Accounting implications of the abolition of the MPF-LSP offsetting mechanism in Hong Kong
The Hong Kong government gazetted the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 in June 2022. The Amendment Ordinance abolishes the use of the accrued benefits derived from employers’ mandatory contributions to a Mandatory Provident Fund (MPF) to offset severance payment and long service payment (LSP) (the abolition).
The Institute has issued an alert regarding the accounting implications of the abolition. The alert summarizes the discussions by the Institute’s Financial Reporting Standards Committee (FRSC) to date and the steps entities should take before the FRSC publishes more comprehensive guidance.
Publication: Financial Reporting Considerations for Closing Out 2022
The Institute has issued the publication Financial Reporting Considerations for Closing Out 2022, which highlights the key topics and reminders that entities should consider in preparing their December 2022 financial statements. The publication discusses new and revised Hong Kong Financial Reporting Standards mandatorily effective from 1 January 2022, agenda decisions issued by the IFRS Interpretations Committee in 2022 that are relevant to Hong Kong entities and the impact on financial reporting brought by the changes in the macroeconomic environment. The considerations highlighted in the publication are also relevant for upcoming interim period-ends and financial year-ends.
IASB initiates project to consider climate-related risks in financial statements
The International Accounting Standsards Board (IASB) has added a project to its work plan to explore whether and how companies can provide better information about climate-related risks in their financial statements. In this article, Andreas Barckow, IASB Chair, provides further information about the project and explains how it relates to the work of the the International Sustainability Standards Board (ISSB).
Auditing and assurance
The Institute has submitted its comment letter on the International Auditing and Assurance Standards Board (IAASB) consultation paper, The IAASB’s Proposed Strategy and Work Plan for 2024-2027.
Updates to Auditing and Assurance Technical Bulletins and Circulars
The Institute has revised the relevant Auditing and Assurance Technical Bulletins and Circulars for local legislative changes due to regulatory reform.
Auditor’s reporting under Product Eco-responsibility (Regulated Articles) Regulation (Cap. 603C)
The Product Eco-responsibility (Regulated Articles) Regulation (Cap. 603C) will be implemented starting from 1 May 2023. It requires registered suppliers of glass beverage bottles to submit periodic returns to the Hong Kong Environmental Protection Department (EPD) on the bottles they distribute or consume in Hong Kong. It also requires them to engage a CPA (practising) to opine on the periodic returns submitted to the EPD. The Institute’s Circular on Reporting under Section 20 of the Product Eco-responsibility (Regulated Articles) Regulation (Cap. 603C) aims to provide guidance to practitioners when undertaking such engagements.
HKICPA alerts on auditor-related matters
The Institute has published the following alerts which highlight requirements relevant to auditors:
- Alert 45: Monitoring Activities and SOQM Evaluation under HKSQM 1
- Alert 46: Reminders for auditor’s reporting on the Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules
Implementation of the new quality management standards
A publication by the European Federation of Accountants and Auditors for small and medium-sized enterprises shares the approach of a small- and medium-sized practice (SMP) to implementing the new quality management standards, as well as a list of some available electronic implementation tools that might help SMPs.
AFRC audit fee report and 2023 survey report
The two new reports on audit fees (audit fee report) and the appointment of auditors in Hong Kong (survey report) by the Accounting and Financial Reporting Council (AFRC) calls for auditors, audit committees, listed companies and institutional investors to develop a stronger focus on the setting of audit fees and the appointment of auditors, both of which are crucial in upholding the quality of financial reporting and audit in listed companies.
IESBA Q&A on revisions to the definitions of listed entity and PIE in the code
The staff of the International Ethics Standards Board for Accountants (IESBA) released a questions and answers (Q&As) publication on the revisions to the definitions of listed entity and public interest entity (PIE) in the International Code of Ethics for Professional Accountants (including International Independence Standards). The Q&As highlight, illustrate or explain aspects of the PIE revisions in the code and is intended to complement the Basis for Conclusions for the final pronouncement. It also assists stakeholders including firms to adopt and/or implement the PIE revisions, and understand the revised PIE definition and related provisions in the IESBA code.
