When setting its policy to achieve convergence with International Financial Reporting Standards (IFRS) in 2001, the Institute’s Council acknowledged that Hong Kong Financial Reporting Standards (HKFRS) as converged with IFRS would be more exacting than necessary for many smaller companies required to report under the Companies Ordinance (CO). Accordingly, the Council decided that the Institute should develop reporting requirements for small- and medium-sized enterprises (SMEs) that would better meet the needs of users of their financial reports.
Following this, the Institute’s Financial Reporting Standards Committee (FRSC) decided that the Small and Medium-sized Entity Financial Reporting Framework and Financial Reporting Standard (SME-FRF & SME-FRS) should be a predominantly cost-based measurement standard that is straightforward for entities with simple businesses or transactions to apply.
The SME-FRF & SME-FRS were issued in 2005 and have been revised since to cater for changes in the CO. In October 2018, the FRSC commenced a post-implementation review (PIR) of the SME- FRF & SME-FRS, and as a consequence, issued amendments in March 2020 that became effective on 1 January 2021. The amendments include the following:
(i) Transition exemption;
(ii) Addition of lessor accounting requirements and a concept of “presentation currency”; and
(iii) Clarification the disclosure requirements in paragraph 19.16 of the SME-FRF & SME-FRS.
About the courses
Throughout various interviews and discussions with SMEs and small- and medium-sized practices (SMPs) during the PIR and the Institute’s SMP Symposiums over the years, and the handling of day-to-day technical enquiries, I have obtained a detailed understanding of SMEs and SMPs’ needs and concerns.
Due to limited resources it can be challenging for SMEs and SMPs to provide their employees, in particular new joiners, with quick and effective training on the SME-FRF & SME-FRS and guidance on frequently encountered problems in practice. These courses aim to provide this training.
The two e-learning courses of one CPD hour each go through the financial reporting frameworks in Hong Kong, eligibility to use the SME-FRF & SME-FRS and their key features, frequently asked questions from SMEs and SMPs, as well as the recently amendments to the standard. The e-learning courses are:
The Small and Medium-sized Entity Financial Reporting Framework and Financial Reporting Standard
Many SMEs and SMPs still have questions about the eligibility and accounting requirements of the SME-FRF & SME-FRS. This course explains the reporting exemption requirements (e.g. size tests and shareholders’ approval) in the CO, accounting requirements under key sections and transitional arrangements of the standard. Click here for details.
SMEs/SMPs: You should know…
This course covers frequently asked technical questions including common points of confusion or misunderstanding on certain basic financial reporting requirements in the CO, accounting requirements in the SME-FRF & SME-FRS and also HKFRS for Private Entities. The questions covered include:
- What are the available financial reporting frameworks in Hong Kong?
- Can I use SME-FRF & SME-FRS or HKFRS for Private Entities to prepare the financial statements of my company?
- Do companies that are subsidiaries of a listed company qualify for the reporting exemption?
- Can I apply requirements in HKFRS for financial statements prepared under SME-FRF & SME-FRS or HKFRS for Private Entities?
- Will SME-FRF & SME-FRS or HKFRS for Private Entities adopt HKFRS 9 Financial Instruments, HKFRS 15 Revenue from Contracts with Customers and HKFRS 16 Leases?
This e-learning also covers the amendments to the SME-FRF & SME-FRS that became effective on 1 January 2021. In addition, it includes a section to cover the determination of the discount rate of a lease under HKFRS 16 with illustrative examples, presented by Joni Kan CPA, the Institute’s subject matter expert on the standard. Click here for details.
I hope that SMEs and SMPs will find these two e-learning courses relevant and useful when dealing with their daily work. The courses are conducted in Cantonese and you can find more enrolment details on the Institute’s website.
Anthony Wong CPA, Associate Director, Standard Setting at the Hong Kong Institute of CPAs, is in charge of the SME-FRF & SME-FRS and HKFRS for Private Entities standards. He led the recent post- implementation reviews of these two standards. He was the speaker for the financial reporting section of the Institute’s SMP Symposium from 2018 to 2020. Before joining the Institute, he worked at a Big Four firm for more than 10 years, auditing clients ranging from smaller entrepreneurs and private businesses to large listed companies.
