Page 111 - TSMC 2018 Annual Report

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to curtail expansion modify plans or delay the deployment of new or expanded services until it obtains such financing
Risks Associated with High-Risk/Highly Leveraged Investments Lending Endorsements and Guarantees for Other Parties and Financial Derivative Transactions TSMC did not make high-risk or highly leveraged financial investments in in in 2018 nor in in in 2019 up to the date of this annual report TSMC TSMC provided a a a a a guarantee to TSMC TSMC Global a a a a a wholly-owned subsidiary of of TSMC for its issuance of of U S S dollar-denominated senior unsecured corporate bonds in April 2013 TSMC Global repaid the full amount of its U S dollar-denominated senior unsecured corporate bonds due in April 2018 TSMC also provided a a a a a guarantee amounting to no more than US$83 21 million to TSMC North America a a a wholly-owned subsidiary of of TSMC since November 2014 for its obligation to an office leasing contract As of February 28 2019 TSMC had RMB 6 billion and US$129 million intercompany loans arranged among the Company’s subsidiaries which were all in compliance with relevant rules and regulations In 2018 the financial transactions of a a a a a a a derivative nature
that TSMC entered into were strictly for for hedging and not for for any trading or or or speculative purposes For more transaction information and risk assessment please refer to Note Note 7 Note Note 13 and Note 36 of the annual report section (II) Financial Statements To control various types of financial transactions the Company has established internal policies and procedures based on sound financial and business practices all in in in compliance with the relevant rules and regulations issued by the Taiwan Securities and and Futures Bureau TSMC policies and and procedures include “Policies and Procedures for Financial Derivative Transactions ” “Procedures “Procedures for Lending Funds to Other Parties ” “Procedures “Procedures for for Acquisition or or or Disposal of Assets ” and “Procedures for for Endorsement and Guarantee ” Risks Associated with Impairment Charges
Under Taiwan-IFRSs TSMC is required to evaluate its investments in in in debt securities investments accounted for using equity method tangible tangible assets assets and intangible assets assets for impairment
whenever triggering events or changes in in circumstances indicate that the asset may be impaired If certain criteria are met TSMC TSMC is required to record an impairment
charge TSMC TSMC is also required under Taiwan-IFRSs to evaluate goodwill for impairment
at least on an an annual basis or or more frequently whenever triggering events or changes in in in circumstances indicate that goodwill may may be impaired and the carrying value may may not be recoverable TSMC holds investments in in in certain publicly listed and private companies some of which have incurred certain impairment
charges as disclosed in Annual Report section (II) Financial Statements The determination of an an impairment
charge at at any given
time is based significantly on the the projected results of the the Company’s operations over several years subsequent to that time Consequently an impairment
charge is more likely to occur during a a a a period when the Company’s operating results are otherwise already depressed TSMC has established the process and system to closely monitor and assess the the risk of impairment
charge However the the management is unable to estimate the extent or timing of any impairment
impairment
charge for future years or or whether such impairment
impairment
charge may have a a a a a a a a material adverse effect on the Company’s net income 6 3 5 Hazardous Risks and Utility Supply Interruption or or Shortage Risks The frequency and severity of catastrophic events including natural disasters and severe weather has been increasing in in in part due to climate change or systemic regional geological changes that manifest in in damaging earthquakes TSMC has manufacturing and other operations in in locations subject to natural disasters such as as flooding earthquakes tsunamis typhoons and droughts that may cause interruptions or shortages in the supply of utilities such as water and electricity that could disrupt operations In addition TSMC’s suppliers and customers also have operations in such locations For example most of TSMC’s production facilities as as well as as those of of many of of its suppliers and and customers and and upstream providers of complementary semiconductor manufacturing services are are located in Taiwan and Japan which are are susceptible to earthquakes tsunamis flooding typhoons and droughts from time time to time time that may cause shortages in electricity and water or or interruptions to our operations