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Questions and Answers on financial reporting issues relating to the transition from the predecessor Companies Ordinance (Cap. 32) to the new Companies Ordinance (Cap. 622) ("new CO")

These Questions and Answers ("Q&As") have been developed by the Institute's Companies Ordinance Application Issues (Financial Reporting) Working Group (Working Group) and are endorsed by the Institute's Financial Reporting Standards Committee (FRSC). These Q&As will be updated from time to time to provide guidance on emerging financial reporting related application issues specific to the transition from the predecessor Hong Kong Companies Ordinance (Cap. 32) to the new Hong Kong Companies Ordinance (Cap.622).

These Q&As deal with transitional matters and are therefore only expected to have relevance in a financial year which crosses over 3 March 2014 or in the first financial reporting year beginning on or after 3 March 2014. A separate series of Q&As has been developed by the Working Group to cover other financial reporting related application issues relating to requirements of the new Hong Kong Companies Ordinance (Cap.622). These other Q&As are expected to have continuing relevance beyond the end of the first financial reporting year beginning on or after 3 March 2014.

These Q&As are non-mandatory in nature and intended for general guidance only. Users of these Q&As should consider taking their own legal advice if in doubt as to their obligations under the Hong Kong Companies Ordinance.

The Institute, the FRSC and the Working Group do not accept responsibility or liability, and disclaim all responsibility and liability, in respect of the Q&As and any consequences that may arise from any person acting or refraining from action as a result of any materials in the Q&As.

All references to Parts, Divisions, Sub-divisions, Schedules and Sections in the questions and answers are to the new CO, unless otherwise indicated.

Last revision date: 30 September 2014

Part A – Disclosure in annual reports for financial years ended before 3 March 2014

Last revision date: 15 July 2014

Q1.	Question A1 – References to specific sections of the CO Is there any requirement to amend the general CO references in the annual report (such as references to section 161 in respect of directors' emoluments) if the financial year covered by that annual report ended before 3 March 2014?

Answer

No, the new CO and the financial reporting standards do not contain such requirement. This answer applies even if the date of approval of that annual report is on or after 3 March 2014, since Schedule 11, "Transitional and saving provisions", only refers to financial years which began before 3 March 2014 and end on or after 3 March 2014, and not to earlier financial years.

However, as the relevant provisions in the predecessor CO (Cap. 32) were repealed on 3 March 2014, companies are encouraged (but not mandated) to add a note or remark in their financial statements that references to the provisions in the CO are references to the provisions in the predecessor Companies Ordinance (Cap.32) as was in force before 3 March 2014 or other wordings to similar effect.

Q2.

Question A2 – Disclosure under HKAS 10 Events after the Reporting Period
For financial years which end before 3 March 2014, is it necessary to disclose the commencement of the new CO on 3 March 2014 in the financial statements for those periods, and/or the automatic transition to the no-par value regime as non-adjusting post balance sheet events under paragraph 21 of Hong Kong Accounting Standard (HKAS) 10?

Answer

No. As the commencement of the new CO on 3 March 2014 and the transition to the no-par value regime have no immediate financial impact on the company and no impact on the number of shares in issue or the relative entitlement of any of the members, they are not events that should influence the economic decisions of users of the financial statements. They therefore fall outside the scope of the disclosure required by paragraph 21 of HKAS 10.

However, care should be taken to ensure that any post balance sheet (reporting date) event note (or other disclosure, such as in the directors' report), which refers to a specific transaction (such as an issuance of new share capital), makes the correct references to the relevant Companies Ordinance (i.e. either the predecessor Ordinance, Cap. 32, or the new Ordinance Cap. 622), depending on whether the transaction occurred before or after 3 March 2014.

Q3.

Question A3 - Disclosure under HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
For financial years that end before 3 March 2014, is it necessary to mention in the financial statements for those periods the new CO when disclosing information under paragraph 30 of HKAS 8 about the possible impact of amendments, new standards and interpretations issued but not yet effective?

Answer

No. Paragraph 30 of HKAS 8 refers to HKFRS which have not yet been adopted. HKAS 8 does not specifically require equivalent disclosure when there are other regulatory requirements that impact on the preparation of the financial statements, such as the annual report requirements of Part 9 "Accounts and Audit", which have not yet been adopted by a company.

