General

 Economy

 Business Environment

 Legal & Regulatory Environment

 Organization of the Professions

 Accounting Principles & Auditing Standards

 Financial Reporting

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Two-thirds of the population had received higher or secondary education in 1995. The main characteristics are hard working; the work ethic is strong and custom of saving a lot percentage of income resulting in residents giving low priority to social and cultural activities. However, growing affluence has led to increased tome for and expenditure on leisure activities, including sports and local and overseas travel.

 The banking system in Taiwan provides the full range of financial services in a wide variety of banks and financial institutions.

 Many major foreign banks have established branches in Taiwan.

 Various financial institutions provide special financial services, including leasing and insurance.

 Securities markets: significant changes instituted in the past few years mark a maturer phase of the securities industry. Government policy is to encourage the development of the stock market as a capital- raising mechanism.

 Transport: Under Six-Year National Development Plan, 1991-1996, the government aimed to expand and upgrade Taiwan’s transport and communications infrastructure. However, financing problems let to many projects being scaled down or cut out altogether. Many projects are still outstanding.

The island has few serious transport bottlenecks. The major exceptions are traffic congestion along the northern strength of the Sun Yat-sen Freeway, which runs the length of the island, in Taipei, the construction of the city’s mass rapid transmit (MRT) system. The state-owned railway network has been electrified since 1979. Cargo handled by Taiwan’s ports by annual average of 5.4% in 1992-1996. There are four major ports. Construction of a fifth container terminal should make it one of the world’s largest container ports by 2000, ranking alongside the current leaders, Hong-Kong and Singapore. Airports: there are two international airports. Chiang kai-shek International, outside Taipei, is by far the most important. It is expected to have an annual capacity of 20 million people and 1m tons of freight by 2000.

 Tele-communication: telephone density at the end of 96 was 46.5 per 100 people, about the same level as South Korea but far behind Hong-Kong and Singapore. Even so, this rate has doubled over the past decade. Telecommunication is now regarded as a key development area for government, with a domestic goal of raising to 50 per 100 people by year 2000.

The following principal types of commercial entities are permitted. Company (Unlimited Con. Limited Con. Unlimited company with limited liability shareholders. Company limited by shares.), partnership, joint venture, branch, representative office, liaison office, job-site office, and sole proprietorship.

Taiwan government encourages foreign investment, especially in high-technology industry. Besides, because trying to join WTO, Taipei (capital of Taiwan) is accelerate the pace of its economic liberalization and deregulation. Since 1994 access for foreign portfolio investors has become much easier: the cap on foreign participation in the stock market is due to rise to 30% from the present 25% of the market capitalization by the end of 1997.

 Securities markets: the regulation and supervision of the public offering, issuing and trading of securities are governed by the Securities and Exchange Law and the Company Law. The authority in charge of the securities market is the SEC. Securities are traded either on the T.S.E on a bidding basis or through over-the counter brokers on a negotiating basis.

 Foreign exchange market: Taiwan is not yet a fully international financial market. However, major currencies are traded in the foreign exchange market.

Securities laws: the securities law prescribes the public offering, issuance, buying and selling, administration and supervision of marketable securities. Marketable securities include government bonds and public offerings of shares and corporate bonds and debentures of a publicly listed company limited by shares.

Prior to public offering, a prospectus must be prepared and distributed to subscribers and signed by the responsible person of the company, the underwriter, certified public accountant and lawyer, all of whom are jointly liable for any claims of damages due to misrepresentation in any of the material facts specified in the prospectus.

A public listed company must publish its financial statements approved by its board of directors and supervisors and certified by an independent accountant as follows:

 Annual financial statements within four months after the close of a fiscal year.

 Semi-annual financial statements within two months after the close of a half year’s operations;

 The first and third quarterly financial statements within one month after close of a quarter’s operations;

 A monthly report on business sales income within ten days of the following month.

In addition, the following important information must be disclosed publicly within two days after occurrence:

 Any corrections or rectifications of the financial statements which have been made by the SEC;

 Any significant matters that affect the shareholders’ equity or the price of securities.

The Securities and Exchange Commission supervises the operations of the stock exchange and all publicly listed companies, as well as the profession of certified public accountants.

Company law: company law in Taiwan provides for four different forms of companies: the unlimited company, the limited company (approximately equivalent to the UK private company), the unlimited company with limited liability shareholders, and the company limited by shares (approximately equivalent to the UK public company). All companies must be registered with the MOEA and public listed companies must be further approved by the SEC.

 Unlimited companies are organized by two or more shareholders who bear unlimited joint and several liabilities for the obligations of the company and half of whom must be domiciled in the Republic of China. The articles of incorporation of the company must be adopted and agreed upon unanimously by all shareholders.

 A limited company must have not less than five shareholders and not more than 21 shareholders, at least half of whom must be Chinese nationals domiciled in the country and holding more than 50 percent of the total capital.

 An unlimited company with limited liability shareholders is a company incorporated both by shareholders with unlimited liability and by shareholders with limited liability. Shareholders with unlimited liability are jointly and severally liable for all obligations of the company, whereas shareholders with limited liability are liable only for their capital contribution.

 A company limited by shares must be incorporated by at least seven promoters, more than half of whom must be domiciled in the country. A government and a legal entity such as a company can be a promoter. The capital must be divided into shares and each share must have the same par value. A part of the share capital may be special shares, such as preferred stocks. The issue price of shares must not be less than the par value, and all shares of an issue must be of the same par value. A shareholder’s liability is limited to the payment in full of his or her subscription.

