| Article 8 | The asset account title/classification in the balance sheet, content thereof, and matters to be noted are as follows:
- 1. Assets shall be appropriately categorized. Current and non-current assets shall be separated. However, the same shall not apply to specific industries where the breakdown of assets by liquidity is inappropriate. The total amounts of assets expected to be recovered within 12 months after the balance sheet date and in excess of 12 months after the balance sheet date shall respectively be presented in financial statements or disclosed in footnotes.
- 2. "Current assets" means unrestricted cash or cash equivalents; an asset held for trading, or that will be held short-term and is expected to be converted to cash within 12 months after the balance sheet date; an asset that is expected to be converted to cash, held for sale, or consumed during the normal course of a business operation cycle, including but not limited to cash or cash equivalents, loans to banks and enterprises in the same industry, operating bills and bonds, investments in bills and bonds under reverse repurchase agreements, receivables, and prepayments.
- (1) "cash and cash equivalents" means cash in treasury, bank deposits, and revolving fund used for small expenditures. Non-current bank deposits shall be separately listed. If the maturity date is longer than one year, a note shall be provided. A fund which has been earmarked for specific purposes or the use of which is restricted shall not be classified into this account. If time deposits are pledged as collateral for a debt, and if the secured debt is a long-term liability, such deposits shall be re-classified as other assets. If the secured debt is a current liability, the deposits shall be re-classified as other current assets. A note shall be provided to explain the fact of any such security. Where the time deposits are used as refundable deposits, they shall be classified as current assets or other assets depending on whether they are short-term or long term. Compensating balance, if incurred due to short-term loans, shall still be classified as current assets, and an explanation shall be provided in footnotes. Compensating balance incurred due to long-term liability shall be classified as other assets or long-term investments rather than current assets.
- (2) "Loans to banks and enterprises in the same industry" mean loans extended to banks and other bills finance companies.
- (3) "Operating bills and bonds" means purchased short-term bills, government bonds and financial bonds. Such shall be accounted for at acquisition cost and valued at period-end at the lower of cost or market value. Where total market value is lower than total cost, the resultant unrealized loss on market price decline shall be posted as loss on trading bills and bonds, with a valuation account being set up for that purpose, and shall be set off against the credit balance upon recovery in market value. When such bills and bonds are sold, the difference between net selling price and cost shall be recorded as either gain or loss on trading bills and bonds. A footnote shall be provided where operating bills and bonds are subject to a repurchase agreement or otherwise subject to any restriction or limitation.
- (4) "Investments in bills and bonds under reverse repurchase agreements" mean any dollar amount actually paid to the trading counterpart in a reverse repurchase transaction in bills and bonds.
- (5) "Receivables" means all amounts receivable, such as accounts receivable, notes receivable and other receivables. Overdue loans with an overdue period of less than three months shall be classified under accounts receivable. Where during the period in which guaranteed commercial papers are issued the collateral is subject to provisional attachment yet the borrower still pays the interest regularly, in order to extend a grace period for the borrower to apply for removal of such attachment, if such commercial paper matures without being presented immediately, the balance of the commercial paper shall be accounted for as notes receivable." Other receivables" means amounts receivable other than notes receivable and accounts receivable. Other receivables shall be itemized if exceeding five percent of total current assets. When the account is being settled, the potential losses from receivables shall be estimated and sufficient amount of allowance for bad debts shall be set aside. Allowance for bad debts is a contra-receivable valuation account.
- (6) "Other financial assets" means financial assets not listed separately on the balance sheet. Other financial assets, based on their liquidity, shall be identified as either current or non-current. The non-current shall be re-listed under "other financial assets-non-current."
- (7) "prepayments" mean all the prepaid amounts and expenses. Prepayments for purchase of fixed assets in accordance with contract and construction costs for construction in progress shall be recorded under fixed assets instead of prepayments.
- (8) "Other current assets" mean all the current assets not falling within the above categories. Current assets, except for cash and other financial assets, whose amount doe not exceed five percent of total current assets, may be incorporated into other current assets.
- 3. "Long-term equity investments" means any investment in the stock of another enterprise where the stock of such invested company is not traded in an open market or does not have a definite market price, where the Bills Finance Company intends to control the invested company or to establish a close relationship with it, or where the Bills Finance Company has the positive intent and ability to hold the invested company's equity on a long-term basis. Long-term equity investments shall be valued and footnoted as follows:
- (1) Except as otherwise provided in items 2 through 6 of this subparagraph, long-term equity investments shall be valued and presented, and consolidated financial statements shall be prepared in accordance with Statement of Financial Accounting Standards Nos. 5 and 7.
