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Article 1
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These Regulations are prescribed in accordance with Article 14, Paragraph 2 of the Securities and Exchange Act ("SEA").
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Article 2
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The financial reports of a securities firm 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.
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Article 3
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When a securities firm concurrently operates two or more of the types of businesses under Article 15 of the SEA in accordance with Article 45 of the same law, there shall be separate handling of accounts for each respective type of business. The accounting affairs of the futures department of a securities firm that concurrently operates futures business in accordance with Article 57 of the Futures Trading Law shall be handled pursuant to futures trading laws and regulations. When a securities firm concurrently operates a bills finance business in accordance with Article 17 of the Act Governing Bills Finance Business, accounting in its bills finance department shall be handled in accordance with the Act Governing Bills Finance Business. If the treatment of accounting affairs of a securities firm concurrently operated by a financial institution is otherwise provided in banking laws and regulations, such laws and regulations shall govern, provided that accounting matters and financial reports related to
securities business shall still be handled in accordance with these Regulations. These Regulations shall apply mutatis mutandis to accounting affairs of the branch offices of securities firms.
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Article 4
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A securities firm shall establish an accounting system based on the nature of its accounting affairs, the actual status and development of its business, and its management needs.
The content of the accounting system referred to in the preceding paragraph shall include the following individual items, based on the nature of 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. accounting procedures;
5. finance and payment/receipt operations; and
6. other items in accordance with the regulations of the Financial Supervisory Commission (FSC) of the Executive Yuan.
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Article 5
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With the exception of a securities firm concurrently operated by a financial institution, which shall be separately governed by relevant regulations, the appointment and discharge of accounting personnel at a securities firm shall be approved by a majority vote of directors present at a board meeting with a majority quorum. Within five days of an appointment or discharge, the securities firm shall apply with the Taiwan Stock Exchange, GreTai Securities Market, or securities dealers' association for registration and reporting to the FSC for recordation.
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Article 6
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Unless otherwise approved by the FSC, the fiscal year of a securities firm shall be the calendar year. Closing of accounts for the first half year shall be made on June 30 and closing of accounts for the year shall be made on December 31.
Accounting shall be on an accrual basis.
The bookkeeping unit shall be the New Taiwan Dollar (NTD).
The unit for preparation of financial statements shall be 1000 NTD.
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Article 7
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"Financial reports" shall mean financial statements, statements of significant account titles, and other disclosures and explanations under these Regulations helpful to users of the reports in their decision-making.
Financial statements shall include balance sheets, income statements, statements of changes in shareholder equity, statements of cash flows, and any notes or schedules appended to them.
Except for a newly established securities firm or as otherwise provided by the FSC, a securities firm shall prepare the principal financial statements and accompanying notes referred to in the preceding paragraph using two-period comparisons, and the responsible person, managers, and in-charge accountant shall place their signatures or seals on each page of such statements.
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Article 8
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The content of a financial report shall fairly present a securities firm's financial position, operating results, and cash flows without being misleading to the judgments or decisions of an interested party.
If a financial report violates these Regulations or any other relevant regulations, then upon an FSC notice that an adjustment is required following an audit, the securities firm 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 securities firm shall indicate the reasons for the adjustment, the items adjusted, and the amount of adjustment as notified by the FSC.
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Article 9
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In order that a financial report may thoroughly disclose information on financial position, operating results, and cash flows, notes on the following matters shall be provided:
1. the historical development of the company and its business scope;
2. a declaration that the financial statement was prepared in conformance with these Regulations, other applicable laws and regulations (names of the laws or regulations shall be expressly stated), and generally accepted accounting principles;
3. a summary of significant accounting policies and the bases of measurement employed;
4. where there is a change in accounting treatment due to special factors that affects comparisons of financial information for the prior or subsequent periods, an explanation of the reasons for the change and the impact on the financial statements;
5. the basis of valuation of any amount in the financial report, where its provision is required;
6. where any item presented in the financial report is subject to restriction by law, contract, or other binding stipulation, a note on the circumstances of the restriction, its effective period, and related matters;
7. the standards by which assets and liabilities are classed as either current or non-current;
8. significant commitments and contingent liabilities;
9. information on relevant financial products, such as call (put) warrants and hedge transactions;
10. changes in capital structure;
11. long-term and short-term borrowings;
12. additions, expansions, construction, leases, obsolescence, idling, sale, pledge, or transfer of major assets;
13. major investments in other enterprises;
14. significant transactions with related parties;
15. losses caused by major disasters;
16. the progress or conclusion of any major litigation;
17. the signing, completion, revocation, or lapse of material contracts;
18. information related to employee pension funds;
19. important changes in organization and significant management reforms;
20. material influences stemming from changes in government regulation;
21. financial information by segment;
22. types, issuance dates, and amounts of privately placed securities;
23. the material impact of any suspension of business;
24. merger, acceptance, or transfer of the entire business to or from another securities firm; and
25. other necessary disclosures to ensure that the financial statement is not misleading or to facilitate fairness in presentation.
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Article 10
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Financial statements shall provide notes on any of the following subsequent events that occur between the balance sheet date and the date on which the financial report is submitted:
1. a change in capital structure;
2. any substantial long and short-term borrowing;
3. the addition, expansion, construction, lease, obsolescence, idling, sale, pledge, or transfer of major assets;
4. major investments in other enterprises;
5. losses caused by major disasters;
6. the progress or conclusion of any major litigation;
7. the signing, completion, revocation, or lapse of material contracts;
8. important changes in organization and significant management reforms;
9. material influences stemming from changes in government regulation; and
10. other significant events or measures which may affect the financial position, results of operations, or cash flows.
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Article 11
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Unless otherwise provided by the FSC, the number of years that financial reports provided in these Regulations are kept, or accounting documents, account books, deeds, and books based on which the financial reports are prepared, shall be in accordance with the Business Accounting Act.
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Article 12
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A securities firm shall prepare periodic the following periodic reports:
1. Daily reports, to be prepared on daily basis:
(1) daily statements of account titles (previous business day);
(2) settlement lists;
(3) daily statements of trading on the firm's own account;
(4) daily statements of client trading orders; and
(5) summaries of receipt/payment of settlement amounts.
2. Monthly reports, to be completed before the 5th day of the following month:
(1) monthly statements of account titles (with appropriate presentation of relevant valuation accounts);
(2) reconciliations of client trading orders;
(3) monthly business status reports;
(4) monthly statements of operating securities in treasury; and
(5) summary data on revenues and expenditures.
3. Half-year financial statements, to be publicly announced and reported in accordance with regulations within 2 months after the close of each half business year:
(1) balance sheets;
(2) income statements;
(3) statements of changes in shareholders equity;
(4) statements of cash flows;
(5) notes; and
(6) statements for each account title.
4. Annual financial reports, to be publicly announced and reported in accordance with relevant rules within 4 months after closing of each business year:
(1) balance sheets;
(2) income statements;
(3) statements of changes in shareholders' equity;
(4) statements of cash flows;
(5) footnotes;
(6) statements for each account title; and
(7) other disclosures.
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Article 13
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Unless otherwise provided in these Regulations, generally used formats shall be applicable to the reports.
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Article 14
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Balance sheet assets shall be appropriately categorized. Current and non-current assets shall be distinguished.
The anticipated total amount of return on assets within 12 months after the balance sheet date and in excess of 12 months after the balance sheet date shall be respectively provided in the balance sheet or disclosed in the accompanying notes.
The asset classification of account titles in the balance sheet, their content, and matters to be noted 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 12 months after the balance sheet date; and cash and cash equivalents, provided that assets used in exchange for or liquidation of debt more than 12 months after the balance sheet date, 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 and due in the near future, where interest rate fluctuations have an insignificant impact on the value of the investment.
Non-demand bank deposits shall be posted by item, with maturity dates longer than one year to be noted. Customer settlement amounts, customer settlement amounts collected in advance, funds for subscription of shares collected for an underwriter, and funds which have been earmarked or restricted in use, or which may not be used for other than the designated purpose shall not be entered under this account.
