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When a foreign issuer who sponsors Taiwan depositary receipts ("TDRs") applies with the Taiwan Stock Exchange ("TWSE") for listing, it is required to provide the TWSE with its audited financial statements for the TWSE to understand its financial status. To strengthen the post-listing supervision of TDRs and strengthen the review of foreign issuers' financial statements, the TWSE promulgated the Procedure for Reviewing the Financial Statements of Foreign Issuers Sponsoring TDRs on 19 March 2012 which took effect on the same date. Set forth below is a summary.
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After its listing, a foreign issuer sponsoring TDRs should upload its consolidated financial statements to the Market Observation Post System ("MOPS"), file the same with the TWSE, and fulfill the following requirements:
(1)
The annual financial statements must be audited by the CPA in the country where the underlying shares are listed. If the foreign issuer does not adopt Taiwan or US Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), explanations from two Taiwanese CPAs on the differences between the accounting principles/rules adopted by the foreign issuer and the Taiwan/US GAAP or IFRS should be submitted along with the audited financial statements to the TWSE; provided, however, that if the first three quarters' reports need not be audited or reviewed by the CPA under the regulations of the country where the foreign issuer is incorporated or its underlying shares are listed, the explanations on the differences of the accounting principles/rules are not required.
(2)
The chairman of the board, managers and accounting chiefs should state on the financial statements the absence of fraudulence and omission.
(3)
The consolidated financial statements should be simultaneously published on the MOPS with the disclosure in the country where the foreign issuer is incorporated or its underlying shares are listed within the specified time period in accordance with the regulations thereof; provided, however, that the annual financial statements should in no event be published later than six months of the end of each fiscal year.
(4)
The financial statements should be in both Chinese and English or the official language of the country where the underlying shares are listed and include a Taiwanese CPA's opinion (if available) as well as a simple balance sheet and income statement before and after adjustment.
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The TWSE should review the foreign issuer's financial statements within three business days of the expiry of the announcement or filing period in order to verify whether the foreign issuer has fulfilled the requirements above. The TWSE should also ask the foreign issuer's Taiwanese CPA to provide its work papers.
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If the financial statements indicate any material change to the foreign issuer's financial situation or operation, the TWSE may contact the foreign issuer for further explanation and ask the foreign issuer to provide the opinions of the local CPA (in the country where the underlying shares are listed) who audited the financial statements, if necessary.
