In this course · 7 of 7
Course 3
Pick your year end
7 lessons · 7 min
- 1What Is a Financial Year End in Hong Kong? (Accounting Reference Date)
- 2How do I choose the financial year end for a new Hong Kong company?
- 3How long can a Hong Kong company's first financial period be?
- 4Can I change my Hong Kong company's financial year end, and how?
- 5HKFRS, HKFRS for Private Entities or SME-FRF: Which in Hong Kong?
- 6What Is SME-FRF and Who Can Use It in Hong Kong?
- 7Who can use HKFRS for Private Entities in Hong Kong?
The short answer
Any Hong Kong entity without public accountability (one whose debt or equity is not publicly traded and which does not hold assets for outsiders as a primary business) that publishes general purpose financial statements can use HKFRS for Private Entities. There is no size test. Banks, insurers and securities brokers are excluded; a subsidiary with no public accountability of its own can use it.
HKICPA's FAQ sets out the key points:
- Core test: the entity must not be publicly accountable. Public accountability arises if its debt or equity is traded in a public market, or if it holds assets for a broad group of outsiders as a primary business.
- Excluded: publicly traded entities of any size, and financial institutions: banks, insurers, securities brokers or dealers, pension funds, mutual funds and investment banks.
- Not automatically excluded: companies limited by guarantee, unlimited companies, and not-for-profit organisations. Each depends on its facts. Company status under the Ordinance is not the only test.
- Holding client money incidentally to the main business does not by itself create public accountability. The FAQ gives solicitor firms and charities as examples.
- Subsidiaries: a subsidiary of a group reporting under HKFRS or IFRS may use the standard if it has no public accountability itself.
- No shareholder approval is needed to adopt it, according to the FAQ.
Unlike the SME-FRF, there is no size or company-type threshold. HKICPA revises the standard from time to time, so use the edition in force for your financial year.
Legal basis and sources
The law
- Companies Ordinance (Cap. 622), s.380 (accounting standards)
- HKICPA: HKFRS for Private Entities
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
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