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, and an explanation 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－current－with changes in fair value recognized under income: Refers to financial assets for trading or financial assets initially designated as assets to be measured at fair value with changes in fair value to be recognized in income. These accounts shall be classed according to liquidity as current or non-current; those that are non-current shall be reclassified under "funds and investments" as "financial assets with changes in fair value recognized in income－non current".
"Financial assets for trading" refers to assets that were designated as financial assets for trading at the time of initial recognition by the enterprise. The following financial products shall be classed as financial assets 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.
Financial assets for trading shall be stated under their respective categories, according to trading purpose, as securities, open-ended funds, or money-market instruments held through a brokerage, or as operating securities or derivative financial products.
"Operating securities" refers to securities purchased by a dealer or acquired by an underwriter on a firm commitment basis that have not yet been resold; these shall be presented in detail in subsidiary ledgers according to domestic or foreign security type. When operating securities are the subject of a repurchase agreement or are subject to any other limitation, such fact shall be noted.
"Derivative financial assets" refers to asset accounts that result from a securities firm's trading of domestic or foreign derivative financial products and that conform to the following definitions:
1. Their changes in value reflect fluctuations in a specific variable, credit rating, price index, rate index, or other variable.
2. They are contracts that, relative to other types of contracts that similarly operate by reference to market fluctuations, require only a relatively small net original investment or no net original investment.
3. They have a future settlement date.
When a hybrid product meets the following conditions, the embedded derivative financial product and the host contract shall be bifurcated for separate accounting treatment and the embedded derivative financial product shall be presented as part of the "financial assets for trading" account:
1. The economic characteristics and risks of the embedded derivative product and of the host contract are not closely related.
2. Individual products with the same terms and conditions as the embedded derivative product meet the definition of derivative products.
3. The hybrid product is not one that is measured at fair value with changes in fair value recognized in income.
Financial assets whose changes in fair value are recognized in income shall be measured at fair value. Except for holdings in emerging stocks, which are measured at cost, "fair value" refers to the closing price on the balance sheet date. For open-ended funds, fair value refers to the net asset value of the fund on the balance sheet date.
When stock dividends or new shares issued out of a capital increase from capital reserves are acquired due to the holding of financial assets whose changes in fair value are recognized in income, respective numbers of increased shares shall be noted for each type of financial asset and the average unit cost of each share calculated by the weighted average method.
When an enterprise at the time of original recognition designates certain financial assets to be measured at fair value, with changes in fair value to be recognized in income, it may not thereafter categorize those financial assets under other categories; financial assets that are not originally recognized as assets to be measured at fair value with changes in fair value recognized in income also may not be reclassified as such.
(3) Available-for-sale financial assets－current: refers to financial assets classed as current and that meet one of the following conditions:
1. The assets have been designated as available-for-sale.
2. The assets are not financial assets whose changes in fair value are included in earnings, held-to-maturity financial assets, bond investments for which no active market exists, or 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 asset accounts shall be presented in detail in subsidiary ledgers, according to which type of security they are, as stocks, bonds, or funds; any limitation placed on such an asset shall be noted.
Except where regulations provide otherwise, available-for-sale financial assets shall be measured at fair value, with valuation gains and losses included in shareholder equity. "Fair value," for exchange- or OTC-listed securities, refers to their 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) Held-to-maturity financial assets－current: refers to financial assets held to maturity and maturing within one year.
Financial assets held to maturity shall be measured at amortized cost.
(5) Bond investments for which no active market exists－current: refers to the "current" portion of bond investments not quoted on the active market.
(6) Bond investments under resale agreements: the actual amounts paid for transactions in bonds with resale agreements.
(7) Margin loans receivable: refers to margin loans extended to customers by a securities firm handling margin lending and securities financing.
Allowance for bad debt－margin loans receivable: a deduction from amounts receivable for margin loans.
A securities firm engaging in securities financing shall record the securities loaned to customers in memorandum entries but not in account entries.
(8) Refinancing margin: The margin amount or refinancing difference in securities refinancing, delivered by a securities firm to a securities finance company for the borrowing of securities in connection with margin loans and securities financing in securities trading.
(9) Refinancing collateral receivable: the deposit for refinancing of securities paid to a securities finance company by a securities firm dealing with margin loans and securities financing in securities trading.
(10) Stock borrowing margin: The margin paid by a securities firm as needed for stock borrowing transactions when borrowing from the holders of the subject securities or selling short in an exchange market.
(11) Stock borrowing collateral price: The collateral price paid by a securities firm as needed for stock borrowing transactions when borrowing from the holders of the subject securities or selling short in an exchange market.
(12) Notes receivable: All short-term notes receivable except those resulting from brokered securities trades.
Notes receivable shall be valued at fair value based on the imputed interest rate. Notes receivable and maturing within one year or less, however, may be valued at par value when the discrepancy between their fair value and value at maturity is small and they are frequently traded.
Discounted or transferred notes receivable shall be deducted and an explanatory note provided.
Notes receivable resulting from operating activities shall be recorded separately from notes receivable resulting from non-operating activities.
Notes receivables from related parties shall be disclosed separately.
Notes provided for security shall be so indicated in the notes to the balance sheet.
If the collection of a note receivable becomes impossible, it shall be written off.
During account settlement, the amount of notes receivable which cannot be realized shall be assessed and proper allowance for bad debts shall be recognized, and the net amount shall be disclosed.
(13) Accounts receivable: Claims aside from those incurred due to brokered securities trades fall within this category.
Accounts receivable shall be valued at fair value based on the imputed interest rate. Accounts receivable within one year or less, however, may be valued at par value when the discrepancy between their fair value and value at maturity is small and they are frequently traded.
Accounts receivable from related parties shall be separately disclosed.
If the collection of an account receivable becomes impossible, it shall be written off.
At closing, the amount of accounts receivable which cannot be realized shall be assessed and proper allowance for bad debts shall be recognized, and the net amount shall be disclosed.
(14) Other financial assets－current: Financial assets not listed separately on the balance sheet shall be listed under "other financial assets," and based on their liquidity shall be stated as current or non-current assets. Non-current assets shall be reclassified as "other financial assets－non-current" under "funds and investments."
When the amount of a financial asset accounts for 5 percent or more of aggregate current assets, it shall be given a separate balance sheet entry.
(15) Prepayments: all prepaid amounts and expenses.
Contractually stipulated prepayments for purchase of fixed assets and payment for uncompleted construction shall be recorded as fixed assets and shall not be classified as prepayments.
(16) Other receivables: other receivables not falling within notes receivable and accounts receivable, including accounting errors and claims arising out of breach of contract. During account settlement, the amount of other receivables uncollectible shall be assessed and proper allowance for bad debts shall be recognized, and the net amount shall be disclosed.
If the collection of other receivables becomes impossible, they shall be written off.
Any item under other receivables that exceeds the aggregate amount of current assets by 5% shall be separately recorded.
(17) Long-term equity investments held for disposal: equity investments for which sale to a subsidiary is planned within 12 months after the balance sheet date.
(18) Other current assets: all the current assets not falling within the above categories.
Any of the above current assets whose amount is less than 5% of the aggregate amount of current assets, except for those under cash and "other financial assets－current," may be incorporated into "other current assets."
2. Funds and long-term investments: all special funds and long-term investments for the purpose of ordinary business operations. When the amount of a financial asset accounts for 5 percent or more of funds and long-term investments, it shall be given a separate balance sheet entry.
(1) Available-for-sale financial assets－non-current: refers to the non-current portion of financial assets available for sale.
Items under this account shall be presented in detail in subsidiary ledgers, according to the type of security they represent, as stock, bond, or fund. When available-for-sale financial assets are subject to any limitation, such fact shall be noted.
Except where regulations provide otherwise, available-for-sale financial assets shall be measured at fair value. Valuation gains and losses on these assets shall be recorded under shareholder equity. "Fair value," for stocks or depository receipts listed on an exchange or traded on an over-the-counter exchange, 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.
Holdings of unlisted or non-OTC traded stocks, where those holdings have no material influence, shall be listed as available-for-sale financial assets, to be measured at cost at period end.
(2) Held-to-maturity financial assets－non-current: 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.
