Chapter I General Principles |
| Article 1 | These Regulations are adopted under Article 14, paragraph 2 of the Securities and Exchange Act (the "Act"). |
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| Article 2 | The financial reports of a securities firm shall be prepared in accordance with these Regulations and other applicable laws and regulations. Matters not provided for therein shall be governed by generally accepted accounting principles (GAAP).
The GAAP described in the preceding paragraph shall mean the following, as recognized by the Financial Supervisory Commission (FSC): International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC). |
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| Article 3 | When a securities firm simultaneously operates two or more of the businesses specified in Article 15 of the Act in accordance with applicable requirements, the accounting matters for each such business shall be handled separately. When a securities firm concurrently operates futures business pursuant to Article 57 of the Futures Trading Act, the accounting matters for its futures segment shall be governed by applicable futures trading laws and regulations. When a securities firm concurrently operates bills finance business pursuant to Article 17 of the Act Governing Bills Finance Business, the accounting matters for its bills finance segment shall be governed by applicable bills finance laws and regulations. When a securities firm concurrently operates specified trust business lines pursuant to Article 3 of the Trust Enterprise Act, the accounting matters for its trust segment shall be governed by applicable trust enterprise laws and regulations.
When a financial institution concurrently operates securities business pursuant to Article 45, paragraph 2 of the Act, if the treatment of its accounting matters is subject to other applicable financial laws and regulations of the competent authority in charge of that industry, those laws and regulations shall govern. However, accounting matters and financial reports for its securities operations shall still be governed by these Regulations.
If a securities firm's securities business is operated by different departments based on the nature of business, the accounting matters thereof may be separately handled by each department. |
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| Article 4 | A securities firm shall establish, and amend when necessary, an accounting system based on the nature of its accounting matters, the actual status and development of its business, and its management needs.
The accounting system referred to in the preceding paragraph shall, based on the nature of the securities firm's business operations, and in a way that meets the needs of preparation of the consolidated financial reports and uniformity in the accounting policies of the securities firm and its subsidiaries, separately provide a general description of the accounting system, descriptions and uses of accounting items, accounting documents, account books, and accounting reports, and accounting procedures.
A securities firm shall see to it that its subsidiaries establish their accounting systems in accordance with the preceding paragraph. |
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| Article 5 | With the exception of a securities firm concurrently operated by a financial institution, which shall otherwise be subject to other applicable requirements, the appointment and discharge of the principal accounting officer of a securities firm shall be approved by a majority of the directors present at a board of directors meeting attended by a majority of the directors. Within 5 days after appointment or change, the securities firm shall file for registration with the Taiwan Stock Exchange (TWSE), the Taipei Exchange (TPEx), or the relevant securities dealers association, to be forwarded to the FSC for recordation. |
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| Article 6 | Except as otherwise approved by the FSC, a securities firm shall use the calendar year as its financial year, with accounts closed on June 30 for the first half of the financial year and on December 31 for the whole financial year.
The accrual basis of accounting shall be used.
Accounts shall be expressed in New Taiwan Dollars (NT$).
Financial statements shall be presented in thousands of NT dollars. |
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| Article 7 | "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 IAS 1.
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 8 | If an enterprise from another industry concurrently operates securities business, when preparing financial reports in accordance with the requirements of the competent authority in charge of that industry, it shall additionally disclose a balance sheet, a statement of comprehensive income, accompanying notes, and statements of major accounting items for the independent securities segment prepared in accordance with Chapter II of these Regulations. This requirement does not apply, however, if the enterprise from another industry only concurrently operates proprietary bond trading. |
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| Article 9 | Financial reports shall present fairly the financial position, financial performance, and cash flows of a securities firm without being misleading to an interested party in making judgments and decisions.
If a financial report violates these Regulations or any other applicable requirements, for which the FSC as a result of an audit gives a notice requiring adjustment to be made, the securities firm shall make the required adjustment and correction. If the adjusted amount reaches the threshold set by the FSC, a corrected financial report shall be publicly disclosed, together with a description of the reasons, items, and amount specified in the FSC notice for adjustment. |
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| Article 10 | The following shall apply when a securities firm makes an accounting change:
1. Changes in accounting policies:
A. "Accounting policies" are the specific principles, bases, conventions, rules and practices applied by a securities firm in preparing and presenting financial statements.
B. When a securities firm changes an accounting policy voluntarily in a new financial year in order to produce financial reports that provide reliable and more relevant information about the effects of transactions or other events or conditions on the securities firm's financial position, financial performance, or cash flows, it shall request its attesting certified public accountants (CPAs) to provide an item-by-item analysis and review opinion on the reasonableness of the nature of the change in accounting policy, the reasons why applying the new accounting policy provides reliable and more relevant information, each line item affected and the estimated effect for the financial year preceding the earliest financial year affected by retrospective application of the new accounting policy, and the actual effect on the opening balance of retained earnings for the immediately preceding financial year. These shall be submitted as a proposal for adoption by resolution of the board of directors, after which they shall be submitted to the FSC for approval. Upon approval by the FSC, the securities firm shall publicly disclose and file information on the estimated effect arising from the application of the new accounting policy and the attesting CPAs' review opinion.
