Technical news

The latest standards and technical developments

Members’ handbook

Members’ handbook update no. 243 relates to the issuance of Classification of Liabilities as Current or Non-current (Amendments to HKAS 1 Presentation of Financial Statements). The amendments, which clarify how to classify debt and other liabilities as current or non-current, are effective for annual periods beginning on or after 1 January 2023, and apply retrospectively. Earlier application is permitted.

Update no. 244 relates to the updates of Practice Note (PN) 810.2 (Revised) The Duties of the Auditor of an Insurer authorized under the Insurance Ordinance to incorporate guidance for reporting under paragraph 36(2) of Part 6 of Schedule 3 to the Insurance Ordinance; and PN 860.1 (Revised) The Audit of Retirement Schemes to incorporate changes arising from the Occupational Retirement Schemes (Amendment) Ordinance 2020 and the revised Registrar’s Guidelines on the preparation of the Statement of the Employer’s Auditor under section 20(7A) of the ordinance.

Update no. 245 contains amendments to Hong Kong Financial Reporting Standards (HKFRSs), which are effective for annual reporting periods beginning on or after 1 January 2020.

Financial reporting 

Guidance for COVID-19 financial reporting issues for SMEs

The Institute recently published guidance highlighting key COVID-19-related considerations when preparing financial statements under the Small and Medium-sized Entity Financial Reporting Framework and Financial Reporting Standard. The Institute previously published guidance in March and June on financial reporting issues for statements prepared under HKFRSs.

Institute’s roundtable discussion on IASB Discussion Paper Business Combinations – Disclosures, Goodwill and Impairment

Last call to join the Institute’s roundtable discussion on 6 October to share your views on the International Accounting Standards Board (IASB) Discussion Paper DP/2020/1 Business Combinations – Disclosures, Goodwill and Impairment, which sets out possible improvements to the information companies report about acquisitions and to the accounting for goodwill. Members can submit their comments on the discussion paper by 14 November.

Amendments to IFRSs in response to the IBOR reform

The International Accounting Standards Board (IASB) has amended International Financial Reporting Standard (IFRS) 9 Financial Instruments, International Accounting Standard 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts, and IFRS 16 Leases as a result of the interbank offered rates (IBOR) reform project. The amendments address issues affecting financial statements when changes are made to contractual cash flows and hedging relationships arising from the replacement of an IBOR with an alternative benchmark rate (replacement issues).

The amendments complement those that were published in September 2019 under phase 1 of the project, which address issues affecting financial reporting in the period during which there is uncertainty about contractual cash flows and hedging relationships arising from the IBOR reform (pre-replacement issues).

A project summary has been published to provide further information on the work related to phase 2 of the project, and the amendments are effective for annual reporting periods beginning on or after 1 January 2021, with early adoption permitted.

Auditing and assurance

Institute publishes a quick guide to auditing and COVID-19

The Institute has put together a summary of the key issues and considerations impacting the audit of financial statements as a result of COVID-19 and resources from global accounting bodies to help members navigate some of the challenges for the next reporting.

Invitations to comment

The Institute is seeking comments on the International Auditing and Assurance Standards Board (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 by 11 December.

IAASB stakeholders’ survey

The IAASB invites interested stakeholders to complete the online survey on experiences and feedback on the Auditor Reporting Standards by 23 October.

IAASB’s virtual roundtables

The IAASB invites interested stakeholders to attend its virtual roundtable on Unique Aspects of Fraud in Audits of Less Complex Entities on 7 October to explore issues and challenges related to fraud through discussions with experts and leaders.

IAASB’s webinar

During the webinar, the IAASB answered questions on the recently released Exposure Draft Proposed International Standard on Auditing (IAS) 600 (Revised) Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors) and Proposed Conforming and Consequential Amendments to Other ISAs. 

IFAC resources on COVID-19 

The International Federation of Accountants has launched various resources to support practitioners during the pandemic:

  • IFAC’s COVID-19 Resource Page.
  • A statement that public interest responsibilities must remain paramount in an age of COVID-19.
  • The Practice Transformation Action Plan, which covers four key focus areas for small- and medium-sized practices.

IAASB’s project update

The IAASB Audit Evidence Working Group has published a Project Update for ISA 500 Audit Evidence, to update stakeholders about its information gathering activities, issues identified to date, and the way forward.

IAASB’s illustrative examples for ISA 540 (Revised)

The IAASB’s implementation working group on ISA 540 (Revised) Auditing Accounting Estimates and Related Disclosures has issued illustrative examples for auditing expected credit loss accounting estimates. These examples have been developed to assist the auditor in understanding how ISA 540 (Revised) may be applied to accounting impairment losses under IFRS 9 Financial Instruments.

Revisions to notes relating to the Legislative Council election

The Registration and Electoral Office has updated the 2020 Legislative Council General Election – Notes for Candidate and Independent Auditor (Claim for Government Payment in respect of Declared Election Expenses under Cap. 241L).


Invitation to comment 

The Institute has extended the comment period for Exposure Draft of Code of Ethics for Professional Accountants – Chapter G Section 100 Professional Ethics Relevant to Anti-Money Laundering and Counter-Terrorist Financing Compliance for Accounting Professionals until 20 October. This is a component of the Institute’s proposal to enhance the risk-based supervision of accounting professionals concerning anti-money laundering and counter-terrorist financing compliance.

