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How we set standards & contribute to international standards

The Institute is the accounting and auditing standard-setter for Hong Kong. The Institute also sets the professional ethical standards for accountants in Hong Kong.

After extensive consultation on convergence, in the early 2000s, the Institute Council decided that Hong Kong standards should fully converge with international standards. Our due process documents explain our procedures for developing and adopting international standards. In summary, the process for setting standards is illustrated in the diagram below.

 

 

* Technical issues may be identified in the following manner:

 

• Regular meetings with key stakeholder groups (academics, investors, preparers, accounting practitioners and regulators);
• Committee and Advisory Panel meetings;
• Stakeholders directly contacting HKICPA SSD;
• Formal consultation documents.

 

If Hong Kong standards are fully converged with international standards what does the Institute do to set standards?

Adopting international standards that are principle-based means that the Institute has a responsibility in setting standards not just for Hong Kong but also with global markets in mind. With Hong Kong as the primary focus, the Institute voices its stakeholders' issues or concerns and reports inconsistencies in the market to international and national standard-setters; we then work together to address those matters and ensure we maintain one global set of principle-based standards that is appropriate for all IFRS jurisdictions. The diagram below outlines examples of what the Institute does to contribute to the development of international standards.

 

 

The Institute also works in collaboration with other national and regional standard-setters. The diagram below shows how we work with other standard-setting bodies globally.

 

  • HKICPA conducts local research and outreach—the findings of which are shared with the Boards and contribute to their ongoing projects. Research or a fact-finding exercise assist HKICPA in better understanding the root cause of issues or inconsistencies, assessing the reasonableness of the matter (including whether it could be addressed through existing literature) and, to the extent feasible, recommending possible solutions to address the matter.
  • HKICPA responds to key projects that matter most to our stakeholders throughout the project life cycle.
  • HKICPA actively participates in and presents key topics at standard-setting meetings hosted by the Boards, including the IASB's World Standard Setters conference, the IASB's Accounting Standards Advisory Forum (as a technical leader of the Asian-Oceanian Standard-Setters Group), and the IAASB and IESBA's National Standard Setters Meeting.
  • HKICPA collaborates and discusses issues with staff of the IASB, the IFRS Interpretations Committee, the IAASB and the IESBA, and shares information about the Hong Kong accounting and auditing practices.
  • HKICPA identifies suitable Hong Kong candidates for the Boards or their task forces and advisory groups, and provides them technical support throughout their terms.
  • HKICPA facilitates dialogues between the Boards and the stakeholders in Hong Kong.

 

 

Click here for more information about AOSSG.
Click here for the IFASS Charter.
Click here for more information about the IAASB & IESBA National Standard Setters Group.
Click here for more information about how the IASB works with national standard-setters.
Click here for past meetings in which the Institute participated.

 

Standard Setting Department reviews and updates (if necessary) the policy documents describing the processes in setting the Financial Reporting Standards, the Standards of Professional Ethics, and Auditing and Assurance Practices (collectively “professional standards”) on an annual basis.

 

Post-implementation Review (PIR)

Objectives of the PIR:

  • Determine whether the professional standards are being consistently understood and implemented in a manner that achieves the intended purpose.
  • Identify how practical challenges and concerns are being addressed.

For internationally converged standards

The Institute actively participates in the post-implementation reviews coordinated by the IASB, IAASB and IESBA where the issues are considered significant to Hong Kong entities and/or professional accountants.

 

For local pronouncements 

Financial Reporting Standards

A PIR of the SME-FRF & SME-FRS takes place every five years, unless significant issues arise earlier, to provide a stable platform for small and medium-sized entities and allow sufficient time for preparers and practitioners to gain experience in applying the standard. A review does not formally commit the Financial Reporting Standards Committee (FRSC) to undertake a project to revise the SME-FRF & SME-FRS.

 

For HK Interpretations and Accounting Guidelines, the Institute updates the FRSC annually on any related IASB developments and on the recommendation from the Investment Circular Reporting Panel (under the auspices of the Auditing and Assurance Standards Committee (AASC)) on whether any amendments are required. The FRSC will decide on next steps based on project priority.

 

For Accounting Bulletins, PIRs are not applicable because Accounting Bulletins are informative publications on subjects of topical interest and do not have the same authority as the other pronouncements identified above.

 

The Institute identifies local application and/or emerging issues on converged standards and local pronouncements through different ways, e.g. regular communication with relevant stakeholders, monitoring TQ submissions, monitoring the news and reviewing publications of relevant regulators and other entities etc. In addition, the FRSC is asked to raise any application and/or emerging issues on converged standards and local pronouncements every year. The Institute analyses the issues and considers the next steps in the coming year’s strategic plan.

 

Standards of Professional Ethics and Auditing and Assurance Practices

For locally developed pronouncements in relation to Standard of Professional Ethics, the Institute will carry out a review of the references to local regulations and legislations every two years to consider whether the terms and references need to be updated as well as whether any consequential change to the contents in the local pronouncements is warranted.

 

In addition, the Institute has mechanisms in place to identify and address issues arising from the application of the professional standards. A key mechanism is to conduct an analysis every three years of qualitative and quantitative data collected over the previous three-year period. Sources of data collected include technical enquiries relating to the application of professional standards, regularly soliciting feedback from relevant committees and advisory panels of the Institute or other stakeholders and publications by regulators identifying issues on the application of professional standards. Based on the analysis, AASC /Ethics Committee (EC) will consider whether a PIR is considered necessary for a particular standard.

 

The analysis of data collected would help the AASC/EC identify complex, contentious and/or significant issues as follows:

 

  • The number of technical enquiries on a specific standard would help indicate how widespread and significant the issue is i.e. a vast majority or only an isolated number of members not understanding the standard;
  • The nature and depth of the technical enquiries would help indicate whether there are contentious or complex issues in the implementation of the standard;
  • The issues identified from discussions at the AASC/EC, advisory panels or outreach with stakeholders would also help indicate contentious or complex issues;
  • The areas of concern identified in reports issued by regulators such as the Institute’s Quality Assurance Department and Financial Reporting Council may indicate their pervasiveness and significance.

 

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