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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.
Current asset means that the securities firm expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; that it holds the asset primarily for the purpose of trading; that it expects to realize the asset within 12 months after the balance sheet date; or that 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. As a minimum, current assets shall include the following asset line items:
- Cash and cash equivalents:
- Cash on hand, demand deposits, and short-term, highly liquid time deposits or 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 held for trading. The following financial instruments shall be appropriately recorded under the category of broker's investments in securities, open-end funds or money market instruments, securities held for operations, or derivative instruments:
- Assets that are acquired principally for the purpose of sale in the near term.
- Assets that, upon initial recognition, are 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.
- Assets that are derivative financial assets, except for derivative financial assets that are financial guarantee contracts or designated and effective hedging instruments.
- 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.
- 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 are designated as available-for-sale.
- Financial assets that are neither derivative financial assets nor any of the following:
- Financial assets measured at fair value through profit or loss.
- Held-to-maturity financial assets.
- Financial assets measured at cost.
- Debt instrument 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: Means 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.
- Debt instrument investments for which no active market exists – current:
- Debt instrument 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.
- Debt instrument 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.
- With respect to discounted or transferred trade receivables, an assessment shall be made to determine whether the risks and rewards of the trade receivables, and the control retained over them, will qualify them for derecognition under IAS 39, and the trade receivables shall then be disclosed in accordance with IFRS 7.
- 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.
- When non-current assets or disposal groups classified as held for sale no longer meet the criteria in IFRS 5, they shall cease to be classified as held for sale.
- When assets or disposal groups meet the definition of held for distribution to owners, they shall be reclassified from held for sale to held for distribution to owners, and shall be deemed an extension of the original disposal plan, and the classification, presentation, and measurement of the new disposal plan shall apply. When the assets or disposal groups classified as held for distribution to owners no longer meet the criteria in IFRS 5, they shall cease to be classified as held for distribution to owners.
- Other current assets: Current assets not attributable to any of the classes above.
Non-current assets means tangible, intangible and financial assets of a long-term nature, other than assets classified as current. As a minimum, non-current assets shall include the following asset line items:
- 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:
- Assets that are designated, upon initial recognition, as at fair value through profit or loss.
- Assets that are designated as available-for-sale.
- Assets that meet the definition of loans and receivables.
- Held-to-maturity financial assets shall be measured at amortized cost.
- Investments accounted for using the equity method:
- The valuation and presentation of investments accounted for using the equity method shall be made in accordance with IAS 28.
- 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. 51, 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 or 1 operating cycle.
- 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. The depreciation method used shall reflect the pattern in which the asset's future economic benefits are expected to be consumed. If that pattern cannot be determined reliably, the straight-line method shall be used. The depreciable amount should be allocated on a systematic basis over the asset's useful life.
- 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 4, subparagraph 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.
- The amortization method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. If that pattern cannot be determined reliably, the straight-line method shall be used. The amortized amount of an intangible asset shall be allocated on a systematic basis over its useful life.
- 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 two paragraphs in relation to financial assets at fair value through profit or loss, available-for-sale financial assets, financial assets measured at cost, debt instrument investments 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 and paragraph 4 in relation to available-for-sale financial assets, financial assets measured at cost, debt instrument investments 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 measured using the cost model, 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. If the recoverable amount of non-financial assets is determined on the basis of fair value less costs of disposal, disclose the extra information regarding the fair value measurement, including the level of the fair value hierarchy, the valuation techniques, and the key assumptions. If the recoverable amount is determined on the basis of value in use, disclose the discount rate for value in use measurement.
With respect to the items described in paragraph 3 and paragraph 4 in relation to financial assets at fair value through profit or loss, derivative financial assets for hedging, available-for-sale financial assets, debt instrument investments for which no active market exists, held-to-maturity financial assets, securities margin loans receivable, trade receivables, other receivables, non-current assets held for sale, and investment property, the measurement and disclosure of fair value shall be made in accordance with IFRS 13.
The items described in paragraphs 3 and 4 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, debt instrument investments 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 17
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A securities firm shall present all items of income and expense recognized in a period in a single statement of comprehensive income displaying components of profit or loss and components of other comprehensive income.
A securities firm shall present expenses recognized in profit or loss under the preceding paragraph using a classification based on their nature.
When items of income or expense are material, a securities firm shall disclose their nature and amount separately in the statement of comprehensive income or in the notes.