Held-to-maturity financial assets shall be measured at amortized cost.
Investments held to maturity that mature within one year shall be reclassified as "held-to-maturity investments－maturing within one year" under "current assets". Except where there is a change in intent or ability such that measurement at amortized cost is no longer appropriate, financial assets held to maturity may not be reclassified as available-for-sale financial assets.
(3) Bond investments for which no active market exists－non-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 with recognition of changes in fair value recorded in earnings.
2. The bond investments have not been designated as available-for-sale.
Bond investments for which no active market exists shall be measured at amortized cost and classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "bond investments for which no active market exists－non current" under "funds and investments".
(4) Funds: assets provided for special purposes such as sinking funds, improvement and expansion funds, contingency reserves, and futures department funds.
A futures department fund is the working capital exclusively appropriated for the futures department by a securities firm concurrently dealing in futures business.
The resolutions and rules forming the basis for provision of a fund shall be recorded.
A welfare fund set aside in accordance with the Act Governing Employee Welfare Funds shall be classified as an expense.
(5) Long-term equity investments using the equity method: investments in specified enterprises approved by the SEC.
Valuation and presentation of long-term equity investments using the equity method shall conform with the Statement of Financial Accounting Standards No. 5.
Long-term investments shall be valued by the equity method. If the financial reports produced by the investee company fail to conform to generally accepted accounting principles in the ROC, the report shall first be adjusted to conform to such principles and profits and losses for investments recognized accordingly. If the investee company meets any of the following conditions, its financial statements shall be audited by a certified public account in accordance with the Regulations for Auditing and Certification of Financial Statements by Certified Public Accountants and the generally accepted auditing standards:
1) Its paid-in capital is NT$30 million or more;
2) Its operating revenue reaches NT$50 million or more or 10% or more of the operating revenue of the securities firm.
If long-term equity investments valued using the equity method are pledged as collateral or subject to restrictions, such fact shall be indicated in the notes.
3. Fixed assets: the tangible assets used for operation, with an economic life of one year or more, and not for the purpose of sale.
Within the fixed asset classification, land, depreciable assets and depletable assets shall be presented separately. Any asset under "fixed assets" that accounts for 5% of the aggregate total of that category shall be given a separate balance sheet entry.
Fixed assets shall be recorded at the historical cost of acquisition or construction. However, the interest on the purchase price of a "presold" house and the fixed assets purchased with capital increase in cash shall not be capitalized. Idled fixed assets shall be reclassified as other assets at the lower of fair value or book value. If a fixed asset is still used after the expiration of its service life, such asset shall be depreciated to residual value. Leased assets shall be recognized and disclosed in accordance with The Statements of Financial Accounting Standards No. 2.
If a leased asset is in the nature of an operating lease, the improvement made to the leased property is called a leasehold improvement and shall be recorded as a fixed asset.
The valuation basis for a fixed asset shall be indicated. If a fixed asset has been revalued, the date of revaluation and the increased or decreased amount shall be recorded, and the acquisition cost and the appraisal increment shall be separately presented in the balance sheet. The land value increment tax reserve allocated due to land appraisal increment shall be classified as a long-term liability. The accrual of depreciation on fixed assets which have been revalued shall be based on the revalued value beginning from the day after the record date of the revaluation.
Except for land, fixed assets shall be periodically depreciated on a reasonable and systematic basis within their estimated useful life.
The accumulated depreciation or accumulated impairment 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 and the term of the lease, and re-classified as expenses of relevant period according to its nature without interruption or reduction. For depreciable assets, the method for computation of depreciation shall be noted.
If a fixed asset is provided as collateral for security, mortgage, or creation of a lien, such fact shall be indicated.
Major accounts of fixed assets are as follows:
(1) Land: all the land of the company used in operations;
(2) Buildings: all the buildings of the company used in operations;
(3) Equipment: all income-generating equipment, information equipment, transportation equipment, and other equipment acquired for operation purposes;
(4) Prepayments for buildings/land: all the prepayments for purchase of land and buildings;
(5) Prepayments for equipment: all prepayments for purchase of equipment;
(6) Leasehold improvements: improvements made to the property under the operating lease;
(7) Other fixed assets.
4. Intangible assets: assets which are nonphysical but have economic value, such as goodwill. When the amount an intangible asset accounts for 5 percent or more of total intangible assets, it shall be given a separate balance sheet entry.
Externally purchased intangible assets shall be recorded at actual cost.
Self-developed intangible assets that cannot be identified clearly (e.g. goodwill) shall not be recorded. Those which can be clearly identified can only be recorded in an amount which is no more than the fee for application for registration.
During the development stage, assets shall be valued and the profits and losses recognized and disclosed in accordance with the Statements of Financial Accounting Standards No. 19.
The valuation basis for intangible assets shall be noted, and those assets shall be amortized reasonably and systematically. The maximum amortization period shall not be more than 20 years, provided that this shall not apply where clear evidence exists demonstrating the validity of the intangible assets past 20 years.
The amortization method for intangible assets shall be noted.
5. Other assets: all the assets not falling within the above categories and with a collection or realization period of one year or more, such as refundable deposits, long-term notes receivable, and other miscellaneous assets.
Long-term notes receivable and other long-term receivables shall be valued based at fair value according to the imputed interest rate.
A receivable account with a substantial overdue amount shall be separately recorded, and the condition thereof and the amount of allowance for bad debt shall be noted.
When the amount of other assets exceeds 5% of the total amount of assets and other financial assets/liquidity, the names of the accounts shall be separately recorded.
(1) Operation bond: the operation bonds set aside in accordance with Article 55 of the SEA;
(2) Settlement/clearance fund: The settlement/clearance fund paid/deposited by securities firms in accordance with Article 107 or Article 132 of the SEA;
(3) Refundable deposits: other refundable deposits;
(4) Deferred debits: long-term prepaid expenses that will bring future economic benefits and shall be subsequently amortized periodically;
(5) Accounts with branches: in the case of a security firm with branch offices, the amount of the accounts between the head office and branch offices;
(6) Accounts with head office: the amount of the accounts between the branch offices and head office of a securities firm;
(7) Inter-departmental accounts: The amount of the inter-departmental transactions between the securities department and futures department of a securities firm concurrently dealing with futures business; to be used when there is debit balance;
(8) Other assets: the assets not falling within the above categories.
6. Debit items for trade brokerage: items to be offset against each other in the trades brokered by a securities broker. When the statement is prepared, the balance after offsetting debit items against credit items shall be recorded, but the details shall be explained in the notes of the financial reports.
(1) Cash and cash equivalents－settlement amounts: All settlement amounts (excluding handling fees and taxes withheld) received from and paid to customers in handling securities brokerage business shall be recorded under this account, including deposits in a separate accounts exclusively used for settlement purposes.
(2) Receivable securities purchased for customers: receivable but unsettled securities purchased for customers;
(3) Receivable price of securities purchased for customers: the prices of securities purchased for the account of and receivable from customers but unsettled;
(4) Receivable securities sold through consignment: the securities to be sold through consignment and receivable from customers and unsettled;
(5) Settlement price: net settlement amounts receivable from and payable to the stock exchange, to be used when there is debit balance.
(6) Securities purchased for customers: securities purchased for the accounts of customers.
(7) Securities sold for customers: securities sold for the accounts of customers.
(8) Receivable notes for settlement: notes delivered by consignors or securities finance institutions in settlement in the process of securities brokerage business. Sub-accounts under this account may be established by party.
(9) Receivable accounts for settlement: the withdrawal slips, transferred amounts, remittances delivered by consignors, stock exchanges, or securities finance institutions in settlement in the process of securities brokerage business. Sub-accounts under this account may be established by party.
(10) Margin trading: the amounts of margin trading directly settled by securities finance institutions and stock exchange in the process of margin loan/securities financing agency business. This account may be a credit balance.
If financial assets held by a securities firm 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.
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Article 15
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Liabilities shall be appropriately categorized. Current and non-current liabilities shall be distinguished.
The total amount of liability anticipated for liquidation within 12 months after the balance sheet date and that to be liquidated more than 12 months after the balance sheet date shall be respectively disclosed in the financial statement or in the notes to the statement.
