China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theYears Ended December 31, 2013 and 2012 andIndependent Auditors’ Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordancewith the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports andConsolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2013 are
all the same as the companies required to be included in the consolidated financial statements of parent
and subsidiary companies as provided in International Accounting Standard 27 “Consolidated andSeparate Financial Statements.”

Relevant information that should be disclosed in the consolidated

financial statements of affiliates has all been disclosed in the consolidated financial statements of parent
and subsidiary companies.

Hence, we have not prepared a separate set of consolidated financial

statements of affiliates.

Very truly yours,
CHINA AIRLINES, LTD.

-1-

INDEPENDENT AUDITORS’ REPORTThe Board of Directors and the Stockholders
China Airlines, Ltd.
We have audited the accompanying balance sheets of China Airlines, Ltd. and subsidiaries as of December 31,
2013, December 31, 2012 and January 1, 2012, and the related consolidated statements of comprehensive
income, changes in equity and cash flows for the years ended. These consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on 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 andstandards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of China Airlines, Ltd. and subsidiaries as of December 31, 2013,
December 31, 2012 and January 1, 2012, the results of its operations and its cash flows for the years then ended,in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, theInternational Financial Reporting Standards, International Accounting Standards, Interpretation as well as
related guidance translated by Accounting Research and Development Foundation endorsed by the Financial
Supervisory Commission of the Republic of China with effective date.
We have also audited financial statements of the parent company, China Airlines, Ltd., as of and for the years
ended December 31, 2013 and 2012 on which we have issued an unqualified report.

March 27, 2014
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial
position, financial performance and cash flows in accordance with accounting principles and practices
generally accepted in the Republic of China and not those of any other jurisdictions. The standards,
procedures and practices to audit such consolidated financial statements are those generally applied in the
Republic of China.
For the convenience of readers, the independent auditors’ report and the accompanying consolidated 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 andconsolidated financial statements shall prevail.
-2-

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

December 31, 2013
Amount%ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 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 assets - current (Notes 6 and 17)

January 1, 2012
Amount%$ 19,007,649
215,673
75,504135,0039-$ 10,831,131
1,491,348
65,392
52,767

5
1-$ 11,113,772
3,936,655
100,197
108,6675
2-7,774,730
14,517
587,665
16,9596,791,453
2,465,919

4
3
1

7,511,353
20,708447,873
13,572
6,832,594
3,710,992

3
3
2

10,179,247
34,081
634,027
7,482
6,665,055
3,264,590

4
3
2

37,085,072

17

30,977,730

14

36,043,773

16

28,7685,617
468,476
2,687,755
149,662,068
2,076,740
489,412
9,127,014
19,344,977

1
68
1
4
9

34,771
759
463,3392,545,444
161,024,343
1,498,004
425,000
10,252,297
12,078,008

1
73
1
5
6

374,085
41,340434,1032,448,254
172,929,004
1,498,283
400,560
9,020,711
8,798,248

1
74
1
4
4

183,890,827

83

188,321,965

86

195,944,588

84$ 220,975,899

100$ 219,299,695

100$ 231,988,361

100$

204,036
2,799
22,853779,176432,535
14,339,082
88,9278,850,384
4,780,000
25,265,961
4,399,039
2,741,236

7
4
2
12
2
1

$

61,906,028

Total current assets
NONCURRENT ASSETS
Financial assets at fair value through profit or loss - noncurrent, net of current portion (Notes 4, 7
and 31)
Available-for-sale financial assets - noncurrent, net of current portion (Notes 4, 8 and 31)
Derivative financial assets for hedging - noncurrent, net of current portion (Notes 4, 5, 9 and 31)
Financial assets carried at cost - noncurrent, net of current portion (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 income tax asset (Notes 4 and 27)
Other assets - noncurrent (Notes 17, 33 and 34)
Total noncurrent 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 payable (Note 21)
Current tax liabilities (Notes 4 and 27)
Deferred revenue - current (Notes 4, 5 and 22)
Bonds payable - current portion (Notes 19, 31 and 33)
Loans and debts - current portion (Notes 18, 31 and 33)
Capital lease obligations - current portion (Note 4, 20 and 31)
Other current liabilities

1,600,000
23,702444,902378,882
11,286,295
41,094
8,291,996
5,460,000
16,932,026
5,313,935
2,278,212

1
5
4
3
8
2
1

28

52,051,044

2,026
27,368,023
53,239,582
3,302,484
628,820
8,641,834
1,909,749
10,410,907
676,086

12
24
2
4
1
5
-

Total noncurrent liabilities

106,179,511

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 and 31)
Deferred revenue - noncurrent (Notes 4 and 22)
Accrued pension costs (Notes 4, 5 and 24)
Other noncurrent liabilities

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 19 and 25)
Capital stock
Capital surplus
Accumulated deficit
Legal reserve
Special reserve
Accumulated deficit
Total retained earnings
Other equity
Treasury shares
Total equity attributable to owners of the Company
NONCONTROLLING INTERESTS (Note 25)
Total equity
TOTAL

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

-3-$

47,076911,210
371,711
13,612,868
29,976
9,662,017
12,200,000
18,230,972
3,784,053
2,063,573

1
6
4
5
8
2
1

24

60,913,456

27

11,43015,765,000
66,967,720
3,409,129
1,319,914
13,012,557
1,967,650
10,576,657
927,685

7
30
2
1
6
1
5
-

25,325
15,880,000
72,803,448
2,836,868
312,509
18,399,015
1,711,677
10,255,396
1,320,235

7
31
1
8
1
4
1

48

113,957,742

52

123,544,473

53

168,085,539

76

166,008,786

76

184,457,929

80

52,000,000
1,924,015

23
1

52,000,000
1,405,394

24-

46,316,224
422,10120-

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

2
(3)
(1)
-

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)

2
(3)
(1)
-

50,806,464

23

51,459,772

23

45,765,021

19

2,083,896

1

1,831,137

1

1,765,411

1

52,890,360

24

53,290,909

24

47,530,432

20$ 220,975,899

100$ 219,299,695

100$ 231,988,361

100

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED 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$ 92,183,033
39,393,152
10,126,360

65
28
7

$ 91,171,709
40,985,098
8,815,332

65
29
6

Total revenues

141,702,545

100

140,972,139

100

90,691,255
18,720,774
8,936,698
6,941,681
6,872,847

64
13
6
5
5

88,042,867
18,779,166
8,632,456
8,547,977
7,090,902

63
13
6
6
5

Total costs

132,163,255

93

131,093,368

93

GROSS PROFIT

9,539,290

7

9,878,771

7

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

6,554,496
3,746,621

4
3

7,010,111
3,148,611

5
2

Total operating expenses

10,301,117

7

10,158,722

7(761,827)-(279,951)-

1,603,573
469,039(2,122,326)

1(1)

1,209,103
990,873(2,508,751)

1
1
(2)

450,361-

416,721-400,647-

107,946-

PRETAX LOSS

(361,180)-(172,005)-

INCOME TAX EXPENSE (Notes 4, 5 and 27)

587,700

1

48,153-

NET LOSS(948,880)(1)

COSTS (Notes 9, 12, 26, 32 and 34)
Flight operations
Terminal and landing fees
Passenger services
Aircraft maintenance
OthersOPERATING LOSSNONOPERATING INCOME
Other income (Notes 15 and 26)
Other gains and losses (Notes 9 and 26)
Finance cost (Notes 9, 26 and 32)
Share of the profit of associates and joint ventures(Note 13)
Total nonoperating income-4-(220,158)(Continued)

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED 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)$

Other comprehensive income for the year, netof income tax

81,030-4,108
96,500$%(81,645)--(41,374)(22,133)-(6,082)(23,940)-(6,144)(582,244)(1)(29,893)-

121,972-

121,723-(611,568)(1)

TOTAL COMPREHENSIVE LOSS FOR THE YEAR$

(827,157)(1)$(831,726)(1)

NET INCOME (LOSS) ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests$(1,274,046)
325,166(1)-$(418,356)
198,198-$(948,880)(1)$(220,158)-$(1,171,929)
344,772(1)-$(972,318)
140,592(1)-$(827,157)(1)$(831,726)(1)

TOTAL COMPREHENSIVE INCOME (LOSS)ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

LOSS PER SHARE (NEW TAIWAN DOLLARS;
Note 28)
Basic and diluted$(0.25)

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

-5-$(0.08)(Concluded)

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

Share Capital(Note 25)BALANCE AT JANUARY 1, 2012

$ 46,316,224

Capital Surplus(Notes 19 and 25)$

422,101

Equity Attributable to Owners of the Company
Other Equity (Note 25)
Exchange
Differences on
Unrealized Gain
Retained Earning (Notes 24 and 25)
Translating(Loss) on
UnappropriatedForeign
Available-for-sale
Legal Reserve
Special Reserve
Earnings
Operations
Financial Assets$

799,630$

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

$

-

$

15,155

Treasury Shares
Held by
Subsidiaries

Cash Flow
Hedges$34,855$

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

Non-Controlling
Interests(Note 25)

Total Equity$

1,765,411$ 47,530,432

Offset 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)

198,198(220,158)

Other comprehensive loss for the year ended December 31, 2012, net ofincome tax

-

-

-

-

(443,390)(60,381)(31,821)(18,370)-(553,962)(57,606)(611,568)

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

-

-

-

-

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

140,592(831,726)

5,683,776

983,293

-

-

-

-

-

-

-

6,667,069-

6,667,069

-

-

-

-

-

-

-

-

-

-

(74,866)(74,866)

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

1,831,137

53,290,909

Appropriation from the 2012 earnings
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

-

-

-

-

-

-

-

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

-

-

-

-

(1,274,046)

-

-

-

-

(1,274,046)

325,166(948,880)

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

19,606

121,723

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

-

-

-

-

(1,319,427)

62,224

5,180

80,094-(1,171,929)

344,772(827,157)

Cash dividend from subsidiaries paid to non-controlling interest

-

-

-

-

-

-

-

-

-

-

(92,013)(92,013)

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

2,083,896$ 52,890,360

Issue of common shares for cash
Cash dividend from subsidiaries paid to non-controlling interest

BALANCE AT DECEMBER 31, 2013

$ 52,000,000$

1,924,015$

321,891$

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

-6-

$

1,843

$

(11,486)$

96,579$$

CHINA AIRLINES, LTD. AND SUBSIDIARIESCONSOLIDATED 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
Bad-debt expense
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
Gain on disposal of subsidiaries
Gain on disposal of associate
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
Decrease (increase) in inventories
Decrease (increase) in other current assets
Decrease (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
Increase (decrease) in other liabilities
Cash generated from operations
Interest received
Dividend received
Interest paid
Income tax paid
Net cash generated from operating activities-7-$(361,180)$(172,005)

17,244,851
50,72379(135,500)
2,799(361,433)(65,631)(450,361)(6,008)(742,286)
318,255
209,433
2,122,326
301,008(14,512)(48,986)(579,015)

16,928,269
44,6605,854(475,129)(243,325)(187,354)(416,721)(20,111)(128)
294,188(1,203,159)
2,508,751
862,048(14,512)(66,414)-

1,411,176(214,653)(171,326)(133,314)
4,080
1,262,215
382,372
177,6022,592,128
555,208(426,740)
20,784(164,684)
85,90722,865,317
339,814402,805(1,976,580)(145,454)

3,294,521
2,621,530(317,818)
363,826(127,011)(66,231)(48,505)
339,980(2,476,585)(1,148,626)(268,915)
258,279(191,842)(9,687)
20,067,828
250,835
286,099(2,454,552)(148,643)

21,485,902

18,001,567(Continued)

For the Years Ended
December 31
2013
2012
CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of investments accounted for by the cost method
Disposal of affiliates
Acquisition of property, plant and equipment
Disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayment to equipment
Increase in computer software cost
Decrease in restricted assets
Net cash used in investing activities$

742,286(5,966,226)
37,458(134,518)
394,101(7,396,503)(115,135)
56,306$(30,409)(4,834,425)
460,839(399,110)
670,135(5,207,110)(69,100)
81,809(12,382,231)(9,327,371)(1,466,964)
16,900,000(5,460,000)
15,211,898(26,182,916)
204,648(179,459)(92,013)1,600,000
5,345,000(12,200,000)
12,700,000(22,819,950)
108,147(191,406)
6,667,069(74,866)(1,064,806)(8,866,006)

137,653(90,831)

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

8,176,518(282,641)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

10,831,131

11,113,772

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 19,007,649$ 10,831,131

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 issue of common shares
Cash dividend paid to non-controlling interest
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 consolidated financial statements.

-8-(Concluded)

CHINA AIRLINES, LTD. AND SUBSIDIARIESNOTES TO CONSOLIDATED 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 hold total both 45.9% of the Company’s shares.

2. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statement 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 and entities controlled by the Company (the “Group”) have 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 datethat the consolidated financial statement were authorized for issue, the Financial Supervisory
Commission (the “FSC”) has not announced the effective dates for the following new, amended andrevised standards and interpretations (the “New IFRSs”). On January 28, 2014, the Financial
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 the date thatthe consolidated financial statement 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.

-9-

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”- 10 -

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 initial application of the above New IFRSs is not expected to have any
material impact on the Group’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 Group 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 Group 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 Group considers whether it has control overother entities for consolidation. The Group has control over an investee if and only if it has i)
power over 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 overan investee.

- 11 -

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 Group 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.
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
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.

- 12 -

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 Group 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 Group accrues related liability when thetransaction 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 consolidated financial statement were authorized for issue, the Group was continuing
to assess the possible impact that the application of other standards and interpretations will have on theGroup’s financial position and operating result, and will disclose the possible impact when theassessment 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
statement 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 Group’s consolidated financial statement for the year ended December 31, 2011 is its first IFRS
consolidated financial statement. The date of transition to IFRSs was January 1, 2012. The effect oftransition upon the Group’s consolidated financial statement, please refer to Note 37.
Statement of Compliance
The consolidated financial statement have been prepared in accordance with the Regulations Governing the
Preparation of Financial Reports by Securities Issuers, or other regulations
Basis of Preparation
The consolidated financial statements have been prepared on the historical cost basis except for financial
instruments that are measured at fair values. Historical cost is generally based on the fair value of theconsideration given in exchange for assets.

- 13 -

The opening consolidated balance sheets as of the date of transition to IFRSs were prepared in accordancewith IFRS 1 “First-time Adoption of International Financial Reporting Standards”. The applicable IFRSs
have been applied retrospectively by the Group except for some aspects where IFRS 1 prohibits
retrospective application or grants optional exemptions to this general principle. (For the exemptions that
the Group elected, refer to Note 37.) The summary of the group’s significant accounting policies go as
follows.
Current and Non-current 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 are
not classified as current are classified as non-current.
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.
Basis of Consolidationa. Principles for preparing consolidated financial statements
The consolidated financial statements incorporate the financial statements of the Company and theentities controlled by the Company (i.e. its subsidiaries, including special purpose entities).
When necessary, adjustments are made to the financial statements of subsidiaries to bring theiraccounting policies into line with those used by the Company.
All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.
Total comprehensive income of subsidiaries is attributed to the owners of the Company and to thenon-controlling interests even if this results in the non-controlling interests having a deficit balance.
b. Subsidiary included in consolidated financial statements

Investor Company
China Airlines, Ltd.

Investee Company
Cal-Dynasty International
Cal-Asia Investment
Hwa Hsia
Yestrip
Cal Park
Cal Hotel Co., Ltd.
Abacus Distribution System(Taiwan)Mandarin Airlines
Taiwan Air Cargo Terminal
LimitedDynasty Holidays
Taoyuan International Airport
Services
Taiwan Airport Services
Global Sky Express

Main Businesses and Products

Percent of Shareholding
December 31, December 31,
January 1,
2013
2012
2012

A holding company, real estate andhotel services
General investment
Cleaning of aircraft and maintenanceof machine and equipment
Travel business
Real estate lease and international
trade
Hotel business
Sale and maintenance of hardware andsoftware
Air transportation and maintenance of
aircraft
Air cargo and storage

100

100

100

100
100

100
100

100
100

100
100

100
100

100
100

100
94

100
94

100
94

94

94

94

59

59

59

Travel businessAirport services

51
49

51
49

51
49

Airport services
Forwarding and storage of air cargo

47
25

47
25

47
25

(Continued)- 14 -

Investor Company

Investee Company

Percent of Shareholding
December 31, December 31,
January 1,
2013
2012
2012

Main Businesses and Products

Freight Princess Ltd.
Freight Prince Ltd.
Freight Queen Ltd.
Dynasty Properties Co., Ltd.
Dynasty Hotel of Hawaii, Inc.