As a minimum, the statement of comprehensive income shall include the following line items, with the related details disclosed in the notes:
- Income:
- Brokerage fee revenue: Revenue from handling fees received by a securities firm for executing customer orders, during short sale or securities lending operations, or for the provision of agency services for transactions in emerging stocks.
- Revenue from underwriting business: Remuneration from underwriting securities on a firm commitment basis, handling fee revenue from underwriting securities on a best-efforts basis, revenue from underwriting processing fees, and revenue from underwriting advisory fees.
- Net gains (losses) on issuance of call (put) warrants: A securities firm's net gains or losses arising from changes in fair value of liabilities for call (put) warrants and of repurchased call (put) warrants, gains on exercise of call (put) warrants before maturity, and gains on expired call (put) warrants, less related fees incurred by the securities firm for issuing call (put) warrants.
- Net gains (losses) on sale of securities held for operations: The net amount after offsetting all gains and losses arising from the sale of securities held for operations by the dealing and underwriting segments.
- Net gains (losses) on measurement at fair value through profit or loss for securities held for operations: The net amount after offsetting all gains and losses arising from the fair value measurement of securities held for operations that are acquired by the dealing and underwriting segments.
- Net gains (losses) on the covering of securities borrowing and short sales of bonds with reverse repurchase agreements: In the case of a securities firm engaging in securities borrowing or outright sale of government bonds acquired under reverse repurchase agreements, the net amount after offsetting all gains arising from a decline in the market price of the given security when the trade is covered at maturity with all losses arising from an increase in the market price of the given security when the trade is covered at maturity.
- Net gains (losses) on measurement at fair value through profit or loss for securities borrowing and short sales of bonds with reverse repurchase agreements: In the case of a securities firm engaging in securities borrowing or outright sale of government bonds acquired under reverse repurchase agreements, the net amount after offsetting all gains and losses from measuring relevant items at fair value.
- Interest revenue: Interest revenue that a securities firm derives from its margin purchase or money lending business or otherwise related to its business activities.
- Net income from wealth management business: In the case of a securities firm engaging in wealth management business, the net amount of the resultant revenues less related expenditures.
- Net gains (losses) on derivative instruments: In the case of a securities firm engaging in domestic or foreign derivative instrument business or hedging transactions, the net amount after offsetting the resultant gains and losses.
- Other operating income: Operating revenues and gains not attributable to any of the items above.
- The recognition and measurement of revenue shall be made in accordance with IAS 18. When, and only when, a securities firm assesses it has exposure to the significant risks and rewards for the sale of goods or the rendering of services based on an examination of the circumstances of the transaction, the recognition of revenue shall be based on the gross amount; otherwise, the recognition of revenue shall be based on the net amount.
- Handling fee expenses: Includes broker's exchange fees, dealer's exchange fees, and underwriting handling fees that a securities firm is required to pay to the Taiwan Stock Exchange or the GreTai Securities Market.
- Employee benefits expenses:
- Expenses in relation to employee benefits that IAS19 requires to be recognized, including short-term employee benefits (such as wages, salaries, and labor and national health insurance contributions for employees), post-employment benefits (such as pensions), other long-term employee benefits (such as long-service leave), and termination benefits (such as early retirement incentive programs).
- If the post-employment preferential deposit interest rate that a securities firm has offered to an employee in accordance with its internal rules or as stipulated in the employment contract is higher than the prevailing interest rate on the market, IAS 19 shall apply to the excess portion of the interest upon the employee's retirement.
- Depreciation and amortization expenses: Related depreciation and amortization expenses that IAS16 and IAS38 require to be recognized.
- Finance costs: Include interest expenditures incurred in relation to operating activities and for all classes of liabilities, with the portion eligible for capitalization being deducted.
- Other operating expenses: Operating expenses required for a securities firm's business management needs and not attributable to any of the items above.
- Share of the profit or loss of associates and joint ventures accounted for using the equity method: The profit or loss of associates and interests in joint ventures that a securities firm recognizes using the equity method according to its share in the associates and the interests in joint ventures.
- Tax expense (benefit): The aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.
- Profit or loss of discontinued operations:
- The post-tax profit or loss of discontinued operations and the post-tax gain or loss recognized on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation.
- The presentation and disclosure of profit or loss of discontinued operations shall be made in accordance with IFRS 5.
- Profit or loss during the period: Earnings or deficit in the current reporting period.
