Form 6-K

1934 Act Registration No. 1-14700

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2015

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F  x            Form 40-F  ¨

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes  ¨            No   x

(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82:             .)

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Taiwan Semiconductor Manufacturing Company Ltd.
Date: November 13, 2015     By  

/s/ Lora Ho

      Lora Ho
      Senior Vice President & Chief Financial Officer


  

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

  
  

Consolidated Financial Statements for the

Nine months Ended September 30, 2015 and 2014 and

Independent Accountants’ Review Report

  

 


INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries (the “Company”) as of September 30, 2015 and 2014 and the related consolidated statements of comprehensive income for the three months ended September 30, 2015 and 2014 and for the nine months ended September 30, 2015 and 2014, as well as the consolidated statements of changes in equity and cash flows for the nine months ended September 30, 2015 and 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

We conducted our reviews in accordance with Statement on Auditing Standards No. 36, “Review of Financial Statements,” issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting,” endorsed by the Financial Supervisory Commission of the Republic of China.

November 10, 2015

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the accountants’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language accountants’ review report and consolidated financial statements shall prevail.

 

- 1 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

   

September 30, 2015

(Reviewed)

   

December 31, 2014

(Adjusted and Audited)

   

September 30, 2014

(Adjusted and Reviewed)

   

January 1, 2014

(Adjusted and Audited)

 
    (Note 3)     (Note 3)     (Note 3)     (Note 3)  
    Amount     %     Amount     %     Amount     %     Amount     %  

ASSETS

               

CURRENT ASSETS

               

Cash and cash equivalents (Note 6)

  $ 515,731,398        33      $ 358,449,029        24      $ 225,884,318        17      $ 242,695,447        19   

Financial assets at fair value through profit or loss (Note 7)

    98,835               192,045               69,164               90,353          

Available-for-sale financial assets (Note 8)

    1,597,602               73,797,476        5        64,391,337        5        760,793          

Held-to-maturity financial assets (Note 9)

    7,362,003        1        4,485,593                             1,795,949          

Hedging derivative financial assets (Note 10)

    96,153                                                    

Notes and accounts receivable, net (Note 11)

    96,611,632        6        114,734,743        8        113,999,433        8        71,649,926        6   

Receivables from related parties (Note 32)

    511,008               312,955               532,767               291,708          

Other receivables from related parties (Note 32)

    128,490               178,625               161,962               221,576          

Inventories (Note 12)

    65,066,214        4        66,337,971        5        65,336,989        5        37,494,893        3   

Noncurrent assets held for sale (Note 30)

                  944,208                                      

Other financial assets (Note 33)

    3,613,680               3,476,884               2,989,824               501,785          

Other current assets (Note 17)

    2,844,481               3,656,110               2,864,405               2,984,224          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    693,661,496        44        626,565,639        42        476,230,199        35        358,486,654        28   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT ASSETS

               

Available-for-sale financial assets (Note 8)

                                              58,721,959        5   

Held-to-maturity financial assets (Note 9)

    2,571,357                                                    

Financial assets carried at cost (Notes 13 and 31)

    1,507,749               1,800,542               1,866,008               2,145,591          

Investments accounted for using equity method (Note 14)

    26,935,985        2        28,255,737        2        26,985,165        2        28,321,241        2   

Property, plant and equipment (Note 15)

    830,825,109        53        818,198,801        55        824,309,879        61        792,665,913        63   

Intangible assets (Note 16)

    13,196,292        1        13,531,510        1        11,942,249        1        11,490,383        1   

Deferred income tax assets (Note 4)

    5,743,803               5,138,782               4,940,633        1        7,145,004        1   

Refundable deposits (Note 32)

    400,263               356,069               2,359,756               2,519,031          

Other noncurrent assets (Note 17)

    1,376,756               1,202,006               1,273,661               1,469,577          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent assets

    882,557,314        56        868,483,447        58        873,677,351        65        904,478,699        72   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,576,218,810        100      $ 1,495,049,086        100      $ 1,349,907,550        100      $ 1,262,965,353        100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

               

CURRENT LIABILITIES

               

Short-term loans (Note 18)

  $ 33,564,120        2      $ 36,158,520        2      $ 35,883,358        3      $ 15,645,000        1   

Financial liabilities at fair value through profit or loss (Note 7)

    179,363               486,214               691,062               33,750          

Hedging derivative financial liabilities (Note 10)

                  16,364,241        1        9,769,897        1                 

Accounts payable

    18,057,750        1        21,878,934        2        20,418,733        1        14,670,260        1   

Payables to related parties (Note 32)

    1,128,121               1,491,490               1,290,677               1,688,456          

Salary and bonus payable

    10,428,126        1        10,573,922        1        9,505,689        1        8,330,956        1   

Accrued compensation/profit sharing to employees and bonus to directors and supervisors (Notes 22 and 29)

    16,105,423        1        18,052,820        1        12,959,725        1        12,738,801        1   

Payables to contractors and equipment suppliers

    34,338,079        2        26,980,408        2        28,683,936        2        89,810,160        7   

Income tax payable (Note 4)

    24,464,158        2        28,616,574        2        19,412,953        1        22,563,286        2   

Provisions (Note 19)

    9,898,270        1        10,445,452        1        7,677,524        1        7,603,781        1   

Liabilities directly associated with noncurrent assets held for sale (Note 30)

                  219,043                                      

Long-term liabilities - current portion (Note 20)

    23,515,931        1                                             

Accrued expenses and other current liabilities (Note 21)

    30,010,029        2        29,746,011        2        25,954,613        2        16,693,484        1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    201,689,370        13        201,013,629        14        172,248,167        13        189,777,934        15   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT LIABILITIES

               

Hedging derivative financial liabilities (Note 10)

                                5,821               5,481,616          

Bonds payable (Note 20)

    191,970,754        12        213,673,818        14        211,796,805        15        210,767,625        17   

Long-term bank loans

    35,000               40,000               40,000               40,000          

Deferred income tax liabilities (Note 4)

    153,932               199,750                                      

Obligations under finance leases (Note 15)

                  802,108               773,743               776,230          

Net defined benefit liability (Note 4)

    6,611,531               6,567,782               6,838,838        1        6,801,663        1   

Guarantee deposits (Note 21)

    23,208,034        2        25,538,475        2        160,419               151,660          

Others (Note 19)

    1,555,245               885,192               798,772               694,901          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent liabilities

    223,534,496        14        247,707,125        16        220,414,398        16        224,713,695        18   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    425,223,866        27        448,720,754        30        392,662,565        29        414,491,629        33   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

               

Capital stock (Note 22)

    259,303,805        16        259,296,624        17        259,293,750        19        259,286,171        21   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital surplus (Note 22)

    56,298,728        4        55,989,922        4        55,944,799        4        55,858,626        4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retained earnings (Note 22)

               

Appropriated as legal capital reserve

    177,640,561        11        151,250,682        10        151,250,682        12        132,436,003        11   

Appropriated as special capital reserve

                                              2,785,741          

Unappropriated earnings

    644,577,881        41        553,914,592        37        473,751,730        35        383,670,168        30   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    822,218,442        52        705,165,274        47        625,002,412        47        518,891,912        41   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Others (Note 22)

    13,138,191        1        25,749,291        2        16,865,491        1        14,170,306        1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to shareholders of the parent

    1,150,959,166        73        1,046,201,111        70        957,106,452        71        848,207,015        67   

NONCONTROLLING INTERESTS (Note 22)

    35,778               127,221               138,533               266,709          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    1,150,994,944        73        1,046,328,332        70        957,244,985        71        848,473,724        67   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,576,218,810        100      $ 1,495,049,086        100      $ 1,349,907,550        100      $ 1,262,965,353        100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

(Reviewed, Not Audited)

 

 

    For the Three Months Ended
September 30
    For the Nine Months Ended
September 30
 
    2015
(Note 3)
    2014
(Adjusted)
(Note 3)
    2015
(Note 3)
    2014
(Adjusted)
(Note 3)
 
    Amount     %     Amount     %     Amount     %     Amount     %  

NET REVENUE (Notes 24, 32 and 37)

  $ 212,504,909        100      $ 209,049,734        100      $ 639,978,805        100      $ 540,285,390        100   

COST OF REVENUE (Notes 12, 29 and 32)

    110,188,424        52        103,471,256        49        328,509,564        51        273,136,725        51   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GROSS PROFIT BEFORE REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

    102,316,485        48        105,578,478        51        311,469,241        49        267,148,665        49   

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

    19,271               (3,206            735               13,442          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GROSS PROFIT

    102,335,756        48        105,575,272        51        311,469,976        49        267,162,107        49   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES (Notes 29 and 32)

               

Research and development

    16,486,365        8        15,207,282        8        49,880,041        8        40,885,511        7   

General and administrative

    4,296,668        2        4,612,193        2        13,126,301        2        14,676,344        3   

Marketing

    1,377,131        1        1,323,259        1        4,247,546        1        3,710,936        1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    22,160,164        11        21,142,734        11        67,253,888        11        59,272,791        11   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Notes 15,16 and 29)

    (1,786,668            (5,300            (2,131,983            (235,292       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME FROM OPERATIONS (Note 37)

    78,388,924        37        84,427,238        40        242,084,105        38        207,654,024        38   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NON-OPERATING INCOME AND EXPENSES

               

Share of profits of associates and joint venture

    925,854               1,036,725               2,876,252               3,040,159        1   

Other income

    1,066,001               688,325               3,492,533        1        2,618,607          

Foreign exchange gain, net (Note 36)

    2,571,011        1        1,150,993        1        2,326,899               759,385          

Finance costs (Note 25)

    (792,941            (816,054            (2,370,284            (2,414,084       

Other gains and losses (Note 26)

    1,235,770        1        (1,110,583            21,375,777        3        1,109,450          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating income and expenses

    5,005,695        2        949,406        1        27,701,177        4        5,113,517        1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME BEFORE INCOME TAX

    83,394,619        39        85,376,644        41        269,785,282        42        212,767,541        39   

