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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II PRESENTATION OF FINANCIAL INSTRUMENTS CHAPTER III DISCLOSURE OF FINANCIAL INSTRUMENTS CHAPTER I GENERAL PROVISIONS Article 1. For the purpose regulating the presentation of financial instruments, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. The presentation of financial instruments includes the presentation and disclosure of financial instruments. Article 2. When presenting financial instruments, an enterprise shall classify the financial instruments on the basis of the features of such instruments and the nature of the relevant information. Article 3. The following items shall be governed by other pertinent accounting standards: (1) The long term equity investments, which are regulated by the Accounting Standards for Enterprises No. 2-Long Term Equity Investments, shall be governed by the Accounting Standards for Enterprises No. 2-Long Term Equity Investments; (2) The share-based payments, which are regulated by the Accounting Standards for Enterprises No. 11-Share-based Payment, shall be governed by the Accounting Standards for Enterprises No. 11-Share-based Payment; (3) The debt restructuring shall be governed by the Accounting Standards for Enterprises No. 12-Debt Restructuring; (4) The contingent contracts with consideration between the combing parties in business combinations shall be governed by the Accounting Standards for Enterprises No. 20-Business Combination; (5) The rights and obligations arising from leases shall be governed by the Accounting Standards for Enterprises No. 21-Leases; (6) The rights and obligations arising under original insurance contracts shall be governed by the Accounting Standards for Enterprises No. 25-Original Insurance Contracts; and (7) The rights and obligations arising under reinsurance contracts shall be governed by the Accounting Standards for Enterprises No. 26-Reinsurance Contracts. Article 4. These Standards do not apply to the contracts that are entered into in accordance with the expected purchase, sale, or usage requirements and a non-financial item is to be duly bought or sold. However these Standards apply to those contracts to buy or sell a non-financial item that can be settled in cash or net amount of another financial instrument, or by exchange of financial instruments. CHAPTER II PRESENTATION OF FINANCIAL INSTRUMENTS Article 5. When issuing a financial instrument, an enterprise shall, depending on the substance of the financial instrument as well as the definitions of the financial asset, financial liability and equity instrument, it shall, in the initial recognition, recognize this financial instrument or its constituent parts as a financial asset, financial liability or equity instrument. Article 6. If a financial instrument, which is issued by an enterprise and which will be settled through a self-equity instrument, shall be recognized as an equity instrument in the initial recognition if it satisfies either of the following requirements: (1) This financial instrument does not include any contractual obligation to pay any cash or deliver any financial asset to another entity; or (2) This financial instrument does not include any contractual obligation to exchange any financial asset or financial liability with another entity in the event of potential unfavorable conditions. Article 7. Where a financial instrument, which is issued by an enterprise and which must be or may be settled through a self-equity instrument in the future, satisfies either of the following conditions, it shall be recognized as an equity instrument in the initial recognition: (1) This financial instrument is a non-financial instrument and the enterprise has no obligation to settle it by delivering an unfixed number of self-equity instruments; or (2) This financial instrument is a derivative instrument and it can only be settled through delivery of a fixed number of self-equity instruments in exchange for a fixed amount of cash or other financial assets, of which the equity instruments do not include the contracts to be settled through receipt or delivery of self-equity instruments of the enterprise. Article 8. Regardless of whether or not a financial instrument is to be settled through the delivery of cash or any other financial asset, if it needs to be determined through the occurrence or nonoccurrence of any uncertain future events which neither the issuer nor the holder is able to control (namely the financial instruments with contingent settlement terms), the issuer shall recognize it as a financial liability. However, if either of the conditions is satisfied, the issuer shall recognize it as an equity instrument: (1) It is for sure that the events relating to contingent terms, in which it is required to make settlement in cash or through other financial assets, will not occur; or (2) No settlement will be made in cash or through other financial assets unless the issuer carries out enterprise liquidation. Article 9. For a derivative financial instrument which the issuer or holder can choose to make settlement by net amount in cash or through the issuance of shares in exchange for cash, the issuer shall recognize it as a financial asset or financial liability, unless all settlement ways available show that this derivative financial instrument shall be recognized as an equity instrument. Article 10. Where an enterprise issues an non-derivative financial instrument that contains both a liability and an equity component, it shall, in the initial recognition, separate the liability component from the equity component and treat them respectively. To separate them from each other, the enterprise shall first determine the fair value of the liability component and regard it as the amount of initial recognition, then determine the amount of initial recognition of the equity component on the basis of the issuance price of the entire financial instrument less the amount of the initial recognition of the liability component. The dealing expenses incurred for the issuance of this non-derivative financial instrument shall be apportioned between the liability component and the equity component at their respective relative fair value. Article 11. After an enterprise deducts the dealing expenses (excluding the