China Airlines, Ltd.
Financial Statements for theYears Ended December 31, 2013 and 2012 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. as of December 31, 2013,
December 31, 2012 and January 1, 2012 and the related statements of comprehensive income, changes inequity and cash flows for the years ended. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements basedon our audits.
We conducted our audits in accordance with the Rules Governing the Audit 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 atest 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 allmaterial respects, the financial position of China Airlines, Ltd. as of December 31, 2013, December 31,
2012 and January 1, 2012 and its financial performance and its cash flows for the years then ended, inconformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, orother regulations.
The accompanying schedules of major accounting items of China Airlines, Ltd. as of and for the year
ended December 31, 2013 are presented for the purpose of additional analysis. Such schedules havebeen subjected to the auditing procedures described in the second paragraph. In our opinion, suchschedules are consistent, in all material respects, with the financial statements required to in the firstparagraph.

March 27, 2014
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 acceptedin the Republic of China and not those of any other jurisdictions. The standards, procedures andpractices 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 the interpretation of the two versions, the Chinese-language independent auditors’
report and financial statements shall prevail.
-1-

CHINA AIRLINES, LTD.
BALANCE SHEETS(In Thousands of New Taiwan Dollars)

December 31, 2013
Amount%ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 4 and 6)
Financial assets at fair value through profit or loss - current (Notes 4, 5, 7 and 31)
Available-for-sale financial assets - current (Notes 4, 5, 8 and 31)
Derivative financial assets for hedging - current (Notes 4, 5, 9 and 31)
Receivables:
Notes and accounts, net (Notes 4, 5 and 11)
Notes and accounts - related parties (Note 32)
Other receivables
Current tax assets (Notes 4 and 27)
Inventories, net (Notes 4 and 12)
Other current assets (Note 17)$ 14,970,817
23,25472,440135,0037-7,364,392
456,218
506,379
7,794
6,677,081
1,120,056

4
1
-

4
3
1

9,723,621
282,809505,435
5,577
6,513,721
1,234,291

5
3
1

26,291,653

13

30,696,388

14

5
66
1
4
9

759
371,367
8,633,263
151,677,995
1,468,433
408,222
9,642,493
11,324,489

4
72
1
5
5

374,085
371,367
8,576,000
163,755,397
1,468,433
385,726
8,420,472
7,801,910

4
74
1
4
3

179,723,540

85

183,527,021

87

191,153,390

86$ 211,056,974

100$ 209,818,674

100$ 221,849,778

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

$

59,940,257

NONCURRENT ASSETS
Financial assets at fair value through profit or loss - noncurrent (Notes 4, 5, 7 and 31)
Derivative financial assets for hedging - noncurrent (Notes 4, 5, 9 and 31)
Financial assets carried at cost - noncurrent (Note 10)
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, 33 and 34)
Total noncurrent assets$

9,011,364
1,253,615
62,73852,767

4
1
-

4
3
1

7,058,818
385,058
386,586
10,923
6,708,336
1,361,448

31,333,434

15

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

January 1, 2012
Amount%8,947,397
3,278,739
96,131
108,667

Total current assets

TOTAL

December 31, 2012
Amount%$LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans (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
Notes and accounts payable - related parties (Note 32)
Other payables (Notes 21 and 32)
Current tax liabilities (Notes 4 and 27)
Deferred revenue - current (Notes 4, 5 and 22)
Bonds payable - current portion (Notes 19, 31 and 32)
Loans and debts - current portion (Notes 18, 31 and 33)
Capital lease obligations - current portion (Note 4, 20, 31 and 33)
Other current liabilities

1,600,000
23,702
337,538
1,185,343
9,706,332
7,837,700
6,130,000
16,671,452
5,279,608
2,029,065

1
5
4
3
8
2
1

28

50,800,740

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

100,310,253

Total liabilities

Total current liabilities
NONCURRENT LIABILITIES
Derivative financial liabilities for hedging - noncurrent (Notes 4, 5, 9 and 31)
Bonds payable - noncurrent (Notes 19, 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

EQUITY (Note 25)
Capital stock
Capital surplus
Retained earnings
Legal reserve
Special reserve
Accumulated deficits
Total retained earnings
Other equity
Treasury shares
Total equity
TOTAL

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

-2-$47,076536,480
965,595
12,294,967
9,242,298
12,200,000
18,047,762
3,745,039
1,774,466

6
4
5
8
2
1

24

58,853,683

26

11,43016,205,000
63,749,392
1,825,382
1,183,790
12,811,264
1,967,650
8,968,721
835,533

8
30
1
1
6
1
4
-

25,325
16,550,000
69,385,610
1,379,620
160,021
18,137,067
1,711,677
8,719,782
1,161,972

7
31
1
8
1
4
1

48

107,558,162

51

117,231,074

53

160,250,510

76

158,358,902

75

176,084,757

79

52,000,000
1,924,015

25
1

52,000,000
1,405,394

25
1

46,316,224
422,10121-

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

2
(4)
(2)
-

316,010
3,873,369(6,031,067)(1,841,688)(60,562)(43,372)

2
(3)
(1)
-

799,630
5,162,071(6,941,643)(979,942)
50,010(43,372)

1
2
(3)
-

50,806,464

24

51,459,772

25

45,765,021

21$ 211,056,974

100$ 209,818,674

100$ 221,849,778

100

CHINA AIRLINES, LTD.
STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Loss Per Share)

For the Years Ended December 31
2013
2012
Amount%Amount%REVENUES (Notes 4 and 32)
Passenger
Cargo
Others$ 87,573,928
38,983,676
5,195,073

66
30
4$ 86,167,009
40,808,925
5,159,534

65
31
4

Total revenues

131,752,677

100

132,135,468

100

88,182,486
19,207,426
8,499,498
6,264,507
2,779,053

67
15
6
5
2

85,691,995
19,328,660
8,227,064
7,951,890
2,833,936

65
15
6
6
2

Total costs

124,932,970

95

124,033,545

94

GROSS PROFIT

6,819,707

5

8,101,923

6

OPERATING EXPENSES (Note 26)
Marketing and selling
General and administrative

6,173,781
2,417,803

4
2

6,320,066
2,558,447

4
2

Total operating expenses

8,591,584

6

8,878,513

6(1,771,877)(1)(776,590)-

1,343,415(162,309)(2,047,047)

1(2)

990,564
1,095,584(2,446,604)

1
1
(2)

1,693,481

1

678,283-

827,540-

317,827-

PRETAX LOSS

(944,337)(1)(458,763)-

INCOME TAX EXPENSE (BENEFIT) (Notes 4, 5
and 27)329,709-(40,407)-(1,274,046)(1)(418,356)(Continued)

COSTS (Notes 9, 12, 26, 32 and 34)
Flight operations
Terminal and landing fees
Passenger services
Aircraft maintenance
OthersOPERATING LOSSNONOPERATING INCOME
Other income (Note 25)
Other gains and losses (Notes 9, 26 and 32)
Finance cost (Notes 9 and 26)
Share of the profit of associates and joint ventures(Note 13)
Total nonoperating income

NET LOSS-3-

CHINA AIRLINES, LTD.
STATEMENTS OF COMPREHENSIVE INCOME(In Thousands of New Taiwan Dollars, Except Loss Per Share)

For the Years Ended December 31
2013
2012
Amount%AmountOTHER COMPREHENSIVE INCOME (LOSS)
Exchange differences on translating foreign
operations (Notes 4 and 25)
Unrealized gain (loss) 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 loss on defined benefit plans (Note 24)
Income tax relating to components of othercomprehensive income (Note 27)(70,014)--(33,393)(22,133)-(6,154)(41,911)-(78,973)(447,297)(1)(23,673)-

97,848-Other comprehensive income (loss) for the year,
net of income tax

102,117-(553,962)(1)

TOTAL COMPREHENSIVE LOSS FOR THE YEAR

$ (1,171,929)(1)(972,318)(1)

LOSS PER SHARE (NEW TAIWAN DOLLARS;
Note 28)
Basic and diluted$

67,654-9,701
96,500$(0.25)The accompanying notes are an integral part of the financial statements.

-4-

$

%

$

$(0.08)(Concluded)

CHINA AIRLINES, LTD.
STATEMENTS OF CHANGES IN EQUITY(In Thousands of New Taiwan Dollars)

Retained Earnings

BALANCE AT JANUARY 1, 2012

Share Capital

Capital Surplus

Legal Reserve

UnappropriatedSpecial Reserve
Earnings$ 46,316,224

$

$

$

422,101

799,630

5,162,071$ (6,941,643)

Exchange
Differences on
Translating
Foreign
Operations

Other Equity
Unrealized
Gain (Loss) on
Available-forsale Financial
Assets$$-15,155

Cash Flow
Hedges$34,855

Treasury
Shares Hold by
Subsidiaries

Total Equity$(43,372)$ 45,765,021

Compensation of 2011 deficit
Legal reserve
Special reserve--(483,620)-(1,288,702)

483,620
1,288,702

-

-

-

-

-

Net loss for the year ended December 31, 2012

-

-

-

-

(418,356)

-

-

-

-

(418,356)

Other comprehensive income (loss) for the year ended
December 31, 2012, net of income tax

-

-

-

-

(443,390)(60,381)(31,821)(18,370)-(553,962)

Total comprehensive income (loss) for the year ended
December 31, 2012

-

-

-

-

(861,746)(60,381)(31,821)(18,370)-(972,318)

Issue of common shares for cash

5,683,776

983,293

-

-

-

-

-

-

-

6,667,069

BALANCE AT DECEMBER 31, 2012

52,000,000

1,405,394

316,010

3,873,369(6,031,067)(60,381)(16,666)

16,485(43,372)

51,459,772

Compensation of 2012 deficit
Legal reserve
Special reserve

-

-

5,881
-

52,924(5,881)(52,924)

-

-

-

-

-

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

518,621

-

-

-

-

-

-

-

518,621Net loss for the year ended December 31, 2013

-

-

-

-

(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 income (loss) for the year ended
December 31, 2013

-

-

-

-

(1,319,427)

62,224

5,180

80,094-(1,171,929)

3,926,293$ (7,409,299)(43,372)$ 50,806,464

BALANCE AT DECEMBER 31, 2013

$ 52,000,000$

1,924,015$

321,891$

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

-5-

$

1,843

$

(11,486)$

96,579$

CHINA AIRLINES, LTD.
STATEMENTS OF CASH FLOWS(In Thousands of New Taiwan Dollars)

For the Years Ended
December 31
2013
2012
CASH FLOWS FROM OPERATING ACTIVITIESNet loss
Adjustments to reconcile net loss to net cash generated from (used in)operating activities:
Depreciation expenses
Amortization expenses
Net gain on fair value change of financial assets held for trading
Net loss on fair value change of financial liabilities held for trading
Interest income
Dividend income
Share of profit of associates and joint ventures
Gain on disposal of property, plant and equipment
Loss on inventories and property, plant and equipment
Net loss (gain) 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
Decrease (increase) in notes and accounts receivable
Increase in accounts receivable - related parties
Decrease (increase) in other receivables
Increase in inventories
Decrease in other current assets
Increase in notes and accounts payable
Increase in accounts payable - related parties
Increase (decrease) in other payables
Increase (decrease) in deferred revenue
Decrease in provisions
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-$(944,337)$(458,763)

16,485,432
43,077(133,683)
2,799(275,404)(65,403)(1,693,481)(3,725)
318,081
194,074
2,047,047
882,876(14,512)(48,986)(579,015)

16,169,497
38,818(472,167)(180,921)(186,901)(678,283)(52,864)
294,188(1,159,794)
2,446,604
627,596(14,512)(66,414)-

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)

2,871,376
2,617,777(102,249)
302,753(154,042)
235,714
198,428
219,748(2,737,961)(1,148,626)(181,834)
263,232(198,358)
18,492,042
183,917502,442(2,374,743)(65,343)

20,035,801

16,738,315(Continued)

CHINA AIRLINES, LTD.
STATEMENTS OF CASH FLOWS(In Thousands of New Taiwan Dollars)

For the Years Ended
December 31
2013
2012
CASH FLOWS FROM INVESTING ACTIVITIESPayments 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$ (4,999,109)(14,535)
30,306(103,945)
364,516(7,327,815)(107,919)
77,732$ (4,402,833)(30,409)403,205(378,319)
649,660(4,813,742)(61,314)
90,535(12,080,769)(8,543,217)(1,600,000)
16,900,000(6,130,000)
14,520,000(25,826,529)
149,584(169,075)-

1,600,000
5,785,000(12,200,000)
12,700,000(22,637,507)
106,231(112,899)
6,667,069(2,156,020)(8,092,106)

160,441(39,025)

NET INCREASE IN CASH AND CASH EQUIVALENTS

5,959,453

63,967

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

9,011,364

8,947,397

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 14,970,817

Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) short-term loans
Issue 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
Proceeds of the issue of the common shares
Net cash used in financing activities
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIESThe accompanying notes are an integral part of the financial statements.

-7-$

9,011,364(Concluded)

CHINA AIRLINES, LTD.
NOTES TO FINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2013 AND 2012
(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, 2013 and 2012, CADF and
NDF held 45.9% of the Company’s shares in total.

2. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the board of directors and authorized for issue on March 27,
2014.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
a. New, amended and revised standards and interpretations (the “New IFRSs”) in issue but not yet
effective
The Company has not applied the following International Financial Reporting Standards (IFRS),International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS(SIC) issued by the IASB. As of the date that the financial statements were authorized for issue, theFinancial Supervisory Commission (the “FSC”) has not announced the effective dates for the following
new, amended and revised standards and interpretations (the “New IFRSs”). On January 28, 2014, theFinancial Supervisory Commission (FSC) announced the framework for the adoption of updated IFRSs
version in the ROC. Under this framework, starting January 1, 2015, the previous version of IFRSs
endorsed by the FSC (the 2010 IFRSs version) currently applied by companies with shares listed on the
Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market
will be replaced by the updated IFRSs without IFRS 9 (the 2013 IFRSs version). However, as of thedate that the financial statements were authorized for issue, the FSC has not endorsed the following
new, amended and revised standards and interpretations issued by the IASB (the “New IFRSs”)
included in the 2013 IFRSs version. Furthermore, the FSC has not announced the effective date forthe following New IFRSs that are not included in the 2013 IFRSs version.

