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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 other applicable laws and regulations. Matters not provided for therein shall be governed by generally accepted accounting principles (GAAP).
The GAAP described in the preceding paragraph shall mean the following, as recognized by the Financial Supervisory Commission (FSC): International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).
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Article 3
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When a securities firm simultaneously operates two or more of the businesses specified in Article 15 of the Act in accordance with applicable requirements, the accounting matters for each such business shall be handled separately. When a securities firm concurrently operates futures business pursuant to Article 57 of the Futures Trading Act, the accounting matters for its futures segment shall be governed by applicable futures trading laws and regulations. When a securities firm concurrently operates bills finance business pursuant to Article 17 of the Act Governing Bills Finance Business, the accounting matters for its bills finance segment shall be governed by applicable bills finance laws and regulations. When a securities firm concurrently operates specified trust business lines pursuant to Article 3 of the Trust Enterprise Act, the accounting matters for its trust segment shall be governed by applicable trust enterprise laws and regulations.
When a financial institution concurrently operates securities business pursuant to Article 45, paragraph 2 of the Act, if the treatment of its accounting matters is subject to other applicable financial laws and regulations of the competent authority in charge of that industry, those laws and regulations shall govern. However, accounting matters and financial reports for its securities operations shall still be governed by these Regulations.
If a securities firm's securities business is operated by different departments based on the nature of business, the accounting matters thereof may be separately handled by each department.
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Article 10
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The following shall apply when a securities firm makes an accounting change:
- Change in accounting policy:
- When a securities firm changes an accounting policy voluntarily in a new financial year in order to produce financial reports that provide reliable and more relevant information about the effects of transactions or other events or conditions on the securities firm's financial position, financial performance, or cash flows, it shall request a certified public accountant (CPA) to provide an item-by-item analysis and review opinion on the reasonableness of the nature of the change in accounting policy, the reasons why applying the new accounting policy provides reliable and more relevant information, each line item affected and the estimated effect for the financial year preceding the earliest financial year affected by retrospective application of the new accounting policy, and the actual effect on the opening balance of retained earnings for the immediately preceding financial year. These shall be submitted as a proposal for adoption by resolution of the board of directors, after which they shall be submitted to the FSC for approval. Upon approval by the FSC, the securities firm shall publicly disclose and file information on the estimated effect arising from the application of the new accounting policy and the CPA review opinion.
- If, for the voluntary change in accounting policy in the new financial year, it is impracticable to determine either the period-specific effects or the cumulative effect of the change, as described in paragraph 23 of IAS 8, the securities firm shall calculate the effects in accordance with paragraph 24 of IAS 8 and the preceding item above, and shall request a CPA to provide an item-by-item analysis and review opinion on the reasonableness of the reasons why retrospective application is impracticable and how and from when the change in accounting policy has been applied, and also provide an opinion on the impact on the audit opinion for the financial year preceding the change in accounting policy. The securities firm shall then follow the procedure described above.
- Unless it is impracticable to determine the effects as described in the preceding item, then within 2 months after the beginning of the financial year in which the new accounting policy is adopted, the securities firm shall calculate the line items affected and the actual effect for the financial year preceding the earliest financial year affected by retrospective application of the new accounting policy and the actual effect on the opening balance of retained earnings for the immediately preceding financial year, and shall submit those for adoption by the board of directors, after which they shall be publicly disclosed and filed and submitted to the FSC for recordation. If the difference between the actual effect of the change in accounting policy and the original estimated effect is NT$10 million or more, and is also 1 percent or more of the income for the immediately preceding financial year or 5 percent or more of paid-in capital, the securities firm shall analyze the reasons for the difference and request a CPA to provide an opinion on its reasonableness. The analysis and the CPA's opinion shall also be publicly disclosed and filed with the FSC.
- Except when applying a new accounting policy to newly purchased assets, in which case the provisions of the preceding items need not be applied, if a change in accounting policy is applied without having been duly filed for approval, the financial reports for the financial year in which the new accounting policy was applied shall be restated, and the new accounting policy may only be applied from the next financial year after a supplementary submission has been made and approved.