dealing expenses incurred for the issuance of equity instrument by the combing party in a business combination) from the consideration for an equity instrument it issues, it shall increase the owner's equities. If it pays any consideration and dealing expenses for the repurchase of a self-equity instrument, it shall decrease the owner's equities. When it issues, repurchases, sells or writes off a self-equity instrument, it shall not recognize the profits or losses, if any, that have been incurred. Article 12. If the financial instrument or its constituent part is attributable to the financial liability, the relevant interests, gains or losses shall be recorded in the profits and losses of the current period. As to the various distributions (excluding stock dividends) to holders of an equity instrument, an enterprise shall decrease the owner's equities. The enterprise shall not recognize any change in the fair value of the equity instrument. Article 13. The financial assets and financial liabilities shall be presented respectively in the balance sheet and shall not offset against each other. However, if any of the following circumstances is met, the post-offset net amount shall be presented in the balance sheet: (1) The enterprise has the statutory right to offset the amount already recognized and such statutory right is enforceable at the present time; or (2) The enterprise intends to settle on a net amount basis, or simultaneously realize the financial assets and settle the financial liabilities. For the transfer of any financial asset which does not satisfy the conditions for the termination of recognition, the transferor shall not offset the financial asset already transferred against the relevant liability. CHAPTER III DISCLOSURE OF FINANCIAL INSTRUMENTS Article 14. The disclosure of financial instruments refers to the relevant information about the already recognized and unrecognized financial instruments that an enterprise discloses in its notes. The information about the financial instruments which an enterprise discloses shall be helpful for the users of financial reports to reasonably evaluate the importance of the effects of the financial status and operating outcomes of the enterprise. Article 15. An enterprise shall disclose the information about the important accounting policies and measurement basis adopted for preparing financial statements of financial instruments, which shall mainly cover: (1) For a financial asset or financial liability which is designated to be measured at its fair value and of which the changes are recorded in the profits and losses of the current period, the enterprise shall disclose the following information: (a) The basis for designation; (b) The name of the designated financial asset or financial liability; and (c) The descriptions about how to eliminate or remarkably decrease the inconsistencies in the recognition or measurement of the relevant gains or losses formerly caused by different calculation bases for the financial asset or financial liability after the designation, as well as about whether or not the designated financial asset or financial liability conforms to the risk management or investment strategy as stated in the formal written document of the enterprise; (2) The conditions for the availability of the designated financial asset for sale; (3) The objective basis for determining the impairment already incurred to the financial asset and the specific method for calculating and determining impairment loss of the financial asset; (4) The basis for the calculation of the gains and losses of the financial assets and financial liabilities; (5) The conditions for terminating the recognition of financial assets and financial liabilities; and (6) Other accounting policies relating to the financial instruments. Article 16. An enterprise shall disclose the carrying amounts of the following financial assets or financial liabilities: (1) The financial assets which are measured at fair value and their changes are recorded in the profits and losses of the current period; (2) The held-to-maturity investments; (3) The loans and receivables; (4) The financial assets available for sale; (5) The financial liabilities which are measured at fair value and of which the changes are recorded in the profits and losses of the current period; and (6) Other financial liabilities. Article 17. Where an enterprise designates a single loan or a batch of loans or receivables to be measured at fair value and records the changes in the profits and losses of financial assets of the current period, it shall disclose the following information: (1) The amount of the biggest credit risk exposure which the enterprise has to face on the balance sheet date due to the aforesaid loan(s) or receivables, as well as the relevant amounts of the credit derivative instruments or similar instruments dispersing such credit risk. The term "credit risk" refers to the risk that the failure of either party to perform the obligations under a financial instrument may result in financial loss to the other party; and (2) The amount of changes in the fair value of the loan(s) or receivables caused by the changes of credit risk in the current period, and the accumulative amount of changes in the fair value of the loan(s) and receivables caused by the changes of credit risk, the amount of changes in the fair value of the relevant credit derivative instrument or similar instrument in the current period, as well as the accumulative amount of changes since the designation of such loan(s) or receivables. Article 18. An enterprise shall designate a particular financial liability to be measured at its fair value and record its changes in the profits and losses of the financial liabilities of the current period, it shall disclose the following information: (1) The amount of changes in the fair value of the financial liability caused by the changes of credit risk in the current period, and the accumulative amount of changes in the fair value of the financial liability caused by the changes of credit risk; and (2) The difference between the carrying amount of the financial liability and the contractual amount to be paid at maturity. Article 19. When an enterprise reclassifies the financial assets, if it changes the subsequent measurement basis of a financial