Your fortnightly technical updates newsletter (24 May 2023)

Members' Handbook

Update No. 291 issues Revisions to the Code Relating to the Definition of Engagement Team and Group Audits which address holistically the various independence considerations in an audit of group financial statements. The revisions also deal with the independence and other implications of the changes made to the definition of an engagement team in the Code to align with changes to the definition of the same term in the Hong Kong Standards on Auditing (HKSAs) and Hong Kong Standards on Quality Management (HKSQMs).

Standard setting

Updated guidance: Illustrative examples on rent concessions

The Institute has updated its guidance which illustrates the application of Hong Kong Financial Reporting Standard (HKFRS) 16 Leases to common rent concessions. The updated guidance has incorporated the analysis and conclusion in the agenda decision Lessor Forgiveness of Lease Payments (IFRS 9 Financial Instruments and IFRS 16 Leases) published by the International Financial Reporting Standards (IFRS) Interpretations Committee.

IFRS for SMEs Accounting Standard educational material: the effects of climate-related matters on financial statements

The IFRS Foundation has published educational material to illustrate how the IFRS for SMEs Accounting Standard requires companies to consider climate-related matters that have a material effect on the financial statements.

The educational material contains a non-exhaustive list of examples of when companies may need to consider climate-related matters in their financial statements and is aimed at supporting the consistent application of the IFRS for SMEs Accounting Standard. It does not add to or change the requirements in the IFRS for SMEs Accounting Standard.

Online workshop on impairment accounting review

The International Accounting Standards Board (IASB), the European Accounting Association (EAA) and the European Financial Reporting Advisory Group (EFRAG) will jointly hold a virtual research workshop on 30 June to provide an overview of the IASB’s forthcoming Request for Information (RFI) Post-implementation Review of IFRS 9 - Impairment, due to be published by the end of May 2023. The RFI will look at the impairment requirements in IFRS 9 and the related disclosure requirements in IFRS 7 Financial Instruments: Disclosures for credit risk.

Invitation to comment

The Institute is seeking comments on the International Auditing and Assurance Standards Board (IAASB) Exposure Draft Proposed International Standard on Auditing (ISA) 570 (Revised 202X), Going Concern and Proposed Conforming and Consequential Amendments to Other ISAs by 24 July.

The proposed revisions aim to:

Promote consistent practice and behaviour and facilitate effective responses to identified risks of material misstatement related to going concern;
Strengthen the auditor’s evaluation of management’s assessment of going concern, including reinforcing the importance, throughout the audit, of the appropriate exercise of professional skepticism; and
Enhance transparency with respect to the auditor’s responsibilities and work related to going concern where appropriate, including strengthening communications and reporting requirements.

IAASB digital technology market scan: Internet of Things technologies

This article by the IAASB explores the Internet of Things, focusing on networks for asset monitoring and data generation, a technology that enables real time tracking, managing and monitoring of business processes and assets. It also may form part of an entity’s internal control system and may provide data inputs to non-financial reporting, such as emissions reporting.

IAASB April board call meeting

The meeting papers of the IAASB April board meeting are now available.

Institute submission

The Institute has submitted its comment letter on the International Ethics Standards Board for Accountants (IESBA) Exposure Draft, Proposed Revisions to the Code Addressing Tax Planning and Related Services.

Invitation to comment

The Institute is seeking comments on the IESBA Consultation Paper Proposed IESBA Strategy and Work Plan, 2024 – 2047, by 7 June.

The Institute’s Ethics Committee meeting minutes

Minutes of the 255^th meeting is now available.

HKICPA resource centre

Access resources and publications at the Institute’s Resource Centre to the Code which will keep you updated on the latest ethics pronouncements.

Invitation to comment

The Institute is seeking comments on the International Sustainability Standards Board (ISSB) Exposure Draft Methodology for Enhancing the International Applicability of the SASB Standards and SASB Standards Taxonomy Updates by 3 July.

ISSB May 2023 podcast & update

The ISSB podcast, with its chair and vice-chair highlighting the recent discussions and decisions made at its May meeting, and a summary of the meeting, are now available.

Advocacy and practice development

SFC consults on revisions to takeovers and share buy-back rules

On 19 May, Securities and Futures Commission (SFC) issued a consultation paper to seek comments on the proposed amendments to the Codes on Takeovers and Mergers and Share Buy-backs, including codification of existing practices of the Takeovers Executive and clarification of certain matters in the codes. Please refer to the press release for details.

The deadline for responding to the consultation paper is 23 June.

Institute issues submission on proposals to enhance tax certainty of onshore gains on disposal of equity interests

The Institute issued a submission on 22 May, in response to the Financial Services and the Treasury Bureau (Treasury) consultation paper on enhancing tax certainty of onshore gains on disposal of equity interests. Generally, Hong Kong does not tax capital gains. Since acquisition and disposal of equity interests are common during the process of business expansion and restructuring, the government proposes implementing a “tax certainty enhancement scheme” to provide greater certainty of non-taxation of onshore gains on disposal of equity interests that meet specified criteria.

The Institute’s submission expresses strong in-principle support for the proposal, while indicating the need for some further clarification and guidance, as well as suggesting certain additional refinements to help make the Hong Kong tax regime even more competitive.

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:

Anti-money laundering (AML) notices and news

Gazettal of the revised Guidelines on Anti-Money Laundering and Counter-Terrorist Financing for Professional Accountants (“AML Guidelines”)

The Institute has revised the AML Guidelines taking into account recent amendments made to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615). The revised AML Guidelines will be gazetted on 25 May 2023 and become effective on 1 June 2023. Please refer to the Institute’s website for our update later.

Sanctions

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.

Other AML news

Hong Kong Customs smashes money laundering syndicate with over $3.5 billion laundered

Useful resources

Publications from other organizations:

The transition to a Chief Value Officer – An opportunity for finance and accounting professionals by IFAC
Creative problem solving: A path to efficient innovation by Institute of Management Accountants
6 critical reasons why culture should be at the top of every CEO's agenda from Entrepreneur
Are you incentivising climate destruction? from Financial Management

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