Issue 3 Volume 19 July 2023 DRIVING BUSINESS SUCCESS SHAPING POLICY, DRIVING GROWTH Paul Chan, Financial Secretary of the Government of the HKSAR, on the evolution of the profession and its importance to the success of Hong Kong CPA CONGRESS: PART 1 Panellists discuss how to meet ESG goals, and company best practices for adopting new technologies CPA CONGRESS: PART 2 Panellists discuss strategies for the Greater Bay Area and how to create an inclusive workplace SECOND OPINIONS How worried should we be about artificial intelligence? PLUS: 50th anniversary special:
PRESIDENT’S MESSAGE APLUS July 2023 1 Loretta Fong President Dear members, “ Indeed, the Institute continues to build on its legacy over the past half-decade to serve the accounting profession and the public interest of our city.” The past few months have been incredibly eventful for the Institute, with two major events and the launch of a dedicated website to celebrate the Institute’s 50th anniversary. The much-anticipated inaugural global sustainability disclosure standards from the International Sustainability Standards Board (ISSB) were also finally issued during this time, while we worked tirelessly to execute our strategic plan for 2023. The HKICPA 50th Anniversary Cup event at the Happy Valley Racecourse in June was a fantastic start to the Institute’s 50th anniversary celebrations. The special commemoration race dedicated to the Institute’s golden jubilee was exhilarating, and it was an honour to present the trophies to the winners of the race alongside Vice Presidents Roy Leung and Edward Au. I am grateful to have shared this experience with over 200 guests in attendance and to have had the chance to connect with fellow accountants, especially the younger members of the Institute. The CPA Congress was another successful event, with over 700 online and offline attendees participating. I was pleased to catch up with even more members in person, as well as our esteemed Guests of Honour, including Paul Chan, Financial Secretary of the Government of the Hong Kong Special Administrative Region, Shu Huihao, Director General of the Accounting Regulatory Department of the Ministry of Finance, and Asmâa Resmouki, President of the International Federation of Accountants, who officiated the opening alongside myself and our leadership team. Our gratitude goes out to them for their presence and support. The Financial Secretary, who is also a former President of the Institute, was gracious enough to grant us an exclusive interview for the 50th Anniversary Interview Series. Be sure to give it a read! The feedback we’ve received since the congress has been overwhelmingly positive, and the sessions were genuinely engaging and informative, providing a wealth of insights and information that will undoubtedly prove beneficial in all of our professional pursuits. I enjoyed moderating the first keynote session with Julia Leung, Chief Executive Officer of the Securities and Futures Commission. The second keynote session by Prof. K.C. Chan, Chairman of WeLab Bank and Senior Advisor to WeLab, was also remarkable. Don’t miss the two articles covering the keynotes and panel discussions in this issue. Meanwhile, in June, the ISSB issued its two inaugural standards. This is a momentous occasion and the Institute has expressed its support and reiterated its commitment to contribute to the public good and play a leading role in the sustainability journey. Indeed, the Institute continues to build on its legacy over the past half-decade to serve the accounting profession and the public interest of our city. Our recent visit to Beijing in May for the first time in three years to meet with representatives from the Ministry of Finance’s Accounting Department, Chinese Institute of Certified Public Accountants, and the China Securities Regulatory Commission was productive, and we shared the latest updates regarding the industry reform in Hong Kong, our three key focuses for the future, and our strategic focuses for 2023. We remain committed to engaging with stakeholders and creating opportunities for our profession and members. We continue to do so through initiatives such as the Institute’s GBA Field Visit Series, which held its second visit to Dongguan in June. While we continue to celebrate the Institute’s 50th anniversary, we will also initiate different activities for the betterment of the profession. We encourage our members to stay tuned for more updates as we strive for excellence in our efforts to support the development of the accounting profession in Hong Kong and beyond.
