Technical news

1. Clarify that an entity is permitted to limit measurement and disclosure of Scope 3 Category 15 greenhouse gases (GHG) emissions to financed emissions as defined in HKFRS S2;
2. Permit the use of alternative classification systems to disaggregate information about financed emissions;
3. Clarify the availability of the jurisdictional relief from using the GHG Protocol Standard, if only part of an entity is required to use a different method for measuring GHG emissions; and
4. Introduce a jurisdictional relief from using global warming potential values from the latest Intergovernmental Panel on Climate Change Assessment Report for converting GHG emissions.

These amendments are effective for reporting periods beginning on or after 1 January 2027, with early application permitted. The Impact Analysis sets out the high-level details of the amendments and their impact on entities in Hong Kong.

Financial reporting

Invitation to comment

The Institute is seeking comments on our Exposure Draft Proposed Amendments to Accounting Guideline 5 (Revised) Merger Accounting for Common Control Combinations by 27 May.

Institute’s resources to support implementation of HKFRS 18

To support members in implementing HKFRS 18 Presentation and Disclosure in Financial Statements, the Institute has developed the HKFRS 18 Navigator. The series of targeted newsletters will be rolled out throughout 2026, focusing on critical areas to streamline your preparation. This first issue, Getting Ready, provides an overview of the major changes introduced by HKFRS 18, their potential impacts, and the initial steps entities should be taking now, while the second issue, Navigating the New Structure, provides guidance on classifying income and expenses across operating, investing and financing categories, highlights the two required subtotals, and outlines key implications for preparers. This webcast provides a practical overview of the core changes introduced by HKFRS 18 and why they matter for financial reporting.

Educational publication: Financial Reporting Considerations for Closing Out 2025

The Institute has issued an educational publication titled Financial Reporting Considerations for Closing Out 2025. It provides preparers with key reminders and insights for preparing their 2025 annual financial statements in accordance with HKFRS Accounting Standards, and covers three key areas:

• Amended HKFRS Accounting Standards mandatorily effective on 1 January 2025.
• Topical and emerging topics in relation to evolving tariffs, stablecoins, and relevant IFRS Interpretations Committee’s agenda decisions.
• New and amended HKFRS Accounting Standards issued but not yet effective as of 1 January 2025.

IFRS Foundation’s video on risk mitigation accounting

This IFRS Foundation video addresses three frequently asked questions (FAQs) about the International Accounting Standards Board’s proposed Risk Mitigation Accounting model: the use of repricing time bands in applying risk mitigation accounting and the role of risk limits; whether equity is in or out of the model; and the requirements for reflecting the effects of unexpected changes and recognizing any risk mitigation adjustment excess.

IFRS Foundation’s webcast on Overview of the forthcoming IFRS Accounting Standard – IFRS 20

This IFRS Foundation webcast explains the forthcoming IFRS 20 Regulatory Assets and Regulatory Liabilities, which sets out the accounting requirements for regulatory assets, regulatory liabilities, regulatory income and regulatory expense. The standard is expected to primarily affect entities subject to a specific type of rate regulation, such as those operating in the utilities, energy and transportation sectors. The standard is expected to be issued in the second quarter of 2026.

Educational material to support implementation of the IFRS for SMEs Accounting Standard

The IFRS Foundation has published a webcast and an educational module to support implementation of the IFRS for SMEs Accounting Standard. The webcast covers updates to Section 9 Consolidated and Separate Financial Statements and Section 15 Joint Arrangements, while the educational module focuses on Section 33 Related Party Disclosures. Explore educational resources published by the IFRS Foundation in the first quarter of 2026 here.

Auditing and assurance

Invitation to comment

The Institute invites comments on the International Auditing and Assurance Standards Board’s (IAASB) public consultation survey for post-implementation review (PIR) of International Standard on Auditing 540 (Revised) by 15 May.

Educational publication: Auditing and Ethics Considerations for 2025 Year-end Audits

This Institute publication outlines focus areas for auditors conducting audits in accordance with Hong Kong Standards on Auditing (HKSAs).

