Chapter I General Provisions
|
| Article 1 | These Guidelines are prescribed in accordance with Paragraph 2 of Article 14 of the Securities and Exchange Law. |
| Article 2 | The financial reports of a securities firm shall be prepared in accordance with these Guidelines and relevant laws and regulations. Matters not provided therein shall be handled in accordance with the generally accepted accounting principles promulgated by the Financial Accounting Standards Committee of the Accounting Research and Development Foundation of the Republic of China. |
| Article 3 | The accounting affairs of a securities firm which, in accordance with Article 45 of the Securities and Exchange Law, concurrently operates two types of business or more under Article 15 of the same law shall be separately handled based on the type of the business.
The accounting affairs of the futures department of a securities firm which concurrently operates futures business in accordance with Article 57 of the Futures Trading Law shall be handled pursuant to futures trading laws and regulations.
If the treatment of accounting affairs of a securities firm concurrently operated by a financial institution is otherwise provided in the banking laws and regulations, such laws and regulations shall be complied with. However, the accounting events and financial reports related to securities business shall still be handled in accordance with these Guidelines.
These Guidelines shall apply mutatis mutandis to the accounting affairs of the branch offices of securities firms. |
| Article 4 | A securities firm shall establish its accounting system based on the nature of its accounting affairs, the actual status and development of its business, and its management needs in preparation for possible inspection.
The content of the accounting system referred to in the preceding paragraph shall, based on the nature of business operation, include a general description, chart of accounts, account titles, accounting documents, account books, accounting reports, descriptions and uses of accounting statements, procedures for handling accounting affairs, finance and payment/receipt operations, etc. |
| Article 5 | The appointment and discharge of the accounting personnel of a securities firm shall be approved by a majority vote by the directors present at a board of meeting attended by a majority of the directors, except that a securities firm which is concurrently operated by a financial institution shall separately follow other relevant rules and regulations. Within five (5) days of the appointment or discharge, the relevant securities firm shall apply with the stock exchange, over-the-counter stock exchange, or securities dealers' association for registration and reporting to the SFC for recordation. |
| Article 6 | Unless otherwise approved by the SFC, the fiscal year of a securities firm shall be calendar year. Closing for the first half of the year shall be made on June 30 and closing for the year shall be made on December 31.
The accounting basis shall be accrual system.
The bookkeeping unit shall be New Taiwan "Dollar".
The unit for preparation of financial statements shall be NT$1000. |
| Article 7 | The financial reports shall mean financial statements, list of significant account titles, and other disclosures and explanations under these Guidelines which help the users make decision.
A financial statement shall include balance sheet, income statement, statement of changes in stockholders' equity, statement of cash flows, and footnotes or schedules.
A securities firm, unless newly established, shall prepare the principal financial statements and their notes referred to in the preceding paragraph by comparing two consecutive periods, and the responsible person, in-charge and handling accountants shall sign or seal each page of such statements. |
| Article 8 | The content of a financial report shall fairly present the financial position, operating results, and cash flows of a securities firm without misleading an interested party in making judgment and decision.
If a financial report violates these Guidelines or any other relevant regulations, upon the SFC's notice of adjustment after examination, the securities firm shall make adjustment and correction. If the adjusted amount attains the standard set by the SFC, a corrected financial report shall be publicly announced. When making public announcement, the securities firm shall indicate the reasons, items, and amount of adjustment as notified by the SFC. |
| Article 9 | In order that a financial report may thoroughly disclose the information of financial position, operating results, and cash flows, notes to the following matters shall be provided:
1. Historical changes and development of the company and its business scope;
2. A declaration that the financial statement was prepared in conformance with these Criteria and other applicable laws and regulations (names of laws or regulations shall be expressly stated) and generally accepted accounting principles;
3. Summary of significant accounting policies and the basis on which they are judged;
4. Where due to special reasons the accounting treatment changes thus affecting the comparison of the financial information of the prior or subsequent periods, the reason of change and the impact on the financial statements shall be explained;
5. If it is necessary to provide the valuation basis of any amount in the financial report, such shall be provided.
6. If any account contained in a financial report is restricted by laws and regulations, contract, or other limitations, the condition, time limit and relevant matters shall be stated;
7. Standards for classifying assets and liabilities as either current or non-current;
8. Significant commitments and contingent liabilities;
9. Information of relevant financial products, such as call (put) warrants, hedge transaction, etc.
10. Change of capital structure;
11. Long-term and short-term borrowings;
12. Addition, expansion, construction, lease, obsolescence, lying idle, sale, pledge, or transfer of major assets;
13. Major investment in other enterprises;
14. Significant transactions with related parties;
15. Loss caused by major disasters;
16. Processing or conclusion of material actions;
17. Signing, completion, cancellation, or voidance of material contracts;
18. Information related to employees pension fund;
19. Adjustment of important organization and significant reformation of management system;
20. Material impact of change of government laws and regulations;
21. Departmental financial information;
22. Where the company has carried out a private placement of securities, the type of securities, the date of the placement, and the amount shall be disclosed.
23. Material impact of suspension of business;
24. Merger, transfer of the entire business to or from another securities firm;
25. Other necessary disclosures to ensure the financial statements are not misleading or to facilitate the fair presentation of the financial statements. |
| Article 10 | Notes shall be provided in the case of occurrence of the following subsequent events between the balance sheet date and the date on which the financial report is submitted:
1. Change of capital structure;
2. Long-term and short-term borrowings in substantial amounts;
3. Addition, expansion, construction, lease, obsolescence, lying idle, sale, pledge, or transfer of major assets;
4. Major investments in other enterprises;
5. Loss caused by major disasters;
6. Processing or conclusion of material actions;
7. Signing, completion, cancellation, or voidance of material contract;
8. Adjustment of important organization and significant reformation of management system;
9. Material impact of change of governmental laws and regulations;
10. Other significant events or measures which may affect the financial position, results of operations, or cash flows. |
| Article 11 | Unless otherwise provided by the SFC, the number of years for keeping the financial reports provided in these Guidelines or the accounting documents, books of account, deeds, books, etc. based on which the financial reports are prepared shall be in accordance with the Business Accounting Law. |
Chapter II Periodic Report
|
| Article 12 | A securities firm shall prepare periodic reports as follows:
1. Daily reports: to be prepared on daily basis.
(1) daily statements of account titles (previous business day);
(2) settlement lists
(3) daily statement of trade for own account;
(4) daily operation statement of trade for customers' accounts;
(5) summary of receipt/payment of settlement amount.
2. Monthly reports: to be prepared before the 5th day of the following month.
(1) monthly statement of account titles (Relevant valuation titles shall be properly represented);
(2) statement of securities traded by consignors;
(3) monthly report of general business condition;
(4) monthly statement of operating securities in treasury;
(5) Statement of general condition of revenue/expenditure.
3. Semi-annual financial statements: to be publicly announced and reported in accordance with relevant rules within 2 months after closing of each half business year.
(1) balance sheets;
(2) income statements;
(3) statements of changes in shareholders' equity;
(4) statements of cash flows;
(5) Footnotes;
(6) List of each account title.
4. Annual financial reports: to be publicly announced and reported in accordance with relevant rules within 4 months after closing of each business year.
(1) balance sheets;
(2) income statements;
(3) statements of changes in shareholders' equity;
(4) statements of cash flows;
(5) Footnotes;
(6) List of each account title;
(7) Other disclosures. |
| Article 13 | Unless otherwise provided in these Guidelines, the generally used formats shall be applicable to the reports. |
Chapter III Balance Sheet
|
| Article 14 | Assets shall be appropriately categorized. Current and non-current assets shall be separated.
The anticipated total amount of return on assets within 12 months after the balance sheet date and in excess of 12 months after the balance sheet date shall be respectively provided in the financial statement or disclosed in a footnote thereof.
The asset account/classification in the balance sheet, content thereof, and matters to be noted are as follows:
1. Current assets: Cash or cash equivalents that are not restricted in use; assets held for the purpose of trade, or that will be held short-term and are expected to be converted to cash within 12 months of the balance sheet date; assets that are expected to be converted to cash, put up for sale, or consumed during the normal course of a business operation cycle.
