english translation of consolidated1 financial statements...
TRANSCRIPT
The auditors’ report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared
and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese
language auditors’ report and financial statements, the Chinese version shall prevail.
(English Translation of Consolidated1 Financial Statements and Report
Originally Issued in Chinese)
Solid State System Co., Ltd. and Subsidiaries
Consolidated Financial Statements
December 31, 2016 and 2015
(With Independent Auditors’ Report Thereon)
See accompanying notes to consolidated financial statements.
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)
Solid State System Co., Ltd. and Subsidiaries
Consolidated Balance Sheets
December 31, 2016 and 2015
(expressed in thousands of New Taiwan Dollars)
December 31,
2016
December 31,
2015
Assets Amount % Amount %
Current assets:
Cash and cash equivalents (note 6(1)) $ 69,684 10 184,340 22
Accounts receivable, net (note 6(3)) 7,616 1 1,358 -
Accounts receivable from related parties, net (notes 6(3) and 7) 64,846 9 49,606 6
Inventories (note 6(4)) 124,440 17 129,665 16
Other current financial assets (notes 6(5) and 8) 188,754 26 187,550 22
Other current assets 7,705 1 9,357 1
463,045 64 561,876 67
Non-current assets:
Property, plant and equipment (notes 6(6) and 8) 188,652 26 191,784 23
Intangible assets (note 6(7)) 17,390 2 29,233 4
Deferred tax assets (note 6(10)) 23,686 3 17,462 2
Refundable deposits(note 8) 29,692 4 29,702 4
Other non-current financial assets 2,974 1 3,774 -
Other non-current assets (note 6(9)) 477 - - -
262,871 36 271,955 33
Total assets $ 725,916 100 833,831 100
See accompanying notes to consolidated financial statements.
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)
Solid State System Co., Ltd. and Subsidiaries
Consolidated Balance Sheets (Continued)
December 31, 2016 and 2015
(expressed in thousands of New Taiwan Dollars)
December 31,
2016
December 31,
2015
Liabilities and Equity Amount % Amount %
Current liabilities:
Current financial liabilities at fair value through profit or loss
-current (note 6(2))
$ 67 - 57 -
Accounts payable 11,535 2 7,246 1
Accrued payroll 18,289 2 18,528 2
Unearned revenue (note 7) - - 28,086 4
Other current liabilities 29,211 4 42,460 5
59,102 8 96,377 12
Non-current liabilities:
Deferred tax liabilities (note 6(10)) 197 - - -
Net defined benefit liabilities-non-current (note 6(9)) - - 802 -
Guarantee deposits - - 1,050 -
197 - 1,852 -
Total liabilities 59,299 8 98,229 12
Equity (note 6(11)):
Common stock 808,596 111 808,596 97
Capital surplus 276,160 38 276,160 33
Accumulated deficits (418,139) (57) (349,154) (42)
Total equity 666,617 92 735,602 88
Total liabilities and equity $ 725,916 100 833,831 100
See accompanying notes to consolidated financial statements.
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)
Solid State System Co., Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2016 and 2015
(expressed in thousands of New Taiwan Dollars, except for earnings per share)
For the years ended December 31,
2016 2015
Amount % Amount % Operating revenues (notes 6(13) and 7) $ 643,069 100 482,374 100
Operating costs (notes 6(4) and 7) 429,285 67 335,070 69
Gross profit 213,784 33 147,304 31
Operating expenses (note 6(8)):
Selling 67,610 11 61,129 13
General and administrative 33,263 5 38,032 8
Research and development 193,313 30 223,132 46
Total operating expenses 294,186 46 322,293 67
Net operating loss (80,402) (13) (174,989) (36)
Non-operating income and expenses (note 6 (15)):
Other income 4,878 1 3,396 1
Other gains and losses (674) - 2,886 -
Financial costs (105) - (248) -
4,099 1 6,034 1
Loss before tax (76,303) (12) (168,955) (35)
Income tax benefit (note 6(10)) (6,246) (1) (4,893) (1)
Net loss (70,057) (11) (164,062) (34)
Other comprehensive income:
Items that will not be reclassified subsequently to profit
or loss:
Remeasurements of the defined benefit plans (note 6(9)) 1,291 - (1,773) -
Income tax relating to items that will not be reclassified
subsequently (note 6(10))
219 - (301) -
Total items that will not be reclassified subsequently to
profit or loss
1,072 - (1,472) -
Other comprehensive income 1,072 - (1,472) -
Total comprehensive income $ (68,985) (11) (165,534) (34)
Earnings per share (New Taiwan Dollars) (note 6(12))
Basic earnings per share $ (0.87) (2.17)
See accompanying notes to consolidated financial statements.
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)
Solid State System Co., Ltd. and Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2016 and 2015
(expressed in thousands of New Taiwan Dollars)
Common
stock
Advance
receipts for
share capital
Capital
surplus
Accumulated
deficits Total equity Balance as of January 1, 2015 $ 707,737 2,011 92,333 (183,620) 618,461
Net loss for the period - - - (164,062) (164,062)
Other comprehensive income for the period - - - (1,472) (1,472)
Total comprehensive income for the period - - - (165,534) (165,534)
Conversion of advance receipts for share capital to common stock 859 (2,011) 1,152 - -
Advance receipts for common stock issued in cash 100,000 - 169,325 - 269,325
Compensation cost of common stock issued to employees - - 13,350 - 13,350
Balance as of December 31, 2015 808,596 - 276,160 (349,154) 735,602
Net loss for the period - - - (70,057) (70,057)
Other comprehensive income for the period - - - 1,072 1,072
Total comprehensive income for the period - - - (68,985) (68,985)
Balance as of December 31, 2016 $ 808,596 - 276,160 (418,139) 666,617
See accompanying notes to consolidated financial statements.
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)
Solid State System Co., Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2016 and 2015
(expressed in thousands of New Taiwan Dollars)
For the years ended December 31,
2016 2015
Cash flows from operating activities:
Net loss before income tax $ (76,303) (168,955) Adjustments Adjustments of non-cash-related items
Depreciation 29,887 25,040 Amortization 12,818 12,915 Provision for doubtful accounts 43 - Interest expense 105 248 Interest income (2,426) (2,537) Compensation cost of common stock issued to employees - 13,350 Provision for inventory devaluation loss 37,096 30,739
Total adjustments of non-cash-related items 77,523 79,755 Changes in operating assets and liabilities: Changes in operating assets: Financial assets held for trading - 8 Accounts receivable (6,301) 1,121 Accounts receivable from related parties (15,240) 12,651 Inventories (31,871) (58,240) Other operating assets 1,224 24,648
Total changes in operating assets (52,188) (19,812) Changes in operating liabilities: Accounts payable 4,289 (16,775) Financial liabilities held for trading 10 57 Other operating liabilities (41,165) 34,059
Total changes in operating liabilities (36,866) 17,341 Total changes in operating assets and liabilities (89,054) (2,471)
Total adjustments (11,531) 77,284 Cash flow used in operations (87,834) (91,671) Interest received 2,486 2,540 Interest paid (107) (246) Income taxes refunded (paid) 317 (238)
Net cash flows used in operating activities (85,138) (89,615) Cash flows from investing activities: Acquisition of property, plant and equipment (26,703) (87,556) Decrease (increase) in refundable deposits 10 (5,448) Acquisition of intangible assets (975) (10,544) Increase in other financial assets-current (800) (55,500)
Net cash flows used in investing activities (28,468) (159,048) Cash flows from financing activities:
Increase (decrease) in guarantee deposits (1,050) 1,050 Advance receipts for common stock issued in cash - 269,325
Net cash flows generated from (used in) financing activities
(1,050) 270,375
Net increase (decrease) in cash and cash equivalents for the period (114,656) 21,712 Cash and cash equivalents at beginning of period 184,340 162,628 Cash and cash equivalents at end of period $ 69,684 184,340
(Continued)
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)
Solid State System Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2016 and 2015
(amounts expressed in thousands of New Taiwan Dollars,
except for per share information and unless otherwise noted)
1. Organization
Solid State System Co., Ltd. (“the Company”) was incorporated on November 26, 1998, as a company
limited by shares and registered under the Ministry of Economic Affairs of the Republic of China
(“R.O.C.”) The address of the Company’s registered office is 5F-1 No. 22 Tai Yuen Street, Tai Yuen
Hi-Tech Industrial Park, Jubei City, Hsinchu 302, Taiwan, R. O. C. The Company’s common stocks
have been publicly listed on Taipei Exchange since December 24, 2007.
The main activities of the Company and its subsidiaries (hereinafter referred to as the “Consolidated
Company”) are the design, research, development, manufacture and sale of integrated circuits (ICs).
2. Approval Date and Procedures of the Financial Statements
The consolidated financial statements were authorized for issue by the Board of Directors on March 2,
2017.
