Conrad C. Chang

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Update on IFRS Adoption in Taiwan

Conrad Chang

Chairman

Financial Accounting Standards Committee

Accounting Research and Development Foundation

1

IFRS Adoption Roadmap

In May 2009, Financial Supervisory

Commission announced a roadmap for the adoption of IFRS

Two-phased Adoption

2

The First phase

All listed companies and financial companies

Except for credit cooperatives, credit card companies, and insurance intermediaries

Mandatory adoption in 2013

Voluntary adoption in 2012

3

The Second Phase

All other public companies

Mandatory adoption in 2015

Voluntary adoption in 2013

4

Early adopter case:

CLEVO co.

( 藍天電腦 )

Book value per share will increase to $65 from $13 after early adoption of IFRS

Mainly the revaluation of PP&E from cost to fair value

Stock price also increases as well

Self-selection bias?

A comprehensive picture?

What can we learn from this case?

5

Task Force for IFRS Adoption

A. Adoption of IFRS (ARDF)

B. Introduction of IFRS into Taiwan

(Taiwan Stock Exchange)

C. Laws and Monitoring Mechanism

(Securities and Futures Bureau of FSC)

D. Education and Promotion (Over-the-

Counter Market)

6

A. Adoption of IFRS (ARDF)

1.

2.

Translation of IFRS

All IFRS and IAS are already translated except for IAS 39

The translation of IFRIC and SIC is under way

Active participation in international activities

World Standards Setters (WSS)

National Standards Setters (NSS)

Asia and Oceania Standards Setters Group

(AOSSG), hopefully

Regional Standard Setters, etc.

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B. Introduction of IFRS into

Taiwan (Taiwan Stock Exchange)

1.

Analysis on the challenges and impacts of

IFRS adoption in Taiwan

Application of principled-based accounting standards

Difference analysis of Taiwan GAAP vs. IFRS

Formation of professional judgment

Interpretations of accounting issues

Issues for the first-time adoption and transitional period

Practice guidance from other countries

8

B. Introduction of IFRS into

Taiwan (Taiwan Stock Exchange)

2. Solving the issues of adopting IFRS

Adjustments of accounting systems and

IT systems (including XBRL) for public companies

Changes in CPA audits

9

B. Introduction of IFRS into

Taiwan (Taiwan Stock Exchange)

3. Adjustment of the public information disclosure systems

Amendment of regulations on filing public information

Revision of M.O.P.S

(Market Observation Post System, 公

開資訊觀測站 )

Revision of account titles and codes

Revision of XBRL

10

C. Laws and Monitoring Mechanism

(Securities and Futures Bureau of

FSC)

Amendment of Security Laws

Revision of regulations on the preparation of financial statement for all adopting companies (public companies, insurance industry, banking industry, securities and futures industry, etc.)

Gaps between IFRS and domestic tax laws

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D. Education and Promotion

(Over-the-Counter Market)

Promotional brochures for IFRS

Training and educational seminars for accounting managers of public companies

They have to take at least 15-hour IFRS accounting courses before the adoption

Even TV ads!

12

Some special issues in Taiwan

Preparation basis of financial statements

Determination of functional currency

Land appreciation tax

13

Preparation basis of financial statements

Financial statement

Consolidated statement (in IFRS)

Preparation basis

When subsidiary exists; equity method for associates

Individual statement (in IFRS)

Separate statement (in IFRS)

Entity statement

(non-IFRS)

When subsidiary does not exist; equity method for associates

FVPL for subsidiaries and associates

Equity method for subsidiaries and associates (non-IFRS)

Required?

yes yes no yes

14

Determination of functional currency

How to determine for export-oriented companies?

If so, do they have to file dual-currency financial statements?

Can they pay dividends in functional currency?

Which statement for filing domestic income tax returns?

15

Land Appreciation Tax

( 土地增值稅 )

Very unique tax system

Do IAS 12 Income Taxes apply to it?

If so, for companies using cost method for PP&E, do they have to accrue deferred tax liabilities in case that the current appraisal value

( 目前公告現值 ) had been adjusted?

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