(1) Cash and cash equivalents: Cash in treasury, bank deposit, petty cash, and revolving fund paid in small amount for incidental expenses, and the short-term investment which is convertible into cash in fixed amount at any time, due in near future, and the change of whose interest rate has insignificant impact on its value.
The non-current bank deposits shall be separately classified. If the maturity date is longer than one year, a note shall be provided. Customer's settlement amount, customers' settlement amount collected in advance, fund for subscription of shares collected for an underwriter, and fund which has been earmarked, or the use of which is restricted, or which shall not be used for purpose other than the intended one shall not be classified into this account.
If the time deposits (including negotiable certificates of deposit) 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, and a note shall be provided to explain the fact of security. Where the time deposits are provided as guarantee deposits-out, 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 be classified as current asset, and an explanation shall be provided in the note. Compensating balance incurred due to long-term liability shall be classified as other asset or long-term investment rather than current asset.
(2) Short-term investment: This includes the securities, other than those issued by the company, traded on the open market, convertible into cash at any time, and not aimed at controlling or maintaining close business relation with the investee company.
Short-term investments shall be valued by using lower-of-cost-or-market method, and a note of the method for calculating the cost shall be provided. Market price means the average closing price of the last month in an accounting period. The market price of an open-end fund means its net asset value on the balance sheet date.
For the stock dividends acquired for holding securities or the stocks distributed due to capitalization of capital reserve, the increased number of shares shall be recorded by the type of short-term investments, and the average unit cost of each share shall be calculated by weighted average method.
If the securities are pledged as collateral for a debt, and if the secured debt is a long-term liability, such securities shall be re-classified as long-term investment; if the secured debt is a current liability, such securities shall still be classified as short-term investment, but a note shall be provided to explain the fact of security. Where the securities are provided as guarantee deposits-out, they shall be classified as short-term or long-term investment based on their long-term or short-term nature.
Allowance for loss of short-term investment due to price decline shall be recorded as a deduction of short-term investment.
(3) Operating securities - dealing department: All the securities purchased by a dealer for business purpose fall in this category. For this title, details shall be recorded in separate accounts based on the type of securities. Except where emerging stocks are held, which shall be valued according to the cost method, the operating securities shall be valued by the-lower-of-cost-or-market method based on their total amount. Market price means the closing price on the day on which an accounting period ends.
If operating securities are provided for transactions with a call option or subject to restriction/limitations, a note shall be provided.
Allowance for loss of operating securities due to price decline - dealing department: This shall be recorded as a deduction of operating securities - dealing department.
(4) Operating securities - underwriting department: All the securities which are acquired by an underwriter through underwriting on firm commitment basis and which have not been sold fall in this category. Such securities shall be valued by the-lower-of-cost-or-market method based on their total amount. Market price means the closing price on the day on which an accounting period ends.
If operating securities are provided for transactions with a call option or subject to restriction/limitations, a note shall be provided.
Allowance for loss of operating securities due to price decline - underwriting department: This shall be recorded as a deduction of operating securities - underwriting department.
(5) Operating securities - hedging: All securities purchased by securities firms for their own accounts to avoid risk of fluctuation of the call (put) warrants issued by them fall in this category. This title shall be valued by the lower-of-cost-or-market method. Market price means the closing price on the day on which an accounting period ends.
Allowance for loss of operating securities due to price decline - hedging: This shall be recorded as a deduction of operating securities - hedging.
(6) Operating securities - call (put) warrant: All the call (put) warrants directly purchased from the market by securities dealers fall in this category. This title shall be valued by lower-of-cost-or-market method based on the total amount. Market price means the closing price on the day on which an accounting period ends.
Allowance for loss of operating securities due to price decline - call (put) warrant: This shall be recorded as a deduction of operating securities - call (put) warrant.
(7) Call option - hedging: The option contracts purchased by a securities firm for hedging the risk of the fluctuation of the call (put) warrants issued by it fall in this category. This account shall be valued by fair value method.
(8) Investment in bonds with a put option: The amount actually paid for transactions with a put option fall in this category.
(9) Receivable amount for margin loans: The margin loans extended to customers by a securities firm in handling margin lending and securities financing fall in this category.
Allowance for bad debts - receivable amount for margin loans: a deduction of receivable amount for margin loans.
The security firm engaging in securities financing shall record the securities loaned to customers in memorandum entries but shall not enter such into account. However, the details shall be provided in the note of the financial report.
(10) Refinancing margin: The margin money or difference of securities refinancing delivered by a securities firm to a securities finance company for borrowing of securities in dealing with margin loan and securities financing in securities trading.
(11) Refinancing deposit receivable: the deposit for refinancing of securities paid to a securities finance company by a securities firm dealing with margin loan and securities financing in securities trading.
(12) Stock borrowing margin: The margin paid by a securities firm as needed for the issuance of put warrants when borrowing from the holders of underlying securities or selling short in an exchange market.
(13) Stock borrowing collateral price: The collateral price paid by a securities firm as needed for the issuance of put warrants when borrowing from the holders of underlying securities or selling short in an exchange market.
(14) Derivative financial product assets: Assets generated through a securities firm's trading in derivative financial products, such as trading in interest-rate derivative products or convertible bond asset swaps. These shall be valued according to regulations.
(15) Notes receivable: All the short-term notes receivable except those resulting from consigned securities trading fall in this category.
Notes receivable shall be valued at fair value according to the imputed interest rate. Notes receivable and maturing within one year or less, however, may be valued at par value when the discrepancy between their fair value and value at maturity is small, and they are frequently traded..
Discounted or transferred notes receivable shall be deducted and a note shall be provided.
Notes receivable resulting from operating activities shall be separately recorded from notes receivable resulting from non-operating activities.
Notes receivables from related parties shall be separately disclosed.
Notes provided for security shall be so indicated in the notes.
If the collection of a note receivable becomes impossible, it shall be written off.
At closing, the amount of notes receivable which cannot be realized shall be assessed and proper allowance for bad debts shall be recognized, and the net amount shall be disclosed.
(16) Accounts receivable: The claims except those incurred due to consigned securities trading fall within this category.
Accounts receivable shall be valued at fair value according to the imputed interest rate. Accounts receivable within one year or less, however, may be valued at par value when the discrepancy between their fair value and value at maturity is small, and they are frequently traded.
Accounts receivable from related parties shall be separately disclosed.
If the collection of an account receivable becomes impossible, it shall be written off.
At closing, the amount of accounts receivable which cannot be realized shall be assessed and proper allowance for bad debts shall be recognized, and the net amount shall be disclosed.
(17) Other financial assets/liquidity: Financial assets not listed separately on the balance sheet shall be listed under "other financial assets" and based on their liquidity shall be listed as current or non-current assets. Non-current assets shall be re-listed under "other financial assets-non-current."
(18) Prepayments: all the prepaid amounts and expenses.
Prepayments for purchase of fixed assets in accordance with contract and payment for uncompleted construction shall be recorded as fixed assets and shall not be classified as prepayments.
(19) Other receivables: other receivables not falling within notes receivable and accounts receivable, including accounting errors and claims arising out of breach of contract. At closing, the amount of other receivables uncollectible shall be assessed and proper allowance for bad debts shall be recognized, and the net amount shall be disclosed.
If the collection of other receivables becomes impossible, they shall be written off.
If any of the other receivables exceeds the aggregate amount of current assets by 5%, it shall be separately recorded.
(20) Deferred loss on purchase of call (put) warrants: in connection with the increase of the fair value of the issued call (put) warrants, the amount which has not been recognized as loss in the current period.
(21) Other current assets: all the current assets not falling within the above categories.
The above current assets, except for cash and other financial assets/liquidity, whose amount is less than 5% of the aggregate amount of current assets may be incorporated into other current assets.
2. Funds and long-term investments: all the special funds and the long-term investments for the purpose of ordinary business operation.
(1) Funds: the asset allocated/deposited for special purpose such as sinking fund, improvement and expansion fund, contingent reserve, and funds for futures department.
The funds for futures departments are the working capital exclusively appropriated to the futures department by a securities firm concurrently dealing with futures business.
