2016 CPC

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

CPC is operated and managed by the Government of the Republic of China (ROC). CPC's accounts are maintained generally

in accordance with the accounting laws and regulations governing state-owned enterprises. The Corporation's significant

accounting policies conform to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, and

the following International Financial Reporting Standards, International Accounting Standards (IASs), Interpretations of

International Financial Reporting Standards (IFRIC), and Interpretations of IAS (SIC) (collectively, "IFRSs") endorsed by the

Financial Supervisory Commission (FSC).

The Corporation's annual financial statements are required to be examined by the Executive Yuan and the Ministry of Audit of

the Control Yuan. The examinations are primarily aimed at determining the extent to which the Corporation meets its budget

as approved by the Legislative Yuan. The Corporation's financial statements are finalized on the basis of the results of these

examinations. The Ministry of Audit's adjustments should be reflected in the financial statements audited by independent

certified public accountants. The opening balance of the following year of the Corporation's books of accounts is based on

the balance after the adjustments made by the Ministry of Audit. The examination of the Corporation's financial statements as

of and for the year ended December 31, 2014 had already been completed.

The examinations of the Corporation's financial statements as of and for the year ended December 31, 2015 by these

government agencies had not yet been completed as of the audit report date. The financial statements were compiled

in conformity with Guidelines Governing the Preparation of Financial Reports by Securities Issuers, International Financial

Reporting Standards and related regulations.

On May 14, 2009, the Financial Supervisory Commission (FSC) announced the "Framework for the Adoption of IFRSs by the

Companies in the ROC." Under this framework, starting from 2013, companies listed on the Taiwan Stock Exchange or traded

on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare their financial statements in accordance with

the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (the

"IFRSs") endorsed by the FSC. On the other hand, public traded companies that are not listed on the Taiwan Stock Exchange

or the Taiwan GreTai Securities Market, credit cooperatives, and credit card companies should adopt IFRSs in 2015.

Under the original IFRS adoption timetable announced by the FSC, CPC should adopt IFRSs in 2015. However, the

Directorate-General of Budget of the Executive Yuan, Accounting, and Statistics (DGBAS) soon became concerned that the

differences in the timing of the application of IFRSs and budgeting basis by the numerous state-owned companies could result

in inconsistencies in these companies' presentation of financial position and financial performance in the Consolidated Table

of State-Owned Subordinate Unit Businesses. Thus in 2010, DGBAS announced the "IFRSs Adoption Plan for State-Owned

Entities,"stipulating that all state-owned entities should adopt IFRSs in 2013.

For readers' convenience, the accompanying financial statements have been translated into English from the original Chinese

version prepared and used in the ROC. If inconsistencies arise between the English version and the Chinese version or if

differences arise in the interpretations between the two versions, the Chinese version of the financial statements shall prevail.

Statement of Compliance

The financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial

Reports by Securities Issuers and IFRSs as endorsed by the FSC.

Basis of Preparation

The financial statements have been prepared on the historical cost basis, except for financial instruments that are measured at

fair value.

The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs

are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

c. Level 3 inputs are unobservable inputs for the asset or liability.

Classi cation of Current and Non-current Assets and Liabilities

Current assets include:

a. Assets held primarily for the purpose of trading;

b. Assets to be realized within twelve months after the reporting period; and

c. Cash and cash equivalents, unless the asset is restricted from being exchanged or used to settle a liability for at least 12

months after the reporting period.

Financial Statement