Techwatch 208

The latest standards and technical developments

Local updates 

Invitations to comment 

The Institute is seeking comments on:

  • The International Ethics Standards Board for Accountants (IESBA) Exposure Drafts: Proposed Revisions to the Non-Assurance Services Provisions of the Code and Proposed Revisions to the Fee-Related Provisions of the Code by 3 April.
  • The International Accounting Standards Board (IASB) Exposure Draft ED/2019/7 General Presentation and Disclosures by 22 May.
  • IASB Request for Information: Comprehensive Review of the IFRS for SMEs Standard by 12 June.


New webpage on goodwill and impairment 

The new webpage on goodwill and impairment provides details of the Hong Kong Institute of CPAs’ involvement in local and global discussions on accounting for goodwill, as well as upcoming activities.

New webpage on accounting for cypto-assets 

Cypto-assets, including cryptocurrencies such as bitcoin, have generated a significant amount of interest in recent years. As activity related to crypto-assets has increased, one important issue is how to account for crypto-asset transactions. The new webpage on crypto-assets explains how the Institute is monitoring the developments of crypto-assets and participating in the global discussions on accounting treatments. It also provides relevant guidance and publications on accounting for crypto-asset transactions.

Illustrative examples of rent concessions 

Due to the recent market conditions, some landlords have chosen to lessen tenants’ difficulties by providing rent reduction or other means of subsidy. The Institute has issued a publication to illustrate the application of Hong Kong Financial Reporting Standard 16 Leases to some commonly seen rent concession arrangements and highlight key factors to be considered for lessees and lessors when accounting for these transactions.

International updates 

Audit and assurance 

  • The International Auditing and Assurance Standards Board (IAASB) Auditor Reporting Project Update.
  • The International Federation of Accountants (IFAC) article on Achieving High-Quality Audits.


  • IESBA December 2019 meeting highlights.
  • IFAC Exploring the IESBA Code: Second Installment. 
  • IESBA Proposed Revision to the Code Addressing Objectivity of Engagement Quality Reviewers.
  • IESBA webinars explaining its proposed revisions to international independence standards.

IFRS updates 

  • January 2020 IASB update and podcast.
  • IFRS 17 Insurance Contracts podcast covering the January IASB’s meeting.
  • January 2020 IFRS for SMEs update.
  • January 2020 IFRS Interpretations Committee update.

Professional accountants in business 

HKEX publishes results of latest review of issuers’ annual report disclosure 

Hong Kong Exchanges and Clearing (HKEX) has recently published a report on findings and recommendations from its review of issuers’ annual reports for the financial year ended in 2018. HKEX was generally satisfied with its findings and recommends the following:

  • Business review in management discussion and analysis 

Issuers should make clear disclosure about risk areas such as major regulatory or governmental policy changes, and an assessment on the impact to their business operations and previously announced business plans. Where applicable, issuers should also discuss the impact of the policy changes to their financial performance during the financial year.

  • Financial statements with auditors’ modified opinions 

Issuers with audit modifications should actively engage their auditors to discuss their action plans with a view towards taking appropriate and effective actions to remove the modifications. On asset valuations of receivables and deposits, issuers should maintain a credit loss policy supported by historical loss information and adjusted by forward looking economic factors, and make impairments according to such policy.

  • Material intangible assets, including goodwill 

Issuers should ensure that the key assumptions applied in impairment testing are not overly optimistic and provide sufficient information for investors to understand how issuers assess the reasonableness of key assumptions.

  • Using non-GAAP financial measures

Issuers should ensure that the non-generally accepted accounting principles (GAAP) financial measures should be unbiased, presented with no greater prominence than GAAP measures, clearly defined, reconciled to the relevant amounts in the financial statements with sufficient explanation on adjusting items and presented consistently over time.

Preparers of financial statements, in particular for those listed entities are encouraged to read the report and follow HKEX guidance to improve annual report disclosures to enhance transparency to stakeholders.

Digital transformation in finance functions

The Institute of Chartered Accountants in England and Wales Tech Faculty’s latest publication – Digital Transformation in Finance Functions: ASEAN and U.K. Perspectives – focuses on practical experiences, drawing on interviews with around 20 chief financial officers or digital transformation leads in finance functions from the United Kingdom, Singapore, Malaysia, Vietnam, Indonesia and Cambodia, and shares key lessons about the challenges of transformation in practice.

The findings indicate that the role of digital technology in finance is clear. It can be used to automate standard, repeatable processes, and thereby free up staff to spend more time on higher-value work, such as critical thinking, problem-solving and business partnering.

The research also highlights a range of challenges that typically need to be addressed, and the report focuses on three important messages in this regard:

  • The pace of technological and business change is creating an urgent need to build the capabilities and demand for higher value activities – it is no longer an option, finance teams must act now.
  • People are the key to transformation, and finance functions needs to prioritize re-skilling, training and cultural change in their activities – partly around tech skills, but also business and commercial awareness and soft skills.
  • Transformation is difficult, it doesn’t happen overnight, and therefore small steps matter – focusing on marginal gains can prove helpful in managing the expectations of stakeholders and keeping staff motivated.

