Choosing and changing a financial year end: Hong Kong company accounting reference date

Choosing and Changing a Financial Year End for a Hong Kong Company

A Hong Kong company selects its accounting reference date - the date to which its financial statements are prepared each year - at the point of incorporation. That date becomes the company's financial year end. The process of choosing and changing a financial year end Hong Kong company must follow is governed by the Companies Ordinance (Cap. 622) and administered by the Companies Registry. Any change to the accounting reference date is made by filing Form NAC4 with the Registrar. The decision affects audit deadlines, profits tax return due dates, and the annual return filing cycle, so directors should understand the rules before setting or altering the date.

Hong Kong Accounting Reference Date

The accounting reference date is the last day of a company's financial period. For a newly incorporated company, the first accounting reference date is set by the directors and recorded on the incorporation form (NNC1). The date can be any day of the year, but it must be consistent from one year to the next unless the company formally changes it. The accounting reference date determines when the company's financial statements must be prepared and audited, and it sets the timetable for the annual return (Form NAR1) filing.

Under section 662 of the Companies Ordinance, a company's financial year end is the date that falls on the anniversary of its accounting reference date. For example, if the accounting reference date is 31 December, each financial year ends on 31 December. The first financial period may be longer or shorter than 12 months, but subsequent periods must be exactly 12 months unless the company changes its accounting reference date.

Hong Kong Financial Year End Options

A Hong Kong company can choose any date as its financial year end. Common choices include 31 December, 31 March, and 30 June, but there is no statutory restriction on the day or month. The choice is driven by practical factors:

• Business cycle: aligning the year end with a natural low point in trading activity simplifies inventory counts and year-end procedures.
• Group reporting: a subsidiary often adopts the same year end as its parent to facilitate consolidation.
• Tax planning: the Inland Revenue Department issues profits tax returns based on the company's accounting period. A year end that matches the tax assessment cycle can simplify filing.
• Audit capacity: auditors are busiest between January and April. A year end outside that peak may reduce audit fees and speed up completion.

The Companies Registry does not restrict the accounting reference date to any particular day. A company incorporated on 15 June could set its accounting reference date as 30 June, 31 December, or any other date the directors choose.

Hong Kong Change Financial Year End

A company may change its accounting reference date by filing Form NAC4 with the Companies Registry. The change must be approved by the directors, and the form must be signed by a director or the company secretary. There is no fee for filing Form NAC4, but the company must ensure the change does not create a financial period that exceeds 18 months or is shorter than 6 months, unless the Registrar grants an extension.

The procedure is straightforward:

1. The directors pass a resolution approving the new accounting reference date.
2. Form NAC4 is completed and signed.
3. The form is delivered to the Companies Registry within 15 days of the resolution.
4. The Registrar updates the company's record.

A company cannot change its accounting reference date more than once in any five-year period without the Registrar's permission, unless the change is to align with a parent company's year end or to comply with a court order.

Hong Kong Form NAC4

Form NAC4 is the statutory notice of change of accounting reference date. It is prescribed under the Companies Ordinance and is available on the Companies Registry website. The form requires:

• The company name and company number.
• The current accounting reference date.
• The proposed new accounting reference date.
• The date of the directors' resolution approving the change.
• The signature of a director or the company secretary.

The form must be filed within 15 days of the resolution. Late filing may result in a penalty. The Registrar will not accept a change that would cause the current financial period to exceed 18 months, unless the company has a special reason and applies for an extension.

Hong Kong Form NAC3

Form NAC3 is the statement of revision of financial statements. It is used when a company has already filed financial statements with the Companies Registry and later discovers an error or omission. The directors may revise the financial statements and deliver Form NAC3 together with the revised statements to the Registrar. This form is not directly related to changing the financial year end, but it is relevant when a change of accounting reference date leads to a revision of previously filed accounts.

For example, if a company changes its year end and subsequently restates its comparative figures, it may need to file revised financial statements using Form NAC3. The form must be signed by a director and accompanied by a statement explaining the revision.

Effect on Audit and Tax Filing

Changing the financial year end affects the audit and tax filing deadlines. The audit must be completed within six months of the financial year end for a private company, or within four months for a listed company. If the change creates a short financial period (less than 12 months), the audit must still be completed within the same timeframe from the new year end.

The Inland Revenue Department issues profits tax returns based on the accounting period. When a company changes its year end, the tax return for the transitional period may cover a period of more or less than 12 months. The company must file the profits tax return (Form BIR51) within one month of the issue date, regardless of the length of the accounting period.

First Financial Period and Incorporation Date

The first financial period of a Hong Kong company begins on the date of incorporation and ends on the first accounting reference date. The period may be up to 18 months long. For example, a company incorporated on 1 January 2026 with an accounting reference date of 31 December 2026 has a first financial period of 12 months. If the same company chose 30 June 2027 as its first accounting reference date, the first financial period would be 18 months.

The directors must ensure the first financial period does not exceed 18 months. If they wish to set a longer period, they must apply to the Registrar for permission.

Annual Return and Form NAR1

The annual return (Form NAR1) is filed with the Companies Registry within 42 days of the company's return date. The return date is the anniversary of the incorporation date, not the financial year end. Changing the accounting reference date does not change the annual return filing date. However, the annual return must include the company's financial year end, so any change must be reflected in the next NAR1 filing.

Directors should coordinate the change of accounting reference date with the annual return cycle to avoid confusion. If the change is made close to the return date, the company may need to file an updated NAR1 to reflect the new year end.

Directors and Members

The directors are responsible for setting and changing the accounting reference date. The members (shareholders) do not need to approve the change unless the company's articles of association require it. The directors must act in the best interests of the company and ensure the change does not prejudice the company's compliance obligations.

Once the financial statements are prepared, the directors must lay them before the members or send them to members if the annual general meeting is dispensed with. The audit report must accompany the financial statements. Changing the year end does not alter this requirement, but it may shift the timetable for the members' meeting.