Aircraft lease
Aircraft lease
Aircraft lease
Real estate management
Hotel business

100
100
100
100
100

100
100
100
100
100

100
100
100
100
100

Taoyuan International
Airport Services
Taiwan Airport Services

Tao YaoWorker dispatch service

-

-

100

Taiwan Airport Service (Samoa)

100

100

100

Hwa Hsia

Hwa Shin Building Safeguard

Airport supporting service andinvestment
Building security and maintenanceservices

100

100

100

Cal-Dynasty International(Concluded)
Note: Taoyuan International Airport Services Co., Ltd. decided to dissolute Tao Yao Company, andliquidation had been completed in March 2012, amounted to $128 thousand, which wasrecognised as other gains (or losses) - gain on disposal of subsidiaries.
Except that Taoyuan International Airport Services Co., Ltd., Taiwan Airport Services Co., Ltd. andGlobal Sky Express (Taiwan) Co., Ltd. were controlled by the Company, others were investee
companies owned over 50% voting power by the Company. The financial reporting of the above
companies were audited by CPA.
China Airlines, Ltd.

100% 100% 100% 100% 100% 100% 100% 100% 100% 94%

94%

54%

51%

49%

47%
Global Sky Express

Taiwan Airport Services

Taoyuan International Airport Services

Dynasty Holidays

Taiwan Air Cargo Terminal

Mandarin Airlines

Abacus Distribution System (Taiwan)

Cal Hotel Co., Ltd.

Cal Park

Yestrip

Freighter Princess Ltd.

Freighter Prince Ltd.

Freighter Queen Ltd.

Hwa Hsia

Cal-Asia Investment

Cal-Dynasty International

2.5%
100%
100%

2.5%
100%
Taiwan Airport Service (Samoa)

Dynasty Hotel of Hawail, Inc.

Dynasty Properties Co., Ltd.

Hwa Shin Building Safeguard

100%- 15 -

25%

Foreign Currencies
In preparing the consolidated financial statement of the Group, 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 athistorical cost in a foreign currency are not retranslated. Non-monetary items measured at fair value thatare 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; andExchange differences arising on the retranslation of non-monetary items are included in profit or loss forthe period except for exchange differences arising from the retranslation of non-monetary items in respectof which gains and losses are recognized directly in other comprehensive income, in which case, theexchange differences are also recognized directly in other comprehensive income.
For the purposes of presenting consolidated financial statement, the assets and liabilities of the Group’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 (attributed to the owners of theCompany and non-controlling interests as appropriate).
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.
Investment in Associates and Jointly Controlled Entities
An associate is an entity over which the Company has significant influence and that is neither a subsidiarynor an interest in a joint venture. Joint venture arrangements that involve the establishment of a separate
entity in which ventures have joint control over the economic activity of the entity are referred to as jointly
controlled entities.

- 16 -

The results and assets and liabilities of associates and jointly controlled entities are incorporated in these
consolidated financial statement 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 the associate andjointly 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 at apercentage 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, theproportionate 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 the investment
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 shareof further losses. Additional losses and liabilities are recognized only to the extent that the Company has
incurred legal obligations, or constructive obligations, or made payments on behalf of that associate andjointly 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 group decides whether to recognize additional impairment loss to the Associate based on IAS 39“Financial instruments: Recognition and Measurement.” 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 is recognized to the extent that the recoverable amount of theinvestment 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 andthe 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 theretained interest and its fair value is included in the determination of the gain or loss on disposal of theassociate and the jointly controlled entity. The Company accounts for all amounts previously recognizedin 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 a group entity transacts with its associate and jointly controlled entity, profits and losses resulting
from the transactions with the associate are recognized in the Company’ consolidated financial statement
only to the extent of interests in the associate and the jointly controlled entity that are not related to theCompany.

- 17 -

Property, Plant and Equipment
Property, plant and equipment are tangible items that are held for use in the production or supply of goods
or services, for rental to others, or for administrative purposes; and are expected to be used more than one
period. The cost of an item of property, plant and equipment shall be recognized as assets if, and only if itis probable that future economic benefits associated with the item will flow to the entity; and the cost of theitem can be measured reliably. Property, plant and equipment are stated at cost, less subsequentaccumulated depreciation and subsequent accumulated impairment loss.
Freehold land is not depreciated.
Depreciation is recognized using the straight-line method. Each significant part is depreciated separately.
The estimated useful lives, residual values and depreciation method are reviewed at the end of eachreporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as
owned assets. Assets are depreciated over the shorter of the lease term and their useful lives using thestraight-line method.
Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amount of the asset and isrecognized in profit or loss.
Investment Properties
Investment properties are properties held to earn rentals or for capital appreciation. Investment properties
also include land held for a currently undetermined future use.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initialrecognition, investment properties are measured at cost less accumulated depreciation and accumulated
impairment loss.
Depreciation is recognized using the straight-line method. Investment properties are depreciated overtheir expected useful lives.
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 Group expects to dispose of the intangible asset before theend of its economic life. The effect of a change in an accounting estimate is recognized prospectively
based on IAS-8 “Accounting policies, Changes in Accounting Estimates and Errors.”
Impairment of Tangible and Intangible Assets Other Than Goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order todetermine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of- 18 -

an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which theasset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable andconsistent basis; otherwise Corporate assets are allocated to the smallest group of cash-generating units on areasonable 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 a group entity 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.
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 manner described in Note 31.
- 19 -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 theGroup’s past experience of collecting payments, an increase in the number of delayed payments inthe portfolio past the average credit period of 60 days, as well as observable changes in national or
local economic conditions that correlate with default on receivables.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is thedifference between the asset’s carrying amount and the present value of estimated future cash flows,
discounted at the financial asset’s original effective interest rate.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of theimpairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognized, the previously recognized impairment loss is reversed through profit orloss to the extent that the carrying amount of the investment at the date the impairment is reversed
does not exceed what the amortized cost would have been had the impairment not been recognized.

- 20 -

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 Group derecognizes a financial asset only when the contractual rights to the cash flows fromthe asset expire, or when it transfers the financial asset and substantially all the risks and rewards ofownership of the asset to another party.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss
that had been recognized in other comprehensive income is recognized in profit or loss.
b. Equity instruments
Debt and equity instruments issued by a group entity 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 Group’s assets minus all liabilities.
Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue
costs.
- 21 -

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.
Equity instruments issued by a group entity 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 Group 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 Group are classified
separately as financial liabilities and equity in accordance with the substance of the contractual
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.
e. Derivative financial instruments
The Group 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.

- 22 -

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 Group enters into some derivative transactions that aim to manage interest rates, exchange rates, fuelprices, and other factors affecting gains or losses on assets and liabilities. The hedging transactions aredefined as cash flow hedge. When entering into hedging transactions, the Group 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 the hedging
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 Group 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 Group recognizes provisions when the Group has a present obligation (legal or constructive) arisingfrom 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.
a. Onerous contracts
Where the Group has a contract under which the unavoidable costs of meeting the obligations under thecontract exceed the economic benefits expected to be received from the contract, the present obligations
arising under onerous contracts are recognized and measured as provisions.

- 23 -

b. Aircraft lease contract
The existence of current obligations should be evaluated to recognize as provision by the time aircraft
contract expire and return to the loss or 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 Group and theamount 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 Group and the amount of income can be measured reliably. Interest income is accrued on atime 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 Group as lessee
Assets held under finance leases are initially recognized as assets of the Group at their fair value at the
inception of the lease or, if lower, at the present value of the minimum lease payments. The
corresponding liability to the lessee is included in the consolidated balance sheets as a finance leaseobligation.
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 Group’s general policy on borrowing
costs. Contingent rents are recognized as expenses in the periods in which they are incurred.
b. Operating lease
The Group as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant
lease unless another systematic basis is representative of the time pattern of the lessee’s benefit from theuse of the leased asset.
The Group 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.
- 24 -

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.
Financial lease
This transaction does not actually dispose of the assets, the accounting treatment deemed transaction
did not occur, and use the book value of the asset before sale continuing recognition of the asset.
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 the bookvalue of the gain or loss should be recognized immediately; only the part of selling price above fairvalue 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 consolidated balance sheets represents the present valueof the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fairvalue of plan 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.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets areadded to the cost 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.

- 25 -

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 Group’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 Group’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 consolidated financial statement and the corresponding tax bases used in thecomputation of taxable profit. Deferred tax liabilities are generally recognized for all taxable
temporary differences. Deferred tax assets are generally recognized for all deductible temporary
differences, unused loss carry forward and unused tax credits for purchases of machinery, equipment
and technology, research and development expenditures, and personnel training expenditures to theextent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilized.

- 26 -

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 theGroup 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 Group’s accounting policies which states in Note 4, management is required tomake judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are notreadily apparent from other sources. The estimates and associated assumptions are based on historicalexperience and other 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.
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.

- 27 -

Income Taxes
The Group is subject to income taxes in numerous jurisdictions. Where the final tax payable differs fromthe 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 recognized for
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 Group 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 Group 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 Group’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 Group 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.
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 (frequent flyer program), 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- 28 -

estimated on the basis of historical trends of breakage and redemption, which is then used to project the
expected claiming of these benefits. Changes in fair value per mileage or redemption rate may have amaterial impact on deferred 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

$

$

$

1,131,370
5,396,373

123,926
5,892,800

132,240
5,463,349

11,091,301
1,388,605

4,174,972
639,433

4,279,060
1,239,123$ 19,007,649$ 10,831,131$ 11,113,772

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%
0.70%-0.83%

0.15%-4.23%
0.73%-0.87%

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

The amount of time deposits with original maturities more than three months for the years ended December
31, 2013, December 31, 2012 and January 1, 2012 were $793,050 thousand, $1,713,212 thousand and1,667,954 thousand, respectively, and the market rate intervals were 0.94%-3.18% and 0.35%-4% and0.3%-4.123%, which were recognized as other assets current. (Refer to Note 17)

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
Non-derivative financial assets
Beneficial certificates
Domestic quoted shares$- 29 -

23,254-$-

192,419
192,419

838,137
653,211
1,491,348

3,662,138
274,517
3,936,655

215,673$ 1,491,348$ 3,936,655(Continued)

December 31,
2013

December 31,
2012

$

2,799

$

-

$

$

-

$

-

$

January 1, 2012

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 thousand was converted
into 29,137,529 common shares of China Life Insurance Co., Ltd. on April 19, 2012 at the conversion priceof 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 did not meet the criteria of hedge effectiveness and therefore were not accountfor 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$

75,504-28,768-$65,392-$ 100,197-

34,771-

41,340-Non-current
Domestic marketable
Trans Asia Airways$ 104,272$ 100,163- 30 -$ 141,537

December 31,
2013
Current
Non-current$

75,50428,768$ 104,272

December 31,
2012$

January 1, 2012

65,392
34,771$ 100,197
41,340$ 100,163$ 141,537

December 31,
2012

January 1, 2012

9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING
December 31,
2013
Derivative financial assets underhedge accounting
Interest rate swaps
Foreign exchange forward contracts
Currency option
Fuel swaps$

Current
Non-current

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 option
Fuel swaps

Current
Non-current

The fair value of each derivative contract is determined using quotes from financial institutions.

- 31 -

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:

Maturity Date

Range ofInterest Rates
Paid

Range of Interest Rates
Received2014.08.24-2017.06.22

0.90%-1.14%

6165 page 3M CP rate

2013.04.11-2017.06.22

0.70%-2.42%6165 page 3M CP rate

2012.04.26-2016.11.28

0.99%-2.60%

6165 page 3M CP rate

Notional Amount(In Thousands)
December 31, 2013
NT$5,240,000
December 31, 2012
NT$6,080,000
January 1, 2012
NT$3,335,000

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 Group used foreign exchange forward contracts to minimize the risk of changes in foreign 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 Group 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.

- 32 -

The outstanding currency options at the end of the reporting period were as follows:

Maturity Date

Notional Amount(In Thousands)

JPY/USD
JPY/USD

2014.01.10-2014.04.30
2014.01.10-2014.04.30

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

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

Currency
December 31, 2013
Buy USD call option
Sell USD put option
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:
Notional
Amount(In Thousands)

Currency

Maturity Date

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, 2013
Buy fuel call option
Sell fuel put option
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 absolute values offair value because fuel swap contracts only have notional amounts.

- 33 -

Gains and losses of hedging instruments reclassified from equity to profit or loss were included in thefollowing line items in the consolidated statements of comprehensive income:For the Year Ended December 31
2013
2012
Decrease in operating cost
Increase in finance cost
Other foreign exchange gain

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

79,894

10. FINANCIAL ASSETS CARRIED AT COST

Unlisted common stocks
Abacus International Holdings Ltd.
Jardine Aviation Service
Taikoo (Xiamen) Landing Gear
Service Co., Ltd.
Titan V.C. Corp.
Taikoo Spirt Aerospace Systems(Jin Jiang) Composite Co., Ltd.
Chung Hwa Express Co.
Regal International Advertising
Far Eastern Air Transport
Unlisted preferred stocks
Abacus International Holdings Ltd.

Classified according to financial
asset measurement categories
Available-for-sale financial assets

December 31, 2013
% ofAmountOwnership

December 31, 2012
% ofAmountOwnership

January 1, 2012
% ofAmountOwnership$ 297,946
56,0231415$ 297,946
56,0231415$ 297,946
56,02314
15

73,6652,066

8
569,6832,066

8
540,0052,066

8
521,37811,0005,925
468,003511
7
620,223
11,0005,925
462,866

511
7
6

20,665
11,0005,925
433,630

5
11
7
6

473

-

473

-

473

-

$ 468,476$ 463,339$ 434,103$ 468,476$ 463,339$ 434,103

The Group invested US$1,040 thousand in the cash capital of Taikoo (Xiamen) Landing Gear Service Co.,
Ltd. by CAL-Asia Investment, Inc. to develop aviation industry business.
Above unlisted stock investments held by the Group were evaluated by cost after deducting impairment
losses because the range of reasonable fair value estimates were significant and unable to be reasonably
evaluated, the management considered its fair value unable to evaluate.

11. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

Notes receivable
Accounts receivable
Accounts receivable
Less: Allowance for impairment loss

December 31,
2013

December 31,
2012

January 1, 2012

$

$

$

294,511
7,538,081(57,862)7,480,219$- 34 -

7,774,730$

283,411

313,636

7,292,035(64,093)
7,227,942

10,002,413(136,802)
9,865,611

7,511,353$ 10,179,247

The average credit period was 7 to 55 days. In determining the recoverability of a accounts receivable, theCompany considered any change in the credit quality of the accounts receivable since the date credit was
initially granted to the end of the reporting period, allowance for impairment loss were based on estimatedirrecoverable amounts determined by reference to past default experience of the counterparties and ananalysis of their current financial position.
Movement in the allowance for impairment loss recognized on notes receivable and trade receivables wereas follow:
For the Year Ended December 31
2013
2012
Balance at January 1
Impairment loss recognized on receivables
Amounts written off during the period as uncollectible
Amounts recovered from prior gear write-off
Effect of exchange rate changes$

64,09385(6,712)(6)402$ 136,802
5,854(78,538)(25)

Balance at December 31$

57,862$64,093

12. INVENTORIES

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

December 31,
2013

December 31,
2012

January 1, 2012

$ 6,359,575
403,380
27,043
1,455$ 6,336,195
360,616
134,493
1,290$ 6,153,586
352,997
157,356
1,116$ 6,791,453$ 6,832,594$ 6,665,055

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 associates
Investments in jointly controlled entities

December 31,
2013

December 31,
2012

January 1, 2012

$ 1,838,330
849,425$ 1,730,142
815,302$ 1,682,108
766,146$ 2,687,755$ 2,545,444$ 2,448,254- 35 -

a. The amount of investment in associates were as follows:
December 31,
2013

December 31,
2012

$

$

January 1, 2012

Unlisted companies
China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics
Xiamen International Air Cargo Terminal
Xiamen International Airport Air Cargo
Storage
Eastern United International Logistics(Holdings) Ltd.
Yangtze River Express Airlines

407,725
225,221244,486
192,175
518,904

381,819
228,777
233,647
189,301
454,826$

381,187
239,741
230,666
177,404
431,545

215,606

210,780

194,724

34,213-30,992-

26,841-$ 1,838,330$ 1,730,142$ 1,682,108

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

Name of Associate

December 31,
2013

December 31,
2012

January 1, 2012

20%
36%
25%
28%
28%

20%
36%
25%
28%
28%

20%
36%
25%
28%
28%

28%

28%

28%

35%
-

35%
25%

35%
25%

China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics
Xiamen International Air Cargo Terminal
Xiamen International Airport Air Cargo
Storage
Eastern United International Logistics(Holdings) Ltd.
Yangtze River Express Airlines

The financial statements used as basis of the amounts of and related information on the investments
accounted for by the equity method and the share of profit or loss and other comprehensive income ofthose investments for the years ended December 31, 2013 and 2012 had all been independently audited,
except those of Eastern United International Logistics (Holding) Ltd. However, the management
determined that there would have been no significant adjustments had this investee’s financial
statements been independently audited.
The board in August 2010 resolved to sale the ownership of Yangtze River Express Airlines.
According to the schedule, the disposal should be completed by the end of 2012. The expectedamount of disposal was higher than the book value of investment. Hence, the Group reclassified thebook value of investment as non-current assets held for sale. However, the transaction was notcompleted within one year. Therefore, the Group reclassified the investment to investments accounted
for by the equity method on September 30, 2012. However, in July 2013, the Group entered into thecontract again. The Group reclassified it as non-current assets held-for-sale. This transaction was
settled on December 23, 2013, and total disposal amount of RMB153,061 thousand was received. The
Group recognized $742,286 thousand as gain on disposal of investments.