3. New Standards and Interpretations Adopted
(1) Impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial
Supervisory Commissions R.O.C. (“FSC”) but not yet in effect
According to the Ruling No. 1050026834 issued on July 18, 2016, by the FSC, public entities are
required to conform to the IFRSs which were issued by the International Accounting Standards
Board (IASB) before January 1, 2016, and were endorsed by the FSC on January 1, 2017 in
preparing their financial statements. The related new standards, amendments and interpretations are
as follows:
New Standards, Amendments and Interpretations Effective date per IASB
Amendments to IFRS 10, IFRS 12 and IAS 28 Investment
Entities: Applying the Consolidation Exception
January 1, 2016
Amendments to IFRS 11 Accounting for Acquisitions of
Interests in Joint Operations
January 1, 2016
IFRS 14 Regulatory Deferral Accounts January 1, 2016
Amendments to IAS 1 Disclosure Initiative January 1, 2016
Amendments to IAS 16 and IAS 38 Clarification of
Acceptable Methods of Depreciation and Amortization
January 1, 2016
2
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
New Standards, Amendments and Interpretations Effective date per IASB
Amendments to IAS 16 and IAS 41 Agriculture: Bearer
Plants
January 1, 2016
Amendments to IAS 19 Defined Benefit Plans: Employee
Contributions
July 1, 2014
Amendments to IAS 27 Equity Method in Separate
Financial Statements
January 1, 2016
Amendments to IAS 36 Recoverable Amount Disclosures
for Non-Financial Assets
January 1, 2014
Amendments to IAS 39 Novation of Derivatives and
Continuation of Hedge Accounting
January 1, 2014
Annual improvements cycles 2010-2012 and 2011-2013 July 1, 2014
Annual improvements cycle 2012-2014 January 1, 2016
IFRIC 21 Levies January 1, 2014
The initial application of the above IFRSs would not have any material impact on its consolidated
financial statements.
(2) New standards, amendments and interpretations not yet endorsed by the FSC
New standards and amendments issued by the IASB but not yet endorsed by the FSC are
summarized as below. The FSC announced that the Consolidated Company should apply IFRS 9
and IFRS 15 starting January 1, 2018. As of the date the Consolidated Company’s consolidated
financial statements were authorized for issue, the FSC has not yet announced the effective dates
of the other IFRSs.
New Standards, Amendments and Interpretations Effective date per IASB
IFRS 9 Financial Instruments January 1, 2018
Amendments to IFRS 10 and IAS 28 Sale or Contribution of
Assets Between an Investor and Its Associate or Joint
Venture
Effective date to be
determined by IASB
IFRS 15 Revenue from Contracts with Customers January 1, 2018
IFRS 16 Leases January 1, 2019
Amendment to IFRS 2 Clarifications of Classification and
Measurement of Share-based Payment Transactions
January 1, 2018
Amendment to IFRS 15 Clarifications of IFRS 15 January 1, 2018
3
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
New Standards, Amendments and Interpretations Effective date per IASB
Amendment to IAS 7 Disclosure Initiative January 1, 2017
Amendment to IAS 12 Recognition of Deferred Tax Assets for
Unrealized Losses
January 1, 2017
Amendments to IFRS 4 Insurance Contracts (Applying IFRS 9
Financial Instruments with IFRS 4 Insurance Contracts)
January 1, 2018
Annual improvements cycle 2014-2016:
IFRS 12 Disclosure of Interests in Other Entities
January 1, 2017
IFRS 1 First-time Adoption of International Financial
Reporting Standards" and IAS 28 "Investments in
Associates and Joint Ventures
January 1, 2018
IFRIC 22 Foreign Currency Transactions and Advance
Consideration
January 1, 2018
Amendments to IAS 40 Investment Property January 1, 2018
The standards which are relevant to the Consolidated Company are listed below:
Issue Dates
New Standards and
Amendments Content of Amendment
May 28, 2014
April 12, 2016
IFRS 15 Revenue from
Contracts with Customers
The new standard provides a single model for
determining whether an entity recognizes revenue in
accordance with the method, timing and amount by
applying the five-step model. IFRS 15 replaces IAS
18 Revenue, IAS 11 Construction Contracts, and the
relevant interpretations.
On April 12, 2016, the amendments clarify how to
identify performance obligations in a contract;
determine whether a company is a principal or an
agent; and determine whether the revenue from
granting a license should be recognized at a point in
time or over time.
4
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Issue Dates
New Standards and
Amendments Content of Amendment
November 19,
2013
July 24, 2014
IFRS 9 Financial
Instruments
The new standard will replace IAS 39 Financial
Instruments: Recognition and Measurement. The main
amendments are as follows:
‧Clarification and measurement: The financial asset
is driven by the entity’s business model and the
contractual cash flow characteristics, which would
be classified as financial assets measured at
amortized cost, financial assets measured at fair
value through other comprehensive income (OCI),
and financial assets at fair value through profit or
loss. The financial liabilities measured at fair value
through profit or loss that have changes in fair value
related to the changes in its credit risk are
recognized in OCI.
‧Impairment: The new expected credit loss model is
to replace the current incurred loss model.
‧Hedge accounting: More principle-based regulations
are adopted to correspond hedge accounting with
risk management. Such regulations include the
revisions on the requirements of adoption,
continuation, and discontinuation of hedge
accounting, allowing more categories of risk
exposure to conform with the hedged items.
January 13, 2016 IFRS 16 Leases The new standard of accounting for lease is amended
as follows:
‧For a contract that is, or contains, a lease, the lessee
shall recognize a right-of-use asset and lease
liability on the balance sheet. During the lease term,
the lease payment shall include the measurement of
the depreciation on the right-of-use asset and the
interest expense on the lease liability.
‧A lessor shall classify a lease as either finance lease
or operating lease. The accounting treatment
remains similar in accordance with IAS 17 Leases.
The Consolidated Company assessed that the application of the IFRS 15 Revenue from Contracts with
Customers and IFRS 9 Financial Instruments would not have any material impact on its financial
position and financial performance. The Consolidated Company continues evaluating the impact of the
initial adoption of the IFRS 16 Leases on its financial position and financial performance. The results
thereof will be disclosed when the Consolidated Company completes its evaluation.
5
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
4. Significant accounting policies
The significant accounting policies presented in the consolidated financial statements are summarized
as follows. Except for those described individually, the significant accounting policies have been
applied consistently to all periods presented in these consolidated financial statements.
(1) Statement of compliance
The consolidated financial statements have been prepared in accordance with the Regulations
Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as
the “Regulations”) and the International Financial Reporting Standards, International Accounting
Standards, IFRIC Interpretations, and SIC Interpretations endorsed by the FSC (hereinafter
referred to as the “IFRSs endorsed by the FSC”).
(2) Basis of preparation
A. Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis except for
the following material items in the balance sheets:
(a) Financial instruments measured at fair value through profit or loss are measured at fair
value (including derivative financial instruments);
(b) The net defined benefit liability (asset) is recognized as the fair value of the plan assets,
less, the present value of the defined benefit obligation.
B. Functional and presentation currency
The functional currency of each consolidated entity is determined based on the primary
economic environment in which it operates. The consolidated financial statements are
presented in New Taiwan Dollars (“TWD”), which is the Company’s functional currency.
All financial information presented in TWD has been rounded to the nearest thousand.
(3) Basis of consolidation
A. Principles of preparation of the consolidated financial statements
The consolidated financial statements comprise the Company and the entities controlled by
the Company (its subsidiaries). The Company controls an entity when it is exposed, or has
rights, to variable returns from its involvement with the entity and has the ability to affect
those returns through its control over the entity.
The financial statements of subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases.
6
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Intra-group balances and transactions, and any unrealized income and expenses arising from
intra-group transactions are eliminated in preparing the consolidated financial statements.
B. List of subsidiaries in the consolidated financial statements
Percentage of
ownership (%)
Name of
investor Subsidiary Main activities
December
31, 2016
December
31, 2015
The Company ViCHIP
Corporation
Limited(ViCHIP)
Operating electronic components
manufacturing, wholesaling, sales and product
design business
100% 100%
C. List of subsidiaries which are not included in the consolidated financial statements: None.
(4) Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of the
consolidated entities at the exchange rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the end of the reporting period (hereinafter referred
to as the reporting date) are retranslated to the functional currency at the exchange rate at that date.
The foreign currency gain or loss on monetary items is the difference between amortized cost in
the functional currency at the beginning of the period, adjusted for the effective interest and
payments during the period, and the amortized cost in foreign currency translated at the exchange
rate at the end of the period.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair
value are retranslated to the functional currency at the exchange rate at the date that the fair value
was determined. Non-monetary items in a foreign currency that are measured based on historical
cost are translated using the exchange rate at the date of transactions.
Foreign currency differences arising on retranslation are recognized in profit or loss except for
the available-for-sale equity instrument differences, which are recognized in other comprehensive
income.
(5) Classification of current and non-current assets and liabilities
The Consolidated Company classifies an asset as current when any one of the following
requirements is met. Assets that are not classified as current are non-current assets.
A. It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
B. It holds the asset primarily for the purpose of trading;
C. It expects to realize the asset within twelve months after the reporting period; or
7
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
D. The asset is cash or cash equivalent unless the asset is restricted from being exchanged or
used to settle a liability for at least twelve months after the reporting period.
The Consolidated Company classifies a liability as current when any one of the following
requirements is met. Liabilities that are not classified as current are non-current liabilities.
