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 May 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: May 15, 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

Three Months Ended March 31, 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 March 31, 2015 and 2014 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 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.

April 24, 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)

 

 

 

March 31, 2015

(Reviewed)

 

December 31, 2014

(Adjusted and Audited)

 

March 31, 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)

$ 437,412,411      28    $ 358,449,029      24    $ 231,697,295      18    $ 242,695,447      19   

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

  297,698           192,045           11,425           90,353        

Available-for-sale financial assets (Note 8)

  68,204,390      5      73,797,476      5      845,002           760,793        

Held-to-maturity financial assets (Note 9)

  13,060,038      1      4,485,593           2,394,178           1,795,949        

Notes and accounts receivable, net (Note 11)

  98,529,745      6      114,734,743      8      73,774,054      6      71,649,926      6   

Receivables from related parties (Note 32)

  592,021           312,955           558,970           291,708        

Other receivables from related parties (Note 32)

  162,908           178,625           162,444           221,576        

Inventories (Note 12)

  64,599,666      4      66,337,971      5      43,481,269      3      37,494,893      3   

Noncurrent assets held for sale (Note 30)

            944,208                            

Other financial assets (Note 33)

  3,946,604           3,476,884           584,364           501,785        

Other current assets (Note 17)

  3,688,211           3,656,110           2,381,416           2,984,224        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

  690,493,692      44      626,565,639      42      355,890,417      27      358,486,654      28   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT ASSETS

Available-for-sale financial assets (Note 8)

                      59,284,283      5      58,721,959      5   

Financial assets carried at cost (Note 13)

  1,817,677           1,800,542           2,055,075           2,145,591        

Investments accounted for using equity method (Note 14)

  30,363,144      2      28,255,737      2      29,512,938      2      28,321,241      2   

Property, plant and equipment (Note 15)

  813,219,884      52      818,198,801      55      828,011,580      64      792,665,913      63   

Intangible assets (Note 16)

  13,138,963      1      13,531,510      1      12,113,629      1      11,490,383      1   

Deferred income tax assets (Note 4)

  6,246,031      1      5,138,782           7,799,443      1      7,145,004      1   

Refundable deposits (Note 32)

  442,633           356,069           2,560,988           2,519,031        

Other noncurrent assets (Note 17)

  1,173,031           1,202,006           1,422,102           1,469,577        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent assets

  866,401,363      56      868,483,447      58      942,760,038      73      904,478,699      72   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

$ 1,556,895,055      100    $ 1,495,049,086      100    $ 1,298,650,455      100    $ 1,262,965,353      100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short-term loans (Note 18)

$ 18,683,595      1    $ 36,158,520      2    $ 24,843,645      2    $ 15,645,000      1   

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

  64,929           486,214           188,535           33,750        

Hedging derivative financial liabilities (Note 10)

  11,627,838      1      16,364,241      1                       

Accounts payable

  18,595,310      1      21,878,934      2      15,380,651      1      14,670,260      1   

Payables to related parties (Note 32)

  1,609,613           1,491,490           1,330,050           1,688,456        

Salary and bonus payable

  8,032,667      1      10,573,922      1      6,107,014      1      8,330,956      1   

Accrued profit sharing to employees and bonus to directors and supervisors (Note 22)

  23,436,465      1      18,052,820      1      16,018,761      1      12,738,801      1   

Payables to contractors and equipment suppliers

  27,372,814      2      26,980,408      2      53,461,455      4      89,810,160      7   

Income tax payable (Note 4)

  38,954,401      2      28,616,574      2      28,433,542      2      22,563,286      2   

Provisions (Note 19)

  8,130,817      1      10,445,452      1      9,964,997      1      7,603,781      1   

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

            219,043                            

Accrued expenses and other current liabilities (Note 21)

  31,056,696      2      29,746,011      2      18,668,514      2      16,693,484      1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

  187,565,145      12      201,013,629      14      174,397,164      14      189,777,934      15   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT LIABILITIES

Hedging derivative financial liabilities (Note 10)

                      5,279,032           5,481,616        

Bonds payable (Note 20)

  213,208,771      14      213,673,818      14      211,798,101      16      210,767,625      17   

Long-term bank loans

  40,000           40,000           40,000           40,000        

Deferred income tax liabilities (Note 4)

  159,538           199,750                            

Obligations under finance leases

  799,612           802,108           783,275           776,230        

Net defined benefit liability (Note 4)

  6,553,652           6,567,782           6,793,685      1      6,801,663      1   

Guarantee deposits (Note 21)

  23,715,049      2      25,538,475      2      154,505           151,660        

Others (Note 19)

  937,535           885,192           711,901           694,901        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent liabilities

  245,414,157      16      247,707,125      16      225,560,499      17      224,713,695      18   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  432,979,302      28      448,720,754      30      399,957,663      31      414,491,629      33   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

Capital stock (Note 22)

  259,303,020      17      259,296,624      17      259,291,239      20      259,286,171      21   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital surplus (Note 22)

  56,274,436      4      55,989,922      4      55,835,280      4      55,858,626      4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retained earnings (Note 22)

Appropriated as legal capital reserve

  151,250,682      10      151,250,682      10      132,436,003      10      132,436,003      11   

Appropriated as special capital reserve

                      2,785,741      1      2,785,741        

Unappropriated earnings

  632,904,503      40      553,914,592      37      431,536,961      33      383,670,168      30   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  784,155,185      50      705,165,274      47      566,758,705      44      518,891,912      41   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Others (Note 22)

  24,110,858      1      25,749,291      2      16,583,227      1      14,170,306      1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to shareholders of the parent

  1,123,843,499      72      1,046,201,111      70      898,468,451      69      848,207,015      67   

NONCONTROLLING INTERESTS (Note 22)

  72,254           127,221           224,341           266,709        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

  1,123,915,753      72      1,046,328,332      70      898,692,792      69      848,473,724      67   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

$ 1,556,895,055      100    $ 1,495,049,086      100    $ 1,298,650,455      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)

 

 

  Three Months Ended March 31  
  2015
(Note 3)
  2014
(Adjusted)
(Note 3)
 
  Amount   %   Amount   %  

NET REVENUE (Notes 24, 32 and 37)

$ 222,034,144      100    $ 148,215,172      100   

COST OF REVENUE (Notes 12, 29 and 32)

  112,585,333      51      77,839,185      53   
  

 

 

   

 

 

    

 

 

   

 

 

 

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

  109,448,811      49      70,375,987      47   

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

  (19,547        21,017        
  

 

 

   

 

 

    

 

 

   

 

 

 

GROSS PROFIT

  109,429,264      49      70,397,004      47   
  

 

 

   

 

 

    

 

 

   

 

 

 

OPERATING EXPENSES (Notes 29 and 32)

Research and development

  16,781,463      7      12,067,892      8   

General and administrative

  4,366,053      2      4,655,977      3   

Marketing

  1,390,996      1      1,152,780      1   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expenses

  22,538,512      10      17,876,649      12   
  

 

 

   

 

 

    

 

 

   

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Note 29)

  (264,629        (2,741     
  

 

 

   

 

 

    

 

 

   

 

 

 

INCOME FROM OPERATIONS (Note 37)

  86,626,123      39      52,517,614      35   
  

 

 

   

 

 

    

 

 

   

 

 

 

NON-OPERATING INCOME AND EXPENSES

Share of profits of associates and joint venture

  1,134,649      1      955,609      1   

Other income

  881,782           613,699        

Foreign exchange gain (loss), net (Note 36)

  48,183           (36,401     

Finance costs (Note 25)

  (793,942        (796,580     

Other gains and losses (Note 26)

  362,185           43,384        
  

 

 

   

 

 

    

 

 

   

 

 

 

Total non-operating income and expenses

  1,632,857      1      779,711      1   
  

 

 

   

 

 

    

 

 

   

 

 

 

INCOME BEFORE INCOME TAX

  88,258,980      40      53,297,325      36   

INCOME TAX EXPENSE (Notes 4 and 27)

  9,275,072      4      5,455,495      4   
  

 

 

   

 

 

    

 

 

   

 

 

 

NET INCOME

  78,983,908      36      47,841,830      32   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(Continued)

 

- 3 -


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)