- 36 -

The amounts of investment in associated include goodwill arising from the acquisition of associated inprevious in December 31, 2013, December 31, 2012 and January 1, 2012, the balance of goodwill were
$182,223 thousand, $175,286 thousand and $177,945 thousand, respectively, shown below are themovements in 2013 and 2012 of goodwill.
Goodwill
Balance at January 1, 2012
Effect of exchange rate changes$ 177,945(2,659)Balance at December 31, 2012

$ 175,286

Balance at January 1, 2013
Effect of exchange rate changes$ 175,286
6,937

Balance at December 31, 2013

$ 182,223

The share of profit or loss of associated recognized under equity method were as follows:
2013
China Aircraft Services
Asian Compressor Technology Services
Kaohsiung Catering Services
Science Park Logistics
Xiamen International Air Cargo Terminal
Xiamen International Airport Air Cargo Storage
Eastern United International Logistics (Holdings) Ltd.
Yangtze River Express Airlines$

28,183
95,71147,306
27,56237,29319,923
7,093
-

2012
$

21,06999,84940,921
25,19032,733
20,2437,332-$ 263,071$ 247,337

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

b. 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 Group 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.
- 37 -

The summarized financial information on the Group’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

Details of investment income attributable to investment in jointly controlled entitles were as follows:
For the Year Ended December 31
2013
2012
China Pacific Catering Services
China Pacific Laundry Services$ 158,787
28,503$ 145,248
24,136$ 187,290$ 169,384

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 statement 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
Leased assets
Leasehold improvements
Construction in progress

938,392
13,078,656
222,573,614
38,691,367
8,725,560
968,680
135,4032,664,470
1,007,237

926,159
12,968,483
207,516,311
51,940,712
8,523,526
1,011,699
150,160
2,595,453
296,130

945,726
12,990,954
206,176,079
52,270,176
7,833,196
999,504
171,0392,277,502
574,914$ 288,783,379$ 285,928,633$ 284,239,090

Buildings
Flight equipment
Equipment under finance lease
Machinery equipment
Office equipment
Leased assets
Leasehold improvements

$

$

$

Net value$ 139,121,311

Accumulated depreciation- 38 -

4,298,391
108,380,142
18,198,277
5,816,956
689,167
120,420
1,617,958

3,816,200
90,657,915
22,693,471
5,485,072
677,244
132,504
1,441,884$ 124,904,290

3,449,428
80,255,451
20,309,434
5,209,231
610,855
150,199
1,325,488$ 111,310,086

Freehold Land

FlightEquipment

Buildings

Equipment
under Finance
Lease

OthersTotal

Cost
Balance at January 1,
2012
Additions
Disposals
DiscardReclassification
Net exchange difference
Balance at December 31,
2012$

945,726
11,730(9,500)(21,797)$

12,990,954
43,699(29,316)(7,463)7,531(36,922)$926,159

$

$

-

$

$

206,176,079
3,648,379(2,651,204)
343,057-$

52,270,176
561,209(890,673)-$

11,856,155
569,408(448,664)(27,030)
630,579(3,480)$ 284,239,090
4,834,425(4,029,357)(34,493)981,167(62,199)

12,968,483$ 207,516,311$

51,940,712$

12,576,968$ 285,928,633$(3,449,428)(389,670)
10,451
32
12,415$ (80,255,451)(12,419,559)
1,968,505
48,590-$ (20,309,434)(3,244,371)
860,334-$(7,295,773)(874,390)
430,904
625
228
1,702

$ (111,310,086)(16,927,990)
3,270,194
625
48,850
14,117-$(3,816,200)$ (90,657,915)$ (22,693,471)$(7,736,704)$ (124,904,290)$

926,159
12,233$

12,968,483
53,401(10,833)(396)
47,24320,758$ 207,516,311
3,987,410(2,279,769)(5,682)
13,355,344-$

51,940,712
771,874(759,287)(13,261,932)-$

12,576,968
1,153,541(218,867)(69,074)
57,3871,395$ 285,928,633
5,966,226(3,268,756)(75,152)
198,042
34,386$

938,392$

13,078,656$ 222,573,614$

38,691,367$

13,501,350$ 288,783,379

$

-

$

(3,816,200)(392,091)
10,321
391(93,451)(7,361)$ (90,657,915)(12,970,864)
1,981,752
5,682(6,738,797)-$ (22,693,471)(2,999,325)
755,335
6,739,184-$(7,736,704)(882,267)
215,348
66,362
93,587(827)$ (124,904,290)(17,244,547)
2,962,756
72,435523(8,188)$-$(4,298,391)$ (108,380,142)$ (18,198,277)$(8,244,501)$ (139,121,311)

Accumulated depreciationand impairment
Balance at January 1,
2012
Depreciation expense
Disposals
DiscardReclassification
Net exchange difference
Balance at December 31,
2012
Cost
Balance at January 1,
2013
Additions
Disposals
DiscardReclassification
Net exchange difference
Balance at December 31,
2013
Accumulated depreciationand impairment
Balance at January 1,
2013
Depreciation expense
Disposals
DiscardReclassification
Net exchange difference
Balance at December 31,
2013

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
Others45-55 years
10-25 years
25 years
3-13 years(Continued)- 39 -

Flight 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

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(Concluded)

The Group’s flight equipment and leased assets included the aircraft, passenger cabin, engine heavy
maintenance on aircraft, engine overhauls, aircraft landing gear overhaul and repairable spar parts and othermajor compact.
For certain buildings the Group elected to use the revalued amount under ROC GAAP as deemed cost
under IFRS on January 1, 2012.
Refer to Note 33 for the carrying amount of property, plant and equipment pledged by the Group to secureborrowings/general banking facilities granted to the Group.

15. INVESTMENT PROPERTIES

Carrying amount
Investment properties

December 31,
2013

December 31,
2012

January 1, 2012

$ 2,076,740$ 1,498,004$ 1,498,283

The investment properties held by the Group was land located in Nankan and building located in Taipei,
which were leased to others.
The building was depreciated on a straight-line basis on 55 years and located in Taipei.
The Group held the land located in Nankan, Taoyuan. The difference between the net fair value ofappraisal report by the end of 2010, $1,468,433 thousand and carrying value $2,047,448 thousand, wasrecognized impairment loss $579,015 thousand. In September 2013, the Group acquired the appraisal
reports, the net fair value of the land were $2,316,300 thousand and $2,449,699 thousand both exceeded thecost $2,047,488 on the date of acquisition, therefore the impairment loss was all been reversed, included inother income - other.
The fair value of the investment properties held by the Group $2,348,759 thousand, $1,500,892 thousand
and $1,501,606 thousand on December 31, 2013, December 31, 2012 and January 1, 2012, respectively.

- 40 -

All of the Group’s investment properties were held under freehold interest.

Cost

Accumulated
Impairment
andDepreciation

Net Value

Balance at January 1, 2012
Additions$ 1,503,350-$(5,067)(279)$ 1,498,283(279)

Balance at December 31, 2012

$ 1,503,350$(5,346)$ 1,498,004

Balance at January 1, 2013
Additions
Reclassification
Gain on reversal of impairment$ 1,503,350
25
579,015$(5,346)(304)-$ 1,498,004(304)
25
579,015

Balance at December 31, 2013

$ 2,082,390$(5,650)$ 2,076,740

Computer
Software Cost

Accumulated
Amortization

Net Value

Balance at January 1, 2012
Additions
Amortization expense$ 793,223
69,100-$ (392,663)(44,660)$ 400,560
69,100(44,660)

Balance at December 31, 2012

$ 862,323$ (437,323)$ 425,000

Balance at January 1, 2013
Additions
Amortization expense$ 862,323
115,135-$ (437,323)(50,723)$ 425,000
115,135(50,723)

Balance at December 31, 2013

$ 977,458$ (488,046)$ 489,412

16. OTHER INTANGIBLE ASSETS

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$

793,050
486,260
604,163
21,214561,232$ 1,713,212
1,082,396
564,574
350,810$ 1,667,954
782,717568,027
245,892$ 2,465,919$ 3,710,992$ 3,264,590(Continued)

Current
Other financial assets
Temporary payments
Prepayments
Restricted assets
Others- 41 -

December 31,
2013

December 31,
2012

January 1, 2012

$ 15,397,766
2,318,009
1,106,855
507,209
14,0401,098$

8,708,335
1,432,395
1,335,954
564,809
13,66022,855$

5,115,314
1,307,754
1,626,527
721,604
12,98014,069$ 19,344,977$ 12,078,008$

8,798,248(Concluded)

Noncurrent
Prepayments for aircraft
Prepayments - long-term
Refundable deposits
Restricted assets
Other financial assets
OthersThe prepayments for aircraft was the prepaid deposit, capitalized interest, etc. that the Group entered into acontract to purchase A350-900 and 777-300ER aircraft. As for the instruction of the contract, please refer
to Note 34.

18. BORROWINGSa. Short-term loans

Bank loans - unsecured

December 31,
2013

December 31,
2012$$ 1,600,000

204,036January 1, 2012$-

The range of interest rate on bank loans were 1.36%-1.60%, 1.150%-1.230% and 1.038%-1.13% on
December 31, 2013, December 31, 2012 and January 1, 2012, respectively.
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

$ 21,368,167
36,522,857$ 20,755,926
47,869,954$ 21,633,000
59,169,672

20,655,000
40,48178,505,543
25,265,961

15,305,000
31,134
83,899,746
16,932,026

10,255,000
23,252
91,034,420
18,230,972$ 53,239,582$ 66,967,720$ 72,803,448

Less: Current portion

Secured bank loans were secured by freehold land, building and flight equipment, please refer to Note33.

- 42 -

Bank loans (New Taiwan dollars, U.S. dollars and Japanese yen) are repayable quarterly, semiannuallyor in lump sum upon maturity. Related information is summarized as follows:
Currency
U.S. Dollars

New Taiwan Dollars

Japanese Yen

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

45,609,666
49,178,080
53,051,014$

411,975
669,004
899,884$

71,112
1,240,000

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

45,609,666
49,178,080
53,051,014

12,261,153
19,447,800
27,269,224

20,205482,434

1.283%-3.6%
1.287%-2.638%
0.7%-3.15%

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

1.975%
0.6957%

2002/4/11-2024/4/1
2002/4/11-2029/2/4
2002/4/11-2029/2/4

2003/7/22-2017/9/21
2001/4/20-2017/9/21
2000/7/6-2017/9/21

2013/9/1-2016/8/1
2007/12/26-2012/12/26

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

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The
NIFs, with various maturities until December 2017, were used by the Company to guarantee
commercial paper it issued. As of December 31, 2013, December 31, 2012, January 1, 2012, thecommercial paper was issued at discount rates of 1.302%-2.121%, 1.375% - 2.125% and 1.341% 2.102%, respectively.

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.

December 31,
2013

December 31,
2012

January 1, 2012

$

$

$

- 43 --

910,000-

1,300,000

1,200,000

1,300,000(Continued)

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 semiannually.
May 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

$

$

$

1,610,000

2,300,000

2,300,000

6,000,000

6,000,000

6,000,000--

8,800,000--

2,200,000-

4,380,000

4,380,000

5,345,000

5,345,000-

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
32,148,023
4,780,000

21,225,000
5,460,000

28,080,000
12,200,000$ 27,368,023$ 15,765,000$ 15,880,000(Concluded)

Less: Current portion

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 were these affiliates: Taoyuan International Airport Services,
Mandarin Airlines, Abacus Distribution Systems (Taiwan), China Pacific Catering Services and Hwa Hsia.
which held the bonds with total face value of $670,000 thousand, and are eliminated in consolidated
financial statement. In addition the jointly controlled entity, China Pacific Catering Services Co. held
$40,000 thousand as well.

- 44 -

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). The affiliates held the bonds
with face value of $440,000 thousand, that are eliminated in consolidated financial statement.
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$12.24, subject to adjustment if there iscapital injection by cash, stock dividend distribution, the proportion of cash dividend per share inmarket price exceed 1.5%. As of December 31, 2013, there was no adjustment to the conversion priceand no convention occurred.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - option. The effective interest rate of the liability
component was 1.8245% per annum on initial recognition.
Proceeds from issue
Equity component$ 6,000,000(518,621)

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

20. CAPITAL LEASE OBLIGATIONS
December 31,
2013

December 31,
2012

January 1, 2012

$

$

$

Minimum lease payments
Not later than one year
Later than one year and not later than five years
Later than five years
Less: Future financial cost
Present value of minimum lease payments

4,399,137
8,021,198
629,630
13,049,965(9,092)

5,314,096
9,388,480
3,634,103
18,336,679(10,187)3,784,232
13,477,381
4,936,414
22,198,027(14,959)$ 13,040,873$ 18,326,492$ 22,183,068

$

$

$

Present value of minimum lease payments
Not later than one year
Later than one year and not later than five years
Later than five years

4,399,039
7,984,991
656,843$ 13,040,873- 45 -

5,313,935
9,383,585
3,628,972$ 18,326,492

3,784,053
13,471,870
4,927,145$ 22,183,068(Continued)

Current
Noncurrent

December 31,
2013

December 31,
2012

January 1, 2012

$

$

$

4,399,039
8,641,834$ 13,040,873

5,313,935
13,012,557$ 18,326,492

3,784,053
18,399,015$ 22,183,068(Concluded)

The Company leased certain of its A340-300 aircrafts 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 prion
to the transaction.
Additionally, Taiwan Air Cargo Terminal Co., Ltd. signed “Air Cargo Terminal Operating Contract” tolease land building and personal state etc. of Taiwan Taoyuan and Taiwan Kaohsiung Air Cargo Terminal.
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

$

$

$

4,326,230
860,275
468,454372,140
1,300,322
606,499566,609
5,838,553

3,623,771
980,111
521,967
228,256
1,314,020
591,275
512,673
3,514,222

4,657,021
1,439,557
1,158,029
261,163
1,844,327
447,231569,553
3,235,987$ 14,339,082$ 11,286,295$ 13,612,868

December 31,
2013

December 31,
2012

January 1, 2012

$

$

$

22. DEFERRED REVENUE

Frequent flyer program
Advance ticket sales

Current
Noncurrent

2,587,188
8,172,945

2,636,952
7,622,694

2,182,695
9,190,999$ 10,760,133$ 10,259,646$ 11,373,694

$

$

$

8,850,384
1,909,749$ 10,760,133- 46 -

8,291,996
1,967,650$ 10,259,646

9,662,017
1,711,677$ 11,373,694

23. PROVISIONS

Plane under operating lease
Onerous contract

December 31,
2013

December 31,
2012

January 1, 2012

$ 3,302,484-

2,628,134
780,995

2,066,466
770,402$ 3,302,484$ 3,409,129$ 2,836,868

Plane Under Operating Lease
The Company and Mandurin Airlines rented flight equipments under operating lease agreements. Under
the contracts, when the lease expire to return the lessor, the flight equipment have to be repaired according
to the plan use years and flight hours, the flight rising falling numbers and the engine rotation times, theCompany had existing obligation to recognize provision when signing the lease or during the lease period.
Onerous Contract
The Taiwan Air Cargo Terminal Co., Ltd. (TACT) signed a cargo terminal renovation and extension projectcontract with the Civil Aeronautics Administration (CAA). TACT recognized a provision for an onerous
contract because of the unavoidable costs of the renovation and extension project, which will exceed theeconomic benefit expected to be received on this project. In July 2013, TACT acquired the CAA’s toextend the charted operating period. After project revaluation, the economic benefits were expected to
exceed the unavoidable costs. Thus, TACT reversed the provision for the onerous contract. For othercontract information, please refer to Note 34.
Aircraft Lease
Contract

OnerousContract

Total

Balance at January 1, 2012
Additional provisions recognized
Usage
Effect on discount reversal
Effect of exchanger rate changes$ 2,066,466
862,048(268,915)(31,465)$

770,402
7,945
2,648

$ 2,836,868
862,048(268,915)
7,945(28,817)

Balance at December 31, 2012

$ 2,628,134$

780,995$ 3,409,129

Balance at January 1, 2013
Additional provisions recognized
Usage
Effect on discount reversal
Effect of exchanger rate changes$ 2,628,134
1,082,003(426,740)
19,087$780,995(780,995)-$ 3,409,129
1,082,003(426,740)(780,995)
19,087

Balance at December 31, 2013

$ 3,302,484$-$ 3,302,484

24. RETIREMENT BENEFIT PLANS
a. Defined contribution plans
The Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed
defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’
individual pension accounts at 6% of monthly salaries and wages.

