Chapter I General Principles
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| Article 1 | These Regulations are prescribed in accordance with Article 14, Paragraph 2 of the Securities and Exchange Act. |
| Article 2 | A securities issuer ("Issuer") shall establish its accounting system based on the nature of its accounting affairs, the actual status of business and development, and management needs.
The accounting system referred to in the preceding paragraph shall provide for the following individual items, based on the nature of the Issuer's business operations:
1. A general description
2. A chart of accounts
3. Account titles, accounting documents, account books, and description and use of accounting statements
4. Procedures for handling general accounting affairs
5. Procedures for handling cost accounting affairs
6. Sale, purchase, and collection
7. Rules for payments and warehouse management
8. Other items required by the Financial Supervisory Commission (FSC) of the Executive Yuan. |
| Article 3 | The financial reports of an Issuer shall be prepared in accordance with these Regulations and relevant laws and regulations. Matters not provided therein shall be handled in accordance with the Generally Accepted Accounting Principles. |
| Article 4 | "Financial reports" shall mean financial statements, lists of important account titles, and other disclosures and explanations helpful to users' decision-making.
A financial statement shall include a balance sheet, income statement, statement of changes in shareholders' equity, statement of cash flows, and notes or schedules.
An Issuer, unless newly established or where applicable regulations provide otherwise, shall prepare the principal financial statements and their notes referred to in the preceding paragraph by comparing two consecutive periods, and the responsible person representing the business, its manager, and its in-charge accountant shall sign or seal each page of such statements. |
| Article 5 | The content of a financial report shall fairly present the financial position, operating results, and cash flows of the Issuer without misleading an interested party in making judgments and decisions.
If a financial report violates these Regulations or any other applicable regulations, upon examination and notice of adjustment from the FSC, the Issuer shall make adjustment and correction. If the adjusted amount attains the standard set by the FSC, a corrected financial report shall be publicly announced. When making public announcement, the Issuer shall indicate the reasons, items, and amount of adjustment as notified by the FSC. |
| Article 6 | Any change in an Issuer's accounting shall be handled according to the following rules:
1. A change in accounting principles:
(1) If there is a legitimate reason for a change in accounting principles, then at the end of the year preceding the one in which the new accounting principles are to be implemented, the attesting CPA shall be requested to provide an item-by-item analysis and review opinion on the rationality of the theoretical basis and the reasons for using both the original accounting principles and the newly adopted principles, the reasons for changing to the new accounting principles, concrete evidence for the superiority of the new accounting principles, and the estimated cumulative effect of a change in accounting principles. These shall be submitted as a proposal for passage by the board of directors, after which they shall be submitted to the FSC for approval. Following FSC approval, the Issuer shall make a public announcement of the estimated cumulative effect of the change to the new accounting principles and the attesting CPA's review opinion.
(2) If the cumulative effect of a change in accounting principles cannot be calculated due to practical difficulties as described in Paragraph 12 of Statement of Financial Accounting Standards No. 8, the attesting CPA shall be requested to provide an item-by-item analysis and review opinion on the rationality of the theoretical basis and the reasons for using both the original accounting principles and the newly adopted accounting principles, the reasons for changing to the new accounting principles, concrete evidence for the superiority of the new accounting principles, and the reason that the cumulative effect of a change in accounting principles cannot be calculated, and after additionally providing an opinion on the impact on the auditing opinion for the year of the change to the new accounting principles, the matter shall be handled according to the above procedure.
(3) Unless unable to calculate the cumulative effect of a change in accounting principles as referred to in the preceding item, within two months after the beginning of the year in which the new accounting principles go into effect, the actual cumulative effect of a change in accounting principles shall be calculated, reported to the board of directors, then reported to the FSC for recordation. If the difference between the actual cumulative effect of a change in accounting principles and the original estimated cumulative effect of a change in accounting principles is $10 million New Taiwan Dollars (NTD) or more, and if the amount is also one percent or more of net operating revenues for the previous year or more than five percent of total paid-in capital, an analysis of the reason for the difference shall be given and the attesting CPA shall also be requested to provide an opinion on its rationality. The analysis and the attesting CPA's opinion shall be publicly announced and reported to the FSC.
(4) If the condition in item 2 applies to the Issuer, then in the year in which the new accounting principles go into effect, the Issuer shall disclose the effect of the change in accounting principles on the profits/losses in the notes to its first quarter, semi-annual, third quarter, and yearly financial reports.
(5) With the exception of the application of new accounting principles to newly-purchased assets, which may be exempted from handling in accordance with the provisions of the preceding items, when any other change in accounting principles has not been reported for approval prior to its adoption in accordance with regulations, the financial report for the year in which the change to the new principle was implemented shall be rewritten, and the new accounting principle applied only in the year after a supplementary report has been filed and approved.
2. Any change in accounting estimates in relation to the useful life of depreciable or depletable assets, the method of depreciation or depletion, the amortization period of intangible assets, and the method of amortization shall be handled in accordance with items 1, 4, and 5 of the preceding subparagraph. |
Chapter II Financial Statements
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Section I Balance Sheets
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| Article 7 | Assets shall be appropriately categorized. Liquid and illiquid assets shall be distinguished, provided that this shall not apply to special enterprises in which distinguishing assets according to liquidity is not appropriate.
The total amount of expected asset recovery within the 12 months following the balance sheet date and expected asset recovery more than 12 months after the balance sheet date shall be respectively expressed in the financial statement or disclosed in a footnote.
The classification of asset account titles in the balance sheet, account content, and matters to be set out in notes are as follows:
1.Current assets: Assets generated by an enterprise's operations, where it is expected that the assets will be converted to cash, consumed, or sold within the enterprise's normal operating cycle; assets held primarily for trading; assets that are expected to be converted to cash within the 12 months following the balance sheet date; and cash and cash equivalents, provided that those used in exchange for or liquidation of debt, or that are subject to other restrictions, shall not be included.
(1) Cash and cash equivalents: Cash in treasury, bank deposits, petty cash, revolving funds paid in small amounts for incidental expenses, and highly liquid short-term investments convertible into fixed cash amounts at any time, due in the near future, where fluctuations in the investment's interest rate have insignificant impact on its value.