- Other comprehensive income: Means each component of other comprehensive income classified by nature, including share of the other comprehensive income of associates and joint ventures accounted for using the equity method:
- Items that may be subsequently reclassified into profit or loss: Include exchange differences resulting from translating the financial statements of a foreign operation, unrealized gains or losses from available-for-sale financial assets, gains and losses on measuring investments in equity instruments at fair value through other comprehensive income, and the effective portion of gains and losses on hedging instruments in a cash flow hedge.
- Items not to be reclassified into profit or loss: Include revaluation surplus and remeasurements of defined benefit plans.
- Total comprehensive income.
- Allocations of profit or loss during the period attributable to non-controlling interest and owners of the parent.
- Allocations of total comprehensive income during the period attributable to non-controlling interest and owners of the parent.
- Earnings per share:
- Basic and diluted earnings per share for profit or loss from continuing operations attributable to the ordinary equity holders of the parent entity and for profit or loss attributable to the ordinary equity holders of the parent entity.
- The calculation and presentation of earnings per share shall be made in accordance with IAS 33.
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Article 20
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To meet the objective of presenting full and complete information about the financial position, financial performance, and cash flows of a securities firm, financial reports shall contain explanatory notes disclosing the following:
- Company history and scope of business operations.
- A statement that the financial reports comply with these Regulations, applicable laws and regulations (giving the titles of the laws or regulations), as well as IFRS, IAS, IFRIC Interpretations, and SIC Interpretations.
- The date when the financial reports were authorized for issue and the process involved in authorizing the financial reports for issue.
- The effect or impact that may arise when it has or has not applied a new or revised IFRS, IAS, IFRIC Interpretation, or SIC Interpretation recognized by the FSC.
- A summary of significant accounting policies used that are relevant to an understanding of the financial reports, and the measurement basis (or bases) used in preparing the financial reports.
- Significant accounting judgments, estimations, and assumptions, as well as information about the assumptions it makes and other major sources of estimation uncertainty.
- Objectives, policies and processes for managing capital, and any change in capital structure, including funding, liability, and equity.
- If for a special reason there is a change in accounting treatment, thus affecting the comparison of financial data between two successive periods, the reason for the change and its effect on the financial reports shall be noted.
- If it is necessary to provide the basis of valuation for any amount, financial instrument, or other item presented in the financial reports, the basis of valuation shall be noted.
- If any item presented in the financial reports is subject to any legal, regulatory, contractual, or other restriction, the circumstances and timing of the restriction and other related information shall be noted.
- Criteria for classifying assets and liabilities into current and non-current.
- Material contingent liabilities and unrecognized contractual commitments.
- Information on related financial instruments such as call (put) warrants and hedging transactions.
- Financial risk management objectives and policies.
- Long-term and short-term borrowings.
- The addition, expansion, construction, lease, obsolescence, idling, sale, transfer, or long-term renting of major assets.
- Principal investments in other enterprises.
- Significant transactions with related parties.
- Losses due to major disasters.
- Major litigation pending or concluded.
- The signing, completion, voidance, or lapse of major contracts.
- Information about employee benefits. The information shall be disclosed in accordance with IAS 19, and shall include the influence of defined benefit plans on the amount, timing, and certainty of future cash flows, actuarial losses and gains arising from changes in demographic assumptions and financial assumptions, and the expected contributions in the next reporting period in the following financial year.
- Major organizational adjustments and significant management reforms.
- Material effects of changes in government laws and regulations.
- Segment financial information required to be disclosed in accordance with IFRS 8 including the scope of business, revenue, and gains and losses of each reportable segment.
- Information on Mainland Area investments by the securities firm or by its subsidiaries in a third jurisdiction.
- In the case of private placement of securities, the type, issue date, and amount shall be disclosed.
- Material effects of discontinuance of operations.
- Any merger with or transfer of all business operations from or to another securities firm.
- The content and monetary amount of trust business activities conducted in accordance with the Trust Enterprise Act.
- When subsidiaries hold shares in the parent, the names of the subsidiaries and the shareholdings, amounts, and reasons shall be separately presented.
- Fair value information. The information shall be disclosed in accordance with IFRS 13, and shall include information on recurring or non-recurring fair value measurement of assets and liabilities, inputs such as fair value valuation technique and parameters or assumptions used in fair value measurement, and Level 3 of fair value hierarchy.
- Foreign-currency-denominated assets and liabilities that have significant influence: Include the amount of risk exposure, currency, and exchange rate for monetary and non-monetary items denominated in foreign currencies, and the foreign exchange gains or losses on monetary items.