-8-

The New IFRSs Included in the2013 IFRSs Version Not Yet Endorsed by the FSC

Effective Date
Announced by IASB (Note 1)

Improvements to IFRSs (2009) - amendment to IAS 39

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”
Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed July 1, 2011
Dates for First-time Adopters”
Amendment to IFRS 1 “Government Loans”
January 1, 2013
Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets andJanuary 1, 2013
Financial Liabilities”
Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets”
July 1, 2011
IFRS 10 “Consolidated Financial Statements”
January 1, 2013
IFRS 11 “Joint Arrangements”
January 1, 2013
IFRS 12 “Disclosure of Interests in Other Entities”
January 1, 2013
Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated
January 1, 2013
Financial Statements, Joint Arrangements and Disclosure ofInterests in Other Entities: Transition Guidance”
Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment
January 1, 2014
Entities”
IFRS 13 “Fair Value Measurement”
January 1, 2013
Amendment to IAS 1 “Presentation of Other Comprehensive Income” July 1, 2012
Amendment to IAS 12 “Deferred Tax: Recovery of Underlying
January 1, 2012
Assets”
IAS 19 (Revised 2011) “Employee Benefits”
January 1, 2013
IAS 27 (Revised 2011) “Separate Financial Statements”
January 1, 2013
IAS 28 (Revised 2011) “Investments in Associates and Joint
January 1, 2013
Ventures”
Amendment to IAS 32 “Offsetting Financial Assets and Financial
January 1, 2014
Liabilities”
IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine”
January 1, 2013

The New IFRSs Not Included in the 2013 IFRSs Version
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”
IFRS 14 “Regulatory Deferral Accounts”
Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”
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”-9-

Effective Date
Announced by IASB (Note 1)
July 1, 2014 (Note 2)
July 1, 2014
Note 3Note 3January 1, 2016
July 1, 2014
January 1, 2014
January 1, 2014
January 1, 2014

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: IASB tentatively decided that an entity should apply IFRS 9 for annual periods beginning on
or after January 1, 2018.
b. Significant impending changes in accounting policy resulted from New IFRSs in issue but not yet
effective
Except for the following, the future initial application of the above New IFRSs is not expected to haveany material impact on the Company’s accounting policies:
1) IFRS 9 “Financial Instruments”
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. Specifically, financial assets that are held within a business model whose
objective is to collect the contractual cash flows, and that have contractual cash flows that are solely
payments of principal and interest on the principal outstanding are generally measured at amortizedcost at the end of subsequent accounting periods. All other financial assets are measured at theirfair values at the end of reporting period. However, the Company may make an irrevocable
election to present subsequent changes in the fair value of an equity investment (that is not held for
trading) in other comprehensive income, with only dividend income generally recognized in profit
or loss.
As for financial liabilities, the main changes in the classification and measurement relate to thesubsequent measurement of financial liabilities designated as at fair value through profit or loss.
The amount of change in the fair value of such financial liability attributable to changes in the credit
risk of that liability is presented in other comprehensive income and the remaining amount ofchange in the fair value of that liability is presented in profit or loss, unless the recognition of theeffects of changes in the liability’s credit risk in other comprehensive income would create or
enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial
liability’s credit risk are not subsequently reclassified to profit or loss. If the above accounting
treatment would create or enlarge an accounting mismatch in profit or loss, the Company presents
all gains or losses on that liability in profit or loss.
2) New and revised standards on consolidation, joint arrangement, and associates and disclosurea) IFRS 10 “Consolidated Financial Statements”
IFRS 10 replaces IAS 27 “Consolidated and Separate Financial Statements” and SIC 12“Consolidation - Special Purpose Entities”. The Company considers whether it has control
over other entities for consolidation. It has control over an investee only if it has (i) powerover the investee; (ii) exposure, or rights, to variable returns from its involvement with theinvestee; and (iii) the ability to use its power over the investee to affect the amount of its
returns. Additional guidance has been included in IFRS 10 to explain when an investor has
control over an investee.

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b) IFRS 11 “Joint Arrangements”
IFRS 11 replaces IAS 31 “Interests in Joint Ventures” and SIC 13 “Jointly Controlled Entities Non-Monetary Contributions by Ventures”. Joint arrangements are classified as joint
operations or joint ventures, depending on the rights and obligations of the parties to thearrangements. Joint ventures are accounted for using the equity method. Under IAS 31, Joint
arrangements are classified as jointly controlled entities, jointly controlled assets, and jointly
controlled operations, and the Company accounts for its jointly controlled entities using the
proportionate consolidation method.
c) IFRS 12 “Disclosure of Interests in Other Entities”
IFRS 12 is a new disclosure standard and is applicable to entities that have interests in
subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In
general, the disclosure requirements in IFRS 12 are more extensive than in the current
standards.
d) Revision to IAS 28 “Investments in Associates and Joint Ventures”
Revised IAS 28 requires when a portion of an investment in an associate meets the criteria to beclassified as held for sale, that portion is classified as held for sale. Any retained portion thathas not been classified as held for sale is accounted for using the equity method. Under
current IAS 28, when a portion of an investment in associates meets the criteria to be classified
as held for sale, the entire investment is classified as held for sale and ceases to apply the equity
method.
Under revised IAS 28, when a portion of an investment in an associate is held by, or is held
indirectly through, an entity that is a venture capital organization, the Group elects to measure
the investment at fair value through profit or loss. Any remaining portion of its investment inthat associate that is not held through a venture capital organization is accounted for using theequity method. Under current IAS 28, the entire investment in the associate is accounted forusing equity method regardless of whether the investments are held by, or are held indirectly
through, an entity that is a venture capital organization.
3) 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.
4) Amendment to IAS 1 “Presentation of Items of Other Comprehensive Income”
The amendment to IAS 1 requires items of other comprehensive income to be grouped into thosethat (1) will not be reclassified subsequently to profit or loss; and (2) will be reclassified
subsequently to profit or loss when specific conditions are met. Income taxes on related items ofother comprehensive income are grouped on the same basis. Under current IAS 1, there were nosuch requirements.
5) Revision to IAS 19 “Employee Benefits”
Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fairvalue of plan assets when they occur, and hence eliminate the “corridor approach” permitted undercurrent IAS 19 and accelerate the recognition of past service costs. The revision requires all- 11 -

actuarial gains and losses to be recognized immediately through other comprehensive income inorder for the net pension asset or liability to reflect the full value of the plan deficit or surplus.
Furthermore, the interest cost and expected return on plan assets used in current IAS 19 are replacedwith a “net interest” amount, which is calculated by applying the discount rate to the net defined
benefit liability or asset.
6) 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.
7) New issued IFRIC 21 “Levies”
IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a government.
It addresses the accounting for a liability whose timing and amount is certain and the accounting fora provision whose timing or amount is not certain. The Company accrues related liability when
the transaction or activity that triggers the payment of the levy occurs. Therefore, if the obligating
event occurs over a period of time (such as generation of revenue over a period of time), theliability is recognized progressively. If an obligation to pay a levy is triggered upon reaching aminimum threshold (such as a minimum amount of revenue or sales generated), the liability isrecognized when that minimum threshold is reached.
c. Significant impending changes in accounting policy resulting from the amendments to the Regulations
Governing the Preparation of Financial Reports by Securities Issuers in issue but not yet effective
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 interpretations will
have on the Company’s financial position and operating result, and will disclose the possible impact
when the assessment is completed.

4. SIGNIFICANT ACCOUNTING POLICIESOn May 14, 2009, the FSC announced the “Framework for the Adoption of IFRSs by the Companies in the
ROC.” In this framework, starting 2013, companies with shares listed on the Taiwan Stock Exchange ortraded on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare their financial
statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities
Issuers and the IFRS, IAS, IFRIC and SIC (the “IFRSs”) endorsed by the FSC.
The Company’s financial statements for the year ended December 31, 2013 is its first IFRS financial
statements prepared in accordance with the Regulations Governing the Preparation of Financial Reports by
Securities Issuers.
Statement of Compliance
The financial statements have been prepared in accordance with the Regulations Governing the Preparationof Financial Reports by Securities Issuers, or other regulations.

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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.
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.

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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.
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.

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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.
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- 15 -

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.
also include land held for a currently undetermined future use.

Investment properties

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.
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.

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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.
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.

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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, 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 initialrecognition of the financial asset, the estimated future cash flows of the investment have been
affected.
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.

- 18 -

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.
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.
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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.
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.

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e. Derivative financial instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to interest
rate and foreign exchange rate 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.
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.

- 21 -

a. Onerous contracts
Where the Company has a contract under which the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be received from the contract, the present
obligations arising under onerous contracts are recognized and measured as provisions.
b. Aircraft lease contracts
When the aircraft lease contracts expire and will be returned to lessor, should assess if existingobligations 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.

- 22 -

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.

- 23 -

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 is based on current taxable profit. Since part of the income and expenses aretaxable 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 is 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.
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.
- 24 -

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 Group is able to control thereversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future. Deferred tax assets arising from deductible temporary differences 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.
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.

- 25 -

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 sales 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.

- 26 -

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 (19), 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

Cash on hand and revolving fund
Checking accounts and demand deposits
Cash equivalentTime deposits with original maturities less than
three months
Repurchase agreements collateralized by bonds

December 31,
2013

December 31,
2012

January 1, 2012

$

$

$

125,312
4,611,834

9,334,516
899,155$ 14,970,817

112,610
4,713,159

123,396
4,256,564

3,985,688
199,907$

9,011,364

3,767,682
799,755$

8,947,397

The market rate intervals of cash in bank and cash equivalent at the end of the reporting period were as
follows:
December 31,
2013

December 31,
2012

January 1, 20120%-2%

0%-2.5%0%-1.17%

0.8%-6.5%
0.58%-0.6%

0.27%-4.45%
0.755%-0.83%

0.15%-4.23%
0.78%-0.87%

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

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
December 31,
2013

December 31,
2012

$

$

January 1, 2012

Financial assets held for trading - current
Derivative financial assets (not under hedge
accounting)Foreign exchange forward contracts- 27 -

23,254-$(Continued)

Non-derivative financial assets
Beneficial certificates
Domestic quoted shares

December 31,
2013

December 31,
2012

$

-

$

$

January 1, 2012

600,404
653,2111,253,615$ 3,004,222
274,517
3,278,739

23,254$ 1,253,615$ 3,278,739

$

2,799

$

-

$

$

-

$

-

$

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

Financial assets at FVTPL - noncurrent
Convertible bonds
China Life Insurance Co., Ltd.

374,085(Concluded)

Of the above convertible bonds, a portion with an aggregate face value of $250,000,000 was converted into
29,137,529 common shares of China Life Insurance Co., Ltd. on April 19, 2012 at the conversion price of
NT$8.58 per share and reclassified to financial assets at fair value through profit or loss - current, and theCompany has disposed all the securities before March, 2013.
At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge
accounting were as follows:

Maturity Date

Notional Amount(In Thousands)

2014.01.03-2014.07.08

NTD2,078,418/USD70,500

Currency
December 31, 2013
Buy

NTD/USDThe Company entered into foreign exchange forward contracts during 2013 and 2012 to manage exposures
to exchange rate fluctuations of foreign currency denominated assets and liabilities. Part of foreignexchange forward contracts were not account for using hedge accounting.

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
December 31, 2013
% ofCarrying Value
Ownership

December 31, 2012
% ofCarrying Value
Ownership

January 1, 2012
% ofCarrying Value
Ownership

Current
Foreign marketable
equity securities
France Telecom$ 72,440-$ 62,738- 28 --$ 96,131-

9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING
December 31,
2013

December 31,
2012

January 1, 2012

Derivative financial assets underhedge accounting
Interest rate swaps
Foreign exchange forward contracts
Currency options
Fuel swaps$

Current
Noncurrent

5,617
27,033
107,970$759
47
38,956
13,764

$

9,674
5,396
93,597$ 140,620$

53,526$ 108,667$ 135,003
5,617$

52,767759$ 108,667-$ 140,620$

53,526$ 108,667

$

2,026
1,255
21,598$15,167
15,771
730
3,464

$

26,578766
3,540
41,517$

24,879$35,132$

72,401$

22,853
2,026$

23,702
11,430$47,07625,325$24,879$35,132$

72,401

Derivative financial liabilities underhedge accounting
Interest rate swaps
Foreign exchange forward contracts
Currency options
Fuel swaps

Current
Noncurrent

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

2014.08.24-2017.06.22

0.9%-1.14%

Range of Interest Rates
Received

December 31, 2013
NTD5,240,000- 29 -

6165 page 3M CP rate
(Continued)

December 31, 2012
NTD6,080,000

2013.04.11-2017.06.22

0.7%-2.42%6165 page 3M CP rate

2012.04.26-2016.11.28

0.99%-2.60%

6165 page 3M CP rate
(Concluded)

January 1, 2012
NTD3,335,000

The interest rate swaps settle on a quarterly basis. The floating rate on the interest rate swaps isReuters 6165 page 3M CP rate. The Company will settle the difference between the fixed and floatinginterest rates on a net basis.
b. Foreign exchange forward
The Company entered into foreign exchange forward contracts to minimize the risk of changes inforeign currency rate on the cash flow exposure related to fuel payments and aircraft rental, which will
be paid in U.S. dollars.
The outstanding foreign exchange forward contracts at the end of the reporting period were as follows:

Maturity Date

Notional Amount(In Thousands)

NTD/USD

2013.01.10-2013.04.11

NTD1,085,297/USD37,000

NTD/USD

2012.01.20-2012.06.15

NTD1,079,105/USD36,000

Currency
December 31, 2013

None

December 31, 2012
Buy
January 1, 2012
Buyc. 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)

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

JPY/USD
JPY/USD

2014.01.10-2014.04.30
2014.01.10-2014.04.30- 30 -

JPY2,440,000/USD24,000
JPY2,340,450/USD24,000(Continued)

Maturity Date

Notional Amount(In Thousands)

JPY/USD
JPY/USD

2013.01.08-2013.06.07
2013.01.08-2013.06.07

JPY1,918,450/USD23,500
JPY1,840,745/USD23,500

JPY/USD
JPY/USD

2012.01.06-2012.05.25
2012.01.06-2012.05.25

JPY1,832,900/USD23,000
JPY1,716,570/USD23,000(Concluded)

Currency
December 31, 2012
Buy USD call option
Sell USD put option
January 1, 2012
Buy USD call option
Sell USD put option

d. 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, 2013
Buy fuel call option
Sell fuel put option

USD
USD

2014.01.31-2014.11.30
2014.01.31-2014.11.30

NTD107,970
NTD21,598

USD
USD

2012.07.01-2013.03.31
2012.07.01-2013.03.31

NTD13,764
NTD3,464

USD
USD

2012.03.31-2012.06.30
2012.03.31-2012.06.30

NTD93,597
NTD41,517

December 31, 2012
Buy fuel call option
Sell fuel put option
January 1, 2012
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 trading ofderivative financial instruments the contractual amounts are shown at the absolute values of fair 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
2013
2012
Decrease in operating cost
Increase in finance cost
Other foreign exchange gain

- 31 -$ 136,089(9,954)
93,206$84,786(19,002)
14,110$ 219,341$

79,894

10. FINANCIAL ASSETS CARRIED AT COST

Unlisted common
stocksAbacus International
Holdings Ltd.
Jardine Air Terminal
Services
Chung Hwa Express
Co.
Regal International
Advertising
Unlisted preferredstocksAbacus International
Holdings Ltd.