The classification of liability accounts in the balance sheet, their content, 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: including short-term borrowings from banks, overdrafts, and other short-term loans.
For short-term loans, the nature of loan, guarantee, and the range of interest rates shall be noted based on the type of loans. If collateral is provided, the name of collateral and its book value shall be recorded.
Borrowings from non-financial institutions in accordance with Article 17 of the Regulations Governing Securities Firms shall be separately recorded.
(2) Commercial paper payable: short-term bills issued by financial institutions through consignment to acquire fund from the monetary market.
Commercial paper payable shall be valued based on present value. The discounts of commercial paper payable shall be recorded as a deduction of commercial papers payable.
For commercial paper payable, the guarantee, acceptance agency and interest rate shall be noted. If collateral is provided, the name of collateral and its book value shall be noted.
(3) Financial liabilities－current－with changes in fair value recognized in income. Refers to financial liabilities for trading or financial liabilities to be measured at fair value, with changes in fair value to be recognized in income. Financial liabilities whose changes in fair value are recognized in income shall be classed according to liquidity as current or non-current. Those that are non-current shall be reclassified under "long-term liabilities" as "financial liabilities whose changes in fair value are recognized in income－non current".
Financial liabilities for trading. Refers to financial liabilities which at the time of initial recognition were designated as liabilities for the purpose of trading. The following financial liabilities shall be classed as financial liabilities 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 product liabilities.
4. Securities covering obligations in short sales or sales or securities borrowing and lending.
5. Financial liabilities for trading whose subsequent valuations are measured at fair value, where the assessed fair value is negative.
Financial assets for trading shall be recorded under accounts such as "investments in bonds with resale agreements-short sales," "call/put warrants," "stock borrowing/lending," and "financial derivatives products."
Issuance of call/put warrants by a securities firms shall be recognized as a liability according to amounts actually received, and amounts paid in the repurchase of call put warrants previously issued shall be listed as a deduction from liabilities.
When a securities firm engages in securities borrowing and lending transactions, the amounts of sales of borrowed securities shall be recognized as liabilities. They shall be separately classed as transactions for hedging and non-hedging purposes, and recorded in detail in stock or bond sub-accounts. Amounts paid for repurchase of borrowed stocks or bonds shall be deductions from this category.
Financial liabilities whose changes in fair value are recognized in income shall be measured at fair value; valuation gains and losses on those liabilities shall be stated under current-period income. "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. The financial liabilities listed at the time of initial recognition by an enterprise as assets with changes in fair value to be recognized in income may not be subsequently reclassified as financial assets under any other category; financial liabilities that were not originally classified as assets to be measured at fair value with changes in fair value recognized in income also may not be re-classified as financial assets to be measured at fair value.
(4) Preferred stock liabilities－non-current: refers to preferred stock issued in accordance with the 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 non-current shall be reclassified as "preferred stock liabilities－non-current."
(5) Liabilities for bonds with attached repurchase agreements: the amount actually acquired in dealing with transactions with a repurchase agreement.
(6) Securities financing refundable deposits: Deposits collected from customers for securities financing by a securities firm dealing with margin loan and securities financing in securities trading.
(7) Deposits payable for securities financing: the sale price (less stock exchange tax, handling fee for consigned trading, and securities financing fee) of loaned stocks collected as collateral by a securities firm dealing with margin loans and securities financing in securities trading from customers for securities financing.
A securities firm engaging in securities financing shall record the securities provided by customers as guarantees in memorandum entries but shall not enter such into account. Details shall be provided in the notes to the financial report.
(8) Refinancing borrowings: the refinancing amount acquired from securities finance companies by a securities firm in dealing with margin loans and securities financing in securities trading.
(9) Notes payable: all undue notes payable except those resulting from brokered securities trading.
Notes payable shall be valued at present value. However, those resulting from operating activities and which maturing within one year may be valued at the amount stated on the books.
Notes payable resulting from operating activities shall be separately recorded from notes payable resulting from non-operating activities.
Notes of large value payable to banks and related parties shall be separately disclosed.
If collateral has been provided for notes payable, the name of collateral and the book value shall be recorded.
Notes for refundable deposits which can be recovered for cancellation upon termination of the guaranteed responsibilities may not be recorded as current liabilities. However, the nature and amount of the guarantee shall be explained in the notes of the financial statements.
(10) Accounts payable: amounts payable incurred in business other than brokered securities trading.
Accounts payable shall be valued at present value. However, those resulting from operating activities and which maturing within one year may be valued at par value.
Accounts payable resulting from operating activities shall be separately recorded from accounts payable resulting from non-operating activities.
Accounts of large value payable to related parties shall be separately disclosed.
(11) Amounts received in advance: all the amounts received in advance.
Amounts received in advance shall be separately recorded based on principal classification, and relevant agreement, if any, shall be noted.
(12) Amounts collected for other parties: all the amounts collected for other parties, such as the securities transaction tax and salary income tax.
(13) Other payables: other payables not falling within notes payable and accounts payable, such as tax payable, salary payable, and dividends.
For the dividend and bonus payable passed by the resolution of the shareholders meeting, the distribution method and proposed payment date shall be noted.
When profit and loss are calculated at the end of each period, the estimated income tax payable calculated based on taxable income shall be recorded as current liabilities.
If any of the other payables exceeds the aggregate amount of current liabilities by 5%, it shall be separately recorded based on the nature or party concerned.
(14) 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.
(15) Other current liabilities: all the current liabilities not falling within the above categories, such as corporate bonds and long-term borrowings maturing within one year.
Any of the above current liabilities whose amount does not exceed 5% of the aggregate amount of current liabilities may be incorporated into other current liabilities.
2. Long-term liabilities: liabilities which will mature in excess of 12 months after the balance sheet date, including corporate bonds payable, long-term borrowings, long-term notes payable, and long-term payables. 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): For bonds issued by a securities firm, the approved total amount, interest rate, maturity date, name of collateral, book value, issuing area, and other relevant terms and restrictions shall be indicated in the footnotes. If the bonds are convertible corporate bonds, the method of conversion and the amount converted shall also be noted.
The premium and discount of corporate bonds payable are valuation accounts of corporate bonds payable and shall be shown as an additions to or deductions from corporate bonds payable, amortized reasonably and systematically during the circulation period of the bonds, and recorded as an adjustment to interest expense.
(2) Long-term borrowings: the type, date of maturity, interest rate, name of collateral, book value, and other important restrictions agreed shall be disclosed.
For long-term loans that are to be repaid in foreign currency or in an amount translated at a foreign exchange rate, the name and amount of such foreign currency shall be indicated.
Long-term notes payable and other long-term payables shall be valued at present value.
For long-term liabilities which reach maturity within 12 months after the balance sheet date, when the original loan contract period was over 12 months and the enterprise intends to continue long-term refinancing, and when the financial statement indicates that refinancing or loan extension had been accomplished prior to the balance sheet date, the loan shall continue to be listed as a long-term liability, and the amount of the loan and the relevant facts disclosed in the notes to the financial statement.
Long-term liabilities shall be listed as current liabilities when, under a given loan contract, breach of a specific clause of the loan contract requires immediate repayment. However, when consent has been obtained from the creditor prior to the financial statement submission date that the creditor will not enforce such a clause, and when there is little possibility of commission of such a breach within 12 months after the balance sheet date, then the loan may continue to be listed as a long-term liability.
(3) Preferred stock liabilities－non-current: Preferred stock issued in accordance with the 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 any item under other liabilities exceeds 5% of the aggregate total amount of liabilities, the account title shall be given a separate listing.
(1) Reserve for loss on breaches of contract: the reserve allocated from the transaction amounts of consigned securities trades to cover losses caused by breaches of contract by customers.
(2) Trading loss reserve: When profits from the operating department's sales of operating securities exceed losses, a specified percentage of the excess shall be allocated as a trading loss reserve.
(3) Refundable deposits: all other deposits made as security.
(4) Accounts with branches: to be used when there is a credit balance in the account between the head office and branch offices, in the case branch offices have been established.
