Chapter I General Principles
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| Article 1 | These Regulations are adopted under Article 14, paragraph 2 of the Securities and Exchange Act (the "Act"). |
| Article 2 | A securities issuer ("issuer") shall establish an accounting system based on the nature of its accounting matters, the actual status and development of its business, and its management needs.
The accounting system referred to in the preceding paragraph shall separately provide the following items, based on the nature of the issuer's business operations:
1. A general description of the accounting system.
2. A chart of journals and ledgers.
3. Descriptions and uses of accounting items, accounting documents, account books, and accounting statements.
4. General accounting procedures.
5. Cost accounting procedures.
6. Accounting for sales, purchases, and collections.
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 other applicable laws and regulations. Matters not provided for therein shall be governed by generally accepted accounting principles (GAAP).
The GAAP described in the preceding paragraph shall mean the following, as recognized by the FSC: International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC). |
| Article 4 | "Financial reports" shall mean financial statements, statements of major accounting items, and any other disclosures and explanatory information helpful to the decision making of users.
A complete set of financial statements shall comprise a balance sheet, a statement of comprehensive income, a statement of changes in equity, a statement of cash flows, and related notes or supplementary schedules.
An issuer, unless newly established, or under any of the circumstances set out in paragraph 4 herein, or otherwise required by the FSC, shall prepare the major financial statements and related notes referred to in the preceding paragraph by presenting comparative information for two consecutive periods. The major financial statements shall also be signed or sealed on each page by the issuer's chairperson, managerial officer, and principal accounting officer.
When an issuer applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial reports, or when it reclassifies items in its financial reports, it shall do so in accordance with paragraphs 10 and 39 of IAS 1. |
| Article 5 | Financial reports shall present fairly the financial position, financial performance, and cash flows of an issuer without being misleading to an interested party in making judgments and decisions.
If a financial report violates these Regulations or any other applicable requirements, for which the FSC as a result of an audit gives a notice of adjustment, the issuer shall make the required adjustment and correction. If the adjusted amount meets the standard set by the FSC, a corrected financial report shall be publicly disclosed, together with an indication of the reasons for the adjustment, the items adjusted, and amount of adjustment as notified by the FSC. |
| Article 6 | The following shall apply when an issuer makes an accounting change:
1. Change in accounting policy:
(1) When an issuer changes an accounting policy voluntarily in a new financial year in order to produce financial reports that provide reliable and more relevant information about the effects of transactions or other events or conditions on the issuer's financial position, financial performance, or cash flows, it shall request a certified public accountant (CPA) to provide an item-by-item analysis and review opinion on the reasonableness of the nature of the change in accounting policy, the reasons why applying the new accounting policy provides reliable and more relevant information, each line item affected and the estimated effect for the financial year preceding the earliest year affected by retrospective application of the new accounting policy, and the actual effect on the opening balance of retained earnings for the immediately preceding financial year. These shall be submitted as a proposal for adoption by resolution of the board of directors and for recognition by the supervisors, after which they shall be publicly disclosed and filed.
(2) If, for the voluntary change in accounting policy in the new financial year, it is impracticable to determine either the period-specific effects or the cumulative effect of the change, as described in paragraph 23 of IAS 8, the issuer shall calculate the effects in accordance with paragraph 24 of IAS 8 and the preceding item above, and shall request a CPA to provide an item-by-item analysis and review opinion on the reasonableness of the reasons why retrospective application is impracticable and how and from when the change in accounting policy has been applied, and also provide an opinion on the impact on the audit opinion for the financial year preceding the change in accounting policy. The issuer shall then make a public disclosure and filing according to the above procedure.
(3) Unless it is impracticable to determine the effects as described in the preceding item, then within 2 months after the beginning of the financial year in which the new accounting policy is adopted, the issuer shall calculate the line items affected and the actual effects for the financial year preceding the earliest year affected by retrospective application of the new accounting policy and the actual effects on the opening balance of retained earnings for the immediately preceding financial year, and shall submit those for adoption by the board of directors and for recognition by the supervisors, after which they shall be publicly disclosed and filed, and shall also be submitted to the shareholders meeting for the year of the change. If the difference between the actual effects of the change in accounting policy and the effects originally presented in public disclosure and filing is NT$10 million or more, and is also 1 percent or more of net operating revenues for the immediately preceding financial year, or 5 percent or more of paid-in capital, the issuer shall analyze the reasons for the difference and request a CPA to provide an opinion on its reasonableness. The analysis and the CPA's opinion shall also be publicly disclosed and filed as described above.
2. Any matter among accounting estimates in relation to a change in the useful life or the depreciation or depletion method of depreciable or depletable assets, a change in the amortization period or amortization method of intangible assets, or a change in the residual value of any such assets shall also be governed by the applicable provisions of item 1 of the preceding subparagraph.
If an issuer changes an accounting policy or accounting estimate after the beginning of a financial year, then when applying the provisions of the preceding paragraph, it shall publicly disclose and file information on the prior periods affected by retrospective application of the new accounting policy, the line items affected and the actual effects for the immediately preceding financial year, and the actual effects on the opening balance of retained earnings for the immediately preceding financial year. The issuer shall also provide additional information on the reasonableness and necessity for the change in accounting policy or accounting estimate after the beginning of the financial year, and shall prior to public disclosure and filing request a CPA to provide an item-by-item analysis and review opinion on the reasonableness of those and other relevant matters. These shall then be publicly disclosed and filed after being submitted as a proposal for adoption by resolution of the board of directors and recognition by the supervisors, and shall also be submitted to the next following shareholders meeting.
The expression "public disclosure and filing" or "publicly disclose and file" as used in this article means entering the information into the website specified by the FSC for the submission of electronic filings.
