Technical news

• Determining and Accounting for Transaction Costs (IFRS 9 Financial Instruments)
• Embedded Prepayment Option (IFRS 9 Financial Instruments)
• Updates to Committee’s agenda decisions for IFRS 18 Presentation and Disclosure in Financial Statements

The Institute is also seeking comments on the International Accounting Standards Board (IASB) Request for Information (RFI) Post-implementation Review of IFRS 16 Leases by 29 August. To learn more about the RFI, watch the IASB webcast.

IASB issues revised Practice Statement on management commentary

The IASB has issued the revised Practice Statement 1 Management Commentary. The revised Practice Statement supports improvements to and greater global alignment in management commentary and narrative reports accompanying the financial statements.

The IASB intends for the revised Practice Statement to serve as a global benchmark for regulators to use in updating or developing their national requirements and guidance. It will also provide companies with a comprehensive resource for meeting investors’ information needs.

The International Sustainability Standards Board (ISSB) welcomes the issuance of the revised Practice Statement. The Practice Statement is an important tool for supporting connected reporting, facilitating better connections between financial statements and sustainability-related financial disclosures.

New educational materials on the IFRS for SMEs Accounting Standard

The IFRS Foundation has published the following updated educational modules to support small- and medium-sized entities in applying the third edition of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) Accounting Standard:

• Section 1 Small and Medium-sized Entities;
• Section 2 Concepts and Pervasive Principles; and
• Section 7 Statement of Cash Flows.

These updated modules are also relevant for entities applying the revised HKFRS for Private Entities Accounting Standard, issued by the Institute in April, which is equivalent to the third edition of the IFRS for SMEs Accounting Standard published by the IASB.

Auditing and assurance

ISA 240 (Revised) The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements

The IAASB has revised International Standard on Auditing 240 (Revised) (ISA 240 (Revised)), which responds to global scrutiny and stakeholder concern regarding the auditor’s role in detecting fraud.

The revisions align with ISA 570 (Revised 2024) Going Concern, recognizing that fraud and financial distress are often interrelated risks that must be addressed together to bolster corporate transparency and resilience. ISA 240 (Revised) will be effective for audits of financial statements for periods beginning on or after 15 December 2026. The Institute will follow its due process for the convergence and adoption of the standard.

New FAQ for the ISA for LCE

The International Auditing and Assurance Standards Board (IAASB) has published a new FAQs document for the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE), which is tailored for financial audits of smaller and less complex entities. This new FAQ replaces the previous version and addresses common questions received during webinars and outreach following the standard’s publication in December 2023, providing timely and practical clarifications.

This release is the final component of the IAASB’s planned implementation support package to facilitate the effective implementation of the standard. It complements the previously released adoption guide, fact sheet, first-time implementation guide, and other supplemental materials.

Ethics

Institute submission

The Institute has submitted its comment letter on the International Ethics Standards Board for Professional Accountants (IESBA) Consultation Paper: Collective Investment Vehicles and Pension Funds – Auditor Independence.

Sustainability

Invitations to comment

The Institute is seeking comments on the following ISSB Exposure Drafts Proposed Amendments to the SASB Standards and Proposed Amendments to the Industry-based Guidance on Implementing IFRS S2 by 14 October.

Institute submission

The Institute has submitted its responses to the ISSB Exposure Draft Amendments to Greenhouse Gas Emissions Disclosures.

IFRS Foundation publishes jurisdictional profiles providing transparency and evidencing progress towards adoption of ISSB Standards

The IFRS Foundation has published an initial set of 17 jurisdictional profiles to provide transparency to capital markets which evidences the high degree of alignment with the ISSB Standards. Hong Kong is among the initial set of jurisdictions that have set a target of fully adopting the ISSB Standards.

These profiles provide detailed information about each jurisdiction’s targets for aligning with ISSB Standards and the current status of their sustainability-related disclosure requirements. They are published once a jurisdiction’s approach to sustainability reporting is finalized and no longer subject to consultation. This represents a significant step in clarifying progress toward establishing a global baseline for sustainability disclosures in capital markets.