- 47 -

Employees in U.S. and Japan of China Airlines Co., Ltd. and subsidiaries are members of U.S. andJapan government retirement benefit plans. Subsidiaries should appropriate specific portion to
retirement benefit plans. The obligation to the government retirement benefit plans of China Airlines
Co., Ltd. and subsidiaries is appropriating specific portion amount.
b. Defined benefit plans
The Group 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 Group contribute to a pension fund administered by the pension fundmonitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s
name.
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:

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

December 31,
2013

December 31,
2012

January 1, 2012

1.625-2.000%
1.920-2.000%
1.500-2.500%

1.25%-1.75%
1.54%-2.00%
1.50%-2.50%

1.50%-1.75%
1.68%-2.00%
1.50%-2.50%

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
Current actuarial losses (gains)
Past service cost

An analysis by function
Operating cost
Operating expense$ 326,537
218,397(69,456)
59,136
12,184$ 355,779
219,689(86,898)
59,136
5,803$ 546,798$ 553,509$ 419,027
127,771$ 374,075
179,434$ 546,798$ 553,509

Actuarial gains and losses recognized in other comprehensive income for the years ended December 31,
2013 and 2012 was $23,940 thousand and $582,244 thousand, respectively. The cumulative amountof actuarial gains and losses recognized in other comprehensive income as of December 31, 2013 and2012 was $606,184 thousand and $582,244 thousand, respectively.

- 48 -

The amounts included in the consolidated balance sheet on the Group’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
DeficitUnrecognized past service cost

$ 14,902,893(4,472,814)
10,430,079(19,172)$ 15,387,523(4,726,756)
10,660,767(84,110)$ 15,071,689(4,667,245)
10,404,444(149,048)

Accrued pension costs$ 10,410,907$ 10,576,657$ 10,255,396

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/(gains)
Benefits paid
Current vested past service cost

$ 15,387,523
326,537
218,397
12,838(1,048,784)
6,382$ 15,071,689
355,779
219,689
540,506(800,140)-

Defined benefit obligation at the end of the year

$ 14,902,893$ 15,387,523

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

$ 4,726,756
69,456(11,102)635,698(947,994)$ 4,667,245
86,898(41,738)
713,756(699,405)

Fair value of plan assets at the end of the year

$ 4,472,814$ 4,726,756

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
Others- 49 -

The Group chose to disclose the history of experience adjustments as the amounts determined for eachaccounting period prospectively from the date of transition to IFRSs:
December 31

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

2013

2012

$ 14,902,893$ (4,472,814)$ 10,430,079$(12,838)$(11,102)$ 15,387,523$ (4,726,756)$ 10,660,767$(540,506)$(41,738)

The Group expects to make a contribution of $623,735 thousand to the defined benefit plans during theannual 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$ 53,391,536$ 46,708,091

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

December 31,
2013

December 31,
2012$ 1,391,536
518,621
11,747955$ 1,391,536
11,747
955

1,156

1,156

$ 1,924,015$ 1,405,394- 50 -

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.
Related information about issuing employee share option for cash was as follows:

Employee Stock Options on A Capital Increase in 2012
Options granted
Options exercised
Options expired

Number of
Options (InThousands)

Weighted
Average
Exercise Price

56,838(33,097)(23,741)$11.7311.73
11.73

Current granted weighted-average option fair value$ 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%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.

- 51 -

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 based on ROC GAAP. The bonus to employees wasestimated on the basis of past experiences. However, there were net losses in 2012; thus, no bonus toemployees was estimated. Material differences between such estimated amounts 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, thedifferences 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, 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 regulations of the Securities and Futures Bureau, a special reserve is appropriated from thebalance of the retained earnings at an amount equal to the carrying value of the treasury stock held bysubsidiaries in excess of the market value on the balance sheet date. The special reserve may bereversed 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 a net loss in that year.
The appropriation of earnings for 2012 had been resolved by the shareholders’ meeting on June, 25
2013.
Appreciation of
Earnings
Legal reserve
Special reserve

$

5,881
52,924$ 58,805
There was no earnings to be appropriated of the 2012 earnings after recognized above legal reserve andspecial reserve.
Appropriation of earnings in 2013
The bonus to employees was estimated on the basis of past experiences. 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 of an amount that was the same as these 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, at the date of transitions to IFRSs, if 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. The Company had decrease- 52 -

in retained earnings at the date of transitions to IFRSs, 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 adjustment of other retained earning of $45,380 thousand,and the unappropriated deficits of $6,089,873 thousand. With the reversal of special reserve of$3,926,293 thousand, the remaining amount of accumulated deficit was deducted to 3,483,293
thousand. The Company offset the accumulated deficit against legal reserve of $321,891 thousand.
No bonus to employees was appropriated for 2013 because of a net loss in that year.
Under the Company Law, legal reserve shall be appropriated until it has reached the Company’s paid-in
capital. This reserve may be used to offset a deficit. In the Company have no deficit and the legal
reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or
distributed in cash.
Information on bonus to employee is available on the Market Observation Post System website.
Except for non-ROC resident stockholders, all stockholders receiving the unappropriated earnings
generated on and after January 1, 1998 are allowed a tax credit equal to their proportionate share of theincome tax paid by the Company.
d. Others equity items
The movement of other equity items is as follows:
Exchange
Unrealized
Differences on Gain (Loss) on
Translating
Available-forForeign
sale Financial
Operations
AssetsBalance at January 1, 2013
Exchange differences arising ontranslating the foreign
operations
Unrealized gain (loss) on
available-for-sale financial
assetsCumulative gain (loss) arisingon changes in fair value ofhedging instruments
Cumulative (gain)/loss arisingon changes in fair value ofhedging instruments
reclassified to profit or loss
Share of exchange difference of
associates accounted forusing the equity method
Effect of income tax$ (60,381)$ (16,666)

74,968

Balance at December 31, 2013$

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

74,968

-

7,244

-

7,244

-

-

315,841

315,841--(219,341)(219,341)(12,744)(416)(1,648)(16,406)(416)(30,798)

1,843$ (11,486)- 53 -

$

Total

$

96,579$86,936(Continued)

Exchange
Unrealized
Differences on Gain (Loss) on
Translating
Available-forForeign
sale Financial
Operations
AssetsBalance at January 1, 2012
Exchange differences arising ontranslating the foreign
operations
Unrealized gain (loss) on
available-for-sale financial
assetsCumulative gain (loss) arisingon changes in fair value ofhedging instruments
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
Effect of income tax$

Balance at December 31, 2012-$15,155

Cash Flow
Hedge$

34,855

Total$

50,010(72,748)--(72,748)-(37,831)-(37,831)--

57,761

57,761--(79,894)(79,894)

12,367

333
5,677

3,763

333
21,807$ (60,381)$ (16,666)

16,485$ (60,562)(Concluded)$

Exchange differences arising on the retranslation of non-monetary items are included in profit or loss
for the period except for exchange differences arising from the retranslation of non-monetary items in
respect of which gains and losses are recognized directly in other comprehensive income, in whichcase, the exchange differences are also recognized directly in other comprehensive income.
e. Non-controlling interest
For the Year Ended December 31
2013
2012
Balance at January 1, 2013
Net income attributable to non-controlling interest
Foreign exchange difference
Unrealized gain or loss on financial instrument
Effect on income tax
Actuarial gains and losses on defined benefit plan
Dividends paid by subsidiaries$ 1,831,137
325,166
6,062(3,136)(7,159)23,839(92,013)$ 1,765,411
198,198(8,897)(3,543)
10,636(55,802)(74,866)

Balance at December 31, 2013

$ 2,083,896$ 1,831,137- 54 -

f. 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 of December 31, 2013 and 2012 were as follows:

Subsidiary

Shares(In Thousands)

Carrying
Amount(In Thousands)

Market Value(In Thousands)$ 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
Mandarin Airlines
Hwa Hsia

2,075
814

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.

- 55 -

26. NET INCOME
a. Other income
For the Year Ended December 31
2013
2012
Interest income
Subsidy income
Dividend income
Others$361,433
182,025
65,631
994,484$ 1,603,573$

243,325
119,843
187,354658,581$ 1,209,103

b. 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 disposal of subsidiaries
Gain on foreign exchange
Gain on disposal of equity investments
Others$

6,008
132,701
160,565
742,286(572,521)$

20,111
475,129128
1,060,594(565,089)$

469,039$

990,873c. Financial cost
For the Year Ended December 31
2013
2012
Interest expense
Bonds payable
Bank loan
Interest on obligations under financial lease
Discount reversal of onerous contract
Loss arising on derivatives as designated hedging instruments
in cash flow hedge accounting relationship reclassified fromequity to profit or loss$

553,910
1,361,164
197,298-$

627,378
1,609,336
245,090
7,945

9,954

19,002$ 2,122,326$ 2,508,751

Information of interest capitalization was as follows:
For the Year Ended December 31
2013
2012
Capitalization interest
Capitalization rate

$ 160,749
1.85%-1.91%- 56 -$ 90,300
1.91%-2.26%

d. Impairment loss of financial assets (gain on reversal)
For the Year Ended December 31
2013
2012
Accounts receivable
Reversal of impairment loss on account receivable

$
$

85
(6)

$
$

5,854
-

e. Depreciation and amortization expense
For the Year Ended December 31
2013
2012
Property, plant, equipment
Investment property
Intangible asset
Depreciation and amortization expense

An analysis of depreciation by function
Operating cost
Operating expense

An analysis of amortization by function
Operating cost
Operating expense$ 17,244,547
304
50,723$ 16,927,990
279
44,660$ 17,295,574$ 16,972,929$ 16,523,374
721,477$ 16,466,872
461,397$ 17,244,851$ 16,928,269$

967
49,756$

2,527
42,133$50,723$

44,660f. Employment benefit expense
For the Year Ended December 31
2013
2012
Post-employment benefit
Defined contribution plan
Defined benefit plan

Other employee benefits
Salary expenses
Personnel service expenses

An analysis of employee benefit expense by function
Operating cost
Operating expense- 57 -$

229,456
546,798$

220,693553,509$776,254$774,202$ 14,973,410
3,250,309$ 14,772,239
2,482,822$ 18,223,719$ 17,255,061$ 15,359,535
3,640,438$ 14,725,130
3,304,133$ 18,999,973$ 18,029,263

27. INCOME TAX
a. Income tax expense recognized in profit or loss
The major components of tax expense (benefit) were as follows:

Income tax expense - current
Current
Prior year adjustment
Income tax expense - deferred
Current
Income tax expense recognized in profit or loss

2013

2012

$ 186,650605$ 143,776
1,323

400,445(96,946)$ 587,700$

48,153

A reconciliation of accounting profit and income tax expense were as follows:

Loss before tax
Income tax expense (benefit) calculated at the statutory rate
(17%)
Effect on different tax of subsidiaries govern by other region
Effect on adjustment to income tax
Undeductible expenses and losses deciding taxable income
Temporary differences
Tax-exempt income
Income tax payable
Loss carryforwards - deducted taxable income
Loss carryforwards - generated
Oversea income tax expense
Deferred tax
Temporary differences
Investment tax credits - expired
Unrecognized loss carryforwards and investment tax credits
Adjustments for prior years’ tax
Income tax expense recognized in profit or loss

2013

2012

$ (361,180)$ (172,005)$ (61,401)(123,129)$ (29,241)(9,977)309,138
728,946(257,461)
41,720(485,287)
34,124

31,45591,240(101,405)
101,740
59,964(253,634)
165,684
488,395
605(147,787)
111,418(60,577)
1,323$ 587,700$

48,153b. Income tax recognized in other comprehensive income
2013

2012

Deferred tax
Recognized in other comprehensive income
Conversion of foreign operations
Unrealized gain on available-for-sale financial assets
Hedging instruments fair value revaluation for cash flow
hedging
Actuarial loss on defined benefit plan
Income tax expense recognized in other comprehensive income- 58 -$ (15,909)(1,648)$13,550
5,677(16,406)
4,070

3,763
98,982$ (29,893)$ 121,972

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

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
Income$(51,526)(731,148)(10,253)
716,078
111,394(85,913)
46,72829,730(1,011,592)(148,073)$

20,934(11,018)
-

$

(624)
-

$

1,761,886
448,617
1,062,237
566,127
114,947
329,460
532,626
4,311,114-$ 10,252,297$ (1,134,575)

$

9,916

$

(624)

$

9,127,014

$

$

$

-

$

-

$

241,995

Beginning
Balance

Exchange
Difference

Ending Balance

Deferred tax assets
Temporary differences
Defined benefit plan
Finance leases assets
Dynasty flyer program
Major component depreciation
Maintenance reserve
Depreciation of major spare part
Allowance for reduction of inventory
OthersLoss carryforward
Investment credits$

1,792,478
731,148458,870
346,159454,733
200,860
282,732
514,538
5,322,706
148,073

Deferred tax liabilities
Temporary differences
Finance leases assets
Unrealized foreign exchange gain
Depreciation difference from fixed
assetsDefined benefits plan
Others790,369
237,048
144,529
147,968$

1,319,914(790,369)
4,947(16,667)(13,144)
81,103$(734,130)

16,86422,945$39,809

3,227
$

3,227

127,862
3,720
255,243$628,820

For the year ended December 31, 2012

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
IncomeExchange
Difference

Ending Balance

Deferred tax assets
Temporary differences
Defined benefit plan
Finance leases assets
Dynasty flyer program
Major component depreciation
Maintenance reserve
Depreciation of major spare part
Allowance for reduction of inventory
OthersLoss carryforward
Investment credits$

1,717,805
376,090
172,884
353,092
164,219
177,673564,567
5,295,468
198,913$(24,309)731,148
82,780173,275
101,641
36,641
105,059(60,526)
27,238(50,840)$

98,982
11,088
-

$

(591)
-

$

1,792,478
731,148458,870
346,159454,733
200,860
282,732
514,538
5,322,706
148,073$

9,020,711$

1,122,107$

110,070$(591)$ 10,252,297

$

2,110

$

790,369
234,938

$

-

$

-

Deferred tax liabilities
Temporary differences
Finance leases assets
Unrealized foreign exchange gain
Depreciation difference from fixed
assetsOthers146,009
164,390$

312,509(1,480)1,334$

1,025,161(11,902)$(11,902)$(5,854)$(5,854)790,369
237,048
144,529
147,968$

1,319,914

Deductible temporary differences, unused loss carryforwards and unused investment credits for which
no deferred tax assets have been recognized in the balance sheets.
- 59 -

Loss carryforwards
2017
2018
2019
2020
2021
2022
2023

Investment tax credits
Personnel training
Automated equipment

December 31,
2013

December 31,
2012$

197,226
3,396,913
120,02980,080125,604
214,365$

3,582
199,934
217,527
120,02980,080125,466-$

27,263
289,469
244,968
137,976
80,402-$ 4,134,217$

746,618$

780,078$

125,487$

82,84460,254$143,42161,949$125,487$

143,098$

205,370

January 1, 2012

d. As of the year ended in 2013, unused investment tax credits of China Airlines, Ltd. and subsidiaries
were as follows:

Laws and Statutes

Tax Credit Source

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

2014

24,691

24,691

2015$ 65,233$ 65,233$ 64,277$ 60,254

China Airlines, Ltd.
Article 6 of the Statutefor Upgrading
Industries

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

Taiwan Air Cargo
Terminal Limited
Article 6 of the Statutefor Upgrading
Industries

Investments in equipment
and technology

2014

e. Unused tax loss carryforwards as of December 31, 2013 were as follows:
UnusedAmountExpiry Year
China Airlines, Ltd.
2018
2019
2021
2022

$

5,317,848
19,338,075
2,899,496
598,471$ 28,153,890(Continued)- 60 -

UnusedAmountExpiry Year
Mandarin Airline Co., Ltd.
2018
2019
2023

$

394,452
192,508
224,234$

811,194$

97,720101,471
45,157
9,617$

253,965$

2,939
18,558$21,497$34,923
115,988
102,248$

253,159(Concluded)

Cal Hotel Co., Ltd.
2019
2020
2021
2022

Cal Park Co., Ltd.
2019
2020

Taiwan Air Cargo Terminal Limited
2021
2022
2023

f. Integrated income tax
December 31,
2013

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

Imputation credits accounts

January 1, 2012$

24,942Since the Company had accumulated deficit as of December 31, 2013 and 2012, there were no expectedcreditable tax ratio.
Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputationcredits allocated to ROC resident shareholders of the Company was calculated based on the creditableratio as of the date of dividend distribution.
g. Income tax assessment
The income tax returns of the Company and its subsidiaries through 2011, except those of Taiwan Air
Cargo Terminal Limited (TACT), have been examined by the tax authorities.

