China Airlines, Ltd. and Subsidiaries
Consolidated Financial Statements for theYears Ended December 31, 2014 and 2013 andIndependent Auditors’ Report-1-

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, 2014 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.

-2-

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,
2014 and 2013, and the related consolidated statements of comprehensive income, changes in equity and cash
flows for the years ended. These consolidated financial statements are the responsibility 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, 2014 and2013 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, the International Financial ReportingStandards, 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, 2014 and 2013 on which we have issued an unqualified report.

March 27, 2015
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.

-3-

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

2014
AmountASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4, 6 and 17)
Financial assets at fair value through profit or loss - current (Notes 4, 5, 7 and 31)
Available-for-sale financial assets - current (Notes 4, 8 and 31)
Derivative financial assets for hedging - current (Notes 4, 5, 9 and 31)
Receivables:
Notes and accounts, net (Notes 4, 5 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)%$ 20,468,151
235,81442,8509-$ 19,007,649
215,673
75,504135,0039-9,460,468
6,615
817,8418,714
7,226,063
2,643,974

4
1
3
1

7,774,730
14,517
587,665
16,9596,791,453
2,465,919

4
3
1

40,910,490

18

37,085,072

17

28,881
727
469,3172,806,823
142,655,066
2,076,461
670,997
8,521,770
30,931,222

1
62
1
4
14

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

188,161,264

82

183,890,827

83$ 229,071,754

100$ 220,975,899

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

Total current assets
NONCURRENT ASSETS
Available-for-sale financial assets - noncurrent, net of current portion (Notes 4, 8 and 31)
Derivative financial assets for hedging - noncurrent (Notes 4, 5, 9 and 31)
Financial assets carried at cost - noncurrent, net of current portion (Notes 10 and 31)
Investments accounted for by the equity method (Notes 4 and 13)
Property, plant and equipment (Notes 4, 5, 14 and 33)
Investment properties (Notes 4 and 15)
Other intangible assets (Notes 4 and 16)
Deferred income tax asset (Notes 4, 5 and 27)
Other assets - noncurrent (Notes 17, 33 and 34)
Total noncurrent assets
TOTAL

2013
Amount%LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans (Note 18)
Short-term bills payable (Note 18)
Financial liabilities at fair value through profit or loss - current (Notes 4, 5, 7 and 31)
Derivative financial liabilities for hedging - current (Notes 4, 5, 9 and 31)
Notes and accounts payable
Notes and accounts payable - related parties (Note 32)
Other payable (Notes 21 and 26)
Current tax liabilities (Notes 4 and 27)
Provisions - current (Notes 4, 5 and 23)
Deferred revenue - current (Notes 4, 5 and 22)
Bonds payable - current portion (Notes 19, 31 and 32)
Loans and debts - current portion (Notes 18, 31 and 33)
Capital lease obligations - current portion (Note 4, 20, 31 and 33)
Other current liabilities (Note 26)$

4,361,628
2,088,113
2,460,000
411,804
435,384
11,096,311
75,9406,744
11,163,756
8,585,000
14,218,482
2,758,433
3,696,400

2
1
1
5
5
4
6
1
2

61,357,995

27

61,906,028

28

5,150
18,323,836
73,192,954
4,297,036
423,589
7,100,289
1,805,315
10,179,539
1,388,943

8
32
2
3
1
4
1

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

116,716,651

51

106,179,511

48

Total liabilities

178,074,646

78

168,085,539

76

52,491,666
1,992,415

23
1

52,000,000
1,924,015

23
1(3,864,876)(3,864,876)(1,905,698)(43,372)

(2)
(2)
(1)
-

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

2
(3)
(1)
-

48,670,135

2150,806,464

23

2,326,973

1

2,083,896

1

50,997,108

22

52,890,360

24$ 229,071,754

100$ 220,975,899

100

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

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 19 and 25)
Capital stock
Capital surplus
Retained earnings
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.

-4-

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

2014
Amount%2013
Amount%REVENUES (Notes 4, 26 and 32)$ 150,581,742

100$ 141,702,545

100

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

136,954,265

91

130,675,160

92

GROSS PROFIT

13,627,477

9

11,027,385

8

OPERATING EXPENSES (Notes 24 and 26)

11,113,447

7

10,301,117

7

OPERATING PROFIT

2,514,030

2

726,2681

1,094,416(1,740,965)(2,019,124)

1
(1)
(2)

1,603,573(1,019,056)(2,122,326)

1
(1)
(1)

509,352-

450,361-(2,156,321)(2)(1,087,448)(1)

PRETAX PROFIT (LOSS)

357,709-(361,180)-

INCOME TAX EXPENSE (Notes 4, 5 and 27)

959,1131

587,700

1

NET LOSS(601,404)(1)(948,880)(1)

119,945-

81,030-17,467(2,537,524)

(1)

4,108
96,500-(15,590)-(6,082)-

74,083-(23,940)-

393,641-(29,893)-(1,947,978)(1)

121,723-(2,549,382)(2)(827,157)(1)

NONOPERATING 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

OTHER 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 gains (losses) on defined benefit plans(Note 24)
Income tax relating to components of othercomprehensive income (Note 27)
Other comprehensive income (loss) for the year,
net of income tax
TOTAL COMPREHENSIVE LOSS FOR THE YEAR$$(Continued)-5-

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

2014
AmountNET INCOME (LOSS) ATTRIBUTABLE TO:
Owner of the Company
Non-controlling interests

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

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

%

%

$

(751,232)
149,828-$(1,274,046)
325,166(1)-$(601,404)-$(948,880)(1)$(2,696,395)
147,013(2)-$(1,171,929)
344,772(1)-$(2,549,382)(2)$(827,157)(1)$(0.14)

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

-6-

2013
Amount$(0.25)(Concluded)

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

Equity Attributable to Owners of the Company
Other Equity

Retained Earnings

Exchange
Differences on
Translating
Foreign
Operations$

Unrealized Gain
(Loss) on
Available-for-saleFinancial Assets

Share Capital

Capital Surplus

Legal Reserve

Special Reserve

UnappropriatedEarnings

BALANCE AT JANUARY 1, 2013

$ 52,000,000

$

$

$

3,873,369$ (6,031,067)

Appropriation of 2012 the 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

-

-

-

-

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

-

-

-

-

(1,274,046)

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

-

-

-

-

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

-

-

-

Cash dividend from subsidiaries paid to non-controlling interest--

52,000,000

-

-

-

-

518,621-518,621

-

-

-

-

(1,274,046)

325,166(948,880)(45,381)

62,224

5,180

80,094-102,117

19,606

121,723-(1,319,427)

62,224

5,180

80,094-(1,171,929)

344,772(827,157)

-

-

-

-

-

-

-

-

(92,013)(92,013)

1,924,015

321,891

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

1,843(11,486)

96,579(43,372)

50,806,464

2,083,896

52,890,360--(321,891)-(3,926,293)

321,891
3,926,293

-

-

-

-

-

-

-

491,666

68,400

-

-

-

-

-

-

-

560,066-

560,066

Net income (loss) for the year ended December 31, 2014

-

-

-

-

(751,232)

-

-

-

-

(751,232)

149,828(601,404)

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

-

-

-

-

47,471

98,00915,501(2,106,144)-(1,945,163)(2,815)(1,947,978)Total comprehensive income (loss) for the year ended December 31, 2014

-

-

-

-

(703,761)

98,00915,501(2,106,144)-(2,696,395)

147,013(2,549,382)

Issue of common shares for cash

-

-

-

-

-

-

-

-

-

-

200,000

200,000

Cash dividend from subsidiaries paid to non-controlling interest

-

-

-

-

-

-

-

-

-

-

(103,936)(103,936)-$ (3,864,876)

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

2,326,973$ 50,997,108

1,992,415$-$

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

-7-$

99,852$

16,485$$ 53,290,909

-

$

$

1,831,137-$ 52,491,666(16,666)$-

BALANCE AT DECEMBER 31, 2014$

Total Equity-

Convertible bonds converted to ordinary shares(60,381)Non-controlling
Interests$ 51,459,772

Compensation of 2013 deficit
Legal reserve
Special reserve

316,010

Total(43,372)

BALANCE AT DECEMBER 31, 2013

1,405,394

Treasury Shares
Held by
Subsidiaries

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

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

357,7092013$(361,180)

17,460,725
55,42230,021

17,244,851
50,723
79(78,742)(441,968)(29,522)(509,352)(52,340)(6,557)
521,473
436,9122,019,124
1,530,536(14,512)(2,862)-(132,701)(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)

55,802(1,513,216)(114,621)(200,822)(412,261)(342,329)(443,447)
119,499(1,755,706)
2,208,926(579,081)
9,333(157,437)
59,112
18,209,819
454,403411,683(2,061,008)(106,302)

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)

16,908,595

21,485,902(Continued)-8-

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

2014
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of available-for-sale financial assets
Proceeds on share redemption of financial assets measured at cost
Disposal of affiliates
Payment for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Increase in prepayment for equipment
Increase in computer software cost
Decrease in restricted assets

2013

96,862
4,616(9,920,198)
82,451(498,599)
330,518(12,337,340)(230,392)
129,169

742,286(5,966,226)
37,458(134,518)
394,101(7,396,503)(115,135)
56,306(22,342,913)(12,382,231)

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans
Increase in short-term bills payable
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 ordinary shares from non-controlling interest
Cash dividend paid to non-controlling interest

4,213,633
2,088,138(4,780,000)
39,440,000(34,284,523)
146,335(183,913)
200,000(103,936)(1,466,964)
16,900,000(5,460,000)
15,211,898(26,182,916)
204,648(179,459)(92,013)

Net cash generated from (used in) financing activities

6,735,734(1,064,806)

159,086

137,653

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

1,460,502

8,176,518

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR

19,007,649

10,831,131

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

$ 20,468,151$ 19,007,649

Net cash used in investing 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.

-9-(Concluded)

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

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

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

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

Effective Date
Announced by IASB (Note)

January 1, 2009 and January 1,
2010, as appropriate
Amendment to IAS 39 “Embedded Derivatives”
Effective for annual periods
ended 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
(Continued)- 10 -

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

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

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

Note:

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

Except for the following, the initial application of the above 2013 version of IFRSs is not expected tohave any material impact on the Group’s accounting policies:
1) IFRS 12 “Disclosure of Interests in Other Entities”
IFRS 12 is a new disclosure standard that applies to entities with interests in subsidiaries, joint
arrangements, associates and/or unconsolidated structured entities. The disclosure requirements in
IFRS 12 are more extensive than those required in the current standards.
2) IFRS 13 “Fair Value Measurement”
IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value,establishes a framework for measuring fair value, and requires disclosures about fair value
measurements. The disclosure requirements in IFRS 13 are more extensive than those required in
the current standards. For example, quantitative and qualitative disclosures based on thethree-level fair value hierarchy currently required for financial instruments only will be extended by
IFRS 13 to cover all assets and liabilities within its scope.
The fair value measurements under IFRS 13 will be applied prospectively from January 1, 2015.
3) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”
The amendments to IAS 1 requires the grouping of items of other comprehensive income (OCI) into
those that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified
subsequently to profit or loss. Income taxes on OCI items are grouped on the same basis. Under- 11 -

the current IAS 1, there are no such requirements.
The Company will apply the above amendments starting in 2015. Items not expected to bereclassified to profit or loss are remeasurements of the defined benefit plans and share of thedefined benefit plans of associates and joint ventures accounted for using the equity method. Items
expected to be reclassified to profit or loss are the exchange differences on translating foreign
operations, unrealized gains (losses) on available-for-sale financial assets, cash flow hedges, andshare of the other comprehensive income (except the share of the remeasurements of the defined
benefit plans) of associates and joint ventures accounted for using the equity method.
4) Revision to IAS 19 “Employee Benefits”
Revised IAS 19 requires the immediate recognition of all changes in defined benefit obligations andin the fair value of plan assets in the period these changes occur, thus eliminating the “corridor
approach” permitted under the current IAS 19. In addition, all past service costs are recognized
immediately in the period of plan amendment. The revision requires all remeasurements of thedefined benefit plans to be recognized immediately in other comprehensive income so that the net
pension asset or liability will reflect the full value of the plan deficit or surplus.
Furthermore, the interest cost and expected return on plan assets used in the current IAS 19 are
replaced with net interest on the net defined liability or asset, which is calculated by applying thediscount rate to the net defined benefit liability or asset.
The anticipated impact of the initial application of the revised IAS 19 is detailed as follows:
Adjustments
Arising from
Adjusted
Impact on
Carrying
InitialCarrying
Assets, Liabilities and Equity
AmountApplication
AmountJanuary 1, 2014
Deferred tax assets
Accrued pension liabilities$ 9,127,104$ 10,410,907

$
$

3,259
19,172$ 9,130,363$ 10,430,079

Retained earnings
Non-controlling interests$ (3,161,115)
2,083,896$(8,444)(7,468)$ (3,169,559)
2,076,428

Total effect on equity$ (1,077,219)$(15,912)$ (1,093,131)

Deferred tax assets
Accrued pension liabilities$ 8,521,770$ 10,179,539

$
$

2,273
13,369$ 8,524,043$ 10,192,908

Retained earnings
Non-controlling interests$ (3,864,876)
2,326,973$(5,860)(5,236)$ (3,870,736)
2,321,737

Total effect on equity$ (1,537,903)$(11,096)$ (1,548,999)

December 31, 2014

- 12 -

Impact on
Total Comprehensive Income

Carrying
AmountOperating cost
Operating expense
Income tax expense
Total effect on net profit for theyear$136,954,265
11,113,447
959,113

