Update no. 267 includes revision to various auditing and assurance pronouncements in Volume III to:
- Conform to Hong Kong Standard on Related Services (HKSRS) 4400 (Revised) Agreed-Upon Procedures Engagements that will be effective for agreed-upon procedures engagements for which the terms of engagement are agreed on or after 1 January 2022.
- Align with the 2020 edition of the Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements issued by International Auditing and Assurance Standards Board (IAASB) and other housekeeping editorial changes.
Update no. 268 relates to the amendments to the Small and Medium-sized Entity Financial Reporting Framework and Financial Reporting Standard (SME-FRF & SME-FRS) that are effective for annual reporting periods beginning on or after 1 January 2021. These amendments were previously set out in Appendix 4 but are now incorporated into the text of the standard. In addition, certain consequential amendments are made to the illustrative company-level and consolidated financial statements in Appendices 2 and 3 respectively.
Update no. 269 relates to consequential amendments arising from Hong Kong Financial Reporting Standards (HKFRSs) that are effective for annual reporting periods beginning on or after 1 January 2022. These amendments were previously set out in the appendices to the respective HKFRS or in a separate document Annual Improvements to HKFRSs 2018-2020. The update also includes editorial corrections for Hong Kong Accounting Standard 1 (Revised) Presentation of Financial Statements and HKFRS Practice Statement 2 Making Materiality Judgements, and the withdrawal of Hong Kong (IFRIC) Interpretation 9 Reassessment of Embedded Derivatives.
Speech by IASB Chairman
Andreas Barckow, Chair of the International Accounting Standards Board (IASB), delivered a speech on 7 December 2021 in which he outlined the IASB’s immediate and future priorities, talked about the growing importance of sustainability issues in financial reporting and shared his views on convergence with the Financial Accounting Standards Board.
December 2021 IASB podcast and updates
The IASB December podcast, with its chair and vice-chair highlighting the projects discussed during the December meeting, and a summary of the December meeting, are now available.
December 2021 IASB Investor Update
The IASB Investor Update includes an interview with Anthony Scilipoti, President and Chief Executive Officer of Veritas Investment Research Corporation and member of the Capital Markets Advisory Committee. It also includes a summary of consultations in 2021 and a reminder about IASB papers that are open for comment.
IFRS Interpretations Committee agenda decision
The IFRS Interpretations Committee published its agenda decision on Economic Benefits from Use of a Windfarm (IFRS 16 Leases).
November 2021 IFRS Interpretations Committee Update
The IFRS Interpretations Committee Update provides a summary of discussions at its November meeting. Topics discussed include principal versus agent: software resellers, economic benefits from use of a windfarm and negative low emission vehicle credits.
Auditing and assurance
Updates to Auditing and Assurance Technical Bulletins and Circulars
As well as update no. 267 of the Members’ Handbook, the Institute has also revised some Auditing and Assurance Technical Bulletins and Circulars to conform to HKSRS 4400 (Revised) and align with the 2020 IAASB handbook and other housekeeping editorial changes.
Institute’s Auditing and Assurance Standards Committee meeting minutes
Minutes of the meeting held in November 2021 is now available.
IAASB December 2021 board meeting
The meeting summary and audio recording of the IAASB December board meeting is now available.
High demand for assurance engagements on sustainability and ESG reporting
The IAASB released a statement agreeing to dedicate capacity and resources to the assurance of sustainability/environmental, social and governance (ESG) reporting in responding to the growing demand of enhanced requirements and guidance. It also highlights the IAASB’s plan to develop new guidance or revise existing guidance, etc. in the future.
Series of articles on preparing for the new quality management standards
The second article of the series issued by the International Federation of Accountants (IFAC) – International Standard on Quality Management (ISQM)1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements – Risk Responses explores the design and implementation of risk responses to identified quality risks and includes examples that will help support small- to medium-sized practitioners to comply with ISQM 1.
FRC begins new series on guidelines for effective audit committees
The Financial Reporting Council has released the first of a new publication series. Guidelines for Effective Audit Committees – Selection, Appointment and Reappointment of Auditors provides specific and practical guidelines for audit committees to establish a robust process for selecting, appointing and reappointing auditors as an essential first step in achieving audit quality. It also highlights two key considerations for audit committees in selecting and appointing auditors: audit quality and audit fees.
ICAEW audit and assurance resources
The Institute of Chartered Accountants in England and Wales (ICAEW) publication Audit and Beyond December 2021 explores how to improve audit files and keys to conducting a good audit.
Institute members can subscribe to ICAEW’s International Standards for free to access a wide range of resources on auditing and ethics.
Institute launches new webpage and video on the code of ethics
To help you refresh your memory and uphold professionalism in 2022, the Institute has launched a new webpage on the Code of Ethics for Professional Accountants and a new video recapping its structure and the fundamental principles. The page also includes links to educational material, and other relevant information.
Institute’s Ethics Committee meeting minutes
Minutes of the meeting held in September 2021 is now available.
IESBA November-December 2021 board meeting
The meeting summary and audio recording of the International Ethics Standards Board for Accountants (IESBA) November-December board meeting is now available.
