Your fortnightly technical updates newsletter (15 June 2022)

Standard setting

Last call: Live webinar on HKFRS 3 Business Combinations

Register for the live webinar on 21 June which will go through the recent revision to the definition of a business and the introduction of the optional concentration test in Hong Kong Financial Reporting Standard (HKFRS) 3. Speakers will also share with participants the differences in accounting for business combinations and asset acquisitions, as well as common application issues of HKFRS 3.

IASB May 2022 podcast & update

The International Accounting Standards Board (IASB) podcast, with its chair and executive technical director highlighting the projects discussed during its May meeting, and a summary of the May meeting, are now available.

IFRS Interpretations Committee agenda decision

The International Financial Reporting Standards (IFRS) Interpretations Committee has published its agenda decision on Principal versus Agent: Software Reseller – IFRS 15 Revenue from Contracts with Customers.

Getting ready for the Quality Management Standards

The Institute has issued an Alert reminding firms requiring to comply with the suite of quality management standards to have their systems of quality management (SOQM) designed and implemented by 15 December 2022 and evaluate their SOQM within one year of the effective date. Firms which have not yet started the preparation for the new suite of quality management standards should take immediate action now to meet the new requirements.

Visit the Institute’s New and Major Standards Resource Centre for available resources.

Balancing urgency and effectiveness in international sustainability assurance standards

This article by the International Auditing and Assurance Standards Board (IAASB) discusses the next steps to be taken for new standards for ESG assurance. The article describes the growing desire globally to develop reliable, high-quality sustainability reporting as a key element of corporate reporting, which is leading to new requirements and heightened expectations, as a critical moment. In addition to the well-established principles-based and subject-specific standards and guidance that are being effectively applied, the IAASB is committed to leading this effort to create new “sustainability bespoke” assurance standards and is now in the process of identifying the specific approach to building these standards that will have the greatest impact on establishing high-quality assurance to support reliable sustainability reporting. The IAASB expects the sustainability assurance standards will need to be developed in a phased approach and will keep stakeholders updated of the progress.

ICAEW audit and assurance resources

The Institute of Chartered Accountants in England and Wales (ICAEW) has the following resources that may be of interest to members:

ISQM 1: The role of tech and training covers experience sharing by a practitioner of a small-sized firm on how she established her firm’s SOQM by using the available training materials, webinars and guidance provided by the ICAEW, the IAASB and the International Federation of Accountants. It is also emphasized that the firm is solely responsible for designing, implementing and operating the SOQM. Each firm has its own quality risks and should tailor its SOQM accordingly.
Quality management guide targeting resources from service providers highlights the standard requirements in relation to resources from service providers and the types of information that audit firms are needed to obtain from service providers.
Resources to help audit firms prepare for the new and revised quality management standards under International Standard on Quality Management (ISQM) 1, ISQM 2 and International Standard on Auditing (ISA) 220 (Revised).
Summary of links to technical help, webinars, publications and events to all stages of an audit.
Resources and support tools on auditing accounting estimates under ISA 540 (Revised), such as webcasts and articles with practical illustrations.

Institute members can subscribe to ICAEW’s International Standards platform for free to access a wide range of resources on auditing and ethics.

IESBA commits to readying global ethics and independence standards timely in support of sustainability reporting and assurance

The International Ethics Standards Board for Accountants (IESBA) announced that it commits to develop fit-for-purpose, globally applicable ethics and independence standards to support transparent, relevant and trustworthy sustainability reporting. The related work will proceed in tandem with the development of IFRS Sustainablity Disclosure Standards by the International Sustainability Standards Board (ISSB), and sustainability-related International Standards on Assurance Engagemnets by the IAASB. The IESBA will issue in the near term guidance to draw the attention of professional accountants and other market participants to the fundamental principles and key provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) that already apply broadly to sustainability reporting and assurance.

IESBA’s discussion on sustainability and ethics

Watch this Sustainability and Ethics Discussion by the IESBA that examines the critical role complying with ethics standards (including on independence), plays in ensuring the reliability and trustworthiness of sustainability information. Speakers provide key insights about the applicability of the Code to the preparation and presentation of sustainability information and the provision of assurance thereon.

IESBA June board meeting

The audio recording of the IESBA June board meeting is now available.

Four further members appointed to the International Sustainability Standards Board

The IFRS Foundation Trustees announced the appointment of Richard Barker, Verity Chegar, Bing Leng and Ndidi Nnoli-Edozien as inaugural members of the ISSB.

Advocacy and practice development

SFC proposes amendments to the SFO to strengthen enforcement

On 10 June, Securities and Futures Commission (SFC) issued a consultation paper to seek views from the market about its proposed enforcement-related amendments to the Securities and Futures Ordinance (SFO), which may enable SFC to take more effective enforcement action. The amendments include amending section 213 of the SFO to expand the basis for applying for remedial and other orders against a regulated person by the SFC, and broadening the insider dealing provisions to address insider dealing perpetrated in Hong Kong involving overseas-listed securities and insider dealing involving Hong Kong-listed securities perpetrated elsewhere.

Please refer to the press release for details. The deadline for responding to the consultation paper is 12 August.

Proposed resolution to amend the Protection of Wages on Insolvency Ordinance

The Secretary for Labour and Welfare (SLW) will move a proposed resolution in the Legislative Council to amend the Protection of Wages on Insolvency Ordinance (PWIO). The proposed resolution will increase the ceilings for wages in arrears, wages in lieu of notice, severance, untaken statutory holidays and untaken leave, under the PWIO.

The Institute welcomes the proposal as it has, for some time, been urging SLW to review and increase the relevant ceilings under the PWIO, in particular the limits on wages in arrears and wages in lieu of notice, which had not been reviewed for over 20 years. As the Institute’s then president wrote in a letter to SLW in April 2020, the Protection of Wages on Insolvency Fund has always been a vital source of early payments for workers who are made unemployed due to the failure and winding up of their employers, and who have not received their full entitlements. Employees often rely on ex-gratia payments from the Fund to help tide them over periods of unemployment. Given the increases in unemployment over the past two years, this had become an even more important issue.

Announcements by the Inland Revenue Department (IRD)

Members may wish to be aware of the following matters:

Announcements by the government

Members may wish to be aware of the following matters:

AML notices

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:

Global priorities for professional accountants in business and the public sector by IFAC
Today’s CEOs don’t just lead companies. They lead ecosystems. from Harvard Business Review
7 core skills of great CFOs from CFO.com
Fintech state-of-play: opportunities for finance professionals by ACCA
5 trends driving the importance of understanding ESG from Journal of Accountancy

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Disclaimer: Some sections contain information from outside sources. We endeavour to link to reputable sources but the Institute is not responsible for the accuracy of the content and the content does not necessarily represent the views of the Institute.

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