The resolutions and rules based on which a fund is allocated/deposited shall be recorded.
The welfare fund set aside in accordance with the Statute on Employee Welfare Fund shall be classified as expense.
(2) Long-term investments: the purchase of long-term bonds and shares in specified enterprises or other investments approved by the SEC.
The method used to account for long-term investments shall be provided. Long-term investments shall be separately classified based on their nature.
An investor company's investment in an enterprise's stock shall be classified as a long-term investment in equity securities if any of the following conditions is met:
1) where an investee company's stock is not traded in an open market nor has any definite market price;
2) where an investor company intends to control an investee company or to establish a close relationship with it; or
3) where an investor company intends and has the ability to hold the investee company's equity on a long-term basis.
Except for the following conditions, the long-term investments shall be valued and disclosed and the consolidated financial statements shall be prepared in accordance with The Statements of Financial Accounting Standards No. 5 and No. 7:
1) Unless otherwise provided, the influence of the long-term investment on the investee company shall be assessed based on the ratio of voting stocks of the investee company held by the investor company;
2) If the total assets or operating revenue of any individual subsidiary have not reached the standard for including in the consolidated statements, but if the total assets or operating revenue of all the subsidiaries which have not reached the standard for including in the consolidated statements are 30% or more of the total assets or operating revenue of the securities firm, the subsidiaries whose total assets or operating revenue reaches 3% or more of the securities firm shall be included in the consolidated statements. Unless the ratio subsequently decreases to 20%, such subsidiaries shall continue to be included in the consolidated statements. For the subsidiaries not included in the consolidated statement, 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.
3) If the total votes in the common stocks and special (preferred) voting stocks held by the investor company is more than 50% of the total votes of the investee company, or if the investor company directly or indirectly controls the personnel, finances, or operations of the investee company as set forth in Article 369-2, Paragraph 2 of the ROC Company Law, or if all the following conditions are met, the investment income shall be recognized in the current period:
(a) Where the beginning book balance of the long-term investment is NT$50 million or more and reaches 5% or more of the paid-in capital of the securities firm;
(b) Where the securities firm holds 30% or more of the equity of the investee company, or where the aggregate shares in the investee company held by the securities firm, its directors, supervisors, managers, and the enterprises directly or indirectly controlled by the securities firm is more than 50%; and
(c) Where the securities firm is among the three shareholders of the investee company with the highest shareholding, or where the board chairman or president of the investee company is appointed by the securities firm.
Long-term investments shall be valued by equity method. If the financial reports produced by the investee company fail to conform to generally accepted accounting principles in the ROC, the report shall first be adjusted to conform to such principles and profits and losses for investments recorded thereafter. If the investee company meets any of the following conditions, its financial statements shall be audited by a certified public account in accordance with the "Regulations for Auditing and Certification of Financial Statements by Certified Public Accountants" and the generally accepted auditing standards:
1) Where its paid-in capital is NT$30 million or more;
2) Where its operating revenue reaches NT$50 million or more or 10% or more of the operating revenue of the securities firm.
Valuation of unamortized premium or discount of long-term investments in bonds shall be adjusted based on par value. The premium or discount shall be amortized on a reasonable and systematic basis.
If long-term investments are pledged as collateral or subject to restrictions, such shall be indicated in the notes.
3. Fixed assets: the tangible assets used for operation, with an economic life of one year or more, and not for the purpose of sale.
Within the fixed asset classification, land, depreciable assets and assets subject to depletion shall be presented separately.
The fixed assets shall be recorded at acquisition costs or construction costs. However, the interest on the purchase price of a "presold" house and the fixed assets purchased with capital increase in cash shall not be capitalized. Fixed assets that will no longer be used in operations shall be reclassified as other assets at a value equal to the lower of the net realizable value or book value. When there is no net realizable value, the cost and accumulated depreciation shall be offset against each other, and the difference thereof shall be recorded as a loss.
If a fixed asset is still used after the expiration of the service life, such asset shall be depreciated based on the residual value. The leased assets shall be recognized and disclosed in accordance with The Statements of Financial Accounting Standards No. 2.
If a leased asset falls within operating lease, the improvement made to the leased property is called leasehold improvement and shall be recorded as a fixed asset.
The valuation basis for a fixed asset shall be indicated. If the fixed assets have been revalued, the date of revaluation and increased or decreased amount shall be recorded, and the acquisition costs and the appraisal increment shall be separately presented in the balance sheet. The land value increment tax reserve allocated due to land appraisal increment shall be classified as long-term liability. 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.
Except for land, the fixed assets shall be periodically depreciated on a reasonable and systematic basis within the estimated useful life.
The accumulated depreciation of a fixed asset shall be recorded as a deduction of fixed assets.
The leasehold improvement shall be reasonably and systematically depreciated based on the lower of the estimated useful life and the lease term, and re-classified as expenses of relevant period according to its nature without interruption or reduction. For depreciable assets, the method for computation of depreciation shall be noted.
If a fixed asset is provided as collateral for security, mortgage, or creation of Dien, such shall be indicated.
Major accounts of fixed assets are as follows:
(1) Land: all the land of the company used in operations;
(2) Buildings: all the buildings of the company used in operations;
(3) Equipment: all the income-generating equipment, information equipment, transportation equipment, and other equipment acquired for operation purpose;
(4) Prepayments for building/land: all the prepayments for purchase of land and buildings;
(5) Prepayments for equipment: all the prepayments for purchase of equipment;
(6) Leasehold improvement: the improvement made to the property of operating lease;
(7) Other fixed assets.
4. Intangible assets: the assets which are nonphysical but have economic value, such as goodwill.
Purchased intangible assets should be recorded at actual cost.
Self-developed intangible assets that cannot be identified clearly (e.g. goodwill) shall not be recorded. Those which can be clearly identified can only be recorded in an amount which is no more than the fee for application for registration.
During the development stage, the assets shall be valued and the loss/profit shall be recognized and disclosed in accordance with the Statements of Financial Accounting Standards No. 19.
The valuation basis for intangible assets shall be noted. Intangible assets shall be amortized reasonably and systematically. The maximum amortization period shall not be more than 20 years, provided that this shall not apply where clear evidence exists demonstrating the validity of the intangible assets past 20 years.
The amortization method of intangible assets shall be noted.
5. Other assets: all the assets not falling within the above categories and with a collection or realization period of one year or more, such as guarantee deposit-out, long-term note receivable, and other miscellaneous assets.
Long-term notes receivable and other long-term receivables shall be valued based on calculation of their fair value according to the imputed interest rate.
The account receivable overdue in substantial amount shall be separately recorded, and the condition thereof and the amount of allowance for bad debt shall be noted.
When the amount of other assets exceeds 5% of the total amount of assets and other financial assets/liquidity, the names of the accounts shall be separately recorded.
(1) Operation bond: the operation bond set aside in accordance with Article 55 of the Securities and Exchange Law;
(2) Settlement/clearance fund: The settlement/clearance fund paid/deposited by securities firms in accordance with Article 107 or Article 132 of the Securities and Exchange Law;
(3) Guarantee deposit-out: other guarantees deposited-out;
(4) Deferred debits: long-term prepaid expenses which will bring future economic benefits and shall be periodically amortized subsequently;
(5) Accounts with branches: in the case of a security firm with branch offices, the amount of the accounts between the head office and branch offices;
(6) Accounts with head office: the amount of the accounts between the branch offices and head office of a securities firm;
(7) Inter-departmental accounts: The amount of the inter-departmental transaction between the securities department and futures department of a securities firm concurrently dealing with futures business; to be used when there is debit balance;
(8) Other assets: the assets not falling within the above categories.
6. Debit items for consigned trades: items to be offset against each other in the securities trading consigned to a securities broker. When the statement is prepared, the balance after offsetting debit items against credit items shall be recorded. However, the detailed contents shall be explained in the notes of the financial reports.
(1) Cash and cash equivalents - settlement amount: All settlement amounts (excluding handling fee and taxes withheld) of customers received/paid in handling securities brokerage business shall be recorded under this account, including the deposit in a separate settlement account which should not be used for other purpose.
