Update no. 251 relates to the issuance of Practice Note (PN) 820 (Revised 2020) The Audit of Licensed Corporations and Associated Entities of Intermediates. The PN has been restructured and revised to put more emphasis on risk assessment and based on that, to provide additional guidance on how risk assessment should drive the extent of audit work for licensed corporations.
Update no. 252 relates to the publication of the revised Accounting Guideline 5 Merger Accounting for Common Control Combinations.
Update no. 253 relates to amendments to the Code of Ethics for Professional Accountants as a result of the International Ethics Standards Board for Accountants’ (IESBA) Revisions to the Code to Promote the Role and Mindset Expected of Professional Accountants to better promote the role and mindset expected of all professional accountants; and PN 730 (Revised) Guidance for Auditors Regarding Preliminary Announcements of Results to align with the latest regulatory requirements and provide additional guidance in various practical scenarios.
Update no. 254 relates to editorial corrections to Hong Kong Accounting Standard 39 Financial Instruments: Recognition and Measurement and Hong Kong Financial Reporting Standard 9 Financial Instruments and an update of the glossary.
Invitations to comment
The Institute is seeking comments on:
- The International Accounting Standards Board (IASB) Exposure Draft ED/2020/4 Lease Liability in a Sale and Leaseback by 10 March.
- The IASB Request for Information Post Implementation Review of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities by 1 April.
- The IASB Discussion Paper DP/2020/2 Business Combinations under Common Control by 5 July.
The Institute has submitted its comment letter on the International Financial Reporting Standards (IFRS) Foundation’s Consultation Paper on Sustainability Reporting.
Frequently asked questions on the interaction between HKFRS 16 Leases and the Hong Kong Insurance (General Business) (Valuation) Rules
The Institute has issued an FAQ to make members aware of a recently issued circular from the Insurance Authority on applying the provisions of the Insurance (General Business) (Valuation) Rules in the valuation of a right of use asset and related lease liability and its relation to HKFRS 16 Leases.
IASB investor perspective article
Issue 22 of the IASB Investor Update is now available and highlights financial reporting challenges arising from COVID-19.
December 2020 IASB podcast and update
The December podcast, focusing on the IASB discussions at its monthly meeting, and the December IASB Update, highlighting the tentative decisions reached at the IASB monthly meeting, are now available.
IASB December 2020 IFRS for SMEs
The December 2020 IFRS for SMEs Update newsletter, providing a summary of news, events, and other information about the IFRS for SMEs standard and related SME activities, is now available.
December 2020 IFRS Interpretations Committee update
The December IFRS Interpretations Committee Update newsletter, summarizing the decisions reached by the Interpretations Committee at its September meeting, is now available.
Auditing and assurance
IAASB issued quality management standards for auditors
The International Auditing and Assurance Standards Board (IAASB) has issued a set of three revised quality management standards aimed at improving quality management for auditors across the globe. The standards become effective on 15 December 2022. The Institute will follow the International Convergence Programme for local adoption in due course.
IAASB’s videos on quality management standards
The IAASB has published video introductions to the new and revised quality management standards explaining the key aspects of the three standards to help stakeholders begin their implementation efforts.
IAASB December virtual meeting
The highlights and audio of the IAASB December virtual meeting is now available.
IAASB communique on audits of less complex entities
The IAASB has issued a communique detailing development plans for a separate standard for audits of less complex entities.
IFAC support resources
The International Federation of Accountants (IFAC) releases the following support resources:
- A publication describing an agreed-upon procedures (AUP) engagement with case studies and example procedures that might be applied and two illustration AUP reports from International Standard on Related Services 4400 (Revised) Agreed-Upon Procedures Engagements.
- A brochure explaining and differentiating the range of audit, review, compilation, and AUP services which small- and medium-sized practices can provide and tailor to meet the needs of their small- and medium-sized entity clients.
U.K. FRC response to using technology to enhance audit quality
The Financial Reporting Council (FRC) in the United Kingdom has published its response to its recent consultation, Technological Resources: Using Technology To Enhance Audit Quality. The FRC’s response incorporates discussion of responses received as well as discussion of other matters that have arisen throughout additional outreach and engagement with stakeholders.
ICAEW guidance on determining materiality during COVID-19
COVID-19 is likely to impact how materiality in audits is determined by auditors and the choice of benchmarks used. The Institute of Chartered Accountants in England and Wales article provides reminders to auditors of considerations when determining materiality in audits as well as how these considerations might be relevant in the current environment.