If an issuer has established the position of independent director in accordance with the Act, then when it submits a proposal for resolution by the board of directors pursuant to paragraph 1 or 2, adequate consideration shall be given to each independent director's opinion; if an independent director has an objection or reservation, the objection or reservation shall be documented in the minutes of the meeting of the board of directors.
If an issuer has established an audit committee in accordance with the Act, the matters for which paragraphs 1 and 2 requires recognition by the supervisors shall be subject to the consent of one-half or more of the entire membership of the audit committee, and shall also be submitted to the board of directors for resolution.
The expression "entire membership of the audit committee " as used in the preceding paragraph shall be calculated according to the number of members then actually holding that position. |
| Article 7 | An issuer shall prepare consolidated financial reports in accordance with Chapter II of these Regulations and IAS 27, and shall prepare annual parent company only financial reports in accordance with Chapter IV of these Regulations.
An issuer that does not have a subsidiary shall prepare individual financial reports in accordance with Chapter II of these Regulations, and shall prepare statements of major accounting items in accordance with Article 23 of these Regulations.
An issuer preparing interim financial reports shall follow the provisions of Chapters II and III of these Regulations as well as IAS 34. |
| Article 8 | The meaning of "parent," "subsidiary," and "associate" as used in these Regulations shall be determined in accordance with IAS 27 and IAS 28.
The meaning of "control," "significant influence," or "joint control" as used in these Regulations shall be determined in accordance with IAS 27, IAS 28, and IAS 31. |
Chapter II Financial Reports
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Section I Balance Sheet
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| Article 9 | Assets shall be properly classified. Current and non-current assets shall be distinguished, except when a presentation of all assets in order of liquidity provides information that is reliable and more relevant.
For each asset line item, the total amount expected to be recovered within 12 months after the balance sheet date and the total amount expected to be recovered more than 12 months after the balance sheet date shall be separately presented in the financial reports or disclosed in the notes.
As a minimum, the balance sheet shall include the following asset line items:
1. Current assets: An entity shall classify an asset as current when it expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; when it holds the asset primarily for the purpose of trading; when it expects to realize the asset within 12 months after the balance sheet date; or when the asset is cash or a cash equivalent, unless the asset is to be used for an exchange or to settle a liability, or otherwise remains restricted, at more than 12 months after the balance sheet date.
(1) Cash and cash equivalents: Cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
An issuer shall disclose the components of cash and cash equivalents and the policy which it adopts in determining the composition of cash and cash equivalents.
(2) Financial assets at fair value through profit or loss – current: Financial assets that are not measured at amortized cost or at fair value through other comprehensive income.
(3) Financial assets measured at fair value through other comprehensive income – current: An investment in an equity instrument that is not held for trading, where at initial recognition an entity elects to present subsequent changes in the fair value of the investment under other comprehensive income.
(4) Derivative financial assets for hedging – current: Any derivative financial asset that is a designated and effective hedging instrument under hedge accounting requirements. Any such asset shall be measured at fair value.
(5) Financial assets measured at amortized cost – current: Financial assets for which both of the following conditions are met:
i. The issuer holds the asset within a business model whose objective is to hold assets in order to collect contractual cash flows.
ii. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Upon initial recognition an issuer may still designate a financial asset for which the foregoing conditions are met as at fair value through profit or loss, if when doing so it eliminates or reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.
(6) Notes receivable: All notes receivable.
Notes receivable shall be measured at amortized cost using the effective interest method. However, short-term notes receivable with no stated interest rate may be measured at the original invoice amount if the effect of discounting is immaterial.
Discounted or transferred notes receivable shall be deducted and the deduction shall be noted.
Notes receivable arising from operating activities shall be presented separately from other notes receivable arising from non-operating activities.
Notes receivable from related parties in significant amounts shall be presented separately.
Notes provided as security shall be indicated in the notes to the financial reports.
At each balance sheet date an assessment shall be made of whether there is any uncollectible amount from notes receivable and an appropriate allowance for doubtful debts shall be made.
(7) Trade receivables: Claims resulting from sale of goods or services.
Trade receivables shall be measured at amortized cost using the effective interest method. However, short-term trade receivables with no stated interest rate may be measured at the original invoice amount if the effect of discounting is immaterial.
Trade receivables from related parties in significant amounts shall be presented separately.
At each balance sheet date an assessment shall be made of whether there is any uncollectible amount from trade receivables and an appropriate allowance for doubtful debts shall be made.
Unrealized interest revenue on installment sales shall be presented as a deduction from trade receivables. For trade receivables that will be recovered after more than 1 year, the amount expected to be recovered in each financial year shall be disclosed in the notes to the financial reports.
Pledged trade receivables shall be disclosed in the notes to the financial reports.
(8) Other receivables: Receivables other than notes receivable and trade receivables.
At each balance sheet date an assessment shall be made of whether there is any unrecoverable amount from other receivables and an appropriate allowance for doubtful debts shall be made.
Allowances for doubtful debts shall be presented respectively as deductions from notes receivable, trade receivables, and other receivables. If such items are further subclassified, the allowances for doubtful debts shall also be presented respectively in the same manner.
(9) Current tax assets: The portion of the tax amount already paid in respect of current and prior periods that exceeds the amount due for those periods.
(10) Inventories: Inventories are assets:
i. held for sale in the ordinary course of business;
ii. in the process of production for sale in the ordinary course of business; or
iii. in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Inventories shall be accounted for in accordance with IAS 2.
Inventories shall be measured at the lower of cost and net realizable value. If the cost of inventories is higher than net realizable value, inventories shall be written down below cost to net realizable value, and the amount of the write-down shall be recognized as cost of sales in the period the write-down occurs.
Inventories provided as a pledge or security or used under the surveillance of creditors shall be noted.
