VALUE HKFRS Limited - PwC CN
VALUE HKFRS Limited
Illustrative HKFRS consolidated financial statements
December 2020
1
This publication presents the sample annual financial reports of a fictional listed company, VALUE HKFRS Limited. It illustrates the
financial reporting requirements that would apply to such a company under Hong Kong Financial Reporting Standards as issued at 31
August 2020. Supporting commentary is also provided. For the purposes of this publication, VALUE HKFRS Limited is listed on The
Stock Exchange of Hong Kong Limited and is the parent entity in a consolidated entity.
VALUE HKFRS Limited 2020 is for illustrative purposes only and should be used in conjunction with the relevant financial reporting
standards and any other reporting pronouncements and legislation applicable in specific jurisdictions.
This content is for general information purposes only, and should not be used as a substitute for consultation with
professional advisors.
Introduction
This publication presents illustrative consolidated financial statements for a fictional listed company, VALUE HKFRS Limited. The
financial statements comply with Hong Kong Financial Reporting Standards (HKFRS) as issued at 31 August 2020 and that apply to
financial years commencing on or after 1 January 2020.
This publication includes the disclosures required by the Hong Kong Companies Ordinance (Cap. 622) and the Rules Governing the
Listing Securities on The Stock Exchange of Hong Kong Limited and the Rules Governing the Listing of Securities on the Growth
Enterprise Market of The Stock Exchange of Hong Kong Limited (the ¡°Listing Rules¡±) published up to and including August 2020. Their
related disclosures are marked in red and orange respectively. This publication has not included all the disclosures required by the
Listing Rules. For example, the disclosure of corporate governance has not been included as it is expected to vary significantly from one
company to another company and should be tailored to suit the particular circumstances of the company. Please refer to Appendix 14 of
Main Board Listing rules / Appendix 15 of GEM Listing rules for detailed disclosure requirements of corporate governance report.
This publication includes presentation and disclosures of treasury shares. These disclosures are for illustrative purposes only for those
companies which are allowed to hold treasury shares under the laws and regulations of the place of incorporation. Companies
incorporated in Hong Kong are not allowed to hold treasury shares under the Hong Kong Companies Ordinance (Cap. 622). Also, Hong
Kong listed companies are not allowed to hold treasury shares under Listing Rules (unless a specific waiver is obtained from The Stock
Exchange of Hong Kong Limited).
We have attempted to create a realistic set of financial statements for VALUE HKFRS Limited, a corporate entity that manufactures
goods, provides services and holds investment property. However, as this publication is a reference tool, we have not removed any
disclosures based on materiality. Instead, we have included illustrative disclosures for as many common scenarios as possible. Please
note that the amounts disclosed in this publication are purely for illustrative purposes and may not be consistent throughout the
publication.
New disclosure requirements and changes in accounting policies
After several years of major changes, there are only a few revisions to the financial reporting requirements that we had to illustrate in
these example financial statements. At the time of writing, the biggest impact on the financial statements of entities all around the world
is related to the COVID-19 pandemic. Most entities will be affected by this in one form or another. However, as the events are still
unfolding, except the early adoption of the amendments made to HKFRS 16 Leases for COVID-19-related rent concessions in 2020 as
illustrated in the example financial statements (see note 2), this publication is not providing any other illustrative examples or guidance.
Instead, we are referring our readers to our dedicated web site which provides many useful resources, including certain disclosure
examples, and which is constantly being updated to reflect latest developments.
Our fact pattern further assumes that VALUE HKFRS Limited will not be affected by the interest rate benchmark reforms. However,
entities with significant hedging relationships will need to explain the changes to their accounting policies and provide the new
disclosures arising from the adoption of the amendments made to HKFRS 9 Financial Instruments or HKAS 39 Financial Instruments:
Recognition and Measurement and HKFRS 7 Financial Instruments: Disclosures. This includes entities that have exposure to interest
rates where (i) the interest rates are dependent on interbank offered rates (IBORs), and (ii) these IBORs are subject to interest rate
benchmark reforms. The new disclosures are illustrated in Appendix G.
In addition, we have added comparative information to the leasing disclosures that were new last year and where comparatives were not
provided as the simplified transition approach was followed, and removed the previous leasing disclosures that are now no longer
required (see note 15(b), note 33 and note 40). We have also made a few improvements to existing disclosures and replaced references
to the conceptual framework with those to the HKICPA¡¯s revised Conceptual Framework for Financial Reporting.
The other amendments to standards that apply from 1 January 2020 are primarily clarifications, see Appendix F. We have assumed that
none of them required a change in VALUE HKFRS Limited¡¯s accounting policies. However, this assumption will not necessarily apply to
all entities. Where there has been a change in policy that has a material impact on the reported amounts, this would need to be
appropriately disclosed.
Early adoption of standards and impacts of standards and interpretations not yet adopted
Other than the amendments to lease accounting for COVID-19-related rent concessions that provide operational relief to entities that
are lessees and have been granted such concessions, VALUE HKFRS Limited generally only adopts other standards early if they clarify
existing practice, such as the amendments made by the HKICPA as part of the improvements programme, but do not introduce
substantive changes.
