HKEx review of listed companies’ financial reports

The Hong Kong Exchanges and Clearing Limited (“HKEX”) has recently published a report summarizing key observations and findings from her review of 100 issuers’ annual, interim and quarterly financial reports released between October 2013 and April 2015. The reports highlight several key areas where listed companies can continue to improve their compliance with the disclosures requirements of the Listing Rules and accounting standards:

• Take note of the Listing Rules disclosure requirements related to financial information, as well as Listing Rules amendments
• Provide additional information in reports when there are significant events or material balances and transactions
• Provide clear, understandable and entity-specific information in relation to disclosure of the judgements and estimates used in applying the accounting policies
• State clearly when the listed company is not an early adopters of new or revised accounting standards that have been issued but are not yet effective, and provide the known or reasonably estimable information needed to assess the possible impact that application of the new or revised standards will have on their financial statements in the period of initial applications
• Ensure robust asset impairment review processes are in place and improve the quality of disclosures particularly where the recoverable amount was based on value in use
• Provide entity-specific information rather than boilerplate text in presenting financial risk information, the disclosure should enable users to understand what management thinks are the key financial risks and how they have been adequately managed
• Follow disclosure requirements under HKFRS 13 “Fair Value Measurement” to enable users to assess the valuation techniques and inputs used in fair value measurements, especially those on significant unobservable inputs and the effect on financial statements.

Financial reports should provide clear and concise information that is relevant and material, directors and those responsible for preparing annual reports of listed companies should take note of and act on the observations and findings discussed in the report.

Source: http://www.hkex.com.hk/eng/rulesreg/listrules/guidref/Documents/frm-14.pdf