A. It expects to settle the liability in its normal operating cycle;
B. It holds the liability primarily for the purpose of trading;
C. The liability is due to be settled within twelve months after the reporting period; or
D. It does not have an unconditional right to defer settlement of the liability for at least twelve
months after the reporting period. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity instruments do not affect its
classification.
(6) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, petty cash and demand deposits. Cash
equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value.
The time deposits, which meet the above definition and are held for the purpose of meeting short-
term cash commitments rather than for investment at other purpose, are classified as cash and cash
equivalents.
(7) Financial instruments
Financial assets and financial liabilities are initially recognized when the Consolidated Company
becomes a party to the contractual provisions of the instruments.
A. Financial assets
(a) Financial assets at fair value through profit or loss
A financial asset is classified in this category if acquired principally for the purpose of
selling or repurchasing in the short term. This type of financial asset is measured at fair
value at the time of initial recognition, and attributable transaction costs are recognized
in profit or loss as incurred. Financial assets at fair value through profit or loss are
measured at fair value, and changes therein, which take into account any dividend and
interest income, are recognized in profit or loss, and are included in non-operating
income and expenses. A regular way purchase or sale of financial assets shall be
recognized and derecognized, as applicable, using trade-date accounting.
8
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(b) Receivables
Receivables are financial assets with fixed or determinable payments that are not quoted
in an active market. Receivables comprise note and account receivables and other
receivables. Such assets are recognized initially at fair value, plus, any directly
attributable transaction costs. Subsequent to initial recognition, receivables are
measured at amortized cost using the effective interest method, less, any impairment
losses other than insignificant interest on short-term receivables.
Interest income is included in non-operating income and expenses.
(c) Impairment of financial assets
A financial asset is impaired if, and only if, there is objective evidence of impairment as
a result of one or more events that occurred after the initial recognition of the asset and
that loss event has an impact on the estimated future cash flows of the financial asset that
can be estimated reliably.
All individually significant receivables are assessed for specific impairment.
Receivables that are not individually significant are collectively assessed for impairment
by grouping together assets with similar risk characteristics. In assessing collective
impairment, the Consolidated Company uses historical trends of the probability of
default, the timing of recoveries, and the amount of loss incurred, adjusted for
management’s judgment as to whether current economic and credit conditions are such
that the actual losses are likely to be greater or lesser than those suggested by historical
trends.
An impairment loss in respect of a financial asset is deducted from the carrying amount
except for accounts receivable, for which an impairment loss is reflected in an allowance
account against the receivables. When it is determined a receivable is uncollectible, it
is written off from the allowance account. Any subsequent recovery of a receivable
written off is recorded in the allowance account. Changes in the amount of the
allowance account are recognized in profit or loss.
Impairment losses and recoveries are recognized in profit or loss. Impairment losses and
recoveries on financial assets other than receivables are recognized in non-operating
income and expenses.
(d) Derecognition of financial assets
The Consolidated Company derecognizes financial assets when the contractual rights of
the cash inflow from the asset are terminated, or when the Consolidated Company
transfers substantially all the risks and rewards of ownership of the financial assets.
9
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
On derecognition of a financial asset in its entirety, the difference between the carrying
amount and the sum of the consideration received or receivable and any cumulative gain
or loss that had been recognized in other comprehensive income and included in non-
operating income and expenses.
B. Financial liabilities and equity instruments
(a) Classification of debt or equity
Debt or equity instruments issued by the Consolidated Company are classified as
financial liabilities or equity in accordance with the substance of the contractual
agreement.
Equity instruments refer to surplus equities of the assets after the deduction of all the
debts for any contracts. Equity instruments issued are recognized as the amount of
consideration received, less, the direct cost of issuing.
Interest related to a financial liability is recognized in profit or loss, under non-operating
income and expenses.
(b) Financial liabilities at fair value through profit or loss
A financial liability is classified in this category if acquired principally for the purpose
of selling or repurchasing in the short term. This type of financial liability is measured
at fair value at the time of initial recognition, and attributable transaction costs are
recognized in profit or loss as incurred. Financial liabilities at fair value through profit
or loss are measured at fair value, and changes therein, which take into account any
interest expense, are recognized in profit or loss, and are included in non-operating
income and expenses.
(c) Other financial liabilities
Financial liabilities not classified as held-for-trading or designated as at fair value
through profit or loss, which comprise accounts payable and other payables, are
measured at fair value, plus, any directly attributable transaction cost at the time of initial
recognition. Subsequent to initial recognition, they are measured at amortized cost
calculated using the effective interest method. Interest expense not capitalized as capital
cost is recognized in profit or loss, and is included in non-operating income and expenses.
(d) Derecognition of financial liabilities
The Consolidated Company derecognizes a financial liability when its contractual
obligation has been discharged or cancelled, or has expired. The difference between the
carrying amount of a financial liability removed and the consideration paid is recognized
in profit or loss, under non-operating income and expenses.
10
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(e) Offsetting of financial assets and liabilities
The Consolidated Company presents financial assets and liabilities on a net basis when
the Consolidated Company has the legally enforceable right to offset and intends to settle
such financial assets and liabilities on a net basis or to realize the assets and settle the
liabilities simultaneously.
C. Derivative financial instruments
The Consolidated Company holds derivative financial instruments to hedge its foreign
currency and interest rate exposures. Derivatives are recognized initially at fair value and
attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial
recognition, derivatives are measured at fair value, and changes therein are recognized in
profit or loss, under non-operating income and expenses. When the fair value of a derivative
instrument is positive, it is classified as a financial asset, and when the fair value is negative,
it is classified as a financial liability.
(8) Inventories
Inventories are measured at the lower of cost and net realizable value. The costs of inventories
include expenditure incurred in acquiring the inventories, conversion costs, and other costs
(weighted-average method) incurred in bringing them to their existing location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less the
estimated costs incurred in acquiring the available-for-sale inventories and selling expenses.
(9) Property, plant and equipment
A. Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation
and accumulated impairment losses. Cost includes expenditure that is directly attributed to
the acquisition of the asset, any cost directly attributable to bringing the asset to the location
and condition necessary for it to be capable of operating in the manner intended by
management, and the initial estimate of the costs of dismantling and removing the item and
restoring the site on which it is located. The cost of the software is capitalized as part of the
equipment if the purchase of the software is necessary for the equipment to be capable of
operating.
Each part of an item of property, plant and equipment with a cost that is significant in relation
to the total cost of the item shall be depreciated separately, unless its useful life and
depreciation method are the same as the useful life and depreciation method of another
significant part of that same item.
The gain or loss arising from the derecognition of an item of property, plant and equipment
shall be determined as the difference between the net disposal proceeds, if any, and the
carrying amount of the item, and it shall be recognized as non-operating income and expenses.
11
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
B. Subsequent cost
Subsequent expenditure is capitalized only when it is probable that the future economic
benefits associated with the expenditure will flow to the Consolidated Company and the
amount can be reliably measured. The carrying amount of those parts that are replaced is
derecognized. Ongoing repairs and maintenance are expensed as incurred.
C. Depreciation
The depreciable amount of an asset is determined after deducting its residual amount, and it
shall be allocated on a systematic basis over the asset’s useful life. Each significant item of
property, plant and equipment shall be evaluated and depreciated separately if it possesses a
different useful life. The depreciation charge for each period shall be recognized in profit or
loss.
The estimated useful lives for the current and comparative years of significant items of
property, plant and equipment are as follows:
(a) Building: 2 to 50 years
(b) Machinery and equipment: 2 to 10 years
(c) Office and other equipment: 2 to 5 years
(d) Buildings constitute mainly building facilities, mechanical and electrical power
equipment, related engineering, laboratory engineering, etc. Each constituent is
depreciated based on its useful life of 50 years, 10 years, and 2 years.
Depreciation methods, useful lives, and residual values are reviewed at each reporting date.
If expectations differ from the previous estimates, the change is accounted for as a change in
an accounting estimate.
(10) Leases
A. Lesser
Lease income from an operating lease is recognized in income on a straight-line basis over
the lease term.
B. Lessee
Payments made under an operating lease (excluding insurance and maintenance expenses)
are recognized in profit or loss on a straight-line basis over the term of the lease.
12
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(11) Intangible assets
A. Research and development
During the research phase, activities are carried out to obtain and understand new scientific
or technical knowledge. Expenditures during this phase are recognized in profit or loss as
incurred.
Expenditures arising from the development phase shall be recognized as an intangible asset
if all the conditions described below can be demonstrated; otherwise, they will be recognized
in profit or loss as incurred.
(a) The technical feasibility of completing the intangible asset so that it will be available for
use or sale.
(b) Its intention to complete the intangible asset and use or sell it.
(c) Its ability to use or sell the intangible asset.
(d) How the intangible asset will generate probable future economic benefits.
(e) The availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset.
(f) Its ability to measure reliably the expenditure attributable to the intangible asset during
its development.
B. Other intangible assets
Other intangible assets acquired by the Consolidated Company are measured at cost less
accumulated amortization and any accumulated impairment losses.
C. Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits
embodied in the specific asset to which it relates.
D. Amortization
The depreciable amount is the cost of an asset, or other amount substituted for cost, less its
residual value.
