Q：
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Does the Hong Kong company need to include its branches or representative offices located in Hong Kong or overseas when preparing the statutory financial statements?
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A：
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Branches and representative offices located in Hong Kong or overseas are not a separate legal entity and are regarded as an extension of a company incorporated in Hong Kong. The company incorporated in Hong Kong is fully entitled to assets and liable for debts of those branches or representative offices. Therefore, the Hong Kong company need to include those branches or representative offices when preparing the statutory separate financial statements.
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Q：
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Are we required to prepare consolidated financial statements under Companies Ordinance?
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A：
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According to section 379(2) of the Companies Ordinance, if the company is a holding company at the end of the financial year, the company must prepare consolidated financial statements for the financial year.
However, according to section 379(3) of the Companies Ordinance, if the company can satisfy one of following three conditions, the company is not required to prepare consolidated financial statements:
(a)
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if the company is a wholly owned subsidiary of another body corporate at the end of the financial year; or
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(b)
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if—
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(i)
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the company is a partially owned subsidiary of another body corporate at the end of the financial year;
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(ii)
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at least 6 months before the end of the financial year, the directors notify the members in writing of the directors’ intention not to prepare consolidated statements for the financial year, and the notification does not relate to any other financial year; and
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(iii)
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as at a date falling 3 months before the end of the financial year, no member has responded to the notification by giving the directors a written request for the preparation of consolidated statements for the financial year; or
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(c)
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if—
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(i)
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the company is a partially owned subsidiary of another body corporate at the end of the financial year; and
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(ii)
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all members agree in writing before the end of the financial year that consolidated statements will not be prepared for the financial year, and the agreement does not relate to any other financial year.
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Q：
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Are we required to prepare separate (company-level) financial statements?
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A：
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According to section 379(1) of the Companies Ordinance, a company’s directors must prepare for each financial year separate (company-level) financial statements.
However, according to section 379(2) of the Companies Ordinance, if the company is a holding company at the end of the financial year, the directors must instead prepare consolidated financial statements for the financial year.
According to section 2 of Schedule 4 of the Companies Ordinance, if consolidated financial statements is prepared, the consolidated financial statements for a financial year must contain, in the notes to the statements, the holding company’s statement of financial position for the financial year and must include a note disclosing the movement in the holding company’s reserves.
If a holding company falls within the exemption under section 379 of the Companies Ordinance not to prepare consolidated financial statements, a separate (company-level) financial statements is required to be prepared in accordance with applicable accounting standards.
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FAQ