(2) Receivable securities purchased for customers: the receivable and unsettled securities purchased for customers;
(3) Receivable price of securities purchased for customers: the price of securities purchased for the account of and receivable from customers and unsettled;
(4) Receivable securities sold through consignment: the securities to be sold through consignment and receivable from customers and unsettled;
(5) Settlement price: net settlement amount receivable from and payable to the stock exchange, to be used when there is debit balance.
(6) Securities purchased for customers: the securities purchased for the accounts of customers.
(7) Securities sold for customers: the securities sold for the accounts of customers.
(8) Receivable notes for settlement: the notes delivered by consignors or securities finance institutions in settlement in the process of securities brokerage business. Sub-accounts under this account may be established by party.
(9) Receivable accounts for settlement: the withdrawal slip, transferred amount, remittance delivered by consignors, stock exchange, or securities finance institutions in settlement in the process of securities brokerage business. Sub-accounts under this account may be established by party.
(10)Margin trading: the amounts of margin trading directly settled by securities finance institutions and stock exchange in the process of margin loan/securities financing agency business. This account may be a credit balance. |
| Article 15 | Liabilities shall be appropriately categorized. Current and non-current liabilities shall be separated.
The total amount of liability anticipated for liquidation within 12 months after the balance sheet date and that in excess of 12 months after such date shall be respectively provided in the financial statement or disclosed in a footnote thereof.
The liability account/classification in the balance sheet, content thereof, and matters to be noted are as follows:
1. Current liabilities: Must be fully liquidated within 12 months after the balance sheet date, or if created through operations, anticipated liquidation must occur within one business cycle in the normal course of business.
(1) Short-term loans: including short-term borrowings from banks, overdrafts, and other short-term loans.
For short-term loans, the nature of loan, guarantee, and the range of interest rates shall be noted based on the type of loans. If collateral is provided, the name of collateral and its book value shall be recorded.
Borrowings from non-financial institutions in accordance with Article 17 of the Regulations Governing Securities Firms shall be separately recorded.
(2) Commercial papers payable: short-term bills issued by financial institutions through consignment to acquire fund from the monetary market.
Commercial papers payable shall be valued based on present value. The discounts of commercial papers payable shall be recorded as a deduction of commercial papers payable.
For commercial papers payable, the guarantee, acceptance agency and interest rate shall be noted. If collateral is provided, the name of collateral and its book value shall be noted.
(3) Liabilities for issuance of call (put) warrants: the amounts actually acquired for issuance of call (put) warrants.
(4) Repurchase of issued call (put) warrants: the amount paid by a securities firm for repurchase of the call (put) warrant issued by it. This account is a deduction of the account "liabilities for issuance of call (put) warrants".
(5) Liabilities for bonds with a call option: the amount actually acquired in dealing with transactions with a call option.
(6) Securities financing guarantee deposit-in: The deposit collected from customers for securities financing by a securities firm dealing with margin loan and securities financing in securities trading.
(7) Deposit payable for securities financing: the sale price (less stock exchange tax, handling fee for consigned trading, and securities financing fee) of loaned stocks collected as collateral by a securities firm dealing with margin loan and securities financing in securities trading from customers for securities financing.
The securities firm engaging in securities financing shall record the securities provided by customers as guarantee in memorandum entries but shall not enter such into account. However, the details shall be provided in the note of the financial report.
(8) Refinancing borrowings: the refinancing amount acquired from securities finance companies by a securities firm in dealing with margin loan and securities financing in securities trading.
(9) Notes payable: all the undue notes payable except those resulting from consigned securities trading.
Notes 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 the amount stated on book.
Notes payable resulting from operating activities shall be separately recorded from notes payable resulting from non-operating activities.
Notes of large value payable to banks and related parties shall be separately disclosed.
If collateral has been provided for notes payable, the name of collateral and the book value shall be recorded.
Notes for guarantee deposit-out which can be recovered for cancellation upon termination of the guaranteed responsibilities may not be recorded as current liabilities. However, the nature and amount of the guarantee shall be explained in the notes of the financial statements.
(10) Accounts payable: amounts payable incurred in business other than consigned securities trading.
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 par value.
Accounts payable resulting from operating activities shall be separately recorded from accounts payable resulting from non-operating activities.
Accounts of large value payable to related parties shall be separately disclosed.
(11) Borrowed securities payable/hedges: the amount resulting from sale of securities borrowed by a securities firm engaging in trading of borrowed securities. For this title, details shall be recorded in separate accounts based on the type of securities. They shall be valued by the-higher-of-cost-or-market-price method in relation to each of the various put warrants issued. Market price means the closing price on the day on which an accounting period ends.
Repurchase of borrowed securities/hedges is a contra account to this item.
Loss allowance for increase in value of securities borrowed is an adjunct account to this item.
(12) Repurchase of borrowed securities payable /hedges: the amount paid by a securities firm for repurchase of stocks borrowed. This item creates a contra account to the "borrowed securities payable /hedges" account, and shall be included in valuation of the "borrowed securities payable /hedges" account.
(13) Liabilities for derivative financial products: Liability accounts generated by a securities firms' trading in derivative financial products, such as trading in the interest rate derivative products or convertible bond asset swaps, which shall be valued according to regulations.
(14) Amounts received in advance: all the amounts received in advance.
Amounts received in advance shall be separately recorded based on principal classification, and relevant agreement, if any, shall be noted.
(15) Amounts collected for other parties: all the amounts collected for other parties, such as the securities transaction tax and salary income tax.
(16) Other payables: other payables not falling within notes payable and accounts payable, such as tax payable, salary payable, and dividends.
For the dividend and bonus payable passed by the resolution of the shareholders meeting, the distribution method and proposed payment date 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 as current liabilities.
If any of the other payables exceeds the aggregate amount of current liabilities by 5%, it shall be separately recorded based on the nature or party concerned.
(17) Other current liabilities: all the current liabilities not falling within the above categories, such as corporate bonds and long-term borrowings which become mature within one year.
The above current liabilities whose amount is less than 5% of the aggregate amount of current liabilities may be incorporated into other current liabilities.
2. Long-term liabilities: liabilities which will mature in excess of 12 months after the balance sheet date, including corporate bonds payable, long-term borrowings, long-term notes payable, and long-term payables.
(1) Corporate bonds payable (including overseas corporate bonds): For bonds issued by a securities firm, 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 are convertible corporate bonds, the method of conversion and the amount converted shall also be noted.
The premium and discount of corporate bonds payable are valuation account of corporate bonds payable and shall be classified as an addition or deduction of corporate bonds payable, amortized during the circulation period of the bonds by using a reasonable and systematic method, and recorded as an adjustment of the interest expense.
(2) Long-term borrowings: the content, date of maturity, interest rate, name of collateral, book value, and other important restrictions agreed shall be disclosed.
For the long-term loan to be repaid in foreign currency or in an amount translated at a foreign exchange rate, the name and amount of such foreign currency shall be indicated.
Long-term notes payable and other long-term payables shall be valued at present value.
For long-term liabilities which reach maturity within 12 months of the balance sheet date, when the original loan contract period was in excess of 12 months and the enterprise intends to continue long-term refinancing, and when the financial statement indicates that refinancing or loan extension had been accomplished before the submission date, the loan shall continue to be listed as a long-term liability, and a footnote shall be appended to the financial statement disclosing 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.
3. Other liabilities: the liabilities not falling within the above categories, such as guarantee deposit-in, other miscellaneous liabilities, etc. When the amount of other liabilities exceeds 5% of the total amount of liabilities, the name of accounts shall be separately reported.
(1) Reserve for loss caused by breach of contract: the reserve allocated from the transaction amount of a consigned securities trade to cover the loss caused by breach of contract by customers.
(2) Trading loss reserve: When the profit exceeds loss in the sale of operating securities/dealing department and call (put) warrants, a specified percentage of the portion in excess shall be allocated as trading loss reserve.
(3) Guarantee deposit-in: all the bonds deposited in.
(4) Accounts with branches: to be used when there is a credit balance in the account between the head office and branch offices, if any.
(5) Accounts with head office: to be used when there is a credit balance in the account between the branch offices and head office of a securities firm.
