Thu, Jan 22, 2009 - Page 12 News List

FSC clarifies rule on booking idle equipment writeoffs

By Crystal Hsu  /  STAFF REPORTER

The Financial Supervisory Commission (FSC) clarified late on Tuesday that changes in the accounting rule would not affect booking of costs and losses related to idle equipment.

The commission is expected to brief the Cabinet on the matter today in the wake of complaints from local companies that the implementation on Jan. 1 of the International Accounting Standards Statement No. 10 includes a requirement that all businesses book inventory writeoffs in their balance sheets on a quarterly basis.

The commission said the new accounting rule only requires companies to list idle equipment as operating costs, but makes no mention of when and how often companies should file such costs.

The FSC added that listed companies could book the writeoffs at the end of the year. A decision on booking for unlisted companies that fall under the jurisdiction of the Ministry of Economic Affairs has yet to be reached.

As the global economic downturn has dampened demand for electronics and communication products, many companies have failed to meet their sales targets, leaving equipment idle or underused.

Local companies had earlier complained that if they were required to book idle equipment costs and losses every quarter, this could reflect poorly on their balance sheets and affect banks’ willingness to extend credit.

An unnamed official said the whole matter was a misunderstanding, adding that these concerns should ease off when the economy picks up.

“As the economy is expected to pick up in the second half, concerns over idle equipment may ease,” the FSC official said by telephone. “Corporate financial statements may improve as well.”

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