 

 

  Three Months Ended March 31  
  2015
(Note 3)
  2014
(Adjusted)
(Note 3)
 
  Amount   %   Amount   %  

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

$ (2,279,138   (1 $ 2,831,381      2   

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

  (204,815   —        (415,445   —     

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

  843,163      —        (4,747   —     

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

  (4,793   —        2,956      —     
  

 

 

   

 

 

   

 

 

   

 

 

 

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

  (1,645,583   (1   2,414,145      2   
  

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

$ 77,338,325      35    $ 50,255,975      34   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

Shareholders of the parent

$ 78,989,911      36    $ 47,866,793      32   

Noncontrolling interests

  (6,003   —        (24,963   —     
  

 

 

   

 

 

   

 

 

   

 

 

 
$ 78,983,908      36    $ 47,841,830      32   
  

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

Shareholders of the parent

$ 77,351,478      35    $ 50,279,714      34   

Noncontrolling interests

  (13,153   —        (23,739   —     
  

 

 

   

 

 

   

 

 

   

 

 

 
$ 77,338,325      35    $ 50,255,975      34   
  

 

 

   

 

 

   

 

 

   

 

 

 
  2015   2014  
 

Income Attributable to
Shareholders of

the Parent

 

Income Attributable to
Shareholders of

the Parent

 

EARNINGS PER SHARE (NT$, Note 28)

Basic earnings per share

$        3.05    $        1.85   
  

 

 

   

 

 

 

Diluted earnings per share

$        3.05    $        1.85   
  

 

 

   

 

 

 

 

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

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

  Equity Attributable to Shareholders of the Parent          
                              Others              
                                  Unrealized                      
                             

Foreign

Currency

Translation

  Gain/Loss                      
  Capital Stock - Common Stock       Retained Earnings   from Available-                      
  Shares           Legal Capital   Special Capital   Unappropriated       for-sale   Cash Flow           Noncontrolling   Total  
  (In Thousands)   Amount   Capital Surplus   Reserve   Reserve   Earnings   Total   Reserve   Financial Assets   Hedges Reserve   Total   Total   Interests   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   

Net income for the three months ended March 31, 2015

  —        —        —        —        —        78,989,911      78,989,911      —        —        —        —        78,989,911      (6,003   78,983,908   

Other comprehensive income for the three months ended March 31, 2015, net of income tax

  —        —        —        —        —        —        —        (2,258,112   619,879      (200   (1,638,433   (1,638,433   (7,150   (1,645,583
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the three months ended March 31, 2015

  —        —        —        —        —        78,989,911      78,989,911      (2,258,112   619,879      (200   (1,638,433   77,351,478      (13,153   77,338,325   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

  640      6,396      23,793      —        —        —        —        —        —        —        —        30,189      —        30,189   

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

  —        —        261,752      —        —        —        —        —        —        —        —        261,752      (26   261,726   

From share of changes in equities of subsidiaries

  —        —        (1,031   —        —        —        —        —        —        —        —        (1,031   1,031      —     

Decrease in noncontrolling interests

  —        —        —        —        —        —        —        —        —        —        —        —        (179   (179

Effect of disposal of subsidiary

  —        —        —        —        —        —        —        —        —        —        —        —        (42,640   (42,640
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, MARCH 31, 2015

  25,930,302    $ 259,303,020    $ 56,274,436    $ 151,250,682    $ —      $ 632,904,503    $ 784,155,185    $ 2,244,001    $ 21,867,362    $ (505 $ 24,110,858    $ 1,123,843,499    $ 72,254    $ 1,123,915,753   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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   

Net income for the three months ended March 31, 2014

  —        —        —        —        —        47,866,793      47,866,793      —        —        —        —        47,866,793      (24,963   47,841,830   

Other comprehensive income for the three months ended March 31, 2014, net of income tax

  —        —        —        —        —        —        —        2,807,924      (395,098   95      2,412,921      2,412,921      1,224      2,414,145   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the three months ended March 31, 2014

  —        —        —        —        —        47,866,793      47,866,793      2,807,924      (395,098   95      2,412,921      50,279,714      (23,739   50,255,975   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

  507      5,068      17,235      —        —        —        —        —        —        —        —        22,303      —        22,303   

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

  —        —        (29,636   —        —        —        —        —        —        —        —        (29,636   —        (29,636

From differences between equity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries

  —        —        (10,945   —        —        —        —        —        —        —        —        (10,945   10,945      —     

Decrease in noncontrolling interests

  —        —        —        —        —        —        —        —        —        —        —        —        (29,574   (29,574
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, MARCH 31, 2014

  25,929,124    $ 259,291,239    $ 55,835,280    $ 132,436,003    $ 2,785,741    $ 431,536,961    $ 566,758,705    $ (4,332,438 $ 20,915,683    $ (18 $ 16,583,227    $ 898,468,451    $ 224,341    $ 898,692,792   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

  Three Months Ended
March 31
 
  2015  

2014

(Adjusted)

 

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax

$ 88,258,980    $ 53,297,325   

Adjustments for:

Depreciation expense

  54,706,227      40,985,942   

Amortization expense

  771,769      636,435   

Finance costs

  793,942      796,580   

Share of profits of associates and joint venture

  (1,134,649   (955,609

Interest income

  (881,782   (613,699

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

  4,081      (497

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

  (2,961   (20,987

Gain on disposal of financial assets carried at cost, net

  (42,243   (23,758

Unrealized (realized) gross profit on sales to associates

  19,547      (21,017

Loss (gain) on foreign exchange, net

  (1,054,551   2,665,824   

Gain from hedging instruments

  (4,592,076   (325,678

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

  4,602,284      327,961   

Changes in operating assets and liabilities:

Derivative financial instruments

  (526,938   233,713   

Notes and accounts receivable, net

  16,205,075      (2,124,198

Receivables from related parties

  (279,066   (267,262

Other receivables from related parties

  15,717      4,415   

Inventories

  1,738,305      (5,986,376

Other financial assets

  (425,720   (28,952

Other current assets

  (32,060   615,697   

Accounts payable

  (2,573,738   722,298   

Payables to related parties

  118,123      (358,406

Salary and bonus payable

  (2,541,255   (2,223,942

Accrued profit sharing to employees and bonus to directors and supervisors

  5,383,645      3,279,960   

Accrued expenses and other current liabilities

  (82,857   2,073,184   

Provisions

  (2,314,512   2,359,196   

Net defined benefit liability

  (14,130   (7,978
  

 

 

   

 

 

 

Cash generated from operations

  156,119,157      95,040,171   

Income taxes paid

  (118,496   (179,230
  

 

 

   

 

 

 

Net cash generated by operating activities

  156,000,661      94,860,941   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of:

Available-for-sale financial assets

  —        (5,181

Financial assets carried at cost

  (31,533   (3,782

Held-to-maturity financial assets

  (9,372,767   (1,396,723

 

(Continued)

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

  Three Months Ended
March 31
 
  2015  

2014

(Adjusted)

 

Property, plant and equipment

$ (48,875,682 $ (114,905,317

Intangible assets

  (1,151,372   (1,178,194

Proceeds from disposal or redemption of:

Available-for-sale financial assets

  36,021      62,843   

Held-to-maturity financial assets

  800,000      800,000   

Financial assets carried at cost

  9,125      28,533   

Property, plant and equipment

  30,161      55,255   

Cash received from other long-term receivables

  —        78,060   

Interest received

  874,723      596,277   

Refundable deposits paid

  (189,442   (7,869

Refundable deposits refunded

  101,714      16,506   

Net cash inflow from disposal of subsidiary (Note 30)

  601,047      —     
  

 

 

   

 

 

 

Net cash used in investing activities

  (57,168,005   (115,859,592
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (decrease) in short-term loans

  (17,341,135   8,819,028   

Interest paid

  (861,616   (863,834

Guarantee deposits received

  176,072      3,744   

Guarantee deposits refunded

  (174,920   (1,443

Proceeds from exercise of employee stock options

  30,189      22,303   

Decrease in noncontrolling interests

  (179   (29,574
  

 

 

   

 

 

 

Net cash generated by (used in) financing activities

  (18,171,589   7,950,224   
  

 

 

   

