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

FORMOSA CHEMICALS & FIBRE

CORPORATION

PARENT COMPANY ONLY 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

INDEX
Items		Pages
Index
Independent Auditors' Report	1-6
Parent Company Only Balance Sheets	7-8
Parent Company Only Statements of Comprehensive Income	9-10
Parent Company Only Statements of Changes in Equity	11
Parent Company Only Statements of Cash Flows	12-13
Notes to Parent Company Only Financial Statements	14-77

INDEPENDENT AUDITORS' REPORT TRANSLATED FROM CHINESE

PWCR23000449 To the Board of Directors and Shareholders of FORMOSA CHEMICALS & FIBRE CORPORPATION

Opinion

We have audited the accompanying parent company only balance sheets of FORMOSA CHEMICALS

• FIBRE CORPORATION (the "Company") as at December 31, 2023 and 2022, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only 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 - Audits of the Other Independent Auditors section of our report), the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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 parent company only financial statements section of our report. We are independent of the Company 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 Company's 2023 parent company only financial statements. These matters were addressed in the context of our audit of the parent company only 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 Company's 2023 parent company only financial statements are stated as follows:

Assessment of loss allowance for accounts receivable

Description

Refer to Note 4(10) 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(4) for details of loss allowance for accounts receivable. As of December 31, 2023, the Company's accounts receivable amounted to NT$18,517,986 thousand, net of loss allowance in the amount of NT$66,840 thousand.

The Company 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 on 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.

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1. Assessed the reasonableness of estimates used by management in calculating expected credit 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.
2. Performed subsequent collection test in order to verify the adequacy of loss allowance provided for accounts receivable.

Valuation of inventories

Description

Refer to Note 4(12) for accounting policy on inventory valuation, Note 5(2) for accounting estimates and assumption uncertainty in relation to inventory valuation, and Note 6(5) for detailed information on allowance for inventory valuation losses. As of December 31, 2023, the inventory and allowance for inventory valuation losses were NT$20,417,319 thousand and NT$881,660 thousand, respectively.

The Company is primarily engaged in the manufacture and sales of petrochemical plastic products, fibers weaving and cords. Because the price of petrochemical plastic products is subject to the fluctuations in international crude oil prices, and the textile market is competitive, there is a higher risk of inventory valuation loss. The Company 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 loss is material to the financial statements, we considered the valuation of inventory as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on 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 Company'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 - audits of the other independent auditors

We did not audit the financial statements of certain investments accounted for under the equity method. These investments accounted for under the equity method amounted to NT$121,180,477 thousand and NT$112,548,005 thousand, constituting 27% and 25% of total assets as of December 31, 2023 and 2022, respectively, and comprehensive income (loss) was NT$9,800,832 thousand and (NT$4,470,574) thousand, constituting 52% and 12% of total comprehensive income (loss) for the years then ended, respectively. Those financial statements were audited by other independent auditors whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on the audit reports of the other independent auditors.

Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the Company'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 Company 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 Company's financial reporting process.

Auditors' responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only 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

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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 parent company only 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 parent company only 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 Company's internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
4. 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 Company'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 parent company only 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 Company to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only 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 parent company only 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 parent company only 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

