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Your fortnightly technical updates newsletter (1 March 2023)
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Members' Handbook
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Handbook Update No. 286 relates to the publication of the revised Preface to Hong Kong Financial Reporting Standards. The Preface is updated for editorial corrections.
Handbook Update No. 287 includes:
- Revision to relevant practice notes as a result of the Financial Reporting Council (Amendment) Ordinance 2021 which expanded the Accounting and Financial Reporting Council’s (AFRC) statutory functions with effect from 1 October 2022.
- Revision to Preface to the Hong Kong Quality Control/Management, Auditing, Review, Other Assurance, and Related Services to incorporate changes to the post-implementation review framework.
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Standard setting
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Accounting implications of the abolition of the MPF-LSP offsetting mechanism in Hong Kong
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The HKSAR government gazetted the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 (the Amendment Ordinance) in June 2022. The Amendment Ordinance abolishes the use of the accrued benefits derived from employers’ mandatory contributions to a Mandatory Provident Fund (MPF) to offset severance payment and long service payment (LSP) (the ‘Abolition’).
The Institute has issued an alert regarding the accounting implications of the Abolition. The alert summarizes the discussions by the Institute’s Financial Reporting Standards Committee (FRSC) to date and the steps entities should take before the FRSC publishes more comprehensive guidance.
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Institute submission
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The Institute has submitted its comment letter on the International Accounting Standards Board (IASB) Exposure Draft Third Edition of the IFRS for SMEs Accounting Standard.
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The Institute’s Financial Reporting Standards Committee meeting minutes
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Minutes of the December 2022 meeting is now available.
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E-learning: Year-end Financial Reporting Reminders for 2022
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In this e-learning session, the speaker discusses the following topics to assist entities to get well prepared for 2022 year-end closing:
- New and amended HKFRSs that are effective for 2022;
- Common application issues of HKFRS 9 Financial Instruments, HKFRS 15 Revenue from Contracts with Customers and HKFRS 16 Leases, including common pitfalls identified through the recent Accounting and Financial Reporting Council inspections;
- IFRS Interpretations Committee agenda decisions that are relevant to Hong Kong; and
- Amendments to HKFRSs that have been issued but are not yet effective.
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E-learning: HKAS 36 Impairment of Assets
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This archived webinar covers the following aspects of Hong Kong Accounting Standard (HKAS) 36:
- common pitfalls of HKAS 36, including identification of cash generating units, deriving discount rates and related cash flow projections, comparable recoverable amount and carrying amount, identification of impairment indicators and disclosures;
- how to deal with corporate assets, especially leased offices and other material right-of-use assets that are corporate assets;
- considerations for impairment assessment of goodwill, particularly the allocation of goodwill to appropriate testing level and the frequency of assessment; and
- practical tips in preparing and reviewing valuation assumptions and models.
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IASB February 2023 update & podcast
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The IASB podcast, with its chair, vice-chair and executive technical director highlighting the projects discussed during its February meeting, and a summary of the February meeting, are now available.
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Invitation to comment
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The Institute is seeking comments on the following issued by the International Auditing and Assurance Standards Board’s (IAASB):
- Proposed Strategy and Work Plan for 2024–2027 by 11 March
- Exposure Draft on Proposed International Standard on Auditing (ISA) 500 (Revised), Audit Evidence and proposed conforming and consequential amendments to other ISAs by 24 March
- Exposure Draft on Proposed Part 10, Audits of Group Financial Statements of the Proposed ISA for Audits of Financial Statements of Less Complex Entities (ISA for LCE) and proposed conforming amendments by 2 April
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HKICPA survey and video on proposed ISA 500 (Revised)
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The Institute is interested in hearing your views about Proposed ISA 500 (Revised), Audit Evidence. To collect these views, you are invited to take a survey which highlights the key attributes of the proposals followed by yes/no questions. The survey takes around twenty minutes to complete and will close on 24 March. Click here to begin the survey.