INCOME TAX EXPENSE (Notes 4 and 27)

    8,077,319        4        9,076,017        4        36,071,170        5        28,969,205        5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

    75,317,300        35        76,300,627        37        233,714,112        37        183,798,336        34   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 22 and 27)

               

Items that may be reclassified subsequently to profit or loss

               

Exchange differences arising on translation of foreign operations

    13,245,566        6        3,410,878        1        7,597,640        1        3,190,117        1   

Changes in fair value of available-for-sale financial assets

    (3,622,659     (1     8,120               (20,455,403     (3     (438,481       

Share of other comprehensive income (loss) of associates and joint venture

    (354,145            (36,019            239,665               (42,040       

Income tax benefit (expense) related to components of other comprehensive income that may be reclassified subsequently

    15,553               (2,622            (2,551            (13,745       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss) for the period, net of income tax

    9,284,315        5        3,380,357        1        (12,620,649     (2     2,695,851        1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

  $ 84,601,615        40      $ 79,680,984        38      $ 221,093,463        35      $ 186,494,187        35   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

               

Shareholders of the parent

  $ 75,329,224        35      $ 76,331,255        37      $ 233,736,649        37      $ 183,896,351        34   

Noncontrolling interests

    (11,924            (30,628            (22,537            (98,015       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 75,317,300        35      $ 76,300,627        37      $ 233,714,112        37      $ 183,798,336        34   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

               

Shareholders of the parent

  $ 84,613,016        40      $ 79,711,149        38      $ 221,125,549        35      $ 186,591,536        35   

Noncontrolling interests

    (11,401            (30,165            (32,086            (97,349       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 84,601,615        40      $ 79,680,984        38      $ 221,093,463        35      $ 186,494,187        35   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    For the Three Months Ended
September 30
    For the Nine Months Ended
September 30
 
    2015     2014     2015     2014  
   

Income Attributable to
Shareholders of

the Parent

   

Income Attributable to
Shareholders of

the Parent

   

Income Attributable to
Shareholders of

the Parent

   

Income Attributable to

Shareholders of

the Parent

 

EARNINGS PER SHARE (NT$, Note 28)

       

Basic earnings per share

  $          2.91      $          2.94      $          9.01      $          7.09   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

  $          2.91      $          2.94      $          9.01      $          7.09   
 

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars, Except Dividends Per Share)

(Reviewed, Not Audited)

 

 

    Equity Attributable to Shareholders of the Parent              
                                              Others                    
    Capital Stock - Common
Stock
          Retained Earnings     Foreign
Currency
    Unrealized
Gain/Loss from
Available-
                               
   

Shares

(In Thousands)

    Amount     Capital Surplus     Legal Capital
Reserve
    Special Capital
Reserve
    Unappropriated
Earnings
    Total     Translation
Reserve
    for-sale
Financial Assets
    Cash Flow
Hedges Reserve
    Total     Total     Noncontrolling
Interests
    Total Equity  

BALANCE, JANUARY 1, 2015

    25,929,662      $ 259,296,624      $ 55,989,922      $ 151,250,682      $      $ 553,261,982      $ 704,512,664      $ 4,502,113      $ 21,247,483      $ (305   $ 25,749,291      $ 1,045,548,501      $ 127,246      $ 1,045,675,747   

Effect of retrospective application

                                       652,610        652,610                                    652,610        (25     652,585   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED BALANCE, JANUARY 1, 2015

    25,929,662        259,296,624        55,989,922        151,250,682               553,914,592        705,165,274        4,502,113        21,247,483        (305     25,749,291        1,046,201,111        127,221        1,046,328,332   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Appropriations of prior year’s earnings

                           

Legal capital reserve

                         26,389,879               (26,389,879                                                        

Cash dividends to shareholders - NT$4.50 per share

                                       (116,683,481     (116,683,481                                 (116,683,481            (116,683,481
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

                         26,389,879               (143,073,360     (116,683,481                                 (116,683,481            (116,683,481
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the nine months ended September 30, 2015

                                       233,736,649        233,736,649                                    233,736,649        (22,537     233,714,112   

Other comprehensive income for the nine months ended September 30, 2015, net of income tax

                                                     7,507,537        (20,118,301     (336     (12,611,100     (12,611,100     (9,549     (12,620,649
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the nine months ended September 30, 2015

                                       233,736,649        233,736,649        7,507,537        (20,118,301     (336     (12,611,100     221,125,549        (32,086     221,093,463   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

    718        7,181        130,974                                                                138,155               138,155   

Disposal of investments accounted for using equity method

                  (26,537                                                             (26,537            (26,537

Adjustments to share of changes in equities of associates and joint venture

                  230,222                                                                230,222        149        230,371   

From share of changes in equities of subsidiaries

                  (25,853                                                             (25,853     25,853          

Decrease in noncontrolling interests

                                                                                        (42,719     (42,719

Effect of disposal of subsidiary

                                                                                        (42,640     (42,640
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, September 30, 2015

    25,930,380      $ 259,303,805      $ 56,298,728      $ 177,640,561      $      $ 644,577,881      $ 822,218,442      $ 12,009,650      $ 1,129,182      $ (641   $ 13,138,191      $ 1,150,959,166      $ 35,778      $ 1,150,994,944   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JANUARY 1, 2014

    25,928,617      $ 259,286,171      $ 55,858,626      $ 132,436,003      $ 2,785,741      $ 382,971,408      $ 518,193,152      $ (7,140,362   $ 21,310,781      $ (113   $ 14,170,306      $ 847,508,255      $ 266,830      $ 847,775,085   

Effect of retrospective application

                                       698,760        698,760                                    698,760        (121     698,639   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED BALANCE, JANUARY 1, 2014

    25,928,617        259,286,171        55,858,626        132,436,003        2,785,741        383,670,168        518,891,912        (7,140,362     21,310,781        (113     14,170,306        848,207,015        266,709        848,473,724   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Appropriations of prior year’s earnings

                           

Legal capital reserve

                         18,814,679               (18,814,679                                                        

Reversal of special capital reserve

                                (2,785,741     2,785,741                                                           

Cash dividends to shareholders -NT$3.00 per share

                                       (77,785,851     (77,785,851                                 (77,785,851            (77,785,851
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

                         18,814,679        (2,785,741     (93,814,789     (77,785,851                                 (77,785,851            (77,785,851
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the nine months ended September 30, 2014

                                       183,896,351        183,896,351                                    183,896,351        (98,015     183,798,336   

Other comprehensive income for the nine months ended September 30, 2014, net of income tax

                                                     3,150,962        (455,751     (26     2,695,185        2,695,185        666        2,695,851   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the nine months ended September 30, 2014

                                       183,896,351        183,896,351        3,150,962        (455,751     (26     2,695,185        186,591,536        (97,349     186,494,187   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

    758        7,579        25,908                                                                33,487               33,487   

Disposal of investments accounted for using equity method

                  (2,273                                                             (2,273            (2,273

Adjustments to share of changes in equities of associates and joint venture

                  90,327                                                                90,327        (45     90,282   

From share of changes in equities of subsidiaries

                  (27,789                                                             (27,789     27,789          

Decrease in noncontrolling interests

                                                                                        (58,571     (58,571
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, September 30, 2014

    25,929,375      $ 259,293,750      $ 55,944,799      $ 151,250,682      $      $ 473,751,730      $ 625,002,412      $ (3,989,400   $ 20,855,030      $ (139   $ 16,865,491      $ 957,106,452      $ 138,533      $ 957,244,985   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Nine Months Ended September 30  
     2015     

2014

(Adjusted)

 

CASH FLOWS FROM OPERATING ACTIVITIES

     

Income before income tax

   $ 269,785,282       $ 212,767,541   

Adjustments for:

     

Depreciation expense

     163,884,425         141,919,819   

Amortization expense

     2,365,320         1,914,239   

Finance costs

     2,370,284         2,414,084   

Share of profits of associates and joint venture

     (2,876,252      (3,040,159

Interest income

     (2,875,858      (1,974,366

Loss (gain) on disposal of property, plant and equipment and intangible assets, net

     49,503         (13,482

Impairment loss on property, plant and equipment

     2,317,424         239,864   

Impairment loss on intangible assets

     58,514           

Impairment loss on financial assets

     132,015         176,920   

Gain on disposal of available-for-sale financial assets, net

     (21,482,011      (260,908

Gain on disposal of financial assets carried at cost, net

     (82,128      (65,819

Gain on disposal of investments accounted for using equity method

     (2,305,323      (2,028,643

Loss from liquidation of subsidiaries

             90   

Realized gross profit on sales to associates

     (735      (13,442

Loss on foreign exchange, net

     2,492,659         1,200,859   

Dividend income

     (616,675      (644,241

Income from receipt of equity securities in settlement of trade receivables

             (1,211

Loss from hedging instruments

     137,124         4,643,145   

Loss (gain) arising from changes in fair value of available-for-sale financial assets in hedge effective portion

     298,751         (4,163,555

Gain from lease agreement modification

     (428,388        

Changes in operating assets and liabilities:

     

Derivative financial instruments

     (213,641      678,501   

Notes and accounts receivable, net

     15,780,788         (42,349,537

Receivables from related parties

     (198,053      (241,059

Other receivables from related parties

     51,115         4,897   

Inventories

     1,271,757         (27,842,096

Other financial assets

     1,049,004         (2,244,906

Other current assets

     925,665         137,831   

Accounts payable

     (3,106,992      5,726,261   

Payables to related parties

     (363,369      (397,779

Salary and bonus payable

     (145,796      1,174,733   

Accrued compensation/profit sharing to employees and bonus to directors and supervisors

     (1,947,397      220,924   

Accrued expenses and other current liabilities

     198,533         9,654,733   

Provisions

     (540,919      73,286   

Net defined benefit liability

     43,749         37,175   
  

 

 

    

 

 

 

(Continued)

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Nine Months Ended September 30  
     2015     

2014

(Adjusted)

 

Cash generated from operations

   $ 426,028,375       $ 297,703,699   

Income taxes paid

     (40,821,123      (29,848,815
  

 