Non-demand bank deposits shall be posted by item, with a note if their maturity date is longer than one year. Those specifically earmarked or restricted in use, e.g., for expansion of facilities or as sinking funds, may not be listed as cash.
If 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 a refundable guarantee, they shall be classified as current assets or other assets depending on whether they are short-term or long term.
Compensating balances, if incurred due to short-term loans, shall be classified as current assets, with an explanation to be provided in the notes. Compensating balances incurred due to long-term liabilities shall be classified as other assets or long-term investments rather than current assets.
(2) Financial Assets at Fair Value Through Profit or Loss－Current: Current financial assets that are one of the following:
1. Financial assets held for trading.
2. Financial assets, except those designated as hedged items in hedge accounting relationships, which at the time of initial recognition were designated as assets to be measured at fair value, with changes in fair value to be recognized in earnings.
The following financial products shall be classed as financial assets held for trading:
1. Products acquired primarily for the purpose of sale in the near term.
2. Assets that are part of a group of distinct financial product portfolios under comprehensive management, where there is evidence that in the near term the group is in fact being managed for short-term profit.
3. Derivative financial assets, except those that are designated and effective hedging instruments.
Financial assets at fair value through profit or loss shall be measured at fair value. "Fair value," for stocks or depository receipts listed on the Taiwan Stock Exchange or traded over-the-counter on the GreTai Securities Market (GreTai), means the closing price on the balance sheet date. For open-end funds, fair value means the net asset value of the given fund on the balance sheet date. In these Regulations, "stocks traded over-the-counter" does not include the stocks of public companies that, under Article 5 of the GreTai Securities Market Regulations Governing Review of Emerging Stocks Traded on Over-the-Counter Markets, have been approved for over-the-counter trading at a securities firm's place of business ("emerging stocks").
Financial assets at fair value through profit or loss shall be classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "financial assets at fair value through profit or loss－non current" under "funds and investments".
(3) Available-for-sale financial assets－current: Non-derivative financial assets that meet one of the following conditions:
1. The assets have been designated as available-for-sale.
2. The assets fall within none of the following financial asset classes:
a. Financial assets at fair value through profit or loss.
b. Financial assets held to maturity.
c. Financial assets measured at cost.
d. Bond portfolios with no active market bonds.
e. Receivables.
Available-for-sale financial assets shall be classified according to liquidity as current or non-current. Those that are non-current shall be reclassified as "available-for-sale financial assets－non current" under "funds and investments".
Available-for-sale financial assets shall be measured at fair value. "Fair value," for stocks or depository receipts listed on the Taiwan Stock Exchange or traded over-the-counter on the GreTai, means the closing price on the balance sheet date. For open-end funds, fair value means the net asset value of the given fund on the balance sheet date.
(4) Derivative financial assets for hedging－current: Derivative financial assets that have been designated in hedge accounting relationships and are effective hedging instruments shall be measured at fair value and classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "derivative financial assets－non current" under "funds and investments".
(5) Financial assets measured at cost－current: Holdings in the following stocks that have no material influence, or derivatives linked to and settled in those stocks:
1. Stocks not listed on the Taiwan Stock Exchange or the GreTai.
2. Emerging stocks.
Financial assets measured at cost shall be classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "financial assets measured at cost－non current" under "funds and investments".
(6) Bond portfolios with no active market bonds－current: Investments in bonds paying fixed or determinable amounts and not quoted on an active market, where the following conditions are also met:
1. The bond investments have not been designated for measurement at fair value and for recognition of changes in their fair value in profit or loss.
2. The bond investments have not been designated as available-for-sale.
Bond portfolios with no active market bonds shall be stated at amortized cost and classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "bond portfolios with no actively traded bonds－non current" under "funds and investments".
(7) Notes receivable: all notes receivable.
The fair value of notes receivable shall be calculated from the imputed interest rate, provided that for notes receivable at one-year periods or less, where the difference between the fair value and the value at maturity is small and the notes are frequently traded, the notes need not be measured at fair value.
Discounted or transferred notes receivable shall be deducted and the deduction set out in the financial statement notes.
Notes receivable resulting from operating activities and notes receivable resulting from non-operating activities shall be given separate entries.
Notes receivables in significant amounts from related parties shall be separately disclosed.
Notes provided for security shall be so indicated in the notes to the financial statement.
Notes receivable that are determined to be impossible to collect shall be written off.
During account settlement, the amount of uncollectible notes receivable shall be assessed and an appropriate allowance for bad debt provided.
(8) Accounts receivable: claims resulting from sale of goods or services.
The fair value of accounts receivable shall be calculated based on the imputed interest rate, provided that for accounts receivable at one-year periods or less, where the difference between the fair value and the value at maturity is small and where trading is also frequent, the accounts receivable need not be measured at fair value.
Large accounts receivable from related parties shall be separately disclosed.
An account receivable for which collection is determined to be impossible shall be written off.
During account settlement, the amount of uncollectible accounts receivable shall be assessed and an appropriate allowance for bad debt provided.
Unrealized interest revenue on installment sales shall be classified as a deduction from accounts receivable. Where the recovery period of any portion of an account receivable exceeds one year, a note shall be provided showing the anticipated amount recoverable in each year.
"Pledged accounts receivable" shall be disclosed in the notes to the financial statement.
Where accounts receivable include long-term construction contract sums, the amount reserved as retainage for construction within the already-invoiced accounts receivable shall be indicated in the balance sheet or the notes to the financial statement. If the expected period for recovery of the retainage is more than one year, the anticipated amount recoverable in each year shall be noted.
(9) Other receivables: other receivables not falling within notes receivable and accounts receivable.
During account settlement, the amount of other receivables uncollectible shall be assessed and an appropriate allowance for bad debt provided.
If any of the "other receivables" exceeds the aggregate amount of current assets by 5%, they shall be individually stated according to type and counterparty.
Allowances for bad debts shall be respectively stated as deductions from notes receivable, accounts receivable, and other receivables. If such accounts are further subdivided, the allowances for bad debts shall also be respectively recorded in the same manner.