- 61 -

The tax authority claimed that TACT’s negative imputed credit account (ICA) should be a positive
amount; thus TACT was assessed an additional income tax liability of $183,741 thousand. TACT was
dissatisfied with this assessment and filed an application for the reexamination of its return with the tax
authorities; an administrative appeal with the Ministry of Finance (MOF), an administrative action with
the High Administrative Court and an appeal with the Supreme Administrative Court, which were alloverruled and dismissed. The final appeal decision, which was rendered on December 4, 2013, wasunfavorable to TACT. TACT booked all its cumulative losses of $183,741 thousand as of December
31, 2013 under “nonoperating losses and expenses - other expenses.”
TACT was assessed by the tax authorities with an additional income tax liability amounting to$129,350 thousand and an additional fine of on its 2001 income tax filing due to the excessive
distribution of ICA to its shareholders. TACT was dissatisfied with this assessment and filed an
application for the reexamination of its return and an administrative appeal and also initiatedadministrative action, which were all dismissed. TACT then appealed to the Supreme Administrative
Court, which ruled on December 9, 2010 that the Company should make up for the excessive
distribution of ICA but need not pay a fine. Furthermore, the tax authorities were instructed to retry
the case. Dissatisfied with the disapproval of the fine, the tax authorities filed a retrial appeal on
December 29, 2010. On the other hand, TACT was dissatisfied with the decision to reverse theexcessive distribution of ICA and filed a retrial appeal on January 12, 2011. The Supreme
Administrative Court dismissed both appeals on December 8, 2011. TACT was still dissatisfied withthe additional fine, therefore, TACT filed an administrative appeal with the Ministry of Finance on
December 21, 2012. The tax authority amended the fine to 0.8 times on August 1, 2013. However
TACT was still dissatisfied with the results of retrial and recheck. Hence, TACT an administrative
appeal to the Ministry of Finance again. The appeal was still pending as of December 31, 2013. The
amount of provision recognized by TACT for over-distributed tax and fine was $147,810 thousand.

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
For the Year Ended December 31
2013
2012
Weighted average number of shares used to calculate loss per share- 62 -

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.

29. OPERATING LEASE ARRANGEMENTS
China Airlines, Ltd., Mandarin Airlines and Taiwan Air Cargo Terminal rented planes and hangars undervarious operating lease contracts expiring on various dates until January 2024. The Group does not have abargain 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 Group has rented ten A330-300 planes, three B737-800
planes and eight ERJ 190 planes under operating contracts; the lease terms range from 8 to 12 years, withan extension option.
As of December 31, 2013, December 31, 2012 and January 1, 2012, the refundable deposits paid by theGroup under operating lease contracts were $716,552 thousand, $626,924 thousand and $730,138 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

$

$

$

3,786,257
13,492,847
14,483,470$ 31,762,574

3,692,557
13,053,97816,323,006$ 33,069,541

4,313,677
9,575,839
6,127,591$ 20,017,107

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$ 3,543,880$ 2,150,535

30. CAPITAL MANAGEMENTThe Group manages its capital to ensure that entities in the Group 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 Group consists of net debt (borrowings offset by cash and cash
equivalents) and equity of the Group comprising issued capital, reserves, retained earnings, other equity andnon-controlling interests.
To support its operating activities and purchase of aircraft, the Group needs to maintain sufficient capital.
Therefore, the goal of capital management is to ensure financial resources and operating plan is able tosupport the future working capital, capital expenditures, debt repayment and dividend expenses and otherneeds.
- 63 -

31. FINANCIAL INSTRUMENTS
a. Fair values of financial instruments
1) Financial instruments not evaluated 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

$ 32,148,023
78,505,543$ 33,242,397
78,642,338$ 21,225,000
83,899,746$ 21,390,587
85,527,989$ 28,080,000
91,034,420$ 28,844,150
93,231,254

Some long-term debts and capital lease obligations are floating-rate financial liabilities, so theircarrying values are their fair values. As of December 31, 2013, December 31, 2012 and January 1,
2012, 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% to 1.4554%, 0.868% to0.9051% and 1.1281 % to 1.25%, respectively, prevailing in the market for long-term debts.
2) Fair value measurements recognized in the balance sheets
The following table provides an analysis of financial instruments that are measured subsequent toinitial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fairvalue is observable:a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;b) Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) orindirectly (i.e. derived from prices); andc) Level 3 fair value measurements are those derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data (unobservable inputs).
December 31, 2013
Level 1
Financial assets at FVTPL
Derivative instrument
Domestic money market fund$Level 2

Level 3

Total

192,419$

23,254-$-$$ 192,419$

23,254$-$ 215,673(Continued)- 64 -

23,254
192,419

Level 1
Available-for-sale financial
assetsSecurities listed in domestic
countries
Securities listed in othercountries$

Level 2

28,768$

Level 3-75,504

$

Total

-

-

$

28,768-75,504$ 104,272

$

-

$

-

$ 104,272

Financial liabilities at FVTPL
Derivative instrument

$

-

$

2,799

$

-

$

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

Derivative financial liabilities forhedging

$

-

$

$

-

$ 24,879(Concluded)

24,8792,799

December 31, 2012
Level 1
Financial assets at FVTPL
Domestic money market fundSecurities listed in domestic

Available-for-sale financial
assetsSecurities listed in domestic
Securities listed in othercountries$

Level 2

Level 3

Total

838,137
653,211

$

-

$

-

$

$ 1,491,348

$

-

$

-

$ 1,491,348

$

$

-

$

-

$

34,771
65,392--

838,137
653,211

34,771
65,392$

100,163

$

-

$

-

$

100,163

Derivative financial assets forhedging$-$

53,526$-$53,526

Derivative financial liabilities forhedging$-$

35,132$-$35,132- 65 -

January 1, 2012
Level 1
Financial assets at FVTPL
Financial assets at FVTPL
Securities listed in domestic
Financial assets designated as
at FVTPL

Available-for-sale financial
assetsSecurities listed in domestic
Securities listed in othercountries

Level 2

$ 3,662,138
274,517$374,085

Level 3

-

$

-

Total

-

$ 3,662,138
274,517-374,085$ 4,310,740

$

-

$

-

$ 4,310,740

$

$

-

$

-

$

41,340100,197--

41,340100,197$

141,537

$

-

$

-

$

141,537

Derivative financial assets forhedging$-$

108,667$-$

108,667

Derivative financial liabilities forhedging$-$

72,401$-$

72,401

There were no transfers between Levels 1 and 2 in the current 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.
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 Group because it is
not necessary to disclose the fair value of semifinancial and nonfinancial instruments.

- 66 -

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)215,673
104,272
140,620
468,476
29,806,215

1,491,348
100,163
53,526463,339
22,438,700

4,310,740
141,537
108,667
434,103
25,990,192$ 30,735,256$ 24,547,076$ 30,985,239

$

2,799
24,879135,161,328$

35,132
138,459,341$$ 135,189,006$ 138,494,473$ 156,578,815

Financial liabilities
Financial liabilities at FVTPL
Derivative financial liabilities for hedging
Financial liabilities at amortized cost (2)72,401
156,506,414

1) The balances included loans and receivables measured at amortized cost, which comprise cash andcash equivalents, notes and accounts receivables, accounts receivable - related parties, otherreceivables, refundable deposits, other financial asset and other restricted financial asset.
2) The balances included financial liabilities measured at amortized cost, which comprise short-termloans, short-term notes payable, notes and accounts payables, accounts payable - related parties,
other payable, bonds payable and long-term loans, capital lease obligation, part of other current
liabilities, part of other noncurrent liability and guarantee deposit.
c. Financial risk management objectives and policies
The Group 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 Group 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 the Groupstockholders 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 Group has a financial risk committee, which meets periodically to evaluate theperformance of derivative instruments and determine the appropriate hedging percentage. This
committee informs the Group of global economic and financial conditions, controls the entire financial
risk resulting from changes in the financial environment and fuel prices, and develops the strategy andresponse to avoid financial risk with the assistance of financial risk experts to effect risk management.
1) Market risk
The Group is primarily exposed to the financial risks of changes in foreign currency exchange rates
and interest rates. The Group entered into derivative financial instruments to manage its exposure
to foreign currency risk and interest rate risk.

- 67 -

The Group 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 Group 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 Group’s foreign assets and liabilities carrying value denominated in foreign currencies atthe end of reporting periods were as follows:
December 31,
2013

December 31,
2012

January 1, 2012

$

$

$

Assets
USD
EUR
HKD
JPY
RMB

4,640,919
713,966
1,301,084
950,527
11,604,538

2,375,009
594,762
1,084,376
857,477
6,329,004

4,326,485
562,935
1,403,578
764,126
5,696,389

Liabilities
USD
EUR
HKD
JPY
RMB

18,331,727
306,431314,869
1,269,617
1,709,514

26,635,417
270,483
253,553
1,189,635
1,547,641

37,052,377
393,279
265,795
1,512,342
1,214,393

Sensitivity analysis
The Group was mainly exposed to the U.S. dollar.
The following details the Group’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.
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, $23,902 thousand and $604,542 thousand, respectively.
b) Interest rate risk
The Group enters into interest swap contracts to hedge against the risks on change in net
liabilities interest rates.

- 68 -

The Group was exposed to interest rate risk because entities in the Group borrowed funds atboth fixed and floating interest rates. The risk is managed by the Group by maintaining anappropriate mix of fixed and floating rate borrowings, and using interest rate swap contracts andforward interest rate contracts. Hedging activities are evaluated regularly to align with interest
rate views and defined risk appetite, ensuring the most cost-effective hedging strategies areapplied.
The carrying amount of the Group’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

$ 31,285,991$ 19,627,309$ 23,926,691

92,612,484

105,423,929

117,370,797

Sensitivity analysis
The sensitivity analyses below were determined based on the Group’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 Group’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, theGroup’s pretax profit for the year ended December 31, 2012 would have decreased by $968,000
thousand.
c) Other price risk
The Group was exposed to fuel price risk on its purchase of aviation fuel. The Group enters
into fuel swaps contract to hedge against adverse risks on fuel price changes.
Sensitivity analysis
The sensitivity analyses below were determined based on the exposure to fuel price risks at theend of the reporting period.
For the Year Ended December 31
2013
2012
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
Fuel price increase 5%
Fuel price decrease 5%$ 21,417(13,132)- 69 -$ 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 Group. The Group’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 Group has established procedures to management operations related credit risk to maintain thequality of accounts receivable.
To assess individual customers, the Group consider into the financial condition of the customers,
the credit rating agency rating, the Group’s internal credit rating, transaction history and current
economic conditions and many other factors that may affect the repayment. Sometimes, the Group
uses certain credit enhancement tools to reduce the credit risk of specific customers.
Financial credit risk
Credit risk on bank deposits, investments income and other financial instruments are measured andmonitor by the Group’s finance department. The Group’s trading partners and other parties were
well-performing banks and financial institutions, corporations, and government agencies, the risk ofCounterparties fail to discharge an obligation is low, therefore there is no significant credit risk.
3) Liquidity risk
The objective of the Group’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 Group has adequate financial flexibility.
Liquidity and interest risk rate tables
The following table shows the remaining contractual maturity analysis of the Group’s financial
liabilities with agreed-upon repayment periods, which were based on the date the Group may berequired to pay the first repayment and financial liabilities is evaluated based on undiscounted cash
flows, including cash flows of interest and principal.
Bank loans with a repayment on demand clause were included in the second column of the tablebelow regardless of whether or not the banks would choose to exercise early their rights to
repayment. The maturity dates for other nonderivative financial liabilities were based on theagreed-upon repayment dates. The Group’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.

- 70 -

December 31, 2013
The Weighted
Average
Effective
Interest Rate(%)

1-3 Months

3 Months to
1 Year

1-2 Years

2-5 Years$

831,745$ 3,567,392$ 2,411,223$ 5,609,974

1.49972,948,546

21,808,169

14,068,334

34,186,654

3,904,705

4.3739102,972

389,895

545,441

1,085,625

-

2,201

21,879

394

405

-

$ 3,885,464$ 25,787,335$ 17,025,392$ 40,882,658$ 4,534,335

The Weighted
Average
Effective
Interest Rate(%)

1-3 Months

3 Months to
1 Year

1-2 Years

2-5 Years

5+ Years

1.7331$ 1,248,340$ 4,291,374$ 2,718,551$ 7,065,507$ 3,671,645

1.5651

4,056,735

13,642,505

27,354,926

33,832,759

5,474,640

4.37391,719,955

354,917455,626

1,040,599-

19,703

7,474

2,910

5,046

-

$ 7,044,733$ 18,296,270$ 30,532,013$ 41,943,911$ 9,146,285

The Weighted
Average
Effective
Interest Rate(%)

1-3 Months

3 Months to
1 Year

1-2 Years

2-5 Years

5+ Years

1.7051$ 1,246,171$ 2,824,627$ 5,326,776$ 8,698,169$ 5,027,041

1.55703,937,456

14,836,271

17,784,643

46,114,432

8,512,110

4.5164

186,021478,923

428,758

1,265,859

222,238-

29,85835,297

5,778

1,468

-

$ 5,399,506$18,175,118$ 23,545,955$ 56,079,928$ 13,761,389

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments

1.4260-5+ Years$

629,630

December 31, 2012

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments-

January 1, 2012

Finance leaseliabilities
Floating interest rate
liabilities
Fixed interest rate
liabilities
Derivative
instruments

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- 71 -

32. RELATED-PARTY TRANSACTIONS
Details of transactions between the Group 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$$$

113,392
13,87726,001$$$

249,000
13,121
38,486

Purchases of Goods
For the Year Ended
December 31
2013
2012
$ 531,293$ 1,278,542$
53,014$ 442,825$ 1,224,036$
62,275The amount of accounts receivable - related parties at reporting dates were as follows:
December 31,
2013
Associates
Jointly controlled entities
Major stockholder

December 31,
2012

January 1, 2012

5,447
594
8,476

$ 16,251
1,117
3,340

$ 29,301
1,083
3,697

$ 14,517$ 20,708$ 34,081$

The amount of accounts payable - related parties at reporting dates were as follows:
December 31,
2013
Associates
Jointly controlled entities
Major stockholder

December 31,
2012$ 108,889
317,284
6,362$

70,303
302,779
5,800$ 432,535$ 378,882

January 1, 2012$

88,682
275,7267,303$ 371,711

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
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 on usage
hours. In 2013 and 2012, the Company had paid rentals of $53,014 thousand and $62,275 thousand,respectively.

- 72 -

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

d. Bonds payable - related parties
China Pacific Catering Services subscribed private unsecured bonds issued by China Airlines, Ltd. in2010 (refer to Note 19), and had been paid in full in May 2013. As of December 31 and January 1,
2012, China Pacific Catering Services both hold 40,000 thousand bonds issued by China Airlines, Ltd.
e. Property transactions
To enhance asset use and improve resource sharing within its network, the Company sold the land andbuilding located in 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 and short-term bank loans
and business transactions:

Property, plant and equipment
Restricted assets - noncurrent
Pledged certificate deposits
US treasury bill

December 31,
2013

December 31,
2012

January 1, 2012

$ 110,044,021$ 136,203,861$ 150,997,123

181,209487,649

191,239
545,460

181,260
660,979$ 110,712,879$ 136,940,560$ 151,839,362- 73 -

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

34. COMMITMENTS AND CONTINGENT LIABILITIESAs of December 31, 2013, the Group had commitments and contingent liabilities (except for thosementioned in other notes), 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 aircraft in 2016 to2018.
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 slot to acquire aircraft in2015 to 2016. The board of the Company has reserved to transfer the purchase right of the six confirm
aircraft to the aircraft leasing company then lease those aircrafts back after the Company acquires theplanes.
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.
d. Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract with the Civil
Aeronautics Administrations (CAA) on January 14, 2000. The chartered operation period (COP) is 20
years from the date of transfer of the chartered operation rights from CAA to TACT. The terminal
expansion and improvements and the equipment installation and upgrade in the Taiwan Taoyuan
International Airport cargo terminal and Kaohsiung cargo terminal were expected to be completed in
the first 10 years of the COP. This construction project was approved by CAA’s board in 2003. The
total estimated expense of the construction project was $8,490,000 thousand. Designation of project
was from 2004 and the construction began in 2008. In 2013, TATC filed an application of for theextension of the chartered operation period, and CAA approved a 10-year extension.
The original total expenditure of the previous main construction project were $8,490,000 thousand.
However, TACT filed an arbitration for the total amount of expenditure in 2012 to revised the total
amount as $6,840,000 thousand.
- 74 -

As of December 31, 2013, TACT had signed the following construction contracts with unrelatedparties:
Contract
Amount (VAT
Included)

Client NameContract Title

CECI Engineering
Consultant, Inc., Taiwan
Siemens Taiwan

Cargo Terminal Expansion Construction Consultant
Contract
Cargo Terminal Expansion Construction First-StageAnd Second-Stage Storage And Transport
Facilities Contract
Cargo Terminal Expansion Construction First-Stage
Contract
Taoyuan Cargo Terminal Expansion Construction
Post-Arbitration Revised Contract
Taoyuan Cargo Terminal Expansion Construction
Post-Arbitration Revision Contract

Chien Kuo Construction
Co., Ltd.
Guo Chi Construction Co.,Ltd.
Lih Hwa Construction
Company Limited$