(5) Accounts with head office: to be used when there is a credit balance in the account between the branch offices and head office of a securities firm.
(6) Inter-departmental accounts: the amounts of inter-departmental transactions between the securities department and futures department of a securities firm that concurrently deals in futures business; to be used when there is a credit balance.
(7) Other liabilities: liabilities not falling within the above categories.
4. Credit items in brokered trading: items to be offset against each other in the securities trading consigned to a securities broker. When the statement is prepared, the recorded balance shall be the balance after offsetting debit items against credit items; details, however shall be provided in the notes of the financial reports.
(1) Securities deliverable purchased for customers: any securities deliverable to principals resulting from purchase of securities for customers.
(2) Prices payable of securities sold for customers: prices payable to principals resulting from sales of securities for customers.
(3) Securities deliverable sold for customers: any securities deliverable resulting from sales of securities for customers.
(4) Settlement notes payable: all notes delivered to principals or financial institutions in settlements arising out of securities brokerage business.
(5) Settlement accounts payable: all amounts paid through transfer to principals or financial institutions in settlements arising out of securities brokerage business.
(6) Settlement proceeds: the net settlement amount of receivable and payable transactions; to be used when there is a credit balance.
(7) Margin trading: the amounts of margin trades directly settled by securities finance institutions with the stock exchange in its securities financing agency business; to be used when there is a credit balance.
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Article 16
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The classification of shareholder equity account titles in the balance sheet, their content, and matters to be noted are as follows:
1. Capital stock: the capital invested in a securities firm by shareholders and for which application for registration has been made with the authority in charge of corporate registration, but does not include preferred stock with the nature of a liability.
The type of capital stock, par value per share, number of shares authorized, number of shares issued, and special terms shall be indicated. Treasury stocks shall be handled by the cost method and recorded as a deduction from shareholder equity. The number of shares shall be recorded.
2. Capital reserve: capital reserve refers to the equity components of financial products issued by the issuer and premiums generated through share capital transactions between the company and shareholders, typically including premiums on stock issued above par value, gains from donated capital, and other reserves generated in accordance with generally accepted accounting principles.
Capital reserves shall be listed separately according to type, with circumstances relating to any limits on their utilization to be set out in the notes to the report.
3. Retained earnings (or accumulated deficit): the equity resulting from operating activities, including legal reserves, special reserves, and unappropriated earnings (or deficit to be covered).
(1) Legal reserve: the legal reserve allocated in accordance with the Company Law.
(2) Special reserve: the reserve allocated from earnings in accordance with relevant laws and regulations, contracts, the articles of incorporation, or resolutions of shareholders meetings.
(3) Unappropriated earnings (or deficit to be offset): the undistributed or not yet appropriated earnings (a deficit to be offset is a loss not yet covered).
Distribution of earnings or offsetting of losses shall not be recognized until approved by the shareholders meeting, but when an earnings distribution or offsetting of losses has been proposed it shall be disclosed in the notes to the financial statement for the current period.
4. Other shareholder equity: Refers to other items resulting in increases or decreases to shareholder equity, and typically includes unrealized gains or losses on financial products, unrealized losses on market value decline of long-term equity investments, net losses not recognized as retirement fund costs, translation adjustments, treasury stock, and other adjustment items.
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Article 17
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The account structure of income statements, their contents, and items to be noted are as follows:
1. Revenues:
(1) Brokerage handling fee revenue: handling fee revenue derived from brokered trading and securities financing business. This account shall be further subdivided as follows:
1) Handling fee revenues from brokered trading (applicable to brokers and OTC trading).
2) Handling fees from securities financing (applicable to securities financing).
3) Emerging stock handling fee revenues.
(2) Revenues from underwriting business: the revenue derived from underwriting of securities. This account shall be further subdivided as follows:
1) Revenues from underwriting securities on a firm commitment basis.
2) Handling fee revenues from underwriting securities on best-efforts basis.
3) Processing fee revenues from underwriting operations.
4) Revenues from underwriting consultation and other revenue.
(3) Profit from issuance of call (put) warrants: profits derived from a securities firm's issuance of call (put) warrants, including gains on changes in fair value of call (put) warrant liabilities, gains on exercise of call (put) warrants before maturity, gains on changes in fair value for repo of call (put) warrants, and gains on expired call (put) warrants.
(4) Gains on sale of operating securities: includes all gains on sales of operating securities by the dealing and underwriting departments. Amounts in this account shall be separately recorded by type and whether trading took place through the centralized securities exchange market or the securities firm's place of business, and shall be entered as net of income from sale of the securities after deduction of their cost.
(5) Valuation gains on operating securities: Unrealized gains on operating securities measured at fair value. Amounts in this account shall be separately recorded according to operational category.
(6) Gains on covering of borrowed securities and bonds with resale agreements: Profits generated through the securities firm's securities borrowing transactions or outright sale of bonds with resale agreements due to a decline in the market price of the given security when the trade is covered at maturity. This item shall be listed as net after write-off of relevant items.
(7) Valuation gains on borrowed securities and bonds with resale agreements: Profits generated through valuation-related items connected with the securities firm's transactions in borrowed securities or outright sales of bonds with resale agreements.
(8) Revenue from providing agency service for stock affairs: revenue from providing agency service for stock affairs.
(9) Interest revenue: interest revenue from margin purchase and short sales, bond trades, and other business-related activities.
(10) Revenue from derivative financial products: Revenue account generated by a securities firm's trading in foreign or domestic derivative financial products in operations or hedging transactions.
(11) Dividend revenue: dividend and bonus revenue from stocks held by the company.
(12) Other operating revenue: other operating revenue not falling under the above categories.
(13) Non-operating revenue and profits: non-operating revenue and revenue not falling within the above categories.
2. Expenses:
(1) Brokerage handling fee expenses: the handling fees payable by a securities firm to the stock exchange or the OTC exchange in trading securities through consignment. Items in this account shall be listed separately according to whether they were transacted through the centralized securities market or the securities firm's place of business.
(2) Dealing handling fee expenses: the handling fees payable by a securities dealer to the stock exchange or the OTC exchange. Items in this account shall be listed separately according to whether they were transacted through the centralized securities market or the securities firm's place of business.
(3) Refinancing processing fee expenses: the securities firm's expenses arising from processing fees paid to securities finance enterprises for refinancing in connection with margin loans borrowing of securities.
(4) Underwriting operation processing fee expenses: expenses arising from processing fees paid by an underwriter in underwriting operations.
(5) Expenses arising out of issuance of call (put) warrants: the expenses payable by a securities firm for issuance of call (put) warrants.
(6) Loss on issuance of call (put) warrants: the losses incurred by a securities firm in issuing call (put) warrants, including loss due to changes in the fair value of call (put) warrant liabilities, and losses due to changes in the fair value of call (put) warrant repurchase.
(7) Losses on sale of operating securities: Includes the price differential of all operating securities sold by the dealing and underwriting departments when the security is sold at a price below cost. Amounts in this account shall be separately recorded by type and whether the transaction took place through the centralized securities exchange market or the securities firm's place of business, and shall be entered as net of income from sale of the securities after deduction of their cost.
(8) Losses on valuation of operating securities: Unrealized losses on operating securities measured at fair value. Amounts in this account shall be separately recorded according to operational category.
(9) Losses on covering of borrowed securities and bonds with resale agreements: Losses arising out of the securities firm's securities borrowing transactions or outright sales of bonds with resale agreements due to a decline in the market price of the given security when the trade is covered at maturity. This item shall be listed as net after write-off of relevant items.
(10) Valuation losses on borrowed securities and bonds with resale agreements: Valuation losses due to valuation-related items connected with the securities firm's transactions in borrowed securities or outright sale of bonds with resale agreements.
(11) Interest expenses: interest expenses arising out of margin loans and securities borrowing, bond trades, and other business-related activities.
(12) Losses on derivative financial products: Losses arising out of a securities firm's trading in foreign or domestic derivative financial products in operations or hedging transactions.
