Your quarterly news for CFOs and members working in business (21 April 2021)

HKEX review results of disclosure in issuers' annual reports

On 29 January, Hong Kong Exchanges and Clearing (HKEX) published a report on the findings and recommendations from its review of issuers’ annual reports for financial years ended between January and December 2019. HKEX was generally satisfied with its findings and recommends the following:

Disclosure on the impact of the COVID-19 pandemic in issuers’ business review and management discussion and analysis section – Issuers should disclose in their next annual reports (i) the effect of the COVID-19 pandemic on their operations, and the relevant risks or uncertainties that will materially affecting their future performance; (ii) quantitative measures of the financial or operational impact of the COVID-19 pandemic; (iii) assessments of the liquidity positions and working capital sufficiency with reference to their operations and capital commitments; and (iv) measures to manage the impact of the COVID-19 pandemic.

Financial statements with auditors’ modified opinion – Issuers should continuously review their liquidity positions and funding needs, and formulate and implement action plans to address such needs in a timely manner. Where there are material changes in the reporting items, issuers should develop appropriate and supportable estimates for these items, document key judgements made and consider retaining experts if necessary. They should also engage in early discussions with their auditors and agree in advance the timing, form and approach of the assessment of these estimates as early as practicable.

Continuing connected transactions (CCTs) – Independent non-executive directors (INEDs) play an important role in providing checks and balances over the issuers’ corporate affairs, business operations and transactions, and in particular, in the monitoring of CCTs. Issuers should have in place appropriate internal controls and mechanisms to monitor, and assist INEDs in overseeing their CCTs, and their INEDs should review the appropriateness of these internal control procedures. Issuers should also make reference to best practices adopted by other issuers set out in our last year’s report.

Material intangible assets – Issuers should perform proper analysis and carefully consider the impact of the COVID-19 pandemic on impairment tests and update the assumptions used to reflect the latest available information and evidence.

Material level 3 financial assets – Issuers should develop robust disclosure on level 3 fair value measurements, in particular providing the qualitative and quantitative information to the extent necessary for an understanding of the valuation techniques and the underlying unobservable inputs.

Members who are preparers of financial statements, particularly for listed entities, are encouraged to read the report and follow HKEX guidance to improve annual report disclosure to enhance transparency to stakeholders.

News and updates

Finance transformation: the human perspective

The Association of International Certified Professional Accountants and KPMG International has recently released a joint report, Finance transformation: the human perspective, which discussed why organizations aren’t reaping the rewards of finance transformation and reveals the missing ingredient to success.

Read the executive summary for an overview.

lFAC Exploring the IESBA Code: The Building Blocks Instalment

This final instalment of Exploring the IESBA Code explains the “building blocks” structure of the International Code of Ethics for Professional Accountants (Including International Independence Standards) and its interconnected nature to help readers better understand how to use and navigate the Code so that they can quickly identify and access the ethics and independence standards and guidance relevant to them.

Upcoming events and activities

Financial Controllership Programme – be a forward-thinking leader

The Financial Controllership Programme is open for enrolment. Running from May to November, the five modules prepare aspiring or new to the post financial controllers with the skills they need to be effective forward-thinking leaders. Participants can join the entire programme or individual modules.

The programme provides training on the important practical skills one needs to be a successful financial controller. Industry-leading experts serve as course directors and experienced professional accountants in business as facilitators, training participants with the attributes necessary to become forward-thinking leaders and add value to their organizations.

Join full programme or individual modules by 30 April to enjoy early bird discounts.

Investment Series – (i) Analyzing a company research report and (ii) Option basics

The two face-to-face seminars on 27 April and 18 May aim to enhance participants’ understanding of different types of analytical methods used in the finance industry, the roles of analysts, and the fundamentals of a company; and the fundamental concepts of options, different types of options, defining elements of an option contract, option contract specifications and basic option strategies respectively.

If you have suggestions on specific topics or speakers for future PAIB events, please let us know at paib@hkicpa.org.hk.

Features and articles

The following articles and publications may be of your interest:

Business articles

Strategic resilience during the COVID-19 crisis from McKinsey & Company
A road map for ESG disclosures and assurance from Journal of Accountancy
CFOs step up to face their new enemy: Poor data from Financial Management
The robots are coming for Phil in Accounting from The New York Times
Digital strategy in a post-COVID world: reimagining business and operational priorities for the future by ICAEW

Tax articles

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