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Please refer to Page iii of the HK SME-FRS, which states that:

SME-FRF and SME-FRS should be read in the context of the Preface to Hong Kong Financial Reporting Standards. SME-FRS should also be read in the context of the SME-FRF.

Which on our understanding is that, if any situations not covered by SME-FRS, you can refer to: Hong Kong Financial Reporting Standards.

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3 Answers

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Some opinion is that when situation not covered by SME-FRS, the CPA in charge should use his Professional skepticism and make professional judgement, which in our understanding, this opinion can also be concluded to refer to HKFRS.

Standard reference:

In the event that the SME-FRS does not cover an event or a transaction undertaken by an entity, management may consider the SME-FRF for guidance on developing an appropriate accounting policy, consistent with the historical cost convention, for that particular event or transaction.

(Paragraph 1.2 of SME-FRS)

Example of situations not cover by SME-FRS:

Derivatives, forex and swaft, which is not cover by Section 6 Investment of SME-FRS (SME-FRS doesn't have Financial Instrument section), should be accounted using fair value model, by referring to Full GAAP.

answered by (9.9k points)
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Question 1: how to account gift income from shareholders?

Answer 1: Dr Bank / Cr Other reserve of equity

Reference: Q.16 of HKICPA's CO-rewrite - non transitional Q&A

(Extra only at following)

Question B1 – Capital contributions How should a company account for a shareholder's contribution (e.g. waiver of loan) in equity in its financial statements under the new CO? Should it be credited to share capital or to a reserve?

Where the shareholder's contribution is in the nature of a gift and not a subscription for new shares, a company will credit the amount to an "other reserve" outside of share capital. There is no requirement to notify the Registrar about an alteration of a reserve outside of share capital.

answered by (9.9k points)
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Question 2: How to handle accounting treatment for court-free amalgamation?

Answer 2: Please HKICPA guidance: [Questions and Answers relating to court-free amalgamation] / [Web based link 2, same content]

In our point, we think the essential principle is treat the companies merged as single corporate since the companies' incorporation date. In another words, the oldest companies as headquarter and all other later companies as branches.

answered by (9.9k points)
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