Mega Bank Annual Report 2017

32 Mega Bank -32- Impairment assessment of equity investments carried at cost Description For the accounting policy for the impairment assessment of equity investment carried at cost (accounted under other financial assets), please refer to Note 4(9) of the consolidated financial statements; for critical accounting judgments, estimates, and key sources of assumption uncertainty of equity investments carried at cost, please refer to Note 5(3) of the consolidated financial statements; for detail of other financial assets-equity investments carried at cost, please refer to Note 6(9) of the consolidated financial statements. Other financial assets-equity investments carried at cost and its accumulated impairment as at December 31, 2017, was $10,214,744 thousand and $884,452 thousand, respectively. For the provision of impairment for other financial assets-equity investments carried at cost accounted for by the Bank and its subsidiaries, in accordance with the Bank and its subsidiaries’ accounting policy, upon the end of each reporting period, the Bank and its subsidiaries shall estimate impairment losses when it is assessed that there is objective evidence of impairment. When individual equity investments have existing objective evidence of impairment loss, provision of impairment loss is determined by the recoverable amount of cash flows based on the financial and operating status. Because the aforementioned determination on whether there is existing objective evidence of impairment for equity investments carried at cost and the provision of impairment (including the determination of recoverable cash flows) involve subjective judgment and numerous assumptions and estimates, the method of determining assumptions and estimates will directly affect recognized amounts. Thus, we have included the impairment assessment of the Bank and its subsidiaries’ equity investments carried at cost as one of the key audit matters in our audit. How our audit addressed the matter The procedures that we have conducted in response to specific aspects of the above-mentioned key audit matter are summarized as follows: 1. Understood and assessed the Bank and its subsidiaries’ related policies, stop -loss and exception management controls, and handling procedures for determining impairment evidence and the provision of impairment for equity investments measured at cost. 2. Sampled and tested the evaluations provided by management to determine whether there are documents that support the existence of impairment evidence. 3. Sampled and tested the appropriateness of management’s estimate future cash flows (e.g. documents related expected recoverable cash flows of investees) and recalculated the accuracy of provisioned impairment amounts. Other matter – Parent company only financial report We have audited and expressed an unqualified opinion on the parent company only financial statements as at and for the years ended December 31, 2017 and 2016, prepared by the Bank. 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 Public Banks” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations 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. 屯婈倗⎰㚫妰ⷓḳ⊁㇨ PricewaterhouseCoopers, Taiwan 11012 冢⊿ⶪᾉ佑⋨➢昮嶗ᶨ㭝 333 嘇 27 㦻 27F, No.333, Sec.1, Keelung Rd., Xinyi Dist., Taipei 11012, Taiwan T: +886 (2) 2729 6666 , F: +886 (2) 2729 6686 , www.pwc.tw