Items not being reclassified to
profit or loss:
Remeasurements of thedefined benefit plans
Income taxes relating toitems that will not bereclassified$

74,083Adjustments
Arising from
InitialApplication$(3,893)
(824)
801

$

(3,916)$

1,085

393,641

Impact on other comprehensive
income for the year (net ofincome tax)

(185)

$

Adjusted
Carrying
Amount$ 136,950,372
11,112,623
959,914$75,168393,456

900

b. New IFRSs in issue but not yet endorsed by the FSC
The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the
FSC. As of the date the consolidated financial statements were authorized for issue, the FSC has notannounced their effective dates.
Effective Date
The New IFRSs Not Included in the 2013 IFRSs Version
Announced by IASB (Note 1)
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
Annual Improvements to IFRSs 2012-2014 Cycle
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of
IFRS 9 and Transition Disclosures”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”

July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 4)
January 1, 2018
January 1, 2018

Amendments to IFRS 10, IFRS 12 and IAS 28“'Investment Entities:
Applying the Consolidation Exception”
Amendment to IFRS 11 “ Accounting for Acquisitions of Interests in
Joint Operations”
IFRS 14 “Regulatory Deferral Accounts”
IFRS 15 “Revenue from Contracts with Customers”

January 1, 2016

Amendments to IAS 16 and IAS 38 “Clarification of Acceptable
Methods of Depreciation and Amortization”
Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants”
Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”
Amendment to IAS 27 “Equity Method in Separate Financial
Statements”
Amendment to IAS 36 “Impairment of Assets: Recoverable AmountJanuary 1, 2016

- 13 -

January 1, 2016 (Note 3)

January 1, 2016
January 1, 2016
January 1, 2017

January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014

Disclosures for Non-financial Assets”
Amendment to IAS 39 “Novation of Derivatives and Continuation of
Hedge Accounting”
IFRIC 21 “Levies”

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: Prospectively applicable to transactions occurring in annual periods beginning on or afterJanuary 1, 2016.
Note 4: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal theremaining amendments are effective for annual periods beginning on or after January 1, 2016.
The initial application of the above New IFRSs, whenever applied, would not have any material impact
on the Group’s accounting policies, except for the following:1) IFRS 9 “Financial Instruments”
Recognition and measurement of financial assets
With regards to financial assets, all recognized financial assets that are within the scope of IAS 39“Financial Instruments: Recognition and Measurement” are subsequently measured at amortizedcost or fair value. Under IFRS 9, the requirement for the classification of financial assets is statedbelow.
For the Group’s debt instruments that have contractual cash flows that are solely payments ofprincipal and interest on the principal amount outstanding, their classification and measurement are
as follows:a) For debt instruments, if they are held within a business model whose objective is to collect thecontractual cash flows, the financial assets are measured at amortized cost and are assessed for
impairment continuously with impairment loss recognized in profit or loss, if any. Interest
revenue is recognized in profit or loss by using the effective interest method;b) For debt instruments, if they are held within a business model whose objective is achieved byboth the collecting of contractual cash flows and the selling of financial assets, the financial
assets are measured at fair value through other comprehensive income (FVTOCI) and areassessed for impairment. Interest revenue is recognized in profit or loss by using the effective
interest method, and other gain or loss shall be recognized in other comprehensive income,
except for impairment gains or losses and foreign exchange gains and losses. When the debt
instruments are derecognized or reclassified, the cumulative gain or loss previously recognizedin other comprehensive income is reclassified from equity to profit or loss.
Except for above, all other financial assets are measured at fair value through profit or loss.
However, the Group may make an irrevocable election to present subsequent changes in the fairvalue of an equity investment (that is not held for trading) in other comprehensive income, with
only dividend income generally recognized in profit or loss. No subsequent impairment
assessment is required, and the cumulative gain or loss previously recognized in othercomprehensive income cannot be reclassified from equity to profit or loss.

- 14 -

The impairment of financial assets
IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit
Losses Model”. The credit loss allowance is required for financial assets measured at amortized
cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arisingfrom IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments andfinancial guarantee contracts. A loss allowance for the 12-month expected credit losses is required
for a financial asset if its credit risk has not increased significantly since initial recognition. A loss
allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has
increased significantly since initial recognition and is not low. However, a loss allowance for fulllifetime expected credit losses is required for trade receivables that do not constitute a financing
transaction.
For purchased or originated credit-impaired financial assets, the Group takes into account the
expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate.
Subsequently, any changes in expected losses are recognized as a loss allowance with acorresponding gain or loss recognized in profit or loss.
Hedge accounting
The main changes in hedge accounting amended the application requirements for hedge accounting
to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes
include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening
the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging
derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing
retrospective effectiveness assessment with the principle of economic relationship between thehedging instrument and the hedged item.
2) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”
In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to thedisclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose inevery reporting period the recoverable amount of an asset or each cash-generating unit. The
amendment clarifies that such disclosure of recoverable amounts is required only when an
impairment loss has been recognized or reversed during the period. Furthermore, the 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.
Except for the above impact, as of the date the consolidated financial statements were authorized for
issue, the Group is continuously assessing the possible impact that the application of other standards
and interpretations will have on the Group’s financial position and financial performance, and will
disclose the relevant impact when the assessment is completed.
As of the date the accompanying consolidated financial statements were authorized for issue, the Groupwas continuing to assess the possible impact that the application of other standards and except for IAS
19 interpretations will have on the Company’s financial position and operating result, and will disclose
the possible impact when the assessment is completed.
4. SIGNIFICANT ACCOUNTING POLICIESStatement of Compliance
The consolidated financial statements have been prepared in accordance with the Regulations Governing
the Preparation of Financial Reports by Securities Issuers, or other regulations.
Basis of Preparation- 15 -

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.
Current and Noncurrent Assets and Liabilities
Current assets include assets held primarily for the purpose of trading, assets expected to be realized withintwelve months after the reporting period, and cash and cash equivalents unless the asset is restricted frombeing exchanged or used to settle a liability for at least twelve months after the reporting period. All otherassets such as property, plant and equipment, investment properties, intangible assets and other assets thatare not classified as current are classified as noncurrent.
Current liabilities include liabilities held primarily for the purpose of trading, liabilities due to be settled
within twelve months after the reporting period. Terms of a liability that could, at the option of thecounterparty, result in its settlement by the issue of equity instruments do not affect its classification.
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, subsidiaries’
accounting policies are consistent with the Company.
All intra-group transactions, balances, income and expenses are written of in consolidation financial
statement.
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

Main Businesses and Products

Percent of Shareholding
December 31,
December 31,
2014
2013

Cal-Dynasty International

A holding company, real estate and hotel services

100

100

Cal-Asia Investment
Hwa Hsia

General investment
Cleaning of aircraft and maintenance of machine andequipment
Travel business
Real estate lease and international trade
Hotel business
Sale and maintenance of hardware and software

100
100

100
100

100
100
100
94

100
100
100
94

Air transportation and maintenance of aircraft
Air cargo and storage
Travel businessAirport services

94
59
51
49

94
59
51
49

Airport services
Forwarding and storage of air cargo

47
25

47
25

Yestrip
Cal Park
Cal Hotel Co., Ltd.
Abacus Distribution System(Taiwan)Mandarin Airlines
Taiwan Air Cargo Terminal(Note)
Dynasty Holdings
Taoyuan International Airport
Services
Taiwan Airport Services
Global Sky Express(Continued)- 16 -

Investor Company

Investee Company

Freighter Princess Ltd.
Freighter Prince Ltd.
Freighter Queen Ltd.
Tigerair Taiwan Co., Ltd.(Note)
Cal-Dynasty International Dynasty Properties Co., Ltd.
Dynasty Hotel of Hawaii, Inc.
Taiwan Airport Services
Hwa Hsia

Main Businesses and Products
Aircraft lease
Aircraft lease
Aircraft lease
Air transpotation
Real estate management
Hotel businessTaiwan Airport Service (Samoa) Airport supporting service and investment
Hwa Shin Building Safeguard
Building security and maintenance services

Percent of Shareholding
December 31, 2014 December 31, 2013
100
100
90
100
100

100
100
100
100
100

100
100

100
100

(Concluded)
Note: Shareholding is held combinedly by The Group.

Freighter Queen Ltd. was liquidated on 17 April, 2014.
In order to provide the customers with more diverse options, the board of directors has reached anagreement to establish a Low Cost Carrier, named Tigerair Taiwan Co., Ltd., with Tiger Airways
Singapore Pte. Ltd. in the form of joint venture. The capital stock of Tigerair Taiwan Co., Ltd. is
2,000,000 thousand, which contains 1,600,000 thousand(80%) from the company and 200,000 thousand(10%) from Mandarin Airlines Co., Ltd. respectively. Tigerair Taiwan Co., Ltd was established on
April 21, 2014 and started operating on September 26, 2014. The financial information of Tigerair
Taiwan Co., Ltd. has been consolidated into the Group’s financial statement since the day it wasestablished.
The Company’s holdings of the issued share capital of Taoyuan International Airport Service, Taiwan
Airport Service and Global Sky Express did not each exceed 50%, but since the Company had control
over these investees, they were listed as subsidiaries. The financial information of the subsidiaries
above on 2014 and 2013 has been reported into the correspondent period as investees after auditing.
The Company’s holding of the issued share capital of China Pacific Catering Services and China Pacific
Laundry Services exceeded 50% , yet The Company didn’t not have control over the investees. Pleaserefer to Note 13.
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.

- 17 -

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.
Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor
an interest in a joint venture. (Joint venture arrangements that involve the establishment of a separate
entity in which venturers have joint control over the economic activity of the entity are referred to as jointly
controlled entities.)
The results and assets and liabilities of associates are incorporated in these consolidated financial
statements using the equity method of accounting. Under the equity method, an investment in an associate
is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss andother comprehensive income of the associate. The Group also recognizes the changes in the Group’s shareof (equity of associates /equity of associates attributable to the Group).
When the Group’s share of losses of an associate equals or exceeds its interest in that associate 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 Group’s net investment in the associate, the Group discontinues
recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent
that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf ofthat associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets
and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which isincluded within the carrying amount of the investment and is not amortized. Any excess of the Group’s
share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after
reassessment, is recognized immediately in profit or loss.
The fair value of any investment retained in the former subsidiary at the date when control is lost isregarded as the fair value on initial recognition for subsequent accounting under IAS 39 “Financial
Instruments: Recognition and Measurement” or, when applicable, the cost on initial recognition of aninvestment in an associate. According to IAS 36 “Impairment Loss”, the impairment loss recognized by the
impairment test comparing the recoverable amount (using the higher of value in use or fair value minus
costs of sale) and the book value is part of the book value of the investment. Any reversal in the impairment
loss, if being in the additional range of the recoverable amount, is recognized under IAS 36 “Impairment
Loss”.
The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset- 18 -

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 theextent that the recoverable amount of the investment subsequently increases.
Investments in jointly controlled entities
Joint venture arrangements that involve the establishment of a separate entity in which venturers have joint
control over the economic activity of the entity are referred to as jointly controlled entities.
The results and assets and liabilities of jointly controlled entities are incorporated in these financial
statements using the equity method of accounting. Under the equity method, an investment in jointly
controlled entity is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the
profit or loss and other comprehensive income of the jointly controlled entity. The Group also recognizes
the changes in the company’s share of equity of jointly controlled entity attributable to the Group.The
accounting treatment in assessing impairment test and recognized reversal of impairment loss are consistent
with investments in associates.
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. The estimated useful life residual value arereviewed at the end of each reporting period.
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.

- 19 -

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.
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
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, the discount rate
reflects current market time value of money and the specific risks to the asset that the estimated future cash
flows have not yet adjusted to the market.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.
When an impairment loss subsequently is reversed, the carrying amount of the asset or cash-generating unit
is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amountthat would have been determined had no impairment loss been recognized for the asset or cash-generating
unit in prior years. A reversal of an impairment loss is recognized in profit or loss.
Financial Instruments
Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual
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- 20 -

Financial assets are classified into the following specified categories: Financial assets at fair value
through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans andreceivables. The classification of financial assets is depending on their nature and purpose of theoriginal recognition. Financial assets are classified into the following categories: Financial
assets at fair value through profit or loss and available-for-sale financial assets.
a) Financial assets at fair value through profit or loss
Financial assets are classified as at fair value through profit or loss when the financial asset iseither held for trading or it is designated as at fair value through profit or loss.
Financial assets at fair value through profit or loss are stated at fair value, with any gains orlosses arising on remeasurement recognized in profit or loss. The net gain or loss recognizedin profit or loss incorporates any dividend or interest earned on the financial asset. Fair value
is determined in the manner described in Note 31.
b) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated asavailable-for-sale or are not classified as loans and receivables, held-to-maturity investments orfinancial assets at fair value through profit or loss.
Changes in the carrying amount of available-for-sale financial assets are recognized in othercomprehensive income and will be reclassified to profit or loss when the investment is disposedof or is determined to be impaired.
Dividends on available-for-sale equity instruments are recognized in profit or loss when the
Company’s right to receive the dividends is established.
Available-for-sale equity investments that do not have a quoted market price in an active market
and whose fair value cannot be reliably measured and derivatives that are linked to and must be
settled by delivery of such unquoted equity investments are measured at cost less any identified
impairment loss at the end of each reporting period and are presented in a separate line item asfinancial assets carried at cost. If, in a subsequent period, the fair value of the financial assets
can be reliably measured, the financial assets are remeasured at fair value. The difference
between carrying amount and fair value is recognized in profit or loss or other comprehensive
income on financial assets.
c) Loans and receivables
Loans and receivables (including trade receivables, cash and cash equivalent, debt investmentswith no active market, and other receivables are measured at amortized cost using the effective
interest method, less any impairment, except for short-term receivables when the effect of
discounting is immaterial.
2) Impairment of financial assets
Financial assets, other than those at fair value through profit or loss and available-for-sale financial
assets, are assessed for indicators of impairment at the end of each reporting period. Financial
assets are considered to be impaired when there is objective evidence that, as a result of one or more
events that occurred after the initial recognition of the financial asset, the estimated future cash
flows of the investment have been affected.
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- 21 -

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.
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.

