Hong Kong exchange, securities regulator give listed companies until mid-May to have books audited amid Covid-19 travel restrictions

Eric Ng

Hong Kong’s stock exchange operator will allow companies listed on its main board to defer the publication of their annual reports until mid-May because of the Covid-19 outbreak, if they release to the public a set of preliminary results, or key financial information, by the end of this month.

The companies in question must also provide an estimated timeline on when they expect to publish their audited annual results, and explain the factors they have considered in support of their expectations, bourse operator Hong Kong Exchanges and Clearing (HKEX) and securities watchdog Securities and Futures Commission (SFC) said on Monday.

In normal circumstances, companies listed on the main board with December 31 as their year-end must issue annual reports, including audited financial statements, by April 30. The deadline for companies listed on the secondary GEM board is March 31.

“The challenges arising from the Covid-19 pandemic are unprecedented and the SFC and the HKEX are cognisant of the challenges that market participants have been facing under the circumstances,” they said. “In view of the severity of the outbreak, it is necessary and appropriate to encourage market participants to accord priority to the health and safety of all concerned, including the accounting and other personnel of listed issuers and auditors carrying out their work.”

Deferments of up to 60 days starting from Monday, March 16, will be considered on a case-by-case basis.

The key financial information that companies must furnish includes their assets, liabilities, income and expenses, as well as changes in shareholders’ equity, as well as discussions of financial performance and the impact of major events and transactions.

“In all cases, the announcement should also explain how and why the travel and other restrictions have affected the issuer’s ability to meet its reporting deadline,” HKEX and the SFC said.

The latest guidance provides listed companies with more flexibility and clarity on the deferred publication of annual reports and audited statements. On February 4, HKEX and the SFC said they would allow listed companies to issue unaudited results by the March 31 deadline and have their shares continue trading, but only on a case-by-case basis.

No blanket extension for financial reporting as SFC, HKEX prepare for delays

“While the lock downs in some coastal regions in mainland China are gradually being released, many of the interior regions still have travel restrictions,” said Clement Chan Kam-wing, managing director of accounting firm BDO. “In addition, recently imposed travel restrictions in the US and Europe will also affect audit work on certain subsidiaries of Hong Kong-listed firms.

“The further clarification has given more flexibility for the release of listed firms’ annual reports, besides details on how they can meet disclosure requirements so that their shares can continue to trade.”

Case-by-case approvals will only be given in cases where deferments of deadlines to beyond mid-May are required. “The SFC appreciates that it is uncertain when the travel restrictions and other precautionary measures against the Covid-19 pandemic can be lifted, and that an extension beyond the 60-day period (further extension) may be warranted in some cases,” HKEX said. “The exchange will consider applications for a further extension solely on a case-by-case basis, having regard to the individual circumstances of the issuers.”

Hong Kong exchange, accountants mull extending reporting deadline

The novel coronavirus, which causes Covid-19, has killed more than 6,500 people and infected nearly 170,000. It has led to travel restrictions in China and abroad. In doing so, it has affected the feasibility of auditors’ visits to mainland China and other countries for audit work, which usually includes on-site inspection of inventory and other assets.

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