The Corporation changed the estimated useful lives of its certain operating concession asset based on the evaluations of the Corporation’s Asset Review Committee to ensure that the estimated useful lives appropriately reflect the economic substance and the expected future economic benefits of the Corporation’s operating concession asset.
The changes in accounting estimates are expected to increase the Corporation’s amortization expense by approximately NT$308 million for the year ending December 31, 2017.
year：Using its vast experience and technical expertise that has been developed since the launch of passenger rail service, especially in the area of maintenance, the Corporation periodically reviews the expected economic benefits of its assets and changes in circumstances such as the operating environment that could result in the actual useful lives differing from the Corporation’s current estimates. During a meeting held on September 15, 2017, the Asset Review Committee of the Corporation reviewed the estimated useful lives of certain operating concession asset and determined that changes in estimate were appropriate. On October 19, 2017, the Board of Directors of the Corporation resolved the implementation of the recommended changes.
preceding the accounting change：Not applicable
The opinion of Ruske Ho, CPA with Deloitte & Touche Taiwan, is set forth as below:
|Operating concession assets subject
to changes in accounting estimates
|Before change||After change|
|Items||Estimated useful lives (years)||Estimated useful lives (years)|
|Machinery and equipment|
|Buildings and auxiliary structures||10-16||15-35|
|Maintenance equipment and tools||5-25||10-35|
|Computer and technology equipment||5-15||5-35|
|High-speed train sets||15-35||15-35|
Regulations Governing the Preparation of Financial Reports by Securities Issuer.
Asset Review Committee of Taiwan High Speed Rail Corporation (the “Corporation”) approved changes in the estimated useful lives of certain operating concession asset on September 15, 2017. The table below shows the asset useful lives before and after the changes:
control and classified as computer and technology equipment under the category of machinery and equipment have been shortened to 7 to 10 years from 12 years, taking into account the replacement time indicated by the initial design and historic records of failures and repairs. With respect to uninterruptible power supply used in the Disaster Warning System and classified as signaling system under the category of transportation equipment, its estimated useful life has been shortened to 5 years from 35 years. Certain equipment classified as telecommunication system under the category of transportation equipment such as the mobile switching office of the radio system, radio enhanced base transceiver station, bi-directional amplifier and monitoring and control Equipment in plant monitoring and control system will be depreciated over a period of 15 to 20 years, versus 35 years previously.
assets after considering the opinion of the Corporation’s internal experts, history of all equipment repairs and conditions, ongoing maintenance and replacement activities, and expected enhancements. The assets subject to changes in accounting estimates include buildings and auxiliary structures, maintenance equipment and tools, and computer and technology equipment that come under the category of machinery and equipment; and high-speed train sets, signaling system and telecommunication system that fall under the category of transportation equipment.
Corporation’s power system, which is categorized as machinery and equipment, include instructions set out in the Maintenance Manual, the replacement schedule carried out by the maintenance staff, retirements of components that occur in the normal course of business, and maintenance, inspections and enhancements scheduled to extend the useful lives of existing assets. Given that the repair and maintenance needs for certain equipment are outsourced to third-party providers as the equipment are no longer supported by their original manufacturers, the Corporation has reassessed and reduced the estimated useful lives of said equipment. In relation to high-speed train sets under the category of transportation equipment, studies conducted by vendors on the retirement of railcars recommend replacing the cars ahead of original schedule. Moreover, the estimated useful lives of certain equipment were shortened on the grounds of instructions set out in the Maintenance Manual and initial design documents, recommendations following an evaluation of the interim maintenance program, and termination of support from the original equipment manufacturers. With regard to certain equipment classified as maintenance equipment and tools or computer and technology equipment under the category of machinery and equipment, plus those classified as signaling system or telecommunication system under the category of transportation equipment, the determination of shortened useful lives involves the judgment of in-house experts who have discussed in depth the topic and examined the original design, and the opinion of maintenance staff based on their experience and records of maintenance.
in the area of maintenance, the Corporation periodically reviews the expected economic benefits of its assets and changes in circumstances such as the operating environment that could result in the actual useful lives differing from the Corporation’s current estimates. During a meeting held on September 15, 2017, the Asset Review Committee of the Corporation reviewed the estimated useful lives of certain operating concession asset and determined that changes in estimate were appropriate. Revisions in the estimated useful lives, as set forth in the table in Section II, became effective on October 1, 2017.
the Asset Review Committee of the Corporation, supporting documentation such as the original design of equipment, the findings and recommendations of the evaluation of assets, and other information such as a review and analysis of programs to extend the useful lives of certain assets.
Changes in accounting estimates were resolved at a meeting of the Board of Directors and announced in accordance with reporting requirements on October 19, 2017. Same information will be reported to the latest upcoming shareholders’ meeting.
(1) The Company’s 2016 profit distribution has been approved at the 2017 annual shareholders’ meeting.