- regulatory capital adequacy ratio
- The basis for calculating the number of shares to be distributed as profit-sharing compensation to employees, and information on profit-sharing compensation to employees, directors, and supervisors:
- The fixed amount or ratio prescribed in the articles of incorporation (and a statement that this information may be queried on the Market Observation Post System).
- The basis for the estimated figures for the current period, the basis for calculating the number of shares to be distributed, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure.
- The actual distribution for the previous fiscal year (with an indication of the number of shares, monetary amount, and stock price, of the shares distributed), and, if there is any discrepancy between the actual distribution and the recognized amount, additionally specify the amount of the discrepancy, the cause, and how it is treated.
- Supporting information for items presented in the balance sheet and in the statements of comprehensive income, of changes in equity and of cash flows, or other necessary descriptions essential for avoiding misunderstanding by users or for the fair presentation of the financial reports.
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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.
- Information on investees: If the securities firm directly or indirectly exercises significant influence or control over, or has a joint venture interest in, 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, recognized investment gain or loss, and cash dividends.
- 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.
- Information on investments in the Mainland Area:
- If the securities firm directly or indirectly exercises significant influence or control over, or has a joint venture interest in, 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.
If the shares issued by a securities firm have a par value other than NT$10, for the calculation of a transaction amount of 20 percent of paid-in capital under subparagraph 1, items C, D, and F of the preceding paragraph, 10 percent of the equity attributable to owners of the parent as stated in the balance sheet shall be substituted.
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Article 23
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A securities firm shall fully disclose information on related party transactions in accordance with IAS 24, and the following provisions shall be complied with:
- The name and relationship of the related party shall be presented.
- If the transaction amount or balance of any single related party reaches 10 percent or more of the securities firm's total transaction amount or balance of that type of transaction, the name of each such related party shall be individually presented.
In considering whether a counterparty is a related party, attention shall be directed to the substance of the relationship in addition to the legal form. Unless it can be established that no control, joint control, or significant influence exists, a party falling within any of the following shall be deemed to have a substantive related party relationship, and relevant information shall be disclosed in the notes to the financial reports in accordance with IAS 24:
- An affiliated enterprise within the meaning given in Chapter VI-I of the Company Act, and any of its directors, supervisors, and managerial officers.
- A company or institution governed by the same general management office as the securities firm, and any of its directors, supervisors, and managerial officers.
- A person holding the position of manager or higher in the general management office.
- A company or institution shown as an affiliated enterprise in the securities firm's publications or public announcements.
- Another company or institution whose board chairman or president is the same person as, or is the spouse or a relative within the second degree of kinship of, the board chairman or president of the securities 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.
- Remuneration to directors, supervisors, general manager, and assistant general managers and related information:
- 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.
- In any of the following circumstances, the securities firm shall disclose the remuneration paid to each of the directors and supervisors, provided that this rule does not apply 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 two financial years, it shall disclose the remuneration paid to each of the directors, supervisors, and general manager. This requirement, however, shall not apply if there is net income after tax for the most recent fiscal year and such net income after tax is sufficient to make up the accumulated deficits.
- 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 total amount of remuneration received by all of the directors and supervisors in their capacity as directors or supervisors of the companies listed in the financial reports exceeds 2 percent of the net income after tax, and the remuneration received by any individual director or supervisor exceeds NT$15 million, the securities firm shall disclose the remuneration paid to that individual director or supervisor.
- Labor-management relations:
- Indicate each item of 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.
- List the loss sustained as a result of labor disputes in the most recent financial year, 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 29
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A securities firm shall disclose the following financial overview:
- Condensed balance sheet and statement of comprehensive income for the most recent 5 financial years, and shall specify the name of the CPAs and the auditor's opinion.
- Financial analysis for the most recent 5 years: including financial structure, solvency, profitability, cash flows and the rates of other special requirements, and explain the reasons for the change of each of the financial ratios over the most recent 2 fiscal years.
- If the securities firm or an affiliated enterprise has encountered any financial difficulties in the most recent fiscal year, the impact on the company's financial condition shall be set forth.
"Affiliated enterprise" in subparagraph 3 of the preceding paragraph refers to an affiliated enterprise as defined in Article 369-1 of the Company Act.
