Hong Kong Accounting Standards

The accounting standards in Hong Kong are referred to as the Hong Kong Financial Reporting Standards (HKFRS), and prescribe the treatment of financial transactions in Hong Kong. These standards are issued by the Hong Kong Institute of Certified Public Accountants (HKICPA), who also issue Financial Reporting Standards for qualifying SMEs (SME-FRS) to reduce reporting procedures for small and medium-sized enterprises (SME).

HKFRS are modelled on and are broadly, but not exactly, the same as International Financial Reporting Standards (IFRS) framework, issued by the International Accounting Standards Board (IASB). The largest difference is on the treatment of inventory. HKFRS is generally more detailed than IFRS.

The HKFRS is made of 41 different accounting standards and 15 financial reporting standards. Each standard covers a discrete area, such as the financial statement presentations, cash flow statements, inventory, etc.


Financial year-end

The Hong Kong company’s fiscal year begins on the day of the company’s incorporation. The first year-end must be no later than 18 months after the incorporation date of the company, and should be decided by the directors before the first anniversary of the company. Succeeding accounting periods should be of 12 months.



All Hong Kong companies are required to maintain proper records and accounts to comply with the regulations on an annual basis. The records should be available for inspection at the registered office, or other designated address, and should be sufficient to give an up-to-date picture of the state of affairs of the company. They should include bank statements, sales invoices and expense receipts.

Bookkeeping ensures that all records of financial transactions are complete, correct and up to date. Income statements and balance sheets can be prepared once the bookkeeping is complete.


Annual Financial Statements 

All companies in Hong Kong must prepare annual financial statements, including a profit and loss statement, balance sheet, cash flow statement and statement of changes in equity. Private companies are not required to file annual financial statements with the Companies Registry, but public companies must do so.



An annual third-party audit is required for all companies. The auditor must be licensed by the HKICPA. The annual Profits Tax Return (PTR) must be supported by audited accounts, so the time for completing the audit must be allowed for in order to meet the tax submission deadline.

The auditor’s opinion in the Audit Report will state whether the company’s financial reports reflect an accurate, complete and fair representation of the company’s state of financial affairs.



Small and medium-sized enterprises (SME) will be eligible for a reporting exemption if the company meets certain criteria as to its ownership structure or size (the accounts still need to be audited but do not need to be filed with the Companies Registry).