Who is eligible to use the SME-FRF and SME-FRS in Hong Kong?
Hong Kong companies that fall within the reporting exemption in section 359 of the Companies Ordinance: small private companies, small guarantee companies, qualifying groups, larger eligible private companies with 75% member approval, and single private companies with unanimous written member consent. Banks, securities firms, insurers and deposit-takers cannot use them.
HKICPA's guidance ties eligibility to the reporting exemption:
- Private company with no subsidiary and no parent: no size test, but all members must approve in writing each year.
- Small private company: any two of revenue of HK$100 million or less, assets of HK$100 million or less, 100 employees or fewer.
- Group of small private companies: same tests on aggregate figures.
- Small guarantee company or group: revenue of HK$25 million or less.
- Eligible private company or group: the HK$200 million version of the tests, with approval from members holding at least 75% of voting rights and no objection.
Not eligible: entities holding a banking licence; entities taking interest-bearing loans in trade or business; corporations licensed under Part V of the Securities and Futures Ordinance; insurers (other than as agents). A holding company is also excluded if its group includes any of these.
Size-test timing: generally two consecutive years of passing to enter and two of failing to leave.
HKICPA's page does not describe the technical differences between the SME framework and full HKFRS, so ask your accountant what is simplified in your case.
Legal basis
- Companies Ordinance (Cap. 622), ss.359-366
Sources
Applies to 2026 · Last reviewed 29 October 2026
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.
Related questions
- Is a Hong Kong company legally required to keep accounting records?Yes. Section 373 of the Companies Ordinance (Cap. 622) requires every company to keep accounting records that explain its transactions and show its financial position and performance at any time. Directors who fail to take all reasonable steps risk a fine of HK$300,000, and up to 12 months' jail if the failure is wilful.
- How long must a Hong Kong company keep its accounting records?Seven years. Under section 377 of the Companies Ordinance, a company must keep its accounting records for 7 years after the end of the financial year to which the last entry relates. The Inland Revenue Department separately requires business records to be kept at least 7 years after the transactions they relate to.
- What does section 51C of the Inland Revenue Ordinance require from my business?Anyone carrying on a trade, profession or business in Hong Kong must keep enough records, in English or Chinese, to work out assessable profits, and keep them for at least 7 years. Failing to do so without reasonable excuse can lead to a fine of up to HK$100,000.
- Which documents should a Hong Kong business keep for its books?Keep every document that supports an entry in your books: sales and purchase invoices, receipts, bank statements, contracts, payroll and MPF records, asset purchase papers, loan agreements, and stocktake sheets. The test is whether someone else could trace any figure back to its source.
- Can a Hong Kong company keep its accounting records digitally or scan paper originals?Yes. The Companies Ordinance allows records in hard copy or electronic form, provided they stay available for reference and can be reproduced on paper. The IRD also accepts electronic books and scanned source documents if integrity, legibility and origin details are preserved, and no prior approval is needed.