Your fortnightly technical updates newsletter (11 November 2020)

Members' Handbook

Update No. 249 relates to the publication of Interest Rate Benchmark Reform – Phase 2, which amends HKAS 39 Financial Instruments: Recognition and Measurement, HKFRS 4 Insurance Contracts, HKFRS 7 Financial Instruments: Disclosures, HKFRS 9 Financial Instruments and HKFRS 16 Leases.

Update No. 250 relates to the withdrawal of standards and interpretations which have been superseded by the issuance of new standards.

Standard setting

Webinars on COVID-19 related financial reporting issues for 2020 reporting periods

The Institute is holding a series of webinars to highlight key financial reporting implications of COVID-19:

20 November. Accounting considerations for HKAS 36 Impairment of Assets
11 December. Expected credit losses accounting considerations under HKFRS 9 Financial Instruments
14 December. Application issues of HKFRS 16 Leases and recent amendments to HKFRS 16
16 December. COVID-19 related and common practical issues

Virtual Conference: Annual Accounting Update 2020: The “New Normal” Financial Reporting

The Institute is holding a virtual conference on 28 November to provide an overview of major standard setting projects in progress, financial reporting issues for the 2020 period end, and common misconceptions and application issues on HKFRS 15 Revenue from Contracts with Customers and HKFRS 16. Other developments on amendments to HKAS 1 Presentation of Financial Statements and HKFRS 3 Business Combinations will also be discussed.

Discussion Paper Business Combinations - Disclosures, Goodwill and Impairment

Members may be interested in the following recordings concerning the International Accounting Standards Board’s (IASB) Discussion Paper DP/2020/1 Business Combinations – Disclosures, Goodwill and Impairment, which sets out possible improvements to the information companies report about acquisition and to the accounting for goodwill. Members can submit their comments on the paper by 14 November.

Recordings are now available for two discussions on the paper:

IASB second webinar on the paper, covering improving disclosures about acquisitions
IASB and European Accounting Association virtual research workshop, providing an overview of the paper and discussing academic evidence

Recording of the IASB research forum

A recording is now available for the 2020 IASB Research Forum held by the IASB and the Accounting and Business Research discussing some of the latest accounting research relevant to the IASB’s work. Topics included the accounting for intangible assets, the impact of IFRS 11 Joint Arrangements on the comparability of accounting information, and capital transition arrangements adoption and its effect on bank systematic risk under IFRS 9 Financial Instruments.

IASB October 2020 podcast and update

The October podcast, focusing on the IASB discussions at its monthly meeting, and the October Update newsletter, highlighting the tentative decisions reached at that meeting, are now available.

Webinar on PN 820 (Revised) The Audit of Licensed Corporations and Associated Entities of Intermediaries

In October 2020, the Institute issued an exposure draft for PN 820 (Revised) to put more emphasis on risk assessment and based on that to provide additional guidance on how risk assessment should drive the extent of audit work for licensed corporations. This webinar on 1 December will provide an overview of the revised PN and explain the rationale for the revisions made. The speakers will also share some examples of challenges encountered by auditors of licensed corporations.

Institute’s roundtable discussion on the IAASB Discussion Paper Fraud and Going Concern in an Audit of Financial Statements

Join the Institute’s roundtable discussion on 20 November to share your views on the International Auditing and Assurance Standards Board (IAASB) Discussion Paper Fraud and Going Concern in an Audit of Financial Statements: Exploring the Differences Between Public Perceptions About the Role of the Auditor and the Auditor’s Responsibilities in a Financial Statement Audit. Members can submit their comments on the discussion paper by 11 December.

Invitation to comment

The Institute is seeking comments on:

Exposure Draft Practice Note 820 (Revised) The Audit of Licensed Corporations and Associated Entities of Intermediaries by 30 November.
Exposure Draft Technical Bulletin AATB 5 Environmental, Social and Governance (ESG) Assurance Reporting by 2 December.
The IAASB Discussion Paper Fraud and Going Concern in an Audit of Financial Statements: Exploring the Differences Between Public Perceptions About the Role of the Auditor and the Auditor’s responsibilities in a Financial Statement Audit by 11 December.

