Common Differences between Taiwan-IFRSs and R.O.C. GAAP
The common differences between Taiwan-IFRSs and R.O.C. GAAP are summarized below:
Consolidated Balance Sheet
a) Classifications of deferred income tax asset/liability and valuation allowance
Under R.O.C. GAAP, a deferred tax asset and liability is classified as current or non-current in accordance with the classification of its related asset or liability. Deferred income tax assets and deferred income tax liabilities fall into the same taxable entity; thus, they should be offset on the balance sheet. However, if a deferred income tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as either current or non-current based on the expected length of time before it is realized or settled. Under Taiwan-IFRSs, a deferred tax asset and liability is classified as non-current asset or liability and consider the right of offsetting deferred income tax liabilities and deferred income tax assets based on taxation by law before reclassifying.
In addition, under R.O.C. GAAP, valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. Under Taiwan-IFRSs, deferred tax assets are only recognized to the extent that it is probable that there will be sufficient taxable profits and the valuation allowance account is no longer used.
b) Classification of leased assets
Under R.O.C. GAAP, leased assets are classified under other assets. Under Taiwan-IFRSs, leased assets are classified as property, plant and equipment according to their nature. Leased assets are mainly operating leasing, leasing part of the office. Office leased to others are not considered as investment properties since they cannot be sold separately and comprise only an insignificant portion of the plant.
c) Employee benefits
The Company had previously applied an actuarial valuation on its defined benefit obligation and recognized the related pension cost and retirement benefit obligation in conformity with R.O.C. GAAP. Under Taiwan-IFRSs, the Company should carry out actuarial valuation on defined benefit obligation in accordance with IAS No. 19, “Employee Benefits.”
In addition, under R.O.C. GAAP, it is not allowed to recognize actuarial gains and losses from defined benefit plans directly to equity; instead, actuarial gains and losses should be accounted for under the corridor approach which resulted in the deferral of gains and losses. When using the corridor approach, actuarial gains and losses should be amortized over the expected average remaining working lives of the participating employees.
Under IAS No. 19, “Employee Benefits,” the Company elects to recognize actuarial gains and losses immediately in full in the period in which they occur, as other comprehensive income, which is classified under retained earnings. Subsequent reclassification to earnings is not permitted.
In addition, under R.O.C. GAAP, the minimum pension liability should be recognized in the balance sheet. If the accrued pension cost is less than the minimum amount, the difference should be recognized as an additional liability. Under Taiwan-IFRSs, there is no aforementioned requirement of minimum pension liability.
Consolidated Statement of Comprehensive Income
d) Non-operating income and expenses
Certain non-operating income and expenses, such as the foreign exchange loss, net gain on disposal of financial assets, and disposal of property, plant and equipment are reclassified as other gains and losses; interest revenue, rental revenue and depreciation of rental assets are reclassified as other income; interest expenses are reclassified as finance cost.
e) Other comprehensive income
Under Taiwan-IFRSs, Income Statement is replaced by “Statement of Comprehensive Income”. The key difference is the addition of “Other Comprehensive Income”, which is mainly the change in equity resulting from transactions other than those with shareholders. For the Company, the key items in other comprehensive income include exchange differences on translation of foreign operations and actuarial losses on defined benefit plans. Further, other comprehensive income is not included in the calculation of EPS.
Consolidated Statement of Cash Flows
f) Classification of interest received and the interest paid
Using the indirect method to report cash flows under R.O.C. GAAP, cash flows from interest received and paid are classified as operating activities and not disclosed separately. However, according to IAS No. 7 "Statement of Cash Flows," cash flow from interest received shall be disclosed separately and classified under investing activities, and interest paid is classified under financing activities.
g) Income tax paid
Under Taiwan-IFRSs, income tax paid is required to be disclosed separately within operating activities, therefore, the statement of cash flows will start with income before income tax instead of net income.
h) Cash flows denominated in a foreign currency
Under Taiwan-IFRSs, cash flow arising from foreign currency transactions shall be recorded and translated by using the foreign exchange rate at the date of the cash flow occurs, and the resulting exchange gain or loss is presented as a reconciliation item to income before income tax.
Source: Taiwan Stock Exchange Corporation
