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Hong Kong Exchanges and Clearing Limited (HKEX) published its bi-annual Listed Issuer Regulation Newsletter, highlighting various themes relating to audits and financial reporting, compliance with the new HKEX Listing Rules on share schemes and the disclosure of business valuations in transactions.
Auditing, financial reporting and related internal control matters
HKEX reminded issuers of the importance of the timely publication of quality financial reports, and urged issuers and their audit committees to monitor the audit progress, as well as to understand the nature and root cause of the outstanding matters and the timeline to resolve the issues.
Compliance with new HKEX Listing Rules on share schemes
With the new Listing Rules on share schemes taking effect on 1 January 2023, the HKEX reminded issuers of:
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The minimum 12-month vesting period for the grant of options or awards, unless the grants are made to employee participants under specific circumstances set out in the scheme document.
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The requirement of scheme documents to provide a description (which may be qualitative) of the performance targets attached to the options or awards to be granted, or a negative statement.
Disclosure of Business Valuations in Transactions
HKEX highlighted the following general principles for the disclosure of valuations:
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Selection of valuation methods – issuers should describe the selected valuation models and explain why they are selected, in particular why the methods were appropriate for the transactions or the target companies.
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Valuation assumptions and inputs – issuers should explain, with detail and in specific terms, their assumptions and adopted valuation inputs.
Members who are preparers of financial statements for listed entities are encouraged to read the newsletter and follow HKEX guidance to improve annual report disclosure to enhance transparency to stakeholders.
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