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Article 30
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A securities firm shall review and analyze its financial position, and financial performance, and assess risk items. The required particulars are as follows:
- Financial condition: The report shall explain the reason for, and impact of, any material change over the most recent 2 fiscal years in its assets, liabilities, or equity. Where the impact is of material significance, it shall further describe how the securities firm plans to respond.
- Financial performance: The report shall explain the reasons for any material changes over the most recent 2 fiscal years in operating income, and income before tax; forecast the securities firm's expected sales volume and provide the basis for the forecast; and describe the possible impact of such changes upon the securities firm's financial and business affairs, and how the securities firm plans to respond.
- Cash flows: The report shall analyze and explain any changes over the most recent fiscal year in the securities firm's cash flows; describe how the securities firm plans to address any illiquidity problems; and provide an analysis of the securities firm's cash liquidity for the coming fiscal year.
- The impact of any material capital expenditures over the most recent fiscal year upon the securities firm's financial and operating condition.
- The securities firm's policy for the most recent fiscal year on investments in other companies, the main reasons for profit/losses resulting therefrom, plans for improvement, and investment plans for the coming fiscal year.
- The section on risks shall analyze and assess the following matters for the most recent fiscal year and as of the day of the close of the fiscal year:
- The effect upon the securities firm's profits (or losses) of interest and exchange rate fluctuations and changes in the inflation rate, and response measures to be taken in the future.
- The securities firm's policy regarding high-risk investments, highly leveraged investments, loans to other parties, endorsements, guarantees, and derivatives transactions; the main reasons for the profits/losses generated thereby; and response measures to be taken in the future.
- Effect on the securities firm's financial operations of important policies adopted and changes in the legal environment at home and abroad, and measures to be taken in response.
- Effect on the securities firm's financial operations of developments in science and technology as well as industrial change, and measures to be taken in response.
- Effect on the securities firm's crisis management of changes in the securities firm's corporate image, and measures to be taken in response.
- Expected benefits and possible risks associated with any merger or acquisition, and measures to be taken in response.
- Expected benefits and possible risks associated with any plant expansion, and measures to be taken in response.
- Risks associated with any consolidation of business operations, and measures to be taken in response.
- Effect upon and risk to the securities firm of any large transfer or changing of hands of shareholding of a director, a supervisor, or a shareholder holding greater than a 10 percent stake in the securities firm, and measures to be taken in response.
- Effect upon and risk to the securities firm associated with any change in governance personnel or top management, and measures to be taken in response.
- Litigious or non-litigious matters. List any major litigious, non-litigious, or administrative dispute that involves the securities firm or any of its directors, supervisors, general manager, any major shareholder holding a stake of greater than 10 percent, or any company or companies controlled by the securities firm, and that has been concluded by a final and conclusive judgment or is still pending. Where the outcome of such a dispute could materially affect shareholders' equity or the prices of the firm's securities, the report shall disclose the facts of the dispute, amount of money at stake in the dispute, the date of commencement of litigation, the main parties to the dispute, and the status of the dispute as of the date of the close of the fiscal year.
- Other significant risks, and measures to be taken in response.
- Crisis management mechanisms.
- Other important matters.
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Article 31
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A securities firm shall disclose the following information regarding its CPA:
- Information on professional fees: A securities firm may opt to disclose CPA professional fees either by fee range or by disclosure of individual amounts, and, given any of the following conditions, shall disclose the following information:
- When non-audit fees paid to the CPA, to the accounting firm of the CPA, and to any affiliated enterprise of such accounting firm are equivalent to one quarter or more of the audit fees paid to them, the amounts of both audit and non-audit fees and the details of the non-audit services shall be disclosed. "Audit fees" means professional fees paid by the securities firm to its CPA for audits, reviews, and secondary reviews of financial reports, reviews of financial forecasts, and tax certification.
- When the securities firm changes its accounting firm and the audit fees paid for the financial year in which the change took place are lower than those paid for the financial year immediately preceding the change, the amount of the audit fees before and after the change and the reason shall be disclosed.
- When the audit fees paid for the current financial year are lower than those paid for the immediately preceding financial year by 15 percent or more, the amount and percentage of and reason for the reduction in audit fees shall be disclosed.
- Information on change in CPA: If a securities firm changed its CPA during the most recent 2 financial years or any subsequent interim period, it shall disclose the following information:
- Regarding the former CPA:
- Date of and reason for the change in CPA, together with a description of whether the CPA or the securities firm terminated or discontinued the engagement.