(10) Other financial assets－current: Financial assets not listed separately on the balance sheet shall be listed as "other financial assets－non-current" and shall be categorized according to liquidity as either current or non-current. Non-current assets shall be reclassified as "other financial assets－non-current" under "funds and investments".
When the amount of a financial asset under "current assets" accounts for 5 percent of aggregate current assets, it shall be given a separate balance sheet entry.
(11) Inventory: Assets meeting any one of the following conditions:
1) Items held for sale in the normal course of business;
2) Items of work-in-progress which will be sold after further processing;
3) Materials and supplies directly or indirectly consumed in the production of goods or services for sale.
The accounting treatment of inventories shall be in accordance with Statement of Financial Accounting Standards No. 10.
Where the value of inventories is markedly reduced due to defects, damage, or obsolescence such that the net realizable value is below cost, the stated cost shall be reduced to the net realizable value.
Inventories provided for pledge, security, or used under the surveillance of creditors shall be noted.
If a construction company which contracts with other parties to construct pre-sold buildings meets all of the following conditions, it may recognize the profit for sale of the buildings based on the percentage-of-completion method:
1) The construction has progressed beyond the preparatory stage, i.e., the designing, planning, contracting, and site preparation have been completed and building of the project can begin at any time;
2) The total amount of pre-sale contracts has reached the total estimated construction cost;
3) Buyers' payments have reached 15% of the total contract price;
4) The collectibility of the contract amount receivable can be reasonably estimated;
5) Reasonable estimates can be made of total construction costs necessary for contract performance and the degree of completion at period end;
6) Reasonable estimates can be made of costs attributable to the contract for sale of buildings.
When a construction company purchases a property under construction from another party, the company continuing the construction and sale of the buildings shall adopt the completed contract method for recognition of profits on the sale of the buildings.
As a contractor has statutory mortgage on any construction in progress commissioned by a construction company, the construction company shall not offset such construction against the billings on construction in progress.
(12) Construction in progress: the construction costs incurred during the construction period by a long-term construction contract undertaken by an enterprise and the profits/losses recognized during that period.
Profits/losses under the long-term construction contract shall be recognized and expressed in accordance with Statement of Financial Accounting Standards No. 11.
(13) Prepayments: prepaid expenses and prepayments for purchase of materials.
Contractually stipulated prepayments for purchase of fixed assets and payments for uncompleted construction for operational use shall be listed as fixed assets and may not be listed as prepayments.
(14) Long-term equity investments held for disposal: equity investments in a subsidiary, where sale of those investments is planned within 12 months after the balance sheet date.
(15) Non-current assets held for sale: refers to non-current assets or assets within a disposal group held for sale that, in their current condition, are available for immediate sale by the enterprise in accordance with generally applicable terms and commercial practices, and for which completion of sale within 12 months is highly probable.
Measurement, balance sheet presentation, and disclosures for non-current assets held for sale and disposal groups held for sale shall follow the standards provided in the Statement of Financial Accounting Standards (SFAS) No. 38.
(16) Other current assets: all current assets not falling within the above categories. With the exception of "cash and other financial assets－current", any of the above assets which accounts for less than 5% of aggregate current assets may be incorporated into "other current assets".
2. Funds and investments: All special funds and long-term investments made for regular business purposes. A financial asset listed under the "funds and investments" account that accounts for 5% of aggregate "funds and investments" assets shall be given a separate balance sheet entry.
(1) Financial assets held to maturity－non-current: Non-derivative financial assets paying fixed or determinable amounts at a fixed maturity date, which the company both intends and has the ability to hold to maturity. Financial assets held to maturity shall be measured at amortized cost. Investments held to maturity that mature within one year shall be reclassified as "investments held to maturity－current" under "current assets".
(2) Funds: assets provided for specified uses such as sinking funds, improvement and expansion funds, and contingency reserves.
Resolutions and rules that serve as the basis for provision of a fund shall set out in a note.
A welfare fund set aside in accordance with the Employee Welfare Fund Act shall be stated as an expense.
(3) Long-term investments: Long-term investments made to acquire a controlling interest or to gain other rights and interests in a property to satisfy operational objectives, such as investment in the stocks of other enterprises or investment in real estate.
The method of valuation of long-term investments shall be provided in a note, and they shall be separately listed according to type.
The valuation and expression of long-term equity investments using the equity method shall be carried out in accordance with Statement of Financial Accounting Standards No. 5.
In recognizing investment gains and losses according to the equity method, when an investee's financial report is not prepared in accordance with the generally accepted accounting principles of the ROC, that report shall first be adjusted in accordance with those principles and investment gains and losses recognized in accordance with the adjusted report. When the CPA, based on the Statement of Auditing Standards No. 24, judges that the investee company has a material influence on the fair presentation of the audited company's financial statement, the investee company's financial statement shall be audited by a CPA in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and with the Generally Accepted Accounting Principles.
If long-term investments are pledged as collateral or subject to restrictions, that fact shall be indicated in the notes.
3. Fixed assets: tangible assets used for operations, with a service life of one year or more, and not for the purpose of sale.
Under fixed assets, land, depreciable assets and depletable assets shall be presented separately. Any asset under "fixed assets" accounting for 5% of total "fixed assets" shall be given a separate balance sheet entry.
Fixed assets shall be recorded at the historical cost of acquisition or construction, provided that interest on the purchase price of a "presold" building or fixed assets purchased with a cash capital increase shall not be capitalized. Idled fixed assets shall be reclassified as other assets at the lower of their net fair value or book value. A fixed asset that is still in use after the expiration of its service life shall be depreciated based on the residual value.
Leased assets shall be recognized and disclosed in accordance with Statement of Financial Accounting Standards No. 2.
If a leased asset is of the operating lease type, the improvement made to the leased property is termed a leasehold improvement and shall be recorded as a fixed asset.
The valuation basis for a fixed asset shall be indicated in a note. If the fixed asset has 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. The land value increment tax reserve allocated due to a land appraisal increment shall be classified as a long-term liability. Where fixed assets have been revalued, from the day following the date of record of the revaluation, depreciation shall be calculated based on the reassessed value.