- (2) Unless otherwise provided, the influence of a long-term equity investment on an invested company shall be assessed based on the ratio of voting rights in the invested company held by the Bills Finance Company.
- (3) Where the total assets or operating revenue of any individual subsidiary have not reached the standard for inclusion in the consolidated statements, if the total assets or operating revenue of each such subsidiary that have not reached the standard for inclusion in the consolidated statements reach in aggregate 30% or more of the total assets or operating revenue of the Bills Finance Company, the subsidiaries whose total assets or operating revenue reaches 3% or more of that of the Bills Finance Company shall be included in the consolidated statements. Unless the percentage subsequently decreases to 20% [or lower], such subsidiaries shall continue to be included in the consolidated statements. For the subsidiaries not included in the consolidated statements, their company names, percentage of shareholder's equity that is held by the parent, and the reason why they are not included in the consolidated statements shall be disclosed in the notes.
- (4) The stock of a public company held by the Bills Finance Company that has been approved for trading on over-the-counter markets under Article 5 of the GreTai Securities Market Regulations Governing Review of Emerging Stocks Traded on Over-the-Counter Markets (that is, emerging stocks) in which the Bills Finance Company has no significant influence over such public company, shall be valued under the cost method at period-end.
- (5) If the total common stock and voting preferred stock held by the Bills Finance Company in total represent more than 50% of the total votes of an invested company, or if the Bills Finance Company directly or indirectly controls the operation of an invested company's personnel, financial, or business affairs as set forth in Article 369-2, paragraph 2 of the Company Act, the gain or loss arising from such investment shall be recognized in the period when its occurs.
- (6) Where the beginning book balance of long-term investments reaches 5% or more of the paid-in capital of the Bills Finance Company; where the Bills Finance Company holds 30% or more of the equity of the invested company, or the shareholding of the Bills Finance Company, together with the combined shareholding in the invested company by the directors, supervisors, and managers of, and enterprises directly or indirectly controlled by the Bills Finance Company exceeds 50%; and where the Bills Finance Company is among the three shareholders of the invested company with the highest shareholding or where the board chairperson or general manager of the invested company is appointed by the Bills Finance Company, the gain or loss arising from such investment shall be recognized in the period when it occurs.
- (7) Long-term equity investments shall be valued under the equity method. If the financial report prepared by an invested company fails to conform to generally accepted accounting principles in the ROC, the report shall first be adjusted to conform to such principles and the profit/loss on such investment recognized accordingly. Where the paid-in capital of an invested company reaches NT$30 million or more, or where its operating revenue reaches NT$50 million or more or 10% or more of the operating revenue of the Bills Finance Company, the financial statements of such invested company shall be audited by a certified public accountant in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants as well as generally accepted auditing standards.
- (8) The valuation basis for long-term equity investments shall be noted; if any such investment is pledged as collateral or otherwise subject to any restriction or limitation, such shall also be noted.
- 4. "Long-term bond investments" means long-term bonds that are held to maturity. The valuation of unamortized premium or discount thereon shall be adjusted based on par value. The premium or discount shall be amortized in a rational and systematic manner.
- 5. "Fixed assets" means tangible assets purchased for use in the operation of the business, having an economic life of one year or more, and not intended for sale. The fixed assets account group mainly includes land, buildings, equipment, prepayments for land and buildings, prepayments for equipment, construction in progress, leasehold improvements, and other fixed assets for use in the operation of the business.
- (1) Within the fixed assets classification, land, depreciable assets, and depletable assets shall be presented separately.
- (2) Fixed assets shall be accounted for at acquisition or construction cost. However, such interest that arises from purchase of a pre-construction house or purchase of a fixed asset by cash capital increase shall not be capitalized. Fixed assets that have no value in use shall be recorded under other assets at the lower of net realizable value or book value. When there is no net realizable value, the cost and accumulated depreciation shall be offset against each other, with the difference recorded as a loss. If a fixed asset is still in use after the expiration of the useful life, such asset shall continue to be depreciated based on the salvage value.
- (3) The leased assets shall be recognized and presented in accordance with Statement of Financial Accounting Standards No. 2.If a leased asset falls under an operating lease, the improvement made to such leased property is called leasehold improvement and shall be recorded as a fixed asset.