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

  (1,779,163   2,050,275   
  

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

  78,881,904      (10,998,152

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

$ 437,412,411    $ 231,697,295   
  

 

 

   

 

 

 

 

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 THREE MONTHS ENDED MARCH 31, 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 April 24, 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

March 31,

2015

 

Increase in investments accounted for using equity method

$ 167   

Increase in deferred income tax assets

  687   
  

 

 

 

Increase in assets

$ 854   
  

 

 

 

 

(Continued)

 

- 9 -


Impact on Assets, Liabilities and Equity

March 31,

2015

 

Increase in net defined benefit liability

$ 5,723   
  

 

 

 

Increase in liabilities

$ 5,723   
  

 

 

 

Decrease in retained earnings

$ (4,869
  

 

 

 

Decrease in equity

$ (4,869
  

 

 

 

(Concluded)

 

Impact on Total Comprehensive Income

Three Months
Ended

March 31, 2015

 

Increase in cost of revenue

$ (3,687

Increase in operating expense

  (2,036

Increase in share of profit of associate and joint venture

  167   

Decrease in income tax expense

  687   
  

 

 

 

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

$ (4,869
  

 

 

 

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   
     

 

 

    

 

(Continued)

 

- 10 -


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

March 31, 2014

Investments accounted for using the equity method

$ 29,507,728    $ 5,210    $ 29,512,938   

Deferred income tax assets

  7,893,479      (94,036   7,799,443   
     

 

 

    

Total effect on assets

$ (88,826
     

 

 

    

Net defined benefit liability

  7,577,202    $ (783,517   6,793,685   
     

 

 

    

Total effect on liabilities

$ (783,517
     

 

 

    

Retained earnings

  566,063,897    $ 694,808      566,758,705   

Noncontrolling interests

  224,458      (117   224,341   
     

 

 

    

Total effect on equity

$ 694,691   
     

 

 

    

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   
     

 

 

    

Three months ended March 31, 2014

Cost of revenue

  (77,836,093 $ (3,092   (77,839,185

Operating expense

  (17,874,995   (1,654   (17,876,649

Share of the profit or loss of associates and joint ventures

  955,380      229      955,609   

Income tax expense

  (5,456,064   569      (5,455,495
     

 

 

    

Impact on net income for the period

$ (3,948
     

 

 

    

 

(Continued)

 

- 11 -


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

Impact on net income attributable to:

Shareholders of the parent

$ 47,870,745    $ (3,952 $ 47,866,793   

Noncontrolling interests

  (24,967   4      (24,963
  

 

 

    

 

 

    

 

 

 
$ 47,845,778    $ (3,948 $ 47,841,830   
  

 

 

    

 

 

    

 

 

 

Impact on total comprehensive income attributable to:

Shareholders of the parent

$ 50,283,666    $ (3,952 $ 50,279,714   

Noncontrolling interests

  (23,743   4      (23,739
  

 

 

    

 

 

    

 

 

 
$ 50,259,923    $ (3,948 $ 50,255,975   
  

 

 

    

 

 

    

 

 

 

(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

IFRS 15 Revenue from Contracts with Customers

January 1, 2017

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

 

- 12 -


  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.

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.

 

- 13 -


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.

 

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.

 

- 14 -


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

March 31,

2015

  December 31,
2014
 

March 31,

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   50 a), b)

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 c)

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%
controlling
interest
of in
TSMC
Solar.

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)

 

(Continued)

 

- 15 -


           

Establishment

and Operating

Location

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

March 31,

2015

    December 31,
2014
   

March 31,

2014

    Note

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 SSL

 

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

 

Selling and marketing of solid state lighting related products

 

Delaware, U.S.A.

    —          —          100   a), d)

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)
 

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

 

Investing in solar related business

 

Amsterdam, the Netherlands

    100     100     100   a), e)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    —          —          49   b)

TSMC Solar Europe

 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

 

Hamburg, Germany

    100     100     100   a), e)

(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: According to the agreement among TSMC, TSMC Solar and VTAF III, each of the investment held by VTAF III is separately owned by TSMC and TSMC Solar. As the investment owned by VTAF III, which is indirectly owned by TSMC Solar, has entered into liquidation process due to bankruptcy and the bankruptcy trustee confirmed that no residual assets could be reimbursed to the shareholders, in the second quarter of 2014, TSMC Solar’s percentage of ownership over VTAF III has decreased to nil. Consequently, TSMC’s percentage of ownership over VTAF III has been adjusted to 98%.
Note c: TSMC and TSMC GN aggregately have a controlling interest of 94% in TSMC SSL as of December 31, 2014 and March 31, 2014. TSMC and TSMC GN have completed the disposal of TSMC SSL in February 2015. Please refer to Note 30.
Note d: To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC SSL approved to file for the liquidation of TSMC Lighting NA. The liquidation procedure has been completed in the third quarter of 2014.
Note e: 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 After the liquidation, TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, will be held directly by TSMC Solar. TSMC Solar Europe GmbH started their liquidation procedure in the third quarter of 2014.

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.

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.

 

- 16 -


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

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Cash and deposits in banks

$ 432,069,913    $ 352,761,240    $ 224,475,625   

Repurchase agreements collateralized by corporate bonds

  3,629,594      3,920,562      3,071,910   

Commercial paper

  999,530      1,159,325      299,851   

Repurchase agreements collateralized by short-term commercial paper

  448,784      449,180      2,927,812   

Repurchase agreements collateralized by government bonds

  264,590      158,722      922,097   
  

 

 

    

 

 

    

 

 

 
$ 437,412,411    $ 358,449,029    $ 231,697,295   
  

 

 

    

 

 

    

 

 

 

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

 

 

March 31,

2015

  December 31,
2014
  March 31,
2014
 

Derivative financial assets

Forward exchange contracts

$ 297,698    $ 73,117    $ 3,935   

Cross currency swap contracts

  —        118,928      7,490   
  

 

 

    

 

 

    

 

 

 
$ 297,698    $ 192,045    $ 11,425   
  

 

 

    

 

 

    

 

 

 

Derivative financial liabilities

Forward exchange contracts

$ 64,601    $ 126,607    $ 186,105   

Cross currency swap contracts

  328      359,607      2,430   
  

 

 

    

 

 

    

 

 

 
$ 64,929    $ 486,214    $ 188,535   
  

 

 

    

 

 

    

 

 

 

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.

 

- 17 -


Outstanding forward exchange contracts consisted of the following:

 

    Contract Amount
  Maturity Date (In Thousands)

March 31, 2015

Sell EUR/Buy US$

April 2015 EUR5,420/US$5,794

Sell NT$/Buy US$

June 2015 NT$1,777,048/US$56,000

Sell US$/Buy EUR

April 2015 US$20,640/EUR19,000

Sell US$/Buy JPY

April 2015 US$2,000/JPY240,130

Sell US$/Buy NT$

April 2015 to June 2015 US$1,965,000/NT$61,740,851

Sell US$/Buy RMB

April 2015 US$177,000/RMB1,103,996

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

March 31, 2014

Sell EUR/Buy US$

April 2014 EUR1,030/US$1,421

Sell NT$/Buy EUR

April 2014 NT$419,405/EUR10,000

Sell NT$/Buy JPY

April 2014 NT$941,573/JPY3,150,000

Sell NT$/Buy US$

April 2014 NT$962,307/US$31,700

Sell US$/Buy EUR

April 2014 US$266,577/EUR193,700

Sell US$/Buy JPY

April 2014 US$498,716/JPY50,938,160

Sell US$/Buy RMB

April 2014 to June 2014 US$86,000/RMB525,831

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

March 31, 2015

April 2015

NT$2,758,469/US$88,130 0.02%

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%

March 31, 2014

April 2014

NT$2,222,031/US$73,080 0.45%-0.76%

 

- 18 -


8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Publicly traded stocks

$ 68,204,002    $ 73,797,085    $ 60,122,854   

Money market funds

  388      391      6,431   
  

 

 

    

 

 

    

 

 

 
$ 68,204,390    $ 73,797,476    $ 60,129,285   
  

 

 

    

 

 

    

 

 

 

Current portion

$ 68,204,390    $ 73,797,476    $ 845,002   

Noncurrent portion

  —        —        59,284,283   
  

 

 

    

 

 

    

 

 

 
$ 68,204,390    $ 73,797,476    $ 60,129,285   
  

 

 

    

 

 

    

 

 

 

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 will end within a year.

