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Techwatch 206

12/16/2019


Local updates

Auditing and Assurance Standards Committee minutes

Minutes of the 378th meeting are now available.

Financial Reporting Standards Committee minutes

Minutes of the 252nd meeting are now available.

Members’ handbook update no. 234

Members’ handbook update no. 234 relates to the issuance of amendments to Hong Kong Accounting Standard 39 Financial Instruments: Recognition and Measurement, Hong Kong Financial Reporting Standard (HKFRS) 7 Financial Instruments: Disclosures, and HKFRS 9 Financial Instruments. The amendments modify some specific hedge accounting requirements to provide relief from potential effects of the uncertainties caused by the interest rate benchmark reform. In addition, the amendments require companies to provide additional information to investors about their hedging relationships which are directly affectedby these uncertainties. The amendments are effective for annual periods beginning on or after 1 January 2020. Early application is permitted.

Institute submissions

The Institute commented on:

  • International Accounting Standards Board (IASB) Exposure Draft ED/2019/05 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Proposed amendments to International Accounting Standard 12).
  • IASB Exposure Draft ED/2019/06 Disclosure of Accounting Policies.

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.

Ethics survey

The Institute’s Ethics Committee is conducting a survey to understand the ethical attitudes of professional accountants in Hong Kong and the impact of the Institute’s Code of Ethics for Professional Accountants. Details can be found on the Institute’s website.

International updates

Audit and assurance

  • International Auditing and Assurance Standards Board International Standard on Auditing (ISA) 540 (Revised) Implementation Support: Audit Client Briefing.
  • International Federation of Accountants (IFAC) Panel Discussions on Implementation of ISA 540 (Revised) Accounting Estimates.

Ethics

  • IESBA Code of Ethics high level summary of prohibitions applicable to audits of public interest entities.
  • IFAC publication Exploring the IESBA Code: First Installment.

IFRS updates

  • November2019IASBupdateand podcast.
  • International Financial Reporting Standard (IFRS) 17 Insurance Contracts podcast covering the November 2019 Board meeting.
  • The IFRS Foundation published a Guide to Selecting and Applying Accounting Policies – IAS 8, which includes a three-step process with illustrative examples to help companies develop their accounting policies when preparing IFRS financial statements.

Professional accountants in business

Professional Development Framework for PAIBs

The Institute’s Professional Accountants in Business (PAIB) Committee has recently published a Professional Development Framework for PAIBs, which aims to provide a useful and accessible guide to the competencies necessary for PAIBs to perform both their current and desired roles.

The framework can help PAIBs shape their careers, realize their objectives and take control of their learning to achieve their goals. It can also be used by employers and company boards to help evaluate their finance functions and ensure they are future ready with the right mix of skills.

To learn more, read the article How to make use of the Institute's Professional Development Framework for PAIBs in A Plus November 2019 issue.

Understanding and Communicating Value Creation

The PAIB Committee of the IFAC has recently released a report, which highlights takeaways from the September 2019 PAIB Committee meeting, and outlines key priorities for accountants in business.

The report specifically focuses on:

  • Integrated value creation;
  • The value of data;
  • Action on the sustainable development goals;
  • Opportunities and challenges for accountants in small- and medium-sized entities; and
  • Professional ethics.

New SFC guidance addresses market misconduct

On 21 November, the Securities and Futures Commission (SFC) issued a statement to remind listed companies about their disclosure obligations together with a circular on the conduct expected of asset managers.

The SFC emphasized the importance for listed companies to ensure that their announcements and other documents do not include false, incomplete or misleading information about their counterparties in pending corporate transactions. In some cases, the SFC observed that insufficient information was provided about counterparties' controllers or beneficial owners. The statement also sets out non-exhaustive examples of circumstances (see below) where the identities of the actual controllers or beneficial owners of a counterparty to a transaction may be required:

  • Acquisitions, disposals, capital injections, and formation of joint ventures.
  • Money lending.
  • Issuance of shares, convertible bonds and options.
  • Private funds and similar arrangements.

Corporate finance

SFC adopts new approach to virtual asset trading platforms

The SFC issued a position paper on 6 November, setting out a new regulatory framework for virtual asset trading platforms. In particular, platforms which operate in Hong Kong and offer trading of at least one security token can apply to be licensed by the SFC.

According to the position paper, licences will be granted by the SFC only to platform operators meeting robust regulatory standards, which are comparable to those which apply to licensed securities brokers and automated trading venues. Additional requirements are also imposed to address specific risks associated with virtual assets.

Please refer to the press release for details.

Taxation

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

  • Conditional waiver of surcharges for settlement of 2018/19 tax bill by installments (see also the government press release on the latest relief measures).
  • Comprehensive avoidance of double taxation arrangement between Hong Kong and Macau.
  • Reply to question on Legislative Council regarding enhanced tax deduction for research and development expenditures.
  • Tax guide for charitable institutions and trusts of a public character (Chinese version).
  • Passage of Inland Revenue (Amendment) (Tax Concessions) Bill 2019.
  • Stamp duty statistics (October 2019).

Annual meeting with the IRD – 2019

The minutes of the 2019 annual meeting (as well previous years’ meeting minutes) between representatives of the Institute and the commissioner and other senior officers of the Inland Revenue Department (IRD) are now available on the Institute’s website.

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 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. Member practices may also find the Financial Action Task Force’s 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 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 206 here