(11) Prepayments: Prepaid expenses and prepayments for purchase of materials.
(12) Non-current assets held for sale: Any non-current asset, or asset included in a disposal group held for sale, that is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups, and whose sale must be highly probable.
The measurement, presentation, and disclosure of non-current assets held for sale and disposal groups held for sale shall be made in accordance with IFRS 5.
(13) Other current assets: Current assets not attributable to any of the classes above.
2. Non-current assets: Tangible, intangible and financial assets of a long-term nature, other than assets classified as current.
(1) Financial assets measured at fair value through other comprehensive income – non-current: The non-current portion of financial assets measured at fair value through other comprehensive income, including long-term investments in equity instruments not accounted for using the equity method.
(2) Investments accounted for using the equity method: An investment in an associate, or an interest in a jointly controlled entity not recognized by the venturer using proportionate consolidation.
The valuation and presentation of investments accounted for using the equity method shall be made in accordance with IAS 28 and IAS 31.
When investment gain or loss is recognized, if the financial reports prepared by an associate do not conform to these Regulations, those financial reports shall first be adjusted to achieve conformance before they may be used to recognize investment gain or loss. The financial reports of an associate used in applying the equity method shall be prepared as of the same date as that of the investor, and if prepared as of a different date, adjustments shall be made for the effects of significant transactions or events that occur between that date and the date of the investor's financial reports. In no case shall there be more than 3 months difference between the balance sheet date of the associate and that of the investor. If a CPA determines, pursuant to Statement of Auditing Standards No. 24, that an associate has a material effect on the fair presentation of the financial reports of an investor, the financial reports of the associate shall be audited by a CPA in accordance with the Regulations Governing
Auditing and Certification of Financial Statements by Certified Public Accountants and generally accepted auditing standards.
If an investment accounted for using the equity method is pledged as collateral or otherwise subject to any restriction or limitation, that fact shall be noted.
(3) Property, plant and equipment: Tangible asset items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and that are expected to be used during more than 1 financial year.
Property, plant and equipment shall be subsequently measured using the cost model and accounted for in accordance with IAS 16.
Each component of property, plant and equipment that is significant shall be depreciated separately.
When items of property, plant and equipment have different useful lives, or provide economic benefits in different ways, or are subject to different depreciation methods or depreciation rates, the notes to the financial reports shall show each class of their material components.
(4) Investment property: Property held, by the owner or by the lessee under a finance lease, to earn rentals, or for capital appreciation, or both.
Investment property shall be subsequently measured using the cost model and accounted for in accordance with IAS 40.
(5) Intangible assets: An identifiable non-monetary asset without physical substance that meets the definition of identifiability, control by an entity, and existence of future economic benefits.
Intangible assets shall be subsequently measured using the cost model and accounted for in accordance with IAS 38.
(6) Biological assets: A living animal or plant related to agricultural activity. Biological assets shall be accounted for in accordance with IAS 41.
(7) Deferred tax assets: The amounts of income taxes recoverable in future periods in respect of deductible temporary differences, the carryforward of unused tax losses, and the carryforward of unused tax credits.
(8) Other non-current assets: Non-current assets not attributable to any of the classes above.
Exploration and evaluation assets shall be subsequently measured using the cost model and accounted for in accordance with IFRS 6.
The items described in the preceding paragraph in relation to financial assets at fair value through profit or loss, financial assets measured at fair value through other comprehensive income, financial assets measured at amortized cost, notes receivable, trade receivables, and other receivables shall be accounted for in accordance with IFRS 9 and IAS 39.
An issuer shall assess at each balance sheet date whether there is any objective evidence of impairment for the items described in paragraph 3 in relation to financial assets measured at amortized cost, notes receivable, trade receivables, other receivables, investments accounted for using the equity method, property, plant and equipment, investment property, intangible assets, and exploration and evaluation assets. If any such evidence exists, the issuer shall recognize the amount of any impairment loss in accordance with IAS 39 and IAS 36.
The items described in paragraph 3 in relation to financial assets at fair value through profit or loss, derivative financial assets for hedging, financial assets measured at amortized cost, and biological assets shall be distinguished as current and non-current based on liquidity. |
| Article 10 | Liabilities shall be properly classified. Current and non-current liabilities shall be distinguished, except when a presentation of all liabilities in order of liquidity provides information that is reliable and more relevant.
For each liability line item, the total amount expected to be settled within 12 months after the balance sheet date and the total amount expected to be settled more than 12 months after the balance sheet date shall be separately presented in the financial reports or disclosed in the notes.
As a minimum, the balance sheet shall include the following liability line items:
1. Current liabilities: An entity shall classify a liability as current when it expects to settle the liability in its normal operating cycle; when it holds the liability primarily for the purpose of trading; when it expects to settle the liability when due within 12 months after the balance sheet date, even if an agreement to refinance or to reschedule payments on a long-term basis is completed after the balance sheet date and before the financial reports are authorized for issue; or when it does not have an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
(1) Short-term borrowings: Includes short-term borrowings from banks, overdrafts, and other short-term borrowings.
For short-term borrowing, the nature of the borrowing, the guarantee status, and the interest rate range shall be noted based on the type of borrowing. If collateral is provided, the name and carrying amount of the collateral shall be noted.
Borrowings from financial institutions, shareholders, employees, related parties, and other individuals or institutions shall be separately 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 measured at amortized cost using the effective interest method. However, short-term bills payable with no stated interest rate may be measured at the original face amount if the effect of discounting is immaterial.
For short-term bills payable, the guarantor or accepting institution and the interest rate shall be noted. If collateral is provided, the name and carrying amount of the collateral shall be noted.
