Technical news

The latest standards and technical developments

Members’ handbook

Update no. 264 relates to:

  • Consequential amendments arising from the following standards, which were previously set out in the appendices to the respective standards but are now incorporated into the text and basis for conclusions.

Interest Rate Benchmark Reform – Phase 2: Amendments to Hong Kong Accounting Standard (HKAS) 39 Financial Instruments: Recognition and Measurement, Hong Kong Financial Reporting Standard (HKFRS) 4 Insurance Contracts, HKFRS 7 Financial Instruments: Disclosures, HKFRS 9 Financial Instruments and HKFRS 16 Leases.

– COVID-19-related rent concessions beyond 30 June 2021: Amendment to HKFRS 16 Leases.

  • The Preface to Hong Kong Financial Reporting Standards is updated for the issuance of invitations to comment on International Financial Reporting Standards (IFRS) Interpretations Committee tentative agenda decisions.
  • HKAS 36 Impairment of Assets is updated for editorial corrections.

Financial reporting 

Invitation to comment

The Institute is seeking comments on the International Accounting Standards Board (IASB) Exposure Draft ED/2021/7 Subsidiaries without Public Accountability: Disclosures by 17 December.

Institute submission

The Institute has submitted comment letters on:

  • IASB Discussion Paper DP/2020/2 Business Combinations under Common Control.
  • IASB Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities.

Recording of the IASB webinar on Exposure Draft Management Commentary

A recording is now available for a webinar held by the IASB on Exposure Draft ED/2021/6 Management Commentary, which sets out a proposed comprehensive framework for companies preparing management commentary in response to investors and creditors’ changing information needs and developments in narrative reporting. Members can submit comments on the exposure draft to the Institute by 8 October.

Recording of the IASB second webinar on BCUCC discussion paper

A recording is now available of the IASB second webinar on the Discussion Paper DP/2020/2 Business Combinations under Common Control (BCUCC), which discussed feedback the IASB received in the initial outreach activities and addressed some of the frequently asked questions from stakeholders.

July IASB and joint IASB-FASB update and podcast

The July IASB and joint IASB-FASB Update, highlighting the tentative decisions reached at the IASB monthly meeting and discussions from the joint meeting with the Financial Accounting Standards Board (FASB), and the July podcast, focusing on the IASB discussions at its monthly meeting, are now available.

July IFRS Interpretations Committee podcast

The July IFRS Interpretations Committee podcast, highlighting the committee’s key activities at its July meeting, is now available.

Auditing and assurance

IAASB proposes new standard for the audits of LCEs

Less complex entities (LCEs) are important constituents of economies worldwide, and account for the great majority of entities. At the same time, increasingly complex structures and transactions need to be addressed in the International Standards on Auditing (ISAs). As complexity in the ISAs can pose challenges for audits of LCEs, the International Auditing and Assurance Standards Board (IAASB) has developed a draft standard that is proportionate to the typical nature and circumstance of an LCE audit.

The Institute is seeking comments on the IAASB Exposure Draft Proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE) by 31 December. To facilitate responses, the IAASB has prepared an optional response template.

Learn more about the proposed standard by reading the overview article from the International Federation of Accountants (IFAC) and the IAASB webpage.

Auditing and Assurance Technical Bulletins

The Institute has published Auditing and Assurance Technical Bulletin (AATB) 6 Non-Authoritative Guidance on Applying HKSAE 3000 (Revised) to Extended External Reporting (EER) Assurance Engagements, in convergence with from the IAASB’s own guidance. It covers a broad spectrum of EER assurance including information prepared outside the requirements of the Hong Kong Exchanges and Clearing Limited (HKEX). Additional support material on EER is also available from the IAASB.

The Institute has also revised AATB5 Environmental, Social and Governance (ESG) Assurance Reporting, which is tailored with reference to the ESG reporting circumstances in Hong Kong and the ESG information prepared under the requirements of the HKEX.

Auditor’s reporting requirements for the Funding Scheme for Children’s Well-being and Development

The reporting requirements for the Funding Scheme for Children’s Well-being and Development require auditors to report on certain aspects of the funded organizations following Hong Kong Standard on Related Services (HKSRS) 4400 Engagements to Perform Agreed-Upon Procedures Regarding Financial Information and the specimen agreed-upon procedures report developed by the Commission on Children. In order to report the findings required by the commission, the Institute’s alert suggests practising members to consider performing procedures beyond the scope of HKSRS 4400.