 

9. HELD-TO-MATURITY FINANCIAL ASSETS

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Current portion

Commercial paper

$ 13,060,038    $ 4,485,593    $ 2,394,178   
  

 

 

    

 

 

    

 

 

 

 

10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Financial liabilities - current

Fair value hedges

Stock forward contracts

$ 11,627,838    $ 16,364,241    $ —     
  

 

 

    

 

 

    

 

 

 

Financial liabilities - noncurrent

Fair value hedges

Stock forward contracts

$ —      $ —      $ 5,279,032   
  

 

 

    

 

 

    

 

 

 

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:

 

 

March 31,

2015

 

December 31,

2014

 

March 31,

2014

 

Contract amount (US$ in thousands)

$ 55,611,164    $ 56,172,570    $ 50,253,432   
  (US$1,771,000   (US$1,771,000   (US$1,648,572

 

11. NOTES AND ACCOUNTS RECEIVABLE, NET

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Notes and accounts receivable

$ 99,016,398    $ 115,221,473    $ 74,260,712   

Allowance for doubtful receivables

  (486,653   (486,730   (486,658
  

 

 

    

 

 

    

 

 

 

Notes and accounts receivable, net

$ 98,529,745    $ 114,734,743    $ 73,774,054   
  

 

 

    

 

 

    

 

 

 

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

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Neither past due nor impaired

$ 89,431,546    $ 102,692,871    $ 66,347,383   

Past due but not impaired

Past due within 30 days

  8,299,658      12,041,872      7,426,671   

Past due 31-60 days

  798,541      —        —     
  

 

 

    

 

 

    

 

 

 
$ 98,529,745    $ 114,734,743    $ 73,774,054   
  

 

 

    

 

 

    

 

 

 

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

  —        290      290   

Reversal

  (81   (209   (290

Effect of exchange rate changes

  —        (77   (77
  

 

 

    

 

 

    

 

 

 

Balance at March 31, 2015

$ 8,012    $ 478,641    $ 486,653   
  

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 20 -


  Individually
Assessed for
Impairment
  Collectively
Assessed for
Impairment
  Total  

Balance at January 1, 2014

$ 8,058    $ 478,530    $ 486,588   

Provision

  —        21,147      21,147   

Reversal

  (230   (20,917   (21,147

Effect of exchange rate changes

  —        70      70   
  

 

 

    

 

 

    

 

 

 

Balance at March 31, 2014

$ 7,828    $ 478,830    $ 486,658   
  

 

 

    

 

 

    

 

 

 

(Concluded)

Aging analysis of accounts receivable that is individually determined as impaired

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Past due 61-120 days

$ —      $ —      $ 321   

Past due over 121 days

  8,012      8,093      7,832   
  

 

 

    

 

 

    

 

 

 
$ 8,012    $ 8,093    $ 8,153   
  

 

 

    

 

 

    

 

 

 

The Company held bank guarantees and other credit enhancements as collateral for certain impaired accounts receivables. As of March 31, 2015, December 31, 2014 and March 31, 2014, the amount of the bank guarantee and other credit enhancements were nil, nil and NT$325 thousand (US$11 thousand), respectively.

 

12. INVENTORIES

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Finished goods

$ 10,960,937    $ 9,972,024    $ 7,332,318   

Work in process

  47,725,273      51,027,892      31,895,019   

Raw materials

  3,742,818      3,222,523      2,444,274   

Supplies and spare parts

  2,170,638      2,115,532      1,809,658   
  

 

 

    

 

 

    

 

 

 
$ 64,599,666    $ 66,337,971    $ 43,481,269   
  

 

 

    

 

 

    

 

 

 

Write-down of inventories to net realizable value in the amount of NT$1,769,358 thousand and NT$590,034 thousand, respectively, were included in the cost of revenue for the three months ended March 31, 2015 and 2014.

 

13. FINANCIAL ASSETS CARRIED AT COST

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Non-publicly traded stocks

$ 1,593,978    $ 1,606,659    $ 1,771,146   

Mutual funds

  223,699      193,883      283,929   
  

 

 

    

 

 

    

 

 

 
$ 1,817,677    $ 1,800,542    $ 2,055,075   
  

 

 

    

 

 

    

 

 

 

 

- 21 -


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:

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Associates

$ 26,209,636    $ 24,968,071    $ 25,960,124   

Joint venture

  4,153,508      3,287,666      3,552,814   
  

 

 

    

 

 

    

 

 

 
$ 30,363,144    $ 28,255,737    $ 29,512,938   
  

 

 

    

 

 

    

 

 

 

 

  a. Investments in associates

Associates consisted of the following:

 

 

Principal Activities

Place of

Incorporation
and Operation

Carrying Amount  

% of Ownership and Voting Rights

Held by the Company

 
Name of Associate

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

March 31,

2015

  December 31,
2014
 

March 31,

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
$ 10,560,974    $ 10,105,485    $ 11,078,910      33   33   39

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

Fabrication and supply of integrated circuits Singapore   8,919,391      8,296,955      8,036,044      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
  3,247,436      3,408,945      3,855,061      20   20   20

Xintec Inc. (Xintec)

Wafer level chip size packaging service Taoyuan,
Taiwan
  2,360,234      2,053,982      1,863,049      35   40   40

Global Unichip Corporation (GUC)

Researching, developing, manufacturing, testing and marketing of integrated circuits Hsinchu,
Taiwan
  1,121,601      1,102,704      1,127,060      35   35   35
        

 

 

    

 

 

    

 

 

        
$ 26,209,636    $ 24,968,071    $ 25,960,124   
        

 

 

    

 

 

    

 

 

        

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 the second quarter of 2014, the Company sold 82,000 thousand common shares of VIS and recognized a disposal gain of NT$2,028,643 thousand. After the sale, the Company owned approximately 33.7% of the equity interest in VIS.

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.

 

- 22 -


Name of Associate   

March 31,

2015

     December 31,
2014
    

March 31,

2014

 

VIS

   $ 29,059,090       $ 28,567,489       $ 28,521,347   
  

 

 

    

 

 

    

 

 

 

Motech

   $ 3,704,769       $ 4,242,769       $ 4,688,916   
  

 

 

    

 

 

    

 

 

 

GUC

   $ 3,875,092       $ 4,327,965       $ 4,136,544   
  

 

 

    

 

 

    

 

 

 

Xintec

   $ 5,602,050         
  

 

 

       

 

  b. Investments in joint venture

Joint venture consisted of the following:

 

 

Principal Activities

Place of

Incorporation

and Operation

Carrying Amount   % of Ownership and Voting Rights
Held by the Company
 
Name of Joint Venture

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

VisEra Holding Company (VisEra Holding)

Investing in companies involved in the design, manufacturing and other related businesses in the semiconductor industry Cayman Islands $ 4,153,508    $ 3,287,666    $ 3,552,814      49   49   49
        

 

 

    

 

 

    

 

 

        

 

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

  —        3,562,755      22,835,366      978,950      —        22,555,321      49,932,392   

Disposals or retirements

  —        —        (462,676   (305,318   —        —        (767,994

Effect of exchange rate changes

  (8,244   (218,806   (719,097   (35,173   (7,820   (31,166   (1,020,306
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2015

$ 4,028,541    $ 272,507,799    $ 1,775,823,820    $ 28,599,294    $ 833,334    $ 131,858,891    $ 2,213,651,679   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  7,191      3,907,238      49,864,675      916,304      10,819      —        54,706,227   

Disposals or retirements

  —        —        (428,452   (305,300   —        —        (733,752

Effect of exchange rate changes

  (4,619   (155,227   (656,474   (29,001   (4,145   —        (849,466
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2015

$ 461,712    $ 144,997,924    $ 1,237,168,151    $ 17,349,937    $ 454,071    $ —      $ 1,400,431,795   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 March 31, 2015

$ 3,566,829    $ 127,509,875    $ 538,655,669    $ 11,249,357    $ 379,263    $ 131,858,891    $ 813,219,884   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  —        2,519,647      9,108,620      606,260      —        63,974,216      76,208,743   

Disposals or retirements

  —        —        (223,116   (318,888   —        —        (542,004

Effect of exchange rate changes

  17,761      198,335      959,428      32,285      2,400      3,217      1,213,426   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2014

$ 4,004,670    $ 231,900,718    $ 1,423,764,726    $ 22,381,689    $ 806,830    $ 336,151,226    $ 2,019,009,859   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

  6,898      3,584,230      36,724,579      659,617      10,618      —        40,985,942   

Disposals or retirements

  —        —        (223,075   (318,888   —        —        (541,963

Effect of exchange rate changes

  9,318      144,311      909,022      26,776      1,092      —        1,090,519   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2014

$ 420,408    $ 128,962,707    $ 1,046,624,215    $ 14,593,276    $ 397,673    $ —      $ 1,190,998,279   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at March 31, 2014

$ 3,584,262    $ 102,938,011    $ 377,140,511    $ 7,788,413    $ 409,157    $ 336,151,226    $ 828,011,580   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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.

