Laws Information

法規資訊
Title: Business Entity Accounting Act
Am Date: 2014-06-18
Legislative History: On June 18, 2014 amendment was made in accordance to the presidential order to (103) Hua Tsung (1) Yi Tzu 10300093261.

Transaction

Amended

Article 28-1
The balance sheet represents the financial position of the business entity as at the end of the period. The elements directly related to the measurements of financial position in the balance sheet are:
1. Assets the resource controlled by the business entity as a result of past events and from which future economic benefits are expected to flow to the business entity.
2. Liabilities the present obligation of the business entity arising from past events, the settlement of which is expected to result in an outflow from the business entity of resources embodying economic benefits.
3. Equity the residual interest in the assts of the business entity after deducting all its liabilities.

Article 28-2
The statement of comprehensive income represents the financil performance of the business entity for the period. The elements directly related to the measurement of financial performance are:
1. Income increases in ecomomic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
2. Expenses decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.

Article 41-1
An item that satisfies definition of an element of financial statements should be recognized in the balance sheet or statement of profit or loss and other comprehensive income if:
1. It is probable that any future economic benefit associated with the item will flow to or from the business entity; and
2. The item has a cost or value that can be measured with reliability.

Article 41-2
Business entities shall select measurement bases for recognizing financial statement items in a manner appropriate to the requirements of circumstances. Common measurement bases include historical cost, fair value, realizable value, or other measurement bases.
(Accounting Events)
Article 11
Events leading to changes in assets, liabilities, equity, income or expenses of a business entity are accounting events.
Accounting events involve rights and obligations to parties other than the business entity are external accounting events. Accounting events do not involve parties other than the business entity are internal accounting events.
Accounting events shall be recorded using the double-entry bookkeeping method.

(Accounting System)
Article 12
A business may establish its own accounting system based on the actual business operations, nature of accounting affairs, internal control, and management needs.

(Standard of Business Entity Accounting Processing)
Article 13
Accounting standards set out the name, format, and method of preparation of source documents, accounting items, journals, ledgers and financial statements shall be prescribed by the Central Competent Authority.

(Account Books)
Article 20
Accounting books consist of following two categories:
1. Journals used to record accounting events chronologically.
2. Ledgers used to accumulate accounting events according to the accounting items.

(Ledger Books)
Article 22
Ledgers consist of following two categories:
1.General Ledger The ledger used to record all controlling items.
2.Subsidiary Ledgers The ledger used to record all subsidiary items of a controlling item.

(Required Books)
Article 23
Journals and general ledgers shall be used by all business entities. Manufacturers or entities with larger business scope may use cost accounting books or special journals and subsidiary ledgers. Business entities with sound accounting systems may replace journals with daily account lists.

Article 27
Accounting items shall be classified by financial statement elements.
A business entity may increase or decrease any accounting item based on actual operating needs.

(Content of Financial Statement)
Article 28
The financial statements comprises of :
1. A statement of financial position
2. A statement of comprehensive income.
3. A statement of cash flows.
4. A statement of changes in equity.
The financial statements must be supplemented with necessary notes which are an integral part of the complete set of financial statements.

(Notes to Financial Statements)
Article 29
A business entity presents following disclosures in the notes to financial statements:
1. Statement of compliance with this Act and legal orders determined pursuant to the authorization of this Act.
2. Measurement bases used in the prepartion of financial statemnets as well as other accounting policies used that are relevant to an understanding of the financail statements.
3. The nature of the chnage in accounting policy as well as the reasons of the change and the amount of adjustments.
4. Creditors’ rights on specified assets.
5. Critiria on the separate classification of current and non-current assets and liabilities.
6. Material contingent liabilities and unrecognized contractual commitments.
7. Restrictions on earnings distribution
8. Significant events affecting equity.
9. Significant subsequent events.
10. Other necessary disclosures that avoid users misinterpreting financial statements or help to achieve fair presentation.
Business entities may include supporting information for items presented in financial statements in the notes to the financial statements based upon the actual requirement of circumstances.

(Classification of Titles for Financial Statements)
Article 31
Items in financial statements shall be classified in a manner appropriate to the requirements of circumstances or laws. Business entities shall retain the presentation and classification of items in the financial statements from one period to the next.
When business entities change the presentation or classification of items in the financial statements, the comparative amounts shall be reclassified in addition to proper disclosure on the reclassification.

(Actual Cost of Asset)
Article 41
Initial recognition of assets and liabilities, as a matter of principle, shall be based on the cost.