(6) Inter-departmental accounts: the amount of the inter-departmental transaction between the securities department and futures department of a securities firm concurrently dealing with futures business; to be used when there is a credit balance;
(7) Other liabilities: the liabilities not falling within the above categories.
4. Credit items for consigned trading: items to be offset against each other in the securities trading consigned to a securities broker. When the statement is prepared, the balance after offsetting debit items against credit items shall be recorded. However, the detailed contents shall be explained in the notes of the financial reports.
(1) Securities deliverable purchased for customers: the securities deliverable to consignors in dealing with the business of purchasing securities for customers.
(2) Price payable of securities sold for customers: the price payable to consignors in dealing with the business of selling securities for customers.
(3) Securities deliverable sold for customers: the securities deliverable in dealing with the business of selling securities for customers.
(4) Settlement notes payable: the notes delivered to consignors or financial institutions in settlement in dealing with securities brokerage business.
(5) Settlement accounts payable: the amount paid through transfer to consignors or financial institutions in settlement in dealing with securities brokerage business.
(6) Settlement proceeds: net settlement amount receivable from and payable to the stock exchange; to be used when there is a credit balance.
(7) Margin trading: the amounts of margin trading directly settled by securities finance institutions and stock exchange in dealing with margin loan/securities financing agency business; to be used when there is a credit balance. |
| Article 16 | The stockholders equity account/classification in balance sheets, content thereof, and matters to be noted shall be as follows:
1. Capital stock: the capital invested in a securities firm by shareholders and applied for registration with the authority in charge of corporate registration.
The type of capital stock, par value per share, number of shares authorized, number of shares issued, and special terms shall be indicated.
Treasury stocks shall be handled by the cost method and recorded as a deduction of stockholders equity. The number of shares shall be recorded.
2. Capital reserve: capital reserve refers to premiums generated through share capital transactions between the company and shareholders, typically including premiums on stock issued above par value, gains from donated capital, and other reserves generated in accordance with generally accepted accounting principles.
Capital reserves shall be listed separately according to their nature, with circumstances relating to any limits on the utilization thereof shall be set out in footnotes.
3. Retained earnings (or accumulated deficit): the equity resulting from operating activities, including legal reserve, special reserve, and unappropriated earnings (or deficit to be covered), etc.
(1) Legal reserve: the legal reserve allocated in accordance with the Company Law.
(2) Special reserve: the reserve allocated from earnings in accordance with relevant laws and regulations, contracts, articles of incorporation, or resolutions of shareholders meetings.
(3) Unappropriated earnings (or deficit to be offset): the undistributed or not yet appropriated earnings (a deficit to be offset is the loss not yet recouped).
Distribution of earnings or offsetting of losses shall not be recognized until approved by the shareholders meeting. However, when an earnings distribution or offsetting of losses has been proposed, such shall be disclosed in the footnotes of the current financial statements.
4. Other shareholder equity: Refers to other items resulting in increases or decreases to shareholder equity, and typically includes unrealized losses on market value decline of long-term equity investments, net losses not recognized as retirement fund costs, translation adjustments, treasury stock, and other adjustment items. |
Chapter IV Income Statement
|
| Article 17 | The account structure of income statement, the contents thereof, and items to be footnoted are as follows:
1. Revenue:
(1) Brokerage handling fee revenue: the revenue of handling fee derived from consigned trading and securities financing business. This account shall be classified as follows:
1) Handling fee revenue from consigned trading (applicable to brokers and OTC trading).
2) Handling fee from securities financing (applicable to securities financing).
3) Emerging stock handling fee revenues.
(2) Revenue from underwriting business: the revenue derived from underwriting of securities. This account shall be classified as follows:
1) Compensation from underwriting securities on a firm commitment basis.
2) Handling fee revenue from underwriting securities on best-efforts basis.
3) Revenue from underwriting operation.
4) Revenue from underwriting consultation and other revenue.
(3) Profit from issuing call (put) warrants: the profit derived from issuing call (put) warrants by a securities firm, including the profit from change in fair value of call (put) warrant liabilities, profit from exercising call (put) warrants before maturity, profit from change in fair value for repo of call (put) warrants, and profit from expired call (put) warrants, etc.
(4) Profit from transactions of options - hedging: the profit acquired by a securities firm from transactions of options to hedge fluctuation of the value of call (put) warrants, including the profit in the change of fair value of options.
(5) Profit from sale of securities - dealing: the profit of dealing department from sale of securities. In this account, the profit from centralized stock market and OTC market shall be separately recorded, and the net profit of the revenue from sale of securities less the cost for sale of securities shall be reported.
(6) Profit from sale of securities - underwriting: the profit of underwriting department from sale of securities. In this account, the profit from centralized stock market and OTC market shall be separately recorded, and the net profit of the revenue from sale of securities less the cost for sale of securities shall be reported.
(7) Profit from sale of securities - hedging: the profit obtained by dealing department from sale of operating securities acquired for hedging change in value of call (put) warrants. In this account, the profit from centralized stock market and OTC market shall be separately recorded, and the net profit of the revenue from sale of securities less the cost for sale of securities shall be reported.
(8) Profit from sale of securities - call (put) warrants: the profit obtained by dealing department from trading call (put) warrants. In this account, the profit from centralized stock market and OTC market shall be separately recorded, and the net profit of the revenue from sale of securities less the cost for sale of securities shall be reported.
(9) Profit from short covering: Profits generated through a securities firm engaging in trading of borrowed securities when the market value [of a give stock] has declined at the time the stock must be purchased for return. This item shall be listed as the net amount when writing off borrowed stock payable/hedges, operating securities/hedges, or repurchase of borrowed stock payable/hedges.
(10) Revenue from providing agency service for stock affairs: revenue from providing agency service for stock affairs.
(11) Interest revenue: interest revenue from dealing with margin loan/securities financing business, trading bonds, and other business-related activities.
(12) Revenue from derivative financial products: Revenue account generated by a securities firm's trading in derivative financial products.
(13) Dividend revenue: dividend and bonus revenue from stocks held by the company.
(14) Other operating revenue: other operating revenue not falling into the above accounts.
(15) Non-operating revenue and profits: non-operating revenue and revenue not falling within the above categories.
2. Expenses:
(1) Brokerage handling fee expense: the handling fee payable by a securities firm to the stock exchange or OTC securities exchange in trading securities through consignment. In this account, the expense from centralized stock market and OTC market shall be separately recorded.
(2) Dealing handling fee expense: the handling fee payable by a securities dealer to the stock exchange or OTC securities exchange. In this account, the expense from centralized stock market and OTC market shall be separately recorded.
(3) Refinancing handling fee expense: the handling fee expense of a securities firm for refinancing with the securities finance company in dealing with securities margin loan/securities financing business.
(4) Underwriting operation handling fee expense: the handling fee expense paid by an underwriter in underwriting operation.
(5) Expenses for issuing call (put) warrants: the expenses payable by a securities firm for issuing call (put) warrants.
(6) Loss in issuing call (put) warrants: the loss incurred by a securities firm in issuing call (put) warrants, including loss in change of fair value of call (put) warrant liabilities, and loss in change of fair value of call (put) warrant repurchase.
(7) Loss from transactions of options - hedging: the profit acquired by a securities firm from transactions of options to hedge fluctuation of the value of call (put) warrants, including the loss from change of fair value of options, loss from exercising of call (put) warrants before maturity,
(8) Loss from sale of securities - dealing: the difference when the revenue from sale of operating securities by the dealing department is less than the cost for sale of the securities. In this account, the loss from centralized stock market and OTC market shall be separately recorded, and the net loss of revenue from sale of securities less the cost from sale of securities shall be reported.
(9) Loss from sale of securities - underwriting: the difference when the revenue from sale of operating securities by the dealing department is less than the cost for sale of the securities. In this account, the profit from centralized stock market and OTC market shall be separately recorded, and the net loss of the revenue from sale of securities less the cost for sale of securities shall be reported.
(10) Loss from sale of securities - hedging: the loss incurred by dealing department from sale of operating securities for hedging. In this account, the loss from centralized stock market and OTC market shall be separately recorded, and the net loss of the revenue from sale of securities less the cost for sale of securities shall be reported.