 

- 23 -


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

  —        78,496      199,110      145,880      423,486   

Retirements

  —        —        (42,737   —        (42,737

Effect of exchange rate changes

  (43,186   (6,053   (1,425   (1,305   (51,969
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2015

$ 5,845,627    $ 6,422,696    $ 18,852,046    $ 4,437,130    $ 35,557,499   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

Balance at January 1, 2015

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

Additions

  —        212,239      421,365      138,165      771,769   

Retirements

  —        —        (42,737   —        (42,737

Effect of exchange rate changes

  —        (6,053   (1,349   (303   (7,705
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2015

$ —      $ 3,985,098    $ 15,238,425    $ 3,195,013    $ 22,418,536   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at January 1, 2015

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at March 31, 2015

$ 5,845,627    $ 2,437,598    $ 3,613,621    $ 1,242,117    $ 13,138,963   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost

Balance at January 1, 2014

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

Additions

  —        371,030      269,160      526,097      1,166,287   

Retirements

  —        —        (20,353   —        (20,353

Effect of exchange rate changes

  93,047      (954   537      380      93,010   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2014

$ 5,720,564    $ 4,814,904    $ 17,336,149    $ 4,255,873    $ 32,127,490   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

Balance at January 1, 2014

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

Additions

  —        123,690      359,025      153,720      636,435   

Retirements

  —        —        (20,353   —        (20,353

Effect of exchange rate changes

  —        (954   526      44      (384
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2014

$ —      $ 3,464,403    $ 13,778,333    $ 2,771,125    $ 20,013,861   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at March 31, 2014

$ 5,720,564    $ 1,350,501    $ 3,557,816    $ 1,484,748    $ 12,113,629   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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.

 

17. OTHER ASSETS

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Tax receivable

$ 2,069,072    $ 2,187,136    $ 1,327,531   

Prepaid expenses

  1,598,404      1,399,810      1,068,105   

Long-term receivable

  341,100      385,700      754,020   

Others

  852,666      885,470      653,862   
  

 

 

    

 

 

    

 

 

 
$ 4,861,242    $ 4,858,116    $ 3,803,518   
  

 

 

    

 

 

    

 

 

 

Current portion

$ 3,688,211    $ 3,656,110    $ 2,381,416   

Noncurrent portion

  1,173,031      1,202,006      1,422,102   
  

 

 

    

 

 

    

 

 

 
$ 4,861,242    $ 4,858,116    $ 3,803,518   
  

 

 

    

 

 

    

 

 

 

 

- 24 -


18. SHORT-TERM LOANS

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Unsecured loans Amount

$ 18,683,595    $ 36,158,520    $ 24,843,645   
  

 

 

   

 

 

   

 

 

 

Original loan content

US$ (in thousands)

$ 595,000    $ 1,140,000    $ 815,000   

Annual interest rate

  0.38%-0.47%      0.38%-0.50%      0.38%-0.50%   

Maturity date

 
 
Due in April
2015
  
  
 
 
Due in January
2015
  
  
 
 
Due in April
2014
  
  

 

19. PROVISIONS

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Sales returns and allowances

$ 8,130,817    $ 10,445,452    $ 9,964,997   

Warranties

  14,853      19,828      12,925   
  

 

 

    

 

 

    

 

 

 
$ 8,145,670    $ 10,465,280    $ 9,977,922   
  

 

 

    

 

 

    

 

 

 

Current portion

$ 8,130,817    $ 10,445,452    $ 9,964,997   

Noncurrent portion (classified under other noncurrent liabilities)

  14,853      19,828      12,925   
  

 

 

    

 

 

    

 

 

 
$ 8,145,670    $ 10,465,280    $ 9,977,922   
  

 

 

    

 

 

    

 

 

 

 

  Sales Returns
and Allowances
  Warranties   Total  

Three months ended March 31, 2015

Balance, beginning of period

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

Provision

  1,427,900      2,809      1,430,709   

Reversal

  —        (5,793   (5,793

Payment

  (3,738,087   (1,340   (3,739,427

Effect of exchange rate changes

  (4,448   (651   (5,099
  

 

 

    

 

 

    

 

 

 

Balance, end of period

$ 8,130,817    $ 14,853    $ 8,145,670   
  

 

 

    

 

 

    

 

 

 

Three months ended March 31, 2014

Balance, beginning of period

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

Provision

  4,354,104      3,064      4,357,168   

Payment

  (1,997,250   (722   (1,997,972

Effect of exchange rate changes

  4,362      131      4,493   
  

 

 

    

 

 

    

 

 

 

Balance, end of period

$ 9,964,997    $ 12,925    $ 9,977,922   
  

 

 

    

 

 

    

 

 

 

 

- 25 -


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

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Noncurrent portion

Domestic unsecured bonds

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

Overseas unsecured bonds

  47,101,500      47,577,000      45,724,500   
  

 

 

    

 

 

    

 

 

 
  213,301,500      213,777,000      211,924,500   

Less: Discounts on bonds payable

  (92,729   (103,182   (126,399
  

 

 

    

 

 

    

 

 

 
$ 213,208,771    $ 213,673,818    $ 211,798,101   
  

 

 

    

 

 

    

 

 

 

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

 

21. GUARANTEE DEPOSITS

 

 

March 31,

2015

 

December 31,

2014

 

March 31,

2014

 

Capacity guarantee

$ 29,830,950    $ 30,132,100    $ —     

Others

  164,299      164,075      154,505   
  

 

 

    

 

 

    

 

 

 
$ 29,995,249    $ 30,296,175    $ 154,505   
  

 

 

    

 

 

    

 

 

 

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

$ 6,280,200    $ 4,757,700    $ —     

Noncurrent portion

  23,715,049      25,538,475      154,505   
  

 

 

    

 

 

    

 

 

 
$ 29,995,249    $ 30,296,175    $ 154,505   
  

 

 

    

 

 

    

 

 

 

 

- 26 -


22. EQUITY

 

  a. Capital stock

 

 

March 31,

2015

  December 31,
2014
 

March 31,

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)

  25,930,302      25,929,662      25,929,124   
  

 

 

    

 

 

    

 

 

 

Issued capital

$ 259,303,020    $ 259,296,624    $ 259,291,239   
  

 

 

    

 

 

    

 

 

 

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 March 31, 2015, 1,073,353 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,366,767 thousand shares (one ADS represents five common shares).

 

  b. Capital surplus

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Additional paid-in capital

$ 24,077,758    $ 24,053,965    $ 24,034,598   

From merger

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

From convertible bonds

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

From differences between equity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries

  —        —        89,882   

From share of changes in equities of subsidiaries

  103,304      104,335      —     

From share of changes in equities of associates and joint venture

  395,962      134,210      13,388   

Donations

  55      55      55   
  

 

 

    

 

 

    

 

 

 
$ 56,274,436    $ 55,989,922    $ 55,835,280   
  

 

 

    

 

 

    

 

 

 

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;

 

- 27 -


  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.

