|
Article 7
|
Assets shall be appropriately categorized. Liquid and illiquid assets shall be distinguished, provided that this shall not apply to special enterprises in which distinguishing assets according to liquidity is not appropriate.
The total amount of expected asset recovery within the 12 months following the balance sheet date and expected asset recovery more than 12 months after the balance sheet date shall be respectively expressed in the financial statement or disclosed in a footnote.
The classification of asset account titles in the balance sheet, account content, and matters to be set out in notes 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 the 12 months following the balance sheet date; and cash and cash equivalents, provided that those used in exchange for or liquidation of debt, 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, due in the near future, where fluctuations in the investment's interest rate have insignificant impact on its value.
Non-demand bank deposits shall be posted by item, with a note if their maturity date is longer than one year. Those specifically earmarked or restricted in use, e.g., for expansion of facilities or as sinking funds, may not be listed as cash.
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, with an explanation to be 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 at Fair Value Through Profit or Loss－Current: Current financial assets that are one of the following:
1. Financial assets held for trading.
2. Financial assets, except those designated as hedged items in hedge accounting relationships, which at the time of initial recognition were designated as assets to be measured at fair value, with changes in fair value to be recognized in earnings.
The following financial products shall be classed as financial assets held 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, except those that are designated and effective hedging instruments.
Financial assets at fair value through profit or loss shall be measured at fair value. "Fair value," for stocks or depository receipts listed on the Taiwan Stock Exchange or traded over-the-counter on the GreTai Securities Market (GreTai), 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. In these Regulations, "stocks traded over-the-counter" does not include the stocks of public companies that, under Article 5 of the GreTai Securities Market Regulations Governing Review of Emerging Stocks Traded on Over-the-Counter Markets, have been approved for over-the-counter trading at a securities firm's place of business ("emerging stocks").
Financial assets at fair value through profit or loss shall be classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "financial assets at fair value through profit or loss－non current" under "funds and investments".
(3) Available-for-sale financial assets－current: Non-derivative financial assets that meet one of the following conditions:
1. The assets have been designated as available-for-sale.
2. The assets fall within none of the following financial asset classes:
a. Financial assets at fair value through profit or loss.
b. Financial assets held to maturity.
c. Financial assets measured at cost.
d. Bond portfolios with no active market bonds.
e. 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 assets shall be measured at fair value. "Fair value," for stocks or depository receipts listed on the Taiwan Stock Exchange or traded over-the-counter on the GreTai, means the closing price on the balance sheet date. For open-end funds, fair value means the net asset value of the given fund on the balance sheet date.
(4) Derivative financial assets for hedging－current: Derivative financial assets that have been designated in hedge accounting relationships and are effective hedging instruments shall be measured at fair value and classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "derivative financial assets－non current" under "funds and investments".
(5) Financial assets measured at cost－current: Holdings in the following stocks that have no material influence, or derivatives linked to and settled in those stocks:
1. Stocks not listed on the Taiwan Stock Exchange or the GreTai.
2. Emerging stocks.
Financial assets measured at cost shall be classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "financial assets measured at cost－non current" under "funds and investments".
(6) Bond portfolios with no active market bonds－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 and for recognition of changes in their fair value in profit or loss.
2. The bond investments have not been designated as available-for-sale.
Bond portfolios with no active market bonds shall be stated at amortized cost and classed according to liquidity as current or non-current. Those that are non-current shall be reclassified as "bond portfolios with no actively traded bonds－non current" under "funds and investments".
(7) Notes receivable: all notes receivable.
The fair value of notes receivable shall be calculated from the imputed interest rate, provided that for notes receivable at one-year periods or less, where the difference between the fair value and the value at maturity is small and the notes are frequently traded, the notes need not be measured at fair value.
Discounted or transferred notes receivable shall be deducted and the deduction set out in the financial statement notes.
Notes receivable resulting from operating activities and notes receivable resulting from non-operating activities shall be given separate entries.
Notes receivables in significant amounts from related parties shall be separately disclosed.
Notes provided for security shall be so indicated in the notes to the financial statement.
Notes receivable that are determined to be impossible to collect shall be written off.
During account settlement, the amount of uncollectible notes receivable shall be assessed and an appropriate allowance for bad debt provided.
(8) Accounts receivable: claims resulting from sale of goods or services.