asset from the costs or amortized costs to the fair value, or vice versa, it shall disclose the fair values or carrying amounts of the financial asset before and after the reclassification as well as the reason for reclassification. Article 20. For the transfer of a financial asset which does not meet the requirements as described in the Accounting Standards for Enterprises No. 23-Transfer of Financial Assets regarding the termination of recognition, the enterprise shall disclose the following information: (1) The nature of the financial asset transferred; (2) The nature of the remaining risks and rewards relating to the ownership; (3) If the enterprise continues to recognize the entire financial asset transferred, it shall disclose the carrying amounts of the financial asset transferred and the relevant liabilities; and (4) If the enterprise continues its involvement in the financial asset transferred, it shall disclose the carrying amount of the entire financial asset transferred, continue to recognize the carrying amounts of the financial asset and the relevant liabilities. Article 21. An enterprise shall disclose the following information about the financial assets as collaterals: (1) The carrying amounts of the financial assets as collaterals of liabilities or contingent liabilities; and (2) The time limits and conditions relating to the collaterals. Article 22. If an enterprise receives a collateral (of a financial asset or non-financial asset) which is permitted to be sold or re-pledged even when the owner of the collateral does not break the contract, it shall disclose the following information: (1) The fair value of the collateral held; (2) If the enterprise sells or re-pledge the collateral received, it shall disclose the fair value of the collateral and whether or not it has the obligation to return the collateral; and (3) The terms and conditions relating to the use of the collateral. Article 23. An enterprise shall disclose the detailed information about the impairment loss of each class of financial assets, including the period beginning balances of the provisions for the impairment losses of financial assets of two comparable consecutive periods, the amount of provision made in the current period, the amount revered in the current period, the adjustment to the period end balances. Article 24. An enterprise shall disclose the following information about the borrowings in breach of the contract: (1) The nature and reason for the breach of contract (failure to duly repay the contractual principal and interest of the borrowing); (2) The carrying amount of the borrowings in breach of contract on the date of balance sheet; and (3) The remedies which have been made for the events relating to breach of contract before the financial reports are authorized to issue to outsiders, and the information about the negotiations between the enterprise and the creditor on the extension of the term of a borrowing. Article 25. An enterprise shall disclose the following information relating to the each class of hedges: (1) The descriptions about the hedging relationship; (2) The descriptions about the hedge instruments and their fair value on the balance sheet date; and (3) The nature of the hedged risks. Article 26. An enterprise shall disclose the following information relevant to cash flow hedges: (1) The periods during which the cash flows are expected to occur and to have effects on the profits and losses; (2) A description of any forecast transaction for which hedge accounting had previously been used but which is no longer expected to occur; (3) The amount recognized in the owner's equities of the current period; (4) The amount which is shifted out of the owner's equities of the current period and is directly recorded in the profits and losses of the current period; (5) The amount which is shifted out of the owner's equities of the current period and is directly recorded in the initially recognized amount of the non-financial assets or non-financial liabilities formed by the forecast transaction; and (6) The gains or losses arising from the ineffective hedges of the current period. Article 27. For the fair value hedges, an enterprise shall disclose the gains or losses arising from the hedging instruments of the current period, as well as the gains or losses on the hedged items arising from the hedged risks. Article 28. For hedges of net investment in an overseas operation, an enterprise shall disclose the gains or losses arising from ineffective hedges of the current period. Article 29. Except for the provisions of Article 31 of these Standards, an enterprise shall disclose the following information about the fair value of each class of financial assets and financial liabilities: (1) The methods applied in determining the fair values, including directly consulting, in full or in part, the price quotations in an active market or adopting a valuation technique. If the enterprise adopts a valuation technique, it shall disclose the relevant valuation assumptions for each class of financial assets or financial liabilities, including the rate of repayment ahead of schedule, rated of expected credit loss, interest rate or discount rate, etc; and (2) Whether or not the fair values are determined in full or in part by using a valuation technique based on assumptions that are not supported by the present public transaction prices or available market figures for the identical financial instruments. If such valuation technique is of significant sensitiveness to the valuation assumptions, the enterprise shall disclose the fact and the possible effects of the change of valuation technique, and shall simultaneously disclose the amount of changes of the current period in the fair values determined by adopting this valuation technique which is directly recorded in the profits and losses of the current period. Where an enterprise judges whether or not a valuation technique is of significant sensitiveness to the valuation assumptions, it shall take into full account the net profits, total amount of assets, total amount of liabilities, total amount of the owner's equities (applying to the circumstance under which the changes in fair value are recorded in the owner's equities) and other factors. If the fair values of financial assets and financial liabilities are