TSMC accrued profit sharing to employees based on certain percentage of net income during the period, which amounted to NT$5,282,686 thousand and NT$3,200,716 thousand for the three months ended March 31, 2015 and 2014, respectively. Bonuses to members of the Board of Directors were expensed based on estimated amount payable. If the actual amounts subsequently approved by the shareholders differ from the amounts estimated, the differences are recorded in the year such bonuses are approved by the shareholders as a change in accounting estimate. If profit sharing approved for distribution to employees is in the form of common shares, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.

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.

The appropriations of 2014 and 2013 earnings have been approved by TSMC’s Board of Directors in its meeting held on February 10, 2015 and by TSMC’s shareholders in its meeting held 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   
  

 

 

    

 

 

       

The Board of Directors of TSMC also approved on February 10, 2015 the profit sharing to employees and bonus to members of the Board of Directors in the amounts of NT$17,645,966 thousand and NT$406,854 thousand in cash for 2014, respectively. There is no significant difference between the aforementioned approved amounts and the amounts charged against earnings of 2014.

 

- 28 -


The appropriations of earnings, profit sharing to employees and bonus to members of the Board of Directors for 2014 are to be presented for approval in the TSMC’s shareholders’ meeting to be held on June 9, 2015 (expected).

TSMC’s profit sharing to employees and bonus to members of Board of Directors in the amounts of NT$12,634,665 thousand and NT$104,136 thousand in cash for 2013, respectively, had been approved by the shareholders in its meeting held on June 24, 2014. The aforementioned approved amount had no difference with the one approved by the Board of Directors in its meetings held on February 18, 2014 and the same amount had been charged against earnings of 2013.

The information about the appropriations of TSMC’s profit sharing to employees and bonus to members of the Board of Directors is available at the Market Observation Post System website.

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:

 

  Three Months Ended March 31, 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

  (2,278,865   —        —        (2,278,865

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

  —        (195,085   —        (195,085

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

  —        (2,902   —        (2,902

Share of other comprehensive income of associates and joint venture

  20,753      822,659      (200   843,212   

Income tax effect

  —        (4,793   —        (4,793
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

$ 2,244,001    $ 21,867,362    $ (505 $ 24,110,858   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 29 -


  Three Months Ended March 31, 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

  2,830,754      —        —        2,830,754   

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

  —        (395,296   —        (395,296

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

  —        (20,649   —        (20,649

Share of other comprehensive income of associates and joint venture

  (22,830   17,891      95      (4,844

Income tax effect

  —        2,956      —        2,956   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

$ (4,332,438 $ 20,915,683    $ (18 $ 16,583,227   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

  e. Noncontrolling interests

 

  Three Months Ended March 31  
  2015   2014  

Balance, beginning of period

$ 127,221    $ 266,709   

Share of noncontrolling interests

Net loss

  (6,003   (24,963

Exchange differences arising on translation of foreign operations

  (273   627   

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

  (6,769   838   

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

  (59   (338

Share of other comprehensive income of associates and joint venture

  (49   97   

 

(Continued)

 

- 30 -


  Three Months Ended March 31  
  2015   2014  

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

$ (26 $ —     

From differences between equity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries

  —        10,945   

From share of changes in equities of subsidiaries

  1,031      —     

Decrease in noncontrolling interests

  (179   (29,574

Effect of disposal of subsidiary

  (42,640   —     
  

 

 

    

 

 

 

Balance, end of period

$ 72,254    $ 224,341   
  

 

 

    

 

 

 

(Concluded)

 

23. SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for three months ended March 31, 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$)

 

Three months ended March 31, 2015

Balance, beginning of period

  718    $ 47.2   

Options exercised

  (640   47.2   
  

 

 

    

Balance, end of period

  78      47.2   
  

 

 

    

Balance exercisable, end of period

  78      47.2   
  

 

 

    

Three months ended March 31, 2014

Balance, beginning of period

  1,763    $ 45.9   

Options exercised

  (507   44.0   
  

 

 

    

Balance, end of period

  1,256      46.7   
  

 

 

    

Balance exercisable, end of period

  1,256      46.7   
  

 

 

    

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.

Information about TSMC’s outstanding stock options was as follows:

 

March 31, 2015

December 31, 2014 March 31, 2014
  Weighted-average   Weighted-average   Weighted-average
Range of Exercise Price Remaining
Contractual Life
Range of
Exercise Price
Remaining
Contractual Life
Range of
Exercise Price
Remaining
Contractual Life
(NT$) (Years) (NT$) (Years) (NT$) (Years)

$47.2

0.1 $47.2 0.4 $43.2-$47.2 1.0

 

- 31 -


24. NET REVENUE

The analysis of the Company’s net revenue was as follows:

 

  Three Months Ended
March 31
 
  2015   2014  

Net revenue from sale of goods

$ 221,899,524    $ 147,997,622   

Net revenue from royalties

  134,620      217,550   
  

 

 

    

 

 

 
$ 222,034,144    $ 148,215,172   
  

 

 

    

 

 

 

 

25. FINANCE COSTS

 

  Three Months Ended March 31  
  2015   2014  

Interest expense

Corporate bonds

$ 763,918    $ 769,977   

Bank loans

  24,955      21,628   

Finance leases

  5,007      4,969   

Others

  62      6   
  

 

 

    

 

 

 
$ 793,942    $ 796,580   
  

 

 

    

 

 

 

 

26. OTHER GAINS AND LOSSES

 

  Three Months Ended March 31  
  2015   2014  

Gain on disposal of financial assets, net

Available-for-sale financial assets

$ 2,961    $ 20,987   

Financial assets carried at cost

  42,243      23,758   

Other gains

  16,169      47,613   

Net gain on financial instruments at FVTPL

Held for trading

  317,555      104,110   

Fair value hedges

Gain from hedging instruments

  4,592,076      325,678   

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

  (4,602,284   (327,961

Other losses

  (6,535   (150,801
  

 

 

    

 

 

 
$ 362,185    $ 43,384   
  

 

 

    

 

 

 

 

- 32 -


27. INCOME TAX

 

  a. Income tax expense recognized in profit or loss

Income tax expense consisted of the following:

 

  Three Months Ended
March 31
 
  2015   2014  

Current income tax expense

Current tax expense recognized in the current period

$ 10,403,960    $ 6,019,953   

Other income tax adjustments

  42,039      26,996   
  

 

 

    

 

 

 
  10,445,999      6,046,949   
  

 

 

    

 

 

 

Deferred income tax expense (benefit)

The origination and reversal of temporary differences

  (183,268   (674,439

Investment tax credits and operating loss carryforward

  (987,659   82,985   
  

 

 

    

 

 

 
  (1,170,927   (591,454
  

 

 

    

 

 

 

Income tax expense recognized in profit or loss

$ 9,275,072    $ 5,455,495   
  

 

 

    

 

 

 

 

  b. Income tax expense recognized in other comprehensive income

 

  Three Months Ended March 31  
  2015   2014  

Deferred income tax expense (benefit)

Related to unrealized gain/loss on available-for-sale financial assets

$ 4,793    $ (2,956
  

 

 

    

 

 

 

 

  c. Integrated income tax information

 

 

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Balance of the Imputation

Credit Account - TSMC

$ 35,353,150    $ 35,353,150    $ 15,242,724   
  

 

 

    

 

 

    

 

 

 

The estimated creditable ratio for distribution of TSMC’s earnings of 2014 was 11.29%; however, effective from January 1, 2015, the creditable ratio for individual shareholders residing in the Republic of China will be half of the original creditable ratio according to the revised Article 66-6 of the Income Tax Law.

The actual creditable ratio for distribution of TSMC’s earnings of 2013 was 9.78%, which is calculated based on the Rule No.10204562810 issued by the Ministry of Finance to include the adjustments to retained earnings from the effect of transition to Taiwan-IFRSs in the accumulated unappropriated earnings in the year of first-time adoption of Taiwan-IFRSs.

The imputation credit allocated to shareholders is based on its balance as of the date of the dividend distribution. The estimated creditable ratio may change when the actual distribution of the imputation credit is made.

All of TSMC’s earnings generated prior to December 31, 1997 have been appropriated.

