ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITORS' REPORT THEREON

DECEMBER 31, 2023 AND 2022

------------------------------------------------------------------------------------------------------------------------------------

For the convenience of readers and for information purpose only, the independent 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 independent auditors' report and financial statements shall prevail.

~1~

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

In connection with the Consolidated Financial Statements of Affiliated Enterprises of ADVANTECH CO., LTD. (the "Consolidated FS of the Affiliates"), we represent to you that, the entities required to be included in the Consolidated FS of the Affiliates as of and for the year ended December 31, 2023 in accordance with the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" are the same as those required to be included in the Consolidated Financial Statements of ADVANTECH CO., LTD. and its subsidiaries (the "Consolidated FS of the Group") in accordance with International Financial Reporting Standard 10, as well as that, the information required to be disclosed in the Consolidated FS of Affiliates is disclosed in the Consolidated FS of the Group. Consequently, ADVANTECH CO., LTD. does not prepare a separate set of Consolidated FS of Affiliates.

Very truly yours,

ADVANTECH CO., LTD.

By

K.C. Liu , Chairman

February 27, 2024

~2~

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of ADVANTECH CO., LTD.

Opinion

We have audited the accompanying consolidated balance sheets of ADVANTECH CO., LTD. and its 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, 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 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 Independent 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 in 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.

~3~

Key audit matters

Key audit matters are those matters that, in our professional judgements, 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:

Valuation of inventories

Description

Refer to Note 4(14) for the accounting policies on the valuation of inventories, Note 5 for the uncertainty of accounting estimations and assumptions for the valuation of inventories, and Note 6(6) for the details of inventories. The balances of the Group's inventories and allowance for inventory valuation as at December 31, 2023 are $10,863,248 thousand and $1,059,452 thousand, respectively.

The Group is primarily engaged in the manufacture and sales of embedded computer boards, industrial automation products, applied computers and industrial computers. Due to the rapid changes in technology, environment and industrial characteristics, inventories of the Group are available in different sizes and types. Since the valuation of inventories is subject to management's judgment and the accounting estimations will have significant influence on the inventory values, we considered the valuation of inventories as one of the key audit matters.

How our audit addressed the matter

We have performed primary audit procedures for the above matter as follows:

  1. Obtained an understanding of the policy on allowance for inventory valuation loss to affirm the reasonableness of application.
  2. Validated the accuracy of the system logic in calculating the ageing of inventories.
  3. Tested the basis of market value used in calculating the net realizable value of inventory and validated the accuracy of net realizable value calculation of selected samples.

~4~

Recognition of sales revenue from the Embedded-IoT and the Applied Computing Business Group

Description

Refer to Note 4(33) for the related accounting policies on sales revenue and Note 6(22) for the details of revenues.

The Group operates in a highly competitive industrial computer industry. Moreover, the overall industry was impacted by the global economic environment in 2023, increasing the risk associated with recognizing revenue. Therefore, we considered the recognition of sales revenue from the Embedded-IoT and the Applied Computing Business Group, which showed an increasing trend in sales revenue, as one of the key audit matters.

How our audit addressed the matter

We have performed primary audit procedures for the above matter as follows:

  1. Obtained an understanding of and assessed the internal controls in relation to sales revenue, and validated its operating effectiveness.
  2. Tested the details of sales revenue of the Embedded-IoT and Applied Computing Business Group for the entire year, and selected samples of sales revenue transactions and related documents to confirm the appropriateness of revenue recognition.
  3. Inspected significant abnormal sales returns and allowances after the balance sheet date.
  4. Performed accounts receivable confirmation procedure to significant customers.

Other matter

We have audited and expressed an unqualified opinion on the parent company only financial statements of ADVANTECH CO., LTD. as at and for the years ended December 31, 2023 and 2022.

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

~5~

to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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.

Independent 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.

~6~

  1. 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.
  2. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  3. 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.
  4. 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.
  5. 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.

~7~

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 auditors' report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Liang, Hua-Ling

Lin, Yi-Fan

For and on behalf of PricewaterhouseCoopers, Taiwan

February 27, 2024

-------------------------------------------------------------------------------------------------------------------------------------------------

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.

