| Summary: | 碩士 === 國立中央大學 === 財務金融學系在職專班 === 105 === The adoption of IFRS Standard has brought a dramatic impact on Taiwan's Capital Market. If some financial assets of a company are classified as available for sale (AFS), the gains and losses resulting from the investments will be included in other comprehensive income of the statement of comprehensive income. AFS financial assets eventually cannot directly affect net income or EPS whether a company accumulates profits or losses from these assets. Therefore, it is more likely that companies classify problematic financial assets as AFS. So far investors pay more attention to the statement of comprehensive income than the statement of changes in equity. However, it is “the statement of changes in equity” that actually indicates changes in fair value of AFS investments over a certain period, helping shareholders learn about overall effects of the company’s performance.
When the significance of the neglected financial assets is huge enough to affect operation or stock price of a company, and even damaging interests of uninformed shareholders, investors of the company should have noticed the AFS financial assets in advance or the company should have disclosed the related information to the public proactively. Even if a decline in fair value of AFS investments is significant or prolonged (even the value is near zero), it will never affect EPS but affect investor confidence for the company. Hence, most investors are not concerned about this potential issue.
Sampled from public companies in Taiwan, there were 79 companies from TCRI database matching a defined filtering criterion. The criterion was more than 10% of their assets were AFS financial assets (non-current and current assets) in the balance sheet. Also, taking “divided unrealized gains/losses on AFS financial assets by merged consolidated gains/losses in the last three years” into consideration, case companies were selected for this study. Furthermore, the study explored various aspects in detail such as AFS financial items, the difference between realized and unrealized gains/losses on AFS financial assets, how the assets affected profits and losses of their banking business and how to indirectly affect benefits of investors.
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