 

    

 

 

 

Net cash generated by operating activities

     385,207,252         267,854,884   
  

 

 

    

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

     

Acquisitions of:

     

Available-for-sale financial assets

     (3,628      (91,405

Financial assets carried at cost

     (87,970      (3,765

Held-to-maturity financial assets

     (19,301,111      (1,396,723

Property, plant and equipment

     (172,993,344      (236,115,030

Intangible assets

     (2,657,499      (2,268,872

Proceeds from disposal or redemption of:

     

Available-for-sale financial assets

     53,990,941         663,433   

Held-to-maturity financial assets

     13,900,000         3,200,000   

Financial assets carried at cost

     357,993         68,919   

Investments accounted for using equity method

     3,962,848         3,471,883   

Property, plant and equipment

     70,433         163,250   

Cash received from other long-term receivables

             83,840   

Costs from entering into hedging transactions

     (495,348      (520,856

Interest received

     2,606,926         1,874,722   

Other dividends received

     616,675         644,241   

Dividends received from investments accounted for using equity method

     3,407,126         3,223,090   

Refundable deposits paid

     (267,994      (49,868

Refundable deposits refunded

     227,253         73,851   

Net cash inflow from disposal of subsidiary (Note 30)

     601,047           
  

 

 

    

 

 

 

Net cash used in investing activities

     (116,065,652      (226,979,290
  

 

 

    

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

     

Increase (decrease) in short-term loans

     (2,628,330      20,610,319   

Interest paid

     (2,704,853      (2,743,513

Guarantee deposits received

     557,639         13,213   

Guarantee deposits refunded

     (552,993      (4,981

Decrease in obligations under finance leases

     (29,098      (28,426

Proceeds from exercise of employee stock options

     33,891         33,487   

Cash dividends

     (116,683,481      (77,785,851

Decrease in noncontrolling interests

     (42,719      (58,571
  

 

 

    

 

 

 

Net cash used in financing activities

     (122,049,944      (59,964,323
  

 

 

    

 

 

 

(Continued)

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Nine Months Ended September 30  
     2015     

2014

(Adjusted)

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

   $ 10,109,235       $ 2,277,600   
  

 

 

    

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     157,200,891         (16,811,129

CASH AND CASH EQUIVALENTS INCLUDED IN NONCURRENT ASSETS HELD FOR SALE, BEGINNING OF PERIOD

     81,478           

CASH AND CASH EQUIVALENT ON CONSOLIDATED BALANCE SHEET, BEGINNING OF PERIOD

     358,449,029         242,695,447   
  

 

 

    

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 515,731,398       $ 225,884,318   
  

 

 

    

 

 

 

 

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

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 and 2014

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

(Reviewed, Not Audited)

 

 

1. GENERAL

Taiwan Semiconductor Manufacturing Company Limited (TSMC), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. TSMC is a dedicated foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks.

On September 5, 1994, TSMC’s shares were listed on the Taiwan Stock Exchange (TWSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).

The address of its registered office and principal place of business is No. 8, Li-Hsin Rd. 6, Hsinchu Science Park, Taiwan. The principal operating activities and operating segments information of TSMC and its subsidiaries (collectively as the “Company”) are described in Notes 4 and 37.

 

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on November 10, 2015.

 

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

 

  a. Initial application of the amendments to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards, International Accounting Standards (IASs), Interpretations of International Financial Reporting Standards (IFRIC), and Interpretations of IASs (SIC) (collectively, “IFRSs”) endorsed by the Financial Supervisory Commission (FSC) (collectively, “2013 Taiwan-IFRSs version”)

According to Rule No. 1030029342 and Rule No. 1030010325 issued by the FSC, the 2013 Taiwan-IFRSs version and the related amendments to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers should be adopted by the Company starting 2015.

The Company believes that as a result of the adoption of aforementioned 2013 Taiwan-IFRSs version and the related amendments to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the following items have impacted the Company’s consolidated financial statements.

 

  1) IFRS 12, “Disclosure of Interests in Other Entities”

IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 for the Company’s annual consolidated financial statements are more extensive than in the previous standards.

 

- 8 -


  2) IFRS 13, “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only are extended by IFRS 13 to cover all assets and liabilities within its scope.

The measurement requirements of IFRS 13 shall be applied prospectively from January 1, 2015. Please refer to Note 31 for related disclosures.

 

  3) Amendments to IAS 1, “Presentation of Items of Other Comprehensive Income”

According to the amendments to IAS 1, the items of other comprehensive income will be grouped into two categories: (a) items that may not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. In addition, income tax on items of other comprehensive income is also required to be allocated on the same basis.

The items that may not be reclassified subsequently to profit or loss include actuarial gains or losses from defined benefit plans, the share of actuarial gains or losses from defined benefit plans of associates and joint venture as well as the related income tax on such items. Items that may be reclassified subsequently to profit or loss include exchange differences arising on translation of foreign operations, changes in fair value of available-for-sale financial assets, cash flow hedges, the share of other comprehensive income of associates and joint venture as well as the related income tax on items of other comprehensive income.

 

  4) Amendments to IAS 19, “Employee Benefits”

The amendments to IAS 19 require the Company to calculate a “net interest” amount by applying the discount rate to the net defined benefit liability or asset to replace the interest cost and expected return on planned assets used in current IAS 19. In addition, the amendments eliminate the accounting treatment of either corridor approach or the immediate recognition of actuarial gains and losses to profit or loss when it incurs, and instead, require to recognize all actuarial gains and losses immediately through other comprehensive income. The past service cost, on the other hand, will be expensed immediately when it incurs and no longer be amortized over the average period before vested on a straight-line basis. In addition, the amendments also require a broader disclosure in defined benefit plans.

The impact on the current period is summarized as follows:

 

Impact on Assets, Liabilities and Equity   

September 30,

2015

 

Increase in investments accounted for using equity method

   $ 471   

Increase in deferred income tax assets

     2,060   
  

 

 

 

Increase in assets

   $ 2,531   
  

 

 

 

Increase in net defined benefit liability

   $ 17,169   
  

 

 

 

Increase in liabilities

   $ 17,169   
  

 

 

 

Decrease in retained earnings

   $ (14,638
  

 

 

 

Decrease in equity

   $ (14,638
  

 

 

 

 

- 9 -


                                                                   
Impact on Total Comprehensive Income   

Three Months
Ended

September 30,
2015

    

Nine Months
Ended

September 30,
2015

 

Increase in cost of revenue

   $ (3,658    $ (11,021

Increase in operating expense

     (2,065      (6,148

Increase in share of profit of associate and joint venture

     144         471   

Decrease in income tax expense

     686         2,060   
  

 

 

    

 

 

 

Decrease in net income and other comprehensive income attributable to shareholders of the parent

   $ (4,893    $ (14,638
  

 

 

    

 

 

 

The impact on the prior reporting periods is summarized as follows:

 

Impact on Assets, Liabilities and Equity    As Originally
Stated
     Adjustments
Arising
from Initial
Application
     Adjusted  

December 31, 2014

        

Noncurrent assets held for sale

   $ 945,356       $ (1,148    $ 944,208   

Investments accounted for using equity method

     28,251,002         4,735         28,255,737   

Deferred income tax assets

     5,227,128         (88,346      5,138,782   
     

 

 

    

Total effect on assets

      $ (84,759   
     

 

 

    

Liabilities directly associated with noncurrent assets held for sale

     220,191       $ (1,148      219,043   

Net defined benefit liability

     7,303,978         (736,196      6,567,782   
     

 

 

    

Total effect on liabilities

      $ (737,344   
     

 

 

    

Retained earnings

     704,512,664       $ 652,610         705,165,274   

Noncontrolling interests

     127,246         (25      127,221   
     

 

 

    

Total effect on equity

      $ 652,585      
     

 

 

    

September 30, 2014

        

Investments accounted for using the equity method

     26,979,558       $ 5,607         26,985,165   

Deferred income tax assets

     5,033,530         (92,897      4,940,633   
     

 

 

    

Total effect on assets

      $ (87,290   
     

 

 

    

Net defined benefit liability

     7,612,862       $ (774,024      6,838,838   
     

 

 

    

Total effect on liabilities

      $ (774,024   
     

 

 

    

Retained earnings

     624,315,567       $ 686,845         625,002,412   

Noncontrolling interests

     138,644         (111      138,533   
     

 

 

    

Total effect on equity

      $ 686,734      
     

 

 

    

(Continued)

 

- 10 -


                                                              
Impact on Assets, Liabilities and Equity    As Originally
Stated
     Adjustments
Arising from
Initial
Application
     Adjusted  

January 1, 2014

        

Investments accounted for using the equity method

   $ 28,316,260       $ 4,981       $ 28,321,241   

Deferred income tax assets

     7,239,609         (94,605      7,145,004   
     

 

 

    

Total effect on assets

      $ (89,624   
     

 

 

    

Net defined benefit liability

     7,589,926       $ (788,263      6,801,663   
     

 

 

    

Total effect on liabilities

      $ (788,263)      
     

 

 

    

Retained earnings

     518,193,152       $ 698,760         518,891,912   

Noncontrolling interests

     266,830         (121      266,709   
     

 

 

    

Total effect on equity

      $ 698,639      
     

 

 

    
           (Concluded
Impact on Total Comprehensive Income    As Originally
Stated
     Adjustments
Arising from
Initial
Application
     Adjusted  

Three months ended September 30, 2014

        

Cost of revenue

   $ (103,468,164    $ (3,092    $ (103,471,256

Operating expense

     (21,141,080      (1,654      (21,142,734

Share of the profit or loss of associates and joint ventures

     1,036,527         198         1,036,725   

Income tax expense

     (9,076,586      569         (9,076,017
     

 

 

    

Impact on net income for the period

      $ (3,979   
     

 

 

    

Impact on net income attributable to:

        

Shareholders of the parent

   $ 76,335,237       $ (3,982    $ 76,331,255   

Noncontrolling interests

     (30,631      3         (30,628
  

 