(13) Operating expenses: includes all of the company's required operating expenses, which shall be given separate, detailed entries as needed, and includes expenses such as salaries, meal expenses, stationery/printing, communications, entertainment, utilities, insurance premiums, taxes, depreciation, amortization, rent, repair/maintenance, advertising, commissions, computer information, donations, memberships, bad debts, loss on breaches of contract, trading losses, losses on accounting errors, penalties, employees' welfare, travel expenses, transportation expenses, overtime pay, miscellaneous purchases, retirement pensions, employee training expenses, service expenses, newspapers and magazines, depository service expenses, stock borrowing fees, emerging stock handling fees, securities investor protection fees, miscellaneous expenses shall be separately recorded in detail according to actual needs.
(14) Non-operating expenses and losses: all financial expenditures incurred through non-operating activities, as well as losses on disposal of fixed assets, impairment losses, losses on disposal of investments, valuation losses on non-operating financial products, and dividends on preferred stock having the nature of a financial liability.
3. Losses and gains from continuing operations: The net amount of the preceding two items shall be indicated as pre-tax income, income tax expenses (benefits), and after-tax income.
4. Income from discontinued business: income in the current period from the disposal of or decision to dispose of significant departments, including operating income prior to suspension and disposal income during the current period. Disposal income shall be assessed on the date on which the disposal is decided. Any loss shall be immediately recognized; any gains shall be recognized only upon realization.
5. Extraordinary income: income items distinguished by their unusual nature and by the infrequency of their occurrence, such as losses arising when newly promulgated laws or regulations prohibit operation or losses due to seizure by a foreign government.
Extraordinary income shall be recorded separately and shall not be amortized on a yearly basis.
6. The amount of cumulative effect resulting from a change in accounting principles shall be recorded independently following extraordinary income.
7. Current-period net gains (or net losses): The earnings (or losses) of the current accounting period are the aggregate amount of the preceding three items.
8. Earnings per share shall be calculated and presented in accordance with The Statements of Financial Accounting Standards No. 24.
9. Income tax shall be amortized and presented in accordance with the Statements of Financial Accounting Standards No. 22.
10. Where two or more types of business are operated, income statements based on the type of business shall be prepared.
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Article 18
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A statement of changes in shareholder equity is a report indicating changes in the constituents of shareholder equity. The statement shall give period-opening balances for capital stock, capital reserves, retained earnings (or accumulated deficits), shareholder equity, and other items, along with any increases or decreases in the same for the current period and period-end balances.
The following shall be recorded under retained earnings:
1. The beginning balance;
2. Adjustment of prior period gains and losses: Correction of errors in the calculation, recording, and recognition of prior period gains or losses and in the adoption of accounting principles or methods.
3. Net current-period gains or losses.
4. Allocation of legal reserves, special reserves, and distribution of dividends.
5. The period-end balance.
Adjustments of prior period gains and losses, unrealized gains or losses not included in current period income but directly recorded under shareholder equity (e.g. translation adjustments), and income tax expenses (profits) resulting from changes in capital reserves shall be directly entered as net amounts under those headings.
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Article 19
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A cash flow statement is a consolidated report on receipts and payments of cash and cash equivalents during a specific period in relation to operational, investment, and financing activities. Cash flow statements shall be prepared in accordance with The Statements of Financial Accounting Standards No. 17 (cash flow statements).
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Article 20
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Notes to a financial report shall be prepared in accordance with Articles 9 and 10 herein, and in addition, shall also disclose current-period information relating to the following matters:
1. Information on large-value transactions:
(1) Extension of monetary loans to others.
(2) Endorsements and guarantees for others.
(3) Acquisition of real estate equaling at least NT$100 million or 20% of paid-in capital.
(4) Disposal of real estate equaling at least NT$100 million or 20% of paid-in capital.
(5) A combined total of discounts on processing fees in trades with affiliated persons equaling NT$5 million or more.
(6) Receivables from affiliated persons amounting to at least NT$100 million or 20% of paid-in capital.
2. Information on investee enterprises:
(1) For enterprises which directly or indirectly have a controlling or material influence on the investee company, the name, location, chief areas of operation, original investment amount, stock holdings at the end of the prior period, current period income and recognized income on investments.
(2) Enterprises with a direct or indirect controlling influence in the investee company shall also disclose information relating to transactions of the investee company falling under sub-subparagraphs 1-6 of the preceding subparagraph.
3. Information on investments in China:
(1) The name of the investee company in China, its principal areas of operation, paid-in capital, the method of investment, inward and outward remittances of funds, shareholding ratios, investment income, book value of investment at period end, repatriated earnings on investment, and the limit on investment in the mainland area.
(2) For a securities firm that uses the equity method in recognizing investment income from the investee company in China or in preparing a consolidated report, 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.
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Article 21
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A securities firm shall make full disclosure of trades with associated persons in accordance with the Statement of Financial Accounting Standards No. 6. Substantive relationships as well as purely legal ones shall be taken into account when determining which trading counterparts are considered associated persons. Under any of the following circumstances, an entity shall be deemed to have a substantive relationship as an associated person except where it can demonstrate lack of controlling ability or substantive influence, and disclosure of relevant information in notes to financial statements will be required in accordance with the Statement of Financial Accounting Standards No. 6:
1. The affiliated enterprises referred to under Chapter VI-I of the Company Law and their directors, supervisors, and managers.
2. Any company or institution falling under the control of the same general management division and their directors, supervisors, and managers.
3. Personnel in the general management division at the level of manager or above.
4. Any company or institution listed as an affiliated enterprise in information published or released to the public.
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Article 22
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Names of financial statements and statements of significant account titles are as follows (forms shown below):
1. Balance Sheet (Form 1);
2. Statement of Assets, Liabilities, and Stockholders Equity Accounts.
(1) Statement of Cash and Cash Equivalents (Form 2-1);
(2) Statement of Financial Assets for Trading (excluding financial derivatives products):
1. Statement of Securities Broker's Investment in Securities (Form 2-1-1)
2. Statement of Open-ended Funds and Money-market Instruments (Form 2-2-2)
3. Statement of Operating Securities－Dealing Department (Form 2-2-3)
4. Statement of Operating Securities－Underwriting Department (Form 2-2-4)
5. Statement of Operating Securities－Hedging Transactions (Form 2-2-5)
(3) Statement of Financial Derivatives Products－OTC (Form 2-3);
(4) Statement of Available-for-sale Financial Assets－current (Form 2-4);
(5) Statement of Held-to-Maturity Financial Assets－Maturing Within one Year (Form 2-5);
(6) Statement of Bond Investments for Which No Active Market Exists－Current (Form 2-6);
(7) Statement of Investments in Bonds with Resale Agreements (Form 2-7);
(8) Statement of Margin Loans Receivable (Form 2-8);
(9) Statement of Refinancing Deposits (Form 2-9);
(10) Statement of Refinancing Deposits Receivable (Form 2-10);
(11) Statement of Notes Receivable (Form 2-11);
(12) Statement of Accounts Receivable (Form 2-12);
(13) Statement of Prepayments (Form 2-13);
(14) Statement of Other Receivables (Form 2-14);
(15) Statement of Long-term Equity Investments Held for Disposal (Form 2-15);
(16) Statement of Other Current Assets (Form 2-16);
(17) Statement of Changes in Available-for-Sale Financial Assets－Non-current (Form 2-17);
(18) Statement of Changes in Held-to-Maturity Financial Assets－Non-current (Form 2-18);
(19) Statement of Bond Investments for Which No Active Market Exists－Non-current (Form 2-19);
(20) Statement of Changes in Funds (Form 2-20);
(21) Statement of Changes in Long-term Equity Investments Valued by the Equity Method (Form 2-21);
(22) Statement of Changes in Other Long-term Investments (Form 2-22);
(23) Statement of Changes in Fixed Assets (Form 2-23);
(24) Statement of Changes in Accumulated Depreciation of Fixed Assets (Form 2-24);
(25) Statement of Other Assets (Form 2-25);
(26) Statement of Short-term Debt (Form 2-26);
(27) Statement of Financial Liabilities for Trading (excluding financial derivatives products) (Form 2-27):
1. Statement of Liabilities in Issuance of Call (Put) Warrants and Repurchase of Call (Put) Warrants (Form 2-27-1)
2. Statement of Borrowed Securities Payable (Form 2-27-2)
3. Statement of Investment in Bonds with Resale Agreements－Borrowed Securities (Form 2-27-3)
(28) Statement of Liabilities in Bonds with Repurchase Agreements (Form 2-28);
(29) Statement of Securities Financing Deposits Received (Form 2-29);
(30) Statement of Securities Lending Collateral Payable (Form 2-30);
(31) Statement of Securities Refinance Borrowings (Form 2-31);
(32) Statement of Notes Payable (Form 2-32);
(33) Statement of Accounts Payable (Form 2-33);
(34) Statement of Other Payables (Form 2-34);
(35) Statement of Other Current Liabilities (Form 2-35);
(36) Statement of Long-term Borrowings (Form 2-36);
(37) Statement of Preferred Stock Liabilities (Form 2-37);
(38) Statement of Other Liabilities (Form 2-38);