CONTENTS Issue 03 Volume 19 July 2023 NEWS 01 President’s message 04 Institute news 07 Business news FEATURES 08 50th Anniversary Interview Series: Paul Chan The Financial Secretary of the Government of the Hong Kong Special Administrative Region on why he remains optimistic about the city’s economic recovery 14 Looking back, moving forward Key insights from the panel discussions in the morning session of the CPA Congress 2023, the flagship event of the Institute’s 50th Anniversary 20 Global and inclusive thinking Key takeaways from the panel discussions in the afternoon session of the CPA Congress SHORT PROFILES 30 Q&A with a PAIB Christie Leung, Equity Market Finance Director at YUDO Holdings Co. Limited 31 Q&A with a PAIP Dickson Sin, Director – Auditing Methodologies, Audit at Grant Thornton 38 Young member of the month Tracy Yeung, Research Assistant Professor at Lingnan University COLUMNS 27 Thought leadership: Nancy Tse The Deputy Chair of IFAC’s Professional Accountants in Business Advisory Group on the profession’s role supporting net zero transitions 28 Second opinions How worried should we be about artificial intelligence? Panellists discuss challenges and opportunities companies face in meeting ESG goals, and best practices for companies looking to adopt cutting-edge technologies, from artificial intelligence to virtual assets 30 Q&A with a PAIB 31 Q&A with a PAIP 14Looking back, moving forward
DRIVING BUSINESS SUCCESS About our name A Plus stands for Accounting Plus. It represents a profession that is rich in career options, stays relevant amid rapid changes, and adds value to business. This magazine strives to present the global mindset and varied expertise of Institute members – Accountants Plus. Editor Gerry Ho Email: gerry.ho@mandl.asia Managing Editor Jemelyn Yadao Contributor Elizabeth Utley Registered Office 2/FWang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong Advertising enquiries Advertising Director Derek Tsang Email: derektsang@mandl.asia ISSN 1815-3380 President Loretta Fong Vice Presidents Roy Leung Edward Au Chief Executive and Registrar Margaret W. S. Chan Director of Corporate Communications Rebecca Tam Publication Manager Michael Wong Editorial Coordinator Maggie Tam Office Address 37/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Tel: (852) 2287-7228 Fax: (852) 2865-6603 Member and Student Services Counter 27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Website: www.hkicpa.org.hk Email: hkicpa@hkicpa.org.hk 40 Meet the speaker The archived version of this year’s China Taxation Conference cover different aspects of tax and business in Mainland China SOURCE 32 Proposed revisions to IAASB ISAs and IESBA Code of Ethics A n overview of the Institute’s responses to recent consultation documents of the IAASB and IESBA 35 Getting prepared for CPD compliance audit A summary of the continuing professional development requirements and tips on how to meet them 36 Technical news 38Young member of the month A Plus is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine. ©Hong Kong Institute of Certified Public Accountants July 2023. The digital version is distributed to all 47,519 members, 11,571 students of the Institute and 2,183 business stakeholders every quarterly. 20Global and inclusive thinking Panellists examine the impact of the Greater Bay Area on Hong Kong professionals and industries, and the importance of building a corporate culture that attracts, develops, and retains top talent
The CPA Congress was successfully held on 15 July to celebrate the Institute’s 50th anniversary. The event assembled overseas, Mainland China and Hong Kong business and political leaders to share valuable insights on a variety of hot topics that are relevant to enterprises. The CPA Congress attracted over 700 participants to join this highly anticipated event via online or onsite attendance. Paul Chan, Financial Secretary of the Government of the Hong Kong Special Administrative Region (HKSAR), Shu Huihao, Director General of the Accounting Regulatory Department of the Ministry of Finance, and Asmâa Resmouki, President of the International Federation of Accountants graced the event as Guests of Honour and delivered opening remarks. The three Guests of Honour joined the Institute’s leadership team in officiating the opening of the major event. Julia Leung, Chief Executive Officer of the Securities and Futures Commission, and Prof. KC Chan, Chairman of WeLab Bank and Senior Advisor of WeLab, delivered the two keynotes of the morning and afternoon sessions respectively. Visit the 50th anniversary website for photo highlights and read the press release for a full recap of the event. You can also read the CPA Congress Special Edition, which was published to commemorate the event, and the two articles covering the keynotes and panel discussions in this issue. The full event is now available as an archived webinar. Institute’s 50th Anniversary Cup The Institute kicked off its 50th anniversary celebrations with the 50th Anniversary Cup horse racing event on 7 June. Members and guests gathered to witness a special commemoration race dedicated to the Institute’s golden jubilee during the race meeting at the Happy Valley Racecourse. Trophies were presented by Institute President Loretta Fong and Vice Presidents Roy Leung and Edward Au to the owner, trainer and jockey of the winning horse right after the race. Around 200 guests, including Guests of Honour, Paul Chan, Financial Secretary, Wang Songmiao, Secretary General of the Liaison Office of the Central People’s Government in the HKSAR and Dr. Kelvin Wong, Chairman of the Accounting and Financial Reporting Council, attended the occasion. Visit the photo highlights on the 50th anniversary website. Leadership visit to Beijing Institute President Loretta Fong, Vice President Edward Au, and Chief Executive and Registrar Margaret Chan, represented the Institute’s leadership in a visit to Beijing on 29-30 May to meet with Chinese government authorities, regulators and the Institute’s counterparts. The trip included a meeting with Dong Wang, Deputy Director-General of the Ministry of Finance’s Accounting Department, which was followed by meetings with representatives from the Chinese Institute of Certified Public Accountants and the China Securities Regulatory Commission. Championing ethical leadership amid competing pressure Global Accounting Alliance (GAA) sponsored the “Championing ethical leadership amid competing pressures,” which was held on 11 May by Economist Impact. As one of the GAAmember organizations, the Institute served as part of the organizing committee, and attended the event to share the latest development of Hong Kong accounting profession. This initiative aims to promote ethical behaviour and responsible practices among organizations, employees and stakeholders while considering their impact on society at large. Representatives from European Union, Schneider Electric, United Nations and Edelman participated as the panellists to explore the challenges and opportunities that arise from upholding business ethics for organizations globally. The full video can be viewed here. NEWS Institute news Business news 4 July 2023 CPA Congress inspires enterprises for the future The Institute’s leadership team alongside the Guests of Honour at the the CPA Congress held on 15 July.
