Formosa Chemicals & Fibre : 2023 Q4 Financial Results - Consolidated Financial Report (IFRS)

FORMOSA CHEMICALS & FIBRE

CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITORS' REPORT

DECEMBER 31, 2023 AND 2022

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For the convenience of readers and for information purpose only, the auditors' report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors' report and financial statements shall prevail.

FORMOSA CHEMICALS & FIBRE CORPORATION

AND SUBSIDIARIES

INDEX
Items		Pages
Index
Independent Auditors' Review Report	1-7
Consolidated Balance Sheets	8-9
Consolidated Statements of Comprehensive Income	10-11
Consolidated Statements of Changes in Equity	12-13
Consolidated Statements of Cash Flows	14-15
Notes to Consolidated Financial Statements	16-105

INDEPENDENT AUDITORS' REPORT TRANSLATED FROM CHINESE

PWCR23000512

To the Board of Directors and Shareholders of Formosa Chemicals & Fibre Corporation

Introduction

We have audited the accompanying consolidated balance sheets of Formosa Chemicals & Fibre Corporation and subsidiaries (the "Group") as at December 31, 2023 and 2022, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of material accounting policies

In our opinion, based on our audits and the reports of other auditors (refer to the Other matter section), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations that came into effect as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the Regulations Governing Financial Statement Audit and Attestation Engagements of Certified Public Accountants and Standards on Auditing of the Republic of China. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Group's 2023 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Group's 2023 consolidated financial statements are stated as follows:

Assessment of loss allowance for accounts receivable

Description

Refer to Note 4(12) for accounting policy on accounts receivable, Note 5(2) for uncertainty of accounting estimates and assumptions in relation to impairment of accounts receivable, and Note 6(5) for details of loss allowance for accounts receivable. As of December 31, 2023, the Group's accounts receivable amounted to NT$24,242,888 thousand, net of loss allowance in the amount of NT$130,989 thousand.

The Group assesses expected credit impairment loss on accounts receivable based on historical experience, forward-looking information and known reason or existing objective evidences. For those accounts which are considered uncollectible, the Company recognises impairment with a credit to accounts receivable. Management evaluates the reasonableness of estimated provision periodically. As the estimation of loss allowance is subject to management's judgement and business indicators, the amount of provision is based on the collectability of accounts receivable, and considering that accounts receivable and loss allowance are material to the financial statements, we considered the loss allowance for accounts receivable a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

1. Obtained the overdue aging report used when management assessed the expected credit impairment loss, assessed whether the logic of data source was consistently applied, and tested its accuracy with proper documents.
2. Assessed the reasonableness of estimates used by management in calculating expected credit

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impairment loss and obtained supporting documents, including forward-looking information, disputed accounts, overdue accounts, subsequent collection, and other indicators that would show that the customer would be unable to repay on schedule.

3. Performed subsequent collection test in order to verify the adequacy of loss allowance provided for accounts receivable.

Evaluation of inventories

Description

Refer to Note 4(14) for accounting policy on inventory valuation, Note 5(2) for accounting estimates and assumption uncertainty in relation to inventory valuation, and Note 6(6) for detailed information on allowance for inventory valuation losses. As of December 31, 2023, the inventory and allowance for inventory valuation losses were NT$46,113,019 thousand and NT$1,859,315 thousand, respectively.

The Group is primarily engaged in the manufacture and sales of petrochemical plastic products, fibers weaving and cords. As the price of petrochemical plastic products is subject to the fluctuations in international crude oil price, and the textile market is competitive, there is a higher risk for inventory valuation loss. The Group recognises inventories at the lower of cost and net realisable value, and the net realisable value is calculated based on average price less selling expenses. Since the net realisable value used in inventory valuation involves subjective judgement and high uncertainty in estimation, and the allowance for inventory valuation losses is material to the financial statements, we considered the allowance for inventory valuation losses as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

1. Assessed the reasonableness of policies and procedures on allowance for inventory valuation loss, including the reasonableness of classification of inventory in determining the net realisable value.
2. Obtained an understanding of the Group's warehousing control procedures. Reviewed the annual physical inventory count plan and participated in the annual inventory count in order to assess the effectiveness of the classification of inventory and internal control over inventory.
3. Checked the method in calculating the net realisable value of inventory and assessed the

reasonableness of allowance for valuation loss.

