1. A method for processing transform blocks according to quantization matrices in a video coding system, the method comprising: receiving one or more initial quantization matrices having first sizes; deriving one or more derived quantization matrices having second sizes from one of said one or more initial quantization matrices; receiving a transform block having a block size, where the transform block is associated with a picture, and wherein the block size is equal to one of the first sizes or one of the second sizes; processing the transform block according to respective one of said one or more initial quantization matrices if the block size is equal to said one of the first sizes; and processing the transform block according to respective one of said one or more derived quantization matrices if the block size is equal to said one of the second sizes.