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Hong Kong – Financial Statements Review Program Report 2011.

13 May 2012

 

In January 2012, the Listing Division published the results of its review of listed issuers’ published financial reports for compliance with the disclosure requirements of the Listing Rules and accounting standards.
 
Key findings:
 
• Additional information should be presented in financial reports to provide a better understanding of the nature and impact of significant events or material balances and transactions.
 
• Analysis of remuneration paid to auditors, in respect of audit and nonaudit services, should be improved (paragraph 2(h) Appendix 23 of the Listing Rules).
 
• Discussions in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) should be consistent with the financial statements and should provide an additional useful narrative to explain the company’s performance and financial position (minimum disclosure requirements are set out in paragraph 32(1)-(12) Appendix 16 of the Listing Rules).
 
• Improvements in connected and related-party disclosure were noted, but there is room for further improvement.
 
• Disclosures provided on financial instruments, and in particular convertible bonds, require improvement (e.g., disclose the accounting policy adopted and the risks and exposures arising from the bonds).
 
• There appear to be different interpretations of the relevant accounting standards on acquisitions and whether they should be treated as an acquisition of a business” or an acquisition of “assets and liabilities”.
 
• Clearer explanations should be provided where there is some evidence that there is “control” in an investee, but where the investee is accounted for as if control does not exist.
 
• Disclosure of assumptions and methods to arrive at fair values of investment properties, including the qualification and experience of valuers, should be improved (e.g., adopting table presentation format).
 
• Segment information should be balanced and consistent with information disclosed elsewhere in the financial reports (e.g., MD&A being consistent with segment information in the financial statements).
 
• Benchmarks together with other procedures should be in place for determining when disclosures should be provided.
 
Please follow the link to the report:
 
 

For further information, please contact:

 
Venantius Tan, Partner, Morrison & Foerster
vtan@mofo.com
 
John Moore, Partner, Morrison & Foerster
johnmoore@mofo.com

 

Morrison & Foerster Capital Markets Practice Profile in Hong Kong

 

 

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