TechWatch 189

Members’ handbook update no. 218

Update no. 218 relates to the issuance of a revised Conceptual Framework for Financial Reporting 2018.

Local updates

Q&As on HKAS 12 Income Taxes

The Institute issued Q&As on applying HKAS 12 Income Taxes in light of the recent two-tiered Hong Kong profits tax regime.

Invitation to comment

The Institute is seeking comments on the IASB Discussion Paper DP/2018/1 Financial Instruments with Characteristics of Equity by 9 Nov.

International updates

IFRS updates

• June IASB Update
• June IFRIC Update
• IASB video which explains the IASB’s proposed approach in DP/2018/1 to classify financial instruments either as debt or equity

Professional accountants in business

HKEX publishes review results of listed issuers’ financial reports
On 1 June, Hong Kong Exchanges and Clearing (HKEX) published a report summarizing key findings from its review of 100 periodic financial reports released by listed issuers between February 2017 and April 2018.

The report highlights the importance of the following areas:

• Providing investors with meaningful management commentary;
• Judgments and estimates;
• Assessing the impairment of tangible and intangible assets (including goodwill);
• Accounting for acquisitions;
• Impact of applying key HKFRSs in issue but not yet effective; and
• New auditors’ reporting.

HKEX reminds issuers that financial reports and all other corporate communication should be accurate, complete and not misleading, and the Audit Committee should focus on financial reporting integrity as part of its core oversight responsibilities.

Members, especially those responsible for preparing financial reports of listed issuers, are encouraged to read the report.

Role of the finance function in enterprise performance management

The International Federation of Accountants recently published a report on enterprise performance management (EPM). For finance professionals to be viewed as business partners, they must contribute effectively to EPM beyond traditional financial reporting and financial systems.

EPM represents a range of activities and practices that provide the reference points needed to deliver insights based on financial and non-financial, internal and external, and structured and unstructured data and information. It is based on an integrated management approach that links strategy to core processes and activities using relevant measures to report, manage performance and improve understanding of value creation.

This publication identifies why and how the finance function must evolve to support EPM, including:

• Why EPM is critical to the future of the profession;
• How accountants in business and the finance function can drive effective performance and financial management; and
• The four key enablers of EPM.

Corporate finance

HKEX consultation on backdoor listing and continuing listing criteria

On 29 June, HKEX released a consultation paper to seek views on proposals to tighten the reverse takeover rules and continuing listing criteria to address concerns over backdoor listings and “shell” activities. This forms part of HKEX’s ongoing holistic review of its rules to tackle problematic corporate behaviour with a view to maintaining the quality and reputation of the Hong Kong market. A summary of the proposed Listing Rule amendments is set out in the press release. Comments are requested by 31 August.

HKEX has also issued guidance letter (HKEX-GL96-18) on listed issuer’s suitability for continued listing, citing examples of circumstances where HKEX may raise concerns whether a listed issuer or its business continues to be suitable for listing.

Forum on Hong Kong market’s future role

On 1 June, financial experts from Mainland China and Hong Kong took part in a lively discussion to review Hong Kong’s contributions to China’s opening up, and the role Hong Kong can play as the country enters a new phase of capital market reforms, at a forum titled “A New Journey for a New Era – The Future of Hong Kong’s Capital Market.” The forum was attended by over 400 guests, including senior representatives from regulators, industry groups, corporations and investors. Read the HKEX press release for details.

Taxation

Announcements by the Inland Revenue Department (IRD)

Members may wish to be aware of the following matters:

• A Legislative Council question on claim for Disabled Dependant Allowance
• Levy payment to the Property Management Services Authority starting from 1 July
• Expanded scope of tax deductions for capital expenditure incurred for purchase of intellectual property rights
• Tax obligations of property owners, taxpayers and employers
• IRD Performance Pledges 2018-19
• Stamp Duty statistics (May 2018)
• Stamping Circular No. 06/2018 about filing of return of stockborrowing transactions
• A research brief on health insurance for individuals in Hong Kong

Institute’s recent tax submissions

The Institute’s Taxation Faculty has commented on Inland Revenue (Amendment) (No. 3) Bill 2018, relating to enhanced tax deductions for certain expenditures incurred on research and development activities.

Legislation and other initiatives

Anti-money laundering notices

Members should note the following notices and publications in relation to anti-money laundering and counter-terrorist financing (AML/CTF):

• Government notice 4161: An updated list of terrorists and terrorist associates has been specified under the United Nations Sanctions Ordinance (UNSO).
• Government notice 4162: An updated list of terrorists and terrorist associates has been specified under the UNSO.
• Legal notice 117: The United Nations Sanctions (Central African Republic) Regulation 2018 has been published in the Gazette.
• Legal notice 118: The United Nations Sanctions (Yemen) Regulation 2015 (Amendment) Regulation 2018 has been published in the Gazette.
• Legal notice 122: The United Nations Sanctions (Democratic People’s Republic of Korea) (Amendment) Regulation 2018 has been published in the Gazette.
• Government notice (extraordinary) 30: An updated list of terrorists and terrorist associates has been specified under the United Nations (Anti-Terrorism Measures) Ordinance.
• United Nations (Anti-Terrorism Measures) (Amendment) Ordinance 2018 was enacted by the Legislative Council on 21 March and came into effect on 31 May.
• United Nations Sanctions (Amendment) Ordinance 2018, which enables regulations made under the ordinance to impose sanctions directly against persons, in addition to places, has come into effect.
• Insurance Authority issued Key Findings of AML/CFT Onsite Inspection Visits to Authorized Insurers Carrying on Long Term Business on 31 May, to review their AML/CFT policies, procedures and controls (collectively referred to as “AML/CFT systems”) and their compliance with the AMLO and the guideline.
• High-risk and non-cooperative jurisdictions: In June, the Financial Action Task Force issued a public statement regarding two jurisdictions and a document titled “Improving Global AML/CFT Compliance: On-going Process” concerning eight other jurisdictions.
• Specially designated nationals and blocked persons list, published by the United States Treasury’s Office of Foreign Assets Control. More details on the Resource Centre of the Treasury.

Anti-money laundering procedures manual for accountants

The Institute published an anti-money laundering procedures manual for accountants to support its members in their compliance with and implementation of the new anti-money laundering and counter-terrorist financing regulatory regime. The manual is now available for purchase at the 27/F service counter of the Institute’s office.

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