MICB Annual Report 2015

Annual Report 2015

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(4)

Foreign currency translations

Functional and presentation currency

Items included in the financial statements of each of the Bank and its subsidiaries’ entities are measured using the currency of the primary

economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in

New Taiwan Dollars, which is the Bank’s functional and the Bank and its subsidiaries’ presentation currency.

Transactions and balances

The transactions denominated in foreign currency or to be settled in foreign currency are translated into a functional currency at the spot

exchange rate between the functional currency and the underlying foreign currency on the date of the transaction.

Foreign currency monetary items should be reported using the closing rate (market exchange rate) at the date of each balance sheet.

When multiple exchange rates are available for use, they should be reported using the rate that would be used to settle the future cash

flows of the foreign currency transactions or balances at the measurement date. Foreign currency non-monetary items measured at

historical cost should be reported using the exchange rate at the date of the transaction. Foreign currency non-monetary items measured

at fair value should be reported at the rate that existed when the fair values were determined.

Exchange differences arising when foreign currency transactions are settled or when monetary items are translated at rates different from

those at which they were translated when initially recognised or in previous financial statements are reported in profit or loss in the period.

If a gain or loss on a non-monetary item is recognised in other comprehensive income, any foreign exchange component of that gain or

loss is also recognised in other comprehensive income. Conversely, if a gain or loss on a non-monetary item is recognised in profit or

loss, any foreign exchange component of that gain or loss is also recognised in profit or loss.

Translation of foreign operations

The operating results and financial position of the entire Bank and its subsidiaries’ entities in the consolidated financial statements that

have a functional currency (which is not the currency of a hyperinflationary economy) different from the presentation currency are

translated into the presentation currency as follows:

(A)

Assets and liabilities presented are translated at the Bank and its subsidiaries’ closing exchange rate at the date of that balance sheet;

(B)

The profit and loss presented is translated by the average exchange rate in the period (except for the situation that the exchange rate

on the trade date shall be adopted when the exchange rate fluctuate rapidly); and

(C)

All resulting exchange differences are recognised in other comprehensive income.

The translation differences arising from above processes are recognised as ‘Cumulative translation differences of foreign operations’

under equity items.

(5)

Cash and cash equivalents

“Cash and cash equivalents” in the consolidated balance sheet includes cash on hand, due from other banks, short-term highly liquid

investments that are readily convertible to known amount of cash and subject to an insignificant risk of changes in value. In respect of the

consolidated statements of cash flows, cash and cash equivalents include cash and cash equivalents in the consolidated balance sheet, due

from the central bank and call loans to bank meeting the definition of cash and cash equivalents as stated in IAS No.7 “Cash Flow Statements”,

and securities purchased under resale agreements meeting the definition of cash and cash equivalents as stated in IAS No. 7 “Cash Flow

Statements” as endorsed by the FSC.

(6)

Bills and bonds under repurchase or resale agreements

The transactions of bills and bonds with a condition of repurchase agreement or resell agreement are accounted for under the financing method.

The interest expense and interest income are recognised as incurred at the date of sale and purchase and the agreed period of sale and purchase.

The repo trade liabilities, bond liabilities, reverse repo trade bills and bond investments are recognised at the date of sale or purchase.

(7)

Financial assets or liabilities

The financial assets and liabilities of the Bank and its subsidiaries including derivatives are recognised in the consolidated balance sheet and

are properly classified in accordance with IFRSs as endorsed by the FSC.

Financial assets

The IFRSs as endorsed by the Financial Supervisory Commission apply to the entire Bank and its subsidiaries’ financial assets, which

are classified into four categories: loans and receivables, financial assets at fair value through profit or loss, available-for-sale financial

assets and held-to-maturity financial assets.

(A)

A regular way purchase or sale

Financial assets that are purchased or sold on a regular way purchase or sale basis should be recognised and derecognised using

trade date accounting or settlement date accounting. The uniform accounting principles should be applied in the accounting for

purchase and sale of financial assets of the same type. All the Bank and its subsidiaries’ financial assets are accounted for using

trade date accounting.

(B)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

There are two types of loans and receivables: one is originated by the Bank and its subsidiaries; the other is not originated by the

Bank and its subsidiaries. Loans and receivables originated by the entity refer to the direct provision by the Group of money,

merchandise or services to debtors, and loans and receivables not originated by the Group are loans and receivables other than those

originated by the Group.