The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), today (Friday) published a report summarising key findings from its review of 100 periodic financial reports released by issuers between October 2013 and April 2015*.

The review found several key areas where issuers can continue to improve their financial disclosure.  According to the Exchange's report:

• Issuers should take note that in addition to the disclosure requirements in accounting standards, the Listing Rules have disclosure requirements related to financial information, in particular those set out in Appendix 16 to the Main Board Rules and its Growth Enterprise Market (GEM) Rules equivalent.  Issuers should pay attention to the recent Listing Rules amendments with reference to the new Companies Ordinance, in particular paragraph 28 of the Main Board Rules Appendix 16 and GEM Rules equivalent;
   
• Issuers should ensure that additional information is presented in annual and interim reports when there are significant events or material balances and transactions;
   
• Issuers should improve the quality of their disclosure of the judgments and estimates they made in applying the accounting policies.  The information should be clear, understandable and entity-specific;
   
• Issuers should note that when they are not early adopters of new or revised accounting standards that have been issued but are not yet effective, they should state this and provide the known or reasonably estimable information needed to assess the possible impact that application of the new or revised standards will have on the issuers' financial statements in the period of their initial application;
   
• Issuers should ensure that robust asset impairment review processes are in place, and more should be done to improve the quality of disclosure, particularly where the recoverable amount was based on value in use, so that investors and other users have confidence in the reported asset values;
   
• Issuers should provide entity-specific information rather than boilerplate text in preparing financial risk information to enable investors and other users to understand what management thinks are the key financial risks and how they have adequately managed those risks; and
   
• Issuers should follow the accounting disclosure requirements regarding fair value measurements, which are designed to help investors and other users assess the valuation techniques and inputs used in fair value measurements, particularly those based on significant unobservable inputs, and the effect on financial statements.

The overarching principle for financial reporting should be "information provided is relevant and material" and issuers should avoid cluttering by reducing non-relevant and non-material disclosure so that their communication through financial reports is clear and concise.

The Exchange encourages directors and other persons responsible for financial reporting to take note of the matters discussed in today's report.  They should review and regularly improve their financial reporting systems and explore ways to better integrate information in financial statements and other parts of the financial report such that the information provided is useful to investors and other users.

The report is available under the "Rules & Regulations – Rules and Guidance on Listing Matters – Other Guidance Materials for Listed Issuers – Financial reporting matters" section of the HKEx website.

Ends