HKFRS guide: choosing a financial reporting framework in Hong Kong

Every Hong Kong company prepares annual financial statements for audit. The framework you use decides how much detail goes into them, and the right choice depends mainly on the company's size and who relies on its accounts.

Full HKFRS

Full Hong Kong Financial Reporting Standards are converged with IFRS Accounting Standards. Listed companies and groups with public accountability use them, as do companies whose investors or lenders require IFRS-equivalent statements.

HKFRS for Private Entities

This is a simplified standard for entities without public accountability. It has fewer accounting policy choices, simpler recognition rules and much lighter disclosure. It suits most private trading and holding companies that do not qualify for the SME framework or prefer a fuller standard.

SME-FRF and SME-FRS

The Small and Medium-sized Entity Financial Reporting Framework is available to companies that qualify for simplified reporting under the Companies Ordinance. Examples include small private companies within the size limits and, with shareholder approval, some larger private companies. It is largely based on historical cost and gives the shortest accounts.

Choosing and changing

Consider who reads the accounts. Banks, investors, a parent group's reporting requirements and planned fundraising can each push you towards a fuller framework. Changing framework later means restating comparatives, so it is worth deciding at incorporation or at the first audit.

Working with the auditor

Whichever framework you choose, the auditor reports against it. Agree it at the planning stage so the year-end file, disclosure checklist and tax computation all start from the same basis.

Our year-end team prepares the financial statements under the chosen framework and coordinates the audit with your auditor.