Financial reporting
List of new and amended HKFRS
The Institute has published the list of amended Hong Kong Financial Reporting Standards (HKFRS) that are applicable to December 2022 year-end.
IASB December 2022 podcast and update
The International Accounting Standards Board (IASB) podcast, with its chair and executive technical director highlighting the projects discussed during its December meeting, and a summary of the December meeting, are now available.
IASB Chair Andreas Barckow discusses IFRS 17 becoming effective from 1 January 2023
The IASB has published a short video to remind stakeholders that International Financial Reporting Standard (IFRS) 17 Insurance Contracts applies to companies with annual reporting periods beginning on or after 1 January 2023.
December 2022 IFRS for SMEs Accounting Standard Update
This edition of the IFRS for SMEs Accounting Standard Update includes frequently asked questions on the proposals in the Exposure Draft (ED) Third edition of the IFRS for SMEs Accounting Standard; a list of newly available resources to support the consultation on the ED; and guidance on how to get involved in the consultation.
IASB publishes its review of classification and measurement requirements relating to financial instruments
The IASB has published its project report and feedback statement concluding the post-implementation review (PIR) of the classification and measurement requirements in IFRS 9 Financial Instruments. Feedback from stakeholders and research undertaken as part of the PIR show that the requirements set out in IFRS 9 are working as intended and provide useful information to users of financial statements. In response to feedback, the IASB has also identified areas for research and standard-setting to further enhance information provided to users of financial statements.
Call for papers on hedge accounting requirements of financial instruments accounting standard
The IASB and Accounting & Finance journal have announced a call for research papers on the application and impact of hedge accounting requirements in IFRS 9 and new disclosure requirements in IFRS 7 Financial Instruments: Disclosures related to this. The IASB is seeking evidence about: whether the requirements are working as intended; any important or contentious issues that have come to the attention of the IASB; and any unexpected costs or implementation issues. Papers should be submitted via the online system by 1 September 2023.
Auditing and assurance
Revised standard on risk assessment for 2022 audits
Hong Kong Standard on Auditing (HKSA) 315 (Revised 2019) Identifying and Assessing the Risks of Material Misstatement is effective for audits of financial statements for periods beginning on or after 15 December 2021. It introduces major changes in the approach to risk identification and assessment which will have far-reaching effects for firms of all sizes.
The following resources provide tips and support for the implementation of HKSA 315 (Revised 2019):
- The Institute’s Audit Practice Manual (2022 edition) has been updated to address the new and revised requirements of HKSA 315 (Revised 2019).
- The Institute’s archived e-learning course on HKSA 315 (Revised 2019) provides a deep dive into the new and revised requirements and discusses their implementation within auditing.
- CPA Canada’s publication Briefing for management and those charged with governance assists practitioners to explain the changes to their audit clients.
The risk identification and assessment process: Tips on implementing ISA 315 (Revised 2019)
This new implementation tool by the International Federation of Accountants (IFAC) helps auditors implement International Standard on Auditing (ISA) 315 (Revised 2019). It provides an overview of core concepts and explains new and previously existing requirements of ISA 315 (Revised 2019). It also includes examples and emphasizes the scalability of the standard with a focus on less complex entities.
Quality management and group audits: Highlighting certain aspects of interaction between ISA 220 (Revised) and ISA 600
The International Auditing and Assurance Standards Board’s (IAASB) fact sheet focuses on the interactions between ISA 220 (Revised) on quality management at the engagement level and ISA 600 on group audits. It highlights aspects of a group audit that may be affected by ISA 220 (Revised) and International Standard on Quality Management 1. This includes the revised definition of engagement team and leadership and direction, supervision, and review responsibilities. This fact sheet is particularly useful for group audits in which component auditors are involved.
2021 IAASB Handbook
The 2021 edition of the Handbook of the International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements is now available. It replaces the 2020 edition and incorporates the following that are effective for audits of financial statements for periods beginning on or after 15 December 2021.
- ISA 315 (Revised 2019) Identifying and Assessing the Risks of Material Misstatement, which replaces ISA 315 (Revised) Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment.
- Conforming and consequential amendments from ISA 315 (Revised 2019) in other relevant standards.