636,493
1,892,400

1,491,938
371,200
303,200

As of December 2013, the cumulated consultant service expense and construction equipment had
amounted to 395,950 thousand (VAT included) and 3,748,392(VAT included), respectively. Whenthe projects had been completed and checked, the amounts of $258,778 thousand (VAT included) and$2,301,204 thousand (VAT included) were reclassified to property, plant, and equipment. The
remaining cumulative payments of $1,584,360 thousand (VAT included) after deducting the loss of$141 thousand on the collapse of an express delivery warehouse for imports were recognized underconstruction in progress.
Assets acquired from cargo terminal improvements, equipment acquisition and subsequent equipment
acquisition and replacement will be transferred to the government without any compensation.
Furthermore, on the termination of the lease contract on lands, buildings and personal properties when
the chartered operating license expires, the leased land and operating assets would be returned to thegovernment in their original state.
TACT should pay royalties to CAA during the chartered operation period. The calculation is based on
annual sales (including operating revenue and nonoperatingg revenue but excluding the rental revenue
from specific district), and CAA has the right to adjust the royalty rates on the basis of actual revenue
and expenditure. The royalty rates are based on CAA letter order No. 1000021973 and have remained
the same as those in the original contract signed in April 2012; these rates were listed as follows:

Annual Operating Amount
Below 2 billion
Above 2 billion but below 4 billion
Above 4 billion but below 6 billion
Above 6 billion but below 8 billion
Above 8 billion but below 10 billion
Above 10 billion but below 12 billion
Above 12 billion- 75 -

Royalty Rate

Royalty Rate
(BeforeAdjustment)

6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%

6.66%
8.88%
11.10%
13.32%
15.54%
17.76%
19.98%

e. CAL Park Co., Ltd. (“CAL Park”) signed “Taiwan Taoyuan International Airport Aviation Operation
Center (including Airport Hotel) Construction Operating Contract” with the CAA on September 20,
2006. However, on November 1, 2010, the Taoyuan Airport Corporation took over the CAA’s rights
on this contract from the CAA. The contract is effective 50 years (consisting of the development stage
and operating period) from the contract date. Three years before contract expiry date, CAL Park has
the first option to renew the contract once with a 20-year extension.
CAL Park’s business scope includes providing business and other operating space related to civil airtransport, hotels, aviation service and related industries adhered to the base and essential services law
and approved by the Taoyuan Airport Corporation.
CAL Park should pay land rentals on the date of the registration of surface rights. The rates for thedevelopment stage differ from those for the operation period. It should follow Article No. 2 of the“Regulations for Favorable Rentals Regarding Public Land Lease and Superficies in Infrastructure
Projects,” which states that rental calculation in the development stage should include the land value
added tax plus the necessary maintenance fee; in the operation period, rentals are 60% of the amountbased on the National Building Land Rental Standard plus land value tax, value-added tax and thenecessary maintenance fee.
CAL Park should pay construction and operation security deposits of $100,000,000 (using a refundable
certificate deposit recognized under deposits-in). If CAL Park complies with the contract terms within
three months amount after the initial operation date, half of the security deposits will be refundedinterest free, and the remaining amount will be refunded within three months after the end of theoperating period and the completion of asset transfer. In 2013, CAL Park received refunded security
deposits of $50,000,000 with no interest.
In the 50 years beginning from the initial operation date (March 1, 2009) of CAL Park to the end of theconstruction period, CAL Park should pay royalties based on the operating revenue estimated in thefinancial plan of its investment executing proposal. If the sales and business tax declared and filed bya business entity for a single year exceeds 10% of the operating revenue as estimated in the financial
plan in its investment execution proposal, CAL Park should pay additional an royalties at 10% of thisexcess.
CAL Park should submit the asset transfer plan within five years before the expiry date of the charteredoperation period, begin the negotiation of the asset transfer contract, and complete the assignation nolater than three years before the expiry day of chartered period. If CAA decides not to keep thebuilding and equipment on the base, CAL Park Co., Ltd. Should remove all related building andequipment within three months after the expiry date.
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.

- 76 -

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 $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)c. Business relationship and important transactions between China Airlines, Ltd. and its subsidiaries:
Table 8 (attached)- 77 -

36. SEGMENT INFORMATION
a. Segment information
The Company mainly engages in air transportation services for passengers, cargo and others. The
major revenue-generating asset is the aircraft fleet, which is jointly used for passenger and cargoservices. Thus, the Company’s sole reportable segment is the flight segment. For operating segment
reporting in the consolidated financial statements, the reportable segment of the Company and its
consolidated subsidiaries comprises the flight and the non-flight business departments.
Air
Transportation

For the Year Ended December 31, 2013
Adjustment andOthersWrite-off

Operating revenue$ 139,170,014$

7,594,716$(5,062,185)

Operation profit and losses
Interest revenue
Investment income accounted forby the equity method
Revenue
Financial cost
Operating expense$$

1,290,657$

36,500(2,088,984)$$$ 142,417,586$

9,379,067$(57,845)(761,827)
361,433(361,180)$ 151,738,808
2,687,755
66,549,336

Total assets$ 220,975,899

AirTransportation

For the Year Ended December 31, 2012
Adjustment andOthersWrite-off

Operating revenue$ 139,401,781$

6,695,865$(5,125,507)

Operation profit and losses
Interest revenue
Investment income accounted forby the equity method
Revenue
Financial cost
Operating expense$$

537,865$

36,500(854,316)

Total$ 140,972,139$(279,951)
243,325
416,7212,527,216(2,508,751)(570,565)

Loss before income tax
Identifiable assets
Investment accounted for by theequity method
Assets$ 141,702,545

450,361
2,200,890(2,122,326)(489,711)

Loss before income tax
Identifiable assets
Investment accounted for by theequity method
AssetsTotal$$ 153,633,917$

8,982,774$(94,345)(172,005)$ 162,522,346
2,545,444
54,231,905

Total assets$ 219,299,695- 78 -

b. Geographical segment
The geographical segment information of the Company and its subsidiaries in 2013 and 2012 are listed
below:For the Year Ended December 31, 2013

Operating revenue
Operation profit
and losses
Interest revenue
Investment income
accounted for by
the equity
methodRevenue
Interest expense
Operating expense

America

Northeast Asia

Southeast Asia

EuropeAustralia$

43,511,399$

20,882,502$

31,287,675$

14,401,584$

3,416,981$

15,466,867$(4,536,459 )$

1,786,656$(1,300,039 )$(1,849,477 )$(103,996 )$

2,848,642

Domestic

Adjustment andEliminations

Consolidation$

17,797,722$(5,062,185 )$ 141,702,545$

2,356,346$

36,500China(761,827 )
361,433

450,361
2,200,890(2,122,326 )(489,711 )Loss before income
tax
Identifiable assets
Investment
accounted for by
the equity
methodAssets$$$

1,752,153$

112,281$

208,519$

19,908

$

7,391

$

17,218$ 149,679,183$(57,845 )(361,180 )$ 151,738,808

2,687,755
66,549,336

Total assets$ 220,975,899

For the Year Ended December 31, 2012
America

Northeast Asia

Southeast Asia

EuropeAustralia

China

Domestic

Adjustment andEliminations

Consolidation$ 140,972,139

Operating revenue$

44,384,216$

19,206,697$

31,305,683$

14,524,394$

3,136,455$

16,047,775$

17,492,426$(5,125,507 )Operation profit
and losses$(4,051,217 )$

1,917,346$(925,216 )$(2,362,025 )$

29,033$3,339,909$

1,735,719$

36,500$Interest revenue
Investment income
accounted for by
the equity
methodRevenue
Interest expense
Operating expense

243,325

416,7212,527,216(2,508,751 )(570,565 )Loss before income
tax
Identifiable assets
Investment
accounted for by
the equity
methodAssets(279,951 )$$

1,989,033$

81,824$

178,786$

16,398

$

4,887

$

20,045$ 160,325,718$(94,345 )(172,005 )$ 162,522,346

2,545,444
54,231,905

Total assets$ 219,299,695

37. FIRST-TIME ADOPTION OF IFRSs
a. Basis of the preparation for financial information under IFRSs
The Group’s consolidated financial statements for the year ended December 31, 2013 were the first
IFRS financial statements. The Group not only follows the significant accounting policies stated in
Note 4 but also applies the requirements under IFRS 1 “First-time Adoption of IFRS” as the basis forthe preparation.

- 79 -

b. Impact on the transition to IFRSs
The impact to consolidated balance sheet and consolidated comprehensive income statement after
adopting IFRS were as follows:
1) Reconciliation of the consolidated balance sheet as of January 1, 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
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 attributable to owners of the Company
Noncontrolling interests
Total equity
Total liabilities and equity$

12,774,182
640,681
8,762,581
5,855
16,506,173
38,689,472

Difference$(1,660,410 )(6,654 )(2,097,526 )(5,855 )1,124,746(2,645,699 )Amount$Impact of Transition to IFRSs
Item

Note

11,113,772
634,027
6,665,055
17,630,919
36,043,773

Cash and cash equivalents
Other receivable
Inventories
OthersTotal current assets

1
2
2
15
2

1,666,487
854,783
2,521,270
151,441,357
713,480

781,767(5,255 )776,512
21,487,647
1,498,283(312,920 )

2,448,254
849,528
3,297,782
172,929,004
1,498,283
400,560

Investments accounted for by the equity method
OthersTotal long-term investments
Property, plant and equipment
Investment properties
Intangible assets

11

10,904,400
6,993,895
1,589,087
19,487,382(9,277,873 )
6,423,068
2,026,816(840,434 )(1,668,423 )

1,626,527
6,423,068
9,020,711
748,653
17,818,959

Deposits
Prepayments - noncurrent
Deferred tax assets
OthersTotal other assets

3
4
15
5

$ 212,852,961$

19,135,400$ 231,988,361$$(19,783 )471,018
2,562,875
125,047
3,139,157$

13,632,651
9,190,999
1,221,178
33,729,471
57,774,299

2, 3, 4, 5, 9, 13
5

Total assets

11

13,612,868
9,662,017
3,784,053
33,854,518
60,913,456

Other payable
Deferred revenue - current
Capital lease obligations - current portion
Other current liabilities
Total current liabilities

3, 14
14
3
2

1,374,429
88,671,695
90,046,124

17,024,586
37,07817,061,664

18,399,015
88,708,773
107,107,788

Capital lease obligations - noncurrent
OthersTotal long-term liabilities

3

7,549,554
5,312,853
1,923,220
14,785,627
162,606,050

2,705,842
2,836,868(5,211,895 )
312,509
1,711,677(703,943 )
1,651,058
21,851,879

10,255,396
2,836,868
100,958
312,509
1,711,677
1,219,277
16,436,685
184,457,929

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

7
8
3
15
14

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 )(2,325,184 )
50,01041,298(36,554 )1,598,197
2,325,184(41,298 )(6,818 )50,010(43,372 )(3,868,627 )
47,059,078
3,187,833
50,246,911

3,875,265(1,294,057 )(1,422,422 )(2,716,479 )

6,638
45,765,021
1,765,411
47,530,432

19,135,400$ 231,988,361$ 212,852,961

$

11

10

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 attributable to owners of the Company
Noncontrolling interests
Total equity

9, 12, 15

13

11

Total liabilities and equity

2) Reconciliation of the consolidated balance sheet as of December 31, 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

12,636,270
455,287
8,672,979
216,404
11,680,083
33,661,023

Difference$(1,800,139 )(7,414 )(1,840,385 )(216,404 )
1,181,049(2,683,293 )Amount$10,836,131
447,873
6,832,594
12,861,132
30,977,730

1,732,849
503,6442,236,493
144,417,565

812,595(4,775 )807,820
16,606,778

2,545,444
498,869
3,044,313
161,024,343

589,098

1,498,004(164,098 )1,498,004
425,000

10,563,511
7,002,751
1,345,591
18,911,853(9,227,557 )
10,140,730
3,249,546(744,267 )
3,418,452

1,335,954
10,140,730
10,252,297
601,324
22,330,305

Impact of Transition to IFRSs
ItemCash and cash equivalents
Other receivable
Inventories
OthersTotal current assets
Investments accounted for by the equity method
OthersTotal long-term investments
Property, plant and equipment
Investment properties
Intangible assets
Deposits
Prepayments - noncurrent
Deferred tax assets
OthersTotal other assets

Note
1
1
2
15
2

11

2、3、4、5、9、
13
5

3
4
15
5
11

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$ 199,816,032$

19,483,663$ 219,299,695$$(130,479 )
669,3024,442,872
196,253
5,177,948$

11,416,774
7,622,694
871,063
26,962,565
46,873,096
430,862
82,744,149
83,175,011

12,581,695
12,585,166

Total assets

11,286,295
8,291,996
5,313,935
27,158,818
52,051,044

Other payable
Deferred revenue - current
Capital lease obligations - current portion
Other current liabilities
Total current liabilities

13,012,558
82,744,149
95,756,707

Capital lease obligations - noncurrent
OthersTotal long-term liabilities

3、14
14
3
2

3

(Continued)- 80 -

ROC GAAP
Item

AmountOther 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 attributable to owners of the Company
Noncontrolling interests
Total equity
Total liabilities and equity$

8,106,644
4,735,675
1,646,067
14,488,386
144,536,493

Difference$

2,470,013
3,409,129(4,649,229 )
1,319,914
1,967,650(804,828 )
3,712,649
21,472,293

Amount$10,576,657
3,409,129
86,446
1,319,914
1,967,650
841,239
18,201,035
166,008,786

Accrued pension costs
Provisions - noncurrent
Deferred profits on sale - leaseback
Deferred tax liabilities
Deferred revenue - noncurrent
OthersTotal other liabilities
Total liabilities
Capital stock
Capital surplus
Retained earnings

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

52,000,000
1,405,394(1,841,688 )(2,599,694 )(2,917,215 )(182 )
41,298(36,554 )2,539,314
2,917,215(41,298 )(6,818 )(60,380 )(182 )(43,372 )(5,512,347 )
52,141,231
3,138,308
55,279,539

5,408,413(681,459 )(1,307,171 )(1,988,630 )(103,934 )
51,459,772
1,831,137
53,290,909

19,483,663$ 219,299,695$ 199,816,032$

Impact of Transition to IFRSs
Item

Note

7
8
3
15
14

11

10

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 attributable to owners of the Company
Noncontrolling interests
Total equity

9、12、15

13

11

Total liabilities and equity(Concluded)
3) Reconciliation of the consolidated 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$ 143,452,702(131,985,369 )
11,467,333(10,501,421 )
965,912(519,957 )
445,955(203,183 )$242,772

Difference$$(2,480,563 )
892,001(1,588,562 )
342,701(1,245,861 )
627,902(617,959 )
155,030(462,929 )Amount$ 140,972,139(131,093,368 )
9,878,771(10,158,720 )(279,949 )
107,945(172,004 )(48,153 )(220,157 )(80,460 )(41,374 )(611,570 )Operating revenue
Operating cost
Gross profits
Operating expenses
Operating loss
Nonoperating income and expenses
Income before income tax
Income tax expense
Net income
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

(831,727 )Total comprehensive income for the period(22,134 )(6,146 )(559,303 )
97,847$

Impact of Transition to IFRSs
Item

Note
2,14
2,3,6,7,8
6,7,14
2,3,8,911,15
11c. Explanations of significant reconciling items in the transition to IFRSs
1) Time deposits over three months
Time deposits that can be readily cancelled without eroding the principal and negotiable certificatesof deposit that can be readily sold without eroding the principal can meet the definition of cash inaccordance with ROC GAAP. However, under IAS 7” Statement of Cash Flow”, cash equivalents
are held for the short-term cash commitments rather than investment or other purposes. If an
investment can be readily convertible to a known amount of cash and be subject to an insignificant
risk of changes in value; it can be qualified as a cash equivalent. An investment is normallyqualified as a cash equivalent only when it has a short maturity of, say, three months or less fromthe date of acquisition. Therefore, time deposits with a carrying amount of $1,713,212 thousand
and $1,667,954 thousand as of December 31, 2012 and January 1, 2012, respectively, held by theGroup was for investment purposes and thus no longer classified as cash under IFRSs.
2) Significant component inspection and overhaul costa) Based on IAS 16 “Property, Plant and Equipment,” since the Group 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.

- 81 -

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 Group 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 Group 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 Group made certain adjustments. As of January 1, 2012, the Groupdecreased inventory by $2,140,098 thousand; increased property, plant and equipment by $157,146
thousand. As of December 31, 2012, the Group decreased inventory by $1,928,339 thousand;decreased property, plant and equipment by $477,627 thousand; decreased other assets related tomaintenance by $29,445 thousand; and increased long-term prepayment by $610,037 thousand.
For the year ended December 31, 2012, the Group decreased revenue by $19,106 thousand andoperating cost by $448,062 thousand, and increased nonoperating expenses by $271,378 thousand.
3) Lease
Under ROC GAAP, aircraft used by the Group 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 group were reclassified as a finance lease oroperating lease depending on the substance of the transaction.
After the transition to IFRSs, the Group made certain adjustments. As of January 1, 2012 andDecember 31, 2012, the Group increased property, plant and equipment by $23,206,351 thousand
and $20,787,426 thousand, respectively; decreased deposits - out by $9,225,000 thousand on bothsates; 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; anddecreased deferred profits on sale-leaseback by $5,211,895 thousand and $4,649,228 thousand,respectively. For the year ended December 31, 2012, the Group 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; and increased finance cost by $283,041
thousand.
4) 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 Group reclassified the prepayment forequipment as a long-term prepayment by $5,738,999 thousand and $5,738,999 thousand,respectively.

