Financial Statements requirements in Hong Kongrussonxiao
The Hong Kong Companies Ordinance put in place since 2014 require companies incorporated in Hong Kong to prepare annual accounting and audits. Companies must provide financial statements including but not limited to Profit & Loss account and Balance Sheet.
- Financial statements: definition and purposes
Financial statement is a report provided by a company for its shareholders and investors that shows details of its financial situation, and includes documents such as the profit and loss account and balance sheet. Decision-makers will find this information vital for allocation of company resources.
In Hong Kong, it is not only used for shareholders but must also be provided to local fiscal authorities called IRD to verify that local accounting standards were used correctly.
A complete set of financial statements consists of 3 main documents:
- Balance sheet
The balance sheet is a statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period.
The standard format of balance sheet in Hong Kong is as follows:
Balance Sheet is often used to estimate the liquidity, funding, and debt position of an entity, and is the basis for the number of liquidity ratios.
- Profit & Loss account
A profit and loss account (also referred to as P&L or a profit and loss statement) provides an overview of a company’s revenue and expenses over a given period of time. These figures will show whether a business made a profit or loss over that period (usually either one months or consolidated months over the course of a year). As a result, it is one of the most important financial documents a business will need to produce.
The standard format of a Profit & Loss account in Hong Kong is as follows:
When reviewed over multiple time periods, the income statement can also be used to analyse trends in the results of the company operations.
- Cash flow statement
A cash flow statement is a financial statement that summarises the amount of cash that enters and leaves your business, giving you more information about the amount of working capital that’s available over a given period. It includes all the cash brought in from sales, but not sales made on credit that haven’t actually been paid for. Similarly, it won’t show raw materials and other items that have been purchased on credit but not paid for. In short, cash flow statements are a measurement of how well a company is able to generate cash to fund operating expenses and pay debt obligations.
There is no standard format of a Cash flow statement in Hong Kong but please see an accepted format as below:
The accountant of the Company shall help to prepare financial statements according to local requirements but will need necessary documentation in order to do so. This includes all legal invoices such as sales invoices, purchase invoices, general expenses invoices, bank statements, bank slips, business contracts, inventory lists if any and so on…
If you have any further question about your company accounting, audit or tax filings, please do not hesitate to contact us.
 As defined by the Cambridge University: https://dictionary.cambridge.org/fr/dictionnaire/anglais/financial-statement