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Article 9
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Assets shall be properly classified. Current and non-current assets shall be distinguished, except when a presentation of all assets in order of liquidity provides information that is reliable and more relevant.
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 reports or disclosed in the notes.
As a minimum, the balance sheet shall include the following asset line items:
- Current assets: An entity 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.
An issuer 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 classified as a financial asset held for trading 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 to not be able to recover almost all of the original investments.
Bond investments for which no active market exists shall be measured at amortized cost.
- Notes receivable: All notes receivable.
Notes receivable shall be measured at amortized cost using the effective interest method. However, short-term notes receivable with no stated interest rate may be measured at the original invoice amount if the effect of discounting is immaterial.
Discounted or transferred notes receivable shall be deducted and the deduction shall be noted.
Notes receivable arising from operating activities shall be presented separately from other notes receivable arising from non-operating activities.
Notes receivable from related parties in significant amounts shall be presented separately.
Notes provided as security shall be indicated in the notes to the financial reports.
At each balance sheet date an assessment shall be made of whether there is any uncollectible amount from notes receivable and an appropriate allowance for doubtful debts shall be made.
- Trade receivables: Claims resulting from sale of goods or services.
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.
Unrealized interest revenue on installment sales shall be presented as a deduction from trade receivables. For trade receivables that will be recovered after more than 1 year, the amount expected to be recovered in each financial year shall be disclosed in the notes to the financial reports.
Pledged trade receivables shall be disclosed in the notes to the financial reports.
- Other receivables: Receivables other than notes receivable and 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.
Allowances for doubtful debts shall be presented respectively as deductions from notes receivable, trade receivables, and other receivables. If such items are further subclassified, the allowances for doubtful debts shall also be presented respectively in the same manner.
- 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.
- Inventories: Inventories are assets:
- held for sale in the ordinary course of business;
- in the process of production for sale in the ordinary course of business; or
- in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Inventories shall be accounted for in accordance with IAS 2.
Inventories shall be measured at the lower of cost and net realizable value. If the cost of inventories is higher than net realizable value, inventories shall be written down below cost to net realizable value, and the amount of the write-down shall be recognized as cost of sales in the period the write-down occurs.
Inventories provided as a pledge or security or used under the surveillance of creditors shall be noted.
- Prepayments: Prepaid expenses and prepayments for purchase of materials.
- 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 - current: A non-derivative financial asset with fixed or determinable payments and fixed maturity, and which the enterprise 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 using the effective interest method.
- 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, plant 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, plant and equipment shall be subsequently measured using the cost model and accounted for in accordance with IAS 16.
Each component of property, plant and equipment that is significant shall be depreciated separately.
When items of property, plant 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 to the financial reports 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, and investment property that is subsequently measured using the fair value model shall be subject to the following provisions:
- The income approach shall be used for the valuation of fair value. If, however, undeveloped land cannot be valuated using the income approach, the land development analysis approach shall be adopted instead.
- When the income approach is used, it shall be subject to the following provisions:
- Cash flow: Cash flow shall be valuated on the basis of existing lease contracts, rent at local market rates, or current market rents for similar comparable properties in the same location and condition, and overvalued and undervalued comparable properties shall be excluded. If there is a period-end value, the discounted present period-end value may be added.
- Analysis period: When there is no specified period for the income, the analysis period in principle shall not be longer than 10 years; when there is a specified period for the income, the income shall be estimated for the remainder of the specified period.
- Discount rate: The discount rate shall be determined using the risk premium approach only, with the calculation based on a certain interest rate, plus the estimate for the individual characteristics of the investment property. The language "based on a certain interest rate" means the interest rate may not be lower than the floating interest rate on a 2-year time deposit of a small amount, as posted by the Chunghwa Post Co., Ltd., plus 0.75 percentage points.
- Valuation of fair value shall be performed as follows:
- When the amount of any single item of investment property held is less than 20 percent of paid-in capital and NT$300 million, valuation may be performed through an internal appraisal or outsourced appraisal.
- When the amount of any single item of investment property held is equal to or greater than 20 percent of paid-in capital or NT$300 million, an appraisal report shall be obtained from a professional appraiser, or the property shall be appraised internally and a CPA engaged to issue a review opinion regarding the reasonableness of the appraisal.
- When the amount of any single item of investment property held is equal to or greater than 10 percent of total assets, appraisal reports shall be obtained from two or more professional appraisers, or an appraisal report shall be obtained from two appraisers at a joint appraiser's firm, or an appraisal report shall be obtained from a professional appraiser and a CPA engaged to issue a review opinion regarding the reasonableness of the appraisal.