Classified according tofinancial asset
measurement
categories
Available-for-salefinancial assets

December 31, 2013
% ofAmountOwnership

December 31, 2012
% ofAmountOwnership

January 1, 2012
% ofAmountOwnership$ 297,946

14$ 297,946

14$ 297,946

14

56,02315

56,02315

56,02315

11,00011

11,00011

11,00011

5,925
370,8946

5,925
370,8946

5,925
370,894

6

473

-

473

-

473

-

$ 371,367$ 371,367$ 371,367$ 371,367$ 371,367$ 371,367

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 can not be reasonably
assessed various estimates of probability, the Company’s management believes its fair value can not be
reliably measured.

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

Notes receivable

December 31,
2013

December 31,
2012

$

$

291,248

258,580

January 1, 2012$

294,226

Accounts receivable
Accounts receivable
Less: Allowance for impairment loss

7,118,748(45,604)
7,073,144

6,852,272(52,034)
6,800,238

9,558,405(129,010)
9,429,395$ 7,364,392$ 7,058,818$ 9,723,621

The average credit period was 30 to 45 days. In determining the recoverability of a accounts receivable,
the Company 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
estimated irrecoverable amounts determined by reference to past default experience of the counterparties
and an analysis of their current financial position.

- 32 -

Movement in the allowance for impairment loss recognized on notes receivable and accounts receivables
were as follow:
For the Year Ended December 31
2013
2012
Balance at January 1
Less: Amounts written off as uncollectible$

52,034(6,430)$ 129,010(76,976)

Balance at December 31$

45,604$52,034

12. INVENTORIES

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

December 31,
2013

December 31,
2012

January 1, 2012

$ 6,246,657
403,380
27,044$ 6,213,227
360,616
134,493$ 6,003,368
352,997
157,356$ 6,677,081$ 6,708,336$ 6,513,721

The cost of inventories recognized as operating costs due to write-downs of inventories was $149,430
thousand and $112,174 thousand.

13. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

Investments in subsidiaries
Investments in associates
Investments in jointly controlled entities

December 31,
2013

December 31,
2012

January 1, 2012

$ 7,909,086
1,069,607
849,425$ 6,784,417
1,033,544
815,302$ 6,780,856
1,028,998
766,146$ 9,828,118$ 8,633,263$ 8,576,000

December 31,
2013

December 31,
2012

January 1, 2012

$ 1,355,357
1,479,619
1,102,073
1,056,433
604,5101,275,313
420,209
252,587$ 1,137,396
1,469,920
1,183,101
1,016,755
509,672
457,661
410,112255,200

a. Investment in subsidiaries

Unlisted companies
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 -$ 1,290,975
1,466,188
1,123,584
1,050,254
419,864
408,831398,588
272,023(Continued)

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

December 31,
2013

December 31,
2012

$

$

210,275
78,81030,98636,353
6,471
30
30
30

$ 7,909,086

193,634
74,62535,78733,543
6,924
29
29
29

$ 6,784,417

January 1, 2012$

203,062
76,25937,612
26,350
7,176
30
30
30

$ 6,780,856(Concluded)

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,
2013

December 31,
2012

January 1, 2012

54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
51%
100%
25%
100%
100%
100%

54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
51%
100%
25%
100%
100%
100%

54%
100%
94%
100%
49%
100%
94%
47%
100%
100%
51%
100%
25%
100%
100%
100%

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.

The Company holds less than 50% of the issued share capital of Tauyuan International Airport Service,Taiwan Airport Service and Global Sky Express, since the Company is able to exercise significant
influence, above companies are 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.
To meet the operation demand, CAL-Asia investment issued common stock for cash $14,535 thousand
and $30,409 thousand in January, 2013 and May, 2012, respectively. The Company acquired all the
additional shares.
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, 2013 and 2012
was based on the subsidiaries’ financial statements audited by the auditors for the same years.

- 34 -

The share of profit or (loss) of subsidiaries recognized under equity method was as follows:2013
The share of profit or loss

$ 1,307,429

2012$

321,870

b. Investments in associates
December 31,
2013

December 31,
2012

$

$

January 1, 2012

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

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

381,819
228,777
233,647
189,301$ 1,033,544$

381,187
239,741
230,666
177,404$ 1,028,998

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,
2013

December 31,
2012

January 1, 2012

20%
36%
25%
28%

20%
36%
25%
28%

20%
36%
25%
28%

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

The investments accounted for by the equity method and the share of profit or loss and othercomprehensive income of those investments for the years ended December 31, 2013 and 2012 wasbased 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, 2013 and 2012 and January 1, 2012, the balance of goodwill were all$53,844 thousand. Shown below are the movements in 2013 and 2012 of goodwill.

Goodwill

Transaction
betweenCompany andSubsidiary

December 31, 2013
Balance, beginning of year
Reduction$

53,844-$

84,910(32,868)

Balance, end of year$

53,844$52,042

Balance, beginning of year
Reduction$

53,844-$ 117,778(32,868)

Balance, end of year$

53,844$

December 31, 2012

- 35 -

84,910

The share of profit or loss of associates recognized under equity method were as follows:
2013
China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics$

28,183
95,71147,306
27,562

2012$

21,06999,84940,921
25,190$ 198,762$ 187,029

December 31,
2013

December 31,
2012

January 1, 2012

$ 685,797
163,628$ 658,232
157,070$ 619,404
146,742$ 849,425$ 815,302$ 766,146

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

China Pacific Catering Services
China Pacific Laundry Services

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,
2013

December 31,
2012

January 1, 2012

51%
55%

51%
55%

51%
55%

China Pacific Catering Services
China Pacific Laundry Services

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.
The summarized financial information on the Company’s interests in the jointly controlled entities
accounted for using the equity method is set out below:
December 31,
2013

December 31,
2012

January 1, 2012

$ 594,412$ 612,753$ 216,257$ 141,483$ 505,338$ 642,430$ 215,248$ 117,218$ 445,465$ 629,009$ 192,776$ 115,552

Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities

For the Year Ended December 31
2013
2012
Income recognized in profit or loss
Expenses recognized in profit or loss
Other comprehensive income$ 1,188,922$ 1,001,632$
4,714- 36 -$ 1,128,437$ 959,053$
7,709

The investments accounted for by the equity method and the share of profit or loss and othercomprehensive income of those investments for the years ended December 31, 2013 and 2012 wasbased on the jointly controlled entities’ financial statements audited by the auditor for the same years.

14. PROPERTY, PLANT AND EQUIPMENT
December 31,
2013

December 31,
2012

January 1, 2012

$

$

$

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

210,350
7,368,106
222,507,866
38,078,519
4,104,144
668,892
1,104,439
3,834

210,350
7,286,415
207,456,231
51,327,865
4,103,114
708,947
1,044,553
34,824

219,850
7,301,389
206,021,290
51,305,619
4,159,897
693,434
996,380
35,469$ 274,046,150$ 272,172,299$ 270,733,328

$

$

$

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

Net value

Freehold Land

Buildings

3,181,061
108,498,875
17,767,630
3,211,113
476,155
965,3032,911,004
90,799,422
22,293,677
3,112,732
476,110
901,359

2,735,168
80,326,571
19,619,778
3,050,569
413,078
832,767$ 134,100,137$ 120,494,304$ 106,977,931$ 139,946,013$ 151,677,995$ 163,755,397

FlightEquipment

Equipment
under Finance
Lease

OthersTotal

Cost
Balance at January 1,
2012
Additions
Disposals
Reclassification
Balance at December 31,
2012$

219,850(9,500)-$7,301,389
21,707(29,218)(7,463)$ 206,021,290
3,629,146(2,537,261)
343,056$

51,305,619
561,209(538,963)-$

5,885,180
190,771(194,015)
9,502$ 270,733,328
4,402,833(3,308,957)
345,095$

210,350$

7,286,415$ 207,456,231$

51,327,865$

5,891,438$ 272,172,299

$

-

$

(2,735,168)(186,191)
10,355-$ (80,326,571)(12,386,691)
1,865,203
48,637$ (19,619,778)(3,210,190 )
536,291-$(4,296,414)(386,425)
192,426212$ (106,977,931)(16,169,497)
2,604,275
48,849$-$(2,911,004)$ (90,799,422)$ (22,293,677)$(4,490,201)

Accumulated depreciationand impairment
Balance at January 1,
2012
Depreciation expense
Disposals
Reclassification
Balance at December 31,
2012$ (120,494,304)(Continued)- 37 -

Freehold Land

Buildings

FlightEquipment

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)(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 equipments
Electro-mechanical equipment
OthersFlight equipments and equipments under finance lease
Airframe
Aircraft cabin
EngineHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Office equipments
Leasehold improvements
Building improvements
OthersAssets leased to others

45-55 years
10-25 years
25 years
3-13 years
20-25 years
7-13 years
20 years
6-8 years
3-10 years
7-10 years
7-15 years
3-15 years
5 years
3-5 years
3-5 years

The Company’s flight equipment and leased assets included the aircraft fuselage, passenger cabin, engine,
heavy maintenance on aircraft engine overhauls, aircraft landing gear overhaul and repairable spare partsand other major component.
For certain buildings, the Company elected to use the revalued amount under ROC GAAP as deemed cost
under IFRSs on January 1, 2012.
Refer to Note 33 for the carrying amounts of property, plant and equipment pledged by the Company.

- 38 -

15. INVESTMENT PROPERTIES

Carrying amount
Investment properties

December 31,
2013

December 31,
2012

January 1, 2012

$ 2,047,448$ 1,468,433$ 1,468,433

The investment properties (land) held by the Company was located in Nankan, which was leased to others.
The fair value of the investment properties held by the Company were $2,316,300 thousand, $1,468,433
thousand and $1,468,433 thousand on December 31, 2013, December 31, 2012 and January 1, 2012,
respectively.
The fair value valuation was performed by the independent qualified professional valuers.
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 $2,047,488 thousand,therefore the all impairment loss was reversed (included in other income - other).
All of the Company’s investment properties were held under freehold interest.

Cost

Accumulated
Impairment

Net Value

Balance at January 1, 2012
Additions$ 2,047,448-$(579,015)-$ 1,468,433-

Balance at December 31, 2012

$ 2,047,448$(579,015)$ 1,468,433

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

Computer
Software Cost

Accumulated
Amortization

Net Value

Balance at January 1, 2012
Additions
Amortization expense$ 726,522
61,314-$ (340,796)(38,818)$ 385,726
61,314(38,818)

Balance at December 31, 2012

$ 787,836$ (379,614)$ 408,222

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

16. OTHER INTANGIBLE ASSETS- 39 -

The above items of other intangible assets were depreciated on a straight-line basis on 2-12 years.

17. OTHER ASSETS
December 31,
2013

December 31,
2012

January 1, 2012$

281,673
462,141
376,242$600,352
446,742314,354$

398,443
451,574
384,274$

1,120,056$

1,361,448$

1,234,291$ 15,397,766
1,767,537
743,250
487,649
14,040$8,708,335
1,085,101
971,933
545,460
13,660$5,115,314
715,842
1,296,794
660,980
12,980$ 18,410,242$ 11,324,489$

7,801,910

Current
Temporary Payments
Prepayments
OthersNoncurrent
Prepayments for aircraft
Prepayments-long-term
Refundable deposits
Restricted assets
Other financial assets

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

Bank loans - unsecured

December 31,
2013

December 31,
2012$$ 1,600,000-

January 1, 2012$-

The range of interest rate on bank loans was 1.15%-1.23% on December 31, 2012.
b. Long-term debts

Unsecured bank loans
Secured bank loans
Commercial paper
Proceeds from issue
Less: Unamortized discountDecember 31,
2013

December 31,
2012

January 1, 2012

$ 19,875,000
34,188,569$ 20,637,428
44,509,550$ 21,486,620
55,715,003

20,655,000
40,481
74,678,088
25,001,950

15,305,000
31,13480,420,844
16,671,452

10,255,000
23,25187,433,372
18,047,762$ 49,676,138$ 63,749,392$ 69,385,610

Less: Current portion- 40 -

Secured bank loans were secured by buildings, machinery equipments and flight equipments, pleaserefer to Note 33.
Bank loans (New Taiwan dollars, U.S. dollars and Japanese yen) are repayable quarterly, semiannuallyor in lump sum upon maturity date. Related information is summarized as follows:
Currency
New Taiwan
Dollars

U.S. Dollars

Japanese Yen$$

Original currency
December 31, 2013
December 31, 2012
January 1, 2012

$ 41,844,455
45,816,983
49,575,497

410,562
664,951895,7421,240,000

Translated in New Taiwan dollars
December 31, 2013
December 31, 2012
January 1, 2012

41,844,455
45,816,983
49,575,497

12,219,114
19,329,995
27,143,692

1.283%-2.647%
1.287%-2.638%
0.7%-2.6%

0.2376%-4.79%
0.308%-4.39%
0.3911%-4.77%

2002/4/112020/2/26
2002/4/112020/2/26
2002/4/112020/2/26

2003/07/222017/09/21
2001/07/202017/09/21
2000/07/062017/09/21

482,434

Interest rates
December 31, 2013
December 31, 2012
January 1, 2012

0.6957%

Periods
December 31, 2013
December 31, 2012
January 1, 20122007/12/262012/12/26

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 1.302%-2.121% in
2013, 1.375% to 2.125% in 2012 and 1.341% to 2.102% in 2011.

