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Article 7
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"Financial reports" shall mean financial statements, statements of major accounting items, and any other disclosures and explanatory information helpful to the decision making of the primary users.
A complete set of financial statements shall comprise a balance sheet, a statement of comprehensive income, a statement of changes in equity, a statement of cash flows, and their accompanying notes or supplementary schedules.
A securities firm, unless newly established, or under any of the circumstances set out in paragraph 4 herein, or otherwise required by the FSC, shall prepare the major financial statements and notes described in the preceding paragraph by presenting comparative information for two consecutive periods. The major financial statements shall also be signed or sealed on each page by the securities firm's chairperson, managerial officer, and principal accounting officer.
When a securities firm applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial reports, or when it reclassifies items in its financial reports, it shall do so in accordance with the applicable provisions of IFRS 18.
For the purposes of these Regulations, information is material if omitting, misstating or obscuring the information in the financial reports could reasonably be expected to influence decisions that the primary users of general purpose financial reports make on the basis of information in those financial reports. Judgments of materiality depend on qualitative factors and quantitative factors. Whether information is quantitatively material is assessed by considering not only the size of the impact recognized in the financial report, but also any unrecognized items that could ultimately affect primary users' overall perception of the securities firm's financial position, financial performance and cash flows (e.g., contingent liabilities or contingent assets). When assessing qualitative factors, consideration shall be given to both securities firm-specific and external qualitative factors, including involvement of a related party, uncommon transactions or features of a transaction, unexpected variation or changes in trends, the securities firm's geographical location, its industry sector, or the state of the economy or economies in which it operates.
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Article 17
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A securities firm shall present all items of income and expense recognized in a period in a single statement of comprehensive income displaying components of profit or loss and components of other comprehensive income.
A securities firm shall present expenses recognized in profit or loss under the preceding paragraph using a classification based on their nature.
When items of income or expense are material, a securities firm shall disclose their nature and amount separately in the statement of comprehensive income or in the notes.
The income and expenses recognized in profit or loss under paragraph 1 shall be classified into the operating category, investing category, financing category, income taxes category, or discontinued operations category in accordance with IFRS 18. A securities firm shall further assess whether it has a specified main business activity of investing in particular types of assets or providing financing to customers, so as to classify income and expenses into the appropriate category.
As a minimum, the statement of comprehensive income shall include the following line items, with the related details disclosed in the notes:
1. Income:
A. Brokerage fee revenue: Revenue from handling fees received by a securities firm for executing customer orders, during short sale or securities lending operations, or for the provision of agency services for transactions in emerging stocks.
B. Revenue from underwriting business: Remuneration from underwriting securities on a firm commitment basis, handling fee revenue from underwriting securities on a best-efforts basis, revenue from underwriting processing fees, and revenue from underwriting advisory fees.
C. Net gains (losses) on issuance of call (put) warrants: A securities firm's net gains or losses arising from changes in fair value of liabilities for call (put) warrants and of repurchased call (put) warrants, gains on exercise of call (put) warrants before maturity, and gains on expired call (put) warrants, less related fees incurred by the securities firm for issuing call (put) warrants.
D. Net gains (losses) on sale of securities held for operations: The net amount after offsetting all gains and losses arising from the sale of securities held for operations by the dealing and underwriting segments.
E. Net gains (losses) on measurement at fair value through profit or loss for securities held for operations: The net amount after offsetting all gains and losses arising from the fair value measurement of securities held for operations that are acquired by the dealing and underwriting segments.
F. Realized net gains or losses from debt instrument investments measured at fair value through other comprehensive income: The net amount after offsetting all gains and losses arising from the sale by a securities firm of debt instruments measured at fair value through other comprehensive income.
G. Net gains or losses from reclassification of financial assets: Means gains or losses that meet one of the following conditions in accordance with IFRS 9:
a. Net gains or losses from reclassification from measurement at amortized cost to measurement at fair value through profit or loss.
b. Cumulative net gains or losses from reclassification from measurement at fair value through other comprehensive income to measurement at fair value through profit or loss.
H. Expected credit impairment losses and reversal gains: the amount of expected credit impairment losses (or reversals) recognized in accordance with IFRS 9.
I. Gains or losses arising from derecognition of financial assets measured at amortized cost: Means gains or losses arising when a securities firm derecognizes from its books financial assets measured at amortized cost that it had originally recognized.
J. Net gains (losses) on the covering of securities borrowing and short sales of bonds with reverse repurchase agreements: In the case of a securities firm engaging in securities borrowing or outright sale of government bonds acquired under reverse repurchase agreements, the net amount after offsetting all gains arising from a decline in the market price of the given security when the trade is covered at maturity with all losses arising from an increase in the market price of the given security when the trade is covered at maturity.
