|
Article 14
|
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.
(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) Non-current assets held for sale: refers to non-current assets or assets within a disposal group held for sale that, in their current condition, are available for immediate sale by the enterprise in accordance with generally applicable terms and commercial practices, and for which completion of sale within 12 months is highly probable.
Measurement, balance sheet presentation, and disclosures for non-current assets held for sale and disposal groups held for sale shall follow the standards provided in the Statement of Financial Accounting Standards (SFAS) No. 38.
(19) 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 a certified public accountant, pursuant to Statement of Auditing Standards No. 24, determines that the investee company has a material influence on the fair presentation of the audited entity's financial statement, the investee company's 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.
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: non-currency assets that are nonphysical in form, but which conform to the requirements of being identifiable, under the control of the enterprise, and having future economic value. 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.
Recognition, measurement, and disclosures for intangible assets shall follow the standards provided in the Statement of Financial Accounting Standards (SFAS) No. 37.
During the development stage, assets shall be valued and profits and losses recognized and disclosed in accordance with the Statement 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.
|
|
Article 26
|
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 assistant general manager (Form 14):
(1) A securities broker shall, in accordance with the following provisions, disclose the remuneration paid to directors, supervisors, general managers and assistant general managers in the most recent fiscal year; for a director that concurrently serves as a manager, remuneration shall be disclosed separately for each position:
(i) The broker may elect either to use the aggregate disclosure method, disclosing the names and corresponding remuneration brackets, or to use the individual disclosure method, disclosing the respective names and remuneration amounts.
(ii) If the securities firm's most recent capital adequacy ratio, either unaudited, CPA-reviewed, or adjusted following FSC examination, is lower than 150 percent, or if it has had consecutive after-tax deficits in the most recent two fiscal years, it shall disclose the remuneration of each individual director, supervisor, and general manager.
(iii) If in the most recent fiscal year the shareholding percentage by directors is insufficient at a securities firm that is a public company, and such insufficiency continues for three consecutive months or longer, the securities firm shall disclose the remuneration of each individual director. If in the most recent fiscal year the shareholding percentage by the supervisors is insufficient, and such insufficiency continues for three consecutive months or longer, the securities firm shall disclose the remuneration of each individual supervisor.
(iv) If for any three months in the most recent fiscal year the average share pledge ratio for directors or supervisors at a securities firm that is a public company was more than 50 percent, the securities firm shall disclose the remuneration in each of those months of each individual director or supervisor whose pledge ratio was more than 50 percent.
(2) Where any chairman, general manager, or managerial officer 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.
|