(3) Financial liabilities at fair value through profit or loss – current: Financial liabilities that meet either of the following conditions:
i. Financial liabilities held for trading.
ii. Financial liabilities that, except for those designated as hedged items under hedge accounting requirements, are designated upon initial recognition as at fair value through profit or loss.
A financial instrument shall be classified as a financial liability held for trading if:
i. it is incurred principally for the purpose of repurchasing it in the near term;
ii. it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or
iii. it is a derivative financial liability, except for a derivative financial liability that is a designated and effective hedging instrument.
(4) Derivative financial liabilities for hedging – current: A derivative financial liability that is a designated and effective hedging instrument under hedge accounting requirements. Any such liability shall be measured at fair value.
(5) Financial liabilities measured at amortized cost – current: Financial liabilities that are not:
i. financial liabilities at fair value through profit or loss;
ii. financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies;
iii. financial guarantee contracts; or
iv. commitments to provide a loan at a below-market interest rate.
(6) Notes payable: All notes payable.
Notes payable shall be measured at amortized cost using the effective interest method. However, short-term notes payable with no stated interest rate may be measured at the original invoice amount if the effect of discounting is immaterial.
Notes payable arising from operating activities shall be presented separately from notes payable arising from non-operating activities.
Notes payable to banks or related parties in significant amounts shall be presented separately.
If collateral has been provided for notes payable, the name and carrying amount of the collateral shall be noted.
Notes used for refundable deposits that can be recovered for cancellation upon termination of the guarantee obligation need not be presented as current liabilities, provided that the nature and amount of the guarantee shall be indicated in the notes to the financial reports.
(7) Trade payables: Liabilities incurred for purchase of materials or supplies, goods, or services on credit.
Trade payables shall be measured at amortized cost using the effective interest method. However, short-term trade payables with no stated interest rate may be measured at the original invoice amount if the effect of discounting is immaterial.
Trade payables arising from operating activities shall be presented separately from other payables arising from non-operating activities.
Payables to related parties in significant amounts shall be presented separately.
If collateral has been provided for trade payables, the name and carrying amount of the collateral shall be noted.
(8) Other payables: Payables other than notes payable and trade payables, such as tax payable, accrued payroll, and dividends payable.
For dividends and bonuses payable passed by resolution of the shareholders meeting, the distribution method and scheduled payment date, if determined, shall be disclosed.
(9) Current tax liabilities: Unpaid tax for current and prior periods.
(10) Provisions – current: Any liability of uncertain timing or amount.
Provisions shall be accounted for in accordance with IAS 37.
A provision shall be recognized when an issuer has a present obligation as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
An issuer shall disaggregate provisions into provisions for employee benefits and other items in the notes to the financial reports.
(11) Liabilities directly associated with non-current assets held for sale: Any liability included in a disposal group held for sale that is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups, and whose sale must be highly probable.
(12) Other current liabilities: Current liabilities not attributable to any of the classes above.
2. Non-current liabilities: Liabilities other than current liabilities.
(1) Bonds payable (including overseas bonds): Bonds issued by an issuer.
For issued bonds, the total approved amount, interest rate, maturity date, name of collateral, carrying amount, issuing area, and other relevant terms and restrictions shall be noted in the notes to the financial reports. If the bonds are convertible bonds, the method of conversion and amounts already converted shall also be noted.
Premiums and discounts on bonds payable are valuations of bonds payable. They shall be presented as an addition to or reduction from bonds payable, and shall also be amortized, as an adjustment to interest expenses, using the effective interest method during the period of bond circulation.
(2) Long-term borrowings: Includes long-term borrowings from banks and other long-term borrowings or borrowings repaid in installments. For long-term borrowings, the content, maturity date, interest rate, name of collateral, carrying amount, and any other important restriction terms shall be noted.
For a long-term borrowing repaid in foreign currency or in an amount translated at a foreign exchange rate, the name and amount of such foreign currency shall be noted.
Long-term borrowings from shareholders, employees, and related parties shall be noted separately.
Long-term notes payable and other long-term payables shall be measured at amortized cost using the effective interest method.
(3) Financial liabilities measured at amortized cost – non-current: The non-current portion of financial liabilities measured at amortized cost, other than bonds payable and long-term borrowings.
(4) Deferred tax liabilities: The amounts of income taxes payable in future periods in respect of taxable temporary differences.
(5) Other non-current liabilities: Non-current liabilities not attributable to any of the classes above.
The items described in the preceding paragraph in relation to financial liabilities at fair value through profit or loss, financial liabilities measured at amortized cost, notes payable, trade payables, and other payables shall be accounted for in accordance with IAS 39.
The items described in paragraph 3 in relation to financial liabilities at fair value through profit or loss, derivative financial liabilities for hedging, and provisions shall be distinguished as current and non-current based on liquidity. |
| Article 11 | Equity items, their components, and information to be disclosed in the balance sheet are as follows:
1. Equity attributable to owners of the parent:
(1) Share capital: Capital contributed by shareholders to an issuer and registered with the competent authority in charge of company registration, but excluding preferred shares in the nature of liabilities.
For share capital, the classes, par value per share, the number of shares authorized, the number of shares issued and fully paid, a reconciliation of the number of shares outstanding at the beginning and at the end of the period, the rights, preferences and restrictions attaching to each class of share capital, shares in the issuer held by the issuer or by its subsidiaries or associates, shares reserved for issue (or for transfer or conversion) under options and contracts for the sale of shares, and special conditions shall be disclosed in the notes.
If convertible preferred shares or overseas depositary receipts are issued, the issuing area, issuance and conversion methods, converted amount, and special conditions shall be disclosed.