Except for land, fixed assets shall be periodically depreciated or depleted on a reasonable and systematic basis during each period within their estimated useful or mining life and restated as expenses or indirect manufacturing costs during the relevant period according to their nature, without interruption or deduction.
The accumulated depreciation, accumulated impairment, or accumulated depletion of a fixed asset shall be recorded as a deduction from fixed assets.
A leasehold improvement shall be reasonably and systematically depreciated based on the lower of its estimated useful life or lease term, and re-classified as an expense or indirect manufacturing cost in the relevant period according to its nature, without interruption or reduction.
The method for calculating the depreciation of depreciable assets shall be given in a note.
If a fixed asset is provided as a guarantee or has a mortgage or lien against it, that fact shall be given in a note.
4. Intangible assets: Non-currency assets that are nonphysical in form but which conform to the requirements of being identifiable, under the control of the enterprise, and having future economic value.
Any asset under "intangible assets" that accounts for 5% of total "intangible assets" shall be given a separate balance sheet entry.
Recognition, measurement, and disclosures for intangible assets shall follow the standards provided in the Statement of Financial Accounting Standards (SFAS) No. 37.
During the development stage, the assets shall be valued and profits/losses recognized and disclosed in accordance with the Statement of Financial Accounting Standards No. 19.
The valuation basis for intangible assets shall be noted.
5. Other assets: All the assets not falling within the above categories and with a collection or recovery period longer than one year or one operating cycle, such as refundable deposits, long-term notes receivable, and other miscellaneous assets.
The fair value of long-term notes receivable and other long-term receivables shall be calculated from the imputed interest rate.
Large, overdue accounts receivable shall be listed separately, and the collection status 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, such assets shall be listed separately according to type.
When land acquired by an Issuer is registered under another's name as the owner, the reasons shall be disclosed in the notes and the methods of preservation specified.
If financial assets held by an Issuer are provided as collateral for debt, they shall be categorized according to the liquidity of the collateralized debt as current or non-current assets. Assets provided as refundable deposits shall be categorized according to liquidity as current or non-current assets. |
| Article 8 | Liabilities shall be appropriately categorized. Liquid and illiquid liabilities shall be distinguished, provided that this shall not apply to special enterprises where distinguishing liabilities according to liquidity is not appropriate.
The total amounts of liabilities anticipated for liquidation within 12 months after the balance sheet date and those in excess of 12 months after the balance sheet date shall be respectively provided in the financial statement or disclosed in the notes to the statement.
The categorization of liability account titles on the balance sheet, the content of entries made therein, and matters to be noted are as follows:
1. Current liabilities: Liabilities incurred through the enterprise's operations for which liquidation is anticipated within one business cycle in the normal course of business; liabilities incurred primarily in relation to trading; liabilities which must be liquidated within 12 months after the balance sheet date; and liabilities whose liquidation the enterprise may not unconditionally defer more than 12 months beyond the balance sheet date.
(1) Short-term loans: Includes short-term borrowings from banks, overdrafts, and other short-term loans.
For short-term loans, the nature of the loan, guarantee, and the range of interest rates shall be noted based on the type of loans. If collateral is provided, the name of the collateral and its book value shall be recorded.
Borrowings from financial institutions, shareholders, employees, related parties, and other individuals or institutions shall be individually noted.
(2) Short-term bills payable: Short-term bills issued through financial institutions to acquire funds from the money market, including commercial paper payable and bankers' acceptances.
Short-term bills payable shall be valued at current value. Discounting of short-term bills payable shall be recorded as a deduction from short-term bills payable.
For short-term bills payable, the agency for guarantee and acceptance and the interest rate shall be noted. If collateral is provided, the name and book value of such collateral shall be stated.
(3) Financial liabilities at fair value through profit or loss－current. Current financial liabilities that meet one of the following conditions:
1. Financial liabilities held for trading.
2. Financial liabilities, except those designated as hedged items in hedge accounting relationships, which at the time of initial recognition were designated as liabilities to be measured at fair value, with changes in fair value to be recognized in earnings.
The following financial products shall be classified as financial liabilities held for trading:
1. Liabilities incurred primarily for the purpose of repurchase in the near term.
2. Liabilities that are part of a group of distinct financial product portfolios under comprehensive management, where there is evidence that in the near term the group is in fact being managed for short-term profit.
3. Derivative financial liabilities, with the exception of those that are designated and effective hedging instruments.
Financial liabilitiesat fair value through profit or loss shall be measured at fair value. "Fair value," for stocks or depository receipts listed on the Taiwan Stock Exchange or traded over-the-counter on the GreTai, means the closing price on the balance sheet date. Financial liabilities at fair value through profit or loss shall be classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "financial liabilities at fair value through profit or loss－non current" under "long-term liabilities".
(4) Derivative financial liabilities for hedging－current: Derivative financial liabilities that have been designated in hedge accounting relationships and are effective hedging instruments; these shall be measured at fair value and classified according to liquidity as current or non-current. Those that are non-current shall be reclassified as "derivative financial liabilities－non current" under "long-term liabilities".
(5) Financial liabilities measured at cost－current: Derivative financial liabilities that are linked to or settled in stocks not listed on the Taiwan Stock Exchange or the GreTai, or emerging stocks. Financial liabilities measured at cost shall be classed according to liquidity as current or non-current; those that are non-current shall be reclassified as "financial liabilities measured at cost－non current" under "long-term liabilities".
(6) Notes payable: all notes payable.
Notes payable shall be valued at present value, provided that those resulting from operating activities and maturing within one year may be valued at face value.
Notes payable resulting from operating activities shall be distinguished from notes payable from non-operating activities.
Large-amount notes payable to banks and related parties shall be individually disclosed.
If collateral has been provided for notes payable, the name of the collateral and its book value shall be recorded.
Notes used for refundable deposits that can be recovered for cancellation upon termination of the guarantee obligation need not be recorded as current liabilities, provided that the nature and amount of the guarantee shall be explained in the notes to the financial statement.
(7) Accounts payable: liabilities incurred for purchase of materials, goods, or services on credit.
Accounts payable shall be valued at present value, providing that those resulting from operating activities and maturing within one year may be valued at the account book value.
Accounts payable resulting from operating activities shall be distinguished from accounts payable from non-operating activities.