- 41 -

19. BONDS PAYABLE

Five-year secured domestic bonds - issued at parinNovember 2007; repayable in November 2010,
November 2011 and November 2012;indicator rate plus 0.4% interest p.a., payable
quarterly
January 2010; repayable in January 2013,
January 2014 and January 2015; indicatorrate plus 1.5% interest p.a., payable
quarterly
February 2010; repayable in February 2013,
February 2014 and February 2015; indicatorrate plus 1.5% interest p.a., payable
quarterly
May 2011; repayable in May 2014, May 2015
and May 2016; 1.35% interest p.a., payableannually
Three-year private unsecured bonds - issued at
par inApril 2009; repayable in April 2012; 3.4%
interest p.a., payable semiannually
June 2009; repayable in June 2012; 3.4%
interest p.a., payable semiannuallyMay 2010; repayable in May 2013; 2.8%
interest p.a., payable semiannually
January 2012; repayable in January 2015; 2%interest p.a., payable semiannually
Five-year private unsecured bonds - issued at parinApril 2009; repayable in April 2014; 3.6%
interest p.a., payable semiannually
June 2009; repayable in June 2014; 3.6%
interest p.a., payable semiannually.
January 2013; repayable in January 2017 and2018; 1.6% interest p.a., payable annually
Seven-year private unsecured bonds - issued at
par inJanuary 2013; repayable in January 2019 and2020; 1.85% interest p.a., payable annually
Five-year convertible bonds - issued at discountinDecember 2013; repayable in lump sum uponmaturity; 1.8245% discount rate p.a.
Less: Bonds payable discountDecember 31,
2013

December 31,
2012

January 1, 2012

$

$

$

-

-

1,200,000

910,000

1,300,000

1,300,000

1,610,000

2,300,000

2,300,000

6,000,000

6,000,000

6,000,000--

8,800,000--

2,200,000-

5,050,000

5,050,000

5,785,000

5,785,000-

1,100,000

1,100,000

1,100,000

800,000

800,000

800,000

5,400,000--

5,500,000--

6,000,000
516,977
32,588,023
4,780,000

22,335,000
6,130,000

28,750,000
12,200,000$ 27,808,023$ 16,205,000$ 16,550,000

Less: Current portion- 42 -

The indicator rate mentioned above is the 90 days’ commercial paper rates in Taiwan’s secondary market.
In May 2010, the Company made a first issue of 2010 private unsecured bonds with aggregate face value of$5,050,000 thousand. The investors included these affiliates: Taoyuan International Airport Services,
Mandarin Airlines, Abacus Distribution Systems (Taiwan), China Pacific Catering Services and Hwa Hsia,
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).
On December 26, 2013, the Company made a first issue of 2013 unsecured convertible bonds, with thecoupon rate of 0 % and the effective interest rate of 1.8245%. 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$12.24, subject to adjustment if there iscapital injection by cash, stock dividend distribution, the proportion of cash dividend per share inmarket price exceed 1.5%. As of December 31, 2013, there was no adjustment to the conversion priceand no convention occurred.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - option. The effective interest rate of the liability
component was 1.8245% per annum on initial recognition.
Proceeds from issue
Equity component
Liability component at the date of issue$ 6,000,000(518,621)$ 5,481,379

20. CAPITAL LEASE OBLIGATIONS
December 31,
2013

December 31,
2012

January 1, 2012

Not later than one year
Later than one year and not later than five years
Later than five years

$

$

$

Present value of minimum lease payments$ 12,817,184$ 18,090,872$ 21,882,106

Current
Noncurrent

$

$

$

Minimum lease payments
4,368,184
7,853,000
596,000

4,368,184
8,449,000$ 12,817,184- 43 -

5,279,608
9,249,264
3,562,000

5,279,608
12,811,264$ 18,090,872

3,745,039
13,321,067
4,816,000

3,745,039
18,137,067$ 21,882,106

The Company leased certain of its A340-300 aircraft and sixteen engines by sale-leaseback under financeleases. The lease terms are from April 2001 to December 2018. 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 rates underlying all obligations under finance leases were floated ranging from 1.306%-2.244% and1.296%-2.273% per annum in 2013 and 2012, respectively.

21. OTHER PAYABLES

Fuel cost
Ground service expense
Repair expense
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expense
Others

December 31,
2013

December 31,
2012

January 1, 2012$

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

3,450,813
980,111
521,967
228,256
1,136,741
591,275
512,673
2,284,496$$ 13,047,948$

9,706,332$ 12,294,967

December 31,
2013

December 31,
2012

January 1, 2012$

7,759,948
2,587,189$

7,168,398
2,636,952$$ 10,347,137$

9,805,350$ 10,953,975$

8,437,388
1,909,749$

7,837,700
1,967,650$$ 10,347,137$

9,805,350$ 10,953,975

December 31,
2013

December 31,
2012

January 1, 2012

$ 2,591,678$ 1,825,382$ 1,379,620

4,462,222
1,407,292
1,158,029
261,163
1,522,629
447,231569,553
2,466,848

22. DEFERRED REVENUE

Advance ticket sales
Frequent flyer program

Current
Noncurrent

8,771,281
2,182,694

9,242,298
1,711,677

23. PROVISIONS

Operating lease - aircraft

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, 2012
Additional provisions recognizedUsage$ 1,379,620
627,596(181,834)

Balance at December 31, 2012

$ 1,825,382

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

Balance at December 31, 2013

$ 2,591,678

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 7% of total monthly salaries andwages 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,
2013

December 31,
2012

January 1, 2012

1.92%
1.92%
1.50%

1.54%
1.54%
1.50%

1.50%
2.00%
1.50%

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

Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:
For the Year Ended December 31
2013
2012
Current service cost
Interest cost
Expected return on plan assets
Past service cost

An analysis by function
Operating cost
Operating expense$ 211,368
163,494(33,061)
59,136$ 242,114
159,455(47,395)
59,136$ 400,937$ 413,310$ 292,966
107,971$ 279,325
133,985$ 400,937$ 413,310

Actuarial gains and losses recognized in other comprehensive income for the years ended December 31,
2013 and 2012 was $41,911 thousand and $447,297 thousand, respectively. The cumulative amountof actuarial gains or losses recognized in other comprehensive income as of December 31, 2013 and2012 was $489,208 thousand and $447,297 thousand, respectively.
The amounts included in the balance sheet on the Company’s obligation on its defined benefit plans
were as follows:
December 31,
2013

December 31,
2012

January 1, 2012

Present value of funded defined benefit
obligation
Fair value of plan assets
DeficitPast service cost unrecognized$ 11,390,715(2,511,360)
8,879,355-$ 11,727,654(2,699,797)
9,027,857(59,136)$ 11,549,012(2,710,959)
8,838,053(118,271)

Accrued pension costs

$

$

$

8,879,355

8,968,721

8,719,782

Movements in the present value of the defined benefit obligations were as follows:
For the Year Ended December 31
2013
2012
Defined benefit obligation at the beginning of the year
Current service cost
Interest cost
Actuarial losses
Benefits paid

$ 11,727,654
211,368
163,494
41,942(753,743)$ 11,549,012
242,114
159,455
425,880(648,807)

Defined benefit obligation at the end of the year

$ 11,390,715$ 11,727,654- 46 -

Movements in the fair value of the plan assets were as follows:
For the Year Ended December 31
2013
2012
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

$ 2,699,797
33,061
31
451,862(673,391)$ 2,710,959
47,395(21,417)
520,715(557,855)

Fair value of plan assets at the end of the year

$ 2,511,360$ 2,699,797

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,
2013

December 31,
2012

January 1, 201238.25%
40.69%
21.06%

40.75%
19.19%
40.06%

40.75%
19.19%
40.06%

100.00%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,
2013

December 31,
2012

January 1, 2012

$ 11,390,715$ (2,511,360)$ 8,879,355$
41,942$(31)$ 11,727,654$ (2,699,797)$ 9,027,857$
425,880$
21,417$ 11,549,012$ (2,710,959)$ 8,838,053$$-

The Company expects to make a contribution of $453,510 thousand to the defined benefit plans during
the annual period beginning after 2013.

25. EQUITY
a. Share capital
1) Common shares
December 31,
2013

December 31,
2012

January 1,
2012

Numbers of shares authorized (inthousands)
Amount of shares authorized

6,000,000$ 60,000,000

6,000,000$ 60,000,000

5,200,000$ 52,000,000

Amount of shares issued
Shares premium$ 52,000,000
1,391,536$ 52,000,000
1,391,536$ 46,316,224
391,867$ 53,391,536$ 53,319,536$ 46,708,091- 47 -

To meet the Company’s financial demand for its operation as well as repay its debt, the board
resolved in June 2011 to publicly issue 568,378 thousand common shares at NT$11.73 per share,with NT$10 par value. On August 10, 2011, the above transaction was approved by the Financial
Supervisory Commission (FSC), and the subscription base date was determined at February 10,2012 by board of directors and the record date of February 10, 2012. The Company completed theregistration of this capital increase on February 20, 2012.
b. Capital surplus

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

December 31,
2013

December 31,
2012$ 1,391,536
11,747955$ 1,391,536
11,747955

1,156
518,6211,156-$ 1,924,015$ 1,405,394

January 1, 2012$

391,867
28,123
955
1,156
-

$

422,101

Under the Company Law, 10% of the publicly issued common shares should be reserved forsubscription by the Company’s employees. In December 2011, the board resolved the amount ofshares and price for subscription by the employees. Under Statement of Financial AccountingStandards No. 39 - “Share-based Payment,” the compensation cost of employee stock options wasrecognized on the grant date, using the fair value method.

Number of
Options(In Thousands)

Weighted-average
ExercisePrice

56,838(33,097)(23,741)$ 11.73
11.73
11.73

Employee stock options on a capital increase in 2012
Options granted
Options exercised
Options expired

Weighted-average fair value of options granted$ 0.4948

Options granted were priced using the Black-Scholes pricing model, and the inputs to the model wereas follows:
Grant-date share price
Exercise price
Expected volatility
Expected life
Expected dividend yieldRisk-free interest rate

$12.15$11.7339.89%
5 days
0.7687%- 48 -

The compensation cost of employee stock options issued for a capital increase in December 2011 wasrecognized at $28,123 thousand, which was reclassified in February 2012 to capital surplus - issuanceof common shares at fair value of $16,376 thousand and capital surplus - expired employee stock
options of $11,747 thousand.
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, employee stock options and conversion 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 both cash and stock dividends (cash dividend should not be less than 30%of the total dividends) or stock dividends only. 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 prioryears should also meet the foregoing 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.
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 stockholders resolved to offset the accumulated deficit of 2011 in the stockholders’ meeting heldon June 15, 2012. The Company offset the accumulated deficit (a net loss of $1,954,271 thousand)against the unappropriated earnings of $181,950 thousand, a special reserve of $1,288,702 thousand,and the legal reserve of $483,620 thousand. No bonus to employees was appropriated for 2011
because of the net loss in that year.

- 49 -

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.
On March 27, 2014, the board resolved to offset the accumulated deficit in 2013. The deficit, included
a net loss of $1,274,046 thousand, negative other retained earning of $45,380 thousand, and theunappropriated deficits of $6,089,873 thousand, the remaining amount of accumulated deficit was$3,483,293 thousand. The Company offset the accumulated deficit against legal reserve of $321,891
thousand. No bonus to employees was appropriated for 2013 because of a net loss in that year.
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.
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.

- 50 -

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
AssetsBalance 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)$ (16,666)

67,654

Balance at December 31, 2013

Cash Flow
Hedge
16,485$ (60,562)--

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$ (11,486)$

96,579$86,936

Balance at January 1, 2012
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

$

-

$

$

34,855$50,010

Balance at December 31, 201215,155$

Total(70,014)--(70,014)-(33,393)-

57,761(33,393)
57,761--(79,894)(79,894)(2,734)
12,367(4,105)
5,677

3,763

(6,839)21,807$ (60,381)$ (16,666)

16,485$ (60,562)- 51 -$

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

Purpose of Treasury Stock

Reduction
Duringthe Year(Note)

Number of
Shares,Endof YearYear ended December 31, 2013
Company’s shares held by its subsidiaries reclassified frominvestment in shares of stock to treasury stock

2,889

-

2,889

2,889

-

2,889

Year ended December 31, 2012
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$ 22,717
8,915$ 22,717
8,915$ 31,632$ 31,632$ 24,895
9,770$ 24,895
9,770$ 34,665$ 34,665$ 27,385
10,747$ 27,385
10,747$ 38,132$ 38,132

December 31, 2013
Mandarin Airlines
Hwa Hsia

2,075
814

December 31, 2012
2,075
814

Mandarin Airlines
Hwa Hsia

January 1, 2012
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.

- 52 -

26. NET PROFIT (LOSS)
a. Other income
For the Year Ended December 31
2013
2012
Interest income
Subsidy income
Dividend income
Others$275,404
182,025
65,403
820,583$

180,921
119,843
186,901
502,899$ 1,343,415$

990,564b. Other gains and losses
For the Year Ended December 31
2013
2012
Gain on disposal property, plant and equipment
Net gain arising on financial assets classified as held for trading
Gain on foreign exchange, net
Others$

3,725
130,884
82,971(379,889)$

52,864472,167
1,058,116(487,563)$(162,309)$ 1,095,584

c. Finance costs
For the Year Ended December 31
2013
2012
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$

562,686
1,289,608
184,799$654,721
1,527,791
245,090

9,954

19,002$ 2,047,047$ 2,446,604

Information about capitalized interest is as follows:
For the Year Ended December 31
2013
2012
Capitalized interest
Capitalization rate

$ 160,749
1.85%-1.91%- 53 -$ 90,300
1.91%-2.26%

d. Depreciation and amortization
For the Year Ended December 31
2013
2012
Property, plant and equipment
Intangible assets

An analysis of deprecation by function
Operating costs
Operating expenses

An analysis of amortization by function
Operating expenses$ 16,485,432
43,077$ 16,169,497
38,817$ 16,528,509$ 16,208,314$ 16,133,489
351,943$ 15,815,499
353,998$ 16,485,432$ 16,169,497$$

43,07738,817e. Employee benefits expense
For the Year Ended December 31
2013
2012
Post-employment benefits
Defined contribution plans
Defined benefit plans

Other employee benefits
Salary expenses
Personnel service expenses

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

120,016
400,937$

114,198
413,309$

520,953$

527,507$ 11,309,878
1,794,616$ 11,438,960
1,905,396$ 13,104,494$ 13,344,356$ 11,167,044
2,458,403$ 11,368,015
2,503,848$ 13,625,447$ 13,871,863

27. INCOME TAX
a. Income tax recognized in profit or loss
The major components of tax expense (benefit) were as follows:
For the Year Ended December 31
2013
2012
Current tax
Current year
Deferred tax
Current year$

Income tax expense (benefit) recognized in profit or loss
- 54 -

76,217$59,997

253,492(100,404)$ 329,709$ (40,407)

A reconciliation of accounting profit and income tax expense (benefit) is as follows:
For the Year Ended December 31
2013
2012
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
Loss carryforwards - generated
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 (benefit) recognized in profit or loss

$ (944,337)$ (458,763)$ (160,537)$ (77,990)

8,389
894,896(257,461)
41,720(485,287)
34,124762
76,893(101,405)
101,740
59,964(438,580)
165,684
526,389372(151,245)
111,418(60,577)
33$ 329,709$ (40,407)

b. Income tax recognized in other comprehensive income
For the Year Ended December 31
2013
2012
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 loss on defined benefit plan
Total income tax recognized in other comprehensive income$ (12,744)(1,648)$ 12,366
5,677(16,406)
7,125