- In the case of a securities firm whose shares have a par value other than NT$10, for the calculation of the 5 percent of paid-in capital under item 3, 2.5 percent of the equity attributable to owners of the parent as stated in the balance sheet shall be substituted.
- Any matter among accounting estimates in relation to a change in the useful life or depreciation method of depreciable assets, a change in the amortization period or amortization method of intangible assets, or a change in the residual value of any such assets shall also be governed by the provisions of items (1) and (4) of the preceding subparagraph.
The expression "public disclosure and filing" or "publicly disclose and file" as used in the preceding paragraph means entering the information into the website designated by the FSC for the submission of electronic filings.
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Article 14
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Assets shall be properly classified. Current and non-current assets shall be distinguished.
For each asset line item, the total amount expected to be recovered within 12 months after the balance sheet date and the total amount expected to be recovered more than 12 months after the balance sheet date shall be separately presented in the financial statements or disclosed in the notes.
As a minimum, the balance sheet shall include the following asset line items:
- Current assets: A securities firm shall classify an asset as current when it expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; when it holds the asset primarily for the purpose of trading; when it expects to realize the asset within 12 months after the balance sheet date; or when the asset is cash or a cash equivalent, unless the asset is to be used for an exchange or to settle a liability, or otherwise remains restricted, at more than 12 months after the balance sheet date.
- Cash and cash equivalents: Cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
A securities firm shall disclose the components of cash and cash equivalents and the policy which it adopts in determining the composition of cash and cash equivalents. - Financial assets at fair value through profit or loss – current: Financial assets that meet any of the following conditions:
- Financial assets held for trading.
- Financial assets that, except for those designated as hedged items under hedge accounting requirements, are designated upon initial recognition as at fair value through profit or loss.
A financial instrument shall be recorded and classified as a financial asset held for trading, and shall be recorded under the category of broker's investments in securities, open-end funds or money market instruments, securities held for operations, or derivative instruments if:
- It is acquired principally for the purpose of sale in the near term.
- It is, upon initial recognition, a part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking.
- It is a derivative financial asset, except for a derivative financial asset that is a financial guarantee contract or a designated and effective hedging instrument.
Financial assets at fair value through profit or loss shall be measured at fair value.
- Available-for-sale financial assets – current: Financial assets that are not derivative financial assets and that meet any of the following conditions:
- . Financial assets that are designated as available-for-sale.
- . Financial assets that are not:
- Financial assets measured at fair value through profit or loss.
- Held-to-maturity financial assets.
- Financial assets measured at cost.
- Bond investments for which no active market exists.
- Receivables.
Available-for-sale financial assets shall be measured at fair value.
- Derivative financial assets for hedging – current: Any derivative financial asset that is a designated and effective hedging instrument under hedge accounting requirements. Any such asset shall be measured at fair value.
- Financial assets measured at cost – current: Financial assets that meet all of the following conditions:
- An investment in equity instruments that do not have a quoted price in an active market, or a derivative instrument that is linked to such equity instruments that do not have a quoted price in an active market and that shall settled by delivery of such equity instruments.
- The fair value cannot be reliably measured.
- Bond investments for which no active market exists – current: Bond investments that do not have a quoted price in an active market and with fixed or determinable payments, and that meet all of the following conditions:
- Not classified as at fair value through profit or loss.
- Not designated as available-for-sale.
- There are no other reasons except for credit worsening that are likely to cause the holder not being able to recover almost all of the original investments.
Bond investments for which no active market exists shall be measured at amortized cost.
- Investments in bonds with reverse repurchase agreements: The actual amounts paid by a securities firm when engaging in transactions in bonds with reverse repurchase agreements.
- Securities margin loans receivable: Margin loans extended to customers by a securities firm conducting securities trading margin purchase and short sale business.
At each balance sheet date an assessment shall be made of whether there is any uncollectible amount from securities margin loans receivable and an appropriate allowance for doubtful debts shall be made, with the result presented on a net basis. - Deposits for securities borrowed: Guarantee amounts deposited by a securities firm in Securities Borrowing and Lending transactions, either for borrowing underlying securities from the holders or for short selling on an exchange market.
