Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
(ii)
New HKICPA guidance on the accounting implications of the abolition of the MPF-LSP offsetting
mechanism
As disclosed in note 28(c), in June 2022 the Hong Kong SAR Government (the "Government") gazetted
the Hong Kong Employment and Retirement Schemes Legislation (Offsetting Arrangement)
(Amendment) Ordinance 2022 (the "Amendment Ordinance"), which will come into effect from 1 May
2025 (the "Transition Date"). Once the Amendment Ordinance takes effect, an employer can no longer
use any of the accrued benefits derived from its mandatory contributions to mandatory provident
fund ("MPF") scheme to reduce the long service payment ("LSP") in respect of an employee's service
from the Transition Date (the abolition of the "offsetting mechanism"). 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.
In July 2023, the HKICPA published "Accounting implications of the abolition of the MPF-LSP offsetting
mechanism in Hong Kong" that provides accounting guidance relating to the offsetting mechanism and
the abolition of the mechanism. In particular, the guidance indicates that entities may account for the
accrued benefits derived from mandatory MPF contributions that are expected to be used to reduce
the LSP payable to an employee as deemed contributions by that employee towards the LSP.
However, applying this approach, upon the enactment of the Amendment Ordinance in June 2022, it is
no longer permissible to apply the practical expedient in paragraph 93(b) of HKAS 19 that previously
allowed such deemed contributions to be recognised as reduction of service cost (negative service
cost) in the period the contributions were made; instead these deemed contributions should be
attributed to periods of service in the same manner as the gross LSP benefit.
To better reflect the substance of the abolition of the offsetting mechanism, the group has changed its
accounting policy in connection with its LSP liability and has applied the above HKICPA guidance
retrospectively. The cessation of applying the practical expedient in paragraph 93(b) of HKAS 19 in
conjunction with the enactment of the Amendment Ordinance resulted in a catch-up profit or loss
adjustment in June 2022 for the service cost up to that date and consequential impacts on current
service cost, interest expense and remeasurement effects from changes in actuarial assumptions for
the rest of 2022 (see note 28(c)), with the corresponding adjustment to the comparative carrying
amount of the LSP liability. This change in accounting policy did not have any impact on the opening
balance of equity at 1 January 2022, and the cash flows and earnings per share amounts for the year
ended 31 December 2022. It also did not have a material impact on the company-level statement of
financial position as at 31 December 2022 and 31 December 2023.
HKAS 12.88A,
88C-88D
85
CP
In this illustration, it is assumed that certain relevant new tax laws implementing the Pillar Two model rules have been enacted or
substantively enacted by 31 December 2023 in at least one of the jurisdictions in which HK Listco operates, and HK Listco expects to be
impacted by these new tax laws. Accordingly, HK Listco has disclosed the impacts of the amendments to HKAS 12 in the change in
accounting policy note and provided further disclosures in note 6(c).
If none of the jurisdictions in which an entity operates has enacted or substantively enacted the tax laws to implement the Pillar Two
model rules by the reporting date, but the entity expects that it will be impacted by the new or forthcoming tax laws, it is a best practice to
nevertheless disclose information about the estimated exposure and/or progress in assessing the exposure. See note 6(c) and footnote 147
for further details of the disclosure requirements introduced by the amendments.
46
© 2023 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"),
a private English company limited by guarantee. All rights reserved.View entire presentation