disclosed on the basis of total amount (except for the financial assets and financial liabilities disclosed in the balance sheet on a net amount basis) and the disclosure form shall be helpful for the users of financial reports to compare the fair values and carrying amounts of the financial assets and financial liabilities. Article 30. If there is no active market for a financial asset or financial liability, in accordance with Article 52 (3) of the Accounting Standards for Enterprises No. 22-Recognition and Measurement of Financial Instruments, if the financial asset or financial liability is measured on the basis of a more fair public transaction price or valuation result of a same financial instrument, the enterprise shall disclose the following information according to the category in which the financial asset or financial liability falls: (1) The accounting policies adopted for determining and recognizing the difference between the original actual dealing price and the fair value, which is included in the profits and losses; and (2) The balances of the differences at the beginning of period and at the end of period. Article 31. An enterprise is not required to disclose the information about the fair values of the following financial assets or financial liabilities: (1) An short-term financial asset or financial liability whose difference between its carrying amount and its fair value is quite small; and (2) An equity instrument investment for which there is no price quotation in the active market, as well as any derivative instrument which is connected with this equity instrument and must be settled by delivery of this equity instrument. Article 32. An enterprise shall disclose the following information about any equity instrument investment for which there is no price quotation in the active market, as well as about any derivative instrument which is connected with this equity instrument and must be settled by delivery of this equity instrument: (1) The fact that no disclosure of relevant fair value is made because the fair value cannot be reliably measured; (2) The descriptions about this financial instrument, and the reason for which its carrying amount and fair value cannot be measured reliably; (3) The descriptions about the relevant market of the financial instrument; (4) Whether or not the enterprise intends to dispose of this financial instrument as well as the possible disposal ways; and (5) If the enterprise has ceased to recognize the financial instrument in the current period, it shall disclose the carrying amount of the financial instrument at time of cessation of recognition, as well as the profits and losses incurred at the time of cessation of recognition. Article 33. An enterprise shall disclose the following incomes, expenses, gains or losses relating to financial instruments: (1) The net incomes or net losses of the financial assets or financial liabilities, the held-to-maturity investments, loans and receivables, and the financial assets available for sale which are measured at their fair value in the current period and of which the changes are recorded in the profits and losses of the current period, and of the financial liabilities which are measured at the amortized cost; (2) The total amount of interest incomes or interest expenses of the financial assets for financial liabilities which are calculated and recognized in the current period through the method of effective interest rate; (3) The following for commission incomes or disbursements which are incurred due to the following items and are not touched in the determination of the actual interest rate: (a) The financial assets or financial liabilities other than the financial assets or financial liabilities which are measured at their fair value and of which the changes are included in the profits and losses of the current period; and (b) The enterprise' management of the trust property of others, and other acts which the enterprise commits as a custodian; (4) The interest incomes from the financial assets have been impaired; and (5) The impairment losses of the held-to-maturity investments, loans and receivables, and of the financial assets available for sale, which are incurred in the current period. Article 34. An enterprise shall disclose the descriptive and quantitative information relevant to each class of financial instruments: (1) The descriptive information: (a) The risk exposures and why they have occurred; and (b) The risk management targets, policies and process, as well as the method for the measurement of risks. If there is any change in the aforesaid descriptive information, an explanation shall be made; (2) The quantitative information: (a) The summarized data of the risk exposures on the balance sheet date. When the enterprise provides such data, it shall be based on the relevant information internally offered to the key managers. If the enterprise manages the risks through several methods, it shall specify the method whereby the most relevant and reliable information can be provided; (b) The information provided in accordance with Articles 35 through 45 of these Standards; (c) The risk concentration information on the balance sheet date. The risk concentration information shall include an explanation of the management level on how to determine the risk concentration points, and the reference factors for the determination of the risk concentration points (including the dealing counterparts, geographical areas, type of currency and type of market), the amounts of the risk exposures relating to the risk concentration points. If the above-mentioned information is unable to represent the information about the risk exposures of the enterprise in the current period, the enterprise shall further provide relevant information. Article 35. An enterprise shall disclose the following information relating to the credit risks of each class of financial instruments: (1) Without taking into consideration the guaranties or other credit enhancements (for example, a net amount settlement agreement where the offsetting conditions are not satisfied), the enterprise shall disclose the amount that best represents its maximum credit risk exposure on the balance sheet date, and the information, and the information about the available collaterals or other credit