Large accounts payable to related parties shall be individually disclosed.
If collateral has been provided for accounts payable, the name of the collateral and its book value shall be recorded.
(8) Other payables: other payables not falling within notes payable and accounts payable, such as tax payable, wages, and dividends.
For dividends and bonuses payable passed by resolution of the shareholders meeting, the distribution method and proposed payment date, if determined, shall be disclosed.
During settlement of profits and losses at the end of each period, the estimated income tax payable calculated based on taxable income shall be recorded as a current liability.
Any other payables that exceed 5% of the aggregate amount of current liabilities shall be individually recorded by counterparty.
(9) Other financial liabilities－current: Financial liabilities not listed individually on the balance sheet shall be listed as other financial liabilities and be categorized according to liquidity as either current or non-current. Non-current liabilities shall be reclassified as "other financial liabilities－non-current" under "long-term liabilities".
Any financial liability under "current liabilities" that accounts for 5 percent of aggregate current liabilities shall be given a separate balance sheet entry.
When financial liabilities of an enterprise reach maturity within the 12 months after the balance sheet date and long-term refinancing or extension is not accomplished until after the balance sheet date, such liabilities shall still be stated as current liabilities.
(10) Amounts received in advance: all amounts received in advance, such as deposits received in advance for sales of products or provision of services.
Amounts received in advance shall be given separate entries according to category and any special stipulations shall be noted.
(11) Liabilities directly associated with non-current assets held for sale: refers to assets within a disposal group held for sale that, in their current condition, are available for immediate sale by the enterprise in accordance with generally applicable terms and commercial practices, and for which sale within one year is highly probable.
(12) Other current liabilities: All current liabilities not falling within the above categories. Any of the above current liabilities that account for less than 5% of the aggregate total of current liabilities may be incorporated into "other current liabilities."
2. Long-term liabilities: Liabilities which will mature 12 months or more after the balance sheet date, including corporate bonds payable, long-term borrowings, long-term notes payable, and long-term payables. Any financial liability under "long-term liabilities" that accounts for 5 percent of aggregate long-term liabilities shall be given a separate balance sheet entry.
(1) Corporate bonds payable (including overseas corporate bonds): The bonds issued by an Issuer.
For issued bonds, the total approved amount, interest rate, maturity date, name of the collateral, book value, issuing area, and other relevant terms and restrictions shall be indicated in the notes to the financial statement. If the bonds are convertible corporate bonds, the method of conversion and amounts already converted shall also be noted.
Premiums and discounts on corporate bonds payable are valuation accounts and shall be classified as additions to or reductions of corporate bonds payable. They shall be reasonably and systematically amortized during the period of bond circulation and recorded as an adjustment in interest expenses.
(2) Long-term borrowings: Includes long-term bank loans, and other long-term borrowings or loans paid in installments. For long-term borrowings, the content, date of maturity, interest rate, name of collateral, book value, and any important restrictions shall be disclosed.
For a long-term loan 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 loans from shareholders, employees, and related parties shall be separately recorded.
Long-term notes payable and other long-term payables shall be valued at present value.
(3) Preferred stock liabilities－non-current: Preferred stock issued in accordance with Statement of Financial Accounting Standards No. 36 and having the nature of a financial liability.
Preferred stock liabilities shall be classified according to liquidity as current or non-current. Those that are current shall be reclassified as "preferred stock liabilities－current."
3.Other liabilities: Liabilities not falling within the above categories, such as refundable deposits and other miscellaneous liabilities. When the amount of other liabilities exceeds 5% of the total amount of liabilities, the name of accounts shall be separately reported.
For financial liabilities maturing within 12 months after the balance sheet date, if the original loan contract period was in excess of 12 months and the enterprise intends long-term refinancing, and has accomplished refinancing or rollover by the balance sheet date, or if, based on the current refinancing contract, it has the discretionary ability to refinance the financial assets or extend the loan more than 12 months beyond the balance sheet date, the assets shall be listed as non-current liabilities, and the amount of the loan and relevant facts provided in the notes to the financial statement.
Financial 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 the creditor has agreed prior to the balance sheet date not to enforce such a clause, and when there is an extension to more than 12 months after the balance sheet date with the condition that when the business is capable of rectifying the breach during the period of extension, the creditor may not demand immediate repayment of assets, then the loan shall be listed as a non-current liability. |
| Article 9 | Classification of accounts in the balance sheet under "shareholder equity," the content of account entries, and matters to be noted are as follows:
1. Capital stock: Capital invested in the issuer by shareholders and for which application for registration has been made with the authority in charge of corporate registration, provided that preferred stock having the nature of a financial liability shall not be included.
The type of capital stock, par value per share, number of shares authorized, number of shares issued, and special terms shall be indicated.
If convertible preferred stock and international depositary receipts are issued, the issuing area, issuance and conversion methods, converted amount and special conditions shall be disclosed.
Treasury stocks shall be treated using the cost method and recorded as a deduction from shareholder equity. The number of shares shall be noted.
2. Additional paid-in capital reserves: Refers to the equity components of financial products issued by the issuer or the premiums generated by capital stock transactions between the issuer and the shareholder, and typically includes premiums over the par value of stock issued, surplus from donations, and other revenues generated as recognized by generally accepted accounting principles.
Additional paid-in capital reserves shall be recognized separately according to their type; where utilization is restricted, the restricting conditions shall be disclosed in the notes to the financial statement.
3.Retained earnings (or accumulated deficit): Equity resulting from operating activities, including legal reserves, special reserves, and unappropriated retained earnings (or deficit to be covered).
(1) Legal reserve: The amount of legal reserve to be allocated in accordance with the Company Law.
(2) Special reserve: The reserve allocated from earnings in accordance with relevant provisions of laws and regulations, contracts, the articles of incorporation, or resolutions of shareholders meetings.
(3) Unappropriated earnings (or deficit to be offset): Undistributed and unappropriated earnings (deficit not offset is accumulated deficit).
(4) Distribution of earnings or offsetting of losses shall not be recorded until approved by the shareholders meeting, provided that any proposed earnings distribution or offsetting of losses shall be disclosed in the notes to the current financial statement.
