Your quarterly news for CFOs and members working in business (21 April 2022)

HKEX Review Results of Disclosure in Issuers’ Annual Reports

On 28 January, Hong Kong Exchanges and Clearing (HKEX) published a report on the findings and recommendations from its annual review of issuers’ annual reports for the 2020 financial year end. HKEX was generally satisfied with its findings and recommends the following:

Auditors’ modified opinions – Issuers should develop supportable estimates for asset valuations, extensively document key judgements made and consider retaining experts to perform asset valuations where necessary. Issuers should also engage in early discussions with auditors to agree on the timing, form and approach relating to the assessment of these estimates as early as practicable. Audit committees should assess and challenge the reasonableness of management’s assumptions and valuation methods adopted. Before the audit commences, they should discuss and agree with the auditors on any higher risk areas and the corresponding audit approach, timetable and form of reporting on audit findings.
Material lending transactions – Issuers should establish proper internal controls to monitor lending transactions, and where these activities are conducted outside their ordinary course of business, the directors should have proper oversight. Issuers engaged in money lending business are recommended to disclose in annual reports details of this business segment including: (a) business model and credit risk assessment policy; (b) major terms of loans granted, size and diversity of clients and concentration of loans on major clients; (c) management’s discussion on loan impairments and reasons; and (d) other key internal controls.
Material intangible assets reported on issuers’ financial statements – Issuers should ensure that financial forecasts and key assumptions used in impairment tests are reasonable and not overly optimistic, having regard to historical cash flows, available market information and future prospects. They should continuously review the clarity and transparency of their disclosure of impairment tests.

Members who are preparers of financial statements in particular 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

The Green and Sustainable Finance Cross-Agency Steering Group welcomes the publication of the ISSB proposed standards for public consultation

The Green and Sustainable Finance Cross-Agency Steering Group (Steering Group) welcomes the recent publication of the proposed general requirements for disclosure of sustainability-related financial information and the climate disclosure requirements by the International Sustainability Standards Board (ISSB).

The proposed standards are built on the recommendations of the Task Force on Climate-related Financial Disclosures and are intended to form a comprehensive and effective global baseline of investor-focused sustainability disclosures.

The ISSB is seeking feedback through a public consultation process and aims to finalize the standards by the end of 2022. The Steering Group would like to encourage the financial sector, listed companies and all interested stakeholders to participate in the ISSB consultation.

Accounting for a better world: priorities for a transforming profession

ACCA has published a report that identifies seven key priorities for the future of the profession, where accountancy will play an indelible role looking ahead.

The report considers the priorities facing the accountancy profession in helping create a better tomorrow. By sharing stories and examples across the profession, it also seeks to strike a cautious yet prevailing note of hope for the future, illuminating and showcasing the role of accountancy, and the positive contribution accountants can make in forging a new path to a better destination for global society.

Upcoming events and activities

Business Valuation Programme (April to June)

The programme aims to provide an insight into the valuation of various assets and is intended for new valuation specialists or those interested in a career in valuations. Don't miss the last chance to join the BV Programme, enrol now to boost your professional growth.

Virtual roundtable on ISSB exposure drafts

AThe Institute will host a virtual roundtable on 11 May to discuss the International Sustainability Standards Board (ISSB) exposure drafts (EDs) released recently.

Representatives from the ISSB will be guiding the discussions at the roundtable and will interact directly with participants. Join the Institute staff and other stakeholders in this virtual roundtable to express your views and help steer the ISSB in developing the global baseline for sustainability disclosures. For more information about the EDs and ways to provide your comments, please visit the Institute’s website for details.

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

Time for action on sustainability: Next steps for the accountancy profession by IFAC
Why inclusive leadership is so vital to D&I by ICAEW
Make resilience your company’s strategic advantage from Harvard Business Review
Three keys to a resilient post pandemic recovery from McKinsey
5 steps towards the future of finance from Financial Management

Tax articles

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