K. Net gains (losses) on measurement at fair value through profit or loss for securities borrowing and short sales of bonds with reverse repurchase agreements: In the case of a securities firm engaging in securities borrowing or outright sale of government bonds acquired under reverse repurchase agreements, the net amount after offsetting all gains and losses from measuring relevant items at fair value.
L. Interest revenue calculated using the effective interest method: Interest revenue that a securities firm derives from its margin purchase or money lending business or otherwise related to its business activities, where such interest revenue is calculated using the effective interest method in accordance with IFRS 9.
M. Net income from wealth management business: In the case of a securities firm engaging in wealth management business, the net amount of the resultant revenues less related expenditures.
N. Net gains (losses) on derivative instruments: In the case of a securities firm engaging in domestic or foreign derivative instrument business or hedging transactions, the net amount after offsetting the resultant gains and losses.
O. Other operating income: Operating revenues and gains not attributable to any of the items above.
P. The recognition and measurement of revenue from contracts with customers shall be made in accordance with IFRS 15. If a securities firm controls specific services before it transfers the services to its customer, it shall recognize the revenue based on the gross amount; otherwise, it shall recognize the revenue based on the net amount.
2. Expenditures and expenses:
A. Handling fee expenses: Includes broker's exchange fees, dealer's exchange fees, and underwriting handling fees that a securities firm is required to pay to the TWSE or the TPEx.
B. Employee benefits expenses:
a. Expenses in relation to employee benefits that IAS19 requires to be recognized, including short-term employee benefits (such as wages, salaries, and labor and national health insurance contributions for employees), post-employment benefits (such as pensions), other long-term employee benefits (such as long-service leave), and termination benefits (such as early retirement incentive programs).
b. If the post-employment preferential deposit interest rate that a securities firm has offered to an employee in accordance with its internal rules or as stipulated in the employment contract is higher than the prevailing interest rate on the market, IAS 19 shall apply to the excess portion of the interest upon the employee's retirement.
C. Depreciation and amortization expenses: Related depreciation and amortization expenses that IAS16 and IAS38 require to be recognized.
D. Other operating expenses: Operating expenses required for a securities firm's business management needs and not attributable to any of the items above.
3. Operating profit or loss: Including all income and expenses classified in the operating category.
4. Share of the profit or loss of associates and joint ventures accounted for using the equity method: The profit or loss of associates and interests in joint ventures that a securities firm recognizes using the equity method according to its share in the associates and the interests in joint ventures.
5. Profit or loss before financing and income taxes: Including operating profit or loss and all income and expenses classified in the investing category.
6. Tax expense (benefit): The aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.
7. Profit or loss of discontinued operations:
A. The post-tax profit or loss of discontinued operations and the post-tax gain or loss recognized on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation.
B. The presentation and disclosure of profit or loss of discontinued operations shall be made in accordance with IFRS 5.
8. Profit or loss during the period: Earnings or deficit in the current reporting period.
9. Other comprehensive income: Means each component of other comprehensive income classified by nature, including share of the other comprehensive income of associates and joint ventures accounted for using the equity method:
A. Items that may be subsequently reclassified into profit or loss: Include exchange differences resulting from translating the financial statements of a foreign operation, unrealized valuation gains or losses from debt instrument investments measured at fair value through other comprehensive income, and gains and losses from hedging instruments.
B. Items not to be reclassified into profit or loss: Include revaluation surplus, unrealized valuation gains and losses from equity instrument investments measured at fair value through other comprehensive income, remeasurements of defined benefit plans, and gains and losses from hedging instruments.
10. Total comprehensive income.
11. Allocations of profit or loss during the period attributable to non-controlling interest and owners of the parent.
12. Allocations of total comprehensive income during the period attributable to non-controlling interest and owners of the parent.
13. Earnings per share:
A. Basic and diluted earnings per share for profit or loss from continuing operations attributable to the ordinary equity holders of the parent entity and for profit or loss attributable to the ordinary equity holders of the parent entity.
B. The calculation and presentation of earnings per share shall be made in accordance with IAS 33.
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Article 20
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To meet the objective of presenting full and complete information about the financial position, financial performance, and cash flows of a securities firm, financial reports shall contain explanatory notes disclosing the following:
1. Company history and scope of business operations.
2. A statement that the financial reports comply with these Regulations, applicable laws and regulations (giving the titles of the laws or regulations), as well as IFRS, IAS, IFRIC Interpretations, and SIC Interpretations.
3. The date when the financial reports were authorized for issue and the process involved in authorizing the financial reports for issue.
4. The effect or impact that may arise when it has or has not applied a new or revised IFRS, IAS, IFRIC Interpretation, or SIC Interpretation recognized by the FSC.