(11) Loss from sale of securities - call (put) warrants: the loss incurred by the dealing department from trading call (put) warrants. In this account, the loss from centralized stock market and OTC market shall be separately recorded, and the net loss of the revenue from sale of securities less the cost for sale of securities shall be reported.
(12) Loss from appreciation in value of borrowed securities: Loss arising due to valuation of borrowed securities payable /hedges when a securities firm is engaging in trading of borrowed securities.
(13) Interest expense: interest expense from dealing with margin loan/securities financing business, trading bonds, and other business-related activities.
(14) Loss from decline in price of operating securities: the unrealized loss in decline of price of operating securities. In this account, the loss shall be separately recorded based on the type of business.
(15) Losses from derivative financial product: Losses arising out of a securities firm's trading in derivative financial products.
(16) Operating expenses: all the operation expenses required by the company. The expenses, such as salary, meal expenses, stationery/printing, communications, entertainment, utilities, insurance premium, taxes, depreciation, amortization, rent, repair/maintenance, advertisement, commission, computer information, donation, membership, bad debts, loss on breach of contract, trading loss, loss on accounting errors, penalties, employees' welfare, travel expense, transportation expense, overtime pay, miscellaneous purchase, retirement pension, employee training expense, service expense, newspapers and magazines, depository service expenses, stock borrowing fees, emerging stock handling fees, securities investor protection fees, miscellaneous expenses, etc., shall be separately recorded in detail according to actual needs.
(17) Non-operating expenses and losses: financial expenses incurred by non-operating activities, loss on disposal of fixed assets, loss on disposal of short-term investment, loss on decline of price of short-term investment.
3. Losses and gains from continuing operation: The net amount of the preceding two Items shall be indicated as pre-tax loss/gain, income tax expense (profit), and after-tax loss/gain.
4. Discontinued losses and gains: the losses or gains incurred in the current period for disposing or deciding to dispose of significant department, including the operating losses and gains and disposal losses and gains before suspension of operation in the current period. Disposal losses and gains shall be assessed on the date on which the disposal is decided. Any loss shall be immediately recognized. The profit, if any, shall be recognized upon realization.
5. Extraordinary losses and gains: the losses and gains that are distinguished by their unusual nature and by the infrequency of their occurrence, such as losses arising when newly promulgated laws or regulations prohibit operation or due to seizure by a foreign government.
Significant losses or gains shall be separately recorded and shall not be amortized on yearly basis.
6. The amount of cumulative effect resulting from the change of accounting principles shall be separately recorded below extraordinary losses/gains.
7. Net income (or net loss) of current period: The earnings (or losses) of the current accounting period are the aggregate amount of the preceding three Items.
8. Earnings per share shall be calculated and disclosed in accordance with The Statements of Financial Accounting Standards No. 24.
9. Income tax shall be amortized and disclosed in accordance with the Statements of Financial Accounting Standards No. 22.
10. Where two or more types of business are operated, income statements based on the type of business shall be prepared. |
Chapter V Statement of Changes in Stockholders' Equity
|
| Article 18 | A statement of changes in stockholders' equity is a report to indicate the changes in the items representing stockholders' equity. The statement shall record the capital stock, capital reserve and retained earnings (or accumulated deficit), and beginning balance of other shareholder equity items; increased or decreased items and amounts in the current period; ending balance, etc.
The contents of retained earnings are as follows:
1. Beginning balance;
2. Prior period adjustments of loss and profit: Correction of errors in the calculation, recording, and recognition of loss and profit items in the prior period and in the use of accounting principles and method.
3. Net profit or net loss of current period.
4. Allocation of legal reserve, special reserve, and distribution of dividends, etc.
5. Ending balance.
The prior period adjustments of losses and gains, the unrealized losses or gains not included in the losses/gains of the current period but directly recorded under stockholders' equity (e.g. translation adjustments), and the income tax expense (profit) incurred from changes in capital reserve shall be directly classified under such items in net amount. |
Chapter VI Statement of Cash Flows
|
| Article 19 | A cash flow statement is a consolidated report on receipts and payments of cash and cash equivalents during a specific period in relation to operational, investment, and financing activities. Cash flow statements shall be prepared in accordance with The Statements of Financial Accounting Standards No. 17 (cash flow statement). |
| Article 19-1 | Notes to a financial report, in addition to being prepared in accordance with Articles 9 and 10 herein, shall also disclose information relating to the following matters:
1. Information on large-value transactions:
(1) Extension of monetary loans to others.
(2) Endorsements and guarantees for others.
(3) Acquisition of real estate equaling at least NT$100 million or 20% of paid-in capital.
(4) Disposal of real estate equaling at least NT$100 million or 20% of paid-in capital.
(5) A combined total of discounts on commissions in trades with affiliated persons equaling NT$5 million or more.
(6) Receivables from affiliated persons amounting to at least NT$100 million or 20% of paid-in capital.
2. Information on re-investing enterprises:
(1) For enterprises which directly or indirectly have a controlling or very large influence on the investee company, the name, location, chief areas of operation, original investment amount, stock holdings at the end of the previous period, profits and losses in the current period and recorded profits and losses on investments.
(2) Enterprises which directly or indirectly have a controlling influence in the investee company shall also disclose information relating to transactions of the investee company falling under Sub-subparagraphs 1-6 of the preceding subparagraph, provided that where the total assets or operating revenues of the investee company are less than 10% of the respective figures for the issuer, or where it directly or indirectly controls the personnel, finances, or operations of the investee company, only disclosure of information on transactions under Sub-subparagraphs 1 and 2 are required.
(3) Notes to consolidated financial reports shall also disclose information on the items listed in Paragraphs 1 and 2 of this article, provided that where the total assets or operating revenues of the investee company are less than 10% of the respective figures for the securities firm, or where the securities firm directly or indirectly controls the personnel, finances, or operations of the investee company, it may be exempt from the provisions of Subparagraph 2. Securities firms disclosing information on transactions in accordance with the above provisions shall, in preparing consolidated statements, add appropriate notes of explanation for those already offset. |
| Article 19-2 | Securities firms shall make full disclosure of trades with associated persons in accordance with the Statement of Financial Accounting Standards No. 6. Substantive relationships as well as purely legal aspects shall be taken into account when determining which trading counterparts are to be considered associated persons. Under any of the following circumstances, except where an entity can demonstrate a lack of controlling ability or substantive influence, an entity shall be deemed to have a substantive relationship as an associated person, and notes disclosing relevant information in financial statements will be required in accordance with the Statement of Financial Accounting Standards No. 6:
1. "Affiliated enterprises" as referred to under Chapter VI-I of the Company Law, and their directors, supervisors, and managers.
2. Any company or institution falling under the control of the same general management division and their directors, supervisors, and managers.
3. Personnel in the general management division with the level of manager or above.
4. Any company or institution listed as an affiliated enterprise in information published or released to the public. |
Chapter VII Names and Formats of Financial Statements
|
| Article 20 | Names of financial statements and lists of significant account titles are as follows (formats as attached):
1. Balance Sheet (Form 1);
2. Lists of Assets, Liabilities, and Stockholders Equity Accounts.
(1) List of Cash and Cash Equivalents (Form 2-1);
(2) List of Short-term Investments (Form 2-2);
(3) Operating Securities - List of Dealing Department (Form 2-3);
(4) Operating Securities - List of Underwriting Department (Form 2-4);
(5) List of Investment in Bonds with Put Option (Form 2-5);
(6) List of Amount of Margin Loan Receivable (Form 2-6);
(7) List of Refinancing Margin (Form 2-7)
(8) List of Refinancing Deposit Receivable (Form 2-8);
(9) List of Notes Receivable (Form 2-9);
(10) List of Accounts Receivable (Form 2-10);
(11) List of Prepayments (Form 2-11);
(12) List of Other Receivables (Form 2-12);
(13) List of Other Current Assets (Form 2-13);
(14) List of Changes in Funds (Form 2-14);
(15) List of Changes in Long-term Equity Investments (Form 2-15);
(16) List of Changes in Long-term Bond Investments (Form 2-16);
(17) List of Changes in Other Long-term Investments (Form 2-17);
(18) List of Changes in Fixed Assets (Form 2-18);
(19) List of Changes in Accumulated Depreciation of Fixed Assets (Form 2-19);
(20) List of Other Assets (Form 2-20);
(21) List of Short-term Loans (Form 2-21);
(22) List of Bonds with Call Option Liabilities (Form 2-22);
(23) List of Securities Refinancing Deposit-in (Form 2-23);
(24) List of Securities Financing Deposit Payable (Form 2-24);
(25) List of Refinancing Borrowings (Form 2-25);
(26) List of Notes Payable (Form 2-26);
(27) List of Accounts Payable (Form 2-27);
(28) List of Other Payables (Form 2-28);
(29) List of Other Current Liabilities (Form 2-29);
(30) List of Long-term Loans (Form 2-30);
(31) List of Other Liabilities (Form 2-31);