 The business of a company limited by shares must be conducted by a board of directors which comprises at least three directors with a tern of office of no more than three years, but who are eligible for re-election. The supervisors of the company hold office for a term of three years or less but may be re-elected; at least one of them must be domiciled within the country. A supervisor must not concurrently serve as a director, managerial officer or any other staff member of the company.

Accounting principles:

 Accounting is influenced by the Commercial Accounting Law, the Securities and Exchange Law, the Accountancy Profession and Tax Law.

 The majority of business enterprises in Taiwan keep their accounting records in compliance with the Commercial Accounting Law promulgated in 1948, brought into force in 1952 and amended in 1964 and 1968. To meet the rapid economic growth, the Commercial Accounting Law was drastically amended in 1987, with the new rules applying as from 1990.

 The Accounting Law applies to all business enterprises established under the Business Regulation and Company Las but is not applicable to small partnerships or sole proprietors.

 The financial year must run from 1 January to 31 December and accounting records and financial statements, if not kept in the national currency, must be translated into it.

  Accrual accounting and double entry bookkeeping must be used. If day-to-day accounting is on a cash basis, adjustments must be made at the year-end.

 A general accounting system, designed by the government, must be followed.

 A company’s annual financial reports must be reviewed by the supervisors of the company. For a publicly held company, the financial report must be audited and certified by a certified public accountant and published within one month after it has been duly certified.

 A company must, after paying all taxes, transfer at least 10 percent of its net profits to a legal surplus reserve before it declares dividends and bonuses, until the reserve equals the total authorized capital stock. Apart from the legal reserve, the company according to its articles of incorporation may also set a special reserve aside or a resolution adopted at a shareholders’ meeting.

 The following must be treated as capital reserves:

 A company must not distribute dividends and bonuses when it generates no profits for an accounting period. For the purpose of maintaining the price of its shares, a company may declare dividends and bonuses out of the legal reserve to the extent that the amount of such reserve exceeds 50 percent of its capital stocks, or that the amount of legal reserve set aside for a year exceeding 20 percent of the profits, only the portion in excess of the 50 percent and 20 percent may declared as dividends and bonuses. A company may declare dividends and bonuses payable in new shares issued by the company. The half of the legal reserve in excess of 50 percent of the paid-in capital stock may be capitalized by issuing new shares for distribution to all shareholders proportionately.

The accountancy profession in Taiwan has been organized since certified public accountants from various places in Mainland China followed the Nationalist government to Taiwan in 1949. As early as the 1950s, American CPAs were working in the US Aid Agency in Taiwan and assisting in training Chinese government accounting personnel. Since the 1970s, the US ‘Big Eight‘ (later the ‘Big Six’) have appointed local CPA firms as correspondent, affiliate, or member firms in Taiwan. Except for a handful of Japanese-trained accountants, the majority of practicing public accountants is US-oriented, as American accounting textbooks are generally used for accounting education in Taiwan.

The CPA qualification can be obtained by passing the full course of a CPA exam sponsored by the government. A CPA must have two years’ work experience and must be a member of a CPA association before he or she can practice either as a sole practitioner or in a firm of CPAs.

CPA Associations: the responsibilities of the CPA Associations are to take all actions deemed necessary with respect to any matter affecting the professional interest of the members.

Accounting Research and Development Foundation of the ROC: the purpose of the Foundation is to raise the level of accounting education in Taiwan, to facilitate the continuing development of accounting statements and to assist businesses with setting up accounting system. The Foundation is responsible for formulating guidelines on accounting principles and audit standards.

Ernst & Young

KPMG Peat Marwick

Coopers & Lybrand

Deloitte &Touche

Price Waterhouse

Arthur Anderson & Co.

Accounting principles

Accounting principles are established by the Accounting Research and Development Foundation of the ROC and are issued in the form of Financial Accounting Standards Bulletins. These generally are similar to U.S. accounting standards. The Securities and Exchange Commission (SEC) also issues accounting guidelines for public companies. Basically, most accounting standards are similar to U.S. standards.

Form and content of financial statements

Basically, the accounts kept must be classified into nine categories: assets, liabilities, owners’ equity, operating revenues, operating costs, non-operating revenues and expenses, operating expenses, extraordinary items and income tax.

 Companies may adopt an accounting year other than the calendar year and  every business enterprise must keep at least two account books: a general journal and a general ledger. The historical cost-accounting convention must be followed.

  CONSOLIDATION

. If this is dome a reserve for asset valuation must be established and depreciation calculated on the revalued amount.

 Auditing:

  A company’s financial statements and the accounting principles reflected therein are representations of its management. The independent accounting firm attests as to whether the financial statements conform with generally accepted accounting principles. To do so, the accountants must examine the financial statements in accordance with the generally accepted auditing standards enumerated in Auditing Standards Bulletins published by the Auditing standards Board of the Foundation. In general, auditing standards and procedures are similar to those in the United States.

 A CPA may express an unqualified, qualified or adverse opinion or issue a disclaimer of opinion. Most reports that are not unqualified will include one or more paragraphs explaining the issues or making the appropriate disclosures. Circumstances that may require a departure from the standard report relate to the following.

 The inventory of the GAAP was prepared mainly on the basis of the US GAAP. The main differences are:

The corporations that I choose are Dell Computer Corporation (US) and Acer Computer Corporation (Taiwan). Both corporations are famous in computer field. Dell is about number 4 in US while Acer is number one in Taiwan. The following is their financial report comparison.

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