APLUS Disciplinary findings Leung KamMan, Victor Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of professional competence and due care under sections 100.5(c) and 130.1 of the Code of Ethics for Professional Accountants; Hong Kong Standard on Quality Control (HKSQC) 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements; Hong Kong Standard on Auditing (HKSA) 230 Audit Documentation and HKSA 500 Audit Evidence. Leung was a sole proprietor of Chinaweal CPA & Co. (Chinaweal) and CWB CPA Limited (collectively the practices). He was responsible for the practices’ quality control systems and the quality of the practices’ engagements. A previous practice review on Chinaweal and Leung’s own name practice was conducted concurrently in 2013/2014 (previous practice review). The practices were subject to the present practice review which was concluded in August 2020. In the present practice review, the reviewer found a number of significant deficiencies in the practices’ quality control systems and in the performance of a certain number of audit engagements, some of which were the same or similar deficiencies as identified in the previous practice review. As a result, two complaints were laid against Leung. Decisions and reasons: Leung admitted to the complaints against him. The Disciplinary Committee reprimanded Leung and ordered that his practising certificate be cancelled and shall not be issued for six months with effect from 20 June 2023. He was ordered to pay a penalty of HK$75,000 and the costs of the disciplinary proceedings of HK$140,265. Wong Tai Wai, David Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of professional competence and due care in sections R110.2 and R113.1 under Chapter A of the Code of Ethics for Professional Accountants; HKSQC 1; HKSA 230; HKSA 500; HKSA 520 Analytical Procedures; HKSA 700 (Revised) Forming an Opinion and Reporting on Financial Statements; and HKSA 705 Modifications to the Opinion in the Independent Auditor’s Report. Wong was practising in his own name with no staff (the practice). The practice was subject to a practice review (the review) on his audit engagement of a client, which was concluded in June 2020. The practice review reviewer (reviewer) identified a number of significant findings and deficiencies in the practice’s audit, which led to concerns over Wong’s lack of professional competence and due care. This was demonstrated by the practice’s insufficient quality control policies and procedures, deficient monitoring function, and lack of audit quality in the audit of the client. The reviewer’s report also revealed various failures on the part of Wong to perform audit design and planning and appropriate audit procedures, to obtain appropriate audit evidence, and to maintain an adequate system of quality control in various aspects. Decisions and reasons: The Disciplinary Committee found thatWong had been guilty of professional misconduct. The committee reprimandedWong and ordered that the name of Wong be removed from the register of CPAs for two years and his practising certificate be cancelled with effect from20 July 2023. He was ordered to pay the costs of the disciplinary proceedings of HK$186,617.50. Details of the disciplinary findings are available on the Institute’s website. Educational publication on HKFRS 17 Insurance Contracts – Journal Entries Hong Kong Financial Reporting Standard (HKFRS) 17 Insurance Contracts is a comprehensive new financial reporting standard on insurance contract accounting which became effective from 1 January 2023. The Institute has issued an educational publication, which explains the basic principles of the three measurement models in HKFRS 17 (i.e. General Measurement Model, Premium Allocation Approach and Variable Fee Approach) and provides illustrations of the journal entries for 10 simplified fact patterns of insurance contract transactions, showing how these journal entries map to the movements in the insurance contract liability and how they are reflected in the income statement. The backbone of the publication is built on the General Measurement Model followed by comparisons of its key differences with the other two models. This publication aims to help readers understand insurance contract accounting under HKFRS 17 “from the ground up” before tackling more complicated areas of the standard. In addition, for readers interested in gaining deeper understanding and knowledge of HKFRS 17, “Notes to further insights” are provided in relevant areas. Council meeting minutes The abridged minutes from the April, May and June 2023 Council meetings are now available. July 2023 5
With a refreshed layout designed for easy browsing, the new A Plus website delivers a brand new experience to keep you up to date with the latest developments impacting the profession. Enjoy content on the revamped website carefully curated to help you catch up with Institute, accounting and business news and insights, as well as success stories that will inspire you. Whether browsing from your desktop or mobile devices, read up on the latest articles and seamlessly transition to articles on topics that interest you. As easy as it gets. Introducing the new A Plus website Pinpoint articles on specific topics, such as “sustainability” or “digital transformation” with the enhanced search function Bookmark articles of interest and read them later under the always present bookmark tab Find out what topics are covered at a glance with meta tags Consume content by the latest articles, issues, or under specific categories or topics, with options to view PDF or flipbook versions. ESG APLUS.HKICPA.ORG.HK