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful
lives of intangible assets from the date that they are available for use. The estimated useful
lives for the current and comparative periods are as follows:
13
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(a) Software: 3 to 8 years
(b) Patent and technology fee: 3 to 12 years
(c) Other intangible assets: 5 years
The residual value, amortization period, and amortization method for an intangible asset with
a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change
shall be accounted for as changes in accounting estimates.
(12) Impairment of non-financial assets
The Consolidated Company measures whether an impairment occurred in non-financial
assets (except for inventories and deferred income tax assets) on every reporting date, and
estimates the recoverable amount. If it is not possible to determine the recoverable amount
(fair value less cost to sell and value in use) for the individual asset, then the Consolidated
Company will have to determine the recoverable amount for the asset's cash-generating unit
(CGU).
The recoverable amount for individual asset or a cash-generating unit is the higher of its fair
value less costs to sell and its value in use. If, and only if, the recoverable amount of an asset
is less than its carrying amount, the carrying amount of the asset shall be reduced to its
recoverable amount. That reduction is an impairment loss. An impairment loss shall be
recognized immediately in profit or loss.
The Consolidated Company should assess at the end of each reporting period whether there
is any indication that an impairment loss recognized in prior periods for an asset other than
goodwill may no longer exist or may have decreased. If any such indication exists, the entity
shall estimate the recoverable amount of that asset.
An impairment loss recognized in prior periods for an asset other than goodwill shall be
reversed if, and only if, there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognized. If this is the case, the
carrying amount of the asset shall be increased to its recoverable amount as a reversal of a
previously recognized impairment loss.
(13) Revenue recognition
A. Goods sold
Revenue from the sale of goods in the course of ordinary activities is measured at the fair
value of the consideration received or receivable, net of returns, trade discounts, and volume
rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an
executed sales agreement, that the significant risks and rewards of ownership have been
transferred to the customer, recovery of the consideration is probable, the associated costs
and possible return of goods can be estimated reliably, there is no continuing management
involvement with the goods, and the amount of revenue can be measured reliably. If it is
14
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
probable that discounts will be granted and the amount can be measured reliably, then the
discount is recognized as a reduction of revenue as the sales are recognized.
B. Service
Revenue from services rendered is recognized in profit or loss in proportion to the stage of
completion of the transaction at the reporting date.
(14) Employee benefits
A. Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognized as an
employee benefit expense in profit or loss in the periods during which services are rendered
by employees.
B. Defined benefit plans
The Consolidated Company’s net obligation in respect of defined benefit pension plans is
calculated separately for each plan by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior periods; that benefit is
discounted to determine its present value. Any fair value of any plan asset is deducted.
The discount rate is the yield at the reporting date (market yields of government bonds) on
bonds that have maturity dates approximating the terms of the Consolidated Company’s
obligations and that are denominated in the same currency in which the benefits are expected
to be paid.
The calculation is performed annually by a qualified actuary using the projected unit credit
method. When the calculation results in a benefit to the Consolidated Company, the
recognized asset is limited to the total of any unrecognized past service costs and the present
value of economic benefits available in the form of any future refunds from the plan or
reductions in future contributions to the plan. In order to calculate the present value of
economic benefits, consideration is given to any minimum funding requirements that apply
to any plan in the Consolidated Company. An economic benefit is available to the
Consolidated Company if it is realizable during the life of the plan, or on settlement of the
plan liabilities.
When the benefits of a plan are improved, the expense of the increased benefit relating to the
past services by the employees is recognized immediately in profit or loss.
Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains
and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset
ceiling (if any, excluding interest), are recognized immediately in other comprehensive
income , , are recognized immediately in other comprehensive income; wherein the Company
recognized them under retained earnings.
15
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
The Consolidated Company recognizes the gains or losses on the curtailment or settlement
of the defined benefit plans when the curtailment or settlement occurs. The gain or loss on
curtailment comprises any resulting change in the fair value of the plan assets and in the
present value of the defined benefit obligation.
C. Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided.
A liability is recognized for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Consolidated Company has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee, and the
obligation can be estimated reliably.
(15) Income tax
Income tax expenses include both current taxes and deferred taxes. Except for expenses related
to business combinations or recognized directly in equity or other comprehensive income, all
current and deferred taxes shall be recognized in profit or loss.
Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the
year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate,
as well as tax adjustments related to prior years.
Deferred taxes arise due to temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and their respective tax bases.
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to
the period when the asset is realized or the liability is settled, based on tax rates that have been
enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities may be offset against each other if the following criteria are met:
A. The entity has the legal right to settle tax assets and liabilities on a net basis; and
B. the taxing of deferred tax assets and liabilities fulfills one of the scenarios below:
(a) Levied by the same taxing authority; or
(b) Levied by different taxing authorities, but where each such authority intends to settle tax
assets and liabilities (where such amounts are significant) on a net basis every year of
the period of expected asset realization or debt liquidation, or where the timing of asset
realization and debt liquidation is matched.
16
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
A deferred tax asset should be recognized for the carry forward of unused tax credits and
deductible temporary differences to the extent that it is probable that future taxable profit will be
available against which the unused tax credits and deductible temporary differences can be utilized.
Such unused tax credits and deductible temporary differences shall also be re-evaluated every year
on the financial reporting date, and adjusted based on the probability that future taxable profit will
be available against which the unused tax credits and deductible temporary differences can be
utilized.
(16) Earnings per share
The Consolidated Company discloses the Company’s basic and diluted earnings per share
attributable to common stockholders of the Company. The calculation of basic earnings per share
is based on the profit attributable to the common stockholders of the Company divided by the
weighted-average number of common stock outstanding. The calculation of diluted earnings per
share is based on the profit attributable to common stockholders of the Company, divided by the
weighted-average number of common stock outstanding after adjustment for the effects of all
dilutive potential common stock.
(17) Operating segment information
An operating segment is a component of the Consolidated Company that engages in business
activities from which it may earn revenues and incur expenses (including revenues and expenses
relating to transactions with other components of the Consolidated Company). Operating results
of the operating segment are regularly reviewed by the Consolidated Company’s chief operating
decision maker to make decisions about resources to be allocated to the segment and to assess its
performance. Each operating segment consists of standalone financial information.
5. Major Sources of Accounting Assumptions, Judgments and Estimation Uncertainty
The preparation of the consolidated financial statements in conformity with the IFRSs endorsed by the
FSC requires management to make judgments, estimations, and assumptions that affect the application
of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual
results may differ from these estimations.
Management continues to monitors the accounting estimations and assumptions. Management
recognizes any changes in accounting estimations during the period in which the estimates are revised
and in any future periods affected.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a
material adjustment within the next financial year is as follows:
(1) Valuation of inventory
Due to the rapid technological changes, the Consolidated Company estimates the net realizable
value of inventory for obsolescence and unmarketable items at the end of the reporting period, and
then writes down the cost of inventories to net realizable value. The net realizable value of the
inventory is mainly determined based on the assumptions of future demand within a specific time
17
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
horizon which might subject to significant fluctuations. Please refer to note 6(4) for further
description of the valuation of inventory.
(2) Valuation of Property, plant and equipment
In the process of evaluating the potential assets, the Consolidated Company is required to make
subjective judgments in determining the independent cash flows, useful lives, expected future
income and expenses related to the specific asset groups considering of the nature of the industry.
Any changes in these estimates based on changed economic conditions or business strategies and
could result in significant impairment charges or reversal in future years. Please refer to note 6(6)
for further description of the impairment assessment on property, plant and equipment.
6. Description of the Significant Accounts
(1) Cash and cash equivalents
December 31,
2016 2015
Cash on hand and petty cash $ 287 167 Checking and savings accounts 25,397 48,148
Time deposits 44,000 136,025
$ 69,684 184,340
Refer to note 6(16) for the sensitivity analysis of the financial assets and liabilities of the
Consolidated Company.
Time deposits with original maturities of more than three months as of December 31, 2016 and
2015, respectively, were reclassified to other current financial assets. Please refer to note 6(5).
(2) Financial liabilities at fair value through profit or loss
December 31,
2016 2015
Financial liabilities at fair value through profit or loss
Held for trading-current:
Foreign currency forward contracts $ (67) (57)
The Consolidated Company held derivative financial instruments to manage its foreign currency
exchange risk resulting from operations. The Consolidated Company held the following
derivative instruments presented as held-for-trading financial liabilities as of December 31, 2016,
and 2015:
18
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Unit: foreign currency thousand
December 31, 2016 December 31, 2015
Contract
amount
Currency
Maturity
date
Contract
amount
Currency
Maturity
date
Sell-forward
foreign currency
exchange contracts
USD 500 Sell USD/
Buy TWD
February 3,
2017
USD 350 Sell USD/
Buy TWD
January 29,
2016
(3) Accounts receivable
December 31,
2016 2015
Accounts receivable 7,659 1,358
Less: allowance for doubtful receivables (43) -
$ 7,616 1,358
Aging analysis of receivables (including accounts receivable and receivables from related parties)
as of the reporting date:
December 31, 2016 December 31, 2015
Total
amount
Impaired
amount
Total
amount
Impaired
amount Not past due $ 72,465 42 50,964 -
Past due 0~89 days 40 1 - -
$ 72,505 43 50,964 -
The movement in the allowance for doubtful receivables (including accounts receivable and
receivables-related parties) was as follows:
For the years ended
December 31,
2016 2015
Balance as of January 1 $ - -
Impairment loss recognized 43 -
Balance as of December 31 $ 43 -
19
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
The Consolidated Company comprehensively determines an impairment loss according to the
historical payment behaviors, credit ratings, and aging of receivables of its customers. An
impairment loss in respect of accounts receivable is reflected in an allowance account against the
receivables.
