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TechWatch 183

January 2018



Members’ handbook updates

Handbook updates nos. 210 to 211

Update no. 210 relates to amendments to HKFRS 9 Financial Instruments.

Update no. 211 relates to the issuance of HKFRS 17 Insurance Contracts.

Ethics

Institute’s submission on IESBA exposure draft

The Institute submitted comments on the International Ethics Standards Board for Accountants’ Exposure Draft Proposed Revisions to the Code Pertaining to the Offering and Accepting of Inducements.

Financial reporting

HKFRS 17 Insurance Contracts

a. Letter to the IASB

The Institute wrote to the International Accounting Standards Board Chairman to share market concerns in relation to implementing HKFRS 17 Insurance Contracts by 2021. The letter also provides recommendations for the IASB to consider.

b. Letter to Hong Kong authorized insurers

The Institute wrote to authorized insurers in Hong Kong to communicate its considerations for issuing HKFRS 17.

Mergers and acquisitions: survey

Are you an institutional or retail investor, analyst, or other user of publicly listed financial statements with an interest in mergers and acquisitions? The Institute’s Standard Setting Department is conducting a survey to understand how investors/analysts view the substance of mergers and acquisitions (M&As) with third parties and M&As under common control. The deadline is 28 February.

The findings of this survey will help us consider whether all M&As should be accounted and reported in the same way. The more feedback we receive, the more useful our analysis will be. For enquiries, please contact outreachhk@hkicpa.org.hk.

Professional accountants in business

Technology opportunities for the finance function

The Association of Chartered Certified Accountants has recently published a report which explores the opportunities and challenges that technology presents for the future chief financial officer function in the face of extraordinary digital change impacting businesses.

The report shares insights from leading executives across the world on the technologies changing the face of the finance function, and examines how finance can harness the explosion in digital capabilities to help drive long-term corporate value.

Investor relations best practice guide

The Hong Kong Investor Relations Association has issued its first publication contributed by 10 investor relations (IR) professionals from leading Hong Kong-listed companies.

The guide focuses on IR practices particular to Hong Kong as well as regulations and best practice in other parts of the world. By examining the role of investor relations officers (IROs), the stakeholders etc., it also addresses some of the unique characteristics of the Hong Kong market. It takes a detailed look at the tools IROs use to communicate investment proposals and build comprehensive IR programmes, as well as providing valuable practical tips every step of the way.

Small and medium practices

Agreed-upon procedures engagements: a growth and value opportunity

The SMP Committee of the International Federation of Accountants has recently released a publication which outlines what an agreed-upon procedures engagement is, identifies the benefits to clients of offering such services, and when such engagements are appropriate. It also covers examples of financial and non-financial information agreed-upon procedures engagements and six short case studies with example procedures that might be applied.

Corporate finance

HKEX concludes on the new board concept paper and proposes way forward to expand Hong Kong’s listing regime

On 15 December, the Hong Kong Exchanges and Clearing (HKEX) published the conclusions to the New Board Concept Paper, which summarized 360 responses from a broad range of respondents representing all relevant stakeholders.

Based on the feedback received, the HKEX has determined to proceed to expand Hong Kong’s listing regime to facilitate listings of companies from emerging and innovative sectors by introducing two new chapters to the Main Board Listing Rules; as well as to modify the existing Listing Rules in relation to overseas companies (and also make consequential changes to the 2013 Joint Policy Statement) to create a new concessionary secondary listing route. Formal consultation on the proposed Rule amendments is expected to be launched in the first quarter of 2018.

HKEX publishes GEM consultation conclusions and changes to GEM and main board listing rules

On 15 December, HKEX also published the conclusions on the consultation paper on the review of the growth enterprise market (GEM) and changes to the GEM and main board listing rules.

Based on the 100 responses received, HKEX decided to implement substantially all of the proposals in the paper with listing rules amendments to reflect the new role of GEM as a market for small and mid-sized companies, effective on or after 15 February with transitional arrangements.

Guidance notes on cooperation with the SFC

On 12 December, the Securities and Futures Commission (SFC) published an updated guidance note highlighting the benefits of cooperating with the SFC in its investigations and enforcement proceedings. It replaces the previous version issued in March 2006.

The guidance note introduces new measures to encourage the types of cooperation which help the SFC investigate more serious legal or regulatory breaches and achieve timely and desirable enforcement outcomes. It also outlines the factors the SFC takes into account when assessing cooperation. In recognition of cooperation, sanctions may be reduced by an amount which varies according to when a case is resolved.

The guidance note will not apply to criminal cases. Refer also to the frequently asked questions to gain a better understanding.

New SFC compliance bulletin highlights conflicts of interest

On 19 December, the SFC published the first issue of its SFC Compliance Bulletin: Intermediaries to provide guidance to intermediaries and market practitioners on the SFC’s regulatory and supervisory priorities.

The bulletin aims to enhance communication with Managers-In-Charge of core functions of licensed corporations and highlights the importance of managing conflicts of interest in selling practices and asset management using case studies identified in the SFC’s recent on-site inspections and off-site monitoring.

SFC seeks views on proposed refinements to OTC derivatives regime and conduct requirements

On 20 December, the SFC published a consultation paper on over-the-counter (OTC) derivatives and conduct risks.

The consultation proposes to refine/ narrow the scope of certain regulated activities to provide more clarity about the OTC derivatives licensing regime. It also includes proposals related to risk mitigation, client clearing, record keeping and other conduct requirements for OTC derivatives transactions, as well as licensing fees, insurance, competence and training requirements under the new OTC derivatives licensing regime. The deadline for responding to the consultation paper is 20 February.

Taxation

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

  • Inland Revenue (Amendment) (No. 7) Bill 2017, to implement a two-tier profits tax rates regime has been introduced into the Legislative Council.
  • Inland Revenue (Amendment) (No. 6) Bill 2017 has been introduced into the Legislative Council. It aims to codify transfer pricing principles into the Inland Revenue Ordinance (Cap. 112) and implement the minimum standards of the Base Erosion and Profit Shifting action plans promulgated by the Organization for Economic Co-operation and Development.
  • Webpage relating to Country-by- Country Reporting which has been updated to set out the implementation framework provided under the Inland Revenue (Amendment) (No. 6) Bill 2017 and the voluntary filing arrangement for accounting periods beginning between 1 January 2016 and 31 December 2017.
  • A notification which reminds employers to notify IRD if they change their postal address.
  • Stamping Circular No. 01/2018 on Filing of Return of Stock Borrowing Transactions

Anti-money laundering notices

Members should note the following notices and publications in relation to anti-money laundering/combating the financing of terrorism:

  • Government notice 9942: An updated list of relevant persons and entities has been specified under the United Nations Sanctions (Democratic People’s Republic of Korea) Regulation.
  • Specially designated nationals and blocked persons list, published by the United States’ Treasury’s Office of Foreign Assets Control. More details on the Resource Centre of the Treasury.

     


Please refer to the full version of TechWatch 183