4. Other shareholder equity: Refers to other items resulting in increases or decreases to shareholder equity, and typically includes unrealized revaluation gains, net losses not recognized as retirement fund costs, translation adjustments, equity directly related to non-current assets held for sale, and treasury stock. |
Section II Income Statements
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| Article 10 | The account structure of income statements, content of account entries, and matters to be noted are as follows:
1. Operating revenues: revenues derived from sale of goods or provision of services in the ordinary course of operating activities in the current period, including sales revenue and service revenue. Recognition of operating revenue shall comply with Statement of Financial Accounting Standards No. 32.
Sales of goods, revenues from processing, revenues from building or repairs, and revenues from services shall be presented separately.
The allowance for sales returns and discounts shall be recorded as a deduction from sales revenue.
2. Operating costs: The costs to be borne for sale of goods or provision of services in the ordinary course of operating activities in the current period, including sales costs and service costs.
The allowance for returns and discounts on purchases shall be deducted from purchasing costs.
3. Operating expenses: Expenses incurred from the sale of goods or provision of services in the current period, including research and development expenses, marketing expenses, and management and general affairs expenses. Where operating costs and operating expenses cannot be separately listed, however, they may be consolidated as operating expenses.
4. Non-operating revenue and gains, expenses and losses: Revenues and expenses not arising from ordinary operating activities, including interest revenues, interest expenses, dividends on preferred stock having the characteristics of liabilities, gains/losses on valuation of financial assets, gains/losses on valuation of financial liabilities, gains/losses on investments recognized under the equity method, exchange gains/losses, gains/losses on disposal of fixed assets, gains/losses on disposal of investment, impairment losses, and impairment loss reversals. Interest revenue and interest expenses shall be separately recorded. Gains/losses on valuation of financial assets, gains/losses on valuation of financial liabilities, investment gains/losses recognized under the equity method, exchange gains/losses, and gains/losses on disposal of investment may be recorded at net amounts.
5. Gains/losses on units in continuing operation: The net amounts in the preceding four subparagraphs; shall be separately listed as pre-tax gains/losses, income tax expenses (profits), and after-tax gains/losses.
6. Gains/losses on discontinued units: Gains or losses generated by previous disposal of units or by organizational units of the enterprise classified as held for sale, including gains and losses on discontinued units, gains and losses on disposal of assets of discontinued units, and gains and losses measured at net fair value.
Presentation of and disclosures for gains and losses on discontinued units shall follow the standards provided in the Statement of Financial Accounting Standards (SFAS) No. 38.
7. Extraordinary gains and losses: Gains and losses that are distinguished by their unusual nature and by the infrequency of their occurrence, such as the passage of a new law prohibiting operations or losses due to seizure [of assets] by a foreign government.
Significant losses or gains shall be separately recorded and shall not be amortized on a yearly basis.
8. The amount of cumulative effect resulting from the change of accounting principles shall be separately recorded following extraordinary losses/gains.
9. Current period net income (or net losses): Earnings (or losses) in the current accounting period are the aggregate of the amounts in the preceding four subparagraphs.
10. Earnings per share shall be calculated and disclosed in accordance with Statement of Financial Accounting Standards No. 24.
11. Income tax shall be amortized and disclosed in accordance with Statement of Financial Accounting Standards No. 22.
Except where otherwise provided by the Statements of Financial and Accounting Standards, expenses and losses shall be listed according to function, provided that expenses relating to employment, depreciation, depletion, and amortization shall be disclosed. |
Section III Statement of Changes in Shareholder Equity
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| Article 11 | A statement of changes in shareholder equity is a report indicating changes in components of shareholder equity. The statement shall record beginning balances for capital stock, capital reserves, retained earnings (or accumulated deficit), and other components of shareholder equity that undergo adjustment, the items being increased or deceased items in the current period and their amounts, and balances at the end of the period.
The contents of retained earnings entries are as follows:
1. Beginning balance;
2. Adjustments of preceding period profits/losses: Correction of errors in the calculation, recording, and recognition of profit and loss items in the preceding period and in the use of accounting principles and methods.
3. Current period net profits or net losses.
4. Allocation of legal reserves, special reserves, and distribution of dividends.
5. Ending balance.
Adjustments of gains and losses for the preceding period, unrealized losses or gains not included in current period gains/losses but directly recorded under shareholders' equity (e.g. translation adjustments), and income tax expenses (profits) arising out of changes in capital reserves shall be directly entered under such items as net amounts. |
Section IV Statement of Cash Flows
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| Article 12 | A cash flow statement is a summarized report of 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 Statement of Financial Accounting Standards No. 17. |
Section V Notes
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| Article 13 | In order that financial reports may fully disclose information on financial condition, operational results, and cash flows, explanatory notes on the following matters shall be provided:
1. Company history and scope of operations.
2. A declaration that the financial statement has been prepared in accordance with these Regulations, applicable laws and regulations (with the name of the law to be given), and generally accepted accounting principles.
3. A summary of important accounting policies and the bases of measurement employed.
4. When there is a comparison showing the effects on financial data in preceding and subsequent periods due to a change in accounting treatment arising out of special circumstances, the reasons for the change and its effects on the financial statements shall be noted.
5. The basis of valuation shall be noted for those amounts, financial products, or other items presented in the financial report for which its disclosure is required.
6. Where any item presented in a financial report is subject to restriction by law, contract, or other binding stipulation, the circumstances of the restriction, its effective period, and related matters shall be noted.
7. The standards on the basis of which assets or liabilities are classed as current or non-current.
8. Any major commitments or contingent liabilities.
9. Changes in capital structure.
10. Long and short term borrowing and lending.
11. The addition, expansion, construction, lease, obsolescence, idling, sale, transfer, or long-term renting of major assets.
