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TechWatch 205

11/29/2019


Local updates

Auditing and Assurance Standards Committee minutes
Minutes of the 377th meeting are now available.

Members’ handbook update no. 233
Update no. 233 contains amendments to Statement 1.500 Continuing Professional Development (Revised October 2019) as a result of the International Education Standard 7 Continuing Professional Development (Revised) issued in December 2018.

Institute submission
The Institute commented on the International Ethics Standards Board for Accountants (IESBA) exposure draft Proposed Revisions to the Code to Promote the Role and Mindset Expected of Professional Accountants.

Institute 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.

Publication on common control combinations
The Institute has published Common Control Combinations – How They Were Reported in Hong Kong. The study documents how business combinations under common control (BCUCC) were reported by Hong Kong-listed companies and whether the accounting method used was influenced by specific characteristics of the combinations. The study also analyses when and how companies applied the predecessor method to a BCUCC and what information was disclosed.

ICAC ethics resources for accounting professionals
Independent Commission Against Corruption (ICAC) ethics resources for accounting professionals are now available.

International updates

Audit and assurance

  • International Auditing and Assurance Standards Board (IAASB) publication on professional scepticism.
  • IAASB September meeting highlights and podcast.
  • International Federation of Accountants (IFAC) article Audit Quality in a Multidisciplinary Firm.

Ethics

  • IESBA webinar explaining the newly effective code of ethics.
  • IESBA September meeting highlights and podcast.
  • IFAC article Case Studies on Compliance with the IESBA Code of Ethics.

IFRS updates

  • October 2019 International Accounting Standards Board update and podcast.
  • The IFRS Interpretations Committee has published its first biannual Compilation of Agenda Decisions which brings together agenda decisions from January to September. The committee publishes agenda decisions when, following consultation, it decides further standard-setting is not required to deal with a question raised, for example if existing International Financial Reporting Standards (IFRS) requirements are adequate to answer the question.
  • The IFRS foundation held the 2019 IASB Research Forum to discuss some of the latest accounting research that is relevant to the IASB’s work. Academics, practitioners, standard-setters and regulators participated in the forum, and topics covered include earnings management under principles-based/ rules-based accounting standards, impact of IFRS 10 on consolidated financial reporting, and capitalization of intangibles assets by firms in Japan that adopt IFRS standards.

Corporate finance

HKEX enhances guidance for overseas companies seeking to list in Hong Kong 

On 29 October, Hong Kong Exchanges and Clearing Limited (HKEX) published enhancements to guidance materials for overseas companies seeking to list in Hong Kong, with a view to facilitate the listing application process for these overseas issuers. In particular, the HKEX has:

  • Formulated alternative procedures for United States “Domestic Issuers” within the meaning of the U.S. Securities Act with an offering of a security subject to Regulation S.
  • Published a standardized template for first movers from jurisdictions new to listing in Hong Kong.
  • Simplified Central Clearing and Settlement System (CCASS) related information, provided Frequently Asked Questions and revised CCASS admissions forms on HKEX website.

In particular, in accordance with the Joint Policy Statement regarding the Listing of Overseas Companies issued by the Securities and Futures Commission (SFC) and HKEX, applicants from overseas, incorporated in jurisdictions that have not been accepted for listing in Hong Kong, must prove that their domestic laws, rules and regulations, among others, meet the key shareholder protection standards, at least equivalent to those provided in Hong Kong. Accordingly, HKEX has published a standardized template for these issuers to understand the key shareholder protection standards of Hong Kong and check whether the equivalent standards of their home jurisdictions have reached those applied in Hong Kong.

Please refer to the press release for details.

SFC concludes Consultation on the Enhanced Investor Compensation Regime
The SFC released consultation conclusions on proposed enhancements to the Investor Compensation Regime, on 8 October. The compensation limit will be increased from HK$150,000 to HK$500,000 per investor per default and cover northbound trading under Mainland-Hong Kong Stock Connect.

The changes are expected to be effective in early 2020, subject to the legislative process.

Corporate governance

The Institute’s Best Corporate Governance Awards 2019

The Institute’s 20th annual Best Corporate Governance Awards are reaching a conclusion. The judges have reviewed the shortlisted entities and have met to decide on the final list of awardees. The results announcement and presentation ceremony will be held on 5 December. 

Taxation

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

  • Inland Revenue (Tax Concessions) Bill passed.
  • Launch of government bill payment service through Faster Payment System.
  • Interest rate increase for tax reserve certificates.
  • Country-by-Country reporting updated FAQ.
  • Acting Financial Secretary responds to “The Chief Executive’s 2019 Policy Address.”
  • Jail terms for property owners who evaded tax (see TechWatch issue 204).
  • List of qualifying debt instruments (as at 30 September 2019).
  • Stamp duty statistics (September 2019).
  • IRD Annual Report 2018-19.

Legislation and other initiatives

Anti-money laundering notices

Members should take note of the Financial Action Task Force (FATF)’s public statement regarding the Democratic People’s Republic of Korea, and its document entitled “Improving Global AML/CFT Compliance: On-going Process,” relating to 12 jurisdictions with strategic anti-money laundering and counter- financing of terrorism (AML/CFT) deficiencies.

For the current lists of terrorists, terrorist associates and relevant persons/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 UN sanctions currently in force in Hong Kong.

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. Members may also find the FATF’s Guidance for a Risk-Based Approach for the Accounting Profession to be helpful.

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 205 here