HKFRS News 

In this newsletter, we look at the following topics:
  
Amendment to HKFRS 2 dealing with vesting conditions and cancellations
   
The HKICPA published an amendment to HKFRS 2 Share-based Payments in March 2008.  The amendment limits vesting conditions to service conditions and performance conditions.  Other features of a share-based payment are not vesting conditions.  These features are included in the grant date fair value for share-based payment transactions.  The amendment will apply for annual periods beginning on or after 1 January 2009 with earlier application permitted.

Amendment to IAS 32 dealing with puttable instruments
   
The IASB published an amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial statements on 14 February 2008 after a long waiting period.  The amendment is the outcome of the Board's earlier commitment to improve the relevance and understandability of the current accounting treatment for these instruments.  The impact of the changes will be most significant for entities structured as co-operatives or partnerships.  Some investment funds may also be affected to a limited extent.  The amendment changes the classification of certain qualifying instruments from financial liabilities to equity instruments.  These instruments will no longer have to comply with the measurement requirements of financial liabilities stated in IAS 39 Financial Instruments: Recognition and Measurement or the disclosure requirements of IFRS 7 Financial Instruments: Disclosure.  Constituents argued that these instruments often represent a residual interest in the entity and as such meet the definition of equity, despite the inherent obligation to pay cash.  As a result, the Board was persuaded to amend IAS 32.  The amendment is effective for annual periods beginning on or after 1 January 2009 with earlier adoption allowed.  The corresponding amendment to HKAS 32 and HKAS 1 is expected to be published by the HKICPA in due course.

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Read more by downloading our HKFRS News - May 2008 (pdf file, 194KB) for your reference.
  
Note: HKFRS has converged with IFRS effective from 1 January 2005.  Contents contained in this newsletter are relevant to both HKFRS preparers and IFRS preparers.