Version 24 - September 2025 (CUD release)

Content update information

Financial period type: 12-Months (annual)
Target industry type: Manufacturing, Services, and Generic (excluding Financial Services)

Legislative changes for the December 2025 financial year

Amendments to HKAS 21 – Lack of exchangeability
Amendments to HKFRS 9 and HKFRS 7 – Classification and Measurement of Financial Instruments
Annual Improvements to HKFRS Accounting Standards — Volume 11 – Amendments to HKFRS 1, HKFRS 7, HKFRS 9, HKFRS 10 and HKAS 7
Contracts Referencing Nature-dependent Electricity – Amendments to HKFRS 9 and HKFRS 7
HKFRS 18 – Presentation and Disclosure in Financial Statements
HKFRS 19 - Subsidiaries without Public Accountability: Disclosures
Hong Kong Interpretation 5 Presentation of Financial Statements – Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause (amendments)
Amendments to HKFRS 10 and HKAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

HKFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information
HKFRS S2 – Climate-related Disclosures

Specifies how an entity shall assess whether a currency is exchangeable into another currency and how it shall estimate a spot exchange rate at a measurement date when exchangeability is lacking.
Requires disclosures of information that enable users of financial statements to understand the impact of a currency not being exchangeable.
Effective for annual periods beginning on or after 1 January 2025 with early application permitted.
When applying the amendments, an entity cannot restate comparative information.
Any cumulative effect of initially applying the amendments shall be recognised as an adjustment to the opening balance of retained profits or to the cumulative amount of translation differences accumulated in a separate component of equity, where appropriate, at the date of initial application.

The key areas of the amendments include:
Clarifying the date on which a financial asset or financial liability is derecognised and introducing an accounting policy option to derecognize a financial liability that is settled through an electronic payment system before the settlement date if specified criteria are met.
Clarifying how to assess the contractual cash flow characteristics of financial assets with environmental, social and governance and other similar contingent features.
Clarifying the requirements for classifying financial assets with non-recourse features and contractually linked instruments.
Including additional disclosures for investments in equity instruments designated at fair value through other comprehensive income and financial instruments with contingent features.
Effective for annual periods beginning on or after 1 January 2026.
Shall be applied retrospectively with an adjustment to opening retained profits (or other component of equity) at the initial application date.
Prior periods are not required to be restated and can only be restated without the use of hindsight.
Earlier application of either all the amendments at the same time or only the amendments related to the classification of financial assets is permitted.

HKFRS 7 Financial Instruments: Disclosures:
The amendments update certain wording in paragraph B38 of HKFRS 7 and paragraphs IG1, IG14, and IG20B of the Guidance on implementing HKFRS 7 to simplify or achieve consistency with other paragraphs in the standard and/or with the concepts and terminology used in other standards. Additionally, the amendments clarify that the Guidance on implementing HKFRS 7 doesn’t necessarily illustrate all the requirements in the referenced paragraphs of HKFRS 7 or create additional requirements.
HKFRS 9 Financial Instruments:
The amendments clarify that when a lessee determines that a lease liability has been extinguished in accordance with HKFRS 9, the lessee needs to apply paragraph 3.3.3 of HKFRS 9 and recognize any resulting gain or loss in profit or loss. Furthermore, the amendments update certain wording in paragraph 5.1.3 of HKFRS 9 and Appendix A of HKFRS 9 to remove potential confusion.
HKFRS 10 Consolidated Financial Statements:
The amendments clarify that the relationship described in paragraph B74 of HKFRS 10 serves as one example of various relationships that might exist between the investor and other parties acting as de facto agents of the investor, which removes the inconsistency with the requirement in paragraph B73 of HKFRS 10.
HKAS 7 Statement of Cash Flows:
The amendments replace the term “cost method” with “at cost” in paragraph 37 of HKAS 7 following the prior deletion of the definition of “cost method”.
Effective for annual periods beginning on or after 1 January 2026.
Earlier application is permitted.