Exploring the IESBA Code in audio
The Exploring the IESBA Code instalment series, which provides readers with an in-depth walkthrough of the IESBA Code in 12 easy to read instalments, is now available for free in audio format courtesy of the IFAC and ProDio.
The IESBA latest eNews is now available, highlighting various activities going on in and around the IESBA.
Ethical leadership in the digital world
Paper 2 of a four part series issued by Chartered Professional Accountants of Canada, the Institute of Chartered Accountants of Scotland, the IESBA and the IFAC – Technology is a double-edged sword with both opportunities and challenges for the accountancy profession examines the impact of rapid technological change and the importance of ethical leadership from the lens of the professional accountant. It also provides practical guidance to both professional accountants and professional firms.
Appointment of the Chair of the ISSB
On 16 December 2021, the Trustees of the IFRS Foundation announced the appointment of Emmanuel Faber to serve as Chair of the International Sustainability Standards Board (ISSB), from 1 January 2022.
The ISSB will develop IFRS Sustainability Disclosure Standards that provide a global baseline of disclosure requirements designed to give investors high quality, globally comparable sustainability information. The ISSB will also work in close cooperation with the IASB to ensure connectivity and compatibility between standards.
Webcast: Recommendations for consideration by the ISSB
The webcast explains the recommendations from the IFRS Foundation’s Technical Readiness Working Group (TRWG) to the ISSB for consideration on IFRS Sustainability Disclosure Standards. It includes a closer look at the TRWG’s role, an explanation of recommended architecture of standards, a deep dive into the prototypes and a summary of other recommendations made by the TRWG.
Institute responds to HKEX’s consultation paper: Proposed Amendments to Listing Rules relating to Share Schemes of Listed Issuers
The Institute generally support the broad direction of the proposals in the consultation paper Proposed Amendments to Listing Rules relating to Share Schemes of Listed Issuers by the Hong Kong Exchanges and Clearing (HKEX), to align the regulatory requirements of both share option schemes and share award schemes.
At the same time, in view of the expanded role of remuneration committees envisaged under the proposals, we consider that the spotlight has turned towards the composition, operation and functioning of these committees. In our view, this also needs to be looked at. Issues such as whether there should be a requirement (or, at least, a recommended best practice) for lead independent non-executive director on boards, and whether executive directors should continue to be eligible for appointment to remuneration committees, should be discussed. The detailed submission is available on the Institute’s website.
HKEX’s consultation conclusions on special purpose acquisition companies
On 17 December 2021, the HKEX published conclusions to its consultation on special purpose acquisition companies (SPACs). The HKEX proposed new rules to create a listing regime for SPACs that will take effect on 1 January 2022, with the following key amended proposals:
- The minimum number of institutional professional investors required is reduced from 30 to 20.
- A SPAC’s board is required to have at least two Type 6 or Type 9 SFC-licensed individuals (including one director representing the licensed SPAC promoter).
- Investment requirements of independent private investments in public equity are strengthened to provide a stronger regulatory check on the terms and valuation of the De-SPAC transaction.
- Overall warrant cap has increased to 50 percent, with more prominent disclosure on the dilutive effect of all warrants. There is also no separate cap on the warrant to share ratio and on promoter warrants.
Please refer to the press release for more details.
Please also refer to the submission of the Institute’s Corporate Finance Advisory Panel, with a number of suggestions to make the listing regime more competitive among major jurisdictions.
ORO notice for petitioners in bankruptcy proceedings
The Official Receiver’s Office (ORO) issued an announcement on 10 December 2021, advising that any petitions presented that are not in compliance with the relevant requirements or amount to an abuse of process (e.g. the bankruptcy proceedings being invoked in an improper manner or for an improper purpose such as using it as a means for debt collection or negotiation with creditors) is liable to be dismissed by the court with costs ordered against the petitioner.
Announcements by the IRD
Members may wish to be aware of the following matters:
- Stock Borrowing Relief – Filing of Return of Stock Borrowing Transactions.
- A notice issued by the Inland Revenue Department (IRD) to remind taxpayers to pay their tax on time.
- The IRD’s Annual Report 2020-21.
- Jail and suspended sentence for couple convicted of falsely claiming deductions for expenses of self-education and approved charitable donations.
- A newly published Advance Ruling Case No. 67.
- Stamp Duty statistics.
Legislation and other initiatives
Announcements by the government
Members may wish to be aware of the following matters:
- The expansion of vaccine bubble from 24 February 2022 to combat COVID-19 spread.
- Latest comprehensive tightening of inbound control measures to prevent spreading of Omicron cases to community.
- Hong Kong Monetary Authority takes disciplinary action against ePaylinks Technology Co., Limited for contravention of the Payment Systems and Stored Value Facilities Ordinance.
The list of terrorists and terrorist associates designated by the United Nations Security Council (UNSC), published pursuant to the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575), was gazetted on 31 December 2021. See the relevant 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 31 December 2021. See the relevant UNSC press release.
The list of individuals and entities published under section 33 of the United Nations Sanctions (Central African Republic) Regulation 2020 (Cap. 537CM), was updated on 22 December 2021. See the relevant UNSC press release.
For the current lists of terrorists, terrorist associates and relevant persons/ entities under 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: www.hkicpa.org.hk