NEWS Business 1 in 3 The portion of Hong Kong accounting firms that currently lack 20 percent of manpower needed, according to a survey conducted by The Hong Kong Association of Registered Public Interest Entity Auditors (PIEAA) between October 2022 and February 2023. The findings highlight a serious talent shortage in the accounting industry. “This will affect Hong Kong’s position as a fundraising centre for listed companies,” Clement Chan, PIEAA’s Chairman and an Institute member, told the South China Morning Post. Hong Kong’s gross domestic product expanded 1.5 percent in the second quarter of this year, compared with a revised 2.9 percent growth in the previous quarter, according to the Census and Statistics Department. Led by inbound tourism and private consumption, the Hong Kong economy continued to recover in the second quarter, though the momentum softened on the back of the strong rebound in the preceding quarter, said a government spokesperson. July 2023 7 ¥3 billion The amount PwC will invest in artificial intelligence (AI) over the next five years in Mainland China and Hong Kong to “responsibly deliver human-led tech-powered solutions” to its clients. According to the firm, it will also use AI-tools and technology to enhance its internal operations. ¥66.8 billion – Gabriela Figueiredo Dias, International Ethics Standards Board for Accountants’ (IESBA) Chair. IESBA said in early July that recent events in a number of major jurisdictions involving professional accountants have undermined public trust in the accountancy profession. It therefore emphasized the importance of accountants understanding and complying with their ethical obligations under the Code. The value of debt and loans issued to fund projects with environmental and social benefits in the Greater Bay Area in the second quarter, compared with 56.8 billion yuan achieved in the previous quarter, according to a report by HSBC and CECEP Environmental Consulting Group. The percentage of audits carried out by the United States branches of global accounting firms, including the Big Four, in which deficiencies were found by inspectors of the Public Company Accounting Oversight Board last year, up from 21 percent of audits inspected in 2021. Some firms told the U.S. regulator that the increase in flawed audits are due to high staff turnover and remote work, reported the Financial Times. 30% APLUS “The high-quality ethics standards in the Code are a cornerstone to ethical behaviour in business and organizations, and they underpin the accountancy profession’s longstanding good reputation.” – Emmanuel Faber, Chair of the International Sustainability Standards Board (ISSB), spoke at the IFRS Foundation Conference on 26 June to officially launch the inaugural global ISSB Standards, IFRS S1 and IFRS S2. For the first time, the standards create a common language for disclosing the effect of climate-related risks and opportunities on a company’s prospects. “Our language is an accounting language. It is sustainability translated into an accounting language.” “This is a critical moment in advancing IOSCO’s goal of improving climate-risk disclosure for investors.” – Jean-Paul Servais, Chair of the Board of the International Organization of Securities Commissions (IOSCO). IOSCO announced on 25 July its endorsement of the ISSB’s standards following its comprehensive review of the standards. It is calling on its 130 member jurisdictions to consider how they can incorporate the standards into their respective regulatory frameworks.
PROFILE Paul Chan Paul Chan, Financial Secretary of the Government of the Hong Kong Special Administrative Region, talks to A Plus about the city’s economic revival, how the profession can contribute to Hong Kong’s continued development as an international financial centre, and why he’s upbeat about the career growth opportunities for Institute members Before joining the government in 2012, first as the Secretary for Development, Paul Chan had served as the Hong Kong Institute of CPAs’ President in 2006, and as the Legislative Council Member of the Accountancy Functional Constituency from 2008 to 2012. He sat on many of the Institute’s committees, including taxation, small and medium practitioners, member services and Mainland affairs, as well as the Fourth and Fifth Long Range Plan task forces. “I volunteered my time to the Institute and that opened my eyes to the role that CPAs can play for the wider community. Particularly in terms of policy advocacy, we can make a difference,” says Chan. The seasoned Institute member, who has built on his career in the accounting profession to reach one of the highest positions in government, sits with A Plus in celebration of the Institute’s 50th anniversary. From helping to formulate the Institute’s Budget proposals to the government, to now being on the receiving end, Chan is well acquainted with the Institute’s history as a thought leader and also the impact CPAs’ expertise can have on improving society. The Institute’s Budget proposal is one of the main submissions that the government makes reference to, he says. “Over the years, the Institute has been making valuable submissions touching on such issues as Hong Kong’s economic development, manpower, tax, sustainable development, etc. and they are important pieces of reference to us,” he adds. “The Institute has been very active in terms of policy advocacy, particularly on enhancing the competitiveness of the tax system. So naturally in the submission, there are proposals about tax concessions or exemptions towards different areas.” Weighing suggestions against numerous factors aside from technical validity is crucial when looking at Budget proposals, including those on tax policy, Chan says. “We need to take into consideration the economic situation, public finance, the fiscal strength of the government, the HONG KONG’S SUCCESS INGREDIENT 50th Anniversary Interview Series: 8 July 2023
APLUS Photography by Jocelyn Tam July 2023 9
PROFILE Paul Chan competitiveness of the Hong Kong economy, as well as the future direction of our economic development. We have to balance not just these factors but also the interests of different stakeholders, because the Budget concerns everyone. People expect that the Budget would be fair and balanced, meeting their current needs as well as realizing the long-term vision.” Something that the Institute has long called for in its proposals is an extensive review of the tax system to be conducted due to the narrow tax base of Hong Kong, with the aim of enhancing the city’s overall competitiveness. Chan highlights that Hong Kong is still at the early stage of economic recovery after the epidemic, and so the potential impacts of such a review should be carefully examined. “We face a challenging external environment. In the first five months of 2023, the total value of merchandise export fell by more than 16 percent yearon-year. To safeguard a sustainable economic recovery, we have to be very careful and refrain from doing anything that may dampen business confidence.” The timing of such a review is an important consideration, he adds. “We are at a time of attracting businesses and talents, and a simple and low tax regime is one key aspect of our competitiveness. We want to make sure that businesses will see that we are welcoming them.” Careful optimism Since reopening its borders and boundaries, Hong Kong’s economic activity has been normalizing, according to the International Monetary Fund in May. However, headwinds