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TechWatch 194

12/17/2018


Meeting minutes

Financial Reporting Standards Committee minutes

Minutes of the 245th meeting is now available.

Ethics Committee minutes

Minutes of the 239th meeting is now available.

Local updates

Report on key audit matters

The Institute published the results of its study on the implementation of reporting key audit matters, effective for its second year, and the impact to users of financial reports. This report covers an analysis of 479 auditor's reports from listed companies.

Invitation to roundtable discussion on Hong Kong SME Standard

The Institute invites you to share your experience at a roundtable on 8 January 2019 about preparing or using financial reports under the Hong Kong small- and medium-sized enterprises Standard. The Institute is particularly interested in your responses to the questions in its Request for Information.

Proposed one-year deferral of IFRS 17 and what it means for Hong Kong

On 14 November, the International Accounting Standards Board (IASB) tentatively decided to propose a one-year deferral of the effective date for IFRS 17 Insurance Contracts and extend the temporary exemption for insurers to apply IFRS 9 Financial Instruments to 2022.

Following the Institute’s standard setting due process, a Hong Kong public consultation on the IASB proposals will commence as soon as the IASB exposes the proposals for comment.

The Institute strongly encourages Hong Kong insurers to respond to the Institute’s and/or the IASB’s consultation documents by writing or speaking to us. The Institute may consider hosting roundtable forums.

The Institute will deliberate whether to defer the effective date of Hong Kong’s equivalent insurance standard, HKFRS 17, once we hear the feedback of Hong Kong stakeholders including insurers and investors, and once the IASB makes its final decisions.

Notwithstanding the IASB’s tentative proposals, the Institute strongly advises insurers to continue with their implementation efforts as the proposals are not expected to fundamentally change the requirements of the standard and we hear that the additional time would be welcomed for further testings of new systems and communication to stakeholders.

Members’ handbook update Nos. 220 - 221

Update no. 220 contains PN 850 (Revised) Reporting on Flag Days and General Charitable Fund-raising Activities Covered by Public Subscription Permits issued by the Social Welfare Department.

Update no. 221 contains the revised Code of Ethics for Professional Accountants.

Invitation to comment

The Institute is seeking comments on the International Auditing and Assurance Standards Board’s Exposure Draft Proposed ISRS 4400 (Revised) Agreed-Upon Procedures Engagements by 15 February 2019.

Institute’s submission

The Institute has commented on the IAASB Exposure Draft Proposed ISA 315 (Revised) Identifying and Assessing the Risks of Material Misstatement.

International updates

Asian-Oceanian Standard-Setters Group meeting
At the Asian-Oceanian Standard-Setters Group (AOSSG) meeting on 20 and 22 November, the Institute’s standard setting team led a discussion on IFRS 15 Revenue from Contracts with Customers, where the region shared commonly seen implementation challenges, which appeared to focus on real-estate development.

The Institute’s standard setting team also led a discussion on business combinations under common control, exploring factors that could be considered to determine the appropriate accounting for such transactions. Overall, AOSSG members commented that transactions with commercial substance, which is one of the factors explored, should be accounted for in the same way regardless of whether a transaction is under common control.

AOSSG members also discussed IFRS 17 with IASB board members. One IASB board member commented that some amendments to IFRS 17 will be likely but should not stop preparers from continuing with implementations, as any amendments would not change the fundamentals of the standard.

IFRS updates

November IASB Update, workplan and Investor Update

Professional accountants in business

Data analytics: an information resource

Data analytics is a broad term that encompasses many diverse techniques and processes of drawing insights from historical data over time. Today the term is most often used to describe the analysis of large volumes of data and/or high-velocity data, which presents unique computational and data-handling challenges.

The International Federation of Accountants’ (IFAC) new resources on data analytics provides an overview of the different types of data analytics and their applications to financial reporting and audit, as well as usage in business, to uncover valuable insights.

IFAC report – perspectives on the finance function journey

The IFAC Professional Accountants in Business (PAIB) Committee has recently released a report which provides insight into finance function transformation, including opportunities and challenges facing the profession. The report also captures conversations and takeaways from the IFAC PAIB Committee meeting held in September.

