Financial Institutions Allowed Not to List Huge Financial Loss in Q3 Income Statement
Written by Writer on Thursday, October 16th, 2008
Financial Institutions Allowed Not to List Huge Financial Loss in Q3 Income Statement
Taipei, Oct. 16, 2008 (CENS)–In accordance with the resolution of the International Accounting Standards Board (IASB), the Accounting Research Development Foundation decided yesterday (Oct. 15) to allow domestic financial institutions to reclassify their financial assets under the “trading purpose” category to the “non-trading purpose category” in their third-quarter income statement.
The ruling, which will be retroactive to July 1, will apply to stocks and bonds, but not financial derivatives. It will allow financial institutions not to reflect their staggering financial loss in their third-quarter income statement.
Domestic life insurers will be among the major beneficiaries of the change in accounting practice. Cathay Life Insurance and Shin Kong Life Insurance, for instance, will not have to list their billions of NT dollars of stock-investment loss in their third-quarter income statement. An official of the Financial Supervisory Commission (FSC) noted that whether the accounting adjustment will be extended to the fourth quarter will hinge on the decision of IASB.
Meanwhile, Bankers Association ROC has suggested postponing the implementation of the requirement for domestic banks to estimate the potential loss in their loan extension and accounts receivable according to the fair market value, in accordance with the principle of the No. 34 Basic Financial Statements, to after 2011, from the original schedule of 2009..
Under the ruling of the Accounting Research Development Association, financial institutions will be able to move their financial assets under the “trading purpose” category to the “non-trading purpose” category, with the notes of “ready for sale” or “held until maturity.”
Citing the reasoning of IASB, an FSC official remarked that the global financial tsunami constitutes a rare circumstance justifying the temporary suspension of the principle of No. 34 Basic Financial Statements which forbids enterprises from arbitrarily changing the accounting categories of its income statement, such as moving assets under the trading-purpose category to the non-trading purpose category, in order to prevent accounting manipulation by enterprises. - (by Philip Liu)