- 22 -

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss
that had been recognized in other comprehensive income is recognized in profit or loss.
b. Equity instruments
Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity
in accordance with the substance of the contractual arrangements and the definitions of a financial
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.
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 Company areclassified separately as financial liabilities and equity in accordance with the substance of thecontractual arrangements and the definitions of a financial liability and an equity instrument.
On initial recognition, the fair value of the liability component is estimated using the prevailing market
interest rate for similar non-convertible instruments. This amount is recorded as a liability on anamortized cost basis using the effective interest method until extinguished upon conversion or the
instrument’s maturity date. Any embedded derivative liability is measured at fair value.
The conversion option classified as equity is determined by deducting the amount of the liability
component from the fair value of the compound instrument as a whole. This is recognized andincluded in equity, net of income tax effects, and is not subsequently remeasured. In addition, theconversion option classified as equity will remain in equity until the conversion option is exercised, inwhich case, the balance recognized in equity will be transferred to capital surplus - share premium.
When the conversion option remains unexercised at maturity, the balance recognized in equity will betransferred to capital surplus - share premium.
Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity
components in proportion to the allocation of the gross proceeds. Transaction costs relating to theequity component are recognized directly in equity. Transaction costs relating to the liability
component are included in the carrying amount of the liability component.

- 23 -

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 and fuel price risks, including foreign exchange forward contracts,
interest rate swaps, currency options and fuel swaps.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into andare subsequently remeasured to their fair value at the end of each reporting period. The resulting gainor loss is recognized in profit or loss immediately unless the derivative is designated and effective as ahedging instrument, in which event the timing of the recognition in profit or loss depends on the natureof the hedge relationship. When the fair value of derivative financial instruments is positive, thederivative is recognized as a financial asset; when the fair value of derivative financial instruments isnegative, the derivative is recognized as a financial liability.
Hedge Accounting
The Company enters into some derivative transactions that aim to manage interest rates, exchange rates,
fuel prices, and other factors affecting gains or losses on assets and liabilities. The hedging transactions
are defined as cash flow hedge. When entering into hedging transactions, the Company has prepared
official documents that describe the hedging relationship between hedging instruments and items been
hedged, objective of risk management, hedging strategy, and the way to evaluate the effectiveness of thehedging instrument.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion isrecognized immediately in profit or loss.
The associated gains or losses that were recognized in other comprehensive income are reclassified fromequity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in thesame period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently
results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses
that were recognized in other comprehensive income are removed from equity and are included in the initialcost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued prospectively when the 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- 24 -

Where the Company has a contract under which the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be received from the contract, the present
obligations arising under onerous contracts are recognized and measured as provisions.
b. Aircraft lease contracts
When the aircraft lease contracts expire and will be returned to lessor, should assess if existingobligations exist and required to recognize as provision when signing of the lease contract.
Revenue Recognition
a. Rendering of services
Passenger fares and cargo revenue are recognized when transport service is provided. The value of
unused passenger tickets is recognized as “advance ticket - sales”.
b. Dividend and interest income
Dividend income from investments is recognized when the shareholder’s right to receive payment has
been established provided that it is probable that the economic benefits will flow to the 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 Company at the lower of theirfair value at the inception of the lease or the present value of the minimum lease payments. The
corresponding liability to the lessee is included in the balance sheets as a finance lease obligation.
Minimum lease payments are apportioned between finance expenses and reduction of the leaseobligation so as to achieve a constant rate of interest on the remaining balance of the liability. Financeexpenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying
assets, in which case they are capitalized in accordance with the Company’s general policy on
borrowing costs. Contingent rents are recognized as expenses in the periods in which they are
incurred.
b. Operating lease1) The Group as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of therelevant lease unless another systematic basis is representative of the time pattern of the lessee’s
benefit from the use of the leased asset.
2) The Group as lessee- 25 -

Operating lease payments are recognized as an expense on a straight-line basis over the lease term,
except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed. Contingent rents arising under operating leases arerecognized as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives arerecognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental
expense on a straight-line basis, except where another systematic basis is more representative of thetime pattern in which economic benefits from the leased asset are consumed.
c. Sale and leaseback
Sale and leaseback transaction if met the condition that all the risks and rewards of ownership of theleased asset is essentially transfer to the lessee, the sale and leaseback type is finance lease; If part ofthe significant risks and rewards of the leased asset ownership remain with the lessor (the buyer), thesale and leaseback type is operating lease.
1) Financial lease
This transaction does not actually dispose of the assets, the accounting treatment deemedtransaction did not occur, and use the book value of the asset before sale continuing recognition of
the asset.
2) Operating lease
If the selling price is equal to the fair value, the transaction gain or loss should be recognized
immediately. If selling price is above fair value, the difference between the fair value and thebook value of the gain or loss should be recognized immediately; only the part of selling price
above fair value shall be deferred and amortized over the period of the lease.
Retirement Benefit Costs
Payments to defined contribution retirement benefit plans are recognized as an expense when employees
have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected
unit credit method. All actuarial gains and losses on the defined benefit obligation are recognized
immediately in other comprehensive income. Past service cost is recognized immediately to the extent
that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average
period until the benefits become vested.
The retirement benefit obligation recognized in the balance sheets represents the present value of thedefined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value ofplan assets. Any asset resulting from this calculation is limited to the unrecognized past service cost, plus
the present value of available refunds and reductions in future contributions to the plan.
Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or
settlement occurs.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets(assets are substantially ready for their intended use or sale through a fairly long period) are added to thecost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on- 26 -

qualifying assets is deducted from the borrowing costs eligible for capitalization.
Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which
they are incurred.
Frequent Flyer Program
The Company has a “Dynasty Flyer Program” through which program members can convert accumulated
mileage to a cabin upgrade, free tickets and other member reward.
A portion of passenger revenue attributable to the rewards for the frequent flyer program is deferred. The
entity should recognize this deferred revenue as revenue only when the entity has fulfilled its obligations on
the granting of rewards or when the period for converting the mileage to rewards has expired.
Share-based Payment Arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments
at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on astraight-line basis over the vesting period, based on the 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 are based on current taxable profit. Since part of the income and expenses
are taxable or deductible in other periods, or in accordance with the relevant tax laws are taxable ordeductible, current taxable profit differs from net profit reported in the consolidated statements ofcomprehensive income.
The Group’s current tax liabilities are calculated by the tax rate has been legislative or substantial
legislative at the balance sheet date.
According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided foras income tax in the year the stockholders approve the retention of these earnings.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
b. Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets andliabilities in the consolidated financial statements 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.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in- 27 -

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 inwhich 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 shown on Note 4, management is required to makejudgments, 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.
Income Taxes
The Group is subject to income taxes in numerous jurisdictions. Where the final tax payable differs from- 28 -

the amounts that were initially recognized, these differences will affect the income tax and deferred tax
provisions in the period in which the differences are determined. Deferred tax assets are 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 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 and residual
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 the sameor similar type of aircraft; incurred overhaul costs; and historical operating performance data. Changes injudgment or estimations may have a material impact on the amount of maintenance reserve.
Frequent Flyer Program
As stated in Note 4 (22), a portion of passenger revenue attributable to the awarding of frequent flyer
benefits is deferred until the awards are given out. The deferment of the revenue is estimated on the basisof historical trends of breakage and redemption, which is then used to project the expected claiming ofthese benefits. Changes in fair value per mileage or redemption rate may have a material impact ondeferred revenue.

- 29 -

6. CASH AND CASH EQUIVALENTS
December 31
2014
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

$

2013

385,684
8,730,325$

350,901
6,176,842

10,187,695
1,164,447

11,091,301
1,388,605$ 20,468,151$ 19,007,649

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

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

2014

2013

0%-2%
0.85%-4.8%
0.55%-0.65%

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

The amount of time deposits with original maturities more than three months for the years ended December
31, 2014 and 2013 were $1,145,720 thousand and $793,050 thousand, respectively, and the market rateintervals were 0.2%-4.8% and 0.94%-3.18%, which were recognized as other current assets. (Refer toNote 17)

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

2013

Financial assets held for trading - current
Derivative financial instruments (not under hedge accounting)Foreign exchange forward contracts
Non-derivative financial assets
Beneficiary certificates$

46,812$

23,254

189,002

192,419$ 235,814$ 215,673$$

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

-

2,799

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

Currency

Maturity Date

- 30 -

Notional Amount(In Thousands)

December 31, 2014
Buy

NTD/USD

2015.01.02-2015.06.16

NTD1,247,678/USD40,300

NTD/USD

2014.01.03-2014.07.08

NTD2,085,799/USD70,500

December 31, 2013
Buy

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
December 31
2014
Carrying
Value

2013
% of
Ownership% of
Ownership

Carrying
Value

Current
Foreign marketable equity securities
France Telecom

$

-

-

28,881-$75,504-28,768-Non-current
Domestic marketable
Trans Asia Airways$

28,881$ 104,275

Net gain on disposal of available-for-sale financial assets in 2014 is $4,007 thousand.
9. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING
December 31
2014

2013

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

Current
Non-current$

727
32,285
10,565$

5,617
27,033
107,970$

43,577$

140,620$42,850727$

135,003
5,617$

43,577$

140,620

$

5,150
3,028
2,456,972

$

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

24,879Derivative financial liabilities under hedge accounting
Interest rate swaps
Currency option
Fuel swaps- 31 -

Current
Non-current$ 2,460,000
5,150

$

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

24,879The fair value of each derivative contract is determined using quotes from financial institutions.
a. Interest rate swaps
The Company entered into interest rate swap contracts to mitigate the risk of changes in interest rates on
the cash flow exposure related to the outstanding floating rate debt. All swapped fixed interest rate
swap out the floating rate interest rate swap contracts are designated as cash flow hedges. The
outstanding interest rate swap contracts at the end of the reporting period were as follows:

Notional Amount(In Thousands)

Maturity Date

Range ofInterest Rates
Paid

Range of Interest Rates
Received2015.05.24-2017.06.22

0.9%-1.14%

TAIBOR rate

2014.08.24-2017.06.22

0.9%-1.14%

6165 page 3M CP rate

December 31, 2014
NT$4,500,000
December 31, 2013
NT$5,240,000

The interest rate swaps settle on a quarterly basis. The Company will settle the difference between the
fixed and floating interest rates on a net basis.
b. 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.
The outstanding currency options at the end of the reporting period were as follows:

Currency

Maturity Date

Notional Amount(In Thousands)

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

JPY/USD
JPY/USD

2015.01.08-2015.05.15
2015.01.08-2015.05.15

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

JPY/USD
JPY/USD

2014.01.10-2014.04.30
2014.01.10-2014.04.30

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

December 31, 2013
Buy USD call option
Sell USD put optionc. Fuel options
The Company used fuel swaps to minimize the risk of changes in fuel price related to operating cost.

- 32 -

The outstanding fuel swaps at the end of the reporting period were as follows:

Currency

Maturity Date

Notional
Amount(In Thousands)

USD
USD

2015.03.31-2015.11.30
2015.03.31-2015.11.30

NTD10,565
NTD2,456,972

USD
USD

2014.01.31-2014.11.30
2014.01.31-2014.11.30

NTD107,970
NTD21,598

December 31, 2014
Buy fuel call option
Sell fuel put option
December 31, 2013
Buy fuel call option
Sell fuel put option

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

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

10. FINANCIAL ASSETS CARRIED AT COST
December 31
2014

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

2013

Carrying
Value

% of
Ownership

Carrying
Value

% of
Ownership$ 297,946
56,0231415$ 297,946
56,02314
15

75,919-6-

73,6652,066

6
522,031
11,0005,925
468,8445
11
6-

21,37811,0005,925
468,003

5
11
6
-

473

-

473

-

Unlisted preferred stocks
Abacus International Holdings Ltd.

