As one of the two SARs of China, Hong Kong enjoys the rights to develop its own accounting standards, rather than applying the relative standards of mainland China. The Hong Kong Institute of Certified Public Accountants (HKICPA) is the only organization authorized by law to promulgate financial reporting and auditing standards for professional accountants in Hong Kong.

What is the Hong Kong Financial Reporting Standard?

The accounting standards of Hong Kong are known as the Hong Kong Financial Reporting Standards (HKFRS), which have been fully converged with International Financial Reporting Standards (IFRS) since January 1, 2005. According to the HKICPA, HKFRS are designed to apply to general purpose financial statements and other financial reporting of all profit-oriented entities.

On April 30, 2010, the HKICPA issued the Hong Kong Financial Reporting Standard for Private Entities (HKFRS for Private Entities) as a financial reporting option for private entities to relieve the reporting requirements under full HKFRS. Section 1 of HKFRS for Private Entities presents the qualifying criteria for applying this standard.

[tips title="Important Tip"]Entities are not mandated to adopt this standard, even if they are eligible to do so. This means that such eligible entities can apply for the full HKFRS if they wish.[/tips]

Are there any additional reporting standards in Hong Kong?

There is an additional standard that applies to small and medium-sized entities, the Hong Kong Small and Medium-sized Entity Financial Reporting Framework and Financial Reporting Standard (SME-FRF & SME-FRS). This standard was initially issued in August 2005 and revised in March 2014. Again, the standard is not mandatory. The qualifying criteria is set out in Division 2 of the Hong Kong Companies Ordinance and highlighted in Paragraphs 22-43 of this standard.

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