3. Income Statement (Form 3);
4. Income Statements Based on Type of Business (Form 4);
5. Statement of Revenue and Expense Accounts.
(1) Statement of Brokerage Handling Fee Revenues (Form 5-1);
(2) Statement of Revenues from Underwriting Business (Form 5-2);
(3) Statement of Profit (Loss) on Sale of Securities (Form 5-3);
(4) Statement of Revenues from Stock Affairs Agency Services (Form 5-4);
(5) Statement of Interest Revenues (Form 5-5);
(6) Statement of Operating Expenses (Form 5-6);
(7) Statement of Non-operating Revenues and Expenditures (Form 5-7);
6. Statement of Changes in Shareholder Equity (Form 6);
7. Statement of Cash Flows (Form 7);
8. Securities Underwriting Report Form (Form 8);
9. OTC Trading Operations Report Form (Form 9);
10. Margin Loan/Securities Financing Business Report Form (Form 10);
11. Statement of Securities Refinancing Collateral (Form 11);
12. Statement of Securities Borrowed (Lent) in Securities Refinancing (Form 12).
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Article 23
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A securities firm shall prepare consolidated financial statements in accordance with the Statement of Financial Accounting Standards No. 7.
In addition to including the notes from the statements of the parent company and the subsidiary, the notes to consolidated financial statements shall disclose the following matters:
1. The business relationships between the parent company and its subsidiaries, and between each of the subsidiaries, and the status and amounts of major transactions between any of the entities (Form 27).
2. Where subsidiaries hold shares in the parent company, the names of the subsidiaries, their shareholdings in numbers of shares and in dollar amounts, and the reasons for holding the shares shall be individually stated.
The provisions of Chapters I through VII and Chapter X shall apply mutatis mutandis to the preparation of consolidated financial statements, and except where FSC regulations provide otherwise, preparation of the statement of important accounting titles may be waived.
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Article 24
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Unless otherwise approved by the FSC, a securities firm shall prepare consolidated financial statements covering its affiliated enterprises.
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Article 25
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Consolidated financial statements covering a securities firm's affiliates shall be prepared and presented in accordance with the Guidelines for Preparation of Consolidated Business Reports of Affiliates and Reports on Affiliations prescribed by the FSC.
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Article 26
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A securities firm shall describe the status of its operations as follows:
1. Significant business items: A securities firm shall describe matters with a significant impact on business occurring during the preceding five years, including mergers and acquisitions, splits, investment in affiliated enterprises, reorganization, procurement or disposal of material assets, and significant changes in operating methods or areas of business.
2. Information on investments in overseas enterprises: A securities firm shall provide general information on investment in overseas enterprises and offices and their investee businesses, including investment amounts, gains or losses on investment, cash dividends, and endorsements/guarantees or loans provided to other parties by such enterprises (Form 13).
3. Information on establishment of overseas branch institutions or representative offices: A securities firm shall set forth the location, types of business operated, inward and outward remittances of operating funds, current-period income for the branch entity, and intercompany transactions with the parent company (Form 13-1).
4. Remuneration and related information on the directors, supervisors, general manager and vice general manager (Form 14):
(1) Transportation allowances and remuneration for each director and supervisor in the previous fiscal year. If a director concurrently acts as manager, remuneration for each position shall be separately disclosed.
(2) Total salaries, cash awards, special allowances, and bonuses paid to the general manager and vice general manager in the previous fiscal year.
(3) If remuneration is provided to directors, supervisors, general mangers, and vice general managers other than as described in the preceding two items, including items such as automobiles, houses, or other personal expenditures, then the name and position of the recipient, the nature and cost of the assets provided, a rental amount based on actual or fair market price, and any other payments shall be disclosed.
(4) Where any chairman, general manager, or manager in charge of finance or accounting at a securities firm has within the previous year held a position at the accounting firm of a certified public accountant or any of its affiliated enterprises, that person's name, the position they held, and the period during which they held the position shall be disclosed.
The term "affiliated enterprise of a certified public accountant's accounting firm" as used in these Regulations shall mean enterprises in which accountants at the accounting firm of the certified public accountant hold more than 50% of the shares or hold more than half of the director's positions, or those companies or enterprises listed as affiliates in materials printed or issued publicly by the accounting firm of the certified public accountant.
5. Labor-management relations (Form 15):
(1) Significant employee welfare programs, the retirement system and its implementation, and negotiations between labor and management shall be disclosed.
(2) Any losses caused to the company by labor disputes in last thee years shall be explained, and estimation of related amounts currently incurred or likely to be incurred in the future and any counter measures shall be disclosed. If such amounts cannot be reasonably estimated, an explanation shall be provided for that fact.
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Article 27
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A securities firm that is market listed or traded on an OTC exchange shall disclose the market value of its issued securities, their dividends, and distribution of shareholdings:
1. Market value information: If the securities of a securities firm are exchange listed or traded on the OTC market, it shall disclose their highest and lowest transaction value in each quarter of the last two years (Form 16).
2. Dividend information: Information on the dividend policy, cash dividends per share distributed in the previous two years, and the amounts of any stock dividends on retained earnings and on capital reserve shall be provided. The amounts of any accumulated and unpaid dividends shall be disclosed. An explanation shall be given of any planned or anticipated material change in the dividend policy of a securities firm (Form 17).
3. Distribution of shareholdings: An explanation of the distribution of shareholdings in common stocks and preferred stocks of the securities firm as of the balance sheet date shall be provided (Form 18).
If a securities firm distributes shares from a capital increase out of earnings or capital reserves, it shall disclose information on cash dividend and market value retroactively adjusted based on the number of shares after distribution. .
A securities firm shall disclose any equity transfers and changes in equity pledges for the current period involving the equity interests of directors, supervisors, and managers, as well as shareholders with a stake of 10 percent or more in the company (Form 19).
A securities firm that is approved to offer and issue securities through the shelf registration system shall disclose the approved amount and relevant information of the securities to be issued or already issued (Form 20).
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Article 28
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A securities firm shall disclose the following financial information for the preceding five years:
1. A condensed balance sheet and income statement (From 21);
2. A key financial ratio analysis (Form 22); and
3. Significant information which may increase understanding of the financial condition, operating results, cash flows or other variable trends (e.g., the impact of changes in commodity prices and exchange rates).
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Article 29
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A securities firm shall review its financial condition, operating results, and cash flows and analyze the causes of change. The review shall cover at least the following matters, and discussion may be conducted on a departmental basis depending on actual need:
1. Material capital expenditures and sources of funding: An explanation of material capital expenditures invested or committed in the previous two years, and the nature, expected efficiency, and the actual or expected sources of funding of the capital expenditures to be invested in the coming five years. If a material change is expected in the corresponding cost of capital of future borrowings and capital increases or in policies relating to borrowing and capital increases, an explanation shall be provided (Form 23).
2. Liquidity: An analysis of liquidity in the preceding two years and the reason for any increase or decrease, and, based on operational trends, capital demand and other material commitments and transaction or non-transaction matters, an explanation of changes in future working capital demand, amounts of working capital to be generated from operations, and working capital requirements or amounts obtainable from other parties. If it is discovered that liquidity has been or will be materially insufficient, the remedy that has been or will be taken shall be indicated (Form 24).