12. Principle investments in other enterprises.
13. Major transactions with related parties.
14. Losses due to major disasters.
15. Acceptance of any research and development project funded by another party and the amount thereof.
16. The progress or conclusion of any major litigation.
17. The signing, completion, revocation, or lapse of any important contract.
18. Information on employee retirement funds.
19. Business segment financial information.
20. Information on investment in mainland China.
21. Information on derivatives investments.
22. Types, issuance dates, and amounts of privately placed securities.
23. Important changes in organization and significant management reforms.
24. Material influences stemming from changes in government regulation.
25. Other explanations necessary in order to avoid misunderstanding by the user and to aid in the fair and impartial presentation of the financial report. |
| Article 14 | Explanatory notes shall be added in the financial report with respect to any of the following subsequent events occurring in the period from the balance sheet date to the submission of the financial report:
1. A change in capital structure.
2. Large long- or short-term borrowings.
3. The addition, expansion, construction, lease, obsolescence, idling, sale, transfer, or long-term renting of major assets.
4. Significant changes in production capacity.
5. Significant changes in production and sales policies.
6. Principle investments in other enterprises.
7. Losses due to major disasters.
8. The progress or conclusion of any major litigation.
9. The signing, completion, revocation, or lapse of any important contract.
10. Important organizational changes and significant reforms of management systems.
11. Material influences stemming from changes in government regulation.
12. Any other important event or measure capable of affecting the company's future financial condition, operational results, and cash flows. |
| Article 15 | The notes of a financial report shall disclose current-period information on the following items:
1. Major transaction information:
(1) Loans of capital to others.
(2) Provision of endorsements or guarantees for others.
(3) Period end securities holdings.
(4) Accumulated buying/selling of the same securities for which the dollar amount reaches $100 million NTD or 20% or more of paid-in capital.
(5) Acquisition of fixed assets for which the dollar amount reaches $100 million NTD or 20% or more of paid-in capital.
(6) Disposition of real estate for which the dollar amount reaches $100 million NTD or 20% or more of the net paid-in capital.
(7) Buying/selling products with related parties for which the dollar amount reaches $100 million NTD or 20% or more of paid-in capital.
(8) Account receivables from related parties for which the dollar amount reaches $100 million NTD or 20% or more of paid-in capital.
(9) Derivatives transactions.
If the issuer belongs to a financial, insurance, or securities business, and its main registered business operations include loaning capital to others, providing endorsements or guarantees, and securities trading, it may be exempt from application of items 1 to 4 with regard to the disclosure of transaction information on loans of capital to others, endorsements or guarantees, short-term investments trading, dealing in securities and bonds, and hedging account securities.
2. Information on re-invested enterprises:
(1) For those who directly or indirectly have major influence or control over the investee company, their names, locations, main business operations, original invested amount, holdings of stock at the end of the period, profits/losses during the current quarter, and recognized investment profits/losses shall be disclosed.
(2) For those who directly or indirectly have control over the investee company, the investee company's transaction information listed under items 1 to 9 shall be disclosed. If the investee company under the issuer's direct or indirect control belongs to a financial, insurance, or securities business, the regulations of the preceding subparagraph apply.
3. Information on mainland China investments:
(1) The name of the investee company in mainland China, its main business operations, paid-in capital, method of investment, inward and outward remittances of capital, shareholding ratios, investment profits/losses, period end book values of investments, repatriated investment profits, and the limit on the amount of investment in the mainland China region.
(2) Major transactions with the investee company in mainland China occurring directly or indirectly through a third region, and the prices, payment terms, and unrealized profits/losses:
(A) The amount and percentage of goods bought and the balance and percentage of payables at the end of the term.
(B) The amount and percentage of goods sold and the balance and percentage of receivables at the end of the period.
(C) The amount and percentage of property transactions and the amount of profits/losses generated thereby.
(D) The balance of negotiable instrument endorsements or guarantees or the collateral provided at the end of the term and its purpose.
(E) The highest balance, the end of period balance, the interest rate range, and total current period interest on financing.
(F) Other transactions having a major impact on the current period profits/losses or financial status, such as the provision or receipt of service.
The transaction amounts or balance referred to in the above sub-items (A) through (F) shall be individually listed if they reach 10% of the issuer's total transaction amount or balance for that respective category, but otherwise may be reported in the aggregate.
(3) When the issuer uses the equity method in recognizing investment profits/losses for the mainland China investee company or prepares a consolidated report, the recognition or preparation shall be done in accordance with the financial report of the investee company, audited and certified by an international firm in cooperation with an R.O.C. accounting firm, provided that when preparing an interim consolidated financial report, recognition or preparation may be done in accordance with a financial report of the investee company that has been reviewed by an international firm in cooperation with an R.O.C. accounting firm. |
| Article 16 | The issuer shall disclose information on related party transactions in accordance with Statement of Financial Accounting Standards No. 6. To determine whether the transaction counterparty is a related party, the substantive relationship shall be considered in addition to the formal legal relationship. When a counterparty is any one of the following, except where it can be proven there is no ability to control or act as a major influence, it shall be deemed to have a substantive relationship as a related party and relevant information shall be disclosed in the notes to the financial report in accordance with Statement of Financial Accounting Standards No. 6:
1. An affiliated enterprise or its directors, supervisors, and managers as prescribed under Chapter 6-1 of the Company Law.
2. A company or institution under the same central management as that of the issuer, or its directors, supervisors, and managers.