(2) Capital surplus: Means the equity components of financial instruments issued by an issuer or premiums resulting from share capital transactions between an issuer and its owners, and typically includes premium in excess of the par value of the shares issued, donated surplus, and others arising as a result of regulatory provisions associated with these Regulations. Capital surpluses shall be presented separately according to their nature; if there is any restriction on their use, the restriction shall be disclosed in the notes.
(3) Retained earnings (or accumulated deficit): Equity resulting from operating activities, including legal reserves, special reserves, and undistributed earnings (or deficit to be offset).
i. Legal reserve: A fixed-percentage reserve appropriated as required by the Company Act.
ii. Special reserve: A reserve appropriated from earnings in accordance with the requirements of applicable laws and regulations, contracts, or articles of incorporation, or as resolved at shareholders meetings.
iii. Undistributed earnings (or deficit to be offset): Undistributed and unappropriated earnings ("deficit to be offset" is deficit not yet offset).
iv. An earnings distribution or offsetting of deficit shall not be accounted for unless and until approved by a shareholders meeting. However, when an earnings distribution or offsetting of deficit has been proposed, such shall be disclosed in the notes to the financial reports for the current period.
(4) Other equity: Includes the accumulated balances of exchange differences resulting from translating the financial statements of a foreign operation, of gains and losses on measuring investments in equity instruments at fair value through other comprehensive income, and of the effective portion of gains and losses on hedging instruments in a cash flow hedge.
(5) Treasury shares: Treasure shares shall be accounted for using the cost method and presented as a deduction from equity. The number of shares shall be noted.
2. Non-controlling interest: The equity in a subsidiary not attributable, directly or indirectly, to a parent. |
Section II Statement of Comprehensive Income
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| Article 12 | An issuer shall present all items of income and expense recognized in a period in a single statement of comprehensive income displaying components of profit or loss and components of other comprehensive income.
An issuer shall present revenues and expenses recognized in profit or loss under the preceding paragraph using a classification based on their function, and shall also disclose additional information on the nature of these items, including depreciation and amortization expense and employee benefits expense.
When items of income or expense are material, an issuer shall disclose their nature and amount separately in the statement of comprehensive income or in the notes.
As a minimum, the statement of comprehensive income shall include the following line items:
1. Revenue:
(1) Operating revenue: Includes revenue arising from the sale of goods and revenue arising from the rendering of services.
(2) Other revenue: Includes revenue arising from the use by others of entity assets yielding interest, royalties and dividends.
The recognition and measurement of revenue shall be made in accordance with IAS 18.
The recognition and measurement of revenue associated with construction contracts shall be made in accordance with IAS 11. An issuer shall present the gross amount due from customers for contract work as an asset and the gross amount due to customers for contract work as a liability.
2. Operating costs: The costs to be borne for the sale of goods or rendering of services in the period.
3. Net gains and losses from the derecognition of financial assets measured at amortized cost: Any net gain or loss arising from the removal from the financial statements by an issuer of a previously recognized financial asset measured at amortized cost.
4. Net gains and losses from the reclassification of financial assets: Any net gain or loss arising from the reclassification of a financial asset out of the amortized cost category to the fair value through profit or loss category.
5. Finance costs: Include interest on liabilities, gains or losses from fair value hedging instruments and adjustment to the hedged items, and changes in the fair value of cash flow hedging instruments as reclassified from equity to profit or loss, with the portion eligible for capitalization being deducted.
6. Share of the profit or loss of associates and joint ventures accounted for using the equity method: The profit or loss of associates and jointly controlled entities that an issuer recognizes using the equity method according to its share in the associates and jointly controlled entities.
7. Tax expense (benefit): The aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.
8. Profit or loss of discontinued operations: The post-tax profit or loss of discontinued operations and the post-tax gain or loss recognized on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation.
The presentation and disclosure of profit or loss of discontinued operations shall be made in accordance with IFRS 5.
9. Profit or loss for the period: Earnings or deficit in the current reporting period.
10. Other comprehensive income: Each component of other comprehensive income classified by nature, including exchange differences resulting from translating the financial statements of a foreign operation, gains and losses on measuring investments in equity instruments at fair value through other comprehensive income, the effective portion of gains and losses on hedging instruments in a cash flow hedge, and actuarial gains and losses on defined benefit plans.
11. Share of the other comprehensive income of associates and joint ventures accounted for using the equity method.
12. Total comprehensive income.
13. Allocations of profit or loss for the period attributable to non-controlling interest and owners of the parent.
14. Allocations of total comprehensive income for the period attributable to non-controlling interest and owners of the parent.
15. Basic and diluted earnings per share for profit or loss from continuing operations attributable to the ordinary equity holders of the parent entity and for profit or loss attributable to the ordinary equity holders of the parent entity.
The calculation and presentation of earnings per share shall be made in accordance with IAS 33. |
Section III Statement of Changes in Equity
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| Article 13 | As a minimum, the statement of changes in equity shall include the following:
1. total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interest;
2. for each component of equity, the effects of retrospective application or retrospective restatement recognized in accordance with IAS 8; and
3. for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from:
(1) net profit (or net loss) for the period;
(2) other comprehensive income; and
(3) transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.
An issuer shall present, either in the statement of changes in equity or in the notes, the amount of dividends recognized as distributions to owners during the period, and the related amount per share. |
Section IV Statement of Cash Flows
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| Article 14 | A statement of cash flows provides users of financial statements with a basis to assess the ability of the issuer to generate cash and cash equivalents and the needs of the issuer to utilize those cash flows. Namely, it presents, through inflows and outflows of cash and cash equivalents, a summary report on the operating, investing and financing activities of the entity during the period. The presentation and disclosure of cash flow information shall be made in accordance with ISA 7. |
Section V Notes
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| Article 15 | To meet the objective of presenting full and complete information about the financial position, financial performance, and cash flows of an issuer, financial reports shall contain explanatory notes disclosing the following :
1. Company history and scope of business operations.
2. A statement that the financial reports comply with these Regulations, applicable laws and regulations (giving the title of the laws or regulations), as well as IFRS, IAS, IFRIC Interpretations, and SIC Interpretations.