~8~

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED 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

6(1)

$

11,011,580

16

$

12,029,785

18

1110

Financial assets at fair value through

6(2)

profit or loss - current

8,619,027

13

3,211,182

5

1136

Financial assets at amortised cost -

6(4) and 8

current

1,569,168

2

139,910

-

1150

Notes receivable

6(5)

1,293,317

2

1,434,823

2

1170

Accounts receivable

6(5)

7,961,226

12

9,641,564

15

1180

Accounts receivable - related parties

7

16,734

-

32,400

-

1200

Other receivables

73,265

-

80,598

-

1210

Other receivables - related parties

7

922

-

890

-

130X

Inventories

6(6)

9,803,796

14

14,007,765

21

1460

Non-current assets held for sale

6(11)

238,341

-

-

-

1470

Other current assets

7

798,361

1

1,168,431

2

11XX

Total current assets

41,385,737

60

41,747,348

63

Non-current assets

1510

Financial assets at fair value through

6(2)

profit or loss - non-current

2,906,420

4

2,703,431

4

1517

Financial assets at fair value through

6(3)

other comprehensive income - non-

current

2,951,234

4

2,199,556

3

1535

Financial assets at amortised cost -

6(4)

non-current

61,410

-

-

-

1550

Investments accounted for under

6(7)

equity method

4,704,633

7

4,383,238

7

1600

Property, plant and equipment

6(8) and 8

11,326,045

17

11,039,395

17

1755

Right-of-use assets

6(9)

1,965,522

3

614,655

1

1780

Intangible assets

6(10)

2,750,414

4

2,789,279

4

1840

Deferred income tax assets

6(27)

830,790

1

700,239

1

1915

Prepayments for business facilities

92,705

-

127,024

-

1990

Other non-current assets

8

81,362

-

80,773

-

15XX

Total non-current assets

27,670,535

40

24,637,590

37

1XXX

Total assets

$

69,056,272

100

$

66,384,938

100

(Continued)

~9~

ADVANTECH CO., LTD. AND SUBSIDIARIES

CONSOLIDATED 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(12)

$

237,730

-

$

531,330

1

2120

Financial liabilities at fair value

6(2)

through profit or loss - current

635

-

21,634

-

2130

Contract liabilities - current

6(22)

1,088,750

2

1,313,695

2

2170

Notes and accounts payable

7

6,088,794

9

7,126,418

11

2200

Other payables

6(13) and 7

4,395,090

6

5,146,661

8

2230

Current income tax liabilities

3,440,853

5

3,588,177

5

2250

Provision for liabilities - current

212,893

-

252,434

-

2280

Lease liabilities - current

6(9)

106,391

-

168,012

-

2320

Long-term liabilities, current portion

6(14) and 8

118,500

-

-

-

2399

Other current liabilities

337,171

1

332,445

1

21XX

Total current liabilities

16,026,807

23

18,480,816

28

Non-current liabilities

2540

Long-term borrowings

6(14) and 8

-

-

121,500

-

2560

Current income tax liabilities - non-

current

219,989

-

659,969

1

2570

Deferred income tax liabilities

6(27)

1,936,142

3

2,137,306

3

2580

Lease liabilities - non-current

6(9)

1,610,905

2

175,846

-

2600

Other non-current liabilities

452,851

1

525,487

1

25XX

Total non-current liabilities

4,219,887

6

3,620,108

5

2XXX

Total liabilities

20,246,694

29

22,100,924

33

Equity attributable to shareholders of

the parent

Share capital

6(17)

3110

Common shares

8,577,795

12

7,778,434

11

3140

Advance receipts for share capital

6,699

-

1,335

-

Capital surplus

6(18)

3200

Capital surplus

9,753,806

14

9,110,280

14

Retained earnings

6(19)

3310

Legal reserve

9,630,127

14

8,552,226

13

3320

Special reserve

-

-

555,794

1

3350

Unappropriated retained earnings

19,599,420

28

17,750,074

27

Other equity

6(20)

3400

Other equity

893,350

2

66,559

-

31XX

Equity attributable to

shareholders of the parent

48,461,152

70

43,814,702

66

36XX

Non-controlling interest

6(21)

348,426

1

469,312

1

3XXX

Total equity

48,809,578

71

44,284,014

67

Significant contingent liabilities and

9

unrecognized contract commitments

Significant events after the balance

11

sheet date

3X2X

Total liabilities and equity

$

69,056,272

100

$

66,384,938

100

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

~10~

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

ADVANTECH Co. Ltd. published this content on 06 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 March 2024 03:55:05 UTC.