Hong Kong Financial Reporting Standards (HKFRS)

Hong Kong Financial Reporting Standards (HKFRS)

What Are HKFRS?

HKFRS are the principal accounting standards for Hong Kong companies with public accountability. The Hong Kong Institute of Certified Public Accountants (HKICPA) issues these standards to govern the preparation of statutory financial statements. Public accountability means holding assets in a fiduciary capacity as a primary business. This includes banks, insurance companies, and listed entities.

Hong Kong Financial Reporting Standards: Who Uses Full HKFRS?

Full HKFRS is mandatory for listed companies and any entity whose shares or debt instruments trade in a public market. It also applies to entities holding client monies or assets in a fiduciary capacity. The term "full hkfrs hong kong" distinguishes this complete framework from the reduced alternatives available to smaller entities.

HKFRS for Private Entities

The HKICPA also publishes HKFRS for Private Entities. This simplified framework is for companies without public accountability. A qualifying company may adopt HKFRS for Private Entities instead of full HKFRS. The framework omits many complex disclosure rules from the full standards but still requires compliance with HKICPA standards. An entity using this framework must state its financial statements were prepared in accordance with HKFRS for Private Entities.

Full HKFRS Hong Kong vs SME-FRF and SME-FRS

Companies qualifying for the reporting exemption under section 359 of the Companies Ordinance (Cap. 622) may use the SME Financial Reporting Framework (SME-FRF) and SME Financial Reporting Standard (SME-FRS). These are the least demanding of the three frameworks. SME-FRF and SME-FRS are for companies with no public accountability that are small enough to meet statutory thresholds. The reporting exemption reduces disclosure requirements but does not remove the audit requirement.

Statutory Financial Statements Hong Kong

Regardless of the financial reporting framework adopted, statutory financial statements must include an auditor's report. This report must be from a practising certified public accountant registered with the HKICPA. Directors must lay the audited financial statements before the company's members. The choice of framework affects the content and detail of the financial statements but not the statutory duty to deliver them to the Companies Registry.

Selecting the Correct Framework

A company's choice between full HKFRS, HKFRS for Private Entities, and SME-FRF depends on two factors: whether it has public accountability and whether it qualifies for the section 359 reporting exemption. Directors uncertain which framework to apply should consult a practising accountant who holds a practising certificate from the HKICPA.