- (4) The valuation basis for a fixed asset shall be indicated. If the fixed asset has been revalued, the date of revaluation and increased or decreased amount shall be recorded, and the acquisition cost and the revaluation increment shall be separately presented in the balance sheet. The reserve for land value increment tax allocated due to land revaluation increment shall be classified under long-term liabilities. The accrual of depreciation on fixed assets which have been revalued shall be based on the revalued value beginning from the day following the date of record of the revaluation.
- (5) Fixed assets with the exception of land shall be charged off as depreciation or depletion expense over their estimated useful life in a rational and systematic manner. The accumulated depreciation or accumulated depletion of a fixed asset shall be presented as a fixed asset contra account.
- (6) Leasehold improvement shall be depreciated in a rational and systematic manner over the lower of the estimated useful life or the lease term, and re-classified as expenses of each period according to its nature without interruption or reduction.
- (7) For depreciable assets, the depreciation calculation methods shall be noted. If a fixed asset is provided as collateral for security, mortgage, or creation of lien, such shall be indicated.
- 6. "Intangible assets" means assets that have no physical substance but have economic value, such as franchise and goodwill.
- (1) Purchased intangible assets shall be recorded at actual cost. Goodwill arising from a business combination shall be treated in accordance with Statement of Financial Accounting Standards No. 25.Self-developed intangible assets, except for those subject to capitalization requirements, shall be treated as a current-period expense.
- (2) The valuation basis for intangible assets shall be noted. Intangible assets shall be amortized in a rational and systematic manner. The maximum amortization period shall be no more than 20 years, except where clear evidence exists demonstrating the life of the intangible assets past 20 years. The amortization method for intangible assets shall be noted.
- 7. "Other assets" mean all the assets not falling within the above categories and with a collection period of one year or more, such as non-accrual loans, refundable deposits, and other miscellaneous assets. When the amount of other assets exceeds 5% of total assets, the titles of the accounts shall be separately recorded.
- (1) "Non-accrual loans" means the outstanding balance of guaranteed/endorsed loans that are more than three months past due with no payments being made. When the account is being settled, the potential losses on non-accrual loans shall be assessed and a sufficient amount shall be set aside as allowance for bad debts. Allowance for bad debts is a valuation account for non-accrual loans.
- (2) "Refundable deposits" means deposits used as security.
- (3) Deferred income tax assets means all the deferred income tax effects of deductible temporary differences.
- (4) "Other miscellaneous assets" means all the assets not falling within the above categories.
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| Article 9 | The liability account categories on the balance sheet, content thereof, and matters to be noted are as follows:
- Liabilities shall be appropriately categorized. Current and non-current liabilities shall be separated. However, the same shall not apply to specific industries where the breakdown of liabilities by liquidity is inappropriate. The total amount of liabilities anticipated for settlement within 12 months after the balance sheet date and in excess of 12 months after the balance sheet date shall respectively be presented in financial statements or disclosed in footnotes.
- "Current liabilities" means liabilities that must be settled within 12 months after the balance sheet date, or if incurred through operations, are expected to be settled within one business cycle in the normal course of business, such as loans and overdrafts from banks and other enterprises in the same industry, liabilities from bills and bonds under repurchase agreements, accounts payable, advance receipts, and other miscellaneous payables.
- "Loans and overdrafts from banks and enterprises in the same industry" means the amount of short-term loans from banks and other enterprises in the same industry bearing interest on a daily basis and the amount of overdrafts therefrom within the line of credit under contract.
- "Liabilities from bills and bonds under repurchase agreements" means any dollar amount actually received from the trading counterpart in a repurchase transaction in bills and bonds.
- Accounts payable shall be valued at present value. However, those which result from operating activities and which become mature within one year may be valued at book value. Accounts payable resulting from operating activities shall be separately recorded from other accounts payable resulting from non-operating activities. Accounts of large value payable to related parties shall be separately disclosed.
- "Advance receipts" means all the amounts received in advance. Advance receipts shall be separately recorded based on principal classification, and relevant agreement, if any, shall be noted.
- "Other payables" means amounts payable other than accounts payable, such as taxes payable, salaries payable, and dividends. For the dividends payable passed by the resolution of the shareholders meeting, the distribution method shall be noted. When loss and profit are calculated at the end of each period, the estimated income tax payable calculated based on taxable income shall be recorded under other payables. If any item under other payables exceeds 5% of total payables, it shall be separately recorded based on the nature or party concerned.
- "Other current liabilities" means all the current liabilities not falling within the above categories, such as bonds payable and long-term loans which become mature within one year. Any current liability whose amount does not exceed 5% of total current liabilities may be incorporated into other current liabilities.