- 82 -

5) Investment properties
Under ROC GAAP, the properties held to earn rentals are classified as fixed assets. Under IFRSs,
the 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 Group
reclassified the land held to earn rentals and assets leased to others from fixed asset to investment
properties at its carrying amount of $1,498,283 thousand and 1,498,004 thousand, respectively.
6) Employee benefits - accumulating compensated absences
Under ROC GAAP, the accounting for accumulating compensated absences is not clarified clearly.
In practice, it is accounted for as expense when the salaries are paid by entity. After the adoptionof IFRSs, the 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 Group increased other payables by $680,707
thousand and $585,283 thousand, respectively. For the year ended December 31, 2012, the Groupdecrease salary and wages $95,504 thousand.
7) 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 Group increased accrued pension costs by$2,878,099 thousand and $2,632,117 thousand, respectively; decreased prepaid pension cost by 49
thousand and 103 thousand, respectively; decreased deferred pension cost by $318,987 thousand
and $173,001 thousand, respectively; decreased net loss not recognized as pension cost by$2,325,184 thousand and $2,917,215 thousand, respectively; increased non-controlling interests
94,527 thousand and 135,705 thousand, respectively, and increased investments accounted for by
the equity method by $39,335 thousand and $37,331 thousand, respectively. For the year ended
December 31, 2012, the Group decreased pension cost by $338,945 thousand, and retained
earnings, by $582,244 thousand, because of actuarial gain or loss on the defined pension plan.
8) 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.
Under IAS 37 “Provisions, Contingent Liabilities and Contingent Assets,” the expansion contract
signed by the subsidiaries of the Company and Civil Aeronautics Administration were evaluatedthat the inevitable cost exceeded the expected economic benefits and therefore recognize related
provisions.

- 83 -

As of January 1, 2012 and December 31, 2012, the Group increased provisions - noncurrent by$2,154,775 thousand and $2,611,130 thousand, respectively; for the year ended December 31, 2012,
the Group made an adjustment to increase operating cost of $445,762 thousand and increasefinancial cost of 10,593 thousand.
9) 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 Group increased property, plant and equipmentby $6,286,693 thousand and $8,468,893 thousand, respectively; and increased translation
adjustment by $1,976,066 thousand and $3,107,016 thousand respectively; for the year ended
December 31, 2012, the Group increased gains on foreign currency exchange by $1,051,250
thousand.
10) Adjustments to the operating of retained earnings and equity (the Company) on January 1, 2012
January 1,
2012
Total equity under ROC GAAP
Adjustments to retained earnings
Employee benefits - defined benefit actuarial gains and losses
Customer loyalty programmer
Provisions - noncurrent
Property, plant and equipment
Employee benefits - short-term cumulative paid leave
Effect of 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

$ 45,765,021(5,127,274)(2,114,868)(1,800,104)(1,984,858)(539,188)(92,921)
4,310,627
272,580
1,906,684(5,169,322)
3,875,26511) Joint venture
China Pacific Catering Services Ltd. and China Pacific Laundry Services Ltd. held by the Group are
jointly controlled entities based on the principle of IFRS No. 31 “joint venture.” After adopting
IFRS, the Group recognize the equity of China Pacific Catering Services Ltd. and China Pacific
Laundry Services Ltd. under equity method.

- 84 -

As of January 1, and December 31, 2012 China Airlines Co., Ltd. decrease total consolidated assets
of $1,763,695 thousand and $1,852,294 thousand respectively owing to the joint venture accounting
treatment; decrease total consolidated liabilities of $230,918 thousand and $216,210 thousand,respectively; noncontolling interest decrease $740,093 thousand and $790,199 thousand,respectively; increase equity investment $792,684 thousand and $845,885 thousand; in addition,
increase consolidated net loss $155,100 thousand (including income tax decrease $58,402 thousand)in 2012.
12) Cumulative translation adjustments
The Group used an exemption under IFRS 1 “First-time Adoption of International Financial
Reporting Standards” of resetting the cumulative translation difference of $50,529 thousand to zeroon the transition to IFRSs and thus adjusted retained earnings as of January 1, 2012; because of theabove exemptions and the change of the functional currency, the cumulative translation adjustments
decreased by $47,603 thousand.
13) Revaluation increments
Under IFRS 1, the Group used the revaluation increments under ROC GAAP to some of its plants
as deemed cost on the IFRS transition date, and reclassified unrealized revaluation increments toretained earnings.
As of January 1, 2012 and December 31, 2012, the amount of reclassification from unrealized
revaluation increment to plants and buildings of the Group was $41,298 thousand.
14) 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.
15) 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. Above over, income tax
asset and liability can only be offset under certain condition.

- 85 -

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 $5,855 thousand and 214,996 thousand, deferred income tax assets- noncurrent increased by $2,026,816 thousand and $3,249,546 thousand, respectively; deferredincome tax liabilities - noncurrent increased by $312,509 thousand and $1,319,914 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 expense decreased by$96,629 thousand, and the effect on retained earnings due to defined benefit actuarial gains andlosses decreased by $98,935 thousand.
16) Presentation of the consolidated comprehensive income statement
After adopting IFRSs, consolidated comprehensive income statement contains current year income
and other comprehensive income. The Group reclassified some of accounts for the presentation
under IFRSs.
d. Special reserve on adoption day
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 paid and received should be disclosed separately and classified
under operating activities.
Except for the above difference, there are no other significant differences between ROC GAAP and
IFRSs in the statement of cash flows.

- 86 -TABLE 1

CHINA AIRLINES, LTD. AND SUBSIDIARIESENDORSEMENT/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

Limits on EachCounter-party’s
Maximum
Endorsement/
Balance for the Ending Balance
Nature ofGuarantee
PeriodRelationshipAmounts(Note 1)100%
subsidiary
54% subsidiary$ 10,161,293
10,161,293

1,080,000

1,080,000

100%
subsidiary100%
subsidiary100%
subsidiary

10,161,293

309,474

10,161,293

Taikoo Spirit
Investments
Aerospace Systems
accounted(Jinjiang) Composite for by thecost method$

3,400,000$

3,400,000

ActualBorrowingAmount$3,071,000

Ratio ofAccumulated
Value ofAmount ofCollaterals
Collateral to Net
Property, Plant
Equity of theor Equipment
Latest Financial
Statement (%)

Maximum
Collateral/
Guarantee
Amounts
Allowable(Note 2)$Endorsement/ Endorsement/ Endorsement/
Guarantee
Guarantee
Guarantee
Given byGiven byGiven on Behalf
Parent on
Subsidiaries on of Companies in
Behalf ofBehalf ofMainlandSubsidiaries
Parent
China

-

6.69

$ 25,403,232

Y

-

-

361,800-

2.13

25,403,232

Y

-

-

285,564

285,564

285,564

0.56

25,403,232

Y

-

-

203,295

-

-

-

-

25,403,232

Y

-

-

10,161,293

180,000

180,000

19,029-0.35

25,403,232

Y

-

-

255,063

16,326

16,22915,323-

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.
Note 3: Transaction with subsidiaries have been written off in consolidated financial report.

- 87 -TABLE 2

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

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 1
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-China Airlines(the “Company”)

Mandarin Airlines

Abacus Distribution
Systems (Taiwan)

Marketable Securities Type andIssuer/Name

December 31, 2013
Percentage ofCarrying Value
Ownership

Relationship with theHolding Company

Holding Company Name

StockFrance 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)- 88 -

Holding Company Name

Marketable Securities Type andIssuer/Name

Relationship with theHolding Company

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
$

6,557

-

5,100,962

62,412

Bond investments with no active market noncurrent

60

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

Market Value or
Net Asset Value
$

Note

6,557

-

-

62,412-60,000-60,000-2,265,182

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.
Note 5: Transaction with subsidiaries have been written off in consolidated financial report.
(Concluded)- 89 -TABLE 3

CHINA AIRLINES, LTD. AND SUBSIDIARIES
MARKETABLE 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 andIssuer/Name

Financial Statement AccountBeneficial certificates
UPAMC James Bond Money Market Fund Financial assets at fair value through profit
or loss - current
Union Money Market Fund
Financial assets at fair value through profit
or loss - current
Capital Money Market Fund
Financial assets at fair value through profit
or loss - current
Eastspring Inv Well Poll Money Market
Financial assets at fair value through profit
or loss - current
Stock
China Life Insurance Co., Ltd.

Financial assets at fair value through profit
or loss - current

Note 1:

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

Note 2:

Transaction with subsidiaries have been written off in consolidated financial report.

Beginning Balance

Acquisition (Note)

DisposalEnding Balance

Counter-party

Nature ofRelationship

Shares/Units

AmountShares/Units

AmountShares/Units

AmountCarrying Value--

12,332,965.40$ 200,000

23,393,785.19$ 380,000

35,726,750.59$ 580,770$ 580,000--

15,603,545.13

200,000

35,022,892.78

450,000

50,626,437.91

650,738

-

-

-

-

44,624,047.60

700,000

44,624,047.60

-

-

-

-

66,568,415.70

880,000--

16,424,127

430,312--- 90 -

Gain (Loss) on
Disposal$

Shares/Units

Amount

770

-

$

-

650,000

738--

700,604

700,000

604--

66,568,415.70

880,760

880,000

760--

16,424,127

466,052

430,31235,740--TABLE 4

CHINA AIRLINES, LTD. AND SUBSIDIARIESTOTAL 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

Related Party

Nature of Relationship
Purchase/Sale

China Airlines, Ltd. (“China
Airlines”)$

Amount% to
Total

Payment Terms

Unit Price

268,440
213,019(2,373,391)
303,434
1,197,513
996,8810.22
0.17(1.55)
0.25
0.97
0.81

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

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

Purchase
Purchase
Sale
Purchase
Purchase
Purchase

Equity-method investee
Subsidiary
Equity-method investee
Subsidiary

Purchase
Purchase
Purchase
Purchase

206,347
376,613129,058
272,415

0.17
0.31
0.10
0.22

Taiwan Air Cargo Terminal

China Airlines

Parent company

Sale(268,440)

Cal Park

China Airlines

Parent company

Sale

Mandarin Airlines

China Airlines

Parent company

China Pacific Catering Services

China Airlines

Taoyuan International Airport
Service

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

Abnormal Transaction--

30 days
40 days
40 days
2 months-(20.49)2 months(213,019)(72.16)

Purchase
Sale

2,043,020(303,434)

Investor using equity
methodSale

China Airlines

Parent company

China Aircraft Services

China Airlines

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

41,33246.59-

2 months--

159,764

88.08

-

28.33
(4.09)

2 months
2 months--(422,956)
286,863(41.66)68.40-(1,197,513)(57.70)60 days--

303,544

71.12

-

Sale

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

307,188

69.33-

Investor using equity
methodSale(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 salesSale(129,058)(9.14)

40 days--

20,11010.39-

Hwa Hsia

China Airlines

Parent company

Sale(272,415)(76.60)2 months--

50,65888.32-

Note: Transaction with subsidiaries have been written off in consolidated financial report.

- 91 -$Note

TABLE 5

CHINA AIRLINES, LTD. AND SUBSIDIARIESRECEIVABLES 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)

Overdue
Company Name

Related Party

Nature of RelationshipEnding 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

AmountAllowance 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-

Note: Transaction with subsidiaries have been written off in consolidated financial report.

- 92 -$

Action Taken

Amounts Received
in Subsequent
Period$-TABLE 6

CHINA AIRLINES, LTD. AND SUBSIDIARIESNAMES, 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

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

Location

Main Businesses and Products

Abacus Distribution System (Taiwan)
China Aircraft Service
Asian Compressor Technology Services
Taiwan Airport Services
Kaohsiung Catering Services
Cal Hotel Co., Ltd.
Science Park Logistics
China Pacific Laundry Services

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

Real estate lease and international trade
Air transportation and maintenance of aircraft
Air cargo and storage
A holding company, real estate and hotel services
In-flight catering
Airport services
General investment

Hwa Hsia

Taoyuan, Taiwan

Dynasty Holidays
Yestrip
Global Sky Express
Freighter Princess Ltd.
Freighter Prince Ltd.
Freighter Queen Ltd.

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

Sale and maintenance of hardware and software
Airport services
Research, manufacture and maintenance of engines
Airport services
In-flight catering
Hotel business
Storage and customs of services
Cleaning and leasing of the towel of airlines, hotels,
restaurants, and health clubs
Cleaning of aircraft and maintenance of machine andequipment
Travel businessTravel business
Forwarding and storage of air cargo
Aircraft lease
Aircraft lease
Aircraft lease

Xiamen International Airport Air Cargo
Terminal
Xiamen International Airport Air Cargo
Storage
Eastern United International Logistics

Xiamen International Airport

Taiwan Airport Services

Investment Amount
December 31,
December 31,
2013
2012

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

1,500,000
2,042,368
1,350,000US$
26,145439,110147,000
US$
46,516150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000
47,016,200

100.0093.99
54.00
100.0051.00
49.00
100.0052,20058,00077,322
12,289140,240
465,000
150,654
137,500

13,021,042
28,400,000
7,732,200
20,626,644
14,329,759
46,500,000
13,293,000
13,750,000

93.93
20.00
24.50
47.35
35.78
100.0028.48
55.00

420,209407,725
244,486
251,295
225,221210,275
192,175
163,628

50,00050,000100.00408
1,600,000
250,000
1,000
1,000
1,000

1,500,000
2,042,368
1,350,000US$
26,145439,110147,000
US$
47,016

HK$

52,20058,00077,322
12,289140,240
465,000
150,654
137,500$

HK$

50,0001,479,619
1,102,073
1,355,358
1,056,433
685,797604,5101,275,313$

9,699(93,296)416,581
15,399311,347
190,307763,477

$

Note

9,699
(54,821)
224,954
15,399158,787
93,250763,477

Note 1
Note 2-

161,895
140,915
411,034
86,166132,207
16,641
96,88951,823152,054
28,183
95,71140,78747,306
16,641
27,56228,503-78,81029,92929,929Note 151.00
100.0025.00
100.00100.00100.0030,98636,353
6,471
30
30
30

3,527
13,588
2,689
-

1,799
13,588
672
-

-

JPY

US$
US$
US$

20,40026,265
2,500
1
1
1

US$
US$
US$

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$

Investment
Income (Loss)

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

Note 2:

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

Note 3:

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

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

Note 5:

Transaction with subsidiaries have been written off in consolidated financial report.

- 93 -TABLE 7

CHINA AIRLINES, LTD. AND SUBSIDIARIESINVESTMENTS 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
Capitalas ofJanuary 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
as ofDecember 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)-

56,0181,888)(Note 4)

-

(US$

7,381
248)

(US$

5,104
172)

-

(Continued)- 94 -

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 (Samoa), 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.
Note 10: Transaction with subsidiaries have been written off in consolidated financial report.
(Concluded)- 95 -TABLE 8-1

CHINA AIRLINES, LTD. AND SUBSIDIARIES AND SUBSIDIARIES
BUSINESS RELATIONSHIP AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINE, LTD. AND ITS SUBSIDIARIESFOR THE YEAR ENDED DECEMBER 31, 2013
(In Thousands of New Taiwan Dollars)Intercompany Transactions
No.

0

Company Name

China Airlines, Ltd.