3,763
76,041$ (23,673)$ 97,847

EndingBalancec. Deferred tax assets and liabilities
For the year ended December 31, 2013

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensiv
e Income$ 1,524,377
731,148458,870$$

Deferred tax assets
Temporary differences
Defined benefit plan
Finance leases assets
Dynasty flyer program- 55 -(22,012)(731,148)(10,253)

7,125-$ 1,509,490
448,617(Continued)

Depreciation of significant
Maintenance reserve
Depreciation of major sparepart depreciation
Allowance for reduction of
inventory
OthersLoss carryforwards
Investment credits

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensiv
e Income$$$

342,642
310,315715,383
130,270

EndingBalance-$ 1,058,025
440,585

200,860(85,913)-

114,947

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

46,728
138,678(1,030,590)(148,073)(11,017)-

327,711500,134
4,242,162$ 8,641,671$ 9,642,493$(996,930)$(3,892)$$(790,369)$-

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)

For the year ended December 31, 2012

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensiv
e Income$ 1,461,951
376,090
170,062
234,535$$

EndingBalance

Deferred tax assets
Temporary differences
Defined benefit plan
Finance leases assets
Dynasty flyer program
Depreciation of significant
Maintenance reserve
Depreciation of major sparepart depreciation
Allowance for reduction of
inventory
OthersLoss carryforwards
Investment credits(13,615)
731,148
82,780172,580
75,78076,041-$ 1,524,377
731,148458,870
342,642
310,315

164,219

36,641-200,860

175,924
428,863
5,209,915
198,913105,059(66,294)
62,836(50,840)

9,904-

280,983
372,473
5,272,752
148,073$ 8,420,472$ 1,136,075

85,945$ 9,642,493(Continued)- 56 -$

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensiv
e Income$$

EndingBalance

Deferred tax liabilities
Temporary differences
Finance leases assets
Unrealized foreign exchange
gain
Depreciation difference fromfixed assets
Others$$-790,369-$

790,369

2,110

234,938-

237,048

146,009
11,902(1,480)11,844(11,902)

144,529
11,844160,021$ 1,035,671(11,902)$ 1,183,790(Concluded)$

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

Loss carryforwards
Expiry in 2019
Investment credits
Personnel training
Automated equipment

December 31,
2013

December 31,
2012$ 3,200,000

$

-

$

-

$

65,233$82,844-$143,421-$

65,233$82,844$143,421

Total
Creditable
AmountRemaining
Creditable
AmountExpiryYear$ 40,542$ 40,542

2014

24,691

24,691

2015$ 65,233$ 65,233

January 1, 2012

d. Unused investment tax credits as of December 31, 2013 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
equipmente. Unused tax loss carryforwards as of December 31, 2013 were as follows:
UnusedAmountExpiry Year
2018
2019
2021
2022

$

5,317,848
19,338,075
2,899,496
598,471$ 28,153,890- 57 -

f. Integrated income tax
December 31,
2013

December 31,
2012$ 225,815$ 111,570

Imputation credit accounts

January 1, 2012$

24,942The Company had accumulated deficit as of December 31, 2013 and 2012; 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 2011 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
2013
2012
Basic and diluted loss per share$ (0.25)$ (0.08)

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
2013
2012
Net loss used to calculate loss per share$ (1,274,046)$(418,356)

Number of Shares (Share in Thousands)
For the Year Ended December 31
2013
2012
The weighted average number of shares used to calculate loss per
share

5,197,111

5,134,993

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.

- 58 -

29. OPERATING LEASE ARRANGEMENTS
The Company rented planes and hangars under various operating lease contracts expiring on various dates
until January 2024. 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 quarterly or semiannually, subleasing is not allowed for all the leasearrangements. As of December 31, 2013, the Company has rented ten A330-300 aircrafts and three
B737-800 aircrafts under operating contracts; the lease terms range from 8 to 12 years, with an extension
option.
As of December 31, 2013, December 31, 2012 and January 1, 2012, the refundable deposits paid by theCompany under operating lease contracts were $499,645 thousand, $513,271 thousand and $616,485
thousand, respectively. Part of the refundable deposits is secured by credit guarantees.
The future minimum lease payments for the noncancelable operating lease commitments were as follows:

Up to 1 year
Over 1 year to 5 years
Over 5 years

December 31,
2013

December 31,
2012

January 31,
2012

$

$

$

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

2,903,354
8,102,917
9,385,992$ 20,392,263

3,016,840
6,994,003
6,127,591$ 16,138,434

The lease payments recognized in profit or loss for the current period were as follows:
For the Year Ended December 31
2013
2012
Minimum lease payment$ 2,967,896$ 2,150,535

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.
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.

- 59 -

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, 2013
Carrying
AmountFair Value

December 31, 2012
Carrying
AmountFair Value

January 1, 2012
Carrying
AmountFair Value

Financial liabilities
Bonds payable
Loans and debt

$ 32,588,023
74,678,088$ 33,210,597
74,718,685$ 22,335,000
80,042,844$ 21,330,022
82,049,087$ 28,750,000
87,433,372$ 28,844,150
89,622,206

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
0.486% in 2013, 0.868% to 0.9051% in 2012 and 1.1281 % to 1.25% in 2011 prevailing in themarket 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, 2013
Level 1

Level 2

Level 3

Total

Financial assets at FVTPL
Derivative instrument

$

-

$

23,254$-$23,254

Available-for-sale financial
assetsSecurities listed in othercountries$

72,440

$

-

$

-

$

72,440Financial liabilities at FVTPL
Derivative instrument

$

-

$

2,799

$

-

$

2,799

Derivative financial assets forhedging$-$ 140,620$-$ 140,620

Derivative financial liabilities forhedging

$

-

$

$

-

$

- 60 -

24,87924,879December 31, 2012
Level 1
Financial assets at FVTPL
Domestic money market fundSecurities listed in the ROC$

Level 2

Level 3

Total

600,404
653,211

$

-

$

-

$

600,404
653,211$ 1,253,615

$

-

$

-

$ 1,253,615

Available-for-sale financial
assetsSecurities listed in othercountries$

62,738

$

-

$

-

$

62,738Derivative financial assets forhedging$-$

53,526$-$53,526

Derivative financial liabilities forhedging$-$

35,132$-$35,132January 1, 2012
Level 1
Financial assets at FVTPL
Financial assets designated as
at FVTPL
Securities listed in the ROC

Level 2

Level 3Total

$ 3,004,222
274,517

$

-

$

-

$ 3,004,222
274,517$ 3,278,739

$

-

$

-

$ 3,278,739

Available-for-sale financial
assetsSecurities listed in othercountries$

96,131

$

-

$

-

$

96,131

Derivative financial assets forhedging$-$

108,667$-$

108,667

Derivative financial liabilities forhedging$-$

72,401$-$

72,401

There 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 instruments designated as at fair value through profit or loss,
available-for-sale financial assets, and derivative financial assets for hedging are based on theirquoted 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 andwith no quoted prices, the fair values are determined using valuation techniques incorporating
estimates and assumptions consistent with those generally used by other market participants toprice 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.
- 61 -

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.
b. Categories of financial instruments
December 31,
2013

December 31,
2012

January 1, 2012

$

$

$

Financial assets
Financial assets at FVTPL
Available-for-sale financial assets
Derivative financial assets for hedging
Financial assets carried at cost
Loans and receivables (1)23,25472,440140,620
371,367
24,542,746

1,253,615
62,73853,526371,367
18,372,879

3,652,824
96,131
108,667
371,367
21,430,016$ 25,150,427$ 20,114,125$ 25,659,005

$

$

$

Financial liabilities
Financial liabilities at FVTPL
Derivative financial liabilities for hedging
Financial liabilities at amortized cost (2)2,799
24,879135,336,140$ 135,361,018

35,132
134,068,940$ 134,104,072

72,401
152,511,764$ 152,584,165

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 noncurrent.
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.
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 financial risk committee, which meets periodically to evaluate theperformance of derivative instruments and determine the appropriate hedging percentage. This
committee informs the Company of global economic and financial conditions, controls the entire- 62 -

financial risk resulting from changes in the financial environment and fuel prices, and develops thestrategy 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.
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,
2013

December 31,
2012

January 1, 2012

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

59,054
14,950289,355
2,202,309
1,024,262

123,586
13,462360,576
1,517,912
873,956

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

883,538
7,016
63,061
3,423,950
308,515

1,185,879
9,709
59,8394,872,121
236,237

Assets
USD
EUR
HKD
JPY
RMB
Liabilities
USD
EUR
HKD
JPY
RMB
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
risk internally 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.

- 63 -

The range of sensitive analysis includes assets and liabilities is not denominated by functional
currency. When New Taiwan dollars increase one dollar against U.S. dollars and all othervariables were held constant, there would be an increase in pre-tax profit for the years ended
December 31, 2013 and 2012, $91,377 thousand and $643,649 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.
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. Hedging activities are evaluated regularly to align withinterest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies
are applied.
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.

Fair value interest rate risk
Financial liabilities
Cash flow interest rate risk
Financial liabilities

December 31,
2013

December 31,
2012

January 1, 2012

$ 31,618,152$ 20,737,309$ 24,596,691

88,465,143

101,709,408

113,468,786

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 been 100 basis points higher and had all other variables been held constant,
the Company’s pretax profit for the year ended December 31, 2013 would have decreased by$700,000 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, 2012 would have decreased by$968,000 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.

- 64 -

For the Year Ended December 31
2013
2012
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%$ 21,417(13,132)$ 91,940(84,966)$ 12,381(13,940)$ 18,590(10,300)

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.
- 65 -

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

1-3 Months

3 Months to
1 Year

1-2 Years

2-5 Years$

823,934$ 3,544,250$ 2,379,000$ 5,474,000

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

1-3 Months

3 Months to
1 Year

1-2 Years

2-5 Years

5+ Years$$

1.4260-5+ Years$

596,000

December 31, 2012
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments

1.7331

1,183,067

4,131,029$

2,560,986$

6,827,494$

3,634,103

1.5651

3,966,007

13,472,659

27,757,995

33,221,728

3,064,274

4.27391,719,955

354,917455,626

1,040,599-

19,703

7,474

2,910

5,046

-

6,888,732$ 17,966,079$ 30,177,517$ 41,094,867

1-3 Months

3 Months to
1 Year

1-2 Years

2-5 Years

$

$

$

$

6,698,377

January 1, 2012
The Weighted
Average
Effective
Interest Rate(%)
Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments

1.7051

1,169,604

2,614,628$

5,110,667$

8,366,714

5+ Years$

4,936,414

1.55703,929,651

14,660,865

17,587,615

45,470,464

5,935,269

1.6540186,021478,923

428,758

1,265,859

222,238-

29,85835,297

5,778

1,468

-

5,315,134$ 17,789,713$ 23,132,818$ 55,104,505$ 11,093,921$- 66 -

Loan commitments

Disposal unsecured bank loan limit

December 31,
2013

December 31,
2012

January 1, 2012

$ 14,854,000$ 10,442,000$ 13,881,000

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
2013
2012
Associates
Jointly controlled entities
Major stockholder$ 2,313,453$
13,877$26,001

Purchases of Goods
For the Year Ended
December 31
2013
2012

$ 2,425,572$
13,121$
38,486$ 3,001,332$ 1,278,542$
53,014$ 2,993,968$ 1,224,036$
62,275The amount of accounts receivable - related parties at reporting dates were as follows:
December 31,
2013

December 31,
2012

January 1, 2012

$ 447,148
594
8,476

$ 380,601
1,117
3,340

$ 278,029
1,083
3,697

$ 456,218$ 385,058$ 282,809

Associates
Jointly controlled entities
Major stockholder

The amount of accounts payable - related parties at reporting dates were as follows:

Associates
Jointly controlled entities
Major stockholder

December 31,
2013

December 31,
2012

$

$

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

January 1, 2012

876,764
302,7795,800$

682,566
275,726
7,303$ 1,185,343$

965,595

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 this contract. The rental rate was adjusted in August
2010. In 2013 and 2012, the rentals received amounted $1,297,098 thousand and $1,183,607
thousand, respectively.

- 67 -

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 $228,635 thousandin 2013 and $237,688 thousand in 2012, 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 2013 and 2012, the Company had paid rentals of about $53,014 thousand and $62,275
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 2013 and 2012, the Company paid rentals of $213,019
thousand each.
c. Endorsements and guarantees
December 31, 2013
Authorized
Actual AmountAmountUsed

December 31, 2012
Authorized
Actual AmountAmountUsed

January 1, 2012
Authorized
Actual AmountAmountUsed$ 3,400,000$ 3,071,000$ 3,400,000$ 3,237,000$ 3,400,000$ 3,320,000

1,080,000
285,564
180,000

361,800
285,564
19,0291,080,000
300,478
244,982
180,000

300,478
244,982
118,497

29,520334,243
297,216
180,000

29,520334,243
297,216
146,379

16,22915,32315,852

15,32916,52413,005The Company
Cal Park
Taiwan Air Cargo
Terminal
Freighter Princess Ltd.
Freighter Prince Ltd.
Freighter Queen Ltd.
Cal Hotel
Cal Asia
Taikoo Spirit Aerospace
Systems (Jinjiang)
Composite

The term of making collections and payments for receivables and payables is from 30 days to 2 months,
which is consistent with the Company’s credit policy.
d. Bonds payable - related parties
Related parties that invested in the first issue of private unsecured bonds in 2012 and 2010 (Note 19)
are summarized as follows:
December 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

- 68 -$ 100,000
280,000
60,000December 31, 2012
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
60,000

300
300
60
40
10

300,000
300,000
60,00040,00010,000The first issue of private unsecured bonds in 2010
Taoyuan International Airport Services
Mandarin Airlines
Abacus Distribution Systems (Taiwan)
China Pacific Catering Services
Hwa Hsia

In 2013 and 2012, interest expenses were $8,776 thousand and $28,463 thousand, respectively. As of
December 31, 2013 and 2012 the interests payable were $4,195 thousand and $6,649 thousand.
e. Property transactions
To enhance asset use and improve resource sharing within its network, the Company sold the land andbuilding located on the Taichung Port road to Mandarin Airlines for $29,320 thousand in December
2012. The gain on disposal of properties was $126 thousand, which had been collected in full.
f. Compensation of key management personnel
For the Year Ended December 31
2013
2012
Short-term employee benefits
Post-employment benefits$ 35,415
4,353$ 43,324
4,069$ 39,768$ 47,393

The 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 and business
transactions:

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

December 31,
2013

December 31,
2012

January 1, 2012

$ 104,982,313$ 131,682,059$ 146,284,016

487,649

545,460

660,980$ 105,469,962$ 132,227,519$ 146,944,996- 69 -

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

34. COMMITMENTS AND CONTINGENT LIABILITIESAs of December 31, 2013, the Company had commitments and contingent liabilities, as follows:
Commitmenta. 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, 2013

December 31, 2012

January 1, 2012

US$ 315,859 thousand

US$237,194 thousand

US$119,197 thousand

b. 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.
Prepayments for aircraft purchase were as follows:
December 31, 2013

December 31, 2012

US$ 163,786 thousand

US$26,673 thousandc. To provide more options to its passengers, the board of directors resolved on December 13, 2013 tohave a joint venture with Tiger Airways Singapore Pte. Ltd. to establish a new low-cost carrier (LCC),
which will be named Tigerair Taiwan Co., Ltd. (“Tigerair Taiwan”). The paid-in capital of Tigerair
Taiwan will be $2 billion. The Company and Mandarin Airlines will acquire 90% of Tigerair
Taiwan’s shares for NT$1.8 billion. Tigerair Taiwan had already obtained CAA’s approval for its
establishment and planned to launch its operation before the end of 2014.
Contingent Liabilities
a. The Company has been named as a defendant in the civil class action alleged the fuel surcharges leviedin the shipments to and from the United States in violation of Antitrust Laws. The Company has
properly joined the defendants’ Joint Defense Group. Except duly response to the Court’s orders, thisCompany, together with other Asian airlines defendants, keeps arguing the Plaintiffs’ qualification to be“a class” in this civil class action. During late 2013 and early 2014, the litigation turns to be
prejudicial to defendants according to the lawyers’ observation. After proper assessment, theCompany changed its strategy to diminish impact from this litigation.
This litigation is on-going. After the Company’s valuation at the contingent liabilities subject toavailable information, a proper provision has been recorded in 2013 financial statements. Further
information which is expected to prejudice seriously the position of the Company will be disclosed
upon material developments in due course.

