Update no. 256 contains amendments to Statement 1.500 Continuing Professional Development (Revised March 2021) to include the requirements of International Education Standard 8 Professional Competence for Engagement Partners Responsible for Audits of Financial Statements (Revised).
Institute roundtable on the IASB’s Business Combinations under Common Control Discussion Paper
On 11 May, the Institute will hold a roundtable on the International Accounting Standards Board’s (IASB) Discussion Paper DP/2020/2 Business Combinations under Common Control (BCUCC), which explains the IASB’s preliminary views on how to reduce the diversity in practice and improve the transparency and comparability in reporting BCUCC. Representatives from the IASB will participate in the roundtable, and this will be an excellent opportunity to communicate directly with local and international standards setters. Members can also submit comments by 5 July.
Members may also be interested in the following two recordings of the discussions on the paper:
- IASB webinar providing an overview of the paper.
- IASB, European Accounting Association, and European Financial Reporting Advisory Group virtual research workshop, providing an overview of the paper and discussing academic evidence.
Amendments to IAS 1, IAS 8 and IFRS Practice Statement 2
The IASB has issued narrow-scope amendments to the following standards:
- International Accounting Standard (IAS) 1 Presentation of Financial Statements. The amendments require companies to disclose their “material” accounting policy information rather than their “significant” accounting policies.
- IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The amendments clarify how companies should distinguish changes in accounting policies from changes in accounting estimates.
- International Financial Reporting Standard (IFRS) Practice Statement 2 Making Materiality Judgements. The amendments provide guidance on how to apply the concept of materiality to accounting policy disclosures.
The amendments to IAS 1 and IAS 8 will be effective for annual reporting periods beginning on or after 1 January 2023, with early application permitted.
COVID-19-related rent concessions beyond 30 June 2021
The IASB held a supplementary meeting on 10 March to consider feedback on Exposure Draft ED/2021/2 COVID-19-Related Rent Concessions beyond 30 June 2021, which proposes to extend the time period over which the practical expedient in paragraph 46A of IFRS 16 Leases is available for use. The IASB decided to finalize the proposal with an additional explanatory transition paragraph and plans to publish the final amendment to IFRS 16 on 31 March 2021 (please refer to Supplementary IASB Update March 2021). The Institute plans to publish an equivalent amendment to Hong Kong Financial Reporting Standard 16 in early April.
The Institute submitted its comment letter on the exposure draft.
Joint call for research papers on key standards
In conjunction with the Financial Accounting Standards Board and The Accounting Review, the IASB has published a joint call for research papers on the following standards:
- Revenue recognition (Accounting Standards Codification (ASC) Topic 606 and IFRS 15)
- Leases (ASC Topic 842 and IFRS 16)
- Financial instruments (ASC Topic 326 and IFRS 9)
The deadline for submissions is 15 May 2022.
Recording of the IASB’s webinar on Exposure Draft Regulatory Assets and Regulatory Liabilities
A recording is now available of the webinar held by the staff of the IASB that provided an overview of the proposals of the Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities. The Institute is also seeking comments on the exposure draft by 31 May.
Recordings of the IASB’s webinars on three standards
Recordings are now available for the webinars held by the IASB to stimulate research into three standards and to inform the post-implementation reviews of them.
- IFRS 9 Financial Instruments.
- IFRS 15 Revenue from Contracts with Customers.
- IFRS 16 Leases.
Speech by the IASB Chair
Hans Hoogervorst, Chair of the IASB, delivered a speech at a meeting of the International Forum of Accounting Standard Setters reflecting how IFRSs have evolved during his 10-year tenure and the importance of independent standard setting.
IASB February podcast
The February podcast, focusing on the IASB discussions at its monthly meeting, is now available.
February IFRS Interpretations Committee update
The February IFRS Interpretations Committee Update newsletter, summarizing the decisions reached by the Interpretations Committee at its February meeting, is now available.
Auditing and assurance
Invitation to comment
The Institute is seeking comments on the International Auditing and Assurance Standards Board (IAASB) Exposure Draft Conforming and Consequential Amendments to the IAASB’s Other Standards as a Result of the New and Revised Quality Management Standards by 23 April. The proposed revisions align the IAASB’s standards related to review, assurance and related services, as well as its framework, with the new Quality Management Standards through conforming amendments.
The Institute has submitted comments on the IAASB Discussion Paper Fraud and Going Concern in an Audit of Financial Statements: Exploring the Differences Between Public Perceptions About the Role of the Auditor and the Auditor’s Responsibilities in a Financial Statement Audit.
