Accounting Standards in Hong Kong
Accounting Standards in Hong KongUpdated on Thursday 19th May 2016
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Hong Kong is a Special Administrative Region of China and it imposes its own accounting standards. The Hong Kong Institute of Certified Public Accountants is the most important institution in the city that deals with accounting issues: it releases the standards for financial reporting and for accounting.
Hong Kong uses the International Financial Reporting Standards and the Companies Ordinance sets forth the obligations for the annual reporting for all types of companies.
The legal framework for financial reporting in Hong Kong
The Generally Accepted Accounting Principles in Hong Kong are based on a few key sources:
- the Companies Ordinance: which contains the requirements for the mandatory books and records as well as audits of companies incorporated in Hong Kong;
- the Hong Kong Financial Reporting Standards (the same as the International Reporting Standards);
- the listing rules and requirements for the Hong Kong Stock Exchange.
Small and medium-sized companies in Hong Kong are subject to a more relaxed financial reporting framework, but they must comply with the requirements nevertheless. A small private company can use the Hong Kong Financial Reporting Standards for Private Entities, or if they are incorporated outside of Hong Kong, the International Financial Reporting Standards.
The representatives at our law firm in Hong Kong can help you determine if your company passes the size test to be included in a small or medium-sized business in the city and use the appropriate accounting and reporting standards.
The annual financial statements in Hong Kong
Companies in Hong Kong are required to submit information about:
- the balance sheet (the company’s financial situation);
- the comprehensive income statements;
- cash flow statement;
- accounting policies;
- statements for changes in equity.
The financial statements issued by the company must reflect that legal entity’s real financial situation. This information is public and useful both for the employees of the company and for its shareholders and creditors.
Observing the minimum levels of financial disclosure in Hong Kong is mandatory. The Hong Kong Accounting Standards define these rules as well as how financial transactions are governed by the city.
For more comprehensive information about these accounting rules and personalised assistance for your business, you can contact our Hong Kong law firm.