$ 469,317$ 468,476(Continued)- 33 -

December 31
2014
Carrying
Value
Classified according to financial asset
measurement categories
Available-for-sale financial assets

2013
% of
Ownership$ 469,317% ofOwnership

CarryingValue$ 468,476(Concluded)

Titan V.C. Corp. liquidated and returned its shares in June 27, 2014 and the Group has received the refundof $4,616 thousand and recognized disposal gain of $2,550 thousand recognized as gain on sale ofavailable-for-sale financial asset in company balances).
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
December 31
2014
Notes receivable$291,4202013$

294,511

Accounts receivable
Accounts receivable
Less: Allowance for impairment loss

9,235,179(66,131)9,169,048

7,538,081(57,862)7,480,219$ 9,460,468$ 7,774,730

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
2014
2013
Beginning balance
Impairment loss recognized on receivables
Amounts written off during current period
Amounts recovered during current period
Exchange influence$ 57,862
30,021(21,387)
(272)
(93)

$ 64,093
85(6,712)(6)402

Ending balance$ 66,131$ 57,862- 34 -

12. INVENTORIES
December 31

Aircraft spare parts
Items for in-flight sale
Work in process - maintenance services
Others2014

2013$ 6,593,407
388,184
243,308
1,164$ 6,359,575
403,380
27,043
1,455$ 7,226,063$ 6,791,453

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

13. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
December 31

Investments in associates
Investments in jointly controlled entities

2014

2013

$ 1,896,814
910,009$ 1,838,330
849,425$ 2,806,823$ 2,687,755

a. The amount of investment in associates were as follows:
December 31
2014

2013

Unlisted companies
China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics
Arport air Cargo Terminal (Xiamen)
Arport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

$

450,111232,105
259,605
189,019
509,411
222,974
33,589$ 1,896,814$

407,725
225,221244,486
192,175
518,904
215,606
34,213$ 1,838,330

Xiamen International Air Cargo Terminal and Xiamen International Airport Air Cargo Storage renamed
to Arport Air Cargo Terminal (Xiamen) Co.,LTD and Arport Air Cargo Service (Xiamen) Co.,LTD,
respectively.
As the end of the reporting period, the proportion of ownership and voting rights in associates held by
the Group were as follows:
December 31
Name of Associate
China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services- 35 -

2014

2013

20%
36%
25%

20%
36%
25%

Science Park Logistics
Arport air Cargo Terminal (Xiamen)
Arport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

28%
28%
28%
35%

28%
28%
28%
35%

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, 2014 and 2013 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 net value of Yangze River Express Airlines has been negative because the continuous operating
loss, and investment value has been recognized to 0 in the Group balances as of the end of 2007.
The board in August 2010 resolved to sell 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 amounts of investment in associated include goodwill arising from the acquisition of associates inprevious years and the movements of goodwill were as follows:
Goodwill
Balance on January 1, 2013
Exchange influence$ 175,286
6,937

Balance on December 31, 2013

$ 182,223

Balance on January 1, 2014
Exchange influence$ 182,223
3,908

Balance on December 31, 2014

$ 186,131

The investment revenue of associates recognized under equity method were as follows:
2014
China Aircraft Services
Kaohsiung Catering Services
Asian Compressor Technology Services
Science Park Logistics
Arport air Cargo Terminal (Xiamen)
Arport air Cargo Service (Xiamen)
Eastern United International Logistics (Holdings) Ltd.

$35,664
100,716
49,08623,42634,36519,7444,361$ 267,362
b. Investments in jointly controlled entities
The investments in jointly controlled entities were as follows:- 36 -

2013$

28,183
95,71147,306
27,56237,29319,923
7,093$ 263,071

December 31

China Pacific Catering Services
China Pacific Laundry Services

2014

2013

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

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

China Pacific Catering Services
China Pacific Laundry Services

2014

2013

51%
55%

51%
55%

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

Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities

2014

2013

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

Details of investment income attributable to investment in jointly controlled entitles were as follows:
For the Year Ended December 31
2014
2013
China Pacific Catering Services
China Pacific Laundry Services$ 212,571
29,419$ 158,787
28,503$ 241,990$ 187,290

The investments accounted for by the equity method and the share of profit or loss and othercomprehensive income of those investments was based on the jointly controlled entities’ financial
statement audited by the auditor for the same years.

14. PROPERTY, PLANT AND EQUIPMENT
December 31
2014

2013

Cost
Freehold land$

- 37 -

953,614$938,392

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

13,085,921
232,035,450
33,985,116
9,553,310
1,009,989
131,786
3,912,736
89,425

13,078,656
222,573,614
38,691,367
8,725,560
968,680
135,4032,664,470
1,007,237$ 294,757,347$ 288,783,379$$

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

Net value

Freehold Land

Buildings

FlightEquipment

4,794,850
121,645,204
16,998,403
6,182,237
750,551
115,489
1,615,547

4,298,391
108,380,142
18,198,277
5,816,956
689,167
120,420
1,617,958$ 152,102,281$ 139,121,311$ 142,655,066$ 149,662,068

Equipment
under Finance
Lease

OthersTotal

Cost
Balance at January 1,
2013
Additions
Disposals
DiscardReclassification
Net exchange difference
Balance at December 31,
2013$

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)$

938,392(17,336)
32,558$13,078,656
29,289(308)(77,318)
55,602$ 222,573,614
7,640,577(3,522,099)
5,343,358-$

38,691,367
1,232,885(1,009,302)(4,929,834)-$

13,501,350
1,017,447(439,103)
612,7194,833$ 288,783,379
9,920,198(4,988,148)
948,925
92,993$

953,614$

13,085,921$ 232,035,450$

33,985,116$

14,697,246$ 294,757,347

Accumulated depreciationand impairment
Balance at January 1,
2013
Depreciation expense
Disposals
DiscardReclassification
Net exchange difference
Balance at December 31,
2013
Cost
Balance at January 1,
2014
Additions
Disposals
Reclassification
Net exchange difference
Balance at December 31,
2014- 38 -

Accumulated depreciationand impairment
Balance at January 1,
2014
Depreciation expense
Disposals
Reclassification
Net exchange difference
Balance at December 31,
2014

$

-

$

(4,298,391)(551,789)
307
77,588(22,565)$ (108,380,142)(13,670,202)
3,064,001(
2,658,861)-$ (18,198,277)(2,461,728)
999,5112,662,091-$(8,244,501)(776,727)
436,566(75,343)(3,819)$ (139,121,311)(17,460,446)
4,500,385
5,475(26,384)$-$(4,794,850)$ (121,645,204)$ (16,998,403)$(8,663,824)$ (152,102,281)

Property, plant and equipment were depreciated on a straight-line basis over the estimated useful life of theasset:
Building
Main buildings
Others
Machinery Equipments
Electro-mechanical equipment
OthersFlying equipments and equipment under finance lease
Airframe
Aircraft cabin

45-55 years
10-25 years
25 years
3-13 years
15-25 years
7-13 years(Continued)

EngineHeavy maintenance on aircraft
Engine overhauls
Landing gear overhauls
Repairable spare parts
Office equipments
Leasehold improvements
Building improvements
OthersAssets leased to others

10-20 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)

Refer to Note33 for the carrying amounts of property, plant and equipment pledged by the Group.

15. INVESTMENT PROPERTIES
December 31

Carrying amount
Investment properties

2014

2013

$ 2,076,461$ 2,076,740

The investment properties held by the Group were land located in Nankan and building in Taipei areas,
which were all leased to others. The buildings were depreciated on a straight-line basis on 55 years andlocated 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 $2,047,448 on the date of acquisition, therefore the impairment loss was all been reversed, included in- 39 -

other income - other.
The fair value of the investment properties held by the Group is $2,348,759 thousand on both December 31,
2014 and 2013, respectively.
All of the Group’s investment properties were held under freehold interest.

Cost

Accumulated
Impairment
andDepreciation

Net Value

Balance on 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 on December 31, 2013

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

Cost

Accumulated
Impairment
andDepreciation

Net Value

Balance on January 1, 2014
Additions$ 2,082,390-$(5,650)(279)$ 2,076,740(279)

Balance on December 31, 2014

$ 2,082,390$(5,929)$ 2,076,461(Concluded)

Computer
Software Cost

Accumulated
Amortization

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

Balance at January 1, 2014
Additions
Amortization expense
Reclassification$

977,458
230,392
6,615$(488,046)(55,422)-$489,412230,392(55,422)6,615

Balance at December 31, 2014

$ 1,214,465$(543,468)$

670,997

16. OTHER INTANGIBLE ASSETSNet Value

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

- 40 -

17. OTHER ASSETS
December 31
2014

2013

Current
Other financial assets
Temporary payments
Prepayments
Restricted assets
Others$1,145,720
200,545861,811904
434,994$

793,050
486,260
604,163
21,214561,232$

2,643,974$

2,465,919(Continued)

December 31
2014

2013

$ 27,585,802
1,550,942
1,328,227
296,733
14,265
155,253$ 15,397,766
2,318,009
1,106,855
507,209
14,0401,098$ 30,931,222$ 19,344,977(Continued)

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
a contract to purchase A350-900 and 777-300ER aircraft. As for the instruction of the contract, pleaserefer to Note 34.

18. BORROWINGSa. Short-term loans
December 31
2014

2013

Bank loans - unsecured$ 4,361,628$

204,036

Interest rates

1.18%-1.30%

1.36%-1.60%

b. Short-term and bills payable
December 31
2014
Commercial paper
Less: Unamortized discount on bills payable- 41 -

2013$ 2,090,000
1,887

$

-

$ 2,088,113$-

Annual discount rate

1.108%-1.238%-

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

Unsecured bank loans
Secured bank loans

2014

2013

$ 30,553,456
32,413,444$ 21,368,167
36,522,857(Continued)

December 31

Commercial paper
Proceeds from issue
Less: Unamortized discountLess: Current portion

2014

2013

$ 24,505,000
60,46487,411,436
14,218,482$ 20,655,000
40,48178,505,543
25,265,961$ 73,192,954$ 53,239,582(Concluded)

Secured bank loans were secured by freehold land, building, machinery equipment and flightequipment, please refer to Note 33.
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
New Taiwan
Dollars

U.S. Dollars

Japanese Yen$$

Original currency
December 31, 2014
December 31, 2013

$ 54,477,262
45,609,666

267,902411,975

44,448
71,112

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

54,477,262
45,609,666

8,477,870
12,261,153

11,76820,2051.277%2.2074%
1.2830%-3.6%

0.2311%-4.39%

1.975%

0.2376%-4.39%

1.975%

2002.04.11-

2003.07.22-

2013.09.01-

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

- 42 -

2029.02.04
2002.04.112024.04.01

December 31, 20132020.02.26
2003.07.222017.09.21

2016.08.01
2013.09.012016.08.01

The Company has note issuance facilities (NIFs) obtained from certain financial institutions. The
NIFs, with various maturities until November 2017, were used by the Company to guarantee
commercial paper it issued. As of December 31, 2014 and 2013, the commercial paper was issued at
discount rates 1.3895%-2.086% and 1.302%-2.121%, respectively.
19. BONDS PAYABLE
December 31
2014
Privately places corporate bond first-time issued in 2009
Privately places corporate bond second-time issued in 2009
Secured corporate bond first-time issued in 2010
Secured corporate bond first-time issued in 2011
Unsecured corporate bond first-time issued in 2012
Unsecured corporate bond first-time issued in 2013
Convertible bond issued the fifth time
Less: Current portion$

1,440,000
4,200,000
5,345,000
10,900,000
5,023,836
26,908,836
8,585,000

2013$

1,100,000
800,000
2,520,000
6,000,000
5,345,000
10,900,000
5,483,023
32,148,023
4,780,000$ 18,323,836$ 27,368,023

Conditions

Rate (%)

Related issuance conditions were as follows:
Category
Privately places corporate bond first-time issued in2009
Privately places corporate bond second-time issued in2009
Five-year secured domestic bonds - issued at par in
January 2010; repayable in January 2013, January
2014 and January 2015; indicator rate plus 1.5%
interest p.a., payable quarterly
Five-year secured domestic bonds - issued at par in
February 2010; repayable in February 2013,
February 2014 and February 2015; indicator rateplus 1.5% interest p.a., payable quarterly
Five-year secured domestic bonds - issued at par in
February 2010; repayable in February 2013,
February 2014 and February 2015; indicator rateplus 1.5% interest p.a., payable quarterly
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Five-year secured domestic bonds - issued at par in
May 2011; repayable in May 2014, May 2015 andMay 2016; 1.35% interest p.a., payable annually
Three-year secured domestic bonds - issued at par in
January 2012; repayable in January 2015; 2%interest p.a., payable semiannually
Five-year private unsecured bonds - issued at par in

Period2009.4.15-2014.4.15
2009.6.15-2014.6.15
2010.1.25-2015.1.25

2010.2.1-2015.2.1

2010.2.8-2015.2.8

2011.5.20-2016.5.20

2011.5.20-2016.5.20

2011.5.20-2016.5.20

2011.5.20-2016.5.20

2012.1.10-2015.1.10

2013.1.17-2018.1.17- 43 -

Repayable semi-annually and pay
principal on due date
Repayable semi-annually and pay
principal on due datePrincipal repayable in January andFebruary 2013, 2014 and 2015;
indicator rate plus 1.5% interestp.a., payable quarterly
Principal repayable in January andFebruary 2013, 2014 and 2015;
indicator rate plus 1.5% interestp.a., payable quarterly
Principal repayable in January andFebruary 2013, 2014 and 2015;
indicator rate plus 1.5% interestp.a., payable quarterly
Principal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in May of2014, 2015 and 2016; indicatorrate; payable annuallyPrincipal repayable in January
2015; indicator rate; payablesemi-annuallyPrincipal repayable in January of

3.60
3.60
Indicator
rate plus
1.50
Indicator
rate plus
1.50
Indicator
rate plus
1.50
1.35

1.35

1.35

1.35

2.00

1.60

January 2013; repayable in January 2017 and 2018;
1.6% interest p.a., payable annually
Seven-year private unsecured bonds - issued at par in
January 2013; repayable in January 2019 and 2020;
1.85% interest p.a., payable annually
Five-year convertible bonds - issued at discount in
December 2013; repayable in lump sum uponmaturity; 1.8245% discount rate p.a.