- 70 -

b. The Company has been named as a defendant, together with other members in Association of Asia
Pacific Airlines, by some passengers in the civil class action alleged 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 we have seen any evidence supporting
Plaintiffs’ allegation so far.
c. Due to fraudulent financial reporting of Far Eastern Air transports Corp. (FAT) during the third quarterof 2005 to the third quarter of 2007, the Securities and Futures Investors Protection Center (SFIPC)
raised a civil action in 2009 against FAT’s institutional stockholders, directors and supervisors, whowere alleged jointly and severally liable for the damages at NT$297,061 thousand. The Company wasnamed as a joint defendant in January 2010.
The Company entered into a settlement with SFIPC and the allegation against the Company and the
directors assigned by it was therefore with drawled on May 28, 2013. The settlement is covered by the
directors and officers liabilities insurance subject to US$50,000 deductibles, which does not materially
impact on the finance of the Company.

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

None2) 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 (Note 9)b. Investment in Mainland China: Table 7 (attached)- 71 -

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.

37. FIRST-TIME ADOPTION OF IFRSs
a. Basis of the preparation for financial information under IFRSs
The Company’s date of transition to the Regulations was January 1, 2012. The impact of thetransition to the Regulations (for 2010 IFRS) on the Company’s balance sheets and statements ofcomprehensive income is stated as follows:b. Impact on the transition to IFRSs
1) Reconciliation of the balance sheet as of January 1, 2012
ROC GAAP
Item
Current assets
Cash and cash equivalents
Other receivable
Inventories, net
Deferred tax assets - current
OthersTotal current assets
Long-term investments
Investments accounted for by the equity method
OthersTotal long-term investments
Net properties

Amount$Intangible assets
Other assets
Deposits
Deferred tax assets - noncurrent
OthersTotal other assets
Total assets
Current liabilities
Accrued expenses
Advance ticket sales
Capital lease obligations - current portion
Other current liabilities
Total current liabilities
Long-term liabilities
Capital lease obligations - noncurrent
OthersTotal long-term liabilities
Other liabilities
Accrued pension costs
Deferred profits on sale - leaseback
Deferred tax liabilities - noncurrent
OthersTotal other liabilities
Total liabilities
EquityCapital stock
Capital surplus
Retained earnings
Other equity
Cumulative translation adjustments
Net loss not recognized as pension cost
Unrealized valuation loss on financial instruments
Unrealized revaluation increment
Company shares held by subsidiaries reclassified totreasury stock
Total other equity
Total equity
Total liabilities and equity

8,947,397
510,901
8,587,292
152,994
14,723,919
32,922,503

Difference$(5,466 )(2,073,571 )(152,994 )5,916(2,220,115 )Impact of Transition to IFRSs
Item

Amount$8,947,397
505,435
6,513,721
14,729,835
30,696,388

Cash and cash equivalents
Other receivable
Inventories
OthersTotal current assets
Investments accounted for by the equity method
OthersTotal long-term investments
Property, plant and equipment

9,255,182
758,432
10,013,614
140,532,375(679,182 )(679,182 )
23,223,022

8,576,000
758,432
9,334,432
163,755,397

503,997

1,468,433(118,271 )

1,468,433
385,726

Investment properties
Intangible assets

10,521,794
6,695,423
1,499,890
18,717,107(9,225,000 )
5,831,156
1,725,049(838,910 )
2,507,705

1,296,794
5,831,156
8,420,472
660,980
16,209,402

Deposits
Prepayments - noncurrent
Deferred tax assets
OthersTotal other assets

Note

1)
1)
13)

1), 2), 3), 4), 10),
11)
4)

2)
3)
13)
4)

$ 202,689,596$

11,536,206$ 221,849,778

Total assets$$

41,333471,0172,559,400
3,071,751$

12,294,967
9,242,298
3,745,039
33,571,378
58,853,683

Other payable
Deferred revenue - current
Capital lease obligations - current portion
Other current liabilities
Total current liabilities2), 5), 12)12)2)

12,253,634
8,771,281
1,185,639
33,571,378
55,781,932
1,135,067
85,960,935
87,096,002

17,002,000
17,002,000

18,137,067
85,960,935
104,098,002

Capital lease obligations - noncurrent
OthersTotal long-term liabilities

2)

6,378,717
5,312,853
1,061,014
12,752,584
155,630,518

2,341,065
1,379,620(5,211,895 )
160,021
1,711,677
380,488
20,454,239

8,719,782
1,379,620
100,958
160,021
1,711,677
1,061,014
13,133,072
176,084,757

Accrued pension costs
Provisions - noncurrent
Deferred profits on sale-leaseback
Deferred tax liabilities
Deferred revenue - noncurrent
OthersTotal other liabilities
Total liabilities

6)
7)
2)
13)
12)

46,316,224
422,101
4,189,380(5,169,322 )46,316,224
422,101(979,942 )Capital stock
Capital surplus
Retained earnings(1,598,197 )

1,598,197-(2,325,184 )
50,01041,298(36,554 )2,325,184(41,298 )(6,818 )50,010(43,372 )(3,868,627 )
47,059,078

3,875,265(1,294,057 )

6,638
45,765,021

19,160,182$ 221,849,778$ 202,689,596$- 72 -

Exchange difference on translating foreign
operations
Unrealized valuation loss on financial instruments
Company shares held by subsidiaries reclassified totreasury stock
Total other equity
Total equity
Total liabilities and equity

9)8), 10), 13)11)2) Reconciliation of the balance sheet as of December 31, 2012
ROC GAAP
Item

AmountCurrent assets
Cash and cash equivalents
Other receivable
Inventories, net
Deferred tax assets - current
OthersTotal current assets
Long-term investments
Investments accounted for by the equity method
OthersTotal long-term investments
Net properties$

Current liabilities
Accrued expenses
Advance ticket sales
Capital lease obligations - current portion
Other current liabilities
Total current liabilities
Long-term liabilities
Capital lease obligations - noncurrent
OthersTotal long-term liabilities
Other liabilities
Accrued pension costs
Deferred profits on sale - leaseback
Deferred tax liabilities - noncurrent
OthersTotal other liabilities
Total liabilities
EquityCapital stock
Capital surplus
Retained earnings
Other equity
Cumulative translation adjustments
Net loss not recognized as pension cost
Unrealized valuation loss on financial instruments
Unrealized revaluation increment
Company shares held by subsidiaries reclassified totreasury stock
Total other equity
Total equity
Total liabilities and equity$(5,406 )(1,813,456 )(212,169 )5,380(2,025,651 )Amount$Impact of Transition to IFRSs
Item

9,011,364
386,586
6,708,336
10,185,367
26,291,653

Cash and cash equivalents
Other receivable
Inventories
OthersTotal current assets
Investments accounted for by the equity method
OthersTotal long-term investments
Property, plant and equipment

9,310,864
385,785
9,696,649
133,555,450(677,601 )(14,418 )(692,019 )
18,122,545

8,633,263
371,367
9,004,630
151,677,995

467,358

1,468,433(59,136 )1,468,433
408,222

Investment properties
Intangible assets

10,196,933
6,834,273
1,256,847
18,288,053(9,225,000 )
9,793,436
2,808,220(696,968 )
2,679,688

971,933
9,793,436
9,642,493
559,879
20,967,741

Deposits
Prepayments - noncurrent
Deferred tax assets
OthersTotal other assets$ 190,324,814$ (19,493,860 )$ 209,818,674

$

$

$

Intangible assets
Other assets
Deposits
Deferred tax assets - noncurrent
OthersTotal other assets
Total assets

9,011,364
391,992
8,521,792
212,169
10,179,987
28,317,304

Difference

9,597,896
7,168,399
840,208
27,977,101
45,583,604

108,436
669,301
4,439,400
5,217,137

Note

1)
1)
13)

1), 2), 3), 4), 10),
11)
4)

2)
3)
13)
4)

Total assets

9,706,332
7,837,700
5,279,608
27,977,101
50,800,740

Other payable
Deferred revenue - current
Capital lease obligations - current portion
Other current liabilities
Total current liabilities2), 5), 12)12)2)

248,664
79,965,821
80,214,485

12,562,600
12,562,600

12,811,264
79,965,821
92,777,086

Capital lease obligations - noncurrent
OthersTotal long-term liabilities

2)

6,900,732
4,735,675
749,087
12,385,494
138,183,583

2,067,989
1,825,382(4,649,229 )
1,183,790
1,967,650(2,395,582 )
20,175,318

8,968,721
1,825,382
86,446
1,183,790
1,967,650
749,087
14,781,076
158,358,902

Accrued pension costs
Provisions - noncurrent
Deferred profits on sale - leaseback
Deferred tax liabilities
Deferred revenue - noncurrent
OthersTotal other liabilities
Total liabilities

16)
7)
2)
13)
12)

52,000,000
1,405,394
4,248,184(6,089,872 )

52,000,000
1,405,394(1,841,688 )Capital stock
Capital surplus
Retained earnings(2,599,694 )2,539,314(60,380 )(2,917,215 )(182 )
41,298(36,554 )

2,917,215(41,298 )(6,818 )(182 )(43,372 )(5,512,347 )
52,141,231

5,408,413(681,459 )(103,934 )
51,459,772

18,812,400$ 209,818,674$ 190,324,814$

Exchange difference on translating foreign
operations
Unrealized valuation loss on financial instruments
Company shares held by subsidiaries reclassified totreasury stock
Total other equity
Total equity

9)8), 10), 13)

11)

Total liabilities and equity

3) Reconciliation of the statement of comprehensive income for the year ended December 31, 2012
ROC GAAP
Item
Operating revenue
Operating cost
Gross profits
Operating expenses
Operating profits
Nonoperating income and expenses
Income before income tax
Income tax expense
Net income

Amount$ 132,608,831(123,426,454 )9,182,377(8,839,287 )
343,900(207,747 )
135,343(76,539 )$
58,804

Difference$$(473,363 )(607,091 )(1,080,454 )(39,226 )(1,120,490 )
525,574(594,106 )
116,946(477,160 )Amount$ 132,135,468(124,033,545 )
8,101,923(8,878,513 )(776,590 )
317,827(458,763 )(40,407 )(418,356 )(70,014 )(33,393 )(553,962 )Operating revenue
Operating cost
Gross profits
Operating expenses
Operating loss
Nonoperating income (expenses)
Income before income tax
Income tax benefit
Profit before tax
Exchange differences on translating foreign operations
Unrealized gain (loss) on available-for-sale financial
assetsCash flow hedges
Share of other comprehensive income of associates andjoint ventures
Actuarial gain and loss arising from defined benefit plans
Income tax relating to components of othercomprehensive income
Other comprehensive income for the year

(972,318 )Total comprehensive income for the period(22,133 )(78,973 )(447,297 )
97,848$Impact of Transition to IFRSs
Item

Note
1), 12)1), 2), 5), 6), 7)5), 6), 12)1), 2), 7), 8)
13

c. Explanations of significant reconciling items in the transition to IFRSs
1) Significant component inspection and overhaul costa) Based on IAS 16 “Property, Plant and Equipment,” since the Company uses the cost method torecognize property and equipment (P&E), it should depreciate separately each part of flightequipment with a cost that is significant in relation to the total cost of the equipment.

- 73 -

b) Based on IAS 16, for parts of flight equipment that require regular major inspections, their costis recognized in the carrying amount of such an item when that cost is incurred if therecognition criteria (probability of future economic benefits and cost measurement reliability)
are met and derecognizes the carrying amount of previous replacement cost. If previous
replacement cost is not recognized as property, plant and equipment, the cost of current
inspection will be used as an indication of what the cost of the existing inspection component
was. The Company can use this cost in derecognizing the asset.
c) ROC GAAP does not indicate the accounting for spare parts and maintenance equipment. In
practice, the Company considered these items as inventory and recognized gain and loss after
disposal. Under IFRSs, major aviation spare parts and maintenance equipment with useful
lives of over one year are considered property, plant, equipment and are depreciable over theiruseful lives.
On the transition to IFRSs, the Company made certain adjustments. As of January 1, 2012, theCompany decreased inventory by $2,157,462 thousand; increased property, plant and equipment by$313,724 thousand; increased long-term prepayment by $124,683 thousand; decreased other assets
by $247,750 thousand; and increased other assets - current by $450 thousand. As of December 31,
2012, the Company decreased inventory by $1,943,208 thousand; decreased property, plant andequipment by $456,940 thousand; decreased other assets related to maintenance by $29,445
thousand; and increased long-term prepayment by $624,906 thousand. For the year ended
December 31, 2012, the Company decreased revenue by $19,106 thousand and operating cost by$452,153 thousand, and increased nonoperating income and expenses by $271,378 thousand.
2) Lease
Under ROC GAAP, aircraft used by the Company under a sale-leaseback contract do not meet thecapital lease criteria. Thus, the aircraft were accounted for as being under an operating lease.
Under IAS 17 “Leases,” indicates that whether a lease is a finance lease or an operating leasedepends on the substance rather than the form of the transaction. Thus, the sale-leaseback
contracts on the aircraft and engines used by the Company were reclassified as a finance lease oroperating lease depending on the substance of the transaction.
On the transition to IFRSs, the Company made certain adjustments. As of January 1, 2012 andDecember 31, 2012, the Company increased property, plant and equipment by $23,206,351
thousand and $20,787,426 thousand, respectively; decreased deposits - out by $9,225,000 thousandon both dates; decreased accrued rent payable by $396,469 thousand and $396,901 thousand,respectively; increased lease obligations by $19,561,400 thousand and $17,002,000 thousand,respectively; and decreased deferred profits on sale-leaseback by $5,211,895 thousand and$4,649,229 thousand, respectively. For the year ended December 31, 2012, the Company
increased the depreciation by $2,420,690 thousand; decreased the amortization of deferred profits
on sale-leaseback by $562,667 thousand; decreased operating cost by $2,844,638 thousand; andincreased finance cost by $283,041 thousand.
3) Prepayment for equipment
Under ROC GAAP, prepayment for equipment is accounted for as a fixed asset.
Under IFRSs, prepayment should be classified as long-term prepayment under noncurrent assets.
As of January 1, 2012 and December 31, 2012, the Company reclassified the prepayment forequipment as a long-term prepayment by $5,115,314 thousand and $8,706,035 thousand,respectively.

