萬國法律事務所

Taiwan’s Financial Supervisory Commission (FSC) has made a major resolution with respect to the new system for the recognition of real property under the International Financial Reporting Standards (IFRS). The FSC resolved in a pre-hearing recently that, for “all industries” across the board, real property (including real property investments made by banks and insurance companies) must be recognized at cost and the profits from appreciation of such properties cannot be included in shareholders’ equity.

The financial industry will take the greatest hit under this policy, whereby life insurance companies will be directly affected given their substantial investments in real property. It is generally expected that more than 200 billion New Taiwan Dollars in profit from appreciation of real property that are currently on the books of a few large-scale life insurance companies may as result be excluded from net worth. Much heated debate is expected at the public hearing to be held shortly.

Officials emphasized that the FSC had already confirmed with the International Accounting Standards Committee that Taiwan’s policy will not violate the IFRS and is consistent with the international standards. It is believed that FSC’s current position is to monitor the system for several years and once the real property appraisal standards in Taiwan mature and the value of company real properties no longer fluctuate excessively, recognition at market value may once again adopted.