What Is Simplified Financial Reporting for Hong Kong SMEs?

Sections 359 to 366 and Schedule 3 of the Companies Ordinance let qualifying companies fall "within the reporting exemption".

What changes for an exempt company

• The financial statements need not give a true and fair view (s.380(7)); they follow Part 1 of Schedule 4 and the applicable accounting standard (in practice usually the SME framework).
• The directors' report needs no business review (s.388(3)) and may omit several items.
• The notes need not disclose directors' material interests in significant transactions.

What does not change

• The company must still keep proper records and prepare financial statements.
• Audit is still required for all companies except dormant companies, according to the Companies Registry (Companies Ordinance s.394, s.447).

Who qualifies Small private and guarantee companies, larger eligible private companies with members' approval, and a private company with no subsidiary or holding company if all members agree in writing for that year. The thresholds are in the answers on small private company size thresholds and on small group and eligible private company tests.

Not available to banks, licensed securities corporations, insurers, and money-lending or deposit-taking businesses (s.359(4)).