2013.1.17-2020.1.17

2013.12.26-2018.12.26

2017 and 2018; indicator rate;
payable annuallyPrincipal repayable in January of2019 and 2020; indicator rate;
payable annually
Except for converting to capitalstock or buying back, principal
repayable in December of 2018

1.85

-

The indicator rate mentioned above is the 90 days’ commercial paper rates in Taiwan’s secondary market.
In January 2012, the Company made a first issue of 2012 private unsecured bonds with aggregate facevalue of $5,785,000 thousand. The investors included these affiliates: Taoyuan International Airport
Services, Mandarin Airlines and Abacus Distribution Systems (Taiwan) held $440,000 thousand of its facevalue in aggregate and would write off in the consolidation financial report.
On December 26, 2013, the Company made the fifth issue of unsecured convertible bonds, and the issue
conditions are as follows:a. The holders may demand a lump-sum payment for the bonds upon maturity.
b. On 30 days before December 26, 2015 and December 26, 2016, the holders can require the Company toredeem their bonds at face value.
c. The Company may redeem the bonds piecemeal between January 26, 2014 and, November 16, 2018
under certain conditions.
d. Between January 26, 2014 and December 16, 2018 (except for the period between the ex-dividend date
and the date of dividend declaration on record), holders may convert the bonds to the Company’scommon shares. The initial conversion price was set at NT$12.24, subject to adjustment if there iscapital injection by cash, stock dividend distribution, the proportion of cash dividend per share inmarket price exceed 1.5%. As of December 31, 2014, there was no adjustment to the conversion pricebut face value $601,800 thousand of corporate bond convert into 49,167 thousand of common stock.
The convertible bonds contain both liability and equity components. The equity component was presented
in equity under the heading of capital surplus - option. The effective interest rate of the liability
component was 1.8245% per annum on initial recognition.
Proceeds from issue
Equity component$ 6,000,000(518,621)

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

20. CAPITAL LEASE OBLIGATIONS
December 31
2014

2013

Minimum lease payments-flight equipment
Within one year
Beyond one year and within five years
Beyond five years$

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

Present value of minimum lease payments$

9,673,133$ 12,817,184- 44 -

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

Interest rates

1.29%-1.67%

1.31%-2.24%

The Company leased aircraft and engines by sale-leaseback under finance leases. The lease terms are from
June 2006 to April 2019. During the lease term, the Company retained all risks and rewards attached toaircraft and engines, and enjoyed the same substantive right prior to the transaction, interest rate underlying
all obligation under finance leases were floated. Therefore, the minimum lease payments undersale-leaseback aircraft contract are not inclusive of interest expense.
Taiwan Air Cargo Terminal Co. (TACT) signed a terminal construction contract. As for the contract, pleaserefer to Note 34.
December 31
2014

2013

Minimum lease payments – Cargo Terminal$

Within one year
Beyond one year and within five years
Beyond five years
Less: Financial cost

31,786
158,5313,729
194,046(8,457)$38,199132,52162,061
232,781(9,092)Present value of minimum lease payments$ 185,589$ 223,689

Interest rate

1.29%-1.67%

1.31%-2.24%$

30,500
153,491
1,598$

30,855
131,991
60,843$

185,589$

223,689

Present value of minimum lease payments – Cargo Terminal
Within one year
Beyond one year and within five years
Beyond five years

Discount rate
Total amount of present value of minimum lease payments
Current
Noncurrent

5.04%

5.04%

$

2,758,433
7,100,289$

4,399,039
8,641,834$

9,858,722$ 13,040,873

21. OTHER PAYABLES
December 31
2014$

Fuel cost
Ground service expense
Repair expense
Interest expense
Short-term employee benefits
Terminal surcharges
Commission expense
Others3,785,144
1,406,034
845,514349,544
1,322,847
738,526
607,366
2,041,336$ 11,096,311- 45 -

2013$

4,326,230
860,275
468,454372,140
1,300,322
668,542566,6095,776,510$ 14,339,082

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

Current
Noncurrent

2013

2,501,231
10,467,840$

2,587,189
8,172,944$ 12,969,071$ 10,760,133$ 11,163,756
1,805,315$$ 12,969,071$ 10,760,133

8,850,384
1,909,749

23. PROVISIONS
December 31

Operating lease-aircraft
Onerous contract

Current
Non-current

2014

2013

$ 4,303,780-$ 3,302,484-$ 4,303,780$ 3,302,484

$

$

6,744
4,297,036$ 4,303,780

3,302,484$ 3,302,484

Operating Lease-aircraft
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, flight cycle and the engine revolution times the Group had existingobligation to recognize provision when signing the lease or during the lease period. Tigerair Taiwan Co.,
Ltd. also rented flight equipments under operating lease agreements, in accordance to the contract, Tigerair
has to pay the maintenance reverse according to the flying hours.
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.

- 46 -

Aircraft Lease
Contract

OnerousContract

Total

Balance at January 1, 2013
Additional provisions recognized
Usage
Effect on reversal
Effect of exchange 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

Balance at January 1, 2014
Additional provisions recognized
Usage
Effect of exchange rate changes$ 3,302,484
1,530,536(579,080)
49,840$-$ 3,302,484
1,530,536(579,080)
49,840

Balance at December 31, 2014

$ 4,303,780$-$ 4,303,780

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.
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 plan assets are invested in domestic (foreign) equity and debt securities, bank deposits, etc. The
investment is conducted at the discretion of Bureau of Labor Funds, Ministry of Labor or under the
mandated management. However, in accordance with Enforcement Rules of the Labor Pension Act,the return generated by employees’ pension contribution should not be below the interest rate for a
2-year time deposit with local banks.
The actuarial valuations of plan assets and the present value of the defined benefit obligation werecarried out by qualifying actuaries. The principal assumptions used for the purposes of the actuarial
valuations were as follows:
December 31

Discount rates
Expected return on plan assets- 47 -

2014

2013

1.625-2.730%
1.920-2.730%

1.625-2.000%
1.920-2.000%

Expected rates of salary increase

1.500-3.500%

1.500-2.500%

Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:
For the Year Ended December 31
2014
2013
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$ 448,725
266,373(78,196)
5,803$ 326,537
218,397(69,456)
59,136
12,184$ 642,705$ 546,798$ 462,298
180,407$ 419,027
127,771$ 642,705$ 546,798

Actuarial gains and losses recognized in other comprehensive income for the years ended December 31,
2014 and 2013 was $74,083 thousand and $23,940 thousand, respectively. The cumulative amount of
actuarial losses recognized in other comprehensive income as of December 31, 2014 and 2013 was$532,101 thousand and $606,184 thousand, respectively.
The amounts included in the consolidated balance sheet on the Group’s obligation on its defined benefit
plans were as follows:
December 31
2014

2013

Present value of funded defined benefit obligation
Fair value of plan assets
DeficitUnrecognized past service cost

$ 14,073,849(3,880,941)
10,192,908(13,369)$ 14,902,893(4,472,814)
10,430,079(19,172)

Accrued pension costs$ 10,179,539$ 10,410,907

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

$ 14,902,893
448,725
266,373(48,643)(1,495,499)-$ 15,387,523
326,537
218,397
12,838(1,048,784)
6,382

Defined benefit obligation at the end of the year

$ 14,073,849$ 14,902,893- 48 -

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

$ 4,472,814
78,19625,440642,074(1,337,583)$ 4,726,756
69,456(11,102)635,698(947,994)

Fair value of plan assets at the end of the year

$ 3,880,941$ 4,472,814

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

2013

51.43%
26.21%
22.36%

38.25%
40.69%
21.06%

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

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

December 31,
2014

December 31,
2013

December 31,
2012

January 1,
2012$ 14,073,849$ (3,880,941)$ 10,192,908$ 14,902,893$ (4,472,814)$ 10,430,079$ 15,387,523$ (4,726,756)$ 10,660,767$ 14,073,849$ (3,380,941)$ 10,692,908$(386,532)$

403,568$(540,506)$-$(22,412)

$

3,295

$

(41,738)$-

The Group expects to make a contribution of $629,653 thousand to the defined benefit plans during theannual period beginning after 2014.

- 49 -

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

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

2014

2013

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

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

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

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

2014

2013

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

The capital surplus from shares issued in excess of par (additional paid-in capital from issuance ofcommon shares and treasury stock transactions) and donations may be used to offset a deficit; inaddition, when the Company has no deficit, such capital surplus may be distributed as cash dividends ortransferred to capital (limited to a certain percentage of the Company’s paid-in capital and once a year).
The capital surplus from long-term investments and employee stock options may not be used for any
purpose.
c. Appropriation of earnings and dividend policy
The Company’s Articles of Incorporation provide that the following should be appropriated fromannual net income (less any deficit): (a) 10% as legal reserve, and (b) special reserve equivalent to a
debit balance of any stockholders’ equity account. From the remainder, the Company should also
appropriate at least 3% as bonus to employees. Of the final remainder, at least 50% should be
distributed to stockholders as cash or stock dividends (cash dividend should not be less than 30% of thetotal dividends). In determining the amount of cash dividends to be distributed, the board of directors
should take into account future cash requirements of the Company, primarily cash requirements for
future aircraft acquisitions. Distribution of earnings generated in prior years should also meet theforegoing guidelines.
All earnings appropriations should be made and approved by the stockholders in, and given effect to in
the financial statements of, the year following the year of earnings generation.
Appropriation of earnings in 2012
The Company appropriated net income in 2012 on the basis of ROC GAAP. The bonus to employees- 50 -

was estimated on the basis of past experience. However, there were net losses in 2012; thus, no bonus
to employees was estimated. Material differences between estimates and the amounts proposed by the
Board of Directors in the following year are retroactively adjusted in the current year. If the actual
amounts subsequently resolved by the stockholders differ from the proposed amounts, the differences
are recorded in the year of stockholders’ resolution as a change in accounting estimate.
Based on a directive issued by the Securities and Futures Bureau (SFB), an amount equal to the net
debit balance of certain stockholders’ equity accounts (including unrealized valuation gain or loss onfinancial instruments, cumulative translation adjustments against the unrealized gain of equity, and net
loss not recognized as pension cost) should be transferred from unappropriated earnings to a special
reserve. Any special reserve appropriated may be reversed to the extent of the decrease in the net
debit balance.
Under the SFB’s regulations, a special reserve is appropriated from the balance of the retained earnings
at an amount equal to the carrying value of the treasury stock held by subsidiaries in excess of themarket value on the balance sheet date. The special reserve may be reversed when the market value
recovers.
The appropriation of the 2012 earnings was approved at the stockholders’ meeting on June 25, 2013, as
follows:
Appropriationof Earnings
Legal reserve
Special reserve

$

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

- 51 -

The Company offset the accumulated deficit against legal reserve of $321,891 thousand. No bonus toemployees was appropriated for 2013 because of a net loss in that year.
On March 27, 2015 the board proposed to offset the accumulated deficit against paid-in capital of$1,511,953 thousand. No bonus to employees was a appropriated for 2014 because of a net loss in that
year.
Information on bonus to employee is available on the Market Observation Post System website.
Except for non-ROC resident stockholders, all stockholders receiving the unappropriated earnings
generated on and after January 1, 1998 are allowed a tax credit equal to their proportionate share of theincome tax paid by the Company.
d. Others equity items
The movement of other equity items is as follows:
Exchange
Differences on
Translating
Foreign
Operations

Unrealized
Gain (Loss) on
Available-forsale Financial
AssetsCash Flow
Hedge

Balance on January 1, 2014
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 on December 31, 2014

$

1,843

(11,486)

96,579Total$

86,936

118,083--

118,083-

17,357-

17,357--(2,934,947)(2,934,947)--

397,424

397,424(20,074)953(2,809)431,379953
408,496

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

99,852- 52 -$

e.

Exchange
Differences on
Translating
Foreign
Operations

Unrealized
Gain (Loss) on
Available-forsale Financial
AssetsCash Flow
Hedge

Balance on 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

$

$

$

Balance at December 31, 2013$

(60,381)(16,666)

16,485

Total$(60,562)

74,968--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$(11,486)$

96,579$86,936(Concluded)

Non-controlling interest
For the Year Ended December 31
2014
2013
Beginning balance
Net income attributable to non-controlling interest
Foreign exchange difference
Unrealized gain or loss on financial instrument
Actuarial gains and losses on defined benefit plan
Effect on income tax
Issue of common shares by subsidiaries
Dividends paid by subsidiaries$ 2,083,896
149,8281,860
110(12,953)
8,168
200,000(103,936)$ 1,831,137
325,166
6,062(3,136)
23,839(7,159)(92,013)Ending balance$ 2,326,973$ 2,083,896- 53 -

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, 2014
Company’s shares held by its subsidiaries reclassified frominvestment in shares of stock to treasury stock

2,889

-

2,889

2,889

-

2,889

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

The Company’s shares held by its subsidiaries as of December 31, 2014 and 2013 were as follows:

Subsidiary

Shares(In Thousands)

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

December 31, 2014
Mandarin Airlines
Hwa Hsia

2,075
814

December 31, 2013
Mandarin Airlines
Hwa Hsia

2,075
814

Above subsidiaries acquired the Company’s stock in previous years was based on investment planning.
The shares of the Company held by its subsidiaries were treated as treasury stock. The subsidiaries
can exercise stockholders’ right on these treasury stocks, except the right to subscribe for theCompany’s new shares and the right to vote.
26. NET INCOME
a. Revenue
For the Year Ended December 31
2014
2013
Passenger
Cargo
Others- 54 -$ 97,137,071
43,629,974
9,814,697$ 92,183,033
39,393,152
10,126,360$ 150,581,742$ 141,702,545

b. Other income
For the Year Ended December 31
2014
2013
Interest income
Subsidy income
Dividend income
Others$441,968
194,671
29,522428,255$ 1,094,416$

361,433
182,025
65,631
994,484$ 1,603,573

c. Other gains and losses
For the Year Ended December 31
2014
2013
Gain on disposal property, plant and equipment
Net gain arising on financial assets classified as held for trading
Gain on disposal of available-for-sale financial assets
Litigation settlement
Gain or loss on foreign exchange, net
Gain on disposal of equity investments
Others$52,34078,742
6,557(1,212,121)(44,366)(622,117)$ (1,740,965)

$

6,008
132,701(1,488,095)
160,565
742,286(572,521)$ (1,019,056)

The Company along with worldwide leading carriers was named as defendants in the civil class action
by global airfreight forwarders alleging the 2000-2006 fuel surcharges levied on the shipments to andfrom the United States in violation of US Antitrust Laws. The board of directors reached the resolution
for settlement of US$90,000 thousand in three installments starting from 2014 on annual basis, andUS$50,000 thousand of which was recognized as operating cost in the financial report for the year of
2013. For consistency, the company reclassified the said operating cost to non-operating loss and theremaining balances recognized as non-operating loss of 2014 as well.