- 74 -

4) Investment properties
Under ROC GAAP, properties held to earn rentals are classified as fixed assets. Under IFRS,
properties held for earning rentals or for capital appreciation or for both purposes should beclassified as investment properties. As of January 1, 2012 and December 31, 2012, the Company
reclassified the land held to earn rentals from fixed asset to investment properties at its carrying
amount of $1,498,433 thousand.
5) Employee benefits - accumulating compensated absences
Under ROC GAAP, accounting for accumulating compensated absences is not classified clearly.
In practice, it is accounted for as expense when the salaries are paid by entity.
Under IFRSs, the expected cost of accumulating compensated absences is recognized as employees
render services that increase their entitlement to these compensated absences.
As of January 1, 2012 and December 31, 2012, the Company increased other payables by $505,629
thousand and $507,698 thousand, respectively. For the year ended December 31, 2012, theCompany increased salary and wages by $2,069 thousand.
6) Employee benefits - actuarial gain or loss for defined pension plan
Under ROC GAAP, SFAS 18 “Accounting for Pensions” indicates that unrecognized transitional
net transition obligation is amortized on a straight-line basis over the average remaining service
period and included in net pension cost. On transition to IFRSs, the transition policies of IAS 19“Employee Benefits” no longer apply; thus the effects of the unrecognized transitional net
obligations should be fully recognized at once and the retained earnings should be adjusted
accordingly.
Under ROC GAAP, actuarial gain or loss are recognized under the corridor approach and amortizedover the average remaining service years of employees. Under IAS 19, all actuarial gains or losses
recognized in other comprehensive income should be recognized immediately under retained
earnings in the statement of changes in equity. These actuarial gains and losses should not bereclassified in the subsequent period.
As of January 1, 2012 and December 31, 2012, the Company increased accrued pension costs by$2,341,065 thousand and $2,067,989 thousand, respectively; decreased deferred pension cost by$118,271 thousand and $59,136 thousand, respectively; decreased net loss unrecognized as pension
cost by $2,325,184 thousand and $2,917,215 thousand, respectively; and increased investments
accounted for by the equity method by $133,899 thousand and $179,255 thousand, respectively.
For the year ended December 31, 2012, the Company decreased pension cost by $338,945
thousand, and retained earnings by $443,391 thousand, because of actuarial gain or loss on thedefined pension plan.
7) Provisions - noncurrent
Under IAS 37 “Provisions, Contingent Liabilities and Contingent Assets,” the Company shouldmake an assessment on whether there is an existing obligation on its return of an aircraft to thelessor after a lease term expires.
As of January 1, 2012 and December 31, 2012, the Company increased provisions - noncurrent by$1,379,620 thousand and $1,825,382 thousand, respectively; for the year ended December 31, 2012,
the Company increased operating cost by $445,762 thousand.

- 75 -

8) Cumulative translation adjustments - fleet
Under a regulation by the Securities and Futures Bureau (SFB), the carrying amount of an aircraft
acquired and the related U.S. dollar-denominated obligation incurred for the acquisition areaccounted for as an investment in a foreign operating entity if the Company’s use of the aircraft
results in generating revenues and incurring expenses mainly in U.S. dollars. On the balance sheet
date, the carrying amount of the aircraft and the related liability are restated at balance sheet daterates. The difference is recognized in stockholders’ equity as a translation adjustment.
On transition to IFRSs, the above accounting treatment will no longer be used because there is no
similar rule in IFRSs.
As of January 1, 2012 and December 31, 2012 the Company increased property, plant andequipment by $6,286,693 thousand and $8,468,893 thousand, respectively; and increasedtranslation adjustment by $1,976,066 thousand and $3,107,016 thousand respectively; for the year
ended December 31, 2012, the Company increased gains on foreign currency exchange by$1,051,250 thousand.
9) Adjustments to the operating of retained earnings and equity on January 1, 2012
January 1,
2012
Total equity under ROC GAAP
Adjustments to retained earnings
Employee benefits - defined benefit actuarial gains andlossesCustomer loyalty program
Provisions - noncurrent
Property, plant and equipment
Employee benefits - short-term cumulative paid leave
Effect on affiliate’s adoption of IFRSs
Cumulative translation adjustments - aircraft
Other
Income tax effect associated with adjustments to opening
retained earnings
Adjustments to retained earnings
Adjustments to other equity item

$ 47,059,078

Total equity under IFRS

$ 45,765,020(5,127,274)(2,114,868)(1,800,104)(1,984,858)(539,188)(92,921)
4,310,627
272,581
1,906,682(5,169,323)
3,875,265

10) Cumulative translation adjustments
The Company elected to use an exemption under IFRS 1 “First-time Adoption of International
Financial Reporting Standards” of resetting the cumulative translation difference of $50,529
thousand to zero on the transition to IFRSs and thus adjusted retained earnings as of January 1,
2012; because of the above exemptions and the change of the functional currency, the cumulativetranslation adjustments decreased by $47,603 thousand.
11) Revaluation increments
Under IFRS 1, the Company elected to use the revaluation increments under ROC GAAP to someof its plants as deemed cost on the IFRS transition date, and reclassified unrealized revaluation
increments to retained earnings.

- 76 -

As of January 1, 2012 and December 31, 2012, the amount reclassified from unrealized revaluation
increment to plants and buildings of the Company was $41,298 thousand, and the amountreclassified from unrealized revaluation increments to retained earnings was $41,298 thousand.
12) Customer loyalty program
The accounting treatment of reward points given to customers is not specified in ROC GAAP; thus,
reward is recognized as expense using the incremental cost method. Under IFRIC 13 “Customer
Loyalty Programmes,” loyalty award credits should be accounted for as a separate component of asales transaction. The Company should allocate some of the proceeds of a sale to the award
credits and recognize this portion of the proceeds as deferred revenue. The Company should
recognize the deferred revenue as revenue only when it has fulfilled its obligations.
As of January 1, 2012 and December 31, 2012, the Company increased deferred revenue - current
by $471,018 thousand and $669,302 thousand, respectively; increased deferred revenue noncurrent by $1,711,677 thousand and $1,967,650 thousand, respectively; decreased accrued
expense - operating by $67,827 thousand and $2,361 thousand, respectively; decreased revenue by$454,257 thousand; and increased operating expense by $65,466 thousand.
13) Income tax
Under ROC GAAP, entities are required to provide a valuation allowance for deferred tax assets if
it is more likely than not that these assets will be realized. Under IFRSs, deferred income tax
assets are recognized only when it is probable that there will be taxable profits against which thedeferred tax assets can be used. Thus, a valuation allowance account is not needed.
Under ROC GAAP, deferred income tax assets and liabilities are classified as current or noncurrent
on the basis of the classification of the related assets and liabilities for financial reporting. A
deferred tax asset or liability that cannot be related to an asset or liability for financial reporting isclassified as current or noncurrent on the basis of its realization or reversal date. Under IFRSs,
deferred income tax asset and liability is always classified as noncurrent. Moreover, income tax
asset and liability only can be presented as offsetting amount under certain conditions.
IAS 12 “Income Tax” requires the adjustment of income tax assets and liabilities related to theadjustment of retained earnings. As of January 1, 2012 and December 31, 2012, deferred income
tax assets - current decreased by $152,994 thousand and 212,169 thousand; deferred income tax
assets - noncurrent increased by $1,725,049 thousand and $2,808,220 thousand, respectively;deferred income tax liabilities - noncurrent increased by $160,021 thousand and $1,183,790
thousand, respectively; and cumulative translation adjustments decreased by $327,341 thousand and$520,100 thousand, respectively. For the year ended December 31, 2012, income tax expensedecreased by $116,946 thousand, and the effect on retained earnings due to defined benefit actuarial
gains and losses decreased by $76,041 thousand.
14) Presentation of the stand-alone comprehensive income statement
After adopting IFRSs, stand-alone comprehensive income statement contains current year income
and other comprehensive income. The Company reclassified some of accounts for thepresentation under IFRSs.

- 77 -

d. Under Legal Interpretation No. 1010012865 issued by the Financial Supervisory Commission on April
6, 2012, on the first-time adoption of IFRSs, the Company should appropriate to a special reserve anamount that is the same as the sum of unrealized revaluation increment and cumulative translationdifferences (gains) transferred to retained earnings as a result of the Company’s use of exemptions
under IFRS 1, but if the increase in retained 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. This special reserve may be reversed inproportion to the usage, disposal or reclassification of the related assets and thereafter distributed. On
the date of transition to IFRSs, the Company’s retained earnings decreased; thus, the Company did not
any appropriate special reserve.
e. The Company has prepared the above assessment in compliance with (a) the 2010 version of the IFRSs
translated by the Accounting Research and Development Foundation and endorsed by the Financial
Supervisory Commission (FSC) and (b) the amended Guidelines Governing the Preparation of
Financial Reports by Securities Issuers issued by the FSC on December 22, 2011. However, IASB has
issued new, amended and revised standards and interpretations. Hence, those assessment mentioned
above may change as other laws and regulations may be amended to comply with the adoption of
IFRSs. Actual results may differ from this assessment.
f. Explanation of material adjustments to the statement of cash flows.
Under ROC GAAP, in the statement of cash flows prepared using the indirect method, interest paid andreceived and dividends received are classified as operating activities. In addition, interest anddividends received are not required to be disclosed separately. However, based on IAS 7 “Statementof Cash Flows,” interest and dividends received should be disclosed separately and classified underoperating activities.
Except for the above difference, there are no other significant differences between ROC GAAP and
IFRSs in the statement of cash flows.

- 78 -TABLE 1

CHINA AIRLINES, LTD. AND INVESTEESENDORSEMENT/GUARANTEE PROVIDEDFOR THE YEAR ENDED DECEMBER 31, 2013
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Counter-party

No.

Endorsement/
Guarantee
ProviderName

0 China Airlines
Cal Park(the “Company”) Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Freighter Queen Ltd.
Cal Hotel
1 Cal-Asia
Investment

Ratio of
Limits on Each
Accumulated
Counter-party’s
Value ofMaximum
Amount ofEndorsement/
Collaterals
Balance for the Ending Balance
Collateral to Net
Guarantee
Property, Plant,
Nature of Relationship
PeriodEquity of theAmountsor Equipment
Latest Financial(Note 1)
Statement (%)

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)

100% subsidiary
54% subsidiary
100% subsidiary
100% subsidiary
100% subsidiary

Taikoo Spirit Aerospace
Investments accounted
Systems (Jinjiang) Composite for by the cost method$ 10,161,293
10,161,293
10,161,293
10,161,293
10,161,293
255,063$

3,400,000
1,080,000
309,474
203,295
180,000$

16,3263,400,000
1,080,000
285,564
180,000
16,229$Endorsement/
Guarantee
Given Onbehalf ofCompanies in
MainlandChina

285,564
-

6.69
2.13
0.56
0.35

$ 25,403,232
25,403,232
25,403,232
25,403,232
25,403,232

Y
Y
Y
Y
Y

-

-

-

1.27

637,657--

Y

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.

- 79 -

Endorsement/ Endorsement/
Guarantee
Guarantee
Given byGiven byParent on
Subsidiaries on
Behalf ofBehalf of
Subsidiaries
ParentTABLE 2

CHINA AIRLINES, LTD. AND INVESTEESMARKETABLE SECURITIES HELDDECEMBER 31, 2013
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

December 31, 2013
Percentage ofCarrying Value
Ownership

Relationship with theHolding Company

Financial Statement Account-

Available-for-sale - current
Financial assets carried at cost - noncurrent

195,587
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
592,500

11,00056,023
5,925

11.00
15.00
6.22

16,74934,577
1,248

Note 4Note 3

Parent company-

Available-for-sale financial asset - current
Available-for-sale financial asset - current

2,074,628
8,274

22,7173,064-

22,717
3,064

-

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

Bond investments with no active market noncurrent

280

280,000-

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 noncurrent

100

100,000-

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-

73,665
21,3785.83
5.45

37,952
7,549

Note 2
Note 2

Beneficial certificates
Mirae Asset Solomon Money Market Fund-

265,726

3,276

-

3,276

-

Eastspring Inv Well Pool Money Market Fund-

2,941,566

39,091-39,091-Taishin 1699 Money Market Fund-

2,368,105

31,287-31,287-

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

2,910,773

43,103-

43,103-

Holding Company Name Marketable Securities Type and Issuer/Name

China Airlines(the “Company”)

Mandarin Airlines

Abacus Distribution
Systems (Taiwan)

Stock
France Telecom
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
France Telecom

Shares/Units$

72,440297,946

13.59

Market Value or
Net Asset Value

$

Note

72,440233,454

Notes 1 and 4-

Notes 1 and 4(Continued)- 80 -

Relationship with theHolding Company

Holding Company Name Marketable Securities Type and Issuer/Name

Yuanta De-Bao Money Market Fund-

Mega Diamond Money Market Fund-

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

Hwa Hsia

Stock
TransAsia Airways-

Titan V.C. Corp.