(Asset Exchange and Donated Asset)
Article 42
An asset acquired in exchange for non-monetary assets, a business shall measure the cost of the acquired asset at fair value. If the fair value cannot be measured reliably, the asset’s cost is measured at the carrying amount of the asset given up.
Donated assets must be recorded on the basis of fair value and classified as capital surplus, revenue or deferred revenue depending on their nature.

(Inventories)
Article 43
Inventory cost may be calculated by using specific identification method, first-in first-out method or average method.
Inventories shall be measured at the lower of cost and net realizable value. If the cost of inventories is higher than net realizable value, inventories shall be written down below cost to net realizable value, and the amount of the write-down shall be recognized as cost of sales in the period the write-down occurs.

(Securities)
Article 44
Financial instrument shall be measured by using fair value, cost, and amortized cost depending on the nature thereof.
Long-term securities investment with power of control or major influence shall be used the equity method.

(Allowance for Uncollectible Receivable)
Article 45
Receivables must be measured by their amounts less the estimated allowance for uncollectible accounts, and items of allowance for uncollectible accounts must be respectively established. Where the receivable becomes definitely uncollectible, the relevant item must be written off.
Accounts receivable and notes receivable resulting from operating activities must be separately recorded from accounts receivable and notes receivable resulting from non-operating activities.

(Method of Depreciation)
Article 47
Assets must be depreciated by using straight-line method, fixed percentage on diminishing book value method, sum-of-years’-digits method, production method, working-hour method or other depreciation methods approved by the central competent authority. Where the assets belong to different categories, the depreciation may be computed separately based on different categories.

(Depletable Asset)
Article 49
An accumulated depletion item must be established for depletion assets, and the depletion expense must be recorded for each period.

(Intangible Asset)
Article 50
For purchased goodwill, trademarks, patents, copyrights, franchises, and other intangible assets, the cost must be the acquisition cost.
If the intangible assets referred to in the preceding Paragraph are self-developed, only the cost for registration or finished creative work can be recorded as acquisition cost. The research and development costs incurred must be recorded as current expenses. However, in the event of stipulations provided otherwise by the competent authority, this limit does not apply.

(Reevaluation and Adjustment of Asset)
Article 51
Business may revalue assets according to laws and regulations.

(Processing of Reevaluation)
Article 52
The surplus incurred due to revaluation or adjustment of assets processed in accordance to the preceding Article must be recorded as unrealized reevaluation surplus.
The revalued assets must be recorded at the revalued amount. From the year following the year of revaluation, the depreciation, depletion, or amortization of the revalued assets must be calculated based on the revalued amount.

(Deferred Expenses)
Article 53
Prepaid expenses are those which will bring future economic benefit and be charged to future periods. Prepaid expenses must be measured on the basis of the portion of amount covering the unexpired period.

(Evaluation of Capital Paid by Properties)
Article 55
Capital paid by properties other than cash must be recorded on the basis of the fair value of such properties. If the fair value is not available, an estimate may be made.

(Merger, Dissolution, Termination or Transfer)
Article 57
In case of mergers, spin-offs, acquisitions, dissolutions, terminations or transfers of business, as a matter of principle, assets shall be accounted for based on fair value, carrying amount, or transaction price.

(Total Comprehensive Income)
Article 58
All the income generated by a business in a fiscal year less all the costs, expenses, and losses in the same period shall be the total comprehensive income.

(Revenue)
Article 59
Operating revenue must be recorded upon completion of a transaction.
Installment sales must be recorded based on gross profit rate method depending on their nature. Service revenue may be recognized periodically if such service is provided over several periods based on its nature.
"Upon completion of a transaction" referred to in the preceding Paragraph means upon payment and receipt of cash in the case of a business adopting cash basis and upon completion of delivery of goods or provision of services in the case of a business adopting accrual basis.

(Cost Expenses)
Article 60
Revenue and expenses that relate to the same transaction or other event are recognized appropriately.

(Employee Pension)
Article 61
A business which pays retirement pension to employees must set aside amounts for retirement pension according to law and recognize such as the expenses during the employment of the employees.

(Closing Deadline)
Article 65
A business must close its books within two months after the close of each fiscal year. The period may be extended by two and a half months if necessary.

(Effective Date)
Article 83
This Law shall become effective from the date of issuance.
The articles of this Law amended on May 30, 2014, and shall be enforced from January 1, 2016. But a business entity may voluntarily adopt these regulations since January 1, 2014.
Article 63
(Deleted)