However, the company may wish to make disclosure about the commencement date for the annual report requirements of Part 9 for the avoidance of doubt. For example, it would be acceptable to expand the disclosure made under paragraph 30 of HKAS 8 for new HKFRS not yet effective as follows:

"Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended [31 December 2013*]
*Amend date as appropriate

Up to the date of issue of these financial statements, the Institute has issued a few amendments and a new standard which are not yet effective for the year ended [31 December 2013*] and which have not been adopted in these financial statements. These include the following which may be relevant to the group …
*Amend date as appropriate

In addition, the annual report requirements of Part 9, "Accounts and Audit", of the new Hong Kong Companies Ordinance (Cap. 622) come into operation as from the company's first financial year commencing on or after 3 March 2014 in accordance with section 358 of that Ordinance. The group is in the process of making an assessment of the expected impact of the changes in the Companies Ordinance on the consolidated financial statements in the period of initial application of Part 9 of the new Hong Kong Companies Ordinance (Cap. 622). So far it has concluded that the impact is unlikely to be significant and will primarily only affect the presentation and disclosure of information in the consolidated financial statements."

(Note: Similar disclosure is also relevant for financial years which cross over 3 March 2014: see question B1)

Part B – Disclosures in annual reports for financial years ended on or after 3 March 2014 but before 3 March 2015

Last revision date: 15 July 2014

Q4.	Question B1 – References to specific sections of the CO How should a company refer to the Companies Ordinance in its annual report for a financial year ending on or after 3 March 2014 but before 3 March 2015?

Answer

The divisions of Part 9, which cover directors' reports, financial statements and the audit requirement, are not effective until the first financial year that begins on or after 3 March 2014. For any financial years that began before that date, the various sections of the predecessor CO (i.e. Cap. 32) relevant to the accounts and directors' report continue to apply (as stated in section 78 of Schedule 11). For example, the disclosure of directors' emoluments in such a reporting period will need to be made in accordance with section 161 of the predecessor CO (Cap. 32), rather than in accordance with section 383 of the new CO and the new Companies (Disclosure of Information about Benefits of Directors) Regulation (Cap. 622G).

However, all other parts of the new CO come into effect on 3 March 2014. For example, as from 3 March 2014 the company will need to comply with the requirements of section 135 and paragraph 37 of Schedule 11 to automatically transition to the new no-par regime (see questions B2 and B3 below). This will have an impact on the presentation of changes in equity in the financial statements prepared for that period.

As a result, care needs to be taken when preparing financial statements for a period that began before 3 March 2014 but will end on or after that date, to make sure that it is clear as to which Companies Ordinance reference is being made. For example, the company may consider including the following wording in its notes to financial statements when referring to the predecessor CO (Cap. 32):

"Statement of compliance

"These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (HKFRSs), the collective term which includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (HKASs) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (HKICPA) and accounting principles generally accepted in Hong Kong. These financial statements also comply with the applicable requirements of the Hong Kong Companies Ordinance which concern the preparation of financial statements, which for this financial year and the comparative period continue to be those of the predecessor Companies Ordinance (Cap. 32), in accordance with transitional and saving arrangements for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), "Accounts and Audit", which are set out in sections 76 to 87 of Schedule 11 to that Ordinance. A summary of the significant accounting policies adopted by the group is set out below."

For disclosure on directors' remuneration, the company may consider to include the following example wording in notes to financial statements:

"Directors' remuneration

Directors' remuneration disclosed pursuant to section 78 of Schedule 11 to the Hong Kong Companies Ordinance (Cap. 622), which requires compliance with section 161 of the predecessor Hong Kong Companies Ordinance (Cap. 32), is as follows: …"

For disclosure on "new standards and amendments issued but not yet effective" under HKAS 8, the company may consider to include the following example wording:

"Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended [31 December 2014*]
*Amend date as appropriate

Up to the date of issue of these financial statements, the Institute has issued … which are not yet effective for the year ended [31 December 2014*] and which have not been adopted in these financial statements. These include the following which may be relevant to the group …
*Amend date as appropriate

In addition, the annual report requirements of Part 9 "Accounts and Audit" of the new Hong Kong Companies Ordinance (Cap. 622) come into operation as from the company's first financial year commencing on or after 3 March 2014 in accordance with section 358 of that Ordinance. The group is in the process of making an assessment of expected impact of the changes in the Companies Ordinance on the consolidated financial statements in the period of initial application of Part 9 of the new Hong Kong Companies Ordinance (Cap. 622). So far it has concluded that the impact is unlikely to be significant and will primarily only affect the presentation and disclosure of information in the consolidated financial statements."