Getting started with the new Quality Management Standards
The International Federation of Accountants’ (IFAC) article provides an overview of the new Quality Management Standards effective from 15 December 2022.
Recent developments in extended external reporting assurance
The IFAC article reviews two companion academic articles recently published in the Institutional Perspectives section of the Journal of International Financial Management and Accounting that together provide a contemporaneous and comprehensive assessment of the extended external reporting assurance landscape.
Vision for accelerating integrated reporting assurance
The IFAC is partnering with the International Integrated Reporting Council on a joint initiative to help more businesses implement integrated reporting. The first instalment sets out what integrated reporting assurance involves for organizations, auditors, and others. It also addresses the difference between the two types of assurance – limited and reasonable – and what is required of auditors and organizations to strive for reasonable integrated reporting assurance.
IAASB February board meeting
The audio recording of the IAASB February board meeting is now available.
ESG reporting and attestation roadmap
The Association of International Certified Professional Accountants and the Centre for Audit Quality’s publication includes a new roadmap to provide audit practitioners with a blueprint to support companies in achieving their environmental, social, and governance (ESG) reporting goals and provide ESG-related tools for auditors.
Professional scepticism in a remote working environment
A blog and podcast by CPA Canada shares perspectives and practical examples on applying professional scepticism in a remote working environment during uncertain times.
COVID-19 year-end reminders for auditors
A CPA Canada’s blog summarizes the organization’s discussion with Canada’s audit regulators on issues that are causing audits to be more challenging this year given the effects of the COVID-19 pandemic.
A new approach to risk assessment
In an article in International Standards, the Institute of Chartered Accountants in England and Wales (ICAEW) shares some of the practical challenges and areas of focus for auditors in the implementation of International Standard on Auditing 315 (Revised) Identifying and Assessing the Risks of Material Misstatement Through Understanding of the Entity and Its Environment. Institute members can subscribe to ICAEW’s International Standards for free.
Proposed revisions to the definitions of listed entity and PIE
The Institute is seeking comments on the International Ethics Standards Board for Accountants (IESBA) Exposure Draft Proposed Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code by 3 April. The proposed revisions broaden the definition of a public interest entity (PIE) in the International Code of Ethics for Professional Accountants (Including International Independence Standards) (IESBA code) to include more categories of entities.
The IESBA recently released a new staff publication providing additional context to the proposals, supplementing the guidance material in the explanatory memorandum of the exposure draft.
Members are invited to join the Institute’s roundtable on 7 April to share their views with Deputy Chair of the IESBA, members of the Institute Ethics Committee and other participants. Members attending the roundtable will be entitled up to 1 continuing professional development hour.
lFAC Exploring the IESBA Code: The Building Blocks Instalment
This final instalment of Exploring the IESBA Code explains the “building blocks” structure of the IESBA code and its interconnected nature to help readers better understand how to use and navigate the IESBA code so that they can quickly identify and access the ethics and independence standards and guidance relevant to them.
Latest edition of The IESBA eNews
The March edition of The IESBA eNews highlights various activities going on in and around the IESBA, such as the search for the board’s next chair, the upcoming virtual board meetings, and much more.
Feedback on IFRS Foundation’s consultation on sustainability reporting
The IFRS Foundation Trustees met in February and March to discuss feedback received on their Consultation Paper on Sustainability Reporting, which indicated an urgent need for the IFRS Foundation to play a role in developing global sustainability reporting standards. The Trustees are continuing their work on the establishment of an international sustainability reporting standards board within the existing governance structure of the IFRS Foundation, and plan to publish a feedback statement that summarizes the consultation feedback and how that feedback informed their decisions. The Trustees remain on track to make a final determination about a new board in advance of the United Nations COP26 conference in November.
Invitation for comment
On 9 February, the Securities and Futures Commission (SFC) issued a Consultation Paper on conduct requirements for capital market transactions in Hong Kong. The SFC considered that proposed requirements may help clarify the roles played by intermediaries in equity and debt capital raisings and set out the standards of conduct expected of them in book-building, pricing, allocation and placing activities. A separate “sponsor coupling” proposal is also suggested for requiring at least one head of the underwriting syndicate to act as a sponsor for an initial public offering of shares. Please refer to the press release for details.
The deadline for responding to the consultation paper is 7 May.
HSIC’s consultation conclusions on Hang Seng Index size and composition
On 1 March, the Hang Seng Indexes Company Limited (HSIC) released the consultation conclusions on its proposals to enlarge the Hang Seng Index (HSI) and change its composition, in order to provide a more balanced representation of the market and ensure that the HSI remains “the most representative and important benchmark of the Hong Kong stock market.” The specific changes include:
- Increasing the number of HSI constituents to 80 by mid-2022 and to 100 ultimately.
