For entities reporting under Hong Kong Financial Reporting Standards (HKFRSs), 2005 was certainly a remarkable year.

The harmonisation of HKFRSs with the International Financial Reporting Standards (IFRSs) resulted in changes in some significant accounting policies and new disclosure requirements. For many preparers, I believe this “big bang” adoption created a lot of hard work and the preparation of the 2005 financial statements was the most challenging task for many years.

The new HKFRSs aim to improve transparency and provide clear and unambiguous information to users and accordingly requires significantly increased disclosure requirements. However, with this increased disclosure burden, regulators and reviewers have found that there is a tendency for preparers to use boiler-plate type disclosures irrespective of their relevance to the specific entity’s financial information. While these illustrative model financial statements provide guidance on disclosure, it is essential for preparers to tailor the descriptions according to the specific circumstances of the entity, in particular, those describing accounting policies, key sources of estimation uncertainties and financial instruments risk disclosures.

With the promise by the International Accounting Standards Board to provide a “stable platform” until 2009, the new standards, interpretations and the changes in standards that impact reporting entities in 2006 have been less significant.

However, due consideration does need to be given to these changes as well as the option to early adopt those standards, amendments or interpretations issued but not yet effective. As well as addressing these new and revised requirements, I also strongly encourage preparers to respond to the challenge of producing annual reports that are clear and unambiguous and that are tailored specifically to the circumstances of the entity.

This publication includes an illustrative 2006 annual report issued by a fictitious listed company, a presentation and disclosure checklist for 2006 and a section which gives a summary of the key changes to HKFRSs and listing rules which affect the disclosure and presentation of information in the financial statements in issue as of 25 January 2007.

Please continue to keep up to date with the new international developments that will shape Hong Kong Standard setting in future via our IAS Plus website (www.iasplus.com) .

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