HKSA extends deadline for reaction to standards draft
The Hong Kong Society of Accountants (HKSA) will allow firms more time to make responses to a controversial draft accounting standard that would dramatically escalate the degree of disclosure of related party transactions.
Authorities had won widespread support for the broad principle of increased related party disclosures, but encountered significant opposition to individual provisions of the draft standard.
In particular, corporate respondents expressed strong opposition to a rule that, if implemented, would force companies to disclose the individual names of related parties with which they dealt.
James Fawls, director of professional standards at the society, said companies would be allowed a month to make submissions on the standard.
The extension had been made because of the interest level in the draft standard.
The society had received a larger than normal number of submissions on the draft standard by the time of the original deadline last month, largely complaining about the proposed disclosure of the names of related parties.
Concerns had been raised about the implications of this provision, particularly about the degree it would affect the privacy of companies.
This was particularly the case among unlisted companies and smaller listed groups.
The draft document deems that companies should disclose party relationships and transactions in all financial statements, whether or not they are listed.
If implemented as it stands, the document will go far beyond the stock exchange's connected transactions policy. Companies will have to report controlling relationships, whether or not transactions take place.
Some company auditors also complained that the standard would rapidly escalate administrative costs for companies because of what they termed the release of 'unnecessary information'.
The society is preparing 20 standards that will see the formulation of a clear set of formal reporting requirements for auditors.