(4) Inventories
December 31,
2016 2015
Raw materials $ 2,359 10,276 Work in process 81,612 68,700
Finished goods 40,468 49,210
Merchandise inventory 1 1,479
$ 124,440 129,665
The details of operating costs were as follows:
For the years ended
December 31,
2016 2015
Cost of goods sold $ 392,174 304,343
Inventory devaluation loss 37,096 30,739
Revenue from sale of scrap - (12)
Physical inventory losses 15 -
$ 429,285 335,070
(5) Other current financial assets
December 31,
2016 2015
Time deposits (over three months) $ 170,600 185,100 Pledged deposits 15,300 -
Others 2,854 2,450
$ 188,754 187,550
Please refer to note 8 for the details regarding facilities guarantee as of December 31, 2016.
20
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(6) Property, plant and equipment
Land Building
Machinery
and
equipment
Office and
other
equipment Total
Cost:
Balance as of January 1, 2016 $ 34,271 74,992 97,209 34,377 240,849
Additions - - 26,201 584 26,785
Reclassification - - (30) - (30)
Disposals and write-off - - (5,381) (7,392) (12,773)
Balance as of December 31, 2016 $ 34,271 74,992 117,999 27,569 254,831
Balance as of January 1, 2015 $ 34,271 73,654 30,335 17,117 155,377
Additions - 1,338 69,400 19,943 90,681
Reclassification - - (425) - (425)
Disposals and write-off - - (2,101) (2,683) (4,784)
Balance as of December 31, 2015 $ 34,271 74,992 97,209 34,377 240,849
Accumulated depreciation:
Balance as of January 1, 2016 $ - 13,207 17,318 18,540 49,065
Depreciation - 2,530 14,387 12,970 29,887
Disposals and write-off - - (5,381) (7,392) (12,773)
Balance as of December 31, 2016 $ - 15,737 26,324 24,118 66,179
Balance as of January 1, 2015 $ - 10,948 11,721 6,140 28,809
Depreciation - 2,259 7,698 15,083 25,040
Disposals and write-off - - (2,101) (2,683) (4,784)
Balance as of December 31, 2015 $ - 13,207 17,318 18,540 49,065
Book value:
Balance as of December 31, 2016 $ 34,271 59,255 91,675 3,451 188,652
Balance as of December 31, 2015 $ 34,271 61,785 79,891 15,837 191,784
According to the test for impairment for the years ended December 31, 2016 and 2015, the
recoverable amount for an asset or a cash-generating unit is the higher than its book value.
Therefore, the Consolidated Company did not recognize any impairment loss on property, plant
and equipment.
Please refer to note 8 for the details regarding facilities guarantee as of December 31, 2016 and
2015.
(7) Intangible assets
Software
Patent and
technology
fee
Other
intangible
assets Total
Cost:
Balance as of January 1, 2016 $ 17,728 41,902 - 59,630
Additions 485 490 - 975
Write-off (6,957) (3,881) - (10,838)
Balance as of December 31, 2016 $ 11,256 38,511 - 49,767
21
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Software
Patent and
technology
fee
Other
intangible
assets Total
Balance as of January 1, 2015 $ 13,694 38,937 105 52,736
Additions 6,968 3,265 - 10,233
Reclassification 425 - - 425
Write-off (3,359) (300) (105) (3,764)
Balance as of December 31, 2015 $ 17,728 41,902 - 59,630
Accumulated amortization:
Balance as of January 1, 2016 $ 8,724 21,673 - 30,397
Amortization 2,550 10,268 - 12,818
Write-off (6,957) (3,881) - (10,838)
Balance as of December 31, 2016 $ 4,317 28,060 - (32,377)
Balance as of January 1, 2015 $ 10,256 10,885 105 21,246
Amortization 1,827 11,088 - 12,915
Write-off (3,359) (300) (105) (3,764)
Balance as of December 31, 2015 $ 8,724 21,673 - 30,397
Book value:
Balance as of December 31, 2016 $ 6,939 10,451 - 17,390
Balance as of December 31, 2015 $ 9,004 20,229 - 29,233
(8) Operating lease
A. Lessee
The Consolidated Company leases office space and laboratory facilities under operating
leases. The rent expense paid monthly and the leases typically run for a period of 2 to 3
years with an option to renew the lease after that date.
For the years ended December 31, 2016 and 2015, $9,075 and $9,806, respectively, were
recognized as expenses in profit or loss in respect of operating leases.
Period Amount
2017.1.1~2017.12.31 $ 8,543
2018.1.1~2018.7.31 4,123
$ 12,666
22
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
B. Lesser
The office space rented out by the Consolidated Company is through the use of an operating
lease. The term of lease is from August 1, 2015 to September 12, 2016. For the years ended
December 31, 2016 and 2015, the Consolidated Company recognized property rental income
amounting to $2,452 and $859, respectively.
(9) Employee benefit
A. Defined benefit plans
The present value of the defined benefit obligation and the fair value of the plan assets of the
Consolidated Company were reconciled as follows:
December 31,
2016 2015
Present value of the defined benefit obligations $ 14,468 15,503 Fair value of plan assets 14,945 14,701
Net defined benefit liabilities (assets) $ (477) 802 The Consolidated Company makes defined benefit plan contributions to the pension fund
account at Bank of Taiwan that provides pensions for employees upon retirement. The plans
(covered by the Labor Standards Law) entitle a retired employee to receive an annual
payment based on years of service and average salary for the six months prior to retirement.
(a) Composition of plan assets
The Consolidated Company allocates pension funds in accordance with the Regulations
for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund,
and such funds are managed by the Bureau of Labor Funds, Ministry of Labor
(hereinafter referred to as the Bureau of Labor Funds). Minimum earnings shall be no
less than the earnings attainable from two-year time deposits with interest rates offered
by local banks.
The Consolidated Company’s Bank of Taiwan labor pension reserve account balance
amounted to $14,945 at the end of the reporting period. For information on the utilization
of the labor pension fund assets including the asset allocation and yield of the fund,
please refer to the website of the Bureau of Labor Funds.
23
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(b) Movements in present value of the defined benefit obligation
The movements in present value of the defined benefit obligation of the Consolidated
Company for the year ended December 31, 2016 and 2105 were as follows:
For the years ended
December 31,
2016 2015
Defined benefit obligation as of January 1 $ 15,503 13,369
Current service costs and interest 240 301
Remeasurements of the net defined benefit liabilities
(assets)
- Actuarial loss (gain) arising from changes in
financial assumptions
181 1,824
- Actuarial losses (gains) arising from experience
adjustments
(1,456) 9
Defined benefit obligation as of December 31 $ 14,468 15,503
(c) Movements in fair value of the defined benefit plan assets
The movements in fair value of the defined benefit plan assets of the Consolidated
Company for the year ended December 31, 2016 and 2105 were as follows:
For the years ended
December 31,
2016 2015
Fair value of plan assets as of January 1 $ 14,701 14,319
Interest income 228 322
Remeasurements of the net defined benefit liabilities
(assets)
Return on plan assets (excluding current interest) 16 60
Fair value of plan assets as of December 31 $ 14,945 14,701
(d) Expenses recognized in profit or loss
The Consolidated Company’s expenses recognized in profit or losses for the years ended
December 31, 2016 and 2015, were as follows:
For the years ended
December 31,
2016 2015
Net interest on the net defined benefit liabilities (assets) $ 12 (21)
24
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(e) Remeasurements of the net defined benefit liabilities (assets) recognized in other
comprehensive income
The Consolidated Company’s remeasurements of the net defined benefit liabilities
(assets) recognized as accumulated in other comprehensive income for the years ended
December 31, 2016 and 2015 were as follows:
For the years ended
December 31,
2016 2015
Cumulative amount as of January 1 $ 473 2,246
Recognized during the period 1,291 (1,773)
Cumulative amount as of December 31 $ 1,764 473
(f) Actuarial assumptions
The following are the Consolidated Company’s significant actuarial assumptions of the
present value of the defined benefit obligation:
December 31,
2016 2015
Discount rate 1.131% 1.550%
Future salary increases 3.000% 3.000%
The Consolidated Company has been approved by the Bureau of Labor Funds to
temporarily cease its contribution to the labor fund starting October 2014. Therefore,
there were no expected allocation payment to be made by the Consolidated Company to
the defined benefit plans for the one-year period after December 31, 2016.
The weighted-average duration of the defined benefit obligation is 14.52 years.
(g) Sensitivity analysis
When calculating the present value of the defined benefit obligation, the Consolidated
Company uses judgments and estimations to determine the actuarial assumptions,
including the discount rate and future salary changes as of the financial statement date.
Any changes in the actuarial assumptions may significantly impact the amount of the
defined benefit obligation.