- 55 -

d. Financial cost
For the Year Ended December 31
2014
2013
Interest expense
Bonds payable
Bank loan
Interest on obligations under financial lease
Loss arising on derivatives as designated hedging instruments
in cash flow hedge accounting relationship reclassified fromequity to profit or loss$

539,913
1,299,199
172,584$

553,910
1,361,164
197,298

7,428

9,954

$ 2,019,124$ 2,122,326

Information of interest capitalization was as follows:
For the Year Ended December 31
2014
2013
Capitalization interest
Capitalization rate

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

e. Depreciation and amortization expense
For the Year Ended December 31
2014
2013
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- 56 -$ 17,460,446
279
55,422$ 17,244,547
304
50,723$ 17,516,147$ 17,295,574$ 16,671,783
788,942$ 16,523,374
721,477$ 17,460,725$ 17,244,851$

981
54,441$967
49,756$55,422$50,723

f. Employment benefit expense
For the Year Ended December 31
2014
2013
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$

332,011642,705$

229,456
546,798$

974,716$

776,254$ 14,970,181
3,401,097$ 14,973,410
3,250,309$ 18,371,278$ 18,223,719$ 15,564,746
3,781,248$ 15,359,535
3,640,438$ 19,345,994$ 18,999,973

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

$ 182,336(8,283)$ 186,650
605

785,060

400,445$ 959,113$ 587,700

A reconciliation of accounting profit and income tax expense were as follows:
For the Year Ended December 31
2014
2013
Profit (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 in determining taxable income
Temporary differences
Tax-exempt income
Additional income tax under the Alternative Minimun Tax Act
Loss carryforwards – current used

- 57 -$ 357,709$ (361,180)$$ (61,401)(123,129)

60,811
3,851
89,66095,589(100,580)(57,359)

309,138
728,946(257,461)
41,720(485,287)(Continued)

2014

2013

Loss carryforwards - generated
Oversea income tax expense
Deferred tax
Temporary differences
Investment tax credits - expired
Unrecognized loss carryforwards, investment tax credits andtemporary difference
Adjustments for prior years’ tax$

39,75050,614$

34,124

Income tax expense recognized in profit or loss

$ 959,113$ 587,700(Concluded)

2014

2013

$ (14,087)(2,809)$ (15,909)(1,648)431,379(20,842)(16,406)
4,070$ 393,641$ (29,893)

774,862-(253,634)
165,684

10,198(8,283)

488,395
605

b. Income tax recognized in other comprehensive income

Deferred tax
Recognized in other comprehensive income
Translation of foreign operations
Unrealized gain on available-for-sale financial assets
Hedging instruments fair value revaluation for cash flow
hedging
Actuarial gain or loss on defined benefit plan
Total income tax recognized in other comprehensive incomec. Deferred tax assets and liabilities
For the year ended December 31, 2014

Beginning
Balance

Recognized in
Profit or Loss

Recognized in
Other
Comprehensive
IncomeExchange
Difference

Ending Balance

Deferred tax assets
Temporary differences
Defined benefit plan
Dynasty flyer program
Depreciation of significant
Maintenance reserve
Depreciation of major spare part
Allowance for reduction of inventory
OthersLoss carryforward$

1,761,886
448,617
1,062,237
566,127
114,947
329,460
532,626
4,311,114$(14,810)(16,421)(1,062,237)
160,601(114,947)(179,275)
132,530
88,428$(13,995)
415,175
-

$

(293)
-

$

1,733,081
432,196
726,728
150,185
1,080,038
4,399,542$

9,127,014$ (1,006,131)$

401,180

$

(293)

$

8,521,770$

241,995

$

$

-

$

-

$

108,903

Deferred tax liabilities
Temporary differences
Unrealized foreign exchange gain
Depreciation difference from fixed
assetsDefined benefits plan
Others127,862
3,720
255,243$628,820(133,092)(1,374)(775)(85,830)$- 58 -(221,071)

6,847
692
$

7,539

8,301
$

8,301

126,488
9,792
178,406$

423,589

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
Depreciation of significant
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$39,8093,227$

127,862
3,720
255,2433,227$

628,820

Deductible temporary differences, unused loss carryforwards and unused investment credits for which
no deferred tax assets have been recognized in the balance sheets.
December 31
2014
Loss carryforwards
2018
2019
2020
2021
2022
2023
2024

$

57,044
4,952,493
105,874
80,080125,568
248,077
34,048

2013$

197,226
3,396,913
120,02980,080125,604
214,365-$ 5,603,184$ 4,134,217

Investment tax credits
Automated equipment$

24,691$

125,487

Difference in depreciation

$

4,410

$

-

- 59 -

d. As of the year ended in 2014, unused investment tax credits of China Airlines, Ltd. and subsidiaries
were as follows:

Laws and Statutes

Tax Credit Source

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

2015

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

R&D expenses, personnel
training expenses andpurchases of eligible
equipmente. Unused tax loss carryforwards as of December 31, 2014 were as follows:
Expiry Year

Unused Amount

China Airlines, Ltd.
$

2018
2019
2021
2022

7,631,747
19,338,075
2,899,496
598,471$ 30,467,789
Mandarin Airline Co., Ltd.
2018
2019
2023

$

57,044
192,508
223,735$

473,287$

33,961$

59,984
101,471
45,157
9,617$

216,229$4,404(Continued)

Tigerair Taiwan Co., Ltd.
2024
Cal Hotel Co., Ltd.
2019
2020
2021
2022

Cal Park Co., Ltd.
2020

- 60 -

Expiry Year

Unused Amount

Taiwan Air Cargo Terminal Limited
2021
2022
2023
2024

$

34,923
115,951
102,248
34,048$287,170(Concluded)

f. Integrated income tax
December 31

Imputation credits accounts

2014

2013

$ 385,425$ 225,815

Since the Company had accumulated deficit as of December 31, 2014 and 2013, 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 2012, except those of Taiwan Air
Cargo Terminal Limited (TACT), have been examined by the tax authorities.
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 administration has revised the fine to 0.6 times on May- 61 -

20, 2014, while TACT was still unsatisfied with the court decision and filed a retrial appeal on
November 20, 2014. The amount of provision recognized by TACT for over-distributed tax and finewas $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
2014
2013
Basic and diluted loss per share$(0.14)$ (0.25)

The weighted average number of shares used to calculate loss per share was as follows:
Net Loss for the YearFor the Year Ended December 31
2014
2013
$

Net loss used to calculate loss per share(751,232)$ (1,274,046)

Number of Shares (share in thousands)
For the Year Ended December 31
2014
2013
Weighted average number of shares used to calculate loss per share

5,199,401

5,197,111

These bonuses were previously recorded as appropriations from earnings. If the Company decides tosettle the bonus to employees by cash or shares, the Company should presume that the entire amount of thebonus will be settled in shares, and the resulting potential shares should be included in the weighted average
number of shares outstanding used in the calculation of diluted EPS, if the shares have a dilutive effect.
This dilutive effect of the potential shares should be included in the calculation of diluted EPS until thestockholders resolve the number of shares to be distributed to employees at their meeting in the following
year.
29. OPERATING LEASE ARRANGEMENTS
China Airlines, Ltd., Mandarin Airlines, Tigerair Taiwan and Taiwan Air Cargo Terminal rented planes andhangars under various operating lease contracts expiring on various dates until November 2026. The
Group does not have a bargain purchase option to acquire the leased planes and hangar at the expiration of
the lease periods.
The rental rates stated in the aircraft lease agreements some are fixed and some are floated. If theagreed-upon rental rate is floating and will be revised monthly or semiannually, subleasing is not allowed
for all the lease arrangements. As of December 31, 2014, the Group has rented eleven A330-300 planes,
six B737-800 planes, three 777-300ER planes, eight ERJ 190 planes and one A320-200 plans underoperating contracts; the lease terms range from 8 to 12 years, with an extension option.
As of December 31, 2014 and 2013, the refundable deposits paid by the Group under operating lease
contracts were $606,156 thousand and $716,552 thousand, respectively. Part of the refundable deposits issecured by credit guarantees, and outstanding credit guarantee as of December 31 2014 and 2013 were$357,501 thousand and $249,316 thousand.

- 62 -

The future minimum lease payments for the noncancelable operating lease commitments were as follows:
December 31
2014$

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

2013

5,928,038
20,993,092
18,782,575$$ 45,703,705

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

The lease payments recognized in profit or loss for the current period were as follows:
For the Year Ended December 31
2014
2013
$ 4,609,857

Minimum lease payment$ 3,543,880

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.
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
2014
Carrying
Amount$ 26,908,836
87,411,436

2013
Fair Value

Carrying
AmountFair Value$ 27,431,520
87,530,338$ 32,148,023
78,505,543$ 33,242,397
78,642,338

Financial liabilities
Bonds payable
Loans and debt

- 63 -

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

Level 3

Total

189,002$46,812-$-$

46,812
189,002$ 189,002$

46,812$-$ 235,814

Available-for-sale financial
assetsSecurities listed in domestic$

28,881

$

-

$

-

$

28,881

Derivative financial assets forhedging$-$

43,577$-$

43,577

Derivative financial liabilities forhedging$$2,465,150$-$2,465,150

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$75,504

Level 3

-

$

-

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

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 assets at fair value through profit or loss, available-for-sale financial
assets, and derivative financial assets for hedging are based on their quoted prices in an active
market. If quoted market prices are not available, fair values are estimated using valuation
techniques. For those derivative financial assets for hedging and with no quoted prices, thefair values are determined using valuation techniques incorporating estimates and assumptions
consistent with those generally used by other market participants to price financial instruments.
The valuation techniques are applied to the derivative financial assets by financial institutions,which calculate fair values at the expiry date of each contract.
b) Financial assets carried at cost are investments in unquoted shares, which have no quoted prices
in an active market and entail an unreasonably high cost to obtain verifiable fair values. Thus,
no fair value is presented.
c) Fair values of bonds payable are based on their quoted market prices.
The total amount of fair value listed above is not equal to the total value of the Group because it
is not necessary to disclose the fair value of semifinancial and nonfinancial instruments.

- 65 -

b. Categories of financial instruments
December 31
2014

2013

Financial assets
Financial assets at FVTPL
Available-for-sale financial assets(3)Derivative financial assets for hedging
Loans and receivables (1)$235,814498,198
43,57733,524,910$

215,673
572,748
140,620
29,806,215$ 34,302,499$ 30,735,256$$

Financial liabilities
Financial liabilities at FVTPL
Derivative financial liabilities for hedging
Financial liabilities at amortized cost (2)2,465,150
144,488,117$ 146,953,267

2,799
24,879135,161,328$ 135,189,006

1) The balances included loans and receivables measured at amortized cost, which comprise cash andcash equivalents, notes and accounts receivables, accounts receivable - related parties, otherreceivables, refundable deposits, other financial asset and other restricted financial asset.
2) The balances included financial liabilities measured at amortized cost, which comprise short-termloans, short-term notes payable, notes and accounts payables, accounts payable - related parties,
other payable, bonds payable and long-term loans, capital lease obligation, part of other current
liabilities, part of other noncurrent liability and guarantee deposit.
3) Including the Financial assets measured at cost.
c. Financial risk management objectives and policies
The 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 risk committee, which meets periodically to evaluate the performance of
derivative instruments and determine the appropriate hedging percentage. This committee informs theGroup of global economic and financial conditions, controls the entire financial risk resulting fromchanges in the financial environment and fuel prices, and develops the strategy and response to avoid
financial risk with the assistance of financial risk experts to effect risk management.
1) Market risk
The 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.
The Group enters into forward contracts, foreign currency option contracts, and interest swap

- 66 -

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
2014

2013

Assets
USD
EUR
HKD
JPY
RMB

$

6,657,656
693,065
1,293,753
418,274
10,766,934$

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

Liabilities
USD
EUR
HKD
JPY
RMB

12,882,711
190,246
313,9131,240,089
791,414

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

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.
When New Taiwan dollars increase one dollar against U.S. dollars and all other variables were
held constant, there would be an decrease in pre-tax profit in 2014 $174,778 thousand andincrease in pre-tax profit in 2013 $23,902 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.
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 an- 67 -

appropriate mix of fixed and floating rate borrowings, and using interest rate swap contracts andforward interest rate contracts.
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.
December 31

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

2014

2013

$ 33,026,655$ 31,285,991

97,591,031

92,612,484

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, 2014 would have decreased by$645,000 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, 2013 would have decreased by $700,000
thousand.
c) Other price risk
The Group was exposed to fuel price risk on its purchase of aviation fuel. The Group enters
into fuel swaps contract to hedge against adverse risks on fuel price changes.
Sensitivity analysis
The sensitivity analyses below were determined based on the exposure to fuel price risks at theend of the reporting period.
For the Year Ended December 31
2014
2013
Other
Other
CompreComprehensive
hensive
Pre-tax Profit
IncomePre-tax Profit
IncomeIncrease
Increase
Increase
Increase(Decrease)(Decrease)(Decrease)(Decrease)
Fuel price increase 5%
Fuel price decrease 5%$ 31,646(32,545)- 68 -$ 316,498(134,513)$ 21,417(13,132)$ 91,940(84,966)

2) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in financial loss to the 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.