continue to loom over the city, such as slower growth in the United States and Europe weighing on external demand, and tighter financial conditions around the world. While keeping an eye on external risks and uncertainties, Chan remains optimistic about Hong Kong’s economy for the rest of the year. “Hong Kong is a small and open economy, and thus the external headwinds will affect us. The situation of exports is challenging, but with COVID under control, Hong Kong has resumed normalcy and convenient travel with the Mainland and the international community,” he says. “If the number of incoming tourists continues to recover and rise in the second half of the year, and the external environment doesn’t deteriorate significantly, we will achieve the gross domestic product (GDP) growth target for 2023. This year will be better than last year.” Chan points to other positive signs that an economic recovery is Photography by Jocelyn Tam Before joining the government, Paul Chan served as the Hong Kong Institute of CPAs’ President in 2006, and sat on many of the Institute’s committees. 10 July 2023
APLUS underway. “Our export of services in the first quarter of this year was much better than the previous quarter. Investment expenditure for the first quarter went up by about 5.8 percent, whereas it contracted by more than 7 percent last year,” he says. Other than the latest round of consumption vouchers, schemes focused on assisting small and medium-sized enterprises (SMEs), such as the special 100 percent loan guarantee under the SME Financing Guarantee Scheme rolled out by the government, are also reinforcing the momentum of recovery. “By continuing to provide SMEs with the government-guaranteed loans to enable them to borrow from the banks, they can maintain or even expand their business. We seek to protect employment because SMEs account for over 98 percent of business establishments in Hong Kong, and over 45 percent of employment in the private sector,” says Chan. “Protecting jobs, and giving people additional money to spend – this will help private consumption.” To further stimulate private spending, the government in April launched the “Happy Hong Kong” campaign, comprising a series of food fairs, carnivals, sports and musical activities, and more. Chan says it’s important that these events boost the mood and atmosphere. “For us as a city, the last three and half years have been difficult. First the black-clad violence, then COVID which impeded Hong Kong’s connections with the Mainland and the rest of the world. Upon returning to normalcy, we rolled out the ‘Hello Hong Kong’ campaign in February which welcomes incoming tourists and business travellers. We gave out free air tickets, organized mega events, and put in resources to attract exhibitions. At the same time, having gone through all those challenging years, we want to rebuild a spirit of optimism and a sense of happiness in the community,” Chan says. “Apart from the economic benefits, we want the people of Hong Kong to be happy.” Amid increasingly intense global competition, Chan said the digital economy would be a key driver of future growth and development for Hong Kong. He points out that businesses can enhance efficiency through digitalization. “We need to press ahead with digital transformation, particularly for SMEs, because they are less wellresourced. That’s why we have partnered with Cyberport to allow SMEs to use off-the-shelf software to help with the digitalization process,” Chan adds. He announced in this year’s Budget that HK$500 million would be allocated to launch a Digital Transformation Support Pilot Programme to assist SMEs in applying basic digital solutions. The programme is in addition to the Technology Voucher Programme that has been being implemented over the past few years. On 14 July, the Legislative Council approved the funding for the programme. Skills for moving up Chan says his training as an accountant was useful for his career. “When I was an accountant in business, I realized that the training as an accountant is excellent and rewarding. Of course, apart from the technical skills such as accounting and finance knowledge, one needs to develop leadership and communication skills, because you always work in a team. As one moves up the management ladder, you have to demonstrate the ability to lead, command respect and build consensus, and to have people working with you together to achieve goals and realize the vision,” he says. Chan also encourages accountants to enrich their knowledge about the Greater Bay Area (GBA) and the Mainland, as it is very important nowadays. At the same time, he suggests young members should develop their intercultural skills. “Mobility is important, which is the ability to work and interact with people from different cultures, and the readiness to venture into new areas, whether it is a different geographic area or a new area of economic development, for example, the digital economy,” he says. On that note, Chan adds that accountants should embrace technology and innovation. “Although people in different fields may have varying degrees of exposures to technology and innovation, it is a mega trend that is taking place. Accountants will have to embrace new technology and financial innovation.” Noting that Web3 and its blockchain technology will spur new financial innovations and bring opportunities for the community, the government has established The government announced on 30 June the establishment of the Task Force on Promoting Web3 Development. Chaired by Financial Secretary Paul Chan, the task force comprises 15 non-official members from the relevant market sectors, with the participation of key government officials and financial regulators. “ I realized that the training as an accountant is excellent and rewarding. Of course, apart from the technical skills such as accounting and finance knowledge, one needs to develop leadership and communication skills, because you always work in a team.” July 2023 11
