Your fortnightly technical updates newsletter (2 August 2023)

Members' Handbook

Handbook Update No. 297 relates to the following publications in Volume II of the Members’ Handbook:

International Tax Reform— Pillar Two Model Rules (Amendments to HKAS 12 Income Taxes)

The amendments provide entities with temporary relief from accounting for deferred taxes arising from the Organization for Economic Co-operation and Development’s Pillar Two model rules. The Amendments also introduce targeted disclosure requirements to help investors understand an entity’s exposure to income taxes arising from the rules. Entities are required to apply the temporary exception immediately upon the issuance of the amendments and to provide the new disclosures for annual reporting periods beginning on or after 1 January 2023.

Supplier Finance Arrangements (Amendments to HKAS 7 Statement of Cash Flows and HKFRS 7 Financial Instruments: Disclosures)

The amendments introduce new disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on an entity’s liabilities, cash flows and exposure to liquidity risk. The amendments will become effective for annual reporting periods beginning on or after 1 January 2024, with early application permitted.

Handbook Update No. 299 deals with the revision of the HKICPA Code of Ethics for Professional Accountants (COE) as follows:

Relevant provisions in sections 400, 500, 700 and 900 in Chapter C of the COE (Revised 2018)/ COE (Revised 2022) are revised as a result of the transfer of the disciplinary function from the Institute to the Accounting and Financial Reporting Council. The Hong Kong law enforcement agencies no longer refer disciplinary matters to the Institute; and
Amendments as a result of the International Ethics Standards Board for Accountants’ (IESBA) Technology-related Revisions to the Code issued in April 2023.

Standard setting

List of new and amended HKFRS

The Institute has published the list of new and amended Hong Kong Financial Reporting Standards (HKFRS) that are applicable to accounting periods beginning on or after
1 January 2023.

Institute live webinar: Accounting considerations arising from abolition of MPF-LSP offsetting mechanism in Hong Kong

The Government of the HKSAR gazetted the Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022 (the Amendment Ordinance) in June 2022. The Amendment Ordinance will eventually abolish the statutory right of an employer to reduce its long service payment (LSP) and severance payment payable to a Hong Kong employee by drawing on its mandatory contributions to the mandatory provident fund (commonly known as the ‘offsetting mechanism’). Based on the Institute’s guidance issued in July 2023, the abolition is likely to have an immediate impact on the financial statements of entities with a significant employee base in Hong Kong. This is notwithstanding that the net LSP position of an entity may have been immaterial to its financial statements in the past. The live webinar on 22 August will go through the above-mentioned Institute’s guidance and highlight the key financial reporting considerations in relation to the abolition.

Reminder: Institute roundtable on IASB’s Request for Information (RFI) on Post-implementation Review of IFRS 9 Financial Instruments - Impairment

Members and other parties who are interested to share their views on the RFI in the upcoming virtual roundtable organized by the Institute are reminded to reserve their place by 8 August.

Live webinar: Workshop for Audit Mangers/ Seniors In-Charge

Join the online workshop for audit managers/ seniors in-charge over five evenings (30 August, 1, 7, 11 and 13 September) which focuses on advanced auditing topics such as risk assessment procedures, auditing accounting estimates, going concern assessment etc. To be eligible for enrolment, participants should have more than two years of auditing experience with fundamental knowledge of auditing.

The Institute’s Auditing and Assurance Standards Committee meeting

Minutes of the 409^th meeting is now available.

What you need to know about ISSA 5000

The International Auditing and Assurance Standards Board (IAASB) will soon issue the proposed, landmark International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements, for public consultation. Learn more in this short video from IAASB.

Latest on IAASB projects

Learn the latest updates on the IAASB’s projects such as the proposed changes to International Standard on Auditing (ISA) 500, Audit Evidence; the proposed ISA for Audits of Financial Statements of Less Complex Entities, etc.

Professional judgement in audit

The Institute of Chartered Accountants in England and Wales’ (ICAEW) new resource hub on professional judgement helps you develop your skills in approaching difficult judgements.

ICAEW audit and assurance resources

The July issue of ICAEW’s Audit & Beyond discusses tips to address barriers to the exercise of professional judgement; key changes of the new group audit standards; how to address corporate fraud risk, etc.

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

Case study in ethical use of AI today

The International Ethics Standards Board for Accountants (IESBA) has published a recording of a presentation which discusses the ethical consideration in the use of artificial intelligence (AI) with reference to the IESBA International Code of Ethics for Professional Accountants (Including International Independence Standards).

IESBA June meeting

The meeting highlights and decisions of IESBA’s June meeting is now available.

IFRS Sustainability Disclosure Standards endorsed by international securities regulators

The International Organization of Securities Commissions (IOSCO) has announced its endorsement of the International Sustainability Standards Board’s (ISSB) IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures following its comprehensive review of the Standards. Erkki Liikanen, Chair of the IFRS Foundation Trustees, delivered a speech on the endorsement of ISSB Standards by the IOSCO.