- If the former CPA issued an audit report during the most recent 2 years containing an opinion other than an unqualified opinion, state the opinion and reason.
- Indicate whether there were any disagreements between the securities firm and the former CPA on accounting principles or practices, financial report disclosure, and auditing scope or procedure. If any such disagreements did exist, the securities firm shall describe in detail the nature of each such disagreement, how the securities firm addressed them (including whether the securities firm has authorized the former CPA to respond fully to the inquiries of the successor CPA concerning such above-mentioned disagreements), and the final results.
- Indicate whether the former CPA advised the securities firm that it lacked the sound internal controls necessary to develop reliable financial reports.
- Indicate whether the former CPA advised the securities firm that the CPA was unable to rely on the securities firm's written representations, or was unwilling to be associated with the financial reports prepared by the securities firm.
- Indicate whether the former CPA advised the securities firm that the scope of the audit must be expanded, or there was information showing that an expanded audit might impact the reliability of either a previously issued financial report or the financial report to be issued, but due to the change of the CPA or for any other reason, the former CPA did not expand the scope of the audit.
- Indicate whether the former CPA advised the securities firm that information has come to the CPA's attention that might impact the reliability of either a previously issued financial report or the financial report to be issued, but due to the change of the CPA or for any other reason, the former CPA did not address the issue.
- Regarding the successor CPA:
- Names of the successor accounting firm and CPA, and date of engagement.
- If prior to the formal engagement of the successor CPA, the securities firm consulted the new CPA regarding the accounting treatment of or application of accounting principles to a specific transaction, or the type of audit opinion that might be rendered on the securities firm's financial report, the securities firm shall disclose the issues that were the subjects of those consultations and the consultation results.
- The securities firm shall consult and obtain written views from the successor CPA regarding the matters on which the securities firm disagreed with the former CPA, and disclose information on these views.
- The securities firm shall by letter provide the former CPA with a copy of the disclosures it is making in response to item A and item B (c), and advise the CPA of the need to respond by letter within 10 days should the CPA disagree on any such matters. The securities firm shall disclose the content of the reply letter from the former CPA.
- Where 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 auditing CPAs or at an affiliated enterprise of such accounting firm, the name and position of the person, and the period during which the position was held, shall be disclosed. The term "affiliated enterprise" of the accounting firm of the auditing CPAs means an enterprise in which CPAs of the accounting firm to which the auditing CPAs belong hold more than 50 percent of the shares, or of which they hold more than half of the directorships, or any company or institution listed as an affiliated enterprise in the external publications or printed materials of the accounting firm of the auditing CPAs.
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Article 32
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A securities firm preparing and disclosing information on matters specified in Articles 28 through 31 of these Regulations shall request its CPA to issue a review opinion on these matters.
The matters for compliance for the issuing of a review opinion by the CPA under the preceding paragraph shall be separately prescribed by the FSC.
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Article 33-1
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When a securities firm engages in any business combination, it shall determine the actual acquirer and whether it is an actual transfer of control in accordance with IFRS 3. Unless otherwise provided, it shall measure the acquiree's identifiable assets and liabilities at fair value on the date of acquisition, and recognize goodwill or a gain from a bargain purchase. The date of acquisition means the date when the acquirer obtains control from the acquiree.
If any investment property or interest in joint operations that the securities firm acquires and obtains constitutes a "business" as defined under IFRS 3, it shall be handled in accordance with the preceding paragraph.
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Article 33-2
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Goodwill which is recognized in connection with a business combination of a securities firm shall be tested for impairment at least annually in accordance with IAS 36. If there is any significant difference between the actual operation conditions of the acquired company after the business combination and the expected benefits at the time of acquisition, it shall be disclosed in the notes.
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Article 39
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The financial reports and related supplementary documents that a securities firm is required to file in accordance with Article 36 of the Act as applied mutatis mutandis under Article 63 thereof shall be filed in accordance with Article 21 of the Regulations Governing Securities Firms.
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Article 40
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These Regulations shall come into force from the date of issuance, with the exception of Article 4, Article 7, Article 8, Article 11, paragraph 1, Article 12, Articles 14 to 18, Article 20, Article 22, Article 24, Article 25, Article 33, Article 35, and Article 37, as amended on 11 September 2014, which shall come into force from financial year 2015, and Article 14, Article 17, Article 20, Article 23, Article 33-1, Article 33-2, and Article 39, as amended on 14 February 2017, which shall come into force from fiscal year 2017.
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