• Accounting estimates: Enhanced focus on auditing accounting estimates under HKSA 540 (Revised).
• IT environment: Requirements under HKSA 315 (Revised 2019) to obtain an understanding of an entity’s IT environment.
• Group audits: Key changes in HKSA 600 (Revised) and the independence requirements for group audits under Section 405 of the HKICPA Code of Ethics for Professional Accountants (Code).
• Expanded PIE definition: Overview of the revised definition of a public interest entity (PIE) in the Code, enhanced auditor’s report disclosures on PIE independence requirements and related amendments to HKSAs.

HKSA 700 (Revised) FAQs

These Institute FAQs provide guidance on disclosing the auditor’s signature in the auditor’s report.

AFRC issues open letter to PIE auditors

The Accounting and Financial Reporting Council (AFRC) issued an open letter to all PIE auditors serving as reporting accountants for entities seeking initial public offerings. In the letter, the AFRC outlines its key expectations for PIE auditors and emphasizes their indispensable role in maintaining the quality of financial reporting and fostering public trust in Hong Kong’s capital markets.

AFRC report “Transparency Reports: Building Trust and Unlocking Audit Excellence”

The AFRC published a report highlighting key insights drawn from transparency reports published by audit firms. The report explains how relevant and meaningful disclosures assists audit committees and investors in making informed decisions regarding auditor appointments, while also supporting the development of high-performing audit teams.

IAASB’s video “The Skeptic’s Pause”

In this video, the IAASB highlights the importance of pausing to critically assess audit evidence, challenge assumptions, and remain alert to conditions that may indicate possible material misstatement due to fraud or error.

Through a series of reflective prompts, auditors are encouraged to consider whether they have obtained sufficiently persuasive evidence, addressed higher assessed risks appropriately, and remained mindful of potential bias.

Ethics

Invitation to comment

The Institute invites comments on the International Ethics Standards Board for Accountants (IESBA)’s surveys for PIRs of Non-compliance with Laws and Regulations (NOCLAR) by 30 June and the Restructured Code by 3 June. IESBA has also published a snapshot providing an overview of the PIRs, explaining their purpose, direction and current focus.

Updated Q&As: HKICPA revisions to the definitions of Listed Entity and Public Interest Entity in the Code

The Institute has updated the Questions & Answers (Q&As) on the definitions of listed entity and PIE in the Code to provide additional guidance on the following areas:

• Additional ethics and auditing requirements applicable to audits of PIEs under the Code.
• Key differences between the PIE definition under the Code and that under the Accounting and Financial Reporting Council Ordinance.
• The impact of PIE classification on auditor eligibility and independence requirements.

IESBA paper on linkages between IESBA viewpoints and ISQM 1

IESBA has released a paper explaining the linkages and key differences between the IESBA Firm Culture and Governance (FCG) viewpoints (IESBA viewpoints) and International Standard on Quality Management (ISQM) 1. The paper highlights their mutually supportive nature, while recognizing the distinctions in their objectives, scope, output and focus. For illustrative purposes, the paper also presents the linkages between the IESBA viewpoints and ISQM 1 in relation to the eight elements of the FCG framework.

IESBA launches new workstream on private equity investment in accounting firms

The IESBA has agreed to launch a dedicated workstream to examine the ethical and independence implications of private equity investment in accounting firms. The workstream will assess the need for standard setting on alternative practice structures.

Sustainability

Invitation to comment

The Institute is seeking comments on the International Sustainability Standards Board (ISSB) Exposure Draft Proposed amendments to the SASB Standards and IFRS S2 Industry-based Guidance by 22 June.

Webcast: Climate resilience and climate-related scenario analysis requirements in IFRS S2

In this webcast, ISSB member and ISSB technical staff explain the requirements in IFRS S2 on disclosing information about climate resilience and the use of climate-related scenario analysis, including the proportionality mechanisms that enable entities to select an approach to scenario analysis that is commensurate with their circumstances.

Taxation

Inland Revenue Department (IRD) – 2025/26 Profits Tax Filing

The IRD issued 2025/26 Profits Tax Returns (PTRs) on 1 April 2026. Under the first phase of the implementation of mandatory e-filing, entities of in-scope multinational enterprise groups are mandated to e-file their PTRs with effect from the year of assessment 2025/26 onwards. Apart from these entities, other taxpayers are encouraged to e-file their PTRs, together with the supporting documents, in iXBRL format, on a voluntary basis. The IRD has implemented the full adoption of electronic Block Extension Scheme starting from 1 April 2026. Visit IRD website for details.

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