Key HKFRS Updates for 2024
Key HKFRS amendments in 2024 and their practical impact on Hong Kong SMEs and clinics.
The Hong Kong Institute of Certified Public Accountants (HKICPA) has issued several amendments to Hong Kong Financial Reporting Standards (HKFRS) effective for periods beginning on or after 1 January 2024. While large listed companies often have dedicated accounting teams tracking these changes, many SMEs and private clinic operators are caught off-guard. This guide summarises the most practically relevant updates.
1. HKFRS 16 Lease Amendments: Sale and Leaseback
The 2024 amendment to HKFRS 16 clarifies how a seller-lessee should measure lease liabilities arising from a sale and leaseback transaction. For clinics that own their premises and are considering sale-and-leaseback arrangements to free up capital, this update directly affects how the transaction is recognised and measured on the balance sheet. The key practical impact: variable lease payments not included in the initial measurement of the lease liability must now be presented consistently.
2. HKAS 1: Classification of Liabilities with Covenants
Amendments to HKAS 1 clarify when a liability with a right to defer settlement for at least 12 months is classified as non-current, specifically in cases where the right is subject to compliance with covenants. For SMEs with bank loans or facilities, this can shift borrowings between current and non-current, affecting key financial ratios. Clinics negotiating financing should be aware of how covenant structures interact with balance sheet presentation.
3. HKFRS for Private Entities: The Practical Path for Most Clinics
Most private clinics in Hong Kong are not required to apply full HKFRS. They qualify to use the HKFRS for Private Entities (the simplified standard). This standard has fewer disclosure requirements and simpler measurement approaches. However, transitioning between the full and private entity standards, or applying the private entity standard for the first time, requires careful planning. Your accountant should review which standard applies to your clinic and whether election of the full standard would ever be advantageous.
What Action Should Clinic Operators Take Now?
The practical steps are straightforward:
- Confirm with your accountant which HKFRS standard applies to your entity
- If you have property leases or bank covenants, review how the 2024 amendments affect your balance sheet
- Request an updated disclosure checklist for your year-end financial statements
- For multi-entity clinic groups, assess whether group-level reporting obligations apply
- Plan your audit preparation timeline with the new disclosure requirements in mind
Staying current with HKFRS amendments is part of professional financial management, not just a compliance checkbox. BM Accounting tracks all relevant standard updates and proactively advises clients on any changes that affect their financial statements or tax position. If you are unsure how the 2024 HKFRS updates affect your clinic or business, contact BM for a review.
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