The IESBA’s July meeting 

The meeting summary of the International Ethics Standards Board for Accountants’ (IESBA) July virtual meeting is now available.

Extended external reporting 

Statement of intent to work together towards comprehensive corporate reporting

Five framework- and standard-setting institutions of international significance have co-published a shared vision of the elements necessary for more comprehensive corporate reporting and a joint statement of intent to drive towards this goal by working together.

Corporate finance

Institute’s submission
The Institute issued a submission on 10 August, in response to the consultation proposals by the Securities and Futures Commission (SFC) on amendments to the Code on Real Estate Investment Trusts.

Invitation to comment

The Stock Exchange of Hong Kong Limited (HKEX) is seeking comments on Consultation Paper Review of Listing Rules Relating to Disciplinary Powers and Sanctions by 9 October.

Review of Chapter 37 – Debt Issues to Professional Investors Only

On 21 August, the HKEX issued the consultation conclusions on its Review of Chapter 37 – Debt Issues to Professional Investors Only. Most of the original proposal will be implemented.

In its response to the initial consultation paper, the Institute queried whether the eligibility exemption for all “state entities” should be maintained, given the broad definition and that not all such entities would have their debts guaranteed by the state. This point has been taken on board. We also suggested that the definition of “professional investor,” as it relates to an individual, is due for a review, although this question was not specifically raised in the consultation.

Codification of General Waivers and Principles Relating to IPOs and Listed Issuers and Minor Rule Amendments

On 28 August, the HKEX issued the consultation conclusions on Codification of General Waivers and Principles Relating to IPOs and Listed Issuers and Minor Rule Amendments. The views of the Institute (and the majority of other respondents) were accepted and the HKEX will not adopt the proposal to codify the relevant factors considered in granting a waiver from the requirements, under Main Board Listing Rule 3.28, regarding the experience and qualification of a company secretary.

The Institute’s submission to the consultation can be found on its website. Please refer to the consultation paper and consultation conclusions for further details.

Changes to open-ended fund companies regime and consultation on customer due diligence requirements

On 2 September, the SFC issued the consultation conclusions on its proposed enhancements to the open-ended fund companies (OFCs) regime. The enhancements include:

  • Removing all investment restrictions for private OFCs.
  • Allowing licensed or registered securities brokers to act as custodians for private OFCs.
  • Introducing a statutory mechanism for the re-domiciliation of overseas corporate funds to Hong Kong.

Please refer to the press release for details. The changes took effect on 11 September and the SFC has issued a circular on the implementation.

The Institute submitted a response to the consultation paper in February. The Institute, in general, supported the SFC’s proposals.

The SFC is further consulting on the customer due diligence requirements for OFCs to better align them with the practices adopted by other funds in Hong Kong. The deadline for submission to the SFC is 5 October.


Institute issues submission on proposals regarding carried interest

The Institute issued a submission to the Financial Services and the Treasury Bureau on a government proposal to provide a tax concession on carried interest. While the Institute is supportive of the general direction to offer a tax concession, the submission raises certain technical issues and points for clarification.

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

  • Inland Revenue Department’s (IRD) public services resumption and extension of filing deadlines.
  • List of Qualifying Debt Instruments (as at 30 June 2020).
  • Stamp Duty Exemption on the Sale and Purchase of Hong Kong Stocks by Exchange Traded Fund (ETF) market makers for the Allotment and Redemption of ETF Shares or Units.
  • IRD waives surcharges for payment of tax by instalments for businesses and individuals in need.
  • DIPN 22 (Revised).
  • DIPN 49 (Revised).
  • DIPN 53 (Revised).
  • E-Stamping Circular on enhancements to e-Stamping of share transfer instruments.
  • Hong Kong and Serbia enter into tax pact.
  • HK-Macau tax arrangement in force.
  • Circular Letter to Tax Representatives – Block Extension Scheme for Lodgement of 2019/20 Tax Returns [Extended Due Dates for ‘D’ and ‘M’ Code Returns].
  • Stamp Duty statistics (July and August 2020).

Legislation and other initiatives

Announcements by the government 

Members may wish to be aware of the following matters:

  • Government continues to relax social distancing measures under Prevention and Control of Disease Ordinance.
  • Government has resumed normal public services.
  • Hong Kong’s Gross National Income and external primary income flows for first quarter of 2020.
  • Hong Kong once again ranked as world’s freest economy by Fraser Institute.
  • Specifications under the Prevention and Control of Disease (Regulation of Cross-boundary Conveyances and Travellers) Regulation.
  • Policy Address consultation launched.

AML notices and news

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 7 August. See the related United Nations Security Council (UNSC) press release for the changes.

The lists of individuals and entities under the United Nations Sanctions (Democratic Republic of the Congo) Regulation 2019 was updated on 21 August. See the related UNSC press release.

The updated list of terrorists and terrorist associates designated by the UNSC was gazetted on 11 September pursuant to the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575). See the related UNSC press release.

The United Nations Sanctions (Democratic Republic of the Congo) Regulation 2019 (Amendment) Regulation 2020 and the United Nations Sanctions (South Sudan) Regulation 2019 (Amendment) Regulation 2020 were gazetted on 11 September.

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.

Members may wish to be aware that the Hong Kong Customs have cracked down on the largest money laundering case in its history.

Please refer to the full versions of Technical News on the Institute’s website.

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