The Financial Supervisory Commission (FSC) recently amended the Regulations Governing the Preparation of Financial Reports by Securities Issuers to align with International Financial Reporting Standard (IFRS) 18, “Presentation and Disclosure in Financial Statements.” The amendments revise the classification of revenue and expenses in the statement of profit or loss, introduce new disclosure requirements regarding management-defined performance measures, and promote paperless filing of financial reports to streamline reporting procedures.
The Securities and Futures Bureau (SFB) stated that, in response to IFRS 18, Article 12 of the amended Regulations has been revised to explicitly require that revenues and expenses presented in the statement of comprehensive income be classified separately by operating, investing, financing, income tax, and discontinued operations categories. In addition, recognizing that operating revenue and operating costs may include not only revenue and costs arising from the transfer of goods or services, but also revenue and costs generated from specific principal business activities, the definitions of operating revenue and operating costs have been revised accordingly.
The amendments also provide greater flexibility in the classification of operating expenses, allowing enterprises to present such expenses either by nature, by function, or by a combination of both methods.
Newly added Article 24-2 of the Regulations requires enterprises to present goodwill separately in the balance sheet. In light of the changes to the classification of items in the statement of profit or loss, the format of the statement of cash flows has been revised accordingly. Articles 12 and 15 further require disclosure in the notes to the financial statements of expenses classified by nature, such as impairment losses and inventory write-downs.
Moreover, enterprises are required to disclose information relating to management-defined performance measures (MDPMs), including a clear explanation in the notes of the calculation methodology and any adjustment items, in order to prevent potential investor misunderstanding.
In addition, to support carbon reduction and sustainability objectives, Article 29 of the amended Regulations provides that financial reports and related documents previously required to be filed and submitted in paper form shall instead be transmitted electronically. This requirement will apply beginning with financial reports for the first quarter of Year 115 (ROC calendar). Public companies must convert the original required filing documents into electronic format and upload them to the information reporting website designated by the FSC. Upon completion of the transmission, the filing and submission shall be deemed duly completed in accordance with applicable regulations.
