THE Hongkong Society of Accountants is expected to effectively ban the use of extraordinary items in company financial results by the end of the year. The chairman of the society's accounting standards committee, Mr Paul Phenix, said the accounting standard changes under consideration were part of a process to keep local rules in line with international standards. It was also part of a gradual change-over of accounting principles in Hongkong from British standards and towards International Accounting Standards (IAS). In the proposed changes for extraordinaries, exceptionals and prior-year adjustments the society is expected to narrow the cases under which extraordinaries can be entered in the accounts. A society spokesman said a new line in the profit and loss account would also be entered indicating the proportion of profit derived from discontinued activities. The proposals are being considered with IAS exposure draft 46 as a basis. This paper takes a similar line on extraordinaries, as the UK Accounting Standards Board Financial Report Statement Number 3 (FRS3). ''We are not adopting FRS3 verbatim as there are parts that have not a lot of relevance to Hongkong,'' said Mr Phenix. The society spokesman said: ''A lot of FRS3 is also concerned with the actual layout of the profit and loss account. ''We will not be following this in full as it might require another series of columns that were not there before.'' Exact details of what is being proposed by the accounting standards committee have not been released by the society. The society's council is expected to approve the changes before the summer and an exposure draft of what is proposed for consultation over two or thee months. ''The changes could be in force by the end of the year,'' said Mr Phenix. Under the IAS exposure draft the most common form of extraordinary items acceptable for companies in all cases apply to the expropriation of assets and to earthquakes. ''Only on rare occasions does an event or transaction give rise to an extraordinary item,'' says the IAS paper. The impact of the change on company reporting will be to make net profit reporting more volatile. The continuous and discontinuous reporting requirement for income will mean those looking at company data will be able to better gauge the quality of earnings.