A new technical bulletin advising privately owned companies on transitions to the new Hong Kong Financial Reporting Standard (HKFRS) for Private Entities has been made available from audit and accounting firm Mazars.
The paper, which aims to look at how the new, simplified standard will impact a privately owned company and its financial statements, can be downloaded here.
The scaled-down version of the full HKFRS, which will be applicable to companies and businesses that do not have public accountability, will be effective immediately upon release on 30 April 2010.
Referring to the “new HKFRS”, Mazars’ Hong Kong Director for Quality Assurance, Elsa Ho, explains, “This change provides a reporting option that incorporates condensed and simplified accounting principles, based on full HKFRSs.”
“For those private enterprises that are eligible, it can mean a tangible easing of the entire reporting process,” says Ms. Ho.
The fundamental concepts and accounting principles for recognising and measuring assets, liabilities, income and expenditure in accordance with the new HKFRS will be the same as those under the full HKFRSs.
However, the new standard’s departures from the full HKRS include removal of some of the accounting policy options previously allowed, specifically in relation to accounting for property, plant and equipment, investment properties, employee benefits. There will be a focus on measuring assets and liabilities at cost as opposed to fair value, where there is an “undue cost or effort” involved in determining the fair value.
The HKFRS for Private Entities also exempts the recognition of deferred taxation in relation to revaluation gains of investment properties where such tax never has to be paid.
The new standard is designed to be reviewed and updated on a rolling two/three-year basis by the HKICPA.