Q5.	Question B2 – Automatic transition to the no-par regime Which reserves form part of "share capital" on 3 March 2014? For example, would a "capital reserve" or a "merger reserve" form part of "share capital" under the new CO?

Answer

In accordance with section 135 of, and section 37 of Schedule 11 to, the new CO, "share capital" is expanded on 3 March 2014 to consist of:

(a)	the nominal (or par) value of shares issued prior to 3 March 2014;
(b)	any amount standing to the credit of the share premium account (i.e. as created under section 48B of the predecessor CO (Cap. 32)); and
(c)	any amount standing to the credit of the capital redemption reserve (i.e. as created under section 49H of the predecessor CO (Cap. 32)).

All other reserves of any description (such as capital reserves, merger reserves, revaluation reserves) are unaffected by the automatic transition to the no-par regime. These reserves would only form part of share capital if the company subsequently decided to capitalize them in accordance with section 170(2)(c).

Q6.	Question B3 – Disclosure of the transition to the no-par regime How should a company reflect the transition to the no par regime for share capital in its financial statements for a period ending on or after 3 March 2014 but before 3 March 2015? Should comparatives be re-stated?

Answer

The transition to the no-par regime for share capital is an event that occurred on 3 March 2014 for all Hong Kong incorporated companies with share capital. The transition to the no-par regime is not a change in accounting policy or presentation. Therefore, the event should be shown as occurring on that date and the financial information for periods prior to that date should not be re-stated. For example, if a Hong Kong incorporated company is preparing a set of financial statements for the year ended 31 December 2014, it will need to show the following:

in the statement of financial position (or in the notes thereto), the current year information will show "share capital" as at 31 December 2014 computed as described above in question B2, whereas the comparative information as at 31 December 2013 should distinguish between nominal value, share premium account and capital redemption reserve, as computed in accordance with the predecessor CO (Cap. 32); and

in the statement of changes in equity, the company will need to include a line item for the event on 3 March 2014 whereby the balances on share premium account and capital redemption reserve were transferred into share capital in accordance with section 37 of Schedule 11. For any issuances of shares prior to 3 March 2014, the monetary amounts should be reflected in the statement of changes in equity, and in the relevant notes to the financial statements, in accordance with the applicable requirements of the predecessor CO (Cap. 32) to record nominal value and share premium. Whereas for any issuances of shares on or after 3 March 2014, the monetary amounts should be reflected as increases in the single amount of "share capital".

In addition, the company may need to break-down the comparative amounts of equity on the face of the statement of financial position if the company in previous years only split the amount of equity between "share capital" (i.e. nominal value of shares issued) and "other reserves" (i.e. share premium plus retained earnings etc.). This is to minimize the risk of confusion or misunderstanding when comparing the current year amount of "share capital" to the previous period.

For example, the company could take the following approach:

(a)	the comparative amounts of "other reserves" could be broken-down between "statutory reserves" (i.e. share premium account and capital redemption reserve) and "non-statutory reserves" (i.e. those reserves which will continue to be presented outside of share capital even on orafter 3 March 2014), and
(b)	the company could then include a sub-total within equity on the face of the statement of financial position of "share capital plus other statutory reserves" which would be comparable to the new concept of "share capital" under the no-par regime.

Additional explanation in the notes to the financial statements highlighting the impact of the new CO on share capital would also be useful.

This approach is illustrated below:

(Note: The abolition of par value applies to all classes of share capital (ordinary, preference, deferred etc). However, to keep the illustration simple it only deals with ordinary shares.)

[Extract from consolidated statement of financial position:]

[Extract from consolidated statement of changes in equity]

[Extract from notes to the financial statements:]

Share capital

(a)

Authorised and issued share capital

Note (i): Under the Hong Kong Companies Ordinance (Cap. 622), which commenced operation on 3 March 2014, the concept of authorised share capital no longer exists.