Ethics
Revised non-assurance services and fee-related provisions
The revised non-assurance services and fee-related provisions of the Code of Ethics for Professional Accountants significantly strengthen the guardrails around auditor independence in two important areas that have the potential to create incentives influencing auditor behaviour — non-assurance services (NAS) provided to audit clients and fees. The revisions are effective for periods beginning on or after 15 December 2022; otherwise, they are effective as of 15 December 2022.
The following resources provide tips and support for the implementation of the revision:
- The Institute’s updated Ethics Circular 1 has incorporated the new and revised NAS provisions aiming at providing guidance to small and medium practitioners including sole practitioners, on their application of the Code to certain NAS and other topical issues.
- The Institute’s archived e-learning course, titled “Revised non-assurance services and fee-related provisions of the Code of Ethics for Professional Accountants,” provides an overview of the revisions and a deep dive into areas such as the new self-review threat prohibition for public interest entities audit clients; self-interest threats created by fees paid by an audit client; strengthened provisions regarding relative size of fees to the firm from a particular audit client, etc.
Forthcoming key changes to the IESBA Code
One of the IFAC’s three strategic objectives is “Contributing to and promoting the development, adoption, and implementation of high-quality international standards.” This IFAC article summarizes the forthcoming key changes to the International Ethics Standards Board for Accountants’ (IESBA) Code, focused on those which came into effect from 15 December 2022.
Sustainability
ISSB announces guidance and reliefs to support Scope 3 GHG emission disclosures
The International Sustainability Standards Board (ISSB) has set out a series of guidance and reliefs to support those applying the requirement within its Climate-related Disclosures Standard (S2) to disclose Scope 3 greenhouse gas (GHG) emissions when material for a company. The guidance and reliefs are designed to help companies embed and improve their processes for measurement and disclosure of Scope 3 GHG emissions.
ISSB Update December 2022
The ISSB Update provides a summary of discussions at its 13-15 December meeting.
Inaugural membership of Sustainability Standards Advisory Forum announced
Thirteen representatives of jurisdictions and regions from around the world will come together to form a Sustainability Standards Advisory Forum (SSAF), that will work with the ISSB towards a comprehensive global baseline of sustainability-related disclosure for capital markets. The SSAF has been established to formalize and streamline the ISSB’s engagement with jurisdictional and regional bodies to ensure that a broad range of national and regional input on major technical issues related to the ISSB’s standard-setting are discussed and considered.
IFRS Foundation and MoF China sign an MoU to establish an ISSB office in Beijing
On 29 December 2022, the Trustees of the IFRS Foundation signed a Memorandum of Understanding (MoU) with the Ministry of Finance (MoF) of China to establish a Beijing office of the IFRS Foundation. The MoU is effective for an initial three-year period.
IFAC report – Professional Accountants as Finance and Business Leaders
IFAC published a report, Professional Accountants as Finance and Business Leaders, which summarizes the key insights and learnings from the September 2022 meeting of its Professional Accountants in Business (PAIB) Advisory Group. The discussions consider key trends impacting business and public sector organizations globally, and cover the key roles of PAIBs in:
- Driving sustainable value creation through an integrated mindset, with a case study on Natura & Co.;
- Corporate governance and oversight of sustainability, and environmental, social and governance matters;
- Sustainable financing;
- Digitalization of finance and accounting, with a case study on Procter & Gamble; and
- The growing B-Corps movement.
Corporate finance
Institute submission on HKEX’s consultation on Listing Regime for Specialist Technology Companies
The Institute issued a submission in response to the consultation paper issued by the Hong Kong Stock Exchange (HKEX) seeking feedback on proposed new listing rules for Specialist Technology Companies (STCs).
In general, the Institute does not have strong views on whether to introduce a new listing regime to accommodate the listing of the STCs. However, investors, especially retail investors, could be subject to high risk when investing in STCs. Hence, from an investor protection perspective, we suggest that HKEX needs to introduce additional corporate governance requirements on STCs, especially for Pre-Commercial Companies. Refer to the Institute’s submission for details.
Legislation and other initiatives
Anti-money laundering (AML) notices
The United Nations Sanctions (Central African Republic) Regulation 2020 (Amendment) Regulation 2022 and the United Nations Sanctions (Mali) Regulation 2019 (Amendment) Regulation 2022 were gazetted on 23 December 2022.
Members should refer regularly to the Institute’s AML webpage for useful documents and guidance.
Please refer to the full versions of Technical News on the Institute’s website.