25
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
If there is a change in the actuarial assumptions as of December 31, 2016, the impact on
the defined benefit obligation would be as follows:
Impact on the defined
benefit obligation
Increase 0.25% Decrease 0.25%
Discount rate $ (505) 528
Future salary increase rate $ 511 (492)
Reasonably possible changes to one of the relevant actuarial assumptions on December
31, 2016, holding other assumptions remain constant, would have affected the defined
benefit obligation by the amounts shown above. In practical, the relevant actuarial
assumptions are correlated to each other. The approach used in recognizing the net
defined liability in the balance sheets is the same as the one used in developing the
sensitivity analysis and the relevant actuarial assumptions in the current and previous
years.
B. Defined contribution plans
The Consolidated Company allocates 6% of each employee’s monthly wages to the labor
pension personal account at the Bureau of Labor Insurance, Ministry of Labor (hereinafter
referred to as the Bureau of Labor Insurance) in accordance with the provisions of the Labor
Pension Act. Under this defined contribution plan, the Consolidated Company allocates a
fixed amount to the Bureau of Labor Insurance without additional legal or constructive
obligations.
The Consolidated Company’s pension costs under the defined contribution method were
$7,795 and $7,628 for the years ended December 31, 2016 and 2015, respectively. Payment
was made to the Bureau of Labor Insurance.
(10) Income tax
A. Income tax expense (benefit)
The amount of income tax benefit for the years ended December 31, 2016 and 2015, was as
follows:
For the years ended
December 31,
2016 2015
Current tax expense $ - -
Deferred tax benefit
Origination and reversal of temporary differences (6,246) (4,893)
Income tax benefit $ (6,246) (4,893)
26
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
The amount of tax expense (benefit) recognized in other comprehensive income for the years
ended December 31, 2016 and 2015 was as follows:
For the years ended
December 31,
2016 2015
Items that will not be reclassified subsequently to profit or
loss:
Remeasurements of the defined benefit plans $ 219 (301)
The reconciliation of income tax and loss before tax for the years ended December 31, 2016
and 2015, is as follows:
For the years ended
December 31,
2016 2015
Loss before tax $ (76,303) (168,955)
Income tax using the Company’s domestic tax rate (12,971) (28,722)
Adjustment due to impacts from permanent differences 12 (10,676)
Changes in unrecognized tax losses (2,055) 34,604
Under (over) provision in prior periods and others 8,768 (99)
$ (6,246) (4,893)
B. Deferred income tax assets
(a) Deferred tax assets have not been recognized in respect of the following items:
December 31,
2016 2015
Tax losses $ 187,168 189,223
According to the R.O.C. Income Tax Act, the previous 10 years’ losses of the Company’s
domestic subsidiaries as assessed by the tax authorities can offset the current year’s net
income for income tax purposes.
The deferred tax assets have not been recognized in respect of these items because it is
not probable that future taxable profit will be available against which the Consolidate
Company can utilize the benefits there from.
27
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
As of December 31, 2016, the unused operating loss carry forwards were as described
below:
Year loss occurred
Unused operating loss
Carry forwards Expiration year
2006 (assessed) $ 45,809 2016
2007 (assessed) 8,410 2017
2008 (assessed) 131,749 2018
2009 (assessed) 5,149 2019
2010 (assessed) 179,531 2020
2011 (assessed) 189,248 2021
2012 (assessed) 119,127 2022
2013 (assessed) 62,056 2023
2014 (assessed) 125,017 2024
2015 (filed) 195,333 2025
2016 (estimated) 39,559 2026
$ 1,100,988
(b) Recognized deferred tax
Changes in the amount of deferred tax assets (liabilities) for the years ended December
31, 2016 and 2015 were as follows:
Deferred tax assets:
Balance as
of January
1, 2015
Recognized
in profit or
loss
Recognized
in other
comprehen-
sive income
Balance as
of
December
31, 2015
Recognized
in profit or
loss
Recognized
in other
comprehen-
sive income
Balance as
of
December
31, 2016
Provision for
inventory
devaluation
loss $ 12,154 (5,226) - 17,380 (6,306) - 23,686
Defined benefit
plans (177) 4 (301) 120 39 81 -
Others 291 329 - (38) (38) - -
$ 12,268 (4,893) (301) 17,462 (6,305) 81 23,686
28
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
Deferred tax liabilities:
Balance as
of January
1, 2015
Recognized
in profit or
loss
Recognized
in other
comprehen-
sive income
Balance as
of
December
31, 2015
Recognized
in profit or
loss
Recognized
in other
comprehen-
sive income
Balance as
of
December
31, 2016
Defined benefit
plans $ - - - - (37) 138 101
Others - - - - 96 - 96
$ - - - - 59 138 197
C. The Company’s and ViCHIP Corporation Limited’s income tax returns had been assessed by
the tax authorities through 2014.
D. Integrated income tax information:
December 31,
2016 2015
UnAppropriated accumulated deficit of 1998 and after $ (418,139) (349,154) Ba Balance of deductible tax account $ (310) (310)
For the years ended
December 31,
2016 2015
(estimated) (actual)
Tax deduction ratio for earnings distribution to R.O.C.
residents
- -
The information related to the appropriated accumulated deficit and tax deduction ratio
shown in the tables above is prepared in accordance with ruling letter No. 10204562810
issued by the Ministry of Finance, R.O.C. on October 17, 2013. Effective January 1, 2015,
the tax deduction ratio for individual stockholder residing in the R.O.C. will be half of the
original tax deduction ratio according to the revised Article 66-6 of the Income Tax Act.
29
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(11) Capital and other equity interest
As of December 31, 2016 and 2015, the Company’s authorized share capital were both $1,200,000,
of which included the amount of $100,000 reserved for employee stock options, the Company’s
issued and outstanding share capital were both $808,596. The par value of the Company’s
common stock is $10 dollars per share.
As of January 1, 2015, $2,011 cash had been received as advance receipts for share capital but has
not yet been registered. In 2015, the advance was transferred to common stock of 86 thousand
shares; and after the capital registration procedure had been completed, the capital surplus
increased by $1,152.
Pursuant to the Company’s board of directors’ resolution on June 11, 2015, the Company issued
a total of 10,000 thousand shares of common stock, at a par value of $10 per share. These shares
were at $27 dollars per share. The offering was approved with permit No. 1040015065 by the FSC
on May 21, 2015. The effective date of the capital increase was July 14, 2015, and after the capital
registration procedure had been completed. The compensation cost of common stock issued to
employees amounted to $13,350, which was accounted for as reserved for common stock issued
to employees.
A. Common stock
(a) First private placement of common stock in 2008
In order to appeal to strategic investors for the purpose of strengthening the Company’s
stockholder structure and improving competitiveness, on August 8, 2008, based on the
resolution of a special stockholders’ meeting, the board of directors approved the
proposal to raise $100,205 through private placement of 5,726 thousand common stock
at a premium price of $17.5 dollars per share. The premium amounted to $42,945 and
was recognized as capital surplus-additional paid-in capital. The effective date of the
capital increase was August 25, 2008, and the required registration process was
completed on September 8, 2008. Except for the restriction on trading as required by
the Securities and Exchange Act and the requirement for a public offering could only be
made three years after the issuance date whenever the Company meets the profitability
requirement announced by the Taipei Exchange in Taiwan, the rights and obligations of
participants in this private placement are identical to those of holders of current
outstanding common stock. As of the report date, the above-mentioned restriction had not
yet been lifted.
30
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(b) First private placement of common stock in 2013
In order to appeal to strategic investors for the purpose of strengthening the Company’s
stockholder structure and improving competitiveness, on June 4, 2013, based on the
resolution of a special stockholders’ meeting, the board of directors approved the
proposal, to raise $144,000 through private placement of 7,500 thousand common stock
at a premium price of $19.2 dollars per share on November 13, 2013. The premium
amounted to $69,000 and was recognized as capital surplus-additional paid-in capital.
The effective date of the capital increase was November 27, 2013, and the required
registration process was completed on December 25, 2013. Except for the restriction
on trading as required by the Securities and Exchange Act and the requirement for a
public offering could only be made three years after the issuance date whenever the
Company meets the profitability requirement announced by the Taipei Exchange in
Taiwan, the rights and obligations of participants in this private placement are identical
to those of holders of current outstanding common stocks. As of the report date, the above-
mentioned restriction had not yet been lifted.
B. Capital surplus
December 31,
2016 2015
Capital surplus-additional paid-in capital $ 261,214 261,214 Capital surplus-compensation cost of common stock issued
to employees 13,350 13,350 Capital surplus-pick up from changes in enquiry from
associates 1,596 1,596 $ 276,160 276,160
In accordance with the R.O.C. Company Act, realized capital surplus can only be reclassified
as share capital or distributed as cash dividends after offsetting losses. The aforementioned
capital surplus include additional paid in capital and donation gains. In accordance with the
Securities Offering and Issuance Guidelines, the amount of capital surplus to be reclassified
as share capital shall not exceed 10 percent of the actual share capital amount.
C. Retained earnings
(a) Legal reserve
Pursuant to the R.O.C. Company Act, 10% of the Company’s annual profit is to be set
aside as legal reserve until such retention equals the amount of issued common stock.