- Collateral for securities borrowed: Collateral posted by a securities firm in Securities Borrowing and Lending transactions, either for borrowing underlying securities from the holders or for short selling on an exchange market.
- Trade receivables: Claims arising from a securities firm's business operations, including transaction proceeds receivable from the sale of securities held for operations, margin loan interest receivable from proprietary margin trading operations, and receivables from the execution of customer orders to buy or sell securities. The details of such trade receivables shall be disclosed in the notes.
Trade receivables shall be measured at amortized cost using the effective interest method. However, short-term trade receivables with no stated interest rate may be measured at the original invoice amount if the effect of discounting is immaterial.
Trade receivables from related parties in significant amounts shall be presented separately.
At each balance sheet date an assessment shall be made of whether there is any uncollectible amount from trade receivables and an appropriate allowance for doubtful debts shall be made, with the result presented on a net basis. - Prepayments: All prepayments and prepaid expenses.
- Other receivables: Receivables other than trade receivables.
At each balance sheet date an assessment shall be made of whether there is any unrecoverable amount from other receivables and an appropriate allowance for doubtful debts shall be made, with the result presented on a net basis. - Current tax assets: The portion of the tax amount already paid in respect of current and prior periods that exceeds the amount due for those periods.
- Non-current assets held for sale: Any non-current asset, or asset included in a disposal group held for sale, that is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups, and whose sale must be highly probable.
The measurement, presentation, and disclosure of non-current assets held for sale and disposal groups held for sale shall be made in accordance with IFRS 5. - Other current assets: Current assets not attributable to any of the classes above.
- Non-current assets: Tangible, intangible and financial assets of a long-term nature, other than assets classified as current.
- Held-to-maturity financial assets - non-current: A non-derivative financial asset with fixed or determinable payments and fixed maturity, and which a securities firm has the positive intention and ability to hold to maturity, excluding the following items:
- It is designated, upon initial recognition, as at fair value through profit or loss.
- It is designated as available-for-sale.
- It meets the definition of loans and receivables.
Held-to-maturity financial assets shall be measured at amortized cost.
- Investments accounted for using the equity method: An investment in an associate, or an interest in a jointly controlled entity not recognized by the venturer using proportionate consolidation.
The valuation and presentation of investments accounted for using the equity method shall be made in accordance with IAS 28 and IAS 31.
When investment gain or loss is recognized, if the financial reports prepared by an associate do not conform to these Regulations, those financial reports shall first be adjusted to achieve conformance before they may be used to recognize investment gain or loss. The financial reports of an associate used in applying the equity method shall be prepared as of the same date as that of the investor, and if prepared as of a different date, adjustments shall be made for the effects of significant transactions or events that occur between that date and the date of the investor's financial reports. In no case shall there be more than 3 months difference between the balance sheet date of the associate and that of the investor. If a CPA determines, pursuant to Statement of Auditing Standards No. 24, that an associate has a material effect on the fair presentation of the financial reports of an investor, the financial reports of the associate shall be audited by a CPA in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and generally accepted auditing standards.
If an investment accounted for using the equity method is pledged as collateral or otherwise subject to any restriction or limitation, that fact shall be noted. - Property and equipment: Tangible asset items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and that are expected to be used during more than 1 financial year.
Property and equipment shall be subsequently measured using the cost model and accounted for in accordance with IAS 16.
Each component of property and equipment that is significant shall be depreciated separately.
When items of property and equipment have different useful lives, or provide economic benefits in different ways, or are subject to different depreciation methods or depreciation rates, the notes shall show each class of their material components. - Investment property: Property held, by the owner or by the lessee under a finance lease, to earn rentals, or for capital appreciation, or both.
Investment property shall be accounted for in accordance with IAS 40. If the investment property is subsequently measured at fair value, the valuation model, qualifications of the appraiser, and information disclosure shall comply with Article 9, paragraph 3, subparagraph 2, item 4 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers. - Intangible assets: An identifiable non-monetary asset without physical substance that meets the definition of identifiability, control by an entity, and existence of future economic benefits.