- 69 -

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

1.4315

1-3 Months

3 Months to
1 Year$$533,6432,226,077

1-2 Years$

2-5 Years

1,665,836$

5+ Years

5,437,893

$

3,729

1.4627

3,377,496

10,224,542

27,603,968

41,817,988

2,160,706

4.374

152,969

462,498

633,285

818,070

120,197

2,504

21,879

394

405

-

4,066,612$ 12,934,996$ 29,903,483$ 48,074,356

1-3 Months

3 Months to
1 Year

1-2 Years

2-5 Years

$

$

$

$

2,284,632

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

1.4260831,7453,567,392$

2,411,223$

5+ Years

5,609,974$

629,630

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

Loan commitments
December 31

Disposal unsecured bank loan limit

2014

2013

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

32. RELATED-PARTY TRANSACTIONS
Details of transactions between the Group and its related parties are disclosed below:
a. Operating transactions
Sales of Goods
For the Year Ended
December 31
2014
2013
Associates
Jointly controlled entities
Major stockholder

$
$
$

4,608
16,55828,605$$$

113,392
13,87726,001

Purchases of Goods
For the Year Ended
December 31
2014
2013
$ 587,239$ 1,439,844$
60,913$ 531,293$ 1,278,542$
53,014

The amount of accounts receivable - related parties at reporting dates were as follows:
December 31
2014- 70 -

2013

Associates
Jointly controlled entities
Major stockholder

$

240
1,749
4,626

$

5,447
594
8,476

$

6,615

$

14,517

The amount of accounts payable - related parties at reporting dates were as follows:
December 31
2014

2013

65,192
365,493
4,699$ 108,889
317,284
6,362$ 435,384$ 432,535$

Associates
Jointly controlled entities
Major stockholder

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 2014 and 2013, the company had paid rentals of about $60,913 thousand and $53,014
thousand, respectively.
c. Endorsements and guarantees
December 31
2014

2013

Authorized
AmountActualAmountUsed

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

The Company
Cal Park
Taiwan Air Cargo Terminal
Freighter Prince Ltd.
Cal Hotel
Tigerair Taiwan
Cal Asia
Taikoo Spirit Aerospace
Systems (Jinjiang)
Composite
d. Bonds payable - related parties
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.
e. Compensation of key management personnel- 71 -

For the Year Ended December 31
2014
2013
Short-term employee benefits
Post-employment benefits$ 39,282
2,595$ 35,415
4,353$ 41,877$ 39,768

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, lease obligations and business transactions:
December 31

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

2014

2013

$ 104,255,700$ 110,044,021

17,236
279,497

181,209487,649$ 104,552,433$ 110,712,879

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

34. COMMITMENTS AND CONTINGENT LIABILITIESAs of December 31, 2014, the Group had commitments and contingent liabilities (except for thosementioned in other notes) as follows:a. In January 2008, the Company entered into a contract to buy fourteen A350-900 planes from Airbus,
with the option to buy six more A350-900 planes, with aggregate purchase prices of US$3,933,235
thousand and US$1,802,645 thousand, respectively. Excepted delivery slots of aircraft from 2016 to2018.
Prepayments for aircraft purchases were as follows:
December 31
2014
2013
US$ 449,216
thousandUS$ 315,859
thousandb. In December 2012, the Company entered into a contract to buy six 777-300ER planes from the Boeing
Company, with the option to buy six more 777-300ER planes, at aggregate purchase prices of
US$2,067,261 thousand and US$2,213,015 thousand, respectively. Expected delivery slots of aircrafts
are from 2015 to 2016. The board of the Company has resolved to transfer the purchase right of theconfirm orders for six aircrafts to the aircraft leasing company then lease back.

- 72 -

Prepayments for aircraft purchase were as follows:
December 31
2014

2013

US$ 418,325
thousandUS$ 163,786
thousandc. To replace the old aircraft, the Company entered into the four 777-300ER aircrafts lease contract with
12 years term. The expected delivery slot would be from October, 2014. As of December 31, 2014, theCompany had received three aircrafts. The Company entered into three 737-800 aircrafts lease contract.
The expected delivery slot will be September, 2015. The Tigerair Taiwan entered into the two
A320-200 aircrafts lease contract with 10 years term. The expected delivery will be in March and May,
2015.
d. To provide new generation aircrafts maintenance, develop market share in aircrafts maintenance andupgrade the Group’s maintenance qualify, on August 12, 2014 the board resolved to invest a wholly
owned new aircraft maintenance company. Total capital of this company will be 1.35 billion and thiscompany is founded in January 2015.
e. 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, TACT 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.
As of December 31, 2014, TACT had signed the following construction contracts with unrelatedparties:

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

Contract
Amount (VAT
Included)$552,285
1,892,400

As of December 2014, the cumulated consultant service expense and construction equipment had
amounted to 407,756 thousand (VAT included) and 4,046,490(VAT included), respectively. Whenthe projects had been completed and checked, the amounts of $406,361 thousand (VAT included) and$3,932,627 thousand (VAT included) were reclassified to property, plant, and equipment. The
remaining cumulative payments were recognized under construction 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

- 73 -

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 nonoperating 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 AmountRoyalty Rate

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

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

f. 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 thousand (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
refunded interest free, and the remaining amount will be refunded within three months after the end of
the operating period and the completion of asset transfer. In 2014, CAL Park received refunded
security deposits of $50,000 thousand with no interest.
In the 50 years beginning from the initial operation date of CAL Park to the end of the construction
period, CAL Park should pay royalties based on the operating revenue estimated in the financial plan of
its investment executing proposal. If the sales and business tax declared and filed by a 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 this excess.

- 74 -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.
g. The Company has been named as a defendant, together with other airline members in Association ofAsia Pacific Airlines, in the civil class action by some passengers alleging the antitrust violation in US
Northern District Court of California. The Company has properly joined the defendants’ Joint Defense
Group. The litigation is in the pretrial procedure, and none of any evidence supporting Plaintiffs’
allegation has been raised so far.
35. ADDITIONAL DISCLOSURESa. Following are the additional disclosures required by the Securities and Futures Bureau for the Company
and its investees:
1) Financing provided:

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 7 and 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)

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- 75 -

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, 2014
Adjustment andOthersWrite-off

Operating revenue$ 148,630,115$

7,221,423$(5,269,796)

Operation profit and losses
Interest revenue
Investment income accounted forby the equity method
Revenue
Financial cost
Expense$$765,058$

36,5001,712,472$$$ 134,911,503$

9,841,365$(21,345)2,514,030
441,968

357,709$ 144,731,523
2,806,823
81,533,408$ 229,071,754

Total assets

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
Expense$$1,290,657$

36,500(600,889)

Total$ 141,702,545$

726,268
361,433
450,361
2,200,890(2,122,326)(1,977,806)

Loss before income tax
Identifiable assets
Investment accounted for by theequity method
Assets$ 150,581,742

509,352
884,877(2,019,124)(1,973,394)

Profit before income tax
Identifiable assets
Investment accounted for by theequity method
AssetsTotal$$ 142,417,586$

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

Total assets$ 220,975,899- 76 -

b. Geographical segment
The geographical segment information of the Company and its subsidiaries in 2014 and 2013 are listed
below:For the Year Ended December 31, 2014

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

Northeast Asia

Southeast Asia

EuropeAustralia$

45,276,734$

24,486,986$

30,893,375$

13,833,545$

3,765,684$

17,683,332$(2,574,677 )$

2,357,790$(1,184,346 )$(1,498,771 )$(7,499 )$2,769,568

Domestic

Adjustment andEliminations

Consolidation$

20,065,876$(5,423,790 )$ 150,581,742$

2,550,794$

101,171

China

2,514,030
441,968

509,352
884,877(2,019,124 )(1,973,394 )Profit before
income tax
Identifiable assets
Investment
accounted for by
the equity
methodAssets$$$

1,777,721$

111,276$

207,083$

19,771

$

7,341

$

17,100$ 142,612,576$(21,345 )

357,709$ 144,731,523

2,806,823
81,533,408

Total assets$ 229,071,754

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
ExpenseAmerica

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$

3,844,441$

36,500China

726,268
361,433

450,361
2,200,890(2,122,326 )(1,977,806 )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- 77 -TABLE 1

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

Counter-party
Endorsement/
Guarantee
Provider

No.

Name

0

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

1

Cal-Asia
Investment

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

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

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

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

115,446

16,524--

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

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.

- 78 -

279,497
-

6.99
2.22
0.57
0.37
1.85
-

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

Y
Y
Y
Y
Y

-

-

288,615--YTABLE 2

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

December 31, 2014
Percentage ofCarrying Value
Ownership

Market Value or
Net Asset Value

Note

$

$

263,526

Note 1-

Note 1

11.00
15.00
6.22

19,66967,311
679

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

100,000-

75,91922,031

5.83
5.45

18,692
7,240

Note 2
Note 2

265,726

3,294

-

3,294

-

3,375,063

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

56,081-

56,081-

5,142,809

63,289-63,289-974,293

14,506-

14,506-

Relationship with theHolding Company

Financial Statement Account-Financial assets carried at cost - noncurrent

1,359,368-

Financial assets carried at cost - noncurrent

135,937

473--

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

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

11,00056,023
5,925

Parent company

Available-for-sale financial asset - current

2,074,628

30,082

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

Bond investments with no active market current

280

280,000

Taoyuan International
Airport Services

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

Bond investments with no active market current

100

100,000

Cal-Asia Investment

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

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

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

Taishin 1699 Money Market Fund-

Mega Diamond Money Market Fund-

Yuanta Wan Tai Money Market Fund-

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

Holding Company Name Marketable Securities Type and Issuer/Name

China Airlines(the “Company”)

Mandarin Airlines

Abacus Distribution
Systems (Taiwan)

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

Shares/Units

297,946

13.59(Continued)- 79 -

Holding Company Name Marketable Securities Type and Issuer/Name

Relationship with theHolding Company

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

Hwa Hsia

Stock
TransAsia Airways

Stock
China Airlines
Beneficial certificates
Taishin 1699 Money Market Fund-

Parent company-

Financial Statement AccountShares/Units

Market Value or
Net Asset Value$$

60,000-2,265,182

28,881

Available-for-sale financial asset - current

814,152

Financial assets at fair value through profit
or loss - current

506,592

Bond investments with no active market current

Available-for-sale financial asset noncurrent

60

December 31, 2014
Percentage ofCarrying Value
OwnershipNote

60,000-0.40

28,881-

11,805-

11,805

-

6,730

-

6,730

-

Note 1: The subsidiary’s net asset value was $263,526 thousand, which included common stock and preferred stock as of and for the year ended December 31, 2014.
Note 2: The Company does not issue stocks because it is a limited company.
Note 3: The net asset value was calculated using the investee’s unaudited financial statements as of September 30, 2014 because the audited financial statements were not prepared on time.
Note 4: Transaction with subsidiaries have been written off in consolidated financial report.
(Concluded)- 80 -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, 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name

Type and Issuerof Marketable
Securities

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

Financial
Statement
Account

Investments
accounted forusing equity
methodBeginning Balance
Counterparty

Relationship-

Subsidiaries

SharesAcquisition

Amount-$-- 81 -

SharesAmount-$-Shares-

DisposalCarrying
AmountAmountGain (Loss)on Disposal

$

$

-

$

-

Ending Balance-

SharesAmount-$-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, 2014
(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”)

Taiwan Air Cargo Terminal
Hwa Hsia
Mandarin Airlines

Subsidiary
Subsidiary
Subsidiary

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

Equity-method investee
Subsidiary
Subsidiary
Subsidiary

Purchase
Purchase
Sale
Purchase
Purchase
Purchase
Purchase
Purchase

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

Sale
Purchase
Purchase
Purchase$Amount% to
Total

Payment Terms

Unit Price

336,731
312,259(2,038,646)
313,983
1,341,017
217,210526,599
1,084,643

0.26
0.24
1.46
0.24
1.04
0.17
0.41
0.84

30 days
2 months
2 months
2 months
60 days
2 months
40 days
40 days$(146,658)
174,607
235,661
108,070

0.10
0.14
0.18
0.08

15 days
60 days
30 days
2 months

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

- 82 -

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

Abnormal Transaction

-

-

-

-

$

Note

(47,918)(33,067)
446,339(310,573)(349,135)(217,210)(77,021)(229,731)

5.64
3.89
4.44
36.58
41.12
25.58
9.07
35.30

-

9,148
(29,275)(20,770)(10,307)

0.09
3.45
2.45
1.21

-

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, 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Overdue
Company Name

Related Party

Nature of RelationshipEnding Balance

Turnover Rate

$ 446,339

4.69

China Airlines, Ltd. (“China Airlines”)

Mandarin Airlines

Subsidiary

Cal Park

China Airlines

Parent company

217,210

Mandarin Airlines

China Airlines

Parent company

China Pacific Catering Services

China Airlines

Taoyuan International Airport Service

China Airlines

AmountAction Taken

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

1.15

-

-

114,035-

310,573

1.05

-

-

310,573-

Parent company

349,135

4.11

-

-

115,409-

Parent company

299,731

3.57

-

-

298,854-

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

- 83 -$$-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, 2014
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investment Amount
December 31, December 31,
2014
2013

Balance as of December 31, 2014
Percentage ofSharesCarrying Value
Ownership

Net Income(Loss) of theInvesteeReal 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$

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000$

1,500,000
2,042,368
1,350,000
US$ 26,145
439,110147,000

150,000,000
188,154,025
135,000,000
2,614,500
43,911,000
34,300,000

100.0093.99
54.00
100.00
51.00
49.00

$

Territory of the British Virgin
Islands
Abacus Distribution System (Taiwan) Taipei, Taiwan
China Aircraft Service
Hong Kong International Airport
Asian Compressor Technology
Taoyuan, Taiwan
Services
Taiwan Airport Services
Taipei, Taiwan
Kaohsiung Catering Services
Kaohsiung, Taiwan

General investment

US$47,016

US$

47,01647,016,200

100.00

Sale and maintenance of hardware and software
Airport services
Research, manufacture and maintenance of enginesHK$

52,20058,00077,322

HK$

52,20058,00077,322

13,021,042
28,400,000
7,732,200

Airport services
In-flight catering

12,289140,240

12,289140,240

Cal Hotel Co., Ltd
Science Park Logistics
China Pacific Laundry Services

Taoyuan, Taiwan
Tainan, Taiwan
Taoyuan, Taiwan

465,000
150,654
137,500

Hwa Hsia

Taoyuan, Taiwan

50,000

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

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

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

Mandarin Airlines

Tigerair Taiwan Co., Ltd.