 

    

 

 

    

 

 

 
   $ 76,304,606       $ (3,979    $ 76,300,627   
  

 

 

    

 

 

    

 

 

 

Impact on total comprehensive income attributable to:

        

Shareholders of the parent

   $ 79,715,131       $ (3,982    $ 79,711,149   

Noncontrolling interests

     (30,168      3         (30,165
  

 

 

    

 

 

    

 

 

 
   $ 79,684,963       $ (3,979    $ 79,680,984   
  

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 11 -


                                                              
Impact on Total Comprehensive Income    As Originally
Stated
     Adjustments
Arising
from Initial
Application
     Adjusted  

Nine months ended September 30, 2014

        

Cost of revenue

   $ (273,127,447    $ (9,278    $ (273,136,725

Operating expense

     (59,267,830      (4,961      (59,272,791

Share of the profit or loss of associates and joint ventures

     3,039,533         626         3,040,159   

Income tax expense

     (28,970,913      1,708         (28,969,205
     

 

 

    

Impact on net income for the period

      $ (11,905   
     

 

 

    

Impact on net income attributable to:

        

Shareholders of the parent

   $ 183,908,266       $ (11,915    $ 183,896,351   

Noncontrolling interests

     (98,025      10         (98,015
  

 

 

    

 

 

    

 

 

 
   $ 183,810,241       $ (11,905    $ 183,798,336   
  

 

 

    

 

 

    

 

 

 

Impact on total comprehensive income attributable to:

        

Shareholders of the parent

   $ 186,603,451       $ (11,915    $ 186,591,536   

Noncontrolling interests

     (97,359      10         (97,349
  

 

 

    

 

 

    

 

 

 
   $ 186,506,092       $ (11,905    $ 186,494,187   
  

 

 

    

 

 

    

 

 

 

(Concluded)

 

  b. The IFRSs issued by IASB but not endorsed by FSC

The Company has not applied the following IFRSs issued by the IASB but not endorsed by the FSC. As of the date that the consolidated financial statements were issued, the initial adoption to the following standards and interpretations is still subject to the effective date to be published by the FSC.

 

New, Revised or Amended Standards and Interpretations

  

Effective Date Issued by IASB (Note 1)

Annual Improvements to IFRSs 2010 - 2012 Cycle

  

July 1, 2014 or transactions on or after July 1, 2014

Annual Improvements to IFRSs 2011 - 2013 Cycle

  

July 1, 2014

Annual Improvements to IFRSs 2012 - 2014 Cycle

  

January 1, 2016 (Note 2)

IFRS 9 Financial Instruments

  

January 1, 2018

Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and Transition Disclosure

  

January 1, 2018

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

  

Prospectively applicable to transactions beginning on or after January 1, 2016

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

  

January 1, 2016

Amendment to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations

  

January 1, 2016

(Continued)

 

- 12 -


New, Revised or Amended Standards and Interpretations

  

Effective Date Issued by IASB (Note 1)

IFRS 15 Revenue from Contracts with Customers

  

January 1, 2018

Amendment 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

Amendment to IAS 19 Defined Benefit Plans: Employee Contributions

  

July 1, 2014

Amendment to IAS 27 Equity Method in Separate Financial Statements

  

January 1, 2016

Amendment to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets

  

January 1, 2014

Amendment to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting

  

January 1, 2014

(Concluded)

 

  Note 1: The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective dates, unless specified otherwise.
  Note 2: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

Except for the following, the initial application of the above new standards and interpretations has not had any material impact on the Company’s accounting policies:

 

  1) IFRS 9, “Financial Instruments”

All recognized financial assets currently in the scope of IAS 39, “Financial Instruments: Recognition and Measurement,” will be subsequently measured at either the amortized cost or the fair value. The classification and measurement requirements in IFRS 9 are stated as follows:

For the debt instruments invested by the Company, if the contractual cash flows that are solely for payments of principal and interest on the principal amount outstanding, the classification and measurement requirements are stated as follows:

 

  a) If the objective of the Company’s business model is to hold the financial asset to collect the contractual cash flows, such assets are measured at the amortized cost. Interest revenue should be recognized in profit or loss by using the effective interest method, continuously assessed for impairment and the impairment loss or reversal of impairment loss should be recognized in profit and loss.

 

  b) If the objective of the Company’s business model is to hold the financial asset both to collect the contractual cash flows and to sell the financial assets, such assets are measured at fair value through other comprehensive income and are continuously assessed for impairment. Interest revenue should be recognized in profit or loss by using the effective interest method. A gain or loss on a financial asset measured at fair value through other comprehensive income should be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When such financial asset is derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

The other financial assets which do not meet the aforementioned criteria should be measured at the fair value through profit or loss. However, the Company may irrevocably designate an investment in equity instruments that is not held for trading as measured at fair value through other comprehensive income. All relevant gains and losses shall be recognized in other comprehensive income, except for dividends which are recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

 

- 13 -


IFRS 9 adds a new expected loss impairment model to measure the impairment of financial assets. A loss allowance for expected credit losses should be recognized on financial assets measured at amortized cost and financial assets mandatorily measured at fair value through other comprehensive income. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company should measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. If the credit risk on a financial instrument has increased significantly since initial recognition and is not deemed to be a low credit risk, the Company should measure the loss allowance for that financial instrument at an amount equal to the lifetime expected credit losses. The Company should always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables.

The main change in IFRS 9 is the increase of the eligibility of hedge accounting. It allows reporters to reflect risk management activities in the financial statements more closely as it provides more opportunities to apply hedge accounting. A fundamental difference to IAS 39 is that IFRS 9 (a) increases the scope of hedged items eligible for hedge accounting. For example, the risk components of non-financial items may be designated as hedging accounting; (b) revises a new way to account for the gain or loss recognition arising from hedging derivative financial instruments, which results in a less volatility in profit or loss; and (c) is necessary for there to be an economic relationship between the hedged item and hedging instrument instead of performing the retrospective hedge effectiveness testing.

 

  2) IFRS 15, “Revenue from Contracts with Customers”

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18, “Revenue,” IAS 11, “Construction Contracts,” and a number of revenue-related interpretations.

When applying IFRS 15, the Company shall recognize revenue by applying the following steps:

 

    Identify the contract with the customer;

 

    Identify the performance obligations in the contract;

 

    Determine the transaction price;

 

    Allocate the transaction price to the performance obligations in the contracts; and

 

    Recognize revenue when the entity satisfies a performance obligation.

When IFRS 15 is effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Standard recognized at the date of initial application.

 

  3) Amendments to IAS 36, “Recoverable Amount Disclosures for Non-Financial Assets”

The amendments to IAS 36 clarify that the Company is only required to disclose the recoverable amount in the period of impairment accrual or reversal. Moreover, if the recoverable amount of impaired assets is based on fair value less costs of disposal, the Company should also disclose the discount rate used. The Company expects the aforementioned amendments will result in a broader disclosure of recoverable amount for non-financial assets.

Except for the aforementioned impact, as of the date that the accompanying consolidated financial statements were issued, the Company continues in evaluating the impact on its financial position and financial performance as a result of the initial adoption of the other standards or interpretations. The related impact will be disclosed when the Company completes the evaluation.

 

- 14 -


4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2014.

For the convenience of readers, the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language consolidated financial statements shall prevail.

Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and IAS 34, “Interim Financial Reporting,” endorsed by the FSC. The consolidated financial statements do not present all the disclosures required for a complete set of annual consolidated financial statements prepared under Taiwan-IFRSs.

Basis of Consolidation

The basis for the consolidated financial statements

The basis for the consolidated financial statements applied in these consolidated financial statements is consistent with those applied in the consolidated financial statements for the year ended December 31, 2014.

The subsidiaries in the consolidated financial statements

The detail information of the subsidiaries at the end of reporting period was as follows:

 

           

Establishment

and Operating Location

  Percentage of Ownership           
Name of Investor   Name of Investee   Main Businesses and
Products
   

September 30,

2015

    December 31,
2014
   

September 30,

2014

       Note  

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and semiconductor devices

  San Jose, California, U.S.A.     100     100     100          
 

TSMC Japan Limited (TSMC Japan)

 

Marketing activities

  Yokohama, Japan     100     100     100        a
 

TSMC Partners, Ltd. (TSMC Partners)

 

Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry

  Tortola, British Virgin Islands     100     100     100        a
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and technical supporting activities

  Seoul, Korea     100     100     100        a
 

TSMC Europe B.V. (TSMC Europe)

 

Marketing and engineering supporting activities

  Amsterdam, the Netherlands     100     100     100        a
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

  Tortola, British Virgin Islands     100     100     100          
 

TSMC China Company Limited (TSMC China)

 

Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers

  Shanghai, China     100     100     100          
 

VentureTech Alliance Fund III, L.P. (VTAF III)

 

Investing in new start-up technology companies

  Cayman Islands     98     98     98        a
 

VentureTech Alliance Fund II, L.P. (VTAF II)

 

Investing in new start-up technology companies

  Cayman Islands     98     98     98        a
 

Emerging Alliance Fund, L.P. (Emerging Alliance)

 

Investing in new start-up technology companies

  Cayman Islands     99.5     99.5     99.5        a
 

TSMC Solid State Lighting Ltd. (TSMC SSL)

 

Engaged in researching, developing, designing, manufacturing and selling solid state lighting devices and related applications products and systems

  Hsin-Chu, Taiwan            92     92        b

(Continued)

 

- 15 -


           

Establishment

and Operating Location

  Percentage of Ownership      
Name of Investor   Name of Investee   Main Businesses and Products    

September 30,

2015

    December 31,
2014
   

September 30,

2014

    Note

TSMC

 

TSMC Solar Ltd. (TSMC Solar)

 

Engaged in researching, developing, designing, manufacturing and selling renewable energy and saving related technologies and products

  Tai-Chung, Taiwan     99     99     99   TSMC and
TSMC GN
aggregately
have a
99.8%
controlling
interest of
in TSMC
Solar.

c)

 