Related Party

Natural of
Relationship (Note 1)

Accounts

Global Sky Express
Cal-Dynasty International
Mandarin Airlines
Taiwan Air Cargo Terminal
Mandarin Airlines
Taoyuan International Airport Services
Abacus Distribution System (Taiwan)
Taiwan Airport Services
Cal-Asia Investment
Hwa Hsia
Dynasty Holidays
Global Sky Express
Yestrip
Cal park
Cal Hotel Co., Ltd.
Taoyuan International Airport Services
Taiwan Airport Services
Hwa Hsia
Mandarin Airlines
Taiwan Air Cargo Terminal
Dynasty Holidays
Cal-Dynasty International
Cal-Asia Investment
Yestrip
Cal park
Cal Hotel Co., Ltd.
Abacus Distribution System (Taiwan)
Mandarin Airlines
Taoyuan International Airport Services
Abacus Distribution System (Taiwan)
Hwa Hsia
Taiwan Air Cargo Terminal
Mandarin Airlines
Abacus Distribution System (Taiwan)
Hwa Hsia
Global Sky Express

a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a

Cargo revenue
Cargo revenue
Passenger revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Terminal and landing fees
Terminal and landing fees
Terminal and landing fees
Passenger costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Operating expenses
Interest expenses
Interest expenses
Interest expenses
Interest expenses
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties

Amount$97,292
1,877,736
15,578165,2842,843
6,901
11,893
10,242
2,884
2,030
2,427
4,952
996,881376,613272,415
303,434
268,440
46,08541,425
8,683
213,019
71,210
2,530
5,585
1,995
1,197
1,141
422,956
589
2,953
3,899

Transaction Criteria

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions% to Total
Consolidated Total
Revenue or Assets
0.07
1.33
0.01
0.12
0.01
0.01
0.70
0.27
0.19
0.21
0.19
0.03
0.03
0.01
0.15
0.05
0.19
(Continued)- 96 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship (Note 1)

Accounts

Yestrip
Cal Hotel Co., Ltd.
Global Sky Express
Hwa Hsia
Taoyuan International Airport Services
Taiwan Airport Services
Yestrip
Taiwan Air Cargo Terminal
Mandarin Airlines
Taoyuan International Airport Services
Cal-Dynasty International
Abacus Distribution System (Taiwan)
Taiwan Airport Services
Hwa Hsia
Yestrip
Cal Hotel Co., Ltd.
Cal park
Global Sky Express
Mandarin Airlines
Taoyuan International Airport Services
Abacus Distribution System (Taiwan)
Hwa Hsia
Mandarin Airlines
Abacus Distribution System (Taiwan)

a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a

Accounts receivable - related parties
Accounts receivable - related parties
Dividends receivable
Dividends receivable
Dividends receivable
Dividends receivable
Dividends receivable
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Interest payable
Interest payable
Interest payable
Interest payable
Other current liabilities
Other current liabilities

Amount$Transaction Criteria% to Total
Consolidated Total
Revenue or Assets

10,16341,316
286,863
307,1881,454
29
66,57250,6583,232
6,221
159,764
2,670
953
572
-

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.02
0.13
0.14
0.03
0.02
0.07
-

1

Taiwan Air Cargo Terminal

China Airlines, Ltd.
Taiwan Airport Services
Taoyuan International Airport Services
China Airlines, Ltd.
Hwa Hsia
China Airlines, Ltd.
Taoyuan International Airport Services
China Airlines, Ltd.
Taiwan Airport Services
Taoyuan International Airport Services
China Airlines, Ltd.
China Airlines, Ltd.

b
c
c
b
c
b
c
b
c
c
b
b

Sales revenue
Operating costs
Operating costs
Operating costs
Operating costs
Operating expenses
Operating expenses
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Dividends payable

268,440
13,61813,022
12,552
2,556
41,316
1,141-

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.19
0.01
0.01
0.01
0.02
-

2

Mandarin Airlines

China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Airport Services
Taoyuan International Airport Services
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
c
c
b
b
b
b

Passenger revenue
Passenger costs
Terminal and landing fees
Terminal and landing fees
Operating expenses
Interest revenue
Accounts receivable - related parties
Other receivables - related parties

303,434
1,877,736
96,36938,577
165,284
5,585
286,863-

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.21
1.33
0.07
0.03
0.12
0.13
(Continued)- 97 -

Intercompany Transactions
No.

Company Name

Related Party

Natural of
Relationship (Note 1)

Accounts

China Airlines, Ltd.
China Airlines, Ltd.

bb

Taiwan Airport Servicesc

Taoyuan International Airport ServicescInterest receivable
Notes and accounts payable - relatedparties
Notes and accounts payable - relatedpartiesAccounts payable - related parties

Amount$Transaction Criteria% to Total
Consolidated Total
Revenue or Assets

2,670
422,956

The same as ordinary transactions
The same as ordinary transactions

0.19

14,431The same as ordinary transactions

0.01

-

The same as ordinary transactions-

3

Taoyuan International Airport Services Mandarin Airlines
Taiwan Air Cargo Terminal
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Air Cargo Terminal
Mandarin Airlines
China Airlines, Ltd.
China Airlines, Ltd.

c
c
b
b
b
b
b
c
c
b
b

Airport service revenue
Airport service revenue
Airport service revenue
Operating costs
Operating expenses
Interest revenue
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Interest receivable
Dividends payable

38,577
996,8812,843
1,995
307,188953-

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.03
0.70
0.14
-

4

Cal-Dynasty International

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

bbbOperating revenue
Operating costs
Accounts receivable

41,425
1,454

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.03
-

5

Abacus Distribution System (Taiwan)

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b
b
b
b

Service revenue
Operating expenses
Interest revenue
Accounts receivable - related parties
Other receivables - related parties
Interest receivable
Accounts payable - related parties

2,530
6,901
1,197
29
572
589

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions-

6

Taiwan Airport Services

China Airlines, Ltd.
Taiwan Air Cargo Terminal
Mandarin Airlines
China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Air Cargo Terminal
Mandarin Airlines
China Airlines, Ltd.

b
c
c
b
b
c
c
b

Operating revenue
Operating revenue
Operating revenue
Operating expenses
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Dividends payable

376,613
13,61896,36911,893
66,572
14,431-The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.27
0.01
0.07
0.01
0.03
0.01
-

7

Cal-Asia Investment

China Airlines, Ltd.
China Airlines, Ltd.

bb

Operating revenue
Operating expenses-

The same as ordinary transactions
The same as ordinary transactions-

8

Hwa Hsia

China Airlines, Ltd.
Taiwan Air Cargo Terminal
China Airlines, Ltd.
China Airlines, Ltd.

b
c
b
b

Operating revenue
Operating revenue
Operating expenses
Interest revenue

272,415
12,552
10,242-The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.19
0.01
0.01
(Continued)- 98 -

Intercompany Transactions
No.

Company Name

Natural of
Relationship (Note 1)

Accounts

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b

Accounts receivable - related parties
Interest receivable
Accounts payable - related parties
Dividends payable

Related Party

Amount$Transaction Criteria% to Total
Consolidated Total
Revenue or Assets

50,6582,953-

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.02
-

9

Dynasty Holidays

China Airlines, Ltd.
China Airlines, Ltd.

bb

Operating revenue
Operating expenses

46,0852,884

The same as ordinary transactions
The same as ordinary transactions

0.03
-

10

Global Sky Express

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b
b

Operating costs
Operating expenses
Accounts payable - related parties
Dividends payable
Accounts receivable

97,292
2,030
3,899
-

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.07
-

11

Yestrip

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b
b

Operating revenue
Operating expenses
Accounts receivable - related parties
Accounts payable - related parties
Dividends payable

8,683
2,427
3,232
10,163-The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.01
-

12

Cal park

China Airlines, Ltd.
Cal Hotel Co., Ltd.
China Airlines, Ltd.
Cal Hotel Co., Ltd.

b
c
b
c

Operating revenue
Operating revenue
Accounts receivable - related parties
Accounts receivable - related parties

213,019
82,188
159,764
21,592The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.15
0.06
0.07
0.01

13

Cal Hotel Co., Ltd.

China Airlines, Ltd.
China Airlines, Ltd.
Cal park
China Airlines, Ltd.
China Airlines, Ltd.
Cal park

b
b
c
b
b
c

Operating revenue
Operating expenses
Operating costs
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties

71,210
4,952
82,1886,221
21,592The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.05
0.06
0.01

Note 1: Three kinds of relationships with transactors were as follows:a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.
Note 2: Intercompany transactions were written off in consolidated financial report.
(Concluded)- 99 -TABLE 8-2

CHINA AIRLINES, LTD. AND SUBSIDIARIES AND SUBSIDIARIES
BUSINESS RELATIONSHIP AND IMPORTANT TRANSACTIONS BETWEEN CHINA AIRLINE, LTD. AND ITS SUBSIDIARIESFOR THE YEAR ENDED DECEMBER 31, 2012
(In Thousands of New Taiwan Dollars)

Transactions Details
No.

0

Investee Company

China Airlines, Ltd.

Counter Party

Relationship (Note 1)

Global Sky Express
Mandarin Airlines
Taiwan Air Cargo Terminal
Mandarin Airlines
Taoyuan International Airport Services
China Pacific Catering Services
Abacus Distribution System (Taiwan)
Taiwan Airport Services
China Pacific Laundry Services
Hwa Hsia
Dynasty Holidays
Global Sky Express
Yestrip
Cal Hotel Co., Ltd.
China Pacific Catering Services
Taoyuan International Airport Services
Taiwan Airport Services
Hwa Hsia
Mandarin Airlines
Taiwan Air Cargo Terminal
Dynasty Holidays
China Pacific Laundry Services
Cal-Dynasty International
Cal-Asia Investment
Yestrip
Cal park
Cal Hotel Co., Ltd.
Abacus Distribution System (Taiwan)
Mandarin Airlines
Taoyuan International Airport Services
China Pacific Catering Services
Abacus Distribution System (Taiwan)
Hwa Hsia
Taiwan Air Cargo Terminal
Mandarin Airlines
China Pacific Catering Services

a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a

Financial Statement Accounts

Cargo revenue
Passenger revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Other operating revenue
Customer service cost
Terminal and landing fees
Terminal and landing fees
Terminal and landing fees
Passenger costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Other operating costs
Operating expenses
Interest expenses
Interest expenses
Interest expenses
Interest expenses
Interest expenses
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties

Amount$134,400
1,572,484
18,375404,396
2,432
6,421
6,939
11,684
6,701
10,948
3,649
2,729
3,318
5,218
1,149,900
974,717364,839
270,235
286,280
258,818
64,216
74,13627,44077
7,952
213,019
81,1182,430
13,862
10,351
1,120
2,850
280
1,910
338,513
590

Payment Terms

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions% to Total
Consolidated
Revenue or Assets
0.09
1.10
0.01
0.28
0.01
0.01
0.80
0.68
0.25
0.19
0.20
0.18
0.04
0.05
0.02
0.01
0.15
0.06
0.01
0.01
0.17
(Continued)- 100 -

Transactions Details
No.

Investee Company

Counter Party

Relationship (Note 1)

Abacus Distribution System (Taiwan)
China Pacific Laundry Services
Hwa Hsia
Global Sky Express
Yestrip
Cal Hotel Co., Ltd.
Taiwan Air Cargo Terminal
Mandarin Airlines
Taoyuan International Airport Services
Cal-Dynasty International
China Pacific Catering Services
Abacus Distribution System (Taiwan)
Taiwan Airport Services
China Pacific Laundry Services
Hwa Hsia
Yestrip
Cal Hotel Co., Ltd.
Cal park
Mandarin Airlines
Taoyuan International Airport Services
China Pacific Catering Services
Abacus Distribution System (Taiwan)
Hwa Hsia

a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a
a

Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties
Interest payable
Interest payable
Interest payable
Interest payable
Interest payable

Financial Statement Accounts

Amount$Payment Terms% to Total
Consolidated
Revenue or Assets

658
527
446
4,364
18,056402
33,684
230,578
261,255968
290,416205
62,406
12,36448,9292,108
6,564
159,764
3,797
1,920
129
765
38

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.01
0.02
0.12
0.13
0.15
0.03
0.01
0.02
0.08
-

1

Taiwan Air Cargo Terminal

China Airlines, Ltd.
Mandarin Airlines
Taiwan Airport Services
Taoyuan International Airport Services
China Airlines, Ltd.
Hwa Hsia
Taoyuan International Airport Services
China Airlines, Ltd.
Taiwan Airport Services
China Airlines, Ltd.

b
c
c
c
b
c
c
b
c
b

Sales revenue
Sales revenue
Operating costs
Operating costs
Operating costs
Operating costs
Operating expenses
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties

258,818
8,799
111,465
49,551
18,37516,081
7,621
33,684
19,414
1,910

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.18
0.01
0.08
0.03
0.01
0.01
0.01
0.02
0.01
-

2

Mandarin Airlines

China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Airport Services
Taoyuan International Airport Services
Taiwan Air Cargo Terminal
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Airport Services
Taoyuan International Airport Services

b
b
c
c
c
b
b
b
b
b
c
c

Passenger revenue
Passenger costs
Terminal and landing fees
Terminal and landing fees
Terminal and landing fees
Operating expenses
Interest revenue
Accounts receivable - related parties
Interest receivable
Accounts payable - related parties
Accounts payable - related parties
Accounts payable - related parties

286,280
1,572,484
84,30837,803
8,799
404,396
13,862
230,578
3,797
338,513
12,0486,802

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.20
1.10
0.06
0.03
0.01
0.28
0.01
0.12
0.17
0.01
(Continued)- 101 -

Transactions Details
No.

Investee Company

Counter Party

Relationship (Note 1)

Financial Statement Accounts

3

Taoyuan International Airport Services Mandarin Airlines
Taiwan Air Cargo Terminal
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
Mandarin Airlines
China Airlines, Ltd.

c
c
b
b
b
b
c
b

Airport service revenue
Airport service revenue
Airport service revenue
Operating costs
Interest revenue
Accounts receivable - related parties
Accounts receivable - related parties
Interest receivable

4

Cal-Dynasty International

China Airlines, Ltd.
China Airlines, Ltd.

bb

Operating revenue
Accounts receivable

5

China Pacific Catering Services

China Airlines, Ltd.
China Pacific Laundry Services
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
c
b
b
b
b
b

6

Abacus Distribution System (Taiwan)

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

7

Taiwan Airport Services

8

Amount$Payment Terms% to Total
Consolidated
Revenue or Assets

37,80357,172
974,717
2,432
10,351
261,255
6,802
1,920

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.03
0.04
0.68
0.01
0.13
-

27,440968

The same as ordinary transactions
The same as ordinary transactions

0.02-

Operating revenue
Operating costs
Operating expenses
Interest revenue
Accounts receivable - related parties
Interest receivable
Accrued expense

1,149,900
10,933
6,421
1,120
290,416
129
590

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.80
0.01
0.15
-

b
b
b
b
b
b

Service revenue
Operating expenses
Interest revenue
Accounts receivable - related parties
Interest receivable
Accounts payable - related parties

2,430
6,939
2,850
205
765
658

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions-

China Airlines, Ltd.
Taiwan Air Cargo Terminal
Mandarin Airlines
China Airlines, Ltd.
China Airlines, Ltd.
Taiwan Air Cargo Terminal
Mandarin Airlines

b
c
c
b
b
c
c

Operating revenue
Operating revenue
Operating revenue
Operating expenses
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties

364,839
111,465
84,308
11,68462,406
19,414
12,048The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.25
0.08
0.06
0.01
0.03
0.01
0.01

Cal-Asia Investment

China Airlines, Ltd.

b

Operating revenue

77

The same as ordinary transactions-

9

China Pacific Laundry Services

China Airlines, Ltd.
China Pacific Catering Services
Cal Hotel Co., Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
c
c
b
b
b

Operating revenue
Operating revenue
Operating revenue
Operating costs
Accounts receivable - related parties
Accounts payable - related parties

74,136
10,933
10,5296,701
12,364527

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.05
0.01
0.01
0.01
-

10

Hwa Hsia

China Airlines, Ltd.
Taiwan Air Cargo Terminal
China Airlines, Ltd.

bcbOperating revenue
Operating revenue
Operating expenses

270,235
16,081
10,948The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.19
0.01
0.01
(Continued)- 102 -

Transactions Details
No.

Investee Company

Counter Party

Relationship (Note 1)

Financial Statement Accounts

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b

Interest revenue
Accounts receivable - related parties
Interest receivable
Accounts payable - related parties

Amount$Payment Terms% to Total
Consolidated
Revenue or Assets

280
48,92938
446

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.02
-

11

Dynasty Holidays

China Airlines, Ltd.
China Airlines, Ltd.

bb

Operating revenue
Operating expenses

64,216
3,649

The same as ordinary transactions
The same as ordinary transactions

0.04
-

12

Global Sky Express

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

bbbOperating costs
Operating expenses
Accounts payable - related parties

134,400
2,729
4,364

The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.09
-

13

Yestrip

China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.
China Airlines, Ltd.

b
b
b
b

Operating revenue
Operating expenses
Accounts receivable - related parties
Accounts payable - related parties

7,952
3,318
2,108
18,056The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.01
0.01

14

Cal park

China Airlines, Ltd.
Cal Hotel Co., Ltd.
China Airlines, Ltd.
Cal Hotel Co., Ltd.

b
c
b
c

Operating revenue
Operating revenue
Accounts receivable - related parties
Accounts receivable - related parties

213,019
82,165
159,764
21,568The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.15
0.06
0.08
0.01

15

Cal Hotel Co., Ltd.

China Airlines, Ltd.
China Airlines, Ltd.
China Pacific Laundry Services
Cal park
China Airlines, Ltd.
China Airlines, Ltd.
Cal park

b
b
c
c
b
b
c

Operating revenue
Operating expenses
Operating costs
Operating costs
Accounts receivable - related parties
Accounts payable - related parties
Accounts payable - related parties

81,118
5,218
10,52982,165
6,564
402
21,568The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.06
0.01
0.06
0.01

Note 1: Three kinds of relationships with transactors were as follows:a. Parent to subsidiaries.
b. Subsidiaries to parent.
c. Subsidiaries to subsidiaries.
Note 2: Intercompany transactions were written off in consolidated financial report.
(Concluded)- 103 -