Local updates
Impact of coronavirus on audits and financial reporting
The Hong Kong Institute of CPAs’ Issue 32 and Issue 33 of Financial Reporting, Auditing and Ethics Alert highlight some specific issues that are anticipated to pose an impact on a client’s audit risks and financial reporting.
Invitations to comment
The Institute is seeking comments on:
- 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.
- 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.
Financial Reporting Standards Committee minutes
Minutes of the 254th meeting are now available.
International updates
Audit and assurance
- International Federation of Accountants (IFAC) Preparing for Changes to ISA 540 on Auditing Accounting Estimates.
Ethics
- IFAC Exploring the IESBA Code: Third Installment now available.
- IESBA webinar to explain proposed revisions to international independence standards.
- IESBA Technology Working Group’s Phase 1 Report explores the ethical implications of technology on the accounting, assurance, and finance functions.
IFRS updates
- February 2020 IASB Update and podcast.
- IFRS 17 Insurance Contracts podcast covering the February IASB meeting.
- Request for Information: Comprehensive Review of the IFRS for SMEs Standard webcast.
- Exposure Draft General Presentation and Disclosures webinar recording.
Professional accountants in business
COSO issues new ERM guidance
Enterprise risk management (ERM) has been receiving increased attention from boards and executives, as it continues to evolve in its development and uses. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) has recently published new guidance Creating and Protecting Value: Understanding and Implementing Enterprise Risk Management offering succinct, tangible steps to implement an effective ERM programme.
The updated COSO ERM Framework clarifies the relationship between strategy and risk, and that the objective of ERM is to assist organizations in achieving their strategy and business objectives. Organizations can enhance their abilities to be successful in both addressing risks and taking advantage of opportunities by enhancing their ERM processes and integrating ERM fully into their strategy setting and performance processes.
Corporate finance
Institute’s comments on the proposals by HKEX on Review of Chapter 37 – Debt Issues to Professional Investors Only
The Institute responded on 10 February to the consultation proposals by the Hong Kong Exchanges and Clearing (HKEX) on Review of Chapter 37 – Debt Issues to Professional Investors Only (see the January 2020 issue of TechWatch).
The Institute’s submission indicates support for the underlying objective of the HKEX’s initiative, that is, to protect the interests of investors and maintain an effective listing platform for bond market development in Hong Kong, while expressing reservations about some of the specific proposals. In particular, the proposals seem to focus primarily on ensuring the financial strength and capacity of issuers as a way of protecting investors, rather than addressing the apparent problem areas more directly, i.e. discouraging investors who do not, or should not, qualify as professional investors from investing in debts issues under Chapter 37 of the Listing Rules. In this regard, it is suggested that the definition of “professional investor” needs to be revisited.
At the same time, in focusing on ensuring size and financial strength of permitted issuers, the proposals could over-regulate the market for genuine professional investors and affect Hong Kong’s competitiveness as a debt market and regional financing hub.
Taxation
Announcements by the Inland Revenue Department
Members may be interested in the following matters:
- New Country-by-Country Reporting exchange arrangements between Hong Kong and Mainland China.
- Gazettal of:
- Inland Revenue (Amendment) (Tax Concessions) Bill 2020.
- Rating (Exemption) Order 2020 and Revenue (Reduction of Business Registration Fees and Branch Registration Fees) Order 2020.
- List of Qualifying Debt Instruments (as at 31 December 2019).
- Renewable energy facilitation measure takes effect.
- Tax measures proposed in 2020-21 Budget.
- 2020-21 Budget – Concessionary Measures.
- Advance Ruling Case No. 66.
- Stamp Duty statistics.
Legislation and other initiatives
Anti-money laundering 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.
FATF’s publication on high-risk and other monitored jurisdictions
The Financial Action Task Force (FATF) published a statement on 21 February regarding High Risk Jurisdictions Subject to a Call for Action, calling on its members and all jurisdictions to apply specific measures and actions on Democratic People’s Republic of Korea and Iran.
The FATF also issued a notice on jurisdictions under increased monitoring, stating that 18 other jurisdictions have been identified to have strategic anti-money laundering/counter-terrorist financing (AML/CFT) deficiencies, and are working with the FATF to address them.
AML/CFT guidance
For mandatory guidelines and information from the Institute on the 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 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 209 here.
