26 February 2026To:
Members of the Hong Kong Institute of CPAsAll other interested partiesINVITATION TO COMMENT ON PROPOSED AMENDMENTS TOACCOUNTING GUIDELINE 5 (REVISED)
MERGER ACCOUNTING FOR COMMON CONTROL COMBINATIONSComments to be received by 27 May 2026The Financial Reporting Standards Committee (FRSC) of the Hong Kong Institute of CertifiedPublic Accountants (Institute) is seeking comments on the Institute’s Exposure Draft (ED) –Proposed Amendments to Accounting Guideline 5 (Revised) Merger Accounting for CommonControl Combinations. The ED and its accompanying Explanatory Memorandum (EM), whichexplains the background and the proposed amendments, are available on the Institute’s website.The proposed amendments respond to stakeholder feedback gathered since the Institute’s 2016post-implementation review of AG 5, as summarised in the 2018 Feedback Statement. Whilelimited amendments were made in 2020, several outstanding issues were not addressed because,at that time, the FRSC considered that those outstanding issues were likely to be affected by theoutcome of the International Accounting Standards Board (IASB)’s then project on BusinessCombinations under Common Control. Following the IASB’s discontinuation of that project inNovember 2023, the FRSC resumed efforts towards addressing the outstanding issues.Key proposals in the EDBased on recent research findings and outreach feedback, the FRSC noted that certainoutstanding issues remain pervasive and proposed the following amendments to address them:
(a) Clarifying the scope of AG 5;
(b) Clarifying that judgement is required to determine which controlling parties’ perspective shouldbe used to recognise the net assets of the acquired business or entity, and requiring disclosureof the basis for that determination;
(c) Requiring disclosure of how shares issued as consideration are measured; and(d) Introducing a practical expedient that allows entities not to restate comparatives.For details, refer to section ‘IV. Summary of proposals’ of the EM.Impact on entities in Hong KongCommon control combinations are prevalent in Hong Kong. The proposed amendments areexpected to impact a wide range of entities engaged in common control combinations, includinglisted and private entities, as well as IPO applicants. They may also affect investors, analysts andregulators who rely on the financial statements of the combined entities to make informed decisions.Among the proposals, the FRSC considers that proposals (a) to (c) are limited to clarifying existingrequirements and enhancing the disclosure provisions in AG 5. They do not change the underlyingprinciples of AG 5 and are not expected to impose an undue burden on preparers, as the additionaldisclosures can generally be prepared using readily available information.The major change proposed in the ED is the introduction of a practical expedient that would allowentities not to restate comparatives (i.e. proposal (d)). This proposal responds to long-standingconcerns that, for certain common control combinations, the costs of restatement outweigh thebenefits. The FRSC believes that applying this practical expedient can alleviate the burden onpreparers in preparing restated comparatives for the combined entity. This is particularly beneficialfor common control combinations undertaken after an IPO or by private entities, where users offinancial statements may not rely on restated financial information for decision making.How to submit commentsThe FRSC invites your comments on the Exposure Draft by 27 May 2026 to allow your commentsto be considered in developing the final amendments. Comments should be supported by specificreasoning and should be submitted in written form.Comments may be sent by mail, fax or e-mail to:
Standard Setting DepartmentHong Kong Institute of Certified Public Accountants37th Floor, Wu Chung House213 Queen’s Road EastWanchai, Hong KongFax number (+852) 2865 6603E-mail: commentletters@hkicpa.org.hkComments will be acknowledged and may be made available for public review unless otherwiserequested by the respondent.
Invitation to comment on Proposed Amendments to Accounting Guideline 5 (Revised) Merger Accounting for Common Control Combinations
下载原件26 February 2026To:
Members of the Hong Kong Institute of CPAsAll other interested partiesINVITATION TO COMMENT ON PROPOSED AMENDMENTS TOACCOUNTING GUIDELINE 5 (REVISED)
MERGER ACCOUNTING FOR COMMON CONTROL COMBINATIONSComments to be received by 27 May 2026The Financial Reporting Standards Committee (FRSC) of the Hong Kong Institute of CertifiedPublic Accountants (Institute) is seeking comments on the Institute’s Exposure Draft (ED) –Proposed Amendments to Accounting Guideline 5 (Revised) Merger Accounting for CommonControl Combinations. The ED and its accompanying Explanatory Memorandum (EM), whichexplains the background and the proposed amendments, are available on the Institute’s website.The proposed amendments respond to stakeholder feedback gathered since the Institute’s 2016post-implementation review of AG 5, as summarised in the 2018 Feedback Statement. Whilelimited amendments were made in 2020, several outstanding issues were not addressed because,at that time, the FRSC considered that those outstanding issues were likely to be affected by theoutcome of the International Accounting Standards Board (IASB)’s then project on BusinessCombinations under Common Control. Following the IASB’s discontinuation of that project inNovember 2023, the FRSC resumed efforts towards addressing the outstanding issues.Key proposals in the EDBased on recent research findings and outreach feedback, the FRSC noted that certainoutstanding issues remain pervasive and proposed the following amendments to address them:
(a) Clarifying the scope of AG 5;
(b) Clarifying that judgement is required to determine which controlling parties’ perspective shouldbe used to recognise the net assets of the acquired business or entity, and requiring disclosureof the basis for that determination;
(c) Requiring disclosure of how shares issued as consideration are measured; and(d) Introducing a practical expedient that allows entities not to restate comparatives.For details, refer to section ‘IV. Summary of proposals’ of the EM.Impact on entities in Hong KongCommon control combinations are prevalent in Hong Kong. The proposed amendments areexpected to impact a wide range of entities engaged in common control combinations, includinglisted and private entities, as well as IPO applicants. They may also affect investors, analysts andregulators who rely on the financial statements of the combined entities to make informed decisions.Among the proposals, the FRSC considers that proposals (a) to (c) are limited to clarifying existingrequirements and enhancing the disclosure provisions in AG 5. They do not change the underlyingprinciples of AG 5 and are not expected to impose an undue burden on preparers, as the additionaldisclosures can generally be prepared using readily available information.The major change proposed in the ED is the introduction of a practical expedient that would allowentities not to restate comparatives (i.e. proposal (d)). This proposal responds to long-standingconcerns that, for certain common control combinations, the costs of restatement outweigh thebenefits. The FRSC believes that applying this practical expedient can alleviate the burden onpreparers in preparing restated comparatives for the combined entity. This is particularly beneficialfor common control combinations undertaken after an IPO or by private entities, where users offinancial statements may not rely on restated financial information for decision making.How to submit commentsThe FRSC invites your comments on the Exposure Draft by 27 May 2026 to allow your commentsto be considered in developing the final amendments. Comments should be supported by specificreasoning and should be submitted in written form.Comments may be sent by mail, fax or e-mail to:
Standard Setting DepartmentHong Kong Institute of Certified Public Accountants37th Floor, Wu Chung House213 Queen’s Road EastWanchai, Hong KongFax number (+852) 2865 6603E-mail: commentletters@hkicpa.org.hkComments will be acknowledged and may be made available for public review unless otherwiserequested by the respondent.