Local updates
Invitations to comment
The Institute is seeking comments on:
- The International Accounting Standards Board (IASB) exposure draft ED/2019/02 Annual Improvements to IFRS Standards 2018-2020 by 22 July.
- The IASB exposure draft ED/2019/03 Reference to the Conceptual Framework IASB (Proposed amendments to IFRS 3) by 23 August.
- The International Auditing and Assurance Standards Board’s discussion paper on Audits of Less Complex Entities by 12 August.
Update on HKFRS/IFRS 17 Insurance Contracts
The Standard Setting Department of the Institute has issued issue five of its update newsletter on HKFRS 17 Insurance Contracts. Previous newsletters can be found on the Institute’s website.
Professional accountants in business
Future-ready accountants in business
What does being future-ready mean? The Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) has recently released a report, which provides insight into what it will take to prepare future-ready professional accountants. The report also captures conversations and takeaways from the IFAC PAIB Committee meeting held in March.
Key topics covered include:
- Finance function transformation, with a case study from Prudential Financial, Inc.
- Building data science and analytics capabilities.
- Supporting accountants in professional ethics.
- Effective risk management and internal control.
- Examining the role of the audit committee.
Some of the more detailed content has been reproduced in four articles, which are referenced in the report:
- Building data science and analytics capabilities in finance and accounting
- Paying professional ethics more than lip service
- Accountants enabling effective enterprise risk management
- Examining the role of audit committees: four perspectives
HKMA introduces key measures on sustainable banking and green finance
The Hong Kong Monetary Authority (HKMA), in support of the mission to reduce climate change risks and to achieve sustainable finance, has published three sets of measures to support and promote Hong Kong’s green finance development:
(a) Green and sustainable banking: Three phases developing and implementing a common framework to assess the “greenness baseline” of individual banks.
(b) Responsible investment: As manager of the exchange fund, HKMA would give priority to green and environmental, social and governance (ESG) investments if the long-term return is comparable to other investments on a risk-adjusted basis.
(c) Centre for green finance: Established under the HKMA Infrastructure Financing Facilitation Office, it will serve as a platform for technical support and experience sharing for the green development of the Hong Kong banking and finance industry.
Corporate governance
HKEX seeks views on strengthening ESG rules and publishes guidance materials on ESG and gender diversity
On 17 May, Hong Kong Exchanges and Clearing (HKEX) issued a consultation paper to support and improve issuers’ governance and disclosure of ESG activities and metrics.
This consultation reflects the exchange’s commitment to enhancing ESG reporting and disclosure by listed companies, and builds upon its ongoing ESG-related efforts since the launch of the ESG reporting guide in 2013.
Key proposals:
- Introducing mandatory disclosure requirements in the ESG Reporting Guide to include:
– A board statement setting out the board’s consideration of ESG issues; and
– Applications of relevant reporting principles and boundaries in the ESG report.
- Requiring disclosure of significant climate-related issues which have impacted and may impact the issuer;
- Amending the “environmental” key performance indicators (KPIs) to require disclosure of relevant targets;
- Upgrading the disclosure obligation of “social” KPIs to “comply or explain;” and
- Shortening the deadline for publication of ESG reports to align with the publication timeframe of the annual report (i.e. within four months (Main Board issuers) or three months (GEM issuers) after the year-end date).
The deadline for responding to the ESG consultation is 19 July.
HKEX has also launched an e-training course, “ESG Governance and Reporting,” which explains the board’s leadership role in ESG matters and covers the following six topics:
- What is ESG, and why is it important?
- Board’s role in ESG governance.
- Why report on ESG?
- Essential elements in an ESG report.
- Details on ESG reporting.
- ESG disclosure by IPO applicants.
Frequently asked questions (FAQs) No. 24K and 24L in Series 17 and FAQ No. 2A in Series 18 have been added to clarify how different aspects of ESG relate to the Corporate Governance Code.
In respect of disclosure in listing documents by new applicants, HKEX has revised Guidance Letter HKEX-GL86-16 to require additional disclosure on policy relating to board diversity (including gender) and how gender diversity of the board can be achieved in the case of a single gender board. The revised guidance letter also sets out our expected disclosure on ESG matters, including material information on applicants’ environmental policies, and details of the process used to identify, evaluate and manage significant ESG risks.
Please refer to the press release for details.
Corporate finance
HKEX publishes conclusions on proposed rule changes relating to disclaimer or adverse audit opinion on issuer’s financial statements
HKEX has published consultation conclusions on the proposed suspension requirements for listed issuers with disclaimer or adverse audit opinion on their financial statements on 24 May. The Institute submitted its views on 13 December 2018.
After taking into consideration comments from respondents, HKEX decided to implement the proposal with the following modifications.