 

- 33 -


  d. Income tax examination

The tax authorities have examined income tax returns of TSMC through 2011. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

 

28. EARNINGS PER SHARE

 

  Three Months Ended March 31  
  2015   2014  

Basic EPS

$ 3.05    $ 1.85   
  

 

 

    

 

 

 

Diluted EPS

$ 3.05    $ 1.85   
  

 

 

    

 

 

 

EPS is computed as follows:

 

  Amounts
(Numerator)
  Number of
Shares
(Denominator)
(In Thousands)
  EPS (NT$)  

Three months ended March 31, 2015

Basic EPS

Net income available to common shareholders of the parent

$ 78,989,911      25,930,011    $ 3.05   
        

 

 

 

Effect of dilutive potential common shares

  —        344   
  

 

 

    

 

 

    

Diluted EPS

Net income available to common shareholders of the parent (including effect of dilutive potential common shares)

$ 78,989,911      25,930,355    $ 3.05   
  

 

 

    

 

 

    

 

 

 

Three months ended March 31, 2014

Basic EPS

Net income available to common shareholders of the parent

$ 47,866,793      25,928,848    $ 1.85   
        

 

 

 

Effect of dilutive potential common shares

  —        992   
  

 

 

    

 

 

    

Diluted EPS

Net income available to common shareholders of the parent (including effect of dilutive potential common shares)

$ 47,866,793      25,929,840    $ 1.85   
  

 

 

    

 

 

    

 

 

 

If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and shares, profit sharing to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing price (after considering the dilutive effect of dividends) of the common shares at the end of the reporting period. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until profit sharing to employees to be settled in the form of common stocks are approved by the shareholders in the following year.

 

- 34 -


29. ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

  Three Months Ended
March 31
 
  2015   2014  

a. Depreciation of property, plant and equipment

Recognized in cost of revenue

$ 51,041,714    $ 37,457,425   

Recognized in operating expenses

  3,658,291      3,522,295   

Recognized in other operating income and expenses

  6,222      6,222   
  

 

 

    

 

 

 
$ 54,706,227    $ 40,985,942   
  

 

 

    

 

 

 

b. Amortization of intangible assets

Recognized in cost of revenue

$ 407,750    $ 333,467   

Recognized in operating expenses

  364,019      302,968   
  

 

 

    

 

 

 
$ 771,769    $ 636,435   
  

 

 

    

 

 

 

c. Research and development costs expensed as incurred

$ 16,781,463    $ 12,067,892   
  

 

 

    

 

 

 

d. Employee benefits expenses

Post-employment benefits

Defined contribution plans

$ 475,826    $ 412,452   

Defined benefit plans

  68,128      89,042   
  

 

 

    

 

 

 
  543,954      501,494   

Other employee benefits

  22,244,739      16,830,516   
  

 

 

    

 

 

 
$ 22,788,693    $ 17,332,010   
  

 

 

    

 

 

 

Employee benefits expense summarized by function

Recognized in cost of revenue

$ 13,294,494    $ 10,412,071   

Recognized in operating expenses

  9,494,199      6,919,939   
  

 

 

    

 

 

 
$ 22,788,693    $ 17,332,010   
  

 

 

    

 

 

 

 

30. DISPOSAL OF SUBSIDIARY

In January 2015, the Board of Directors of TSMC approved a sale of TSMC SSL common shares of 565,480 thousand held by TSMC and TSMC Guang Neng to Epistar Corp. Accordingly, the Company reclassified TSMC SSL as a disposal group held for sale in its consolidated balance sheet as of December 31, 2014. The expected fair value less costs to sell is substantially lower than the carrying amount of the related net assets of TSMC SSL; as such, impairment losses of NT$734,467 thousand were recognized under other operating gains and losses in the Company’s consolidated statement of comprehensive income for the year ended December 31, 2014. The transaction was completed in February 2015. For the major classes of assets and liabilities classified as held for sale, please refer to Note 13 to the consolidated financial statements for the year ended December 31, 2014.

 

  a. Consideration received from the disposal

 

Total consideration received

$ 825,000   

Expenditure associated with consideration received

  (142,475
  

 

 

 

Net consideration received

$ 682,525   
  

 

 

 

 

- 35 -


  b. Analysis of assets and liabilities over which the control was lost

 

Assets

Cash and cash equivalents

$ 81,478   

Inventories

  28,519   

Other current assets

  91,331   

Property, plant and equipment

  643,699   

Intangible assets

  47,373   

Others

  51,808   

Liabilities

Salary and bonus payable

  (38,151

Accrued expenses and other current liabilities

  (68,132

Net defined benefit liability

  (35,845

Others

  (76,915
  

 

 

 

Net assets disposed of

$ 725,165   
  

 

 

 

 

  c. Gain/loss on disposal of subsidiary

 

Net consideration received

$ 682,525   

Net assets disposed of

  (725,165

Noncontrolling interests

  42,640   
  

 

 

 

Gain/loss on disposal of subsidiary

$ —     
  

 

 

 

 

  d. Net cash outflow arising from disposal of subsidiary

 

Net consideration received

$ 682,525   

Less: balance of cash and cash equivalents disposed of

  81,478   
  

 

 

 
$ 601,047   
  

 

 

 

 

31. FINANCIAL INSTRUMENTS

 

  a. Categories of financial instruments

 

  Note  

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Financial assets

FVTPL

Held for trading derivatives

  a $ 297,698    $ 200,364    $ 11,425   

Available-for-sale financial assets

  b   70,022,067      75,598,018      62,184,360   

Held-to-maturity financial assets

  —        13,060,038      4,485,593      2,394,178   

Loans and receivables

Cash and cash equivalents

  a   437,412,411      358,530,507      231,697,295   

Notes and accounts receivables (including related parties)

  a   99,121,766      115,057,965      74,333,024   

Other receivables

  a   4,450,612      4,051,452      1,377,629   

Refundable deposits

  a   442,633      356,582      2,560,988   
     

 

 

    

 

 

    

 

 

 
$ 624,807,225    $ 558,280,481    $ 374,558,899   
     

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 36 -


  Note  

March 31,

2015

  December 31,
2014
 

March 31,

2014

 

Financial liabilities

FVTPL

Held for trading derivatives

  a $ 64,929    $ 486,614    $ 188,535   

Derivative financial instruments in designated hedge accounting relationships

  —        11,627,838      16,364,241      5,279,032   

Amortized cost

Short-term loans

  —        18,683,595      36,158,520      24,843,645   

Accounts payable (including related parties)

  a   20,204,923      23,379,762      16,710,701   

Payables to contractors and equipment suppliers

  a   27,372,814      26,983,424      53,461,455   

Accrued expenses and other current liabilities

  a   21,517,261      22,248,135      15,528,728   

Bonds payable

  —        213,208,771      213,673,818      211,798,101   

Long-term bank loans

  —        40,000      40,000      40,000   

Other long-term payables (classified under accrued expenses and other current liabilities and other noncurrent liabilities)

  —        18,000      36,000      54,000   

Guarantee deposits (including those classified under accrued expense and other current liabilities)

  a   29,995,249      30,297,600      154,505   
     

 

 

    

 

 

    

 

 

 
$ 342,733,380    $ 369,668,114    $ 328,058,702   
     

 

 

    

 

 

    

 

 

 

(Concluded)

 

  Note a: Including those classified to noncurrent assets held for sale or liabilities directly associated with noncurrent assets held for sale as of December 31, 2014.
  Note b: Including financial assets carried at cost.

 

  b. Financial risk management objectives

The Company seeks to ensure sufficient cost-efficient funding readily available when needed. The Company manages its exposure to foreign currency risk, interest rate risk, equity price risk, credit risk and liquidity risk with the objective to reduce the potentially adverse effects the market uncertainties may have on its financial performance.

The plans for material treasury activities are reviewed by Audit Committees and/or Board of Directors in accordance with procedures required by relevant regulations or internal controls. During the implementation of such plans, Corporate Treasury function must comply with certain treasury procedures that provide guiding principles for overall financial risk management and segregation of duties.

 

  c. Market risk

The Company is exposed to the market risks arising from changes in foreign exchange rates, interest rates and the prices in equity investments, and utilizes some derivative financial instruments to reduce the related risks.

 

- 37 -


Foreign currency risk

Most of the Company’s operating activities are denominated in foreign currencies. Consequently, the Company is exposed to foreign currency risk. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Company utilizes derivative financial instruments, including currency forward contracts and cross currency swaps, to hedge its currency exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency exchange rate movements.