[Note to preparer: consider adding further disclosure if the number of shares that the company may issue is constrained in other ways, such as through the company’s articles of association]

Note (ii): In accordance with section 135 of the Hong Kong Companies Ordinance (Cap. 622), the company’s shares no longer have a par or nominal value with effect from 3 March 2014. There is no impact on the number of shares in issue or the relative entitlement of any of the members as a result of this transition.

Note (iii): In accordance with the transitional provisions set out in section 37 of Schedule 11 to Hong Kong Companies Ordinance (Cap. 622), on 3 March 2014 any amount standing to the credit of the share premium account has become part of the company’s share capital.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company. All ordinary shares rank equally with regard to the company’s residual assets.

(b)

Nature and purpose of reserves

(i)

Share premium

Prior to 3 March 2014, the application of the share premium account was governed by sections 48B the predecessor Hong Kong Companies Ordinance (Cap. 32). In accordance with the transitional provisions set out in section 37 of Schedule 11 to the Hong Kong Companies Ordinance (Cap. 622), on 3 March 2014 any amount standing to the credit of the share premium account has become part of the company’s share capital (see note 33(a)). The use of share capital as from 3 March 2014 is governed by section 149 of the Hong Kong Companies Ordinance (Cap. 622).

(ii)

(c)

Dividends

...

(d)

Shares issued under share option scheme

On 1 February 2014, options were exercised to subscribe for 1,000,000 ordinary shares in the company at a consideration of $6,000,000 of which $1,000,000 was credited to share capital and the balance of $5,000,000 was credited to the share premium account in accordance with section 48B of the predecessor Hong Kong Companies Ordinance (Cap.32). $400,000 was transferred from the capital reserve to the share premium account in accordance with policy set out in note 1(w)(iii).

Part C – Disclosures in annual reports for financial years beginning on or after 3 March 2014 (e.g. financial year ending on 31 March 2015, 30 June 2015 or 31 December 2015)

Last revision date: 15 July 2014

Q7.

Question C1 – Comparative information in financial statements for an entity's first financial year beginning on or after 3 March 2014

An entity's first financial year beginning on or after 3 March 2014 will be the first financial year for which the requirements of sections 380 and 383 will be effective. For example, this will be the first financial year for which disclosures under Schedule 4 and the Companies (Disclosure of Information about Benefits of Directors) Regulation (Cap. 622G) ("the Directors' Benefits Regulation") will be required, instead of those under the 10th Schedule to, and section 161 of, the predecessor Ordinance (Cap. 32). What information should be disclosed in the financial statements for this financial year ("current financial year") as comparative information for these requirements?

Answer

Section 9(2) of the Directors' Benefits Regulation provides that if an amount is shown for a financial year in the notes to the financial statements for that year in relation to the information prescribed by Part 2 of the Regulation, the corresponding amount for the immediate preceding financial year must also be shown in the notes. This is similar to section 161A(1) of the predecessor Companies Ordinance (Cap. 32).

The following amounts are prescribed by Part 2 of the Regulation:

(a)	the aggregate amount of directors' emoluments prescribed by section 4;
(b)	the aggregate amount of directors' retirement benefits prescribed by section 5;
(c)	the aggregate amount of payment for loss of office of directors prescribed by section 6;
(d)	the aggregate amount of consideration for making available directors' services prescribed by section 7.

Consequently, if the company discloses any of these amounts in the notes to the financial statements for the year ended, for example 31 December 2015, the company is required also to disclose the corresponding amount for the year ended 31 December 2014.

Except for the above requirement, the new CO does not contain any additional transitional requirements in this respect, nor does it specify that comparative information needs to be disclosed in respect of the disclosures required by section 380 and 383. Instead this matter falls within the general requirement in section 380(4)(b) for the financial statements to comply with the applicable accounting standards. Section 4(b) of Schedule 4 also requires the financial statements for a financial year must state, if they have not been so prepared, the particulars of, and the reasons for, any material departure from those standards.

In this regard, paragraph 38 of HKAS 1 states that as a minimum an entity shall present comparative information in respect of the preceding period for all amounts reported in the current period's financial statements. Paragraph 38 of HKAS 1 also states that an entity shall include comparative information for narrative and descriptive information that is relevant to understanding the current financial year's financial statements. This indicates that a company's directors may use judgment when deciding whether to continue to disclose information required by the predecessor CO that was included in the financial statements for the preceding financial year, when such information is no longer specifically required by the new CO in the financial statements for the current financial year (for example, the disclosures under the 10th Schedule to the predecessor CO).

