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

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download