Exchange Publishes Results of Latest Review of Issuers’ Annual Report Disclosure

31 Jan 2020

  • Disclosure in issuers’ annual reports was generally satisfactory
  • Areas to note include business review in MD&A, financial statements with auditors’ modified opinions, material intangible assets and using non-GAAP financial measures
  • Issuers should take note that the Rules have been amended to codify some recommended disclosure from our previous reports


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 (the Report) on the findings and recommendations from its review of issuers’ annual reportsNote for the financial year ended between January and December 2018.

This year, the Exchange reviewed 13 specific areas, including five new topics selected based on the findings and observations in our previous reports and the latest market trends and developments of issuers.  The Exchange was generally satisfied with the findings from its review and recommend the following:

  • Business review in Management Discussion and Analysis (MD&A) – Issuers should make clear disclosure about any risk areas such as major regulatory or governmental policy changes, and an assessment on the impact to their business operations and previously announced business plans.Where applicable, issuers should also discuss the impact of the policy changes to their financial performance during the financial year. 
  • Financial statements with auditors’ modified opinions – Issuers with audit modifications should actively engage their auditors to discuss their action plans with a view towards taking appropriate and effective actions to remove the modifications.On asset valuations of receivables and deposits, issuers should maintain a credit loss policy supported by historical loss information and adjusted by forward looking economic factors, and make impairments according to such policy. 
  • Material intangible assets, including goodwill – Issuers should ensure that the key assumptions applied in impairment testing are not overly optimistic and provide sufficient information for investors to understand how issuers assess the reasonableness of key assumptions.
  • Using non-GAAP financial measures – Issuers should ensure that the non-GAAP financial measures should be unbiased, presented with no greater prominence than GAAP measures, clearly defined, reconciled to the relevant amounts in the financial statements with sufficient explanation on adjusting items and presented consistently over time.

“We encourage issuers to follow our guidance to improve their annual report disclosure to enhance transparency to their shareholders.  Issuers should take note that the Rules were amended to codify some previously recommended disclosure on fundraisings, significant investments and results of performance guarantees.  We remind issuers to take note of these additional disclosure requirements,” said Bonnie Y Chan, HKEX’s Head of Listing.

“This year, the Exchange is exploring the use of artificial intelligence to assist our review of issuers’ annual reports. At this initial stage we have applied AI to identify issuers’ disclosure for some selected disclosure Rules.  We will continue this initiative with a long term view to promote completeness in disclosure in annual reports, and more generally, to apply AI to improve efficiency in our other vetting processes,” added Ms Chan. 

The Report is available under the “Listing – Rules and Guidance – Other Resources – Listed Issuers – Exchange’s Review of Issuer’s Annual Disclosure – Review of Issuers’ Annual Report Disclosure” section of the HKEX’s website.



Excluding annual reports issued by collective investment schemes listed under Chapter 20 of the Listing Rules for the Main Board.




Updated 06 May 2020