Part D – SME-FRF & SME-FRS

Last revision date: 15 July 2014

Q8.	Question D1 – Eligibility: End of financial year Is the end date of a financial year relevant when determining whether the company is eligible to use the SME-FRF & SME-FRS (Revised 2014)?

Answer

No. The effective date of the SME-FRF & SME-FRS (Revised 2014) is aligned with the effective date of Part 9. Consequently, these standards are effective for a qualifying company's financial statements that cover a financial year beginning on or after 3 March 2014. Earlier application is not permitted.

Part E – Referencing to the CO in the auditor's report

Last revision date: 30 September 2014

Q9.

Question E1 – For financial years ended before 3 March 2014 but auditor's report dated on or after that date

How should an auditor make reference to the predecessor CO (Cap.32) in their auditor's report on financial statements for financial years ended before 3 March 2014 (e.g. a financial year ended 31 December 2013, 31 January 2014 or 28 February 2014), when the auditor's report is dated on or after 3 March 2014?

Answer

Transitional and savings provisions set out in paragraph 80 of Schedule 11 apply to financial years which both begin before 3 March 2014 and end on or after 3 March 2014. Given this, it is acceptable for an auditor's report dated on or after 3 March 2014 on financial statements for financial years ended before 3 March 2014 (for example: the financial year ended 31 December 2013, 31 January 2014 or 28 February 2014) to make no reference to the new CO. Audit reports may continue to refer to the predecessor CO , as was in force throughout the financial year in question, as the "Hong Kong Companies Ordinance" for audit reports issued under HKSA 700 (Clarified) and refer to "section 141D of the Hong Kong Companies Ordinance" for reports issued with reference to PN900 (Clarified) "Audit of Financial Statements Prepared in Accordance with the Small and Medium-sized Entity Financial Reporting Standard".

Auditors may alternatively choose to refer in their reports to the "predecessor Hong Kong Companies Ordinance (Cap. 32)" for the avoidance of doubt. This alternative practice is equally acceptable provided the date of the auditor's report itself is on or after the commencement date of the new CO (i.e. 3 March 2014).

Consequently, the opinion paragraph in Illustration 1 of HKSA 700 (Clarified) "Forming an Opinion and Reporting on Financial Statements" can read as follows:

"In our opinion, the financial statements give a true and fair view of the state of the Company's affairs as at 31 December 20X1, and of its [profit][loss] and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the [Hong Kong Companies Ordinance/predecessor Hong Kong Companies Ordinance (Cap. 32)]*."
* Delete as appropriate

Q10.

Question E2 (Updated 30 September 2014) – For financial years ended on or after 3 March 2014 but before 3 March 2015 ("cross over periods") (e.g. financial year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)

How should an auditor make reference to the Companies Ordinance ("CO") in their auditor's report on financial statements for cross over periods ended on or after 3 March 2014 but before 3 March 2015 (e.g. year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)?

Answer

I.	*If the auditor's report usually only refers to "Companies Ordinance" (and not a specific section reference)*
	The auditors may regard this as a generic reference and leave it unchanged (i.e. not using the word "predecessor" either).

II.	*If the auditor's report referred to section 141 in previous years*
	As section 141 of the predecessor CO (Cap. 32) was repealed with effect from 3 March 2014, it is therefore incorrect to simply continue referring to "section 141 of the Companies Ordinance" in a report for a cross over period that ended on or after 3 March 2014 but before 3 March 2015. This means that any audit report that would have referred to section 141 explicitly needs to be reworded if covering a cross over period. For example, the auditor should refer to section 80 of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622) in their auditor's report, because section 141 of the predecessor CO only continues to have life through that section. Consequently, the first paragraph of the "auditor's responsibility" section can read as follows: "Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to you, as a body, in accordance with section 141 section 80 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report."