3. The date when the financial reports were authorized for issue and the process involved in authorizing the financial reports for issue.
4. The effect or impact that may arise when it has or has not applied a new or revised IFRS, IAS, IFRIC Interpretation, or SIC Interpretation recognized by the FSC.
5. A summary of significant accounting policies used that are relevant to an understanding of the financial reports, and the measurement basis (or bases) used in preparing the financial reports.
6. Significant accounting judgments, estimations, and assumptions, as well as information about the assumptions it makes and other major sources of estimation uncertainty.
7. Objectives, policies and processes for managing capital, and any change in capital structure, including funding, liability, and equity.
8. If for a special reason there is a change in accounting treatment, thus affecting the comparison of financial data between two successive periods, the reason for the change and its effect on the financial reports shall be noted.
9. If it is necessary to provide the basis of valuation for any amount, financial instrument, or other item presented in the financial reports, that basis of valuation shall be noted.
10. If any item presented in the financial reports is subject to any legal, contractual, or other restriction, the circumstances and timing of the restriction and other related information shall be noted.
11. Criteria for classifying assets and liabilities into current and non-current.
12. Material contingent liabilities and unrecognized contractual commitments.
13. Financial risk management objectives and policies.
14. Long-term and short-term borrowings.
15. The addition, expansion, construction, lease, obsolescence, idling, sale, transfer, or long-term renting of major assets.
16. Principal investments in other enterprises.
17. Significant transactions with related parties.
18. Losses due to major disasters.
19. Any research and development project funded by another party and the amount.
20. Major litigation pending or concluded.
21. The signing, completion, voidance, or lapse of major contracts.
22. Information about employee benefits.
23. Segment financial information.
24. Information on investment in mainland China.
25. Information about investments in derivative instruments.
26. When subsidiaries hold shares in the parent, the names of the subsidiaries and the shareholdings, amounts, and reasons shall be separately presented.
27. In the case of private placement of securities, the type, issue date, and amount shall be disclosed.
28. Major organizational adjustments and significant management reforms.
29. Material effects of changes in government laws and regulations.
30. Supporting information for items presented in the balance sheet and in the statements of comprehensive income, of changes in equity and of cash flows, or other necessary descriptions essential for avoiding misunderstanding by users or for the fair presentation of the financial reports. |
| Article 16 | Financial reports shall include explanatory notes on the following subsequent events that occur between the balance sheet date and the date when the financial reports are authorized for issue:
1. Change in capital structure.
2. Large long-term or short-term borrowings.
3. The addition, expansion, construction, lease, obsolescence, idling, sale, pledge, transfer, or long-term renting of major assets.
4. Significant changes in production capacity.
5. Significant changes in production and sales policies.
6. Principal investments in other enterprises.
7. Losses due to major disasters.
8. Major litigation pending or concluded.
9. Signing, completion, voidance, or lapse of major contracts.
10. Major organizational adjustments and significant management reforms.
11. Material effects of changes in government laws and regulations.
12. Other major events or measures capable of affecting future financial position, financial performance, and cash flows. |
| Article 17 | An issuer shall separately disclose in the notes to the financial reports information on the following events between the issuer and its subsidiaries during the current period, and on parent-subsidiary transactions:
1. Information on significant transactions:
(1) Lending funds to others.
(2) Providing endorsements or guarantees for others.
(3) Holding of securities at the end of the period.
(4) Aggregate purchases or sales of the same securities reaching NT$100 million or 20 percent of paid-in capital or more.
(5) Acquisition of real estate reaching NT$100 million or 20 percent of paid-in capital or more.
(6) Disposal of real estate reaching NT$100 million or 20 percent of paid-in capital or more.
(7) Purchases or sales of goods from or to related parties reaching NT$100 million or 20 percent of paid-in capital or more.
(8) Accounts receivable from related parties reaching NT$100 million or 20 percent of paid-in capital or more.
(9) Trading in derivative instruments.
(10) Others: The business relationship between the parent and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions between them.
2. Information on investees: If the issuer directly or indirectly exercises significant influence or control over an investee company, it shall disclose information on the investee company, showing the name, location, principal business activities, original investment amount, shareholding at the end of the period, profit or loss for the period, and recognized investment gain or loss.
The issuer is exempted from the requirements of items 1 to 4 of the preceding subparagraph when the investee company it controls directly or indirectly is a financial, insurance, or securities enterprise.
3. Information on investments in mainland China:
(1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, investment gain or loss, carrying amount of the investment at the end of the period, repatriated investment gains, and limit on the amount of investment in the mainland China area.
(2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses:
i. The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
ii. The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
iii. The amount of property transactions and the amount of the resultant gains or losses.
iv. The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
v. The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
vi. Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.
The amounts or balances of the transactions referred to in i through vi of the preceding item shall be presented separately if they reach 10 percent or more of the issuer's total transaction amount or balance of that respective category, but otherwise they may be presented in the aggregate.
(3) When the issuer recognizes investment gain or loss using the equity method or prepares consolidated financial statements with respect to a mainland China investee company, the recognition or preparation shall be made based on the investee company's financial reports audited and certified by an international accounting firm having a business cooperation relationship with an R.O.C. accounting firm, provided that when preparing interim consolidated financial reports, the recognition or preparation may be made based on the investee company's financial reports reviewed by an international accounting firm having a business cooperation relationship with an R.O.C. accounting firm. |
| Article 18 | An issuer shall fully disclose information on related party transactions in accordance with IAS 24. In considering whether a counterparty is a related party, attention shall be directed to the substance of the relationship in addition to the legal form. Unless it can be established that no control or significant influence exists, a party falling within any of the following shall be deemed to have a substantive related party relationship, and relevant information shall be disclosed in the notes to the financial reports in accordance with IAS 24:
1. An affiliated enterprise within the meaning given in Chapter VI-I of the Company Act, and any of its directors, supervisors, and managerial officers.