- At the balance sheet date the issuer shall review and assess the validity of the appraisal of fair value based on the provisions below, in order to determine whether to issue a new appraisal report. For any property whose fair value meets the standards under c (II) or (III) of this item, an appraisal report from a professional appraiser and a CPA review opinion on the reasonableness of the appraisal shall be obtained at least once a year:
- If outsourced appraisal is adopted for the valuation of fair value, the issuer shall engage an appraiser to review the original appraisal report, or shall engage a CPA to issue a review opinion on the validity of the original review report.
- If internal appraisal is performed and a CPA is engaged to issue a review opinion on the reasonableness of the report, a CPA shall be engaged to issue a review opinion on the validity of the original internal appraisal report.
- If the property does not meet the level set out in these Regulations as requiring outsourcing of the appraisal or the issuance of a review opinion by a CPA, and the issuer performs an internal appraisal, then the issuer may itself assess the validity of the original appraisal report, or may engage a CPA to issue a review opinion on the validity of the original internal appraisal report.
Disclosure of investment property that is subsequently measured using the fair value model, in addition to being handled in accordance with IAS 40, shall include the following information in the notes to the financial reports:
- Important terms of any existing lease contracts with respect to the subject property, rent at local market rates, and assessed current market rents for similar comparable properties in the same location and condition.
- The present condition of the investment property, the amounts of, and changes in, the income generated in the past by the investment property, and the basis and reasons for the current projection of reasonable net income with respect to the investment property.
- The method for determining the changes in the inflows and outflows of cash for each period in the future, and the basis for the determination.
- The basis and reasons for adjusting and determining the capitalization rate or discount rate of the income.
- Explanation of the appropriateness and reasonableness of the process for income value projection, parameters used in the calculation, and appraisal result.
- When land development analysis approach is adopted, disclosure of the reason for the adoption, the key points of the land development analysis program, the projection of overall economic conditions, the expected total sales price, the rate of return, and the overall capital interest rate. If the above information substantially differs from that for prior periods, the issuer shall give the reason for the difference and the effect on the fair value.
- If outsourced appraisal is adopted, additional disclosure of the information on the appraising office(s), name(s) of the appraiser(s), and appraisal date. If a CPA review opinion is issued, additional disclosure of the name of the CPA and the CPA's firm, the conclusion of the review report, and the date of the review report.
- The valuation results of fair value obtained through outsourced appraisal and internal appraisal shall be disclosed separately. When a CPA has issued a review opinion on the reasonableness of the appraisal, it shall be indicated in a note.
When outsourced appraisal is adopted for the valuation of fair value, the appraisal shall be made by a certified ROC real estate appraiser who satisfies the following conditions, and shall be subject to the Real Estate Appraiser Act and the Regulations Governing Real Estate Appraisals with reference to the relevant Statements of Valuation Standards issued by the Accounting Research and Development Foundation (ARDF):
- The appraiser must have at least 4 years of experience practicing in the field of real estate appraisal. An appraiser who graduated from an academic department equivalent to one devoted to real estate appraisal and obtained the graduation certificate must have at least 3 years of experience practicing in the field.
- The appraiser has never received a fixed prison sentence or a more severe punishment from a court due to a crime involving fraud, breach of fiduciary duty, embezzlement, or forgery in the field of real estate appraisal business.
- The appraiser does not have a record of poor credit in connection with negotiable instruments or with debt during the most recent 3 years nor have a record of being subject to disciplinary action by a real estate appraiser disciplinary board during the most recent 5 years.
- The appraiser does not have a related party or substantive related party relationship with the issuer.
When internal appraisal is adopted for the valuation of fair value, the appraisal shall be performed in accordance with these Regulations and with reference to the relevant Statements of Valuation Standards issued by the ARDF, and shall also be subject to the following provisions:
- Procedures for real estate appraisal shall be established and included in the internal control system. The procedures shall encompass the professional qualifications and conditions to be met by the appraising personnel, acquisition and analysis of information, appraisal of the value of the subject property, preparation of appraisal reports, and preservation of relevant documents.
- An appraisal report shall present the information on which the appraisal is based and the reasons for the conclusion reached, and shall be signed by the personnel in charge. In addition, the appraisal report shall include at least the following: basic data on the subject property, effective date of the appraisal, transactions of comparable properties located in the area of the subject property, assumptions and restrictive conditions of the appraisal, method and implementation procedures of the appraisal, conclusion of the appraisal, and reporting date of the appraisal.
