Publication of HKFRS S1 and HKFRS S2 and updates to Members’ Handbook
Following the Hong Kong government’s publication of the Roadmap on Sustainability Disclosure in Hong Kong on 10 December 2024, the Institute published the inaugural Hong Kong Financial Reporting Standard (HKFRS) Sustainability Disclosure Standards – HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and HKFRS S2 Climate-related Disclosures on a full alignment basis with the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards on 12 December 2024. For details, please access the one-page infographic and Handbook Update No. 319 related to the issuance of HKFRS S1 and HKFRS S2.
Other Members’ Handbook highlights
Handbook Update No. 320 revises practice notes (PN) 620.2 (Revised) and 810.2 (Revised) in Members’ Handbook Volume III. They are updated for reporting in relation to the implementation of the risk-based capital (RBC) regime as a result of the Insurance (Amendment) Ordinance 2023 and the relevant subsidiary legislation which became effective on 1 July 2024.
Under the RBC regime, an authorized insurer is required to submit an auditor’s report on the specified forms included in the annual returns to the Insurance Authority. Guidance on this assurance reporting in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) is now provided in PN 810.2 (Revised).
Handbook Update No. 318 relates to revisions to the Institute’s Code of Ethics for Professional Accountants (Code) incorporating the following:
- Revisions to the Definitions of Listed Entity and Public Interest Entity (PIE) in the Code which will be effective for audits of financial statements for periods beginning on or after 15 December 2024.
- Revisions to the Code Addressing Tax Planning and Related Services (Tax Planning Revisions) which will be effective for tax planning activities or services beginning after 30 June 2025. Early adoption is permitted. Section 600 of Chapter C has also been revised for conforming and consequential amendments as a result of the Tax Planning Revisions.
- Other housekeeping editorial changes to align with the 2024 Handbook of International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA).
Financial reporting
Invitation to comment
The Institute is seeking comments on the IFRS Foundation Exposure Draft Proposed Amendments to the IFRS Foundation Due Process Handbook by 14 February.
List of new and amended HKFRS
The Institute has published the list of amended HKFRSs and Interpretations that are applicable to December 2024 year-end.
IFRS 19 disclosure tracker
The IFRS Foundation has released the IFRS 19 disclosure tracker, which lists the disclosure requirements in IFRS 19 Subsidiaries without Public Accountability: Disclosures and maps them to their equivalents in other IFRS Accounting Standards. The tracker, which requires registration to access, will be updated regularly to reflect changes in both IFRS 19 and other IFRS Accounting Standards.
IASB completes technical work on Management Commentary
The International Accounting Standards Board (IASB) has completed its technical decision-making on the revised IFRS Practice Statement 1 Management Commentary. The IASB is expected to publish the updated Practice Statement in the first half of 2025.
This revision addresses the need for better information related to a company’s ability to create value and generate cash flows, including in the long term. In finalizing the project, the IASB made targeted improvements to its proposals to support alignment with IFRS Sustainability Disclosure Standards and improve connectivity in companies’ reports. The IASB intends that the updated statement will support the improvement and global alignment of management commentary and similar reporting for regulators and companies.
Auditing and assurance
Year-end audit preparation
The following publications and resources will be helpful for practitioners preparing for the annual audit for the year ended on or after 31 December 2024.
- The Accounting and Financial Reporting Council’s (AFRC) Audit Focus for 2024 year-end audits provides guidance to auditors in effectively identifying and responding to the elevated risks in financial reporting and auditing created by the current uncertain economic conditions. It also provides critical reminders to auditors to ensure audit quality for the upcoming year-end audits.
- Practitioners performing group audit engagements for the year ended on or after 31 December 2024 should adopt Hong Kong Standard on Auditing (HKSA) 600 (Revised). This updated standard introduces significant changes to the auditor’s responsibilities, emphasizing a proactive and risk-based approach to group audits. To ensure an effective implementation, practitioners can refer to the Institute’s updated Audit Practice Manual (2024 edition) and other resources relevant to the application of HKSA 600 (Revised) which are available at the Institute’s resource centre. Additionally, practitioners should note that revisions related to the definition of engagement team and group audits in the Institute’s Code will take effect concurrently with the effective date of HKSA 600 (Revised).