Key topics covered include:

  • CFO perspectives on the finance function journey
  • The relationship between audit committees and the CFO / finance function
  • Data analytics applications in business
  • Data modeling beyond financial accounting and reporting
  • The importance of authentic communications and professional ethics to enhance trust in business and accountants
  • The latest thinking from the committee on a vision and roadmap for the future finance function

Corporate finance

SFC’s statement on regulatory framework for investing in virtual assets

The Securities and Futures Commission (SFC) published the statement on regulatory framework for virtual asset portfolio managers, fund distributors and trading platform operators on 1 November 2018.

Increasing demand in investment in virtual assets, which may also refer to “cryptocurrency,” “crypto-asset” or “digital token,” attracted the SFC’s attention, especially the significant risks associated with the investments via funds and unlicensed trading platforms. According to the existing regulations in Hong Kong, virtual assets may fall outside the scope of SFC’s oversight and investors hence may lack of any protection under the current legal regime.

The statement illustrated (i) the SFC’s regulatory approach for virtual asset portfolio managers and fund distributors; and (ii) its intention to exploring regulation of platform operators.

Corporate governance

HKEX’s review of listed issuer’s corporate governance practices and updates on ESG reporting guidance material

On 16 November, the Hong Kong Exchanges and Clearing (HKEX) published the finding of its review on examining issuers’ corporate governance disclosures as well as their level of compliance with the Corporate Governance Code and Corporate Governance Report.

The new amendments to the Corporate Governance Code and related listing rules will be effective on 1 January 2019, which are mainly related to the requirement of independent non-executive director, board diversity and nomination policies. The HKEX considered that the review can provide useful insight and guidance to listed issuers to cope with the requirement of the new code and listing rule requirements.

The HKEX has also updated its “How to prepare an ESG report?” and frequently asked questions on its environmental, social and governance (ESG)-related Listing Rules, taking into account recent international climate-related disclosure recommendations and with an emphasis on the issuer’s governance structure for ESG reporting.

A summary of the above issues is set out in the press release.

Taxation

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

  • Passage of Inland Revenue (Amendment) (No. 5) Bill 2018 to provide for the option for married persons to elect for personal assessment separately for all years of assessment commencing on or after 1 April 2018; to accelerate tax deductions for capital expenditure incurred in relation to environmental protection installations; to provide for tax exemption to cover certain debt instruments issued on or after 1 April 2018.
  • Stamp Office Interpretation and Practice Notes No. 8 (Revised) to update the interpretation of the relevant provisions in relation to different rates of ad valorem stamp duty and the practice to be followed by the Stamp Office upon the enactment of the two Amendment Ordinances.
  • Double tax agreement with India enters into force
  • Enhanced services for e-filing of employers' returns
  • Legislative Council question on easing the demand-side management measures on property
  • Stamp Duty statistics (September 2018)

Legislation and other initiatives

Anti-money laundering notices

For updates on lists of terrorists, terrorist associates and relevant persons/entities under United Nations sanctions, members should also refer to the Institute’s AML page.

ICAC’s Anti-corruption Programme – a Guide for Listed Companies and Tips for Good Environmental, Social and Governance Reporting

The Corruption Prevention Advisory Service (CPAS) unit of the Independent Commission Against Corruption (ICAC) has developed an “Anti-corruption Programme - A Guide for Listed Companies.” It aims to assist listed companies in developing and effectively implementing corporate anti-corruption programmes to prevent corruption. Tips for Good Environmental, Social and Governance Reporting was also published to supplement the guide under the anti-corruption aspect, covering the recommended core elements of a corporate anti-corruption programme that listed companies should disclose.

The CPAS is a specialized unit in the Corruption Prevention Department of the ICAC, providing free, confidential and tailor-made advice and services to private companies, organizations and individuals on corruption prevention controls in areas such as procurement, inventory control and staff administration. You may find timely and useful resources at the CPAS’s website on corruption prevention, such as corruption prevention guides and tools, case studies, quick tips as well as red flags, or by subscription to the CPAS e-news.


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