As required under HKFRS, the impacts of standards and interpretations that have not been early adopted and that are expected to have
a material effect on the entity are disclosed in accounting policy note 2. A summary of all pronouncements relevant for annual reporting
periods ending on or after 31 December 2020 is included in Appendix F. For updates after the cut-off date for our publication, see
.
i
Using this publication
The source for each disclosure requirement is given in the reference column. Shading in this column indicates changes made as a result
of new or revised requirements that become applicable for the first time this year. There is also commentary that (i) explains some of
the more challenging areas, (ii) lists disclosures that have not been included because they are not relevant to VALUE HKFRS Limited,
and (iii) provides additional disclosure examples.
The appendices give further information about the operating and financial review (management commentary), alternative formats for
the statement of profit or loss and other comprehensive income and the statement of cash flows, and industry-specific disclosures. A
summary of all standards that apply for the first time to annual reports beginning on or after 1 January 2020 is included in Appendix F,
and abbreviations used in this publication are listed below.
The references in the left-hand margin of the financial statements represent the paragraphs of Hong Kong Financial Reporting
Standards, the Companies Ordinance or the Listing Rules in which the disclosure appears. The designation ¡®DV¡¯ (disclosure voluntary)
indicates that disclosure is encouraged but not required and, therefore, represents best practice.
List of abbreviations used
Abbreviations
Hong Kong Accounting Standard No. 1, paragraph 1
HKAS1(1)
Hong Kong Accounting Standard No. 1, paragraph 81A(a)
HKAS1(81A)(a)
The Guidance on Implementing of Hong Kong Accounting Standard No. 1, paragraph 5
HKAS1(IG 5)
Hong Kong Accounting Standard No. 1, Basis for Conclusions, paragraph 21
HKAS1(BC 21)
Hong Kong Financial Reporting Standard No. 2, paragraph 6
HKFRS2(6)
HK(SIC) Interpretation No. 13, paragraph 4
HK(SIC)13(4)
HK(IFRIC) Interpretation No. 6, paragraph 4
HK(IFRIC)6(4)
The Hong Kong Companies Ordinance (Cap. 622), Section 383
s383
The Hong Kong Companies Ordinance (Cap. 622), paragraph 1, part 1 of Schedule 4
4Sch.p1.1
Companies (Disclosure of Information about Benefits of Directors) Regulation (Cap. 622G),
Section 4
622G4
Companies (Directors¡¯ Report) Regulation (Cap. 622D), Section 3
622D3
For listed companies only
References to Listing Rules relating to Main Board:
The Listing Rules, Practice Note No. 5, paragraph 5(3)
PN5.5(3)
The Listing Rules, Appendix 16, paragraph 4(1)(a)
A4(1)(a)
The Listing Rules, Chapter 14, paragraph 8
MB14.08
The Listing Rules, Appendix 14, paragraph C.1.2
MB Appendix 14(C.1.2)
Reference to Listing Rules relating to GEM:
The Listing Rules, Chapter 18, paragraph 15
GEM18.15
The Listing Rules, Appendix 16, paragraph 1
GEM Appendix 16(1)
The Listing Rules, Appendix 15, paragraph C.1.2
GEM Appendix
15(C.1.2)
References to ¡°Review of Issuers¡¯ Annual Report Disclsoures¡± issued by HKEx:
Review of Issuers¡¯ Annual Report Disclsoures Report 2019, paragraph 88
Financial Statements Review Programme Report 2016, paragraph 35
ii
HKEx Review 2019,
para 88
FS Review 2016, para.
35
As VALUE HKFRS Limited is an existing preparer of HKFRS consolidated financial statements, HKFRS 1 First-time Adoption of Hong
Kong Financial Reporting Standards does not apply.
The example disclosures are not the only acceptable form of presenting financial statements. The form and content of each reporting
entity¡¯s financial statements are the responsibility of the entity¡¯s management. Alternative presentations may be acceptable if they
comply with the specific disclosure requirements prescribed in HKFRS.
Some of the disclosures in this publication would likely be immaterial if VALUE HKFRS Limited was a ¡®real life¡¯ company. The purpose
of this publication is to provide a broad selection of illustrative disclosures which cover most common scenarios encountered in
practice. The underlying story of the company only provides the framework for these disclosures and the amounts disclosed are for
illustration purposes only. Disclosures should not be included where they are not relevant or not material in specific circumstances.
Guidance on assessing materiality is provided in HKAS 1 Presentation of Financial Statements.
Specialised companies and industry-specific requirements
VALUE HKFRS Limited does not illustrate the disclosures specifically relevant to specialised industries. However, Appendix E provides
an illustration and explanation of the disclosure requirements of HKFRS 6 Exploration for and Evaluation of Mineral Resources and
HKAS 41 Agriculture. Further examples of industry-specific accounting policies and other relevant disclosures can be found in the
following PwC publications:
?
Illustrative financial statements ¨C Investment funds
?
Illustrative consolidated financial statements ¨C Investment property
?
Illustrative financial statements ¨C Private equity funds
?
IFRS 9 for banks ¨C Illustrative disclosures
?
Illustrative consolidated financial statements - Insurance.
iii
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