- "Long-term liabilities" means liabilities due at least 12 months after the balance sheet date, such as bonds payable and long-term payables.
- "Bonds payable" means bonds issued by the Bills Finance Company. For bonds issued, the approved total amount, interest rate, maturity date, name of collateral, book value, issuing area, and other relevant terms and restrictions shall be indicated in the footnotes. If the bonds issued are convertible bonds, the method of conversion and the amount converted shall also be noted. The premium and discount on bonds payable are valuation accounts for bonds payable and shall be classified as an addition or deduction on bonds payable and amortized over the circulation period of the bonds in a rational and systematic manner as an adjustment to interest expenses.
- Other long-term payables shall be valued at present value.
- For long-term liabilities due within 12 months after the balance sheet date, where the original loan contract period was in excess of 12 months and the enterprise intends to continue long-term refinancing, and where refinancing or loan extension had been accomplished before the financial statement submission date, the loan shall continue to be listed as a long-term liability, and footnote disclosure shall be made in the financial statement specifying the amount of the loan and the relevant facts.
- Long-term liabilities shall be listed as current liabilities when, under a given loan contract, breach of a specific clause of the loan contract requires immediate repayment. However, when consent has been obtained from the creditor prior to the financial statement submission date that the creditor will not enforce such a clause, and when there is little possibility that such a breach will be committed within 12 months after the balance sheet date, then the loan may continue to be listed as a long-term liability.
- "Other liabilities" means liabilities not falling within the above categories, such as operating and liability reserve, other miscellaneous liabilities, etc. When the amount of other liabilities exceeds 5% of total liabilities, the title of the accounts shall be separately recorded.
- "Reserve for guarantee obligations" means a sufficient amount of reserve that the Bills Finance Company duly sets aside to cover the potential losses on credit assets it assesses when calculating account balance.
- "Securities trading loss reserve" means the required amount that the Bills Finance Company engaged in proprietary bonds trading allocates on a monthly basis as trading loss reserve from 10% of the net profits arising from its trading in securities, except that such allocation is not required for the part of the aggregate amount reaching NT$200 billion and more. The reserve may not be employed except for writing off the actual net loss arising from proprietary trading in bonds.
- "Pension reserve" means accrued pension liabilities.
- "Deposits received" means all other deposits placed [with the Bills Finance Company].
- "Deferred income tax liabilities" means deferred income tax effects of taxable temporary differences.
- "Other miscellaneous liabilities" means the liabilities not falling within the above categories.
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| Article 10 | The shareholders' equity account categories on the balance sheet, content thereof, and matters to be noted are as follows:
- "Capital stock" means the capital invested in the Bills Finance Company by shareholders and applied for registration with the competent authority for company registrations. The type of capital stock, par value per share, number of authorized shares, number of issued shares, and special terms shall be indicated. If convertible preferred stock and overseas depositary receipts are issued, the place of issue, issuance and conversion methods, converted amount and special terms shall be disclosed.
- "Capital reserves" means the premiums generated through capital stock transactions between the Bills Finance Company and shareholders, usually including premium over shares issued above par value, donations from shareholders, and such others as generated under generally accepted accounting principles. Where the Bills Finance Company capitalizes its capital reserves in a given year, its shall make footnote disclosure of such in the current-period financial statements. Capital reserves shall be listed separately according to their nature, and circumstances relating to any limits on the utilization thereof shall be disclosed in footnotes.
- "Retained earnings" (or "accumulated deficit") means the equity resulting from operating activities, including legal reserve, special reserve, and unappropriated earnings (or deficit to be offset), etc.
- "Legal reserve" means the fixed-percentage reserve required to be allocated by Article 34 of the Bills Financing Act.
- "Special reserve" means the reserve allocated from earnings in accordance with relevant laws and regulations, contracts, articles of incorporation, or resolutions of shareholders meetings.
- "Unappropriated earnings" (or "deficit to be offset") means the undistributed and unappropriated earnings (a deficit to be offset is the loss not yet recouped).
- Distribution of earnings or offsetting of deficit shall not be accounted for until approved by the shareholders meeting. However, when an earnings distribution or offsetting of deficit has been proposed, such shall be disclosed in footnotes to the current financial statements.
- "Other shareholders' equity items" means other items resulting in increases or decreases to shareholders' equity, usually including unrealized losses on market value decline of long-term equity investments, net losses not recognized as pension costs, translation adjustments, treasury stock, etc.
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