ISSB ramps up activities to support global implementation ahead of issuing inaugural standards end Q2 2023
The ISSB, at its meeting on 16 February in Montreal, has taken its final decisions on all the technical content of its initial IFRS Sustainability Disclosure Standards, informed by feedback it received during extensive consultation last year. The ISSB unanimously approved entering the thorough drafting and formal balloting process of the standards, ahead of their expected issuance at the end of Q2 2023. The ISSB also agreed that its initial standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, will become effective starting January 2024. Given sustainability disclosure is new for many companies globally, the ISSB will introduce programmes that support those applying its standards as market infrastructure and capacity is built.
ISSB decides to prioritize climate-related disclosures to support initial application
At its meeting on 4 April, the ISSB decided that it will complement its package of transitional reliefs to support companies applying the ISSB’s first two standards.
The relief will enable companies to focus initial efforts on ensuring they meet investor information needs around climate change. It means companies can prioritize putting in place reporting practices and structures to provide high-quality, decision-useful information about climate-related risks and opportunities in the first year of reporting using the ISSB standards.
IESBA and IAASB highlight commitment to deliver on recommendations in new IOSCO report
The IESBA and IAASB welcomed the report released by the International Organization of Securities Commissions (IOSCO) on developing a global assurance framework for sustainability-related corporate reporting. The IESBA and IAASB commented that the IOSCO report reflects extensive research and feedback from key stakeholders and stated that the report calls for timely development of ethics and assurance standards for sustainability reporting by the IESBA and the IAASB, respectively.
Both the IESBA and IAASB will issue public consultations later this year on standards for sustainability ethics and assurance, respectively. Both boards emphasize their commitment to address key considerations and recommendations presented in the IOSCO report.
Connectivity – what is it and what does it deliver?
The benefits of connectivity were an important consideration when the IFRS Foundation created the ISSB to operate alongside the IASB. In this article, Andreas Barckow, IASB Chair, and Emmanuel Faber, ISSB Chair, explain what connectivity means, why it matters and what benefits it can deliver.
Institute submission on HKEX’s consultation on Proposals to Expand the Paperless Listing Regime and Other Rule Amendments
Institute submission on SFC’s consultation on the Proposed Requirements for Operators of VATPs
The Institute issued a submission in response to the consultation paper issued by the Securities and Futures Commission, seeking feedback on proposals to allow licensed virtual asset trading platform (VATP) operators to serve retail investors.
In principle, the Institute does not object to allowing licensed VATP operators to extend their services to retail investors, provided that there are sufficient robust investor protection measures in place and, in this regard, the submission suggests some additional safeguards. The submission also responds to other questions raised in the consultation paper.
Revision of Panel A Rules
In consultation with the Institute’s Restructuring and Insolvency Faculty Executive Committee, the Official Receiver’s Office has reviewed and revised the Rules for Admission of Firms and Persons for Taking-up Appointment of Liquidators, Provisional Liquidators or Special Managers in Non-Summary Court Winding-up Cases, commonly referred to as the “Panel A” Rules in consultation with the Institute. The revised Panel A Rules took effect on 1 March 2023.
Profits Tax e-Filing
All corporations and businesses can voluntarily e-file tax returns under eTAX for year of assessment 2022/23. Particular attention should be paid to the following updated filing requirements:
- All corporations and businesses, regardless of the amount of their gross income and the mode of return filing, must submit profits tax return together with all supporting documents.
- At the same time, all relevant supplementary forms and other forms required must be e-filed under eTAX.
- If a taxpayer chooses not to e-file the return, the taxpayer has to print and sign a paper Control List for the required forms e-filed and then furnish the signed Control List together with tax return and supporting documents in paper form.
Learn more by reading the letter to Taxation Faulty members.
Legislation and other initiatives
Government welcomes FATF’s adoption of Hong Kong’s AML/CTF follow-up report
On 17 February, the Financial Action Task Force (FATF) published a follow-up report on Hong Kong’s anti-money laundering and counter-terrorist financing (AML/CTF) system, following a review undertaken by its reviewer and member jurisdictions, which the Hong Kong government has welcomed. The report affirms Hong Kong’s progress and efforts in implementing risk-based AML/CTF supervision for most designated non-financial business and profession sectors, including the accounting profession. This reflects the Institute’s efforts to contribute input and updates on the part of the accounting profession for this follow-up report.
Please refer to the full versions of Technical News on the Institute’s website: www.hkicpa.org.hk