The fair value of accounts receivable shall be calculated based on the imputed interest rate, provided that for accounts receivable at one-year periods or less, where the difference between the fair value and the value at maturity is small and where trading is also frequent, the accounts receivable need not be measured at fair value.
Large accounts receivable from related parties shall be separately disclosed.
An account receivable for which collection is determined to be impossible shall be written off.
During account settlement, the amount of uncollectible accounts receivable shall be assessed and an appropriate allowance for bad debt provided.
Unrealized interest revenue on installment sales shall be classified as a deduction from accounts receivable. Where the recovery period of any portion of an account receivable exceeds one year, a note shall be provided showing the anticipated amount recoverable in each year.
"Pledged accounts receivable" shall be disclosed in the notes to the financial statement.
Where accounts receivable include long-term construction contract sums, the amount reserved as retainage for construction within the already-invoiced accounts receivable shall be indicated in the balance sheet or the notes to the financial statement. If the expected period for recovery of the retainage is more than one year, the anticipated amount recoverable in each year shall be noted.
(9) Other receivables: other receivables not falling within notes receivable and accounts receivable.
During account settlement, the amount of other receivables uncollectible shall be assessed and an appropriate allowance for bad debt provided.
If any of the "other receivables" exceeds the aggregate amount of current assets by 5%, they shall be individually stated according to type and counterparty.
Allowances for bad debts shall be respectively stated as deductions from notes receivable, accounts receivable, and other receivables. If such accounts are further subdivided, the allowances for bad debts shall also be respectively recorded in the same manner.
(10) Other financial assets－current: Financial assets not listed separately on the balance sheet shall be listed as "other financial assets－non-current" and shall be categorized according to liquidity as either current or non-current. Non-current assets shall be reclassified as "other financial assets－non-current" under "funds and investments".
When the amount of a financial asset under "current assets" accounts for 5 percent of aggregate current assets, it shall be given a separate balance sheet entry.
(11) Inventory: Assets meeting any one of the following conditions:
1) Items held for sale in the normal course of business;
2) Items of work-in-progress which will be sold after further processing;
3) Materials and supplies directly or indirectly consumed in the production of goods or services for sale.
The accounting treatment of inventories shall be in accordance with Statement of Financial Accounting Standards No. 10.
Where the value of inventories is markedly reduced due to defects, damage, or obsolescence such that the net realizable value is below cost, the stated cost shall be reduced to the net realizable value.
Inventories provided for pledge, security, or used under the surveillance of creditors shall be noted.
If a construction company which contracts with other parties to construct pre-sold buildings meets all of the following conditions, it may recognize the profit for sale of the buildings based on the percentage-of-completion method:
1) The construction has progressed beyond the preparatory stage, i.e., the designing, planning, contracting, and site preparation have been completed and building of the project can begin at any time;
2) The total amount of pre-sale contracts has reached the total estimated construction cost;
3) Buyers' payments have reached 15% of the total contract price;
4) The collectibility of the contract amount receivable can be reasonably estimated;
5) Reasonable estimates can be made of total construction costs necessary for contract performance and the degree of completion at period end;
6) Reasonable estimates can be made of costs attributable to the contract for sale of buildings.
When a construction company purchases a property under construction from another party, the company continuing the construction and sale of the buildings shall adopt the completed contract method for recognition of profits on the sale of the buildings.
As a contractor has statutory mortgage on any construction in progress commissioned by a construction company, the construction company shall not offset such construction against the billings on construction in progress.
(12) Construction in progress: the construction costs incurred during the construction period by a long-term construction contract undertaken by an enterprise and the profits/losses recognized during that period.
Profits/losses under the long-term construction contract shall be recognized and expressed in accordance with Statement of Financial Accounting Standards No. 11.
(13) Prepayments: prepaid expenses and prepayments for purchase of materials.
Contractually stipulated prepayments for purchase of fixed assets and payments for uncompleted construction for operational use shall be listed as fixed assets and may not be listed as prepayments.
(14) Long-term equity investments held for disposal: equity investments in a subsidiary, where sale of those investments is planned within 12 months after the balance sheet date.
(15) 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.
(16) Other current assets: all current assets not falling within the above categories. With the exception of "cash and other financial assets－current", any of the above assets which accounts for less than 5% of aggregate current assets may be incorporated into "other current assets".