The key areas of the amendments include:
Clarifying the application of the ‘own-use’ requirements;
Permitting hedge accounting if nature-dependent electricity contracts are used as hedging instruments; and
Adding new disclosure requirements to enable investors to understand the effect of these contracts on a company’s financial performance and cash flows.
Effective for annual periods beginning on or after 1 January 2026.
Earlier application is permitted.

Supersede HKAS 1 Presentation of Financial Statements.
Introduce new requirements for presentation within the statement of profit or loss, including specified totals and subtotals. Entities are required to classify all income and expenses within the statement of profit or loss into one of the five categories: operating, investing, financing, income taxes, and discontinued operations, and to present two new defined subtotals.
Require disclosures about management-defined performance measures in a single note and introduce enhanced requirements on the grouping (aggregation and disaggregation) and the location of information in both the primary financial statements and the notes.
Effective for annual periods beginning on or after 1 January 2027 with earlier application permitted.
Retrospective application is required.

Allow eligible entities to elect to apply reduced disclosure requirements while still applying the recognition, measurement, and presentation requirements in other HKFRSs.
To be eligible, at the end of the reporting period, an entity must be a subsidiary as defined in HKFRS 10 Consolidated Financial Statements, can't have public accountability, and must have a parent (ultimate or intermediate) that prepares consolidated financial statements available for public use which comply with HKFRSs.
Effective for annual periods beginning on or after 1 January 2027 with earlier application permitted.

Following the issuance of HKFRS 18, the references in HK Int 5 have been updated to reflect the requirements in HKFRS 18.
HK Int 5 has incorporated the references to HKFRS 18, which is effective for annual reporting periods beginning on or after 1 January 2027.

Address an inconsistency between the requirements in HKFRS 10 and HKAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture.
Require full recognition of a gain or loss resulting from a downstream transaction when the sale or contribution of assets constitutes a business. For a transaction involving assets that do not constitute a business, a gain or loss resulting from the transaction is recognized in the investor’s profit or loss only to the extent of the unrelated investor’s interest in that associate or joint venture.
Effective date to be determined.
The amendments are to be applied prospectively.

Set out the general requirements for the content and presentation of information that an entity needs to provide about sustainability-related risks and opportunities.
This is voluntary until and unless relevant authorities and/or regulators mandate their use, despite the stated effective date of 1 August 2025.

Require an entity to disclose information about climate-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance, or cost of capital over the short, medium, or long term.
This is voluntary until and unless relevant authorities and/or regulators mandate their use, despite the stated effective date of 1 August 2025.

Local accounting law changes for December 2025 financial year

Hong Kong enacts law on BEPS 2.0 Pillar Two.
On 28 May 2025, the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024, after incorporating various Committee Stage Amendments, was passed by the Legislative Council of Hong Kong.
The bill contains the legislation for implementation of Pillar Two model rules:
The Income Inclusion Rule ("IIR")
The Undertaxed Profits Rule ("UTPR")
The domestic minimum top-up tax (i.e., Hong Kong Minimum Top-up Tax ("HKMTT"))
The corresponding ordinance was gazetted on 6 June 2025 and became law on the same date.
Upon the gazettal of the ordinance, the IIR and HKMTT took effect retrospectively in Hong Kong for fiscal years beginning on or after 1 January 2025.
The imposition of the UTPR will be deferred to a date to be specified by the government.
The HKMTT applies to multinational enterprise (MNE) groups with consolidated revenues of €750m or more, affecting all Hong Kong constituent entities regardless of ownership interest, while providing relief to avoid double taxation.
Considering the Hong Kong headline profits tax rate at 16.5% and the territorial tax system, MNE groups with a presence in Hong Kong should evaluate the impact of the proposed Pillar Two rules for tax provisioning and compliance.
Affected entities should assess applicability of safe harbors, especially the transitional country-by-country safe harbor, as these could reduce the complexity of full calculation and compliance burden.
These amendments updates are to be included and disclosed in the financial statements for the fiscal year ended 31 December 2025 when /until the company prepare their own financial statements in or after January 2026.
Therefore, these updates would have no impact on the current template content for financial year ended 31 December 2024.
The above legislative update is valid for the second half year from 1 July 2025 to 31 December 2025.
Any newly legislative update will be further discussed and covered in the next content update document.