2. A company or institution governed by the same general management office as the issuer, and any of its directors, supervisors, and managerial officers.
3. A person holding the position of manager or higher in the general management office.
4. A company or institution shown as an affiliated enterprise in the issuer's publications or public announcements. |
Section VI Titles of Financial Statements
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| Article 19 | Titles and forms of financial statements are as follows:
1. Balance sheet (Form 1).
2. Statement of comprehensive income (Form 2).
3. Statement of changes in equity (Form 3).
4. Statement of cash flows (Form 4).
5. Schedules to the financial reports (Forms 5-1 to 5-11). |
Chapter III Interim Financial Reports
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| Article 20 | Interim financial reports shall include interim financial reports for each of the following periods:
1. Balance sheets as of the end of the current interim period, as of the end of the immediately preceding financial year, and as of the end of the comparable interim periods of the immediately preceding financial year.
2. Statements of comprehensive income for the current interim period, for the current financial year to the end of the current interim period, for the comparable interim periods of the immediately preceding financial year, and for the immediately preceding financial year to the end of the comparable interim periods.
3. Statement of changes in equity for the current financial year to date, with a statement of changes in equity for the same period of the immediately preceding financial year.
4. Statement of cash flows for the current financial year to date, with a statement of cash flows for the same period of the immediately preceding financial year. |
Chapter IV Parent Company Only Financial Reports
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| Article 21 | An issuer preparing parent company only financial reports shall apply accounting treatment conforming to the requirements of Chapter II of these Regulations, except when it has control, significant influence, or joint control over an associate, in which case it shall value the long-term equity investment using the equity method.
The profit or loss for the period and other comprehensive income presented in parent company only financial reports shall be the same as the allocations of profit or loss for the period and of other comprehensive income attributable to owners of the parent presented in the financial reports prepared on a consolidated basis, and the owners' equity presented in the parent company only financial reports shall be the same as the equity attributable to owners of the parent presented in the financial reports prepared on a consolidated basis. |
| Article 22 | An issuer preparing parent company only financial reports is not required to prepare segment information within the scope of IFRS 8. |
| Article 23 | An issuer preparing parent company only financial reports shall prepare statements of major accounting items.
Titles and forms of statements of major accounting items are as follows:
1. Statements of assets, liabilities, and equity items:
(1) Statement of cash and cash equivalents (Form 6-1).
(2) Statement of financial assets at fair value through profit or loss – current (Form 6-2).
(3) Statement of financial assets measured at fair value through other comprehensive income – current (Form 6-3).
(4) Statement of derivative financial assets for hedging – current (Form 6-4).
(5) Statement of financial assets measured at amortized cost – current (Form 6-5).
(6) Statement of notes receivable (Form 6-6).
(7) Statement of trade receivables (Form 6-7).
(8) Statement of other receivables (Form 6-8).
(9) Statement of inventories (Form 6-9).
(10) Statement of biological assets – current (Form 6-10).
(11) Statement of prepayments (Form 6-11).
(12) Statement of non-current assets held for sale (Form 6-12).
(13) Statement of other current assets (Form 6-13).
(14) Statement of changes in financial assets at fair value through profit or loss – non-current (Form 6-14).
(15) Statement of changes in financial assets measured at fair value through other comprehensive income – non-current (Form 6-15).
(16) Statement of derivative financial assets for hedging – non-current (Form 6-16).
(17) Statement of changes in financial assets measured at amortized cost – non-current (Form 6-17).
(18) Statement of changes in investments accounted for using the equity method (Form 6-18).
(19) Statement of changes in accumulated impairment of investments accounted for using the equity method (Form 6-19).
(20) Statement of changes in property, plant and equipment (Form 6-20).
(21) Statement of changes in accumulated depreciation of property, plant and equipment (Form 6-21).
(22) Statement of changes in accumulated impairment of property, plant and equipment (Form 6-22).
(23) Statement of changes in investment property (Form 6-23).
(24) Statement of changes in accumulated depreciation of investment property (Form 6-24).
(25) Statement of changes in accumulated impairment of investment property (Form 6-25).
(26) Statement of changes in intangible assets (Form 6-26).
(27) Statement of deferred tax assets (Form 6-27).
(28) Statement of biological assets – non-current (Form 6-28).
(29) Statement of other non-current assets (Form 6-29).
(30) Statement of short-term borrowings (Form 7-1).
(31) Statement of short-term bills payable (Form 7-2).
(32) Statement of financial liabilities at fair value through profit or loss – current (Form 7-3).
(33) Statement of derivative financial liabilities for hedging – current (Form 7-4).
(34) Statement of financial liabilities measured at amortized cost – current (Form 7-5).
(35) Statement of notes payable (Form 7-6).
(36) Statement of trade payables (Form 7-7).
(37) Statement of other payables (Form 7-8).
(38) Statement of provisions – current (Form 7-9).
(39) Statement of liabilities directly associated with non-current assets held for sale (Form 7-10).
(40) Statement of other current liabilities (Form 7-11).
(41) Statement of changes in financial liabilities at fair value through profit or loss – non-current (Form 7-12).
(42) Statement of derivative financial liabilities for hedging – non-current (Form 7-13).
(43) Statement of financial liabilities measured at amortized cost – non-current (Form 7-14).
(44) Statement of bonds payable (Form 7-15).