3. Operating results: An analysis of the constituent items of income from continuing operations and changes in the material transactions, non-transaction matters, and economic environment that affect the increase or decrease of such items. When there is a significant increase, decrease, or change in revenues or expenses, the cause of such change shall be explained. If a material change has occurred or is expected to occur in operating policy, the market situation, or any other internal or external element, thus resulting in a material increase, decrease, or change in the revenues or expenses of continuing operations, an explanation of such fact and its impact shall be given (Form 25).
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Article 30
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Information on certified public accountant: A securities firm shall disclose the following information with respect to its certified public accountant:
1. Information on professional fees: Given any one of the following conditions, an issuer shall disclose information on the professional fees of the certified public accountant:
(1) When professional fees paid to a certified public accountant or the accounting firm of a certified public accountant or its affiliate enterprises for non-auditing services account for a proportion equal to one-quarter or more of the fees paid for auditing, or when fees paid for non-auditing services reach 500,000 New Taiwan Dollars or more, the amount of fees paid for both auditing and non-auditing services as well as the nature of the non-auditing services performed shall be disclosed (Form 23).
(2) When the issuer changes its accounting firm and the amount of fees paid for auditing services during the year in which the change is made are lower than for the previous year, the amount by which the fees decreased, the proportional decrease, and the reasons therefore shall be disclosed.
(3) When the amount of fees paid for auditing services is lower than for the previous year by fifteen percent or more, the amount by which the fees decreased, the proportional decrease and the reasons therefore shall be disclosed.
The professional fees for auditing services referred to in Sub-item 1 means fees the issuer pays a certified public accountant for services in relation to auditing, review, secondary reviews, reviews of financial forecasts, and tax certification.
2. Information on replacement of certified public accountant: If a securities firm has replaced its certified public accountant in last two years or in the subsequent period, it shall disclose the following information (Form 26-2):
(1) Regarding the former certified public accountant:
1. Date of and cause for replacing the certified public accountant. Explain whether the certified public accountant voluntarily terminated or ceased to accept the appointment, or whether the securities firm terminated or discontinued the appointment.
2. If such former certified public accountant issued any audit report other than those without a qualified opinion within the last two years, the opinion and the reason shall be provided.
3. Whether the securities firm and the former certified public accountant held different opinions in connection with:
1) accounting principles or practices;
2) disclosure of financial reports;
3) auditing scope or procedures.
If there were different opinions, a detailed explanation of the nature of each opinion, the securities firm's method of treatment (including whether or not the former certified public accountant was authorized to fully reply to the succeeding accountant's queries in connection with the discrepancy of opinion) and the final result shall be provided.
4. In the case of any of the following situations, disclosure shall be made:
1) Where the former certified public accountant has notified the securities firm that it lacks a sound internal control system so that the financial report is not reliable.
2) Where the former certified public accountant has notified the securities firm that he/she could not rely on the securities firm's statement or that he/she did not wish to be associated with its financial report.
3) Where the former certified public accountant has notified the securities firm that the auditing scope must be expanded, or that the data showed that if the auditing scope was expanded, the reliability of the financial report issued previously or to be issued would be damaged, but due to replacement of the certified public accountant or for other reasons, the former certified public accountant did not expand the auditing scope.
4) Where the former certified public accountant has notified the securities firm that based on the data collected, the reliability of the financial report issued or to be issued might be damaged, but due to replacement of the certified public accountant or for other reasons, the former certified public accountant did not handle this matter.
(2) Regarding the succeeding certified public accountant:
1. The name of the accounting firm, name of the certified public accountant and date of appointment;
2. Before the securities firm officially appoints the succeeding certified public accountant, if it inquired with such accountant about the accounting treatment method of specific transactions or the applicable accounting principles and his/her possible opinion on the financial report, it shall disclose the matters it inquired about and the result of the inquiry.
3. The securities firm shall consult with and obtain the written opinion of the succeeding certified public account in connection with the discrepancy of opinion between it and the former certified public and shall disclose the same.
(3) The securities firm shall send a letter to the former certified public accountant regarding the matters provided in Item 2, sub-item 1 and Item 2, sub-item 2, Sub-sub-item 3) and notify such accountant to reply within 10 days if he/she has a different opinion. The securities firm shall disclose the reply letter of such former certified public accountant.
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Article 31
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A securities firm may prepare interim financial reports only in accordance with Chapter I through Chapter VII and The Statements of Financial Accounting Standards No. 23.
When the securities firm prepares the quarterly report, the statement of changes in shareholder equity and the list of important accounting titles may be waived. Except where otherwise provided by the FSC, it may waive preparation of consolidated financial statements for the first and third quarters.
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Article 32
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Changes in accounting procedures at a securities firm shall be undertaken in accordance with the following rules:
1. Changes in accounting principles:
(1) Where valid reasons require a change in accounting principles, at the end of the year prior to the projected change, the securities firm shall set out the reasons and the theoretical basis for both the original and the proposed new accounting principles, concrete evidence that the new accounting principles will be superior to the old, and data on the projected cumulative effect of adopting the new principles. The securities firm shall seek a certified public accountant to provide an analysis of the reasonableness of each item and a review opinion, which shall be presented in a proposal to the board of directors for passage and thereafter submitted to the FSC for approval and recordation. After approval by the FSC, the securities firm shall publicly announce the projected cumulative effect of adopting the new principles, along with the CPA's review opinion.
(2) Where there are conditions as set forth in The Statement of Financial Accounting Standards No. 8, Section 12, in which substantive difficulty prevents determination of the cumulative effect of a change in accounting principles, the securities firm shall set out the reasons and the theoretical basis for both the original and the proposed new accounting principles, concrete evidence that the new accounting principles will be superior to the old, and the reasons why the projected cumulative effect of adopting the new principles cannot be determined, and shall seek a certified public accountant to provide an analysis of the reasonableness of each item and a review opinion. After presenting its opinion on the effects of the review opinion for the year of the change to the new accounting principles, the securities firm shall proceed in accordance with the procedures set forth above.
(3) Except where the cumulative effect of the change to new accounting principles cannot be determined as set forth in the preceding sub-subparagraph, the securities firm shall, within two months after the beginning of the accounting year during which it changes to the new accounting principles, calculate the actual cumulative effect of adopting the new principles and submit those figures to the FSC following their ratification by the board of directors. If the difference between the figures showing the actual cumulative effect and the projected cumulative effect differ by more than NT$10 million, the securities firm shall present an analysis of the reason for the differences between the two, request a CPA's opinion on its reasonableness, and submit both to the FSC.
(4) Where the circumstances in Subparagraph 2 apply to a securities firm, it shall set out the effects of adopting the new accounting principles with respect to profits and losses in notes to the financial reports prepared for the first quarter, the half-yearly report, and the third quarter in the accounting year during which the new accounting principles are adopted.
(5) With the exception of purchases of real estate to which newly adopted accounting principles are applied, which may be exempted from application of the provisions of each of the preceding subparagraphs, where any other changes in accounting principles have not been reported for approval and filing in accordance with regulations prior to their adoption, the financial report for the year in which the new principles were adopted shall be rewritten, and the new principles may be adopted only in the year following a supplementary report for approval and filing.
2. Accounting estimates relating to changes in the estimated useful life of depreciable or depletable assets and the effective period of intangible assets shall be handled in accordance with such Subparagraphs 1, 4, and 5 of the preceding paragraph.
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Article 33
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Pursuant to the mutatis mutandis application of Article 36 of the SEA through Article 63 of the same law, the submission of financial reports and related documents by securities firms shall be undertaken in accordance with Article 21, Paragraph 3 of the Rules Governing Securities Firms; copies shall also be submitted to the ROC Securities and Futures Institute ("the SFI") to be made available to the public.
Securities firms submitting documents in accordance with the provisions of the preceding article shall, in accordance with the preceding paragraph, submit copies to the TSE, the Over-the-Counter Securities Exchange, and the SFI.
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Article 34
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These Regulations shall become effective on the date of promulgation. Amendments to these Regulations shall take effect at a date to be prescribed by the Securities and Futures Commission.
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