Hong Kong to allow China GAAP, auditors

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Hong Kong Exchanges and Clearing Limited (HKEx) published on 10 December 2010 its consultation conclusions on the acceptance of mainland accounting and auditing standards and mainland audit firms for mainland incorporated companies listed in Hong Kong.

The Exchange has decided to adopt the proposals in its consultation paper on the subject, which was published to seek public comments on a framework to:

– allow mainland incorporated issuers to prepare their financial statements using mainland accounting standards;

– allow mainland audit firms vetted, nominated and endorsed by the central government’s ministry of finance and the China securities regulatory commission to service these issuers using mainland auditing standards; and

– provide for a reciprocal arrangement to allow companies incorporated or registered in Hong Kong and listed on the mainland to prepare their financial statements using Hong Kong financial reporting standards or international financial reporting standards  (IFRS) and be audited by Hong Kong audit firms that are vetted, nominated, endorsed and registered with the Hong Kong Institute of Certified Public Accountants (HKICPA) and use Hong Kong standards on auditing, or international standards on auditing for the audits.

The proposed framework was a joint effort of mainland authorities and Hong Kong regulators, including the Financial Services and the Treasury Bureau, the Securities and Futures Commission (the SFC), the Financial Reporting Council, the HKICPA and The Stock Exchange of Hong Kong Limited.