PARENT COMPANY ONLY BALANCE SHEETS

DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

						December 31, 2023				December 31, 2022
	Assets		Notes		AMOUNT	%			AMOUNT	%
	Current assets
1100	Cash and cash equivalents		4(2) and 6(1)	$	1,848,039		-	$	11,634,474	3
1110	Financial assets at fair value through	6(2)
	profit or loss - current					1,641,598		-			1,562,719	-
1120	Current financial assets at fair value	6(3)
	through other comprehensive income					94,639,552		21			91,204,762	21
1150	Notes receivable, net	6(4)			150,012		-			198,376	-
1160	Notes receivable - related parties		6(4) and 7		122,578		-			186,163	-
1170	Accounts receivable, net	6(4)			7,278,874		2			6,517,260	1
1180	Accounts receivable - related parties		6(4) and 7		11,239,112		3			10,853,824	2
1200	Other receivables	7			1,211,760		-			1,332,436	-
1210	Other receivables - related parties	7			3,077,427		1			2,758,252	1
130X	Inventory	6(5)			19,535,659		4			19,172,462	4
1470	Other current assets					5,312,327		1			3,820,291	1
11XX	Total current assets
				146,056,938		32			149,241,019	33
	Non-current assets
1517	Non-current financial assets at fair	6(3)
	value through other comprehensive
	income					23,244,057		5			19,828,417	5
1550	Investments accounted for under	6(6)
	equity method					212,740,157		47			209,725,866	47
1600	Property, plant and equipment		6(7) and 8		62,096,791		14			58,282,675	13
1755	Right-of-use assets	6(8)			14,817		-			23,502	-
1840	Deferred income tax assets	6(24)			1,911,776		-			1,585,212	-
1900	Other non-current assets		4(2) and 6(1)		6,819,918		2			7,096,790	2
15XX	Total non-current assets
				306,827,516		68			296,542,462	67
1XXX	Total assets
			$	452,884,454		100	$	445,783,481	100

(Continued)

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FORMOSA CHEMICALS & FIBRE CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS

DECEMBER 31, 2023 AND 2022

(Expressed in thousands of New Taiwan dollars)

						December 31, 2023				December 31, 2022
	Liabilities and equity		Notes			AMOUNT	%			AMOUNT	%
	Current liabilities
2100	Short-term borrowings	6(9)	$	10,404,900		2	$	10,300,000		2
2110	Short-term notes and bills payable	6(9)			26,780,338		6			31,596,955		7
2170	Accounts payable					2,565,099		1			1,481,060		-
2180	Accounts payable - related parties	7			9,674,925		2			12,934,223		3
2200	Other payables	7			5,185,834		1			6,640,301		2
2230	Current income tax liabilities					67,451		-			100,396		-
2280	Current lease liabilities					1,922		-			5,732		-
2320	Long-term liabilities, current portion	6(10)(11)			5,300,000		1			6,850,000		2
2399	Other current liabilities					1,871,309		1			2,185,430		-
21XX	Total current liabilities
				61,851,778		14			72,094,097		16
	Non-current liabilities
2530	Corporate bonds payable	6(10)			36,850,000		8			40,650,000		9
2540	Long-term borrowings	6(11)			11,000,000		2			2,500,000		1
2570	Deferred income tax liabilities	6(24)			15,863		-			32,029		-
2580	Non-current lease liabilities					13,412		-			18,247		-
2600	Other non-current liabilities	6(12)			3,894,877		1			4,362,367		1
25XX	Total non-current liabilities
				51,774,152		11			47,562,643		11
2XXX	Total liabilities
				113,625,930		25			119,656,740		27
	Equity
	Share capital	6(13)
3110	Common stock					58,611,863		13			58,611,863		13
	Capital surplus	6(14)
3200	Capital surplus					9,272,140		2			9,246,656		2
	Retained earnings	6(15)
3310	Legal reserve					70,997,369		16			70,224,189		16
3320	Special reserve					76,602,492		17			76,461,277		17
3350	Unappropriated retained earnings					43,627,704		10			41,405,257		9
	Other equity interest	6(16)
3400	Other equity interest					80,470,908		17			70,501,451		16
3500	Treasury stocks	6(13)	(		323,952)	-	(		323,952)	-
3XXX	Total equity					339,258,524		75			326,126,741		73
	Significant contingent liabilities and	9
	unrecognized contract commitments
	Significant events after the balance	11
	sheet date
3X2X	Total liabilities and equity			$	452,884,454		100	$	445,783,481		100

The accompanying notes are an integral part of these parent company only financial statements.

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