How to Keep Books in HKD, USD and RMB for a Hong Kong Company

This answer follows HKAS 21 and Section 30 of HKFRS for Private Entities, which set the rules on exchange rates. Under the SME-FRS there is no separate functional currency: the company uses one reporting currency, that of its primary economic environment.

Core approach

1. Choose a functional currency: the main currency of your business environment, often HKD for local trade, or USD if sales and costs are mainly in USD.
2. Record each transaction in the functional currency at the spot rate on the transaction date (or a close average rate if reasonable), keeping the original-currency amount as well.
3. Bank accounts: hold and reconcile each currency account in its own currency, then translate.
4. At each period end, translate foreign-currency monetary items (cash, receivables, payables, loans) at the closing rate. Exchange differences go to profit or loss.
5. Document your rate source (for example a bank or central-bank rate) and use it consistently.

Example (illustration only): an invoice of USD 1,000 on a day the rate is 7.80 is recorded as HKD 7,800.

Practical tips

• Set up separate ledger accounts per currency.
• Keep invoices showing the currency.
• Use software with multi-currency and revaluation functions.

The legal requirement is that the records must explain transactions and allow financial statements to comply with the Ordinance and applicable standards (ss.373, 380).