PROFILE Paul Chan a task force for promoting Web3 development in Hong Kong, as announced on 30 June. Chaired by Chan, the task force comprises 15 non-official members from relevant market sectors, and key government officials along with financial regulators are also members. A key profession During Chan’s tenure as Institute president in 2006, regulatory reform was a main focus while the profession globally was facing rapid changes. “There were a few corporate failures in the United States, and regulators worldwide were reviewing the regulation of the accounting profession. Hong Kong, being an international financial centre, was in that process. During my time as President of the Institute, talks began about establishing the Financial Reporting Council (FRC),” he says. “Looking back, that was the beginning of the change in the regulation and oversight of the profession, both globally and domestically.” Changes continued. Since then, the regulation of the profession has evolved, and further changes have been signified by further reforms which transferred certain statutory regulatory powers and responsibilities of the Institute to the FRC, now renamed as the Accounting and Financial Reporting Council, or AFRC. Now with the Institute’s regulatory powers transferred to the AFRC, Chan sees the opportunity for the Institute to deliver value for its members. “Apart from education and continuing professional development, the Institute has been providing various services to members over the years. Going forward, there is room to enhance members’ services and they would be valued,” he says. One thing that Chan thinks will remain unchanged for the Institute is its role as an important advocate for the profession and for the public interest. “The accounting profession is a major profession for Hong Kong as an international financial centre. I trust the Institute will continue to offer valuable views and suggestions on a range of matters, from economic development to tax policies, which “ The accounting profession is a major profession for Hong Kong as an international financial centre. I trust the Institute will continue to offer valuable views and suggestions on a range of matters.” Chan delivering his opening remark as a Guest of Honour at the Institute’s CPA Congress 2023 held on 15 July. 12 July 2023
APLUS Chan delivering his speech for the 2023-24 Budget in February. will be valued by the community and the government.” Supporting Hong Kong’s ambitions There are plenty of opportunities for Hong Kong to be an even more successful international financial centre, according to Chan. He particularly wants to see more international companies consider a primary or secondary listing in the city. “Our equities market is successful in terms of size, which is about 13 times of our GDP. But if you look at its composition, slightly more than 50 percent are Mainland companies, and those companies account for over 70 percent of our market capitalization and 80 percent of our daily turnover. That is natural as we have benefitted tremendously from the Mainland’s development. But going forward, as an international financial centre, we want our listing platform to be able to attract more international companies, be they from the Middle East or Southeast Asia,” he says. Hong Kong should also strive to enhance the infrastructure for Renminbi (RMB) and develop more investment and risk-management products, which will be important to future growth as an offshore RMB business hub amid RMB internationalization.” Another key area for Chan is green and sustainable finance. While Hong Kong is Asia’s number one in terms of the value of green and sustainable bonds issued, there is still plenty of room to grow as the world heads towards carbon neutrality, he says. “This is an area where accountants’ role can be important – including contributing to green standard setting, convergence of the Mainland and international standards, green certification, etc,” he says. Chan believes that the profession is also instrumental to Hong Kong’s efforts to further develop itself into an international asset and wealth management centre, given that the GBA has a combined GDP of around US$2 trillion. Separately, with Hong Kong acting as a twoway open platform between the Mainland and the international markets, Chan says members can pursue a career in treasury services and risk management. “I am very optimistic about Hong Kong’s development as an international financial centre, and am so too about the career development opportunities for accountants. For young accountants, choose the field that you are interested in, and go for it.” As the Institute celebrates its 50th anniversary, Chan says he looks forward to the continuous contributions of the Institute in enhancing members’ services and development, and in helping them fulfil their professional and career aspirations. Read the Financial Secretary’s message as Guest of Honour in the A Plus CPA Congress Special Edition. July 2023 13
CPA CONGRESS 2023 Morning session Accounting professionals and business leaders gathered on 15 July at the CPA Congress 2023, organized by the Hong Kong Institute of CPAs, with a range of keynote speeches and panels focusing on the title theme “Creating a Pathway to Advancement: Empowering Enterprises for the Future.” Finance professionals are being buffeted by the increased digitalization of the industry, which brings challenges and tools to tackle global issues like social and governance issues and environmental degradation. These topics took centre stage in two one-hour panel discussions during the congress’ morning session. ESG challenges and opportunities In an impassioned first panel discussion, the audience heard fromAnthony Cheung, Managing Director and Head of ESG at Polymer Capital Management; Dr Christine Loh, Chief Development Strategist of the Institute for the Environment at the Hong Kong University of Science and Technology (HKUST); and John Haffner, Deputy Director – Sustainability at Hang Lung Properties Limited. They were joined in the heated conversation by Mark Harper, Group Head of Sustainability at John Swire & Sons (H.K.) Limited; and Hendrik Rosenthal, Director of Group Sustainability at CLP Holdings Limited. The importance of environmental, social and governance (ESG) is difficult to overstate and as Rosenthal was quick to note, it is no coincidence that this topic launched the congress celebrating the Institute’s 50th anniversary. ESG factors are driving critical decisions by corporate leaders to grow their businesses sustainably. However, it is not always smooth sailing. The panel started by examining some of the biggest challenges companies face in the process of evaluating their impact on the environment and developing guidelines to help themmeet their ESG goals across a range of industries. Construction and property companies like Hang Lung face the challenge of partnering with upstream suppliers and tenants to reduce Attendees of the CPA Congress – the flagship event of the Institute’s 50th Anniversary – gained insights into key topics on the global agenda, and how to contribute to the future success of their organizations. Panel discussions in the morning covered Hong Kong’s role in ESG and green finance, and mega trends in the digital economy. Elizabeth Utley reports. Photography by Calvin Sit LOOKING BACK, MOVING FORWARD 14 July 2023