Future ready: accountancy careers in the 2020s

The Association of Chartered Certified Accountants has recently published a report entitled Future Ready: Accountancy Careers in the 2020s, which explores the major forces affecting the future of the accountancy profession. Apart from the major force transforming the world of work – technology, other forces include changing expectations of individuals in the workplace, shifting social norms and values, new types and levels of connectivity and demographics.

The report also tells the trends changing careers in accountancy and identifies the following five careers zones emerging, which represent broad areas of opportunity which individuals may develop their careers in.

  • Assurance advocate – driving transparency and trust to meet growing regulatory demand.
  • Business transformer – supporting business transformation in the digital age.
  • Data navigator – organizational storytelling driving faster, more credible insights.
  • Digital playmaker – champions of data governance driving productivity and decision support processes.
  • Sustainability trailblazer – helping organization transform to accounting for the whole business.

Small and medium practices

Key factors in evaluating software investment

According to the recent IFAC Global SMP Survey, 28 percent of small- and medium-sized practices (SMPs) that responded are committed to invest 10 percent or more of their firm’s practice revenue on technology. While investing in technology is important to SMPs, the exploration process can be daunting.

The IFAC SMP Committee has recently compiled a five-step software investment evaluation process for SMPs:

  1. Evaluate the suppliers’ business history and reputation.
  2. Evaluate the underlying technologies that comes with the software.
  3. Evaluate the training and support options.
  4. Review the budget and evaluate costs and contract conditions. This will need to be in alignment with the firm’s middle and longer-term strategies.
  5. Evaluate testimonials and references.

There are also a number of articles and videos on IFAC’s Knowledge Gateway highlighting the importance of technology as a new strategic advantage.

Corporate finance

HKEX seeks views on corporate weighted voting rights beneficiaries

HKEX released a consultation paper on 31 January to seek views on a proposal to allow corporate entities to benefit from weighted voting rights (WVR), subject to additional conditions and investor protection measures. Please refer to the press release for details.

The consultation explores the feasibility of whether an issuer can grant WVR to both individual and corporate beneficiaries, subject to specific suitability and eligibility criteria applicable to it.

The deadline for responding to the consultation paper is 1 May. Members are welcome to submit any views or comments on the proposals in the consultation paper, together with their membership number and contact details, to the Advocacy and Practice Development Department on or before 27 March.

Hang Seng Indexes Company Limited seek views on structure of Hang Seng Index

On 13 January, the Hang Seng Indexes Company Limited (HSICL) released a consultation paper to seek views on the following areas:

  1. Positioning of the Hang Seng Index (HSI).
  2. Eligibility of WVRs for the HSI.
  3. Eligibility of secondary-listed companies for the HSI.
  4. Weighting of the financial sector in the HSI.
  5. Matters related to the Hang Seng China Enterprises Index.

In particular, HSICL is considering including listed companies with dual-class shares and WVR, most notably applicable to the Mainland technology giants.

The deadline for responding to the consultation paper to HSICL is 13 March.


Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

  • Gazettal of Inland Revenue (Amendment) (Ship Leasing Tax Concessions) Bill 2020.
  • Notifications of change of address:
    • Employers
    • Individuals
  • Latest arrangements for Inland Revenue Department services.
  • Revision of departmental interpretation and practice notes (DIPNs):
    • DIPN 18, DIPN 35, DIPN 36, DIPN 37, DIPN 56 and DIPN 57
  • Interest on Tax Reserve Certificates.
  • Stamp Duty statistics (January 2020).

Legislation and other initiatives

Anti-money lanudering notices

For the current lists of terrorists, terrorist associates and relevant persons or entities under United Nations (UN) sanctions, members should refer to the Institute’s anti-money laundering 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.

AML/CFT guidance

For mandatory guidelines and information from the Institute on the anti-money laundering or counter-terrorist financing (AML/CFT) requirements for members, see the Institute’s Guidelines on Anti-Money Laundering and Counter-Terrorist Financing for Professional Accountants. Member practices may also find the Financial Action Task Force’s (FATF) Guidance for a Risk-Based Approach for the Accounting Profession to be a useful reference when developing their own risk-based approach to applying the AML/CFT requirements.

Members who are licensed to provide trust or company services 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.

The FATF published guidance, in October 2019, entitled, Best Practices on Beneficial Ownership for Legal Persons. This paper aims to provide suggested solutions to the disclosure of beneficial ownership, supported by cases and examples of best practices from delegations of member jurisdictions of the FATF.

Members should ensure that they are 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 ML/TF risks and vulnerabilities in the Hong Kong market.

Please refer to the full version of TechWatch 208 here.

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