AFRC publication on root cause analysis and remediation
The AFRC has released its Inspection Insights – Root Cause Analysis and Remediation: A Call to Action for Quality Improvement. The report shares observations on how PIE auditors subject to the AFRC 2023 inspections had performed root cause analysis of the identified deficiencies and responded by designing and implementing remedial actions. The AFRC observed that firms with proactive leadership are more pronounced in fostering a culture of continuous improvement and thus have invested more time and resources in developing quality remediation plans.
IAASB approved revised ISA 570 and a new audit project
In December 2024, the International Auditing and Assurance Standards Board (IAASB) made significant strides in enhancing auditing standards.
- The final text of International Standard on Auditing (ISA) 570 (Revised 2024), Going Concern was approved. Among others, the revised standard aims to strengthen the auditor’s evaluation of management’s assessment of going concern and enhance transparency with respect to the auditor’s responsibilities and work related to going concern in the auditor’s report. The IAASB anticipates to publish the final standard in Q2 2025 with an effective date set 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.
- A new project proposal on Audit Evidence and Risk Response was approved. The project aims to improve audit quality through revisions to some auditing standards, namely ISA 330, ISA 500 and ISA 520. The IAASB anticipates an exposure draft by December 2025.
Ethics
Upcoming changes to ethical standards
The following summarizes upcoming changes to the Code that members should prepare for in relation to the new and revised ethical requirements:
- Revisions to the Code Relating to the Definition of Engagement Team and Group Audits: Effective for audits of financial statements for periods beginning on or after 15 December 2023.
- Technology-related Revisions to the Code: Updates to the Independence Standards will take effect for audits and reviews of financial statements for periods beginning on or after 15 December 2024. Additional revisions to the ethical provisions of the Code will be effective from 15 December 2024. Join the Institute’s e-learning to explore these revisions and prepare for the changes.
- Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code: Effective for audits of financial statements for periods beginning on or after 15 December 2024. The Institute’s Ethics Committee, in adopting the revised PIE definition and related provisions, has incorporated local refinements to ensure the definitions are relevant for implementation in Hong Kong. Access the video to learn more about these important changes.
- Revisions to the Code Addressing Tax Planning and Related Services: New provisions concerning tax planning and related services will become effective on or after 1 July 2025. Join the Institute’s e-learning to gain insights into these changes and be well-prepared.
Read this article for highlights on the above changes. To learn more about the new and revised requirements, explore the resources available at the Institute’s Ethics Resource Centre.
Sustainability standards approval at IESBA’s December 2024 meeting
The IESBA took a major leap forward at its December 2024 meeting by approving two sets of standards aimed at enhancing public trust in sustainability reporting and assurance:
- The International Ethics Standards for Sustainability Assurance (IESSA) and related revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards) (the IESBA Code), setting a global benchmark for ethical behaviour and independence in sustainability reporting and assurance.
- Revisions to the IESBA Code on Using the Work of an External Expert, establishing an ethical framework for evaluating the competence, capabilities and objectivity of external experts used by professional accountants and sustainability assurance practitioners.
Sustainability
Highlights from the Beijing International Sustainability Conference 2024
The IFRS Foundation’s Beijing Office hosted the Beijing International Sustainability Conference 2024 on 21 November 2024. The conference, themed “Path to Global Baseline”, highlighted the latest developments from the International Sustainability Standards Board (ISSB). Access the conference archive here.
Webcasts: Accelerating Climate and Sustainability-related Disclosures: A Global Perspective
The International Federation of Accountants (IFAC), the IFRS Foundation, and the International Organization of Securities Commissions (IOSCO) jointly hosted the event Accelerating Climate and Sustainability-related Disclosures: A Global Perspective during the Climate Week New York City 2024. Leaders from IFAC, ISSB and IOSCO joined the event to share their perspectives on global adoption and implementation of the ISSB Standards. To support the ongoing discussion and action, the IFAC has made the recordings available to the public.
Please refer to the full versions of Technical News on the Institute’s website: www.hkicpa.org.hk
