HKFRS For Private Entities in Hong Kong

HKFRS For Private Entities in Hong Kong

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In fact, the Hong Kong business environment is exceptionally friendly and the reason why many businesses are moving there is not surprising at all. This market is notable for being a private sector market, either foreign or local.

The accounting part is the most important thing that you should know how to do before setting up a business in Hong Kong. Those are, for instance, reporting the financial statements of Hong Kong private company and others.

In this article, we will discuss how the Hong Kong Financial Reporting Standard For Private Entities functions.

Hong Kong Financial Reporting Standard for Private Entities

The Hong Kong Private Entities Financial Reporting Standard was rolled out in 2010. The goal of the Hong Kong Financial Reporting Standard For Private Entities is to address private businesses without pubic accountability.

In the case where the full Hong Kong Financial Reporting system is in place, some of the accounting treatments that are permitted are excluded under the Hong Kong Financial Reporting Standard For Private Entities. It will also remove all topics and disclosure requirements that are not applicable to private entities.

Generally, the Hong Kong Financial Reporting Standard For Private Entities will make the measuring to recognize the use of the national financial account standard in Hong Kong easy for all private entities.

Hong Kong Financial Reporting System

The Hong Kong Financial Reporting System (HKFRS) or it is better known as Hong Kong accounting standards (HKAS), is the set of the rules of the country on all financial transactions.

In the context of HKFRS, it implies rules that specify how business transactions are treated. These guidelines are set by the basic principles, term definitions and minimum disclosure levels. The HKFRS can be considered the cornerstone of the reasonable and transparent financial records in Hong Kong.

HKFRS could accomplish this goal by setting out not only the rules for financial statements, but also by reliably interpreting any ambiguity, giving rise to the accounting system of Hong Kong.

Scope of HKFRS and Non-Governmental Organizations

It is important to note that the framework of the HKFRS is comprised of rules that are supposed to apply to all financial reports and statements in which profit is the aim.

In consistent with this, non-government organizations do not follow the HKFRS since they are not to be profit-oriented as per their mandate. In its processes, the HKFRS implement the reporting standards, the accounting standards and any other interpretations the HKICPA comes up with.

Therefore, as per its mission, it describes financial organizations as those which are involved in financial, industrial, commercial and relational activities. In terms of all non-governmental organizations, whether they are in public or private sectors, the HKFRS is not applicable.

Accrual Accounting Basis in IFRS Hong Kong

It is the main rule of the IFRS Hong Kong, that is also referred to as the accrual accounting basis. The Accrual accounting basis is like the basis in the Hong Kong accounting system. The cash flow based accounting is the only exception to the accrual accounting method adopted in Hong Kong.

The accrual accounting basis ensures reactions to any relevant transaction that might incur material accounting changes.

This system enables the generation of financial statements that not only explain the past financial transactions but also promotes identification of future transactions. It is also the most powerful mechanism against illegal transactions where the payments are made using cash.

How FastLane Group Can Help?

It should be noted that respecting the Hong Kong private business assessing standard can prevent you from possible legal problems. If the company is planning to use Hong Kong as its principal place of office, then it needs to abide by the financial reporting requirements, which are like the HKFRS. This system does work and the entrepreneurs must follow it irrespective of the difference in frameworks.

Should you be having difficulty grasping the given reporting standards or need counsel, FastLane can assist you. From consultancy services to bookkeeping services, FastLane’s accounting service has got you covered so your business can thrive even more by cutting down on time spent managing your books. Being fully aware of the Hong Kong GAAP and the help of experienced technicians our financial statements are completely managed.

Contact us for more information!

Frequently Answered Questions

Hong Kong Financial Reporting Standards (HKFRS) constitute a necessary set of requirements for general-purpose financial reporting by private sector entities within Hong Kong. The basis of are International Financial Reporting Standards (IFRS), and the motive envisaged is financial reporting with a high level of transparency and reliability.

HKFRS is an umbrella term that collectively represents asset and liability recognition, measurement, presentation, and disclosure. The Hong Kong Financial Reporting Standard For Private Entities has also exacted its resonance on the local entities.

The filing of the entire companies concerns their annual returns in HK; however, their due filing periods could be dependent on the type of companies involved. For private companies, an annual filing date is due within 42 days of the date of incorporation.

Companies eligible for limited guarantee status have a filing date 42 days before listed on the designated date of return.

Companies situated in Hong Kong have to present annual returns annually. This means that all entities, whether they are in the form of a company, partnership, LLC, or having any earnings, will submit their returns every year.

Deliberate delay in registering a company will certainly draw severe consequences, and the deduction was not limited to only directors also perceived as criminals such as the secretary and other executives.

The violation of the requirement to file annual returns in Hong Kong consists in the fact that it can end with very heavy punishments. Having no tax filing in Hong Kong does not mean that the company director and the officer in charge will be the only people punishable for it. The top officials also have the same responsibility.

All the levels of officers, i.e. the director to the secretary, can be fined or prosecuted, and a fine of 50,000 HKD is imposed for a single offense. As a result, an everyday fine begins from 1000 HKD per day from then onwards.

Companies in Hong Kong can be designated as either an international or a local standard for financial reporting.

SME-FRF is designed to provide support resources to small, and micro enterprises which are those that don’t normally have enough resources. The financial disclosure practices of a company will determine which standard to follow for its statements and the director’s report. These are the ones that will serve as a guide to what information an SME is required to disclose.

Among the 56 accounting standards used under the HKFRS, about 41 of them are accounting standards while the rest are reporting standards. 

The division of financial measures is typically a function of different types of companies or the financial condition of particular companies. Invariably only one company being certified for any specific accounting standard applicable in Hong Kong is a real possibility.

Hong Kong highly relies on International Financial Reporting Standards (IFRS), which is the international means of reporting currently being used.

In some respects, the part of US Generally Accepted Accounting Principles (GAAP) might be useful, but mainly there is no contradiction between the framework for financial reporting in Hong Kong and the International Financial Reporting Standards (IFRS).

The Hong Kong Financial Reporting Standards (HKFRS) are IFRS-based and the main source of accounting standards employed by private enterprises in Hong Kong.

Yes, Hong Kong companies do have options to report using the International Financial Reporting Standards (IFRS) which is the main accounting standard adopted in Hong Kong for accounting for financial reporting, is used for financial reporting.

The Hong Kong Financial Reporting Standards (HKFRS) follow the IFRS standards and are widely used to report financial statements by both limited and public entities.

The adoption of IFRS guarantees that local companies are transparent, their reports can be comparable internationally and locally and are consistent and understandable. These are the necessary conditions in recognition of the financial performance of the companies to meet the interests and expectations of stakeholders.

HKFRS ( Hong Kong Financial Reporting Standards) is a modified form of IFRS ( International Financial Reporting Standards) provided with local differences and interpretations.

The clear delimitation regards the details of disclosure provisions as well as of interpretations issued by the Hong Kong Institute of Certified Public Accountants (HKICPA) for Hong Kong standards.

The same thing is the case with HKFRS but adding more advantages if we strike a balance following local legal incorporates, especially during the formulation. Mainly, HKFRS works to make sure the accounting reporting is similar and IFRS-compliant in Hong Kong.