TSMC Guang Neng Investment, Ltd. (TSMC GN)

 

Investment activities

  Taipei, Taiwan     100     100     100   a)

TSMC Partners

 

TSMC Design Technology Canada Inc. (TSMC Canada)

 

Engineering support activities

  Ontario, Canada     100     100     100   a)
 

TSMC Technology, Inc. (TSMC Technology)

 

Engineering support activities

  Delaware, U.S.A.     100     100     100   a)
 

TSMC Development, Inc. (TSMC Development)

 

Investment activities

  Delaware, U.S.A.     100     100     100  
 

InveStar Semiconductor Development Fund, Inc. (ISDF)

 

Investing in new start-up technology companies

  Cayman Islands     97     97     97   a)
 

InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)

 

Investing in new start-up technology companies

  Cayman Islands     97     97     97   a)

TSMC Development

 

WaferTech, LLC (WaferTech)

 

Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices

  Washington, U.S.A.     100     100     100  

VTAF III

 

Mutual-Pak Technology Co., Ltd. (Mutual-Pak)

 

Manufacturing and selling of electronic parts and researching, developing, and testing of RFID

  New Taipei, Taiwan     58     58     58   a)
 

Growth Fund Limited (Growth Fund)

 

Investing in new start-up technology companies

  Cayman Islands     100     100     100   a)

VTAF III, VTAF II and Emerging Alliance

 

VentureTech Alliance Holdings, LLC (VTA Holdings)

 

Investing in new start-up technology companies

  Delaware, U.S.A.     100     100     100   a)

TSMC Solar

 

TSMC Solar North America, Inc. (TSMC Solar NA)

 

Selling and marketing of solar related products

  Delaware, U.S.A.     100     100     100   a), c)
 

TSMC Solar Europe B.V. (TSMC Solar Europe)

 

Investing in solar related business

  Amsterdam, the Netherlands            100     100   a), d)
 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

  Hamburg, Germany     100                 a), c), d)

TSMC Solar Europe

 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

  Hamburg, Germany            100     100   a), d)

(Concluded)

 

Note a: This is an immaterial subsidiary for which the consolidated financial statements are not reviewed by the Company’s independent accountants.
Note b: TSMC and TSMC GN aggregately had a controlling interest of 94% in TSMC SSL as of December 31, 2014 and September 30, 2014. TSMC and TSMC GN completed the disposal of TSMC SSL in February 2015. Please refer to Note 30.
Note c: In August 2015, TSMC Solar ceased its manufacturing operations. In November 2015, the Board of Directors of TSMC approved that TSMC Solar will be incorporated into TSMC.
Note d: To simplify overseas investments structure, in the second quarter of 2014, the Board of Directors of TSMC Solar approved to file for the liquidation of TSMC Solar Europe. The liquidation procedure was completed in the second quarter of 2015 and TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, is held directly by TSMC Solar.

Retirement Benefits

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the Projected Unit Credit Method. Service cost (including current service cost), and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Company’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year.

 

- 16 -


Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. The interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the pre-tax income of the interim period.

 

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

The same critical accounting judgments and key sources of estimates and uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2014.

 

6. CASH AND CASH EQUIVALENTS

 

    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Cash and deposits in banks

   $ 510,693,940       $ 352,761,240       $ 222,381,793   

Repurchase agreements collateralized by corporate bonds

     3,961,517         3,920,562         2,680,979   

Repurchase agreements collateralized by government bonds

     576,463         158,722         321,802   

Repurchase agreements collateralized by short-term commercial paper

     499,478         449,180           

Commercial paper

             1,159,325         499,744   
  

 

 

    

 

 

    

 

 

 
   $ 515,731,398       $ 358,449,029       $ 225,884,318   
  

 

 

    

 

 

    

 

 

 

Deposits in banks consisted of highly liquid time deposits that were readily convertible to known amounts of cash and were subject to an insignificant risk of changes in value.

 

7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

 

    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Derivative financial assets

        

Forward exchange contracts

   $ 73,638       $ 73,117       $ 31,324   

Cross currency swap contracts

     25,197         118,928         37,840   
  

 

 

    

 

 

    

 

 

 
   $ 98,835       $ 192,045       $ 69,164   
  

 

 

    

 

 

    

 

 

 

Derivative financial liabilities

        

Forward exchange contracts

   $ 179,363       $ 126,607       $ 77,315   

Cross currency swap contracts

             359,607         613,747   
  

 

 

    

 

 

    

 

 

 
   $ 179,363       $ 486,214       $ 691,062   
  

 

 

    

 

 

    

 

 

 

 

- 17 -


The Company entered into derivative contracts to manage exposures due to fluctuations of foreign exchange rates. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge accounting treatment for derivative contracts.

Outstanding forward exchange contracts consisted of the following:

 

          Contract Amount
     Maturity Date    (In Thousands)

September 30, 2015

     

Sell EUR/Buy US$

   October 2015    EUR3,400/US$3,810

Sell NT$/Buy US$

   October 2015    NT$1,828,624/US$56,000

Sell US$/Buy EUR

   October 2015    US$25,692/EUR23,000

Sell US$/Buy NT$

   October 2015 to November 2015    US$845,000/NT$27,667,518

Sell US$/Buy RMB

   October 2015 to November 2015    US$188,000/RMB1,199,447

December 31, 2014

     

Sell EUR/Buy US$

   January 2015    EUR4,550/US$5,561

Sell NT$/Buy US$

   January 2015    NT$1,632,401/US$51,900

Sell US$/Buy EUR

   January 2015    US$29,450/EUR24,100

Sell US$/Buy JPY

   January 2015    US$226,003/JPY27,150,983

Sell US$/Buy NT$

   January 2015    US$170,000/NT$5,276,500

Sell US$/Buy RMB

   January 2015    US$181,000/RMB1,129,243

September 30, 2014

     

Sell EUR/Buy US$

   October 2014    EUR3,580/US$4,568

Sell NT$/Buy JPY

   October 2014    NT$55,560/JPY200,000

Sell NT$/Buy US$

   October 2014    NT$1,613,044/US$53,600

Sell US$/Buy EUR

   October 2014    US$20,060/EUR15,800

Sell US$/Buy JPY

   October 2014    US$291,612/JPY31,673,300

Sell US$/Buy NT$

   October 2014    US$90,000/NT$2,713,420

Sell US$/Buy RMB

   October 2014 to November 2014    US$152,000/RMB936,402

Outstanding cross currency swap contracts consisted of the following:

 

Maturity Date   

Contract Amount

(In Thousands)

  

Range of

Interest Rates
Paid

  

Range of

Interest Rates
Received

September 30, 2015

        

October 2015

   NT$3,216,025/US$98,500       0.18%

December 31, 2014

        

January 2015

   NT$2,511,905/US$80,080       0.05%-0.13%

January 2015

   US$1,460,000/NT$45,974,755    0.16%-1.92%   

September 30, 2014

        

October 2014

   NT$2,947,561/US$98,080       0.20%-0.33%

October 2014 to November 2014

   US$1,800,000/NT$54,200,290    0.19%-1.91%   

 

- 18 -


8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

                                                                                
    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Publicly traded stocks

   $ 1,597,196       $ 73,797,085       $ 64,390,960   

Money market funds

     406         391         377   
  

 

 

    

 

 

    

 

 

 
   $ 1,597,602       $ 73,797,476       $ 64,391,337   
  

 

 

    

 

 

    

 

 

 

In the second quarter of 2014, the Company reclassified some publicly traded stocks from non-current asset to current asset since the lock-up period ended within a year.

 

9. HELD-TO-MATURITY FINANCIAL ASSETS

 

                                                                                
    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Corporate bonds/Bank debentures

   $ 7,539,404       $       $   

Commercial paper

     2,393,956         4,485,593           
  

 

 

    

 

 

    

 

 

 
   $ 9,933,360       $ 4,485,593       $   
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 7,362,003       $ 4,485,593       $   

Noncurrent portion

     2,571,357                   
  

 

 

    

 

 

    

 

 

 
   $ 9,933,360       $ 4,485,593       $   
  

 

 

    

 

 

    

 

 

 

 

10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

                                                                                
    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Financial assets- current

        

Fair value hedges

        

Stock forward contracts

   $ 96,153       $       $   
  

 

 

    

 

 

    

 

 

 

Financial liabilities- current

        

Fair value hedges

        

Stock forward contracts

   $       $ 16,364,241       $ 9,769,897   
  

 

 

    

 

 

    

 

 

 

Financial liabilities- noncurrent

        
        

Fair value hedges

        

Stock forward contracts

   $       $       $ 5,821   
  

 

 

    

 

 

    

 

 

 

The Company’s investments in publicly traded stocks are exposed to the risk of market price fluctuations. Accordingly, the Company entered into stock forward contracts to sell shares at a contracted price determined by specific percentage of the spot price on the trade date in a specific future period in order to hedge the fair value risk caused by changes in equity prices.

 

- 19 -


The outstanding stock forward contracts consisted of the following:

 

    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Contract amount (US$ in thousands)

   $        814,135       $  56,172,570       $   53,962,363   
   (US$ 24,741    (US$ 1,771,000    (US$ 1,771,000

 

11. NOTES AND ACCOUNTS RECEIVABLE, NET

 

                                                                                
    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Notes and accounts receivable

   $ 97,115,658       $ 115,221,473       $ 114,486,051   

Allowance for doubtful receivables

     (504,026      (486,730      (486,618
  

 

 

    

 

 

    

 

 

 

Notes and accounts receivable, net

   $ 96,611,632       $ 114,734,743       $ 113,999,433   
  

 

 

    

 

 

    

 

 

 

In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month of when the invoice is issued. The allowance for doubtful receivables is assessed by reference to the collectability of receivables by performing the account aging analysis, historical experience and current financial condition of customers.

Except for those impaired, for the rest of the notes and accounts receivable, the account aging analysis at the end of the reporting period is summarized in the following table. Notes and accounts receivable include amounts that are past due but for which the Company has not recognized a specific allowance for doubtful receivables after the assessment since there has not been a significant change in the credit quality of its customers and the amounts are still considered recoverable.

