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Hong Kong Financial Reporting Standards

The Hong Kong Financial Reporting Standards, or HKFRS for short, is a set of financial reporting standards issued by the Hong Kong Institute of Certified Public Accountants (HKICPA) in Hong Kong.

Why do business owners need to know about this?

Every company in Hong Kong needs to know and follow these standards to maintain proper bookkeeping to meet audit requirements annually. It’s part of being a compliant business in Hong Kong. It’s so that anyone interested to know about your company’s numbers is on the same page when reporting them, or that you are speaking in the same language. For example, when you talk about revenue, both your company and the Inland Revenue Department would know exactly what you are reporting. It is the application of HKFRS that gives us a “true and fair view” of financial statements.

Just saying here, you can do these administrative tasks yourself but if you want to concentrate on other aspects of your business, we’ll gladly help you with it. While we are on this topic, don't forget that we provide online bookkeeping services.

Now let’s look into the reporting standards that exist and why you need them.

The Financial Reporting Standards

Hong Kong abides by the Financial Reporting Standards (FRS) framework, which follows the International Financial Reporting Standards (IFRS) model. This framework is under the International Accounting Standards Board (IASB). In a nutshell, the accounting standards provide an overview which is “honest and fair” of a company’s financial statements.

Part of the principles of the accounting standards in Hong Kong is that a business entity is responsible for the preparation of their financial statements.

Hong Kong Financial Reporting Standards (HKFRS)

HKFRS is a set of all the documents the government expects and the accounting standards they must comply with. They contain rules to do proper accounting and prepare financial statements.

In short, it is a way for companies to submit their financial report in a uniform manner that applies to companies in Hong Kong so that it is easier for the auditors to audit your report.

So, in general, this term (Hong Kong Financial Reporting Standards) includes:

  • Hong Kong Financial Reporting Standards
  • Hong Kong Accounting Standards (HKAS)
  • Interpretations issued by the Hong Kong Institute of Certified Public Accountants (HKICPA)

Why do I need to know Financial Reporting Standards?

When you own a profit-oriented entity and need to present a financial statement or other financial reporting, you will have to follow the Hong Kong Financial Reporting Standards. When we talk about profit-oriented companies we mean those that perform commercial, financial and other activities of this kind.

Sometimes, the company’s shareholders, creditors, employees and the public at large need to get some common information about the financial position of the company, its performance and cash flows. General-purpose financial statements contain such information.

If you lead a non-profit activity in the private sector, public sector or government, then you won’t need to worry about the compliance with HKFRS.

For the complete guide to the standards, view the HKICPA’s HKFRS Handbook here.

What financial documents do I need to prepare according to the financial reporting standards?

HKFRS applies to general purpose financial statements and other financial reporting of all profit-oriented entities.

These documents would need to adhere to the HKFRS:

  • Statement of comprehensive income, or Profits and Loss statements
  • Statement of Financial Position ( or Balance Sheet)
  • Statement of cash flow
  • Statement showing changes in equity or changes arising from capital transactions
  • Accounting policies
  • Explanatory notes

Some examples of Hong Kong Financial Reporting Standards

Standards of HKFRS

The HKFRS consists of 41 distinct accounting standards, 15 financial reporting standards and several interpretations. Each standard relates to a specific topic such as the way a company presents its financial statements, inventories, statement of cash flows, income taxes etc.

HKAS 18: Revenue

Hong Kong Accounting Standard 18 Revenue (HKAS 18) sets out how accountants would look at revenue arising from transactions and events. This standard would help to determine when to recognise a transaction or an event as “revenue”.

According to HKAS 18:

  • Revenue shall be measured at the fair value of the consideration received or receivable.
  • Revenue from the sale of goods shall be recognized when all the following conditions have been satisfied:
  • The entity transfers to the buyer the significant risks and rewards of ownership of the goods;
  • The entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
  • The amount of revenue can be measured reliably;
  • It is probable that the economic benefits associated with the transaction will flow to the entity; and
  • The costs incurred or to be incurred in respect of the transaction can be measured reliably.

If you need help getting through this, slide into our chat and ask our accountants.

SMEs enjoy some reporting exemptions

Some private and limited companies in Hong Kong have the right to get an optional reporting exemption. This was stated in the Hong Kong Companies Ordinance which came into effect in 2014. It is also known as the new “CO”, short for Companies Ordinance.

Below is the size test. A company must meet 2 out of 3 criteria to be eligible for the exemption in reporting:

Criteria / Type of company Small private company Larger "eligible" private company
Annual revenue cannot exceed HK $100 million HK $200 million
Total assets cannot exceed HK $100 million at the end of the reporting period HK$200 million at the end of the reporting period
The number of employees cannot exceed 100 100

How do I know if I am eligible for the reporting exemptions?

Your company cannot be exempted if:

  1. Your company is in the banking business and is authorised under the Banking Ordinance
  2. Your company accepts loans at interest or repayable premium.
  3. Your company is licensed to carry on a regulated business (under Part V of the Securities and Futures Ordinance)
  4. Your company does any insurance business, other than a sole agent

You can check the whole list of rules and standards in a Small Business Working Group Handbook, or double-check with us.


All Financial Reporting standards exist to help entrepreneurs understand the financial transactions of the company. Following them is essential. Otherwise, you are risking not giving the right numbers and documents to your stakeholders. Business decisions need to be made on true data.

You can follow these yourself, or you can ask our experienced accountants to assist you while you focus on growing your business.

Author Osome Content TeamOsome Content Team

4 min readSep 10, 2020

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