Disclosure plan for accountants hits opposition
The Hong Kong Society of Accountants (HKSA) says it will partially redraft a proposed accounting standard aimed at increasing corporate disclosure of related party transactions.
Although the draft proposal won significant support in the area of general party disclosure, it encountered corporate opposition to individual provisions.
This led to the redraft proposal, HKSA director of professional standards James Fawls said.
'This will involve tidying up a number of definitions and clarifying a few areas people found confusing,' he said.
The term 'related party' refers broadly to any associated company, subsidiary and/or joint venture, as well as any other company controlled by the same shareholders.
Some corporate respondents expressed strong opposition to a rule which, if implemented, would force companies to disclose the individual names of related parties with which they dealt.
The Society will partly redraft this aspect of the rules.
'We will revise the parts of the standard that relate to disclosing related party relationships where there have been no transactions during the year,' Mr Fawls said.
Concerns were raised about the implications of the provision, particularly about the degree to which it would affect the privacy of companies.
These concerns were particularly registered among unlisted and smaller listed groups. For listed companies, it is not so much of an issue because they already have relatively high levels of disclosure.
The initial draft document released by the HKSA proposed companies should disclose related party transactions and relationships in all financial statements - whether or not they were listed.
The document went well beyond the stock exchange's existing policy on connected transactions.
Some company auditors are known to have complained about the existing document and the fact the HKSA's proposals would rapidly increase administrative costs for companies because of what they termed as the release of 'unnecessary information'.