An introductory video in Cantonese with English terminologies has been produced by the Institute to provide an overview of the proposed changes. Watch the video and view the slide presentation to learn more.
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Updates to Auditing and Assurance Technical Bulletins and Circulars
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The Institute has revised the relevant Auditing and Assurance Technical Bulletins and Circulars for local legislative changes due to AFRC regulatory reform.
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Joint statement from the IESBA and IAASB chairs on the International Sustainability Standards Board’s (ISSB) progress toward inaugural international sustainability standards
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This statement by the IESBA and IAASB chairs echoes the recent statement of support from the International Organization of Securities Commissions (IOSCO) and indicates appreciation for IOSCO’s encouragement for their boards’ work to develop standards by the end of 2024. It commented that the IOSCO statement is a timely reminder that providing the necessary assurance and ethics standards is essential to complete the sustainability reporting and assurance standards infrastructure.
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ISQM 1 statement in assurance reports
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For assurance engagements beginning on or after 15 December 2022, assurance reports under International Standard on Assurance Engagement (ISAE) 3000 (Revised),
Assurance Engagements Other than Audits or Reviews of Historical Financial Information need to include a statement that the firm of which the practitioner is a member applies International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, or other professional requirements, or requirements in law or regulation, that are at least as demanding as ISQM 1. An article by the Institute of Chartered Accountants in England and Wales (ICAEW) provides guidance on reflecting the transition from International Standard on Quality Control (ISQC) 1 to ISQM 1 in assurance reports under ISAE 3000 (Revised).
Institute members can subscribe to ICAEW’s International Standards platform for free to access a wide range of resources on auditing and ethics.
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The state of play in sustainability assurance
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The benchmarking study by the International Federation of Accountants (IFAC), American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA) reports that investors, regulators and policymakers are turning their attention to the important role of assurance in ensuring high-quality reporting. It captures and analyzes the extent to which companies are reporting and obtaining assurance over their sustainability disclosures, which assurance standards are being used, and which companies are providing the assurance service.
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Invitation to comment
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The Institute is seeking comments on the IESBA Exposure Draft Proposed Revisions to the International Code of Ethics for Professional Accountants (Including the International Independence Standards) addressing Tax Planning and Related Services by 18 April. The proposed revisions respond to public interest concerns about tax avoidance and the role played by consultants, including professional tax advisers, in light of revelations in recent years such as the Paradise and Pandora Papers. The proposals strengthen the ethical expectations for professional accountants in business and in public practice when performing tax planning activities for employing organizations or providing tax planning services to clients.
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HKICPA resource centre
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Access resources and publications at the Institute’s revamped Resource Centre to the Code which will keep you updated on the latest ethics pronouncements.
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ISSB ramps up activities to support global implementation ahead of issuing inaugural standards end Q2 2023
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The ISSB, at its meeting on 16 February 2023 in Montreal, has taken its final decisions on all the technical content of its initial IFRS Sustainability Disclosure Standards, informed by feedback it received during extensive consultation last year. The ISSB unanimously approved entering the thorough drafting and formal balloting process of the standards, ahead of their expected issuance at the end of Q2 2023. The ISSB also agreed that its initial standards, IFRS S1 General Sustainability-related Disclosure Requirements and IFRS S2 Climate-related Disclosures, will become effective starting January 2024. Given sustainability disclosure is new for many companies globally, the ISSB will introduce programmes that support those applying its standards as market infrastructure and capacity is built.
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ISSB February 2023 podcast & update
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The ISSB podcast, with its chair and vice-chair highlighting the recent discussions and decisions made at its February meeting, and a summary of the meeting, are now available.
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Advocacy and practice development
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Institute submission on HKEX’s consultation on Proposals to Expand the Paperless Listing Regime and Other Rule Amendments
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The Institute issued a submission in response to the Consultation Paper issued by the Stock Exchange of Hong Kong Limited (HKEX), seeking feedback on proposals to further advance its paperless initiatives.