Institute’s Auditing and Assurance Standards Committee meeting minutes

Minutes of the meeting held in May is now available.

IAASB June and July board meeting

The meeting highlights of the IAASB June board meeting and the audio recording of the IAASB July board meeting are now available.

Exploring the impact of disruptive technology

Technological changes affect auditors and audited entities and can cause significant disruption. A summary of the IAASB’s work exploring how the board could respond appropriately to support audit quality and how it leverages technology to improve its own standard-setting activities is available on its Technology focus area webpage. A summary of the disruptive technologies’ roundtable is also available in the meeting papers from January.

Auditor’s responses to the risks of material misstatement arising from estimates made in applying IFRS 17 Insurance Contracts

The Global Public Policy Committee, consisting of representatives of the six largest accounting networks, published a paper on the auditor’s approach to auditing estimates and associated judgements made in the application of IFRS 17 Insurance Contracts, taking into account the enhanced audit requirements in ISA 540 (Revised) Auditing Accounting Estimates and Related Disclosures to identify and assess the risks of material misstatement and audit responses to the identified risks, including the degree to which auditors plan to evaluate and rely on controls as part of their testing strategy.


Invitation to comment

The Institute is seeking comments on the International Ethics Standards Board for Accountants Exposure Draft Proposed Quality Management-related Conforming Amendments to the Code by 5 September.

Keeping up with Changes to the International Code of Ethics for Professional Accountants: A Primer for SMPs and SMEs

The article on the IFAC website highlights the key changes to the code of ethics and the role and mindset expected of professional accountants.


Institute submission

The Institute has submitted its comment letter on the IFRS Foundation Exposure Draft Proposed Targeted Amendments to the IFRS Foundation Constitution to Accommodate an International Sustainability Standards Board to Set IFRS Sustainability Standards.

Recordings of the IFRS Foundation Trustees webinars on its sustainability project

Recordings are now available of the IFRS Foundation Trustees webinars on its project setting up an International Sustainability Standards Board.

Recording of the panel debate from the G20 Venice conference

A recording is now available of the panel debate on regulations, disclosures, financial risk and private financing for the green economy from the G20 Venice conference. The panel debate featured the IFRS Foundation Trustee Chair Erkki Liikanen, and was organized by the Italian Ministry of Economy and Finance and the Bank of Italy to coincide with the G20 Finance Ministers and Central Bank Governors’ meeting.

IFRS Foundation response to G20 finance ministers’ and central bank governors’ communique regarding global sustainability standards

The IFRS Foundation provided comments on the communique issued by the G20 finance ministers and central bank governors that referenced ongoing work of the trustees to consider the formation of a new sustainability board within the governance structure of the IFRS Foundation.

A4S launches Navigating the Reporting Landscape

With the awareness of environmental and social issues increasing, sustainability reporting is shaping the future of business reporting. To help finance professionals stay updated, the Prince’s Accounting for Sustainability Project’s (A4S) Accounting Bodies Network, of which the Institute is a member, has published Navigating the Reporting Landscape. The guide sets out how the corporate reporting landscape is changing, and how these developments are impacting the role of the accountant.

Introduction to the Value Reporting Foundation

The International Integrated Reporting Council and the Sustainability Accounting Standards Board merged to form the Value Reporting Foundation. A video features Janine Guillot, the CEO of the foundation, discussing the new body and the global reporting landscape.

Corporate finance

Transitioning away from LIBOR

The Hong Kong Monetary Authority (HKMA) and the Treasury Markets Association recently issued a leaflet reminding corporate treasurers to make suitable preparations for the transition away from The London Interbank Offered Rate (LIBOR) as an interest rate benchmark. Further information can be found on the HKMA’s website.

