Your fortnightly technical updates newsletter (10 June 2020)

Member's Handbook

Update No. 238 contains:

• Amendments to Chapter A, Part 4B of the Code of Ethics for Professional Accountants to conform with the corresponding revisions to the International Ethics Standard Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants  (Including Independence Standards) on terms and concepts used in ISAE 3000 (Revised) Assurance Engagements Other Than Audits or Reviews of Historical; and
• Revisions to HKSIR 500 Reporting on Profit Forecasts, Statements of Sufficiency Working Capital and Statements of Indebtedness to conform to the latest regulatory and financial reporting requirements.

Update No. 239 contains an amendment to HKFRS 16 Leases that provides a practical exemption for lessees for rent concessions occurring as a direct consequence of the COVID-19 pandemic.

Standard setting

IASB webinar in Putonghua on Exposure Draft General Presentation and Disclosures

On 17 June, staff from the International Accounting Standards Board (IASB) will hold the second in a series of live webinars in Putonghua on Exposure Draft ED/2019/7 General Presentation and Disclosures to explain the detailed proposals for subtotals and categories in the statement of profit and loss. Members can also submit their comments on the proposals by 21 August.

Institute’s comments on two IASB exposure drafts

The Institute has submitted comments on:

• Exposure Draft ED/2020/1 Interest Rate Benchmark Reform – Phase 2 (Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
• Exposure Draft ED/2020/3 Classification of Liabilities as Current or Non-current—Deferral of Effective Date: Proposed amendment to IAS 1

Illustrative examples on COVID-19-related rent concessions

The Institute has published examples on rent concessions to illustrate the application of the amendment to HKFRS 16 Leases to common rent concession fact patterns observed in Hong Kong during the COVID-19 pandemic.

Educational guidance for COVID-19 financial reporting issues

The Institute has published educational guidance highlighting key COVID-19-related financial reporting considerations for 2020 financial reporting periods.

Summary of COVID-19 financial reporting considerations 

The International Federation of Accountants’ (IFAC) webpage summarizes key financial reporting challenges and implications from COVID-19, and highlights various relevant resources available that can assist with some of the financial reporting challenges and issues.

IASB Investor Update Issue 20

Issue 20 of Investor Update, highlighting recently introduced IFRS standards, events and publications of interest to investors, is now available.

Investor education webcast on understanding estimated credit loss information

In this webcast for investors, the staff of the IASB use illustrative examples to explain expected credit loss recognition, measurement model, and related disclosures that entities prepare under IFRS 9 Financial Instruments and IFRS 7 Financial Statements: Disclosures.

May IASB podcast

This monthly podcast focuses on the IASB’s discussions on the amendment to IFRS 16 Leases at its supplemental meeting and discussions at its regular May meeting.

Webinars to address practical audit quality considerations 

The IFAC’s webinars on 9, 16 and 23 July will focus on practical audit quality considerations in the pandemic environment.

Invitation to comment

The Institute is seeking comments on the International Auditing and Assurance Board (IAASB) Exposure Draft ISA 600 (Revised) Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors) and Proposed Conforming and Consequential Amendments to Other ISAs by 14 August.

Revisions to Auditing and Assurance Technical Bulletin

The Institute has revised AATB 3 Implementation Guidance on Revised Hong Kong Standard on Investment Circular Reporting Engagements (HKSIR) 400 Comfort Letters and Due Diligence Meetings to provide guidance to reporting accountants when providing change period comfort where there are changes in accounting policies during the change period.

IAASB’s implementation support on ISA 540 (Revised)

The IAASB’s illustrative examples for auditing accounting estimates illustrate a selection of requirements from ISA 540 (Revised) Auditing Accounting Estimates and Disclosures which may be scaled down or scaled up when auditing simple or complex accounting estimates.

Summary of COVID-19 audit considerations

The IFAC webpage summarizes key audit challenges and implications from COVID-19, and highlights various general resources available that can assist with some of the audit challenges and issues.

Global messaging to inform conversations with key stakeholders related to COVID-19

These messages highlight how the profession is working to address challenges for companies and their auditors during crisis and into recovery, which will assist professional accountancy organizations in their stakeholder dialogue.

Audits involving cryptoassets

The Public Company Accounting Oversight Board document discusses some of the issues auditors and audit committees should consider about audits involving cryptoassets, such as Bitcoin and other digital currencies.

The Institute’s submission

The Institute commented on the following IESBA Exposure Drafts:

• Proposed Revisions to the Non-Assurance Services Provisions of the Code; and
• Proposed Revisions to the Fee-Related Provisions of the Code

IFAC Exploring the IESBA Code 6: Conflict of interest

Professional accountants are required to properly manage conflicts of interest that arise. This sixth instalment of Exploring the IESBA Code highlights key aspects of the Code’s Conceptual Framework to deal with conflicts of interest. 

Advocacy and practice development

The SFC has just published Consultation Paper on Proposed Amendments to the Code on Real Estate Investment Trusts. This proposes a number of enhancements to the code, which aim to strike a balance between facilitating market development and competitiveness on the one hand, and ensuring the protection of investors' interests and market integrity on the other. The deadline for responding is 10 August.

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

• Legislative Council question on taxation mechanism for demand-side management measures for the property market
• Tax returns for individuals issued
• Tax information – Tax exemptions in respect of relief measures under the Anti-epidemic Fund
• Alert regarding fraudulent website
• Interest on Tax Reserve Certificates
• Stamp Duty statistics

Further exemptions from compulsory quarantine under Cap. 599C

The government announced on 8 June that directors or executives of certain companies listed on the Stock Exchange of Hong Kong who can meet the eligibility criteria may apply for exemption from the compulsory quarantine arrangement when they arrive at Hong Kong from the Mainland, subject to a pre-determined quota. 

Anti-money laundering notices

For the current lists of terrorists, terrorist associates and relevant persons/ entities under UN sanctions, members should refer regularly to the Institute's AML webpage. Other useful documents and guidance can also be found on the same page.

Useful resources

Publications from other organizations:

• As digitalization takes hold, here’s how PAOs can support small practices by the IFAC Small and Medium Practices Committee
• The changing nature of audit evidence arising from COVID-19 by CPA Canada
• Supporting businesses in financial distress to avoid insolvency during the COVID-19 crisis by the OECD
• The technology – and human – lessons of COVID-19 by the Journal of Accountancy
• IFAC COVID-19 resource center by IFAC

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