C. If, for the voluntary change in accounting policy in the new financial year, it is impracticable to determine either the period-specific effects or the cumulative effect of the change, as described in paragraph 23 of IAS 8, the securities firm shall calculate the effects in accordance with paragraph 24 of IAS 8 and the preceding item above, and shall request the attesting CPAs to provide an item-by-item analysis and review opinion on the reasonableness of the reasons why retrospective application is impracticable and how and from when the change in accounting policy has been applied, and also provide an opinion on the impact on the audit opinion for the financial year preceding the change in accounting policy. The securities firm shall then follow the procedure described above.
D. Unless it is impracticable to determine the effects as described in the preceding item, then within 2 months after the beginning of the financial year in which the new accounting policy is adopted, the securities firm shall calculate the line items affected and the actual effect for the financial year preceding the earliest financial year affected by retrospective application of the new accounting policy and the actual effect on the opening balance of retained earnings for the immediately preceding financial year, and shall submit those for adoption by the board of directors, after which they shall be publicly disclosed and filed and submitted to the FSC for recordation. If the difference between the actual effect of the change in accounting policy and the original estimated effect is NT$10 million or more, and is also 1 percent or more of the income for the immediately preceding financial year or 5 percent or more of paid-in capital, the securities firm shall analyze the reasons for the difference and request the attesting CPAs to provide an opinion on its reasonableness. The analysis and the CPAs' opinion shall also be publicly disclosed and filed with the FSC.
E. Except when a securities firm applies a new accounting policy to newly purchased assets, in which case the provisions of the preceding items need not be applied, and except when, after the beginning of a financial year, a securities firm voluntarily changes an accounting policy during the year in which regulatory adjustments have come into force, in which case the securities firm shall request the attesting CPAs to issue a review opinion and submit it for adoption by the board of directors and publicly disclose it and then shall file the review opinion and relevant materials with the FSC for recordation, if a change in accounting policy is applied without having been duly filed for approval, the financial reports for the financial year in which the new accounting policy was applied shall be restated, and the new accounting policy may only be applied from the next financial year after a supplementary submission has been made and approved.
F. In the case of a securities firm whose shares have a par value other than NT$10, for the calculation of the 5 percent of paid-in capital under item D, 2.5 percent of the equity attributable to owners of the parent as stated in the balance sheet shall be substituted.
2. Changes in accounting estimates:
A. "Accounting estimates" means amounts in financial statements that are subject to measurement uncertainty and are estimated by securities firms using measurement techniques and inputs.
B. If a change in an accounting estimate arises from a change in the useful life or depreciation method of depreciable assets, a change in the amortization period or amortization method of intangible assets, a change in the residual value of any such assets, or a change in a technique used to estimate the fair value thereof, in addition to complying with item E of the preceding subparagraph, a securities firm shall request the attesting CPAs to provide an analysis and review opinion on the reasonableness of the nature of the changes and the reasons why the changes can provide reliable and more relevant information. The changes in accounting estimates shall then be submitted as a proposal for adoption by resolution of the board of directors, and then submitted to the FSC for approval.
The expression "public disclosure and filing" or "publicly disclose and file" as used in the preceding paragraph means entering the information into the website designated by the FSC for the submission of electronic filings. |
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| Article 11 | A securities firm shall prepare consolidated financial reports in accordance with Chapter II of these Regulations and IFRS 10, and shall prepare annual parent company only financial reports in accordance with Chapter IV of these Regulations.
A securities firm that does not have a subsidiary shall prepare individual financial reports in accordance with Chapter II of these Regulations, and when preparing annual financial reports shall follow the provisions of Articles 27 to 32 of these Regulations.
A securities firm that prepares an annual report in accordance with the Regulations Governing Information to be Published in Annual Reports of Public Companies and discloses in that annual report the content set out in Articles 28 to 31 herein may be exempted from the requirements of Articles 28 to 32 with respect to its annual financial report.
A securities firm preparing interim financial reports shall follow the provisions of Chapters II and III of these Regulations as well as IAS 34. A securities firm, when preparing semi-annual financial reports, shall also prepare semi-annual parent company only financial reports pursuant to Articles 25 to 27, or semi-annual individual financial reports pursuant to Article 27. |
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| Article 12 | The meaning of "parent," "subsidiary," "associate, " and "joint arrangement" as used in these Regulations shall be determined in accordance with IFRS 10, IFRS 11, and IAS 28.
The meaning of "control," "significant influence," or "joint control" as used in these Regulations shall be determined in accordance with IFRS 10, IFRS 11, and IAS 28. |
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| Article 13 | Unless otherwise required by the FSC, the records retention period for the financial reports identified in these Regulations, or for the accounting documents, journals, ledgers, deeds, vouchers, and books based on which the financial reports are prepared, shall be subject to the Business Accounting Act. |
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| Article 13-1 | In the case of a securities firm that is a foreign company's branch within the territory of the Republic of China, unless otherwise provided by the FSC, the functions required by these Regulations to be performed by the board of directors or the supervisors shall be performed by the responsible person of the branch within the territory of the Republic of China authorized by the head office or regional headquarters of the foreign company. |
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