Financial fraud risks to watch for amid the pandemic
An article in the Journal of Accountancy discusses financial fraud risks that professional accountants including auditors need to be especially watchful for fraud amid severe financial pressure associated with the coronavirus pandemic.
Reminder – Auditing and COVID-19
The Institute’s quick guide provides 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 period.
IESBA November – December virtual meeting
The audio of the IESBA November – December virtual meeting is now available.
Report on the IESBA accomplishments
The IESBA report includes an update on the board’s current projects and initiatives and highlights its efforts in promoting awareness, adoption, and implementation of the International Code of Ethics for Professional Accountants (including International Independence Standards). It also summarizes the board’s accomplishments between 2016 and 2020.
Guidance on navigating the heightened risks of fraud during the COVID-19 pandemic
The Staff of the South African Independent Regulatory Board for Auditors, IESBA and IAASB jointly released a publication highlighting the heightened risks of fraud arising from the disruptive and uncertain COVID-19 environment and the implications for professional accountants in business, including accountants in government, and professional accountants in public practice, including auditors.
New guidance on integrating climate-related matters into financial reporting
The Climate Disclosure Standards Board has issued new guidance on the disclosure of the financial effects of climate-related issues on a company’s financial statements. The guidance builds upon the existing IFRSs and addresses three main questions: Are climate-related matters relevant to financial reporting? How should climate-related matters be factored into a company’s financial reporting and what this might look like? What steps can companies take to integrate material climate-related matters into financial reporting?
SFC consults on proposed amendments to the Code on Pooled Retirement Funds
On 18 December, the Securities and Futures Commission (SFC) issued a consultation paper on the proposed amendments to the Code on Pooled Retirement Funds for (i) enhancing its requirements for the operation of these funds; and (ii) clarifying the obligations of key operators including product providers, trustees, management companies and insurance companies. Please refer to the press release for details.
The deadline for submission to the SFC is 19 March.
SFC’s consultation conclusions on proposed customer due diligence requirements for open-ended fund companies
On 23 December 2020, the SFC released consultation conclusions on proposed customer due diligence requirements for open-ended fund companies (OFCs). In the consultation, the SFC had proposed that OFCs should be required to appoint a responsible person to carry out anti-money laundering/counter-terrorist financing functions as stipulated under Schedule 2 to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), similar to the requirements imposed on limited partnership funds under the Limited Partnership Fund Ordinance (Cap. 637) (LPFO). Under the LPFO, the responsible person must be an authorized institution, a licensed corporation, an accounting professional or a legal professional. Following the consultation, the SFC will proceed with legislation to implement the proposal.
Please refer to the press release for details.
Consultation conclusions on Paperless Listing & Subscription Regime, Online Display of Documents and Reduction of the Types of Documents on Display
The Stock Exchange of Hong Kong (HKEX) issued consultation conclusions on Proposals to Introduce a Paperless Listing & Subscription Regime, Online Display of Documents and Reduction of the Types of Documents on Display, on 18 December 2020. The proposals received broad support from institutional respondents. See the press release for details.
The Institute issued a response to the original consultation paper in July, which, in general, supported the HKEX’s proposals.
HKEX’s Latest Review of Issuers’ Corporate Governance Practices and Practitioners’ Insights on Corporate Governance and ESG
On 18 December 2020, HKEX published the findings of its latest review of issuers’ corporate governance practices and market practitioners’ insights on corporate governance and environmental, social and governance (ESG).
Please refer to the press release for details.
Announcements by the Inland Revenue Department
Members may wish to be aware of the following matters:
- Latest arrangements of Inland Revenue Department’s (IRD) public services.
- Legislation Council question on welfare and employment for the elderly.
- Taxpayer convicted of making false statements in connection with holdover applications for provisional tax and falsely claiming deductions of expenses of self-education and approved charitable donations.
- IRD Annual Report 2019-20.
- Hong Kong-Serbia comprehensive avoidance of double taxation agreement.
- IRD Notice: Pay promptly as tax is falling due.
- Stamp Office Stamping Circular No. 01/2021: Stock Borrowing Relief – Filing of Return of Stock Borrowing Transactions.
- Taxpayer jailed for evading salaries tax.
- Stamp Duty statistics.
Legislation and other initiatives
Announcements by the government
Members may wish to be aware of the following matters:
- Government extends social distancing measures under Prevention and Control of Disease Ordinance.
- Government strengthens restrictions to persons arriving at Hong Kong from the U.K.
For the current lists of terrorists, terrorist associates and relevant persons or entities under United Nations sanctions, members should refer regularly to the Institute’s Anti-money laundering (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