(Note 1)

68,0702,151)-(US$

369,082
11,663)

Indirect(Note 1)

20,127
636)

-

(US$

Yangtze River Express
Airlines

Forwarding and storage
2,536,783
of air cargo(RMB 500,000)

Indirect(Note 1)

1,227,722
38,796)-(US$

Shanghai Eastern Aircraft
MaintenanceAircraft line
maintenance

98,101
3,100)

Indirect(Note 2)

(US$

7,848
248)

-

(US$

Shanghai Eastern UnitedInternational

Forwarding of air cargo
and ocean freight(US$31,6461,000)

Indirect(Note 3)

5,443
172)

-

(US$

(US$

Accumulated Investment in
Mainland China as ofDecember 31, 2014

Investment Amounts
Authorized by Investment
Commission, MOEA

Limit on Investment$723,703 (US$22,869)$744,403 (Note 5)$30,598,265 (Note 6)

Net Income(Loss) of
the Investee

Accumulated
Carrying Value
Inwardas ofRemittance ofDecember 31, Earnings as of2014
December 31,
2014

Investment
Gain (Loss)$(US$

132,468 $
122,7034,186) (RMB 24,381)

14.00

77,242
15,348)

14.00

(US$

61,614
1,947) (RMB
68,0702,151)

-

5.83

(US$

20,127
636)

-

(US$

-

-

-

-

7,848
248)

-

8.00

-

(US$

5,443
172)

-

(US$

-

-

(US$

% Ownershipof Direct orIndirect
Investment

797,437
25,199)
-

-

5.45

17.15

$
(RMB

16,675 $255,397 $3,413) (RMB 50,338) (US$

(RMB

9,872
111,356
2,149) (RMB 21,948)-

57,405
1,814)(Note 4)-75,907
14,961)-(RMB

22,0284,342)

-

(RMB

-

-

7,848
248)

-

(US$

5,427
172)

-

(US$

-

-

(Continued)- 78 -

Taiwan Airport Services

Investee Company

Accumulated
Outward
Remittance forMain Businesses andMethod ofPaid-in Capital
Investment
Products
Investment
from Taiwan asof January 1,
2014

Remittance of Funds

OutwardArport Air Cargo Terminal(Xiamen) Co., Ltd.

Forwarding and storage $1,138,914
of air cargo(RMB 224,480)

Indirect(Note 7)$(US$

125,000 $3,950) (US$Arport Air Cargo Service(Xiamen) Co., Ltd.

Forwarding and storageof air cargo(RMB

Indirect(Note 7)

(US$

60,981
1,927)

71,03014,000)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2014

Inward2,152 $
68)

-

-

-

Accumulated Outward
Remittance for Investment in
Mainland China as of December 31, 2014

Investment Amounts Authorized by
Investment Commission, MOEA

Upper Limit on the Amount of
Investment Stipulated by
Investment Commission, MOEA

$188,133 (US$5,945)$188,133 (US$5,945)$341,374 (Note 6)

Net Income(Loss) of theInvestee% Ownershipof Direct orIndirect
Investment$(US$127,152 $122,703
4,018) (RMB 24,381)

14.00

60,981
1,927) (RMB

14.00

(US$

77,242
15,348)Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2014

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2014

$
(RMB

17,690 $254,014 $
3,413) (RMB 50,058) (US$79,3042,506)(RMB

9,872
111,618
2,149) (RMB 21,996) (US$13,449425)

Note 1: China Airlines, Ltd. the “Company” invested in Cal-Asia Investment, which, in turn, invested in a company located in Mainland China.
Note 2: The Company invested in China Aircraft Services, which in turn, invested in a company located in Mainland China.
Note 3: Cal-Asia Investment invested in Eastern United International Logistics (Holdings), which in turn, invested in a company located in Mainland China.
Note 4: The inward remittance of earnings in 2014 amounted to US$1,814,300.
Note 5: The amount comprised US$21,691,103, RMB4,200,000 and NT$36,666,667.
Note 6: The limit stated in the Investment Commission’s regulation, “Investment or Technical Cooperation in Mainland China Adjudgment Rule,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.
Note 7: Taiwan Airport Services invested in Taiwan Airport Services (Samon), which in return, invested in a company located in Mainland China.
Note 8: The RMB and U.S. dollar amounts of assets are translated at year-end rates and those of gains (losses), at the average of the year-end rates of refer for the reporting period.
Note 9: Yangtze River Express had been disposed by Cal-Asia Investment and the Company had received the disposed amount.
Note 10: Xiamen International Air Cargo Terminal and Xiamen International Airport Air Cargo Storage renamed to Arport Air Cargo Terminal (Xiamen) Co., Ltd. and Arport Air Cargo Service (Xiamen) Co., Ltd., respectively.
(Concluded)- 79 -