Subsidiaries

12 Months Ended

Dec. 31, 2022

Disclosure of subsidiaries [abstract]

14.

SUBSIDIARIES

Information on subsidiaries with material noncontrolling interests

The table below shows details of less than wholly owned subsidiaries of the Company that have material noncontrolling interests:


	Place of Incorporation	Proportion of Ownership Interests and Voting Rights Held by Noncontrolling Interests
	and Principal	December 31
Subsidiaries	Place of Business	2021	2022
SENAO	Taiwan	72%	72%
CHPT	Taiwan	66%	66%


	Profit Allocated to Noncontrolling Interests						Accumulated Noncontrolling Interests
	Year Ended December 31						December 31
	2020		2021		2022		2021		2022
	NT$		NT$		NT$		NT$		NT$
	(In Millions)
SENAO	$	312	$	421	$	462	$	4,337	$	4,454
CHPT	$	604	$	588	$	496		4,933		5,235
Individually immaterial subsidiaries with noncontrolling interests								2,477		2,719
							$	11,747	$	12,408

Summarized financial information in respect of SENAO and its subsidiaries that has material noncontrolling interests is set out below. The summarized financial information below represented amounts before intercompany eliminations.


	December 31
	2021		2022
	NT$		NT$
	(In Millions)
Current assets	$	7,963	$	7,249
Noncurrent assets	$	2,981	$	3,053
Current liabilities	$	4,561	$	3,714
Noncurrent liabilities	$	418	$	460
Equity attributable to the parent	$	1,628	$	1,674
Equity attributable to noncontrolling interests	$	4,337	$	4,454


	Year Ended December 31
	2020			2021			2022
	NT$			NT$			NT$
				(In Millions)
Revenues and income	$	27,232		$	31,302		$	31,602
Costs and expenses		26,797			30,715			30,958
Profit for the year	$	435		$	587		$	644

Profit attributable to the parent	$	123		$	166		$	182
Profit attributable to noncontrolling interests		312			421			462
Profit for the year	$	435		$	587		$	644

Other comprehensive income attributable to the parent	$	1		$	2		$	11
Other comprehensive income attributable to noncontrolling interests		2			5			26
Other comprehensive income for the year	$	3		$	7		$	37

Total comprehensive income attributable to the parent	$	124		$	168		$	192
Total comprehensive income attributable to noncontrolling interests		314			426			488
Total comprehensive income for the year	$	438		$	594		$	680

Net cash flow from operating activities	$	862		$	654		$	(329	)
Net cash flow from investing activities		54			215			36
Net cash flow from financing activities		(687	)		(690	)		(826	)
Effect of exchange rate changes on cash and cash equivalents		—			—			1
Net cash inflow (outflow)	$	229		$	179		$	(1,118	)

Dividends paid to noncontrolling interests	$	269		$	278		$	371

Summarized financial information in respect of CHPT and its subsidiaries that has material noncontrolling interests is set out below. The summarized financial information below represented amounts before intercompany eliminations.


	December 31
	2021		2022
	NT$		NT$
	(In Millions)
Current assets	$	4,657	$	4,406
Noncurrent assets	$	4,063	$	4,631
Current liabilities	$	1,183	$	1,087
Noncurrent liabilities	$	32	$	26
Equity attributable to CHI	$	2,572	$	2,689
Equity attributable to noncontrolling interests	$	4,933	$	5,235


	Year Ended December 31
	2020			2021			2022
	NT$			NT$			NT$
				(In Millions)
Revenues and income	$	4,221		$	4,254		$	4,434
Costs and expenses		3,301			3,360			3,673
Profit for the year	$	920		$	894		$	761

Profit attributable to CHI	$	316		$	306		$	265
Profit attributable to noncontrolling interests		604			588			496
Profit for the year	$	920		$	894		$	761

Other comprehensive income (loss) attributable to CHI	$	—		$	(1	)	$	5
Other comprehensive income (loss) attributable to noncontrolling interests		—			(2	)		7
Other comprehensive income (loss) for the year	$	—		$	(3	)	$	12

Total comprehensive income attributable to CHI	$	316		$	305		$	270
Total comprehensive income attributable to noncontrolling interests		604			586			503
Total comprehensive income for the year	$	920		$	891		$	773

Net cash flow from operating activities	$	1,483		$	1,090		$	1,401
Net cash flow from investing activities		(533	)		(519	)		(1,011	)
Net cash flow from financing activities		(349	)		(414	)		(388	)
Effect of exchange rate changes on cash and cash equivalents		1			(1	)		8
Net cash inflow	$	602		$	156		$	10

Dividends paid to noncontrolling interests	$	216		$	259		$	293

Equity transactions with noncontrolling interests

CHIEF issued new shares in March 2020, December 2020, March 2021, December 2021, March 2022 and December 2022, as its employees exercised options. Therefore, the Company’s ownership interest in CHIEF decreased to 58.89% and 58.67% as of December 31, 2021 and 2022, respectively. See Note 34(b) for details.

CHTSC issued new shares in February 2021, February 2022 and May 2022 as its employees exercised options. Therefore, the Company’s ownership interest in CHTSC decreased to 77.46% and 73.09% as of December 31, 2021 and 2022. See Note 34(c) for details.

IISI issued new shares in September 2020 and January 2021 as its employees exercised options. Therefore, the Company’s ownership interest in IISI decreased to 51.02%. See Note 34(d) for details.

