Auditing and Assurance Standards Committee minutes
Minutes of the 376th meeting are now available.
Members’ handbook update no. 232
Update no. 232 contains conforming amendments as a result of the Code of Ethics for Professional Accountants issued in November 2018, and revisions to the Insurance-related practice notes to incorporate changes arising from the Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules issued by the Insurance Authority which came into operation on 23 September.
The Institute commented on:
- International Auditing and Assurance Standards Board’s (IAASB) discussion paper on Audits of Less Complex Entities: Exploring Possible Options to Address the Challenges in Applying the International Standards of Auditing.
- International Accounting Standards Board (IASB) Exposure Draft ED 2019/4 Amendments to International Financial Reporting Standard (IFRS) 17.
Invitation to comment
The Institute is seeking comment on Exposure Draft Proposed Amendments to the Small- and Medium-sized Entity Financial Reporting Framework and Financial Reporting Standard by 31 January 2020.
International Ethics Standards Board for Accountants released a webinar on proposed changes for role and mindset expectations.
IFRS update and articles
- August 2019 IFRS for SMEs Update.
- September 2019 IFRS Interpretations Committee update and podcast.
- September 2019 IASB update.
- Proposed amendments to IFRS 17 Insurance Contracts – Nick Anderson, a member of the IASB, offers insight into the new disclosures the IASB is proposing to add to IFRS 17 Insurance Contracts, which will make it easier for insurers to explain their results in an article.
- Better information about business combinations – in its goodwill and impairment project, the IASB is investigating how companies can provide users of financial statements with better information about business combinations at a reasonable cost. It is also considering the challenging question of how to account for goodwill after a business combination. Tom Scott, a member of the IASB, discusses the IASB’s preliminary views on these matters and encourages stakeholders to respond to the IASB’s discussion paper expected to be issued around the end of 2019 in an article.
- Amendments to IFRS in response to the Interest Rate Benchmark Reform (IBOR) – the IASB has amended some of its hedge accounting requirements in its new and old financial instruments standards, IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, as well as the related standard on disclosures, IFRS 7 Financial Instruments: Disclosures to provide relief from potential effects of the uncertainty caused by the IBOR reform. The IASB has also published a project summary that provides further information on the work related to the IBOR reform.
Institute comments on proposals for codification of general waivers and principles relating to IPOs and listed issuers and minor rule amendments
The Institute issued a submission on 23 September, in response to the proposals by Hong Kong Exchanges and Clearing for codification of general waivers and principles relating to IPOs and Listed Issuers and minor rule amendments, which were reported in the September 2019 issue of TechWatch.
In particular, the Institute has been made aware of concerns expressed by members about the proposal to codify the waiver that has been granted, in certain limited cases, to companies whose company secretary does not comply with the qualification or relevant experience requirements under Rule 3.28 of the Listing Rules.
In the submission, the Institute indicates that it does not support this proposal for several reasons. Concerns raised include the following:
- The company secretary of a listed issuer has an important role and responsibilities, which include supporting the board, advising it on governance matters and facilitating directors’ professional development. He or she should have sufficient standing within the company to fulfil this role.
- Under the proposal, a waiver may be granted where the person appointed to be company secretary does not meet the requirements of Rule 3.28, where that person is assisted by someone who does comply with the rule, for the period of the waiver, which could be for up to three years. However, the Institute’s submission points out that the person assisting the company secretary might be too junior to have any significant influence with the board or management.
- Ideally, the company secretary of a listed issuer should be a qualified professional who is bound by an ethical code and is subject to a disciplinary framework. He or she should also be familiar with the regulatory and governance environment and culture in Hong Kong.
- Where the person appointed is not a qualified professional, he or she should at least be able to meet the “relevant experience” requirements of Rule 3.28 and be familiar with the Hong Kong laws and regulations specified in the rule.
- The Hong Kong market currently offers some of highest standards of corporate governance in the region. This is fundamental to investor confidence and the success of the market. We cannot afford to relax requirements in a way that could risk harming Hong Kong’s standards or reputation.
Please also refer to the Chief Executive's update issued to members on 23 September for further details.
SFC proposes to regulate trustees and custodians of public funds
On 27 September, the Securities and Futures Commission (SFC) launched a consultation on a proposal to regulate depositaries of SFC-authorized collective investment schemes (CIS).
Depositaries operating in Hong Kong would be licensed by, or registered with, the SFC for a new type of regulated activity (RA 13) and be subject to the ongoing supervision of the SFC or the Hong Kong Monetary Authority.
Depositaries refer to trustees for CIS in unit trust form, and custodians for CIS in other forms, who are at the top of the custodial chain. They have the responsibility to safeguard scheme assets and perform independent oversight of scheme operations.
Comments are requested by 31 December. Please refer to the press release for details.
Announcements by the Inland Revenue Department
Members may wish to be aware of the following matters:
- Implementation of Comprehensive Avoidance of Double Taxation Agreement (CDTA) with Cambodia and Fifth Protocol to the Mainland CDTA.
- CDTA with Estonia signed.
- Tax guide for charitable institutions and trusts of a public character.
- IRD penalty page updated.
- Transfer pricing documentation – master file and local file.
- Property owners convicted of tax evasion.
- Stamp duty statistics (August 2019).
Institute’s recent tax submissions
The Institute’s Taxation Faculty has responded to the invitation for views on the proposed profits tax concessions for the insurance industry.
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 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.
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 and terrorist financing risks and vulnerabilities in the Hong Kong market.
Please refer to the full version of TechWatch 204 here.