The IOSCO has called on its 130 member jurisdictions—capital markets authorities that regulate more than 95% of the world’s securities markets—to consider how they can incorporate the ISSB Standards into their respective regulatory frameworks to deliver consistency and comparability of sustainability-related disclosures worldwide.

IFRS Foundation publishes comparison of IFRS S2 with the TCFD Recommendations

The IFRS Foundation has published a comparison of the requirements in IFRS S2 Climate-related Disclosures and the Task force on Climate-related Financial Disclosures (TCFD) recommendations.

Institute Responds to HKEX Consultation on Climate-related Disclosures

In its response to Hong Kong Exchanges and Clearing (HKEX)’s consultation paper on climate-related disclosures, the Institute is generally supportive of HKEX’s efforts to introduce mandatory climate-related disclosures under the ESG reporting framework, based on the requirements of IFRS S2, which was issued in June this year by the International Sustainability Standards Board (ISSB). As HKEX’s consultation paper was issued before the final ISSB standards were published, the Institute’s submission suggests that HKEX should explain how it will update its proposals following issuance of the standards. The Institute notes that there are several key differences between HKEX’s proposals and IFRS S2 and suggests that there should be a plan to gradually remove the differences and adopt the additional requirements of IFRS S2.

The submission also encourages HKEX to re-consider adopting IFRS S1, as this is a foundational document that sets out general requirements and principles for all types of ESG and sustainability information, not just climate-related disclosures, pointing out that, without adopting IFRS S1, the Hong Kong capital market may not be judged to be “ISSB compliant”. Finally, given the practical difficulties that some listed companies may face with implementing the ISSB standards, the Institute highlights the need for an appropriate market infrastructure to support implementation.

Advocacy and practice development

HKEX Publishes Conclusions on Rule Amendments Following Mainland China Regulation Updates and Other Proposed Rule Amendments Relating to PRC Issuers

On 21 July, HKEX published conclusions to its consultation paper on rule amendments following Mainland China regulation updates and other proposed rule amendments relating to PRC issuers. The amendments has come into effect on 1 August.

Please refer to the press release for details.

ORO tender notice

The ORO has issued a tender notice to invite interested practitioners to submit tenders for providing services to complete preliminary examinations in bankruptcy cases. The contractual period will be two years ending on 31 December 2025. The deadline for submission of tenders is 12:00 noon, 22 August, 2023. More details are available at: https://www.oro.gov.hk/eng/announcements/tender.html.

Upcoming Restructuring and Insolvency Faculty (RIF) lunch seminars

The RIF will be holding two face-to-face seminars in August, which may be of interest to a wider audience:

PRC Property Crisis – What is happening and What’s next? (24 August)

At this event, experienced practitioners and experts will hold an interactive panel discussion on dealing with the debt restructuring of Mainland property developers, including consideration of interests of different stakeholders, hurdles faced by them and the developers. They will also provide their insights as to how the debt crisis might be overcome.

Enforcement procedures in the British Virgin Islands and Cayman Islands: practical tips to insolvency practitioners (30 August)

This event will provide an introduction to: (a) the recognition of foreign judgment and arbitration awards, and the enforcement procedures available; (b) winding up proceedings; and (c) the enforcement of share charges, in the British Virgin Islands and Cayman Islands.

Announcements by the Inland Revenue Department

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

AML workshops and live webinar

The Institute’s Revised Guidelines on Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) for Professional Accountants were gazetted on 25 May 2023 and became effective on 1 June 2023. Accordingly, AML workshops (in English) exploring the latest updates and practical guidance to facilitate compliance with AML/CFT requirements will be held on 10 August (Part I) and 22 August (Part II) respectively.

In addition, a live webinar (in Cantonese) will be conducted on 16 August to discuss the main changes in the revised AML/CFT guidelines and their implications for members.

Industry update

Regulated firms are required to review and update their internal AML/CTF policies, procedures and controls (APPC) document and process to address the latest AML/CTF legislation. Now Institute members could purchase a customizable APPC template with 30% special discount from Ingenique Solutions by 31 December 2023. Feel free to contact Ingenique Solutions for details.

Please also feel free to read the article to learn more about the latest updates on Hong Kong AML/CTF legislation.

Sanctions update

The List of terrorists and terrorist associates designated by the United Nations Security Council, published pursuant to the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575) was gazetted on 27 July.
The List of individuals, groups, undertakings and entities published under section 25 of the United Nations Sanctions (ISIL and AI-Qaida) Regulation (Cap.537CB) was updated on 22 July. See the relevant UNSC press release on 21 July.
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:

Future finance roles in an AI era from Financial Management
CFO soft skills: 4 ways to accelerate development from CFO.com
3 skills accountants need in a ‘post-truth’ era from In the Black
Key strategies to climbing the ladder for career advancement from Entrepreneur

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