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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II RELATED PARTIES CHAPTER III RELATED PARTY TRANSACTIONS CHAPTER IV DISCLOSURE CHAPTER I GENERAL PROVISIONS Article 1. For the purpose of regulating the disclosure of information about the related party relationships and transactions, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. An enterprise shall, in its financial statements, disclose the relevant information about all related party relationship and transactions. If it provides consolidated financial statements to outsiders, it is not required to disclose the transactions among the enterprises which have been included in the consolidation scope, but it shall disclose the related party relationships and transactions beyond the consolidation scope. CHAPTER II RELATED PARTIES Article 3. If a party has the power to, directly or indirectly, control, jointly control or exercise significant influence over another party, or if two or more parties are subject to control, joint control or significant influence from a same party, the related party relationships are constituted. The term "control" refers to the power to govern the financial and operating decisions of an enterprise so as to obtain benefits from its business activities. The term "joint control" refers to the contractually agreed sharing of control over an economic activity, which does not exist unless a unanimous consent of the investors sharing the control power is required for the important financial and operating decisions relating to this economic activity. The term "significant influence" refers to the power to participate in the formulation of financial and operating policies of an enterprise, but not the power to control or jointly control the formulation of these policies with other parties. Article 4. The following parties constitute the related parties of an enterprise: (1) The parent company of the enterprise; (2) The subsidiaries of the enterprise; (3) Other enterprises under the control of a same parent company of this enterprise; (4) The investors having joint control over this enterprise; (5) The investors having significant influence on this enterprise; (6) The joint ventures of this enterprise; (7) The associated enterprises of this enterprise; (8) The principal individual investors and the close family members of such individuals. An principal individual investor refers to an individual investors who can control or jointly control an enterprise, or has significant influence on an enterprise; (9) The key managers of this enterprise or of its parent company and their close family members. The key managers refer to the managers who have the authority and responsibility for planning, directing and controlling the activities of the enterprise. The close family members of a principal individual investor or of a key manager refer to the family members who may influence, or be influenced by, that individual in dealing with transactions with the enterprise; and (10) Other enterprises which are controlled or jointly controlled by the principal individual investors, or key managers, or the close family members of such individuals, or on which the principal individual investors, or key managers, or the close family members of such individuals have significant influence . Article 5. Only the existence of the following relationships with corporate parties, does not constitute the company's related parties: (1) The providers of capital, public utilities, government departments and agencies which only have normal dealings with an enterprise; (2) A single customer, supplier, franchiser, distributor or agent with whom an enterprise transacts a significant volume of business by virtue only of the resulting economic dependence; and (3) The joint venture operators which jointly control the joint venture with this enterprise. Article 6. State-controlled enterprises shall not be regarded as related parties simply because they are under the control of the state. CHAPTER III RELATED PARTY TRANSACTIONS Article 7. The term "related party transaction" refers to an event whereby a transfer of resources or obligations takes place between related parties, regardless of whether a price is charged. Article 8. The related party transactions generally include the following types: (1) Purchases or sales of goods; (2) Purchases or sales of assets other than trading goods; (3) Rendering or receiving of labor services; (4) Guaranties; (5) Provision of finance (including loans or equity contributions); (6) Leases; (7) Agency; (8) Transfer of research and development projects; (9) License agreements; (10) Settling debts on behalf of an enterprise or by this enterprise that represents another party; and; (11) The emoluments for key managers. CHAPTER IV DISCLOSURE Article 9. An enterprise shall, in the notes to the financial statements, disclose the following information about the parent company and its subsidiaries, irrespective of whether there have been transactions between them: (1) The name of the parent company and its subsidiaries. If the parent company is not the final controlling party of the enterprise, it shall disclose the name of the final controlling party. If neither the parent company nor the final controlling party provides the financial statements to outsiders, it shall disclose the name of the parent company which is its closest superior parent company providing financial statements to outsiders; (2) The nature of business, name, place of registration, and registered capital (or actually paid-in capital, stock capital) and changes therein of the parent company and its subsidiaries; and (3) The proportion of shares or voting rights held by the parent company in this enterprise or held by this enterprise in its subsidiaries. Article 10. Where there have been transactions between an enterprise and its related parties, it shall, in its notes, disclose the nature of the related party relationships, the types of transactions and the essential elements of the transactions. Such essential elements shall at least include: (1) The amount of transactions; (2) The amounts, terms and conditions of outstanding items, and the information about the guaranties granted to others or obtained; (3) The amounts of provisions for non-performing debts under outstanding items; and (4) pricing policies (including those transactions where no amount or only nominal amounts have been charged). Article 11. Related party transactions shall be disclosed on the basis of the related parties and the types of the transactions involved. The related party transactions of the similar type may be disclosed in aggregate when this does not affect the readers' correct understanding of the financial statements. Article 12. No enterprise may disclose any related party transaction by regarding it as an arm's length transaction unless it provides exact proofs. |
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