SENAO subscribed for all the shares in the capital increase of Youth in April 2020; therefore, the Company’s ownership interest in Youth increased.

Chunghwa did not participate in the capital increase of CHST in November 2022. Therefore, the Company’s ownership interest in CHST decreased.

The above transactions were accounted for as equity transactions since the Company did not cease to have control over these subsidiaries.

The detailed information of the equity transactions for the years ended December 31, 2020, 2021 and 2022 was as follows:


	Year Ended December 31, 2020
	CHIEF Share-Based Payment			SENAO Not Proportionately Participating in the Capital Increase of Youth		IISI Share-Based Payment
	NT$			NT$		NT$
	(In Millions)
Cash consideration received from noncontrolling interests	$	75		$	—	$	7
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(49	)		—		(7	)
Differences arising from equity transactions	$	26		$	—	$	—

Line items for equity transaction adjustments
Additional paid-in capital - arising from changes in equities of subsidiaries	$	26		$	—	$	—


	Year Ended December 31, 2021
	CHIEF Share-Based Payment			CHTSC Share-Based Payment			IISI Share-Based Payment
	NT$			NT$			NT$
	(In Millions)
Cash consideration received from noncontrolling interests	$	29		$	21		$	4
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(17	)		(19	)		(1	)
Differences arising from equity transactions	$	12		$	2		$	3

Line items for equity transaction adjustments
Additional paid-in capital - arising from changes in equities of subsidiaries	$	12		$	2		$	3


	Year Ended December 31, 2022
	CHIEF Share-Based Payment			CHTSC Share-Based Payment			Chunghwa Not Proportionately Participating in the Capital Increase of CHST
	NT$			NT$			NT$
	(In Millions)
Cash consideration received from noncontrolling interests	$	39		$	35		$	15
The proportionate share of the carrying amount of the net assets of the subsidiary transferred to noncontrolling interests		(17	)		(30	)		(10	)
Differences arising from equity transactions	$	22		$	5		$	5

Line items for equity transaction adjustments
Additional paid-in capital - arising from changes in equities of subsidiaries	$	22		$	5		$	5

Business combinations

Subsidiary acquired

In order to develop and cultivate the enterprise customer market, Chunghwa obtained 20.38% ownership interest in IISI by cash on July 1, 2020, the acquisition date. (Note) Chunghwa’s ownership interest in IISI increased to 51.54% by considering the previously held ownership interest in IISI. Chunghwa obtained over half of the seats of the Board of Directors of IISI; therefore, Chunghwa gained control over IISI and included IISI and its subsidiaries in the consolidated financial statements starting from the acquisition date. IISI mainly engages in information system development and maintenance service business, etc.

Note: IISI issued new shares in April 2020 as its employees exercised options; therefore, the percentage of ownership interest in IISI obtained on the acquisition date is lower than that approved by Chunghwa’s Board of Directors in January 2020.

Assets acquired and liabilities assumed at acquisition date


	IISI and Its Subsidiaries
Current assets
Cash and cash equivalents	$	588
Contract assets		583
Trade notes and accounts receivable		165
Inventories		141
Prepayments		114
Other current monetary assets		114
Other current assets		75
Noncurrent assets
Property, plant and equipment		48
Right-of-use assets		70
Intangible assets		12
Deferred income tax assets		6
Other noncurrent assets		102
Current liabilities
Short-term loans		(4	)
Contract liabilities		(334	)
Trade notes and accounts payable		(257	)
Current tax liabilities		(19	)
Lease liabilities		(26	)
Other payables		(266	)
Provisions		(15	)
Other current liabilities		(30	)
Noncurrent liabilities
Deferred income tax liabilities		(3	)
Lease liabilities		(45	)
Net defined benefit liabilities		(32	)
Other noncurrent liabilities		(5	)
	$	982

The trade notes and accounts receivable acquired in business combination transactions have a fair value of $165 million and a gross contractual amount of $167 million. The best estimate of the contractual cash flows not expected to be collected as of the acquisition date was $2 million.

Goodwill arising from acquisition


	IISI and Its Subsidiaries
Consideration transferred	$	234
Add: Fair value of equity interest held before the acquisition date		327
Add: Noncontrolling interest (48.46% of the identifiable net assets of IISI and its subsidiaries)		476
Less: Fair value of identifiable net assets acquired		(982	)
Goodwill arising from acquisition	$	55

The goodwill arising from the acquisition of IISI mainly represents the control premium. In addition, the consideration paid for the combination included amounts attributed to the benefits of expected synergies and the assembled workforces of IISI. These benefits are not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

Goodwill arising from business combinations is not deductible for tax purposes.

Net cash inflow on acquisition of subsidiaries

Impact of acquisition on the financial results of the Company

The financial results of the acquiree since the acquisition date to December 31, 2020 included in the consolidated statements of comprehensive income are as follows:

Had the business combination been in effect at the beginning of the annual reporting period, the Company’s revenue and profit would have been $208,605 million and $34,747 million for the year ended December 31, 2020, respectively. This pro-forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Company that actually would have been achieved had the acquisition been completed on January 1, 2020, nor is it intended to be a projection of future results.

In determining the pro-forma revenue and profit of the Company had IISI been acquired at the beginning of the financial year, the management calculated amortization of intangible assets acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognized in the pre-acquisition financial statements.

IISI and Its
Subsidiaries

Cash and cash equivalents acquired

Less: Consideration paid in cash