3. Income Statement (Form 3);
4. Income Statements Based on Types of Business (Form 4);
5. Lists of Revenue and Expense Accounts.
(1) List of Brokerage Handling Fee Revenue (Form 5-1);
(2) List of Revenue from Underwriting Business (Form 5-2);
(3) List of Profit (Loss) from Sale of Securities (Form 5-3);
(4) List of Revenue from providing Agency Service for Stock Affairs (Form 5-4);
(5) List of Interest Revenue (Form 5-5);
(6) List of Operating Expenses (Form 5-6);
(7) List of Non-operating Revenue and Expenditure (Form 5-7);
6. Statement of Changes in Stockholders' Equity (Form 6);
7. Statement of Cash Flows (Form 7);
8. Form of Securities Underwriting Report (Form 8);
9. Form of Operation Report of OTC Trading (Form 9);
10. Form of Margin Loan/Securities Financing Business Report (Form 10);
11. List of Collateral Securities for Margin Loan/Securities Financing (Form 11);
12. List of Refinancing Collateral (Form 12);
13. List of Securities Borrowed (Lent) for Refinancing (Form 13). |
Chapter VIII Financial Forecasts
|
| Article 21 | Unless otherwise approved by the SFC, a securities firm shall disclose its financial forecasts.
Financial forecasts shall be prepared and disclosed in accordance with the "Guidelines for Implementation of Financial Forecast Information Publication System of Public Companies" prescribed by the SFC and the Statements of Financial Accounting Standards No. 16. |
| Article 22 | Financial forecasts shall be prepared for the expected result of the operational plan in accordance with proper basic assumptions and accounting principles in trustworthy manner. |
| Article 23 | The preparation and presentation of financial forecasts shall be undertaken in accordance with laws and regulations and the Statements of Financial Accounting Standards No. 16.
If financial forecasts may be misleading due to errors, or if changes in basic assumptions may cause significant impact on financial forecasts, a securities firm shall periodically make correction or renewal. |
Chapter IX Other Disclosures
|
| Article 24 | A securities firm shall explain its business conditions as follows:
1. Significant business matters: A securities firm shall provide explanations on matters which have significant impact on business in last five years, including merger and acquisition or combination of other companies, splits, investment in affiliated enterprises, reorganization, procurement or disposal of material assets, significant change in operation method or business content, etc.
2. Information related to investment in overseas enterprise: A securities firm shall provide general information of investment in overseas enterprise, office, and re-investment business of the overseas enterprise and office, including investment amount, investment loss/gain, cash dividend, and endorsement/guarantee provided to other parties by such enterprise/business, and loans (Form 13-1).
3. Remuneration and related information on directors, supervisors, general manager and vice general manager (Form 14):
(1) Transportation allowance and remuneration to each director, supervisor in last fiscal year. If a director concurrently acts as manager, the remuneration shall be respectively disclosed based on his/her position.
(2) Total salaries, cash awards, special allowance, and bonus paid to the general manager and vice general manager in last fiscal year.
(3) If remuneration other than those described in the preceding two Items, such as automobile, house, or other personal expenditures, is provided to directors, supervisors, general mangers, and vice general managers, the name, position, the nature and cost of the assets provided, rental computed based on actual or fair market price, and other payment shall be disclosed.
(4) Where any chairman, general manager, or manager in charge of finance or accounting at a securities firm has within the previous year held a position at the accounting firm of a certified public accountant or any of its affiliated enterprises, the name, position held, and period during which the position was held shall be disclosed.
The term "affiliated enterprise of a certified public accountant's accounting firm" as used in these Criteria shall mean enterprises in which accountants at the accounting firm of the certified public accountant hold more than 50% of the shares or hold more than half of the director's positions, or those companies or enterprises listed as affiliates in materials printed or issued publicly.
4. Labor-management relation (Form 15):
(1) Significant employees welfare program, retirement system and the implementation, and negotiations between labor and management shall be disclosed.
(2) Loss caused to the company by labor disputes in last thee years shall be explained. Estimated amount already incurred or likely to be incurred in future and counter measures shall be disclosed. If the amount cannot be reasonably estimated, such fact shall be explained. |
| Article 25 | A listed securities firm or a securities firm whose stocks are traded on the OTC market shall disclose the market value, dividend, and the condition of dispersal of ownership of securities issued by it:
1. Market value information: If the securities of a securities firm have been listed or traded on the OTC market, it shall disclose the highest and lowest transaction value in each quarter of the last two years (Form 16).
2. Dividend information: Information on the details of the dividend policy, the cash dividend per share distributed in last two years, earnings, and number of shares distributed with capital reserve shall be provided. If there is any accumulated unpaid dividend, the amount thereof shall be disclosed. In case of any material change or expected material change in the dividend policy of a securities firm, an explanation shall be given (Form 17).
3. Condition of dispersal of ownership of securities: An explanation on the condition of dispersal of the common stocks and preferred special stocks of the securities firm on the date of balance sheet shall be provided (Form 18).
If a securities firm distributes stock dividend with earnings or by capitalization of capital reserve, it shall disclose the information of market value and cash dividend retroactively adjusted based on the number of shares after distribution.
A securities firm shall disclose the condition of share transfer and pledge or change in ownership of stocks of its directors, supervisors, managers, and shareholders holding 10% or more of its total shares (Form 19).
A securities firm which is approved to offer and issue securities by shelf registration system shall disclose the approved amount and relevant information of the securities to be issued or already issued (Form 20). |
| Article 26 | A securities firm shall disclose the following financial information of last five years:
1. Condensed balance sheet and income statement (From 21);
2. Material financial ratio analysis (Form 22); and
3. Significant information which may increase the understanding of financial condition, operating results, cash flow or other variable trend (e.g., impact of change in commodity price and exchange rate). |
| Article 27 | A securities firm shall review its financial condition, operating results, and cash flow and analyze the cause of change. The content shall at least cover the following matters, and discussion may be conducted on departmental basis depending on actual need:
1.Material capital expenditure and the source of fund: Give an explanation on material capital expenditure invested or committed in last two years, and the nature, expected efficiency, and the actual or expected sources of fund of the capital expenditure to be invested in the coming five years. If material change is expected in the corresponding cost of capital of future borrowings and capital increase or in the policy of borrowing and capital increase, an explanation shall be provided (Form 23).
2. Liquidity: Analyze the liquidity in last two years and the reason of its increase or decrease, and explain the condition of change in future working capital demand, the working capital amount to be generated from operation, and working capital requirement or amount obtainable from other parties based on the operation trend, capital demand and other material commitment, transaction or non-transaction matters. If it is discovered that the liquidity has been or will be materially insufficient, the remedy which has been or will be taken shall be indicated (Form 24).
3. Operating results: Analyze the constituent items of the losses and gains from continuing operation and the change in the material transaction, non-transaction matters, and economic environment which affects the increase/decrease of such items. When there is significant increase/decrease or change in the revenues or expenses, the cause of such change shall be explained. If material change has occurred or is expected to occur in the operating policy, market situation, or any other internal or external elements, thus resulting in material increase/decrease or change in the revenue or expense of the continuing operation, an explanation on such fact and the impact shall be given (Form 25). |
| Article 28 | Information on certified public accountant: A securities firm shall disclose the following information with respect to its certified public accountant:
1. Information on professional fees: Given any one of the following conditions, an issuer shall disclose information on the professional fees of the certified public accountant:
(1) When professional fees paid to a certified public accountant or the accounting firm of a certified public accountant or its affiliate enterprises for non-auditing services account for a proportion equal to one-quarter or more of the fees paid for auditing, or when fees paid for non-auditing services reach 500,000 New Taiwan Dollars or more, the amount of fees paid for both auditing and non-auditing service as well as the nature of the non-auditing services performed shall be disclosed (Form 23).