2. Funds and investments: All special funds and long-term investments made for regular business purposes. A financial asset listed under the "funds and investments" account that accounts for 5% of aggregate "funds and investments" assets shall be given a separate balance sheet entry.
(1) Financial assets held to maturity－non-current: Non-derivative 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. Financial assets held to maturity shall be measured at amortized cost. Investments held to maturity that mature within one year shall be reclassified as "investments held to maturity－current" under "current assets".
(2) Funds: assets provided for specified uses such as sinking funds, improvement and expansion funds, and contingency reserves.
Resolutions and rules that serve as the basis for provision of a fund shall set out in a note.
A welfare fund set aside in accordance with the Employee Welfare Fund Act shall be stated as an expense.
(3) Long-term investments: Long-term investments made to acquire a controlling interest or to gain other rights and interests in a property to satisfy operational objectives, such as investment in the stocks of other enterprises or investment in real estate.
The method of valuation of long-term investments shall be provided in a note, and they shall be separately listed according to type.
The valuation and expression of long-term equity investments using the equity method shall be carried out in accordance with Statement of Financial Accounting Standards No. 5.
In recognizing investment gains and losses according to the equity method, when an investee's financial report is not prepared in accordance with the generally accepted accounting principles of the ROC, that report shall first be adjusted in accordance with those principles and investment gains and losses recognized in accordance with the adjusted report. When the CPA, based on the Statement of Auditing Standards No. 24, judges that the investee company has a material influence on the fair presentation of the audited company's financial statement, the investee company's financial statement shall be audited by a CPA in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and with the Generally Accepted Accounting Principles.
If long-term investments are pledged as collateral or subject to restrictions, that fact shall be indicated in the notes.
3. Fixed assets: tangible assets used for operations, with a service life of one year or more, and not for the purpose of sale.
Under fixed assets, land, depreciable assets and depletable assets shall be presented separately. Any asset under "fixed assets" accounting for 5% of total "fixed assets" shall be given a separate balance sheet entry.
Fixed assets shall be recorded at the historical cost of acquisition or construction, provided that interest on the purchase price of a "presold" building or fixed assets purchased with a cash capital increase shall not be capitalized. Idled fixed assets shall be reclassified as other assets at the lower of their net fair value or book value. A fixed asset that is still in use after the expiration of its service life shall be depreciated based on the residual value.
Leased assets shall be recognized and disclosed in accordance with Statement of Financial Accounting Standards No. 2.
If a leased asset is of the operating lease type, the improvement made to the leased property is termed a leasehold improvement and shall be recorded as a fixed asset.
The valuation basis for a fixed asset shall be indicated in a note. If the fixed asset has been revalued, the date of revaluation and increased or decreased amount shall be recorded, and the acquisition costs and the appraisal increment shall be separately presented. The land value increment tax reserve allocated due to a land appraisal increment shall be classified as a long-term liability. Where fixed assets have been revalued, from the day following the date of record of the revaluation, depreciation shall be calculated based on the reassessed value.
Except for land, fixed assets shall be periodically depreciated or depleted on a reasonable and systematic basis during each period within their estimated useful or mining life and restated as expenses or indirect manufacturing costs during the relevant period according to their nature, without interruption or deduction.
The accumulated depreciation, accumulated impairment, or accumulated depletion 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 or lease term, and re-classified as an expense or indirect manufacturing cost in the relevant period according to its nature, without interruption or reduction.
The method for calculating the depreciation of depreciable assets shall be given in a note.
If a fixed asset is provided as a guarantee or has a mortgage or lien against it, that fact shall be given in a note.
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.
Any asset under "intangible assets" that accounts for 5% of total "intangible assets" 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, the assets shall be valued and profits/losses recognized and disclosed in accordance with the Statement of Financial Accounting Standards No. 19.
The valuation basis for intangible assets shall be noted.
5. Other assets: All the assets not falling within the above categories and with a collection or recovery period longer than one year or one operating cycle, such as refundable deposits, long-term notes receivable, and other miscellaneous assets.
The fair value of long-term notes receivable and other long-term receivables shall be calculated from the imputed interest rate.
Large, overdue accounts receivable shall be listed separately, and the collection status 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, such assets shall be listed separately according to type.
When land acquired by an Issuer is registered under another's name as the owner, the reasons shall be disclosed in the notes and the methods of preservation specified.
If financial assets held by an Issuer 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.
|