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Taiwan Stock Exchange Corporation Directions for the Particulars to be Disclosed in Pro Forma Financial Statements Prepared by a Transferee Company of a Demerger in an Application for TWSE Listing(2002.09.18) |
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Article 1
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These Directions are established to provide guidance for a transferee company of a demerger in its preparation of pro forma financial statements in its application for listing.
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Article 2
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To file a listing application, a newly established or existing company of an independent operation department of a spin-off listed company shall prepare pro forma historical spin-offs financial statements and consolidated financial statements in accordance with financial statements of the spin-off company and the transferee company of the demerger audited, attested or reviewed by a CPA (the "Pro Forma Financial Statements").
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Article 3
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Preparation of the Pro Forma Financial Statements shall accord with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, comprising an auditor's report, a balance sheet, a statement of income, a statement of cash flows, a statement of changes in shareholders' equity and their accompanying notes or schedules.
Items of the Pro Forma Financial Statements may be appropriately classified and combined based upon actual need. If an item of a balance sheet is less than the pro forma total assets by five percent, it may be listed together with other items; if an item of a statement of income is less than the pro forma pre-tax income by ten percent, it may be listed together with other items.
In addition to the matters required to be disclosed under Article 55 of the FASB Statement No. 1, the accompanying notes of the Pro Forma Financial Statements shall disclose the names of the transferee and transferor companies of the demerger, the spin-off department and its main business, and the principles for preparing accounting items etc.
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Article 4
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The basis of preparing each accounting item of the Pro Forma Financial Statements of a transferee company of a demerger is as follows:
- Assets and liabilities items shall be incorporated if they are related to the transferee department's business and can be directly classified or individually identified.
- Pro forma capital of each year prior to the date fixed for the spin-off shall be retrospectively adjusted according to the capital on the record date for the spin-off, subject to the spin-off company's allotment of shares through capital increase of each year prior to the-spinoff.
- Other capital reserve and translation adjustment items shall be limited to those generated from the spin-off and transfer.
- Items of operating profit or loss shall only list transactions resulted from the transferee department's operating business and exclude items irrelevant to the operating business.
- Items of non-operating revenues and expenditures shall be individually identified based upon the transaction content; only items relating to the operating business of the transferee department shall be listed.
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Article 5
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If the item content of a balance sheet cannot be clearly classified or identified as the transferee department's operating business, the listed items and amounts shall follow reasonable basis, with accompanying notes disclosing the principles and reasonableness of the evaluation or revealing the adjustment.
The accompanying notes shall disclose the fundamental assumptions and calculation methods regarding the conversion rate of issued shares of a demerger's transferee company to the net asset of the spin-off company's.
Any discrepancy among assets, liabilities and shareholders' equity in the Pro Forma Financial Statements shall be listed as a receivable (payable) item of the spin-off company.
Prior to the spin-off of a demerger's transferee company, the expenses of each functional service provided by the spin-off company, such as personnel, rent or depreciation, purchase, sale, management and general administration, professional counseling, investment and financing (including amounts payable to the spin-off company with interest calculated by the average loan interest rate of the spin-off company), shall be listed by estimation on a reasonable basis.
If the item content of a statement of income cannot be clearly classified or identified as the transferee department's operating business, a reasonable allocation base shall be adopted with respect to the listed items and amounts, with accompanying notes disclosing its reasonableness or revealing the adjustment.
With regard to the conversion rate of the issued shares of a demerger's transferee company to the net asset of the spin-off company's and the allocation base for each expense item, an opinion shall be sought from a CPA.
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Article 6
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If a transferee company of a demerger is a newly established company, the preparation of the Pro Forma Financial Statements of the year of the record date for the spin-off shall consolidate the financial information of the spin-off department to which the spin-off company belongs from the beginning of the year until the record date for the spin-off and the financial information from the record date for the spin-off to the end of the year or the mid-term of the newly established company.
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Article 7
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If a transferee company of a demerger is an existing company, the preparation of the Pro Forma Financial Statements of the year of the record date for the spin-off shall consolidate the financial information of the spin-off department to which the spin-off company belongs from the beginning of the year until the record date for the spin-off and the annual or mid-term financial information of the existing company.
The financial statements of a transferee existing company of a demerger shall by audited and attested by a CPA approved by the competent authority for performing financial attestation for public companies, with an unqualified opinion issued by such CPA.
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Article 8
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With regard to relevant personnel, import and sale of goods, production, technology license, patent rights and financing contracts for investment etc., if the spin-off of an enterprise will affect the existing rights and obligations, the effects shall be appropriately specified and explained in the accompanying notes.
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Article 9
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A CPA shall issue an auditor's report based upon the audit results of the Pro Forma Financial Statements in accordance with the FASB Statement No. 28. and prepare the audit working paper in accordance with FASB Statement No. 3.
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Article 10
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In addition to these Directions, the Pro Forma Financial Statements prepared by a transferee company of a demerger shall also follow the Generally Accepted Accounting Principles.
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Article 11
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These Directions shall take effect as of the date of public announcement.
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