The Hong Kong Institute of Certified Public Accountants is asking the business community what it thinks about private companies being exempt from cumbersome accounting and disclosure standards.

The institute's chief executive, Winnie Cheung, told reporters at a media briefing yesterday that many private companies find themselves unduly burdened by the strict accounting practices concerning financial reports.

Under the current framework, private companies must adhere to either the full Hong Kong standards tailored for listed companies, or the simpler version for small companies, when reporting their accounts.

However, companies must satisfy two of three requirements before they are allowed to employ the simple standards. The rules entail that the companies may not be a part of a group company, and they must have a market capitalization and revenue of under HK$50 million, and a staff size of fewer than 50 people.

"Therefore, only a handful of companies are able to benefit from this," Cheung said. "And now we are trying to provide a solution that allows more private companies to access and benefit from a simpler framework."

The regulations around financial reporting and disclosure standards are primarily in place for the purpose of maintaining a level of transparency of the company's accounts, to ensure the interest of involved parties is protected.

The new framework will loosen the criteria, allowing for more private companies and making it easier for them to utilize a simpler accounting framework.

The institute's chairman, Paul Winkelman, said that private businesses in Hong Kong have suffered from the unnecessarily complex accounting and disclosure standards.

"Since the users of these financial reports of private companies are not even accessible to the public, why do we need to burden them?" he said.

The consultation paper will go out to all parties involved, including the regulators, banking sector and business community. Cheung said the organization will get together to analyze the responses at the end of the consultation period in late September. "If a new framework is in fact implemented, about 500,000 private companies will benefit from this," she said.

And less accounting paperwork means less strain on accountants.

Cheung explained that with the simpler version, drafting financial reports will become easier to prepare, thereby reducing costs and the demand for profession accounting services.

(HK Edition 06/05/2008 page2)