IESBA and IAASB establish expert groups to support global implementation of sustainability standards

The IESBA and the IAASB have formed two expert implementation groups that will play important roles in supporting the effective implementation and application of the boards’ recently released global sustainability standards:

• The IESBA’s IESSA Implementation Monitoring Advisory Group (IIMAG) will support the implementation of the International Ethics Standards for Sustainability Assurance (including International Independence Standards) (IESSA) and revisions to the IESBA Code for sustainability reporting.
• The IAASB’s ISSA 5000 Technical Implementation Contact Group (TICG) will support implementation of the International Standard on Sustainability Assurance (ISSA) 5000.

The IIMAG and TICG will provide regular feedback to the boards to ensure that emerging issues related to the implementation of the standards are identified and addressed timely, and that implementation support resources remain relevant and practical.

GRI 102 and IFRS S2 – Reporting on both standards and equivalence for IFRS S2 on GHG emissions disclosures

The Global Sustainability Standards Board (GSSB) has granted equivalence to IFRS S2 for entities preparing disclosures of greenhouse gas (GHG) emissions under GRI 102: Climate Change 2025, the new climate standard issued by the GSSB.

Organizations using both GRI 102 and IFRS S2 can use the equivalent IFRS S2 disclosures for Scope 1, Scope 2 and Scope 3 GHG emissions to meet GRI 102 requirements.

To be able to provide the equivalent IFRS S2 GHG emission disclosures, organizations reporting in accordance with or with reference to the GRI Standards will have to:

• Measure their GHG emissions in accordance with the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004); and
• Include a reference to the location where the information for each of the disclosures can be found as per the Publish a GRI content index requirement in GRI 1: Foundation 2021.

Educational material about using ISSB Industry-based guidance when applying ISSB Standards

The IFRS Foundation has published educational material to help companies understand the role of the ISSB industry-based guidance – which collectively refers to the Sustainability Accounting Standards Board Standards and the Industry-based Guidance on Implementing IFRS S2 – when applying ISSB Standards.

The ISSB industry-based guidance is a useful resource for companies applying ISSB Standards, as it sets out disclosure topics and metrics that are typically relevant with specific industries.

Guidance on disclosures about transition plans

The IFRS Foundation has published a new guidance document titled Disclosing information about an entity’s climate-related transition, including information about transition plans, in accordance with IFRS S2 as part of its commitment to supporting the implementation of ISSB Standards. The document builds on disclosure-specific material developed by the Transition Plan Taskforce, for which the IFRS Foundation took responsibility in 2024.

IAASB and IESBA publications to support implementation of sustainability assurance and ethics standards

The IAASB and the IESBA have released two staff publications, FAQs on Sustainability Assurance Engagements and IESBA Staff Questions and Answers on IESSA, to support implementation of the IAASB’s and IESBA’s global sustainability-related standards: ISSA 5000 and IESSA.

Corporate finance

Second policy statement on development of digital assets issued to scale Hong Kong to new heights of global digital asset leadership

The government issued on 26 June the Policy Statement 2.0 on the Development of Digital Assets in Hong Kong, reinforcing its commitment to establishing Hong Kong as a global hub for innovation in the digital asset field. This new policy statement builds upon the foundational measures outlined in the initial policy statement released in October 2022.

Insolvency

Implementation of the iCMS for civil appeal cases of the High Court

The Judiciary Administration has issued a letter to the Institute, advising that the integrated Court Case Management System (iCMS) will soon be extended to cover the civil appeal cases in the High Court.

Anti-money laundering

FATF list of high-risk and other monitored jurisdictions

On 13 June, the Financial Action Task Force (FATF) published a statement regarding high-risk jurisdictions subject to a call for action, calling on its members and all jurisdictions continue to apply specific measures and actions on Iran, the Democratic People’s Republic of Korea and Myanmar.

The FATF also issued a notice on jurisdictions under increased monitoring, identifying jurisdictions with strategic deficiencies in their anti-money laundering/counter-terrorist and proliferation financing regimes and that are working with the FATF to address these deficiencies.

Please refer to the full versions of Technical News on the Institute’s website: www.hkicpa.org.hk