III.	*If the auditor's report referred to section 141D in previous years*
	Applying the same rationale as mentioned in II. above and with reference to the specific requirements, any auditor's report that would have referred to section 141D explicitly needs to be reworded if covering a cross over period. For example, the auditor should refer to section 77 of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622) in their auditor's report, because section 141D of the predecessor CO only continues to have life through that section. Consequently, the relevant paragraphs and title in the auditor's report can read as follows: second paragraph of the "directors' responsibility for the financial statements" section "In addition, section 77 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to section 141D of the predecessor Hong Kong Companies Ordinance (Cap.32) requires that the balance sheet together with the notes thereon should be prepared in accordance with the requirements of section 77 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to the Eleventh Schedule to that the predecessor Hong Kong Companies Ordinance (Cap.32)." first paragraph of the "auditor's responsibility" section: "Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to you, as a body, in accordance with section 141D section 77 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to section 141D of the predecessor Hong Kong Companies Ordinance (Cap.32) and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report." Title for reporting on other matters under section 141D of the Hong Kong Companies Ordinance "Report on other matters under section 77 of Schedule 11 to the Hong Kong Companies Ordinance (Cap. 622) with reference to section 141D of the predecessor Hong Kong Companies Ordinance (Cap. 32)"

IV.	*If the modified auditor's report refer to sections 141(4) and 141(6)*
	An auditor is required to report by exception on matters stated in sections 141(4) and 141(6) of the predecessor CO. As mentioned in II. above and with reference to the specific requirements, any audit report that would have referred to sections 141(4) and (6) explicitly needs to be reworded if covering a cross over period. For example, the auditor should refer to section 80(1) of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622) in their auditor's report, because sections 141(4) and (6) of the predecessor CO only continue to have life through that section. In addition, the auditor should also refer to the specific sections of 141(4) and (6) of the predecessor CO in their auditor's report for which the auditor specifically reports on. Consequently, the title for this reporting in the auditor's report can read as follows: "Report on matters under section 80(1) of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to sections 141(4) and 141(6) of the predecessor Hong Kong Companies Ordinance (Cap.32)"

Q11.

Question E3 – For financial years ended on or after 3 March 2014 but before 3 March 2015 ("cross over periods") (e.g. financial year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)

How should an auditor make reference to the CO in their auditor's report on the summary financial statements for cross over periods ended on or after 3 March 2014 but before 3 March 2015 (e.g. year ended on 31 March 2014, year ending on 30 June 2014 or 31 December 2014 or 28 February 2015)?

Answer

Section 141CF(1) of the predecessor CO (Cap. 32) and section 5 of the predecessor Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation (Cap.32M) ("Regulation") were repealed effective from 3 March 2014. It is therefore incorrect to simply continue referring to these two sections in a report for a cross over period that ended on or after 3 March 2014 but before 3 March 2015. This means that any audit report that would have referred to them explicitly needs to be reworded if covering a cross-over period.

For example, the auditor should refer to section 83 of Schedule 11 to the new Hong Kong Companies Ordinance (Cap. 622) in their auditor's report, because both section 141CF of the predecessor CO and the predecessor Regulation only continue to have life through that section. In addition, the auditor should also refer to the specific sections of 141CF(1) of the predecessor CO and section 5 of the predecessor Regulation in their auditor's report for which the summary financial report specifically complies with.

Consequently, the paragraph under the "directors' responsibility" section can read as follows:

"Under the Hong Kong Companies Ordinance, the directors are responsible for the preparation of a summary financial report in accordance with section 83 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to section 141CF(1) of the predecessor Hong Kong Companies Ordinance (Cap.32) (referred to as "section 141CF(1) of the Hong Kong Companies Ordinance" thereafter). In preparing the summary financial report, section 141CF(1) of the Hong Kong Companies Ordinance requires that the summary financial report be derived from the annual financial statements and the auditor’s report thereon and the directors' report for the year ended 31 December 20X1, be in such form and contain such information and particulars as specified in section 83 of Schedule 11 to the Hong Kong Companies Ordinance (Cap.622), with reference to section 5 of the Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation (Cap.32M) (referred to as "section 5 of the Hong Kong Companies (Summary Financial Reports of Listed Companies) Regulation" thereafter), and be approved by the board of directors "

There is no change to the wording in the "Opinion" paragraph.

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Financial reporting issues

Questions and Answers on financial reporting issues relating to the transition from the predecessor Companies Ordinance (Cap. 32) to the new Companies Ordinance (Cap. 622) ("new CO")