Where a company incurs no loss, it may distribute the amount of the legal reserve that
exceeds 25% of issued common stock either by capitalizing its legal reserve and
distributing the new shares as stock dividend to its original stockholders in proportion to
the number of shares held by each of them or by distributing a cash dividend.
31
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(b) Special reserve
In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portion
of current-period earnings and undistributed prior-period earnings shall be reclassified
as a special earnings reserve during earnings distribution. The amount to be reclassified
should equal the current-period total net reduction of other stockholders’ equity.
Similarly, a portion of undistributed prior-period earnings shall be reclassified as a
special earnings reserve (which does not qualify for earnings distribution) to account for
cumulative changes to other stockholders’ equity pertaining to prior periods. Amounts
of subsequent reversals pertaining to the net reduction of other stockholders’ equity shall
qualify for additional distributions.
(c) Distribution of earnings/deficit compensation
The Company’s articles of incorporation require that after-tax earnings shall first be
offset against any deficit, and 10% of the remaining balance shall be set aside as legal
reserve. The appropriation for legal reserve is discontinued when the balance of the
legal reserve equals the total authorized capital. Special reserve may be appropriated for
operations or to meet regulations. The remaining earnings, if any, may be appropriated
according to the proposal presented in the annual stockholders’ meeting by the board of
directors.
In consideration of financial planning, distribution of profits shall be appropriated by
means of stock dividends or cash dividends, or both. The cash dividends should not be
lower than 10% of the total dividends.
The deficit compensation for 2015 and 2014 was approved during the stockholders’
meeting held on June 16, 2016 and June 17, 2015. The related information is available
on Market Observation Post System website.
The Company’s accumulated deficits for 2016 will be presented for a resolution in the
Board of Directors’ meeting on March 2, 2017 and to be approved in annual stockholders’
meeting. The information will be available on the Market Observation Post System
website after the said meetings.
32
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(12) Earnings per share
The Consolidated Company calculated the EPS as follows:
For the years ended
December 31,
2016 2015
Basic earnings per share:
Net loss $ (70,057) (164,602)
Weighted-average common stocks outstanding (thousand
shares) $ 80,860 75,709
Basic EPS (TWD) $ (0.87) (2.17)
(13) Operating revenues
For the years ended
December 31,
2016 2015
Sale of goods $ 564,016 421,377
Rendering of services 79,053 60,997
$ 643,069 482,374
(14) Compensation of employees, directors and supervisors
According to the Company’s articles of incorporation, the Company’s annual net income before
tax, after offsetting any accumulated deficit, no less than 10% of the remainder shall be
appropriated as employee compensation, and no more than 2% of the remainder shall be
appropriated as compensation to directors and supervisors. The compensation of employee in
the form of stock bonuses may also apply to employees of the affiliated companies. The Board
of Directors is authorized to set out related terms and conditions. The remuneration to
independent directors of the Company are distributed on a monthly fixed term and excluded from
the above mentioned distribution.
Because the Company incurred a net loss in the years ended December 31, 2016 and 2015,
compensation to employees and directors and supervisors were not accrued.
(15) Non-operating income and expenses
A. Other income
For the years ended
December 31,
2016 2015
Interest income $ 2,426 2,537
Rent income 2,452 859
$ 4,878 3,396
33
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
B. Other gains and losses
For the years ended
December 31,
2016 2015
Foreign exchange gains(losses), net $ (1,941) 2,839
Net gains (losses) on financial assets and liabilities at fair
value through profit or loss 118 (325)
Others 1,149 372
$ (674) 2,886
C. Finance costs
For the years ended
December 31,
2016 2015
Interest expenses $ 105 248
(16) Financial instruments
A. Credit risk
As of the reporting date, the Consolidated Company’s maximum credit risk exposure is
mainly from the carrying amount of financial assets recognized in the consolidated balance
sheet.
The Consolidated Company’s potential credit risk is derived primarily from cash and cash
equivalents and receivable (including accounts receivable and accounts receivables from
related parties). The Consolidated Company maintains its cash and cash equivalents in
various creditworthy financial institutions. The Consolidated Company monitors its
exposure with these financial institutions; therefore, the Consolidated Company believes that
there is no concentration of credit risk in regard to cash and cash equivalents.
The Consolidated Company’s sales to individual clients constituting over 10% of total sales
revenue for the years ended December 31, 2016 and 2015, were 91% and 95%, respectively,
of the total sales revenues. To reduce the concentration of credit risk, the Consolidated
Company continuously evaluates the credit status of its customers and the collectability of
accounts receivable, and provides an allowance for doubtful accounts. It is management’s
belief that such concentration of credit risk is under control.
34
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
B. Liquidity risk
The following are the contractual maturities of financial liabilities:
Carrying
amount
Contractual
cash flows
Within 6
months
6~12
months
1~2
years December 31, 2016
Non-derivative financial
liabilities
Accounts payable $ 11,535 11,535 11,535 - -
Other payables(recorded in
other current liabilities)
21,746 21,746 21,746 - -
Derivative financial liabilities
Financial liabilities at fair
value through profit or loss
67 67 67 - -
$ 33,348 33,348 33,348 -
December 31, 2015
Non-derivative financial
liabilities
Accounts payable $ 7,246 7,246 7,246 - -
Other payables(recorded in
other current liabilities)
34,966 34,966 34,966 - -
Guarantee deposits 1,050 1,050 - - 1,050
Derivative financial liabilities
Financial liabilities at fair
value through profit or loss
57 57 57 - -
$ 43,319 43,319 42,269 - 1,050
The Consolidated Company does not expect that the cash flows included in the maturity
analysis could occur significantly earlier or at significantly different amounts.
C. Currency risk
(a) Exposure to currency risk
The Consolidated Company’s significant financial assets and liabilities exposed to
exchange rate risk were as follows:
December 31, 2016 December 31, 2015
Foreign
currency
Exchange
rate TWD
Foreign
currency
Exchange
rate TWD
Financial assets
Monetary items
USD $ 2,399 32.25 77,368 1,742 32.81 57,155
Financial liabilities
Monetary items
USD 506 32.25 16,319 597 32.81 19,588
35
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(b) Sensitivity analysis
The Consolidated Company’s exposure to foreign currency risk arises from the
translation of the foreign currency exchange gains and losses on cash and cash
equivalents, receivables (including accounts receivable and receivables from related
parties), accounts payable and other payables that are denominated in foreign currency.
A 1% depreciation or appreciation of the TWD against the USD as of December 31,
2016 and 2015, would have decreased or increased the net loss by $507 and $312,
respectively. This analysis is based on foreign currency exchange rate variances that
the Consolidated Company considered to be reasonably possible at the reporting date.
The analysis assumes that all other variables remain constant.
Information on foreign exchange gains (losses), including those realized and unrealized
using the functional currency were as follows:
For the years ended December 31,
2016 2015
Foreign
exchange
gains
(losses)
Average
rate
Foreign
exchange
gains
(losses)
Average
rate
TWD $ (1,941) - 2,839 -
D. Fair value of financial instruments
(a) Categories of financial instruments and fair value
The Consolidated Company’s carrying amount and the fair value of financial assets and
liabilities (including information for fair value hierarchy, but excluding financial
instruments whose fair values approximate the carrying amounts and equity investments
which cannot be estimated reliably in an active market) were as follows:
December 31, 2016
Carrying Fair value
Amount Level 1 Level 2 Level 3 Total
Loans and receivables
Cash and cash equivalents $ 69,684 - - - -
Receivables 72,462 - - - -
Other current financial assets 188,754 - - - -
Refundable deposits 29,692 - - - -
Other non-current financial
assets 2,974 - - - -
$ 363,566 - - - -
36
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
December 31, 2016
Carrying Fair value
Amount Level 1 Level 2 Level 3 Total
Financial liabilities at fair value
through profit or loss
Held for trading financial
liabilities – foreign
currency forward contracts $ 67 - 67 - 67
Financial liabilities measured at
amortized cost
Accounts payable $ 11,535 - - - -
Other payables (recorded in
other current liabilities) 21,746 - - - -
$ 33,281 - - - -
December 31, 2015
Carrying Fair value
Amount Level 1 Level 2 Level 3 Total
Loans and receivables
Cash and cash equivalents $ 184,340 - - - -
Receivables 50,964 - - - -
Other current financial assets 187,550 - - - -
Refundable deposits 29,702 - - - -
Other non-current financial
assets 3,774 - - - -
$ 456,330 - - - -
Financial liabilities at fair value
through profit or loss
Held for trading financial
liabilities – foreign
currency forward contracts $ 57 - 57 - 57
Financial liabilities measured at
amortized cost
Accounts payable $ 7,246 - - - -
Other payables (recorded in
other current liabilities) 34,966 - - - -
Guarantee deposits 1,050 - - - -
$ 43,262 - - - -
(b) Valuation techniques for financial instruments not measured at fair value
The Consolidated Company estimates the financial instruments not measured at fair
value using the following methods and assumptions:
Fair value measurement for financial liabilities measured at amortized cost will be based
on the latest quoted price and agreed-upon price if these prices are available in the active
markets. When market value is unavailable, the fair value of financial liabilities are
evaluated based on the discounted cash flow of the financial liabilities.