Taipei, Taiwan

Air transportation and maintenance of aircraft

Cal-Asia Investment

Eastern United International Logistics Hong Kong

Forwarding and storage of air cargo

HK$

3,329

Taiwan Airport Services

Taiwan Airport Service (Samoa)

Samoa

Airport services and investment

US$

5,877

Hwa Hsia

Hwa Shin Building Safeguard

Taoyuan, Taiwan

Building security and maintenance services

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

Taoyuan, Taiwan
Taipei, Taiwan
Taoyuan, Taiwan
Los Angeles, U.S.A.
Taoyuan, Taiwan
Taoyuan, Taiwan

Main Businesses and Products

26,265
20,400
2,500
US$
1
US$
1
1,600,000
JPY

Note 1
Note 2-577,230

44,04444,044

-

93.93
20.00
24.50

435,744
450,111259,605

177,339
178,322411,087

166,574
35,664
100,716-

20,626,644
14,329,759

47.35
35.78

269,401
232,105

118,206
137,187

55,97149,086-

465,000
150,654
137,500

46,500,000
13,293,000
13,750,000

100.0028.48
55.00

248,177
189,019
166,192

37,90382,25353,48837,90323,426
29,419-50,00050,000100.0081,261

32,76532,765Note 1

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

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

100.0051.00
25.00
100.00100.0080.00

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

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

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

Note 5--20,000,000

10.00

180,089(199,115)(19,911)

-

HK$

3,329

1,050,000

35.00

33,58911,417

4,361

Note 4

US$

5,877

-

100.00396,039

27,22527,225Note 3

10,0001,000,000

100.0020,015

5,989

5,989

-

200,000

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

Note 2:

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

Note 3:

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

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

Note 5:

Freighter Queen Ltd. was put into liquidation this year.

Note 6:

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

- 84 -

17,093
179,102(36,301)
36,865
212,571
104,662

US$
US$
US$

1,496,712
1,278,362
1,316,457
1,160,402
743,817665,127

Note

17,093 $155,584(67,224)
36,865416,807
213,597

JPY$

Investment
Income (Loss)TABLE 7

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

China Airlines

Investee Company Name

Main Businesses andProducts

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

Investment Flows

Outflow

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

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

Indirect(Note 1)$
(US$

130,316 $
4,118) (US$Airport Air Cargo Service(Xiamen) Co., Ltd.

Forwarding and storage(RMB
of air cargo

71,03014,000)Indirect(Note 1)

(US$

Taikoo (Xiamen) Landing
Gear Services

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

Taikoo Spirit Aerospace
Systems (Jinjang)Composite material

369,082
11,663)

Yangtze River Express
Airlines
Shanghai Eastern Aircraft
MaintenanceAircraft line
maintenance

Shanghai Eastern UnitedInternational

Accumulated
Outflow ofInvestment
from Taiwan asofDecember 31,
2014

Inflow

2,152 $
68)-

61,614
1,947)--

68,0702,151)-(US$

Indirect(Note 1)

20,127
636)

-

(US$

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

Indirect(Note 1)

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

98,101
3,100)

Indirect(Note 2)

(US$

7,848
248)

-

(US$

Forwarding of air cargo(US$and ocean freight

31,6461,000)

Indirect(Note 3)

5,443
172)

-

(US$

(US$

Accumulated Investment in
Mainland China as ofDecember 31, 2014

Investment Amounts
Authorized by Investment
Commission, MOEA

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

Net Income(Loss) of
the Investee

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

Investment
Gain (Loss)$(US$

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

14.00

61,614
1,947) (RMB

77,242
15,348)

14.00

(US$

68,0702,151)

-

5.83

(US$

20,127
636)

-

(US$

-

-

-

-

7,848
248)

-

8.00

-

(US$

5,443
172)

-

(US$

-

-

(US$

% Ownershipof Direct orIndirect
Investment

797,437
25,199)
-

-

5.45

17.15

$
(RMB

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

(RMB

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

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

22,0284,342)

-

(RMB

-

-

7,848
248)

-

(US$

5,427
172)

-

(US$

-

-

(Continued)- 85 -

Taiwan Airport Services

Investee Company

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

Remittance of Funds

Outward

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

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

Indirect(Note 7)$(US$

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

Forwarding and storage(RMB
of air cargo

71,03014,000)Indirect(Note 7)

(US$

60,981
1,927)

Accumulated
Outward
Remittance forInvestment
from Taiwan asof December 31,
2014

Inward2,152 $
68)

-

-

-

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

Investment Amounts Authorized by
Investment Commission, MOEA

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

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

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

14.00

60,981
1,927) (RMB

14.00

(US$

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

Carrying
Amount as ofDecember 31,
2014

Accumulated
Repatriation of
Investment
Income as ofDecember 31,
2014

$
(RMB

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

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

Note 1: China Airlines, Ltd. the “Company” invested in Cal-Asia Investment, which, in turn, invested in a company located in Mainland China.
Note 2: The Company invested in China Aircraft Services, which in turn, invested in a company located in Mainland China.
Note 3: Cal-Asia Investment invested in Eastern United International Logistics (Holdings), which in turn, invested in a company located in Mainland China.
Note 4: The inward remittance of earnings in 2014 amounted to US$1,814,300.
Note 5: The amount comprised US$21,691,103, RMB4,200,000 and NT$36,666,667.
Note 6: The limit stated in the Investment Commission’s regulation, “Investment or Technical Cooperation in Mainland China Adjudgment Rule,” is the larger of the Company’s net asset value or 60% of the consolidated net asset value.
Note 7: Taiwan Airport Services invested in Taiwan Airport Services (Samon), which in return, invested in a company located in Mainland China.
Note 8: The RMB and U.S. dollar amounts of assets are translated at year-end rates and those of gains (losses), at the average of the year-end rates of refer for the reporting period.
Note 9: Yangtze River Express had been disposed by Cal-Asia Investment and the Company had received the disposed amount.
Note10: Xiamen International Air Cargo Terminal and Xiamen International Airport Air Cargo Storage renamed to Airport Air Cargo Terminal (Xiamen) Co., Ltd. and Airport Air Cargo Service (Xiamen) Co., Ltd., respectively.
(Concluded)- 86 -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, 2014
(In Thousands of New Taiwan Dollars)

Transactions Details
No.

0

Investee Company

China Airlines, Ltd.

Counter Party

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
Yestrip
Cal Hotel Co., Ltd.

Relationship(Note 1)

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
a
a

Financial Statement Accounts
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
Accounts receivable - related parties
Accounts receivable - related parties

Amount$146,658
1,881,024
12,854
157,6232,417
71
17,872
10,011
1,589
11,943
3,676
10,344
1,084,643
526,599
312,259
313,983
336,731
33,141
1,596
9,124
217,21075,709
6,900
5,585
1,995
1,197
1,169
446,339
239
9,148
16,594435

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
The same as ordinary transactions
The same as ordinary transactions% to Total
Consolidated
Revenue or Assets
0.10
1.25
0.01
0.10
0.01
0.01
0.01
0.01
0.72
0.35
0.21
0.21
0.22
0.01
0.14
0.05
0.19
0.01
(Continued)- 87 -

Transactions Details
No.

Investee Company

Counter Party

Relationship(Note 1)

Financial Statement Accounts

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

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

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

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

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

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

Amount$Payment Terms% to Total
Consolidated
Revenue or Assets

47,918228,109299,73177,02133,067
17,356217,210
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

0.02
0.10
0.13
0.03
0.01
0.01
0.09
-

336,731
12,854
12,73647,9181,169-

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

0.22
0.01
0.01
0.02
-

313,983
1,881,024
100,624
32,285
157,623
5,585
228,1092,670
446,339
14,041-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

0.21
1.25
0.07
0.02
0.10
0.10
0.19
0.01
(Continued)- 88 -

Transactions Details
Counter Party

Relationship(Note 1)

No.

Investee Company

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

4

Cal-Dynasty International

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

b
b
b

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.

6

Taiwan Airport Services

7

Financial Statement Accounts

Amount$Payment Terms% to Total
Consolidated
Revenue or Assets

32,285
1,084,643
2,417
1,995
299,731953-

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
0.72
0.13
-

Operating revenue
Operating costs
Accounts receivable

1,596
-

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

-

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

6,900
71
1,197
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-

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

526,599
100,624
17,87277,021
14,041-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

0.35
0.07
0.01
0.03
0.01
-

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

b
c
b
b
b
b
b
b

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

312,259
12,736
10,01133,067239-

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
0.01
0.01
0.01
-

9

Dynasty Holidays

China Airlines, Ltd.
China Airlines, Ltd.

bb

Operating revenue
Operating expenses

33,141
1,589

The same as ordinary transactions
The same as ordinary transactions(Continued)- 89 -

Transactions Details
No.

Investee Company

Counter Party

Relationship(Note 1)

Financial Statement Accounts

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

11 Yestrip

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

b
b
b
b
b

12 Cal park

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

13 Cal Hotel Co., Ltd.

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

Amount$Payment Terms% to Total
Consolidated
Revenue or Assets

146,658
11,9439,148-

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

0.10
0.01
-

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

9,124
3,676
16,594-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
0.01
-

b
c
b
c

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

217,210
20,564217,210
21,592The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions
The same as ordinary transactions

0.14
0.01
0.09
0.01

b
b
c
b
b
c

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

75,70910,344
20,564
17,356435
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
0.01
0.01
0.01
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)- 90 -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, 2013
(In Thousands of New Taiwan Dollars)
Transactions Details
No.

0

Investee Company

China Airlines, Ltd.

Counter Party

Relationship (Note 1)

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

a.
a.
a.
a.
a.
a.

Cargo revenue
Cargo revenue
Passenger revenue
Other operating revenue
Other operating revenue
Other operating revenue

a.
a.
a.
a.
a.
a.
a.
a.
a.
a.

Financial Statement Accounts

Amount% to Total
Consolidated
Revenue or Assets

97,292
1,877,736
15,578165,2842,843

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

0.07
1.33
0.01
0.12
-

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

6,901
11,893
10,242
2,884
2,030
2,427
4,952
996,881

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
0.01
0.70

a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.

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

376,613272,415
303,434
268,440
46,08541,425
8,683
213,019
71,210
2,530
5,585
1,995

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

0.27
0.19
0.21
0.19
0.03
0.03
0.01
0.15
0.05
-

a.
a.
a.
a.
a.
a.

Interest expenses
Interest expenses
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties

1,197
1,141
422,956589
2,953

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-- 91 -$

Payment Terms

Transactions Details
No.

Investee Company

Counter Party

Relationship(Note 1)

Financial Statement Accounts

0

China Airlines, Ltd.

Global Sky Express
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
a

Accounts receivable - related parties
Accounts receivable - related parties
Accounts receivable - related parties
Dividend receivable
Dividend receivable
Dividend receivable
Dividend receivable
Dividend 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

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
Dividend payable

Amount$Payment Terms% to Total
Consolidated
Revenue or Assets

3,899
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
The same as ordinary transactions

0.02
0.13
0.14
0.03
0.02
0.07
-

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
(Continued)- 92 -

Transactions Details
No.

Investee Company

Relationship(Note 1)

Financial Statement Accounts

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

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

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

Counter Party

2

Mandarin Airlines

3

Taoyuan International Airport Services

4

Cal-Dynasty International

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

b
b
b

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.

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.

AmountPayment Terms% to Total
Consolidated
Revenue or Assets

303,434
1,877,736
96,36938,577
165,284
5,585
286,863
2,670
422,956
14,431
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
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

0.21
1.33
0.07
0.03
0.12
0.13
0.19
0.01
0.03
0.7
0.14
-

Operating 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
-

b
b
b
b
b
b
b

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

-

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
Dividend 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
-

$

(Continued)- 93 -

Transactions Details
No.
7

Investee Company

Counter Party

Relationship(Note 1)

Financial Statement Accounts

AmountPayment Terms% to Total
Consolidated
Revenue or Assets

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

b
c
b
b
b
b
b
b

Operating revenue
Operating revenue
Operating expenses
Interest revenue
Accounts receivable - related parties
Interest receivable
Accounts payable - related parties
Dividend payable272,415
12,552
10,24250,6582,953-

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
0.02
-

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
Dividend 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
Dividend 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

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)- 94 -