A CPA qualified pursuant to the provisions of the Certified Public Accountant Act that issues a review opinion regarding the reasonableness of an issuer's outsourced appraisal or an internally produced appraisal report must meet the following conditions:
- The CPA has 4 or more years of experience in auditing and attesting the financial reports of issuers, or 4 or more years of experience in auditing and attesting financial reports combined with attendance at 90 or more hours of appraisal-related training, for which a qualification certificate has been obtained.
- The CPA has not committed any crime such as fraud, breach of fiduciary duty, misappropriation, or forgery of documents in connection with the auditing and attestation of the financial statements of an issuer or the issuance of a review opinion regarding the reasonableness of an appraisal of real property for which the CPA has been sentenced by a court to a fixed term of imprisonment or a more severe sentence.
- The CPA has no record of poor credit in negotiable instruments or debts during the most recent 3 years, and has not been subject to disciplinary action by the CPA Discipline Committee during the most recent 5 years.
- The CPA is not a related party or substantially related party of the issuer, of the appraiser who issued the appraisal report, or of an authorized person who signed/sealed an appraisal report produced internally by the issuer, and is not an auditing and attesting CPA for the financial reports of the issuer.
A CPA that issues a review opinion with respect to the reasonableness of an appraisal report that is outsourced by or produced internally by an issuer shall do so in compliance with these Regulations and the following provisions:
- Prior to accepting a case for review, the CPA shall carefully assess his or her own professional capabilities and training, practice experience, and independence. Prior to carrying out the review, the CPA shall have ample understanding of the provisions of laws and regulations relating to the production of financial reports, International Financial Reporting Standards, and real property appraisal that relate to the given review case. The CPA may not accept an engagement to issue a fair value conclusion.
- When undertaking a review case, the CPA shall plan and execute appropriate working procedures, in order to produce a conclusion and use the conclusion as the basis for issuing the review opinion report. The related working procedures, data collected, and formulation of a conclusion shall be set out in detail in the review opinion working papers.
- When undertaking review procedures, the CPA shall undertake an item-by-item evaluation of the comprehensiveness, accuracy, and reasonableness of the scope of the appraisal report, the sources of data used, the parameters and methods used in the appraisal, the information adopted for use in the appraisal and any investigation undertaken, any adjustments made by the appraisers, and the process of inference used in the appraisal, and confirm that they conform to these Regulations and other related laws and regulations. When reviewing an appraisal produced internally by an issuer, the CPA shall also undertake an item-by-item analysis of the design, and effectiveness of implementation, of the issuer's internal control system, including working procedures, for internally produced appraisals.
- When there is a major discrepancy between the assumptions, estimates, parameters, or information used in land development analyses, in an appraisal report outsourced by or internally produced by the issuer and those of an appraisal for the preceding period, the CPA shall perform an analysis to confirm that there is a reasonable basis for the discrepancy. The CPA shall provide reasons for any difference of opinion when the CPA's opinion differs from that of the real property appraiser or the internal appraisal personnel.
- The content of a review report shall include at a minimum the names and addresses of the party that commissioned the report, the CPA performing the review, and the firm to which the CPA belongs, the purpose and uses of the review, the major assumptions and limitations of the review case, the scope of review work performed, the principal information adopted in the review procedure, the review conclusion, and the date of the review report. The review shall also include a statement that the opinion is true and accurate, professional and independent, and in compliance with applicable laws and regulations.
A subsidiary of the issuer that holds investment property shall also be subject to the provisions of this item.
If the shares issued by an issuer have no par value or a par value other than NT$10 per share, the valuation threshold of 20 percent of paid-in capital applicable to any single item of investment property as set out in this item shall be replaced by 10 percent of equity attributable to owners of the parent as stated in the balance sheet.
- 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.
- Biological assets: A living animal or plant related to agricultural activity. Biological assets shall be accounted for in accordance with IAS 41.
- 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.
Exploration and evaluation assets shall be subsequently measured using the cost model and accounted for in accordance with IFRS 6.
The items described in the preceding paragraph 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, held-to-maturity financial assets, notes receivable, trade receivables, and other receivables shall be accounted for in accordance with IAS 39.
An issuer 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, notes receivable, trade receivables, other receivables, investments accounted for using the equity method, property, plant and equipment, investment property, intangible assets, and exploration and evaluation assets. If any such evidence exists, the issuer 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, held-to-maturity financial assets, and biological assets shall be distinguished as current and non-current based on liquidity.
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