Aging analysis of notes and accounts receivable, net

 

                                                                                
    

 September 30, 

2015

     December 31,
2014
    

September 30,

2014

 

Neither past due nor impaired

   $ 87,742,721       $ 102,692,871       $ 103,429,104   

Past due but not impaired

        

Past due within 30 days

     8,585,713         12,041,872         10,570,329   

Past due 31-60 days

     283,198                   
  

 

 

    

 

 

    

 

 

 
   $ 96,611,632       $ 114,734,743       $ 113,999,433   
  

 

 

    

 

 

    

 

 

 

Movements of the allowance for doubtful receivables

 

                                                                                
     Individually
Assessed for
Impairment
     Collectively
Assessed for
Impairment
     Total  

Balance at January 1, 2015

   $ 8,093       $ 478,637       $ 486,730   

Provision

     28,593         20,670         49,263   

Reversal

             (32,832      (32,832

Effect of exchange rate changes

     775         90         865   
  

 

 

    

 

 

    

 

 

 

Balance at September 30, 2015

   $ 37,461       $ 466,565       $ 504,026   
  

 

 

    

 

 

    

 

 

 

(Continued)

 

- 20 -


                                                                                
     Individually
Assessed for
Impairment
     Collectively
Assessed for
Impairment
     Total  

Balance at January 1, 2014

   $ 8,058       $ 478,530       $ 486,588   

Provision

             22,071         22,071   

Reversal

     (284      (21,787      (22,071

Effect of exchange rate changes

             30         30   
  

 

 

    

 

 

    

 

 

 

Balance at September 30, 2014

   $ 7,774       $ 478,844       $ 486,618   
  

 

 

    

 

 

    

 

 

 

(Concluded)

Aging analysis of accounts receivable that is individually determined as impaired

 

                                                                                
    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Not past due

   $ 1,136       $       $   

Past due 1-30 days

     3,327                   

Past due 31-60 days

     4,207                   

Past due 61-120 days

     3,264                   

Past due over 121 days

     25,527         8,093         7,774   
  

 

 

    

 

 

    

 

 

 
   $ 37,461       $ 8,093       $ 7,774   
  

 

 

    

 

 

    

 

 

 

 

12. INVENTORIES

 

                                                                                
    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Finished goods

   $ 10,138,370       $ 9,972,024       $ 5,043,513   

Work in process

     49,216,582         51,027,892         55,142,160   

Raw materials

     3,422,366         3,222,523         3,160,203   

Supplies and spare parts

     2,288,896         2,115,532         1,991,113   
  

 

 

    

 

 

    

 

 

 
   $ 65,066,214       $ 66,337,971       $ 65,336,989   
  

 

 

    

 

 

    

 

 

 

Write-down of inventories to net realizable value was included in the cost of revenue, which were as follows:

 

                                                                           
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2015      2014      2015      2014  

Inventory losses

   $ 97,971       $ 691,557       $ 1,465,692       $ 2,215,165   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 21 -


13. FINANCIAL ASSETS CARRIED AT COST

 

                                                                                
    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Non-publicly traded stocks

   $ 1,215,789       $ 1,606,659       $ 1,678,365   

Mutual funds

     291,960         193,883         187,643   
  

 

 

    

 

 

    

 

 

 
   $ 1,507,749       $ 1,800,542       $ 1,866,008   
  

 

 

    

 

 

    

 

 

 

Since there is a wide range of estimated fair values of the Company’s investments in non-publicly traded stocks, the Company concludes that the fair value cannot be reliably measured and therefore should be measured at the cost less any impairment.

The common stock of Alchip Technologies, Ltd. was listed on the Taiwan Stock Exchange Corporation in October 2014. Thus, the Company reclassified the aforementioned investments from financial assets carried at cost to available-for-sale financial assets.

 

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments accounted for using the equity method consisted of the following:

 

                                                                                
    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Associates

   $ 23,585,244       $ 24,968,071       $ 23,805,190   

Joint venture

     3,350,741         3,287,666         3,179,975   
  

 

 

    

 

 

    

 

 

 
   $ 26,935,985       $ 28,255,737       $ 26,985,165   
  

 

 

    

 

 

    

 

 

 

 

  a. Investments in associates

Associates consisted of the following:

 

        Place of   Carrying Amount     % of Ownership and Voting Rights
Held by the Company
 
Name of Associate   Principal Activities   Incorporation
and Operation
 

September 30,

2015

    December 31,
2014
   

September 30,

2014

   

September 30,

2015

    December 31,
2014
   

September 30,

2014

 

Vanguard International Semiconductor Corporation (VIS)

 

Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts

 

Hsinchu, Taiwan

  $ 8,201,681      $ 10,105,485      $ 9,642,010        28     33     33

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

 

Fabrication and supply of integrated circuits

  Singapore     8,961,566        8,296,955        7,606,755        39     39     39

Motech Industries, Inc. (Motech)

 

Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems

 

New Taipei, Taiwan

    3,102,751        3,408,945        3,571,283        18     20     20

Xintec Inc. (Xintec)

 

Wafer level chip size packaging service

 

Taoyuan, Taiwan

    2,240,223        2,053,982        1,932,853        35     40     40

Global Unichip Corporation (GUC)

 

Researching, developing, manufacturing, testing and marketing of integrated circuits

 

Hsinchu, Taiwan

    1,079,023        1,102,704        1,052,289        35     35     35
     

 

 

   

 

 

   

 

 

       
      $ 23,585,244      $ 24,968,071      $ 23,805,190         
     

 

 

   

 

 

   

 

 

       

 

- 22 -


In March 2015, Xintec listed its shares on the R.O.C. Over-the-Counter (Taipei Exchange). Consequently, TSMC’s percentage of ownership over Xintec was diluted to approximately 35.4%. In April 2015, TSMC sold 2,172 thousand common shares of Xintec and recognized a disposal gain of NT$43,017 thousand in the second quarter of 2015. After the sale, TSMC owned approximately 34.6% of the equity interest in Xintec.

In both of the second quarters of 2015 and 2014, the Company sold 82,000 thousand common shares of VIS and respectively recognized a disposal gain of NT$2,263,539 thousand and NT$2,028,643 thousand. After the sale, the Company owned approximately 28.3% and 33.7% of the equity interest in VIS.

In June 2015, Motech merged with Tpcell Solar International Co., Ltd (TSi) with exchange of shares. As a result, the Company’s percentage of ownership over Motech decreased to 18.0%. Motech continues to be accounted for using equity method as the Company still retains significant influence over Motech.

The market prices of the investments accounted for using the equity method in publicly traded stocks calculated by the closing price at the end of the reporting period are summarized as follow. The closing price represents the quoted price in active markets, the level 1 fair value measurement.

 

                                                                                
Name of Associate   

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

VIS

   $ 17,315,536       $ 28,567,489       $ 24,361,568   
  

 

 

    

 

 

    

 

 

 

Motech

   $ 3,179,890       $ 4,242,769       $ 3,525,435   
  

 

 

    

 

 

    

 

 

 

GUC

   $ 2,712,565       $ 4,327,965       $ 4,267,270   
  

 

 

    

 

 

    

 

 

 

Xintec

   $ 3,256,518         
  

 

 

       

 

  b. Investments in joint venture

Joint venture consisted of the following:

 

        Place of   Carrying Amount     % of Ownership and Voting Rights
Held by the Company
 

Name of

Joint Venture

 

Principal

Activities

  Incorporation
and Operation
 

September 30,

2015

    December 31,
2014
   

September 30,

2014

   

September 30,

2015

    December 31,
2014
   

September 30,

2014

 

VisEra Holding Company (VisEra Holding)

 

Investing in companies involved in the design, manufacturing and other related businesses in the semiconductor industry

 

Cayman Islands

  $ 3,350,741      $ 3,287,666      $ 3,179,975        49     49     49
     

 

 

   

 

 

   

 

 

       

In August 2015, the Board of Directors of TSMC approved the acquisition of OmniVision Technologies, Inc.’s (“OVT’s”) 49.1% ownership in VisEra Holding and 100% ownership in Taiwan OmniVision Investment Holding Co. Inc., at an amount not more than US$126 million. The acquisition of shares is pending upon the regulatory approval from related governments.

 

- 23 -


15. PROPERTY, PLANT AND EQUIPMENT

 

    Land and Land
Improvements
    Buildings     Machinery and
Equipment
    Office
Equipment
    Assets under
Finance Leases
    Equipment under
Installation and
Construction in
Progress
    Total  

Cost

             

Balance at January 1, 2015

  $ 4,036,785      $ 269,163,850      $ 1,754,170,227      $ 27,960,835      $ 841,154      $ 109,334,736      $ 2,165,507,587   

Additions

           24,150,678        123,991,559        2,406,587               28,365,554        178,914,378   

Disposals or retirements

           (6,180     (1,908,608     (880,917                   (2,795,705

Lease agreement modification

                                (820,963            (820,963

Effect of exchange rate changes

    30,892        471,030        2,593,902        53,458        (13,076     26,861        3,163,067   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2015

  $ 4,067,677      $ 293,779,378      $ 1,878,847,080      $ 29,539,963      $ 7,115      $ 137,727,151      $ 2,343,968,364   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

             

Balance at January 1, 2015

  $ 459,140      $ 141,245,913      $ 1,188,388,402      $ 16,767,934      $ 447,397      $      $ 1,347,308,786   

Additions

    21,494        11,968,771        149,087,602        2,781,445        25,113               163,884,425   

Disposals or retirements

           (5,313     (1,832,675     (836,801                   (2,674,789

Lease agreement modification

                                (458,612            (458,612

Impairment

           278,057        2,028,627        10,740                      2,317,424   

Effect of exchange rate changes

    18,215        380,506        2,339,517        34,566        (6,783            2,766,021   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2015

  $ 498,849      $ 153,867,934      $ 1,340,011,473      $ 18,757,884      $ 7,115      $      $ 1,513,143,255   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at January 1, 2015