Modified suspension requirement
The HKEX considered that suspending companies with going concern issues could accelerate their demise and create financial hardship for these issuers. Hence, the HKEX has revised the proposal and the suspension requirement will not apply where (i) the disclaimer or adverse opinion relates solely to going concern; or (ii) the underlying issue giving rise to the audit modification has been resolved before the issuer publishes the preliminary results announcement.
Modified remedial period
Under the current rules, issuers may be delisted after continuous suspension for 18 months (12 months for a GEM issuer). HKEX has modified the proposal so that if the resolution of issues giving rise to the disclaimer/adverse opinion is outside the issuer’s control, a longer remedial period may be allowed on a case-by-case basis.
Transitional arrangement
In addition, HKEX will provide a transitional period such that the remedial period will be extended to 24 months for both Main Board and GEM issuers that are suspended due solely to a disclaimer or adverse opinion being issued in the first two financial years after the implementation of the new rule (i.e. for the financial years commencing on or after 1 September 2019 and up to and including 31 August 2021).
The new rules will apply to issuers’ preliminary annual results announcements for financial years commencing on or after 1 September 2019. The amendments to the Main Board Listing Rules and amendments to the GEM Listing Rules can be downloaded from the HKEX website. An updated Guidance Letter on Long Suspension and Delisting, which provides further guidance relating to the suspension requirement and circumstances in which the HKEX may consider allowing a longer remedial period, is also provided.
Please refer to the press release for details.
Taxation
Announcements by the Inland Revenue Department
Members may wish to be aware of the following matters:
- Application for Certificate of Resident Status relating to the Circular of the State Taxation Administration on Matters Concerning “Beneficial Owners” in Tax Treaties (STA Circular 2018 No. 9).
- The Inland Revenue Department (IRD) has issued Departmental Interpretation and Practice Notes (DIPN) No. 56 and DIPN No. 57 to explain the conditions for deduction of the premiums under the Voluntary Health Insurance Scheme and for annuity premiums and voluntary contributions to Mandatory Provident Fund (MPF) schemes, respectively.
- A revised version of DIPN No. 23 Recognized Retirement Schemes has also been issued, to reflect legislative changes relating to MPF schemes and set out IRD’s revised assessing practice relating to defined benefit schemes.
- List of Qualifying Debt Instruments (as at 31 March)
- Tax Obligations of Taxpayers and Employers.
- Business Registration Notice.
- Stamp Duty statistics (April).
- Taxpayer convicted of making false claims for allowances.
Annual meeting with the IRD
The annual meeting between representatives of the Institute’s Taxation Faculty Executive Committee and the IRD took place on 10 May. At the meeting, the IRD confirmed the due dates for lodging profits tax returns for the year of assessment 2018-19. These are highlighted for members’ attention:
Legislation and other initiatives
Anti-money laundering notices and news
For the current lists of terrorists, terrorist associates and relevant persons/entities under United Nations (UN) sanctions, members should refer to the Institute’s AML webpage which is updated regularly. The UN sanctions webpage of the Commerce and Economic Development Bureau contains consolidated lists of UN sanctions currently in force in Hong Kong.
The Financial Action Task Force has recently published its mutual evaluation report on the anti-money laundering and counter-terrorist financing measures in the People’s Republic of China. Hong Kong also underwent a mutual evaluation during 2018 and the report is due to be published quite soon.
AML/CFT guidance
For mandatory guidance and information on the AML/CFT requirements for members, see the Institute’s Guidelines on Anti-Money Laundering and Counter-Terrorist Financing for Professional Accountants.
Members who are licensed trust or company service providers should also see the Guideline on Compliance of Anti-Money Laundering and Counter-Terrorist Financing Requirements for Trust or Company Service Providers, by Companies Registry.
Members should be aware of the Hong Kong Money Laundering and Terrorist Financing Risk Assessment Report (in particular Chapter 6, covering designated non-financial businesses and professions, including accountants), which indicates ML/TF risks and vulnerabilities in the Hong Kong market.
Licensing under the Property Management Services Ordinance
Members may recall that the Institute issued a submission expressing concern over proposals in the consultation on the “Proposed Licensing Regime for Property Management Companies and Property Management Practitioners,” issued by the Property Management Services Authority (PMSA) in November 2018 (refer to TechWatch issue 196 in A Plus February 2019).
The PMSA has recently issued a major proposals “Fact sheet on PMSA licensing regime” on its website after consideration of the feedback received from stakeholders, including the Institute’s submission. In the proposals, it is clarified that an individual who assumes a managerial or supervisory role in relation to part of, but not all, the property management services provided by a property management company (PMC) is not required to hold a property management practitioner (PMP) license. Therefore, an accountant working in supervisory role in a PMC and providing only Category 4, Finance and asset management relating to a property, i.e. services for the budgeting, or management of finance, accounts or asset relating to a property, should not be required to be licensed. Other clarifications are also provided in the fact sheet.
Please refer to the full version of TechWatch 200.