Intangible assets shall be subsequently measured using the cost model and accounted for in accordance with IAS 38. - Deferred tax assets: The amounts of income taxes recoverable in future periods in respect of deductible temporary differences, the carryforward of unused tax losses, and the carryforward of unused tax credits.
- Other non-current assets: Non-current assets not attributable to any of the classes above.
The items described in the preceding paragraph in relation to financial assets at fair value through profit or loss, available-for-sale financial assets, financial assets measured at cost, bond investment for which no active market exists, held-to-maturity financial assets, derivative financial assets for hedging, investments in bonds with reverse repurchase agreements, securities margin loans receivable, deposits for securities borrowed, collateral for securities borrowed, trade receivables, and other receivables shall be accounted for in accordance with IAS 39.
A securities firm shall assess at each balance sheet date whether there is any objective evidence of impairment for the items described in paragraph 3 in relation to available-for-sale financial assets, financial assets measured at cost, bond investment for which no active market exists, held-to-maturity financial assets, investments in bonds with reverse repurchase agreements, securities margin loans receivable, deposits for securities borrowed, collateral for securities borrowed, trade receivables, other receivables, investments accounted for using the equity method, property and equipment, investment property, and intangible assets. If any such evidence exists, the securities firm shall recognize the amount of any impairment loss in accordance with IAS 39 and IAS 36.
The items described in paragraph 3 in relation to financial assets at fair value through profit or loss, derivative financial assets for hedging, available-for-sale financial assets, financial assets measured at cost, bond investment for which no active market exists, and held-to-maturity financial assets shall be distinguished as current and non-current based on liquidity.
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Article 22
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A securities firm shall separately disclose in the notes to the financial reports information on the following events between the securities firm and its subsidiaries during the current period, and on parent-subsidiary transactions:
- Information on significant transactions:
- Lending funds to others.
- Providing endorsements or guarantees for others.
- Acquisition of real estate reaching NT$300 million or 20 percent of paid-in capital or more.
- Disposal of real estate reaching NT$300 million or 20 percent of paid-in capital or more.
- Handling fee discounts on transactions with related parties totaling NT$5 million or more.
- Accounts receivable from related parties reaching NT$100 million or 20 percent of paid-in capital or more.
- Others: The business relationship between the parent and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions between them.
In the case of a securities firm whose shares have a par value other than NT$10, for the calculation of a transaction amount of 20 percent of paid-in capital under items 3, 4, and 6, 10 percent of the equity attributable to owners of the parent as stated in the balance sheet shall be substituted.
- Information on investees: If the securities firm directly or indirectly exercises significant influence, control, or joint venture control, over an investee company that is not in the mainland area, it shall disclose information on the investee company, showing the name, location, principal business activities, original investment amount, shareholding at the end of the period, profit or loss for the period, and recognized investment gain or loss.
The securities firm is exempted from the requirements of items (1) and (2) of the preceding subparagraph when the investee company it controls directly or indirectly is a financial or insurance enterprise. - Information on investments in the mainland area:
- If the securities firm directly or indirectly exercises significant influence, control, or joint venture control, over an investee company in the mainland area , it shall disclose the information on any investee company in the mainland area, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, current profit or loss, and recognized investment gain or loss, carrying amount of the investment at the end of the period, repatriated investment gains, and limit on the amount of investment in the mainland area.
- When the securities firm recognizes investment gain or loss using the equity method or prepares consolidated financial statements with respect to a mainland area investee company, the recognition or preparation shall be based on the investee company's financial reports audited and certified by an international accounting firm having a business cooperation relationship with an ROC accounting firm, provided that when preparing interim consolidated financial reports, the recognition or preparation may be based on the investee company's financial reports reviewed by an international accounting firm having a business cooperation relationship with an ROC accounting firm.
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Article 28
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A securities firm shall provide information on its business conditions in accordance with the following:
- Significant business matters: The securities firm shall provide information on matters arising over the most recent 5 financial years that have had a significant impact on its business, including acquisitions of or mergers with other companies, demergers, equity investments in affiliated enterprises, reorganization, purchases or disposals of major assets, and significant changes in operation method or business activity.
