Page 1 of 2Our Ref.: C/FRSCSent through electronic mail20 July 2017Mr Hans HoogervorstInternational Accounting Standards Board30 Cannon StreetLondon EC4M 6XHUnited KingdomDear Hans,Definition of a Business:
April IASB Board tentative decisionsThe Hong Kong Institute of Certified Public Accountants ("HKICPA") is the only bodyauthorised by law to set and promulgate standards relating to financial reporting,auditing, and ethics for professional accountants, in Hong Kong.The HKICPA provided its comments on the Exposure Draft ED/2016/1 on 11November 2016 and continues to appreciate the IASB's effort in this regard. However,the HKICPA would like to express concerns on and urges the IASB to reconsider twotentative decisions made in April:
making the screening test optional on a transaction-by-transaction basis; and confirming that the screening test is determinative.Our concerns are outlined below.Creating structural opportunitiesHKICPA foresees the optional screening test would become another form of structuringopportunity. That is, entities may choose to apply the screening test as and when itwants, depending on the preferred accounting outcome.Diminished comparability of financial statementsTransactions with similar facts and circumstances would be accounted for differentlydepending on whether entities elected to apply the screening test. This incomparabilitywould exist for similar transactions among entities and within the same entity.Costs would likely outweigh the benefitsHKICPA acknowledges that it is challenging to determine whether a group of assetsconstitutes a business and that some level of judgement is inevitable. However,adding an optional screening test with no conceptual basis would exacerbate theconfusion and costs as the screening test could produce results that arecounterintuitive, manipulated and incomparable.Page 2 of 2HKICPA recommendationDue to our concerns above, the HKICPA recommends removing the screening test inits entirety or making the screening test a part of a holistic assessment to determine abusiness. HKICPA also strongly recommends that the IASB first conducts a thoroughEffects Analysis, particularly on providing an optional screening test, before finalisingits decisions.Finally, the HKICPA urges the IASB to take a step back and revisit, conceptually, thefundamental need for having different accounting requirements for asset and businessacquisitions. The HKICPA would be happy to explore this further with the IASB.The HKICPA and our stakeholders would be very grateful if you would consider thepoints made above.If you have any questions regarding the matters raised in this letter, please contact me,or Kam Leung (kamleung@hkicpa.org.hk), Associate Director of our Standard SettingDepartment.Yours sincerely,Christina NgDirector, Standard Setting Department
Letter to IASB Chairman on the Definition of a Business: April IASB tentative decisions
下载原件Page 1 of 2Our Ref.: C/FRSCSent through electronic mail20 July 2017Mr Hans HoogervorstInternational Accounting Standards Board30 Cannon StreetLondon EC4M 6XHUnited KingdomDear Hans,Definition of a Business:
April IASB Board tentative decisionsThe Hong Kong Institute of Certified Public Accountants ("HKICPA") is the only bodyauthorised by law to set and promulgate standards relating to financial reporting,auditing, and ethics for professional accountants, in Hong Kong.The HKICPA provided its comments on the Exposure Draft ED/2016/1 on 11November 2016 and continues to appreciate the IASB's effort in this regard. However,the HKICPA would like to express concerns on and urges the IASB to reconsider twotentative decisions made in April:
making the screening test optional on a transaction-by-transaction basis; and confirming that the screening test is determinative.Our concerns are outlined below.Creating structural opportunitiesHKICPA foresees the optional screening test would become another form of structuringopportunity. That is, entities may choose to apply the screening test as and when itwants, depending on the preferred accounting outcome.Diminished comparability of financial statementsTransactions with similar facts and circumstances would be accounted for differentlydepending on whether entities elected to apply the screening test. This incomparabilitywould exist for similar transactions among entities and within the same entity.Costs would likely outweigh the benefitsHKICPA acknowledges that it is challenging to determine whether a group of assetsconstitutes a business and that some level of judgement is inevitable. However,adding an optional screening test with no conceptual basis would exacerbate theconfusion and costs as the screening test could produce results that arecounterintuitive, manipulated and incomparable.Page 2 of 2HKICPA recommendationDue to our concerns above, the HKICPA recommends removing the screening test inits entirety or making the screening test a part of a holistic assessment to determine abusiness. HKICPA also strongly recommends that the IASB first conducts a thoroughEffects Analysis, particularly on providing an optional screening test, before finalisingits decisions.Finally, the HKICPA urges the IASB to take a step back and revisit, conceptually, thefundamental need for having different accounting requirements for asset and businessacquisitions. The HKICPA would be happy to explore this further with the IASB.The HKICPA and our stakeholders would be very grateful if you would consider thepoints made above.If you have any questions regarding the matters raised in this letter, please contact me,or Kam Leung (kamleung@hkicpa.org.hk), Associate Director of our Standard SettingDepartment.Yours sincerely,Christina NgDirector, Standard Setting Department