  $ 3,577,645      $ 127,917,937      $ 565,781,825      $ 11,192,901      $ 393,757      $ 109,334,736      $ 818,198,801   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at September 30, 2015

  $ 3,568,828      $ 139,911,444      $ 538,835,607      $ 10,782,079      $      $ 137,727,151      $ 830,825,109   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost

             

Balance at January 1, 2014

  $ 3,986,909      $ 229,182,736      $ 1,413,919,794      $ 22,062,032      $ 804,430      $ 272,173,793      $ 1,942,129,694   

Additions

           36,959,513        315,209,803        5,289,730               (183,863,766     173,595,280   

Disposals or retirements

           (1,140     (978,661     (576,042                   (1,555,843

Reclassification

           (1,996     1,996                               

Effect of exchange rate changes

    17,423        373,621        1,403,525        35,457        12,041        13,347        1,855,414   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2014

  $ 4,004,332      $ 266,512,734      $ 1,729,556,457      $ 26,811,177      $ 816,471      $ 88,323,374      $ 2,116,024,545   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

             

Balance at January 1, 2014

  $ 404,192      $ 125,234,166      $ 1,009,213,689      $ 14,225,771      $ 385,963             $ 1,149,463,781   

Additions

    20,608        11,526,796        128,094,234        2,246,814        31,367               141,919,819   

Disposals or retirements

           (418     (884,428     (575,946                   (1,460,792

Impairment

                  239,864                             239,864   

Reclassification

           (532     532                               

Effect of exchange rate changes

    9,325        261,933        1,239,751        34,697        6,288               1,551,994   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2014

  $ 434,125      $ 137,021,945      $ 1,137,903,642      $ 15,931,336      $ 423,618      $      $ 1,291,714,666   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at September 30, 2014

  $ 3,570,207      $ 129,490,789      $ 591,652,815      $ 10,879,841      $ 392,853      $ 88,323,374        824,309,879   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The significant part of the Company’s buildings includes main plants, mechanical and electrical power equipment and clean rooms, and the related depreciation is calculated using the estimated useful lives of 20 years, 10 years and 10 years, respectively.

In August 2015, TSMC Solar ceased its manufacturing operations. The Company recognized an impairment loss of NT$2,286,016 thousand since the carrying amounts of some of machinery and equipment, office equipment and mechanical and electrical power equipment were expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the nine months ended September 30, 2015.

In the second quarter of 2014, the Company recognized impairment losses of NT$239,864 thousand under other operating segments since the carrying amount of some of machinery and equipment was expected to be unrecoverable. Such impairment losses were included in other operating income and expenses for the six months ended June 30, 2014.

The Company had a building lease agreement with leasing terms from December 2003 to November 2018 and such lease was accounted for as a finance lease. In August 2015, the lease was determined to be an operating lease due to a modification on lease conditions; as such, the Company recognized a gain of NT$428,388 thousand from the modification. Such gain was included in other operating income and expenses for the nine months ended September 30, 2015.

 

- 24 -


16. INTANGIBLE ASSETS

 

     Goodwill      Technology
License
Fees
     Software and
System Design
Costs
     Patent and
Others
     Total  

Cost

              

Balance at January 1, 2015

   $ 5,888,813       $ 6,350,253       $ 18,697,098       $ 4,292,555       $ 35,228,719   

Additions

             1,068,240         416,977         440,090         1,925,307   

Retirements

                     (100,272              (100,272

Effect of exchange rate changes

     161,845         (6,542      2,281         1,753         159,337   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2015

   $ 6,050,658       $ 7,411,951       $ 19,016,084       $ 4,734,398       $ 37,213,091   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization

              

Balance at January 1, 2015

   $       $ 3,778,912       $ 14,861,146       $ 3,057,151       $ 21,697,209   

Additions

             693,671         1,245,215         426,434         2,365,320   

Retirements

                     (100,272              (100,272

Impairment

             58,130         384                 58,514   

Effect of exchange rate changes

             (6,542      2,073         497         (3,972
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2015

   $       $ 4,524,171       $ 16,008,546       $ 3,484,082       $ 24,016,799   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at January 1, 2015

   $ 5,888,813       $ 2,571,341       $ 3,835,952       $ 1,235,404       $ 13,531,510   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at September 30, 2015

   $ 6,050,658       $ 2,887,780       $ 3,007,538       $ 1,250,316       $ 13,196,292   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cost

              

Balance at January 1, 2014

   $ 5,627,517       $ 4,444,828       $ 17,086,805       $ 3,729,396       $ 30,888,546   

Additions

             875,891         711,811         685,382         2,273,084   

Retirements

                     (51,405              (51,405

Effect of exchange rate changes

     91,276         (1,491      2,019         2,003         93,807   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2014

   $ 5,718,793       $ 5,319,228       $ 17,749,230       $ 4,416,781       $ 33,204,032   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization

              

Balance at January 1, 2014

   $       $ 3,341,667       $ 13,439,135       $ 2,617,361       $ 19,398,163   

Additions

             314,529         1,102,788         496,922         1,914,239   

Retirements

                     (51,405              (51,405

Effect of exchange rate changes

             (1,491      1,879         398         786   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2014

   $       $ 3,654,705       $ 14,492,397       $ 3,114,681       $ 21,261,783   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at September 30, 2014

   $ 5,718,793       $ 1,664,523       $ 3,256,833       $ 1,302,100       $ 11,942,249   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s goodwill has been tested for impairment at the end of the annual reporting period and the recoverable amount is determined based on the value in use. The value in use was calculated based on the cash flow forecast from the financial budgets covering the future five-year period, and the Company used annual discount rate of 8.40% and 8.50% in its test of impairment as of December 31, 2014 and 2013, respectively, to reflect the relevant specific risk in the cash-generating unit.

In August 2015, TSMC Solar ceased its manufacturing operation and the Company recognized an impairment loss of NT$58,514 thousand since the carrying amounts of technology license fees, software and system design costs were expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the nine months ended September 30, 2015.

 

- 25 -


17. OTHER ASSETS

 

    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Tax receivable

   $ 1,671,508       $ 2,187,136       $ 1,787,749   

Prepaid expenses

     1,079,711         1,399,810         1,070,833   

Long-term receivable

     369,500         385,700         537,880   

Others

     1,100,518         885,470         741,604   
  

 

 

    

 

 

    

 

 

 
   $ 4,221,237       $ 4,858,116       $ 4,138,066   
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 2,844,481       $ 3,656,110       $ 2,864,405   

Noncurrent portion

     1,376,756         1,202,006         1,273,661   
  

 

 

    

 

 

    

 

 

 
   $ 4,221,237       $ 4,858,116       $ 4,138,066   
  

 

 

    

 

 

    

 

 

 

 

18. SHORT-TERM LOANS

 

    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Unsecured loans Amount

   $     33,564,120       $     36,158,520       $     35,883,358   
  

 

 

    

 

 

    

 

 

 

Original loan content

        

US$ (in thousands)

   $ 1,020,000       $ 1,140,000       $ 1,147,400   

EUR (in thousands)

                     24,000   

Annual interest rate

     0.38%-0.47%         0.38%-0.50%         0.35%-0.51%   

Maturity date

    
 
Due in
October 2015
  
  
    
 
Due in
January 2015
  
  
    
 
Due by
November 2014
  
  

 

19. PROVISIONS

 

    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Sales returns and allowances

   $ 9,898,270       $ 10,445,452       $ 7,677,524   

Warranties

     46,805         19,828         16,148   
  

 

 

    

 

 

    

 

 

 
   $ 9,945,075       $ 10,465,280       $ 7,693,672   
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 9,898,270       $ 10,445,452       $ 7,677,524   

Noncurrent portion (classified under other noncurrent liabilities)

     46,805         19,828         16,148   
  

 

 

    

 

 

    

 

 

 
   $ 9,945,075       $ 10,465,280       $ 7,693,672   
  

 

 

    

 

 

    

 

 

 

 

- 26 -


                                                                                
     Sales Returns
and Allowances
     Warranties      Total  

Nine months ended September 30, 2015

        

Balance, beginning of period

   $ 10,445,452       $ 19,828       $ 10,465,280   

Provision

     11,957,512         39,353         11,996,865   

Payment

     (12,526,015      (11,769      (12,537,784

Effect of exchange rate changes

     21,321         (607      20,714   
  

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ 9,898,270       $ 46,805       $ 9,945,075   
  

 

 

    

 

 

    

 

 

 

Nine months ended September 30, 2014

        

Balance, beginning of period

   $ 7,603,781       $ 10,452       $ 7,614,233   

Provision

     5,747,340         7,416         5,754,756   

Payment

     (5,680,243      (1,227      (5,681,470

Effect of exchange rate changes

     6,646         (493      6,153   
  

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ 7,677,524       $ 16,148       $ 7,693,672   
  

 

 

    

 

 

    

 

 

 

Provisions for sales returns and allowances are estimated based on historical experience, management judgment, and any known factors that would significantly affect the returns and allowances, and are recognized as a reduction of revenue in the same period of the related product sales.

The provision for warranties represents the present value of the Company’s best estimate of the future outflow of the economic benefits that will be required under the Company’s obligations for warranties. The estimate has been made on the basis of historical warranty trends of business and may vary as a result of new materials, altered manufacturing processes or other events affecting product quality.

