Local updates
Institute submission
The Institute commented on International Accounting Standards Board (IASB) Exposure Draft ED/2019/2 Annual Improvements to IFRS Standards 2018-2020..
Invitations to comment
The Institute is seeking comments on:
- IASB Exposure Draft ED/2019/5 Deferred Tax related to Assets and Liabilities arising from a Single Transaction by 14 October.
- IASB Exposure Draft ED/2019/6 Disclosure of Accounting Policies by 11 October.
- International Ethics Standards Board for Accountants (IESBA) Exposure Draft Proposed Revisions to the Code to Promote the Role and Mindset Expected of Professional Accountants by 30 September.
Feature articles on ethical risks faced by professional accountants
The Hong Kong Business Ethics Development Centre has developed a series of feature articles highlighting the ethical risks faced by external auditors, internal auditors, financial accountants and management accountants respectively, and also the legal obligations and professional principles they should pay heed to in tackling ethical challenges.
International updates
Ethics
IESBA role and mindset expected of professional accountants webinar.
IFRS update
The IASB held an additional meeting on 28 August to discuss phase one of its interest rate benchmark reform project, which focuses on financial reporting issues in the period before current interest rate benchmarks are replaced with alternative rates. August 2019 IASB update and podcast provide summaries of this meeting. In August, the IASB also added phase two of the project to its work plan, which will focus on potential financial reporting issues once the existing rate is replaced with an alternative rate.
Professional accountants in business
Future-fit accountants in business
With more demanding customers and societal expectations, achieving long-term value creation and success has never been more challenging for businesses. In a changing and uncertain business environment, chief financial officers (CFOs) and finance functions of today and tomorrow need to provide information and analysis that support decisions about all aspects of an organization’s business model and value creation.
To help drive a future-ready professional accountant in business (PAIB), International Federation of Accountants (IFAC) has launched a “Future-fit” content series, which includes:
- A vision for the CFO and finance function;
- Future-fit accounting roles for the next decade; and
- An evaluation tool to help guide organizations in finance function transformation.
Read the IFAC press release for detail. PAIBs are encouraged to read through the series.
Small and medium practices
Digital Competency Survey – share your experience and views
Small- and medium-sized practices (SMPs) are invited to participate in the Digital Competency Survey by 4 October, which should take about 10 minutes to complete. The objective of the survey is to gain insight into the digital competency level of SMPs in Hong Kong. The results will be used by the Institute in its planning and developing of initiatives to assist SMPs in enhancing their digital competency.
Corporate finance
HKEX publishes consultation paper on codification of general waivers and principles relating to IPOs and listed issuers
On 2 August, Hong Kong Exchanges and Clearing (HKEX) released a consultation paper to seek views on the proposed codification of general waivers and principles relating to initial public offerings (IPOs) and listed issuers, as well as minor amendments to the Listing Rules (the rules). Please refer to the press release for details.
The aim is to (i) improve clarity of the rules; (ii) ensure the rules reflect currently acceptable standards in the market place; and (iii) codify a number of administrative provisions that are currently provided in its guidance letters or listing decisions.
The Institute would like to draw members’ attention, in particular, to question 11 of the consultation paper, which concerns the experience and qualification of the company secretary. HKEX is proposing to codify into the rules that it may grant a Main Board Rule 3.28 waiver to an issuer to appoint a company secretary without the relevant required qualification and/or experience after taking into account the following conditions:
(i) Whether the issuer has principal business activities primarily outside Hong Kong;
(ii) The reasons why the directors consider the individual to be suitable to act as the issuer’s company secretary; and
(iii) Whether the proposed company secretary will be assisted by a qualified person throughout a period of not more than three years, the length of which may depend on factors as discussed in paragraph 70 of the consultation paper.
HKEX consults market on proposed microstructure enhancements in the securities market
HKEX published a consultation paper on 16 August on proposed enhancements to the Pre-opening Session (POS) and Volatility Control Mechanism (VCM) in the securities market. Please refer to the press release for details.
The proposed enhancements on the POS auction mechanism include:
- Adjusting securities coverage to include all equities and funds;
- Introducing randomized auction matching;
- Allowing at-auction limit orders throughout POS;
- Allowing short selling orders with a price not lower than the previous closing price; and
- Setting a two-stage price limit — apply a fixed ±15 percent price limit with reference to the previous closing price during order input period, followed by a second stage price during no cancellation and random matching periods, in which order prices will be limited to within the lowest ask and highest bid prices recorded at the end of order input period.
In addition, the HKEX also seeks views on the following VCM enhancements in the securities market:
- Expanding VCM stock coverage from constituent stocks of the Hang Seng Index and Hang Seng China Enterprises Index (80+ stocks) to constituent stocks of Hang Seng Composite LargeCap, MidCap and SmallCap Indexes (total of nearly 500 stocks);
- Applying a tiered structure of triggering thresholds at ±10 percent, ±15 percent, and ±20 percent to the last traded price five minutes before respectively for the constituent stocks of the three Hang Seng Composite Indexes; and
- Allowing multiple triggers per trading session for each VCM stock.
Taxation
Announcements by the Inland Revenue Department
Members may wish to be aware of the following matters:
- A webpage on transfer pricing documentation has been set up to explain the requirements in relation to master file and local file, and the Inland Revenue Department’s (IRD) approach to ensure compliance with the requirements.
- The IRD’s penalty policy webpage has been updated to cover double taxation relief, exchange of information, transfer pricing requirements, etc.
- Financial Secretary announces measures to support enterprises and residents.
- Updated tax guide for charitable institutions and trusts of a public character.
- List of qualifying debt instruments (as at 30 June).
- Stamp duty statistics (July).
Legislation and other initiatives
Anti-money laundering news
The Financial Action Task Force (FATF) has published the anti-money laundering/ counter-terrorist financing (AML/CTF) Mutual Evaluation Report on Hong Kong. The government has issued a press release, which notes that Hong Kong’s AML/CTF regime is assessed to be compliant and effective overall, making it the first jurisdiction in the Asia-Pacific region to have achieved an overall compliant result in the current round of FATF evaluations.
AML notices
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 the sanctions currently in force in Hong Kong.
AML/CTF guidance
For mandatory guidelines and information from the Institute on the AML/CTF requirements for members, see the Institute’s Guidelines on Anti-Money Laundering and Counter-Terrorist Financing for Professional Accountants.
Members who are licensed to provide trust or company services should see the Guideline on Compliance of Anti-Money Laundering and Counter-Terrorist Financing Requirements for Trust or Company Service Providers, issued by the 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), which indicates the money laundering/ terrorist financing risks and vulnerabilities in the Hong Kong market.
Please refer to the full version of TechWatch 203.
