Form 20-F Filings with U.S. SEC (4/15/2011) - TSMC

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Table of Contents In January 2010, the FASB issued an accounting update to clarify the scope of decrease in ownership provisions of ASC 810-10 and expands the disclosures required upon deconsolidation of a subsidiary. This guidance requires retrospective application for the Company for the year ended December 31, 2009. The adoption of the guidance did not have a material effect on the Company’s results of operations and cash flows for the years ended December 31, 2009 and 2010, and financial position as of December 31, 2009 and 2010. In December 2010, the FASB issued an accounting update requiring that supplemental pro forma information disclosures pertaining to acquisitions be presented as if the business combination(s) occurred as of the beginning of the prior annual accounting period when comparative financial statements are presented. This guidance also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. This guidance is effective for business combinations consummated in periods beginning after December 15, 2010. The Company will make the required disclosures prospectively from the date of the adoption for any material business combinations or series of immaterial business combinations that are material in the aggregate. b. Fair Value On January 1, 2008, the Company adopted the guidance related to fair value measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The guidance related to fair value measurements defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the Company. In addition to defining fair value, the guidance related to fair value measurements expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: Level 1 — Use unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 — Use observable inputs other than Level 1 prices such as quoted prices for identical or similar instruments in markets that are not active, quoted prices for similar instruments in active markets, and model-based valuation in which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Use inputs that are generally unobservable and reflect the use of significant management judgments and estimates. The following section describes the valuation methodologies the Company uses to measure financial assets and liabilities at fair value. The Company uses quoted prices in active markets for identical assets to determine fair value for our Level 1 investments such as corporate bonds, agency bonds, publicly traded stocks, government bonds, money market funds and open-end mutual-funds. For forward exchange and cross currency swap contracts, fair values are estimated using industry standard valuation models. These models use market-based observable inputs including interest rate curves, foreign exchange rates, and forward and spot prices for currencies to project fair value. The forward exchange and cross currency swap contracts financial assets and liabilities are included in Level 2. The following table presents our assets and liabilities measured at fair value on a recurring basis as of December 31, 2009 and 2010: F - 56
Table of Contents Level 1 Level 2 Level 3 Total December 31, 2009 NT$ NT$ NT$ NT$ (In Millions) Derivative financial assets Forward and Cross currency swap contract $ — $ 186.1 $ — $ 186.1 Marketable securities — available-for-sale Corporate bonds 7,042.2 — — 7,042.2 Agency bonds 5,032.0 — — 5,032.0 Government bonds 2,341.8 — — 2,341.8 Publicly traded stocks 574.9 — — 574.9 Corporate issued notes 303.4 — — 303.4 Money market funds 283.7 — — 283.7 Open-end mutual funds 170.0 — — 170.0 Total $15,748.0 $ 186.1 $ — $15,934.1 Level 1 Level 2 Level 3 Total December 31, 2010 NT$ NT$ NT$ NT$ (In Millions) Assets Derivative financial assets Forward contract $ — $ 6.9 $ — $ 6.9 Marketable securities — available-for-sale Corporate bonds 14,871.1 — — 14,871.1 Agency bonds 8,021.2 — — 8,021.2 Publicly traded stocks 4,634.2 — — 4,634.2 Government bonds 2,014.1 — — 2,014.1 Money market funds 376.2 — — 376.2 Total $29,916.8 $ 6.9 $ — $29,923.7 Liabilities Derivative financial liabilities Forward contract $ — $ 19.0 $ — $ 19.0 F - 57
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Table of Contents SECURITIES AND E
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Table of Contents 2009 2010 NT$ NT$
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Page 145 and 146: Exhibit 12.1 CERTIFICATIONS I, Morr
Page 147 and 148: Exhibit 12.2 CERTIFICATIONS I, Lora
Page 149 and 150: Exhibit 13.1 TAIWAN SEMICONDUCTOR M
Page 151: Exhibit 99.1 CONSENT OF INDEPENDENT
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Form 20-F Filings with U.S. SEC (4/15/2011) - TSMC

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