Stock Exchange accepts Mainland Accounting and Auditing Standards

On 10th December 2010, the Hong Kong Exchange and Clearing Limited (HKEx) announced the decision on Acceptance of Mainland Accounting and Auditing Standards and Mainland Audit Firms for Mainland Incorporated Companies Listed in Hong Kong.

The framework includes the following:

-       Allow Mainland incorporated Main Board and Growth Enterprise Market listed companies to prepare their financial statements using China Accounting Standards for Business Enterprises (“CASBE”);

-       Allow Mainland audit firms approved by the Ministry of Finance of China and the China Securities Regulatory Commission to service these issuers using Mainland auditing standards; and

-       To provide for a reciprocal arrangement to allow companies incorporated or registered in Hong Kong and listed in the Mainland to prepare their financial statements using Hong Kong Financial Reporting Standards (“HKFRS”) / International Financial Reporting Standards (“IFRS”) and audited by Hong Kong audit firms registered with the Hong Kong Institute of Certified Public Accountants (“HKICPA”) using Hong Kong Standards on Auditing (“HKSA”) or International Standards on Auditing (“ISA”).

The effective commencement date for the new Listing Rules would be on 15 December 2010.

For issuers who decide to change and prepare its financial statements under CASBE should release an announcement on the change and explain the reasons and show the financial impact of the change. An issuer should not normally change back once it decides to change to CASBE. Listed issuers should decide which set of accounting standards is most suitable to them and adopt that set of accounting standards continuously.

If a Mainland incorporated listing applicant or issuer has decided to adopt CASBE for its annual accounting periods ending on or after 15 December 2010, in the preparation of financial information to be included in a prospectus or a circular issued on or after 15 December 2010, the financial information for all periods presented in the prospectuses or circular should also be prepared under CASBE.

For more information, please refer to the Consultation Conclusions and related Consultation Paper posted in the News & Consultations section of HKEx website. (www.hkex.com.hk)