5. A summary of significant accounting policies used that are relevant to an understanding of the financial reports, and the measurement basis (or bases) used in preparing the financial reports.
6. Significant accounting judgments, estimations, and assumptions, as well as information about the assumptions it makes and other major sources of estimation uncertainty.
7. Objectives, policies and processes for managing capital, and any change in capital structure, including funding, liability, and equity.
8. If for a special reason there is a change in accounting treatment, thus affecting the comparison of financial data between two successive periods, the reason for the change and its effect on the financial reports shall be noted.
9. If it is necessary to provide the basis of valuation for any amount, financial instrument, or other item presented in the financial reports, the basis of valuation shall be noted.
10. If any item presented in the financial reports is subject to any legal, regulatory, contractual, or other restriction, the circumstances and timing of the restriction and other related information shall be noted.
11. Criteria for classifying assets and liabilities into current and non-current.
12. Material contingent liabilities and unrecognized contractual commitments.
13. Information on related financial instruments such as call (put) warrants and hedging transactions.
14. Financial risk management objectives and policies.
15. Long-term and short-term borrowings.
16. The addition, expansion, construction, lease, obsolescence, idling, sale, transfer, or long-term renting of major assets.
17. Principal investments in other enterprises.
18. Material transactions with related parties.
19. Losses due to material disasters.
20. Material litigation pending or concluded.
21. The signing, completion, avoidance, or lapse of material contracts.
22. Information about financial instruments. The information shall be disclosed in accordance with IFRS 7, including disclosure of the significance of financial instruments for the securities firm's financial position and performance; qualitative and quantitative disclosures describing risk exposures arising from financial instruments.
23. Comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers shall be disclosed in accordance with IFRS 15, including details of revenue recognized from contracts with customers, contract balances, contract performance obligations, significant judgments and changes in the judgments, and any assets recognized from the costs to obtain or fulfil a contract with a customer.
24. Relevant information about leases. The information shall be disclosed in accordance with IFRS 16, including disclosure of information that gives a basis for the primary users of the financial reports to assess the effect that the leases have on the financial position, financial performance, and cash flows of the securities firm, and relevant qualitative and quantitative information about its leasing activities.
25. Information about employee benefits. The information shall be disclosed in accordance with IAS 19, and shall include the influence of defined benefit plans on the amount, timing, and certainty of future cash flows, actuarial losses and gains arising from changes in demographic assumptions and financial assumptions, and the expected contributions in the next reporting period in the following financial year.
26. Information relating to management-defined performance measures. The information shall be disclosed in accordance with IFRS 18, including a description of the aspect of financial performance that, in management’s view, is communicated by each management-defined performance measure, how the performance measure is calculated, and a reconciliation to the corresponding totals or subtotals presented in the statement of comprehensive income.
27. Segment financial information required to be disclosed in accordance with IFRS 8 including the scope of business, revenue, and gains and losses of each reportable segment.
28. Information on Mainland Area investments by the securities firm or by its subsidiaries in a third jurisdiction.
29. When subsidiaries hold shares in the parent, the names of the subsidiaries and the shareholdings, amounts, and reasons shall be separately presented.
30. In the case of private placement of securities, the type, issue date, and amount shall be disclosed.
31. Material organizational adjustments and material management reforms.
32. Material effects of changes in government laws and regulations.
33. Material effects of discontinuance of operations.
34. Any merger with or transfer of all business operations from or to another securities firm.
35. The content and monetary amount of trust business activities conducted in accordance with the Trust Enterprise Act.
36. Fair value information. The information shall be disclosed in accordance with IFRS 13, and shall include information on recurring or non-recurring fair value measurement of assets and liabilities, inputs such as fair value valuation technique and parameters or assumptions used in fair value measurement, and Level 3 of fair value hierarchy.
37. Foreign-currency-denominated assets and liabilities that have significant influence: Include the amount of risk exposure, currency, and exchange rate for monetary and non-monetary items denominated in foreign currencies, and the foreign exchange gains or losses on monetary items.
38. Regulatory capital adequacy ratio.
39. The basis for calculating the number of shares to be distributed as profit-sharing compensation to employees, and information on profit-sharing compensation to employees, directors, and supervisors:
A. The fixed amount or ratio prescribed in the articles of incorporation (and a statement that this information may be queried on the Market Observation Post System).
B. The basis for the estimated figures for the current period, the basis for calculating the number of shares to be distributed, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure.
C. The actual distribution for the previous fiscal year (with an indication of the number of shares, monetary amount, and stock price, of the shares distributed), and, if there is any discrepancy between the actual distribution and the recognized amount, additionally specify the amount of the discrepancy, the cause, and how it is treated.
