International Accounting Terminology Explanation

Timeline for Taiwan's Adoption of IFRS Accounting Standards

Significant Impact of IFRS on ERP Systems

Differences in the Balance Sheet;
- Different names and presentation rules for financial statements
- IFRS allows all assets to be measured at fair value (can be revalued) → Other comprehensive income
Differences in the income statement
- Different names and formats for financial statements
- Comprehensive income can include around four special items:
  
  Gain (loss) on available-for-sale securities Translation adjustment gain (loss)
  
  Asset revaluation surplus (revaluation increment) Retirement benefit plan actuarial gains (losses);
Differences in the cash flow statement
- Encourages the use of the direct method
- IFRS treats bank overdrafts as cash equivalents
- Different classifications of certain accounting items
Differences in the statement of changes in equity
- IFRS allows companies to omit the statement of changes in equity if a comprehensive income statement is provided
Parent companies use consolidated financial statements as the formal report ("subsidiaries merged journal generated")

Revenue Recognition
- Under IFRS, revenue recognition is based on the assessment of whether the risks and rewards of ownership have been transferred upon the sale of goods.
- Post-sale warranty services, loyalty points, and accumulated miles for flight tickets (customer loyalty programs) result in deferred revenue.
Fixed Assets:

Consolidated financial statements require the adjustment of the same event to be under the same accounting policy before consolidation.
For example, for the same equipment, Taiwan may amortize it over 5 years, while Singapore may do it over 10 years.
Functional Currency:
- Cost method → Historical rates
  For instance, for assets acquired 10 years ago, the functional currency amount is determined by converting the historical functional currency rate.
- Revaluation method → Gains (other comprehensive income), Impairments (current losses).

ERP's Response from ROC GAAP to EAS

Items	GAAP	EAS
Assets	Current Assets	Current Assets
Assets	Funds and Long-term Investments Fixed Assets Depletable Assets Intangible Assets Other Assets	Non-current Assets
Liabilities	Current Liabilities	Current Liabilities
Liabilities	Long-term Liabilities Other Liabilities	Non-current Liabilities
Owner's Equity Capital or Stock	Capital or Stock Capital Surplus Retained Earnings (Accumulated Deficit) Other Items	Capital Surplus Retained Earnings (Accumulated Deficit) Other Equity Treasury Stock

Income Statement (GAAP)	Comprehensive Income Statement (EAS)
Operating Revenue	Operating Revenue
Operating Costs	Operating Costs
Operating Expenses	Operating Expenses
Non-operating Gains and Losses	Non-operating Gains and Losses
Income Tax Expense	Income Tax Expense (or Benefit)
Income (Loss) from Continuing Operations	Income (Loss) from Continuing Operations
Income (Loss) from Discontinued Operations	Income (Loss) from Discontinued Operations
Extraordinary Gains and Losses	Net Income (or Net Loss) for the period
Cumulative Effect of Changes in Accounting Principle	Other Comprehensive Income for the period
Current Net Income (or Net Loss)	Total Comprehensive Income for the period

Accounting Account (GAAP)	Accounting Account (EAS)
Fixed Assets	Investment Property
	Real Estate, Plant, and Equipment
	Biological Assets
	Mineral Assets
Short-term Investments	Financial Assets Measured at Fair Value through Profit or Loss
	Available-for-Sale Financial Assets
	Financial Assets Measured at Cost
	Financial Assets of Non-active Markets
	Held-to-Maturity Financial Assets
	Derivative Financial Assets for Hedging
Prepaid Income Taxes	Current tax assets
Income Tax Receivables	Current tax assets
Income Tax Payables	Current tax liabilities

ERP System Conversion Process Diagram

Gain (loss) on available-for-sale securities	Translation adjustment gain (loss)
Asset revaluation surplus (revaluation increment)	Retirement benefit plan actuarial gains (losses);

IFRS & EAS