Hong Kong prepares to accept Chinese accounting standards
he Hong Kong stock exchange has been kept on its toes by the idea that Shanghai is determined to establish itself as a financial centre.
In a bid to keep costs of a Hong Kong listing down for Chinese companies, and to make sure Hong Kong remains an attractive place to list, the regulators have said that, from this year, Chinese companies on the Hong Kong board can file reports using their home accounting standards.
"The unification of standards would let Chinese companies whose shares trade in Hong Kong, known in the city as H-shares, post a single set of results for each reporting period identical to the reports they put out for their China-listed shares," wrote Reuters.
It’s a simple and great idea, which saves plenty of duplication of effort. The only people grumbling about it, you’ll be surprised to hear, are the Association of Chartered Certified Accountants Hong Kong, whose members stand to lose plenty of lucrative work.
They sniff that there are not enough trustworthy Chinese auditors and that Chinese companies have regularly been found to be cooking their books. They didn’t mention, however, that mainland accounting firms charge around one-third of what their Hong Kong counterparts do.
The last time I was in Hong Kong, I had lunch with David Webb (www.webb-site.com), the former Stock Exchange board member who now crusades for Hong Kong-listed companies to be more transparent. He told me that the mainland, in terms of corporate reporting regulations, had come on in leaps and bounds and was now far more advanced than Hong Kong.
Chinese companies have been required to make quarterly reports since 2003, unlike the semi-annual reports in Hong Kong, and to deliver them promptly. In Hong Kong, companies have three months to deliver their interim reports and four to deliver an annual report. How are investors supposed to know what is going on?
Mainland China’s accounting standards are actually closer to international standards than those in the US.
On that basis, it is a shame that Hong Kong doesn’t universally apply mainland accounting. The boom in business would help train up more mainland auditors and investors would reap the benefit of greater transparency.