| Summary: | 碩士 === 國立臺灣大學 === 財務金融學研究所 === 90 === The implementation of the Financial Holding Company Law triggered the largest restructuring of the Taiwan financial services industry in recent years. As was intended to occur as a result of implementation of the Law, the first wave of approved financial holding company applicants have expanded aggressively in order to achieve operational synergies and economies of scale. However, as financial holding companies have only recently begun to be established, selecting suitable counterparties for business integration, common marketing and usage of resources in order to increase revenue and decrease operating expenses has proved to be a tricky task. In addition, financial holding companies have so far had lack of working capital on establishment. A source of sufficient and low cost of funds is required, such as through issuance of bonds. Further, it should be noted that the financing should be matched with the related assets to avoid various risks arising from mismatch. With regards to dividend policy, it is advisable to be conservative at the outset. Where distribution of dividends is necessary, stock dividends may well be the best option. Dividend policy can be adjusted subsequently when the profitability of the financial holding company can be more accurately assessed.
The investment, financial and dividend decisions discussed above are important for corporate financial management, the objective of which being to maximize the value of the corporation. This study begins with the purposes of the Financial Holding Company Law, and utilizes the structure of corporate financial management theory combined with practical business considerations to analyze the possible implications of the various financial decisions as described above.
With regards to accounting treatment, the Financial Holding Law gives rise to many unprecedented issues relating to organizational restructuring and income tax deferral, including business transfer, share exchange, spin—offs and consolidated tax returns. This study proposes suitable accounting treatments for these issues in the financial statements of both financial holding companies and their subsidiaries.
The Accounting Research and Development Foundation has already issued an explanatory letter regarding the accounting treatment for business transfers and share exchanges as part of the establishment of a financial holding company. The letter recommends using the book value method without recognition of goodwill. However, is this method still suitable when dealing with subsequent acquisition transactions by the financial holding company given that financial accounting standards require merger transactions to be accounted for based on the fair value method? Situations such as this whereby economic substance is similar but accounting treatments are different should be avoided.
Regarding tax treatment, the Corporate Merger and Acquisition Law stipulates certain measures that remedy deficiencies in the Financial Holding Company Law regarding tax deductions relating to spin-offs. However, regarding the deferred payment of land incremental tax, the Financial Holding Company Law only applies to land in “direct use”, which has a much smaller scope than “all” land as stated in Corporate Merger and Acquisition Law. This study suggests the Laws be amended to resolve this unfair inconsistency. In addition, the only tax benefit of consolidated tax returns is the deferral of income tax payment. It is hoped that the Tax Authority can issue lenient explanations regarding certain unresolved issues such as consistency of application of entities and year-ends for consolidated tax returns (whereby subsidiaries with unutilized losses carried forward or investment tax credits may be allowed to be excluded from the consolidated tax return in the first year but to be included in future years). As for the application of Business Tax Law, it should be noted that the financial holding company and its subsidiaries may be subject to different taxation systems for calculation and filing purposes. For example, financial holding companies, trust companies and venture capital companies are subject to value added tax, while others are subject to non value added tax.
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