- Information related to investments in overseas enterprises: The securities firm shall provide summary information on any investments in overseas enterprises and offices, and any investments in other enterprises and offices by such overseas investee enterprises, including original investment amount, investment gains or losses, cash dividends, and endorsements, guarantees, or loans extended to outside parties by each such enterprise.
- Information on overseas branches and representative offices: The securities firm shall provide information on its overseas branches and representative offices, disclosing the locations, business activities, inward and outward remittances of operating capital, the branch's profit or loss for the period, and any accounts and transactions with the head office.
- Remuneration and related information on directors, supervisors, general manager, and assistant general managers:
- The securities firm shall, in a manner conforming to the following, disclose the remuneration paid to each of the directors, supervisors, general manager, and assistant general managers in the most recent financial year; if a director concurrently serves as a member of management, the remuneration shall be disclosed separately by the position held:
- The securities firm may opt either to disclose aggregate remuneration information, with the name(s) indicated for each remuneration range, or to disclose the name of each individual and the corresponding remuneration amount. For a director concurrently serving as a member of management, the remuneration shall be disclosed separately for each position held. The securities firm may adopt the aggregate disclosure method if it is a non-public company whose issued voting shares are all held, directly or indirectly, by one single person.
- If the securities firm's most recent capital adequacy ratio, whether unaudited, CPA-reviewed, or adjusted following FSC examination, is lower than 150 percent, or if it has had an after-tax deficit for the most recent financial year, it shall disclose the remuneration paid to each of the directors, supervisors, and general manager. The securities firm may adopt the aggregate disclosure method if it is a non-public company whose issued voting shares are all held, directly or indirectly, by one single person.
- The securities firm, if a public company that has had an insufficient director shareholding percentage for 3 consecutive months or longer during the most recent financial year, shall disclose the remuneration paid to each of the directors, and, if one that has had an insufficient supervisor shareholding percentage for 3 consecutive months or longer during the most recent financial year, shall disclose the remuneration paid to each of the supervisors.
- The securities firm, if a public company that has had an average ratio of share pledging by directors and supervisors in excess of 50 percent in any 3 months during the most recent financial year, shall disclose the remuneration paid to each of the directors and supervisors having a ratio of pledged shares in excess of 50 percent for each such month.
- If the securities firm's chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its CPA or at an affiliated enterprise of such accounting firm, it shall disclose the name and position of that person and the period during which the position was held at the accounting firm or affiliated enterprise.
As used in these Regulations, the expression "affiliated enterprise of the accounting firm of its CPA" means one in which the CPAs at the accounting firm of its CPA hold more than 50 percent of the shares, or of which such CPAs hold more than half of the directorships, or a company or institution shown as an affiliated enterprise in the publications or public announcements of the accounting firm of its CPA.
- Labor-management relations:
- Indicate any significant employee benefit policies, professional development, training, or retirement programs and the status of their implementation, as well as agreements between labor and management and policies for safeguarding employees' rights and interests.
- Provide information on any loss sustained as a result of labor disputes in the most recent 3 financial years, together with the disclosure of an estimate of losses incurred to date or likely to be incurred in the future and the mitigation measures taken or to be taken. If the losses cannot be reasonably estimated, the securities firm shall make a statement to that effect.
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Article 35
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A securities firm electing to use the deemed cost exemption described in IFRS 1 shall be subject to the following:
- If the fair value of such an item of investment property is elected to be its deemed cost, the securities firm shall comply with Article 9, paragraph 3, subparagraph 2, item 4 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
- For an item of investment property that does not fall within the scope of the preceding subparagraph allowing the use of fair value as deemed cost, of property and equipment not classified as for investment or held for sale, or of intangible assets, the securities firm may only elect to use a previous GAAP revaluation of that item as deemed cost at the date of the revaluation.
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Article 38
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These Regulations shall be enforced from the fiscal year of 2013, with the exception of Articles 2, 3, 10, 14, 22, 28, and 35 amended on 5 February 2014, which shall be enforced from 1 January 2014.
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