-

Stock
China Airlines

Parent company

Beneficial certificates
Taishin 1699 Money Market Fund-

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

Shares/Units
558,151

December 31, 2013
Percentage ofCarrying Value
Ownership$

Market Value or
Net Asset Value
$

Note

6,557

-

6,557

5,100,962

62,412-62,412

Bond investments with no active market noncurrent

60

60,000-60,000-Available-for-sale financial asset noncurrent
Financial assets carried at cost - noncurrent

2,265,182

28,7670.40

28,767-

1,448,171

2,065

5.30

6,546

-

Available-for-sale financial asset - current

814,152

8,915

-

8,915

-

Financial assets at fair value through profit
or loss - current

506,592

6,693

-

6,693

-

Note 1: The subsidiary’s net asset value was $233,454 thousand, which included common stock and preferred stock as of and for the year ended December 31, 2013.
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 and for the year ended December 31, 2013 because the audited financial statements were not prepared on time.
Note 4: The net asset value was calculated using the investee's audited financial statements as of and for the six months ended June 30, 2013 because the audited financial statements were not prepared on time.
(Concluded)- 81 -TABLE 3

CHINA AIRLINES, LTD. AND INVESTEESMARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITALFOR THE YEAR ENDED DECEMBER 31, 2013
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name

China Airlines

Marketable Securities Type and Issuer/Name

Beneficial certificates
UPAMC James Bond Money Market Fund
Union Money Market Fund
Taishin 1699 Money Market Fund
Capital Money Market FundEastspring Inv Well Poll Money Market

Stock
China Life Insurance Co., Ltd.

Note:

Beginning Balance

Financial Statement AccountCounter-party

Nature ofRelationship

Shares/Units

Financial assets at fair value throughprofit or loss - current
Financial assets at fair value throughprofit or loss - current
Financial assets at fair value throughprofit or loss - current
Financial assets at fair value throughprofit or loss - current
Financial assets at fair value throughprofit or loss - current--

12,332,965.40

-

-

-

Financial assets at fair value throughprofit or loss - current

Acquisition (Note)

AmountDisposalAmount200,000

23,393,785.19

15,603,545.13

200,000

-

-

-

-

-

-

Amount35,726,750.59

35,022,892.78

450,000

50,626,437.91

650,738-

19,022,256.04

250,000

19,022,256.04--

44,624,047.60

700,000---

66,568,415.70-

16,424,127

430,312-- 82 -$

Shares/Units

380,000

Including valuation gain and loss on financial assets at the end of the period.

$

Shares/Units$

580,770

Ending Balance

Carrying Value

Gain (Loss) on
Disposal$$

580,000

Shares/Units

Amount

770

-

$

-

650,000

738--

250,224

250,000

224--

44,624,047.60

700,604

700,000

604--

880,000

66,568,415.70

880,760

880,000

760

-

-

-

16,424,127

466,052

430,31235,740--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, 2013
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)Transaction Details
Company Name

China Airlines, Ltd. (“China Airlines”)

Related Party

Nature of Relationship

Purchase/
Sale

Amount% to Total

268,440
213,019(2,043,020)
303,434
1,197,513
996,881
206,347
376,613129,058
272,4150.22
0.17(1.55)
0.25
0.97
0.81
0.17
0.31
0.10
0.22

30 days
2 months
2 months
2 months
60 days
40 days
30 days
40 days
40 days
2 months

Taiwan Air Cargo Terminal
Cal Park
Mandarin Airlines

Subsidiary
Subsidiary
Subsidiary

China Pacific Catering Services
Taoyuan International Airport Service
China Aircraft Services
Taiwan Airport Services
Kaohsiung Catering Services
Hwa Hsia

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

Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase

Taiwan Air Cargo Terminal

China Airlines

Parent company

Sale(268,440)(20.49)Cal Park

China Airlines

Parent company

Sale(213,019)

Mandarin Airlines

China Airlines

Parent company

Purchase
Sale

China Pacific Catering Services

China Airlines

Parent company

Taoyuan International Airport Service

China Airlines

Parent company

China Aircraft Services

Payment Terms

Unit Price-

2 months-(72.16)2 months

2,043,020(303,434)

28.33(4.09)

Sale(1,197,513)

Sale

China Airlines

Taiwan Airport Services

Note/Account Payable or
Receivable
Ending Balance$

Note% to Total(41,332)(159,764)
422,956(286,863)(303,544)(307,188)(36,048)(66,572)(20,110)(50,658)(1.37)(5.28)
5.04(9.48)(10.03)(10.15)(1.19)(2.20)(0.66)(1.67)--

41,332

46.59

-

-

-

159,76488.08-

2 months
2 months--(422,956)
286,863(41.66)68.40-(57.70)60 days--

303,54471.12-(996,881)(39.94)30 days--

307,188

69.33-

Investor using equity method Sale

(206,347)(13.28)30 days--

36,048

14.06-

China Airlines

Parent company

Sale(376,613)(42.08)45 days--

66,572

54.36-

Kaohsiung Catering Services

China Airlines

Investor using equity method Sale

(129,058)(9.14)

40 days--

20,11010.39-

Hwa Hsia

China Airlines

Parent company(272,415)(76.60)2 months--

50,65888.32-- 83 -$

Payment Terms
-

Sale

$

Abnormal Transaction

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, 2013
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name

Related Party

Nature ofRelationship

OverdueEnding Balance

Turnover Rate

$ 422,956

6.23

China Airlines, Ltd. (“China Airlines”)

Mandarin Airlines

Subsidiary

Mandarin Airlines

China Airlines

Parent company

286,863

Taoyuan International Airport Service

China Airlines

Parent company

China Pacific Catering Services

China Airlines

Cal Park

China Airlines

Amount$Action Taken

Amounts Received
in Subsequent
PeriodAllowance for
Bad Debts--$ 226,108

1.17

-

-

209,562-

307,188

3.51

-

-

306,202-

Parent company

303,544

4.03

-

-

197,045-

Parent company

159,765

1.33

-

-

55,918-- 84 -$-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, 2013
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company

China Airlines, Ltd.

Investee Company

Taiwan Air Cargo Terminal
Cal Park
Cal-Dynasty International
Mandarin Airlines
Taoyuan International Airport Services
China Pacific Catering Services
China Aircraft Service
Cal-Asia Investment

Location

Main Businesses and Products

Investment Amount
December 31,
December 31,
2013
2012

Balance as of December 31, 2013
Net Income (Loss)
Percentage ofof the Investee
SharesCarrying Value
Ownership$

1,350,000
1,500,000US$
26,1452,042,368
147,000
439,110HK$
58,000US$
46,516135,000,000
150,000,000
2,614,500
188,154,025
34,300,000
43,911,000
28,400,000
47,016,200

54.00
100.00100.00
93.99
49.00
51.00
20.00
100.00Air cargo and storage
Real estate lease and international trade
A holding company, real estate and hotel services
Air transportation and maintenance of aircraft
Airport services
In-flight catering
Airport services
General investment

Abacus Distribution System (Taiwan)
Taiwan Airport Services
Kaohsiung Catering Services

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

1,350,000
1,500,000US$
26,1452,042,368
147,000
439,110HK$
58,000US$
47,016$$

1,355,358
1,479,619
1,056,433
1,102,073
604,510685,797
407,725
1,275,313

Sale and maintenance of hardware and software
Airport services
In-flight catering

52,20012,289140,240

52,20012,289140,240

13,021,042
20,626,644
14,329,759

93.93
47.35
35.78

420,209251,295
225,221

Science Park Logistics
Asian Compressor Technology Services
China Pacific Laundry Services

Tainan, Taiwan
Taoyuan, Taiwan
Taoyuan, Taiwan

150,654
77,322
137,500

150,654
77,322
137,500

13,293,000
7,732,200
13,750,000

28.48
24.50
55.00

Hwa Hsia

Taoyuan, Taiwan

50,00050,00050,000Cal Hotel Co., Ltd
Dynasty Holidays
Yestrip
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Freighter Queen Ltd.

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

Storage and customs of services
Research, manufacture and maintenance of engines
Cleaning and leasing of the towel of airlines, hotels,
restaurants, and health clubs
Cleaning of aircraft and maintenance of machine andequipment
Hotel businessTravel businessTravel business
Forwarding and storage of air cargo
Aircraft lease
Aircraft lease
Aircraft lease

US$
US$
US$

465,000
20,40026,2652,500
1
1
1Xiamen International Airport Air Cargo
Terminal
Xiamen International Airport Air Cargo
Storage
Eastern United International Logistics

Xiamen International Airport

Taiwan Airport Services$

416,581
9,699
15,399(93,296)
190,307311,347
140,915
763,477

Investment
Income (Loss)$

Note

224,954
9,699
15,399(54,821)
93,250158,787
28,183
763,477

Note 2
Note 1-

161,895
86,166132,207

152,054
40,78747,306-

192,175
244,486
163,628

96,889411,034
51,82327,562
95,711
28,503-100.0078,81029,92929,929Note 146,500,000
408
1,600,000
250,000
1,000
1,000
1,000

100.0051.00
100.0025.00
100.00100.00100.00210,275
30,98636,353
6,471
30
30
30

16,641
3,527
13,5882,689-

16,641
1,799
13,588
672
-

-

US$
US$
US$

465,000
20,40026,2652,500
1
1
1Forwarding and storage of air cargo

US$

4,118

US$

4,118

-

14.00

260,142

133,149

18,652

Note 3

Xiamen International Airport

Forwarding and storage of air cargo

US$

1,947

US$

1,947

-

14.00

107,684

71,1389,964

Note 3

Hong Kong

Forwarding and storage of air cargo

HK$

3,329

HK$

3,329

1,050,000

35.00

34,213

20,239

7,093

Note 4

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

US$

5,877

-

100.00367,259

22,37022,370Note 3

Hwa Hsia

Hwa Shin Building Safeguard

Taoyuan, Taiwan

Building security and maintenance services

10,0001,000,000

100.0019,970

8,212

8,212

-

Taiwan Airport Service (Samoa)

Xiamen International Airport Air Cargo
Terminal
Xiamen International Airport Air Cargo
Storage

Xiamen International Airport

Forwarding and storage of air cargo

US$

3,950

US$

3,950

-

14.00

258,763

133,149

18,641

Note 3

Xiamen International Airport

Forwarding and storage of air cargo

US$

1,927

US$

1,927

-

14.00

107,922

71,138

9,959

Note 3

Cal-Asia Investment

JPY

JPY

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

Note 2:

Represents the consolidated financial information ofNote 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 the audited financial statement were not prepared on time.

the foreign holding company disclosed in accordance with local regulations.

- 85 -TABLE 7

CHINA AIRLINES, LTD. AND INVESTEESINVESTMENTS IN MAINLAND CHINAFOR THE YEAR ENDED DECEMBER 31, 2013
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

China Airlines

Main Businesses andProducts

Investee Company Name

Xiamen International Air
Cargo Terminal

Accumulated
Outflow of
Total Amount
Investment Investmentof Paid-in
Typefrom Taiwan as
Capitalof
January 1, 2013

Forwarding and storage $1,105,268
of air cargo(RMB 224,480)

Indirect(Note 1)

Xiamen International Airport Forwarding and storage
689,312
Air Cargo Storageof air cargo(RMB 14,000)
Taikoo (Xiamen) Landing
Gear Services

Investment Flows

Outflow

Inflow$(US$122,555 $4,118)-

Indirect(Note 1)-

(US$

57,9601,947)

Landing gear
1,097,917
maintenance services (US$36,890)Indirect(Note 1)64,0242,151)-(US$

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

407,100(RMB 82,682)

Indirect(Note 1)-

(US$

18,929636)

Yangtze River Express
Airlines

Forwarding and storage
2,461,841
of air cargo(RMB 500,000)

Indirect(Notes 1
and 9)

1,154,648
38,796)-(US$

Shanghai Eastern Aircraft
MaintenanceAircraft line
maintenance

92,262
3,100)

Indirect(Note 2)

(US$

7,381
248)

-

(US$

Shanghai Eastern UnitedInternational

Forwarding of air cargo
and ocean freight(US$29,762
1,000)

Indirect(Note 3)

5,104
172)

-

(US$

Accumulated Investment in
Mainland China as ofDecember 31, 2013

Investment Amounts
Authorized by Investment
Commission, MOEA

Limit on Investment$1,430,601 (US$48,068)$1,436,535 (Note 5)$31,734,216 (Note 6)

Accumulated
Outflow ofInvestment
from Taiwan asofDecember 31,
2013

$

-

% Ownershipof Direct orIndirect
Investment

Net Income(Loss) of
the Investee

Accumulated
Carrying Value
Inwardas ofRemittance ofDecember 31, Earnings as of2013
December 31,
2013

Investment
Gain (Loss)$(US$

122,555 $4,118)(133,149)

14.00

71,138

14.00

(US$

57,9601,947)
64,0242,151)(153,497)(US$(33,391)(US$18,929636)
1,154,648
38,796)

-

-

-

(US$

7,381
248)

-

8.00

-

(US$

5,104
172)

-

(US$

-

-

-

-

-

-

5.83

5.45

17.15

$
(RMB

18,652 $
260,142 $3,868) (RMB 52,835) (US$

(RMB

9,964
107,684
2,067) (RMB 21,871)(RMB

73,665
14,961)(RMB

21,3784,342)

(US$

7,381
248)

(US$

5,104
172)

-

-

56,0181,888)(Note 4)

(Continued)- 86 -

Taiwan Airport Services

Investee Company

Xiamen International Air
Cargo Terminal

Accumulated
Outward
Remittance forMain Businesses andMethod ofPaid-in Capital
Investment
Products
Investment
from Taiwan asof January 1,
2013
Forwarding and storage $1,105,268
of air cargo(RMB 224,480)

Xiamen International Airport Forwarding and storage
Air Cargo Storageof air cargo(RMB

68,932
14,000)Remittance of Funds

OutwardAccumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2013

InwardIndirect(Note 7)$
(US$

117,566 $3,950)-

Indirect(Note 7)57,344
1,927)

-

(US$

$

-

$
(US$

117,566 $3,950)

133,149

14.00

57,344
1,927)

71,138

14.00

(US$

-

Accumulated Outward
Remittance for Investment in
Mainland China as of December 31, 2013

Investment Amounts Authorized by
Investment Commission, MOEA

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

$174,910 (US$5,877)$174,910 (US$5,877)$320,068(Note 6)

Net Income(Loss) of theInvestee% Ownershipof Direct orIndirect
Investment

Investment
Income (Loss)

Carrying
Amount as ofDecember 31,
2013

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2013

$
(RMB

18,641 $258,763 $
3,870) (RMB 52,555) (US$74,5902,506)(RMB

9,956
107,9222,068) (RMB 21,919) (US$12,654425)

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 2013 amounted to US$1,887,816.
Note 5: The amount comprised US$47,035,573 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.
(Concluded)- 87 -