In principle, the Institute agrees with most of HKEX’s proposals on the basis that they will improve efficiency and lower administrative costs for listed companies, also reducing the use of paper, without compromising HKEX’s regulatory objectives or jeopardizing market quality. However, we have reservations regarding certain proposals, such as not requiring listed companies to send electric notices of annual and other general meetings to shareholders individually, and removing the requirement for physical attendance by members to meet the quorum for meetings of the Listing Committee and Listing Review Committee. Please refer to our submission for details.
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HKEX’s consultation paper on Rule Amendments Following Mainland China Regulation Updates and Other Proposed Rule Amendments Relating to PRC issuers
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On 24 February, the HKEX issued a consultation paper to seek comments on proposed rule amendments to align the requirements for Mainland China/ PRC issuers with those for other issuers.
Please refer to the press release for details. The deadline for responding to the consultation paper is 24 March 2023.
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Issuance by trustees-in-bankruptcy of “No Objection Letter” to discharged bankrupts
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The Official Receiver’s Office (ORO) issued a letter to the Institute, reminding insolvency practitioners and trustees-in-bankruptcy of their obligation to handle requests from discharged bankrupts for the issuance of a “No Objection Letter” in a timely manner, and in any event within one month from receiving the request from discharged bankrupts.
Any questions on the ORO’s letter may be addressed to Michael Cheung, Chief Insolvency Officer of the ORO, at 2867 2515.
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Revision of Panel A Rules
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In consultation with the Institute’s Restructuring and Insolvency Faculty Executive Committee, the Official Receiver’s Office has reviewed and revised the Rules for Admission of Firms and Persons for Taking-up Appointment of Liquidators, Provisional Liquidators or Special Managers in Non-Summary Court Winding-up Cases, commonly referred to as the “Panel A” Rules in consultation with the Institute. The revised Panel A Rules took effect on 1 March 2023.
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Institute’s response to 2023-24 budget
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The government’s 2023-2024 budget included a range of measures proposed by the Institute in its budget submission. The Institute welcomed the government's 2023-2024 budget for its comprehensive approach and focus on the needs of all sectors of society. It is hoped that the budget will help the city get back on track, revive the economy in the post-COVID era, and reconnect with the international community. However, the Institute believes that the government could also formulate more targeted measures, such as carrying out a broad review of the tax system and providing more family-friendly measures to retain and attract talent, so as to enhance Hong Kong's competitiveness in the medium and long term. See the Institute’s press release for more details.
Highlighting the Institute’s thought leadership on public finance matters, the Institute’s comments were covered extensively in the media, including TVB, Hong Kong Economic Journal (HKEJ), Oriental Daily, and more. A wide-ranging interview in two parts (1 and 2) with the chair of the Taxation Faculty Executive Committee Sarah Chan was published by the HKEJ in the build up to the budget address.
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Announcements by the Inland Revenue Department
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Members may wish to be aware of the following matters:
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Announcements by the government
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Members may wish to be aware of the following matters:
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Anti-money laundering (AML) notices and news
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Government welcomes FATF's adoption of Hong Kong's anti-money laundering and counter-terrorist financing (AML/ CTF) follow-up report
On 17 February, the Financial Action Task Force (FATF) published a follow-up report on Hong Kong's AML/ CTF system, following a review undertaken by its reviewer and member jurisdictions, which the Hong Kong government has welcomed. The report affirms Hong Kong's progress and efforts in implementing risk-based AML/ CTF supervision for most designated non-financial business and profession sectors, including the accounting profession. This reflects the Institute’s efforts, working closely with the government, to contribute input and updates on the part of the accounting profession for this follow-up report.
The Institute will continue to providing a range of services to assist members and practices with their AML/ CFT compliance.
AML notices
Other AML news
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Useful resources
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Publications from other organizations:
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Disclaimer: Some sections contain information from outside sources. We endeavour to link to reputable sources but the Institute is not responsible for the accuracy of the content and the content does not necessarily represent the views of the Institute.
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