enhancements; (2) The information about the credit quality of the financial assets which are not overdue and are not impaired; and (3) The carrying amounts of the financial assets which were overdue or impaired, but for which the contractual terms and clauses have been decided through renegotiations. Article 36. The amount of the financial assets that best represents its maximum credit risk exposure on the balance sheet date shall be the balance after deducting the amounts of the following 2 items from the book balance of the financial assets: (1) The amount offset in pursuance of Article 13 of these Standards; and (2) The impairment loss recognized for these financial assets. Article 37. An enterprise shall, on the basis of the classifications, disclose the following information about the financial assets which were overdue or impaired: (1) An analysis of the time limit for the financial assets which have been overdue but have not been impaired on the balance sheet date; (2) The information about the financial asset separately determined to have been impaired on the balance sheet date, as well as the factors which have been taken into consideration in determining whether or not the financial asset has been impaired; and (3) The collaterals which are held by the enterprise and are corresponding to the financial assets of various classes, the assets corresponding to other credit enhancements, and their fair values. If it is really difficult to estimate the relevant fair values, an explanation shall be made. Article 38. If the financial assets or non-financial assets, which an enterprise obtains in the current period from the disposal of the collaterals or assets corresponding to other credit enhancements due to the debtor's breach of contract, satisfy the conditions for recognition, the enterprise shall disclose the following information: (1) The nature and carrying amount of the assets obtained; and (2) If it is difficult to convert these assets into cash, it shall disclose the plan on the disposal of these assets or on using them in the daily operation. Article 39. An enterprise shall disclose the analysis of the financial assets and financial liabilities on the basis of the remaining maturity days, as well as the methods for managing these financial assets and the liquidity risk of financial liabilities. The term "liquidity risk" refers to the risk of shortfall of fund which an enterprise faces during the course of performing the obligations relating to financial liabilities. Article 40. When an enterprise discloses the analysis of remaining maturity of financial assets and financial liabilities, it shall use its professional judgment to determine proper time periods. The amounts of financial assets and financial liabilities listed in each time period shall be unrealized contractual cash flows. An enterprise may make an analysis on the basis of, but not limited to, the following time periods: (1) 1 month or less; (2) Not less than 1 month but not more than 3 months; (3) Not less than 3 months but not more than 1 year; (4) Not less than 1 year but not more than 5 years; and (5) 5 years or more. Article 41. If the creditor may choose the time for taking back the creditor's rights, the debtor shall list the corresponding financial liabilities into the earliest time period in which the creditor demands to take back the creditor's rights. If the payable amount of debt of a debtor is not fixed, the debtor shall, according to the information on the balance sheet date, determine the amount to be used for the time-to-maturity analysis. If the debtor promises to pay a financial liability by installments, the creditor shall list the payment of each installment it will receive in the corresponding earliest time period. The debtor shall list the payment of each installment it will make in the corresponding earliest time period. The creditor shall list the current deposits and other deposits of the current nature which it takes in the corresponding earliest time period. Article 42. The term "market risks of financial instrument" refers to the risks that the fair value or future cash flows of a financial instrument will fluctuate due to changes in the market price, including the risks of foreign exchange, interest rate and other prices. The term "foreign exchange risk" refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in the foreign exchange rates. The term "interest rate risk" refers to the risk that the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in the market interest rates. The term "risk of other prices" refers to the market risk other than the risks of foreign exchange and interest rate. Article 43. An enterprise shall disclose the following information relating to the analysis of sensitiveness: (1) The sensitiveness analysis of the market risks it faces on the balance sheet date. Such disclosure should reflect the effects of the reasonable and possible changes in the relevant variations on the balance sheet date on the profits and losses or the owner's equities of the current period; and (2) The methods and assumptions used for the sensitiveness analysis of the current period. If these methods and assumptions used for the sensitiveness analysis are different from those of the previous period, the enterprise shall disclose the reason for the change. Article 44. If an enterprise adopts the risk valuation method or similar method to make a sensitiveness analysis which can reflect the connection between the risk variations (for example, between the interest rates and the foreign exchange rates) and if it has adopted such method to manage the financial risks, it may not make disclosure in accordance with Article 43 of these Standards, but it shall disclose the following information: (1) The method, main parameters and assumptions adopted for such sensitiveness analysis; and (2) The purpose of the method adopted, and the possibility that the fair values of the relevant financial assets and financial liabilities can not be fully reflected through such method. Article 45. If the disclosures about the sensitiveness analysis made in accordance with Article 43 or 44 of these Standards can not reflect the inherent market risks of the financial assets, the enterprise shall disclose such fact and the why. |
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