1. 1 Update on IFRS Adoption in Taiwan Conrad Chang Chairman Financial Accounting Standards Committee Accounting Research and Development Foundation

2. 2 IFRS Adoption Roadmap In May 2009, Financial Supervisory Commission announced a roadmap for the adoption of IFRS Two-phased Adoption

3. 3 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

4. 4 The Second Phase All other public companies Mandatory adoption in 2015 Voluntary adoption in 2013

5. 5 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?

6. 6 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)

7. 7 A. Adoption of IFRS (ARDF) 1. Translation of IFRS All IFRS and IAS are already translated except for IAS 39 The translation of IFRIC and SIC is under way 2. 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.

8. 8 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

9. 9 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

10. 10 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

11. 11 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

12. 12 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!

13. 13 Some special issues in Taiwan Preparation basis of financial statements Determination of functional currency Land appreciation tax

14. 14 Preparation basis of financial statements Financial statement Preparation basis Required? Consolidated statement (in IFRS) When subsidiary exists; equity method for associates yes Individual statement (in IFRS) When subsidiary does not exist; equity method for associates yes Separate statement (in IFRS) FVPL for subsidiaries and associates no Entity statement (non-IFRS) Equity method for subsidiaries and associates (non-IFRS) yes

15. 15 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?

16. 16 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?