3. A manager or higher level executive in the central management office.
4. A company or institution listed by the issuer as an affiliated enterprise in its publications or public announcements. |
Section VI Names of Financial Statements and List of Important Account Titles
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| Article 17 | Names of financial statements and lists of important 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 Financial Assets at Fair Value Through Profit or Loss－Current (Form 2-2);
(3) List of Available-for-sale Financial Assets－Current (Form 2-3);
(4) List of Derivative Financial Assets for Hedging current (Form 2-4);
(5) List of Financial Assets Measured at Cost－Current (Form 2-5);
(6) List of Bond Portfolios with no Active Market Bonds－Current (Form 2-6);
(7) List of Notes Receivable (Form 2-7);
(8) List of Accounts Receivable (Form 2-8);
(9) List of Other Receivables (Form 2-9);
(10) List of Inventories (Form 2-10);
(11) List of Construction in Progress (Form 2-11);
(12) List of Prepayments (Form 2-12);
(13) List of long-term equity assets held for disposal (Form 2-13)
(14) Statement of Non-current Assets Held for Sale (Form 2-14);
(15) List of Other Current Assets (Form 2-15);
(16) List of Changes in Financial Assets at Fair Value Through Profit or Loss－Non-current (Form 2-16);
(17) List of Changes in Available-for-sale Financial Assets－Non-current (Form 2-17);
(18) List of Changes in Financial Assets Held to Maturity (Form 2-18);
(19) List of Changes in Derivative Financial Assets for Hedging－Non-current (Form 2-19);
(20) List of Changes in Financial Assets Measured at Cost－Non-current (Form 2-20);
(21) List of Changes in Bond Portfolios With no Active Market Bonds－Non-current (Form 2-21);
(22) List of Changes in Funds (Form 2-22);
(23) List of Changes in Long-Term Equity Investments Using the Equity Method of Accounting (Form 2-23);
(24) List of Changes in Accumulated Impairment in Long-Term Equity Investments Using the Equity Method Of Accounting (Form 2-24);
(25) List of Other Changes in Long-Term Investments (Form 2-25);
(26) List of Changes in Fixed Assets (Form 2-26);
(27) List of Changes in Accumulated Depreciation of Fixed Assets (Form 2-27);
(28) List of Changes in Accumulated Impairment of Fixed Assets (Form 2-28);
(29) List of Changes in Intangible Assets (Form 2-29);
(30) List of Other Assets (Form 2-30);
(31) List of Short-term Loans (Form 3-1);
(32) List of Short-term Bills Payable (Form 3-2)
(33) List of Financial Liabilities at Fair Value Through Profit or Loss (Form 3-3);
(34) List of Derivative Financial Assets for Hedging－Current (Form 3-4);
(35) List of Financial Liabilities Measured at Cost－Current (Form 3-5);
(36) List of Notes Payable (Form 3-6);
(37) List of Accounts Payable (Form 3-7);
(38) List of Accounts Collected in Advance (Form 3-8);
(39) List of Construction Prices Received in Advance (Form 3-9);
(40) List of Other Payables (Form 3-10);
(41) Statement of Liabilities Directly Associated with Non-Current Assets Held for Sale (Form 3-11);
(42) List of Other Current Liabilities (Form 3-12);
(43) List of Corporate Bonds Payable (Form 3-13);
(44) List of Long-term Loans (Form 3-14);
(45) List of preferred stock liabilities (Form 3-15);
(46) List of Other Liabilities (Form 3-16);
3. Income Statement (Form 4);
4. Lists of Revenue and Expense Accounts
(1) List of Operating Revenues (Form 5-1);
(2) List of Operating Costs (Form 5-2);
(3) List of Selling Expenses (Form 5-3);
(4) List of Administrative and General Affairs Expenses (Form 5-4);
(5) List of Non-Operating Revenues and Gains, and Expenses and Losses (Form 5-5);
5. Statement of Changes in Shareholders' Equity (Form 6);
6. Statement of Cash Flows (Form 7).
The company may decide on the basis of the materiality principle whether the lists of assets, liabilities, and shareholder equity items under subparagraph 2 of the preceding paragraph require independent presentation. |
Chapter III Interim Financial Reports and Financial Reports of Special Businesses
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| Article 18 | An Issuer shall prepare interim financial reports in accordance with Chapter 2 herein and Statement of Financial Accounting Standards No. 23.
When an Issuer prepares a quarterly report, the statement of changes in shareholder equity and list of important accounting titles may be waived. Except where FSC regulations otherwise provide, preparation of first-quarter and third-quarter consolidated reports may also be waived. |
| Article 19 | The account titles and financial reports of special businesses may be prepared in accordance with the requirements of the authority in charge of such businesses. In the absence of such requirements and if these Regulations are not applicable, the preparation may be handled based on the characteristics of such a business after a report has been submitted to and approved by the FSC. However, assets and liabilities shall be valued and profits/losses recognized in accordance with these Regulations and generally accepted accounting principles. |
Chapter IV Consolidated Financial Statements and Consolidated Financial Statements of Affiliated Enterprises
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| Article 20 | An Issuer shall prepare consolidated financial statements in accordance with Statement of Financial Accounting Standards No. 7. Notes to consolidated financial statements shall include the following items:
1. The business relationship between the parent company and its subsidiaries and between each of its subsidiaries, and the status and amounts of any major transactions between them (Form 9).
2. Where subsidiaries hold stock in the parent company, the names of the subsidiaries and their shareholdings, dollar amounts, and reasons therefore shall be separately listed.
The provisions of Chapters 2 and 3 shall apply mutatis mutandis to the preparation of consolidated financial statements, and except where FSC regulations otherwise provide, preparation of lists of important accounting titles may be waived. |
| Article 21 | An Issuer shall, except where approval has been otherwise granted by the FSC, prepare the consolidated financial report of affiliated enterprises. |
| Article 22 | The preparation and expression of affiliated enterprises' consolidated financial reports shall be handled in accordance with the Regulations for Preparation of Consolidated Business Reports Covering Affiliates, Consolidated Financial Statements Covering Affiliates, and Reports on Affiliations prescribed by the FSC. |
Chapter V Supplemental Provisions |
| Article 23 | The financial report and related documents that the issuer is required to report under Article 36 of the Securities and Exchange Act shall be separately bound, with the upper right corner of the cover of the financial report imprinted with the common stock code, and in addition to reporting the related documents to the FSC, a copy shall also be sent to the Securities and Futures Institute, ROC for access by the public. For those whose stocks are already listed on the stock exchange, a copy shall also be sent to the TSEC and the ROC Securities Association; for those whose stocks are being traded over the counter, a copy shall be sent to the GreTai Securities Market and the ROC Securities Association.
Copies of the documents that the issuer is required to report under Article 6 shall be sent to the relevant organizations in accordance with the preceding paragraph. |
| Article 24 | These Regulations enter into force from 1 January 2006.
The amendments of 9 March 2007 will enter into force from 1 January 2007, with the exception of Form 6 under Article 17, paragraph 1, subparagraph 5, which will be enforced from 1 January 2008. The amendments of 10 January 2009 will enter into force from the date of their issuance, except Article 7, paragraph 3, subparagraph 1, item 11, which will enter into force from 1 January 2009. |