(45) Statement of long-term borrowings (Form 7-16).
(46) Statement of provisions – non-current (Form 7-17).
(47) Statement of deferred tax liabilities (Form 7-18).
(48) Statement of other non-current liabilities (Form 7-19).
2. Statements of profit or loss items:
(1) Statement of operating revenue (Form 8-1).
(2) Statement of operating costs (Form 8-2).
(3) Statement of selling expenses (Form 8-3).
(4) Statement of administrative expenses (Form 8-4).
(5) Statement of finance costs (Form 8-5).
(6) Summary statement of current period employee benefits, depreciation, depletion and amortization expenses by function (Form 8-6).
An entity may determine, having regard to the concept of materiality, whether or not to separately present the statements of assets, liabilities, and equity items described in subparagraph 1 of the preceding paragraph. |
Chapter V Consolidated Financial Statements Covering Affiliated Enterprises
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| Article 24 | The preparation and presentation of consolidated financial statements covering affiliated enterprises shall be made in accordance with the Regulations Governing Preparation of Consolidated Business Reports Covering Affiliated Enterprises, Consolidated Financial Statements Covering Affiliated Enterprises, and Reports on Affiliations adopted by the FSC.
If, pursuant to the Regulations Governing Preparation of Consolidated Business Reports Covering Affiliated Enterprises, Consolidated Financial Statements Covering Affiliated Enterprises, and Reports on Affiliations, the entities that must be included in preparing the consolidated financial statements covering affiliated enterprises are entirely the same as those that IAS 27 requires to be included in preparing the consolidated financial report comprising the parent and its subsidiaries, and if the required disclosures to be made in the consolidated financial statements covering affiliated enterprises are already made in the consolidated financial report comprising the parent and its subsidiaries, then the consolidated financial statements covering affiliated enterprises need not be prepared, provided that a statement to that effect is made and presented on the front page of the consolidated financial report. |
Chapter VI First-time Adoption
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| Article 25 | IFRS 1 applies when an issuer first adopts IFRS.
Except when electing to use the deemed cost exemption in accordance with Article 26 below, the issuer shall apply IAS 40, IAS 16, IAS 38, and IFRS 6 retrospectively to investment property, property, plant and equipment not classified as for investment or held for sale, intangible assets, and exploration and evaluation assets in accordance with the preceding paragraph at the date of transition to IFRS. |
| Article 26 | An issuer electing to use the deemed cost exemption described in IFRS 1 shall be subject to the following:
1. If there is sufficient evidence that an item of investment property is continuously being rented out and can generate a stable cash flow in the medium or long term, the issuer may use the fair value of the investment property as its deemed cost, with the amount estimated from the contractual rent of the investment property using the discounted cash flow method as the cap and the issuer's weighted average cost of capital as the discount rate.
2. For an item of investment property that does not fall within the scope of the preceding subparagraph allowing the use of fair value as deemed cost, of property, plant and equipment not classified as for investment or held for sale, of intangible assets, or of exploration and evaluation assets, the issuer may only elect to use a previous GAAP revaluation of that item as deemed cost at the date of the revaluation.
The issuer shall disclose in the notes the election of deemed cost, the assumptions and methodology used to determine the fair value, and the weighted average cost of capital as described in the preceding paragraph.
When electing to use the fair value of an item of investment property as its deemed cost as described in subparagraph 1, paragraph 1, the issuer shall obtain the appraisal from a certified R.O.C. real estate appraiser who satisfies the following conditions:
1. The appraiser must have at least 2 years of experience practicing in the field of real estate appraisal.
2. The appraiser does not have a record of poor credit in negotiable instruments or debts during the most recent 3 years, or a record of being subject to disciplinary action by a real estate appraiser disciplinary board during the most recent 5 years.
3. The appraiser may not have a related party or substantive related party relationship with the issuer.
4. The appraiser has had appraisal experience relevant to the investment property being appraised, in terms of geographical location and type, during the preceding year.
The preceding article, and paragraph 1 through the preceding paragraph of this article, shall also apply to subsidiaries of the issuer. In the case of an overseas subsidiary, if the subsidiary's home country has adopted the IFRS, IAS, IFRIC Interpretations and SIC Interpretations, and if the subsidiary's investment property is measured subsequently using the cost model, then when applying IFRS 1 the issuer may not use fair value as deemed cost and shall also use the cost model for its subsequent measurement. |
Chapter VII Supplementary Provisions |
| Article 27 | The regulatory submissions of financial reports and related supplementary documents that an issuer is required to file under Article 36 of the Act shall be separately bound, with the stock code of the issuer's ordinary shares appearing on the upper right corner of the cover of the financial report, and a filing form prepared for the purpose of regulatory filing. The relevant documents shall be filed with the FSC, together with a copy to the Securities and Futures Institute for access by the public. The issuer shall also send a copy to the Taiwan Stock Exchange (TWSE) if its shares are listed on the TWSE, or to the GreTai Securities Market (GTSM) if its shares are traded on the GTSM. |
| Article 28 | A public company whose shares of stock are listed on the TWSE or traded on the GTSM shall apply these Regulations from the beginning of financial year 2013. With the approval of the FSC, however, it may prepare consolidated financial reports for each period in accordance with these Regulations from the beginning of financial year 2012.
A public company whose shares of stock are not listed on the TWSE or traded on the GTSM shall apply these Regulations from the beginning of financial year 2015. It may, however, voluntarily apply these Regulations from the beginning of financial year 2013.
A public company not acting in accordance with the preceding two paragraphs shall act in accordance with the content of these Regulations in effect before their 7 July 2011 amendment and issuance and 1 January 2012 enforcement. |
| Article 29 | These Regulations shall be enforced from 1 January 2012. |