Investor Presentaiton
Appendix D
Notable HKICPA financial reporting guidance
From time to time, the HKICPA issues educational materials on the application of HKFRSS to cater for local needs and issues and to
promote consistent application.
This appendix highlights a notable piece of HKICPA guidance issued in July 2023 that may have pervasive impact on entities reporting
under HKFRSS.
While the guidance is technically non-authoritative, it provides additional insights that might change an entity's understanding of the
principles and requirements in HKFRSS and, because of this, an entity might determine that it needs to change its related accounting
policies. Specifically, the HKICPA notes in the guidance its expectations that entities have to determine whether their existing
accounting policies on the related issues remain appropriate and, if their existing accounting policies are materially different from those
described in the guidance, consider implementing a voluntary accounting policy change to conform with the guidance.
Similar to an accounting change that results from an agenda decision published by the Committee (see Appendix C), the HKICPA
guidance notes that entities should also be entitled to "sufficient time" to implement changes in accounting policies that result from the
guidance, but any such changes should be implemented in a timely manner.
More information on the HKICPA guidance can be obtained from your usual KPMG contact.
Issue date
Title of the publication
4 July 2023
Accounting implications of the
abolition of the MPF-LSP offsetting
mechanism in Hong Kong
Summary of the guidance
The guidance sets out the accounting considerations relating to:
(a) the Mandatory Provident Fund ("MPF")-Long Service Payment
("LSP") offsetting mechanism in Hong Kong SAR, and
(b) the abolition of such mechanism, which was gazetted by the
Government of the Hong Kong SAR on 9 June 2022 in the form of
the Hong Kong Employment and Retirement Schemes Legislation
(Offsetting Arrangement) (Amendment) Ordinance 2022 (the
"Amendment Ordinance").
The HKICPA guidance outlines the following two acceptable accounting
approaches, which characterise the nature of an employer's right to the
accrued benefits arising from its MPF contributions differently, with different
recognition, measurement, as well as presentation and disclosure outcomes
in an entity's financial statements:
(a) account for the accrued benefits derived from an employer's
mandatory MPF contributions that are expected to be used to
reduce the LSP payable to an employee as deemed contributions
by that employee towards his LSP benefits
(b) account for an employer's MPF contributions as the employer's
funding mechanism which gives rise to a right of reimbursement
for its LSP obligation.
From a financial reporting perspective, however, the above guidance is likely
to be an immediate impact on the financial statements of entities with a
significant employee base in Hong Kong SAR, even though from a legal point
of view the Amendment Ordinance has a prospective application as from
May 2025.
At the time of finalising the Amendment Ordinance, the Government of the
Hong Kong SAR indicated that it would launch a scheme to subsidise
employers for a period of 25 years after the transition date on the LSP
payable by employers up to a certain amount per employee per year. The
HKICPA guidance notes that this 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 issued.
[End of Table D]
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