40. Supporting information for items presented in the balance sheet and in the statements of comprehensive income, of changes in equity and of cash flows, including material information that could affect the securities firm's future cash flows, or other necessary descriptions essential for avoiding misunderstanding by the primary users or for the fair presentation of the financial reports.
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Article 27
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A securities firm preparing parent company only financial reports shall prepare statements of major accounting items.
Titles of statements of major accounting items are as follows:
1. Statements of assets and liabilities items:
A. Statement of cash and cash equivalents.
B. Statement of financial assets at fair value through profit or loss – current.
C. Statement of financial assets measured at fair value through other comprehensive income – current.
D. Statement of financial assets for hedging – current..
E. Statement of financial assets measured at amortized cost – current.
F. Statement of investments in bonds with reverse repurchase agreements.
G. Statement of securities margin loans receivable.
H. Statement of trade receivables.
I. Statement of prepayments.
J. Statement of other receivables.
K. Statement of non-current assets held for sale.
L. Statement of other current assets.
M. Statement of changes in financial assets measured at fair value through profit or loss – non-current.
N. Statement of financial assets measured at fair value through other comprehensive income – non-current.
O. Statement of financial assets for hedging – non-current.
P. Statement of financial assets measured at amortized cost – non-current
Q. Statement of changes in investments accounted for using the equity method.
R. Statement of changes in accumulated impairment of investments accounted for using the equity method.
S. Statement of changes in property and equipment.
T. Statement of changes in accumulated depreciation of property and equipment.
U. Statement of changes in accumulated impairment of property and equipment.
V. Statement of changes in right-of-use assets.
W. Statement of changes in accumulated depreciation of right-of-use assets.
X. Statement of changes in accumulated impairment of right-of-use assets.
Y. Statement of changes in investment property.
Z. Statement of changes in accumulated depreciation of investment property.
AA. Statement of changes in accumulated impairment of investment property.
AB. Statement of deferred tax assets.
AC. Statement of other non-current assets.
AD. Statement of short-term borrowings.
AE. Statement of financial liabilities at fair value through profit or loss - current.
AF. Statement of financial liabilities for hedging - current.
AG. Statement of liabilities for bonds with repurchase agreements.
AH. Statement of short sale margins.
AI. Statement of payables for short sale collateral received.
AJ. Statement of trade payables.
AK. Statement of other payables.
AL. Statement of lease liabilities.
AM. Statement of provisions – current.
AN. Statement of liabilities directly associated with non-current assets held for sale.
AO. Statement of other current liabilities.
AP. Statement of financial liabilities at fair value through profit or loss – non-current.
AQ. Statement of financial liabilities for hedging – non-current.
AR. Statement of long-term borrowings.
AS. Statement of provisions – non-current.
AT. Statement of deferred tax liabilities.
AU. Statement of other non-current liabilities.
2. Statements of profit or loss items:
A. Statement of brokerage fee revenue.
B. Statement of revenue from underwriting business.
C. Statement of gains (losses) on sale of securities.
D. Statement of interest revenue.
E. Statement of employee benefits, depreciation, amortization, and other operating expenses.
A securities firm may determine, having regard to the concept of materiality, whether or not to separately present the statements of assets and liabilities items described in subparagraph 1 of the preceding paragraph.
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Article 33-2
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Goodwill which is recognized in connection with a business combination of a securities firm shall be presented as a single line item in the balance sheet, and shall be tested for impairment at least annually in accordance with IAS 36. If there is any significant difference between the actual operation conditions of the acquired company after the business combination and the expected benefits at the time of acquisition, it shall be disclosed in the notes.
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Article 40
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These Regulations shall come into force from the date of issuance, with the exception of Article 4, Article 7, Article 8, Article 11, paragraph 1, Article 12, Articles 14 to 18, Article 20, Article 22, Article 24, Article 25, Article 33, Article 35, and Article 37, as amended on 11 September 2014, which shall come into force from financial year 2015, Article 14, Article 17, Article 20, Article 23, Article 33-1, Article 33-2, and Article 39, as amended on 14 February 2017, which shall come into force from financial year 2017, the Articles as amended on 14 September 2017, which shall come into force from financial year 2018, Article 14, paragraph 4, subparagraphs 3 and 4, and paragraph 6, Article 15, Article 20, Article 27, as amended on 30 July 2018, which shall come into force from financial year 2019, the articles amended on 18 March 2020, which shall come into force from financial year 2020, the articles amended on 1 September 2022, which shall come into force from financial year 2022, Article 10 and Article 14, paragraph 4, subparagraph 1, item B amended on 24 November 2022, which shall come into force from financial year 2023, the introductory part of paragraph 3, and paragraph 4, of Article 15 amended on 24 January 2024, which shall come into force from financial year 2024, and the articles amended on 28 April 2026, which shall come into force from financial year 2028.
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