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Other matter - Reference to the audits of other auditors

We did not audit the financial statements of certain subsidiaries and investments accounted for under the equity method which were audited by other auditors. Therefore, our opinion expressed herein, insofar as it relates to the amounts included in respect of these subsidiaries and associates, is based solely on the reports of the other auditors. Total assets of these subsidiaries and the balances of these investments accounted for under the equity method amounted to NT$153,545,065 thousand and NT$147,331,920 thousand, both constituting 27% of the consolidated total assets as at December 31, 2023 and 2022, respectively, and operating revenue amounted to NT$19,942,215 thousand and NT$29,764,732 thousand, constituting 6% and 8% of the consolidated total operating revenue for the years then ended, respectively. The comprehensive income (loss) recognised from these associates and joint ventures accounted for under the equity method amounted to NT$11,145,442 thousand and (NT$3,973,017) thousand, constituting 62% and 10% of the consolidated total comprehensive income for the years ended December 31, 2023 and 2022, respectively.

Other matter - Parent company only financial reports

We have audited the parent company only financial statements of Formosa Chemicals & Fibre Corporation as of and for the years ended December 31, 2023 and 2022, and have expressed an unqualified opinion on those financial statements.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations that came into effect as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing the Group's financial reporting process.

Auditors' responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Standards on Auditing of the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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1. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.
2. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
3. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Juanlu, Man-Yu	Wu, Han-Chi
For and on Behalf of PricewaterhouseCoopers, Taiwan
March 8, 2024

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The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and independent auditors' report are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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FORMOSA CHEMICALS & FIBRE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2023, DECEMBER 31, 2022 AND JANUARY 1, 2022

(Expressed in thousands of New Taiwan dollars)

												(As amended)
						December 31, 2023				December 31, 2022				January 1, 2022
	Assets		Notes		AMOUNT	%			AMOUNT	%			AMOUNT	%
	Current assets
1100	Cash and cash equivalents		4(4) and 6(1)	$	23,871,348			4	$	34,374,411			6	$	24,286,594		4
1110	Financial assets at fair value	6(2)
	through profit or loss - current					1,641,598			-			1,797,262			-			3,903,900		1
1120	Current financial assets at fair	6(3)
	value through other
	comprehensive income					95,446,870			17			92,125,314			17			116,451,723		20
1136	Current financial assets at	6(4)
	amortised cost					2,990,071			-			4,565,618			1			1,953,235		-
1150	Notes receivable, net	6(5)			3,728,103			1			6,550,164			1			8,173,238		1
1160	Notes receivable - related		6(5) and 7
	parties					5,930			-			8,147			-			8,505		-
1170	Accounts receivable, net	6(5)			15,892,243			3			16,355,474			3			20,204,508		3
1180	Accounts receivable - related		6(5) and 7
	parties					8,350,645			1			7,145,791			1			8,719,009		2
1200	Other receivables	7			3,861,995			1			4,483,253			1			2,742,096		-
1210	Other receivables - related	7
	parties					5,247,127			1			2,429,252			1			2,698,693		-
130X	Inventory		6(6) and 8		44,253,704			8			48,437,390			9			47,200,475		8
1470	Other current assets					9,616,040			2			7,813,014			1			11,513,548		2
11XX	Total current assets
				214,905,674			38			226,085,090			41			247,855,524		41
	Non-current assets
1517	Non-current financial assets at	6(3)
	fair value through other
	comprehensive income					55,926,042			10			51,954,437			9			72,999,266		12
1535	Non-current financial assets at		6(4) and 8
	amortised cost					3,937,378			1			2,250,169			1			2,390,179		1
1550	Investments accounted for	6(7)
	under equity method					127,554,371			22			117,661,397			21			129,632,702		22
1600	Property, plant and equipment		6(8)(28), 7 and 8		148,226,306			26			142,861,143			26			130,897,801		22
1755	Right-of-use assets	6(9)			1,625,153			-			1,650,577			-			1,577,555		-
1780	Intangible assets	6(28)			346,018			-			340,914			-			5,884		-
1840	Deferred income tax assets	6(26)			3,541,259			1			2,139,083			-			2,240,322		-
1900	Other non-current assets		4(4) and 6(1)		9,808,167			2			10,603,486			2			10,746,038		2
15XX	Total non-current assets
				350,964,694			62			329,461,206			59			350,489,747		59
1XXX	Total assets
			$	565,870,368			100	$	555,546,296			100	$	598,345,271		100

(Continued)

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