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CPA CONGRESS 2023 Morning session Scope 3 emissions, which result from activities from assets not owned by reporting organizations but that are indirectly affected via its value chain. “We’re not alone in facing this challenge, but it’s a large one for us,” said Haffner. Harper, who leads group sustainability at Hong Kong conglomerate Swire, highlighted the struggle of companies to respond to many different demands to disclose information. He suggested that there needs to be a system for data tagging when it comes to sustainability data, in addition to standards for data verification and accuracy. Other panellists echoed these concerns, raising questions about the opaque data ownership and collection processes in Hong Kong that make it challenging to gauge companies’ success at meeting their ESG targets. Above all, greenwashing emerged as a chief concern during the discussion. For Polymer Capital Management’s Cheung, responsible for driving sustainable integration and stewardship at the asset manager, the “G” in ESG is something different: greenwashing. “It’s the single biggest risk for ESG investing... and it leads to the very vital and critical role that every CPA here will need to play,” Cheung told the audience. He recommended accountants to consider ESG as a form of risk management, as he does. Cheung combats greenwashing by examining whether a company can break their larger ESG commitment into smaller, more manageable interim targets, and how a company incentivizes the setting and meeting of ESGmetrics, such as through executive compensation. Moderator Dr. StephenWong, Head of the Chief Executive’s Policy Unit, followed up on the point about greenwashing by putting it in the context of ever-increasing regulatory standards, which may incentivize more companies trying to cut corners. Some companies do not realize they are greenwashing, said HKUST’s Loh, who pointed to complex data gathering and tracking procedures that many organizations have never had to do before. Others face the issue of “green hushing” – when companies do not share data because they fear it does not look like enough action on their part. Moreover, still, companies must forge on through these challenges. The world is facing “a planetary crisis,” and “the ambition of every company now should be to make every stakeholder better off,” said Haffner. CLP came face-to-face with this issue in 2019, according to Rosenthal, who was at the time tasked with updating the group’s climate vision. This job was impossible for him as CLP was simultaneously investing in constructing two coal plants. It was an untenable situation. So, over the course of a full year, he sparked conversations with senior management and board members, ultimately culminating in the decision to exit those projects. “ The ambition of every company now should be to make every stakeholder better off.” (Top from left) Hendrik Rosenthal, Director of Group Sustainability at CLP Holdings Limited; Dr. Christine Loh, Chief Development Strategist of the Institute for the Environment at the Hong Kong University of Science and Technology; John Haffner, Deputy Director – Sustainability at Hang Lung Properties Limited; Dr. Stephen Wong, Head of the Chief Executive’s Policy Unit; (bottom from left) Anthony Cheung, Managing Director and Head of ESG at Polymer Capital Management; and Mark Harper, Group Head of Sustainability at John Swire & Sons (H.K.) Limited 16 July 2023
APLUS “Every transition plan needs to be reviewed by a third party in order to make sure it is not just a bunch of empty words and a PR exercise,” he added. The conversation circled back to data. Existing ESG audit and disclosure regimes are already producing significant amounts of information, and as requirements grow, so will the need for standardized metrics to measure improvements in these areas. Without specific ESG assurance standards, companies have only been able to conduct limited assurance by applying financial assurance standards to non-financial data such as emissions figures, Harper noted. However, he believes mandatory reasonable or full assurance for ESG data might be inevitable once the recently released draft International Standard on Sustainability Assurance 5000 General Requirements for Sustainability Assurance Engagements by the International Auditing and Assurance Standards Board is finalized. Panellists concurred that this reflected an opportunity for young auditors to be trained in the latest sustainability standards to meet corporate demand in this area. “It isn’t pure accounting. It’s not dollars, it’s a very different currency. We’re talking about CO2 equivalents, or we’re talking about cubic meters of wastewater, for example,” Rosenthal said. This is not just a corporate issue. While listed companies will comply with strict data-sharing regulations going forward, demands on government bodies in Hong Kong “ It’s not dollars, it’s a very different currency. We’re talking about CO2 equivalents, or we’re talking about cubic meters of wastewater, for example.” carbon neutrality by 2060. According to Leung, preparing local financial institutions and listed companies to be well-versed in the ISSB standards would be important to strengthen Hong Kong’s role in international capital intermediation. In these efforts, the role of accountants and business leaders are crucial. “I look towards the audience in this room to provide support and professionalism that will safeguard the quality and integrity of this market,” she said, addressing the room. ISSB standards A paradigm shift is underway regarding how companies talk about sustainability-related risks and opportunities, and the role of finance professionals in upholding disclosure requirements and supporting companies in this endeavour cannot be understated. The International Sustainability Standards Board (ISSB) issued the inaugural IFRS Sustainability Disclosure Standards on 26 June, which will become a common language for investors, businesses and regulators to communicate sustainability-related information, according to Julia Leung, Chief Executive Officer of the Securities and Futures Commission, Hong Kong. At the International Organization of Securities Commissions (IOSCO), Leung co-chairs the Sustainable Finance Task Force’s Corporate