IAASB issues communique on plans to address complexity, understandability, scalability, proportionally

The communique details the IAASB’s efforts to balance the needs of all its stakeholders by developing a separate standard focused on less complex entities while simultaneously addressing complexity, understandability, scalability and proportionality in the International Standards on Auditing more broadly.

The role of auditors in company-prepared cybersecurity information

A publication by the Center for Audit Quality discusses the role auditors play in cybersecurity as it relates to the audit of the financial statements and how the auditor’s role in cybersecurity could evolve beyond the financial statements to better meet the evolving needs of investors, senior management, boards of directors, and other pertinent stakeholders.

Auditing of revenue recognition

An article by Journal of Accountancy discusses tips for successful auditing of revenue recognition.

IESBA extends closing dates to surveys on key ethical questions arising from technological developments

The International Ethics Standards Board for Accountants (IESBA) is carrying out two online surveys seeking stakeholder feedback on key recommendations raised in the Technology Working Group Phase 1 Final Report and has extended the closing dates for responses to 25 November:

Webinars and keynote speech on Sustainability Reporting

The IFRS Foundation Trustees will hold live webinars on 17 November to discuss their Consultation Paper on Sustainability Reporting. The Institute is seeking comments on the paper by 30 November.

IFRS Foundation Trustee Chair Erkki Liikanen introduces the consultation paper in a recent keynote speech at the United Nations Conference on Trade and Development’s Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting.

Advocacy and practice development

Consultation conclusions on corporate WVR beneficiaries

On 30 October, the Stock Exchange of Hong Kong Limited (HKEX) issued consultation conclusions on its proposals to extend the current weighted voting rights (WVR) regime. See the press release.

After considering the feedback from respondents, for the time being, HKEX has decided not to implement the new proposals to permit primary listing of companies with corporate WVR structures, while secondary listings of such companies may be allowed, subject to specific conditions. HKEX explained that they will give more time for the market to develop a better understanding of Hong Kong’s approach towards regulating listed companies with WVR structures and their controllers, and for regulators to ensure that the existing Chapter 8A regime operates as intended, which will help to inform any future amendments.

The Institute issued a response to the original consultation paper in May.

Invitation to comment

The Securities and Futures Commission (SFC) has launched a consultation on the proposed requirements for fund managers to take climate-related risks into consideration in their investment and risk management processes, and make appropriate disclosures, to meet investors’ growing demands for climate risk information and to combat “greenwashing”. The deadline for submission to the SFC is 15 January 2021. Please refer to the press release for details.

Announcements by the Inland Revenue Department

Members may wish to be aware of the following matters:

FATF’s publication on high-risk and other monitored jurisdictions and counter proliferation financing

The Financial Action Task Force (FATF) held its plenary in October, publishing three statements that may be of interest to members.

The FATF decided to pause the review process for the list of high-risk jurisdictions subject to a call for action. Reference should continue to be made to the previously issued list adopted in February.
The FATF gave the option for jurisdictions under increased monitoring to not report at the meeting given their focus on addressing the impact of the COVID-19 pandemic. Nonetheless, seven jurisdictions chose to report.
Finally, the FATF issued a public statement on counter proliferation financing, strengthening the global response to Weapons of Mass Destruction (WMD) proliferation financing. The FATF will also develop guidance to assist countries and the private sector in assessing and mitigating the proliferation financing risk.

Invitation by FSTB to comment on enhancing AML/ CTF regulation in Hong Kong

The Financial Services and the Treasury Bureau (FSTB) has launched a consultation on legislative proposals to enhance anti-money laundering and counter-terrorist financing (AML/ CTF) regulation in Hong Kong. The deadline for submission of responses to FSTB is 31 January 2021. Please refer to the press release for details.

AML notices

The list of individuals and entities under the United Nations Sanctions (Democratic Republic of the Congo) Regulation 2019 (Cap. 537CJ) was updated on 3 November. See the related United Nations Security Council press release.

For the current lists of terrorists, terrorist associates and relevant persons/ entities under United Nations 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:

Accountancy skills evolution: Impact of COVID-19 & the path forward by IFAC
Ethics in action: Is this a bribe? from Financial Management
Good leadership is an act of kindness from Harvard Business School
Here's how to fix what's sapping your team's energy from Fast Company
How to worry more mindfully from The New York Times
Developing a strategic audit plan from Journal of Accountancy

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