- Selecting constituents by seven industry groups and reviewing the combination of the industry groups every two years.
- Shortening the listing history requirement of constituents to three months.
- Maintaining a minimum number of 20 to 25 Hong Kong companies in the HSI.
- Applying 8 percent weighting cap on all constituents for both HSI and Hang Seng China Enterprises Index.
The Institute’s Corporate Finance Advisory Panel (CFAP) issued a submission in response to the consultation. A number of the CFAP’s views appear to have been taken on board in the conclusions. Read more about some panel members’ views in Second Opinions here.
Institute’s response to 2021-22 budget
The government’s 2021-2022 budget included various suggestions made by the Institute in its budget submission. The Institute considers that the government is right to be prudent on budget measures since the global economic outlook is surrounded by considerable uncertainty. However, the Institute recommends that the government continues to study broadening the tax base. While the Institute is generally supportive of the proposed distribution of consumption vouchers, it is important for the administrative procedures to be straightforward to accommodate the needs of different citizens. See the Institute’s press release.
Announcements by the Inland Revenue Department
Members may wish to be aware of the following matters:
- IRD will resume normal public services.
- Gazettal of Rating (Exemption) Order 2021 and Revenue (Reduction of Business Registration Fees and Branch Registration Fees) Order 2021.
- Gazettal of Revenue (Tax Concessions) Bill 2021.
- Tax measures proposed in 2021-22 budget and the further information 2021-22 Budget – Tax Measures.
- Legislative Council question on stamp duty on stock transactions.
- Legislative question on charitable foundations and charities.
- Legislative question on alleviating burden of tax.
- Profits Tax – What you need to know as a ship operator.
- Profits Tax Return – Fair Value Accounting.
- List of Qualifying Debt Instruments (as at 31 December 2020).
- Revenue (Stamp Duty) Bill 2021 gazetted.
- Stamp Duty statistics (January and February).
Legislation and other initiatives
Announcements by the government
Members may wish to be aware of the following matter:
- Government to gradually loosen social distancing measures under Prevention and Control of Disease Ordinance.
- Government to resume normal public services.
- Government extends social distancing measures under Prevention and Control of Disease Ordinance.
- Government tightens infection control measures for fitness centres.
FATF publication on high risk and other monitored jurisdictions
The Financial Action Task Force (FATF) published a statement on 25 February regarding High Risk Jurisdictions Subject to a Call for Action, calling on its members and all jurisdictions to apply specific measures and actions on the Democratic People’s Republic of Korea and Iran.
The FATF also issued a notice on Jurisdictions under Increased Monitoring, stating that 19 other jurisdictions have been identified to have strategic anti-money laundering/counter-terrorist financing deficiencies, and are working with the FATF to address these deficiencies.
Updated list of terrorists and terrorist associates under section 31 of the United Nations Sanctions (Sudan) Regulation 2013 (Cap. 537 sub. leg. BF) was gazetted on 9 March. See the relevant United Nations Security Council (UNSC) press release.
The List of individuals and entities published under section 30 of the United Nations Sanctions (Yemen) Regulation 2019 (Cap. 537CI) and List of individuals and entities published under section 31 of the United Nations Sanctions (Yemen) Regulation 2019 (Cap. 537CI) was updated on 4 March. See the UNSC Resolution 2564 (2021).
The list of individuals and entities published under section 29 of the United Nations Sanctions (Somalia) Regulation 2019 (Cap. 537CG) was updated on 27 February. See the related UNSC press release.
The updated list of terrorists and terrorist associates designated by the UNSC was gazetted on 24 February, pursuant to the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575). See the related UNSC press release.
The list of individuals, groups, undertakings and entities published under section 33 of the United Nations Sanctions (Central African Republic) Regulation 2020 (Cap. 537CM) was updated on 23 February. See the related UNSC press release.
The list of individuals, groups, undertakings and entities published under section 25 of the United Nations Sanctions (ISIL and Al-Qaida) Regulation (Cap. 537CB) was updated on 20 February. See the related UNSC press release.
The United Nations Sanctions (Somalia) Regulation 2019 (Amendment) Regulation 2021 was gazetted on 11 February.
For the current lists of terrorists, terrorist associates and relevant persons/entities under UN sanctions, members should refer regularly to the Institute’s AML webpage. Other useful documents and guidance can also be found on the same page.
Please refer to the full versions of Technical News on the Institute’s website.