Reporting Workstream, which was closely involved in providing feedback to the ISSB in the lead-up to the final standards. She spoke with Loretta Fong, President of the Institute, during a keynote discussion at the CPA Congress 2023. It is essential for the ISSB to outline a pathway for implementation to encourage the adoption of and transition to the final ISSB standards, Leung noted. “That is, how the standards are set not so high on day one that none of the jurisdictions can adopt them, but high enough for us all to make an effort on this journey.” A key consideration for the IOSCO workstream in recent months was “whether [the standards] are scalable, flexible and interoperable for all jurisdictions to adopt as a global [framework].” Leung welcomed the proportionate measures embedded into the final ISSB standards, as well as the time-limited transitional reliefs, which could facilitate phasing-in of the requirements. Hong Kong should adopt the ISSB standards by starting with large listed companies, Leung added, noting that global stakeholders have high expectations for the international financial centre. Leung noted that another reason for Hong Kong to pay special attention to the ISSB standards is the opportunity from transition finance. Mainland China is committed to the dual climate goals of reaching peak carbon emissions by 2030 and achieving net Julia Leung, Chief Executive Officer of Securities and Futures Commission July 2023 17
CPA CONGRESS 2023 Morning session remain murky, according to Loh. She suggested there is a need to learn more about how people use energy in Hong Kong, pointing out that the city’s three energy companies could share more information about electricity use to spur further innovation. However, some of this information may be regarded as competitive and private, making it crucial for the government to work with companies to navigate these issues. Ultimately, data holds the answer to many ESG-related problems we face today, and as the panel came to a close, Loh pointed to one of Hong Kong’s most definable infrastructure features as an example of inefficiencies that are within our power to correct. The city’s towering apartment and office buildings, many of them over 60 years old, are currently a blackhole of information when it comes to energy efficiency data. But they are also ideally suited to retrofitting that would ease their impact on the environment. “All these things are calculable,” said Loh, who sees within these numbers a roadmap for the types of policies Hong Kong needs to develop over the next 20 years. Navigating mega trends in technology A second panel sawWilson Chow, Global Technology, Media and Telecommunications Industry Leader for PwC China and an Institute member, moderate a discussion between Joanne Chan, Deputy Chief Financial Officer at Animoca Brands; Duncan Chiu, Member of the Technology and Innovation Constituency in the Legislative Council (LegCo); and Sam Lee, Founder and Chief Executive Officer at Coinstreet. Robert Lui, Hong Kong Digital Asset Leader at Deloitte China and an Institute member; and Kelvin Tse, Head of Global Partner Solutions at Microsoft Hong Kong, also spoke on the panel. As the first panel highlighted, demands on professional service providers are evolving to keep pace with a changing world. The range and scope of technological tools to assist these endeavours are quickly growing. Panellists in the second discussion reviewed the challenges and opportunities afforded by digital transformation, revealing best practices for companies looking to adopt cutting-edge technologies from artificial intelligence (AI) to virtual assets. Generative AI ChatGPT, developed by Microsoft-backed research group OpenAI, was on the lips of all the panellists. ChatGPT reached 100 million users within months of launching, while it took around 16 years for the mobile phone to crack that usage threshold, according to Microsoft’s Tse. Now, more companies are looking to train AI models like ChatGPT with their own data to create in-house versions of the tool. But before they reach that stage, organizations must have accurate and relevant data, and a system needs to be in place to gather data. Referring to the first panel discussion, Lui from Deloitte noted that “the most important thing is that we shouldn’t have to think about how we collect data, [as] Christine mentioned.” The success of digital transformation, whether implementing AI tools or upgrading to cloud servers, depends on how well a company can articulate its vision. “Things will get rough along the way, so you will need a north star,” said Chan from Hong Kong Web3 company Animoca Brands. There is a veritable alphabet of new terms for companies to learn, especially in virtual assets, according to Lee. The founder of Hong Kong digital asset consultancy Coinstreet took the panel through a brief explainer of four types of virtual assets: cryptocurrencies like bitcoin with an underlying blockchain protocol, security tokens with underlying real world assets, non-fungible tokens (NFTs) with underlying collectables, and stablecoins pegged to fiat currencies. However, these are more than abstract ideas and not necessarily new concepts. For example, for the concept of stablecoin, we are surrounded by different types of stablecoins, according to Lee, who pointed to the U.S. dollar-pegged Hong Kong dollar and Octopus card payment method as examples. Hong Kong recently rolled out regulations that will allow retail trading of cryptocurrencies as soon as later this year, and the city’s Securities and Futures Commission opened its application portal for virtual asset trading platform licenses on 1 June. Chiu, who represents the Technology and Innovation Constituency in Hong Kong’s LegCo, contextualized these landmark policy shifts within a larger push to spark digital innovation. “We always talk about the advancement of Hong Kong in terms of using technology, but not innovating it,” he explained. Secondary students will find AI in their curriculum from September onwards, said Chiu, who sees himself as a middleman between the government and the technology industry. In addition to education, Hong Kong needs regulations to manage how virtual asset companies and AI platforms use personal data, he added. These promising developments suggest Hong Kong could become an international hub for virtual assets, according to Lui, provided “ We always talk about the advancement of Hong Kong in terms of using technology, but not innovating it.” 18 July 2023
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