The Company also holds short-term borrowings in foreign currencies in proportion to its expected future cash flows. This allows foreign-currency-denominated borrowings to be serviced with expected future cash flows and provides a partial hedge against transaction translation exposure.

The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency monetary items at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges against the New Taiwan dollar, the net income for the three months ended March 31, 2015 and 2014 would have decreased by NT$211,761 thousand and NT$306,019 thousand, respectively, after taking into consideration of the hedging contracts and the hedged items.

Interest rate risk

The Company is exposed to interest rate risk arising from borrowing at both fixed and floating interest rates. All of the Company’s long-term bonds have fixed interest rates and are measured at amortized cost. As such, changes in interest rates would not affect the future cash flows. On the other hand, because interest rates of the Company’s long-term bank loans are floating, changes in interest rates would affect the future cash flows but not the fair value.

Assuming the amount of floating interest rate bank loans at the end of the reporting period had been outstanding for the entire period and all other variables were held constant, a hypothetical increase in interest rates of 100 basis point (1%) would have resulted in an increase in the interest expense, net of tax, by approximately NT$83 thousand for both three months ended March 31, 2015 and 2014.

Other price risk

The Company is exposed to equity price risk arising from available-for-sale equity investments. To reduce the equity price risk, the Company utilizes some stock forward contracts to partially hedge its exposure.

Assuming a hypothetical decrease of 5% in equity prices of the equity investments at the end of the reporting period, the net income for the three months ended March 31, 2015 and 2014 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the three months ended March 31, 2015 and 2014 would have decreased by NT$135,041 thousand and NT$326,779 thousand, respectively.

 

  d. Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from operating activities, primarily trade receivables, and from financing activities, primarily deposits, fixed-income investments and other financial instruments with banks. Credit risk is managed separately for business related and financial related exposures. As of the end of the reporting period, the Company’s maximum credit risk exposure is mainly from the carrying amount of financial assets recognized in the consolidated balance sheet.

 

- 38 -


Business related credit risk

The Company has considerable trade receivables outstanding with its customers worldwide. A substantial majority of the Company’s outstanding trade receivables are not covered by collateral or credit insurance. While the Company has procedures to monitor and limit exposure to credit risk on trade receivables, there can be no assurance such procedures will effectively limit its credit risk and avoid losses. This risk is heightened during periods when economic conditions worsen.

As of March 31, 2015, December 31, 2014 and March 31, 2014, the Company’s ten largest customers accounted for 68%, 76% and 66% of accounts receivable, respectively. The Company believes the concentration of credit risk is insignificant for the remaining accounts receivable.

Financial credit risk

The Company regularly monitors and reviews the transaction limit applied to counterparties and adjusts the concentration limit according to market conditions and the credit standing of the counterparties. The Company mitigates its exposure by selecting counterparties with investment-grade credit ratings.

 

  e. Liquidity risk management

The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund its business requirements associated with existing operations over the next 12 months. The Company manages its liquidity risk by maintaining adequate cash and banking facilities.

As of March 31, 2015, December 31, 2014 and March 31, 2014, the unused of financing facilities of the Company amounted to NT$93,399,467 thousand, NT$73,534,805 thousand and NT$72,980,416 thousand, respectively.

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments, including principal and interest.

 

    Less Than
1 Year
    2-3 Years     4-5 Years     5+ Years     Total  

March 31, 2015

         

Non-derivative financial liabilities

         

Short-term loans

  $ 18,685,301      $ —        $ —        $ —        $ 18,685,301   

Accounts payable (including related parties)

    20,204,923        —          —          —          20,204,923   

Payables to contractors and equipment suppliers

    27,372,814        —          —          —          27,372,814   

Accrued expenses and other current liabilities

    21,517,261        —          —          —          21,517,261   

Bonds payable

    3,072,885        83,163,353        102,525,541        36,555,015        225,316,794   

Long-term bank loans

    1,450        22,115        20,665        —          44,230   

Other long-term payables (classified under accrued expenses and other current liabilities and other noncurrent liabilities)

    —          18,000        —          —          18,000   

Obligations under finance leases

    29,392        58,784        792,972        —          881,148   

Guarantee deposits (including those classified under accrued expense and other current liabilities)

    6,280,200        12,724,699        10,990,350        —          29,995,249   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    97,164,226        95,986,951        114,329,528        36,555,015        344,035,720   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments

         

Forward exchange contracts

         

Outflows

    67,083,597        —          —          —          67,083,597   

Inflows

    (67,143,691     —          —          —          (67,143,691
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (60,094     —          —          —          (60,094
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(Continued)

 

- 39 -


    Less Than
1 Year
    2-3 Years     4-5 Years     5+ Years     Total  

Cross currency swap contracts

         

Outflows

  $ 2,758,469      $ —        $ —        $ —        $ 2,758,469   

Inflows

    (2,767,416     —          —          —          (2,767,416
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (8,947     —          —          —          (8,947
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stock forward contracts

         

Outflows

    55,611,164        —          —          —          55,611,164   

Inflows

    (55,611,164     —          —          —          (55,611,164
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 97,095,185      $ 95,986,951      $ 114,329,528      $ 36,555,015      $ 343,966,679   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2014

         

Non-derivative financial liabilities

         

Short-term loans

  $ 36,164,316      $ —        $ —        $ —        $ 36,164,316   

Accounts payable (including related parties)

    23,370,424        —          —          —          23,370,424   

Payables to contractors and equipment suppliers

    26,980,408        —          —          —          26,980,408   

Accrued expenses and other current liabilities

    22,177,901        —          —          —          22,177,901   

Bonds payable

    3,079,862        66,720,514        98,460,598        58,320,169        226,581,143   

Long-term bank loans

    1,450        19,792        20,846        2,504        44,592   

Other long-term payables (classified under accrued expenses and other current liabilities and other noncurrent liabilities)

    18,000        18,000        —          —          36,000   

Obligations under finance leases

    29,667        59,335        800,409        —          889,411   

Guarantee deposits (including those classified under accrued expense and other current liabilities)

    4,757,700        12,851,275        12,687,200        —          30,296,175   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    116,579,728        79,668,916        111,969,053        58,322,673        366,540,370   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments

         

Forward exchange contracts

         

Outflows

    17,327,250        —          —          —          17,327,250   

Inflows

    (17,283,079     —          —          —          (17,283,079
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    44,171        —          —          —          44,171   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cross currency swap contracts

         

Outflows

    47,291,943        —          —          —          47,291,943   

Inflows

    (46,970,942     —          —          —          (46,970,942
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    321,001        —          —          —          321,001   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stock forward contracts

         

Outflows

    56,172,570        —          —          —          56,172,570   

Inflows

    (56,172,570     —          —          —          (56,172,570
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 116,944,900      $ 79,668,916      $ 111,969,053      $ 58,322,673      $ 366,905,542   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

March 31, 2014

         

Non-derivative financial liabilities

         

Short-term loans

  $ 24,847,820      $ —        $ —        $ —        $ 24,847,820   

Accounts payable (including related parties)

    16,710,701        —          —          —          16,710,701   

Payables to contractors and equipment suppliers

    53,461,455        —          —          —          53,461,455   

Accrued expenses and other current liabilities

    15,528,728        —          —          —          15,528,728   

Bonds payable

    3,051,998        38,560,734        99,689,272        85,635,101        226,937,105   

Long-term bank loans

    1,450        12,689        21,390        10,151        45,680   

Other long-term payables (classified under accrued expenses and other current liabilities and other noncurrent liabilities)

    18,000        36,000        —          —          54,000   

Obligations under finance leases

    28,456        56,913        796,191        —          881,560   

Guarantee deposits

    —          154,505        —          —          154,505   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    113,648,608        38,820,841        100,506,853        85,645,252        338,621,554   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(Continued)

 

- 40 -


    Less Than
1 Year
    2-3 Years     4-5 Years     5+ Years     Total  

Derivative financial instruments

         

Forward exchange contracts

         

Outflows

  $ 28,316,400      $ —        $ —        $ —        $ 28,316,400   

Inflows

    (28,118,463     —&n