Regulations Governing the Preparation of Financial Reports by Securities Firms Article 10

The following shall apply when a securities firm makes an accounting change:1. Changes in accounting policies:A. "Accounting policies" are the specific principles, bases, conventions, rules and practices applied by a securities firm in preparing and presenting financial statements.B. When a securities firm changes an accounting policy voluntarily in a new financial year in order to produce financial reports that provide reliable and more relevant information about the effects of transactions or other events or conditions on the securities firm's financial position, financial performance, or cash flows, it shall request its attesting certified public accountants (CPAs) to provide an item-by-item analysis and review opinion on the reasonableness of the nature of the change in accounting policy, the reasons why applying the new accounting policy provides reliable and more relevant information, each line item affected and the estimated effect for the financial year preceding the earliest financial year affected by retrospective application of the new accounting policy, and the actual effect on the opening balance of retained earnings for the immediately preceding financial year. These shall be submitted as a proposal for adoption by resolution of the board of directors, after which they shall be submitted to the FSC for approval. Upon approval by the FSC, the securities firm shall publicly disclose and file information on the estimated effect arising from the application of the new accounting policy and the attesting CPAs' review opinion.C. If, for the voluntary change in accounting policy in the new financial year, it is impracticable to determine either the period-specific effects or the cumulative effect of the change, as described in paragraph 23 of IAS 8, the securities firm shall calculate the effects in accordance with paragraph 24 of IAS 8 and the preceding item above, and shall request the attesting CPAs to provide an item-by-item analysis and review opinion on the reasonableness of the reasons why retrospective application is impracticable and how and from when the change in accounting policy has been applied, and also provide an opinion on the impact on the audit opinion for the financial year preceding the change in accounting policy. The securities firm shall then follow the procedure described above.D. Unless it is impracticable to determine the effects as described in the preceding item, then within 2 months after the beginning of the financial year in which the new accounting policy is adopted, the securities firm shall calculate the line items affected and the actual effect for the financial year preceding the earliest financial year affected by retrospective application of the new accounting policy and the actual effect on the opening balance of retained earnings for the immediately preceding financial year, and shall submit those for adoption by the board of directors, after which they shall be publicly disclosed and filed and submitted to the FSC for recordation. If the difference between the actual effect of the change in accounting policy and the original estimated effect is NT$10 million or more, and is also 1 percent or more of the income for the immediately preceding financial year or 5 percent or more of paid-in capital, the securities firm shall analyze the reasons for the difference and request the attesting CPAs to provide an opinion on its reasonableness. The analysis and the CPAs' opinion shall also be publicly disclosed and filed with the FSC.E. Except when a securities firm applies a new accounting policy to newly purchased assets, in which case the provisions of the preceding items need not be applied, and except when, after the beginning of a financial year, a securities firm voluntarily changes an accounting policy during the year in which regulatory adjustments have come into force, in which case the securities firm shall request the attesting CPAs to issue a review opinion and submit it for adoption by the board of directors and publicly disclose it and then shall file the review opinion and relevant materials with the FSC for recordation, if a change in accounting policy is applied without having been duly filed for approval, the financial reports for the financial year in which the new accounting policy was applied shall be restated, and the new accounting policy may only be applied from the next financial year after a supplementary submission has been made and approved.F. In the case of a securities firm whose shares have a par value other than NT$10, for the calculation of the 5 percent of paid-in capital under item D, 2.5 percent of the equity attributable to owners of the parent as stated in the balance sheet shall be substituted.2. Changes in accounting estimates:A. "Accounting estimates" means amounts in financial statements that are subject to measurement uncertainty and are estimated by securities firms using measurement techniques and inputs.B. If a change in an accounting estimate arises from a change in the useful life or depreciation method of depreciable assets, a change in the amortization period or amortization method of intangible assets, a change in the residual value of any such assets, or a change in a technique used to estimate the fair value thereof, in addition to complying with item E of the preceding subparagraph, a securities firm shall request the attesting CPAs to provide an analysis and review opinion on the reasonableness of the nature of the changes and the reasons why the changes can provide reliable and more relevant information. The changes in accounting estimates shall then be submitted as a proposal for adoption by resolution of the board of directors, and then submitted to the FSC for approval.The expression "public disclosure and filing" or "publicly disclose and file" as used in the preceding paragraph means entering the information into the website designated by the FSC for the submission of electronic filings.