Regulations Governing the Preparation of Financial Reports by Insurance Enterprises Article 6

An insurance enterprise shall comply with the following provisions when making accounting change:1. Change in accounting policy:(1)"Accounting policies" refer to specific principles, bases, conventions, rules and practices adopted by an insurance enterprise in preparing and presenting financial statements.(2)When an insurance enterprise changes an accounting policy voluntarily in a new fiscal 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 insurance enterprise’s financial position, financial performance, or cash flows, it shall request its certified public accountant (CPA) to provide an item-by-item analysis and review opinion on the reasonableness of the nature of the change in accounting policy, the reasons why applying the new accounting policy provides reliable and more relevant information, each line item affected and the estimated effect for the fiscal year preceding the earliest fiscal 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 fiscal year. These shall be submitted as a proposal for adoption by resolution of the board of directors (council), after which they shall be submitted to the FSC for approval. Upon approval by the FSC, the insurance enterprise shall publicly announce the estimated effects arising from the application of the new accounting policy and the CPA review opinion.(3)If, for the voluntary change in accounting policy in the new fiscal 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 insurance enterprise shall calculate the effects in accordance with paragraph 24 of IAS 8 and the preceding item, and shall request a CPA to provide an item-by-item analysis and review opinion on the reasonableness of the reasons why retrospective application is impracticable and how and from when the change in accounting policy has been applied, and also provide an opinion on the impact on the audit opinion for the fiscal year preceding the change in accounting policy. The insurance enterprise shall then follow the procedure described above.(4)Unless it is impracticable to determine the effects as described in the preceding item, an insurance enterprise shall, within 2 months after the beginning of the fiscal year in which the new accounting policy is adopted, calculate the line items affected and the actual effect for the fiscal year preceding the earliest fiscal 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 fiscal year, and shall submit the calculations for adoption by the board of directors (council), after which they shall be publicly announced 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 in public announcement and filing is NT$10 million or more, and exceeds 1% of the insurance revenue for the immediately preceding fiscal year or 5% of the paid-in capital, the insurance enterprise shall analyze the reasons for the difference and request a CPA to provide an opinion on its reasonableness. The analysis and the CPA's opinion shall also be publicly announced and filed with the FSC.(5)Except when an insurance enterprise applies a new accounting policy to newly purchased assets, in which case the provisions of the preceding items need not apply, if a change in accounting policy is adopted without having been duly filed for approval, the financial reports for the fiscal year in which the new accounting policy was applied shall be restated, and the new accounting policy may only be applied starting from the next fiscal year after a supplementary filing has been made and approved.(6)When an insurance enterprise voluntarily changes its accounting policy after the start date of a fiscal year in accordance with the provisions of the preceding paragraph, it shall publicly announce and file the change period that the new accounting policy applies retroactively, line items affected and the actual effect for the immediately preceding fiscal year, and the actual effect on the opening balance of retained earnings for the immediately preceding fiscal year, and add an explanation to the reasonableness and necessity of changing the accounting policy or accounting estimates after the start date of a fiscal year. The insurance enterprise shall also request a CPA to provide an item-by-item analysis and review opinion on the reasonableness of changes and other items. These shall be submitted as a proposal for adoption by resolution of the board of directors (council) and then handled the same according to the procedure set out in Item (2) of the Subparagraph 1. If the effect of an insurance enterprise’s retrospective application of a new accounting policy on the financial statements for any quarter of the current fiscal year reaches the threshold for restatement of financial reports set out in Paragraph 2, Article 5 of these Regulations, the insurance enterprise shall restate the financial report for the relevant period and request the attesting CPAs to re-audit or review the financial statements and then public announce and file the report again.2.Changes in accounting estimates:(1)"Accounting estimates" means amounts in financial statements that are subject to measurement uncertainty and are estimated by an insurance enterprise using measurement techniques and inputs.(2)If a change in an accounting estimate arises from a change in the useful life or the depreciation or depletion method of depreciable or depletable 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, the insurance enterprise shall request the attesting CPAs to provide an analysis and review opinion on the reasonableness of the nature of changes and the reasons why the changes can provide reliable and more relevant information. Those changes in accounting estimates shall then be submitted as a proposal for adoption by resolution of the board of directors (council), publicly disclosed and filed after approval by the FSC, and then handled the same according to the procedure set out in Item (5) of the preceding subparagraph. If the insurance enterprise makes a change in an accounting estimate during a fiscal year, the insurance enterprise shall do the same as described in Item (6) of the preceding subparagraph, and in addition, provide explanations on the reasonableness and necessity of the time of the change.The expression "publicly announce and file" as used in this article means entering the information into the website designated by the FSC for the submission of electronic filings.Where an insurance enterprise has established the position of independent director, when it submits proposals for adoption by resolution of the board of directors (council) pursuant to Paragraph 1 hereof, it shall take into full consideration each independent director's opinion; where an independent director has an objection or reservation, the objection or reservation shall be recorded in the minutes of the meeting of the board of directors.