 

20. BONDS PAYABLE

 

                                                                                
    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Domestic unsecured bonds

   $ 166,200,000       $ 166,200,000       $ 166,200,000   

Overseas unsecured bonds

     49,359,000         47,577,000         45,705,000   
  

 

 

    

 

 

    

 

 

 
     215,559,000         213,777,000         211,905,000   

Less: Discounts on bonds payable

     (77,315      (103,182      (108,195

Less: Current portion

     (23,510,931                
  

 

 

    

 

 

    

 

 

 
   $ 191,970,754       $ 213,673,818       $ 211,796,805   
  

 

 

    

 

 

    

 

 

 

The major terms of overseas unsecured bonds are as follows:

 

Issuance Period   

Total Amount
(US$

in Thousands)

     Coupon Rate     Repayment and Interest Payment

April 2013 to April 2016

   $ 350,000         0.95   Bullet repayment; interest payable semi-annually

April 2013 to April 2018

     1,150,000         1.625   The same as above

 

- 27 -


21. GUARANTEE DEPOSITS

 

    

September 30,

2015

    

December 31,

2014

    

September 30,

2014

 

Capacity guarantee

   $ 28,792,750       $ 30,132,100       $   

Others

     173,834         164,075         160,419   
  

 

 

    

 

 

    

 

 

 
   $ 28,966,584       $ 30,296,175       $ 160,419   
  

 

 

    

 

 

    

 

 

 

Current portion (classified under accrued expenses and other current liabilities)

   $ 5,758,550       $ 4,757,700       $   

Noncurrent portion

     23,208,034         25,538,475         160,419   
  

 

 

    

 

 

    

 

 

 
   $ 28,966,584       $ 30,296,175       $ 160,419   
  

 

 

    

 

 

    

 

 

 

Starting from the second quarter of 2015, some of guarantee deposits were refunded to customers by offsetting related accounts receivable.

 

22. EQUITY

 

  a. Capital stock

 

    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Authorized shares (in thousands)

     28,050,000         28,050,000         28,050,000   
  

 

 

    

 

 

    

 

 

 

Authorized capital

   $ 280,500,000       $ 280,500,000       $ 280,500,000   
  

 

 

    

 

 

    

 

 

 

Issued and paid shares (in thousands)

     25,930,380         25,929,662         25,929,375   
  

 

 

    

 

 

    

 

 

 

Issued capital

   $ 259,303,805       $ 259,296,624       $ 259,293,750   
  

 

 

    

 

 

    

 

 

 

A holder of issued common shares with par value of NT$10 per share is entitled to vote and to receive dividends.

The authorized shares include 500,000 thousand shares allocated for the exercise of employee stock options.

As of September 30, 2015, 1,072,645 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,363,225 thousand shares (one ADS represents five common shares).

 

  b. Capital surplus

 

    

September 30,

2015

     December 31,
2014
    

September 30,

2014

 

Additional paid-in capital

   $ 24,184,939       $ 24,053,965       $ 24,043,271   

From merger

     22,804,510         22,804,510         22,804,510   

From convertible bonds

     8,892,847         8,892,847         8,892,847   

From share of changes in equities of subsidiaries

     78,482         104,335         73,038   

From share of changes in equities of associates and joint venture

     337,895         134,210         131,078   

Donations

     55         55         55   
  

 

 

    

 

 

    

 

 

 
   $ 56,298,728       $ 55,989,922       $ 55,944,799   
  

 

 

    

 

 

    

 

 

 

 

- 28 -


Under the Company Law, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds, the surplus from treasury stock transactions and the differences between equity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries) may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or stock dividends up to a certain percentage of TSMC’s paid-in capital. The capital surplus from share of changes in equities of subsidiaries may be used to offset a deficit.

 

  c. Retained earnings and dividend policy

TSMC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, TSMC shall first offset its losses in previous years and then set aside the following items accordingly:

 

  1) Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals TSMC’s paid-in capital;

 

  2) Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;

 

  3) Bonus to directors and profit sharing to employees of TSMC of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of TSMC are not entitled to receive the bonus to directors. TSMC may issue profit sharing to employees in stock of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;

 

  4) Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.

TSMC’s Articles of Incorporation also provide that profits of TSMC may be distributed by way of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.

Any appropriations of the profits are subject to shareholders’ approval in the following year.

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. Accordingly, the Company expects to make amendments to the Company’s Articles of Incorporation to be approved during the 2016 annual shareholders’ meeting. For information about the accrual basis of employees’ compensation or profit sharing to employees and bonus to directors for the three months ended September 30, 2015 and 2014, and the nine months ended September 30, 2015 and 2014, and the actual appropriations for the years ended December 31, 2014 and 2013, please refer to Employee benefits expense in Note 29.

The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash or stocks for the portion in excess of 25% of the paid-in capital if the Company incurs no loss.

Pursuant to existing regulations, the Company is required to set aside additional special capital reserve equivalent to the net debit balance of the other components of stockholders’ equity, such as the accumulated balance of foreign currency translation reserve, unrealized valuation gain/loss from available-for-sale financial assets, gain/loss from changes in fair value of hedging instruments in cash flow hedges, etc. For the subsequent decrease in the deduction amount to stockholders’ equity, any special reserve appropriated may be reversed to the extent that the net debit balance reverses.

 

- 29 -


The appropriations of 2014 and 2013 earnings have been approved by TSMC’s shareholders in its meeting held on June 9, 2015 and on June 24, 2014, respectively. The appropriations and dividends per share were as follows:

 

                                                                                           
     Appropriation of Earnings      Dividends Per Share
(NT$)
 
     For Fiscal      For Fiscal      For Fiscal      For Fiscal  
     Year 2014      Year 2013      Year 2014      Year 2013  

Legal capital reserve

   $ 26,389,879       $ 18,814,679         

Special capital reserve

             (2,785,741      

Cash dividends to shareholders

     116,683,481         77,785,851       $ 4.50       $ 3.00   
  

 

 

    

 

 

       
   $ 143,073,360       $ 93,814,789         
  

 

 

    

 

 

       

Under the Integrated Income Tax System that became effective on January 1, 1998, the R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by TSMC on earnings generated since January 1, 1998.

 

  d. Others

Changes in others were as follows:

 

                                                                                           
     Nine Months Ended September 30, 2015  
     Foreign
Currency
Translation
Reserve
     Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
     Cash Flow
Hedges Reserve
     Total  

Balance, beginning of period

   $ 4,502,113       $ 21,247,483       $ (305    $ 25,749,291   

Exchange differences arising on translation of foreign operations

     8,955,736                         8,955,736   

Changes in fair value of available-for-sale financial assets

             (322,039              (322,039

Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets

     (1,358,840      (20,123,082              (21,481,922

Share of other comprehensive income of associates and joint venture

     (93,715      327,320         (347      233,258   

The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates

     4,356         2,051         11         6,418   

Income tax effect

             (2,551              (2,551
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ 12,009,650       $ 1,129,182       $ (641    $ 13,138,191   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 30 -


                                                                                           
     Nine Months Ended September 30, 2014  
     Foreign
Currency
Translation
Reserve
     Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
     Cash Flow
Hedges Reserve
     Total  

Balance, beginning of period

   $ (7,140,362    $ 21,310,781       $ (113    $ 14,170,306   

Exchange differences arising on translation of foreign operations

     3,189,480                         3,189,480   

Other comprehensive income/losses reclassified to profit or loss upon disposal of subsidiaries

     84                         84   

Changes in fair value of available-for-sale financial assets

             (178,550              (178,550

Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets

             (260,050              (260,050

Share of other comprehensive income of associates and joint venture

     (41,619      (486      (26      (42,131

The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates

     3,017         (2,920              97   

Income tax effect

             (13,745              (13,745
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ (3,989,400    $ 20,855,030       $ (139    $ 16,865,491   
  

 

 

    

 

 

    

 

 

    

 

 

 

The exchange differences arising on translation of foreign operation’s net assets from its functional currency to TSMC’s presentation currency are recognized directly in other comprehensive income and also accumulated in the foreign currency translation reserve.

Unrealized gain/loss on available-for-sale financial assets represents the cumulative gains or losses arising from the fair value measurement on available-for-sale financial assets that are recognized in other comprehensive income, excluding the amounts recognized in profit or loss for the effective portion from changes in fair value of the hedging instruments. When those available-for-sale financial assets have been disposed of or are determined to be impaired subsequently, the related cumulative gains or losses in other comprehensive income are reclassified to profit or loss.

The cash flow hedges reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of the hedging instruments entered into as cash flow hedges. The cumulative gains or losses arising on changes in fair value of the hedging instruments that are recognized and accumulated in cash flow hedges reserve will be reclassified to profit or loss only when the hedge transaction affects profit or loss.

 

- 31 -


    e. Noncontrolling interests

 

     Nine Months Ended September 30  
     2015      2014  

Balance, beginning of period

   $ 127,221       $ 266,709   

Share of noncontrolling interests

     

Net loss

     (22,537      (98,015

Exchange differences arising on translation of foreign operations

     744         547   

Other comprehensive income/losses reclassified to profit or loss upon disposal of subsidiaries

             6   

Changes in fair value of available-for-sale financial assets

     (10,193      977   

Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets

     (89      (858

Share of other comprehensive income of associates and joint venture

     (14      (6

The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates

     3           

Adjustments to share of changes in equities of associates and joint venture

     149         (45

From share of changes in equities of subsidiaries

     25,853         27,789   

Decrease in noncontrolling interests

     (42,719      (58,571

Effect of disposal of subsidiary

     (42,640        
  

 

 

    

 

 

 

Balance, end of period

   $ 35,778       $ 138,533   
  

 

 

    

 

 

 

 

23. SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for nine months ended September 30, 2015 and 2014. TSMC elected to take the optional exemption for its issued employee stock options from applying IFRS 2 “Share-based Payment.” The related information is as follows:

 

    

Number of
Stock

Options

(In Thousands)

    

Weighted-

average

Exercise
Price (NT$)

 

Nine months ended September 30, 2015

     

Balance, beginning of period

     718       $ 47.2   

Options exercised

     (718      47.2   
  

 

 

    

Balance, end of period

               
  

 

 

    

Balance exercisable, end of period

               
  

 

 

    

Nine months ended September 30, 2014

     

Balance, beginning of period

     1,763       $ 45.9   

Options exercised

     (758      44.2   
  

 

 

    

Balance, end of period

     1,005         47.2   
  

 

 

    

Balance exercisable, end of period

     1,005         47.2   
  

 

 

    

 

- 32 -


The numbers of outstanding stock options and exercise prices have been adjusted to reflect the distribution of earnings by TSMC in accordance with the plans.

The employee stock options have been fully exercised in the second quarter of 2015.

Information