37
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(c) Valuation techniques for financial instruments that are measured at fair value
Derivative financial instruments
Foreign currency forward contract is measured based on the current forward
exchange rate.
There is no transfer between the levels for the years ended December 31, 2016 and 2015.
(17) Financial risk management
A. Overview
The Consolidated Company is exposed to the following risks due to usage of financial
instruments:
(a) Credit risk
(b) Liquidity risk
(c) Market risk
This note presents information about the Consolidated Company’s exposure to each of the
above risks, the Consolidated Company’s objectives, policies, and processes for measuring
and managing risk, and the Consolidated Company’s management of capital. Further
quantitative disclosures are included throughout these consolidated financial statements.
B. Objectives and policies for managing risk
The core business departments are responsible for the management of operational risk. The
Consolidated Company has established appropriate procedures based on the nature of
business. Before entering into transactions involving risk, the approval policy must be
carried out based on related procedures. Significant contracts are approved by the general
counsel, and the potential risks of operations are assessed by the Internal Audit Office as a
reference for drafting its annual audit plan.
The Consolidated Company regularly monitors risks faced by the Consolidated Company in
accordance with the Consolidated Company’s risk management policies and procedures to
reflect changes in market conditions and the Consolidated Company’s activities. There are
three monitoring mechanisms:
(a) The department or employee responsible establishes a risk management mechanism that
can effectively recognize, evaluate, supervise and control risk.
(b) In addition to the risks approved by the related department or team, the general counsel
assists the president to seek improvements of laws and risks.
38
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(c) The Internal Audit Office monitors risk, as overseen by the directors and supervisors.
C. Credit risk
The credit risk information on cash and cash equivalents and receivables is disclosed in Note
6(16). According to the Consolidated Company’s policy, the Consolidated Company could
only provide financial guarantees for the entities in which it has business relationship with
and demand short term financing support from the Consolidated Company. As of December
31, 2016 and 2015, the Consolidated Company did not provide any financial guarantees for
any such entities.
D. Liquidity risk
Liquidity risk is the risk that the Consolidated Company will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by delivering cash or
another financial asset. The Consolidated Company’s approach to managing liquidity is to
ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Consolidated Company’s reputation.
Liquidity risk of the Consolidated Company is monitored through its corporate treasury
department which tracks the development of the actual cash flow position for the
Consolidated Company and uses input from a number of sources in order to forecast the
overall liquidity position both on a short and long term basis. Corporate treasury invests
surplus cash in money market deposits and short term investments with appropriate maturities
to ensure sufficient liquidity is available to meet liabilities when due. The Consolidated
Company manages sufficient cash and cash equivalents so as to cope with its operations and
mitigate the effects of fluctuations in cash flows. As of December 31, 2016, the
Consolidated Company has unused short-term bank facilities of $232, 250.
E. Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, will
affect the Consolidated Company’s income or the value of its holdings of financial
instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimizing the return.
The Consolidated Company buys and sells derivatives, and also incurs financial liabilities, in
order to manage market risks. All such transactions are carried out within the guidelines set
by the Board of Directors and are subject to the monitor from internal audit office.
Generally the Consolidated Company seeks to apply hedge accounting in order to manage
volatility in profit or loss.
The Consolidated Company is exposed to currency risks on foreign currency denominated
financial assets and liabilities arising from its operating, financing and investing activities.
39
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
The Consolidated Company is exposed to currency risk on sales, purchases and borrowings
that are denominated in a currency other than the respective functional currencies of the
Consolidated Company’s entities, primarily the TWD. The currencies used in these
transactions are denominated in TWD, USD, and JPY.
In respect of the valuation of other monetary assets and liabilities denominated in foreign
currencies, the Consolidated Company hedges 50 percent of its net exposure (net cash flows)
expected in three months, subject to the situation of which the rate may be adjusted to an
acceptable level by buying or selling foreign currencies at spot rates, when there is necessary
to address short-term imbalances. The Consolidated Company uses forward exchange
contracts to hedge, with a maturity of less than three months from the reporting date, and
therefore, hedge accounting is not applied in these circumstances.
(18) Capital management
The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and
market confidence and to sustain future development of the business. Capital consists of common
stock, capital surplus, retained earnings, and non-controlling interests of the Consolidated
Company. The board of directors monitors the return on capital as well as the level of dividends
to common stockholders.
There were no changes in the Consolidated Company’s approach to capital management during
the year ended December 31, 2016.
December 31,
2016 2015
Total liabilities $ 59,299 98,229 Total equity $ 666,617 735,602 Debt-to-capital ratio 8.90% 13.35%
As of December 31, 2016, the debt-to-adjusted-capital ratio had deceased due to the
reclassification of the unearned revenue.
7. Related-party Transactions
(1) Parent company and ultimate controlling party
The Company is the ultimate controlling party of the Consolidated Company.
40
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
(2) Significant transactions with related parties
A. Sales and service revenue from related parties
For the years ended
December 31,
Related Party Categories 2016 2015
Entities with significant influence over the Consolidated
Company
$
582,239
457,947
The collection terms for sales to related parties will be 30 to 45 days or after the month-end;
the prices of products sold to related parties were determined by the product specifications
and the situation regarding market supply and demand, and there was no obvious difference
from those with non-related parties
B. Unearned revenue
Unearned receipts resulting from the contract of rendering service were as follows:
December 31,
Related Party Categories 2016 2015
Entities with significant influence over the Consolidated
Company
$
-
28,086
C. Purchases
For the years ended
December 31,
Related Party Categories 2016 2015
Entities with significant influence over the Consolidated
Company
$
9
8
As of December 31, 2016 and 2015, payables resulting from the above transactions had been
settled.
D. Accounts receivable from related parties
December 31,
Related Party Categories 2016 2015
Entities with significant influence over the Consolidated
Company
$
64,846
49,606
41
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
E. Other transactions
For the years ended
December 31,
Related Party Categories 2016 2015
Entities with significant influence over the Consolidated
Company
$
3
-
As of December 31, 2016 and 2015, payables resulting from the above transactions had been
settled.
(3) Transactions with key management personnel
Key management personnel compensation comprised:
For the years ended
December 31,
2016 2015
Short-term employee benefits $ 8,633 9,988
Post-employment benefits 216 216
$ 8,849 10,204
8. Pledged Assets
The carrying values of pledged assets were as follows:
December 31,
Assets Purpose of Pledged 2016 2015
Time deposits (recorded in other
current financial assets)
Guarantees for purchase $ 300 -
Time deposits(recorded in other
current financial assets)
Customs duty guarantee 15,000 -
Property, plant and equipment Loan commitments 93,526 96,056
Refundable deposits Warranty guarantee 27,420 27,420
$ 136,246 123,476
9. Significant Commitments and Contingencies
Except the consolidated financial statements note 6(8), the Company has licenses to use other
companies’ technology, which require monthly royalty payments based on sales volume.
10. Significant Disaster Losses: None.
11. Significant Subsequent Events: None.
42
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Financial Statements
(Continued)
12. Others
The following is a summary statement of employee benefits, depreciation, and amortization expenses
by function:
By function For the year ended December 31,
2016
For the year ended December 31,
2015
By item
Classified
as
Operating
Costs
Classified
as
Operating
Expenses
Total
Classified
as
Operating
Costs
Classified
as
Operating
Expenses
Total
Employee benefits
Salary 1,424 154,638 156,062 1,009 165,277 167,286
Labor and health
insurance
152 11,847 11,999 109 11,851 11,960
Pension 78 7,729 7,807 61 7,546 7,607
Others 118 6,002 6,120 64 5,675 5,739
Depreciation 3,425 26,462 29,887 - 25,040 25,040
Amortization - 12,818 12,818 - 12,915 12,915
13. Segment Information
(1) General information
The Consolidated Company is a single reportable segment. The Consolidated Company is
mainly engaged in the design, research, development, manufacture and sale of integrated circuits
(ICs). The operating segment information is consistent with the consolidated financial
statements. Please refer to the consolidated statements of comprehensive income for net
revenues from external customers and segment profit or loss, and refer to the consolidated balance
sheets for segment assets.
(2) Products and services information
Revenues of the Consolidated Company from external customers:
For the years ended
December 31,
2016 2015
Sales of integrated circuits $ 564,016 421,377
Rendering of services 79,053 60,997
$ 643,069 482,374
43
Solid State System Co., Ltd. and subsidiaries
Notes to Consolidated Interim Financial Statements
(3) Geographic information
In presenting information on the basis of geography, segment revenue is based on the geographical
location of customers, and segment assets are based on the geographical location of the assets.
For the years ended
December 31,
2016 2015
Revenues from external customers:
Japan $ 313,993 277,414
USA 268,148 180,533
Taiwan 28,617 20,442
China 28,404 3,985
Hong Kong 3,907 -
$ 643,069 482,374
December 31,
2016 2015
Non-current assets Taiwan $ 206,042 221,017
(4) Major customer information
Sales to individual customers representing greater than 10% of the revenues were as follows:
For the years ended
December 31,
2016 2015
Toshiba $ 313,993 277,414
KDIL 268,148 178,514
$ 582,141 455,928