(2) When the issuer changes its accounting firm and the amount of fees paid for auditing services during the year in which the change is made are lower than for the previous year, the amount by which the fees decreased, the proportional decrease and the reasons therefore shall be disclosed.
(3) When the amount of fees paid for auditing services is lower than for the previous year by fifteen percent or more, the amount by which the fees decreased, the proportional decrease and the reasons therefore shall be disclosed.
The professional fees for auditing services referred to in Sub-item 1 means fees the issuer pays a certified public accountant for services in relation to auditing, review, and secondary reviews, reviews of financial forecasts, and tax certification.
2. Information on replacement of certified public accountant: If a securities firm has replaced its certified public accountant in last two years or in the subsequent period, it shall disclose the following information (Form 26-2):
(1) Regarding the former certified public accountant:
1. Date of and cause for replacing the certified public accountant. Explain whether the certified public accountant voluntarily terminates or ceases accepting the appointment, or whether the securities firm terminates or discontinues the appointment.
2. If such former certified public accountant issued any audit report other than those without qualified opinion within last two years, the opinion and the reason shall be provided.
3. Whether there is any different opinion between the securities firm and the former certified public accountant in connection with:
1) accounting principles or practices;
2) disclosure of financial reports;
3) auditing scope or steps.
If there is any different opinion, a detailed explanation on the nature of each different opinion, the securities firm's treatment method (including whether or not the former certified public accountant is authorized to fully reply to the succeeding accountant's queries in connection with the discrepancy of opinion) and the final result of the handling shall be provided.
4. In case of any of the following situations, disclosure shall be made:
1) Where the former certified public accountant has notified the securities firm that it lacks sound internal control system so that the financial report is not reliable.
2) Where the former certified public accountant has notified the securities firm that he/she could not rely on the securities firm's statement or that he/she did not want to be associated with its financial report.
3) Where the former certified public accountant has notified the securities firm that the auditing scope had to be expanded, or that the data showed that if the auditing scope was expanded, the reliability of the financial report issued previously or to be issued would be damaged. However, due to replacement of the certified public accountant or other reasons, the former certified public accountant did not expand the auditing scope.
4) Where the former certified public accountant has notified the securities firm that based on the collected data, the reliability of the financial report issued or to be issued might be damaged. However, due to replacement of the certified public accountant or other reasons, the former certified public accountant did not handle this matter.
(2) Regarding the succeeding certified public accountant:
1. Name of the accounting firm, name of the certified public accountant and date of appointment;
2. Before the securities firm officially appoints the succeeding certified public accountant, if it inquired such accountant about the accounting treatment method of specific transaction or the applicable accounting principle and his/her possible opinion on the financial report, it shall disclose the matters it inquired about and the result thereof.
3. The securities firm shall consult with and obtain the written opinion of the succeeding certified public account in connection with the discrepancy of opinion between it and the former certified public and disclose the same.
(3) The securities firm shall send a letter to the former certified public accountant regarding the matters provided in Item 2, sub-item 1 and Item 2, sub-item 2, Sub-sub-item 3) and notify such accountant to reply within 10 days if he/she has a different opinion. The securities firm shall disclose the reply letter of such former certified public accountant. |
| Article 28-1 | Securities firms preparing financial reports and making disclosures in accordance with the provisions of this chapter shall seek a certified public accountant to issue a review opinion, in accordance with the Guidelines for Other Matters Requiring Disclosure in financial reports. |
Chapter X Interim Financial Reports
|
| Article 29 | A securities firm may prepare interim financial reports only in accordance with Chapter I through Chapter VII and The Statements of Financial Accounting Standards No. 23, and except where otherwise provided by the SFC, the combined statements may be waived.
When the securities firm prepares the quarterly report, the statement of changes in stockholders equity and list of important accounting titles may be waived. In the case of investee company in which the securities firm holds less than 50% shares, the investment losses/gains recognized in accordance with equity method may also be waived. |
Chapter XI Consolidated Financial Statements of Affiliates
|
| Article 30 | Unless otherwise approved by the SFC, a securities firm shall prepare consolidated financial statements of its affiliates. |
| Article 31 | The consolidated financial statements of the affiliates of a securities firm shall be prepared and presented in accordance with the "Guidelines for Preparation of Consolidated Business Report of Affiliates and Relation Report" prescribed by the SFC. |
| Article 31-1 | Changes in accounting procedures at a securities firm shall be undertaken in accordance with the following rules:
1. Changes in accounting principles:
(1) Where valid reasons require a change in accounting principles, at the end of the year prior to the projected change, the securities firm shall set out the original accounting principles, the reason for changing to the proposed new accounting principles and their theoretical basis, concrete evidence that the new accounting principles will be superior to the old, and data on the projected cumulative effect of adopting the new principles; the securities firm shall seek a certified public accountant to provide an analysis of the reasonableness of each item and a review opinion, which shall be presented in a proposal to the board of directors for passage and thereafter submitted to the SFC for approval and recordation.
(2) Where there are conditions as set forth in The Statement of Financial Accounting Standards No. 8, Section 12, in which substantive difficulty prevents determination of the cumulative effect of change in accounting principles, the securities firm shall set out the original accounting principles, the reason for changing to the proposed new accounting principles and their theoretical basis, concrete evidence that the new accounting principles will be superior to the old, and the reasons why the projected cumulative effect of adopting the new principles cannot be determined, and shall seek a certified public accountant to provide an analysis of the reasonableness of each item and a review opinion. After presenting its opinion on the effects of the review opinion for the year of the change to the new accounting principles, the securities firm shall proceed in accordance with the procedures set forth above.
(3) Except where the cumulative effect of the change to new accounting principles cannot be determined as set forth in the preceding sub-subparagraph, the securities firm shall, within two months after the beginning of the accounting year during which it changes to the new accounting principles, calculate the actual cumulative effect of adopting the new principles and submit those figures to the SFC following their ratification by the board of directors. If the difference between the figures showing the actual cumulative effect and the projected cumulative effect differ by more than NT$10 million, the securities firm shall present an analysis of the reason for the differences between the two, request a CPA's opinion on its reasonableness, and submit both to the SFC.
(4) Where the circumstances in Subparagraph 2 apply to a securities firm, it shall set out the effects of adopting the new accounting principles with respect to profits and losses in notes to the financial reports prepared for the first quarter, the half-yearly report, and the third quarter in the accounting year during which the new accounting principles are adopted.
(5) With the exception of purchases of real estate to which newly adopted accounting principles are applied, which may be exempted from application of the provisions of each of the preceding subparagraphs, where any other changes in accounting principles have not been reported for approval and filing in accordance with regulations prior to their adoption, the financial report for the year in which the new principles were adopted shall be rewritten, and the new principles may be adopted only in the year following a supplementary report for approval and filing.
2. Accounting estimates relating to changes in the estimated useful life of depreciable/depletable assets and the effective period of intangible assets shall be handled in accordance with such Subparagraphs 1, 4, and 5 of the preceding paragraph. |
| Article 31-2 | Pursuant to the mutatis mutandis application of Article 36 of the Securities and Exchange Law through Article 63 of the same law, the submission of financial reports and related documents by securities firms shall be undertaken in accordance with Article 21, Paragraph 3 of the Rules Governing Securities Firms; copies shall also be submitted to the ROC Securities and Futures Institute ("the SFI") to be made available to the public.
Securities firms submitting documents in accordance with the provisions of the preceding article shall, in accordance with the preceding paragraph, submit copies to the TSE, the Over-the-Counter Securities Exchange, and the SFI. |
Chapter XII Supplemental Provisions |
| Article 32 | These Guidelines shall become effective on the date of promulgation. |