SFC to introduce investor identification and OTC securities transaction reporting

On 10 August, the Securities and Futures Commission (SFC) released consultation conclusions in relation to a consultation paper, issued in December 2020, proposing to introduce investor identification for the securities market in Hong Kong and require reporting over-the-counter (OTC) securities transactions. To summarize:

  • Licensed corporations and registered institutions have to submit to HKEX the names and identity document information of clients placing securities orders on HKEX.
  • Information on OTC securities transactions in ordinary shares and real estate investment trusts listed on HKEX will be reported to the SFC under a separate regime.

Please refer to the press release for details.

Corporate governance

Findings of brief research on ESG assurance of HSI companies 

To better gauge current practice in ESG assurance, the Institute recently conducted research on the status of the 49 Hang Seng Index (HSI) constituent companies that had published their sustainability/ESG report, or incorporated a sustainability/ESG section in their annual report for 2020/21, as at 28 June. Of these companies, 23 also sought external assurance on the information disclosed. The research found that the assurance provider and the scope of information assured varied among companies.

We will be conducting a similar research on all the December year-end listed companies for 2020/21 and will share the findings in due course.


Implications of the government’s Consumption Voucher Scheme for provisional trustees under the Bankruptcy Ordinance

The Official Receiver’s Office (ORO) issued a letter to the Institute on 2 July, aimed at members who are insolvency practitioners and appointment takers, acting as the joint and several provisional trustees/trustees under the Bankruptcy Ordinance. The letter advises on factors that should be considered in determining whether or not it would be appropriate to lay claim to the consumption vouchers received by an undischarged bankrupt as after-acquired property.

The ORO reminds officeholders that they should not apply an across-the-board decision to all cases. They are encouraged to exercise their professional judgement and use flexibility and discretion when assessing the basic domestic needs of bankrupts and their families, particularly at this time, given the impact of the pandemic.

ORO tender notice

The ORO has issued a tender notice to invite interested parties to submit tender for providing services to complete Preliminary Examination in Bankruptcy Cases. The deadline for tender submission is 12:00 noon, 7 September.


Electronic filing of Profits Tax Returns

Corporations and partnerships satisfying the conditions specified by the Commissioner of Inland Revenue can file their Profits Tax Returns for any year of assessment from 2015/16 to 2020/21 and attach supplementary forms to Profits Tax Return S1, S2, S3 and S4 electronically through eTAX. Please visit the Inland Revenue Department’s (IRD) website for details.

Announcements by the IRD

Members may wish to be aware of the following matters:

  • Internet business in business registration.
  • HKMA releases guideline on fund certification for carried interest tax concession.
  • Tax obligations of taxpayers and employers.
  • Taxpayer jailed for false claims for dependent parent allowances.
  • Tax issues arising from the COVID-19 pandemic.
  • Automatic Exchange of Financial Account Information: Self-certification form and meanings of terms and expressions in the form.
  • Legislative Council question on registration of business by online auction platform users.
  • Legislative Council question on tax-exempt charities.
  • Legislative Council question on latest developments in international tax landscape.
  • Legislative Council question on Voluntary Health Insurance Scheme and health expenditures.
  • Stamp Duty statistics (June and July).

Legislation and other initiatives

Institute’s Anti-Money Laundering and Counter-Terrorist Financing Series – Practical solutions to implementing the AML/CTF requirements (re-run)

The workshops exploring practical solutions to facilitate compliance with anti-money laundering and counter-terrorist financing (AML/CTF) requirements will be rerun as webinars on 9 and 15 September. Join the webinar and learn about the AML/CTF obligations for accountants.

Announcements by the government

Members may wish to be aware of the following matters:

  • Gazettal of Personal Data (Privacy) (Amendment) Bill 2021 which aims to combat doxxing.
  • Phase 1 of new inspection regime for personal information on the Companies Register will come into effect on 23 August. From that date companies may replace the residential addresses of directors with their correspondence addresses, and replace full identity card numbers (IDNs) of directors and company secretaries with their partial IDNs on their own registers for public inspection.
  • The expiry dates of various regulations under the Prevention and Control of Disease Ordinance (Cap. 599) will be extended to 31 March 2022.

AML notices

United Nations Sanctions (Libya) Regulation 2019 (Amendment) Regulation 2021 was gazetted on 9 July.

For the current lists of terrorists, terrorist associates and relevant persons/ entities subject to United Nations 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:

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