Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
(c)
HK Listco Ltd
Financial statements for the year ended 31 December 2023
Long service payment liabilities
Hong Kong employees that have been employed continuously for at least five years are entitled to
long service payments in accordance with the Hong Kong Employment Ordinance under certain
circumstances. These circumstances include where an employee is dismissed for reasons other than
serious misconduct or redundancy, that employee resigns at the age of 65 or above, or the
employment contract is of fixed term and expires without renewal. The amount of LSP payable is
determined with reference to the employee's final salary (capped at $22,500) and the years of service,
reduced by the amount of any accrued benefits derived from the group's contributions to MPF
scheme (see note 28(a)) or ORSO plans (see note 28(b)), with an overall cap of $390,000 per
employee. Currently, the group does not have any separate funding arrangement in place to meet its
LSP obligation.
In June 2022, the Government gazetted the Amendment Ordinance, which will eventually abolish the
statutory right of an employer to reduce its LSP payable to a Hong Kong employee by drawing on its
mandatory contributions to the MPF scheme. The Government has subsequently announced that the
Amendment Ordinance will come into effect from the Transition Date. Separately, the Government is
also expected to introduce a subsidy scheme to assist employers after the abolition 244.
Among other things, once the abolition of the offsetting mechanism takes effect, an employer can no
longer use any of the accrued benefits derived from its mandatory MPF contributions (irrespective of
the contributions made before, on or after the Transition Date) to reduce the LSP in respect of an
employee's service from the Transition Date. However, where an employee's employment
commenced before the Transition Date, the employer can continue to use the above accrued benefits
to reduce the LSP in respect of the employee's service up to that date; in addition, the LSP in respect
of the service before the Transition Date will be calculated based on the employee's monthly salary
immediately before the Transition Date and the years of service up to that date.
The group has accounted for the offsetting mechanism and its abolition as disclosed in notes 1(c)(ii)
and 1(x)(ii).
The group has determined that the Amendment Ordinance primarily impacts the group's LSP liability
with respect to Hong Kong employees that do not participate in the group's ORSO plans. The
Amendment Ordinance has no material impact on the group's LSP liability with respect to employees
that participate in the group's ORSO plans.
244
The HKICPA guidance "Accounting implications of the abolition of the MPF-LSP offsetting mechanism in Hong Kong" notes that
the expected government subsidy does not yet meet the recognition criteria of any element of the financial statements based on
an assessment of relevant facts and circumstances at the time the guidance was published. Entities should consider the latest
developments in this respect and evaluate the impact of those developments on their annual financial statements. This includes
the need to provide any relevant subsequent event disclosures about the government subsidy based on relevant facts and
circumstances up to the time the annual financial statement is authorised for issue.
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